Module 3: Building an Ethical Culture

Core Values (Formal Cultural Element)

-State the values (typically 3 to 5) -Leaders reinforce the values through words, actions, and what they pay attention to -Hire for fit with the values of the company

Structure (formal cultural element)

-Structural elements include authority relationships, lines of accountability, allocation of decision-making rights -Empower workers with a voice in decisions and the freedom to challenge authority -Give those closest to the problem input to its resolution

Language (informal cultural element)

-Talk used in daily conversations -There may be reluctance to talk about ethics. People need to feel comfortable with moral terminology, and it should be routine

Stories (informal cultural elements)

-Tell stories that reinforce important cultural values -Find worthy heroes

Norms (informal cultural element)

-Widely accepted standards of behavior that reveal how an organization "really works" -Can support or undermine ethical conduct -Modify norms that fail to support ethical code, values, mission, and standards

Board of Directors (formal cultural element)

-are the link between owners and managers -They select organizational leaders & hold leaders accountable -Their independence, concern for ethics, and attention to the company are critical

Ethics Officers

-Ethics officers ensure legal compliance and promote ethical conduct -2 key Factors •Must have sufficient power & status to command respect & enforce standards •Must have the necessary independence

Mission Statements (Formal Cultural Element)

-Many mission statements fail to inspire -If you want the mission statement to influence ethics, it must connect to ethics

Code of Ethics (formal cultural element)

-Must be as specific as possible -Gives examples of effective decisions as well as effective decision processes -Must be communicated & understood (e.g. training) -Must be used - incorporated into processes & procedures

Reward and Performance Evaluation Systems (formal cultural element)

-One of the most critical components: People follow what is rewarded. If you want ethics they need to be rewarded. -Focus on not just ends but the means

Rituals (informal cultural elements)

-Repeated organizational dramas that capture attention and are typically meant to evoke an emotional response. -Events associated with changes in status (e.g. trainee graduation), celebrating achievements (e.g. parties), enabling performance (e.g. team-building activities), or building commitment (e.g. company picnic) -The ethical messages sent by rituals need to be evaluated and modified if needed

Reporting and Communication Systems (formal cultural element)

-Reporting systems: solicit reports of ethical violations (ensure anonymity where appropriate) -Consistently send ethics messages through a variety of channels

Culture

Based on agreement of values and intensity of values (cultural strength)

Ethical Culture KEY PRINCIPLE

In order for a company to be ethical, ethics must be reinforced through multiple elements all encouraging the same type of ethical behavior and decisions

Changing an Organization's Culture

•Analyze the organization's current ethical condition (risk assessment & ethical climate analysis) •Simultaneously address both formal and informal elements •Make sure cultural components support one another •Demonstrate ethical consistency throughout the organization and in every organizational activity

Components of Ethical Culture

•Ethical culture: how cultural elements promote or discourage moral action •Formal cultural elements (officially recognized, recorded) •Informal cultural elements (unofficial, not written down)