Week 11 - Topic 7: Values Based Management

Key Point about Values Based Management

It's not only the "right thing to do" but is also "good business" because it can help attract customers and talented employees

Triple Bottom Line (TBL)

Represents people, planet, and profit (the 3 Ps). Measures an organization’s social, environmental, and financial performance

Success can be measured through...

A social audit

What is a Social Audit?

A systematic assessment of a company's performance in implementing socially responsible programs, often based on predefined goals

Some businesses focus primarily on...

Financial performance

Stakeholders

Consist of the people whose interests are affected by an organization's activities

Stakeholders can exist in any of three organizational environments:

1. Internal environment

2. Task environment (external)

3. General environment (external)

Internal Stakeholders (broad)

Consist of employees, owners, and the board of directors

Owners

Consist of all those who can claim the organization as their legal property

Board of Directors

Members elected by the stockholders to see that the company is being run according to their interests

The Board of Directors has the authority to...

- Hire, set compensation for, or fire the CEO

- Approve corporate strategy

External Stakeholders (broad)

People or groups in the organization's external environment that are affected by it

The Task Environment

Consists of 10 groups that present an organization with daily tasks to handle

The General Environment

Refers to the macroenvironment, such as economic, technological, and sociocultural

Ethics

The standards of right and wrong that influence behavior. May vary among countries and cultures

Ethical Behavior

Behavior that is accepted as "right" as opposed to "wrong" according to these standards

Ethical Dilemma

A situation in which you have to decide whether to pursue a course of action that may benefit you or your organization but that is unethical or even illegal

Values

The relatively permanent and deeply held underlying beliefs and attitudes that help determine a person's behavior

Value System

The pattern of values within an organization

Values and Value systems are...

The underpinnings for business ethics and ethical behavior

Organizations may have two important value systems that can conflict:

1. The value system stressing financial performance versus

2. The value system stressing cohesion and solidarity in employee relationships.

Five Most Common Unethical Behaviors at Work

1. Misusing Company Time

2. Abusive behavior

3. Employee Theft

4. Workplace cheating

5. Violating corporate Internet policies

Abusive Supervision

Subordinates' perceptions of the extent to which supervisors engage in the sustained display of hostile verbal and nonverbal behaviors, excluding physical contact

Workplace Cheating

Unethical acts that are intended to create an unfair advantage or help attain benefits that an employee would not otherwise be entitled to receive

Rationale for Business Ethics

Moral & Business Case

Moral Case

Business decisions that are unethical are morally wrong

Business Case

Ethical behavior will enhance a business's reputation and ultimately will serve the interests of owners (stockholders) and other stakeholders

Ethical Dilemmas and the Nature of Ethics

- There are no absolute or fixed principles to help determine if an action is ethical or not

- Leaders and managers therefore need to decide what constitutes an ethical decision

- An organization's ethics should be consistent with its value system

Four Approaches to Resolving Ethical Dilemmas

1. Utilitarian Approach

2. Individual Approach

3. Moral Rights Approach

4. Justice Approach

Utilitarian Approach

For the Greatest Good, typically evaluated using a cost-benefit analysis (financial analysis)

Potential problem for Utilitarian Approach

Looking only at financial costs and benefits can overlook other important factors, such as employee morale

Individual Approach

For Your Greatest Self-Interest Long Term, Which Will Help Others

Potential Problem for Individual Approach

- Assumes that people will act ethically in the short run to avoid harm in the long run.

- Flaw is one person’s short-term gain may not be good for everyone in the long term.

Moral Rights Approach

Respecting Fundamental Rights Shared by Everyone, like: life, liberty, privacy, health, safety, and due process

Justice Approach

Respecting Impartial Standards of Fairness, Policies administered impartially and fairly, regardless of gender, age, sexual orientation, and the like

How Organizations can Promote Ethics

1. Create a strong ethical climate, through policies, procedures, and practices

2. Screen potential employees, like through background checks

3. Institutes ethics codes and training programs

4. Reward ethical behavior and protect whistle-blowers

Code of Ethics

Consists of a formal written set of ethical standards guiding an organization's actions

Whistle-blower

An employee, or even an outside consultant, who reports organizational misconduct to the public

Social Responsibility

A manager's duty to take actions that will benefit the interests of society as well as of the organization

Corporate social responsibility (CSR)

Views that corporations are expected to go above and beyond following the law and making a profit.

Arguments for CSR

- It is an ethical obligation (the "right thing to do")

- Morally appropriate

- Good for business, can help a company's public image with customers and regulators

- Important to employees: helps attract and retain talent

Arguments against CSR

- The social responsibility of a business is to make profits; not to be responsible to society

- Unless a company focuses on profits, it will fail to: provide goods and services, benefit stockholders, create jobs, and expand economic growth

- The real social justification for business is all of the above, like businesses benefit society in the course of pursuing profits

Sustainability

Economic development that meets the needs of the present without compromising the ability of future generations to meet their own needs

Climate Change

Major changes in temperature, precipitation, wind patterns, and similar matters occurring over several decades

Global Warming

One aspect of climate change, it's the rise in global average temperature near the Earth's surface, caused mostly by increasing concentrations in the atmosphere of greenhouse gasses, such as carbon emissions from fossil fuels.

Natural Capital

The value of natural resources, such as topsoil, air, water, and genetic diversity, which humans depend on