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 organizationCulture 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 organizationCorporate success that strengthens the culture.Shared experiences that bond organizational members together

Corporate Culture

Managing Organizational CultureUnderstand the current culture to decide whether to maintain or change itArticulate the culture through slogans, ceremonies, and shared experiencesReward and promote people whose behaviors are consistent with desired cultural values

Corporate Culture

Changing Organizational CultureDevelop a clear idea of what kind of culture you want to createBring in outsiders to important managerial positionsAdopt new slogans, stories, ceremonies, and purposely break with tradition

Ethics and CultureEthics

An individual’s personal beliefs regarding what is right and wrong or good and bad.

Ethical BehaviorThis 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 BehaviorMust begin with top management Top management establishes the organization’s culture and defines what will and will not be acceptable behaviorProvide 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

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

Actors:

Individual ValuesIndividual Values

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Organizational ValuesOrganizational Values

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Managerial ValuesManagerial Values

Ethics in Organizations

Applying Ethical JudgmentsModel 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 ActionsUtility—act optimizes what is best for its constituencies (benefits only or primarily those who are directly involved)Rights—act respects the rights of others involvedJustice—act is consistent with what is considered fairCaring—act is consistent with people’s responsibilities to each other

Social Responsibility and Organizations

Social ResponsibilityThe set of obligations (to behave responsibly) that an organization has to protect and enhance the social context in which it functions.

Areas of Social ResponsibilityStakeholders• 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 andshould therefore help solve them.

2. Corporations are citizens in oursociety.

3. Business often has the resourcesnecessary to solve problems.

4. Business is a partner in oursociety, along with the govern-ment and the general population.

SocialResponsibility

4. The purpose of business in U.S.society is to generate profitfor owners.

2. Involvement in social programsgives business too much power.

3. There is potential for conflictsof interest.

1. Business lacks the expertise tomanage social programs.

Arguments For Social Responsibility Arguments Against Social Responsibility

Figure 4.4

Approaches to Social Responsibility

Degree of Social Responsibility

Accommodativestance

Obstructioniststance

Defensivestance

Proactivestance

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 GovernmentInfluence Each Other

TheGovernment

Business

The government influences businessthrough 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 DimensionsLegal Compliance

Extent to which the organization conforms to local, state, federal, and international laws.

Ethical ComplianceExtent to which members of the organization follow basic ethical/legal standards of behavior.

Philanthropic GivingAwarding of funds or gifts to charities and other social programs.

Managing Social Responsibility:Informal Dimensions

Organizational Leadership and CultureLeadership practices and the culture of the organization can help define the social responsibility stance an organization and its members will adopt.

Whistle BlowingThe 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

LeadersPeople who can influence the behaviors of others without having to rely on forcePeople who are accepted as leaders by others

What leaders actually doUsing non-coercive influence to shape the group’s or organization’s goalsMotivating others’ behavior toward goalsHelping to define organizational culture

Leadership

Leadership Activity Management

Establishing direction and vision for the organization

Creating an agenda Planning and budgeting, allocating resources

Aligning people through communications and actions

that provide direction

Developing a human network for achieving the agenda

Organizing and staffing, structuring and monitoring

implementation

Motivating and inspiring by satisfying needs

Executing plans Controlling and problem solving

Produces useful change and new approaches to challenges

Outcomes Produces predictability and order and attains results

Leadership

Power and LeadershipLegitimate power is granted through the organizational hierarchyReward power is the power to give or withhold rewardsCoercive power is the capability to force compliance by means of psychological, emotional, or physical threatReferent power is the personal power that accrues to someone based on identification, imitation, loyalty, or charismaExpert power is derived from the possession of information or expertise

LeadershipUsing Power

Legitimate request• 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 controlsCoercion

• 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 customersKeep abreast of rivals’ initiativesMBWA

Exerting Strategic Leadership

Establish a strategy-supportive cultureStakeholders are kingChallenge the status quoManagement must listen to customersSell the strategic initiatives to groups and individuals throughout the organizationRecognize 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 leadershipLead by exampleHave written policies and guidelinesEnforce complianceEncourage whistleblowersPromote good corporate citizenship

Make corrective adjustments as needed