It takes more than words and policies. It takes management actively championing ethical reasoning skills and an ethical operating culture.
There is a nexus between ethics, cultural practices, and corporate responsibility.
- It is not sufficient to just have an ethics or corporate responsibility policy. If that was all it took, Enron would still be flying high.
- Culture failure is one of the leading preventable business expenses, yet it gets the least investment in prevention.
- Culture failure is a leading cause of failing to meet one’s corporate responsibilities to basic governance, environmental and community obligations.
- Real ethics and corporate responsibility depend on ethical reasoning skills and cultural practices, not policy.
- Ethics policies often cannot be logically applied to every situation uniformly. Yet corporations expect them to be followed absolutely and tend to enforce them selectively.
- Bad ethics policies can actually cause unethical behavior to emerge in organizations.
- Unethical behavior is caused by the convergence of reasoning flaws, attitudes, pressure and opportunity.
- Severe forms of frustration in the organization are symptoms of ethics and culture failure.
- Managerial action to merely deal with symptoms of frustration, instead of preventing its root causes, usually makes the culture failure worse than if nothing had been done at all.
Do you want to just appear to have corporate responsibility, or do you want to truly have corporate responsibility?
Is your ethics policy effective?
Read this and find out.
Personal ethics and group ethics follow the same ethical principles, however they differ in their processes and effects. These differences represent the cultural effects which must be managed if organizational ethics are to improve.
Ethics in organizations are influenced more by the group ethics system (culture) than by the sum of the individual personal ethics systems. These “group effects” can have a profound effect on the ethical behavior and overall culture of an organization (see illustration below). Therefore, to improve group ethics, more emphasis is generally needed on group dynamics, or culture management, than on personal ethics systems alone. (The illustration below has been included in Wiley’s Organizational Behavior, 8th Edition, 2003, pg 265).
Ethical Reasoning Processes.
Understanding why group ethics systems tend to function at lower levels than individual ethics systems can be explained by noting the differences in the comparative reasoning processes. Individual ethics systems tend to follow the bottom up process (see illustration below) where ideas are refined in a logical progression by eliminating logical fallacies and lower forms first, followed by resolving dilemma, optimizing higher forms of ethics using moral creativity, and policy considerations. In contrast, organizational ethics systems tend to follow the top down process beginning with policies (not reasoning) and consider logical fallacies last, if at all. Organizational ethics processes tend to lack sufficient logical rigor at the beginning of the reasoning process. All decision sciences give the greatest weight to the beginning of the reasoning process, because if this step is not soundly based all subsequent steps will either be irrelevant or dead wrong. Ethical reasoning is a decision science which must obey this same principle.
Change Management Processes.
When actual behavior does not meet required or expected behavior, this deviation constitutes a “culture gap.” Whereas changes in personal ethics and behavior can often be driven by training, reasoning and awareness alone (as espoused by the classical philosophers Socrates, Plato, Aristotle), often groups create their own ethics which can differ greatly from the sum of the individual ethics systems. In order to change the behavior caused by the “group effect” commensurate changes must be “engineered” into the underlying system of causes. Studies in organizational behavior – including our ongoing OrgCulture Study – indicate that emergent behavior in groups can be heavily influenced by three forces: the Required System, Leadership Style and the Background Factors (see flow diagram below). Adding more policies (required systems), a typical knee jerk management reaction to nonconforming behavior, cannot solve a culture gap problem if the true causes are manifested in the four Background Factors, Management Styles, or combinations thereof. This kind of misdiagnosis and mismanagement not only fail to achieve their intended objective, but often make the culture gap worse than if nothing had been done at all. Culture management therefore is not only an acquired skill, but according to many management scholars, it is an essential skill that organizations need if they are to perform to their potential. Doing culture management requires that managers be trained in the tools of diagnosis and response so they may become proficient at reducing unfavorable culture gaps and improving their group’s performance.
If you are in the business of acquiring and merging firms, you are also in the culture management business.
Merger success is not the norm.
Several studies in the early 1990’s on acquisitions by leading consulting organizations and universities revealed more or less the same findings:
- less than 40% paid for their cost of capital, less than 25% created any appreciable value, and nearly 50% were later divested at significant losses to shareholders.
- the inability to integrate cultures and management styles was cited as a leading cause of merger failure.
- the more successful acquiring firms generally placed a higher priority on culture management and integration and were more capable in this managerial skill.
- the less successful acquiring firms generally placed a lower priority on culture integration and management and were less capable in this managerial skill.
We can help you diagnose, estimate, plan, and manage the culture factors involved in your acquisitions using our online survey. A relatively small investment in information can significantly help your chances of success!
Get the culture management skills mergers require. We can show you how to identify and prevent culture failure so they will not spoil your merger plans.