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.