Is hiring ethical people the most important factor involved in creating and sustaining an ethical organisation?
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BUSM 3199/3115/4198 Ethics & Governance Lecture 4: Creating an Ethical Organisation
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Today
So what are we are saying is:
B = f (P & E)
BEHAVIOUR
ENVIRONMENT
PERSON
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Outline
The work context
Organisational culture
Ethical formal and informal cultural systems
Ethics codes
Ethical leadership
The relationship between leadership, culture, ethics codes and behaviour
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Learning objectives for today
Know the characteristics of an ethical organization
Discuss the difference between ethics of value and ethics of compliance
Understand the ethical formal and informal cultural systems
Discuss a code of ethics
Discuss ethical leadership
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An Ethical Organisation
Trust
Effective communication
Openness
Objectivity and fairness
Integrity
Transparency
Values
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The organisation as a context
individual personality is unimportant in organisational criminal behaviour, as it results from role fulfilling rather than individual pathology (Schrager & Short 1978)
a reliable picture of moral conduct can be ascertained “not so much in direct observation of the decision maker as in a firmer grasp of the decision maker’s environment” (Frederick 1992)
Bad apples and bad barrels: Most people are the product of the context they find themselves. They look up and around… (Trevino and Brown 2004)
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Organisational membership
Persons in organisations are socialised in their roles (Katz and Kahn 1978).
Through this process, people accept the organisational goal structure and the culture (Clinard & Yeager 1980).
The expected role behaviour is learned from others’ expectations and the rewards that they receive from their organisational membership.
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Ethics of Values? or Ethics of Compliance?
Values approach - is proactive and inspirational; emphasises expected behaviour, high standards
Compliance approach - is reactive and punitive; emphasises required behaviour, obeying the law
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Organisational culture
Organisational culture affects people in organisations
The organisational culture includes the basic assumptions concerning what is right, proper and fair (Gottlieb & Sanzgiri 1996).
Expresses shared assumptions, values and beliefs and is the social glue that holds the organization together. It’s “how we do things around here.” (Trevino & Nelson 2006)
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Ethical formal cultural systems
Leadership: creates, maintains and changes culture. Most important aspect of an organisation’s ethical culture
Selection and reward systems
Structure - authority, responsibility and ethical culture
Policies and codes- their effectiveness depends on other formal and informal systems. Ethics must be in the blood line of the organisation.
Orientation and training programs.
Decision making processes assumptions and scripts
(Trevino & Nelson 2006)
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Reward systems
Reward systems can encourage unethical behavior
People do what’s rewarded
Rewards don’t have to be explicit
Think about how attempts to motivate can backfire
Set goals for ethical conduct
(Trevino & Nelson 2006)
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Ethics Codes
Have been around since the early 1900s
An international movement towards business ethics codes began in 1980s
Post-Enron, stock exchanges such as NYSE and ASX encouraged the adoption of formal ethics guidelines for company officers.
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Formulating a code of ethics
A code of ethics is, in essence, a formalisation of moral principles and responsibilities
The need for a code of ethics
Requirement by law, e.g. in U.S.
Safeguarding reputation
Improving customer service (and thus sales)
Seeking like-minded partners and suppliers
Attracting and retaining the best employees
Responding to internal and/or external pressure
A code of ethics should be organisation-specific. E.g. Religious body vs commercial company; small vs large company
Codes are guidelines, not laws. Spirit of following the code is more important than the form. E.g. A waiter greeting with sincerity vs merely following what is required
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Approaches to Ethics
General principles - Ensure that our employees uphold the code of ethics with integrity.
Corporate mission - “Uphold the good name of Marketing Institute of Singapore and Singapore, Academic Standards and Student Welfare”
Code of conduct - Personal responsibility of each director and employee to understand and comply with the code of conduct.
Specific policies - On entertainment, while it is an acceptable form of business, directors or employees should turn down meals or entertainment which are excessive in nature or frequency, so as to avoid loss of objectivity when conducting the company’s business
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Ethics codes effectiveness
Code effectiveness depends on cultural values and communication
Use collaboration to create/revise the code
Discuss/debate code frequently
Use code to resolve ethical issues
Communicate ethical decisions
Reward behaviour that is consistent with the code
(Stevens 2008)
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Six Steps for Effective Implementation of a Code of Ethics
Distribute the code of ethics comprehensively to employees
Assist employees in interpreting and understanding the application and intent of the code
Specify management’s role in the implementation of the code
Inform employees of their responsibility to understand the code and provide them with the overall objective of the code
Establish grievance procedures
Provide a conclusion or closing statement, such as one from Cadbury Company: “The character of the company is collectively in our hands. Pride in what we do is important, and let us earn that pride by the way we put the beliefs set out here into action.”
Ethical informal cultural systems
Informal cultural systems
Informal norms
Heroes and role models
Rituals
Myths and stories
Language
Developing and changing the ethical culture
(Trevino & Nelson 2006)
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Org. Culture and Leadership
Leaders affect culture through:
attention
critical incidents and crises
role modeling / teaching / coaching
criteria for scarce resources, rewards, status, recruitment, selection, promotion, retirement, excommunication
others: formal statements, structure, systems, processes, physical setting, rituals, stories, etc.
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The responsibility of managers
Managers have responsibility for ethical behaviour in organisations because they affect culture, policies and practices
Begin with clear standards
Design a plan to continually communicate your standards
Managers are role models
(Trevino & Nelson 2006)
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moral manager
Reputation for
Ethical
Leadership
=
Having a good character
Setting ethical
standards,
expectations etc.
(Trevino & Brown, 2004)
Ethical leadership
Moral person
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Traits
Behaviours
Decision making
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moral person
Integrity
Trustworthiness
Honesty
Do the right thing
Concern for people
Being open
Personal morality
Hold to values
Objective/fair
Concern for society
Follow ethical decision rules
Trevino, Hartman & Brown, 2000
moral manager
Role modelling through visible action
Rewards and discipline
Communicating about ethics and values
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Executive Ethical Leadership Reputation Matrix
Hypocritical leader
Ethical leader
Unethical leader
Strong
Weak
Moral Manager
Weak
Strong
Moral Person
Ethically silent leaders
(Trevino & Brown, 2004)
Weak in ethics as a person, weak in ethics as a manager = Unethical leader
Weak person, strong manager = Hypocritical leader
Strong person, weak manager = Silent leader
Strong person, strong manager = Ethical leader
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Guidelines for effective ethics management
Understand existing ethics culture
Communicate importance of ethical standards
Focus on reward systems
Promote ethical leadership in the organisation
(Trevino & Brown, 2004)
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Giving Voice to Values - Gentile
Focus on Post-decision
Helping people enact their values in the workplace
Scripts, templates - practicing helps
Have to do it in politically sensitive ways
(Trevino & Brown, 2004)
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Conclusions
An ethical organization requires ethical leadership – people look up and around
An ethical leader is a strong moral person and strong moral manager
A code of ethics is a guideline. For it to have meaning within an organisation it has to be part of the culture.
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References
Clinard, MB, & Yeager, P. C. 1980, Corporate crime, The Free Press, New York.
Frederick, NL 1992, 'Ethics and Integrity - Beyond Internal Controls', Managerial Auditing Journal, vol. 7, no. 1.
Gottlieb, JZ & Sanzgiri, J 1996, 'Towards an ethical decision making in organizations', Journal of Business Ethics, vol. 15, pp. 1275-85.
Katz, D, & Kahn, R. L. 1978, The social psychology of organizations, 2 edn, Wiley, New York.
Schrager, L & Short, J 1978, 'Toward a Sociology of Organizational Crime', Social Problems, vol. 25, pp. 407-19.
Stevens, B 2008, 'Corporate ethical codes: Effective instruments for influencing behavior', Journal of Business Ethics, vol. 78, pp. 601-9.
Treviño, LK & Brown, M 2004, 'Managing to be ethical: Debunking five business ethics myths.' Academy of Management Executive, vol. 18, no. 2, pp. 69-81.
Trevino, LK, Hartman, L.P., & Brown, M 2000, 'Moral person and moral manager: How executives develop a reputation for ethical leadership', California Management Review, vol. 42, no. 4, pp. 128-42.
Trevino, LK, & Nelson, K. A. 2006, Managing business ethics: Straight talk about how to do it right, 4 edn, John Wiley & Sons, New York.
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Online References
Jeff Skilling – ENRON
http://www.youtube.com/watch?v=XFTihsjO-og
Some background to Tyco: Former CEO Denis Kozlowski
http://www.youtube.com/watch?v=MYmLaVYsyHw
Milgram Experiment
http://www.youtube.com/watch?v=BcvSNg0HZwk
Stanford Prison Experiment
http://www.youtube.com/watch?v=Z0jYx8nwjFQ