Integrity in Organizations

Building the Foundations for Humanistic Management

W. Amann, A. Stachowicz-Stanusch, W. Amann, A. Stachowicz-Stanusch

• Publisher: Palgrave Macmillan
• Year: 2012
• Print ISBN: 9781137280343
• eBook ISBN: 9781137280350
• Topic: Business
• Subtopic: Business Ethics
• Index: Business

Goes beyond the call for more humanistic management in the aftermath of a series of corporate scandals and the recent financial crisis, and offers advice on how we can build more humanistic organizations with the help of integrity. The authors shed light on leadership, governance and further implementation issues.

Part I

Integrity as a Cornerstone in Building Human-centric Organizations

1

Pursuing Organizational Integrity to Create Humanistic Organizations

Andrew E. Michael

Introduction

In today’s global village, businesses must deal with relentless competition that leads to tremendous pressures to continuously create and maintain a competitive advantage. These pressures influence top management decisions and the strategies, objectives, and policies adopted by organizations. The outcomes of these decisions have, in the worst instances, resulted in the violations of laws, the bankruptcies of firms, and the loss of stakeholder trust in organizational management (Bartunek, 2002; Patsuris, 2002; Carter & Burrus, 2005; Merritt, 2004). However, an additional detrimental impact, resulting from a Darwinian reflection of the competition between firms and the “survival of the most adaptive,” has been the effect on the lives of the organizational members.

As managers try to create, sustain, and increase their firm’s competitive advantage, they experience increased work pressure that is often associated with greater amount of worked hours (Gallie, 2005). In turn, managers ask their subordinates to do more and more, and sometimes for less compensation (White, Hill, McGovern, Mills, & Smeaton, 2003). Moreover, certain requests from superiors may be ethically questionable (even if they do not violate the law) and induce cognitive dissonance (Schweitzer, Ordonez, & Douma 2004). The aforementioned work environments have led to decreased levels of work–life balance and job satisfaction (Green & Tsitsianis, 2005; Van der Lippe, Jager, & Kops, 2006). Thus, on the one hand modern capitalist societies with their intense competition create pressures and incentives that undermine and do not foster integrity and ethical behavior and, on the other, dehumanize today’s organizations (Callahan, 2004). Humanism, apparently, is becoming a scarcer “luxury” that businesses cannot afford. But is this the only reality facing organizations or do practical alternatives exist that could help to build more humanistic organizations? In light of the above, this chapter explores the role that integrity can play in building better, more humanistic organizations. Does the pursuit and creation of a humanistic organization unavoidably conflict with maintaining a competitive advantage and, if so, is this true in both the short and long run? What does integrity mean in terms of ethical management, and what is to be gained from improving workplace integrity?

The chapter begins with a review of the literature regarding the different perspectives of the meaning of integrity. This is followed by a description of the conditions necessary for organizational integrity and also by arguments for an integrity-based approach to management. The next section describes how integrity can help to create more humanistic organizations that benefit all stakeholders in the long run. The chapter ends with a discussion of the challenges that inhibit integrity, and a brief conclusion.

Different perspectives on the meaning of integrity

A review of the literature shows that researchers view and define integrity in differing ways. Although some of these differences are small, others are more fundamental. Despite these differences, common themes do appear in the different definitions of “integrity.” Moreover, all researchers believe that integrity is an important aspect of organizational behavior (e.g., Biegelman et al., 2007; Jacobs, 2004; Pain, 1994) and an important trait of effective business leaders (e.g., Bass, 1990, as cited in Becker, 1998; Kirkpatrick & Locke, 1991; Morrison, 2001; White & Lean, 2007; Yukl & Van Fleet, 1992). Integrity is also considered to be a key determinant of trust in organizations (Butler & Cantrell, 1984, as cited in Becker, 1998; Hosmer, 1995; Mayer, Davis, & Schoorman, 1995; Shaw, 1997).

In the Oxford English Dictionary (1989) integrity is defined as an unimpaired moral state characterized by honesty, innocence, sincerity, and uprightness. According to the Encyclopedia Dictionary of Business Ethics 1997, integrity is defined as the “quality of moral self-governance at the individual and collective levels” (Werhane & Freeman, 1997, as cited in Petrick & Quinn, 2000, p. 4). A person with integrity acts according to important moral principles in a coherent and consistent way over time (Maak, 2008). Integrity involves an unbroken commitment to uphold recognizable oral principles (McFall, 1987). In considering the traits associated with effective leadership, Yukl and Van Fleet (1992) state that integrity exists when “a person’s behavior is consistent with espoused values and the person is honest and trustworthy” (p. 151). Butler and Cantrell (1984, as cited in Becker, 1998) and Hosmer (1995) also suggest that people and organizations with integrity are those with a reputation of being truthful and honest.

Although these researchers appear to use honesty and integrity synonymously, Becker (1998) and others (e.g., Carson, 1995) have argued that these two concepts, though related, are not the same. According to Becker, “Honesty is the refusal to pretend that facts of reality are other than what they are” (p. 158). Integrity involves acting according to morally justifiable principles and not behaving in a way that betrays the convictions of one’s consciousness. Although “one of these principles is that ... honesty is in a rational person’s best interests,” integrity involves adhering to other principles (e.g., justice and independence) and thus honesty in and of itself cannot be the same as integrity (Becker, p. 158).

Objectivism

Mayer et al. (1995), also believe that integrity involves a person’s commitment to principles (Becker, 1998), implying a kind of moral relativism reflective of subjectivism (Peikoff, 1991). However, Becker believes that subjectivism does not provide a rational, objective way to assess people’s integrity, and argues that Ayn Rand’s philosophy of “objectivism” (1990, as cited in Becker) can be used to obtain a more adequate definition of integrity.

According to objectivists, integrity means acting in a committed and loyal way to rational principles and values regardless of emotional or social pressures. These rational principles are morally justifiable general truths and not simply any subjective value system (Becker, 1998). The criteria used to determine moral justification is reality. Following this line of thought, Peikoff (1991) sees integrity as “loyalty to one’s knowledge, to the conclusions one can prove logically” (p. 261, as cited in Becker, 1998).

Under the objectivist view, it is rational for an organization’s decision makers to treat all its stakeholders fairly, including its customers and employees, because this will allow it to succeed in the long run. In contrast, deceptive advertisements, lack of genuine concern for customers and unfair treatment of employees and suppliers may lead to higher short-term rewards (due to increased revenues and lower costs) but these gains will dissipate in the long run because the organization’s decision makers (owners and/or managers) will have not demonstrated integrity in that they will have not acted in accordance with the rational principles of truthfulness and justice.

Objectivism posits that it is in the manager’s rational self-interest to manage subordinates according to the moral principles of fairness, independence of judgment, and productivity. This implies that managers should and will conduct performance appraisals fairly, independent of social pressures and based on objective performance measures because only by doing so can they manage effectively (Becker, 1998). Following this reasoning, it would behoove managers to show genuine concern for their subordinates’ levels of job satisfaction and work–life balance, thus contributing to the creation of a humanistic organization. Firstly, job satisfaction has been positively associated with important desirable outcomes such as productivity/performance, employee engagement, organizational citizenship behavior, and well-being, and negatively related to turnover intentions, actual turnover, and workplace deviance (e.g., Bowling, Eschleman, & Wang, 2010; Currall et al, 2005; Davis, 2006; Judge et al, 2001; Sousa-Poza & Sousa-Poza, 2007). Secondly, research has shown work–life balance to be negatively related to stress, burnout, and turnover, and positively related to performance and employee well-being (Greenhaus, Collins, & Shaw, 2003). If we accept the view that job satisfaction and work–life balance are two important interrelated characteristics of humanistic organizations, then – according to Becker’s analysis of objectivism – organizations and rational managers will have an incentive to treat their employees in a humanistic way. So why then is integrity and humanistic management often lacking in organizations?

First, not all people are rational, and irrational people cannot have integrity (Peikoff, 1991; Rand, 1964; both as cited in Becker, 1998). Second, integrity requires that people base their actions on reason, but there are times when individuals act on their emotions. Third, people may lack integrity because they give in to social pressures from their bosses, co-workers or clients. To avoid verbal and nonverbal disapproval from others or even physical intimidation and threats, individuals may act according to what they perceive their superiors want (Becker). They may avoid giving objective performance appraisals that may negatively influence their subordinates’ merit increases. They may make biased selection decisions, hiring relatives (nepotism) or friends of important clients.

Subjectivism versus objectivism

Barry and Stephens (1998) object to an objectivist approach to understanding integrity. According to these researchers, Rand’s objectivism is not a legitimate moral philosophy because it does not satisfy the two criteria that they see as necessary for the moral minimum accepted by the discipline of philosophy. These are rationality and impartiality. They argue that, although Rand’s objectivism emphasizes rationality and goal orientation, according to Hobbes (1950), “the unalloyed pursuit of self-interest does not result in maximization of individual or social systems utilities” (as cited in Barry & Stephens, p. 164). They further contend that objectivism is not a legitimate theory of moral philosophy because it has not been legitimized by any discipline of moral philosophy.

Locke and Becker (1998) counter the above criticisms by stating that what modern philosophers think about objectivism is irrelevant in judging its validity, and that the only valid basis for evaluating ideas is reason. For them, the opinions of experts are not necessarily true. They also argue that objectivism is not in favor of unalloyed self-interest if this means violations of other people’s rights. They counter the criticism that objectivism violates the criterion of impartiality, maintaining that all individuals should be firstly concerned with their rational self-interests and that no one should have special privileges under the law.

Barry and Stevens (1998) disagree with Becker’s definition of integrity that involves being committed to rational actions characterized by self-interested behavior aimed at achieving one’s own individual happiness. They espouse the view (held by critics such as O’Neill, 1971, and Rachels, 1986, both as cited in Barry & Stevens) that Rand’s objectivism constructs false dichotomies between egoism and altruism. For them the Randian notion of egoism ignores the possibility that altruism can be rational. According to the deontological philosopher Rawls (1971, as cited in Barry & Stevens), a just society can exist when its people understand that their rational efforts to satisfy their own self-interests are interdependent with those of their fellow citizens, implying that egoism and altruism are not necessarily mutually exclusive. Hence, they do not accept that objectivism can be a useful theoretical framework for managing business situations characterized by a wide variety of ethical ambiguity. In the real world, individuals are mutually interdependent and often motivated to help others because this will help them to achieve their own individual interests (O’Nell, 1971, as cited in Barry & Stephens). Therefore, individuals can have integrity even though they act altruistically in consistent and principled ways. This view is also reflected in Carson (1995) who argues that we exhibit integrity when we display “an unwavering commitment to acting for the benefit of others, standing up for those who are under attack, loyalty to people whom we have committed ourselves, acting honorably, and so on” (p. 6).¹

Alternative perspectives to objectivism

In support of their opposition to objectivism, Barry and Stephens present two alternative perspectives: Solomon’s (1992) framework on business ethics and Donaldson and Dunfee’s (1994) Integrative Social Contracts Theory (ISCT). According to Solomon (as cited in Barry & Stephens, 1998) integrity involves openness, affection, and flexibility and a pervasive sense of social context and moral courage that enables individuals to practice what they preach and stand up for others and themselves, while balancing institutional loyalty with moral autonomy. Integrity is a complex of virtues that is inextricably social as well as partly altruistic.

Donaldson and Dunfee (1994) posit that economic agents, such as firms, workers and consumers, form social contracts that represent local norms of ethical behavior. These norms are specific to each agent’s transactions and in this sense are termed “local.” These local norms are considered to be ethical when they are compatible with larger principles fundamental to human existence (hypernorms) that have roots in cultural, philosophical or religious beliefs and that reflect converging beliefs about morality, obligations, and rights (Barry & Stephens, 1998). In contrast to Rand’s objectivism, which is based on deterministic principles, in ISCT ethicality is based on indeterminate moral principles that have been widely accepted by economic agents.

Moreover, Barry and Stephens (1998) argue that objectivism inherently promotes and maintains an economy characterized by imbalances of power in favor of those who control intellectual capital. For them objectivism does not create an ethical requirement for managers to provide their workers the information and other resources that they need to act rationally in their own self-interest and in a way that supports the stated goals of their organization.² Similarly, the employer is not required to address its employees’ dissatisfaction with existing working conditions if it does not see this as serving its own self-interests. Such a state of affairs would be difficult to defend as humanistic. Hence, it would appear that in an objectivists’ world, organizational integrity would not suffice in creating and maintaining a more humanistic organization.

If organizations seek integrity only because it is a business asset that has market worth, serious doubts arise regarding the extent to which such an intention can foster a truly humanistic organization.³ Unless integrity is pursued because it is intrinsically valuable and the “right thing to do,” it will be hard to create and maintain a genuinely humanistic culture that will motivate and help managers and employees to deal with and overcome the ethical challenges they may face, espe...

Table of contents

• Cover
• Title
• Introduction: Why the Business World Needs More Integrity
• Part I  Integrity as a Cornerstone in Building Human-centric Organizations
• Part II  Business Integrity Across the Organization and Beyond
• Part III  Global Suitability, Global Economy, and Integrity
• Part IV  Values and Virtues as Preconditions for Building Humanistic Organizations
• Part V  Integrity and Leadership Ensuring Dignity in Business
• Part VI  Workplace Integrity
• Part VII  Corporate Governance and Anti-Corruption Mechanism Securing and Enhancing Integrity
• Conclusions: Emerging Insights on How to Build More Humanistic Organizations with Integrity
• Index