Organizational Ethics is the ethics of an organization, and it is how an organization ethically responds to an internal or external stimulus. Organizational ethics is interdependent with the organizational culture. Although, it is akin to both organizational behavior (OB) and business ethics on the micro and macro levels, organizational ethics is neither OB, 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.
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The Foreign Corrupt Practices Act (FCPA) restricts U.S. firms from engaging in bribery and other illegal practices internationally. There are laws that have the same type of prohibition for European companies. These laws create a disadvantage competitively for both European and U.S. firms.[1] Such laws are not a restricting element to organizations that have highly elevated ethical behavior as part of their values. Organizations that do not have an outlook for positive ethical practices as part of their cultures, usually lead to their own demise, such as, Enron and WorldCom by their questionable accounting practices. The converse is generally true, organizations that have integrity and encouraging ethical practices as part of their culture are viewed with respect by their employees, community, and corresponding industries. [2] Thereby, the positive ethical outlook of an organization results in a solid financial bottom-line, because of greater sales along with their ability to retain and attract new and talented personnel. 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 and less time to train new employees, which in turn allows for greater output of services (or production of goods).
There are at least four elements which exist in organizations that make ethical behavior conducive within an organization. The four elements necessary to quantify an organization's ethics are: 1) written code of ethics and standards; 2) ethics training to executives, managers, and employees; 3) availability for advice on ethical situations (i.e, advice lines or offices); and 4) systems for confidential reporting.[3]
Good leaders strive to create a better and more ethical organization. Restoring an ethical climate in organization is critical, as it is a key component in solving the many other organizational development and ethical behavior issues facing the organization.
The intrinsic and extrinsic rewards of an ethical organization are tethered to the organizational culture and business ethics of an organization. Based upon the reliability and support structure of each of the four areas needed for ethical behavior, then the organizational ethics will be evident throughout the organization. The organization, the employees, and other entities will receive intrinsic and extrinsic rewards. Actions of employees can range from whistle blowing (intrinsic) to the extraordinary actions of an hourly employee buying all the peanut butter (as produced by his employer), because the labels were not centered, and he knew that his employer (extrinsic) would reimburse him in full.[4]
Above and beyond is a standard part of the operational and strategic plans for organizations that have positive organizational ethics. Above and beyond the quarterly or yearly income statements, an entity will plan for its employees by offering “wellness programs” along with general health coverage, and/or a viable stable retirement plan. Further, an organization will allow for paid maternity leave, or even paid time off for new parents after an adoption. Other perks may include, “on-site” childcare, flextime for work hours, employee education reimbursement, and even telecommuting for various days during a week. All the above are just a few examples of employee benefits that quality organizations offer to their employees. These benefits are not mandates by law, and they represent only a few of benefits that best known corporations and firms offer to their employees throughout the world.
There are many theories and organizational studies that are coarsely 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. As among these areas, it is the influence of leadership in any organization that cannot go unexamined, because they must have a clear understanding of the direction of the organization’s vision, goals (to include immediate and long term strategic plans), and values. It is the leadership that sets the tone for organizational impression management (strategic actions taken by an organization to create a positive image to both internal and external publics). In turn, leadership directly influences the 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 are generally center upon “values for business” as the theoretical approach that most leaders select to present to their "co-members" (which in truth maybe subordinates). In fact, an examination of business methodology reveals that most leaders approach the ethical theory from the perspective of values for business. [5][6] Importantly, as transverse alongside of presenting the vision, values, and goals of the organization, the leadership should infuse a spirit of empowerment to its members. In particular, leadership using this management style of empowerment for their subordinates is based upon view of: “Achieving organizational ownership of company values is a continuous process of communication, discussion, and debate throughout all areas of the organization” [7]as.
Whether it is a team, small group, or a large international entity, the ability for any organization to reason, act rationally, and respond ethically is paramount. Leadership must have the ability to recognize the needs of its members (or called “stakeholders” in some theories or models), especially, the very basics of a person’s desire to belong and fit into the organization. It is the stakeholder theory that implies that all stakeholders (or individuals) must be treated equally regardless of the fact that some people will obviously contribute more than others to an organization. [8] Leadership has to not only place aside each of their individual (or personal) ambitions (along with any prejudice) in order to present the goals of the organization, but they have to also have the stakeholders engaged for the benefit of the organization. Further, it is leadership that has to be able to influence the stakeholders by presenting the strong minority voice in order to move the organization’s members towards ethical behavior. Importantly, the leadership (or stakeholder management) has to have the desire, will, and the skills to ensure that the other stakeholders’ voices are respected within the organization, and leadership has to ensure that those other voices are not expressing views (or needs as in respects to Maslow's Hierarchy of Needs) that are not shared by the larger majority of the members (or stakeholders). Therefore, stakeholder management, as well as, any other leadership of organizations have to take upon themselves the arduous task of ensuring an “ethics system” for their own management styles, personalities, systems, performances, plans, policies, strategies, productivity, openness, and even risk(s) within their cultures or industries.
The function of developing and the implantation of an “ethics system” is difficult, because there is no clear, nor any singular decisive way that is able to be presented as a standard across the board for any organization – as due to each organization’s own culture. Also, the implementation should be done accordingly to the entire areas of operations within the organization. If it is not implemented pragmatically and with empathic caution for the needs, desires, and personalities (consider the Big Five personality traits) of the stakeholders, or the culture, then unethical views may be taken by the stakeholders, or even unethical behavior throughout the organization. Therefore, although, it may require a great deal of time, stakeholder management should consider the Rational Decision-Making Model for implementation of various aspects of an ethical system to the stakeholders. If implantation is done successfully, then all stakeholders (not just the leadership) have accepted the task of benchmarking not only the implantation of an “ethics system”, but each stakeholder feels empowered for the moment to moment daily decisions that are ethically positive for the organization. When executed timely and with care, then all stakeholders (including leadership) will have at the very less a positive and functional success as the basis for continuous improvement (or kaizen) to present as the norm for its organizational ethics.
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