Organizational Behavior Organizational Behavior 13th Edition Don Hellriegel & John W. Slocum, Jr.

Individual and Organizational Ethics Individual and Organizational Ethics Chapter 2

Learning Goals Describe the stages of moral and ethical development Learning Goals Describe the stages of moral and ethical development Explain and apply the core concepts used by individuals and organizations to make ethical decisions Describe some ethics-based initiatives for fostering diversity in organizations Explain the nature of stakeholder responsibility and its ethical basis Chapter 2: PowerPoint 2.1

Learning from Experience: Anne Mulcahy, Chairman of Xerox, Commits to Business Ethics Learning Insights Proactively transformed an ethics scandal Emphasizes importance of transparency Advanced and ensured outstanding ethics and governance practices Chapter 2: PowerPoint 2.2

Stages of Moral Development Stages of Moral Development Stages through which individuals evolve, ranging from the lowest stage (obedience and punishment orientation) to the highest stage (universal ethical principles) No assumption that everyone progresses through all stages Chapter 2: PowerPoint 2.3

Figure 2.1 Kohlberg’s Stages of Moral Development Figure 2.1 Kohlberg’s Stages of Moral Development Obedience & Punishment Instrumental Interpersonal Law & Order Social Contract Universal Principles through Adulthood Childhood Chapter 2: PowerPoint 2.4

Moral Intelligence The mental capacity to determine how universal human principles that cut across the globe should be applied to personal values, goals, and actions. The moral principles in moral intelligence include: Integrity: acting consistently with principles, values, and belief, telling the truth; standing up for what is right; and keeping promises Responsibility: taking responsibility for personal choices; admitting mistakes and failures; embracing responsibility for several others Compassion: actively caring about others Forgiveness: letting go of one’s own mistakes; and letting go of others’ mistakes Chapter 2: PowerPoint 2.5

Ethics Competency: Anne Mulcahy’s Ethical Leadership Ethics Competency: Anne Mulcahy’s Ethical Leadership Learning Insights Results are important, equally important are the means to achieve results Ethical issues are serious Employees have ethical obligations Chapter 2: PowerPoint 2.6

Ethics-Based Principles Concern for Affected Individuals Figure 2.2: Basic Components for Making Ethical Decisions Ethics-Based Principles Benefits and Costs Determination of Rights Concern for Affected Individuals Ethical Intensity Chapter 2: PowerPoint 2.7

Figure 2.3: Determinants of Ethical Intensity Magnitude of Consequence Probability of Effect Social Consensus plus plus plus plus Temporal Immediacy Concentration of Effect Proximity plus plus Chapter 2: PowerPoint 2.8

Ethical Intensity Factors Ethical Intensity Factors Magnitude of Consequences: the harm or benefits accruing to individuals affected by a decision or behavior Probability of Effect: the likelihood that if a decision is implemented it will lead to the harm or benefit predicted Social Consensus: the amount of public agreement that a proposed decision is bad or good continued Chapter 2: PowerPoint 2.9

Ethical Intensity Factors (continued) Ethical Intensity Factors (continued) Temporal Immediacy: the length of time that elapses between making a decision and when the consequences of that decision are known Proximity: the sense of closeness (social, cultural, psychological, or physical) that the decision maker has for victims or beneficiaries of the decision Concentration of effect: the inverse function of the number of people affected by a decision Chapter 2: PowerPoint 2.10

Self-Serving Principles Self-Serving Principles Hedonist principle: Do whatever is in your own self- interest Might-equals-right principle: Do whatever you are powerful enough to impose on others without respect to socially acceptable behaviors Organization interests principle: Act on the basis of what is good for the organization Chapter 2: PowerPoint 2.11

Balancing Interests Principles Balancing Interests Principles Means-end principle: Act on the basis of whether some overall good justifies any moral transgression Utilitarian principle: Act on the basis of whether the harm from a decision is outweighed by the good in it— that is, the greatest good for the greatest number Professional standards principle: Act on the basis of whether the decision can be explained before a group of your peers Chapter 2: PowerPoint 2.12

Concern for Others Principles Concern for Others Principles Disclosure principle: Act on the basis of how the general public would likely respond to the disclosure of the rationale and facts related to the decision Distributive justice principle: Act on the basis of treating an individual or group equitably rather than on arbitrarily defined characteristics (e.g., gender, race, age) Golden rule principle: Act on the basis of placing yourself in the position of someone affected by the decision and try to determine how that person would feel Chapter 2: PowerPoint 2.13

Ethics Insight Our system of capitalism is built on investor trust— trust that corporate leaders and boards of directors will be good stewards of their investments and provide investors with a fair return. There is no doubt that some leaders of corporations have violated that trust. William George, Former Chairman and CEO, Medtronic, and Author, True North: Discover Your Authentic Leadership Chapter 2: PowerPoint 2.14

Ethics Insights for Leaders Ethics Insights for Leaders Leaders must commit to and model ethical behaviors and decisions Develop a code of ethics and follow it Have procedures for organization members to report unethical behavior, such as whistle-blowing policy continued Chapter 2: PowerPoint 2.15

Ethics Insights for Leaders (continued) Ethics Insights for Leaders (continued) Involve leaders and employees in identifying and solving ethical problems Include ethics in performance appraisal Publicize the organization’s ethical orientation Chapter 2: PowerPoint 2.16

Benefits and Costs in Ethical Decision Making Benefits and Costs in Ethical Decision Making Benefits—whatever a party considers desirable Costs—whatever a party considers undesirable Requires a determination of the interests and values of those affected by the decision(s) One party’s benefits in a decision may create or be perceived to create costs for one or more other parties Conflicting assessments can lead to different interpretations of ethical responsibilities Chapter 2: PowerPoint 2.17

Determination of Rights in Ethical Decision Making Determination of Rights in Ethical Decision Making Complex and continually changing One dimension focuses on who is entitled to benefits or participation in decisions Union-management negotiations frequently involve conflicts and dilemmas over management’s rights to hire, promote, fire, reassign union employees, and outsource work Chapter 2: PowerPoint 2.18

Procedural and Interactional Justice Procedural and Interactional Justice Procedural justice: the perceived fairness of the rules, guidelines, and processes for making decisions Interactional Justice: the quality of interpersonal treatment individuals receive during the use of organizational procedures Chapter 2: PowerPoint 2.19

Performance Reviews: Procedural and Interactional Justice Managers should be given specific and clear instructions on procedures Managers should be trained in how to administer the review Results should be discussed with employees Employee participation should be allowed in the review process (e.g., setting goals, providing input on performance) The review should be developmental (e.g., indicate how to improve) Chapter 2: PowerPoint 2.20

Change Competency: James McNerney, CEO of Boeing Change Competency: James McNerney, CEO of Boeing Learning Insights Critical to adhere to highest ethical standards from the top-down Many changes made to advance ethics and compliance Cultural change was vital to creating an ethical environment Chapter 2: PowerPoint 2.21

Insights: Diversity and Ethical Cultures Insights: Diversity and Ethical Cultures People with different perspectives and approaches need to be valued Recognize both the learning opportunities and the challenges of a culturally diverse workforce Create an expectation of high standards of performance and ethics from everyone Stimulate personal development and support openness to ideas Make workers feel valued Chapter 2: PowerPoint 2.22

Generation Diversity and Ethics Generation Diversity and Ethics Mature: born from 1925 through 1944 Baby boomers: born from 1945 through 1964 Generation X: born from 1965 through 1981 Generation Y: born from 1982 through 2000 Chapter 2: PowerPoint 2.23

Ethics-Related Commonalities Among Generations All generations attach importance to family, integrity, achievement, love, and competence Everyone wants respect; they just define it differently Trust matters Leaders are wanted who are credible and trustworthy Organizational politics are seen as a common problem No one really likes change, unless it benefits them Chapter 2: PowerPoint 2.24

Gen Y and 2008 World of Work Report—Do You Agree? Generation Y respondents think that 22 percent of their Gen Y coworkers as a group are ethical Generation X respondents think that 28 percent of Gen Y coworkers as a group are ethical Baby boomer respondents think that 16 percent of Gen Y coworkers as a group are ethical Is this due to small numbers bias: The tendency to view a few incidents, cases, or experiences with individuals as representative of a larger population Chapter 2: PowerPoint 2.25

Harassment Harassment: verbal or physical conduct that denigrates or shows hostility or aversion toward an individual because of that person’s race, skin color, religion, gender, national origin, age, or disability Impacts of Harassment Creates an intimidating, hostile, or offensive work environment Unreasonably interferes with an individual’s work performance Adversely affects an individual’s employment opportunities Chapter 2: PowerPoint 2.26

Sexual Harassment Sexual harassment: unwelcome sexual advances, requests for sexual favors, and other verbal or physical conduct of a sexual nature Quid pro quo harassment: submission to harassment is used as the basis for employment decisions Hostile work environment: occurs when an employee is subjected to comments of a sexual nature, offensive sexual materials, or unwelcome physical contact as a regular part of the work environment Chapter 2: PowerPoint 2.27

Harassment Policy Define harassment Prohibition statement Harassment Policy Define harassment Prohibition statement Complaint procedure Disciplinary measures Protection against retaliation Chapter 2: PowerPoint 2.28

Harassment Policy: Include Provisions On Harassment Policy: Include Provisions On Verbal harassment Physical harassment Visual harassment Sexual favors Chapter 2: PowerPoint 2.29

Leader Insights: Positive Diversity Leader Insights: Positive Diversity Understand and perhaps change key aspects of the organization’s culture Understand and perhaps change key aspects of the ethical dimensions of the organization culture, leadership that models ethical behaviors, and formal policies and mechanisms to ensure ethical decisions Portfolio of diversity initiatives, diversity policies, and supportive diversity practices Chapter 2: PowerPoint 2.30

Diversity Competency: Verizon’s Workplace Diversity Learning Insights Top leaders must set tone and expectations for ethical conduct and diversity Diversity means embracing it as part of company culture, viewing it as integral to the business, and rewarding it Develop diversity strategy with measurable components and feedback indicators Chapter 2: PowerPoint 2.31

Stakeholder Responsibility and Ethics Stakeholder Responsibility and Ethics Stakeholder responsibility: leaders and other employees have obligations to identifiable groups that are affected by or can affect the achievement of an organization’s goals Stakeholders: individuals or groups that have interests, rights, or ownership in an organization and its activities Chapter 2: PowerPoint 2.32

Table 2.3: Examples of Types of Pressures from Primary Stakeholders EMPLOYEES Pay and benefits Safety and health Rights at work/global labor standards Fair/ethical treatment in hiring, reviews, promotion, and related areas SHAREHOLDERS Demands for efficiency/profitability Viability (sustainability) Growth of investment Ethical disclosure of financial information continued Chapter 2: PowerPoint 2.33

Table 2.3: Examples of Types of Pressures from Primary Stakeholders (continued) CUSTOMERS Competitive prices Quality and safe products Respect for customers’ privacy Concern for environment Truthful/ethical advertising and sales practices SUPPLIERS Meet commitments Repeat business Fair trade practices/ethical treatment Chapter 2: PowerPoint 2.34

Ethics Competency: Johnson & Johnson’s Stakeholder Ethics and Principles Learning Insights First responsibility is to the doctors, nurses and patients, to mothers and fathers and all others who use our products and services Responsible to employees and communities Responsible to stockholders Chapter 2: PowerPoint 2.35

Sustainable Development Sustainable Development Pattern of resource use that strives to meet current human needs without compromising the ability of future generations to meet their own needs United Nations Division for Sustainable Development identifies 96 core indicators of sustainable development within a framework that contains 14 themes Chapter 2: PowerPoint 2.36

Assessing Responsibility to Stakeholders Assessing Responsibility to Stakeholders Disclosure Communication and engagement Proactive management Creating shareholder value Chapter 2: PowerPoint 2.37

Discussion Questions Go to www.xerox.com. In the search box, type in “corporate governance guidelines.” Open the document titled “Corporate Governance Guidelines at Xerox.” Identify at least two of the specific ethical principles that are reflected in this document. What is a specific provision that illustrates each of the principles identified? Review the Learning from Experience feature on Anne Mulcahy, chairman and former CEO of Xerox, and other discussions of her leadership in this chapter. How would you evaluate her in relation to each of the six attributes of the diversity competency presented in Chapter 1? For each attribute on which Mulcahy is evaluated, identify the specific statement(s) about her that serve as a basis of your assessment. continued Chapter 2: PowerPoint 2.38

Discussion Questions (continued) Discussion Questions (continued) Think of an organization in which you have been employed (or are currently employed). What are your assessments of the stage of moral development and moral intelligence of the manager for whom you worked? What specific examples of this manager’s behaviors and decisions serve as the basis for your assessments? What are the similarities and differences between the organization interests principle and the utilitarian principle? What are the similarities and differences between the professional standards principle and the distributive justice principle? continued Chapter 2: PowerPoint 2.39

Discussion Questions (continued) Discussion Questions (continued) From your personal perspective, what is your assessment of the ethical intensity of the grading system and practices used by an instructor in a course that you have completed? Your assessment should include an assessment of each of the six components of ethical intensity. What specific aspects of procedural justice are suggested in the Change Competency feature on James McNerney, CEO of Boeing? How would you assess Generation Y individuals as a group with respect to their general pattern of ethical behaviors and decision making within the work environment? Explain. If a generalization is possible, what is your overall assessment? Explain. continued Chapter 2: PowerPoint 2.40

Discussion Questions (continued) Discussion Questions (continued) How did (or does) an organization for which you have worked (or do work) compare with the policies, practices, and goals of Verizon’s workplace diversity as presented in the Diversity Competency feature? Give specific comparisons of similarities and/or differences. What specific ethical principles for guiding decisions and actions are illustrated in the Ethics Competency feature titled “Johnson & Johnson’s Stakeholder Ethics and Principles”? You should relate specific statements in the code to specific ethical concepts. Sustainable development is discussed as an application of stakeholder responsibility. Think of an organization for which you have worked (or currently work). In what ways did it implement or fail to implement sustainable development initiatives? Chapter 2: PowerPoint 2.41

Experiential Exercise: Ethics Competency—What Is Your Decision? Ethical Incident #1 What ethical principle or principles reflect your decisions? How would you assess the ethical intensity in this situation? Ethical Incident #2 What ethical principle or principles reflect your decision? How would you evaluate the ethical intensity in this situation? continued Chapter 2: PowerPoint 2.42

Experiential Exercise: Ethics Competency—What Is Your Decision Experiential Exercise: Ethics Competency—What Is Your Decision? (continued) Ethical Incident #3 What ethical principle or principles reflect your decision? How would you assess the ethical intensity in this situation? Ethical Incident #4 What ethical principle or principles reflect your decision? How would you assess the ethical intensity in this situation? Chapter 2: PowerPoint 2.43 Chapter 2: PowerPoint 2.

Case: Diversity Competency—Consensual Relationship Agreements Critics of CRAs assert that they are too intrusive, ineffective, and unnecessary and that they can cause as many problems as they solve. Identify the specific reasons and examples that might justify these criticisms. How would you assess the ethical intensity of CRAs from the perspective of the employer? From the perspective of the employees in a consensual relationship? continued Chapter 2: PowerPoint 2.44

Case: Diversity Competency—Consensual Relationship Agreements (continued) What specific ethical principles might be used to justify the use of CRAs? Explain. What ethical principles might be used by employees in consensual relationships to oppose signing such an agreement? Explain. Do you personally favor or oppose the use of CRAs in the workplace? Explain. Chapter 2: PowerPoint 2.45