Skip to content
The OCR Glossary

Organizational Dysfunction

Craig E. Carroll,

Organizational dysfunction is the product of structural, cultural, or leadership patterns that undermine the purpose, health, wholeness, safety, solidarity, and worth of an organization or its stakeholders. Organizational dysfunction is characterized in a number of ways. These include the intensification of the profit motive in ways that maximize advantage to a few over the many, internalizing benefits (whether personally or organizationally), and externalizing costs. It is facilitated by a number of manipulative processes, policies, structures, information, and relationships.

An organization’s reputation affects its ability to function effectively both internally and externally. If an organization is under reputational strain, caused by resource deficiency, scandal, litigation, or negative media reports, organizational dysfunctions are more likely to lead employees to internalize the stress so that they are more prone to engage in unethical behavior. This entry discusses three types of organizational dysfunctions and 12 ways by which these dysfunctions are manifested in organizations.

Types of Organizational Dysfunction

There are at least three types of organizational dysfunction: (1) structural dysfunction, (2) cultural dysfunction, and (3) leadership dysfunction. Of these, structural dysfunctions are the most difficult to change.

Structural Dysfunction

Structural dysfunction occurs when there is a strict vertical hierarchy that constrains communication and offers little to no recourse for employees to circumvent the authoritative reporting relationship in the event of a top-down ethical lapse. It includes a closed-loop system where alternative opinions are discouraged and establishes a tradition that fosters dysfunctionality. Also characteristic of this structure is that it does not facilitate interdepartmental cooperation toward common goals, it creates barriers to efficient sharing of information and open communication and to checks and balances that may allow for ethical oversight, and there is an absence of evenly enforced transparency programs regarding policies, procedures, and performance measures. Functional responsibilities of the employees are unclear, or if these responsibilities are intentionally disregarded, there are no structurally imposed sanctions. Performance expectations are inconsistently expressed in job descriptions, performance appraisals, goal setting, and reward systems. If one organization sees that another is not punished and/or benefits from unethical behavior, it will likely copy the behavior and act in a similarly unethical manner.

Cultural Dysfunction

Cultural dysfunction can set in if the policies do not represent the actual behavior of the organization, if there are no clear punitive consequences for ethical violations (including for the leaders), if unethical behavior goes unchecked, if the consequences are not consistently enforced, or if positive behaviors are selectively rewarded and reinforced. Organizational culture produces a social contract containing the precepts, principles, values, and rules that constrain or facilitate ethical behavior. It rewards or punishes violations of the organization’s written policies. The strength of the culture and the depth to which the value system is held dictate how willing employees are to subordinate themselves to the behavioral controls that the organization imposes. In the absence of policies, the pressure on employees to attain organizational goals while simultaneously communicating a lack of concern for how the goals are attained can implicitly endorse misconduct.

Leadership Dysfunction

Leadership dysfunction occurs when leaders leverage their legitimate authority for personal benefit or overlook unethical follower behavior when there are positive consequences for themselves. In addition, leaders who deflect responsibility for ethical violations onto the system, show little regard for strict definitions of right and wrong, decouple outcomes from their actions, or defer the evaluation of the outcome into the future can diffuse unethicality through the organization. Leaders can allow dysfunction to grow when they are inattentive to or unaware of the tendency of employees to act unethically if they think their behavior will go unpunished. Furthermore, leaders who do not share and promote responsibility for the development of ethical values, and organizational values that are positive and congruent with ethical values, lay the groundwork for dysfunction. Leaders should integrate ethics into decision making, strategies, and the execution of organizational goals and then act accordingly.

Twelve Manifestations of Organizational Dysfunction

Organizational dysfunction can be manifested in the following ways:

    1. Deception can take the form of reckless, unchecked impression management characterized by obfuscation, subterfuge, willful misrepresentation, dupery, and outright lying.
    1. Dependency can be created by a leader who instills psychological dependence in his or her employees through strong ties and identification. This dependence can engender self-sacrifice, total commitment, groupthink, or a lack of reflection and critical analysis. Moreover, the leader may also instill fiscal dependence through the control of resources.
    1. Distrust can take the form of a lack of privacy, hidden agendas, or the questioning of motives and intentions by employees of those they work with to the point that paranoia sets in. Furthermore, employees may be encouraged or rewarded for reporting on their colleagues’ transgressions. Employees may spend more time ferreting out perceived hidden agendas as opposed to fulfilling organizational goals.
    1. Egoism can be manifested as a dysfunction when there is the pursuit of short-term personal gain rather than group accomplishment. Employees may see themselves as free agents responsible for their own output with no regard for others’ contributions or needs.
    1. Immediacy becomes a dysfunction when executives and employees favor just-in-time performance for meeting reward systems instead of having long-term performance consequences in mind. Here, employees kick the can of accountability as far into the future as they can. This can also be observed in the manipulation of data and spinning their interpretation to enhance immediate performance with no regard for future consequences.
    1. Impiety as a dysfunction can be evidenced through a lack of admiration, regard, or respect for employees. The interaction tone is uncivil, disrespectful, or discourteous. Moreover, employees may feel harassed or bullied and made to feel aware of their expendability and replaceability.
    1. Impunity is manifested as a lack of accountability. This can be characterized by blaming others for wrongdoing and bad outcomes, deflecting blame, and absolving oneself from responsibility. Moreover, differential rewards may be expended based on favoritism, personal preference, or whoever is in the best position to return favors. Moreover, truth, the demonstration of character, and the fulfilling of obligations and promises are all malleable and at one’s discretion.
    1. Inequality occurs when there is an intentional disparity in the treatment of people, the division of labor, the distribution of resources and rewards, the settling of disputes, and access to power. It can also be observed through the lack of demographic representativeness in the employee base or in the disproportionate representation of selected groups in positions of power.
    1. Inhumanity can be observed through organizational policies that do not value employees’ socialization, sense of community, development, or retention, or through interpersonal relationships that are impersonal, cruel, or lacking in mercy or kindness. Employees may therefore feel alienated or lonely.
  • 10.Invariance is a dysfunction when the organization focuses on goal attainment with a high degree of certainty and a single-minded purpose and questioning, innovation, creativity, and personal problem solving are discouraged or punished.
    1. Narcissism is an organizational dysfunction characterized by individuals’ overt and expressed need for compliments and praise at the expense of measurable performance outcomes, self-aggrandizement, selfishness, or a blatant disregard for others who detract attention from them.
    1. Obduracy is the following and escalation of commitment to a course of action consistent with one’s beliefs or with previous actions and policies, and the unwillingness to change even in the face of information that counters one’s beliefs. This may include making political decisions instead of ethical ones to maintain the status quo.


Organizational dysfunctions can occur in any organization and to varying degrees. Society and organizational stakeholders should be particularly wary of companies’ attempts to build reputation and legitimize themselves by modeling their codes of ethics after that of other organizations whose reputations are positively regarded by society but with no regard for their implementation, awareness building, advocacy, or dispensing of rewards and punishments for those who follow them. Such behavior is indicative of organizational dysfunction.

If the organization’s code does not represent the actual behavior of the organization, violations will lead not only to heightened ethical dysfunction but also to costly damage to its reputation.

Adams, J. S., Tashchian, A., & Shore, T. H. (2001). Codes of ethics as signals for ethical behavior. Journal of Business Ethics, 29(3), 199–211.

Aguilera, R. V., Rupp, D. E., Williams, C. A., & Ganapathi, J. (2007). Putting the S back in corporate responsibility: A multilevel theory of social change in organizations. Academy of Management Review, 32(3), 836–863.

Andreoli, N., & Lefkowitz, J. (2009). Individual and organizational antecedents of misconduct in organizations. Journal of Business Ethics, 85(3), 309–332.

Chua, F., & Rahman, A. (2011). Institutional pressures and ethical reckoning by business corporations. Journal of Business Ethics, 98(2), 307–329.

Collins, J., Uhlenbruck, K., & Rodriguez, P. (2009). Why firms engage in corruption: A top management perspective. Journal of Business Ethics, 87, 89–108.

DeCremer, D., & Sedikides, C. (2008). Reputational implications of procedural fairness for personal and relational self-esteem. Basic and Applied Social Psychology, 30(1), 66–75.

Elovainio, M., Kivimaki, M., Vahtera, J., Keltikangas-Jarvinen, L., & Virtanen, M. (2003). Sleeping problems and health behaviors as mediators between organizational justice and health. Health Psychology, 22(3), 287–293.

Farrell, H., & Farrell, B. J. (1998). The language of business codes of ethics: Implications of knowledge and power. Journal of Business Ethics, 17(6), 587–601.

Galperin, B. L., Bennett, R. J., & Aquino, K. (2011). Status differentiation and the protean self: A social-cognitive model of unethical behavior in organizations. Journal of Business Ethics, 98, 407–424.

Greve, H. R., Palmer, D., & Pozner, J. (2010). Organizations gone wild: The causes, processes, and consequences of organizational misconduct. Academy of Management Annals, 4(1), 53–107.

Griffin, J. J., & Prakash, A. (2014). Corporate responsibility: Initiatives and mechanisms. Business & Society, 53(4), 465–482. doi:

Higgs-Kleyn, N., & Kapelianis, D. (1999). The role of professional codes in regulating ethical conduct. Journal of Business Ethics, 19(4), 363–374.

Jackson, B., Kubzansky, L. D., & Wright, R. J. (2006). Linking perceived unfairness to physical health: The perceived unfairness model. Review of General Psychology, 10, 21–40.

Jurkiewicz, C. L., & Giacalone, R. (2014). Organizational determinants of ethical dysfunctionality. Journal of Business Ethics, 1–12. doi:

Jurkiewicz, C. L., & Grossman, D. (2012). Evil at work. In C. L. Jurkiewicz (Ed.), The foundations of organizational evil (pp. 3–15). Armonk, NY: M. E. Sharpe.

McKendall, M. A., & Wagner, J. A., III. (1997). Motive, opportunity, choice, and corporate illegality. Organization Science, 8(6), 624–647.

Mishina, Y., Dykes, B. J., Block, E. S., & Pollock, T. G. (2010). Why “good” firms do bad things: The effects of high aspirations, high expectations, and prominence on the incidence of corporate illegality. Academy of Management Journal, 53(4), 701–722.

Wright, C., & Rwabizambuga, A. (2006). Institutional pressures, corporate reputation, and voluntary codes of conduct: An examination of the equator principles. Business and Society Review, 111(1), 89–117.

See Also

Ethical Business Practice; Ethics of Reputation Management; Hypocrisy; Legitimacy; Organizational Character; Organizational Culture; Organizational Health; Organizational Integrity; Reputation Change; Reputation Change Management; Reputation Management; Resilience; Strategic Aspirations

See Also

Please select listing to show.