Organizational Culture and Human Relations EdPM-664

HOW TO CREATE VALUES-BASED ORGANIZATION

FELEKE YESHITILA GRS/2991/05

June, 2013

Submitted to: Yekunoamlak Alemu (PhD)

EdPM-664-Organizational Culture and human Relation

Table of Contents
Abstract ............................................................................................................................... iii 1. Overview .......................................................................................................................... 1 1.1 What are values? ............................................................................................................. 1 1.2 Classifying Values........................................................................................................... 1 A. Terminal Values B. Instrumental values 1 2

1.3 Types of Values .............................................................................................................. 2 2. Value Based Organization ................................................................................................. 3 2.1 Definition ........................................................................................................................ 3 2.2 The Benefit and Importance of Value-Based Organization .............................................. 5 3. The Required Steps to Create Values-Based Organizations ............................................... 6 Step 1: Integration of organizational values into organizational acts, strategies, and leadership practices ................................................................................................................................ 6 Step 2: Turn and remold organizat ional cult ure to serve organizat ional goals and leadership ........................................................................................................................... 7 Step 3: Make organizational values visible and use them in every conduct, and increase value-consciousness. ............................................................................................................. 8 Step 4: Communicate through set of selected values .............................................................. 9 4. Lesson Learnt .................................................................................................................. 10

References ....................................................................................................... 12

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Abstract
The recent discussion on modernizing organizations has placed a strong emphasis on values of the organization. Organizational values are used to foster better communication and to reinforce decision-making and preferred actions in an organization. This paper elaborates on the definition, benefits and importance and the required step to create value based organization. Value-based organization as a concept refers to an organization where organizational values are defined and applied in leadership in terms of increasing motivation of personnel, commitment, and rewarding. It proposed the necessary steps used to create value based organization. As a result of this, organization would be successful in its business and as well as in its contribution to the society as a good citizenship.

Values, Value-based organization; organization, organizational culture

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1. Overview
Before we directly go to the discussion of Value-Based Organization, it is important to briefly discuss and understand what value means.

1.1 What are values?

Value is defined in Websters Dictionary as something intrinsically valuable or desirable (Merriam-Webster Online Dictionary, 2005). Rokeach offered a frequently cited definition of a human value as being an "enduring belief that a specific mode of conduct or end-state of existence is personally or socially preferable to an opposite or converse mode of conduct or end-state of existence" (Rokeach, 1973). Rokeach argued that ones major values combine to form a value system, which is "an enduring organization of beliefs concerning preferable modes of conduct or end-states of existence along a continuum of importance". From the above definition, Values are traits or qualities that are considered worthwhile; they represent an individuals highest priorities and deeply held driving forces. Examples of values Ambition, competency, individuality, equality, integrity, service, responsibility, accuracy, respect, dedication, diversity, improvement, enjoyment/fun, loyalty, credibility, honesty, innovativeness, teamwork, excellence, accountability, empowerment, quality, efficiency, dignity, collaboration, security, stewardship, challenge, empathy, influence, accomplishment, learning, courage, wisdom,

independence,

compassion,

friendliness,

discipline/order, generosity, persistency, optimism, dependability, flexibility

1.2 Classifying Values

Rokeach, in his book titled The Nature of Human Values, says there are two kinds of values that people have: "instrumental values" and "terminal values". Terminal Values These are self sufficient end-states of existence that a person strives to achieve or the goals that the person would like to achieve during their life time. These may vary among different

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groups of people in different cultures. As the name implies, a distinguishing feature of terminal values is that they are pursued for their own sake.

A world at peace (Free of war and conflict) Family Security (Taking care of loved one) Freedom (Independence, free choice) Equity (Brotherhood, Equal opportunity for all) Self respect (Self esteem) Happiness (contentedness) Wisdom (A mature understanding of life) Natural Security (Protection from attack) Social recognition (Respect, admiration) Instrumental values

Salvation (saved, Eternal life) True friendship (close companionship) Inner harmony (Freedom from inner conflict) A sense of accomplishment (A lasting contribution) A comfortable life (A prosperous life) Mature love (Sexual and spiritual intimacy) A world of beauty (Beauty of nature and art) Pleasure (An enjoyable leisurely life) An exciting life (A stimulating active life)

These are modes of behavior rather than states of existence. They are preferable modes of behavior or means of achieving the terminal values. According to Rokeach (1973), the functional relationship between instrumental and terminal values are instrumental values describe behavior that facilitate the attainment of terminal values.

Ambitious (Hard working and aspiring) Broad minded (open minded) Capable (Competent, effective) Cheerful (Light hearted, joyful) Honest (sincere, truthful) Imaginative (Daring, creative) Independent (self-reliant, self sufficient) Intellectual (Intelligent, rational) Loving (Affection, tender)

Clean (Neat, tidy) Courageous (Standing up for your beliefs) Forgiving (Willing to pardon others) Helpful (Working for the welfare of others) Obedient (dutiful, respectful) Polite (Courteous, well mannered) Responsible (Dependable, reliable) Self controlled (Restrained, self discipline)

1.3 Types of Values

The following description attempt to name and define specific values that might be held by individual, this is only a partial list. There are a number of different kinds of values.

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Aesthetic Values Cultural values Ecological Values Economic values Educational Values Egocentric Values Ethical or moral Values Health Values Legal Values Political Values

The appreciation of form, composition, color or sound through the senses Pertaining to the continuation/preservation of human knowledge, beliefs, values, arts customs The maintenance of the integrity of natural living systems The use of exchange of money and material Concerning the accumulation, use and communication of knowledge Pertaining to a focus on the individual, personal, self satisfaction and fulfillment Pertaining to present and future responsibilities and ethical standards The maintenance of positive human physiological condition Pertaining to laws, rules and regulations; the making of, respect for and enforcement of laws The activities, functions and policies of government s and their agents Pertaining to leisure activities The use of belief systems based on faith; dogma Concerning those attributes associated with empiricism and empirical research Pertaining to shared human empathy, feelings and status; an interaction of humans

Recreational Values Religious Values Scientific Values Social Values

2. Value Based Organization

2.1 Definition
There is no shared definition yet in current literature which describes the key characteristics of a Value-Based Organization. A first time that, Value-Based Organization appears in literature is in an article by Mitroff and Denton (1999) on spirituality in the workplace. In this study, they differentiate between several different orientations towards religion and spirituality at work. An ethical organization can either be religion-based, spiritual-based or, when the founder or organizational leaders are guided by some philosophical principles or values which are not related to any particular religion or spirituality, values-based However, TBruni and Smerilli (2009) come to the conclusion that they provide for three basic elements that are to be found in value based organizations.

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1)

The activity which is carried out by the Value-Based Organizations essential to its ideal mission and identity

2)

The identity of Value-Based Organizations deeply linked to organizational members who share or even embody the ethical values of the organization.

3)

These organizational members are relatively insensitive to extrinsic incentives as they are primarily intrinsically motivated by contributing to a certain cause.

So far we have seen that there is no clear definition for a Value-Based Organization in todays literature. From the previous discussion we can however conclude that Value-Based Organizations are organizations whose purpose is not only to maximize profits but also contribute to society as a good citizen. The way these organizations want to do business is grounded in philosophical principles or values which are not only important to the founder but also shared by organizational members. Employees in Value-Based Organizations are therefore primarily motivated intrinsically through the benefit they receive from working towards a greater goal. Furthermore, there are some indications that Value-Based Organizations have a higher performance and lower turnover, mainly due to the recruitment of people who share the same values by which congruence between organizational and personal values emerges. Examples of Value-Based Organization One of the Value-Based Organization examples given is Dashen Brewery Company in Ethiopia. Core reasons to characterize Dashen Brewery as a Value-Based Organization are their commitment to do business in a socially responsible and ethical manner, act as an Ethiopian citizen by enriching and supporting the communities. Dashen Brewery distributes special beer Barley to the community and the communities also produces and resell to Dashen Brewery. As a result of this, Dashen Brewery does its business not only for the purpose of increasing profit but also contributing something value to the community. Recently Japan Toyota Company recalled 100000 Toyota brand automobile which have defects on safety air bag. If the Toyota company value integrity and it experience a quality problem in the organization, the companies honestly inform the customers about the exact nature of the problem. The company discusses actions to eliminate the problem, and the anticipated delivery time the customers can expect. If integrity is not a fundamental value, the company may make excuses and mislead the customers. This also an example that shows what value based organization is characterized.
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If the management of the organization value and care about the people in the organization, the organization will pay for health insurance, retirements accounts and provide regular raises and bonuses for dedicated staff. As a result of this, the employees who are working in this organization are motivated and committed by doing whatever the organization assigned them beyond the job description of the organization.

2.2 The Benefit and Importance of Value-Based Organization

Organizational values can be used as a source of legitimization, establishing creditability and trust, or alternative criteria for controlling and rewarding, and communicating the organizations mission and goals. Of course, moves towards Value-Based Organization in modern organizations are cultivated by instrumental thinking and the desire to obtain more efficient performance (Pruzan, 1998). It is said that it is important for businesses to display ethical behavior in order to attract and retain staff, increase profits, attract investors and government funding, and to enhance their reputation within the corporate world. Additionally, as McDonald (1999) notes, organizations are looking for material of a more pragmatic nature that will assist them in making values operational and mechanisms by which values can be integrated into their organizations. However, a Value-Based Organization would offer an alternative, especially in terms of better stakeholder value and the legitimacy of the organizations activities and managerial actions (Brytting & Trollestad, 2000). At the same time, Value-Based Organizations are believed to guide organizational members towards goals which benefit the organization, its members, stakeholders, and society (Kanungo, 2001). Example Ethiopian Air Line is one of the value based organization. It motivates its employees intrinsically and extrinsically. The ethical behaviour of the Ethiopian Air Line attracts and retains employees. As the fact of these, if the organizations post a simple vacant position to recruit competent employees, a number of applicants even over qualified employees apply to a single job. This is the benefit of creating value based organization.

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3. The Required Steps to Create Values-Based Organizations

Leaders must somehow cope with changing and increasingly heterogeneous values, both in their organizations and society at large. How to define matching values and turn values into practice to serve organizational requirements and better outcomes? Moreover, how can we ensure that values benefit corporations, especially in large organizations where diverse value compositions are often present? In this part, four steps are presented for practitioners who are willing to reinforce value-based organization.

Step 1: Integration of organizational values into organizational acts, strategies, and leadership practices
Evidently, the first and the most important step in creating a Value-Based Organization is to answer how we can integrate values, at least in a way that is beneficial for the organization. Still, a lot of questions remain unanswered. Why is the establishment of shared values difficult even in a single organization? Why is there a need to integrate values in organizations? Furthermore, what do leaders and organizations have to do to tackle the challenges discussed above? As Brytting and Trollestads (2000) argued, most leaders had instrumental motives behind the widespread talk about values in working life. Their interviews indicated that efficiency and economic growth is often looked for when leaders say that they want to manage values, to create a common value-base, or to build a strong company culture. This was regarded as an important tool for leaders in their efforts to unite and control their organizations. One way of understanding the increased occurrence of values in leadership is to start with the changes taking place in society. They seem to shift from having relatively homogenous cultural patterns to something less stable and heterogeneous or even fragmented. Many researchers have reported a clear shift in values. This is often described as a slow but steady shift from high estimation of material safety values to post-material freedom values (Inglehart, 1990; Hofstede, 2005). This implies that increased value is granted to an individuals autonomy, well-being, and personal development. For instance, involvement, responsibility, meaningfulness, and self-fulfillment are put forward to characterize good working conditions (Brytting & Trollestad, 2000)
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Most large organizations have multiple goals and a plurality of values, which must be held in balance in order for the organization to be successful. However, a leader may lose contact with the subcultures that exist in the organization, the goals, as well as the processes. Large organizations tend to rely on hierarchies and the bureaucracy that sustain the feeling of security, routine, and habits. Values are part of the organizational culture and habits, and therefore, to change the values might turn into a difficult task because change may break security and customs. (Brytting & Trollestad, 2000).

Step 2:

Turn

and

remold

organizational

culture

to

serve

organizational goals and leadership

Often, the integration of organizational values reveals differences and misunderstandings related to organizational values and their use in leadership. The issue here is that first we have to make certain integrative leadership actions, and then we usually start to understand what kind of culture and organizational climate we have in our organization. Otherwise, if we start on reshaping of organizational culture, it might be endless task and to acts to fit culture to selected values has no strategic direction. Organizational culture may be understood as the ultimate source of ethical and unethical behavior and values, or values are an extension of an organizations culture (Schein, 1985; Schwartz, 1992). In both cases, culture holds some integrating values, goals, and intentions, but often some contradicting issues tend to arise. It is important to note that the organizations values and culture is not one and the same thing. To simplify, while values are the beliefs, the culture is the outward representation of certain key underlying beliefs. Culture consists of the myths, legends, rituals, symbols, and language that define a social group (Meglino & Ravlin, 1998; Schein, 1985). Thus, for leaders to understand this disparity may be one route to better solutions and a way to find solutions to integration problems. However, a difficulty in applying culture/climate in leadership is that it thrives more successfully in some organizational cultures than in others. Yet, leaders are deemed to be a critical element in cultural development (Sims, 2000) and must be effective model of behavior, as reciprocity and feedback stimulate cycles of trust (Sama & Shoaf, 2008). Leaders throughout all stages of the organizations life cycle and all organizational levels continuously shape the organizations climate by providing meaning to policies and

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practices through the manner in which they enact the organizations goals and strategies (Grojean, Resick, Dickson, & Smith, 2004). Yet some have questioned the ethics of attempting to change the values of others. There are some arguments that it is inappropriate for leaders to attempt to install their values in subordinates. Some of these arguments contain negatively flavored tones of the clever ones who oversee and manipulate subordinates fundamental values with impunity. Furthermore, not every person who attempts to influence another does so with the best of motives. On the contrary, Grojean, Resick, Dickson, and Smith (2004) disagree with these arguments, arguing that in most cases, leaders do not install totally new values and identities in their followers; rather, they raise their salience and connect them with goals and required behavior. If we agree that leaders are role models of appropriate behavior and their actions are supposed to have a strong influence over the ethical conduct of followers, then Social Learning Theory provides some additional clues. One way that people learn is by observing the behavior of others and the consequences of it. Thus, a leaders actions might be viewed as the standard of acceptable conduct and are modeled by individuals as appropriate and necessary for achieving goals, efficient performance, and even for career advancement. Basically learning influences via at least two routes: increasing trust in leaders, and facilitating value congruence (Grojean, Resick, Dickson, & Smith, 2004). Leaders tend to be trusted because they act consistently with the values and the organizations mission; they lead by practical example. If leaders also manage to create a climate that the organizations values, as well as the stakeholders values are congruent, personnel may feel that they should integrate their values with the organizational values. In other words, inducing attraction and retention of members who have similar values fit the organization.

Step 3: Make organizational values visible and use them in every conduct, and increase value-consciousness.
Leaders are also held responsible for making codes and values visible and interpreting them if necessary. On that basis, Grojean, Resick, Dickson, and Smith (2004) argues that it is important for leaders to have an awareness of personal values as they influence the choices they make and the behaviors in which they engage. Gaining values-conscious leadership

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involves the integration of personal values and the needs of the stakeholders inside and outside of the organization, especially in the development of a values framework. Within complex organizational settings, Graber and Osborne Kilpatrick (2008) propose that leaders should consider advocating a parsimonious set of values and also determine if these key values are within the scope of the typical organizational member to achieve or internalize. Such reflection will make it far more likely that the final set of organizational values are embraced and actualized. Secondly, they argue that we should apply Senges (1990) thoughts on differentiating expressed values from the values we really act upon. Thus, leaders should explicate beliefs (e.g. via empowerment and introducing organizational development learning cycles) from practices (e.g. tight control) and how well they fit together. If the leadership is capable of providing a shared value-basis, it may also alleviate the potential of shadow relationships to hamper the achievement of organizational goals. Blurring the boundaries between groups and individuals would result in shared goals and better performance (Mills & Spencer, 2005,). Much depends on how leaders themselves perceive values in both their rhetorical and factual aspects. To an individual employee within an organization, the organizations values represent a touchstone to personal values. It is argued that a positive relationship can bring about greater personal loyalty, identification, and commitment to the organization (Chatman, 1991).

Step 4: Communicate through set of selected values

It is argued that leaders should focus on creating the right organizational culture to foster the development of values driven behavior rather than on building a compliance structure (Ponnu & Tennakoon, 2009). To accomplish this step, leaders have the primary role in communicating and demonstrating the true importance of values to the organizations members (Grojean, Resick, Dickson, & Smith, 2004) and to motivate and commit personnel to ethics codes and organizational values. This kind of focus requires that ethics is the cornerstone of how they conduct decisions and set strategies by practicing ethical behavior in their personal life, in their organizational duties, and in their relationships (Sims & Brinkmann, 2002). In leadership, a utility of shared values according to Meglino and Ravlin (1998) is that if people hold similar value systems, this enables them to communicate more clearly, predict each others behavior, and
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more efficiently coordinate activities, resulting in reduced role conflict and ambiguity and increased satisfaction with interpersonal relationships.

4. Lesson Learnt
By doing this paper, I have got opportunity to learn about the value based organization. The focus was on the definition, benefit and importance and the required step to create value based organization. In fact, I have seen that value is one of the most fundamental factors in establishing of thought, action or actions of person and also formation of social life. Specifically, these days no organization could work exclusively on the basis of contracts; all organizations need motivation that goes beyond profit and material incentives. Otherwise, the organization could be unsuccessful. The situation where an organization collapses because everyone does only what is written in his/her job description. I have got knowledge on the required four steps to create the value based organization. The first step is an integration of organizational values into organizational acts, strategies, and leadership practices. The organization value must be aligned with the organization acts, strategies and leadership practices. It also aligned with the organization vision and mission to be successful in creating value based organization. The second step to create value based organization is turn and remold organizational culture to serve organizational goals and leadership. Organizational culture may be understood as the ultimate source of ethical and unethical behaviour and values, or values are an extension of an organizations culture. In order to create a value based organization, it is necessary to assess the strength and weakness of organizational culture and reform the necessary culture in the organization to achieve organizational goal. The third necessary step to create value based organization is to make organizational values visible and use them in every conduct, and increase value-consciousness. The leaders of the organization are responsible for making the code and value in an organization. After making the code and value which are necessary for creating value based organization, the leaders must use such code and value in every activities of the organization as a whole.

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The last step to create value based organization is communicating through set of selected values. The primary role of leaders in an organization is to communicate and demonstrate the true value of the organization to its members. It helps to motivate and commit the employees in order to realize the objectives of the organization. In addition to these, it was a great opportunity to understand the theoretical and conceptual framework of value based organization and linking the theories of value based organization with practical situation using examples.

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References
Brytting, T., & Trollestad, C. (2000). Managerial Thinking on Value-Based Management. International Journal of Value-Based Management, 13, 55-77. Chatman, J.A. (1991). Matching People and Organizations: Selection and Socialization in Public Accounting Firms. Administrative Science Quarterly, 36, 459-484. Grojean, M. W., Resick, C. J., Dickson, M. W., & Smith, D. B. (2004). Leaders, values, and organizational climate: Examining leadership strategies for establishing an

organizational climate regarding ethics. Journal of Business Ethics, 55(3), 223-241. Hofstede, G. (2005). Cultures and Organiz ations, Software of the Mind: Intercultural Cooperation and Its Importance for Survival. New York: McGraw-Hill. Inglehart, R. (1990). Culture Shift in Advanced Industrial Society. New Jersey: Princeton University Press. Kanungo, R. N. (2001). Ethical Values of Transactional and Transformational Leaders. Canadian Journal of Administrative Sciences, 18, 265275

http://dx.doi.org/10.1111/j.1936-4490.2001.tb00261.x McDonald, G. (1999). Business Ethics: Practical Proposals for Organizations. Journal of Business Ethics, 19, 143-158. Meglino, B. M., & Ravlin, E. C. (1998). Individual Values in Organizations: Concepts, Controversies, and Research. Journal of Management, 24(3), 351-389. Mills, A.E., & Spencer E.M. (2005). Values Based Decision-Making: A Tool for Achieving the Goals of Healthcare. HEC Forum, 17, 18-32. Mitroff, I. I., & Denton, E. A. (1999). A Study of Spirituality in the Workplace. Sloan Management Review, 40(4), 83-92. Ponnu, C. H., & Tennakoon, G. (2009). The Association between Ethical Leadership and Employee.

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Pruzan, P. (1998). From Control to Values-Based Management and Accountability. Journal of Business Ethics, 17, 1379-1394. Rokeach, M. (1973). The nature of human values. New York: Free Press. Sama, L. M., & Shoaf, V. (2008). Ethical Leadership for the Professions: Fostering a Moral Community. Journal of Business Ethics, 79, 39-46. Schein, E.H. (1985). Organizational Culture and Leadership. San Francisco: Jossey-Bass. Schwartz, S. H. (1999). A theory of cultural values and some implications for work. Applied Psychology: An International Review, 48(1), 23-47. Senge, P.M. (1990). The Fifth Discipline. New York: Doubleday. Smith, C. A., Organ, D. W., & Near, J. P. (1983). Organizational citizenship behavior: Its nature and antecedents. Journal of Applied Psychology, 68(4), 653-663.

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