Building An Ethical Organization Term Paper


Term Paper

Organizational Behavior


Objective of Organizational Culture:1. Cooperation:

By providing shared values and assumptions, culture may enhance goodwill and mutual trust,encouraging cooperation.

2. Decision Making:S

hared beliefs give members a consistent set of basic assumptions. It may lead to a moreefficient decision-making process due to fewer disagreements.

3. Control:

Control is provided by three mechanisms -


Market control mechanism: relies on price. If results fall short of goals, prices areadjusted to stimulate necessary change


Bureaucratic control mechanism: relies on formal authority. The control processconsists of adjusting rules and regulations and issuing directives


Clan control mechanism: relies on shared beliefs and values. Provide a map thatmembers can rely on to choose appropriate course of action.4.


Culture reduces communication problems in two ways:


No need to communicate in matters for which shared assumptions already exist(things go without saying)


Shared assumptions provide guidelines and cues to help interpret messages that arereceived

5. Commitment:

Strong cultures foster strong identification which causes commitment

6. Perception:

What an individual sees is conditioned by what others sharing the sameexperience say they are seeing

7. Justification of behavior:

Culture helps organization members make sense of theirbehavior by providing justification for it.

Ethics is about behavior. In the face of dilemma, it is about doing the right thing. Ethical managerial leaders and their people take the “right” and “good” path when they come to the ethical choice points.

The purpose of this article is to steer your thinking and action toward creating and sustaining an ethical workplace culture. Managerial leaders and their people are invited to explore how values, actions, and behavioral standards can help steer organizational behavior.

Values Drive Behavior

A well-used axiom in organizational behavior thought asserts that values ultimately drive our behavior. In a nutshell, values exert influence over our attitudes, and attitudes influence our behavior. Values are integral to attitude formation and to how we respond to people and situations. Extensive literature exists dealing with how values relate to effective managerial leadership. A review of this body of work leaves us with the clear picture that values are a key component of effective managerial leadership.

There seems to be a subset of virtuous values that align with ethical behavior. In his book, Authentic Happiness,[1] Martin Seligman has reviewed these core virtuous values that influence ethical behavior and appear to have universal appeal. My adaptation of these values as they apply to ethics follows:

  • Wisdom and Knowledge: The capacity to take information and convert it to something useful. Wisdom comes from capitalizing on one’s experience to interpret information in a knowledgeable manner to produce wise decisions. A prerequisite to doing the right thing when facing an ethical dilemma is knowing what to do, knowing the difference between right and wrong.
  • Self Control: The ability to avoid unethical temptations. The capacity to take the ethical path requires a commitment to the value of acting with temperance. Ethical people say “no” to individual gain if it is inconsistent with institutional benefit and goodwill.
  • Justice and Fair Guidance: The fair treatment of people. Justice is served when individuals perceive that they receive a fair return for the energy and effort expended. For example, a leader’s commitment to justice is tested continually with the allocation of organizational resources. Are certain individuals and groups given special treatment without regard to objective criteria by which to judge fairness? Ethical leaders value and embrace fair advice and guidance.
  • Transcendence: The recognition that there is something beyond oneself more permanent and powerful than the individual. Without this value, one may tend toward self-absorption. Leaders who are motivated predominately by self-interest and the exercise of personal power have restricted effectiveness and authenticity.
  • Love and Kindness: The expression through words and deeds of love and kindness. Researchers have documented that there appear to be different types of “love.” In an organizational context, love refers to an intense positive reaction to another co-worker, group and/or situation. An organization “with heart” allows for the expression of love, compassion and kindness among and between people, the goodwill which can be drawn upon when one faces ethical challenges.
  • Courage and Integrity: The courage to act ethically and with integrity. These values involve discerning right from wrong and acting accordingly. They impel one to consistently do what is right without concern for personal consequences, even when it is not easy.

In practice, these six categories of virtuous values are intertwined. For example, the capacity to administer resources fairly and offer fair guidance to stakeholders along the way is supported by courage and integrity. Difficult decisions surrounding the allocation of limited resources leave some individuals and groups with less than they would prefer. The redeeming grace is the perception that such decisions are made with fairness and integrity. Unpopular decisions are easier to accept when they are perceived to be derived fairly and with integrity.

Driving ethical behavior with values and attitudes requires that there be alignment among values, attitudes, and behavior. Examples of this alignment between each of the virtuous values, associated attitudes, and behavior are offered in Table 1.

Table 1: Values —> Attitude —> Ethical Behavior Chain

ValueAttitude Ethical Behavior
Wisdom and KnowledgeExperience promotes wisdom that helps convert information to knowledge.Using knowledge to solve problems ethically and to do what is right.
Self-ControlSelf-control means effectively managing reactions to challenging situations and temptations.Putting personal motivations aside and acting with objectivity by doing what is right.
JusticeActing justly and fairly is a long-term driver of ethical behavior; remember the “Golden Rule.”Establishing just and mutually agreed upon criteria and administering them fairly to all people.
TranscendenceThe belief in a power and source outside oneself reduces self-serving actions and increases humility.Putting institutional and/or stakeholder interests above self interests. Identifying a personal purpose that is aligned with organizational mission.
Love and KindnessTreating people with kindness helps increase the reservoir of positive affection and love.Recognizing and encouraging others for their contributions.
Courage and IntegrityEthics requires the courage to do the right things consistently without regard to personal consequences.Making unpopular decisions based on fair consideration of the facts.

Putting Virtuous Values into Practice

“What can managerial leaders do on a proactive basis to encourage ethical behavior? At least five practices help leaders steer their organizations toward ethical conduct.

First, any gap between knowledge about what to do and actual actions needs to be closed. If you know what is the right thing to do, just do it. Unfortunately, too often “white collar” criminals will tell us that they knew what was right, yet they failed to do it. John Maxwell, in his recent book “There’s No Such Thing as Business Ethics,”[2] explains various reasons for ethical transgressions, including that people just rationalize their choices with relativism. While the reasons for the transgressor’s actions are varied and complex, the simple truth is that they failed to “do the right thing” in spite of their knowledge. They did not act with wisdom.

Second, managerial leaders must be very deliberate about who joins their organization. Many organizational leaders believe that selecting people for their values is as important as selecting for skill sets. Jim Collins, in his compelling book Good to Great: Why Some Companies Make the Leap . . . and Others Don’t,[3] underscores how long-term success depends on putting the right people in place. Larry Bossidy, as CEO of Allied Signal, made people selection a top priority and considered it a key task of top management. Selecting people who share your virtuous values is critical to building an ethical culture and long-term business success.

Third, new personnel need to be socialized into the organization so as to advance virtuous values. As an executive, I regularly attended new employee orientations to espouse the organization’s values. As a way of promoting and influencing ethical behavior, it is very powerful for new employees to hear managerial leaders espouse core virtuous values and to see those values affirmed through the actions of others in the organization.

Fourth, accountability and follow-up are critical in putting virtuous values into practice. Systems and procedures can remind people of commitments and help connect words or promises with deeds. In organizations with behavioral integrity, words and deeds count. When virtuous values are driving behavior, the alignment of words and deeds serves to advance the creation of an ethical work culture.

Finally, managerial leaders can positively impact the practice of ethical behavior by fairly allocating organizational resources and linking them appropriately. All managerial leaders have five key resources to manage: people, money, capital assets, information, and time. Allocation of these resources and the process managers use to accomplish such distribution can create perceptions of equity and fairness, or inequity and unfairness. Managerial leaders who value justice and fairness are more likely to deal the cards fairly — thereby modeling ethical behavior — than are those who do not.

Behavioral Standards and Codes of Conduct: The Safety Net

Ideally, managerial leaders and their people will act ethically as a result of their internalized virtuous core values. I like to think of this as ethics from the “inside out.” Relying solely on this “inside out” approach, however, is simply naïve in many circumstances.

Established behavioral standards and written codes of ethical conduct can help bolster virtuous values and promote ethical organizational behavior. Behavioral standards usually incorporate specific guidelines for acting within specific functional workplace areas. For example, a sales department may clearly outline criteria for expense reimbursements.

Codes of ethical conduct have received varying degrees of attention over the past three decades. They can be categorized into three types:

Type 1: Inspirational-Idealistic codes of conduct specify global themes such as “Be honest,” “Show integrity in all matters,” “Practice wise decision making,” etc. Such themes are not anchored to specific behavior or situations.

Type 2: Regulatory codes of conduct proscribe clearly delineated conduct. This type of code is designed to help as a jurisprudential tool when disputes occur. It is more of a “do and don’t” approach.

Type 3: Educational/Learning-Oriented codes of conduct offer principles to guide decision making and behavioral reactions into likely situations. This approach is compatible with building a learning organizational culture. For example, the principle and value of fairness might be applied to allocating a bonus pool. Managerial leaders responsible for this process could be engaged in scenarios wherein they would be asked to take “fair action” in making these allocations. Such learning experiences can serve to enlighten and inform so as to foster ethical decision making.

Behavioral standards and codes of ethical conduct can help steer ethical behavior by offering a cue or written rule to remind personnel of the right thing to do–an “outside in” process for ethical behavior management. These standards and codes trigger peoples’ internalized values, thus gaining strength through firm yet fairly administered consequences.

The Ethical Behavior Formula

Taken together, virtuous values, actions, and behavioral standards/codes can produce a “formula,” such as that illustrated below, that may increase the likelihood of ethical organizational behavior:

Virtuous Values + Aligned Action + Behavioral Sandards/Codes –> Increased Ethical Behavior

Consider adapting the six virtuous values and aligning them with key managerial leadership actions such as selection, employee orientation/socialization, and allocation of resources. Behavioral standards and/or codes of ethical conduct can be added as appropriate. Acting on these three formula components may serve to increase the display of ethical organizational behavior.

Three Good Reasons to Apply the Formula

There are at least three good reasons to practice ethical behavior in your organization. These reasons may motivate you to adapt the “formula” into your managerial leadership practice repertoire.

  • First, it is the right thing to do. Employees and external stakeholders alike want and deserve to be treated ethically. Taken to the extreme, a culture allowing unethical behavior can breed all manner of damaging and even criminal activity.
  • Second, it makes economic sense. A mounting body of evidence shows that an emphasis on the softer sides of business, including ethics, positively influences the harder traditional bottom line. By listening to employees, effectively recognizing their work, and practicing good ethical behavior, managers have given a boost to such hard measures as operating earnings, ROI, and stock price.[4]
  • Third, in line with a growing trend to look beyond shareholder value to a broader stakeholder perspective, organizational ethical behavior becomes the socially responsible thing to do. Just think for a moment about the impact of Enron’s, Tyco’s and World Com’s unethical behavior on their respective communities, workforces, and other stakeholders.

A Way to Apply the Formula

To pull the virtuous values, proactive actions, and behavioral standards and ideas together, I offer you a checklist. The Ethical Behavior Enhancement Checklist is intended to help you promote and practice ethical organizational behavior.

The Ethical Behavior Enhancement Checklist

Instructions: For each statement below, on a scale of 1 to 10 (0 being lowest, 10 being highest) rate to what extent the statement is true and/or to what extent you currently practice this behavior. Please be candid since this checklist is self-directed and is intended to help you increase the presence of proactive ethical organizational behavior in your enterprise.

1.A set of virtuous values is clearly espoused.(0 – 10)
2.Espoused values are routinely affirmed by my actions.(0 – 10)
3.People in my organization would say that I talk and act in an ethical manner.(0 – 10)
4.People are selected based upon their alignment with our virtuous values.(0 – 10)
5.New organizational members are oriented to our virtuous values.(0 – 10)
6.Systems and processes that hold people accountable for their words and actions are in place.(0 – 10)
7.Decisions regarding resource allocation are made fairly.(0 – 10)
8.People perceive resources to be distributed fairly.(0 – 10)
9.As appropriate, behavioral standards and/or codes of conduct are specified.(0 – 10)


The economic and people impacts of ethical behavior are measured.(0 – 10)

In reviewing your responses to the checklist, you are encouraged to identify the areas of greatest opportunity for improvement and begin a program of change in these areas. Ideally, responses in the range of 8 – 10 would be most desirable. Additional targets for continual growth and improvement can be identified as circumstances warrant.

With this checklist in your hands, I challenge you to start measuring, tracking, and enhancing your organization’s practice of ethical behavior. Remember, at the most basic level, ethics is about behavior. Doing the right thing is enhanced by espousing a set of virtuous values, aligning your actions with those values, and specifying in key areas those behavioral standards that will encourage others to steer their behavior in an ethical direction.

For another look at ethical leadership by current business leaders, see “Dialogue with Four Executives.”

[1] Martin Seligman, Authentic Happiness (New York: Free Press, 2002).

[2] John Maxwell, There’s No Such Thing as Business Ethics (Boston: Warner Books, Inc., 2003).

[3] James Collins, Good to Great: Why Some Companies Make the Leap…and Others Don’t (New York: Free Press, 2001).

[4] See, for example, Jeffrey Pfeffer, “Business and the Spirit: Management Practices That Sustain Values,” Handbook of Workplace Spirituality and Organizational Performance, eds. R. A. Giacolone and C. L. Jurkiewicz (New York: M. E. Sharpe Press, 2003):29-45; and David Ulrich and Norman Smallwood, Why the Bottom Line Isn’t! How to Build Value Through People and Organization (New Jersey: John Wiley & Sons, Inc., 2003).

Charles D. Kerns, PhD, MBA

Charles D. Kerns, PhD, MBA, is a professor of applied behavioral science at the Graziadio School of Business and Management. He has more than 30 years of business, management, and consulting experience. Through his private consulting firm, Corperformance, he has implemented performance management programs and systems to help companies from many industries maximize their results. Since 1980, he has taught in almost every program in the Graziadio School, first as an adjunct faculty member, then, since 2000, as a member of the full-time faculty. He has also served as the associate dean for Academic Affairs. Dr. Kerns holds a Diplomate, ABPP, in both Industrial-Organizational Psychology and Organizational-Business Consulting Psychology.

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