Chapter 6

Organizational Culture and Ethical Decision Making

Organizational Structure & Business Ethics

in centralized organizations, decision-making authority is concentrated in the hands of top level managers & little authority is delegated to lower levelsin decentralized organizations, decision making authority is delegated as far down the chain of command as possibleeach structure has a unique influence on ethical decision making & behavior

Centralized Organizations...

stress formal rules, policies & procedures supported with systematic control systems

codes of ethics may specify the techniques for decision makers

tend to be very bureaucratic

the division of labor is well defined

Ethical Issues That May Arise in Centralized Organizations...

blame-shifting or ‘scape-goating’-transferring blame for ones’ actions to others

specialization limits the ability of the individual to understand how their actions affect the overall organization

because of minimal upward communication, top level managers may not be aware of problems

Decentralized Organizations...

have few formal rules, and coordination and control are usually informal and personal

are adaptable and are very aware of external change

managers can react quickly to changes in the external and internal environment

Ethical Issues That May Arise in Decentralized Organizations...

difficulty in responding quickly to changes in policy & procedures established by top management

employees have extensive decision making authority

The Role of Corporate Culture in Ethical Decision Making

culture gives members of an organization meaning & provides them with rules for behaving within the organization

a company’s history & unwritten rules are a part of its culture

some cultures are so strong they dictate the character of the entire organization to outsider

Organizational Culture...may be explicit statements of values, beliefs, and customs coming from upper management in the form of memos, codes, handbooks, manuals, forms & ceremonies

may be expressed informally through direct & indirect comments that convey management’s wishes: dress codes, promotions, legends, extracurricular activities

Ethics as a Component of Corporate Culture...

top management provides the blueprint of what a corporate culture should be

organizational ethical decisions have a strong impact on corporate culture

a failure to monitor & manage corporate culture may lead to questionable behavior

rewards & punishment need to be consistent with the corporate culture

Two Basic Dimensions Determine an Organization’s Culture...

concern for people-the organizations’ efforts to care for its employees well being

concern for performance-the organizations’ efforts to focus on output and employee productivity

Four Different Cultures Can Emerge

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

Role of Leadershipa leader must respect followers and provide a standard of ethical conduct

leadership style influences how employees act

leadership influence affects ethical behavior

managers can use rewards & punishment to encourage employees in behaviors that support the organization’s goals

Reward & Punishment Dimensions

performance contingent reward behavior -positive reinforcement for good behavior

contingent punishment behavior-negative reinforcement for poor behavior

noncontingent reward behavior-positive reinforcement regardless of behavior

noncontingent punishment behavior-negative reinforcement regardless of behavior

Role of Motivation

offers incentives to encourage employees to work toward organizational objectives

career stage, age, organization size, and geographic location influence needs

an individual’s hierarchy of needs may influence motivation & ethical behavior

The Role of Power

exerting power is one way to influence ethical behavior

reward power

coercive power

legitimate power

expert power

referent power

Group Influencesformal groups-committees, work groups, teams, quality circles

informal groups-‘grapevine’

group norms-standards of behavior acceptable in the group, define acceptable behavior, fosters conformity, may conflict with the organizational culture, & sanctions may be necessary to bring a nonconforming group into line with organizational expectations