The Role of Ethical Culture and Relationships

Organizational Factors:  The Role of Ethical Culture and Relationships

The Role of Corporate Culture in Ethical Decision Making

•       Corporate culture is a set of values, beliefs, goals, norms, and ways of solving problems shared by members (employees) of an organization.

•       Culture gives members of an organization meaning and provides them with rules for behaving within the organization.

•       A company’s history and unwritten rules are a part of its culture.

–    Culture can be influenced by the founder’s values.

•       Some cultures are so strong they dictate the character of the entire organization to outsiders.

Corporate Culture

•       May be explicit statements of values, beliefs, and customs

–   Coming from upper management in the form of memos, codes, handbooks, manuals, forms and ceremonies

•       May be expressed informally through direct and  indirect comments that convey                                                 management’s wishes

–   Dress codes, promotions,                                                 legends, extracurricular                                              activities

Two Basic Dimensions Determine an Organization’s Culture

•       Concern for people—the organization’s efforts to care for its employees’ well-being

•       Concern for performance—the organization’s efforts to focus on output and employee productivity

Four Different Cultures Can Emerge

•      Apathetic—shows minimal concern for people or performance

•      Caring—exhibits high concern for people, but minimal concern for performance

•      Exacting—shows little concern for people, but high concern for performance

•      Integrative—high concern for people                and performance

A Framework of Organizational
Culture Typologies

Ethics as a Component of Corporate Culture

•       Corporate culture is a significant factor in ethical decision making.

•       If a firm’s culture encourages or rewards unethical behavior, its employees may well act unethically.

•       An organization’s failure to monitor or manage its culture may foster questionable behavior.

•       Ethical issues may arise because of conflicts between the cultural values perceived by management and  those actually at work in the organization.

Role of Leadership

•      Leadership is the ability or authority to guide and direct others toward achievement of a goal.

•      Important leaders

–   CEOs and top                                                             management

–   Boards of Directors

Interpersonal Relationships in Organizations

•      One of the biggest challenges in business is getting diverse people to work together efficiently and ethically while coordinating their skills.

•      Relationships among individuals and within groups are an important part of the proper functioning of a business organization.

Interpersonal Relationships in   Organizations (cont’d)

•       Understanding how interpersonal relations influence decisions about ethical issues

–    The corporation’s responsibility as a moral agent

–    Variation in employee conduct

–    Role relationships within the organization

•    Socialization

•    Role-sets

•    Role stress

•    Differential association

•    Whistle-blowing

•    Organizational pressures

Interpersonal Relationships (cont’d)

•       Responsibility of the corporation as a moral agent

–    Corporations are viewed not merely as profit-making entities but also as moral agents accountable to stakeholders.

–    Companies are legally accountable for the conduct of their employees as well as for their decisions and the consequences of those decisions.

–    The only way to ensure consistent decisions that represent the interests of all stakeholders is to require ethical policies.

Interpersonal Relationships (cont’d)

•      Variation in employee conduct

–   People are culturally diverse and have different values, they interpret situations differently and will vary in the ethical decisions they make on the same ethical issue.

–   Good business practice and concern for the law requires organizations to recognize this variation in the employees’ desire to be ethical.

Interpersonal Relationships (cont’d)

•       10%—will take advantage of situations to                       further their own personal interests

•       40%—will go along with the work group on                   most matters

•       40%—will try to follow company policies and rules and   have a strong grasp of the corporate culture

•       10%—maintain formal standards that focus                   on rights, duties and rules

Interpersonal Relationships (cont’d)

•       Role relationships

•       All the roles that a person plays in a company constitute his or her position and together they

–    Prescribe the behavior that others expect of someone in that position

–    Help the organization achieve its goals

Interpersonal Relationships (cont’d)

•       Role relationships (cont’d)

–    Socialization refers to the process through which a person learns the values and behavior patterns considered appropriate by an organization or group.

–    A role-set is the total of all role relationships in which a person is involved as a result of his or her position in an organization.

–    Role stress is the strain, conflict, or disruption that results from a lack of agreement on certain job-related activities.

Interpersonal Relationships (cont’d)

•      Differential association

–   The idea that people learn ethical or unethical behavior while interacting with others who are part of their role-sets or belong to other intimate personal groups

•      Whistle-blowing

–   Exposing an employer’s wrongdoing to outsiders, such as the media or government regulatory agencies

Interpersonal Relationships (cont’d)

•       Legal provisions of whistle-blowing

–    The Sarbanes-Oxley Act makes it illegal to discriminate against a whistle-blower.

–    Publicly traded companies are required to implement an anonymous reporting mechanism.

–    The Federal Sentencing Guidelines for Organizations provides rewards for companies that systematically detect and address unethical or illegal activities.

Interpersonal Relationships (cont’d)

•      Organizational pressures

–   Pressure to achieve company goals can sometimes create ethical issues.

The Role of Opportunity and Conflict

•      Opportunity and conflict influence ethical decision making in interpersonal relationships

•      Opportunity

–   Creates ethical dilemmas

–   Can come from knowledge

–   Can come from persons outside the organization

Opportunity and Conflict (cont’d)

•       Conflict occurs when it is not clear which goals or values take precedence—those of the individual, the organization, or society.

–    Personal-organizational conflict occurs when a person’s individual values and methods for reaching a desired goal differ from those of the organization or a group within the organization.

–    Personal-societal conflict occurs when an individual’s values deviate from those of society.

–    Organizational-societal conflict occurs when the norms and values of a business contravene those of society in general.

Transactional Versus Transformational Leaders

•      Transactional leaders

–   create employee satisfaction through negotiating for desired behaviors or levels of performance

–   ensure that conduct and procedures are followed

•      Transformational leaders

–   strive to raise an employees’ level of commitment and to foster trust and motivation

–   communicate a sense of mission,                             stimulate new ways of thinking

The Power of Leaders

•       Power refers to the influence that leaders and managers have over the behavior and decisions of subordinates.

•       Reward power–offering something desirable to influence behavior

•       Coercive power–penalizing negative behavior

•       Legitimate power–titles and positions of authority

•       Expert power–knowledge based

•       Referent power–exists when goals or objectives               are similar

Motivating Ethical Behavior

•       Motivation is a force within the individual that focuses his or her behavior toward achieving a goal.

•       An individual’s hierarchy of needs may influence his or her motivation and ethical behavior.

–    Relatedness needs are satisfied by social and interpersonal relationships.

–    Growth needs are satisfied by creative or productive activities.

•       Needs or goals may change as a person progresses through the ranks of the company.

Organizational Structure and Business Ethics

•       In centralized organizations, decision-making authority is concentrated in the hands of top level managers and little authority is delegated to lower levels.

–     Considerable distance between employee and decision maker

–     Little upward communication

–     Blame-shifting

•       In decentralized organizations, decision-making authority is delegated as far down the chain of command as possible.

–     Have difficulty in responding quickly to changes in policy and procedures established by top management

–     Profit centers within a decentralized organization may deviate from organizational objectives

Group Dimensions of
Organizational Structure and Culture

•       Corporate values, beliefs, patterns, and rules are often expressed through small groups within the organization.

•       Individual groups within                                           organizations often adopt                                                   their own rules and values.

Group Dimensions

•      Formal groups—committees,                                      work groups and teams

•      Informal groups— “grapevine”

•      Group norms

–    Standards of behavior acceptable in the                                    group, define acceptable behavior, foster                         conformity, may conflict with the organizational culture

–    Sanctions may be necessary to bring a nonconforming group into line with organizational expectations

Group Dimensions (cont’d)

•       Group norms

–    Standards of behavior that groups expect of their members

–    Have the power to enforce a strong degree of conformity among group members

–    Sometimes conflict with the values and rules prescribed by the organization’s culture

Control of Own Actions

•       Ethical decisions within organizations are often made by committees and formal and informal groups, not by individuals.

•       Many decisions are beyond the influence of individuals alone.

•       Individuals entering the business will usually need several years of experience within a specific industry to understand how to resolve ethical close calls.