Organizational ethics

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Organizational ethics is the ethics of an organization, and it is how an organization responds to an internal or external stimulus. Organizational ethics is interdependent with the organizational culture. Although it is to both organizational behavior and industrial and organizational psychology as well as business ethics on the micro and macro levels, organizational ethics is neither organizational behavior nor industrial and organizational psychology, nor is it solely business ethics (which includes corporate governance and corporate ethics). Organizational ethics express the values of an organization to its employees and/or other entities irrespective of governmental and/or regulatory laws.

Contents

Ethics are the principles and values used by an individual to govern their actions and decisions. [1] An organization forms when individuals with varied interests and different backgrounds unite on a common platform and work together towards predefined goals and objectives. [1] A code of ethics within an organization is a set of principles that is used to guide the organization in its decisions, programs, and policies. [2] An ethical organizational culture consists of leaders and employees adhering to a code of ethics. [2]

Overview

An organization's ethical philosophy can affect the organization in many ways including its reputation, productivity, and bottom line. [2] Ethics within an organization can offer many benefits. A positive ethical corporate culture improves the morale among the workers in an organization, which could increase productivity, employee retention and loyalty. [3] Higher productivity improves the efficiency of the organizations and increased employee retention reduces the cost of replacing employees. Other essential benefits of an ethical culture include better internal communication and wider community development through corporate social responsibility.[ citation needed ] In the US, the Foreign Corrupt Practices Act restricts United States business firms from engaging in bribery and other illegal practices internationally. There are laws that have the same type of prohibition for European companies which creates a disadvantage competitively for both European and U.S. firms. [4] Such laws are not a restricting element to organizations that have highly elevated ethical behavior as part of their values. Organizations that lack ethical practices as a mandatory basis of their business structure and corporate culture, have commonly been found to fail due to the absence of business ethics. Corporate downfalls would include, but are not limited to, the recent Enron and WorldCom scandals, two primary examples of unethical business practices concerning questionable accounting transactions.

Organizations focusing on encouraging ethical practices are commonly viewed with respect by their employees, the community, and corresponding industries. [5] Ethical business practices of organizations have resulted in a solid financial bottom-line. This has been seen through greater sales and increased revenue by companies retaining talented personnel and attracting new skilled employees. More importantly, an ethical organization will have the ability to retain employees that are experienced and knowledgeable (generally referred to as human capital). This human capital results in less employee turnover, less training time for new employees, and greater output regarding services (or production of goods).

Basic ethical elements

There are at least four elements that aim to create an ethical culture and behavior of employees within an organization. These elements are:

  1. a written code of ethics and standards (ethical code)
  2. ethics training for executives, managers, and employees
  3. the availability of ethical situational advice (i.e. advice lines or offices)
  4. confidential reporting systems [6]

Organizations are constantly striving for a better ethical atmosphere within the business climate and culture. Businesses must create an ethical business climate in order to develop an ethical organization. Otherwise said, companies must focus on the ethics of employees in order to create an ethical business. Employees must know the difference between what is acceptable and unacceptable in the workplace. These standards are found in the written code of ethics or may be referred to as the employee handbook. These standards are a written form of employee conduct and performance expectations.

Employee handbooks also commonly include rules concerning expectations and consequences that follow misconduct. Handbooks normally will clearly state the rules, guidelines, and standards of an organization as well as possible rules, regulations, and laws that they are bound by. Many company handbooks will include laws regarding sexual harassment, alcohol abuse, and drug/substance abuse.
For more information regarding situational ethical principles, refer to "Situational Ethics."

Intrinsic and extrinsic organizational rewards

The intrinsic and extrinsic rewards of an ethical organization are bound to an organization's culture and ethics. Based on the reliability and support structure of each of the four areas needed for ethical behavior, the organizational ethics will be evident throughout the organization. The organization including the employees, managers, suppliers, customers, and other entities, will receive intrinsic and extrinsic rewards. Actions of employees can range from whistle blowing (intrinsic) to the extraordinary actions of hourly employee purchasing all the recently produced peanut butter (as produced by his employer), that has no resale value due to mislabeled jars. This employee was aware that his employer (extrinsic) would reimburse him in full for purchasing the mislabeled peanut butter. [7]
For more information regarding intrinsic and extrinsic motivation, see "Intrinsic and Extrinsic Motivation."

Ethical theory and leadership empowerment

There are many theories and organizational studies that are related to “organizational ethics,” but "organizations" and "ethics" are wide and varied in application and scope. These theories and studies can range from individual(s), team(s), stakeholder, management, leadership, human resources, group(s) interaction(s), as well as the psychological framework behind each area to include the distribution of job tasks within various types of organizations. Among these areas, the influence of leadership in any organization cannot go unexamined, because of a clear understanding of the organization's vision, goals (including immediate and long-term strategic plans), and values. Leadership sets the tone for organizational management (strategic actions taken by an organization to create a positive image for both the internal and external public). In turn, leadership directly influences organizational symbolism (which reflects the culture, the language of the members, any meaningful objects, representations, and/or how someone may act or think within an organization). The values and ideals within an organization generally center upon “values for business” as the theoretical approach most leaders use to present to their "co-members" (which in truth may be subordinates).
In fact, an examination of business reveals that most leaders approach the X(?) from the perspective of values for the business. [8] [9] Alongside presenting the vision, values, and goals of the organization, the leader should infuse empowerment and motivation to its members. Leaders using empowerment to motivate their subordinates, is based upon the view of: “Achieving organizational ownership of company values is a continuous process of communication, discussion, and debate throughout all areas of the organization” [10] as.
For more information about organization theory, refer to "Organizational Theory."

Stakeholder theory

Whether it is a team, small group, or a large international entity, the ability of any organization to reason, act rationally, and respond ethically is paramount. Leaders must have the ability to recognize the needs and desires of members (or called “stakeholders” in some theories or models), and how they correspond to the organization. It is the stakeholder theory that implies that all stakeholders (or individuals) must be treated equally, regardless of the fact that some individuals will contribute more than others to the organization. [11]
Leaders who motivate others must present the goals of an organization to the stakeholders with respect to particular benefits of the stakeholders. Leaders must set aside individual (or personal) ambitions (along with any prejudice) in order to present these goals properly. Furthermore, it is leadership that influences stakeholders towards ethical behavior for the organization. They must step behind a veil of ignorance and treat every stakeholder as a means with equal weight. Importantly, the leader (or stakeholder management) must possess the necessary skills and rank to ensure that each stakeholders voice is respected and heard within the organization to ensure that other voices are not expressing views (or needs as with respect to Maslow's Hierarchy of Needs). Therefore, stakeholder management must ensure an ethical system for their own management styles, personalities, systems, performances, plans, policies, strategies, productivity, openness, and even risk(s) within their cultures or industries.

Ethical system implementation

The function of developing and implementing business ethics in an organization is difficult. Due to each organization's culture and atmosphere being different, there is no clear or specific way to implement a code of ethics in an existing business. Business ethics implementation can be categorized into two groups; formal and informal measures. Formal measures include training and courses pertaining to ethics. Informal measures are led by example from either the manager or the social norm of the company. [12]

There are several steps to follow when trying to implement an ethical system. Some of these steps include obtaining a commitment from the board of directors and senior managers, developing resources for ethics initiatives, and determining ethical risks and developing contingency plans. Other steps include developing an ethics program that addresses risks while still maintaining compliance with the ethical standards, providing insight for implementation and audits of the ethical programs, and communicating with stakeholders to create shared commitment and values for ethical conduct. [13]

The implementation should be performed to the entirety of the business including all areas of operations. If it is not implemented pragmatically and with caution for the needs, desires, and personalities (consider the Big Five personality traits) of the stakeholders, the culture, and the employees, then problems may arise. Although a great deal of time may be required, stakeholder management should consider the Rational Decision-Making Model for the implementation of various aspects, details, and standards of an ethical system to the stakeholders. If an implementation has been performed successfully, then all stakeholders have accepted the newly designed ethics system for the organization. With the implementation of an ethical system comes the implementation of new tasks and responsibilities. The responsibilities include leadership in ethics, delegating, and communicating as well as motivating the company's ethical position to its employees. [14]

Some corporations have tried to burnish their ethical image by creating whistle-blower protections, such as anonymity. In the case of Citi, they call this the Ethics Hotline. [15] Though it is unclear whether firms such as Citi take offences reported to these hotlines seriously or not.

Theories and models

Refer to the following theories and models for more information:

See also

Related Research Articles

Business ethics is a form of applied ethics or professional ethics, that examines ethical principles and moral or ethical problems that can arise in a business environment. It applies to all aspects of business conduct and is relevant to the conduct of individuals and entire organizations. These ethics originate from individuals, organizational statements or the legal system. These norms, values, ethical, and unethical practices are the principles that guide a business.

Industrial and organizational psychology "focuses the lens of psychological science on a key aspect of human life, namely, their work lives. In general, the goals of I-O psychology are to better understand and optimize the effectiveness, health, and well-being of both individuals and organizations." It is an applied discipline within psychology and is an international profession. I-O psychology is also known as occupational psychology in the United Kingdom, organisational psychology in Australia and New Zealand, and work and organizational (WO) psychology throughout Europe and Brazil. Industrial, work, and organizational (IWO) psychology is the broader, more global term for the science and profession.

Ethical codes are adopted by organizations to assist members in understanding the difference between right and wrong and in applying that understanding to their decisions. An ethical code generally implies documents at three levels: codes of business ethics, codes of conduct for employees, and codes of professional practice.

Organizational culture refers to culture related to organizations including schools, universities, not-for-profit groups, government agencies, and business entities. Alternative terms include business culture, corporate culture and company culture. The term corporate culture emerged in the late 1980s and early 1990s. It was used by managers, sociologists, and organizational theorists in the 1980s.

<span class="mw-page-title-main">Corporate social responsibility</span> Form of corporate self-regulation aimed at contributing to social or charitable goals

Corporate social responsibility (CSR) or corporate social impact is a form of international private business self-regulation which aims to contribute to societal goals of a philanthropic, activist, or charitable nature by engaging in, with, or supporting professional service volunteering through pro bono programs, community development, administering monetary grants to non-profit organizations for the public benefit, or to conduct ethically oriented business and investment practices. While once it was possible to describe CSR as an internal organizational policy or a corporate ethic strategy similar to what is now known today as Environmental, Social, Governance (ESG); that time has passed as various companies have pledged to go beyond that or have been mandated or incentivized by governments to have a better impact on the surrounding community. In addition, national and international standards, laws, and business models have been developed to facilitate and incentivize this phenomenon. Various organizations have used their authority to push it beyond individual or industry-wide initiatives. In contrast, it has been considered a form of corporate self-regulation for some time, over the last decade or so it has moved considerably from voluntary decisions at the level of individual organizations to mandatory schemes at regional, national, and international levels. Moreover, scholars and firms are using the term "creating shared value", an extension of corporate social responsibility, to explain ways of doing business in a socially responsible way while making profits.

<span class="mw-page-title-main">Incentive</span> Something that motivates individuals to perform

In general, incentives are anything that persuade a person or organization to alter their behavior to produce the desired outcome. The laws of economists and of behavior state that higher incentives amount to greater levels of effort and therefore higher levels of performance. For comparison, a disincentive is something that discourages from certain actions.

Organizational behavior or organisational behaviour is the "study of human behavior in organizational settings, the interface between human behavior and the organization, and the organization itself". Organizational behavioral research can be categorized in at least three ways:

In industrial and organizational psychology, organizational citizenship behavior (OCB) is a person's voluntary commitment within an organization or company that is not part of his or her contractual tasks. Organizational citizenship behavior has been studied since the late 1970s. Over the past three decades, interest in these behaviors has increased substantially.

A code of conduct is a set of rules outlining the norms, rules, and responsibilities or proper practices of an individual party or an organization.

Corporate behaviour is the actions of a company or group who are acting as a single body. It defines the company's ethical strategies and describes the image of the company. Studies on corporate behaviour show the link between corporate communication and the formation of its identity.

<span class="mw-page-title-main">Employee engagement</span> Relationship between an organization and its employees

Employee engagement is a fundamental concept in the effort to understand and describe, both qualitatively and quantitatively, the nature of the relationship between an organization and its employees. An "engaged employee" is defined as one who is fully absorbed by and enthusiastic about their work and so takes positive action to further the organization's reputation and interests. An engaged employee has a positive attitude towards the organization and its values. In contrast, a disengaged employee may range from someone doing the bare minimum at work, up to an employee who is actively damaging the company's work output and reputation.

Transactional leadership is a type of leadership style that focuses on the exchange of skills, knowledge, resources, or effort between leaders and their subordinates. This leadership style prioritizes individual interests and extrinsic motivation as means to obtain a desired outcome. It relies on a system of penalties and rewards to achieve short-term goals.

Training and development involves improving the effectiveness of organizations and the individuals and teams within them. Training may be viewed as being related to immediate changes in effectiveness via organized instruction, while development is related to the progress of longer-term organizational and employee goals. While training and development technically have differing definitions, the terms are often used interchangeably. Training and development have historically been topics within adult education and applied psychology, but have within the last two decades become closely associated with human resources management, talent management, human resources development, instructional design, human factors, and knowledge management.

A celebrity board director is an officer with significant influence in the company's governance decision-making process and who possesses one or more celebrity traits including credibility, goodwill, rights, image, influence, liability, and standard of value. A director's leadership and decision-making affects the governance and wealth maximization of shareholders’ wealth.

Compensation and benefits refer to remuneration to employees from employers. Which is the payments or rewards provided to an individual for the work that has been completed.

Work motivation is a person's internal disposition toward work. To further this, an incentive is the anticipated reward or aversive event available in the environment. While motivation can often be used as a tool to help predict behavior, it varies greatly among individuals and must often be combined with ability and environmental factors to actually influence behavior and performance. Results from a 2012 study, which examined age-related differences in work motivation, suggest a "shift in people's motives" rather than a general decline in motivation with age. That is, it seemed that older employees were less motivated by extrinsically related features of a job, but more by intrinsically rewarding job features. Work motivation is strongly influenced by certain cultural characteristics. Between countries with comparable levels of economic development, collectivist countries tend to have higher levels of work motivation than do countries that tend toward individualism. Similarly measured, higher levels of work motivation can be found in countries that exhibit a long versus a short-term orientation. Also, while national income is not itself a strong predictor of work motivation, indicators that describe a nation's economic strength and stability, such as life expectancy, are. Work motivation decreases as a nation's long-term economic strength increases. Currently work motivation research has explored motivation that may not be consciously driven. This method goal setting is referred to as goal priming.

Employee motivation is an intrinsic and internal drive to put forth the necessary effort and action towards work-related activities. It has been broadly defined as the "psychological forces that determine the direction of a person's behavior in an organisation, a person's level of effort and a person's level of persistence". Also, "Motivation can be thought of as the willingness to expend energy to achieve a goal or a reward. Motivation at work has been defined as 'the sum of the processes that influence the arousal, direction, and maintenance of behaviors relevant to work settings'." Motivated employees are essential to the success of an organization as motivated employees are generally more productive at the work place.

Innovation leadership is a philosophy and technique that combines different leadership styles to influence employees to produce creative ideas, products, and services. The key role in the practice of innovation leadership is the innovation leader. Dr. David Gliddon (2006) developed the competency model of innovation leaders and established the concept of innovation leadership at Penn State University.

Reward management is concerned with the formulation and implementation of strategies and policies that aim to reward people fairly, equitably and consistently in accordance with their value to the organization.

Employee recognition is the timely, informal or formal acknowledgement of a person's behavior, effort, or business result that supports the organization's goals and values, and exceeds their superior's normal expectations. Recognition has been held to be a constructive response and a judgment made about a person's contribution, reflecting not just work performance but also personal dedication and engagement on a regular or ad hoc basis, and expressed formally or informally, individually or collectively, privately or publicly, and monetarily or non-monetarily.

References

  1. 1 2 Matthews, J. (n.d.). Eight Elements of an Ethical Organization. Retrieved November 30, 2014, from http://www.entrepreneurship.org/resource-center/eight-elements-of-an-ethical-organization.aspx Archived 2016-12-02 at the Wayback Machine
  2. 1 2 3 Kelchner, L. (n.d.). The Importance of Ethics in Organizations. Retrieved November 30, 2014, from http://smallbusiness.chron.com/importance-ethics-organizations-20925.html
  3. ↑ "Culture, Morale, and Motivation in Organizations: An Overview" (PDF). December 2018.
  4. ↑ Svensson, Jakob, “Who Must Pay Bribes and How Much? Evidence from a Cross-Section of Firms,” Quarterly Journal of Economics, 118(2003), page 207
  5. ↑ Managing with Soul: Combining Corporate Integrity with the Bottom Line,” November 14, 2003, www.hreonline.com/HRE.
  6. ↑ Clark, Margaret M., JD., SPHR, "Corporate Ethics Programs Make a Difference, but not the only difference", HR Magazine, July 1, 2003, page 36.
  7. ↑ Peters, T.J., and Austin, N. ,(1985), Passion for Excellence: The Leadership difference. New York: Ballantine.
  8. ↑ Dricscoll, Dawn-Marie and Hoffman, W. Michael (2002). Ethics Matters: How to Implement Values-Driven Management
  9. ↑ McDaniel, Charlotte, (2004), Organizational Ethics: Research and Ethical Environments, page 39
  10. ↑ Dricscoll, Dawn-Marie and Hoffman, W. Michael, (2002), Ethics Matters: How to Implement Values-Driven Management, page 172
  11. ↑ D.A. Gioia, (1999), "Practicability, Paradigms, and Problems in Stakeholder Theorizing," Academy of Management Review, 24(2), pp. 228–232.
  12. ↑ Belak, Jernej (2011). "Informal and Formal Institutional Measures of Business Ethics Implementation at Different Stages of Enterprise Life Cycle" (PDF). Acta Polytechnica Hungarica. 8 (1): 106.
  13. ↑ Fraedrich, John (1990). Business Ethics: Ethical Decision Making and Cases. South Western College. p. 139. ISBN   9781111825164.
  14. ↑ Murphy, Patrick (1998). "Implementing Business Ethics". Journal of Business Ethics. 7: 907–915. hdl:10822/827633.
  15. ↑ "Citi | Investor Relations | Ethics Hotline". www.citigroup.com. Retrieved 2020-06-15.

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