Corporate Culture, Ethics and Leadership

Corporate Culture Organizational Culture Values, beliefs, behaviors, customs, and attitudes that help the members of the organization understand what it stands for, how it does things, and what it considers important

Corporate Culture The Importance of Organization Culture Culture determines the overall “feel” of the organization, although it may vary across different segments of the organization Culture is a powerful force that can shape the firm’s overall effectiveness and long-term success

Corporate Culture Determinants of Organizational Culture Organization’s founder (personal values and beliefs) Symbols, stories, heroes, slogans, and ceremonies that embody and personify the spirit of the organization Corporate success that strengthens the culture. Shared experiences that bond organizational members together

Corporate Culture Managing Organizational Culture Understand the current culture to decide whether to maintain or change it Articulate the culture through slogans, ceremonies, and shared experiences Reward and promote people whose behaviors are consistent with desired cultural values

Corporate Culture Changing Organizational Culture Develop a clear idea of what kind of culture you want to create Bring in outsiders to important managerial positions Adopt new slogans, stories, ceremonies, and purposely break with tradition

Ethics and Culture Ethics Ethical Behavior An individual’s personal beliefs regarding what is right and wrong or good and bad. Ethical Behavior This behavior is in the eye of the beholder. However, it also refers to behavior that conforms to generally accepted social norms. Problems occur in ambiguous situations that can be interpreted in different ways. Examples of Unethical Behavior “Borrowing” office supplies for personal use, “Surfing the Net” on company time. Filing falsified or inflated business expense reports.

Ethics and Culture Managing Ethical Behavior Must begin with top management Top management establishes the organization’s culture and defines what will and will not be acceptable behavior Provide training on how to handle different ethical dilemmas

Ethics and Culture Managing Ethical Behavior (cont’d) Develop a written code of ethics A formal, written statement of the values and ethical standards that guides a firm’s actions Individual issues Behavior and conscience Privacy

Employees Organization • Conflicts of interest Secrecy and confidentiality Honesty Hiring and firing Wages and working conditions Privacy and respect Subject to ethical ambiguities Advertising and promotions Ordering and purchasing Bargaining and negotiation Financial disclosure Shipping and solicitation Other business relationships Economic Agents Customers Competitors Stockholders Suppliers Dealers Unions Actors: Three basic areas of concern for managerial ethics are the relationships of the firm to the employee, the employee to the firm, and the firm to other economic agents. Figure 4.1

Ethics in Organizations Individual Values + Organizational Values = Managerial Values

Applying Ethical Judgments Model for deciding whether or not a particular action or decision is ethical Gather relevant factual information. Determine the most appropriate moral values. Make a judgment based on the rightness or wrongness of the proposed activity or policy. Ethical Norms Affecting Actions Utility—act optimizes what is best for its constituencies (benefits only or primarily those who are directly involved) Rights—act respects the rights of others involved Justice—act is consistent with what is considered fair Caring—act is consistent with people’s responsibilities to each other

Social Responsibility and Organizations The set of obligations (to behave responsibly) that an organization has to protect and enhance the social context in which it functions. Areas of Social Responsibility Stakeholders Customers, employees, and investors The natural environment Environmentally sensitive products, recycling, public safety The general social welfare Charitable contributions, support for social issues such as child labor and human rights

Arguments For and Against Social Responsibility 1. Business creates problems and should therefore help solve them. 2. Corporations are citizens in our society. 3. Business often has the resources necessary to solve problems. 4. Business is a partner in our society, along with the govern- ment and the general population. Social Responsibility The purpose of business in U.S. society is to generate profit for owners. Involvement in social programs gives business too much power. There is potential for conflicts of interest. Business lacks the expertise to manage social programs. Arguments For Social Responsibility Arguments Against Social Responsibility Figure 4.4

Approaches to Social Responsibility Degree of Social Responsibility Accommodative stance Obstructionist Defensive Proactive Lowest Highest Figure 4.5

Approaches to Social Responsibility (cont’d) Obstructionist Stance (Unconcerned) Do as little as possible to solve social or environmental problems. Defensive Stance (Damage Control) Do only what is legally required and nothing more. Accommodative Stance (Compliance) Meet legal and ethical obligations and go beyond that in selected cases. Proactive Stance (Ethical Culture) Organization views itself as a citizen and proactively seeks opportunities to contribute to society.

How Business and the Government Influence Each Other The government influences business through direct and indirect regulation: • Environmental protection legislation Consumer protection legislation Employee protection legislation Securities legislation The tax codes Business influences the government through: Personal contacts and networks Lobbying Political action committees (PACs) Favors and other influence tactics Figure 4.6

Managing Social Responsibility: Formal Dimensions Legal Compliance Extent to which the organization conforms to local, state, federal, and international laws. Ethical Compliance Extent to which members of the organization follow basic ethical/legal standards of behavior. Philanthropic Giving Awarding of funds or gifts to charities and other social programs.

Managing Social Responsibility: Informal Dimensions Organizational Leadership and Culture Leadership practices and the culture of the organization can help define the social responsibility stance an organization and its members will adopt. Whistle Blowing The organizational response to the disclosure by an employee of illegal or unethical conduct on the part of others within the organization is indicative of the organization’s stance on social responsibility.

Leadership Leaders What leaders actually do People who can influence the behaviors of others without having to rely on force People who are accepted as leaders by others What leaders actually do Using non-coercive influence to shape the group’s or organization’s goals Motivating others’ behavior toward goals Helping to define organizational culture

Leadership

Leadership Power and Leadership Legitimate power is granted through the organizational hierarchy Reward power is the power to give or withhold rewards Coercive power is the capability to force compliance by means of psychological, emotional, or physical threat Referent power is the personal power that accrues to someone based on identification, imitation, loyalty, or charisma Expert power is derived from the possession of information or expertise

Leadership Using Power Legitimate request Instrumental compliance Compliance by a subordinate with a manager’s request because the organization has given the manager the right to make the request Instrumental compliance A subordinate complies with a manager’s request to get the rewards that the manager controls Coercion Threatening to fire, punish, or reprimand subordinates if they do not do something Rational persuasion Convincing subordinates that compliance is in their own best interest

Leadership Using Power (cont’d) Personal identification Using the referent power of a superior’s desired behaviors to shape the behavior of a subordinate Inspirational appeal Influencing a subordinate’s behavior through an appeal to a set of higher ideals or values (e.g., loyalty) Information distortion Withholding or distorting information (which may create an unethical situation) to influence subordinates’ behavior

Exerting Strategic Leadership Stay on top of how well things are going Stay current with internal and external information, reports, etc. Communicate regularly with colleagues, subordinates and customers Keep abreast of rivals’ initiatives MBWA

Exerting Strategic Leadership Establish a strategy-supportive culture Stakeholders are king Challenge the status quo Management must listen to customers Sell the strategic initiatives to groups and individuals throughout the organization Recognize and reward those who lead the change

Exerting Strategic Leadership Keep the organization responsive and innovative Empower “champions” Encourage creativity and innovation Allow champions to fail Offer organizational support Make rewards large and visible Lead the process to develop new capabilities

Exerting Strategic Leadership Exercise ethics leadership Lead by example Have written policies and guidelines Enforce compliance Encourage whistleblowers Promote good corporate citizenship Make corrective adjustments as needed