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In this highly competitive ever changing world some organizations are tempted to follow unethical practices during business dealings. Since their have been identified a need for ethics this assignment may help identify the key issues of ethics and the importance of creating an ethical approach for organizations. The main purpose of this essay is to critically analyze the importance of developing and ethical approach for organizations with assumptions theories and practical examples.
In the beginning of the essay it will discuss the importance of focusing on ethics. Under this the main sub headings will be ethical values and benefits of them. Under the main topic reasons for unethical behavior and outcomes of it, culture and ethics, the importance of leadership and its role on ethics and why does unethical behavior occur will be discussed. These topics will identify mainly the disadvantages of ethics and why it is important to develop an ethical approach. Body shops ethical practices will be discused as a real world example in this essay. The radical humanist approach and the stake holder theory are used to describe the different perspectives for ethics. In the end their will be some implications for managers regarding ethics.
Ethics are important for businesses to succeed and maintain good reputation and social well being. So this essay will justify that it is important to develop and ethical approach for organizations to maintain ethical standards and achieve organizational goals.
2.0Importance of focusing on ethics
Before identify the importance of ethics it is important to know what is ethics, how it relates to business organizations.
Ethics refers to a code of conduct that guides an individual in dealing with others. Business Ethics is a form of the art of applied ethics that examines ethical principles and moral or ethical problems that can arise in business environment. (Importance of ethics in business, 2009)
Ethics also can be defined with reference to values established by a particular society. For example accepting bribes may be unethical in some societies and may be a way of life in other societies. (Chandan, 2004, P.490)
There has been a rapid increase of ethical expectation in business and professions among the past few years. Customers, employees and suppliers are concern about organizations ethical standards. So it is important for organizations to practice ethical standards since their profits, growth depends on them.
Ethics can be used by organizations as a competitive advantage over its rivals. Some management guru's stated that "Consumers are used to buying products despite how they feel about the company that sells them. But a valued company earned a kind of customer loyalty most corporations only dream of because it appeals to its customers more than a product". (Importance of ethics in business, 2009) http://ezinearticles.com/?Importance-of-Ethics-in-Business&id=1212419
Ethical issues in organizations have become more complex because of the global and diversified nature of many large corporations and because of the complication of economic, social, global, natural, political, and legal and government regulations and environment. So the companies need to decide how to adjust to ethical standards in such environments.
Managers have to remember that leading by example is the first step in fostering a culture of ethical behavior in the companies as rightly said by Robert Noyce, "If ethics are poor at the top, that behavior is copied down through the organization", however the other methods can be creating a common interest by favorable corporate culture, setting high standards, norms, framing attitudes for acceptable behavior, making written code of ethics implacable at all levels from top to bottom, deciding the policies for recruiting, selecting, training, induction, promotion, monetary / non-monetary motivation, remuneration and retention of employees. "Price is what you pay. Value is what you get" - Warren Buffet (Importance of ethics in business, 2008)
The above statements explain that the top level hierarchy of decision making can influence ethical behavior in oraganisations. So it is important that the top level hierarchy develop and ethical approach and maintain ethical standards in the organization.
2.1 Ethical values in organizations
Ethical values are seen as an important component of organizational culture. Ethical values set standards as to what is good or bad in conduct and decision making. Ethical standards are becoming a part of formal policies and informal cultures of many organizations. (Daft, 2001, p.326) Some people believe that if they do not break the law then they behave ethically. But ethics is something that goes beyond law which is part of values. Many behaviors needed to be guided and it is important that managers be sensitive and guides its employees with their norms values and behavior.
Managerial ethics is an important principle and it is a principle that guides manager's behaviors and decisions to check whether they are right or wrong in moral sense (Daft, P. 326, 2001)
Forces that shape managerial ethics
Beliefs and values, Moral Development, Ethical Framework
Rituals, ceremonies, stories, Heroes, Language, Slogans, symbols, founder, History
Is decision or behavior ethical and socially responsible?
External Share holders
Government regulations Customers Special interest groups Global market forces
Structure, policies, rules, code of ethics, reward system, selection and training
Source: exhibit 9.7 ( Daft,2001 P.g. 328 , )
The above diagram explains the forces of managerial ethics. The forces that influence ethical decisions are summarized in the above diagram. Individual beliefs and values, a person's ethical decision framework and moral development influence personal ethics. Organisational culture shapes the overall framework of values within the organization and the influences under this are rituals, ceremonies, stories, heroes, language, slogans, founder and history. . Organisational systems influence values and behaviors according to the organizations policy framework and reward systems. When it comes to external shareholders government regulations, customers, special interest groups and global market forces influence managerial ethics. The above diagram helps managers identify whether a decision or a particular behavior is ethical and socially responsible. So by considering these forces managers will be able to develop and ethical approach in their organizations and maintain ethical standards.
2.2 Benefits of creating ethical values
By creating ethical values it will create employee loyalty, high commitment and moral as well as low staffs turn over. Attraction of high quality staff , Reputational benefits (customers, Suppliers) , more open and innovative culture decrease in cost borrowing and insurance and generation of good will in the communities in which the business operates. (Business ethics for SME's, 2007). These values help to create a good reputation increase in commitment and moral of employees in the organization. Ethics also can create a good public image and increase loyal customers. Many organizations have succeeded in using ethical values and practices.
2.3 Real world example of ethics
Body shop is a globalised natural beauty care cosmetic shop which is an example where an ethical approach has been used into practice. In 1994 body shop created a programme for ethical auditing at its early stages. The company values ethical standards and engage in social responsibility and environmental programs. As to their mission statement they focus more on ethical values and social responsibility.
To Courageously ensure that our business is ecologically sustainable:
meeting the needs of the present without compromising the future.
To Meaningfully contribute to local, national and international
communities in which we trade, by adopting a code of conduct which
ensures care, honesty, fairness and respect.
To Passionately campaign for the protection of the environment, human
and civil rights, and against animal testing within the cosmetics and toiletries industry.
(Body shop approach to ethical auditing, 1998)
Guide to the Body Shop International key policies on ethical issues.
source: figure 1 (body shop approach to ethical auditing,1998)
The above diagram explains the new approach followed by body shop for ethical auditing. It describes the international key policies on ethical issues. This company has shown the importance of creating ethical standards in an international level.
Body shop has been able to maintain their ethical values and social responsibility by having ethical and environmental audits. By creating good ethical values, and good work place standards, body shop has been able to gain a reputation and high brad loyalty. This has made body shop as one of the leading companies in the cosmetic industry in an international level.
3.0 Reasons for unethical behavior and outcomes of it
Many large successful companies in America have been affected due to unethical practices and unexpected behaviors. The reason behind most of these outcomes relies on the leadership and management of these companies. Leadership plays an important role when maintaining ethical standards in companies.
Highly educated, successful, and business savvy corporate professionals at Enron, Tyco, WorldCom, and Adelphia got themselves into such a big mess by engaging in unethical practices. (Importance of ethics in business, 2003)
The reason behind this is the failure of such professional to maintain common accepted behavioral standards. Some may commit these unexpected ethical practices by mistake.
3.1 Ethics and Leadership
For the organization to succeed and to follow ethical practices it is important for the Leaders in the organization to be more ethical and guide the organization from front. Leaders like Dennis Kozlowski , Celynco Lalith Kothalwala, are some leaders that have cause their organizations for it's downfall due to unethical procedures.
Dennis Kozlowski the former CEO of General Motors who received a multi-million dollar salary and bonus package in 1987 at a time when the company was closing plants and was laying off thousands of people know and understand ethics. They either were too far removed from the "nitty gritty" that ethical standards did not resonate with them or they simply did not care. (Importance of ethics in business, 2003)
This issue is an example shows how the unethical practices of this top class business leader cause thousand's of jobs to people who follow ethical standards. This shows that this leader has also influence others to engage in unexpected ethical practices. It is important for the leadership of the organization to be concern on ethics and develop ethical approach in their organization. This will help their organization and its employees avoid unethical practices and maintain good ethical business standards.
3.2 Why does unethical behavior occur in organizations
There are many situations were organizations behave unethically and it has become limitless. Unfortunately unethical practices have become common in today's business place. For e.g. Wal-Mart a leading organization in the United States has been highlighted for unethical practices. Employees are not treated well and they receive a very low pay. Women have been discriminated at Wall-Mart in terms of salary, position and decision making. Another unethical example quoted is, Wal-Mart was under investigation for the use of illegal immigrants as workers. In fact, "in October 2003 federal agents uncovered hundreds of illegal immigrants employed by outside contractors cleaning its stores. (Wall Mart unethical business practices, 2009).
Organizations operating in certain industries tend to behave unethically. Certain industry cultures may influence organizations to develop cultures that encourage their members to select unethical acts. For e.g. in many Asian countries like china, India, Sri Lanka organizations culture strongly support for unethical behavior. Especially in Sri Lanka in the government sector this may be a common practice.
If an organization's major competitors in an industry are performing well, as a result of unethical activities, the organizations members too try to engage in unethical practices. Such a scenario results in an organizational culture that serves as a strong influence to unethical actions.
3.3 Organisational culture and ethics
From the values that make up an organization, culture ethical values are now considered among the most important. (Daft, p.326, 2002) Different culture has different assumptions perspectives on ethics. Some cultures such Anglo Sakson western culture's see ethics as important and do not encourage unethical practices. Many organizations may fail to succeed in these types of cultures. But in Asian and third world countries cultures may encourage unethical practices. Bribes gift giving is seen as a common practice in most of these countries. There is a greater chance for companies to succeed by engaging in unethical practices in these types of cultures in the short run. An organizations culture should be strong and effective when doing business dealings.
An effective organizational culture should encourage ethical behavior and discourage unethical behavior. Admittedly, ethical behavior may "cost" the organization. An example might be the loss of sales when a multinational firm refuses to pay a bribe to secure business in a particular country. Certainly, individuals might be reinforced for behaving unethically (particularly if they do not get caught). In a similar fashion, an organization might seem to gain from unethical actions. For example, a purchasing agent for a large corporation might be bribed to purchase all needed office supplies from a particular supplier. (Importance of ethics in business, 2003)
Business practices reflect the value attitudes, and behavior patterns of an organization's culture. (Daft, 2001, P. 321 ) So it is important for managers and the organization to maintain ethical practices to create and ethically oriented organizational culture.
Unethical behavior can be costly to organizations in terms of diminished public trust, tarnished organizational reputation, and lost of profits (The social implications of punishing unethical behavior: observers' cognitive and affective reactions, 2010) http://findarticles.com/p/articles/mi_m4256/is_n4_v18/ai_13928528/
So it is important for managers to respond in a proactive manner than a reactive manner to control and eliminate unethical behavior in their organisations since outcome of unethical behavior may cause a disaster to the organisation.
4.0 View of ethics in different perspectives
Ethics have been viewed by different paradigms and theories. This essay will focus on how Radical humanist paradigm and Stakeholder theory view ethics and developing an ethical approach.
4.1 Radical humanist view of ethics
Under radical humanist paradigm ethics has been highlighted as an important assumption. Under this assumption ethics has been defined as organizations need to act in the ethical manner. How do the actions of managers and organizations impact on employees and society? (Morgan, 1995)
Critical theory originates from the radical humanist paradigm and also has a positive view on ethics. Critical theories set out to critically examine organizations in contemporary society. This approach has emerged from the radical humanist paradigm (Morgan, 1995).
Critical theory also sees work as the problem and has an opposite view to positivist theories. These theories also argue that organizations should be ethical in conducting their business operations. This explains that it's important to deal with employees, customers, clients, society and other businesses in an ethical manner. If organizations focus only on their interests then they could cause problems for the survival and the good will of the community and the environment. According to this theory organizational efficiency and effectiveness is an ideological trap (tunnel vision) that prevents from viewing its situation in a big picture.
These theories also state that if organizations do not empower employees to speak up and contradict ideas and thinking, then the top management will not be exposed to different perspectives and limit the probability of unethical behavior.
4.2 Ethical approach and Diversity in organizations
An ethical approach to management emphasis the importance of diversity in organizations. This approach examines the decisions and practices of organizations for their ethical approach. The issue of gender equity in oragnisations is a humanist and ethical approach to organizations. In the past for many years women in oragnisations have not received equal rights. For example they were not given equal pay \for equal work comparing with men. Still there are barriers to women in high position in many organizations. This cannot be viewed as ethical. So it is important that women get equal rights since it will create diversity in organizations. Since ethical approach creates diversity in organizations and help to create equal rights, radical humanist perspectives highlight the importance of developing an ethical approach to organizations.
4.3 Stake holder theory
Stakeholder theory is unquestionably the most popular framework for discussing business ethics (Philips, 2003).
Stake holders can be define as the people who have an interest claim or stake in an organization (Stake holder theory ethics 209, 2009).
Stake holders are the parties that have an ownership for the organizations. Employees, shareholder, customers, trade unions, government and suppliers can be considered as stake holders who internally and externally contribute to the organization. It is important for the company to consider these parties needs and maintain the value of them. The company should treat these parties ethically and full fill their needs. So these theories state that it is important to create an ethical approach for stakeholders who will ultimately benefit for the well being and growth of the organization.
5.0 Implication to managers in developing and ethical approach
When it comes to ethics it is important foe managers to be aware and encourage and empower employee's to increase ethical behavior.
A manager should treat his employees, customers, shareholders, government, media and society in an honest and fair way by knowing the difference between right or wrong and choosing what is right, this is the foundation of ethical decision making.
Managers should be able to lead by setting examples. They should also communicate ethical values to outside and inside stakeholders. (Stakeholder theory, ethics 209, 2009)
Managers should also be able to create a strong culture since their behavior can influence the cooperate culture. Managers play an important role in promoting ethics in organizations. So if organizations need to achieve goals and overcome challenges in today's workplace managers need to follow an ethical approach and guide from front.
This essay highlighted the importance of ethics in today's global business world. There has been a concern of ethical expectations among employees, customers, shareholders and suppliers. Ethics is also another way of gaining a competitive advantage over other companies. Ethical values benefit organizations and help create ethical standards. There are many situations where organizations behave unethically. Competitors and other strong cultures influence people to behave unethically. Unethical behavior could cost the organization by profits and create a bad reputation and destroy its public image. The essay also discusses how leaders influence ethics and why leadership is important in ethics. Body shops ethical practices and its international policy for ethics was discuss as a real world example.
Describing about the view of different approaches to ethics the radical humanist and Stake holder theory was used. Radical humanist paradigm view ethics as important and explain the need for organizations to behave in an unethical manner. The stake holder theory states the importance of focusing on ethics creating an ethical approach to stake holders.
In some cultures ethics may be an important principle but in other cultures ethics may not be concern important. Ethics differ according to different perspectives and culture. But as humans it's important to create good ethical values and standards. So to succeed and build a good reputation organizations should encourage ethical behavior. There fore it is important for organizations to develop an ethical approach to succeed in today's globalize business world.