Managing for organizational approach

Presented by: Group 9Sumeet Mittal(171)

K Naresh Kumar(172)Ashish Sharma(173)

Gourav Kumar Bhut(174)Anurag Nair(175)

Shashank Sharma(176)

MANAGING FOR ORGANIZATIONAL

INTEGRITY

Is ethics a confidential matter between individuals and their consciences? • Ethics is as much an organizational issue as it is a personal issue?

• Ethics has everything to do with management.

Role of managers in ethics• Managers who fail to facilitate ethical

conduct share responsibility with those who conceive and knowingly benefit from corporate misdeeds.

Integrity based approach• An integrity-based approach to ethics

management combines a concern for the law with an emphasis on managerial responsibility for ethical behaviour.

How Organizations shape individual’s behaviourThe once familiar picture of ethics as

individualistic, unchanging, and impervious to organizational influences has not stood up to scrutiny in recent years.

Fake repair • Sears Auto Centers

Fake Juice Concentra

te

• Beech-Nut Nutrition Corporation

Sears, Roebuck & CompanyIn 1992, Sears, Roebuck & Company was

inundated with complaints about its automotive service business.

Consumers and attorney general from more than 40 states had accused the company of misleading customers and selling unnecessary parts.

Sears management attempted to spur the performance of its auto centers by introducing new goals and incentives for employees.

Gap between Organization and EmployeesAccording to advisers, failure to meet quotas

could lead to a transfer or a reduction in work hours.

Some employees spoke of the “pressure, pressure, pressure” to bring in sales.

Management’s failure to clarify the line between unnecessary service and legitimate preventive maintenance, coupled with consumer ignorance

Settlement after allegationsCEO Edward Brennan acknowledged management‘s responsibility for putting in place compensation and goal-setting systems that “created an environment in which mistakes did occur.”They also instituted a system of unannounced shopping audits and made plans to expand the internal monitoring of service.

The total cost of the settlement, including potential customer refunds, was an estimated $60 million.

How contextual forces influence Top Management

• Suppliers provided nothing but sugar water and chemicals as 100% pure apple juice concentrate.

• CEO of Beech-Nut Nutritions found it out with evidence.

• He could have destroyed the bogus inventory and withdrawn the juice from grocers’ shelves.

How forces worked• Eliminating the bogus inventory would

have even killed meager profit $700000.

• Supplier of juice concentrate offered 25% price advantage.

• CEO was in extra-ordinary pressure to turn the ailing company around.

How forces worked (cont)• Ineffective Quality Control system.

• When a member of research voiced about issues, he was accused of not being a team player and being called “Chicken-Little”.

• No one considered the fact that the sale of adulterated juice is crime and top management is at risk of criminal liability.

Organizational Culture insensitive to Ethical considerations

• FDA Investigation

• CEO pleaded guilty for adulterated product.

• Legal expenses and lost sales cost 25 million dollars.

The limits of a legal compliance programThe risk of litigation and liability has

increased in the past decade.

Damage to ethical lapse can affect company’s reputation.

Companies have started corporate ethics programs to detect and prevent violations of the law.

Martin Marietta : Emphasizing core values

Martin Marietta was under investigation for improper travel billing.

According to its President Thomas Young, “Ethics is personal. Either you had it or you didn’t “.

They had an ethics office with a network of staff responding to the complaints about wrong-doings and served as a source of guidance.

Success of Corporate Ethics Program90000 employees have become responsible.

Less grievances and 75% satisfied employees.

Stages of training on ethics to employees.

Build good reputation and trust with government

auditors as well.

NovaCare : Building Shared AspirantsNovaCare Inc. is the largest provider of

rehabilitation services in the US.

The viability of the firm was in question.

57% turnout among its firstline employees – clinicians and therapists.

The stock prices went down.

Reasons for turnover

Lack of common values and aspirations among employees

Top Management was single-minded.

“Huge Disconnect” between values of managers and employees.

Structural Change to integrate the organizational hierarchy.

Vision of the organization met employees’ goals and reduced grievances.

57% turnover of employees in 1990 reduced to 27% in 1993.

Wetherill Associates : defining Right Actions

Wetherill Associates , a small privately held suppier of electrical parts to automotive industry.

Quality Assurance Manual describes their philosophy text, conduct guide and company profile.

No corporate ethics officer reports to top management as corporate ethics officer is top management.

What Wetherill teaches it’s emplyees• We serve our customers; we are not in

competition with anybody.

• No incentives based on sales resultsto spur individual performances.

• Honesty in the sale of parts to it’s buyers.

Success of Wetherill Associates for it’s Honesty

Revenue grew from $1 million to $98 million in 13 years even when the industry growth is less.

Age range of employees is 17-92years happy with working environment.

In such companies only, unethical individuals can be easily identified.