Introduction
Currently, the society is very much concerned about business ethics more than ever before. There is a paradigm shift in the attitude of the public and business organizations are expected to lay significant emphasis on the solving of social problems. As such, the businesses are expected to behave morally as opposed to being motivated solely by profit. Ethics refers to a discipline that involves moral reasoning as well as the badness or goodness of a given behavior in the society. It is important to realize that conflicts will always exist between personal morality and managerial obligations. As such, the conflicts make humans moral creatures capable of identifying good from bad from the perspective of the society’s norms. Therefore, business owners and managers are expected to make informed decisions about organizational designs that are appropriate for developing the moral reasoning and ethical behavior of its members in order to ensure that the businesses remain competitive and ensure survival (Argandona, 2008). As such, ethical decision-making is important in ensuring the future existence of capitalism as well as the free market economy.
It is clear that ethical or unethical behavior in organizations is influenced by both individual characteristics and contextual factors in a particular organization. As such, two approaches can be used by business managers to promote ethical behavior: individual and organizational. According to the individual approach, the individuals’ level of moral development as well as their ethical sensitivity plays a significant role in determining the ethical behavior of employees in a given organization. The individual approach focuses on the internal drives and needs of the individual rather than the situational forces surrounding the individual. Therefore, the organizational policies and procedures should appeal to the employees’ sense of right and make them sensible to ethical issues. Organizations can promote ethical behavior among employees by identifying and communicating ethical objectives through training and organizational codes of ethics.
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The organizational approach focuses on organizational aspects that help to promote ethical behavior. As such, the behavior of individuals is considered a function of external factors such as organizational design, organizational culture, as well as other environmental conditions. Therefore, organizational design is considered to play a significant role in promoting ethical behavior in employees of an organization.
There is a lot about how organizational design influences business ethics that is not understood. This paper will take up the challenge of examining how organizational design influences business ethics. Therefore, a better understanding of the relationship between organization design and ethical leadership will be sought.
Business Ethics and Organizational Designs
Organizational Design
Organizational design refers to a formal and guided process for integrating the people, information, and technology of a particular organization. As such, an organizational design is used to align the form of the organization as closely as possible to the purpose of the organization. Therefore, organizational designs help organizations to improve the probability that the collective efforts of the members will be successful.
The managers and members of an organization work collectively in order to effectively define the organizational needs and then create appropriate systems that meet the needs. Therefore, it is always important to ensure that a systematic process is followed and that creative thinking is employed in the process to ensure success. For a very long time, western organizations have been influenced by the command and control structure that characterized ancient military organizations. As such, many organizations are currently designed as a bureaucracy whereby authority is and responsibility is formally arranged in a hierarchy. Rules, policies, and procedures are impersonally and uniformly applied to control the behaviors of the members within the hierarchy. Therefore, activity is commonly organized within departments in which people carry out specialized functions such as sales, manufacturing, or accounting. As such, people who perform similar tasks are clustered together.
The hierarchical form of organization is familiar, predictable, and rational but it may not be an effective organizational design for a variety of reasons. For instance, different groups may wish to achieve different outcomes. Therefore, it may be disadvantageous to blindly apply the same form of organization to all purposeful groups in an organization. As such, it is important to realize that different groups may choose different methods through which they will achieve their purpose.
The purpose for which a group exists should form a basis for the choice of the most appropriate way to organize. Therefore, the organization created should best suit the purpose to be accomplished. This is because the patterns of activity that help one group to be successful may be actually dysfunctional for another group hence inhibiting group effectiveness. As such, organization design should begin with the creation of a strategy that will guide the process. The strategy is a combination of an organization’s statement of purpose, vision, and basic philosophy. The strategy will then unify the intent of the organization and help to focus members toward actions tailored to achieve desired outcomes. Therefore, if ethics is ingrained in the organization’s strategy, the resultant organization structure will be able to facilitate promotion of ethical behavior among the members of an organization. This is because organizational design enhances communication and information flow among people because the systems are designed to encourage individual decision-making and responsibility.
Business Ethics
Business ethics refer to moral principles that govern the way a business behaves. Therefore, the same principles that determine actions of an individual also apply to businesses. The concept of ethics has come to be recognized as knowing what is right or wrong in the workplace. It is also important to note that there exists no clear moral compass for guiding leaders through complex moral dilemmas in organizations.
Attention to ethics in organizations helps to sensitize leaders and staff on how they should act in order to enhance the public image of the organization (Argandona, 2008). Additionally, attention to ethics in the workplace helps to ensure that leaders and managers retain a strong moral compass even in times of crises and confusion. Therefore, emphasis on the significance of business ethics ensures that leaders and staff know how they should act in the face of ethical dilemmas.
Organizations can effectively manage ethics in their workplaces by establishing an appropriate ethics management program. Ethics programs help to convey corporate values using codes and policies that guide individual decision-making and behavior. Additionally, the ethics programs may also involve extensive training and evaluation aimed at promoting ethical behavior among leaders and staff of an organization as well as providing guidance in the face of ethical dilemmas. Therefore, the primary role of an ethics program is to balance competing values and reconciling them. As such, organizations need more practical tools and information that will help them understand their values and how to manage them. Development of an organization’s code of conduct is always considered a formal way of promoting ethical behavior. Organizations may develop an overall code of conduct whereby a separate code is developed for each functional department. It is important to ensure that an ethical culture is cultivated in an organization in order to promote moral values as recommended in the organization’s code of ethics. This can be achieved through ethics training whereby members are trained about the significance of an organization’s ethics program. Additionally, social responsibility is an important aspect of business ethics that emphasizes the need for businesses to cultivate and maintain highly ethical practices in the society, particularly regarding the natural environment.
Sources of Individual Ethical Principles
Individual ethical principles are important in shaping the ethical performance of organizations. Managerial ethics and corporate social responsibility help to influence the individual ethical principles in an organization (Al-Samman & Al-Nashmi, 2016).
Managerial ethics refer to a standard of behavior that guides individual managers in their work. It is important to note that the primary goal of managers is to make their organizations effective. Several ethical values guide the ethical behavior of managers. The ethical values include obeying the law, telling the truth, respecting people, maintaining the golden rule, doing no harm, acting when having responsibility and practicing participation. The managers need to obey all the laws of the country in order to conform to ethical values. The managers need to disclose fair accounting results to concerned parties as well as respecting the people who contact them. The golden rule dictates that managers should treat others the same way they want to be treated. The managers are also responsible for prohibiting use of substances that may cause harm to people or environment in the production process. The managers are also expected to encourage participation in the decision making process.
There are several approaches to managerial ethics: utilitarian approach, moral rights approach, and social justice approach. In the utilitarian approach, the managers assess the effects of decisions on people affected by the particular decisions. The action rather than the motive of the action is the focus of the utilitarian approach. As such, if the positive effects of the actions outweigh the negative effects, the action is justified and upheld. For instance, pollution standards as well as analyzing the impact of pollution on society refer to management code of ethics under the utilitarian approach.
According to the moral rights approach, the managers adhere to ethical code that takes care of the fundamental and moral rights of human beings in the society. The approach takes care of human rights such as the right to life and safety, the right to speech, and the right to express feelings in the workplace. As such, managers disclose information in the annual reports necessary for the welfare of the relevant persons. The timing, nature, and validity of the information are taken into account while reporting the information in the annual reports.
The social justice approach involves managers acting in a manner that is fair, impartial, and equitable to all groups in an organization. As such, the employees are discriminated on the basis of religion, caste, religion, or gender. However, it is justified to treat employees that produce more differently from the ones that produce less.
It is important to realize that managerial ethics promote the development of ethical principles in organizations. For instance, employees who know that the managers fail to follow ethical behavior may hesitate in reporting any unethical behaviors for the fear of being misunderstood or penalized. As such, the chain of command may act as a barrier to reporting unethical behaviors in the organization. Additionally, the behavior of managers is followed by others in the organization. Therefore, the ethical actions of top managers in an organization promote ethical behavior in organizations.
Corporate social responsibility promotes individual ethical principles because it represents an organizations obligation to make choices and take actions that will ultimately contribute to the welfare and interest of the society as well as the organization. Corporate social responsibilities comprise economic responsibilities, legal responsibilities, ethical responsibilities and discretionary responsibilities. In terms of the economic responsibilities, the business is the basic economic unit of the society. Therefore, the responsibility of the business is to produce the goods and services that the society requires as well as maximize the profits of its stakeholders.
The legal responsibilities define what the society deems as important with respect to the appropriate corporate behavior. It is important to realize that all modern societies have laid down rules, laws and regulations that organizations are expected to adhere to. As such, organizations should endeavor to fulfill their economic goals within the legal framework. Therefore, it is wrong for business to violate the laid down rules, laws, and regulations.
Ethical responsibilities of an organization refer to behaviors that are not necessarily codified into law and they may not serve the direct economic interests of the organization. Therefore, organizations should act with fairness, equity, and impartiality. Additionally, organizations need to promote ethical behavior by respecting the rights of individuals. However, organizations are justified to treat individuals differently only when relevant to the goals and tasks.
Organization discretionary responsibilities refer to purely voluntary and they are motivated by an organizations desire to make contributions that are not mandated economics, ethics, and law. Generous philanthropic contributions that over no payback to the organization and are not expected represent some of the discretionary responsibilities.
Understanding the Meaning of Organizational Design and Business Ethics
Organizational design refers to a formal and guided process for integrating the people, information, and technology of a particular organization. As such, an organizational design is used to align the form of the organization as closely as possible to the purpose of the organization. Therefore, organizational designs help organizations to improve the probability that the collective efforts of the members will be successful.
Therefore, a good organizational design enables the managers and members of an organization to work collectively in order to effectively define the organizational needs and then create appropriate systems that meet the needs (Daft, 2016). Therefore, it is always important to ensure that a systematic process is followed and that creative thinking is employed in the process to ensure success. Normally, many organizational designs dictate that people who perform similar tasks should be clustered together in a hierarchy. The hierarchical form of organization is familiar, predictable, and rational but it may not be an effective organizational design for a variety of reasons. For instance, different groups may wish to achieve different outcomes. Therefore, it may be inappropriate for organizations to indiscriminately apply the same form of organization to all purposeful groups in an organization. As such, it is important to realize that different groups may choose different methods through which they will achieve their purpose.
The purpose for which a group exists should form a basis for the choice of the most appropriate organizational design. Therefore, the organizational design adopted should best suit the purpose to be accomplished. This is because the patterns of activity that help one group to be successful may be actually dysfunctional for another group hence inhibiting group effectiveness. As such, organization design should begin with the creation of a strategy that will guide the process. The strategy is a combination of an organization’s statement of purpose, vision, and basic philosophy. The strategy will then unify the intent of the organization and help to focus members toward actions tailored to achieve desired outcomes.
Business ethics refer to moral principles that guide the way a business behaves. Therefore, the concept of ethics has come to be recognized as knowing what is right or wrong in the workplace. It is also important to note that there exists no clear moral compass for guiding leaders through complex moral dilemmas in organizations (Dimitriades, 2002).
Emphasis on ethics in organizations helps to sensitize leaders and staff on how they should act in order to enhance the public image of the organization. Additionally, attention to ethics in the workplace helps to ensure that leaders and managers retain a strong moral compass even in times of crises and confusion. Therefore, emphasis on the significance of business ethics ensures that leaders and staff know how they should act in the face of ethical dilemmas.
Organizations can effectively manage ethics in their workplaces by establishing an appropriate ethics management program. Ethics programs help to convey corporate values using codes and policies that guide individual decision-making and behavior (Akharan et al., 2014). Additionally, the ethics programs may also involve extensive training and evaluation aimed at promoting ethical behavior among leaders and staff of an organization as well as providing guidance in the face of ethical dilemmas. Therefore, the primary role of an ethics program is to balance competing values and reconciling them. As such, organizations need more practical tools and information that will help them understand their values and how to manage them
Business Ethics and organizational Design and their Relationship
Implementing Business Ethics through Leadership
Leadership plays a pivotal role in implementing business ethics in organizations. Every organizational leader has the responsibility of modeling high standards of ethics in order to show colleagues and stakeholders that they are honest and determined to do their best for the organization (Dion, 2012). Ethical leaders should not only expect ethical behavior but they should also practice it to the latter. They should not allow their interpersonal behaviors to erode trust. Moreover, leaders should not separate ethics from their daily business decisions. Therefore, business leaders need to assess their personal morals because what they do in their personal life permeates their business affairs. As such, their actions influence the ethical behavior of the organization’s employees.
The organizational leaders also have the primary responsibility of reviewing the company ethics as well as making it clear what is acceptable and what is not. As such, other colleagues and employees will be able to know and understand the ethical values upheld by the organization. The organizational leaders cultivate a respectful environment where people can not only talk about ethics but also share the responsibility of living it. Therefore, an organization’s leadership should endeavor to build trust, demand open communication as well as share the ownership of organizational values. The leaders are also tasked with the responsibility of establishing the mission statement and the core values of the organization. Therefore, the mission statement and the core values should effectively reflect the ethical standards of the organization. Integrity, honesty, honor, and fairness to all are some of the values underlying high ethical standards in any given organization.
The leaders should effectively communicate the mission as well as the core values of the organization to all employees and customers through their words and actions. Additionally, they should create an ethics policy that clearly defines the organization’s philosophy and consequences for not adhering to the policy. Leaders should not think about ethics as a just a matter of just following laws and regulations. Therefore, they should realize that ethics influences the consumers’ reasons for buying from the company. Leaders should demonstrate their commitment to promote business ethics by proving that they are willing to handle ethical issues including social justice, human rights, and sustainability.
Business ethics can be further implemented through ethics training in organizations. As such, leaders should talk about ethics as an ongoing learning journey as opposed to once-a-year training program. This is because the world changes constantly and everyone should always remain vigilant. In order to review ethics violations and questionable decisions, leaders should set up an ethics panel that can take the pressure off the employees regarding decision-making. Furthermore, leaders should incorporate ethics in their performance evaluation in order to ensure that employees are held accountable for their day-to-day actions. As such, the leaders should not exempt anyone from meeting the ethical expectations of the organization. All the senior leaders and high profile managers in the organization should as well be held accountable for their actions.
Ethical leadership has a significant impact on organizations. Ethical leadership plays a mediating role in the relationship between the organization culture and employee outcomes. Therefore, strong ethical commitments among the leaders may impact on the employees’ willingness to put extra effort on job performance. As such, ethical leadership generates positive externalities such as commitment and trust to all the stakeholders hence assuring long-term performance of organizations. Trust is an important aspect of an organization because it is the foundation for goal commitment, constructive conflict, personal accountability, as well as achieving collective goals. Employee trust in leaders facilitates employee compliance with organizational rules and laws, and the implementation of organizational change. Therefore, ethical leadership not only improves employee performance but also their adherence to ethical behavior as stipulated by the organization’s core values. Moreover, ethical leadership improves the interrelationships between employees and leaders as well as among the work groups within the organizations. As such, it helps in the attainment of the collective goals of the organization.
Integrating Ethics using Formal Structure and Systems
Ethics can be incorporated into the formal structures and systems in an organization through various means. Ethics can be incorporated into the organization through a code of ethics, performance evaluation, ethics training programs, and reward systems. A code of ethics is a vital document that makes decision making easier at all levels of the organization by reducing ambiguity and considerations of individual perspectives in ethical standards. Therefore, the code of ethics guides all the managerial decisions hence creating a common framework upon which all ethical decisions of an organization are founded. A formal and effectively communicated code of ethics can go a long way in helping to protect an organization’s reputation and legal standing. This is because the code of ethics communicates the entire ethical vision of an organization.
The organizations can also reinforce business ethics by including ethics in employee performance evaluation. This implies that the ethical behaviors of the employees will contribute to their overall performance in the organization. As such, employees will adhere to ethical principles laid down by the organization as way of improving their work performance. Additionally, incorporating ethics in individual employees’ performance ensures that they are held accountable for their actions (Ghoshal, 2005). Organizations can also initiate ethical training programs where employees are trained on ethical issues. The training should go beyond the once-a-year programs but they should be an ongoing affair because the world of ethics evolves with time. Organizations can also integrate ethics in their reward systems where ethical employees are effectively rewarded in order to reinforce ethical behaviors in the workplace. As such, the compensation incentives in the organization should be tied to ethical behavior in order to increase the relevance of business ethics to individual employees.
Benefits of Ethical Organizations
Business ethics has several benefits for organizations.
Employee Satisfaction
Organizational ethics has a significant impact on the performance of an organization. Ethical practices in organizations facilitate a just working environment. When incorporated within an organization, the employees can get satisfaction from their jobs because of the ethical climate created (Ellman & Pezanis-Christov, 2005). Ethical organizations ensure that a benevolent workplace climate is maintained. A combination of ethical standards, integrity, and fair treatment of employees are the cornerstones of ethical organizations. Therefore, the employees get satisfaction from their jobs because their efforts are recognized and they are compensated appropriately. The employees in ethical organizations are very loyal to their leaders and they perform their duties well. Additionally, employees who are treated ethically feel proud about the company and they put a lot of individual efforts towards attaining organizational goals (Bishop, 2013). Ethical organizations promote trust and loyalty among employees hence improving their job satisfaction.
Increased Profits
Organizations that implement a management philosophy that emphasizes business ethics are more successful as compared to those that operate in an unethical way. Therefore, business ethics is an important catalyst to the success of an organization in terms of profitability. Ethical treatment of employees, accounting practices, interactions with the public can have a direct impact on the overall profitability of a given organization. Ethical organizations ensure that employee morale is enhanced hence increasing productivity. Ethical practices in an organization encourage employees to focus on the attainment of important organization goals hence maximizing the profitability of the business (Maureen & Javier, 2016). Additionally, business ethics enhance employee retention. Therefore, ethical organizations are able to reduce the costs involved in recruiting and training new employees and instead spend the money on revenue generating activities.
Ethical practices in organizations improve the public image of organizations. As such, the organizations are able to attract more consumers to their brand hence increasing sales. Increased sales because of good public image increase the profits of the organization. Additionally, business ethics improves the trust of its customers, public, investors, and shareholders.
Social Status
Business ethics improve the social status of the organizations and improve their brand equity. This is because business ethics promote public goodwill for the organization. A good organizational reputation is important as it improves the trust of the public, investors, customers, and all stakeholders. Moreover, business ethics improve employee performance. As such, committed employees offer quality services to consumers hence improving customer satisfaction. Customer satisfaction is essential for the growth and success of any business enterprise. Furthermore, organizations that emphasize ethical practices prevent legal violations hence eliminating the possibility of being fined by authorities. Therefore, ethical organizations have great chances for growth and success because of good public image.
Sustainability
Ethical organizations have the potential of carrying out business operations sustainably because ethical management techniques are important for managing strategic values such as market share expansion, and cost reduction. As such, the strategic values are essential for ensuring sustainability of organizations. Additionally, business ethics enables organizations to identify preferred values and ensure that organizational values are consistent with those values. As such, the ethical programs initiated facilitate quality management, diversity management, and strategic planning hence ensuring sustainability of the ethical organizations.
Linking and Review of Research Literature
Organization Theories and Ethical Theories
Organizational theories can help organizations to effectively address business issues successfully. As such, organizations can identify a suitable organizational structure that can deal with specific organization problems. Therefore, organizations can carried out a survey of different possibilities that can help in arriving at an informed choice. Organization theories recognize that an organization has structure, members, and goals (Nielsen, 2010). Therefore, organization theories can help to match goals, personnel and the business environment with the organizational design that can meet the challenges facing an organization faces. There are several organization theories such as classical theories, contingency theories and behavioral theories. Classical organizational theories focus on hierarchical designs whereby managers rely on the design to channel work to the appropriate departments. Contingency organization theories focus on the concept that organizations adapt to their environments in the absence of formal structures. Behavioral organizational theories focus on the behavior of individual employees in order to ensure success in a variety of business environments.
A behavioral organization design is appropriate for implementing business ethics because it focuses on the behavior of individual employees. Business ethics involves the accepted set of behaviors in a given organization. Therefore, organization design influences business ethics significantly. As such, a behavioral organization design facilitates implementation of ethical programs in an organization. The research literature indicates that organization design strongly influences business ethics.
Ethical Strategy
Ethical strategies are essential for creating an ethical organization. Businesses can pursue various ethical strategies. The ethical strategies that are available for organizations to pursue include compliance to laws and regulations, protecting the environment, creating an ethical work environment, promoting workplace diversity, promoting ethical practices and making charitable contributions (Goodale, 2006). Therefore, it is clear that ethical strategies are essential for enhancing business ethics in organizations.
Ethics and Corporate Structure
Ethics and corporate structure exhibit a significant relationship in an organization. Basically, the purpose for which a group exists should form a basis for the choice of the most appropriate way to organize. Therefore, an organization created should best suit the purpose to be accomplished. This is because the patterns of activity that help one group to be successful may be actually dysfunctional for another group hence inhibiting group effectiveness (Jurkiewicz & Gacalone, 2016). As such, organization design should begin with the creation of an ethical strategy that will guide the process.
The strategy is a combination of an organization’s statement of purpose, vision, and basic philosophy. The strategy will then unify the intent of the organization and help to focus members toward actions tailored to enhance business ethics (Collins, 2010). Therefore, if ethics is ingrained in the organization’s strategy, the resultant organization structure will be able to facilitate promotion of ethical behavior among the members of an organization. This is because organizational design enhances communication and information flow among people because the systems are designed to encourage individual decision-making and responsibility.
Spiritual Perspective
Spirituality and ethics have had a significant relationship in the workplace over time. As such, spiritually plays a great role in developing ethical leaders in current organizations (McGhee & Grant, 2008). Additionally, spirituality encourages organizational leaders to cultivate a sense of self that recognizes a sense of community. Therefore, spirituality has formed a core of the social lives of ethical leaders (Weaver & Agle, 2002). The reviewed literature shows that there is a close relationship between spirituality, ethics, and leadership. This is because business leaders are increasingly turning to approaches that emphasize spirituality as an authoritative source in making decisions that influence lifestyles, attitudes, and behaviors of employees in organizations.
Conclusion
In conclusion, it is clear that organizational designs significantly influence business ethics. Therefore, ethics can be incorporated into the organization through a code of ethics, performance evaluation, ethics training programs, and reward systems. A code of ethics is a vital document that makes decision making easier at all levels of the organization by reducing ambiguity and considerations of individual perspectives in ethical standards. Therefore, the code of ethics guides all the managerial decisions hence creating a common framework upon which all ethical decisions of an organization are founded. Organizational leaders play a significant role in promoting ethical behavior in the organizations. Of late, there has been a close relationship between spirituality, ethics, and leadership. As such, spirituality influences some of the ethical decisions made by organizational leaders.
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