Ethical Culture and Positive Culture in Organizations

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  • 0:05 Ethical and Positive…
  • 1:23 Culture's Impact on a…
  • 3:52 Cultures That Shape…
  • 4:40 Creating an Ethical Culture
  • 6:58 Lesson Summary
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Lesson Transcript
Instructor: John McLaughlin
In this lesson, you will learn how an ethical and positive culture can be created in an organization and why it is important for organizations to establish an ethical and positive culture.

Ethical and Positive Cultures in Organizations

'What has happened to my company?' Frank Johnson thought as he stared in disbelief at the headline in the Daily News. There, on the front page, was a photo of one of his company executive's cars with melted fudge dripping from the trunk. The headline read, 'Fudge Follies on Freeway 5.'

Frank was the president and CEO of Fudge Pickers, a gourmet fudge manufacturer headquartered in Los Angeles. It didn't take long for Frank to make the connection - inventory had been consistently missing from his warehouse over the past year, and this executive had no good reason to be in possession of enough fudge to shut down a major freeway.

Frank's company is experiencing an ethical crisis. Frank's 'win at all costs' management style has done great things for the growth of Fudge Pickers. Under Frank's leadership, Fudge Pickers has grown from a small regional company to a nationally recognized brand.

Frank has been so focused on establishing and maintaining the aggressive culture that has brought him success, he has lost sight of the importance of establishing an ethical and positive culture in his organization. Before we investigate the importance of organizations establishing a positive and ethical culture, let's define organizational culture.

Culture's Impact on a Positive and Ethical Climate

Organizational culture is a system of shared assumptions, values and beliefs that governs how people behave in organizations. An organization with a positive culture helps employees learn and grow in their jobs and careers. An organization with an ethical culture provides a culture that promotes ethical behavior among the members of the organization. Unethical behavior is any activity by a member of an organization that does not conform to the standards set by the culture of that organization.

Two aspects of the culture of an organization determine if the culture of an organization is ethical and positive: the strength of the culture and the content of the culture. An organization with a strong culture has values and standards that are clearly defined and understood by the majority of its members. A strong culture has a greater impact on the behavior of the members of an organization than a weak culture, which has vague and inconsistent guidelines.

Even a strong culture can only contribute to establishing an ethical and positive culture in an organization if the content of the culture is ethical and positive. The combination of the strength and the content of the culture of an organization creates an ethical climate, the mood of an organization, which influences the behavior of organizational members to be either ethical or unethical.

The core value of Fudge Pickers places a high value on aggressiveness and winning at all costs. Although a strong culture is in place, it is not a positive or ethical culture. The culture of this organization places a low value on helping its members learn and grow in their jobs and considers unethical behavior acceptable as long as the work gets done.

Everyone at Fudge Pickers knows that Sally Simpson, who heads the customer service department, spends half of her workday shopping on the Internet, but she does such a great job with the customers, no one has ever said anything to her about her unethical behavior or tried to help her learn new and improved ways to manage her department.

The top salesman at Fudge Pickers is CJ Jordan, who consistently turns in inflated expense reports. Although his behavior is unethical, as long as CJ is getting new customers for the company, no one questions his exaggerated figures or spends any time helping him become a better salesman.

Cultures That Shape High Ethical Standards

The culture at Fudge Pickers does not encourage ethical behavior. Positive organizational cultures that do encourage ethical behavior usually have three traits in common. These cultures are typically high in risk tolerance, low in aggressiveness and concerned with the methods that are used to achieve organizational goals.

Positive and ethical cultures have rules and boundaries that encourage innovation by their members and discourage uncontrolled competition and a win-at-all-costs approach to achieving organizational goals. Managers of organizations with positive and ethical cultures try to help their employees learn how to become better at their jobs and are concerned with how goals are achieved by the members of their organization; they do not only focus on results.

Creating an Ethical Culture

Frank Johnson called an emergency meeting in the boardroom that included all the executives of Fudge Pickers. His first order of business was to fire the executive who admitted to stealing the fudge. Frank explained to his staff that overlooking the small ethical violations of employees had led to major ethical violations, which had culminated with an employee stealing cartons of fudge from his warehouse.

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