Managers' role in establishing organizational ethical culture

¶ … Role of Managers in Organizational Ethics

Ethics in Organizational Management

One of the more defining changes in contemporary business and other professional organizations, particularly in the 21st century, has been the relative importance of organizational ethics (Stevens, 2008). Generally, organizational ethics apply to internal relations, such as in recruitment, hiring, training, supervision, performance assessment, career opportunity and development, promotions, and human resource issues. Generally, organizational ethics apply to external relations, such as in competitive practices, regulatory compliance, and community and global stewardship (Caldwell, Hayes, Bernal, et al., 2008). Organizational management relates directly to organizational ethics by establishing formal organizational policies, procedures, protocols, and practices, as well as by establishing the bases for an informal corporate culture that reflects the importance of ethical principles in the organization (Caldwell, Hayes, Bernal, et al., 2008).

Ethical Codes of Conduct in Contemporary Organizations

In contemporary Western business and other professional organizations, it is already quite rare for any organizations larger than very small proprietorships not to have formal policies pertaining to ethics in the workplace (Stevens, 2008). Nevertheless, serious ethical breaches still occur on a regular basis; that means the more important variable than just the existence of formal ethical policies is (1) the degree to which informal organizational approaches to ethical principles are consistent with any formal policies and (2) the degree to which the organizational culture that actually exists reflects the implementation of formal ethical policies (Mele, 2008; Toor & Ofri, 2009).

Another way of conceptualizing that is to suggest that among medium-size and larger organizations, almost all of those organizations in which serious ethical violations occur already maintain formal ethical policies that would have prevented those ethical transgressions if they had simply been implemented. Fifty years ago, many organizations lacked formal ethical policies altogether; today, virtually all of the contributing factors to major ethical breaches that involve more than isolated individuals occur because informal practice, organizational cultures, and actual workplace environments deviated from existing formal ethical policies, practices and procedures (Stevens, 2008).

The Consequences of Ethical Deficiencies in Organizational Management

That fact that organizational ethics is largely (or most typically) a function of middle management does not necessarily preclude ethical violations that thoroughly penetrate an organization from the very top to the bottom. Unfortunately, whereas even genuinely ethical intentions of executive leadership can fail to guide the organization because they are inefficiently transmitted throughout the organization, that is hardly the case with respect to unethical leadership. By contrast, ethical failures at the highest levels virtually guarantee that the same tone will characterize the entire organization (Toor & Ofri, 2009).

Notorious examples of that principle would include the failed Enron Corporation that famously perpetrated organizational fraud of tremendous proportions by deliberately establishing an organizational culture that guaranteed that result. For example, at Enron, middle management intentionally created a cut-throat competitive atmosphere in which failure to produce more than coworkers and any dissention or appropriate response to obvious ethical violations spelled career suicide (Stephenson & Staal, 2007). In that case, the process of instilling the unethical organizational culture began even before new associates were hired because it also dictated a grueling interview process intended to weed out candidates who would resist indoctrination and the automatic acceptance of the unacceptable (Stephenson & Staal, 2007).

Thereafter, an organizational culture of contempt for formal regulations, intense pressure to produce, and extreme intolerance for dissention at any level allowed Jeffrey Skilling and Ken Lay to perpetrate massive corporate fraud at Enron for years (Stephenson & Staal, 2007). In that regard, one could argue very convincingly that a very similar situation has existed for years at Penn State University in connection with the apparent systemic failure of athletic department officials and football operations management to address obvious ethical issues within the football staff. There would seem to be few possible alternatives capable of explaining how else a professional collegiate assistant football coach could overlook having personally witnessed a superior forcibly sodomize a child without intervening or following up with aggressive pursuit of justice with authorities. The slap-on-the-wrist approach evidenced by earlier organizational responses to similar complaints about the same coach established a culture of tacit acceptance of the unacceptable throughout the organizational hierarchy.

The Role of Managers in Achieving Organizational Ethical Culture Buy-in

Both Enron and the Penn State Athletic Department cases represent the worst-case scenarios because culpability for inexcusable ethical violations started at the highest levels of the organizational hierarchy. However, it is relatively rare for modern business and other professional organizations to reflect systemic ethical violations than it is for organizations with honest executive leadership to experience ethical problems as the result of the failure of middle management to effectively promote, monitor, and ensure the establishment of an ethical organizational culture at the operational levels (Toor & Ofri, 2009). That concept is illustrated by the recent British Petroleum (BP) Oil Spill in the Gulf of Mexico in April of 2010. Specifically, post-event analysis revealed that senior management within the U.S. Minerals and Management Service (MMS) had established a highly inappropriate relationship with senior executives and management of various oil companies and that those relationships directly contributed to the disastrous explosion that sank the Deepwater Horizon drilling platform (Barsa & Dana, 2011). Meanwhile, because the MMS is a U.S. federal agency, it already maintained comprehensive ethical guidelines and formal policies that apply to all government agencies within the U.S. federal government (Halbert & Ingulli, 2008). Likewise, there is substantial evidence that the operational causes of the initial explosion were the direct result of inappropriate decisions made by middle and senior managers of the Deepwater Horizon operation in connection with the advisability of ignoring dangerous situations whose risks that should have been mitigated by caution with respect to specific equipment decisions. Crucial safety considerations were ignored for the purpose of avoiding operational delays and to save the cost of installing more expensive blowout preventers, among other things (Barsa & Dana, 2011).

Instead of an organizational culture within the MMS that emphasized strict compliance with exiting federal regulations about maintaining relationships that posed potential conflicts of interest, MMS managers routinely socialized with and accepted valuable gifts and perks from their friends within the industry they were supposed to be regulating (Barsa & Dana, 2011). In addition to violating numerous applicable legal statutes and prohibitions, those relationships also violated the most basic and fundamental rules of professional ethics (Mihaly, 2007). Had MMS senior mangers established an organizational culture that took ethical obligations and restrictions more seriously, those attitudes and values would have likely characterized operational management as well (Caldwell, Hayes, Bernal, et al., 2008; Weaver, 2004).

Conclusion

In principle, the BP example is illustrative because it provides both situations in the same factual scenario. Systemic (likely) industry-wide lack of concern with the most basic ethical values within the oil industry combined with organizational leadership ethical failures at the operational management level within at least one U.S. federal regulatory agency to produce an environmental catastrophe. Within the U.S. MMS, there was a deliberate failure of organizational middle management to implement and uphold the ethical policies set forth by the U.S. Congress and legal regulatory compliance obligations were treated as nothing more than procedural formalities to be filed. That approach encouraged and allowed the oil industry to file ridiculous emergency plans that, in retrospect, could not possibly have been intended to provide meaningful safety assurance (Barsa & Dana, 2011). Whereas the oil companies represent situations closer to Enron, the failure of middle management at MMS to execute the formal policies of the U.S. federal government represent the breakdown at the level of organizational ethical culture set by middle management.

Generally, there are two critical aspects of ethical leadership within business and other professional organizations. First, ethical responsibility at the level of executive and boards of directors must establish formal ethical policies and guidelines. However, it is equally important that middle management sincerely promote the values and formal policies designed at the highest levels of the organization. Ultimately, failure at either level is likely fatal to the maintenance of ethical operations within any organization.