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Ethics in an organization means the business conduct of that organization to run the business more effectively and efficiently. In an organization people are working together with different values and motives. Managing the business ethics of an organization more effectively needs to setup common norms and standard and also it need to be communicated and enforced among the working people. Ethical principle provides the base for modern business concept in an organization.
The basic for an ethical organization mainly depend on ethical decision-making talent by ethical leadership. Ethical values and principles of an organization guide the working people and corporate, beyond their common business motive of profit and shareholders enhancement. The modern ethical organization follows corporate social responsibility, fair trade, sustainability, globalization taking into consideration ifs negative effects.
Ethical organization management model
Traditionally the organization main aim is to make profit and methods for achieving it. The modern organization performance, activities and standards are exposed globally and the lenders of the organization are accountable globally.
The modern ethical management of an organization in the 21st century illustrate by four 'P's and it's explain as follows for the success for any modern business ventures. (Refer appendix 3)
3.1 Purpose of the organization
Purpose of the organization is to making fair profit for the shareholders and in case of public service delivery of cost effective service. Personality of a good ethical organization has to consider people needs and with the mindset by giving proper consideration to the world it operates.
3.2 People to whom the organization operate
People comprise in the organization are staffs, customers, suppliers, local communities, stakeholders, who has interest in the organization. Stakeholders can be viewed as internal and external and they are having significant influence on organization ethical values.
3.3 Planet where the organization operate
Organization should give due consideration for the environment, neural recourses, fair-trade and sustainability. The ethical business is socially responsible for the global environment and ethical organization should consider public ethical expectation.
3.4 Principles of the organization
Principle of the organization comprises honesty, truth, and integrity. These principles of the organization has to be matched with other conflicting aims in between purpose of the organization, people to whom it operates and the planet where the organization operates for the success of sustainable organization in the long run.
Need to manage the organization ethically
In the modern environment organization ethics should be actively manage through an organization ethic program and it is necessary to understand the main ethical value of the organization. There are five components in organization management ethic program.
Commitment - Leaders and senior management should have commitment to the program. The leadership should take active role in executing organization ethical value after taking into account the followers and key stakeholders. Leaders are the most important members in the organization. As such their vision, values and their purpose are for the benefit of the entire organization and for the important stakeholders.
Assessment - There should be active assessment of organization ethical value and effectiveness of implementing these values. Business ethic program and organization values and compliance requires constant training and vigilance. Improper monitoring system will leads to unintentionally misconduct by the employee and the organization will face serious ethical lapse.
Codify - Develop a code of ethics in the organization and communicate with each other. Usually board of directors or a committee of the board develops code of ethics in the organization to avoid any possible errors by the employee due to lack of knowledge about the potential risk of a decision.
Formalize - Formulate in the organization ethical structures and systems, ethics training and ethics communication. Individual factors are important in the evaluation of ethical issues. Individual training is necessary to understand organization values and business ethics to avoid any unacceptable moral development. It also helps the employees to control their decision making talent independently.
Integrate - Build an ethical culture and conduct in the organization. Most organization have implemented ethics and compliance program to prevent misconduct and reduce risk associated with employee wrong doing.
Need to develop ethical leadership in an organization
In the modern world ethics and values are in front of executives, managers and leaders who spend much of their time for developing organizational culture. The leadership of the organization should take responsibility and carryout the business in accordance to the management ethics program. The ethical leadership should take steps to witness that the senior management and executives including board of directors to follow and respect organization values. Carryout organization ethics program to achieve ethic program goals. Appointing senior person to coordinate the program and determine the ethics function which needs initiative.
Unethical policies, activities and behaviors in an organization
The following organization activities are not necessarily unlawful which are commonly considered as unethical.
Dishonesty, manipulating the facts and hiding information.
Manipulating and misleading advertisement, positioning and communications
Exploiting peoples feeling.
Fooling and taking advantage of people weakness
Greed and making excessive profit
Anything harming or endangering people
Breaking trust of the organization
Not accepting the blame and paying lot of amounts for the wrong doing
Preventing to notify people any significant changes
Lack of transparency
Harming environment or earth
Preventable waste or excessive consumption
Raiding anyone's privacy
Misusing authority, power and reputation.
More preference giving in appointing family members
Preferential treatment or decision-making based on secret motive or deals
Unfriendliness association with people or group of people
Conflict of interest, disloyalty of trust and breach of confidentiality information
Neglecting the duty of care of an organization
Fail to prevent wrong report within his authority
Unfairness and unkindness
Marketing ethic issues and stakeholders
The organization activities are affected directly or indirectly by the internal and external stakeholders. Internal stakeholders are includes board of directors, managers, employees, and other functional departments. External stakeholders include consumers, other interest groups, competitors, advertising agencies and regulatory bodies. (Miller and Lewis, 1991)
Stakeholder's ethical values are subject to various business issues such as sales practices, consumers' privileges, environmental and product safety, disclosure of information about the products. (Maignan and Ferrell 2004)
Various stakeholders are possibly exercise pressure on organization to achieve their individual ethical values and norms.(Annexure 1). The organization values and norms are affected by specially by primary stakeholders since they are in good position to influence the organization ethical values. The greatest challenge the business ethics in an organization involves the roll of the individual and their value. The primary responsibility factor that dominates for an individual in the organization is taking ethical decision at work (Ferrell, 2005). Ethical decisions at work place are influenced by superiors, subordinates and co-workers. The organization culture, codes of conduct, top management action towards ethical policies and issues all contribute to an organization ethical climate.
In the modern business environment strategy-setting in the business organization is vital for its survival. The organization should consider crucial roll in the organization by setting ethical strategy. The organization has to take into note whether the organization is doing the right thing. In order implement ethical strategy for an organization we should bring different paradigm into the risk debate.
8.1 Functionalist paradigm
This paradigm has been the primary one for organizational studies. This approach is mainly depend on human affairs and believes by hypothesis testing. It deeply rooted in sociological factors. Through Functionalist paradigm can understand and measure via science. It is influence by idealist and Marxist and assumes there are external rules and regulations to secure the external world. (Ardalan, 2003,p.202)
This functionalist paradigm basically explain about classical management theory, sysytem theory and contigency theory. it makes assumption how organisation is always in control mange people in a proper way.(morgan,2006:morgan,1980)
8.2 Radical Humanism - a crucial approach for a ethical organization
This approach has been emerged from the radical humanist paradigm (Morgan 1995, Burrell 2000) this approach argues dehumanization of the employee and the workplace. Individuals generally seen as machines and work as a technical process (Robbins and Barnwell 2006 pp 21-22) In the humanist approach that focus on placing human first rather than the organization.
The basic assumptions of this paradigm are according to Morgan (1995),
• Ideological traps: - Tunnel vision is based on our previous experience becoming the blueprint for interpreting our current experience (we often let myths and our past experience becomes our reality). We are unable to interpret reality without prejudice.
• Power dimension: - The right to define reality or the right of some to have power over others - overt use of power. Power is also used in a subtle or covert way (soft domination) and its use and abuse is often unquestioned. Eg. How is power distributed in organisations? We discuss empowerment and participation but we rarely see this happening in organisations.
• Ethical dimension: - Organisations need to act in an ethical manner. How do the actions of managers and organisations impact on employees and society?
• People first - Work is the problem. The modern organization approach is based on technical and mechanistic organization rather than understanding as human and social activity. Climate change taken by environmental movement viewed as negatively until recently. Therefore organization needs to examine the implications that climate change may have their business. This is important for the survival of the organization in the long run
The critical approach in the radical humanism creates many theories explaining excesses by the business world. Critical theorist include
The Frankfort school who argued that over use of technology will dehumanize the work place.
Marcuse argued that consumerism was becoming problem for society and people where individual did not rethink whether they need to buy. For example buying bigger cars where the oil supply are reducing and problem connected wiyj global warming.(The west Australian 2007)
Habermas argued that communicative distortion due to power relationship in the organizations are not equal. An example for this would be the 'One Tel' where the employees did not able to discusses the organization problems with Jodee Rich because he did not want to hear any bad news (Robbins and Barnwell, 2006).
Habermas propose that three main issues need to address the empowerment. They are
Technical reason : The science and technology has taken precedence over human and ethical issues
Practical reason: Needs to take into consideration employees and society while achieving business goal through mutual understanding instead of focusing on prediction and control.
Emancipator reason: Self questioning enables the development of critical thinking and frees individual from past practice.
Barry and Marshall and Robin Warren from Western Australia in their findings in 2007 challenged the prevailing beliefs and assumption that ulcers were caused by stress. They found that ulcers caused by Bactria could be cured by antibiotics.
Present raising issue of climate and its impact on society (Hartcher 2007, Stern Report) This report by the British government concluded that climate change is the consequence of the greatest market failure and called business to take control of green gas emission.
Organizational ethical decision making
Marketing ethical activities in an organization we should understand how people take ethical decisions. (Refer appendix 3). This diagram explains how the ethical decisions are taken in the normal organizational environment. The outcome of the decisions is evaluated by the internal and external stakeholders. The roll of the individual and their values has the great impact on any business decision making. Determining ethical decision is the primary factor in an organization (Ferrell 2005).
9.1Ethical decision making - Ryanair
The current CEO Mr.Michael O'Leary took the ethical business decision to operate the Ryanair airline as budget airline business model in the European market. It was very success taking such decision in the past and now most successful airline in the European market and most of the airline travelers prefer to travel by Ryanair. The following are the benefit by taking such decision
Low cost-low frills concept
94% of the booking through Internet reduced operating cost
All Boeing 737-800 aircraft reduce training and maintenance cost
Environmentally friendly Boeing 737-800 aircraft
Customer satisfaction - Low cost and high service performance
9.2Unethical decision making - Enron, Daewoo, Toyota
Many cooperate failures over the past decade are due to fraud and financial manipulation.
Enron: The Enron disaster is exhalent example for organizational unethical decision making. On May 25, 2006 US Huston jury found guilty the Enron CEO Mr Ken Lay and Mr Jeff Skilling for hiding financial status of the organization in 2000 and 2001 The group executives manipulate their earnings by illegal inside trading went on to liquidation. Due to the organization failure many investors lost their money and many employees lost their job. The group failed due to unethical and illegal business decision.
Daewoo: Kim Woo Choong founder of Daewoo Group found guilty and convicted 10 years in prison and forfeited US $ 22 billion after the business failure in South Korea. The group has grown with debt-funded acquisitions. The Asian financial crisis exposed the group weakness and the total group went into bankruptcy in 1999.
The following are some of the points for the failure of the organization by operating unethically.
Dishonesty and manipulating the facts and hiding information.
Manipulating and misleading the investors
Breaking the trust of the organization
Lack of transparency
Misusing the authority and power
Neglecting duty of care of the organization
Unfairness towards investors and employees
Fail to prevent wrong report within his authority
The ethical problem to operate the business organization is not only due to financial misinterpretation and manipulation. Toyota's recent troubles have been an example of a company's failure to understand the ethics of the customer relationship. Turning a blind eye to ethical consideration can undermine the wider economy and in time, cause irreparable damage.
Toyota: The organization recall millions of vetches sold to customers with suspected defects as on the specific engineering problem on the breaking systems. The following are the some of the examples that the organization's ethical responsibility failure.
Breaking the trust of the organization
Neglecting duty of care of the organization
Anything harming or endangering customers
Unfairness towards customers and investors
In modern organization ethics play a major role in taking effective decision making. Because for the success of an organization mainly rely on ethics. This report mainly focuses on theories, models and paradigms which helped to a proper decision in an organization.
In this report I explained about functionalist paradigm and radical humanist paradigm. Functionalist focus only on organizational behavior through hypothesis testing but radical humanist paradigm explained about the current approach of an organization and their impact on society. According to paradigms which are not an easy task it heavily teaches about ethics to the people.
In this report I explained about ethical approach and how it controls in making an effective decision making in an organization and describing about what are the unethical approaches which rely on taking ineffective decision making.
At last, to conclude my report, I would say organizations have started to focus on ethics. However, they did not lose the focus on organizational structure. Also there are many differences between paradigms in managing ethics.