The Impact of Ethics on Organizational Culture

Introduction

The concept of organizational culture has always been subjected to vigorous debate. Even though researchers and organizational leaders have all agreed that organizational culture exists and plays a determining role in the development of workplace behavior, there is a lack of agreement with regards to the definition of the concept itself. However, defining the term organizational culture is unlikely to bring any benefit to businesses due to the need of focusing on the positive changes that companies can make through adopting the ethical standards associated with organizational culture. These ethical standards facilitate the development of unique cultures that assist in defining employees’ roles, relationships between each other, and the procedures of handling their customers. In this study, the focus will be placed on analyzing the role of ethics in shaping the organizational culture and behaviors that promote a positive atmosphere in a company.

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If companies want to become successful in what they do, they should invest in the development of the appropriate organizational culture to guide their decision-making on every level. Ethics played a major role in shaping the organization’s culture since it allowed for the equal distribution of authority and shared accountability of stakeholders (Ardichvili, Mitchell, & Jondle, 2008). Also, ethics facilitates the development of a code of conduct that describes how specific practices and procedures should be enforced. Ethics has also set to be instrumental in sustaining the organizational culture. According to Ravasi and Schulz (2006), companies that fail in developing their own organizational culture face a variety of productivity- and ethics-related issues such as the inability to facilitate cooperation or making employees commit to their responsibilities.

In this paper, the value of ethics in promoting an organizational culture will be explored based on the literature review of the relevant scientific sources. In the literature review section, the most important points of research articles will be summarized, in the findings section, the key findings will be presented while the recommendations section will be mention several important findings that the reviewed literature revealed. The objective of the paper is to make a definite conclusion on whether the integration of ethics into the organizational culture of business could bring any benefit, either tangible or not.

Literature Review

Researchers from different fields of expertise have come to a common conclusion that the success of an organization is tightly linked to the way its employees behave within a corporate environment. For instance, Terec-Vland and Cucu (2016) stated that the reinforcement of moral values within an organization could contribute to the enhanced economic activity of a business as well as the sustained economic profit.

Ravasi and Schultz (2006) also explored the organizational culture, although as a context for sensemaking within companies. The researchers concluded that the integration of organizational culture into everyday processes would improve the components of cultural expression such as stories, rituals, values, assumptions, interpretive beliefs, and much more (Ravasi & Schultz, 2006). This means that how workers undertake different assignments and what attitudes they exhibit toward each other and the management will significantly affect business sustainability (Nguyen & Watanabe, 2017). Mitrovic, Grubic-Nesic, Milisavljevic, Melovic, and Babinkova (2014) studied the influence of organizational culture in the context of managers’ attitudes.

The researchers applied theories of leadership to determine whether managerial qualities (e.g., openness, trust, proactivity, collaboration, etc.) contributed to the creation of an effective organizational culture. It was found that different managerial styles and attitudes influenced the perception of organizational culture and its influence on a company’s effectiveness. The sphere in which managers operate also had an impact on the shaping of organizational culture and the dimensions of culture. According to Mitrovic et al. (2014), leaders who operate in the sphere of manufacturing identified the cultural dimensions of confrontation, openness, cooperation, and autonomy as low. Managers of service companies identified the mentioned dimensions as even lower (Mitrovic et al., 2014). Therefore, the researchers concluded that managers had limited ideas about the benefits of organizational culture and the functioning of their companies to improve it through the adoption of strategies to improve effectiveness and facilitate retention.

Nakano (2007) also studied the importance of the creation of ethical organizational culture and found that corporate-conscience-based governance and the establishment of business ethics through the sharing of values were more effective. The author provided the example of Japan where the concept of corporate governance has been given a concrete definition to improve companies’ attitudes toward ethics and establishing such organizational cultures that would promote better performance. Such findings were supported by Rakichevikj, Strezoska, and Najdeska (2010) who underlined the importance of human resource managers knowing the official cultures of their companies that employees should follow through exhibiting certain customs, language, attitudes, and values. Overall, it can be concluded that organizations will struggle with achieving the set objectives and goals without ethics being a part of their organizational cultures.

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In recent years, the concept of organizational culture has gained tremendous attention from scholars, organizational executives, and even employees. According to the research conducted by Gorondutse and Hilman (2016), there was a “significant causal relationship between organizational culture and the performance of SMEs” (small and medium-sized enterprises) (p. 505). The researchers found that when organizations fail to nurture their cultures, their key visions and strategic objectives are less likely to be reached. Also, the perceived level of ethics in an organization was found to be correlated to the positive performance of employees. This leads to the implication that “the more managers/owners perceive that they receive benefits comparable to the resources they spend on social behavior, the more they continue to practice it” (Gorondutse & Hilman, 2016, p. 520). Thus, top managers should take on the responsibility to develop an organizational culture through the use of reinforcements that can include both rewards and punishments. These findings are supported by those of Slavica, Leposava, Stevan, Boban, and Zuzana (2014) who studied the role of managers in assessing and promoting the desired organizational culture within companies. The researchers concluded that top managers should adapt to the creation of organizational culture to the needs of their companies and align them with the ethical guidelines that would be considered acceptable.

Ardichvili, Mitchell, and Jondle (2009) identified several characteristics of ethical business cultures that top executives should embrace. Such characteristics include defining organizational values and missions, ensuring that the relevant stakeholders are involved, and showing effectiveness and integrity when making relevant decisions.

Important research findings were presented by Sinclair (1993) who assessed the benefits of organizational culture as a method for improving the existing ethical values and attitudes. The researcher reported that when organizational culture is created, all workers who hold managerial positions regardless of who they are – junior supervisors or top managers – are required to make sure that everyone has an understanding of their culture. Managers are responsible for monitoring the ethical values and standards are implemented at all times.

When discussing the enforcement of the ethical practices in an organization, it is essential to understand that those unable to follow the established standards should be responsible for their deviations. However, some scientists believe that not all deviations from the established norms should be punished. In their article “Culture corrupts! A qualitative study of organizational culture in corrupt organizations” Campbell and Gorits (2014), there is a disconnect between how managers and their employees perceive organizational cultures, which means that any deviation from the norms should be studied, with employees asked about why they acted in the given situation. To avoid situations, in which workers are subjected to scrutiny for not complying with the established organizational culture, moral responsibility and shared values are to be recognized as essential. Dempsey (2015) mentioned that “since certain corporate values, or culture, will predictably promote wrongdoing by members, all those who participated in that culture will acquire a degree of moral responsibility for the wrongdoing that results.” This occurs because of the establishment of shared values that unite all employees within an organization, with employees giving each other reasons to follow the established values.

Findings

The exploration of relevant research on the topic of ethics in organizational culture showed that companies should take time to evaluate their existing cultures and make changes by the ethical needs and considerations. It was shown that the establishment of an effective culture in an organization could improve employees’ attitudes toward their responsibilities and facilitate the sharing of information targeted at the enhancement of the existing procedures. In this section, the four key findings of the review will be presented, which are as follows:

  1. Organizations need to consider promoting ethical cultures within their corporate environments;
  2. The top management should take on the responsibility of shaping and encouraging ethical organizational cultures;
  3. Close communication between managers and employees is needed for facilitating the sharing of information with regards to the enforcement of appropriate cultural practices.
  4. Businesses should avoid corrupt practices in the promotion of organizational cultures.

The review of research literature on the importance of establishing effective organizational cultures through the use of ethics showed that without such efforts, businesses would be unable to survive in the modern competitive environment, which requires companies to exceed one another to attain a large base of customers. In such competitive environments driven by innovation and continuous change, customers show interest in unique products and services that could bring value to them. For businesses to develop such services and products, not only effective production and marketing strategies should be put in place since employees’ attitudes, morale, and values will impact the way an organization performs.

As demonstrated by the findings from the literature review, ethics is a crucial component of an organizational culture that could shape the way businesses perceive themselves and what goals they are planning to achieve. Moreover, companies now have more incentive to be ethically responsible for the conduct of their employees for creating a positive public image to attract customers or investors. It is important to mention that modern businesses are now making ethics a central component of their organizational culture to ensure that they treat their employees right, respect the specific nature of markets in which they operate, and exercise fair market practices regarding the treatment of their consumers. Thus, ethics is an all-encompassing concept that businesses should consider to not only become competitive in their industry but also to ensure that the internal processes are kept under control.

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Another important finding is that the top management should be the one responsible for ensuring that unethical practices within organizations are avoided at all costs to achieve the set goals and objectives. Since the management has a responsibility to establish organizational goals and making sure that their employees do everything in their power to achieve them, it makes sense that the guidance of organizational culture and the appropriate ethical values will also become the feature of their performance.

Lastly, it was found that the consequences of unethical practices within organizations should be put in place. For instance, when employees fail to comply with the established ethical guidelines, they should be dealt with accordingly. While not all actions require punishment, managers should look into their employees’ behaviors and use reinforcements (e.g., incentives) to make them comply. Also, the review of the literature showed that the use of corruption to promote ethical practices in organizational settings could lead to severe consequences: when a company is corrupt, it is almost impossible for its workers to embrace ethical practices since every individual focuses on achieving personal gains at the expense of their organization. Overall, the review of the literature showed that ethics was a crucial component of organizational culture with regards to guiding the values and attitudes of both managers and their subordinates.

Recommendations

Researchers who studied the relevance of organizational cultures in promoting better performance recommended that ethics should be integrated into the everyday practices for improving both economic performance and the public image (Terec-Vlad & Cucu, 2016). The majority of the scholars concluded that the top management of organizations should be responsible for promoting ethics (Gorondutse & Hilman, 2016; Ardichvili et al., 2009). Managers should get a detailed understanding of the mission and the vision of their organization and define their culture in such a way that could enable it to become superior to competitors. While all employees regardless of their rank in an organization could monitor the establishment of beneficial values and practices, it is the top management that could facilitate initiatives for improving the ethical standards within the corporate environment. Moreover, managers’ knowledge about the importance of ethics integration into the organizational culture can range depending on their education on the subject as well as the existence of corrupt practices that limit ethical behaviors within companies.

An organizational culture that promotes ethical behaviors is linked to a sustainable competitive advantage due to the need to differentiate their products or services that would be attractive to potential customers. Since the majority of companies differentiate based on quality or price, new methods for differentiation are needed. Importantly, developing a unique organizational culture is something that other companies cannot replicate, which means that the development of such a culture based on appropriate ethical principles is essential. Strong organizational culture will not only help a company differentiate itself from competitors but also attract and retain loyal customers and employees as well as contribute to the development of trusting relationships with partners.

Another key recommendation of the majority of researchers whose studies were included in the literature review refers to ensuring that the management establishes effective communication practices with their employees for enhancing information sharing. This means that managers should be responsible for communicating the values and the expected behaviors that they should exhibit to comply with the established organizational culture. Employees must have a clear understanding of what is expected from them and why some of the cultural practices should be embraced while others are eliminated.

Lastly, it is essential to mention that the researchers pointed to the importance of eliminating corrupt practices that prevent organizations from achieving an ethical culture within their existing environments (Campbell & Goritz, 2014). Warning employees about the consequences of corrupt practices is important because the majority of such practices start from top managers. Corruption is considered unethical, which means that it can prevent the development of the appropriate organizational culture that will improve performance while differentiating a company from its competitors in the market (Stucke, 2013). Overall, the researchers who studied the importance of ethics in the establishment of an organizational culture concluded that managers should contribute to the development of values, mission, and ethical practices to facilitate improved performance and achieving a competitive advantage in the industry where their companies operate.

Conclusion

Researchers have extensively studied the concepts of ethics and organizational culture for reaching the strategic objectives and goals for prosperous development. The review of the relevant literature showed that every company faces some challenges in both internal and external operations that could be extremely disruptive if not handled appropriately. Organizational success is regularly defined by the extent to which employees commit to the goals and objectives, their ability to meet with the needs of employees, and the effectiveness of the strategies used in overcoming the infrequent challenges. In such a hectic environment, managers are expected to monitor the performance of their subordinates to determine what measures of improvement should be implemented in the workplace. Instead of engaging in corrupt practices that compromise the integrity and reputation of organizations, managers should put in place ethical organizational practices that could guide the common procedures.

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It can be concluded that ethics is the vital component of shaping an effective organizational culture that could promote enhanced performance while making sure that a business is perceived favorably by both their employees and customers. Conducting a further investigation of the effect of effective organizational culture on employees’ performance and customers’ perceptions is important for identifying the beneficial practices that companies can use to their advantage. It is important to mention that the modern business environment changes continuously and thus requires companies to be attentive to those needs and adapt accordingly. Lastly, it should be mentioned that ethics is a concept that also aligns with the social responsibility efforts of companies and their investments in the growth and improvement of society. Such investments can contribute to the creation of a positive corporate image valued by both employees and companies’ potential clients.

References

Ardichvili, A., Mitchell, J., & Jondle, D. (2009). Characteristics of ethical business cultures. Journal of Business Ethics, 85(4), 445-451.

Campbell, J., & Goritz, A.,S. (2014). Culture corrupts! A qualitative study of organizational culture in corrupt organizations. Journal of Business Ethics, 120(3), 291-311.

Dempsey, J. (2015). Moral responsibility, shared values, and corporate culture. Business Ethics Quarterly, 25(3), 319-340.

Gorondutse, A., & Hilman, H. (2016). Mediation effect of the organizational culture on the relationship between perceived ethics on performance of SMEs. Journal of Industrial Engineering and Management, 9(2), 505-529.

Mitrovic, S., Grubic-Nesic, L., Milisavljevic, S., Melovic, B., & Babinkova, Z. (2014). Manager’s assessment of organizational culture. Business Administration and Management, 17(3), 35-49.

Nakano, C. (2007). The significance and limitations of corporate governance from the perspective of business ethics: Towards the creation of an ethical organizational culture. Asian Business & Management, 6(2), 163-178.

Nguyen, L., & Watanabe, T. (2017). The impact of project organizational culture on the performance of construction projects. Sustainability, 9(781), 1-21.

Rakichevikj, G., Strezoska, K., & Najdeska, K. (2010). Professional ethics: Basic component of organizational culture. Tourism & Hospitality Management 2010, Conference Proceedings, 1168-1177. Web.

Ravasi, D., & Schultz, M. (2006). Responding to organizational identity threats: Exploring the role of organizational culture. Academy of Management Journal, 49(3), 433-458.

Sinclair, A. (1993). Approaches to organisational culture and ethics. Journal of Business Ethics, 12(1), 63. Web.

Slavica, M., Leposava, G., Stevan, M., Boban, M., & Zuzana, B. (2014). Manager’s assessment of organizational culture. E+M Ekonomie a Management, 17(3), 35-49.

Stucke, M. (2013). Is competition always good? Journal of Antitrust Enforcement, 1(1), 162-197.

Terec-Vlad, L., & Cucu, M. (2016). Ethics and organizational culture-key elements regarding the development of economic activities. Ecoforum, 5(1), 192-196.

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