Balberan, Jan Maxin R.             ITETHICS                               March 1, 2008

MANAGING BUSINESS ETHICS

Straight Talk About How To Do It Right

Linda Trevino, Katherine Nelson

Section IV – Ethics and the Organization

Chapter 8: Ethical Problems of Organization

There has been increased concern in recent years over the state of business ethics. The media is responding to the public’s concern over ethics by providing more coverage of ethical falls by organization. It’s easy to wonder if any organization is doing the right thing.

There are thousands of organizations who struggle everyday to uphold an ethical standard. If you try to imagine the hundreds of thousands of transactions that occur, and then think about how many you hear about as being illegal or unethical, the proportion of wrongdoers is probably quite small. However, there are those few who do cross the line. Catastrophes can strike a corporation without warning. They aren’t the result of corporate wrongdoing; rather, they are bolts from the blue sabotage. Although some are basically “accidents” and the company or organization is initially a victim, they can become ethical tragedies depending on how a company reacts. A company’s behavior in a crisis says a lot about what the company stands for. Because a crisis strikes suddenly and unexpectedly, a company frequently becomes more widely know than the event that prompted it.

Some are ethical lapses that result form a purposeful activity. The company, in other words, has been an active participant in its won mess. It has made it own bed, so to speak, and it’s in trouble because of a conscious action or decision it has taken. The ethical dilemma may result form ignorance, negligence, arrogance, and sometimes because of plain old greed.

Other company may have made an unconscious mistake. It has instituted a process, or introduced a product, or is somehow involved in another kind of activity that has a profoundly different outcome than the company expected. The company may have begun with the best of intentions, but they ended the other way around.

Ethical issues involve key stakeholder such as consumers, shareholder, employees, and the environment of the organization. The four main stakeholders are treated with fairness. The cost of bungling an ethical obligation to any of the four major stakeholder groups cannot only be crippling, but it also can be fatal. Just as individuals who cross the line can short circuit their careers or end up fired or prosecuted, organizations pay the same kind of price: their ability to function can be severely limited and they can be even be forced out business. At the very least, if a company’s misdeeds are discovered, they will most certainly be criticized in the press and by the public. Their reputation can suffer long-term damage that may be impossible to repair. And we must remember that no industry, and real no company, has been immune form ethical problems and unethical employees. It is a matter of how we handle the problem.

Chapter 9: Ethics as Organizational Culture

Culture has become a common way of thinking about and describing an organization’s internal world- a way differentiating culture one organization’s personally from another.

The theme we should remember is that a “cookie cutter” or “one size fits all” approach to developing an ethical organization simply will not work. Ethics is an integral part of the organization’s overall culture. Therefore, designing an ethical organization means systematically analyzing all aspects of the organization’s culture and aligning them so that they support ethical behavior and discourage unethical behavior. This kind of analysis and alignment requires and sustained effort over a long period of time.

Standard cookie cutter ethics programs are likely to be ineffective because organizations don’t have cookie cutter ethical problems. Although common ethical problems exist across virtually all organizations, organizations may vary in terms of the ethical problems that are most common or important for them. Thus, each organization must identify and address the unique ethical problem that is faces.

Second, no matter how well-intentioned the organizations are, cookie-cutter efforts are likely to be short lived or ineffective because they tend to be superficial, leaving deeper system unanalyzed and untouched.

Rather than the cookie-cutter approach, organizations that are serious about ethics must proactively develop an ethical culture. Cultures are complex combinations of formal and informal systems. To create an ethical culture, these systems must be aligned to support ethical behavior.

Many organizations guide employee’s behavior through formal organizational value statements, mission statements, credos, policies, and formal codes of ethical conduct. Generally, value and mission statements, and credos are abstract and general statements of guiding beliefs. Formal ethics codes are longer and more detailed, providing guidance about behavior in specific situations. Policy manuals are even lengthier and include more detailed list of rules covering a multitude of job situations. 

In additions to the formal systems, describe before, organizational culture is kept alive informally and symbolically through informal norms, heroes, rituals, myths, and stories. Information about these is carried through informal communication systems such as the grapevine. In this way, people come to know what behaviors are really rewarded, how decisions are really made, and what organizational leaders really expect. If the formal and informal systems are out of alignment, people are more likely to believe the messages carried by the formal system. Therefore, management of these informal systems is extremely important.

An organization that wishes to develop or change its ethical culture must attend to the complex interplay of formal and informal systems that can support either ethical or unethical behavior. Thus, quick-fix solutions are not likely to succeed. A broad, multi-system approach to developing and changing organizational ethics was outlined to guide organizations in diagnosing, and if necessary, and changing their ethical culture.

Chapter 10: Creating an Ethical Organizational Culture – Model Ethics Program

Organization details specific principles, programs, and communication mechanisms that contribute to building and maintaining an ethical organizational culture. Organization begins by having ethics infrastructure, the structure within which ethics programs and communications take place.

In many organizations, ethics is managed by a corporate committee staffed by senior-level managers from a variety of functional areas. This committee is setup to provide “ethical oversight and policy guidance for CEO and management decisions.” It also represents an affirmation that top management really cares about ethics.

Within the ethics infrastructure, good communication – downward, upward, and two ways – is essential if an organization is to have a strong, aligned ethics culture. The organization must evaluate the current state of ethics communication and initiatives. It must communicate it values, standards, and policies in a variety of formal and informal ways that meet its employees’ needs. These communication efforts should be synergetic, clear, consistent, and credible.

            When most people think of a corporate communications system, they think of the obvious – the company newspaper, the annual report, and other written materials. However, like culture, a corporate communications system consists of formal and informal components. Formal communications include all written communications like newspapers, magazines, memos, recruiting literature, policy manuals, annual reports, and advertising, as well as formalized oral communication like meetings, and speeches. But, perhaps the most powerful component in a corporation’s communications system is the informal component – the grapevine. The grapevine which is a continual stream of information among employees about “what’s really going on” - exists in very organization.

The company’s ethics message can and should be communicated in a wide variety of ways. The most obvious ethics communication channels include a mission or value statement, a code of conduct, policy statements, a formal whistle blowing process, and communications from leaders. In addition to these, the ethics message needs to be reinforced in all printed materials including recruiting and orientation materials, newsletters and magazines. Specific ethics-related printed materials can also be developed.

Ethics is actually managed in organization – through an ethics infrastructure and a synergetic system of ethics communications that is closely tied to the organization’s culture. Communications must be credible and appropriate to the organization’s audience. In general, a combined commitment/compliance approaches to ethics management with an emphasis on commitment. Employees will learn, through a variety of communications channels, which the organization really cares about ethics and is committed to its values. They will also learn that violations of the organization’s rules will not be tolerated.