UNIT 2 ORGANIZATIONAL ETHICS Structure 2.0 Introduction 2.1, Unit Objectives 2.2: Ethical Corporate Behaviour 2.3 Development of Ethical Corporate Behaviour 2.4 Ethical Leadership 2.5 Summary Answers to ‘Check Your Progress’ 2.7. Exercises and Questions 2.8 Further Reading 2.0 INTRODUCTION To understand the term ‘organizational ethics’, one has to first try and understand the two terms ‘organization’ and ‘ethics’. An organization is a collection | of individuals with a common mission while ‘ethics may be de an attempt “or endeavour by individuals, io understand what is ‘right’ or ‘wrong’. Ethics is concemed with the critical analysis of situations, Organizational design and follow a:set of core principle or concepts in that attempt to develop ethical corporate behaviour. 2.1 UNIT OBJECTIVES This unit teaches you about: * The collective scope of organizational ethics © Corporate code of ethics * Framing.a code of conduct * Managing ethics in an organization ¢ Roles and responsibilities in ethics management 2.2 ETHICAL CORPORATE BEHAVIOUR Organizational ethics is used to consider the issues of morality and rationality in y organizations. Organizational ethics is completely different from management ethics, Management ethics focuses on the ethical, quality of the decisions and Actions taken by managers o ganization, Thus, management ethics deal s | with thei ls in ‘the organization and organiz:the clivities of an organization, Therefore, orp nizational el : scope izational ethics is collective in Organizational ethical issues can be handled at three levels. These level ‘ec levels. These levels are: n Le Corporate mission y y y _ Constituency relations N wa |e Policies and practices Corporate mission refers to the objectives of an organization that are used to & define its ethical responsibilities Corporate mission also reflects the ambitions and expectations of the employees. Employees should be integrated in a good | manner to achieve the corporate mission. | Constituency relations define the responsibilities of the elements of an | organization. The elements of an organization may be employees, customers. | supplies, shareholders and the general public. These responsibilities must be handled properly to manage the ethical conduct of business. | Organizational ethics can also be used to evaluate the policies and practices of the | organizations. Public commitment to ethical principles can give way to business and administrative practices. ends on the type of the organization. Organizations Organizational ethics also dept concems. can be classified by considering their economic and ethical Organizations can be classified into four types. These are Jow economic and ethical concems are ¢ Exploitative: Organizations with These organizations utilize child labour called exploitative organizations. and use rivers for dumping wastes to maximize their profits. e Manipulative: Organizations with high economic performance concerns and low ethical concerns are called manipulative organizations. These organizations use tax laws, labour laws and union leaders to maximize profit. ms and low economic « Hblistic: Organizations with high ethical concel zations spend their | concems are called holistic organizations. These organi money in social and environmental purposes. « Balanced: Balanced organizations have high ethical an concerns. These types of organizations gain profit as well | social and environmental purposes. | eas 5 ure 1.3 shows the different types of organizations classif ethical issues. 1d economic as work for fied by economic and |Holistic |__| Batancea Exploitative Manipulati Low, 4 Jee, High Econoumc Issues Figure 2.1: Different Types of Organizations 2.2.1 Corporate Code of Ethics individual acts. Snoeyenbos and Jewell define three the organization. These elements are: + Implementing the corporate ethical code Introducing an ethics committee ° Introducing a mana; training clements to implement ethical behaviour in gement training programme that includes ethics conduct in the corporate structure. These Buide and regulate the behaviour of the Organizations. can-translate the human core Ethical codes for discipline Proper code of dressing Avoiding abusive language ot actions * Punctuality } © Legalistic ethical codes Always following instructions from superiors Performance of fair performance appraisals ; Personal and cultural ethical codes© Not using official property for personal use «Performance of ood quality of work \ + Having initiative © Conservation of resources and protection of quality of environment ‘ | Advantages of a Code of Ethie of a code of ethics are die outside pressure \ Some of the advant |e Cade of ethies can be used to han n making overall strategic decisions. |e They can also be used ir d fine and implement the policies of the ) © These codes can be used to de! | organization and distribute work between the employees. | | «Code of ethics cam be used to optimize the public image and confidence | of the organization. | © They can be used to increase the skills and knowledge of the individuals. - ‘ | e Code of ethics can also be used to respond to the different issues of } l stakeholders. | © These codes of ethics can be used to discourage improper requests from | employees. | «They can also strengthen the enterprise system. | 23 DEVELOPMENT OF ETHICAL CORPORATE BEHAVIOUR | -The approaches to business ethics can be classified into the following areas: |e Identifying practical issues and assigning responsibilities | «Analysing existing practices and framing a code of conduct | ° Raising fundamental philosophical problems | 2.3.1 Identifying Practical Issues and Assigning Responsibilities | This approach explores various kinds of ethical issues that can arise in business and society. Business activities should be conducted in such a way that they do | not cause any harm to the society. The various ethical issues that can arise I" business and society are: | © Employee rights © Ethical business conducts | + Environmental protection © Child labour in business © Discrepancies in the wages of women employees © Bonded labour Exploitation of unorganized labour + Minimum wages © Obligations of large and multinational corporationsSome organizations implement benchmarki and F 2.3.2 Analysing Existing Practice Conduct ming a Code of This approach deals with the subject of public policy and with the identification of unethical practices. There are various areas of conduct that require some amount of government regulation Such areas include product liability, worker rights, environmental problems. white-collar crimes and child labour, This approach also deals with the ethical guidelines that provide benchmarking for the decision-making process. Benchmarking Benchmarking is one of the trends or perspectives that can be used by the management for the purpose of organizational development. Benchmarking can be defined as a process of comparing the works and service methods against the best practices and best outcomes. Benchmarking acts as a powerful agent for change and motivation that helps in organizational development. Benchmarking basically focuses on identifying changes that can result in higher-quality output by incorporating different organizational behaviour techniques. The process of benchmarking involves looking both inside and outside the organization for | identifying the methods that can be used for organizational development. | Benchmarking facilitates organizational development by _ identifying improvement strategies. It enables the organization to leam from other | organizations. Jt also helps in the relocation of resources that speed up | organizational development. Benchmarking is also used to train and develop | human resources to ensure efficient performance that is comparable to the | performance of competitors. Benchmarking involves team activity. In benchmarking, a team activity should be I. encouraged by seeking new ideas, suggestions and cooperation through a process | of external consultation, Benchmarking also involves introducing new ways of | - working that utilize the talents and abilities of the employees working in an | organization. The active involvement of employees at all levels ensures their | interest and commitment, which is essential for organizational development. In an organization, the internal teams which are used to obtain and analyse data related to benchmarking are responsible for recommending changes and improvements in order to support organization development. There are basically three types of benchmarking: internal benchmarking, functional benchmarking and competitive |~ benchmarking. Internal benchmarking is carried out between closely related | divisions or similar plants of the organization. This type of benchmarking uses shared performance parameters as a basis for comparison. Functional bench- | marking is a more positive approach than internal benchmarking. Functional | benchmarking is used to compare performance parameters of similar business |+ units of different organizations. It is also used to compare various procedures | followed by the organizations for the purpése of organizational development. | Competitive benchmarking uses customer requirements as a parameter for | comparing the performance of the organization against other companies that are | best in the industry. This helps in identifying’ the areas which should be targeted | for improvement, in order to ensure organizational development. ing at the start of the projects. This which is responsible for defining the hich benchmarking will be used. strategy begins with the formation of a team, goals of the project and identifying the areas in wr day-to-day activities Other organizations use benchmarking to carry out hel : al n » strategies (0 reduce The examples include the development of benchmarking ae ee oF customers served per hour manufacturing. set up time, increase in the number ¢ F custome r n equence af steps involved 1n an and cut in the delivery time. The following is the s | effective benchmarking process: ed to be benchmarked. These business processes i all J calibre and training © Determine the key performance areas that ne! | include products and services, customers. departments and organizations, business custure an of employees. © Identify the most relevant competitors al | relevant industry. |. Set the key standards and variables that need (o be measured. + Measure the standard variables regularly and objectively’ | © Develop an action plan to gain or maintain superiority over competitors «Specify programmes and actions to implement the action plan and | monitor the ongoing performance of the organization. nd best organization in the | 2.3.3 Fundamental Philosophical Problems ‘Under this approach, business ethics can be defined as an attempt to Keep ethical obligations. This approach deals with the relationship of the individual and the | Society and it is used to identify the area of development of the society and its culture Italso focuses on the differences between personal morality and social morality The main aim of this approach is to identify and define business values. Business values ‘A business value refers to a set of beliefs pursued by an organization. Business values like ‘customer satisfaction’, ‘enthusiatic teamwork’ and ‘state-of-the-art provision for production’ are some of the commonly pursued values by several organizations | When such values are pursued effectively and with zeal by executing them in the daily activities of the management and the employees of the organization, they are believed to pay back in manifold returns and success. Pursuing business values plays a vital role in the growth and survival tactics ofan organization. In general, the most common values that facilitate in improving profits and the | image of the organization are as follows: : | . | ¢ Persistent progress: It refers to an cagerness and enthusiasm on the part of the organization to keep its functioning as an ever efficient and up-10~ date working endeavour towards progress. + Customer satisfaction: It refers to making the customers feel important and responding to their needs, interests and, if need be, providing solutions to their problems in ‘case of any documentation processes regarding the purchase of the organization's product a Personnel development: When it comes S e 's to development, organizations can benefit more by developing the skills of their employ ces, Besides considering the satisfaction of its customers and mani geaietl “it shouldwwe Ww wo oy ow ot owe ow algo take into account the satisfaction of its employees, which in tum can yield sincere work performance from the employces. © Innovation: It refers to the enthusiasm to take on new challenges and responsibilities on the part of the employees and a desire to diversify and (ry out new ventures on the part of the organization. It refers to making sincere efforts to enhance Optimal use of resources ¢ organization's overall business performance by maximum utilization of th current resources. 2.4 ETHICAL LEADERSHIP Importance of Leaders in an Organization A leader is an integral part of an organization, because it is the leader who helps “The organization to achieve the goals and objectives, The various reasons why the Jeaders are important for an organization are as follows: ‘A leader acts as a friend to the employees he is leading. enizes the potentialities of the individuals and transforms + A leader reco, them into realities, _s-A leader wins the confidence of the employees of an organization. | *” A leader unites the people as a team and builds up team spirit. | «A leader maintains discipline among his group and develops a sense of | responsibility among them. + A leader builds up a high moral ~— organization. =X leader motivates his group in order to achieve the goal of.an organization. «A leader maintains the ethical standards among the employees of an organization. A leader acts as a link between the organization. lc among the employees of the sand objectives | work groups and the forces outside the | Leadership is a form of management, and can be defined as the art of getting things done by others. Thus, the term management divides all the employees of the organization into two groups. These groups are: Managers: Managers are the individuals in the o responsible for directing the activities of others. Workers: Workers are the individuals who are wor of the managers of. leaders. | ganization who are ” king under the control Leadership involves planning, organizing and controlling the resources of the f eee tn so a: (0 ACHIEVE ie goals and objectives che organization. Ti Gers of the organization-make.some. rules to coordina’ and control their “pordinates in the right manner, These rules can_be determined bythe environment and the culture of the organiZation. These rules also define the | elationship of the managers with their ‘subordinates and peers, These rules | ¢ termed as descriptive ethics defined by the managers of the organization ar Poet no one is forced to follow them. These rules are the contextual and moral |I si iy. The guidelines that the managers derive from thelt personal moral philosophy. Th y c yamizational fnoral awareness of the managers ean be ascertained PY the organization administration. ‘ and conduct of the Management ethics in an organization deals with the morality and ou ote individuals and the responsibilities of the Framagement.TWerefone, HVE, management or ethical leadership deals with issucs relating to — | misbehaviour and the m conduct of the management | | 2.4.1 Ethical Issues in Organizations | Theie exist many different ethical issues the organization or at the workplace. | Some of them are: | Identifying the conflict issues in the organization and trying (© avoid them «Deciding different methods to motivate employees Managing fairness in employee performance appraisals «Protecting secret information of the organization «Identifying the areas of interest of customers, employees, suppliers, owners and the staff «Taking action against the reports of complaints in the organization «Handling different problems of employees | + Taking corrective action against employees Fthies management programmes are used by the organizations 10 manage ethics dane workplace. According to Brain Schrag, “Ethics programy: convey corporate values using codes and policies to guide decisions and behaviour, and | can include extensive raining and evaluating, depending on the organization’ | Ethics management programmes are nade up of values, policies and activities | that can affect the behaviour of the organization. Managing ethics as a programme is advantageous to organizations in many ways. Some of the advantages are that: These programmes can assign an independent role to each individual in the organization to manage ethics. + Ethics management can provide the necessary operating values and behaviour to the organizations. «These programmes are used to align the operating values and behaviour. «Ethics management programmes are used to schedule different ethical requirements. These programmes are used to make the organizations aware of ethical issues. These programmes provide structural mechanis: : | problems. isms to handle ethical They also provide some guidelines to decision-making Fasssine for Managing Ethics in Organizations \ guidelines for managing the ethics in organizations are: . | | Identify ethics management as a process: Ethi r j ess: Ethics i provide operating values and associated Petar smelter: )ry 2.4.3, Roles and Responsibilities in Ethics Management Each individual in the organization should be provided a specific role in managing ethics in the organization. However, the role assigned to cach individual depends on the size and nature of the organization. The roles can also be full-time or part-time. The following responsibilities can be assigned in ethics management: are process-oriented because the operating values are determined by ongoing reflection. The deliverables of the ethics programmes, such as codes, policies and procedures, budget times and m produced directly, However. the process of reflection and dialogue cling minutes, are not deliverables are produced by the Use ethics programmes to manage behaviour in organi ethical values provided by the ethical programmes can be used to direct behaviour in the workplace. Therefore, cthical management practices, in addition to cthical values, should also generate deliverables. These deliverables can be used to transform ethical values into behaviour. Avoid ethical dilemma: The codes of ethics and the codes of conduct can | be used to minimize the occurrences of ethical dilemma. Combine ethics management with other management practice: Ethical management should be integrated with other management practices. While developing strategic planning, ethical values of the | organization should be considered. While developing personnel policies, determine the ethical values that are most effective for the environment of the organization and then implement policies to produce these kinds of behaviour. Develop ethics management programmes using cross-functional teams: The employees of the organization should be included in the development and implementation of the ethics management programmes. Value maintenance: Ethics management programmes may increase the ethics of people in the beginning because of the sensitivity of people on | their occurrence. However, people should remain ethical on the implementation of these ethics management programmes. The chief executive officer of the organization must support the ethics management programme. A committee or group should be developed in the organization to control | the development and operation of the ethics management programme. | A committee or group should be developed which should be responsible for training the employees on the policies and procedures of the ethics management programme and should resolve any ethical dilemmas that / may arise. This committee can contain senior officers. A person in the organization should be designated as ombudsperson who has the responsibility of investigating or resolving complaints from the | employees of the organization against the ethics management programme. | Each person of the organization is responsible for the implementation of | the ethics management programme.Typical American Organization Usually, employment is short-term. Layoffs are quite common. Lateral job mobility is also common Performance evaluations and promotions are relatively fast. Career paths are very specialized. People tend to stay in the same area, such as accounting, and become experts in their area. Decisions are carried out by individual managers who are responsible for the outcome of such decisions. The control systems are very explicit via policies, rules and guidelines and people are expected to strictly follow these guidelines. The organization is concerned primarily with the worker’s work life and his role in the organization. Typical Japanese Organization Fairly long-term, usually lifetime employment. Rigorous evaluation and slow promotion. People are primarily generalists and they become familiar with all areas of operations. Collective decision making is the norm. Primary reliance is on implicit control (self-control). People rely heavily on trust and good will. The organization is concerned with the whole life of the worker, business as well as personal and social. A -t vthae aan thanah hath American as.