Ethics and Strategic Planning
Lecture 4
Organisational Values and Culture
Company’s Name – Tommy’s Toys
Nature of Biz : Toy industry’s manufacturer
Mission : serve a better child creativity
Improve kids skills and creativity
Good ads
Eventually: event
Majinlong - claypot
Mission: open the usual. All the things good/success
Buy a stall
Design a place
Hire employee
Mission: provide happiness through perfect event
Compare with other person
Design and adv
Ethical Thought
“In fact, meaningful leadership – leadership that in the long run counts for something – cannot be accompanied by moral collapse. The leader who acts ethically will ultimately succeed. The leader who lacks in ethical foundation will ultimately fail.”
Willard C. Butcher, retired chairman of Chase Manhattan Corporation
A model of the ethical decision-making process
Strategic Planning: the process in which future courses of action are developed to achieve the firm’s short and long term goals.
Mirror Test: involves the decision maker’s ability to look in the mirror after decisions have been made and state that he/she made the right choice
Individual characteristics:
Individual differences
Cognitive biases
Individual ethical decision-making & behavior
Organizational characteristics:
Group & organizational pressures
Organizational culture
Body Shop – mission and core values
“The business of business should not just be about money, it should be about responsibility. It should be about public good, not private greed.”
5 core Values: Support Community
Fair Trade,
Defend Human Rights,
Against Animal Testing,
Activate Self-Esteem,
Protect Our Planet.
Wakenhut’s Core Values
Customer focus
Partnership
Employees
Professionalism
Benchmarking
Innovation and versatility
A Manager’s Ability to Develop Trust, Commitment and Effort
The ability of managers to effectively identify and answer questions that guide the decision making process:
Moral problems – What is duty?
Moral reasoning – What is right?
Moral courage – What is integrity?
Net result will be the development of trust, commitment and effort among the firm’s stakeholders
The Role of Power and Influence in Ethical Decisions
Abuse of power can lead to rampant unethical behavior, resulting in the ultimate demise of the organization (examples: WorldCom and Enron)
Using power in an ethical manner:
Power being exercised to benefit others who have granted the decision maker the power with the expectation that the decision maker will serve others
Power conforms to both the legal and accepted cultural standards of what is considered to be ethical behavior
Influence: the ability to change the viewpoint of another person based on your verbal and nonverbal actions.
Manipulation: occurs when the true intentions of the person are hidden and may only be evident after the decision has been implemented.
The Curse of Unethical Cultures-Factors that affect whether an employee will commit fraud
Financial condition of the organization
Pressure to show profits in the marketplace
Internal accounting controls
The state of the economy
Integrity level of corporate leaders and employees
Commitment to the organization’s value system
Personal traits and characteristics of executives and employees
Reward systems for ethical behavior
Organizational culture and dynamics
Peer pressure
The perception of detection
The swiftness, certainty, and severity of punishment
The Responsibility of Managers
A strong ethical value system can be translated into a competitive advantage
Used by a firm to help differentiate the firm’s products and services in the marketplace
May help convince potential customers to purchase goods and services
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Addressing Ethical Decision Making from a Global Perspective
Egoism: refers to individuals who view decisions based on their self interests.
Utilitarianism: refers to making decisions that do the greatest good for the greatest number of people.
Formalism: focuses on ethical issues based on what the laws and norms of society represent instead of the actual content of the laws
Virtue ethics: refers to individuals who believe that ethical behavior is based on a set of virtues that are morally valid without any consideration to the action or the subsequent outcome.
Moral relativism: refers to being able to define ethical behavior based on the context of certain peers of the individual
Ethical Decision Making and Ethical Leadership
Habits of strong ethical leaders:
Ethical leaders have strong personal character.
Ethical leaders have a passion to do right.
Ethical leaders are proactive
Ethical leaders consider stakeholder’s interests
Ethical leaders are role models for the organisation’s value.
Ethical leaders are transparent and active
Ethical leaders are competent and holistic
in perspective.
Ethical Leadership: A Link Between Strategic Planning and Corporate Culture
Traits: fairly stable and predictable personal characteristics that would remain consistent over time
Integrity: the quality of being honest & having strong moral principles
Honesty: the quality of being honest
Trustworthiness: able to be relied on as honest or truthful
Behaviors: must be consistent with what the manager is saying
Do the right thing
Concern for people
Being open
Personal morality
Moral Manager
Transfer of moral value within the moral manager to those he/she interacts with is based on how the moral manager is able to communicate the ethical values to others
Should be a role model of ethical behavior – actions become models for subordinates
All supervisors are not moral persons nor are they moral managers
Decision Making
Hold on to values
Objective/fair
Concern for society
Follow ethical decision rules
Moral Persons and Moral Managers
Unethical Leader
Weak moral person and weak moral managers
Drive to reward their own self-interests.
Ethical Leader
Should be the ultimate ethical goal of any manager
Ability to use grounded ethical characteristics and transfer them to others within the organization through the characteristics of a moral manager
Hypocritical Leader
Manager has destroyed all three of the critical traits of a moral person
Inconsistent Leader
A manager who has strong ethical traits, behaviors and decision making of a moral person, but is not able to transfer those values to other employees
Inconsistent because of the contradictory strength of the individual moral values and weak characteristics of a moral manager
Corporate Culture
The shared values and beliefs of employees within any given organization
Based on the norms and behavior patterns
Can be used by a firm to establish structural stability and integration of different components within the firm
Unethical Activities
False/misleading promises to customers
Violation of workplace health/safety rules
Employment discrimination
Violation of employee rights to privacy
Sexual harassment or hostile work environment
Carelessness with confidential/proprietary information
Activities posing a conflict of interest
False/misleading information to the public or media
Unfair competition/antitrust
Substance abuse
Environmental breaches
Offering or paying bribes to foreign officials
Falsifying product quality/safety test results
Offering improper gifts, favors, or entertainment to influence others
Shipping a product that does not meet quality/safety standards
Dishonesty/unfair treatment of suppliers
Falsification/improper manipulation of financial data
Embezzling funds or stealing from the organization
Making false/misleading statements to government regulators
False/misleading information to investors or creditors
Trading company shares based on insider information
Improper political contribution to domestic officials
Three Levels Existing with Corporate Culture
Artifacts: factors such as what is seen and heard within a firm
Shared Values: based on what groups within the firm learn about what is acceptable or not acceptable
Basic Assumptions: the agreed starting point for decision making within the firm; linchpin for the establishment and maintenance of an ethical culture
How Managers Can Change a Corporate Culture
a) Primary Embedding Mechanisms
- control and measure on regular basis
- teaching and coaching
b) Secondary Articulation and Reinforcement Mechanisms
- organisation design and structure
- organisational systems and processes
How to Change Ethical Values
Three stage model – ‘cognitive redefinition’:
Stage 1: Unfreezing of the individual’s existing beliefs
Stage 2: Occurs when the beliefs have been unfrozen and the perceptions and attitudes of the individual are allowed to move to a new state
Stage 3: The refreezing takes place
Changing Corporate Culture
Management’s Responsibility:
Verify that ethical decisions are made by all levels of employees
Develop an organization culture that supports the ethical decision making process
Formalizing a culture of ethics:
Define your philosophy and corporate values in a mission statement
Develop guidelines for employees
Establish a formal channel for employees to report violations
Creating a Climate of Integrity
Set an example through strong leadership
Set realistic goals
Provide training
Distinguish between compliance and ethics
Role of a Code of Ethics
Code of ethics: a written document that explicitly states what acceptable and unacceptable behaviors are for all of the employees in the organization.
Represents the identification and interpretation of what the firm considers acceptable behavior
Components impacting the development of the ethical standards of the firm:
Social value
Institutional factors
Personal factors (gender,age, education and nationality)
Organizational factors (corporate culture, ethical culture etc)
Rewards (intrinsic and extrinsic rewards)
Four types of statements a company may adopt to communicate the corporation’s view of the subject of ethics:
Values Statements
Corporate Credos
Codes of Ethics
Internet Privacy Policies
Purpose of a Code of Ethics – achieving internal organisational goals
Code allows firm to declare its ethical vision to all stakeholders
Companies should consider four ethical values when developing a code of ethics:
Integrity
Justice
Competence
Utility
internal stakeholders
external stakeholders
achieving internal organisational goals
Raise ethical awareness and expectations by establishing standards of morally acceptable behaviour within an organisation.
Prevent unethical behaviour by stipulating that specific conduct will not be tolerated by the organisation.
Promote ethical behaviour by articulating the ethical values that should guide members of the organisation in their actions and decisions.
Promote organisational integration and co-ordination – strengthen the commitment of employees and management to the organisation.
satisfying external stakeholders
Promote the reputation of the organisations amongst its external stakeholders.
Pacify external stakeholders (i.e special interest groups) who might have expressed concern about specific aspects of an organisation’s actions
Deflect state interference in the internal affairs of a business.
Format of the Code of Ethics
Two basic formats:-
Aspirational Codes – a short document that spells outs the ethical values that should guide behaviour in an organisation.
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Benefits: concise and brief document, discretion of people to apply appropriate ethical values
Weaknesses: does not provide specific ethical guidance
Content of a Code of Ethics
Categories in codes of ethics:
Rationale for the code
Ethical values or standards
Guidelines for conduct
Sanctions
References for resources
Code of Ethics Content Areas
Fiduciary responsibilities
Compliance
Accounting
Governance
Member communications and confidentiality
Commitment to learning and skill enhancement
Absence of prejudice and harassment
Conflict of interest
Human resources
Cooperation with other credit unions
Social responsibility
Managing Ethics in Organisations – The Role Players
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The Ethics Audit
Systematic evaluation of an organization’s ethics program and performance to determine whether it is effective
Regular, complete, and documented measurements of compliance with policies and procedures
Can be a precursor to establishing an ethics program
Helps to identify the firm’s current ethical standards, policies, and risk areas
The Social Audit
Process of accessing and reporting a business’s performance in fulfilling the economic, legal, ethical, and philanthropic responsibilities expected by its stakeholders
Broader in scope than an ethics audit
An ethics audit might be a component of a social audit
An ethics audit might be a component of a social audit
Benefits of an Ethics Audit
Identify potential risks and liabilities and improve legal compliance
Can be key in improving organizational performance
Improved relationships with stakeholders
Pressure to account for actions in areas including corporate governance, ethics programs, customer relationships, employee relations, environmental policies, and community involvement
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The Auditing Process
Secure top management and board commitment
Establish an ethics audit committee
Define the scope of the audit
Review the organizational mission, goals, and values
Collect and analyze relevant information
Verify the results through an outside agent
Report the findings to
Audit committee, managers, and stakeholders
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Strategic Importance of Ethics Auditing
Should be conducted regularly
Provide a benchmark of overall effectiveness of ethics initiatives
Can be important in asset allocation and program development
Can demonstrate the positive impact of ethical conduct and social responsibility initiatives on the firm’s bottom line
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