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Analysis of repeated ethical scandal through the lens of organisational learning theoris.

Analysis of existing barries to the organisational learning.

Case Study: Commonwealth Bank of Australia

As argued by Trevino and Nelson (2016), the nature of the contemporary business world has undergone a substantial amount of transformation and the business enterprises are often in a dilemma whether they should focus on the attribute on the quality or quantity. Crane and Matten (2016) are of the viewpoint that the extensive focus on the attribute of profitability often makes the organizations to take the help of measures which are not only unethical but at the same time unfair as well. More importantly, it is seen that these measures although offer short-term benefits to the organizations yet in the longer they inordinately affect the business prospects of the concerned organization in an adverse manner (North and Kumta 2018). This report will analyze the concept of ethical learning organizations and also the manner in which the organizations can take into effective consideration the attribute of ethics for the process of their business operations.  

The Commonwealth Bank of Australia (CBA), founded in 1911 and headquartered in Sydney is the largest bank not only of Australia but also of the southern hemisphere as well (Commbank.com.au 2019). The financial institution offers a plethora of financial services to the customers starting from retail or commercial loans, personal loans to insurances, pension plans and others (Commbank.com.au 2019). More importantly, in the present times it is seen that the bank is operational in different nations of the world like United Kingdom, China and others and has more than 1100 business centers (Commbank.com.au 2019). The gross revenue of the financial institution under discussion here for the year 2017 was more than A$26.005 billion and it also offers employment to more than 51,800 people not only in Australia but in other nations as well (Commbank.com.au 2019). However, in the recent times the bank had been adversely affected because of the revelations of the Royal Banking Commission of 2017 which revealed the unethical as well as fraudulent practices used by the bank. 

Structural Roles Related to Organizational Learning 

Jiménez-Jiménez et al. (2015) have argued that a learning organization is the one which creates the kind of workplace that facilitates learning and thereby helps in the improvement of the concerned organization so as to match the requirements of the industry in which it is operational. This term was coined by Peter Senge and is being extensively used by the different organizations for the improvement of their overall business performance (Zeimers et al. 2018). However, at the same time it needs to be said that for the effective utilization of this concept an effective interaction between the different employees and also exchange of knowledge is important along with a congenial workplace wherein learning can take place (Duffield and Whitty 2015). In this regard, it can be said that within the framework of an organization there are various individuals which facilitates such a process, namely, cultural leader, diversity and inclusion leader, diversity leader, employee engagement leader, director of leadership training and others who facilitate the process of learning (Sujan and Furniss 2015). These individuals are required to not only enhance the level of engagement among the different employees but also to offer the right kind of training and facilitate the process of knowledge exchange so that they are being learn new things related to their job in an effective manner.

Senge’s Learning Model

An analysis of the organization CBA reveals the fact that these designations are not present within the organizational structure of the bank and the employees had to rely just on the various kinds of on-job trainings and also the advanced training programs which are given to them. The primary objective of these training programs is to ensure the fact that the employees had the right kind of skill sets which are likely to help them to perform their job roles in an effective manner. However, no emphasis is being placed on the process of continuous learning and this in turn affects the performance level of the employees and also the bank in an adverse manner.  

As per Senge’s Learning Model there are five essential entities of a learning organization, namely, shared vision, system thinking, mental models, team learning and personal mastery which are important for an organization to foster continuous learning (Timanson and Da Costa 2016). The concept of shared vision refers to the process through which the organizations try to foster unanimity of vision or goal among all the different employees so as to achieve it in the best possible manner (Payne and Calton 2017). Furthermore, the entity of system thinking is the one through which the organization integrate the different constituents of their organization so as to improve the performance level of these constituents and also of the organization (Chew, Tan and Hamid 2016). More importantly, it is seen that the effective usage of the concept of mental models enables the organizations to utilize the mental thoughts or the perceptions of the individual employees to foster the kind of environment wherein continuous learning is possible and also for the improvement of their performance (Ehrich et al. 2015). Moreover, the aspect of team learning is being utilized by the organization to foster the kind of team environment wherein interaction and also the transfer of knowledge is being encouraged not only by the members of the team but the team leaders as well (Moghaddam, Akhavan and Mehralian 2015). Lastly, the attribute of personal mastery is being used by the organizations to help the employees create a personal vision for themselves and also to achieve it through continuous learning (Sujan and Furniss 2015). Thus, it can be said that it is the effective correlation of all these attributes that enables an organization to become a continuous learning one.   

Barriers to Continuous Learning

CBA in order to enhance the profit earned not only miss-sold the various insurance, pension plan and other financial services but at the same time charged extra amount of capital from the customers on the personal or the commercial loans (Hutchens 2019). Furthermore, the results of the Royal Banking Commission (2017) also revealed the fact that the bank used to offer loans to the customers who failed to provide any credible documents to the customers and in return charged extra amount of capital from them (ABC News 2019). In addition to this, the results of the commission revealed the fact that more than 75% of the employees failed to comply with the customer financial advice stipulations given by the national government (Hutchens 2019). The net result of these malpractices followed by the bank becomes apparent in the 4.6% increase in the profit margin of the bank in 2018 which was more than $9.8bn in addition to the $4.6 trillion which the bank held in different kinds of assets (ABC News 2019). The bank because of these unethical and fraudulent practices followed by the employees was imposed a penalty of $250m which was to be paid by the bank to the customers for miss-selling the services and also to the national government (Hutchens 2019).   

An analysis of the unethical practices used by CBA reveals the fact that although the organization followed Senge’s learning organization model within its framework yet the model was not being used to foster a continuous learning environment but to make the organization a more profitable one. The different employees of CBA had a shared vision but it was not intended for harmonious growth but to coerce more money from the customers through the use of unethical and fraudulent practices (Payne and Calton 2017). Furthermore, the approach of system thinking was used by the organization to correlate the different constituents or the services offered by it to the customers and thereby to extract money from them. In addition to this, it was seen that through the use of mental model the different workers of bank were imbibe the view in them that the sole focus of the organization should be to earn a higher amount of profit regardless of the means which the employees take to enhance the same. Moreover, the team learning process was also used by the organization and also the employees to learn the best possible means from their colleagues through which they can extract more money from the customers (ABC News 2019). Lastly, through the usage of the concept of personal mastery the employees were trained to develop a personal vision for themselves so as to generate the maximum amount of money from the customers and thereby to enhance the profitability of the organization. Thus, it can be said that although the bank followed Senge’s learning organization model yet it was for the wrong reasons.    

Measures to Foster Continuous Learning

There are various barriers to the process of continuous learning in the organization under discussion which actually inhibits the actual implementation of the process in the true sense of the term. For example, the extreme focus of the organization on the aspect of profitability actually refutes the entire goal of the learning organization concept and the employees thus focus solely on the manner in which they can enhance the profitability of the organization rather than focusing on learning (Zeimers et al. 2018). Secondly, the greed culture that the organization had fostered within its framework is another barrier which hinders the implementation of the continuous learning model within the organization (North and Kumta 2018). Thirdly, lack of ethical training to the employees and also the lack of the usages of the concepts of ethics and morality within the framework of the activities followed by the employees is another significant barrier (Payne and Calton 2017). Fourthly, in the absence of ethical leadership and also effective monitoring the employees are resorting to the kind of practices which yield maximum benefit rather than taking into effective consideration the factors of ethics and morals (Timanson and Da Costa 2016).     

Some of the measures that the organization can utilize for fostering a continuous learning environment within the organization are listed below-

  • Organizational Culture: The organization needs to discard the greed culture which it is following and evolve the kind of culture within its workplace which will facilitate continuous learning. In this regard, it needs to be said that the use of ethical leadership is one measure which is likely to improve the organizational culture of the bank in an effective manner and also encourage the employees to use the concepts of ethics and morality.
  • Focus on Quality: The bank rather than focusing on the entities of quantity and profitability needs to focus on the attribute of quality which is likely to improve the services offered by them to the customers in a substantial manner. In this regard, it can be said that the bank can take the help of the construct of performance management.

Current Activity

Actual Activity which is required

Misleading the customers

The employees need to offer actual information to the customers

Offering loans to the customers without proper documentation

The bank needs to offer loans to the kind of customers with proper documentation

Charging the customers extra amount of money on loans and other services

The bank needs to charge only the amount which has been stipulated by the government

Ineffective customer relationship

The bank needs to maintain effective relationship with all its customers

Use of unethical and fraudulent practices

The bank needs to use the concepts of ethics and morals within the framework of the services offered by them

Task

Person Responsible

Timeframe

Offering education regarding the ethical theories

Trainer

1 month

Teaching the employees to use ethical decision making model

Trainer

1 month

Teaching the employees to be transparent with the customers and not mislead them

Trainer

2 months

Enhancing employee engagement and transfer of knowledge

Trainer, Team leader, manager

3 months

Using the practice of thorough document check and stating the exact amount of interest that the customers need to pay

Trainer, Manager

2 months

The organization for the effective implementation of this plan can take the help of Lewin’s change management model. In this first step, the organization would have to state the actual reason for the implementation plan and also the likely benefits that they are likely to derive from it. In the second stage, the organization would have to offer the right kind of training to employees so that they would be able to use it. In the third stage, the organization would have to integrate the plan within its organization.  

The evaluation process will require the organization to monitor the performance of the employees in an effective manner over a period of atleast 3 months to see the manner in which they are using the concept of ethics within the job roles that they are doing. In addition to this, collecting feedbacks from the customers would also help the organization to find out the extent to which the plan had been successful.

The organization in order to restore its brand image can take the help of different kinds of CSR programs. Some of the most important ones are listed below-

  • Pollution is one of the most important wicked problems which is inflicting the world and thus the organization by taking up the initiative to mitigate this problem would be able to enhance its brand image in a significant manner.
  • Women empowerment is another social issue which has gained a significant amount of prominence in the recent times and the organization by fostering gender equality within its workplace and also helping to resolve the issue of gender inequality is likely to gain in a significant manner.

Conclusion 

To conclude, the notion of ethics has emerged as one of the most important ones that the different business enterprises need to take into effective consideration within the process of their business operation. More importantly, in order to effectively utilize this concept the organizations need to foster a continuous learning environment within its workplace wherein human interaction would be there and also the transfer of knowledge.

References 

ABC News 2019. How the Commonwealth Bank laid the groundwork for a royal commission. [online] Available at: https://www.abc.net.au/news/2017-08-07/commonwealth-bank-laid-the-groundwork-for-royal-commission/8779598 [Accessed 22 Jan. 2019].

Chew, B.C., Tan, L.H. and Hamid, S.R., 2016. Ethical banking in practice: a closer look at the Co-operative Bank UK PLC. Qualitative Research in Financial Markets, 8(1), pp.70-91.

Commbank.com.au 2019. Personal banking including accounts, credit cards and home loans - CommBank. [online] Available at: https://www.commbank.com.au/ [Accessed 22 Jan. 2019].

Crane, A. and Matten, D., 2016. Business ethics: Managing corporate citizenship and sustainability in the age of globalization. Oxford University Press.

Duffield, S. and Whitty, S.J., 2015. Developing a systemic lessons learned knowledge model for organisational learning through projects. International journal of project management, 33(2), pp.311-324.

Ehrich, L.C., Harris, J., Klenowski, V., Smeed, J. and Ainscow, M., 2015. Ethical leadership in a time of increasing accountability. Leading and Managing, 21(1), p.22.

Hutchens, G. 2019. Banking royal commission: all you need to know – so far. [online] the Guardian. Available at: https://www.theguardian.com/australia-news/2018/apr/20/banking-royal-commission-all-you-need-to-know-so-far [Accessed 22 Jan. 2019].

Jiménez-Jiménez, D., Martinez-Costa, M., Martínez-Lorente, A.R. and Rabeh, H.A.D., 2015. Total quality management performance in multinational companies: A learning perspective. The TQM Journal, 27(3), pp.328-340.

Moghaddam, J.Y., Akhavan, P. and Mehralian, G., 2015. Intellectual capital, ethical climate and organisational performance: an interaction analysis. International Journal of Learning and Intellectual Capital, 12(3), pp.232-250.

North, K. and Kumta, G., 2018. Knowledge management: Value creation through organizational learning. Springer.

Payne, S.L. and Calton, J.M., 2017. Towards a managerial practice of stakeholder engagement: Developing multi-stakeholder learning dialogues. In Unfolding stakeholder thinking (pp. 121-135). Routledge.

Sujan, M. and Furniss, D., 2015. Organisational reporting and learning systems: Innovating inside and outside of the box. Clinical Risk, 21(1), pp.7-12.

Timanson, P. and Da Costa, J., 2016. Learning Organisations and their Relationship to Educational Improvement. In The Best Available Evidence (pp. 99-112). SensePublishers, Rotterdam.

Trevino, L.K. and Nelson, K.A., 2016. Managing business ethics: Straight talk about how to do it right. John Wiley & Sons.

Zeimers, G., Anagnostopoulos, C., Zintz, T. and Willem, A., 2018. Organisational learning for corporate social responsibility in sport organisations. European Sport Management Quarterly, pp.1-22.

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