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 organization Culture is a powerful force that can shape the firms overall effectiveness and longterm success

Corporate Culture
Determinants of Organizational Culture
Organizations founder (personal values and beliefs) Symbols, stories, heroes, slogans, and ceremonies that embody and personify the spirit of the organization Corporate success that strengthens the culture. Shared experiences that bond organizational members together

Corporate Culture
Managing Organizational Culture
Understand the current culture to decide whether to maintain or change it Articulate the culture through slogans, ceremonies, and shared experiences Reward and promote people whose behaviors are consistent with desired cultural values

Corporate Culture
Changing Organizational Culture
Develop a clear idea of what kind of culture you want to create Bring in outsiders to important managerial positions Adopt new slogans, stories, ceremonies, and purposely break with tradition

Ethics and Culture

Ethics
An individuals personal beliefs regarding what is right and wrong or good and bad.

Ethical Behavior
This 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 Behavior
Must begin with top management Top management establishes the organizations culture and defines what will and will not be acceptable behavior Provide training on how to handle different ethical dilemmas

Ethics and Culture

Managing Ethical Behavior (contd)
Develop a written code of ethics
A formal, written statement of the values and ethical standards that guides a firms actions

Individual issues
Behavior and conscience Privacy

Actors:
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.

Conflicts of interest Secrecy and confidentiality Honesty

Employees
Hiring and firing Wages and working conditions Privacy and respect

Organization

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

Figure 4.1

Ethics in Organizations
Individual Values + Organizational Values = Managerial Values

Applying Ethical Judgments

Model 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 Actions

Utilityact optimizes what is best for its constituencies (benefits only or primarily those who are directly involved) Rightsact respects the rights of others involved Justiceact is consistent with what is considered fair Caringact is consistent with peoples responsibilities to each other

Social Responsibility and Organizations

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

Areas of Social Responsibility

Stakeholders
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

Arguments For Social Responsibility
1. Business creates problems and should therefore help solve them.

Arguments Against Social Responsibility

1. Business lacks the expertise to manage social programs.

2. Corporations are citizens in our society.

Social Responsibility

2. Involvement in social programs gives business too much power.

3. Business often has the resources necessary to solve problems.

3. There is potential for conflicts of interest.

4. Business is a partner in our society, along with the government and the general population.

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

Figure 4.4

Approaches to Social Responsibility

Degree of Social Responsibility
Obstructionist stance Lowest Defensive stance Accommodative stance Proactive stance Highest

Figure 4.5

Approaches to Social Responsibility (contd)

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 Government Influence Each Other

The Government
The government influences business through 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

Business

Figure 4.6

Managing Social Responsibility: Formal Dimensions

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

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

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

Managing Social Responsibility: Informal Dimensions

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

Whistle Blowing
The 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 organizations stance on social responsibility.

Leadership
Leaders
People who can influence the behaviors of others without having to rely on force People who are accepted as leaders by others

What leaders actually do

Using non-coercive influence to shape the groups or organizations goals Motivating others behavior toward goals Helping to define organizational culture

Leadership
Leadership
Establishing direction and vision for the organization Aligning people through communications and actions that provide direction Motivating and inspiring by satisfying needs Produces useful change and new approaches to challenges

Activity
Creating an agenda

Management
Planning and budgeting, allocating resources Organizing and staffing, structuring and monitoring implementation Controlling and problem solving Produces predictability and order and attains results

Developing a human network for achieving the agenda

Executing plans

Outcomes

Leadership
Power and Leadership
Legitimate power is granted through the organizational hierarchy Reward power is the power to give or withhold rewards Coercive power is the capability to force compliance by means of psychological, emotional, or physical threat Referent power is the personal power that accrues to someone based on identification, imitation, loyalty, or charisma Expert power is derived from the possession of information or expertise

Leadership
Using Power
Legitimate request
Compliance by a subordinate with a managers request because the organization has given the manager the right to make the request

Instrumental compliance
A subordinate complies with a managers request to get the rewards that the manager controls

Coercion
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 (contd)
Personal identification
Using the referent power of a superiors desired behaviors to shape the behavior of a subordinate

Inspirational appeal
Influencing a subordinates 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 customers Keep abreast of rivals initiatives MBWA

Exerting Strategic Leadership

Establish a strategy-supportive culture
Stakeholders are king Challenge the status quo Management must listen to customers Sell the strategic initiatives to groups and individuals throughout the organization Recognize 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 leadership
Lead by example Have written policies and guidelines Enforce compliance Encourage whistleblowers Promote good corporate citizenship

Make corrective adjustments as needed