The importance of ethics in an organization

The term ‘ethics’ can commonly refer to the rules and principles that define right and wrong conduct of individuals (Robbins, Bergman, Stagg and Coulter, 2003, p.150). Ethical Behavior is accepted as “right” or “good” in the context of a governing moral code. Ethics can be viewed as a way of behaving that can be prescribed and imposed by the work environment (Garcia-Zamor, 2003).

Virtually all societies have developed rules and regulations about how business should be transacted and how business organizations should be managed. In other words, based on experience and the philosophical and religious values of the society, rules of acceptable and non-acceptable behaviors evolve and are encoded into society (Mendenhall, Punnett and Ricks, 1995, p.138).

Organization’s Role in Influencing The Ethical Behavior of Employees

Employees care and always question about the ethical conduct of employers and tend to believe the action rather than the word of the employer (Clark, 2000). Managers can discipline an employee by verbal warnings or punishments. However, if a manager himself does not conduct himself ethically, an employee will find not find good reason to follow the organization’s rules. An example is in the case of Exxon-Mobil’s management bribing foreign officials in Kazakhstan to obtain a contract deal (Levine, 2003). As the higher-management in Exxon-Mobil had set a bad example, employees working in Exxon-Mobil will not find good reason to follow the ethical guidelines that were implemented.

How an employee behaves in an organization is made up of attitudes towards pay, promotions, co-workers, supervision and the work itself (Cascio, 1991, p.130). These factors can play an important role in influencing how an employee in the organization behaves. A reasonable amount of wage should be paid in accordance to the kind of work an employee does. Extra bonuses and perks should also be handed out for hardworking employees. When an employee performs well and has shown potential in able to make important decisions, a promotion should be handed out in recognition of this ability. An organization should also work to ensure that there is harmony among the managers and workers and mediate to work out any conflicts.

An employee’s expectation on being treated fairly and ethically by an employer in return with a fair and reasonable amount of work is called the psychological contract (Gómez-Mejía, Balkin and Cardy, 2001, p.460). Employers that uphold the psychological contract will have employees that are more satisfied with their jobs and will give fewer problems. Employers can seal the psychological contract by developing a code of ethics (Gómez-Mejía, Balkin and Cardy, 2001, p.460). A code of ethics can offer guidelines against which unethical behavior can be judged (Finegan, 1994).

According to Weaver (2001), in order to foster ethical employee behavior in an organization, a low power distance suggests that a broad-based, cultural approach to managing ethics is needed. Specifically, managers and supervisors should take actions that develop trust, such as sharing useful information and making good on commitments (Gómez-Mejía, Balkin and Cardy, 2001, p.461). They should also encourage open discussion of employees’ business concerns and demonstrate respect towards employees (Kaptein, 2004). This can show the organization recognizes the strengths and contributions of employees. Social factors such as the ethical climate of the organization and conformance to behavior of peers and superiors play an important part in mediating ethical reasoning of individuals (Bartlett and Preston, 2000).

Organizations can provide ethics training in order for employees to learn how to identify and deal with ethical issues (Kreitner and Kinichi, 2001, p.96). Managers and their staff can be sent to seminars, workshops and video training sessions to learn about ethical issues. Specific units or positions in an organization can also be created to observe and control a company’s employees as to uphold ethical standards (Kreitner and Kinichi, 2001, p.96). These units can help enforce ethical codes and ensure that a one-time announcement of a new ethical code does not get filed away and forgotten.

According to Kreitner and Kinicki (2001, p.92), there is a tendency among managers to act unethically in the face of perceived pressure for results. Terms of employment and compensation schemes can also create incentives for unethical conduct (Carson, 2003). This can cause managers to unwittingly set the stage for unethical shortcuts by employees who seek to please the organization. Adequate training, good communication channels and a cooperative working environment within the hierarchies can help reduce the unethical practices. The rewarding of ethical behavior can be a practice organizations can adopt. The rewards could come in the form of recognition or praise and not necessary money (Minkes, Small, Chatterjee, 1999). This can help promote and encourage ethical behavior within the organization.

Unethical behavior in organizations can be reduced by proper employee selection during interviews and job positions. Selection may bring greater benefits by helping managers decide which employees have attributes that will encourage ethical behavior in the organization (Wilk and Cappelli, 2003). An employee that has gone through interviews and tests and has been assessed by higher authority will be less likely to commit unethical acts in an organization.

Organizational Benefits From Developing Ethical Codes of Conduct for Employees

An organization that enforces ethical regulations and company values will result in employees being united and committed (Watson, Papamacros, Teague and Bean, 2004). Employees that have a sense of unity and direction can work in harmony. An organization may also have a code of ethics that is a formal statement of the company’s primary values and ethical rules it expects its employees to follow (Robbins et al, 2003, p.158). A code of ethics can help establish an orderly environment in which employees can feel safe working. According to Schermerhorn (2004), an individual that feels secure in a working environment can move on to being more focused on an organization’s goal.

Organizations that develop structures that foster ethical conduct and institutionalize ethical practices can go a long way towards reducing the temptation for employees to misbehave (Grant, 1993). An organization can enforce a code of ethics by punishing those who break it. This can discourage employees to behave unethically. A result will be a more consistent behavior in the organization that will give fewer problems.

According to Trevino, Weaver, Gibson and Toffler (1999), many ethics managers believe that part of their job is to assure an environment of candor and safety in an organization. Employees should be able to deliver “bad news” to management without fear of repercussions. If employees are afraid of management, they may be unwilling to inform them of potential risks and problems that may affect the organization negatively. Communication is crucial to the fulfillment of organization members’ responsibilities (Bean, 2001). A lack of communication will result in information not disseminated properly. In contrast to a lack of communication, an organization that has information flowing freely within the hierarchies can have an advantageous working environment that can result in higher efficiency.

Ethics can be a real business asset (Cazalot Jr, 2003). Assets can bring in future economic benefits for an organization (Peirson and Ramsay, 2003, p.46). Generally, ethical employees will follow the guidelines laid down by an organization. When these employees follow guidelines, they tend to ‘do things right’. When things are getting done effectively and efficiently, an organization can expect to see gains rather than losses. Ethics can be seen as a form of capital that can produce profit, like any other kind of capital such as tools and equipment (Mele, 2003).

Ethics encourage examination of issues from the personal perspective and ensure that new ideas and ethics that emerge through individual creative expression are integrated into broader discourse (Beckett, 2003). In today’s increasing competitive business environment, the creation of new ideas and concepts can give companies a competitive advantage that is crucial to an organization’s profits and survival.

Ethics encourages both managers and employees to consider their views based on personal integrity before making decisions (Beckett, 2003). In business, the virtues of integrity include honesty, fairness and trust (Hartman and Beck-Dudley, 1999). An example of personal integrity would be Anita Roddick of Body Shop International. Anita Roddick has ethical practices by being honest with the public, being ‘fair’ to her franchises and respecting her employees (Hartman and Beck-Dudley, 1999). Body Shop International advocates the use of recyclable materials and this can contribute to an external benefit. These externalities include a good impact on the natural environment that can help raise public awareness on the benefits of recycling and saving earth’s resources.

The variety of benefits organizations can expect to accrue from taking a positive ethical stance includes higher sales and profits, improved public image and enhanced employee commitment to the organization’s goals.

Importance of Ethical Practices in An Organization

An organization depends on its managers to work with and through other people by coordinating the staff’s work activities as to accomplish organizational goals (Robbins et al, 2003, p.6). Therefore, for an organization to implement a code of ethics efficiently, good managers are needed. Good managers are self-confident, follow ethical guidelines, have a sense of integrity and are not self-centered (Wallington, 2003). A manager should have moral sensitivity on top of his instrumental roles (Whetstone, 2003). He should be able to judge the ethical behavior of his employees. These managers will be instrumental in ensuring that an organization’s code of ethics is carried out and obeyed by employees.

An individual’s increase or decrease in ethical rule breaking is significantly related to job satisfaction (Sims, 2002). Factors such as good pay, a healthy working relationship with managers and peers and adequate working conditions can contribute to a satisfied employee. A satisfied employee will be more sensitive to ethical decision and therefore will less likely indulge in unethical practices such as leaking organization’s secrets, accepting bribes and stealing company funds (Yetmar, 2000).

The unethical practices of a single organization can cause the public and government agencies to focus more attention on other big companies, their corporate governance and their ethical integrity (Yip, 2002). An example would be ‘Enron’, where a handful of highly paid executives were able to pocket millions of dollars while carelessly eroding the life-savings of thousands of unwitting employees (Sims and Brinkmann, 2003). This can cause government agencies to probe into the ethical practices of other organizations. Organizations should therefore always ensure its employees’ ethical practices are kept in check.

Organizations also have to be aware of shareholders’ concerns. There is a growing number of investors that are guided by a sense of moral duty and that the maximization of shareholder welfare is just as important of the maximization of shareholder wealth (Cummings, 2000). A potential shareholder is more likely to have the confidence to invest in an organization that has ethical business practices. If an organization attracts bad publicity, shareholders and investors lose confidence and stop investing. The result can be dwindling profits and a loss of market share.

Ethics are cultural specific. What it is considered ethical in one culture may be considered unethical in another (Chiu, 2003). Because of globalization, individuals from different parts of the world may come together to work in an organization. Values and culture help determine individual behavior. Thus, there are very different interpretations of what behavior is ethical or unethical in a given situation (Schermerhorn, 1999, p.117). Each individual have their own behavior characteristics and the perception of what is ‘right’ and ‘wrong’ may be different. Individuals in an organization need to be guided by rules and regulations set by a higher authority. This will ensure the efficient and effective running of the organization.

An organization with an ethics programme does not necessary guarantee the prevention of unethical behavior, as General Electric and the Barings Bank in London discovered. Despite an extensive ethics programme that had been in existence for many years, General Electric was found guilty of fraud after one of its employees teamed up with an Israeli general and overcharged the U.S. government more than U.S.$30 million for jet engine servicing (McDonald, 2000). Nick Leeson also traded over the stock options market using the Bank’s own funds that led to the collapse of Barings Bank (Maclagan, 2003). This shows that a fully developed ethical programme may not necessarily prevent an organization from ethical failures but it can at least be the foundation from which a heightening of ethical awareness can spring (McDonald, 2000). An organization that has taken the necessary steps of planning and controlling a code of ethics is less likely to run into problems than an organization that has not.

Conclusion

In conclusion, this essay has demonstrated although Individuals have their own characteristics and behavior patterns, there is a need for organizations to be concerned about the ethical behavior of its staff. An organization can play an active role in influencing the behavior of individuals if it is enforced and consistent with the organizational culture.

There is an importance in managing ethics in the workplace as it holds tremendous benefits for organizations and its employees, both moral and practical. This is particularly true today when it is critical to understand and manage highly diverse values in the workplace.

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