Certification Study Group Business Ethics and Social Responsibility.

Certification Study Group

Business Ethics and Social Responsibility

Comparison of Business Ethics and Social Responsibility

Business Ethics Refers to the principles and standards that define acceptable conduct in the world of business.

Social Refers to a business’s obligation Responsibility to maximize its positive impact

and minimize its negative impact on society.

©The McGraw-Hill Companies, 2000

Comparison of Business Ethics and Social Responsibility

Business ethics deal with the right and wrong actions that arise in any work environment

Social responsibility refers to management’s consideration of the social and economic effects of its decisions

The Role of Ethics in Business Laws and regulations codify the

most basic ethical and responsibility concerns.

Business ethics goes beyond legal issues.

All actions deemed unethical by society are not necessarily illegal.

Ethical Issue

An identifiable problem, situation, or opportunity that requires a person to choose from among several actions that may be evaluated as right or wrong, ethical or unethical.

3-2

Ethical Issue Categories Conflict of interest Fairness and honesty Communications Business relationships Plagiarism Company Loyalty vs. Truth

The Pyramid of Social Responsiblity

Ethical Responsibilitiesbeing ethical; doing what is right, just,

and fair; avoiding harm

VoluntaryResponsibilities

being a “good corporate citizen”;

contributing to thecommunity and quality of life

Source: Adapted from Archie B. Carroll, “The Pyramid of CorporateSocial Responsibility: Toward the Moral Management of Organizational Stakeholders.” Business Horizons 34 (July/August 1991): 42.

Legal Responsibilitiesobeying the law (society’s codification of rightand wrong); playing by the rules of the game

Economic Responsibilitiesbeing profitable

To The General Public and the Environment

To The Consumer

To The EmployeeTo Owners & Stockholders

Responsibility Issues

Responsibilities of Business

Arguments for Social Responsibility

Business helped to create many of the social problems that exist today, so it should play a significant role in solving them

Businesses should be more responsible because they have the financial and technical resources to help solve social problems.

As members of society, businesses should do their fair share to help others.

Socially responsible decision making by businesses can prevent increased government regulation.

Social responsibility is necessary to ensure economic survival

Arguments Against Social Responsibility

It sidetracks managers from the primary goal of business–earning profits.

Participation in social programs gives businesses greater power, perhaps at the expense of particular segments of society.

Some people question whether business has the expertise needed to assess and make decisions about social problems.

Many people believe that social problems are the responsibility of government agencies and officials, who can be held accountable by voters.

Certification Study Group

The Control Process

The Nature of Control Control

The regulation of organizational activities so that some targeted element of performance remains within acceptable limits.

Provides organizations with indications of how well they are performing in relation to their goals.

Provides a mechanism for adjusting performance to keep organizations moving in the right direction.

The Planning—Controlling Link

Source: Van Fleet, David D., and Tim Peterson, Contemporary Management, Third Edition. Copyright © 1994 by Houghton Mifflin Company. Used with permission.

The Nature of Control The Purpose of Control

Control is one of the four basic management functions. The control function, in turn, has four basic purposes.

Adapt to environmental change Limit the accumulation of error

Control helps the organization

Cope with organizational complexity Minimize costs

Types of Resource Controls

Physical Physical

FinancialFinancial

HumanHuman

InformationInformation

The Nature of Control

Types of Controls Areas of Control

Physical resources — inventory management, quality control, and equipment control.

Human resources — selection and placement, training and development, performance appraisal, and compensation.

Information resources — sales and marketing forecasts, environmental analysis, public relations, production scheduling, and economic forecasting.

Financial resources — managing capital funds and cash flow, collection and payment of debts.

The Nature of Control

Steps in the Control Process

Establishstandards

Measureperformance

Compareperformanceagainst standards

Maintain thestatus quo

Correct thedeviation

Changestandards

Determine needfor correctiveaction

21 43

Figure 14.3

Steps in the Control Process

Establish Standards Control standard—a target against which

subsequent performance will be compared. Control standards should be expressed in

measurable terms. Control standards should be consistent with

organizational goals. Control standards should be identifiable

indicators of performance.

Steps in the Control Process

Measure Performance Performance measurement is an ongoing

process. Performance measures must be valid

indicators (e.g., sales, costs, units produced) of performance.

Steps in the Control Process

Compare Performance Against Standards Define what is a permissible deviation from the

performance standard. Utilize the appropriate timetable for measurement.

Determine the Need for Corrective Action Maintain the status quo (do nothing). Correct the deviation to bring operations into

compliance with the standard. Change the standard if it was set too high or too

low.

Forms of Operations Control

Preliminary control

Focuses on inputs

to the organizational

system

Inputs Transformation Outputs

Screening control

Focuses on how

inputs are being

transformed into

outputs

Postaction control

Focuses on outputs

from the organiza-

tional system

Feedback

Figure 14.4

Financial Control Financial Control

Control of financial resources (i.e., revenues, shareholder investment) as they flow into the organization, are held by the organization (i.e., working capital, retained earnings), and flow out of the organization (i.e., payment of expenses).

Financial ControlBudgets

Budget A plan expressed in numerical terms Financial

Sources and uses of cash Operating

Planned operations in financial terms Nonmonetary

Planned operations in nonfinancial terms

Financial Control Financial Control

Budgetary Control Budgets may be established at any

organizational level. Budgets are typically for one year or less. Budgets may be expressed in

financial terms, units of output, or other quantifiable factors.

Financial Control Budgets serve four purposes:

Help managers coordinate resources and projects. Help define the established standards for control. Provide guidelines about the

organization’s resources and expectations.

Enable the organization to evaluate the performance of managers and organizational units.

Financial Control

Developing Budgets in Organizations

Operating unitbudget requests

Division budgetrequests

Organizational budget• Prepared by budget

committee• Approved by budget

committee, controller,and CEO

Figure 14.5

Other Tools of Financial Control Ratio Analysis

The calculation of of one or more financial ratios to assess some aspect of the organization’s financial health.

Financial Audits Audit—an independent appraisal of an organization’s

accounting, financial, and operational systems. External audits—financial appraisals conducted by

experts who are not employees of the organization. Internal audits—appraisals conducted by employees of the organization.

Managing Control in Organizations Characteristics of Effective Control

Integration with Planning the more control is linked to planning, the

more effective the control system. Flexibility

the control system must be flexible enough to accommodate change.

Accuracy Inaccurate information results in bad decision

making and inappropriate managerial actions.

Managing Control in Organizations

Characteristics of Effective Control Timeliness

A control system should provide information as often as necessary.

Objectivity A control system

must be free from bias and distortion.

Managing Control in Organizations Resistance to Control

Overcontrol Trying to control too many details becomes

problematic when control affects employee behavior and employees perceive control attempts as unreasonable.

Inappropriate Focus The control system may be too narrow or it

may focus too much on quantifiable variables and leave no room for analysis or interpretation.

Managing Control in Organizations Resistance to Control

Rewards for Inefficiency Rewarding operational inefficiency can

lead employees to behave in ways that are not in the best interests of the organization.

Too much accountability Efficient controls are resisted

by poorly performing employees.

Overcoming Resistance to Control Resistance to control can be overcome by:

Designing effective controls that are properly integrated with organizational planning and aligned with organizational goals and standards.

Creating controls that are flexible, accurate, timely, and objective.

Avoiding overcontrol in the implementation of controls.

Guarding against creating controls that reward inefficiencies.

Overcoming Resistance to Control Resistance to control can be overcome

by: Encouraging employee participation in the

planning and implementing of control systems.

Developing a system of checks and balances in the control systems through the use of multiple standards and information systems that allow the organization to verify the accuracy of performance indicators.

Certification Study Group

Organizational Structure and Authority

Organizational Culture Refers to an organization’s shared

values, beliefs, traditions, philosophies, rules, and heroes.

Also referred to as corporate culture Organizational culture gives employees’

roles meaning and suggests rules for how to behave and deal with problems

Organizational culture A firm’s culture may be expressed

formally through codes of ethics, memos, manuals, and ceremonies.

A firm’s culture may be expressed informally through dress codes, work habits, extracurricular activities, and stories.

Should be shared by all members of the organization and in turn expressed to outsiders

Structure in Organizations  Structure Organizing Organization

Human Interaction Goal Directed Activities

Structure

Assigning Tasks Specialization

The division of labor into small, specific tasks and the assignment of employees to do a single task

Rationale for specialization is efficiency

Steps in the Organizing Process Determine specific work activities

necessary to implement plans and objectives

Group work activities into logical patterns or structures

Assign activities to specific positions and people, and allocate necessary resources

Coordinate activities of different groups and individuals

Evaluate results of the organizing process

The Organization Chart The visual representation of a

firm’s structure that illustrates: Job positions and functions Lines of authority Staff relationships Lines of communication

Common Bases of Departmentalization

Quality Control

Research &DevelopmentManufacturing

HumanResources

Accounting

Function

FolgersCoffee

JifPeanutButter

CrestToothpaste

SureDeodorant

TideDetergent

WesternRegion

Rocky MountainRegion

Midwest Region

SouthernRegion

Eastern Region

Product

Geographic

Non-ProfitAccounts

Small BusinessAccounts

CorporateAccounts

MilitaryAccounts

GovernmentAccounts

Customer

Functional Departmentalization

Quality Control

Research &Development

ManufacturingHuman

ResourcesAccounting

Product Departmentalization

FolgersCoffee

JifPeanutButter

CrestToothpaste

SureDeodorant

TideDetergent

Geographic Departmentalization

WesternRegion

Rocky MountainRegion

Midwest Region

SouthernRegion

Eastern Region

Customer Departmentalization

Non-ProfitAccounts

Small BusinessAccounts

CorporateAccounts

MilitaryAccounts

GovernmentAccounts

Authority and Delegation The act of assigning work activities to

subordinates Delegation is a transfer of

authority

Three Types of Authority Line Authority Staff Authority Functional Authority

Line Structure/Organizations

Manager

AssistantManager

HourlyEmployees

Owner

A Line-and-staff Organization

President

Unit 2Plant Manager

Unit 1Plant Manager

Sup.ofHuman

Resources

Sup. ofPurchasing

Sup. OfOperations

OtherSupervisors

Sup. ofPurchasing

Sup. OfOperations

Other Supervisors

Sup.ofHuman

Resources

Director ofHuman

Resources

Director ofOperations

Director ofPurchasing

OtherDirectors

Assistant toPresident

Authority RelationshipsLineStaffFunctional

Chain of Command More commonly known as unity of

command - an employee should have only one supervisor to whom he/she is directly responsible

This principle should not be violated

Span of Management:Wide Span and Narrow Span

8-6

©The McGraw-Hill Companies, 2000

Wide Span: Flat Organization Narrow Span: Tall Organization

Also Known As Span of Control

There are contrasting spans of control

Wide span of control Narrow spanof control

Contemporary organizations The 1970s

Span of Control Wide span of control

Fewer levels of management Reduces costs Requires improvements in skill levels Requires redesigning jobs

Degree of Centralization The extent to which authority is

delegated throughout an organization determines its degree of centralization. Centralized Decentralized

Other Forms of Organization Structure

Multidivisional Matrix8-7

©The McGraw-Hill Companies, 2000

An Example of Multidivisional Structure: The Walt Disney Company

Source: The Walt Disney Company Annual Report

CEOMichaelEisner

Walt DisneyAttractions

Walt DisneyStudios

ConsumerProducts

MotionPictures

TV AnimationDisney

Channel

MagicKingdom

CA

TokyoDisneyland

Euro-Disney

WaltDisneyWorld

DisneyStores

Licensing PublishingDisneyMusic

Softwareand

Education

CatalogMarketing

MagicKingdom

FL

EpcotCenter

Disney-MGM

Studios

Matrix Design

HumanResources

Group

PurchasingGroup

MFGGroup

DesignGroup

OmegaProject

ContractsGroup

AccountingGroup

HumanResources

Group

PurchasingGroup

MFGGroup

DesignGroup

GammaProject

ContractsGroup

AccountingGroup

HumanResources

Group

PurchasingGroup

MFGGroup

DesignGroup

BetaProject

ContractsGroup

AccountingGroup

HumanResources

Group

PurchasingGroup

MFGGroup

DesignGroup

AlphaProject

ContractsGroup

AccountingGroup

Design MFG ContractAdmin

Purchasing Accounting HR