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    Ethical Challenges Managers Face
    It is late at night and the office is quiet – except that you have a nagging voice in your head. Your product is already two weeks behind schedule. You have got to get it out this week or lose the deal. But you have discovered a problem. To correct the problem would mean another three-week delay – and you know the client will not go for that. It is a small error – it will probably never become an issue. What do you do?

    Managers face these kinds of issues all the time. Ethical dilemmas can arise from a variety of areas, such as:
    Advertisingdesire to present your product or service in the best light.
    Sourcing of raw materialsdoes the company buy from a supplier who may be underpaying their people or damaging the environment?
    Privacyshould the company have access to private e-mails that employees write on company time? or the Web sites they visit during work hours?
    Safetyemployee and community.
    Pay scales
    relation of the pay of top executives to the rest of the company.
    Product pricing policies variable pricing, discounts.
    Communicationwith stockholders, announcements of plant closings, etc.

    Unethical behavior
    It is easy to think that people who behave unethically are simply bad apples or have a character flaw. But in fact, it is often the situation or circumstances that create the ethical pressures. A global study of business ethics, published by the American Management Association, found that the main reasons for a lapse of ethics are:
    Pressure to meet unrealistic business objectives/deadlines.
    A desire to further one's career.
    A desire to protect one's livelihood.
    You may have developed your own personal code of ethics, but the social environment of the organization can be a barrier to fulfilling that code if management is behaving unethically. At Enron, vice president Sherron Watkins pointed out the accounting misdeeds, but she did not take action beyond sending a memo to the company's chairman. Although she was hailed as a hero and whistleblower, she in fact did not disclose the issue to the public.

    Importance of Ethics in Management
    Ethical behavior among managers is even more important in organizations because leaders set the moral tone of the organization and serve as role models. Ethical leaders build trust in organizations.

    If employees see leaders behaving unethically, chances are the employees may be less inclined to behave ethically themselves. Companies may have printed codes of ethics, but the key standard is whether leaders uphold those values and standards. We tend to watch leaders for cues on appropriate actions and behavior that the company expects.
    Decisions that managers make are an indicator of their ethics. If the company says it cares about the safety of employees but then does not buy enough protective gear for them, it is not behaving in line with its code.

    Likewise, if managers exhibit unsafe behavior or look the other way when employees act unsafely, their behavior is not aligned with their stated code.

    Integrity
    Without integrity, there can be no trust. Leadership is based on trust. Ethics drive effectiveness because employees know they can do the right thing decisively and with confidence. Ethical behavior earns the trust of customers and suppliers as well. It earns the public's goodwill.

    Ethical managers and ethical businesses tend to be more trusted and better treated. They suffer less resentment, inefficiency, litigation, and government interference. If top management cuts corners, however, or if they make shady decisions, then no matter how good the code of ethics sounds, people will emulate the questionable behavior, not the code.

    As a manager, you can make it clear to employees that you expect them to conduct business in an ethical manner by offering seminars on ethics, having an ethics hotline via which employees can anonymously raise issues, and having an ombudsman office or ethics committee to investigate issues.

    Integrating Ethics into Managerial Decision Making
    Ethics implies making a choice between decision-making rules. For instance, when choosing between two suppliers, do you choose the cheapest (decision rule 1) or the highest quality (decision rule 2).

    Ethics also implies deciding on a course of action when no clear decision rule is available. Dilemmas occur when the choices are incompatible and when one course of action seems to better serve your self-interest but appears to violate a moral principle.

    One way to tackle ethical dilemmas is to follow an ethical decision-making process, like the one described below.
    Steps in an Ethical Decision-Making Process
    What are you being asked to do? Is it illegal? Is it unethical? Who might be harmed?

    consider the situation from their point of view. For example, consider the point of view of the company's employees, top management, stockholders, customers, suppliers, and community.

    Why Do Leaders Fail in Introducing Values-Based Leadership?
    Introduction
    Over the last decade, much has been written about values, ethics, and integrity from a normative perspective, mostly suggesting what leaders should do and how leaders ought to behave. Both the positive and negative sides of many organizations and personal cases have been analyzed in order to develop a better understanding of ethics and values in leadership.

    Accordingly, while efficiency and profitability are viewed as a leader's primary objectives, there is a long-held view that leaders also have responsibility for ensuring standards of moral and ethical conduct (Barnard, 1938; Cullen, Victor & Stephens, 1989; Resick, Hanges, Dickson & Mitchelson, 2006).
    Especially the values-based leadership (VBL) evoked the role and importance of ethics and values in leadership.
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    Importance of Values-Based Leadership in Organizations
    Many leaders and academics have a fascination with the shared concept of values because values are seen as the underlying attitudes and beliefs that help determine individual behavior, both personnel, and leaders. In such a way, values are a means of influencing behaviors without the need to resort to formal structures, systems, strategies, or control mechanisms.

    Values would also provide a means of directing the organization in the desired way without having to resort to authoritarianism and using tight or confusing rules.

    Moreover, the overall consensus seems to be that values are an important factor in the successful management of large organizations (e.g. Mintzberg et al., 2005; Hofstede, 2005) and in creating a competitive edge (Blanchard & O'Connor, 1997).

    Steps for Values-Based Leadership and Its Unintended Outcomes
    To understand better the practice and execution of VBL, three simplified steps of VBL

    1. Sense of Values
    "Recognizing a situation as an 'ethical' one is the first, critical step in the process of ethical decision making. 
 In short, ethical deliberation implies ethical detection". Sense of values is an important attribute because leaders must consider the welfare of others, both inside and outside the organization. Sensitivity involves an interpretive process wherein the individual recognizes that organizational values or a moral principle is relevant to the circumstances (Rest, 1986). More specifically, sense of values is a leaders' capacity "that enables professionals to recognize, interpret and respond appropriately to the concerns of those receiving professional services".

    2. Values Awareness
    Values awareness is seen here as the second step in the VBL. As Treviño, Weaver, and Reynolds refer to Rest's (1986) study where he observed that "once an individual becomes aware of an ethical issue, ethical judgment process should be more likely to be triggered". In other words, without sensitivity, situations and issues are not interpreted as values-grounded or we assume that no values dimensions are involved. Moreover, one might expect that an outcome of such a VBL where a we do not recognize the importance of values discretion (i.e. sense of values) but we do not have solid values-ground, the VBL might turn out as drifting and implying a mentality of 'anything goes.

    3. Competence to Put Values into Practice
    Values awareness, including generally applicable principles, ethical codes, values and guidelines constitute the foundation of the moral orientation and are necessary in all external and internal actions of leadership in organizations. In real-life situations we have to be able to apply these general principles and act according to them. However, it is seldom obvious what constitutes right or wrong and often there is no ready-made solution for emerging ethical problems. Instead, issues related to values are often encumbered by ambiguity.