Creating Ethical Organisational

Cultures
Learning objectives
• How organisational culture is created?

• How can we create ethical organisational culture?

• What is corporate social responsibility?

• What are the challenges for developing positive

organisational culture?

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How Organisational Culture is Created
Culture is developed over time from :
• An organisation’s history, composed of traditions
and rituals that are passed to succeeding
generations.
– Stories of heroes and heroines are important.
• Values and beliefs that are embodied in the
traditions and rituals.
• Behavioural norms that result (e.g., bell schedules,
7-period day).

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How Organisational Culture is Created
Organisational culture has a powerful impact
on climate:
• Rosabeth Moss Kanter’s study of
successful U.S. corporations.
• High performers have a “culture of pride.”
• This is found in organisations that are
integrative.
• This culture fosters a climate of success.

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How Organisational Culture is Created
Subunits within an organisation may have
cultures of their own resulting in multiple
cultures.
• Theory X administrators believe this
conflicts with their authority.
• Theory Y administrators accept them as
natural.

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How a Culture Begins?
• An organisation’s current customs,
traditions, and general way of doing things
are largely due to what it has done before
and the degree of success it had with
those endeavours.

– The ultimate source of an organisation’s

culture is its founders.

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How a Culture Begins?
• The founders of an organisation
– They have a vision of what the organisation should be.
– They are unconstrained by previous customs for doing
things or ideologies.
– The small size of any new organisation further facilitates
the founders’ imposition of their vision on all
organisational members.
– The organisation’s culture results from the interaction
between the founders’ biases and assumptions and what
the original members learn subsequently from their own
experiences.

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How a Culture Begins?
• Microsoft’s culture is largely a reflection of
co-founder and current CEO, Bill Gates.

– Gates himself is aggressive,

competitive, and highly disciplined.
– Those are the same adjectives often
used to describe the software giant he
heads.

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Keeping a Culture Alive
• Once a culture is in place, practices within the
organisation act to maintain it by exposing
employees to a set of similar experiences.
– An organisation’s human resource practices reinforce its
culture.

• Three forces play a particularly important part in

sustaining a culture—selection practices, the
actions of top management, and socialisation
methods.

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Keeping a Culture Alive
Selection
• The explicit goal of the selection process is to identify and hire
individuals who have the knowledge, skills, and abilities to perform
the jobs within the organisation successfully.
• With multiple candidates, the final decision about who is hired will
be significantly influenced by the decision maker’s judgment of
how well the candidates will fit into the organisation.
• This results in the hiring of people who have common values.
• The selection process also gives applicants information about the
organisation.
• Candidates who perceive a conflict between their values and those
of the organisation can self-select themselves out of the applicant
pool.

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Keeping a Culture Alive
Top Management

• The actions of top management have a

major impact on an organisation’s culture.
• What they say and how they behave
establish norms that filter down through
the organisation.

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Keeping a Culture Alive
Socialisation
• No matter how good a job the organisation does in recruiting and
selection, new employees are not fully indoctrinated in the
organisation’s culture.
• New employees are potentially the most likely to disturb the beliefs
and customs that are in place.
• The organisation will, therefore, want to help new employees adapt
to its culture. This adaptation process is called socialisation.
• The most critical socialisation stage is at the time of entry into the
organisation.
• Employees who fail to learn the essential or pivotal role behaviours
risk being labelled nonconformists or rebels and, ultimately, being
expelled.

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Keeping a Culture Alive
Socialisation
• The process that helps new employees adapt to the
organisation’s culture.
• The diversity paradox

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Keeping a Culture Alive
• The first stage encompasses all the learning that occurs
before a new member joins the organisation.
• In the second stage, the new employee sees what the
organisation is really like and confronts the likelihood that
expectations and reality may diverge.
• In the third stage, the relatively long-lasting changes take
place. The new employee masters the skills required for his
or her job, successfully performs his or her new roles, and
makes the adjustments to his or her work group’s values
and norms.

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How Cultures Form
• The original culture is derived from the founder’s
philosophy.
• This strongly influences the criteria used in hiring.
• The actions of the current top management set the
general climate of what is acceptable behaviour
and what is not.
• Employee socialisation depends on the degree of
success achieved in matching new employees’
values to those of the organisation in the se-
lection process and top management’s preference
for socialisation methods.
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Cultures
How cultures are embedded in
organisations
• Formal/public statements
• Physical Layout
• Slogans, co. lingo
• Mentoring, modeling
• Explicit rewards, promotion criteria
• Stories, legends, myths
• Processes and outcomes, measurement
• Workflow and systems

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Strategies for building, reinforcing,
and changing organisational culture
• Directly modifying the visible aspects of culture.
• Changing the lessons to be drawn from common
stories.
• Setting the tone for a culture and for cultural
change.
• Fostering a culture that addresses questions of
external adaptation and internal integration.

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Ethical Values and Social Responsibility
Ethics
• Ethics refer to the code of moral principles and values
that govern the behaviours of a person or group with
respect to what is right or wrong

Managerial Ethics
• Ethical decisions go far beyond behaviours governed
by law
• Managerial ethics guide the decisions and behaviours
of managers

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Cultures
Sources of Individual Ethical
Principles and Actions

Organisational Behaviour 2 19
Relationship between the Rule of
Law and Ethical Standards

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Corporate Social Responsibility (CSR)
Does it pay to be good?
• Extension of the idea of managerial ethics
• Management’s obligation to make choices and take
action that positively impact stakeholders
• Increase in social responsibility
• Customers and public are paying closer attention to
what organisations do
• Social responsibility can enhance a firm’s
reputation

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How Managers Shape Culture and Ethics
• Value-Based Leadership
• Formal Structure and Systems
– Structure
– Disclosure Mechanisms
– Code of Ethics
– Training Programs
• Managers play key role in providing
leadership and examples of ethical
behaviour
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Cultures
Characteristics of
Values-Based Leaders

Organisational Behaviour 2 23
Corporate Culture and Ethics in a
Global Environment
• The global environment presents tough ethical
challenges
• Countries have varied attitudes and beliefs
• Components that characterize a global culture:
• Multicultural rather than national values
– Basing status on merit rather than nationality
– Managers must think broadly about ethics
• Social audits measure and report ethical, social,
and environmental impact of a company’s
operation

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The Nature of Cultural Influences an
Organisation’s Ethical Climate
• An organisational culture most likely to shape
high ethical standards is high in risk tolerance,
low to moderate in aggressiveness, and focuses
on means as well as outcomes.
• If the culture is strong and supports high ethical
standards, it should have a very powerful and
positive influence on employee behavior.
• Example—Johnson & Johnson has a strong
culture that has long stressed corporate obliga-
tions to customers, employees, the community,
and shareholders, in that order.
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Practices for creating a more ethical culture
• Be a visible role model—Employees will look to top-management
behavior as a benchmark for appropriate behavior.
• Communicate ethical expectations—An organisational code of ethics
should state the organisation’s primary values and the ethical rules
that employees are expected to follow.
• Visibly reward ethical acts and punish unethical ones—Performance
appraisals of managers should include a point-by-point evaluation of
how their decisions measured against the organisation’s code of
ethics.
• Provide ethical training—Use training sessions to reinforce the
organisation’s standards of conduct, to clarify what practices are and
are not permissible, and to address possible ethical dilemmas.
• Provide protective mechanisms—The organisation needs to provide
formal mechanisms so that employees can discuss ethical dilemmas
and report unethical behavior without fear of reprimand.
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Design Essentials
• Cultural and ethical values help determine the
organisation’s social capital and can contribute to
success
• Managers can use rites and ceremonies, stories,
symbols, structures, control systems, and power
relationships to influence culture
• Subcultures may emerge even in strong cultures

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Design Essentials
• Strong cultures can be constructive or non-
constructive
• Managerial ethics and corporate responsibility are
important aspects of organisational values
• Managers can shape culture and ethics through
formal systems
• Social audits are important tools for companies
trying to maintain high ethical standards

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Constructive Versus
Non-Constructive Cultures

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Challenges to Developing Positive,
Cohesive Culture
• Merger or Acquisition
• Developing a global organisational culture
• Developing an ethical organisational
culture
• Developing a culture of empowerment and
quality

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Cultures