1. Copyright © Houghton Mifflin Company7-1 O.C. Ferrell University of New Mexico John Fraedrich University of Wyoming Linda Ferrell University of New Mexico Business Ethics Ethical Decision Making and Cases, Seventh Edition For in-class note taking, choose Handouts or Notes Pages from the print options, with three slides per page.

2. Copyright © Houghton Mifflin Company7-2 Chapter 7 Organizational Factors: The Role of Ethical Culture and Relationships

3. Copyright © Houghton Mifflin Company7-3 Corporate Culture Values Beliefs Goals Norms Groups Corporate history Founder

4. Copyright © Houghton Mifflin Company7-4 Corporate Culture A set of values, beliefs, goals, norms, and rituals that members or employees of an organization share. A company’s history and unwritten rules are a part of its culture. An organization’s failure to monitor or manage its culture may result in unethical behavior.

5. Copyright © Houghton Mifflin Company7-5 Two Basic Dimensions Determine an Organization’s Culture Concern for people—the organization’s efforts to care for its employees’ well- being Concern for performance—the organization’s efforts to focus on output and employee productivity

6. Copyright © Houghton Mifflin Company7-6 Ethical Framework and Audit Caring Apathetic Exacting Integrative

7. Copyright © Houghton Mifflin Company7-7 Organizational Culture Ethics Audit Does the culture reward unethical behavior? Does the organization hire people with values perceived as unethical? Is the company’s objective to make as much profit as possible?

8. Copyright © Houghton Mifflin Company7-8 Role of Leadership To guide and direct others toward the achievement of a goal To motivate others and enforce organizational rules and policies To influence the corporate culture and ethical posture of the organization (rewards and punishment)

9. Copyright © Houghton Mifflin Company7-9 Interpersonal Relationships One of the biggest challenges in business is getting diverse people to work together efficiently and ethically while coordinating their skills. Relationships among individuals and within groups are an important part of the proper functioning of a business organization.

10. Copyright © Houghton Mifflin Company7-10 Interpersonal Relationships in Organizations Corporation as a moral agent Variation in employee conduct Role relationships Significant others Differential association Whistle-blowing

11. Copyright © Houghton Mifflin Company7-11 Interpersonal Relationships in Organizations Organizational pressures –Opportunity and conflict –Conflict resolution How to improve ethical decision making

12. Copyright © Houghton Mifflin Company7-12 Corporation as a Moral Agent Organizations can be held accountable for the conduct of their employees and for all business decisions and outcomes. The organization is responsible to society for its collective decisions and actions. Organizations must be responsible for the correctness of all policies.

13. Copyright © Houghton Mifflin Company7-13 Variation of Employee Conduct 10% of employees follow their own values and beliefs 40% try to follow company rules and policies 40% go along with the work group 10% take advantage of the situation if the penalty is low and risk of being caught is low

14. Copyright © Houghton Mifflin Company7-14 Role Relationships Total of all relationships in which a person is involved because of his or her position in the organization (role) Peers and top managers are the most influential factors in organizational ethical decision making

15. Copyright © Houghton Mifflin Company7-15 Differential Association The idea that people learn ethical or unethical behavior while interacting with others who are part of their role-set or other intimate personal groups Association with those who are unethical, combined with the opportunity to act unethically, is a major influence on ethical decision making

16. Copyright © Houghton Mifflin Company7-16 Whistle-Blowing Exposing an employer’s wrongdoing to outsiders, such as the media or government regulatory agencies Whistle-blowers often receive negative performance appraisals, become organizational ‘outcasts,’ and lose their jobs Companies often establish internal whistle- blower reporting mechanisms

17. Copyright © Houghton Mifflin Company7-17 Organizational Pressures Time Middle managers Pressure to perform Pressure to increase profits Top managers Low level managers

18. Copyright © Houghton Mifflin Company7-18 Opportunity and Conflict Create Ethical Dilemmas Opportunity is the set of conditions that limits unfavorable behavior or rewards favorable behavior A person who behaves unethically and is rewarded (or not punished) is likely to continue to act unethically

19. Copyright © Houghton Mifflin Company7-19 Conflict Resolution Personal-organizational Personal-societal Organizational-societal

20. Copyright © Houghton Mifflin Company7-20 Role of Motivation To focus employees’ behavior toward goal achievement within the organization To understand an individual’s hierarchy of needs and how they influence motivation and ethical behavior

21. Copyright © Houghton Mifflin Company7-21 Centralized Organizations Decision making is concentrated at the upper management levels Works well in high-risk industries with fewer skilled lower-level employees Ethical issues: very little upward communication, less understanding of the interrelatedness of functions, and transferring blame to those who are not responsible

22. Copyright © Houghton Mifflin Company7-22 Decentralized Organizations Decision making is delegated as far down the chain of command as possible. Control and coordination are relatively informal and personal, and the organization is adaptable and sensitive to external changes. Employees are empowered to make decisions; therefore decentralized organizations tend to have fewer formalized ethics programs and policies.

23. Copyright © Houghton Mifflin Company7-23 Group Influence on Organizational Culture Formal groups –Committees –Work groups, teams, quality circles Informal groups