THE IMPORTANCE OF ETHICS TO ORGANIZATIONAL CULTURE

1.4. Organizational Ethical Climate

The improvement of organizational ethics depends on three main factors:

1. Leadership Goals and Values:
   The ethical framework of an organization is heavily influenced by the goals and values set by its leaders. When leaders prioritize ethical behavior and establish clear ethical objectives, it creates a foundation for ethical practices throughout the organization.

2. Personal Character Traits of Leaders and Employees:
   The personal characteristics and integrity of both leaders and employees play a crucial role in shaping the ethical environment. Individuals who demonstrate honesty, fairness, and accountability contribute to a culture of ethics within the organization.

3. Organizational Culture, Beliefs, and Experience:
   The existing culture and collective beliefs of the organization significantly impact its ethical standards. Organizations that have a history of ethical behavior and a culture that supports ethical decision-making are more like ly to maintain high ethical standards.

Management specialists provide the following ethical standards characteristic of leaders:

Practical task. Read the given situation and answer the test after it.

On February 5, 1995, the X individual store 'Pamiškė' was opened. The store sold food products and industrial goods. The products were of good quality, and there was no shortage of visitors, despite the higher prices compared to other stores. In the first year, the store made a significant profit. The owner of 'Pamiškė', feeling the 'big money', wanted even more, and began to disregard his employees: he reduced their wages, fired them without settlement, and so on. Workers started stealing. Noticing the shortcomings, the owner abolished self-service in the store, believing it to be the cause of the problems. However, this was not the solution, and the store's situation worsened rather than improved. Facing significant deficiencies and unpaid loans, the owner decided to liquidate the store.       

An unethical organization can incur significant losses

Morality, professional leadership, and work productivity complement each other throughout the work process. Employees' personal values and character play an important role in improving the ethical climate and culture of the organization.

If ethics are ignored and there is high employee turnover, organizations suffer losses due to significant:

• Costs of lost production until the vacant position is filled;

• Costs of hiring a new employee;

• Costs of training a new employee;

• Costs due to reduced productivity until the new hire becomes familiar with the job."

Practical task. Take the test to assess your understanding of how ethics influences organizational culture: