ORGANIZATIONAL WORK ETHICS AND COMMUNICATION

A Study of Global Communication Ethics of

Multinational Company at Coats Ltd.

By Faradesi Ardialisa, B.Sc.

P056090422.33E

Final-Test Take Home Examination Human Resources Management (MSDM)

Lecturer:

Prof. Dr. Ir. Aida Vitayala Hubeis Dr. Nurmala K. Panjaitan, MS, DEA.

Magister Business Institut Pertanian Bogor (MB-IPB)

December 2009

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ABSTRACT

Globalisation takes place in almost every business around the globe. A global organization is in demand of implementing effective communication ways, because poor communication is considered costly. Diversity is an important element that requires understanding of different culture backgrounds that in the end will form ethical behaviour. Coats Ltd, multinational company operating in almost all continent of the world, cover this global element. It conducts strict global ethics in running the business to meet the standards but with local ethical approaches. The company ensures that the multilevel communication takes place in order to give best possible performances.

The study revealed that global organizations should have a good combination between “think global” and “act local”. Operating procedures are important to be as strict as possible to identify the company code of ethics, but methods to convey messages to all levels should be adjusted according to the local culture. At the end it is suggested that the company could entail methods in benchmarking its global ethics to ensure the continuity of the implementation.

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ABSTRAK

Globalisasi terjadi hampir di seluruh penjuru dunia. Sebuah organisasi global dituntut memiliki cara komunikasi yang efektif karena komunikasi yang buruk berdampak negatif terhadap biaya. Keragaman adalah elemen penting dalam perusahaan global yang menuntut pengertian dari latar belakang budaya. Pada akhirnya budaya akan melahirkan suatu etika perilaku kerja. Coats Ltd, sebuah perusahaan multinasional yang memiliki cabang hampir di semua benua, sudah mengantisipasi elemen ini. Perusahaan ini menjalankan etika kerja global yang ketat demi menjaga standar. Dalam menjalaninya, Coats melakukan pendekatan etika kerja yang berlaku lokal. Hal ini untuk menjaga agar komunikasi yang bersifat multilevel dapat terjadi sehingga menghasilkan hasil terbaik.

Penulisan makalah ini merujuk bagaimana organisasi global harus memiliki kombinasi antara pemikiran global dan implementasi lokal. Prosedur pekerjaan harus dibuat seketat mungkin tetapi mentransfer pesan yang terkandung di dalamnya harus mengikuti etika lokal. Pada akhir pembelajaran, penulis menyarankan agar perusahaan dapat menerapkan benchmark untuk etika kerja globalnya, sehingga implementasi dapat berkelanjutan.

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INTRODUCTION

A. Historical Background

Organization is established to meet certain goals in business. It engages more

than one person to achieve the goals. A big business organization involves economic

relationship among many groups of people including stockholders, employees,

customers, suppliers, governments and societies. Today’s manager must consider all of

the firm’s stakeholders, not just the firm’s stockholders1. In nowadays business, the

complexity of communication has increased to the level of multicultural relationships.

Global organizations have become more common in every part of the world. A

multinational company might have the head office in one continent, research and

development centre in another continent, and manufactures spreading out worldwide.

The diversity has become an important element in the organization. As many

companies have discovered, valuing diversity is good business as well as good social

practice2.

Coats Ltd is a multinational company established more than 200 years ago. The

head office is in the UK and it operates in 71 countries worldwide from all continents.

The way the company communicate effectively is crucial in order to ensure that the

messages are correctly conveyed to the recipients who have different backgrounds. The

management happens through communication.

1 David J. Fritzsche, Business Etchics 2nd edition, McGraw Hill International Edition, 2005, p.1. 2 Kitty O. Locker and Stephen Kyo Kaczmarek, Business Communication: Building Critical Skills, 4th edition., McGraw Hill, 2009, p.41.

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Having had a large number of diversity, the cultural effect cannot be neglected.

Culture forms ethical behaviour. In respect to this, Coats has acquired a number of

global standards of business practices. In adapting to local culture, it is very important

that the selection of adaptation methods is not in the position to damage the business

goal.

B. Objectives

In general, the objective of the paper is to study the importance of work ethics

and communication in an organization. Writer in particular is keen to explore the

understanding of global ethics and communication by taking a deeper look at one of

multinational companies’ ways to implement the them.

Specifically, this paper is written as the take home final examination for Human

Resources Management lecture.

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LITERATURE REVIEW

A. Business Ethics Definition

Ethic can be widely defined as the principles of right and wrong that are

accepted by an individual or a social group. Ethical code is further defined as a system

of principles governing morality and acceptable conduct.3 Business ethics is about to

knowing what is right and wrong, and follow the right things to do. In the workplace it

is about prioritizing moral values for the workplace and ensuring behaviours are

aligned with those values -- its values management4.

In the past, business ethics was not something to be concerned by any

organizations and played no significant roles. To put in the worst assumption, ethics

were seen to have no practical value within business; at best, it is a tool which is useful

in attacking business; it can hardly be used by business people to defend what they do;

it most certainly cannot be used to help them actually decide what to do5.

Nowadays, business ethics are to be considered as management disciplines. The

form vary from codes of ethics, codes of conduct, roles of ethicists and ethics

committees, policies and procedures, procedures to resolve ethical dilemmas, ethics

training, etc.

3 http://www.wordnetweb.princeton.edu/perl/webwn?s=ethic 4 http://managementhelp.org/ethics/ethxgde.htm#anchor29959. 5 W.J. Waluchow, The Hard Problems of Management: Gaining the Ethics Edge. Journal of Business Ethics 7, no. 3 (March 1988), p.162.

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B. Importance of Business Ethics in an Organization

Ethic in business is essential. It is one of determinant factors for business

success, both in macro and micro perspective. Ethical behaviour is a necessary

component of developing and maintaining trust6. Unethical behaviour in could cause

unexpected effects in economic system. Examples of these behaviours are: (i) bribery,

(ii) coercion, (iii) deception, (iv) theft, and (v) unfair discrimination. In macro

perspective, unethical behaviours

Behaviour Impact on Decision Maker Likely Result of Behaviour

Bribery Unearned personal gain Increased costs.

Alteration of decision choice Reduced product/service quality

Coercion Fear of harm Increased costs.

Alteration of decision choice Reduced product/service quality

Deception Alteration of decision choice Reduced satisfaction

Theft Loss of resources Increased cst or elimination of product/service

Unfair Discrinination Purchase of inferior service Increased costs.

Sales level below market False demandreduction

Macro effect of unethical behaviour7

The ethics component is silent when there is no moral issue associated with the

decision, but it becomes relevant when a moral issue surfaces8. There are cases where

this issue can be rooted to the type of management style.

6 Fritzsche, ibid, p.23. 7 Ibid, p.24. 8 Ibid, p.62.

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McNamara, in his website http://managementhelp.org/, outlines that the benefits

of managing ethics in the workplace are: (i) improving society, (ii) help maintaining a

moral course in turbulent times, (iii) cultivating strong teamwork and productivity, (iv)

supporting employee growth and meaning, (v) as an insurance policy to ensure that

policies are legal, (vi) avoiding criminal acts “of omission” and can lower fines, (vii)

managing values associated with quality management, strategic planning and diversity

management, (viii) promoting a strong public image (ix) legitimizing managerial

actions, strengthening the coherence and balance of the organization’s culture,

improving trust in relationships between individuals and groups, supporting greater

consistency in standards and qualities of products., (x) Last - and most -- formal

attention to ethics in the workplace is the right thing to do.

In micro perspective, ethic is considered as trust. Trust is comprised of three

fundamental elements: predictability, dependability, and faith9. Jane Matthews, the

founder and CEO of Boulder Quantum Ventures, considers 8 elements of ethical

organizations10: (i) respect, (ii) honor, (iii) integrity, (iv) customer focus, (v) result-

oriented, (vi) risk-taking, (vii) passion, and (viii) persistence. Respect means to respect

self and others, and this will make managing easier because of the trust resulted from it.

Honor is to appreciate people who has ethical behaviour as they are a fundamental part

of good ethics. Integrity should be owned by people working in the organization as

this build enormous trustworthy, both internal and external trust and at the end it will

result in profit enhancement. Customer focus is essential because an organization

(especially for-profit organization) is established to fulfil customers demand, and

9 Fritzsche, op.cit., p.24. 10 http://www.entrepreneurship.org/eight-elements-of-an-ethical-organization.html.

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customers’ trust is crucial to keep the organization working. Result-oriented does not

mean to neglect the process orientation, but instead to motivate people to work on

achieving the result of that customer wants. Risk-taking must be taken by organization

so that they can innovate, think out of the box and re-invent themselves. Passion is

required to do things as this will result in the excitement to work, obviously an

organization must pay extra attention to keep the passion burning amongst its

employees. Persistence, keep on working even when the result is not as per expected.

C. Organizational Business Communications Definition

Communication is all about to transfer information. In business world,

communication is two-way process of reaching mutual understanding, in which

participants not only exchange information but also create and share meaning11. The

purpose of business communication is to meet an organizational need12, which also

consists of three basic purposes: to inform, to request and to persuade13. It is through

communication that the management takes place. One of most important task from

managers is to collect and convey information. An effective manager knows how to use

best available media to communicate.

In organization, communication goes to both internal and external audiences.

Internal audiences are people in the same organization, whilst external audiences are

from outside; such as customers, suppliers, stockholders, the press, etc. There are three

main ways of communication in an organization: (i) verbal, (ii) written, and (iii)

11 http://www.businessdictionary.com/definition/communication.html 12 Locker and Kaczmarek, op.cit., p.5 13 Ibid, p.8

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electronic message. Verbal communication is mostly face-to-face meeting or

presentation. Written communication is normally in the form of public notice,

company’s bulletin, reports, etc. Electronic message communication is what mostly

business use nowadays such as telephones, emails, computer softwares, etc.

Within any organization, the character of the communication varies according to

whether it is going downwards (example is manager communicates with subordinate),

upwards (example is an employee communicates with a manager), or sideways

(example is communication between colleagues)14.

D. Ethics and Communication Importance in Global Organizational Business

Globalisation is taking place in almost every part of the world. A multinational

company might have the head office in the UK, research and development centre in

China, and manufactures in Southeast Asia. The diversity takes place in almost all

aspects, including gender, race and ethnicity, regional and national origin, social class,

religion, and many more. Amongst those, the most important aspect is culture. Culture

influences every single aspect of business communication15.

National Culture, Organizational Culture, and Personal Culture Overlap (Source: Locker and Kaczmarek)

14 http://www.navis.gr/manager/imp_com.htm 15 Locker and Kaczmarek, op.cit., p.43.

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The need for global organizations to establish ethical principles for decision

makers in other countries may be critical if high standards are to be upheld and if

consistent practices are to be achieved16.

16 Stephen P. Robbins, Organizational Behavior, 9th edition, Prentice Hall, 2001, p.145.

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DISCUSSION

A. History of Coats plc.

Coats Plc was established in 1755 by James and Patrick Clark in Paisley,

Scotland, UK with the initial company name of JJ Clark. The sewing thread company

became public under Coats name in 1890 and started its expansion in Europe from

there. It was once the world’s third largest company by market capitalisation after US

Steel and Standard Oil in 1912. Established a mill in China in 1920, Coats is now

operating in 71 countries worldwide, employing more than 25,000 people around the

globe. As the demand increase, most of the manufacturing are now located in Asia,

including Indonesia.

Looking at the size of the company worldwide, it is clear that Coats has

undergone a huge number of cultural differentiation and situation ethics in order to

expand its capacity to fulfil world’s market demand. Coats have claimed that they have

the unique ability to service customers anywhere in the world with globally consistent

products, dependable service and creative technical solutions17.

B. Global Communication Strategy and Ethics

In the current global economy, effective communication skills are an advantage

that can help bridge cultural divides18. As a UK base company, the first step for

achieving this is by using an international language that is understood by all sites,

17 http://www.coats.com/global_op.htm 18 Dean M. Brenner, The Challenge and Importance of Global Communication, 2007, http://www.thelatimergroup.com/ aboutus/newsversions/spotlight_v5issue5.html.

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English. The English language specification is available in almost all job requirements

in all position, especially in managerial position. There is an exception for factory

machine operators who are not required to speak English.

The organizational structure within Coats is set by country, but each department

has a global supervisor to be reported directly. It adapts the concept of Matrix structure

which is a combination between vertical and horizontal communication approaches. All

Managing Director is of course to report to head office. But some of the positions in the

company has also direct relationship with some of global position. For example, under

Manufacturing Director there are Wet Processing Department, Sample Development

Department, Final Winding Department, and QA Department. But for certain

achievement targets, Sample Development Manager must also report to Regional

Development Manager who report directly to Global Department Manager. The same

thing happens in marketing division, where one of marketing manager has to report

both to Marketing Director and Global Key Account manager. Therefore an excellent

communication skill is highly required to support the effectiveness in doing the job.

Effective, clear and direct communication provides the foundation for success in the

global economy19. Positions that are required to do a global communication must

follow the global communication ethics.

1. Formal global communication means

Most of the communication activities are done in formal communication

means. A standard email accounts are common to discuss matters. For global

reporting purposes, each of division set a global template to be filled in with targets.

19 Dean M. Brenner, The Real Value of Effective Communication, 2007, http://www.thelatimergroup.com/ aboutus/newsversions/beacon_v5issue5.html

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The global key performance index achievement must be reported online using a

secured website that records all performances of Coats around the globe.

2. Informal global communication means

Emails can also be used for informal communication. However, to

ensure that the confidentiality is secured, the company has a central server that

keeps all the email traffics. It is not forbidden to use emails for personal matter, but

all records will be kept centrally and this located in the UK. This is one of the

global ethics for IT role. Other than emails, phone and chat conferences are also

used mostly. The chat conference is proven very effective as it could consist of

many members of a group and it is less costly than international phone call.

3. Communication with External Audiences

Keeping written records are highly recommended in all external

communication. As Coats works with external parties, both supplier and customers,

the record is essential for future traceability to avoid miscommunication. In all

transaction, everything must be in written form. In each email delivered for external

audiences, there is a disclaimer signature that states the prohibition to distribute the

information for non intended recipients.

It is noticed that the communication at this level does not face a significant

problems in term of culture differentiation. The presence of expatriates give a good

emphasise on the importance of high standards. They also tend to promote what the so-

called good global ethical behaviour. The former chair and CEO of Medtronic and a

professor of Management Practice at Harvard Business School, Bill George, states that

there is a direct correlation between behaving ethically and creating long-term

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shareholder value. Furthermore, high integrity in external business dealings goes hand

in hand with creating greater transparency and increased integrity in internal

relationships. This necessitates choosing leaders who are not only ethical themselves

but also committed to ensuring their organizations operate ethically at all times.20

C. The Effect of Country Culture

While minor problems are recognised in higher managerial area, how to convey

the global standards to lower level employers is something different. Lower level

employees in this term aim at middle management level, staff and blue collar labours.

This is when understanding culture plays important role. It is very clear that there is a

gap in cross culture between western and eastern countries and this require different

approaches in bridging them.

In communicating with so many different cultures, the first step in

understanding another culture is to realise that it may do things very differently, and

that the difference is not bad or inferior. Focus on being sensitive and flexible.21 In

general, business ethics in developing country like Indonesia are different to those in

developed countries like European countries.

1. Government regulation ethics

It has been no secret that Indonesian government bureaucracies are

complicated. While efforts have been made to improve the cleanliness of the

procedures, there are still parties that have been taking the advantage of the poor

20 Bill George, Ethics Must Be Global, Not Local., http://www.businessweek.com/print/managing/content/feb2008/ ca20080212_394828.htm21 Locker and Kaczmarek, op.cit., p.51.

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system. Coats in this matter apply a strict ethical conduct in following the rules.

This is one of Coats global ethics to not deviate rules in countries where the

company is running. Some of the examples are described as follows:

• Tax regulation is followed without any bribe.

• Environment policy is met with much more strict allowances. In Indonesia

Coats own its water treatment plan with acceptance level almost twice

stricter than government rule.

• Coats prohibit under age workers and demand the same thing applied for

all of suppliers

• Coats follow regional minimum wage and provide a reasonable pay for

overtime whenever necessary. The company also covers medical and owns

medical clinic inside the factory

Applying "situation ethics" in developing countries is the fastest way to destroy a

global organization. To sustain their success, companies must follow the same

standards of business conduct.22

2. Local Leadership Ethics

Not like in western culture where people are freely to discuss matters no

matter their position is. But in countries like Indonesia, people value seniority in

position. It is more often that people are afraid more to make mistakes because their

boss will be yelling at them rather than looking at the mistakes’ effect on his/her

jobs and to the company. To behave ethically is to be conscious of the power effects

inherent in the leadership relationship and to use self-reflection to minimize the risk

22 George, loc.cit.

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of one’s actions harming another23. Coats adapt to this local ethics. The

bureaucratical structure that allows people to instruct and give punishment of

mistakes is implemented in place. People work based on the global standard

operating procedures, in which some of them have been adjusted according to the

local market situation.

However, it has been recently realised that people from top to bottom

should actively involve in broadening the learning capacity of the organization. For

the last 2 years Coats Indonesia in particular has tried to adopt the concept of

learning organization. Because when employees “own” their jobs, they are able to

measure and influence their individual success as well as the success of their

departments and their companies24. This has become a sort of new ethics in the

company, particularly in Coats Indonesia. A solid work ethics means treating peole

the way you prefer to be treated. That holds true for their vehicles-treat them like

they are your own. 25

23 Jennifer Binns, The Ethics of Relational Leading: Gender Matters, Gender, Work & Organization 15, no. 6., November 2008, p.601. 24 Shari Caudron, 1995, Create an empowering environment, Personnel Journal 74, p.28 25 Dan Marinucci, Redefine work ethic, then exemplify it, Tire Business, September 15, 2008., p.9.

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CONCLUSIONS

As a global company, Coats has applied global ethics and communications in

such adaptable manners. It has advanced communication means that are effective and

thus gives high level of transparencies and compliances. The global ethics of Coats

aims on meeting the high global standardisation without deviating local rules. Ethics is

not concerned with universal moral rules but with sociability, with how — by what

rules — we actually live in concert with others26.

However, the exact same work ethics and communications are not possible in

different place, especially different countries and even continents. Therefore a global

organization should not apply the exact methods in communicating. Conveying

message to people must involve an understanding on the local culture and hence the

organizational culture must be well adjusted to it. This is because culture actively

promotes ethical conduct. It is important to note that ethics will create shareholder

values.

The writers suggest that the company use a tool to ensure that global ethics’

integrity are fully adhered by all members and to be measured in regular basis. A

benchmarks could be utilised to observe this. Organizations can use these benchmarks

to set and expand organizational standards, to engage employees and promote

accountability for progress, to determine and evaluate organizational progress towards

short-term and long-term program goals, to engage in continuous improvement and

integrity systems and processes, to educate senior leaders and governance authorities on

26 Marinucci, loc.cit., p.602.

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expectations, goals, and structures for effective ethics and integrity programs within an

organization., and to include a focus in business decision-making that goes beyond

financial cost-benefit considerations, to assess ethical risk.27

27 Joan Elise Dubinsky and Alan Richter, The Global Ethics & Integrity Benchmarks, http://www.policyinnovations.org/ideas/innovations/data/000088.

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Brenner, Dean M. The Real Value of Effective Communication. 2007. http://www.thelatimergroup.com/aboutus/newsversions/beacon_v5issue5.html (accessed December 19, 2009).

Brenner, Dean M. The Challenge and Importance of Global Communication. 2007, http://www.thelatimergroup.com/aboutus/newsversions/spotlight_v5issue5.html (accessed December 19, 2009).

Dubinsky, Joan Elise., and Richter, Alan. The Global Ethics & Integrity Benchmarks, 2009. http://www.policyinnovations.org/ideas/innovations/data/000088 (accessed December 20, 2009).

Fritzsche, David J. 2005. Business Etchics: A Global and Managerial Perspective, 2nd edition. New York. McGraw Hill International Edition.

George, Bill. 2008. Ethics Must Be Global, Not Local. http://www.businessweek.com/ managing/content/feb2008/ca20080212_394828.htm (accessed December 19, 2009).

Locker, Kitty O., and Kaczmarek, Stephen Kyo. 2009. Business Communication: Building Critical Skills, 4th edition. New York. McGraw Hill.

Matthews, Jane. 2009. Eight Elements of an Ethical Organization. http://www.entrepreneurship.org/eight-elements-of-an-ethical-organization.html (accessed December 19, 2009).

Marinucci, Dan. Redefine work ethic, then exemplify it. Tire Business, September 15, 2008., 9, Business Source Complete, EBSCOhost (accessed December 9, 2009).

McNamara, Carter. Complete Guide to Ethics Management: An Ethics Toolkit for Managers. Copyright 1997-2008. http://www.managementhelp.org/ethics/ ethxgde.htm (accessed December 19, 2009).

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Robbins, Stephen P. 2001. Organizational Behaviour, 9th edition. New Jersey. Prentice Hall.

Waluchow, W. J. The Hard Problems of Management: Gaining the Ethics Edge. Journal of Business Ethics 7, no. 3 (March 1988): 162-184. Business Source Complete, EBSCOhost (accessed December 18, 2009).