Organisational Ethics in the Company Open24 - Essay Example

Organisational Ethics Vagelis Matiatos April 2006 Company Profile OPEN24 is an Athens based subsidiary of Eurobank which has been actively operating for over four years which, since its conception, has experienced rapid growth by the introduction of new and unique products in the extremely competitive banking sector. The bank, through their highly motivated and aggressive sales department offers this unique banking product for small to medium sized enterprises and thus has a current competitive advantage by offering something that no other bank in Greece does at present. The product is supplied by sales people that are qualified financial advisors who visit potential customers at their location, at their convenience, and provide them with all the banking services and products that they may require. Normally, the management is interested in organization mainly from an instrumental point of view. For a company organization is a means to an end in order to achieve its goals. In this sense, organizations can be distinguished into two fundamentally different sets of objectives: Organizations whose goal is to generate specific services or to bring about specific effects in its surrounding world and, Organizations whose goal is to change individuals where this type of the organisation is also known as a non-profit-organization. For the case of Open24, their objectives are to generate specific services by providing better and affordable banking services. (http://en.wikipedia.org/wiki/Organization) The team of financial advisors is highly focused, trained up and very aggressive sellers, they concentrate on non walk-in customers and their objective is the selling of business loans. Increasing competition in the marketplace combined with rather draconian cultural internal problems such as bureaucracy, poor communication, and perceived lack of personal job advancement possibilities has led the employees to high levels of frustration many times in the past. The future OPEN 24 has two main aims: a) Increase the number of financial advisors to 300 and thus, even more aggressively gain a higher share of the Attica market, and b) Expand to the provinces within the current year, establish itself to the major cities, i.e. Patras, Heraklio and Volos, and get a fair share of the local markets before the competition moves in. ‘All organisations begin with some sort of Vision, an initial spark which causes its creation. The organisation’s Vision is essentially the dream which unites a core group of people and inspires them to try and make the dream a reality.’ We can say that Open24 has a vision on what it wants to achieve in the near future. All employees work towards these visions and indeed if they work as group, then there is no reason as to why they should not achieve their organisational goals. (Ping, 1996) Open24 organisation’s purpose grew from their vision and in articulating its mission; they should have stated how it will seek to bring the vision to reality. ‘It is stating what its ‘Unique reason for being’ is, and what the values are that will give meaning to its purpose.’ (Ping, 1996) When it comes to organisational ethics, it is here in the mission statement that the seed is planted which gives rise to the ‘shared set of beliefs’ that will determine the organisation’s climate of opinion. (Ping, 1996) The main problems that the department faces and can prevent from the above mentioned plans are the following: Strict Management that creates employee dissatisfaction thus, high employee turnover ratio. Poor communication. Internal competition between OPEN 24 and the main net of Eurobank’s branches. Indeed without open and honest internal communication, rewards for acts of moral courage and most importantly, a desire within the organisation to ‘walk the talk’, the values stated in Open24 mission statement are not worth the paper they are written on. For this case they need to improve their internal communication to ease communication between the organisation and their employees. If there is improved communication in Open24, then the employees would have been able to raise their views and may be their grievances would have been address by the management. (Ping, 1996) History of the problem OPEN 24, after 6 years of operations, ended up producing 10% of Eurobank’s total Business loans in terms of amounts and 20% of new customers through out Greece. The last few years, many complaints have been placed from OPEN 24 customers of bad services from the bank’s branch. After a deep analysis of the complaints, Eurobank found out that the cause of that was that Branches didn’t service these clients properly because they didn’t feel them “their” clients. They believed that OPEN 24 brought them in financial advisors, got a large amount of bonuses and they had to handle them without receiving anything out of that. In 2004, when OPEN 24 was big enough and showed an interesting potential, Eurobank decided to invest further on the organization. When organisations join the partnership, they do so primarily to further their own strategic knowledge of business ethics issues and organizational methods. Each organization is represented on the partnership by one or two senior executives who have oversight responsibility for ethics. So for this case Eurobank when it decided to invest further on Open24, it was had an aim of furthering own strategic knowledge of business ethics issues and organisational methods. In a business Partnership, it brings together executives and scholars in a forum designed to increase the members knowledge about effectively managing ethics in business organizations. Hence the organisations do benefit a lot and they take this wealth knowledge back to their own organisation. (http://www.scu.edu/ethics/practicing/focusareas/business/businesspartnership.html) By the creation of a bonus scheme that gave bonus to the branch for every new customer and by changing the procedure of loan contract signing strictly to the branches, offered a good background for a better quality service to the customers that came in the branches from OPEN24. But, if you want to make God laugh, tell him you have plans, things worked out differently. The Branches saw the amount of the loans OPEN 24 was selling and the numbers were really amazing compared to the amount of the financial advisors working for the organization. The Branch managers were annoyed that the business next door to the branch preferred an FA to get a loan and not the main branch, it was embracing. The philosophy that Eurobank wanted from the beginning was extroversive branch employees and not the traditional sit in and wait type of bank attitude. This is what made the bank second in the Greek market within 15 years of operation. Although the bank was asking for extroversive employees, the attitude was not followed and the resistance was high. On the other hand, the FA’s network presented a great extroversive attitude and this was very attractive to the Bank’s directors. Branches were doing whatever they could to jeopardize the operations of OPEN 24 as not qualified bank employees, poor knowledge of bank operations and standards etc. These complaints were, up to a level true, but this was not the concept of the organization. An organisation is a formal group of people with one or more shared goals. The word was derived from the Greek word ‘organon’ which means tool. An organization is defined by the elements that are part of it i.e. who belongs to the organization and who does not. By coordinated and planned cooperation of the elements, the organization is able to solve tasks that lie beyond the abilities of the single elements. The price paid by the elements is the limitation of the degrees of freedom of the elements (http://en.wikipedia.org/wiki/Organization) Bank’s procedures, lows etc were useless to FA’s, they are not bankers, they are salesmen offering a unique service to customers that the branches could not. The problem was getting bigger and bigger and the pressure for the Branches was really intense. Then they moved to other ways of stealing customers. They moved to methods like pursuing the customer that OPEN 24 is not the bank, is just an external net finding customers for the bank and that if they wanted really to cooperate with the bank, thus, have other services that the bank offer, they should take back their request by signing a formal letter of complain for pure service and hand it in through the branch. Unhealthy competition between the two channels and the unfairness of the attitudes presented towards OPEN 24 caused high levels of frustration and people to leave, thus creating a high turnover ratio, waste of investment to employees and strengthening of the competition. In addition to that, customers experience that in a way that it should not be experienced from the organization. Indeed, a word of mouth is an advertisement that you can’t miss. Critical discussion As mentioned above, the purpose of OPEN 24 was completely different from the purpose of the Bank’s branches. The Financial Advisors were offering the service of visiting the prospective customers at their offices and informing them about the products and services offered by Eurobank. They would analyze customer’s needs and if agreed, collect the financial information from the business, make a request for a business loan and follow necessary procedures until the customer get an approval and the money at his account. As it is clearly stated by the Bank’s CEO, FA’s are the “hunters” who “hunt” the prospects and get them into the Bank while the Branches are the “farmers” that maintain and broadening the relationship with each customer by cross-selling, up-selling etc. This, if works correctly, can penetrate the market of Small Business Loans much quicker than the competition and it actually does but internal problems should be coped with before the competition moves in. One of the biggest problems is the internal competition with the branches network which frustrates both parties. Herb Genfal (1987) argues that “Monkey see, monkey do” goes the old saw. Modelling is an excellent way to teach sound business ethics. It is no secret that if bosses act in certain ways, employees will follow their leads. All the above mentioned fight starts from the upper management. Heads of each of the channels wanting to assure their positions and add some glory and success to it. They were using unethical ways that do not promote the organization as a whole. The problem though seems to start higher up the hierarchy. If top management wanted to cope with the conflicts, they would have created procedures and bonus systems that would make both sides happy. A well written and an inspiring mission or vision statement is not a panacea for unethical behaviour in an organisation. If it just written and the management is to ensuring that it is strictly adhered to, then it will be useful to the organisation. If the top management were the ones who were practising unethical behaviours, then they had set a bad example and there is no way they should expect other employees to respect them and have confidence in them leave alone doing what they are expected to do. Organisational ethics is a very essential discipline that determine the success or failure of a company. It deals with the shared set of beliefs of the group of individuals that make up the organisation and determines ‘the climate of opinion that sets the standard by which right and wrong is to be judged’. (Ping, 1996) ‘The word ‘ethics’ was derived from the Greek word ‘ethikos’ and ‘ethos’, which relate to the ‘prevalent tone or sentiment of a people or community’. To the Greeks, ethics was a practical science in which the basic rules were founded on recognition of what was generally accepted in society as ‘good’. It was the ethos, or climate of opinion in a society which determined the standards by which right or wrong conduct was to be judged.’ Ethics refers to standards of behaviour that tell us how human beings ought to act in the many situations in which they find themselves - as friends, parents, children, citizens, businesspeople, professionals, and so on. (Ping, 1996) An organisation that have strong organisational ethics has what we call ethical culture. Ethical culture is the behaviour displayed by the collection of employees within an organisation. These behaviours may be outlined by a code of ethics or other policy documents, and are reinforced through mechanisms such as rewards and punishments and communication. However the actual ethical culture may be different from the ethical values the organisation espouses. Business ethics can also be used to describe the way an organisation as a whole interact with their external. Many organisations, some desperate to protect themselves from legal liability while others recognising the social and cultural benefit of ethics training, have invested resources into training their employees on character development and individual morality in an attempt to equip them to deal with the ethical dilemmas they encounter. Indeed it is time for the management of Open24 to review the effectiveness of organisational ethics training commissioned by management, with the view to understanding the characteristics of an effective program in raising the ideals of corporate citizenship and ethical behaviour in their organisation. (Fineman, 1998) It is very important to identify what ethical is not; Ethics is not the same as feelings since feelings provide important information for our ethical choices. Some people have highly developed habits that make them feel bad when they do something wrong, but many people feel good even though they are doing something wrong. Ethics is not religion as many people are not religious, but ethics applies to everyone. All religions do advocate high ethical standards but sometimes do not address all the types of problems we face. Ethics is not following the law as a good system of law does incorporate many ethical standards, but law can deviate from what is ethical. Law can become ethically corrupt, as some totalitarian regimes have made it. Law can be a function of power alone and designed to serve the interests of narrow groups. Law may have a difficult time designing or enforcing standards in some important areas, and may be slow to address new problems. Ethics is not following culturally accepted norms as some cultures are quite ethical, but others become corrupt or blind to certain ethical concerns is not a satisfactory ethical standard. Ethics is not science because social and natural science can provide important data to help us make better ethical choices. But science alone does not tell us what we ought to do. Science may provide an explanation for what humans are like while ethics provides reasons for how humans ought to act. It is not true to say that just because something is scientifically or technologically possible; it may not be ethical to do it. (http://www.scu.edu/ethics/practicing/decision/framework.html) ‘Once the organisation has stated its mission and its key values, the tone has already been set for the organisations ethical climate. The seed has germinated in the ground, so to speak. Any attempts to influence the organisation’s climate through implementation of ‘Codes of Ethics’ or by training in ethics can only reinforce the tone, they can’t change it. Continuing with the analogy, training in ethics and the other elements could be seen as efforts to water and nurture the seed. Remembering that if you’ve planted a lemon tree there is nothing you can do to it to make it grow oranges. By looking at organisational ethics this way it becomes clear as to why stand alone actions such as instigation of ‘Codes of Conduct’ have little effect on the organisation’s overall ethical conduct.’ (Ping, 1996) Finally the management of Open24 needed to have known that making good ethical decisions requires a trained sensitivity to ethical issues and a practiced method for exploring the ethical aspects of a decision and weighing the considerations that should impact their choice of a course of action. Having a method for ethical decision making is absolutely essential. When practiced regularly, the method becomes so familiar that we work through it automatically without consulting the specific steps. (http://www.scu.edu/ethics/practicing/decision/framework.html) References Bauman Z. (1994); Alone again: Ethics after certainty, Demos Bird, London Business and organisational Ethics Partnership (2006), Markkula Center for Applied Ethics, available at http://www.scu.edu/ethics/practicing/focusareas/business/businesspartnership.html, accessed on 7/07/2006 Fineman S. (1998); The Natural Environment, Organisation and Ethics, in (ed.) Parker, M., Ethics & Organisations, Sage, London A Framework for Thinking Ethically (2006); Markkula Center for Applied Ethics, available at http://www.scu.edu/ethics/practicing/decision/framework.html, accessed on 7/7/2006 Harb Genfal, Training and development Journal, November 1987 Humphrey, C., Miller, P. and Scapens, R., (1993), ‘Accountability and Accountable Management in the UK Public Sector, Accounting, Auditing and Accountability Journal, Vol. 6, No.3,pp. 7 - 29 Jackall, R (1988); Moral Mazes: The World of Corporate Managers, Oxford University Press, New York Kärreman, D and Alvesson M.(1999); ‘Ethical closure in organisational settings – the case of media organisations’. Paper presented at the EGOS 15th. Colloquium, Organisations in a Challenging World: Theories, Practices and Societies, The University of Warwick, July 4th. –6th. Legge, K.(1998); ‘Is HRM ethical? Can HRM be ethical’, in Parker, M.(ed.) (1998) Ethics &Organisations, Sage London Organisation (2006); Available at http://en.wikipedia.org/wiki/Organization, accessed on 5/07/2006 Ping, A.C (July 1996); An Organic Perspective On Organisational Ethics, Available at http://www.insight-works.com/Articles/Business_Ethics_&_Trust/organisationalethics.htm, accessed on 7/07/2006 Read More