Creating Ethical and Positive Organisational Culture Yu Fu Email: yu.fu@heig-vd.ch

Organisational Behaviour 2 Learning objectives How organisational culture is created? How can we create ethical organisational culture? What is corporate social responsibility? What are the challenges for developing positive organisational culture? Organisational Behaviour 2

How Organisational Culture is Created Culture is developed over time from : An organisation’s history, composed of traditions and rituals that are passed to succeeding generations. Stories of heroes and heroines are important. Values and beliefs that are embodied in the traditions and rituals. Behavioural norms that result (e.g., bell schedules, 7-period day). Organisational Behaviour 2

How Organisational Culture is Created Organisational culture has a powerful impact on climate: Rosabeth Moss Kanter’s study of successful U.S. corporations. High performers have a “culture of pride.” This is found in organisations that are integrative. This culture fosters a climate of success. Organisational Behaviour 2

How Organisational Culture is Created Subunits within an organisation may have cultures of their own resulting in multiple cultures. Theory X administrators believe this conflicts with their authority. Theory Y administrators accept them as natural. Organisational Behaviour 2

Organisational Behaviour 2 How a Culture Begins? An organisation’s current customs, traditions, and general way of doing things are largely due to what it has done before and the degree of success it had with those endeavours. The ultimate source of an organisation’s culture is its founders. Organisational Behaviour 2

Organisational Behaviour 2 How a Culture Begins? The founders of an organisation They have a vision of what the organisation should be. They are unconstrained by previous customs for doing things or ideologies. The small size of any new organisation further facilitates the founders’ imposition of their vision on all organisational members. The organisation’s culture results from the interaction between the founders’ biases and assumptions and what the original members learn subsequently from their own experiences. Organisational Behaviour 2

Organisational Behaviour 2 How a Culture Begins? Microsoft’s culture is largely a reflection of co-founder and current CEO, Bill Gates. Gates himself is aggressive, competitive, and highly disciplined. Those are the same adjectives often used to describe the software giant he heads. Organisational Behaviour 2

Keeping a Culture Alive Once a culture is in place, practices within the organisation act to maintain it by exposing employees to a set of similar experiences. An organisation’s human resource practices reinforce its culture. Three forces play a particularly important part in sustaining a culture—selection practices, the actions of top management, and socialisation methods. Organisational Behaviour 2

Keeping a Culture Alive Selection The explicit goal of the selection process is to identify and hire individuals who have the knowledge, skills, and abilities to perform the jobs within the organisation successfully. With multiple candidates, the final decision about who is hired will be significantly influenced by the decision maker’s judgment of how well the candidates will fit into the organisation. This results in the hiring of people who have common values. The selection process also gives applicants information about the organisation. Candidates who perceive a conflict between their values and those of the organisation can self-select themselves out of the applicant pool. Organisational Behaviour 2

Keeping a Culture Alive Top Management The actions of top management have a major impact on an organisation’s culture. What they say and how they behave establish norms that filter down through the organisation. Organisational Behaviour 2

Keeping a Culture Alive Socialisation No matter how good a job the organisation does in recruiting and selection, new employees are not fully indoctrinated in the organisation’s culture. New employees are potentially the most likely to disturb the beliefs and customs that are in place. The organisation will, therefore, want to help new employees adapt to its culture. This adaptation process is called socialisation. The most critical socialisation stage is at the time of entry into the organisation. Employees who fail to learn the essential or pivotal role behaviours risk being labelled nonconformists or rebels and, ultimately, being expelled. Organisational Behaviour 2

Keeping a Culture Alive Socialisation The process that helps new employees adapt to the organisation’s culture. The diversity paradox Organisational Behaviour 2

Keeping a Culture Alive The first stage encompasses all the learning that occurs before a new member joins the organisation. In the second stage, the new employee sees what the organisation is really like and confronts the likelihood that expectations and reality may diverge. In the third stage, the relatively long-lasting changes take place. The new employee masters the skills required for his or her job, successfully performs his or her new roles, and makes the adjustments to his or her work group’s values and norms. Organisational Behaviour 2

Organisational Behaviour 2 How Cultures Form The original culture is derived from the founder’s philosophy. This strongly influences the criteria used in hiring. The actions of the current top management set the general climate of what is acceptable behaviour and what is not. Employee socialisation depends on the degree of success achieved in matching new employees’ values to those of the organisation in the se-lection process and top management’s preference for socialisation methods. Organisational Behaviour 2

How cultures are embedded in organisations Formal/public statements Physical Layout Slogans, co. lingo Mentoring, modeling Explicit rewards, promotion criteria Stories, legends, myths Processes and outcomes, measurement Workflow and systems Organisational Behaviour 2

Organisational Behaviour 2 Strategies for building, reinforcing, and changing organisational culture Directly modifying the visible aspects of culture. Changing the lessons to be drawn from common stories. Setting the tone for a culture and for cultural change. Fostering a culture that addresses questions of external adaptation and internal integration. Organisational Behaviour 2

Ethical Values and Social Responsibility Ethics Ethics refer to the code of moral principles and values that govern the behaviours of a person or group with respect to what is right or wrong Managerial Ethics Ethical decisions go far beyond behaviours governed by law Managerial ethics guide the decisions and behaviours of managers Organisational Behaviour 2

Sources of Individual Ethical Principles and Actions Organisational Behaviour 2

Relationship between the Rule of Law and Ethical Standards Organisational Behaviour 2

Corporate Social Responsibility (CSR) Does it pay to be good? Extension of the idea of managerial ethics Management’s obligation to make choices and take action that positively impact stakeholders Increase in social responsibility Customers and public are paying closer attention to what organisations do Social responsibility can enhance a firm’s reputation Organisational Behaviour 2

How Managers Shape Culture and Ethics Value-Based Leadership Formal Structure and Systems Structure Disclosure Mechanisms Code of Ethics Training Programs Managers play key role in providing leadership and examples of ethical behaviour Organisational Behaviour 2

Characteristics of Values-Based Leaders Organisational Behaviour 2

Corporate Culture and Ethics in a Global Environment The global environment presents tough ethical challenges Countries have varied attitudes and beliefs Components that characterize a global culture: Multicultural rather than national values Basing status on merit rather than nationality Managers must think broadly about ethics Social audits measure and report ethical, social, and environmental impact of a company’s operation Organisational Behaviour 2

The Nature of Cultural Influences an Organisation’s Ethical Climate An organisational culture most likely to shape high ethical standards is high in risk tolerance, low to moderate in aggressiveness, and focuses on means as well as outcomes. If the culture is strong and supports high ethical standards, it should have a very powerful and positive influence on employee behavior. Example—Johnson & Johnson has a strong culture that has long stressed corporate obliga­tions to customers, employees, the community, and shareholders, in that order. Organisational Behaviour 2

Practices for creating a more ethical culture Be a visible role model—Employees will look to top-management behavior as a bench­mark for appropriate behavior. Communicate ethical expectations—An organisational code of ethics should state the organisation’s primary values and the ethical rules that employees are expected to follow. Visibly reward ethical acts and punish unethical ones—Performance appraisals of man­agers should include a point-by-point evaluation of how their decisions measured against the organisation’s code of ethics. Provide ethical training—Use training sessions to reinforce the organisation’s standards of con­duct, to clarify what practices are and are not permissible, and to address possible eth­ical dilemmas. Provide protective mechanisms—The organisation needs to provide formal mechanisms so that employees can discuss ethical dilemmas and report unethical behavior without fear of reprimand. Organisational Behaviour 2

Organisational Behaviour 2 Design Essentials Cultural and ethical values help determine the organisation’s social capital and can contribute to success Managers can use rites and ceremonies, stories, symbols, structures, control systems, and power relationships to influence culture Subcultures may emerge even in strong cultures Organisational Behaviour 2

Organisational Behaviour 2 Design Essentials Strong cultures can be constructive or non-constructive Managerial ethics and corporate responsibility are important aspects of organisational values Managers can shape culture and ethics through formal systems Social audits are important tools for companies trying to maintain high ethical standards Organisational Behaviour 2

Constructive Versus Non-Constructive Cultures Organisational Behaviour 2

Challenges to Developing Positive, Cohesive Culture Merger or Acquisition Developing a global organisational culture Developing an ethical organisational culture Developing a culture of empowerment and quality Organisational Behaviour 2