Certification Study Group Business Ethics and Social Responsibility
Dec 26, 2015
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