1. Chapter 17 Organizational Culture and Ethical Behavior

2. What is Organizational Culture?
Shared values, beliefs, norms
influence the way employees think, feel, and behave towards each other and towards people outside the organization
Pattern of shared basic assumptions
An organization’s culture can promote work attitudes and behaviors that increase organizational effectiveness. This is because the organization’s culture controls the way employees perceive and respond to their environment, what they do with information, and how they make decision.

3. Building Blocks of Organizational Culture
Characteristics of people within the organization
Organizational ethics
Employment relationship
Organizational structure
National culture
Organizational culture is made up of 5 building blocks. These are listed above and discussed throughout the chapter.

4. What are Organizational Values?
Guiding principles
behaviors, events, situations, and outcomes are desirable or undesirable
Types
Terminal
Instrumental
There are two kinds of values: terminal and instrumental. A terminal value is a desired end state or outcome that people seek to achieve. An instrumental value is a desired mode or type of behavior. Examples are provided on the next slide.
An organization’s culture consists of the end states that the organization seeks to achieve (its terminal values) and the modes of behavior the organization encourages (its instrumental values). Ideally, instrumental values help the organization achieve its terminal values.

5. Terminal and Instrumental Values
Quality
Responsibility
Innovativeness
Excellence
Economy
Morality
Profitability
Instrumental
Working hard
Respecting traditions
Respecting authority
Being conservative
Being frugal
Being creative
Being honest
This slide provides examples of possible terminal values and instrumental values.

6. Figure 17.1 Terminal and Instrumental Values
Organizational Values
Terminal
Values
Instrumental
Values
This slide illustrates how an organization’s terminal and instrumental values ultimately lead to the development of specific norms, rules, and standard operating procedures that support the culture of the organization. These norms, rules, and SOPs encourage members of the organization to adopt certain terminal and instrumental values and behave in certain ways.
Norms are largely informal so many of the most crucial values an organization has are not written down.
Specific norms,
rules, and SOPs

7. Figure 17.2 Ways of Transmitting Organizational Culture
Formal socialization
practices
Ceremonial
Rites
and
Ceremonies
The
organizational
language
Employees
learn
through:
Employees learn the organization’s values from formal socialization practices, signs, symbols, stores, rites, ceremonies and organizational language.
Stories may be fact or fiction and can provide important clues about cultural values and norms. Stories can reveal the kinds of behaviors that the organization values and the kinds of practices it frowns upon. Studying the stories and language can reveal the values that guide behavior.
Because language is the principal medium of communication in organizations, the characteristic names or phrases a company uses to frame and describe events provide important clues about norms and values.
The concept of organizational language encompasses not only spoken language but how people dress, the offices they occupy, the company cars they drive, and how they formally address one another.
Organizational symbols convey an organization’s cultural values to its members and to others outside the organization. The very design of a building itself is a symbol of an organization’s values.
Signs, symbols, stories

8. Ceremonial Rites Rites of passage Rites of integration
Rites of enhancement
Organizations use several types of ceremonial rites to communicate cultural norms and values. Rites of passage mark an individual’s entry to, promotion in, and departure from the organization. Rites of integration such as shared announcements of organizational success, office parties, and company cookouts, build and reinforce common bonds between members. Rites of enhancement, like awards dinners and employee promotions, give an organization the opportunity to publicly acknowledge and reward employees’ contributions and thereby enhance their commitment to its values.

9. Figure 17.3 Where an Organization’s Culture Comes From
Characteristics of People
Within Organization
Organizational
Ethics
Nature of
Employment
Relationship
Organizational
Culture
Organizational culture is shaped by the interaction of four main factors. These factors work together to produce different cultures in different organizations and cause changes in culture over time.
The ultimate source of organizational culture is the people who make up the organization. Recall the attraction-selection-attrition model from Chapter 2. People inside an organization become more and more similar over time. The founder of an organization has a substantial influence on the organization’s initial culture because of his or her personal values and beliefs.
Organizational ethics is a class of values that an organization can purposefully develop. Ethical values rest on principles stressing the importance of treating everyone fairly and equally. The aspects of organizational ethics are discussed on the next slide.
The third factor shaping organizational culture is the nature of the employment relationship a company establishes with its employees via its human resources policies and practices. Human resources policies can influence how hard employees will work to achieve the organization’s goals, how attached they will be to it, and whether or not they will buy into its values and norms.
An organization’s structure can promote cultural values that foster integration and coordination.
Design of
Organizational Structure

10. Figure 17.4 Sources of Organizational Ethics
Societal
Ethics
Professional
Ethics
Individual
Ethics
The ethics of the country or society in which the organization exists are important determinants of its ethical values. Societal ethics are the moral values formalized in a society’s legal system, in its customs and practices and in the unwritten norms and values that its people follow in their daily lives.
Professional ethics are the moral values that a group of similarly trained people develop to control their performance of a task or use their resources. People internalize the values and norms of their professions just as they do the values and norms of their societies. They follow these norms when deciding how to behave.
Individual ethics are the personal values that people use to structure interactions with other people. In many instances, personal ethics mirror societal ethics and originate in the law. Personal ethics are also the result of an individual’s upbringing. Because personal ethics influence how a person will act in an organization, an organization’s culture is strongly affected by the people who are in a position to establish its ethical values.

11. Adaptive versus Inert Cultures
Adaptive Cultures
Values and norms help organization build momentum, grow, and change to achieve goals
Investment in employees
Merit rewards
Inert Cultures
Values and norms fail to motivate or inspire employees
Stagnation
Minimal investment in employees
Little incentive for improvement
This slide describes the differences between an adaptive culture and an inert culture. The values and norms present in adaptive cultures help the organization achieve its goals while those in the inert cultures do not. However, the values are reflective of the relationship between the organization and its employees. In adaptive cultures, the organization invests in employees and helps employees to meet their own goals as well. Inert cultures have a short-term mindset.

12. Hofstede’s Model of National Culture
Dimensions
Individualism vs Collectivism
Power Distance
Achievement vs Nurturing Orientation
Uncertainty Avoidance
Long-term vs Short-term Orientation
The values and norms of a nation have a profound impact on the culture of each and every organization operating or headquartered within it. Culture, whether organizational or national, is a product of the values and norms that people use to guide and control their behavior. On a national level, a country’s values and norms determine what kinds of attitudes and behaviors are acceptable or appropriate.
A model of national culture developed by Geert Hofstede argues that differences in the values and norms of different countries are captured by five dimensions of culture.
These dimensions are discussed on the following slides.

13. Individualism vs Collectivism
Individual achievement
Freedom
Competition
Example
United States
Collectivism
Group harmony
Cohesiveness
Consensus
Cooperation
Example
Japan
This dimension focuses on the values that govern the relationship between individuals and groups. The slide lists the values that are common under each extreme.
In collectivist cultures, the group is more important than the individual and group members follow norms that stress group rather than personal interests.

14. Power Distance High Inequalities exist Gap between rich and poor
Example
Guatemala
Malaysia
Low
Social welfare programs reduce gaps
Example
France
Germany
Power distance refers to the degree to which a country accepts the fact that differences in its citizens’ physical and intellectual capabilities give rise to inequalities in their well-being. This concept also measures the degree to which countries accept economic and social differences in wealth, status, and well-being as natural. Countries that allow inequalities to persist or increase are said to have high-power-distance. The gap between rich and poor grows very large. In countries that dislike the development of large inequality gaps, the power distance is low. These countries use taxation or social welfare programs to reduce inequality and improve the lot of the least fortunate members of society.

15. Achievement vs Nurturing Orientation
Assertiveness
Performance
Success
Competition
Results-oriented
Example
Japan
United States
Nurturing
Quality of life
warm personal relationships
Service
Caring
Example
Denmark
Sweden
This slide lists the values that are associated with this continuum. Examples of countries representing each extreme are provided.

16. Uncertainty Avoidance
Low
Easygoing
Value diversity
Tolerant of differences
Example
United States
Hong Kong
High
Rigid
Intolerant
Conformity
Structure
Example
Japan
France
Countries differ in their tolerance for uncertainty and willingness to take risks. The slide lists characteristics of each extreme and two examples.

17. Long-Term vs Short-Term Orientation
Thrift
Persistence
High savings rate
Patience
Example
Japan
Hong Kong
Short-term
Personal stability
Happiness
Living in the present
Example
United States
France
This slide lists characteristics of countries with long-term time perspectives and short-term time perspectives. Examples are provided.

18. Table 17.1 Culture Dimensions

19. Creating an Ethical Culture
Establish rules and norms that outline organization’s ethical position
Demonstrate commitment to following rules
Reduce incentives for unethical behavior
Creating an ethical culture is a major priority for many companies. These are steps management can take to instill an ethical culture.
Note that it is important for rules to be created; however, top management must demonstrate its commitment to ethical behavior by following those same rules.

20. Creating an Ethical Culture
Develop fair and equitable HR procedures
Provide access to upper-level managers
Encourage employees to voice concerns
Create a strong board of directors
Creating an ethical culture is a major priority for many companies. These are steps management can take to instill an ethical culture.
Note that it is important for rules to be created; however, top management must demonstrate its commitment to ethical behavior by following those same rules.

21. Why Does Unethical Behavior Occur?
Lapses in Individual Ethics
Ruthless Pursuit of Self-Interest
Outside Pressure
In theory, individuals learn how to behave ethically as they mature. But people can be lead to believe that any act is acceptable if it benefits you or your family or company.
We also confront ethical issues when we consider our personal interests against the effects our actions will have on others. Organizations that are doing poorly are the most likely to commit unethical and illegal acts.
Studies have also found that the likelihood of unethical or criminal behavior increases when people feel outside pressure to perform.

22. Opening Case: How 3M Built a Culture for Innovation
How does 3M’s culture affect creativity?
Cultural values and norms
Empowerment
Recognition
15% of time for personal projects
3M is known for its organizational skills that promote creativity and the innovation of new products. 3M aims to achieve at least 25% of its growth each year from new products developed in the previous 5 years. To promote creativity, 3M has developed cultural values and norms that strongly emphasize the need for employees to feel empowered, to experiment, and take risks to come up with new product ideas. For instance, 3M has developed an informal norm that researchers should spend 15% of their time to develop projects of their own choosing.