Values, Norms, Beliefs and Standards in Business Ethics

Every organisation operates in a particular business network comprising various parties, such as customers, employees, suppliers, distributors, investors and government agencies. With increased competition and awareness, these business parties always want to deal with organisations that are based on some empirical values, a set of pre-established norms, a sound belief system and established standards. Thus, to be successful, organisations need to imbibe positive values, norms, beliefs and standards. Let us discuss them in detail in the next sections.

What is Values?

Values basically mean moral ideas, universal conceptions or points of reference towards others. These are key factors that drive the behaviour of an individual or an organisation. In other words, values can be defined as the interests, attitudes, inclinations, requirements, emotions and character of individuals.

The following are some popular definitions of values:

According to M. Haralambos (2000), a value is a belief that something is good and desirable.

According to R.K. Mukherjee (1949), who was a pioneer Indian sociologist who initiated the study of social values, values are socially approved desires and goals that are internalised through the process of conditioning, learning or socialisation and that become subjective preferences, norms and aspirations.

Values influence the actions of individuals and determine their relationship with others in society. It can be said that values are deep-seated beliefs of a person or social group or a set of rules that people adopt to take right decisions. Examples of values include patience, faithfulness, self-determination, fairness, justice, respect, tolerance, compassion, etc.

Individuals learn values from various sources, such as family, parents, school, peer groups, teachers, and so on. Values enable individuals to differentiate between superior/inferior, attractive/unattractive, proper/improper, good/bad, wanted/unwanted and appropriate/inappropriate in society.

Here, it should be remembered that values are not only important in individuals’ life but also are equally significant for businesses. In any organisation, there is a set of business or corporate values. These values guide and inspire the organisation’s employees to achieve business goals and objectives successfully.

Examples of organisational values include trust, teamwork, stewardship, safety, responsiveness, quality of life, innovation, cordial relationships, fairness, integrity, commitment to customers, transparency, accountability, etc.

What is Norms?

Norms are informal guidelines regarding what is righteous and what is erroneous in a particular social group. These norms form a control system as they are used as a means to influence the members of a social group.

Norms can be formal or informal. Formal norms are explicitly written down and people who violate these norms face a strict action. All legal, social and religious norms are formal in nature. For example, government officers are not allowed to take bribe is a norm.

In case, any official is found taking bribe, he/she can be punished. On the other hand, informal norms are not written or mentioned anywhere.

For example, it is expected that all people who go to a movie theatre to see a movie should remain calm and do not make noise that causes inconvenience to other viewers. This is a norm that is generally accepted but nowhere in the theatre is it explicitly mentioned to do so.

What is Beliefs?

Beliefs refer to basic assumptions and feelings of individuals towards other individuals, events or various other aspects. These beliefs help individuals to carry out their actions in a specific way.

The belief system of an individual starts developing early in their life; however, there is only a little understanding regarding beliefs. There is a link between psychology (present day school of thought) and the belief system.

What is Standards?

Standards refer to a level or degree of a specific parameter. Standards may be measurable or immeasurable or may or may not be documented. For example, in a test, scoring 50% to clear the test is a standard. In an organisation, standards should be based on ethics.

Ethical standards promote values such as trust, fairness and honesty. Generally, organisations follow a set of globally accepted standards throughout the world. Apart from this, every organisation also establishes a set of standards that are specific to it.

Ethical standards are usually stated or defined in a way that may be debatable and open for discussion. The degree of specification may also vary.

For example, an organisation may have a standard that employees must treat customers with respect. Now, here the term respect is quite debatable as it means different to different individuals.

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Relationship Among Values, Norms, Beliefs And Behaviour

The interrelationship between values, morals, ethics, principles and behaviour is shown in Figure:

As per Figure, values possessed by an individual can be determined by behaviour they demonstrate. For example, an individual works extremely hard to achieve goals. In this case, it can be said that the individual values achievement/success. It means that there exists a direct relation between the values and behaviour of an individual. However, only the knowledge of values cannot help in predicting his/ her degree and nature of behaviour exhibited.

In the example stated above, the individual values achievement/success. However, it cannot be said whether he/she would follow the right path to achieve or succeed in a particular aspect.

The views and beliefs of individuals are very difficult to change or modify. This is because when individuals behave in a manner dictated by their values, they do not see the real outcome of their activities. What they see is the result filtered through the values. Thus, it can be said they see what matches their values and they do not see what does not match their values.

Norms are generally much more specific than values but values can be implemented only if norms are observed. Manifestation of the norms can be seen in an individual’s behaviour. Let us understand this with the help of an example.

Assume that an organisation emphasises maintaining privacy. Now, norms corresponding to the value of privacy may be not checking e-mails and letters of a person without his/her prior permission. Norms should be followed by all the members of the organisation. The values and norms would be reflected in the behaviour of individuals.

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Types of Values

Since time immemorial, humans live together in a community and develop values shared by other members of the community on what is good or bad and right or wrong. These values largely influence the behaviour and attitude of individuals in a community as well as at their place of work.

Spiritual Values

These values relate to the non-material aspects in individuals’ lives. To become a better human being and satisfy the urge for a better life, it is important to enhance spiritual awareness.

Spiritual values provide a basis for development, improvement, achievement and advancement to individuals. The values that can be associated with spirituality and help an individual to work better and positively.

Some of these values are explained as follows:

Harmony

In an organisation, every individual faces conflicts, clashes, competition and disagreements with his/her colleagues. If these issues take place more often, there can be an adverse effect on the performance of the individual.

Thus, it is important that there should be coordination and good relationships among individuals. The degree of harmony depends on the level of spiritual consciousness of individuals.

Truthfulness

It is often said that truth is an expression of divinity and spirituality. Truth refers to something that is real. An individual must be true in thoughts, words and his/her actions.

An individual who remains truthful in every circumstance gets elevated to a higher level of spiritual consciousness. Being truthful and honest is also a part of code of conduct set by organisations.

Self-giving

Generally, people help each other with an assumption that if they provide a helping hand to somebody, they will also get help in return whenever needed. In case the same is not reciprocated from the other person, people feel disheartened and start developing a grudge against each other. In contrast, people with high spiritual values generally have a self-giving attitude and do not expect much from others.

Faith

Faith is a strong belief or confidence that is embedded in the psychology of individuals. Our minds perceive faith as a value and can make it a basis for living. According to Sri Aurobindo, faith is the knowledge of the soul which the mind does not possess.

Faith is required in every aspect of individuals. For example, if an individual wants to achieve something, he/she needs to have faith in his/ her abilities. However, the level of faith depends on the past experiences and willingness of people to trust others. A person who trusts others is able to develop cordial relations at the workplace.

Spiritual Managerial Values

As discussed in the previous section, individuals at work place need to possess some spiritual values to perform efficiently. Similarly, there are some spiritual values that must exist at the workplace in order to get the work done.

These values are as follows:

• Each and every individual is a source of immense talent and potential that needs to be developed constantly
  
  
• Work is worship
  
  
• Excellence at work
  
  
• Cooperation and teamwork
  
  
• Business is sacred
  
  
• Self-introspection
  
  
• Decision making in silence

Professional Managerial Values

In an organisation, professional managerial values are possessed by managers and they use these values to support their team members towards the accomplishment of organisational goals and objectives.

However, as the nature of work is dynamic, managers need to adjust their values and behaviour according to the changing nature of work. Professional managerial values and qualities of a manager are discussed as follows:

Encourage Others

A good manager always uses the abilities and assets of his/her team members to get maximum work done by them. While doing so, he/she strives to achieve two goals. First, organisational work is done and secondly, the skills and abilities of employees are enhanced.

Creativity

An ideal manager must be creative and drive creativity in others too. Being creative means that a manager is able to generate innovative ideas and inspires his/her team to become more creative. This helps the team to generate out-of-the-box ideas and drive innovation in an organisation.

Intuitiveness

Intuition means knowing in advance that something is going to happen. Every individual has some kind of intuitive powers owing to which sometimes he/she can foresee the occurrence of certain events. Individuals get this intuition after having professional experience of many years.

This may also be called a gut feeling. Due to this foresight, managers may be able to recognise what kind of events may take place in the near future with a great degree of certainty.

Knowledge

A good manager has a strong knowledge base that he/she uses to take various decisions. Decisions that are based on knowledge are called informed decisions and there are very less chances of informed decisions of being wrong.

Commitment

A good manager always remains focused and committed towards achieving his/her goals. Such a manager holds a vision as to how he/she wants to see his/her team and work towards making his/her team’s efforts a success.

Kindness and Versatility

A good manager is one who is compassionate and is always ready to listen to subordinates. Such a manager is never scared to act and take bold actions. In addition, good managers are flexible, versatile and adaptable.

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Few Other Types of Values

Personal Values

These are values that guide the entire life of individuals. Personal values also determine the behaviour and conduct of individuals in society and ascertain how they relate to other individuals. These values are family values, socio-cultural values and individual values.

Family Values

Every individual belongs to a family and every family has a set of values that can be good or bad. Family values are basically derived from parents and are passed on to children in the family.

Social-cultural Values

These values are ingrained in society and change with time. Social-cultural values may or may not resemble family or personal values. They constitute a very complex mix of various values. These values, at times, may even be contradictory.

Material Values

These values are related to the basic needs of human beings, such as food, shelter and clothing. Material values constitute a part of the complex set of personal values, family values and socio-cultural values.

Material values refer to a person’s inclination towards gathering and valuing material things. Such individuals view material things as a measure of their and other people’s success.

Moral Values

These are the values that a society deems fit and essential for the co-existence of individuals and their well-being. Moral values lead to justified decisions, intentions and actions of individuals. These values include integrity, courage, respect, fairness, honesty, compassion, etc.

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Business Ethics and Values

As discussed, business ethics deals with ethical principles and problems that may occur in a business environment. Showing ethical behaviour in business can bring a number of benefits for an organisation.

For example, an organisation with ethical practices would be able to win the trust of customers; retain employees and attract investors. This would ultimately boost the organisation’s sales and profits; reduce labour turnover; increase productivity; maintain a pool of efficient employees, etc.

On the contrary, unethical behaviour can damage the reputation of an organisation in the market. Thus, strict adherence to ethics is important for an organisation to maintain long-term business prospects. However, such ethical behaviour can be maintained in an organisation if its employees abide by the code of conduct set by the organisation.

For this, it is important that the organisation must imbibe positive values in its work environment. Values are the premise for the conduct and behaviour of employees and members. Thus, business ethics and values are closely linked to each other. Let us now study some ethical business values that are universally accepted for conducting business in the next sub-sections.

Honesty and Integrity

Honesty and integrity are two related concepts. However, there is a subtle difference between these two. Honesty can be described as a quality owing to which an individual does not lie, cheat or steal in any manner. On other hand, integrity is an internal quality of being honest.

A person of high integrity would always be honest having strong morals. Integrity means that an individual does what is right irrespective of the consequences. Integrity is not only a value in itself; it is a value that guarantees other values. There can be honesty without integrity but no integrity without honesty.

Trust

Any society or business runs on trust that draws from ethical foundations and social norms. A business does not run in isolation and there has to be coordination between various stakeholders, such as employees, customers, suppliers and government agencies.

Therefore, success in business depends on maintaining mutual trust among these entities. Without trust, a business cannot sustain. Moreover, mutual trust between stakeholders improves the image of an organisation.

Studies conducted in the past have revealed that trust is a major factor in influencing the competitive position of an organisation in the market. This is because stakeholders (like customers, investors and employees) always prefer to deal with an organisation that fulfils promises made by it; thereby winning the trust of these stakeholders.

Fairness

Fairness and ethics are closely associated and sometimes used interchangeably. However, being fair in one’s dealing requires being just and equitable. In the context of business, being fair means that employees must be treated without any biasness and decisions should be made based on facts and without prejudices.

Fairness can be imbibed in an organisation if all the processes performed in the organisation are free from external influences and stakeholders are treated with respect. The degree to which fairness exists in an organisation can be estimated from parameters such as employee performance and rate of absenteeism and attrition.

Respect

As discussed earlier, in a business, there needs to be coordination between various stakeholders, such as employees, suppliers and customers. This can be possible if differences between the viewpoints of stakeholders are respected and conflicts are resolved amicably.

Ethical businesses treat their employees, customers and other stakeholders with respect, value autonomy and protect the interests of individuals irrespective of their gender, caste, creed, race or origin.

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Value-based Management (VBM)

In the recent years, many new management approaches have emerged with an aim to improve organisational performance. Some of these approaches are Total Quality Management (TQM), continuous improvement, Business Process Reengineering (BPR), kaizen, etc.

Most approaches are successful in improving the business performance of organisations except a few. The main reason for the failure of some approaches was unclear performance targets that were not aligned with organisational values. VBM is an approach to ensure that organisations run their business on values.

It ensures that performance targets of organisations are aligned with:

• Corporate mission
• Corporate strategy
• Corporate governance practices
• Corporate culture
• Corporate communication
• Decision processes
• Performance management and reward processes

There are three elements of a VBM system, which are:

• Creating value: An organisation must aim to create value for its customers and shareholders.
  
  
• Managing value: An organisation must manage its business based on corporate governance, change management, communication and leadership.
  
  
• Measuring value: An organisation must establish as to what kind of value addition has been done.

VBM is a system that gives importance to its customers and shareholders. The system focuses on maintaining an ownership culture in an organisation. Here, ownership culture refers to a culture wherein employees perform activities and tasks that are usually not a part of their assigned work responsibilities.

In addition, VBM focuses on maximising the value of a business organisation and empowering employees by providing them an opportunity to participate in the growth of the organisation. Employees in a VBM environment are able to make better decisions, become more disciplined and get involved in team work.

The following are various benefits of VBM:

• Helps in maximising value creation in an organisation
  
  
• Helps in meeting the interests of management and shareholders
  
  
• Mitigates risk and uncertainty and avoids unwanted corporate restructuring
  
  
• Helps in increasing investments
  
  
• Prioritises organisational activities and tasks

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Factors Responsible for the Enhancement and Dilution of Human Values

During the last few decades, the world has witnessed diminishing human values. The primary cause of these diminishing values is that individuals nowadays seek for materialistic pleasures at the same time forsaking their values.

This scenario of diminishing human values is prevalent all over the world especially in developing countries like India. This is because in these countries, there is a large disparity between haves and have-nots.

The haves represent the section of a society that has sufficient resources for their survival, while the have-nots include those sections of the society that are barely able to earn for their survival (people living under or just above the poverty line).

The disparity between haves and have-nots often leads to a feeling of discontentment and dissatisfaction among the have-nots. At various occasions, dissatisfied individuals in order to gain a particular standard of life indulge themselves in malpractices such as burglaries, theft, murders, etc. This is a direct consequence of diminishing human values in the society.

Basic human values include trust, respect, care, compassion, cooperation, honesty, benevolence, etc. Dilution of human values leads to various social problems, such as communalism, separatism, biasedness, dishonesty, lack of trust, cruelty, sadism, barbarity and self-centredness.

Apart from this, many individuals and institutions create disharmony among two or more groups of people based on religion, gender, caste, social and financial status, etc. Another reason for the dilution of such human values is that individuals nowadays have become self-centred and are concerned about their own benefit.

If the same trend of diminishing values continues, there would be time when people would not be able to socialise with others. Therefore, it is important for individuals to take measures to enhance human values.

However, the enhancement of human values is not a job of a single individual rather the government, citizens and various institutions should also contribute towards bringing such change. For this, a number of measures can be adopted.

Some of them are explained as follows:

• In India, the practice of living in a joint family has been almost eliminated. Individuals who live in a joint family are usually more caring and they learn to adjust and cooperate with other members.
  
  A joint family is considered as a miniature society where members need to share limited resources. In a joint family, young members of the family also live under the guidance and protection of elders who play a key role in imparting good values to them.
  
  
• In countries like India, children remain with their parents until they get settled in their lives. Thus, children require constant support of their parents in every aspect of their lives.
  
  However, in some cases, parents are unable to spend adequate time with their parents due to their busy work schedules. In such a case, children do not learn human values.
  
  Therefore, it is important that parents should spend time with children so that values can be inculcated in the children.
  
  
• Values such as caring for others and for one’s nation should be taught to children early in their lives. Negative values such as self-centredness must be discouraged. Children should always be motivated to become responsible citizens of the nation.

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Case Study: Ethical Misconduct by General Motors

General Motors Company (GM) is an American MNC whose headquarters is at Detroit, Michigan. GM designs, produces, promotes and distributes automobiles and their parts, and also deals in automotive financial services. GM was originally a holding company operating for McLaughlin Carriage Company and was established in September 1908.

GM is currently embroiled in a major ethical issue of knowingly selling cars with faulty ignition switches. As early as March 2005, problems were being reported about the stalling of cars indicating a faulty ignition switch. However, GM did not take any corrective action even after internal tests validated the customers’ complaints in September 2005. The fault was researched upon by the engineering department of GM, and it was estimated that the cost of changing the switch would be $0.90 per car and around $400,000 would be needed to be invested in the production machinery to rectify the problem.

This information was dispersed within the company, and the decision was made to not recall or repair any cars already sold in order to save costs. Later on in 2006, the engineers who had designed the ignition switch requested the parts supplier to change the switch design without changing the part number. The records for these requests were not discovered until 2013 by an internal investigation led by the new GM CEO, Mary Barra.

The investigation also found out that if the driver’s knee touched the ignition switch, it could cause it to switch off, leading to failures in critical systems of car such as braking, steering and deployment of airbags.

GM was fined US$35 million by the U.S. Department of Transportation as it did not immediately inform about the safety concerns regarding its cars to the National Highway Traffic Safety Administration (NHTSA). Mr. David Friedman, the Acting Administrator of NHTSA, stated, GM engineers knew about the defect. GM investigators knew about the defect. GM lawyers knew about the defect. But GM did not act to protect Americans from that defect.

Mary Barra, the current CEO of General Motors, was informed about the scandal before she was appointed for her current position in December 2013. GM recalled 1.6 million defective vehicles in February 2014, which grew to 2.6 million subsequently, to repair the faulty ignition switches. Attorney Kenneth Feinberg, who is responsible for GM’s compensation fund, revealed that their ignition switches caused 124 deaths and 275 injuries. GM has set aside US$625 million, out of which each family who lost a member would receive at least US$ 1 million.

As per recent developments in this scandal, GM has reached a deal with the federal prosecutors. Two criminal charges would be dismissed if GM complies with the terms of the agreement over a period of next three years. Moreover, the company has agreed to provide compensation amounting to US$900 million to the US government. GM has also said that it would spend another US$575 million to settle various civil lawsuits filed against the company.

This real-life scenario illuminates us about the importance of having an open and ethical culture in a company and regularly assessing the same so that problems can be solved without them escalating. GM has started a programme ‘Speak Up for Safety’ as a solution to counter this big issue.

The programme’s objective is to motivate employees to come forward and inform about problems rather than staying silent. According to Mary Barra, GM must embrace a culture where safety and quality come first. GM employees should raise safety concerns quickly and forcefully, and be recognised for doing so.