BUSI 1055 Organisation Behaviour

Lecture 3
Relationships, Fairness, Trust and
Ethics

Dr. Mathew Abraham

Associate Professor of Organisation Behaviour
Nottingham University Business School
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Learning Outcomes
Students would be to:
•Explain the concept of relationships in
organisations
•Discuss the concept of organisational justice
•Elaborate on element of trust in organisations
•Evaluate the concept of ethics in organisations
•Evaluate the implications of trust and ethics in
practice

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 Relationships in Organisations
• Formal • Close relationships
 Determined by roles  Psychological safety
• Informal  Information flow
 Personal relationships  Learning benefits
• Poor relationships
 Anxiety and stress
 Reduced communication
 Lower satisfaction and
performance

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 Social Exchange Theories
Common basic elements include:
the exchange rules and norms that determine
interactions and
the obligations that arise from them for each
partner,
the currency of exchange (i.e., the nature of the
resources passed between the partners), and
the relationships that emerge between and
among exchange partners
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 Rational Choice Theory
• Behaviour is driven by self-interest based on
hedonistic (value maximization) principles
Game theory – mathematical approaches to
describe and analyse interaction among parties
(see prisoners dilemma)
Tit-for-tat (equivalent retaliation) strategy
• Strategy to maximise one’s own outcome
• Emotions can affect strategy
• If the number of interaction rounds is small & limited
the expected utility is limited
Issues of trust
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 Rational Choice Theory
• Individuals are motivated by their personal wants and
goals and are driven by personal desires.
• Since it is not possible for individuals to attain all of the
various things that they want, they must make choices
related to both their goals and the means for attaining
those goals.
• Individuals must anticipate the outcomes of alternative
courses of action and calculate which action will be best
for them.
• In the end, rational individuals choose the course of
action that is likely to give them the greatest satisfaction.
http://sociology.about.com/od/Sociological-Theory/a/Rational-Choice-Theory.htm

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Prisoner’s Dilemma

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 Social Capital Theory
• Network of strong cross cutting personal
relationships developed over time that
provide the basis for trust, cooperation and
collective action
• Actual and potential resources embedded
within, available through, and derived from
the network of relationships in a social unit
 Structural
 Cognitive
 Relational

Nahapiet & Ghoshal, 1998 8

 Social Networks

• Structural aspect of social

capital
• Bridging vs. bonding ties
• Positive vs. negative ties
• Important across many
cultures

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 Managing Relationships in
Organisations
• Relationships are determined by:
Similarity to others
Maximum reward, minimum cost
Instrumentality
• Across authority levels
• Impacted by culture

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 Managing Relationships in
Organisations
• Positive relationships at work are:
Supportive
Appreciative
Informative
Inclusive
Empowering
Validating
Respectful
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 Managing Relationships in
Organisations
• Toxic relationships
Unproductive, counterproductive, or harmful

• Manage through assertiveness

Description of behaviour
Disclosure of emotional reaction
Identification of consequences

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 Psychological Contract
• Individual beliefs about the
terms of the mutual
exchange agreement
between the individual and
their organisation
• Violations lead to profound
behavioural, cognitive and
emotional reactions

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 Contract Violations
• Lead to: • Address violations by:
 Higher turnover and  Changing the benefits
absenteeism and working conditions
 Lower job satisfaction provided by the
 Increased cynicism organisation
 Justifying and reframing
 Lower organisational
perceived shortcomings
citizenship behaviour
 Interventions aimed at
 Lower perceived support
changing subjective
 Reduced trust in the
expectations
organisation

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 Organisational Justice
Employees’ fairness perceptions regarding their
work and conditions of employment
 Distributive – concerned with individuals perceptions
of fairness outcomes
 Procedural – concerned with perceived fairness of the
processes by which decisions about outcomes are
made
 Interactional – concerned with fairness perceptions of
the quality of interpersonal treatment
 Informational - concerned with fairness perceptions
of information received
Colquitt et al., 2001 15
Areas Affected by Experienced Injustice

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Leventhal’s Criteria of Procedural Fairness

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 Trust in Organisations
• Degree to which a person is prepared to make
themselves vulnerable to another person despite
uncertainty about the other’s possible actions
• Three-stages of development
Deterrence-based – e.g. threat of punishments control
based
Knowledge-based – knowledge of others dispositions,
intentions and behaviour patterns
Identification-based – one’s own needs and desires as
personal goals which will act in ways that consider
joint gains
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Determinates of Trust

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Can Broken Trust Be Repaired?

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5 step process of establishing trust
• Identify core values
• Bring core values to life
• Spell out the do’s and don’ts aspects of
values
• Weave values into fabric of organisation
• Ensure accountability and model the way

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Process for Repairing Trust

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 Ethics at work
• Business leaders should voluntarily self regulate.
• Scandals, disasters and frauds? People now
question negative effects of business practices.
• To regain public trust and to avoid more
regulations businesses had to reassure through
“ethics”.
Ethics of action
Ethics effect on society

(refer to D. Knights and H. Wilmott: Introducing OB & Management, 2007.

Chapter 14 on Ethics) 23
 What Does An Ethical Manager Do?

“When managers forget that business is about

values and not just economic performance,
organizations and the broader society suffer. Top
managers in companies that get into trouble
typically make quarterly earnings and the share
price their primary purpose of business and the
most important measure of individual and
organizational success.”
Carly Fiorina, “Corporate Leadership and the Crisis,” The Wall Street Journal (December 12, 2008)
What Does An Ethical Manager Do?
Ethical managers make a conscious and visible
commitment to ethics.
Ethical managers build an environment that
encourages others to behave themselves.
Ethical managers realize that what they do in
their personal lives carries over to the
professional arena.
Ethical managers demonstrate the importance
of serving people and society.
 Business Ethics
• Explores ethical legitimations for and effects of a
wide range of business practices.
• Common approach in mainstream business ethics:
Pro-business approach – BE critiques particular
business practices but does not question the ethics of
business generally.
Free market agenda – BE endorses voluntary self-
regulation of business rather than control from outside.
Compatability of profits and ethics: good ethics = good
business

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 Problems in Business Ethics
• Problem of Relevance – should businesses
only make money? Ethics has no place in the
business world – Milton Friedman.
• Problem of conscience – who decides it is
relevant and how to enforce? Who is the
ethical authority?
• Problem of translation – ethics is
philosophical; abstract. Business is practical &
rational:- efficiency, outputs, products &
costs.
(refer to Knights and Wilmott: Introducing OB & Management, 2007. Chapter 14 on Ethics) 27
 Overcoming problems in Ethics
• Overcoming the ‘relevance’ problem:
Stakeholder theory – other stakeholders have
valid demands for business to ethical.
• Overcoming the ‘conscience’ problem – the
management.
• Overcoming the ‘translation’ problem –
putting in place process where management
formulates and disseminate organisation-wide
ethical and/or policies. Series of rules.
(refer to Knights and Wilmott: Introducing OB & Management, 2007. Chapter 14 on Ethics)
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 Frameworks on Business Ethics
• Utilitarianism
 ethical value of an act is based on its consequences
 Acts that give greatest good for greatest number of
people are deemed to be morally right.
 But what constitutes ‘good outcome’ – debatable?
• Stakeholder theory
 Responsibility of mgmt is not just towards demand
of shareholders but to recognise OB affects other
stakeholders:- inside & outside.
 To consider the ethical consequences of particular
organisational actions.
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 Frameworks on Business Ethics
• Deontology
 Ethics is not about fulfilling a particular end.
 It is a “an end itself”. It is not about consequences.
 It should be part of human behaviour to be ethical. It is
an ethical duty to be ethical.
 It should be a ‘universalizable’ moral duty.
• Justice & Virtue
 Based on emotive issue of fairness.
 Focuses on moral education and character of managers
or the person who acts.
(refer to Knights and Wilmott: Introducing OB & Management, 2007. Chapter 14 on Ethics)

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 Objections to Business Ethics
• Psychological egotism
Acting morally is only justified if it promotes the
manager’s or organisation’s best interest; taking
other people’s interest into account runs contrary
to good business.

• Machivellian concerns
‘The means justify the ends’, even if you have to be
the arch ‘political animal’ to avoid being a
corporate or organization ‘loser’.
(refer to Linstead, Fulop and Lilley: Management and Organization, 2009. Chapter 8 on Managing Ethically)
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 Objections to Business Ethics
• Legal-moral
Implies if it is legal, then that’s all you have to
worry about and the rest will look after itself. So
long as you comply with the ‘spirit of the law’,
organisations need not worry about ethical codes.

• Agency arguments
Profit maximization is the rule of business and
market is the key arbitrator of what is ‘right’ good

(refer to Linstead, Fulop and Lilley: Management and Organization, 2009. Chapter 8 on Managing Ethically)
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How to Make Ethical Choices
 Summary
• Behaviour is influenced by rational
considerations such as:
 rewards and costs, and by
 principles of rewards and punishment
 over time many interactions within relationships
become ritualistic and often automatic
• Organisation Justice – is employees’ fairness
perceptions regarding their work and conditions of
employment and their behavioural reactions to
this.
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 Summary
• Trust is when a person is prepared to make themselves
vulnerable to another person despite uncertainty about
the other’s possible actions.
According to Institute of Business Ethics, UK:
• “Business ethics is the application of ethical values to business
behavior”.
• “Ethics goes beyond the legal requirements for a company and
is, therefore, about discretionary decisions and behaviour
guided by values”. 
• “Stakeholders want to be associated with responsible
organisations. Being treated fairly, honestly and consistently is
of value to a business’s customers, suppliers, investors and
employees. It builds trust”.
Source: http://www.ibe.org.uk/frequently-asked-questions/3#faq273 35
 Reference

• Martin & Fellenz, (2017). Organisation

Behaviour and Management, Cengage.

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