Business Ethics and Organizational Performance Chapter 10 Business Ethics and Organizational Performance

Relationship of Business Ethics to Performance customers, employees, and investors are major concerns for firms that want to develop loyalty and competitive advantage goal is to increase customer dependence on the company & to provide products in an environment of mutual respect & perceived fairness create satisfying relationships with employees support relationships with investors based on trust, dependability, & commitment

Trust as a Component of Business Ethics trust is defined as a virtue that creates a predisposition to place confidence in the behavior of others while taking the risk that the expected behavior will be performed employees must share a common vision of trust trust is the ‘glue’ that holds organizations together trust is essential for maintaining long term relationships between business & consumers

Ethics Contributes to Organizational Quality an organizational commitment to quality causes employees to be more willing to support quality initiatives & discuss ethical issues employee’s commitment to quality has a positive effect on a firm’s competitive position, an ethical work climate should have a positive effect on the financial bottom line

Ethics Contributes to Customer Satisfaction consumers respond positively to socially concerned businesses being good can be extremely profitable customer satisfaction dictates business success a strong organizational ethical climate often places the customer’s interests first research shows a strong relationship between ethical behavior & customer satisfaction

Ethics Contributes to Employee Commitment employee commitment comes from employee’s who believe their future is tied to that of the organization & their willingness to make personal sacrifices for the organization the more dedication on the part of the company, the greater the employee dedication concerns include a safe work environment, competitive salaries & benefit packages, & fulfillment of contractual obligations

Ethics Contributes to Profits corporate concern for ethical conduct is increasingly being integrated with strategic planning to maximize profitability corporate citizenship is positively associated with: return on investment & assets sales growth many studies have found a positive relationship between citizenship & performance

The Role of Ethics in the Economic Performance of Nations societal institutions that promote trust are important for the economic well-being of society trust is the extent to which individuals identify with or have a sense of community conducting business in an ethical & responsible manner generates trust & promotes productivity & innovation reputation matters greatly in business