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9.2 The Relation between Organizational Culture and Knowing the Right Thing to Do

Learning Objectives

  1. Delineate an ethically questionable organizational culture.
  2. Consider responses to an ethically questionable organizational culture.
  3. Define compliance in the business world.
  4. Discuss a way of measuring compliance.

Dishonesty in the Fish Market

A frequently recurring business ethics question involves dishonesty: when, if ever, is it OK to lie, to stretch the truth, to not tell the whole truth? A simple scene of deceit goes like this: A fish dealer sells both expensive salmon caught in the wild and relatively cheap farmed salmon. Occasionally, he switches the farmed for the wild—a change that’s very difficult to detect through appearance or taste, even by expert chefs—and pockets the difference. Randy Hartnell is a fish dealer in New York who suspected that a lot of that kind of dishonest fish switching was going on among his competitors. He investigated and published an Internet report. As he tells it, he visited the famed Fulton Fish Market in lower Manhattan and found some dealers openly admitting that the fish they were selling as wild had actually come from a farm.Randy Hartnell, “N.Y. Times Calls Wild Salmon a Gamble for Consumers,” VitalChoices 2, no. 25 (April 22, 2005), accessed May 25, 2011, http://www.imakenews.com/vitalchoiceseafood/e_article000389904.cfm.

This led the New York Times to do a follow-up story. Using sophisticated chemical tests, the Times confirmed that, yes, at six of eight places sampled, fish being sold as wild for about thirty dollars per pound was actually farmed salmon, which typically sells for about ten dollars a pound.

In the six bad cases, the person who actually made the switch participated in an organization where one or both of two things were true about the culture:

  1. Profit was understood as being more important than honesty.
  2. Honesty was presumably important, but recalcitrant workers paid little attention and sacrificed the truth to make a buck.

These are two very different situations, and they lead to distinct discussions: One has to do with choices being made about what specific culture to instill in an organization. The other concerns complianceIn the business world, compliance measures the distance between what an organization says it believes in the abstract and what it and its members actually do., which, in the business world, measures the distance between what an organization says it believes and what its members actually do.

An Ethically Questionable Corporate Culture

The first situation—one where a fish seller puts profit above honesty because that’s just the way things are done in the company—is one which most outside observers would categorize as fundamentally corrupt. Everyone inside the operation knows what’s going on—principal and peripheral members are lying to bring in money—and newcomers are meant to pick up on and continue the practice. The organization itself is dishonest.

What responses are available? First, we need to check whether a serious attempt is being made, or there’s a real interest in making a serious attempt, to justify the deceitful actions. If there isn’t, if management and leaders of a fish-selling business aren’t interested in ethical debates, there’s not much ethical arguments can do about it. For those wishing to change a situation like this, the law (criminal and civil) presents good venues for action. Bad publicity in the New York Times might do the trick too.

If, on the other hand, there is an interest on the organization’s part in justifying their actions from an ethical viewpoint, we could ask, “Can institutionalized lying be justified and, if so, how?” Three possible answers run through three distinct ethical theories: duty theory, consequentialist-utilitarian theory, egoism:

  1. Can basic duty theories justify putting profits above honesty? Probably not. Duty theories affirm that right and wrong is determined by a set of unchanging rules, and they typically include don’t steal, don’t lie, and similar. Because this kind of ethics starts from the proposition that dishonesty is wrong, it’s hard to see a nonfrivolous way of justifying the fish seller’s deceit.
  2. Can a consequentialist-utilitarian theory justify putting profits above honesty? Utilitarian theory is oriented by the common welfare. Acts in business—whether it’s lying or doing anything else—are defined as acceptable or reproachable depending on whether they end up doing the most good for the most people. Any act, the theory affirms, that ultimately makes more people happier is good.

    In this case, we can imagine an organization promoting lying as a common operating principal and making the case that the ethical stance is, in fact, good. Every Christmas, department stores deploy heavy men in red suits to proclaim that they live at the North Pole and ride a sleigh pulled by reindeer. The stores promote these fictions—addressed to innocent children, no less—to make money. Almost no one finds that ethically objectionable, however. One reason is that they’re implicitly accepting the affirmation that an act making people happier in the end is good, even if it’s dishonest. Similarly, the CIA covert operations branch (undercover spying, insofar as it truly exists) fits a utilitarian mold. In this organization, lying is good because it ultimately serves the American national interest and the basic principles of liberal democracies. Again here, the effects of what’s done matters more than what’s done. Finally, can this reasoning be applied to the lying fish seller? Maybe. As the New York Times story notes, the truth is that even the highest-level chefs and experts have a hard time distinguishing farmed from wild salmon. There is, therefore, a kind of placebo effect for food. If the fake stuff tastes just as good as the real thing, and the only real difference between selling one or the other is that the fish dealer makes out like a bandit, then an argument could be formed that the double-dealing does, in fact, increase happiness (the fish dealer’s) without hurting anyone else. Therefore, the dishonesty is ethically justifiable. In practical terms, however, it’s difficult to see how this strategy could get too far. Sooner or later someone is going to notice the difference, and as people begin to feel scammed (and therefore unhappy), the justification for the double-dealing crumbles.

  3. Can an ethical theory of egoism justify putting profits above honesty? Egoism is a coherent ethical approach to the world that does offer some justification for a deceitful fish trader. On this account, the ethical good for organizations and individuals in the economic world is defined as just whatever serves the organization’s or individual’s interest. And switching in the farmed stuff in for the wild is good for the fish sellers. (It’s hard to find any other explanation for the fact that, as the New York Times discovered, fully 75 percent of the places where fish was sold had some switching going on.) By definition, then, the dealing is ethically justifiable under this theory. Of course, most proponents of egoism in the business world don’t stop there. They go on to note that other, honest dealers who are pursuing their interests have a good reason to reveal the fraud. And, as it turns out, that’s just what honest dealer Randy Hartnell did, presumably helping his own business in the process.

Conclusion. Organizational cultures that incorporate lying as an acceptable part of day-to-day business do exist. Whether or not these cultures are ethically justifiable depends on the deep theoretical stances people adopt when going into business.

The Ethics of Compliance

What happens when an organization’s principles are laudable, but they don’t get put into practice by the people actually doing the work? What happens, the question is, when an enterprise (say, a fish-selling operation) internally promotes basic values including honesty, but outside in the world where the transactions happen, the lesson is lost and individual sellers are swapping farmed for wild salmon?

In the business world, this is called a breakdown in compliance. Of course there are different reasons for compliance failure, everything from a bad-apple employee to a misunderstanding of directions, but the broadest explanation is simply that key elements of the organization’s guiding philosophy aren’t getting through to the members. One response to this possibility is a corporate culture ethics audit.

A corporate culture ethics auditA corporate (or organizational) culture ethics audit attempts to measure how open channels are between the ethical values stationed at the top of the organization to guide activities and the actual practices down below. attempts to loosely measure how open channels are between the ethical values stationed at the top, and the actual practices down below, and one common way of doing the measuring is with a questionnaire addressed to all an organization’s members. Strings of questions can be answered simply yes/no or on a numerical scale from strongly agree (5) down to strongly disagree (0). These questionnaires can be distributed and the responses coming back summed and compared with previous samples in the same workplace or against results drawn from other workplaces. The goal is to get a sense of where people are at in terms of putting company ideals into practice.

It goes without saying that a simple questionnaire can, at best, provide only a crude picture of what’s actually going on inside an organization. The process must begin somewhere, however, and two attempts at drawing up auditing questionnaires come from O. C. Ferrell’s Business EthicsO. C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics, 7th ed. (Boston: Houghton Mifflin, 2008), 181. and Dr. Arthur Gross Schaefer.A. G. Schaefer and Anthony Zaller, “Strategic Modeling: The Ethics Audit for Non-Profit Organizations,” accessed May 25, 2011, http://www.austincc.edu/npo/library/documents/Strategic%20Modelng%20The%20Ethics%20Audit%20for% 20Nonprofit%20Organizations.pdf. Combined, and with additions, subtractions, and modifications, the following corporate ethics audit emerges. (As a quick note, this test could be nuanced by changing the responses from yes or no, to agree or disagree on a one-through-five scale. Some audits also add a section for comments.)

A Corporate Culture Ethics Audit

Answer yes or no.

Part 1: Corporate Culture as Defined and Understood throughout the Organization

  1. Are codes of ethics and business practices clearly communicated to employees?
  2. Are there rules or procedures in company publications that may be consulted?
  3. Is there a value system and understanding of what constitutes appropriate behavior within the organization that is shared by members at all levels of the organization?
  4. Is there open communication going both ways between superiors and subordinates on questions concerning ethics and organizational practices and goals?
  5. Have employees ever received advice on how to bring behavior into closer alignment with the organization’s values and norms?
  6. Does the organization have methods for detecting ethical and behavioral concerns?
  7. Are there penalties that are publicly discussed for transgressions of the organization’s rules and values?
  8. Are there rewards for decisions corresponding with the organization’s culture (even if they don’t result in a profit)?
  9. Do people at work act in a way that’s consistent with what they say are the organization’s values?
  10. Do employees spend their time working in a cohesive way that is in accord with the organization’s values?
  11. Does the organization clearly and directly represent its activities and goals in its public communications?

Part 2: Corporate Culture as Organic and Encompassing

  1. Does the company recognize the importance of creating a culture that is concerned about people and their self-development as participants in the organization’s values?
  2. Do employees treat each other with a respect, honesty, and fairness that correspond to the organization’s values?
  3. Are leadership decisions made with an opportunity for input from all relevant sources?
  4. To what extent does leadership, the board of trustees or executive committee, view its responsibility as one to represent the entire organization?
  5. Are leadership positions open to all members (insofar as such openness coincides with the organization’s values)?
  6. Does the professional staff provide services to all members in accordance with organizational policy and regardless of board or leadership status?
  7. Are employees satisfied that day-to-day responsibilities correspond with what the organization’s culture has led them to expect?
  8. Is turnover low?
  9. Are emotional outbursts springing from ambiguity about responsibilities within the organization rare? (I’m in charge here!)
  10. Is there an absence of open hostility and severe conflict that goes beyond the internal competition provided for by the organization’s culture?
  11. Does the organization address contract negotiations, work expectations, and compensation levels in a way that corresponds with the organization’s values?
  12. Are there shared and commonly held beliefs about how to succeed in the organization?
  13. Are there day-to-day rituals, habits, and practices within the organization that create direction and prevent confusion on ethical and business matters?
  14. Do the dress, speech, and physical work setting prevent an environment of fragmentation or inconsistency about what is right and appropriate for the organization?
  15. Does the organization’s involvement in community activities correspond with the effects of the organization’s day-to-day activities?

In its simplest form—with this audit rendered as a string of yes-or-no questions—the yes answers may be summed with a higher number indicating more compliance within the organization.

This audit can be applied to the question initiating this section. If we assume a fish seller is misrepresenting farmed salmon as the more expensive wild variety and if we assume that the larger business for which the fish seller works actually does value honesty within its corporate culture, then we should expect to see an audit like this produce a low score. We should expect to see that employees either aren’t getting the message as to what the corporate culture is, or they’re seeing it as just words, not real values supported on a day-to-day basis by the company’s leaders.

Key Takeaways

  • A corporate culture may be evaluated in ethical terms: it may be justified as ethically respectable or challenged as ethically reproachable.
  • Compliance in the business world means the organization’s members are acting in accord with the organization’s stated policies and values.
  • Compliance may be loosely measured with a corporate culture ethics audit.

Review Questions

  1. In what ways can an ethically questionable organizational culture be challenged by outsiders? In what situations might one way be preferable to another?
  2. What is an example of compliance, and an example of failure of compliance, in a fish-selling business that openly values honesty?
  3. What does a corporate ethics audit do and how does it do it?