The ethical culture in an organization can be thought of as a slice of the overall organizational culture. So, if the organizational culture represents “how we do things around here,” the ethical culture represents “how we do things around here in relation to ethics and ethical behavior in the organization.” The ethical culture represents the organization’s “ethics personality.”
From an ethical systems perspective, creating and sustaining a strong ethical culture is the key to creating an organization that supports people making good ethical decisions and behaving ethically every day. There are so many forces and factors that lead people to take ethical shortcuts. But when all relevant organizational systems are pushing people in the same ethical direction, ethical failure is much less likely.
According to Treviño and Nelson, ethical culture should be thought of in terms of a multi-system framework that includes formal and informal systems that must be aligned to support ethical judgment and action. Leadership is essential to driving the ethical culture from a formal and informal perspective. Formally, leaders provide the resources to implement structures and programs that support ethics. More informally, through their own behavior, leaders are role models whose actions speak louder than their words, conveying “how we do things around here.” Other formal systems include selection systems, policies and codes, orientation and training programs, performance management systems, authority structures, and formal decision processes. On the informal side are the organization’s role models and heroes, the norms of daily behavior, organizational rituals that support or do not support ethical conduct, the stories people tell about the organization and their implications for conduct, and the language people use (i.e., is it okay to talk about ethics? Or is ethical fading the norm?).
AREAS OF RESEARCH
- Recruiting and selecting for culture
- Orientation and training
- Formal ethics programs and their effectiveness
- Performance evaluation systems, who gets promoted? Can you be a jerk and still get ahead? The folly of hoping for A while rewarding B.
- The effects of rewards and discipline
- Rise of litigiousness and fear of discovery during depositions can strangle change-making. See “How to fix a legal minefield” TED talk by Phillip Howard.
- Codes of ethics, values statements [they don’t work unless they are truly embodied]
- Ethical climate is a related area of research that refers to employees’ perceptions of the organization in terms of broad climates that either support or do not support ethics. The ethical climate questionnaire was originally developed to measure nine climates but most research has supported the existence of three to five climate types. For example, the perception that the organization has a “benevolence climate,” meaning a climate that supports multiple stakeholders inside and outside the organization, is associated with positive employee attitudes and behaviors. By contrast, perceptions that the organization has a “self-interest climate” where it’s every person for him or herself are associated with negative attitudes and behaviors. Research on ethical climate has recently been summarized in a meta-analysis (a study of studies).
- Final Accounting, by Barbara Toffler, chronicles the culture that she found at Arthur Andersen a few years before the company’s downfall.
- What Happened to Goldman Sachs, by Steven Mandis, is a more recent story of a culture that changed (in a negative direction) over the author’s time with the firm.
- Cradle to Cradle Design at Herman Miller: Moving Toward Environmental Sustainability is a Harvard Business Publishing case that highlights the importance of company selection, values and decision making processes in making the decision to support sustainability efforts in a decision about whether to switch from toxic PVC to an alternative material to be used in chair arm pads.
- IKEA’s Global Sourcing Challenge: Indian Rugs and Child Labor (A) is a Harvard Business Publishing case that demonstrates how a company’s commitment to its values can help it address the child labor problem in the sourcing of its carpets.
- Fighting Corruption at Siemens is an interactive HBS case that represents both a failure (as the culture allowed bribery to continue long after the law had changed in Germany to no longer allow it) and a success as the company demonstrates its efforts to change its culture in a systematic way and over time.
IDEAS TO APPLY
- Creating and/or changing an ethical culture is a complex and ongoing task that requires focused attention, support from the top, and effort from many organization members who are all pulling in the same direction.
- Codes of conduct by themselves are not effective, employees must perceive that they are enforced and supported by other cultural systems.
- Look to culture measurement tools to explore how they can provide a snapshot of the climate within organizations
- More research is needed on the role of selection. Can organizations select members and leaders who will be more ethical, meaning less effort is needed to enculturate them? (See some ideas on our Personality and Personnel page)
- Much more research is needed on the effectiveness of training. Most organizations have training programs but we know little about whether they work, and if they do, what works. Are required on-line programs effective? Are face-to-face programs taught by managers more effective? Can games work?
- Research is needed on what happens when ethical systems are nonaligned. What are the worst misalignments? For example, is the performance management system the real linchpin in ethical culture? Or, is it what managers do and say that really drive employee behavior?
- How can ethical climates best be measured?
- Chapter 5 in Trevino & Nelson. Managing Business Ethics. 6th Edition provides a detailed overview of the approach outlined above. [Read our book summary of the 5th edition.]
- Schein, Organizational Culture and Leadership. 3rd Edition [digital copy], 2004.
- Huang, M., Li, P., Meschke, M. and Guthrie, J. (2015) Family Firms, Employee Satisfaction and Corporate Performance. Journal of Corporate Finance. 108-127.
- Madu, B. (2012) Organization culture as driver of competitive advantage. Journal of Academic and Business Ethics.
- HR Can’t Change Corporate Culture By Itself, Harvard Business Review, November 2016.
- The Culture Ate Our Corporate Reputation, Wall Street Journal, October 2016.
- Cultures of Compliance, American Criminal Law Review, September 2016.
- The Power of Culture As a Competitive Advantage, Forbes, September 2015.
- The Building Blocks of Business Ethics (includes a ethics checklist for companies to evaluate their culture), Dividend, the magazine of University of Michigan, Ross School of Business, Fall 2015.
- Inside Amazon: Wrestling Big Ideas in a Bruising Workplace, The New York Times, August 15, 2015.
- Givers Take All: The Hidden Dimensions of Corporate Culture, McKinsey Quarterly, April 2013.
- Companies With Weak Ethical Cultures Experience 10x More Misconduct Than Those With Strong Ones, Corporate Executive Board (via PRNewswire), September 2010.
Relevant Images and Videos
Here is a series of short videos with one of our collaborators, Linda Treviño, discussing Corporate Culture:
Adam Grant talks about some of the challenges of diagnosing ethical culture:
Barry Schwartz talks about cultivating an ethical climate:
Marc Hodak looks corporate culture from a corporate governance perspective:
Edgar Schein answers some questions about corporate culture in the modern context:
See more from Linda Treviño, Adam Grant, and Marc Hodak, as well as other experts discussing issues in the corporate culture sphere on our Corporate Culture playlist at the Ethical Systems YouTube Channel.
- In scandal’s wake, McKinsey seeks culture shift, NYT 1/11/14, story about Dominic Barton’s efforts to restore the ethical culture at McKinsey
- Cohn et al. have an excellent study on “Business culture and dishonesty in the banking industry“
Back to top