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Organizational Factors: The Role of Culture and Relationships

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1 Organizational Factors: The Role of Culture and Relationships
C H A P T E R 7 Organizational Factors: The Role of Culture and Relationships

2 Ethical Corporate Culture
Corporate culture includes the behavioral patterns, concepts, values, ceremonies, and rituals that take place in the organization Gives members of the organization meaning and the internal rules of behavior All organizations have culture Source: © Jack Hollingsworth/Corbis

3 Corporate Culture May be formal statements of values, beliefs, and customs Coming from upper management in the form of memos, codes, manuals, forms and ceremonies May be informal through direct or indirect comments conveying management’s wishes Dress codes, promotions, extracurricular activities

4 Two Dimensions of Organizational 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 Source: Digital Vision

5 Perceived Tone and Culture of the CEO and Other Executives

6 Four Organizational Culture Types
Apathetic: Shows minimal concern for people or performance Caring: Exhibits high concern for people, but minimal concern for performance Exacting: Shows little concern for people, but high concern for performance Integrative: High concern for people and performance A cultural audit is an assessment of the organization’s values Usually conducted by outside consultants

7 A Framework of Organizational Culture Typologies

8 Ethics and Corporate Culture
Corporate culture is a significant factor in ethical decision making If a firm’s culture encourages/rewards/does not monitor unethical behavior, its employees may act unethically Ethical issues can arise because of conflicts between the culture perceived by management and that actually at work in the organization Source: Digital Vision

9 Compliance versus Value-Based Culture
Compliance-based cultures use their legal departments to determine ethical risk Revolves around risk management, not ethics Values-based cultures relies on an explicit mission statement that defines the firm and stakeholder relations Focus on values, not laws

10 Differential Association
The idea that people learn ethical/unethical behavior while interacting with others Studies support that differential association affects ethical decision making Superiors have a strong influence on subordinates Source: S. Pearce/PhotoLink

11 Whistle Blowing Exposing an employer’s wrongdoing to outsiders (external to the company) e.g. the media or government regulatory agencies Interpersonal conflict ensues when employees think they know the right course of action, yet the company promotes a different decision The Sarbanes–Oxley Act and the FSGO has institutionalized whistle-blowing to encourage discovery of misconduct

12 Reasons Why Employees Do Not Report Misconduct
Some employees remain reticent to be a whistle blower and to report misconduct.

13 Leaders Can Influence Corporate Culture
Power refers to the influence that leaders and managers have over the behavior and decisions of subordinates. An individual has power when his/her presence causes people to behave differently Power and influence shape corporate culture Source: Triangle Images

14 Five Power Bases Reward power: Offering something desirable to influence behavior Coercive power: Penalizing negative behavior Legitimate power: Titles and positions of authority Expert power: Knowledge based Referent power: Exists when goals or objectives are similar

15 Motivation A force within the individual that focuses behavior toward achieving a goal An individual’s hierarchy of needs may influence motivation and ethical behavior Relatedness needs are satisfied by social and interpersonal relationships. Growth needs are satisfied by creative or productive activities. Needs or goals may change over time

16 Organizational Structure and Business Ethics
In a centralized organization, decision-making authority is concentrated in the hands of top-level managers Little authority delegated to lower levels In a decentralized organization, decision-making authority is delegated as far down the chain of command as possible

17 Examples of Centralized/Decentralized Corporate Cultures

18 Groups in Corporate Structure and Culture
Formal groups Committees, work groups and teams Informal groups The “grapevine” Group norms Standards of behavior acceptable in the group Define acceptable/unacceptable behavior within the group

19 Variation in Employee Conduct (The 10/40/40/10 Rule)

20 Can People Control Their Own Actions Within a Corporate Culture?
Organizational ethical decisions often made by committees and formal and informal groups Many decisions are beyond the influence of individuals Individuals entering the business will need several years of experience to understand how to resolve ethical issues

21 The Importance of Corporate Culture
According to the Ethics Resource Center, corporate culture is the number one most important factor in limiting misconduct Executives must make maintaining an ethical culture a top priority Source: © Jack Hollingsworth/Corbis

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