1 LEARNING ORGANIZATION &

BUSINESS ETHICS

Contents
Learning Organization......................................................................................4

Why Learning Organization?............................................................................7

How to Develop Learning Organization............................................................9

Four Critical Processes of Learning Organizations........................................9

Empowering employees at all levels.........................................................9

Accumulating and sharing internal knowledge..........................................9

Gathering and integrating external information......................................10

Challenging the status quo and enabling creativity................................10

Tips for Becoming a Learning Organization................................................10

Begin with the Role of the Leaders..........................................................10

Create Your Learning Organization.............................................................11

Read together..........................................................................................11

Attend training and conferences.............................................................11

Provide alternative sources for learning..................................................12

Debrief every project and initiative.........................................................12

Twelve More Tips about How to Become a Learning Organization..............12

Build individual development plans quarterly..........................................12

Put each person directly into contact with customers.............................12

Promote field trips to other organizations...............................................12

Meet regularly across departments.........................................................13

Use cross-functional teams.....................................................................13

Pay for education for all employees........................................................13

Coach improved performance from all members of the organization.....13

 2 LEARNING ORGANIZATION &
BUSINESS ETHICS
Form study groups...................................................................................13

Take time to read, to think, to talk about new ideas and work................13

Hold brainstorming (idea generation) sessions on specific topics...........14

Foster an environment of collegiality......................................................14

Use your performance management system effectively.........................14

Basic Elements of Learning Organization......................................................15

Systems of Preview.....................................................................................16

A simulation system................................................................................16

The prototyping system...........................................................................16

The listening post....................................................................................16

Systems of Review......................................................................................17

A decision-audit system..........................................................................17

A best-practice system............................................................................17

Culture........................................................................................................17

Learning Organization vs. Organizational Learning.......................................18

What is Organizational Learning?...............................................................18

What is a Learning Organization?...............................................................19

Business Ethics..............................................................................................20

Role of Business Ethics...............................................................................20

Ethical Organization.......................................................................................20

Organizational and Applied Ethics..............................................................21

Create an Ethical Organization...................................................................21

Key Elements of Highly Ethical Organizations.........................................22

Framework of an Ethical Organization........................................................23

Leadership and Theory for Ethics in an Organization.................................24

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BUSINESS ETHICS
Creating and Sustaining an Ethical Workplace Culture..................................25

The Values ---> Attitude ---> Behavior Chain.............................................25

Values Drive Behavior.................................................................................25

Wisdom and Knowledge..........................................................................25

Self Control..............................................................................................25

Justice and Fair Guidance........................................................................26

Transcendence.........................................................................................26

Love and Kindness...................................................................................26

Courage and Integrity..............................................................................26

Putting Virtuous Values into Practice..........................................................28

Behavioral Standards and Codes of Conduct: The Safety Net....................30

The Ethical Behavior Formula.....................................................................31

Three Good Reasons to Apply the Formula..............................................31

ARTICLE..........................................................................................................33

A Model of Business Ethics............................................................................33

LEARNING ORGANIZATION &

BUSINESS ETHICS
Learning Organization
A learning organization is one that is able to change its behaviors and mind-
sets as a result of experience. This may sound like an obvious statement, yet
many organizations refuse to acknowledge certain truths or facts and repeat
dysfunctional behaviors over and again. Examples include the number of
 4 LEARNING ORGANIZATION &
BUSINESS ETHICS
times restructuring initiatives are repeated because the previous attempt did
not achieve the desired outcomes or the failure of mergers and acquisitions
to meet initial objectives.

A "Learning Organization" is one in which people at all levels, individually

and collectively, are continually increasing their capacity to produce results
they really care about.

Why should organizations care? Because, the level of performance and

improvement needed today requires learning, lots of learning. In most
industries, in health care, and in most areas of government, there is no clear
path to success, no clear path to follow.

What's in it for the people? Learning to do is enormously rewarding and

personally satisfying. For those of us working in the field, the possibility of a
win-win is part of the attraction. That is, the possibility of achieving
extraordinary performance together with satisfaction and fulfillment for the
individuals involved.

Organizational learning (OL) is more than individual learning and arises

through the interaction of individuals in groups and teams of different sizes.
What is characteristic of OL is that it is an emergent process in the sense
that its outcome is not predictable and it is more than the separate
contributions of individuals. (The principles of complex systems shown in
italics are discussed in Mitleton-Kelly 2003) OL needs the right environment
to thrive, one that allows time for reflection on past actions and outcomes
and is prepared to accept some unpalatable truths and one that is not a
blame culture in the sense that ‘mistakes’ are unacceptable. Such an
environment makes a distinction between ‘mistakes’ that are the result of
irresponsibility and lack of forethought and those that are genuine
explorations of a new idea or a new way of working. If individuals and teams
are encouraged to be innovative then they need to explore alternatives and
to take thoughtful risks.
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BUSINESS ETHICS
During the learning process, individuals will influence each other and their
ideas will co-evolve; that is each idea will adapt and change in the context of
other ideas, and once changed, it will, in turn, have an influence on what
happens next. The concept of co-evolution is a powerful one and applies not
only to internal organizational learning but also to strategy in relation to a
changing environment, as well as to sustainability understanding. Whatever
actions or procedures are in place at any one time regarding sustainability
(whether organizational or environmental) they cannot remain static. As the
broader environment changes these actions and procedures, policies, etc.,
need to change to respond to changes in the environment. Once changed,
they will, in turn, influence that broader environment. When the influence
and change are reciprocal and not unilateral then co-evolution has occurred.
In terms of sustainability, the concept to work towards is that of co-
evolutionary sustainability – in other words the ability of an organization to
continuously and appropriately adapt to external changes in its broader
environment. Another relevant concept, inspired by biology, is the notion of
the social ecosystem. This includes all competitors, suppliers, customers,
associates, legal and government bodies, etc. Complexity theory sees
systems as interacting wholes, influencing each other, in a co-evolutionary
process. Learning organizations encourage self-organization, so that groups
can come together to explore new ideas without being directed to do so by a
manager outside that group. This is the process that occurs natural y around
the coffee machine or the water cooler, but learning organizations actively
encourage self-organization and do not see it as a waste of time. This is an
essential part of the innovative process which is also an integral part of
creating an environment that facilitates co-evolutionary sustainability.

Organizations include multiple and intricate networks of relationships, which

are sustained through communication and other forms of feedback, with
varying degrees of inter-dependence. Although heavily influenced by their
history and culture, they can transcend both when necessary. When such
 6 LEARNING ORGANIZATION &
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organizations meet a constraint they are able to explore the space of
possibilities and find a different way of doing things, i.e., they are creative
and innovative and can create something new. This creation of new orderis
the distinctive characteristic of complex (as distinct from complicated)
systems. Unfortunately, this innate source of innovation is often restricted.
Understanding the characteristics of complex systems and of complex
learning organizations means that we can work with those characteristics to
achieve objectives, rather than against them.

Why Learning Organization?

• Because we want superior performance and competitive advantage
• For customer relations
• To avoid decline
• To improve quality
• To understand risks and diversity more deeply
• For innovation
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• For our personal and spiritual well being
• To increase our ability to manage change
• For understanding
• For energized committed work force
• To expand boundaries
• To engage in community
• For independence and liberty
• For awareness of the critical nature of interdependence
• Because the times demand it
• It’s more fun to go to work in learning organizations.
• Learning organizations give people hope that things can be better
• Learning orgs provide a playground for creative ideas
• Learning orgs provide a safe place to take risks with new ideas and
behaviors and the challenge needed to stretch beyond perceived limits
• In learning organizations everyone's opinions are valued and amount
that people can contribute is not determined by position in the
organization

Another driver towards organizational learning is change. It's been said a lot
but the greatest constant of modern time is change. With regards to the
organizations we are in, change consistently challenges traditional
institutional practices and beliefs. Most important, most of the changes we
now struggle to comprehend arise as consequences, intended or unintended,
of created in some way by the folks from the organizations themselves.

What is required then, given this constant state of change are fundamental
new ways of thinking and acting. The most compelling of which is Systems
Thinking, or "the ability to see the world as a complex system." This kind of
thinking inspires people to say things like: in "you can't just do one thing"
and "everything is connected to everything else."
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• develop the practice of life-long learning

The question is: how do we continually learn, if change is a constant?

That leads to barriers to learning, what stops us from learning? :

• Defensive routines
• Dynamic complexity of systems
• Inadequate and ambiguous outcome feedback
• Misperceptions of the feedback
• Poor interpersonal and organizational inquiry skills

If we could collectively see and to some extent overcome these barriers, the
environment, our families, our communalities and our organizations would all
dramatically improve – another reason for pursuing organizational learning.

How to Develop Learning Organization

• Successful learning organizations
○ Create a proactive, creative approach to the unknown
○ Actively solicit the involvement of employees at all levels
○ Enable all employees to use their intelligence and apply their
imagination
• Learning environment
○ Organization wide commitment to change
○ An action orientation
○ Applicable tools and methods
○ Guiding philosophy
○ Inspired and motivated people with a purpose
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BUSINESS ETHICS

Four Critical Processes of Learning Organizations

Empowering employees at all levels
○ Salient elements of empowerment
○ Start at the bottom by understanding needs of employees
○ Teach employees skills of self-management
○ Build teams to encourage cooperative behavior
○ Encourage intelligent risk taking
○ Trust people to perform

Accumulating and sharing internal knowledge

○ “Open book” management
○ Numbers on each employee’s work performance and production
costs generated daily
○ Information is aggregated once a week from top level to bottom
level
○ Extensive training in how to use and interpret the numbers—how
to understand balance sheets, cash flows and income statements

Gathering and integrating external information

○ Awareness of environmental trends and events
○ Internet accelerates the speed with which useful information can
be located
○ “Garden variety” traditional sources for acquisition of external
information
○ Benchmarking
○ Focus directly on customers for information

Challenging the status quo and enabling creativity

○ Challenging the status quo
○ Create a sense of urgency
○ Establish a “culture of dissent”
 10 LEARNING ORGANIZATION &
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○ Foster a culture that encourages risk taking
○ Cultivate culture of experimentation and curiosity

Tips for Becoming a Learning Organization

Begin with the Role of the Leaders

Begin with the behavior and contribution of your leaders. Your leaders make
four critical contributions to the development of a learning organization.

• Leaders provide the initial vision about why your organization exists
and where you are going.
• They communicate this vision. They clearly communicate their belief
that continuous growth, learning, and improvement will ensure its
accomplishment.
• They build consensus and ownership around this vision, and are
influenced by the views of others in the organization.
• They model the actions they want to develop in others.
• Their expectations are verbal, but most importantly, actions that
others can see. Leaders who want a learning organization continually
learn themselves.
• They read books and articles and share the content with the rest of the
organization. They attend training sessions and conferences.
• They foster an environment in which people are empowered to make
decisions about their work. They make intelligent risk-taking the norm.
They assure that all information people need to make good decisions is
communicated. They promote an organizational environment that
supports learning and personal mastery.

Create Your Learning Organization

To become a learning organization, everyone must contribute. Following are

my ideas about how you can ensure the development of this environment at
work.
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BUSINESS ETHICS
Read together.

One printing shop, with thirty employees, set aside two lunch hours per week
to read and discuss the book, The Goal, as a group. The marketing staff of a
software development company voted on a book to read. The department
members took turns leading the discussion of various chapters at staff
meetings. The leadership team in a student health center read, Leading
Change, together. The group discussed concepts and chapters at their
weekly leadership team meeting.

Attend training and conferences.

A recent study by the American Society for Training and Development

suggests that there is a direct “causative relationship between training and
performance but doesn’t prove it.” (The ASTD Benchmarking service
continues to gather data each year which may prove the relationship over
time.) Create the expectation that anyone who attends training or a
conference will make presentations to other staff about the most important
learning they took away from the event.

Provide alternative sources for learning

Such as CDs and online learning.

Debrief every project and initiative.

If you have developed a new product, designed an ad campaign, or

purchased new equipment, to cite a few examples, don’t just move on to the
next activity. Bring together everyone in the organization who contributed to
the success or failure of the initiative.
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BUSINESS ETHICS
Twelve More Tips about How to Become a Learning
Organization
Build individual development plans quarterly.

These should list negotiated expectations for growth and learning over the
quarter. These plans may include cross-training, skill stretching assignments,
and representing the department at organization-wide meetings, as well as
education.

Put each person directly into contact with customers.

When each individual personally knows customer needs, she is enabled to

make better decisions to satisfy the customer. Remember also, the internal
customers. Anyone to whom you provide a product or a service is a
customer.

Promote field trips to other organizations.

Even organizations in different industries can provide opportunities for

learning.

Meet regularly across departments

Even in a larger organization, bring the whole company together, at least

quarterly. People have to understand the whole work system; otherwise they
improve just their small part of the system. While these small improvements
are important, they do not necessarily optimize the success of the entire
system. This is an area in which every technological advancement makes
meeting easier.

Use cross-functional teams

To solve problems, scout for new opportunities, and cross-fertilize units with
new ideas.

Pay for education for all employees

In fact, some forward thinking organizations have determined learning is so

important, that they pay for any educational pursuit, not just those related
 13 LEARNING ORGANIZATION &
BUSINESS ETHICS
exclusively to the individual’s current job. The goal is to foster learning and
they presume that any investments in learning translate into more effective
work performance over time.

Coach improved performance from all members of the organization

Work constantly to enable people to set and achieve their next goals. Spend
time with people thinking about and planning their next objective.

Form study groups

Internally, and even externally, these groups can focus on creating a learning
organization or any other topic that interests you. Check Peter Senge's
Fieldbook.com Web site for more information about organizing these groups.
There may be people, who are close to you geographically, seeking members
or holding group meetings.

Take time to read, to think, to talk about new ideas and work

Create discussion areas, conference rooms, and break areas that foster
people communicating.

Hold brainstorming (idea generation) sessions on specific topics

Bring "experts" in to help you. As an example, a technical writer can add

value to a discussion about print presentation.

Foster an environment of collegiality

Recently, I attended a meeting led by a young manager. I watched the

interaction for a few minutes as she provided direction and led a discussion.
The most striking feature of the interaction was that she talked to the group
as if they were all colleagues working on the same goal. She demonstrated
no need to be more important than any member of the group.

Use your performance management system effectively

In addition to the development plan, mentioned above, provide 360 degree

feedback from peers, reporting staff members, and the boss.
 14 LEARNING ORGANIZATION &
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Basic Elements of Learning Organization

To build a learning organization, executives and managers must
institutionalize a specific set of practices. For example, the military
developed the practice of “debriefing” an operation so that everyone could
learn from its successes as well as its failures. In turn, as military officers
became experts at debriefing operations, they built up a methodology and
culture that supported this activity. Even if an officer were uncomfortable
with the review of an operation he led, he had to learn how to contain his
discomfort to proceed with the process. The change in practice, debriefing
and the cultural climate, “I can tolerate a debriefing of my errors,”
established the foundation for organizational learning. Building a learning
organization requires very pragmatic questions: What is a requisite variety of
practices we need? What systems information, technological or social—is
needed to support these practices?
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Systems of Preview
A simulation system

Decision makers at all levels master a methodology for anticipating and

assessing the likely consequences of a decision, action or initiative. This
methodology includes guidelines for using role plays, writing scenarios and
creating a logical sequence of possible causes and consequences. Histories
of the future, in which one travels to some future date and invents a
plausible narrative of how the system has evolved, can be a powerful
process tool in this area.

The prototyping system

Organizations learn most effectively when they are able to mount prototypes
of proposed new programs or procedures. To mount prototypes effectively,
decision makers should learn the basic technology of social experimentation:
How does one choose a setting or unit where the prototype is tested? What
data does one collect to evaluate the prototype? When are control groups
 16 LEARNING ORGANIZATION &
BUSINESS ETHICS
useful, and how should one use them? What process and outcome data
should the prototyping group collect? What inferences can be made from a
prototype system about the likely success or failure of its institutionalization?

The listening post

To periodically but regularly take the pulse of the unit, division or

organization, and anticipate emerging issues and problems, the decision
maker selects employees at random to come to a half-day meeting. At this
meeting each employee is asked to think of him/herself as listening posts
within the organization’s culture. Trusted clients or customers are invited.
Participants talk about what they are seeing and experiencing, but under no
circumstance are asked to develop solutions.

Systems of Review
A decision-audit system

Decision makers at all levels master a methodology for auditing the impacts
of important decisions on organizational performance. A “decision audit
policy” helps decision makers learn when to launch an audit. For example,
the policy might state that a decision should be audited, “if it puts $10,000
or more at risk.”

A best-practice system

Managers and decisions makers at all levels master a methodology for

regularly recording an action or decision they made that they believe was
very effective. They record the action on a template designed so that other
people can understand the decision and its good consequences. The records
of these decisions are kept in best practices.

Culture

A culture that promotes organizational learning possesses at least four

critical features:

1. The ability to see the world as it is, without denial or distortions of

unpleasant or threatening features
 17 LEARNING ORGANIZATION &
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2. The willingness to risk speaking the truth to powerful people
3. The ability to tolerate feelings of being ignorant, in the dark and “one
down” in the service of one’s learning
4. The capacity to feel accountable for a decision that has gone awry
without feeling excessively shamed

These abilities may at first appear too scarce or unevenly distributed across
people to imagine that they could be combined to create a learning
organization. However, these psychological dispositions can be developed if
they are nourished by bedrock of concrete practices and systems.

Learning Organization vs. Organizational Learning

Ang & Joseph (1996) contrast Organizational Learning and Learning
Organization in terms of process versus structure.

McGill do not distinguish between Learning Organization and Organizational

Learning. They define Organizational Learning as the ability of an
organization to gain insight and understanding from experience through
experimentation, observation, analysis, and a willingness to examine both
successes and failures.

What is Organizational Learning?

Argyris (1977) defines organizational learning as the process of "detection

and correction of errors." In his view organizations learn through individuals
acting as agents for them: "The individuals' learning activities, in turn, are
facilitated or inhibited by an ecological system of factors that may be called
an organizational learning system".

Huber (1991) considers four constructs as integrally linked to organizational

learning: knowledge acquisition, information distribution, information
interpretation, and organizational memory. He clarifies that learning need not
be conscious or intentional. Further, learning does not always increase the
learner's effectiveness, or even potential effectiveness. Moreover, learning
 18 LEARNING ORGANIZATION &
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need not result in observable changes in behavior. Taking a behavioral
perspective, Huber (1991) notes: An entity learns if, through its processing of
information, the range of its potential behaviors is changed.

Weick (1991) argues that the defining property of learning is the combination
of same stimulus and different responses, however it is rare in organizations
meaning either organizations don't learn or that organizations learn but in
nontraditional ways. He further notes: "Perhaps organizations are not built to
learn. Instead, they are patterns of means-ends relations deliberately
designed to make the same routine response to different stimuli, a pattern
which is antithetical to learning in the traditional sense". Or else, he argues,
Organizational Learning perhaps involves a different kind of learning than
has been described in the past: "the process within the organization by
which knowledge about action-outcome relationships and the effect of the
environment on these relationships is developed" (Duncan & Weiss 1979). In
his view, "a more radical approach would take the position that individual
learning occurs when people give a different response to the same stimulus,
but Organizational Learning occurs when groups of people give the same
response to different stimuli."

What is a Learning Organization?

Senge (1990) defines the Learning Organization as the organization "in which
you cannot not learn because learning is so insinuated into the fabric of life."
Also, he defines Learning Organization as "a group of people continually
enhancing their capacity to create what they want to create." I would define
Learning Organization as an "Organization with an ingrained philosophy for
anticipating, reacting and responding to change, complexity and
uncertainty." The concept of Learning Organization is increasingly relevant
given the increasing complexity and uncertainty of the organizational
environment. As Senge (1990) remarks: "The rate at which organizations
learn may become the only sustainable source of competitive advantage."
 19 LEARNING ORGANIZATION &
BUSINESS ETHICS
McGill (1992) define the Learning Organization as "a company that can
respond to new information by altering the very "programming" by which
information is processed and evaluated."

Business Ethics
Business ethics is a form of the art of applied ethics that examines ethical
principles and moral or ethical problems that can arise in a business
environment.

Business ethics can be both a normative and a descriptive discipline. As a

corporate practice and a career specialization, the field is primarily
normative. In academia descriptive approaches are also taken. The range
and quantity of business ethical issues reflects the degree to which business
is perceived to be at odds with non-economic social values. Historically,
interest in business ethics accelerated dramatically during the 1980s and
1990s, both within major corporations and within academia.

Role of Business Ethics

Business ethics has a vital role in learning organization. A learning

organization always follows the ethics. When any learning organization
implements Business ethics, it becomes an ethical organization.

Ethical Organization
Organizational Ethics is the ethics of an organization, and it is how an
organization ethically responds to an internal or external stimulus.
Organizational ethics is interdependent with the organizational culture.
 20 LEARNING ORGANIZATION &
BUSINESS ETHICS
Although, it is akin to both organizational behavior (OB) and business ethics
on the micro and macro levels, organizational ethics is neither OB, nor is it
solely business ethics (which includes corporate governance and corporate
ethics). Organizational ethics express the values of an organization to its
employees and/or other entities irrespective of governmental and/or
regulatory laws.

Organizational and Applied Ethics

Organizational ethics is a developing field that recognizes a dynamic in

organizational life that requires its own special attention regardless of the
purpose of the organization. Organizational ethics is one of the four broad
categories of applied and practical ethics.

The figure above depicts the integration of applied ethics as four overlapping
circles of ethical theory and practice:

• Essential Social Responsibility

• Ethics of Social Purpose
• Organizational Ethics
• Environmental Ethics

Create an Ethical Organization

○ Organizational ethics is a direct reflection of its leadership
 21 LEARNING ORGANIZATION &
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○ Unethical business practices
○ Involves tacit, if not explicit, cooperation of others
○ Reflect the values, attitudes, and behavior pattern that define
the organization’s operating culture
○ Driving forces of ethical organizations
○ ethical values
○ Integrity
○ Ethical values
○ Shape the search for opportunities
○ Shape the design organizational systems
○ Shape the decision-making process used by individuals and
groups
○ Provide a common frame of reference, that serves as unifying
force

Key Elements of Highly Ethical Organizations

There are at least four elements which exist in organizations that make
ethical behavior conducive within an organization.

1. Written code of ethics and standards

2. Ethics training to executives, managers, and employees
3. Availability for advice on ethical situations (i.e., advice lines or offices)
4. Systems for confidential reporting

○ These interrelated elements must be present and constantly reinforced

○ Role models
○ Corporate credos and codes of conduct
○ Reward and evaluation systems
○ Policies and procedures
 22 LEARNING ORGANIZATION &
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Framework of an Ethical Organization

Leadership and Theory for Ethics in an Organization

There are many theories and organizational studies that are coarsely related
to “organizational ethics”, but "organizations" and "ethics" are wide and
 23 LEARNING ORGANIZATION &
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varied in application and scope. These theories and studies can range from
individual(s), team(s), stakeholder, management, leadership, human
resources, group(s) interaction(s), as well as, the psychological framework
behind each area to include the distribution of job tasks within various types
of organizations. As among these areas, it is the influence of leadership in
any organization that cannot go unexamined, because they must have a
clear understanding of the direction of the organization’s vision, goals (to
include immediate and long term strategic plans), and values. It is the
leadership that sets the tone for organizational impression management
(strategic actions taken by an organization to create a positive image to both
internal and external publics). In turn, leadership directly influences the
organizational symbolism (which reflects the culture, the language of the
members, any meaningful objects, representations, and/or how someone
may act or think within an organization). The values and ideals within an
organization are generally center upon “values for business” as the
theoretical approach that most leaders select to present to their "co-
members" (which in truth maybe subordinates). In fact, an examination of
business methodology reveals that most leaders approach the ethical theory
from the perspective of values for business. Importantly, as transverse
alongside of presenting the vision, values, and goals of the organization, the
leadership should infuse a spirit of empowerment to its members. In
particular, leadership using this management style of empowerment for their
subordinates is based upon view of: “Achieving organizational ownership of
company values is a continuous process of communication, discussion, and
debate throughout all areas of the organization”.
 24 LEARNING ORGANIZATION &
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Creating and Sustaining an Ethical Workplace Culture
The Values ---> Attitude ---> Behavior Chain

Values drive behavior and therefore need to be consciously stated, but they
also need to be affirmed by actions.

Ethics is about behavior. In the face of dilemma, it is about doing the right
thing. Ethical managerial leaders and their people take the "right" and
"good" path when they come to the ethical choice points.

Values Drive Behavior

A well-used axiom in organizational behavior thought asserts that values

ultimately drive our behavior. In a nutshell, values exert influence over our
attitudes, and attitudes influence our behavior. Values are integral to attitude
formation and to how we respond to people and situations. Extensive
literature exist dealing with how values relate to effective managerial
leadership. A review of this body of work leaves us with the clear picture that
values are a key component of effective managerial leadership.

Wisdom and Knowledge

The capacity to take information and convert it to something useful. Wisdom

comes from capitalizing on one's experience to interpret information in a
knowledgeable manner to produce wise decisions. A prerequisite to doing
the right thing when facing an ethical dilemma knows what to do, knowing
the difference between right and wrong.

Self Control

The ability to avoid unethical temptations. The capacity to take the ethical
path requires a commitment to the value of acting with temperance. Ethical
people say "no" to individual gain if it is inconsistent with institutional benefit
and goodwill.
 25 LEARNING ORGANIZATION &
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Justice and Fair Guidance

The fair treatment of people. Justice is served when individuals perceive that
they receive a fair return for the energy and effort expended. For example, a
leader's commitment to justice is tested continually with the allocation of
organizational resources. Are certain individuals and groups given special
treatment without regard to objective criteria by which to judge fairness?
Ethical leaders value and embrace fair advice and guidance.

Transcendence

The recognition that there is something beyond oneself more permanent and
powerful than the individual. Without this value, one may tend toward self-
absorption. Leaders who are motivated predominately by self-interest and
the exercise of personal power have restricted effectiveness and authenticity.

Love and Kindness

The expression through words and deeds of love and kindness. Researchers
have documented that there appear to be different types of "love." In an
organizational context, love refers to an intense positive reaction to another
co-worker, group and/or situation. An organization "with heart" allows for the
expression of love, compassion and kindness among and between people,
the goodwill which can be drawn upon when one faces ethical challenges.

Courage and Integrity

The courage to act ethically and with integrity. These values involve
discerning right from wrong and acting accordingly. They impel one to
consistently do what is right without concern for personal consequences,
even when it is not easy.

In practice, these six categories of virtuous values are intertwined. For

example, the capacity to administer resources fairly and offer fair guidance
to stakeholders along the way is supported by courage and integrity. Difficult
decisions surrounding the allocation of limited resources leave some
 26 LEARNING ORGANIZATION &
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individuals and groups with less than they would prefer. The redeeming
grace is the perception that such decisions are made with fairness and
integrity. Unpopular decisions are easier to accept when they are perceived
to be derived fairly and with integrity.

Driving ethical behavior with values and attitudes requires that there be
alignment among values, attitudes, and behavior. Examples of this alignment
between each of the virtuous values, associated attitudes, and behavior are
offered in Table.

Table: Values ---> Attitude ---> Ethical Behavior Chain

Value Attitude Ethical Behavior

Wisdom and Experience promotes Using knowledge to solve

Knowledge wisdom that helps problems ethically and to do
convert information to what is right.
knowledge.

Self-Control Self-control means Putting personal motivations

effectively managing aside and acting with
reactions to challenging objectivity by doing what is
situations and right.
temptations.

Justice Acting justly and fairly Establishing just and

is a long-term driver of mutually agreed upon
ethical behavior; criteria and administering
remember the "Golden them fairly to all people.
Rule."

Transcendenc The belief in a power Putting institutional and/or

e and source outside stakeholder interests above
oneself reduces self- self interests. Identifying a
serving actions and personal purpose that is
 27 LEARNING ORGANIZATION &
BUSINESS ETHICS

increases humility. aligned with organizational

mission.

Love and Treating people with Recognizing and

Kindness kindness helps increase encouraging others for their
the reservoir of positive contributions.
affection and love.

Courage and Ethics requires the Making unpopular decisions

Integrity courage to do the right based on fair consideration
things consistently of the facts.
without regard to
personal consequences.

Putting Virtuous Values into Practice

"What can managerial leaders do on a proactive basis to encourage ethical

behavior? At least five practices help leaders steer their organizations toward
ethical conduct.

First, any gap between knowledge about what to do and actual actions needs
to be closed. If you know what is the right thing to do, just do it.
Unfortunately, too often "white collar" criminals will tell us that they knew
what was right, yet they failed to do it. John Maxwell, in his recent book

"There's No Such Thing as Business Ethics," explains various reasons for

ethical transgressions, including that people just rationalize their choices
with relativism. While the reasons for the transgressor's actions are varied
and complex, the simple truth is that they failed to "do the right thing" in
spite of their knowledge. They did not act with wisdom.

Second, managerial leaders must be very deliberate about who joins their
organization. Many organizational leaders believe that selecting people for
 28 LEARNING ORGANIZATION &
BUSINESS ETHICS
their values is as important as selecting for skill sets. Jim Collins, in his
compelling book Good to Great: Why Some Companies Make the Leap . . .
and Others Don't underscores how long-term success depends on putting the
right people in place. Larry Bossidy, as CEO of Allied Signal, made people
selection a top priority and considered it a key task of top management.
Selecting people who share your virtuous values is critical to building an
ethical culture and long-term business success.

Third, new personnel need to be socialized into the organization so as to

advance virtuous values. As an executive, I regularly attended new employee
orientations to espouse the organization's values. As a way of promoting and
influencing ethical behavior, it is very powerful for new employees to hear
managerial leaders espouse core virtuous values and to see those values
affirmed through the actions of others in the organization.

Fourth, accountability and follow-up are critical in putting virtuous values into
practice. Systems and procedures can remind people of commitments and
help connect words or promises with deeds. In organizations with behavioral
integrity, words and deeds count. When virtuous values are driving behavior,
the alignment of words and deeds serves to advance the creation of an
ethical work culture.

Finally, managerial leaders can positively impact the practice of ethical

behavior by fairly allocating organizational resources and linking them
appropriately. All managerial leaders have five key resources to manage:
people, money, capital assets, information, and time. Allocation of these
resources and the process managers use to accomplish such distribution can
create perceptions of equity and fairness, or inequity and unfairness.
Managerial leaders who value justice and fairness are more likely to deal the
cards fairly -- thereby modeling ethical behavior -- than are those who do
not.
 29 LEARNING ORGANIZATION &
BUSINESS ETHICS
Behavioral Standards and Codes of Conduct: The Safety Net

Ideally, managerial leaders and their people will act ethically as a result of
their internalized virtuous core values. I like to think of this as ethics from the
"inside out." Relying solely on this "inside out" approach, however, is simply
naïve in many circumstances.

Established behavioral standards and written codes of ethical conduct can

help bolster virtuous values and promote ethical organizational behavior.
Behavioral standards usually incorporate specific guidelines for acting within
specific functional workplace areas. For example, a sales department may
clearly outline criteria for expense reimbursements.

Codes of ethical conduct have received varying degrees of attention over the
past three decades. They can be categorized into three types:

Type 1: Inspirational-Idealistic codes of conduct specify global themes

such as "Be honest," "Show integrity in all matters," "Practice wise decision
making," etc. Such themes are not anchored to specific behavior or
situations.

Type 2: Regulatory codes of conduct proscribe clearly delineated conduct.

This type of code is designed to help as a jurisprudential tool when disputes
occur. It is more of a "do and don't" approach.

Type 3: Educational/Learning-Oriented codes of conduct offer principles

to guide decision making and behavioral reactions into likely situations. This
approach is compatible with building a learning organizational culture. For
example, the principle and value of fairness might be applied to allocating a
bonus pool. Managerial leaders responsible for this process could be
engaged in scenarios wherein they would be asked to take "fair action" in
making these allocations. Such learning experiences can serve to enlighten
and inform so as to foster ethical decision making.

Behavioral standards and codes of ethical conduct can help steer ethical
behavior by offering a cue or written rule to remind personnel of the right
 30 LEARNING ORGANIZATION &
BUSINESS ETHICS
thing to do--an "outside in" process for ethical behavior management. These
standards and codes trigger peoples' internalized values, thus gaining
strength through firm yet fairly administered consequences.

The Ethical Behavior Formula

Taken together, virtuous values, actions, and behavioral standards/codes can

produce a "formula," such as that illustrated below, that may increase the
likelihood of ethical organizational behavior:

Virtuous Values + Aligned Action + Behavioral Standards/Codes -->

Increased Ethical Behavior

Consider adapting the six virtuous values and aligning them with key
managerial leadership actions such as selection, employee
orientation/socialization, and allocation of resources. Behavioral standards
and/or codes of ethical conduct can be added as appropriate. Acting on these
three formula components may serve to increase the display of ethical
organizational behavior.

Three Good Reasons to Apply the Formula

There are at least three good reasons to practice ethical behavior in your
organization. These reasons may motivate you to adapt the "formula" into
your managerial leadership practice repertoire.

First, it is the right thing to do. Employees and external stakeholders alike
want and deserve to be treated ethically. Taken to the extreme, a culture
allowing unethical behavior can breed all manner of damaging and even
criminal activity.

Second, it makes economic sense. A mounting body of evidence shows that

an emphasis on the softer sides of business, including ethics, positively
influences the harder traditional bottom line. By listening to employees,
effectively recognizing their work, and practicing good ethical behavior,
managers have given a boost to such hard measures as operating earnings,
ROI, and stock price.
 31 LEARNING ORGANIZATION &
BUSINESS ETHICS
Third, in line with a growing trend to look beyond shareholder value to a
broader stakeholder perspective, organizational ethical behavior becomes
the socially responsible thing to do. Just think for a moment about the impact
of Enron's, Tyco's and World Com's unethical behavior on their respective
communities, workforces, and other stakeholders.
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BUSINESS ETHICS

ARTICLE

A Model of Business Ethics