Organizational Theory 1 Create a Code of Essay

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Organizational Theory #1

Create a code of ethics for an organization of your choice. For each point in the code of ethics, describe an ethical dilemma that would be resolved using the code of ethics.

All employees will conduct business honestly and ethically. We will constantly improve the quality of our services, products and operations and create a reputation for honesty, fairness, respect, responsibility, integrity, trust and sound business judgment. (Provides a clearly stated, over-arching business philosophy for honesty and fair dealings that every employee can follow).

No illegal or unethical conduct on the part of company employees or affiliates is in the company's best interest. All are expected to adhere to high standards of personal integrity -- not allowing their personal interests to conflict with the interests of the company, its clients or affiliates. We will not compromise our principles for short-term advantage. (Encourages all employees to seek the company's interest first).

All shall avoid using company contacts to advance private business or personal interests at the expense of the company. (Encourages each person to remain professional and refrain from self activities that place the company second to his or her own pursuits).

No bribes, kickbacks or other similar compensation shall be given to any person. This includes gifts, gratuities, fees, bonuses or excessive entertainment, in order to attract or influence business dealings. (Restricts conflicts of interest -- employees are not to accept favors in exchange for superfluous business reward).

Officers, directors and employees will obey all Equal Employment Opportunity laws and act with respect and responsibility towards others in all dealings. (Protects all employees, clients, and affiliates from discrimination of any kind).

All proprietary, confidential or sensitive information will be strictly safeguarded. This information may include strategic business plans, operating results, marketing strategies, customer lists, personnel records, upcoming acquisitions and mergers, new investments or developments, company research, and manufacturing costs and methods. Such information should only be shared on a need-to-know basis. (Stipulates that all internal information is deemed confidential and should not be misused).

Misuse of inside information in connection with trading in the company's securities can expose an individual to civil liability and penalties under the Securities Exchange Act. Information that has not been made public must not be disclosed to anyone except those within the company whose positions require use of the information. Inside information should not be used for personal gain. (Encourages ethics such as those outlined in the Sarbanes-Oxley Act).

Officers, directors and employees will seek to report all information accurately and honestly. Unethical, dishonest, fraudulent and illegal behavior or violations of company policies and procedures are to be disclosed directly to management. (Discourages the falsification of documents and the misreporting of financial or other critical business information. Also, demands reporting of such acts).

Violation of this Code of Ethics can result in discipline, including possible termination. (Explains repercussions for acting contrary to any of the aforementioned ethical guidelines).


Jones, G. (2010). Organizational theory, design, and change (6th ed.). Upper Saddle River, NJ: Prentice Hall.

Winkler, I. (2012). Employee Identities in Corporate Codes of Ethics: The Equal, Responsible, Subordinating, and Self-Monitoring Employee. Canadian Journal of Administrative Sciences (John Wiley & Sons, Inc.), 29(2), 191-202. doi:10.1002/cjas.215

2. Describe how organizational ethics is a product of societal, professional and individual ethics, and explain what happens when ethical behavior is compromised.

Individual ethics refers to personal power to identify right from wrong. This varies from person to person and speaks to individual views regarding how people should behave and individual codes for everyday life. These may be influenced by family, religious beliefs, culture, lived experience and internal reflection (Cameron & Caza, 2004).

While ethics are typically driven by individual morals that determine right or wrong, ethics within society focus on appropriate behavior for people as a whole. They comprise the behaviors or standards in which members of society are expected to practice in order to successfully relate to and live with one another. There are many aspects to consider within the ethics of society as a whole: language, race, gender, culture, religion, education, etc. The standards used to enforce social ethics include family values, morality, and integrity (Jones, 2010).

Professional ethics are standards or codes of conduct set by people in a specific occupation. By calling out expected behaviors in the form of professional codes of conduct, professionals work together to try to uphold a positive reputation and sound business practices. Respect and honesty are the two main components of professional ethics (Cameron & Caza, 2004). Policies highlight preferred standards for carrying out one's work and everyone in a company is expected to represent them. Professional ethics also help employees choose what to do when faced with a problem at work that raises a moral issue, typically conflicts of interest. They become the guidelines to follow whenever one's professional duties and personal interests are opposed.

Organizational ethics are a combination of all of these. They collectively influence the ethics that develop inside an organization (Jones, 2010). Organizational ethics become the standards used by an organization and its members in dealings with stakeholders. All companies, collectively, are expected to follow ethical and legal rules because of the advantages gained for society and its members when its institutions behave in an ethical manner. This includes safety in economic environments and consumer trust in the value of goods and services (Cameron & Caza, 2004).


Cameron, K.S., Bright, D., & Caza, A. (2004). Exploring the relationships between organizational virtuousness and performance. American Behavioral Scientist,47, 766 -- 790.

Jones, G. (2010). Organizational theory, design, and change (6th ed.). Upper Saddle River, NJ: Prentice Hall.

3. Why does differentiation occur in an organization? Distinguish between vertical and horizontal differentiation.

Differentiation is the process by which an organization allocates its resources (both material and human) to tasks, and establishes task and authority relationships that allow the organization to reach its objectives (Jones, 2010). It refers to division of labor and specializations. The more complex the organization, the more differentiation becomes necessary to achieve certain goals. Skill sets are often needed to handle areas involving support, production, maintenance, customer service, and management. As offerings and product/service lines expand and diversify so to do areas within the organization (Jones, 2010). Within each new department or division, the same aforementioned skill sets may be necessary. This creates several organizational layers with similar needs and similar differentiation.

Vertical differentiation refers to hierarchies. Authority and rank are the primary organizing factors, with those higher up possessing more power than those lower. Senior managers have to determine how many levels a hierarchy to create. The main objective in vertical differentiation is to create reporting structures that link all organizational roles and subunits. Horizontal differentiation refers to the way an organization groups tasks into roles and roles into subunits. This is based more on functions and divisions rather than rank and authority (Jones, 2010). It defines the division of labor within the organization, enabling workers to specialize in niche areas. Overall, horizontal differentiation increases an organization's ability to vary offerings and create additional value for customers.


Jones, G. (2010). Organizational theory, design, and change (6th ed.). Upper Saddle River, NJ: Prentice Hall.

3. What do organizations consider when trying to choose interorganizational strategies in order to minimize transaction and bureaucratic costs?

Organizations need to control their resources and minimize their dependence on other organizations. Transaction cost theory argues that the goal of organizations is to minimize the costs of exchanging resources in the environment and the costs of managing exchanges inside the organization. This is critical because transaction and bureaucratic costs deplete productive capacity (Jones, 2012). Managers must weigh the savings in transaction costs achieved from using a particular linkage mechanism against the bureaucratic costs of operating said mechanism.

To select the appropriate interorganizational strategy, managers must first locate the sources of transaction costs that could potentially affect an exchange relationship and make an educated guess as to how high the costs will be. Next, they must estimate the transaction cost savings from using different linkage mechanisms, as well as the bureaucratic costs of operating that linkage mechanism. Low-transaction-cost environments benefit from relatively informal linkage mechanisms such as reputation and verbal contracts (Fang, et. al, 2008). Low-bureaucratic-cost environments have excellent communication and integration between functions and divisions, leaving managers to focus on core activities that create value for the organization and its customers. The ultimate goal is to select a linkage mechanism that offers the most transaction cost savings and lowest bureaucratic cost (Jones, 2010).


Fang, E., Palmatier, R., Scheer, L., & Li, N. (2008). Trust at Different Organizational Levels. Journal of Marketing, 72(2), 80-98.

Jones, G. (2010). Organizational theory, design, and change (6th ed.). Upper Saddle River, NJ: Prentice Hall.

5. Why is differentiation necessary to build a formal organizational structure? Is differentiation limited to large organizations? How is the concept of span of control related to both integration and differentiation?

Differentiation is necessary to build a formal organizational structure because it ensures organizational effectiveness…[continue]

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