Managing Business Ethics Chapter 5 Treviño & Nelson – 5th Edition

Chapter 5 Overview Organizational Ethics as Culture Ethical Culture: A Multisystem Framework Ethical Leadership Other Formal Cultural Systems Informal Cultural Systems Organizational Climates: Fairness, Benevolence, Self-Interest, Principles Developing and Changing Ethical Culture A Cultural Approach to Changing Organizational Ethics The Ethics of Managing Organizational Ethics

Influence of Culture on Individuals Individual Differences Ethical Awareness Ethical Judgment Ethical Action Ethical Culture

Organizational Culture Expresses shared assumptions, values and beliefs and is the social glue that holds the organization together. It’s “how we do things around here.” Strong - assumptions, values, beliefs widely shared Weak - subgroup norms more influential

Culture A body of learned beliefs, traditions, and guides for behavior shared among members of a society or a group

Ethical Culture: A Multisystem Approach Formal Systems Informal Systems Executive Leadership Selection System Policies/Codes Orientation/Training Performance Management Authority Structure Decision Processes Role Models/Heroes Norms Rituals Myths/Stories Language Ethical/ Unethical Behavior Alignment?

Alignment and Misalignment With alignment, all systems are “pushing” employees in the same direction – either ethical or unethical With misalignment, employees get mixed messages about expectations

Leadership Executive Leaders Create Culture Leaders Maintain or Change Organizational Culture Ethical Leadership and Ethical Culture Unethical Leadership Hypocritical Leadership Ethically Neutral or “Silent” Leadership

Executive Ethical Leadership Rests on Two Pillars Moral Person Tells followers how leader behaves Traits Honesty Integrity, Trust Behaviors Openness Concern for people Personal morality Decision-making Values based Fair Moral Manager Tells followers how they should behave and holds them accountable Role modeling Takes visible ethical action Rewards/Discipline Hold people accountable for ethical conduct Communicating Sends an “ethics and values” message

Executive Ethical Leadership Reputation Matrix Hypocritical leader Ethical leader Unethical leader Strong Weak Moral Manager Moral Person Ethically neutral leader

Other Formal Cultural Systems Selection Systems Values and Mission Statements Policies and Codes Orientation and Training Programs Performance Management Systems Organizational Authority Structure Decision-making Processes

Informal Cultural Systems Role Models and Heroes Norms: “The Way We Do Things Around Here” Rituals Myths and Stories Language

Ethical Climates Fairness Benevolence Self-Interest Principles

Ethical Culture Change From ethical to unethical From unethical to ethical

Ethical Culture Change Long-term view Systems view Diagnose/Audit Intervene Evaluate