Archive for 2021-05-02

Overview

In a society where the needs and wants of consumers are constantly changing and demands are increasing, the main aim of the businesses are profit and sustainability in the long run (Terec-Vlad and Cucu, 2016). However, with the development of technology and awareness, consumers tend to buy from businesses that practice ethical conduct (Brinkmann, 2004).

This post aims to provide information on the role of ethics in organizational culture.

The relationship of ethics and culture

Ethics is simply doing the right thing (Krishnamurthy, 2011). Ethics is the ‘code of moral principles and values that governs the behaviors of a person or group with respect to what is right or wrong’ (Mihelič et al., 2010, p. 32).

‘Business ethics comprises moral principles and standards that guide behavior in the business world’ (Victoria, 2018). An ethical or unethical conduct in an organization is the result of one’s own characteristics and the context they live in, where organizational culture is the main context the employees refer to (Meyers, 2004).

Ardichvili et al., (2004) asserts that an ethical culture not only promotes employees taking a decision with respect to corporate responsibility towards the external environment and internal values of the organizational culture but also encourages employees to go an extra mile to choose the ethical decision when all choices seems right.

Ethics is practiced in the organizational culture and applicable to every employee irrespective of their designations, roles and responsibilities (Paliwal, 2006).

Creating an ethical culture

Build a culture of ethical employees, leaders and structures

Treviño et al., (2000) developed a framework which consisted of pillars that contribute towards building an ethical organizational culture. Figure 1 illustrates the three pillars of an ethical organizational culture which consists of Ethical Individuals, Ethical Leadership and Organization’s Structures and Systems.

Figure 1: Three Pillars of an Ethical Organization

Source: (Treviño et al., 2000).

Introduce an Ethics Program and an Ethics Officer

Greenburg (2002) suggests that an ethics program can be introduced to the organization which includes code of ethics, ethics training and ethics hotline. An ethics officer is a person who is in charge of ensuring ethical practices are carried out in the organization and the officer will be accountable to the ethics program introduced in the organization (Grigoropoulos, 2019).

Build the virtues of an ethical culture

Kaptein (2008) suggests that the extent to which 8 virtues namely; (clarity, congruency of management, congruency of supervisors, feasibility, supportability, transparency, discuss ability and sanction ability) are built will depend on creating a strong ethical culture.

Create a culture of integrity

Ethics officers should create a culture where the employees would speak up if there is something untoward happening in the organization that is not in align with the company procedures and conduct without being silent (Lennick and Kiel, 2005).

Verhezen (2010) suggests that ethical behavior is not about referring a legal guide line but internalized values and principles which should be created within the organization by transforming a culture of compliance to a culture of integrity.

Create a culture that promotes whistle-blowing

An organization should build a culture where the employees can reveal the unethical practices of the employer to the ethics committee or ethics officer of the organization and necessary action should be taken by the ethics committee without any partiality to the employer (Kaptein, 2011).

Ethical dilemmas and the negative impact of unethical behavior

An ethical dilemma occurs when an individual or a business is in a complex situation and a decision should be made with regard to the action that needs to be taken among many options available (Harrison, 2005).

In other words, ‘an ethical dilemma is a conflict between at least two ethical principles both of which could lead to an equally good or equally bad outcome’ (Tota and Shehu, 2012, p.557).

Every society in which a business operates expects a certain type of behavior and the organizations that disregard these societal expectations may lose reputation, loose profits and may face legal proceedings (Davidson and Griffin, 2000).

Similarly, Robbins and Judge (2013) asserts that unethical behavior can cause customer boycotts, fines, lawsuits, and government regulation of an organization’s practices.

Video 1 provides an insight to examples of ethical dilemmas, examples of famous businesses that failed due to unethical conduct, impact of ethics on different functions of the organization and how it can be improved.

Video 1: The impact of Business Ethics

Source: (The Business Mindset, 2020)

According to my own experience of ethical conduct in the banking industry, our bank ensures to promote ethical behavior with consideration to all stakeholders.

In the customer perspective, it is extremely important to maintain the integrity the customers have in us as we are handling highly confidential financial information of people. From the moment we joined the bank, we were communicated the bank’s written code of conduct and ethics and the importance of doing the right thing.

Likewise, the ethics, governance and compliance committee has created a culture of whistle-blowing where the unethical conduct can be reported confidentially and will be investigated independently.

The bank promotes an ethical culture, not just towards the customers and employees but towards the environment as well. We have an Environmental and Social Management System (ESMS) which provides the policy framework, implementation and monitoring mechanism to ensure that the finances extended to the customers are used for operations that are socially and economically sustainable and does not cause any environmental damage from their outputs (HNB, 2021). Similarly, all the employees have given a ‘green pledge’ to safeguard the environment, reduce wastage and help to minimize climate change.

In addition to that, during the COVID-19 pandemic, with the debt moratoriums granted by the bank in accordance with the Central Bank regulations, our bank felt that some customers were not granted the relief due to the eligibility criteria set in the CBSL regulations. Therefore our bank set an internal fund of 5 Million to grant SMEs a working capital loan with a concessionary interest rate to ensure that they can still carry on their functions amidst the pandemic.

When considering the repercussions of unethical conduct on a business, it is crucial for businesses to focus on maintaining ethical practices not just because of compliance but because it is the right thing to do (McMurrian and Matulich, 2006).

References

Ardichvili, A., Mitchell, J. and Jondle, D. (2009). Characteristics of Ethical Business Cultures. Journal of Business Ethics. 85(4). pp. 445-451. doi:10.1007/s10551-008-9782-4.

Brinkmann, J. (2004). Looking at consumer behavior in a moral perspective. Journal of Business Ethics. 51(2). pp. 129-141. Available at: https://www.jstor.org/stable/25379179 (Accessed: 5^th May 2021).

Davidson, P. and Griffin, R. (2000). Management Australia in a Global Context. Brisbane: John Wiley and Sons.

Greenburg, J. (2002). Who stole the money, and when? Individual and situational determinants of employee theft. Organizational Behavior and Human decision Processes. 89(1). pp. 985-1003. doi: 10.1016/S0749-5978(02)00039-0

Grigoropoulos, J. (2019). The Role of Ethics in 21st Century Organizations. International Journal of Progressive Education. 15(2). pp. 167-175. doi: 10.29329/ijpe.2019.189.12.

Harisson, M. (2005). An introduction to business and management ethics. New York: Palgrave Macmillan. doi: 10.1007/978-0-230-80225-4

HNB (2021). Environment. HNB. Available at: https://www.hnb.net/about-the-bank/sustainability-csr/environment (Accessed: 5^th May 2021).

Kaptein, M. (2011). From Inaction to External Whistleblowing: The Influence of the Ethical Culture of Organizations on Employee Responses to Observed Wrongdoing. Journal of Business Ethics. 98(3). pp. 513-530. doi: 10.1007/s10551-010-0591-1

Kaptein, M. (2008). Ethics Programs and Ethical Culture: A Next Step in Unraveling Their Multi-Faceted Relationship. Journal of Business Ethics. 89(2). pp. 261-281. doi: 10.1007/s10551-008-9998-3

Krishnamurthy, P. (2011). An Introduction to Ethics. SSRN Electronic Journal. pp. 1-26. doi:10.2139/ssrn.1781502.

Lennick, D. and Kiel, F. (2005). Moral Intelligence: Enhancing Business Performance and Leadership Success. New Jersey: Wharton School Publishing.

McMurrian, R. and Matulich, E. (2006). Building customer value and profitability with business ethics. Journal of Business and Economics Research. 4(11). pp. 11-18. doi: 10.19030/jber.v14i3.9748

Mihelič, K., Lipičnik, B. and Tekavčič, M. (2010). Ethical Leadership. International Journal of Management and Information Systems. 14(5). pp. 31-42. doi: 10.19030/ijmis.v14i5.11

Meyers, C. (2004). Institutional culture and individual behavior: Creating an ethical environment. Science and Engineering Ethics. 10. pp. 269-276. doi:10.1007/s11948-004-0022-8

Paliwal, M. (2006). Business Ethics. New Delhi: New Age Publications.

Robbins, S. and Judge, T. (2013). Organizational Behavior. 15^th edn. United States: Pearson Education.

Terec-Vlad, L. and Cucu, M. (2016). Ethics and Organizational Culture – Key Elements Regarding the Development of Economic Activities. Eco forum. 5(1). pp. 192-198. Available at: https://core.ac.uk/download/pdf/236086351.pdf (Accessed: 03^rd May 2021).

The Business Mindset. (2020).The importance of Business Ethics. Available at: https://www.youtube.com/watch?v=pHrDUu4Rjtg (Accessed: 5^th May 2021).

Tota, I. and Shehu, H. (2012). The Dilemma of Business Ethics. Procedia Economics and Finance. 3. pp. 555-559. doi:10.1016/S2212-5671(12)00195-5

Treviño, L., Hartman, L. and Brown, M. (2000). Moral Person and Moral Manager: How Executives Develop a Reputation for Ethical Leadership. California Management Review. 42(4). pp. 128-142. doi:10.2307/41166057

Verhezen, P. (2010). Giving Voice in a Culture of Silence. From a Culture of Compliance to a Culture of Integrity. Journal of Business Ethics. 96(2). pp. 187-206. doi: 10.1007/s10551-010-0458-5

Victoria, A. (2018). Business Ethics. Research Gate. doi:10.13140/RG.2.2.31350.86082

The concept of positive organizational culture derived from the theory of ‘Positive psychology’ which focuses on building the positive aspects and building the future of life rather than focusing only on the negative (Peterson and Spiker, 2005). At organizational level, ‘it is about the civic virtues and the institutions that move individuals toward better citizenship: responsibility, nurturance, altruism, civility, moderation, tolerance, and work ethic’ (Seligman and Csikszentmihalyi, 2000, p.5).

‘A positive organizational culture emphasizes building on employee strengths, rewards more than it punishes, and emphasizes individual vitality and growth’ (Robbins and Judge, 2013, p.527).

Employee Strengths

Luthans and Youssef (2007) asserts that every person has strengths and weaknesses, organizations with positive culture simply doesn’t ignore the weaknesses but emphasize on how employees can utilize the strengths to maximize their output while avoiding, managing and learning from weaknesses. Further, evidence suggests that emphasizing on their strengths is positively related to the success and well-being of the employees and organization (Lyubomirsky, King, and Diener, 2005).

Rewards

Most organizations tend to focus more on external rewards such as bonuses and promotions but they forget how much it means for humans to hear ‘words of praise’ which in turn makes the employees feels positive about themselves (Chapman and White, 2011). Cohen (2006) asserts that non-monetary rewards should be given as soon as the employee does something praiseworthy, identifying the type of personality the employee possess and should be given to employees who deserve it.

Similarly, Gostick and Elton (2009) suggests that if praise is not given during a short period, it is more likely the manager might forget it and the employee’s efforts maybe unnoticed.

Emphasizing Vitality and Growth

Martin (2004) suggests that a positive organizational culture increases job satisfaction, motivation and productivity in the organization.

A positive culture doesn’t merely emphasize on what the employees can do for the organization but also emphasize on what the organization can do for the employees by identifying their capacities, focusing on career progression and communicating the importance of their contribution to the organization (Feldman and Khardemian, 2003).

The Growing Importance of a Positive Culture

An organization with a positive culture has individuals with morally well-defined goals who are sensitive to the feelings and needs of others in the growing materialistic world (Fineman, 2006).

Sok et al. (2014) suggests that employees in a positive organizational culture has work life balance due to the flexibility provided by the organizations.

A positive organizational culture also acts as a buffer during the change process of an organization by emphasizing on the positive impact of the change (French and Holden, 2012).

A positive organizational culture increases employee engagement as there are positive relationships between employees, the ideas of them are taken in to consideration in the decision making process and it creates a culture of growth and development (Sirisetti, 2012).

Based on research, Video 1 focuses on how a positive organizational culture can be created.

Source: (HR Exchange Network, 2017)

Limitations of Positive Organizational Culture

Furedi (2003) asserts that in some instances employees who are pessimistic due to justifiable reasons and are not in a position to look at the positivity in their lives might think that they are odd or different which may negatively impact the mentality of them.

It is difficult to separate the negativity and positivity as many evidences suggests that positivity evolves from negative experiences so both of them are interrelated (Lazarus 2003).

Neglecting the negative aspects may give employees more freedom to deliberately make mistakes as they are aware that they will not be punished (Gliñska-Neweś and Glinka, 2019).

However, there is a lot of evidence that portrays how ‘positive psychology can be used to enhance employee engagement and change an organization’s culture’ (Parent and Lovelace, 2018 p.212).

When taking in to consideration the benefits of a positive organizational culture and how it has a positive relationship with productivity, employee engagement and performance, it is worthwhile for organizations to focus on creating positivity in the organization amidst the limitations.

References

Chapman, G. and White, P. (2011). The 5 languages of appreciation in the workplace: Empowering organizations by encouraging people. Chicago: Northfield.

Cohen, S. (2006). Compliment your staff with nonmonetary rewards. Journal of Nursing Management. 37(12). pp.10-14. [online] Available at: https://journals.lww.com/nursingmanagement/fulltext/2006/12000/compliment_your_staff_with_nonmonetary_rewards.4.aspx. (Accessed: 21^st April 2021).

Fineman, S. (2006). On being positive: concerns and counterpoints. Academy of Management Review. 31(2). pp. 270-291. doi: 10.2307/20159201.

Feldman, M. and Khardemian, A. (2003). Positive organizational scholarship: foundations of a new discipline. San Francisco: Berrett-Koehler.

French, S. and Holden, T. (2012). Positive organizational behavior: a buffer for bad news. Business Communication Quarterly. 75(2). pp. 208-220. doi: 10.1177/1080569912441823

Gostick, A. and Elton, C. (2009). The carrot principle: How the best managers use recognition to engage their people, retain talent and accelerate performance. London: Simon and Schuster.

Gliñska-Neweś, A. and Glinka, B. (2019). Does Negativity Counterpoint Positivity, or the Other Way Round? On Positive Organizational Scholarship. Management Issues. 17(4). pp.24-38. doi: 10.7172/1644-9584.84.2

HR Exchange Network. (2017). The 4 keys to a Positive Corporate Culture. [online] Available at: https://www.youtube.com/watch?v=MZcGj-eMH5o (Accessed: 12^th April 2021).

Lazarus, R. (2003). Does the Positive Psychology Movement Have Legs? Psychological Inquiry. 14(2). pp. 93–109. doi: 10.1207/S15327965PLI1402_02

Lyubomirsky, S., King, L., and Diener, E. (2005). The benefits of frequent positive affect: Does happiness lead to success. Psychological Bulletin. 131(6). pp. 803-855. doi: 10.1037/0033-2909.131.6.803

Luthans, F. and Youssef, C. (2007). Emerging Positive Organizational Behavior. Journal of Management. 33(3). pp. 321-349. doi: 10.1177/0149206307300814

Martin, A. (2005). The role of positive psychology in enhancing satisfaction, motivation, and productivity in the workplace. Journal of Organizational Behavior Management. 24(1-2). pp. 113-133. doi:10.1300/J075v24n01_07

Parent, J. and Lovelace, K. (2018). Employee engagement, positive organizational culture and individual adaptability. On the Horizon. 26(3). pp. 206-214. doi:10.1108/OTH-01-2018-0003

Peterson, S. and Spiker, B. (2005). Establishing the positive contributory value of older workers: A positive psychology perspective. Organizational Dynamics. 34(2). pp.153-167. doi: 10.1016/j.orgdyn.2005.03.002

Robbins, S. and Judge, T. (2013). Organizational Behavior. 15^th edn. United States: Pearson Education.

Seligman, M. and Csikszentmihalyi, M. (2000). Positive psychology: An Introduction. American Psychologist. 55(1), pp.5-14.

Sirisetti, S. (2012). Employee engagement culture. The Journal of Commerce. 4(1). pp. 72-74.

Sok, J., Blomme, R. and Tromp, D. (2014). Positive and negative spillover from work to home: the role of organizational culture and supportive arrangements. British Journal of Management. 25(3). pp. 456-472.doi: 10.1111/1467-8551.12058.

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