Organizational Factors: The Role of Culture and Relationships C H A P T E R 7.

Organizational Factors: The Role of Culture and

Relationships

C H A P T E R 7

Ethical Corporate Culture

• Corporate culture includes the behavioral patterns, concepts, values, ceremonies, and rituals that take place in the organization – Gives members of the

organization meaning and the internal rules of behavior

• All organizations have culture

Source: © Jack Hollingsworth/Corbis

Corporate Culture

• May be formal statements of values, beliefs, and customs – Coming from upper management in the form of

memos, codes, manuals, forms and ceremonies• May be informal through direct or indirect comments

conveying management’s wishes– Dress codes, promotions, extracurricular

activities

Two Dimensions of Organizational 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

Source: Digital Vision

Perceived Tone and Culture of the CEO and Other Executives

Four Organizational Culture Types

• 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 cultural audit is an assessment of the organization’s values– Usually conducted by outside consultants

A Framework of Organizational Culture Typologies

Ethics and Corporate Culture

• Corporate culture is a significant factor in ethical decision making

• If a firm’s culture encourages/rewards/does not monitor unethical behavior, its employees may act unethically

• Ethical issues can arise because of conflicts between the culture perceived by management and that actually at work in the organization

Source: Digital Vision

Compliance versus Value-Based Culture

• Compliance-based cultures use their legal departments to determine ethical risk– Revolves around risk management, not

ethics• Values-based cultures relies on an explicit

mission statement that defines the firm and stakeholder relations– Focus on values, not laws

Differential Association

• The idea that people learn ethical/unethical behavior while interacting with others– Studies support that

differential association affects ethical decision making

– Superiors have a strong influence on subordinates

Source: S. Pearce/PhotoLink

Whistle Blowing

• Exposing an employer’s wrongdoing to outsiders (external to the company)

– e.g. the media or government regulatory agencies

• Interpersonal conflict ensues when employees think they know the right course of action, yet the company promotes a different decision

• The Sarbanes–Oxley Act and the FSGO has institutionalized whistle-blowing to encourage discovery of misconduct

Reasons Why Employees Do Not Report Misconduct

Some employees remain reticent to be a whistle blower and to report misconduct.

Leaders Can Influence Corporate Culture

• Power refers to the influence that leaders and managers have over the behavior and decisions of subordinates.– An individual has power

when his/her presence causes people to behave differently

• Power and influence shape corporate culture

Source: Triangle Images

Five Power Bases

• 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

Motivation

• A force within the individual that focuses behavior toward achieving a goal

• An individual’s hierarchy of needs may influence 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 over time

Organizational Structure and Business Ethics

• In a centralized organization, decision-making authority is concentrated in the hands of top-level managers

– Little authority delegated to lower levels• In a decentralized organization, decision-making

authority is delegated as far down the chain of command as possible

Examples of Centralized/Decentralized Corporate Cultures

Groups in Corporate Structure and Culture

• Formal groups– Committees, work groups and teams

• Informal groups – The “grapevine”

• Group norms– Standards of behavior acceptable in the

group– Define acceptable/unacceptable behavior within

the group

Variation in Employee Conduct (The 10/40/40/10 Rule)

Can People Control Their Own Actions Within a Corporate Culture?

• Organizational ethical decisions often made by committees and formal and informal groups

• Many decisions are beyond the influence of individuals

• Individuals entering the business will need several years of experience to understand how to resolve ethical issues

The Importance of Corporate Culture

• According to the Ethics Resource Center, corporate culture is the number one most important factor in limiting misconduct

• Executives must make maintaining an ethical culture a top priority

Source: © Jack Hollingsworth/Corbis