"Bribery and Other Types of Unethical Behavior Are Common Place Throughout the Global Business Environment"
Chapter 8 Organizational Culture, Empowerment, and Ethics Humane, Empowering Work Environments Organizational Ethics Culture Humane, Empowering Work Environment Empowerment Building a Constructive Organizational Culture • Organizational culture consists of the values, symbols, stories, heroes, and rites that have special meaning for a company‟s employees. • Culture represents the emotional, intangible part of the organization. If structure is the organization‟s skeleton, culture is its soul. • Many firms are now attempting to develop cultures that are helpful in motivating their employees and keeping them committed to the firm. • 47% of 400 CEOs in North America and Europe said that reshaping culture and related employee behavior took up a great deal of their time and was as important as monitoring financial information. • A recent study of 200 mergers found incompatible cultures to be the primary cause of failures. Functions of Organizational Culture (Figure 8-1) JUSTIFICATION OF BEHAVIOR ENCOURAGE ENHANCED SHARED COOPERATION PERCEPTIONS CULTURE ENHANCED IMPROVED COMMITMENT DECISION MAKING IMPROVED ENHANCED COMMUNICATION CONTROL Elements of Organizational Culture Rituals Rites Values Organizational Culture Symbols Heroes Narratives Focus on Management: Organizational Culture at Quad/Graphics • Selected as one of the “100 Best Companies to Work for in America,”Quad/Graphics is a remarkable success story. • The company‟s philosophy is “Have fun, make money, HARRY and don‟t do business with anyone you don‟t like.” QUADRACCI • Harry Quadracci, who has been called the P. T. Barnum of Printing, describes the company as a circus, a continuous performance of highly creative and individualistic troupes. • Employees at Quad/Graphics are empowered, don‟t sign time cards, are continually learning, and receive a variety of unique benefits. Organizational Values Organizational values are beliefs held by an individual or group that speak to the actions and ends that organizations “ought to” or “should” pursue. The Importance of Values “Every excellent company we studied is clear on what it stands for, and takes the process of value shaping seriously. In fact, we wonder whether it is possible to be an excellent company without clarity on values and without having the right sorts of values.” Peters & Waterman, In Search of Excellence Focus on Management: Values at Hewlett-Packard The HP Way: • We have trust and respect for individuals • We focus on a high level of achievement and contribution • We conduct our business with uncompromising integrity • We achieve our common objectives through teamwork • We encourage flexibility and innovation Symbols • Symbols are things that stand for or suggest something else. • As examples: – office assignments signal status – dress codes suggest the level of formality – logos can influence customer and employee perceptions – an action can be symbolic, as in the case of the “Lambeau Leap” Some Forms of Symbols A PHYSICAL OBJECT A UNIFORM A MASCOT AN ACTION Web Wise: The Land O’Lakes Logo • The importance of company symbols to those outside the firm is seen in a study of customers‟ ratings of 47 firms on things such as quality and reputation. • 600 customers were asked to rate the firms on the basis of their names, and another 600 were also provided with the company logo. • The logo had a strong influence on ratings. For example, Motorola‟s score rose by 55%. • Land O‟Lakes‟ kneeling native American woman logo dropped the company‟s rating by 12%. • http://www.landolakes.com/new/ourCompany/LandO LakesHistory.cfm Forms of Narratives • Stories dramatize relatively ordinary, everyday events within organizations in order to convey important cultural meanings. • Legends are more uplifting than stories and portray events that defy explanation by ordinary circumstances. • Myths are dramatic, unquestioned narratives about imagined events. • Sagas describe heroic exploits performed in the face of adversity. Recurring Story Themes • Equality. These recognize that members must deal with status inequalities in organizations. • Security. These recognize that members desire security, but that organizations can threaten their security. • Control. These recognize tensions between members‟ desire to control events and their realization that they can‟t always do so. Focus on Management: Stories at 3M • The importance of innovation as a 3M value is supported by a story often repeated throughout the firm concerning transparent tape. • According to the story, an employee accidentally developed cellophane tape but was unable to get superiors to accept the idea. • The employee was able to sneak into the corporate boardroom and tape down the board members‟ copies of the minutes with the transparent tape. • The board was impressed enough with the novelty to give it a try, and the product was incredibly successful. • The story reinforces the importance of innovation and encourages 3M employees who believe in their ideas to never take no as a final answer. Heroes • Heroes are company role models. In their performance of deeds, embodiment of character, and support of the existing organizational culture, they highlight the values a company wishes to reinforce. • Heroes are the main characters in the stories relayed throughout an organization. Rites • Rites combine cultural forms into a public performance. • Some forms of rites include: – Rites of Passage (completion of Army basic training) – Rites of Enhancement (awards ceremony) – Rites of Integration (company Christmas party) Rituals • Rituals are relatively simple combinations of repetitive behaviors, often carried out without much thought, and often brief in duration. • For example: – how members greet one another – how visitors are met at airports – who eats where and with whom – how a phone conversation should proceed • Rituals are often more important for their expressive, emotional consequences than for more practical reasons Focus on Management: Herb Kelleher of Southwest Airlines • Herb Kelleher is cofounder, chairman of the board, and CEO of Southwest Airlines. • Under Kelleher‟s guidance, Southwest has been remarkably successful. It has been profitable every year since 1973 yet maintains the lowest fares. It is the safest airline in the world and ranks number one in the industry for service, on-time performance, and lowest employee turnover rate. • Fortune magazine named it the most admired airline and best place to work in the United States. • Kelleher has created a unique culture at Southwest Airlines through a mix of humor, altruism, concern for others, and straight talk. Focus on Management: Culture at Walt Disney Company • Employees -- primarily high school and college students -- are critical to Disney‟s success. • Employees must convey the Disney fantasy and create happiness while carrying out repetitive work at low pay. • Disney is heavily unionized, with 24 unions at Disneyland alone. • To deal with this, Disney pays close attention to organizational culture. Focus on Management:Culture at Walt Disney Company (Continued) • Selection. Disney‟s clean-cut and conservative image attracts the kind of employees it wants. A film shows prospective employees the sort of discipline, grooming, and dress code the company demands. • Socialization. Cast members participate in an ongoing program that continually reinforces Disney‟s values, philosophies, and guest service standards. • Language. Employees are “cast members” and they are “cast” in “roles.” Cast members work “onstage” or “backstage” and they wear “uniforms.” • Ceremonies. Service recognition awards, peer recognition awards, banquets, and informal recognition parties help boost morale. Web Wise: Harley Owners Group (HOG) A good example of rites of integration is the “meetings” of Harley-Davidson‟s HOG (Harley-Owners Group) chapters, where “the bond is metal” as hundreds of Harley riders hit the road together to help out worthy causes of just “share the awareness.” http://www.hog.com/home.asp Some Guidelines for Assessing Organizational Culture • Look around -- what do the headquarters and other buildings look like? How are people dressed? How much interaction is there? Who is talking with whom? How does the place “feel”? • Ask to see newsletters and other internal documents. What values are emphasized? Who are the “heroes” held up for praise? Are parties, celebrations, or other ceremonies mentioned? What sorts of things are discussed? • Look at annual reports or other communications to those outside the firm. What “face” is being presented to the world? Guidelines for Assessing Organizational Culture (Continued) • Ask, “Can you tell me anything about what the culture is like here? Are there stories that people here tell about X?” • Ask, “What values are stressed in X? How are they communicated? How are they reinforced?” • Ask, “Who is looked up to in X?” • See what you can learn about rites and ceremonies in the organization. What happens when people accomplish something? Are there “rites of passage” such as promotion ceremonies and retirement parties? Are there regular “get- togethers” such as holiday parties, social events, and company softball games? Guidelines for Assessing Organizational Culture (Continued) • Ask, “What sorts of behaviors are expected and rewarded here? What sorts of behaviors are punished?” • Ask people outside the firm what they think of it. • Check magazines, newspapers, and other sources to get clues about the culture of the organization. • As appropriate, use quantitative measures of organizational culture. Some Guidelines for Assessing Organizational Culture (Continued) -- Making Sense of the Information • Overall, how salient is culture? – Do leaders mention culture, values, and heroes in their messages? – Do organizational members talk much about culture and its elements? • What primary themes emerge? • Are responses consistent across people, levels, and units? • How does everything fit together? – Are valued behaviors rewarded? – Are symbols, stories, heroes, and ceremonies consistent? Subcultures • Subcultures are distinctive clusters of ideologies, cultural forms, and other practices within the larger culture. • Subcultures may develop among members of the organization who have common training or duties, similar personal characteristics, frequent interaction, or shared experiences. • Subcultures may lead to conflict and misunderstanding. • Potential benefits of subcultures include: – accomplish certain tasks while permitting the primary culture to present a certain “face” to the world – provide diversity of views, assumptions, and values – serve as seeds for desired change Countercultures • Countercultures are subcultures that contradict the dominant culture. • Countercultures help clarify the bounds between acceptable and unacceptable behavior. • Countercultures may arise: – to provide a safe haven for the development of innovative ideas. – to encourage the questioning of old, and perhaps outmoded, values. – to handle severe, shared employee discontents. – because of mergers or acquisitions of firms with differing cultures. Four Views of How Organizational Culture Affects Performance PARTICULAR CULTURAL “STRONG” CHARACTERISTICS CULTURE PERFORMANCE “HEALTHY” STRATEGICALLY CULTURE APPROPRIATE CULTURE Theory Z • In his book, Theory Z, William Ouchi presented comparative studies of Japanese and American management techniques. • He identified three types of organizations: – Typical Japanese (Type J) – Typical American (Type A) – Ideal Hybrid (Type Z) • The Type Z organization: – Emphasis on group decision making and consensus – Long-term employment – Individual achievement and advancement Type A. Type J, and Type Z Organizations (Figure 8-3) CULTURAL VALUE U.S. (TYPE A) JAPAN (TYPE J) U.S. (TYPE Z) Commitment to Employees Short-term employment Lifetime employment Long-term employment Decision Making Individual Group and consensus Group and consensus Responsibility Individual Collective Individual Evaluation Rapid and quantitative Slow and qualitative Slow and qualitative Control Explicit and formal Implicit and informal Implicit and informal Career paths Narrow Broad Moderately broad Concern for people Narrow Holistic Holistic In Search of Excellence • The most popular writing on the relationship between organizational culture and effectiveness was presented by Tom Peters and Robert Waterman in In Search of Excellence. • Based on their observation of 62 successful firms, including Hewlett-Packard, McDonald‟s, Disney Productions, Levi Strauss, and Johnson & Johnson, Peters and Waterman concluded that eight key attributes of the organizational culture contributed to their success. Attributes of Effective Organizational Culture (Peters & Waterman) CLOSENESS TO CUSTOMER AUTONOMY AND BIAS FOR ACTION ENTREPRENEURSHIP SIMULTANEOUS PRODUCTIVITY LOOSE-TIGHT EXCELLENCE THROUGH PROPERTIES PEOPLE SIMPLE FORM, HANDS-ON, LEAN STAFF VALUE-DRIVEN STICK TO THE KNITTING Reactions to In Search of Excellence • There have been several challenges to the conclusions of In Search of Excellence. • Excellence was based on financial performance. Were the firms also successful in terms of social responsibility and social responsibility? • In the years following publication of In Search of Excellence, several of the “excellent” companies suffered financially. • One study found no significant performance differences between a subset of the Peters and Waterman “excellent” companies and a set of firms representative of the Fortune 1,000 industrials. • There were also no differences between the two groups of firms in the extent to which they adhered to the Peters and Waterman attributes of “excellent” companies. Strong Cultures • Strong culture is variously defined in terms of: – degree to which values and ideologies are widely shared and clearly ordered in terms of their relative importance – degree of extremity of values; strength of commitment to values • It seems simplistic to assume that having a strong culture would necessarily lead to success. There are certainly some strong cultures that are inconsistent with demands of the environment, and a strong culture may discourage change. • Having a strong culture may not be enough; it also has to be “right” Strategically Appropriate Culture • For culture to be effective, it must: – be distinctive – be valuable – be hard to imitate • Court ruling: “that there may be instances in which the law might recognize a perceived threat to a „corporate culture‟ that is shown to be palpable (for lack of a better word), distinctive, and advantageous.” Neurotic Leaders and Their Firms (Figure 8-4) EXECUTIVE CULTURE Dramatic Needs attention, Dependency needs of excitement, feels a subordinates complement sense of entitlement “strong leader” tendencies of chief executive Suspicious Vigilantly prepared “Fight or flight” culture, to counter attacks including dependency, and personal threats fear of attack, lack of trust Detached Withdrawn and not Lack of warmth or emotions; involved; lacks conflicts; jockeying for power; interest in present insecurity or future Neurotic Leaders and Their Firms (Figure 8-4) (Continued) EXECUTIVE CULTURE Depressed Lacks self-esteem, Lack of initiative; passivity; self-confidence, or negativity; lack of motivation; initiative; fears ignorance of markets; success and tolerates leadership vacuum mediocrity or failure Compulsive Tends to dominate Rigid, inward directed, insular; organization from subordinates are submissive, top to bottom; uncreative, insecure dogmatic or obstinate; perfectionist The Bottom Line: Developing an Effective Organizational Culture Identify the Core Develop a Formulate Strategic Values and Mission Objectives to Operating Principles Statement for Support the That Support the the Firm Mission Mission and Strategic Objectives Develop Formal Hire New Socialize New Mechanisms for Employees Who Employees into the Communicating Are Compatible with Culture of the Firm the Elements of the the Firm’s Culture Culture to Employees Guidelines for Culture Change • Understand the current culture. • Change at the right time. • Value diversity. • Understand resistance to culture change. • Recognize the importance of implementation. • Use appropriate cultural forms. • Give it some time. The Bottom Line: Changing the Culture of an Organization Realign the Define the Communicate the Organizational Elements of the New Culture to Policies and New Culture Employees Practices to Support the New Culture Replace Managers Use Formal Evaluate the Culture and Employees Mechanisms to of the Firm in Who Do Not Reinforce and Relation to the Embrace the Transmit the Firm’s Mission New Culture New Culture Empowering Others • To foster a creative and productive environment where employees are motivated to achieve exceptional performance, the organization‟s culture needs to empower its employees. • Empowerment seeks to break the cycle of powerlessness in organizations by giving employees a real sense of control. • Empowerment gives people in organizations the ability to get things done, often at levels of the hierarchy where the power can be most directly and effectively applied. “I am the people -- the mob -- the crowd -- the mass. Do you know that all the great work of the world is done through me?” Carl Sandburg Powerlessness • Learned helplessness is a condition that results from the belief that one‟s behaviors simply don‟t make a difference. Learned helplessness results in feelings of powerlessness. • Causes of powerlessness in organizations include: – rules won‟t change – bosses are set in their ways – things have always been done a certain way – the assembly line is relentless Some Consequences of Powerlessness Lowered Depression Self-Efficacy Powerlessness Susceptibility Burnout to Illness Academic Failure Stages of the Empowerment Process (From Figure 8-5) STAGE 1 STAGE 2 STAGE 3 STAGE 4 STAGE 5 Conditions Providing Leading Empowering Self- Empowering Behavioral to Leadership Efficacy Experience Outcomes Powerless- Practices Information ness Some Conditions Leading to Powerlessness • Organizational factors such as bureaucratic climate • Autocratic supervision • Rewards that aren‟t tied to performance • Routine, simplified jobs Some Empowering Managerial Practices • Let the people who work for you participate in decision making. They will gain a sense of control over their work lives and will be more enthusiastic about implementing decisions. • Offer control over work processes, such as the ability to stop the assembly line. • Tie rewards to performance. Employees naturally feel powerless when they see that their actions don‟t directly influence things they care about. • Express confidence, encouragement, and support. Celebrate “small wins” and provide assurance that obstacles can be overcome. Sources of Self-Efficacy Information • Enactive attainment. People may gain self-efficacy through actual mastery of a task. • Vicarious experience. People may gain self-efficacy by seeing that others who are similar can master a task. • Verbal persuasion. Employees may simply be convinced through words of encouragement and feedback that they can master tasks. • Emotional arousal. Techniques that create emotional support or foster a supportive environment may reduce the emotional arousal that lowers self-efficacy. Focus on Management: An Empowering Culture at Saturn Corp. • Saturn employees at plants in Spring Hill, Tennessee and Wilmington, Delaware don‟t punch time clocks. • Labor and management (all called team members) share the same cafeteria. • The union gave up rigid work rules, and GM (Saturn‟s parent corporation) abandoned most of its rigid hierarchy. • Saturn employees were grouped into small teams and given responsibility for everything from covering absent members to major production decisions. • A special team, called Saturn Consulting Services, is available to provide consulting and training expertise to organizations wanting to learn from the Saturn experience. Focus on Management: Empowerment at Federal Express • The goal of Fred Smith, chairman and president of Federal Express, was to create a “power environment.” He calls empowerment “the most important element in managing an organization.” • To create a power environment, Fed Ex has a philosophy that fosters respect for human dignity, ingenuity, and potential. • Fed Ex has a job-secure environment in which people aren‟t afraid to take risks, jobs have been redesigned to increase employee power, and there are many opportunities for promotion from within. • The company also has many programs and processes designed to empower employees. These include an annual employee attitude survey followed by an action phase to deal with concerns, as well as a process for resolving grievances, an awards program, and others. The Bottom Line: Empowering Employees Meet with Involve Employees Assess the Employees and in Identifying Ways Current Job Educate Them About to Enhance Their Responsibilities the Meaning and Levels of Authority of Employees Objectives of and Responsibility Empowerment Create an Provide Provide General Organizational Managerial Guidelines to Formalize the Culture That Guidance and Help Employees Boundaries Supports Support to Use Their of Employees’ Employee Help Authority Authority Empowerment Employees to Effectively as a Core Value Be Successful Encouraging Ethical Behavior • Ethics are principles of morality or conduct. • Business ethics are rules about how businesses and their employees ought to behave. • Business ethics help to guide an organization‟s efforts and offer a foundation for its culture. • The need for ethical behavior in organizations has been dramatized by some very visible ethical violations, including kickbacks, bribes, and myriad other forms of corruption. Global Perspectives: Bribes, Quanxi, and Sokaiya • Bribery in overseas dealings has increased sharply in the last two decades; it has been estimated that bribes paid to acquire large contracts in developing countries now exceed 15% of the contracts‟ value. • Outright bribes and payments for quanxi, or “connections,” total $3 billion to $5 billion in China. • Japan has been rocked by evidence that corporate leaders have made large payments to yakuza, or gangsters, to secure favors and prevent retribution, including to sokaiya, gangsters who obtain information about illicit corporate activities and threaten to disclose it. Ethics and Firm Performance • One recent study found that companies that had an “ethical commitment” -- as evidenced by inclusion of ethics codes in the management reports within annual reports -- had much higher levels of performance than did those without such codes. • Also, some companies with an “ethical” commitment had higher scores on Fortune reputation ratings. • Committing specific unethical acts may have disastrous consequences for organizations and their officers. Whistle Blowing • Whistle blowers are individuals who report to the press, government, or other parties outside the firm illegal or unethical activity within the firm. • Whistle blowers may find their jobs and careers threatened. • About 35 states now have laws protecting whistle blowers. • The federal False Claims Act allows whistle blowers to sue government wrongdoers in the name of the United States. • Opponents of whistle blower protection argue that it may be misused by marginal employees, may result in sidestepping of internal resolution mechanisms, and may lead to “dialing- for-dollars” whistle blowing. Legal Remedies for Unethical Behavior • One of the earliest legal codes for dealing with unethical behavior was the Code of Hammurabi, consisting of 282 rules outlining all aspects of public involvement. • Governments are increasingly applying criminal laws to companies and company executives. • The Foreign Corrupt Practices Act of 1977 was enacted in response to disclosures that American companies were paying bribes to high government officials in foreign countries in an attempt to win contracts and sell products and services. • The 1991 Sentencing Guidelines for Organizations provide tough sanctions, including jail sentences and fines in the millions of dollars, for those convicted of corporate lawbreaking. Guidelines for Ethical Behavior • Be honest, direct, and open in your dealings with others. • Take ethical stands on difficult issues. • Ask whether your actions respect the rights of others. • Ask whether your actions are just. • Ask how you would feel if the act was done to you. • Use your power in ethical ways. • Apply the sunlight test. “Always do right. This will gratify some people, and astonish the rest.” Mark Twain Encouraging Ethical Behavior in Others • Promote, communicate, and reward ethical behavior as a key value. • Model ethical behavior in public and private. • Speak out against unethical behavior when you see it. • Communicate expectations regarding ethical behavior, including through a code of ethics. • Make sure that goals don‟t push employees into unethical behavior; unreasonable goals are often the motivation for lying, cheating, and stealing. Encouraging Ethical Behavior in Others (Continued) • Encourage ethics training. • Give employees ways to voice their ethical questions and concerns, such as through use of ethics hot lines and ombudsmen. • Set up internal programs to resolve ethical conflicts. A Short Code of Ethics The Bottom Line: Encouraging Ethical Employee Behavior Communicate Model Provide Develop a Standards for Appropriate Ethics Code of Ethical Ethical Training to Ethics Behavior to Behavior for Employees Employees Employees Establish and Enforce a Design and Design and Maintain an Zero-Tolerance Implement Implement Organizational Policy for Policies That Policies That Culture That Unethical Identify Reward Ethical Values Ethical Employee Unethical Employee Behavior Behavior Behavior Behavior