Chapter Five
Organizational Culture and Ethical Values
Overview
• Social Capital (goodwill) refers to the quality of interactions
among people and whether they share a common
perspective.
• Organizational Culture: The set of values, norms, guiding
beliefs and understandings that is shared by members of an
organization and is taught to new members.
Organizational culture exists
• It operates on two levels:
• Visible artifacts and observable behavior: like ceremonies,
stories, slogans, behavior, dress code, physical settings.
• Values in the minds of organization members: underlying
values, assumptions, beliefs, attitudes, feelings.
Emergence of Culture
• Culture generally begins with a founder or early leader who
articulates and implements ideas and values as a vision,
philosophy or business strategy.
• When these ideas and values lead to success, they become
institutionalized.
Purpose of Culture
• Culture provides members with a sense of organizational
identity and generates in them a commitment to beliefs and
values that are greater than themselves.
• Cultures serve two critical functions in organizations:
• 1) Internal integration: To integrate members so that they
know how to relate to one another.
• 2) External adaptation: To help the organization adapt to the
external environment.
Interpreting Culture
• Rites and Ceremonies: These are the elaborate, planned
activities that make up a special event and are often
conducted for the benefit of an audience.
• Four types of rites that appear in organizations are:
• Passage
• Enhancement
• Renewal
• Integration
Cont…nd
• Stories are narratives based on true events that are
frequently shared among employees and told to new
employees to inform them about an organization.
• Myths which are consistent with the values and beliefs of
the organization but are not supported by facts.
• Symbols: It is something that represents another thing.
Cont…nd
• Organization Structures: A strong reflection of the culture is
how the organization is designed.
• Power Relationships: Looking at power relationships means
interpreting who influences or manipulates or has the ability
to do so.
• Control Systems: The inner workings of how the organization
controls people and operations.
Organization Design and Culture
• Corporate culture should reinforce the strategy and
structural design that the organization needs to be effective
within its environment.
• Types of culture
• The adaptability culture: It is characterized by strategic focus
on the external environment through flexibility and change
to meet customer needs.
• Innovation, creativity and risk taking are valued and
rewarded.
Cont…nd
• The mission culture: It is characterized by emphasis on a
clear vision of the organization’s purpose and on the
achievement of goals.
• Such as sales growth, profitability, or market share
• The clan culture: It has a primary focus on the involvement
and participation of the organization’s members and on
rapidly changing expectations from the external
environment.
• The bureaucratic culture: It has an internal focus and a
consistency orientation for a stable environment.
Culture Strength and Organizational
Subcultures
• Culture strength refers to the degree of agreement among
members of an organization about the importance of specific
values.
• If widespread consensus exists, the culture is cohesive and
strong.
• A strong culture is typically associated with the frequent use
of ceremonies, symbols, stories, heroes and slogans.
• Subcultures typically include the basic values of the dominant culture
plus additional values unique to members of the subculture.
Organizational Culture, Learning and
Performance
• A strong culture that encourages constant adaptation and
enhances organizational performance by energizing and
motivating employees, unifying people around shared goals.
• An adaptive culture is one of the most important jobs for
organizational leaders.
• Non-adaptive cultures encourage rigidity and stability.
Strong adaptive cultures
• It often incorporates:
The whole is more important than the parts and boundaries
between parts are minimized.
Equality and trust are primary values.
The culture encourages risk taking, change, and
improvement.
Ethical Values and Responsibility
• Ethics is the code of moral principles and values that governs
the behaviors of a person or group with respect to what is
right or wrong.
• Ethical values set standards as to what is good or bad in
conduct and decision making.
• Individual Ethics and Actions: First there are historical
influences like national culture, religion, philosophy and
geographical environment.
Cont…nd
• History leads to the development of societal morality with its
norms and values, laws, codes and regulations.
• Society shapes the local environment, which concerns
organizations, family etc.
• The local environment shapes individual behavior.
Cont…nd
• Managerial Ethics means principles that guide the decisions
and behaviors of managers with regard to whether they are
right or wrong.
• Social responsibility refers to company obligation to
contributes to the welfare and interest of all organization
stakeholders.
• Ethical Dilemma: Arises in a situation concerning right and
wrong in which values are in conflict.
Sources of Ethical Values in Organizations
• Personal Ethics: Beliefs and values, moral development,
ethical framework;
• Organizational Culture: Rituals, ceremonies, stories, heroes,
language, slogans, symbols, founder, history;
• Organizational Systems: Structure, policies, rules, code of
ethics, reward system, selection, training;
• External Stakeholders: Government regulations, customers,
special interest groups, global market forces.
How Leaders Shape Culture and Ethics
• Managers signal and implement values through leadership as
well as through the formal system of the organization.
• Structure: Introducing an ethics committee which is a cross-
functional group of executives who oversee company ethics.
• Disclosure Mechanisms: Create an environment in which
employees feel free to point out problems.
Cont…nd
• Code of Ethics: Formal statement of the company’s values
concerning ethics and social responsibility.
• Training Programs: To ensure that ethical issues are
considered in daily decision making.
Corporate Culture and Ethics in a Global Environment
• It is emphasis on multicultural rather than national values.
• It is being sensitive to cultural differences without being
limited to them.
• Social audit: It is one of the most useful mechanisms for
building global ethics.
• It measures and reports the ethical, social and environmental
impact of a company’s operations.
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