Intro to Management Study Guide
Intro to Management Study Guide MGT 201
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Chapter 1: The Exceptional Manager Section 1.1: Management: What It Is, What Its Benefits Are Definition of Management o The pursuit of organizational goals efficiently and effectively. Organizations (or people who work together to achieve a specific purpose) value managers because of the multiplier effect, which states that good managers have an influence on the organization far beyond the results that can be achieved by one person acting alone. Mary Barra o Promoted to CEO of GM in December 2013 and became the 1 female CEO of an American automaker o Became the 22 woman at the helm of a Fortune 500 company o Her story Grew up in suburban Detroit, joined GM at age 18 on the factory floor as an intern, graduated from GM institute with an electrical engineering degree, and then became a plant engineer at Pontiac Was given a scholarship by GM for grad school at Stanford to get a degree in business. She then began moving up the GM ladder. o Obviously internal promoting played a big part in her climb up the GM ladder, but it was not the only thing Ability to take risks Obviously both men and women have to deal with uncertainty, but the ability to take risks – to embrace change and to keep going forward despite fears and internal criticism – is important to any manager’s survival, regardless of gender Art of Management Defined o Is being an exceptional manager a gift? Not exactly. Parts are teachable. Management is “the art of getting things done through people.” Thus, managers are task oriented, achievement oriented, and people oriented as they operate within an organization – a group of people who work together to achieve some specific purpose o More formally, management is defined as: 1) The pursuit of organizational goals efficiently and effectively by 2) integrating the work of people through 3) planning, organizing, leading, and controlling the organization’s resources o “Efficiently” and “Effectively” Efficiency = the means The means of attaining the organization’s goals. To be efficient means to use resources (people, money, raw materials, etc.) wisely and cost effectively Effectiveness = the ends Regards the organization’s end/the goals. To be effective means to achieve results, to make the right decisions and to successfully carry them out so that they achieve the organizations goals. o Good managers are concerned with trying to achieve both qualities. Often, however, organizations will erroneously strive for efficiency without being effective. Ex: Airline passengers complaining about missing flights, losing bags, cancelled trips, etc. Efficiency: saving company dollars o Large part because there are events that they cannot individually control. o Saying “I’m sorry” may be efficient for the airlines (even when gift cards and monetary value is exchanged), but it is not effective because the lasting impression leaves customers wanting to take business elsewhere Effectiveness: retaining customers and their dollars o Apologizing doesn’t worked because customers know that “talk is cheap.” * Saying “I’m sorry” may be efficient for the airlines (even when gift cards and monetary value is exchanged), but it is not effective because the lasting impression leaves customers wanting to take business elsewhere* Why Organizations Value Managers: The Multiplier Effect o Some great achievements of history (such as scientific discoveries or works of art) were accomplished by individuals working quietly be themselves, but so much more has been achieved by people who were able to leverage their talents and abilities by being managers. Ex: Top 10 architectural developments of the world were all built as part of a team, even if they were inspired by one individual o Good managers create value through “The Multiplier Effect” Your influence on the organization is multiplied far beyond the results that can be achieved by just one person acting alone. o Exceptional Managers are in high demand “The scarcest, most valuable resource in business is no longer financial capital, its talent. If you doubt that, just watch how hard companies are battling for the best people. Talent of every type is in short supply, but the greatest shortage of all is skilled, effective managers.” Finding the best for the job is often a company’s way of fixing a major problem Financial Rewards of Being an Exceptional Manager o 2013 statistics Average wage = $40,872 W/HS diploma = $33,696 W/bachelor’s degree = $63,388 Top ranked CEO’s = $9,800,000 Median CEO’s = $168,140 Median general/operation managers = $95,440 What are the rewards of studying and practicing management? o Studying You will understand how to deal with organizations from the outside Since we are all in constant interaction with all kinds of organizations, it helps to understand how they work and how the people in them make decisions. Such knowledge may give you some defensive skills that you can use in dealing with organizations from the outside You will understand how to relate to your supervisors Enable you to understand the pressures managers deal with and how they will best respond to you You will understand how to interact with coworkers. Kinds of management policies in place can affect how your coworkers behave. Can give you the understanding of teams and teamwork, cultural differences, conflict and stress, and negotiation and communication skills that will help you get along with fellow employees You will understand how to manage yourself in the workplace Give you the opportunity to realize insights about yourself, your personality, emotions, values, perceptions, needs, and goals. Help build skills in areas such as selfmanagement, listening, handling change, managing stress, avoiding groupthink, and coping with organizational politics o Practicing You and your employees can experience a sense of accomplishment. Every successful goal accomplished provides you not only with personal satisfaction, but also with the satisfaction of all those employees you directed who helped you accomplish it. You can stretch your abilities and magnify your range. Every promotion stretches abilities, challenges talents/skills, and magnifies the range of your accomplishments You can build a catalog of successful products or services. Every product or service you provide becomes a monument to your accomplishments. Will help you in running your own business. You can help become a mentor and help others Mentor o An experienced person who provided guidance to someone new to the work world Section 1.2: What Managers Do: The Four Principal Functions? The Management Process o What you as a manager do to “get things done”, to achieve the stated goals of your organization Four Management Functions o Planning You set goals and decide how to achieve them o Organizing You arrange tasks, people, and other resources to accomplish the work o Leading You motivate, direct, and otherwise influence people to work hard to achieve the organization’s goals o Controlling You monitor performance, compare it with goals, and take corrective action if needed Planning o Defined as setting goals and deciding how to achieve them o Ex: College is designed to educate students. Managers must decide what the best way to accomplish this is (Which degrees should be offered? Which students do we admit? What kind of faculty is needed? What buildings and equipment do we need?) Organizing o Defined as arranging tasks, people, and other resources to accomplish the work o Ex: College administrators must determine the tasks to be done, by whom and what the reporting hierarchy is to be. (Organized in to departments? Full time vs. part time faculty? Who teaches what?) Leading o Defined as motivating, directing, and otherwise influencing people to work hard to achieve the organization’s goals o Ex: Leadership begins with the president, who is the one who must inspire the faculty, staff, students, alumni, donors, and residents of the surrounding community to help realize the college’s goals. Controlling o Defined as monitoring performance, comparing it with goals, and taking corrective action as needed o Ex: Is the college discovering that fewer students are majoring in nursing than before? Whose fault is that? How do we fix that and not take a net financial loss? Section 1.3: Seven Challenges to Being an Exceptional Manager Managing for Competitive Advantage/Staying Ahead of Rivals o Competitive Advantage The ability of an organization to produce goods or services more effectively than competitors do, thereby outperforming them This means an organization must stay ahead in 4 areas 1) Being responsive to customers a. First law of business is “take care of the customer” i. Without customers, sooner or later there will be no organization 2) Innovation a. Finding ways to deliver new or better goods or services b. No organization can allows itself to become complacent, especially when rivals are coming up with creative ideas c. “Innovate or die” 3) Quality a. Making improvements in quality has become an important management idea b. If a monopoly, not as big of a deal. But as soon as a rival comes along, quality will determine who succeeds 4) Efficiency a. Companies strive to produce goods or services as quickly as possible using as few employees and raw materials as possible b. Overstaffed may not be able to compete (Law of Diminishing Returns) Managing for Diversity: The Future Won’t Resemble the Past o Today, nearly 1 in 6 American workers are foreign born, which is the highest percentage since the 1920’s o 2050 54% of USA will be minority groups. Whites are projected to decrease from 63% of the population to 47% Blacks increase by 1213% Asians increase 59% Hispanics increase 1729% Nearly 1 in 5 residents is expected to be 65 and older Double population o Some think that diversity and variety in staffing produce organizational strength Challenge to the manager of the near future is to maximize the contributions of employees diverse in gender, age, race, ethnicity, and sexual orientation Managing for Globalization: The Expanding Management Universe o Verbal expressions and gestures don’t have the same meaning to everyone throughout this world. Not understanding such differences can affect how well organizations manage globally. o Globalization has leveled the competitive playing fields between industrial and emerging market countries. Managing for globalization will be a complex, ongoing challenge. Managing for Information Technology: Dealing with the “New Normal” o Challenge of managing for information technology will require your unflagging attention Most important is the Internet The global network of independently operating but interconnected computers, linking hundreds of thousands of smaller networks around the world By 2017, consumers are projected to spend $2.3 trillion online. This kind of e commerce has reshaped entire industries and revamped the very notion of what a company is The buying and selling of goods or services over computer networks More important than ecommerce, information technology has led to the growth of ebusiness Using the internet to facilitate every single aspect of running a business Since it so radically lowers the cost of communication, it radically alters activities based around communication Result is the “New Normal” Far Ranginstelectronic management: ecommunication all the time o 21 century managers must be experts in technological communication, ranging from email, texts, social media, etc. o Getting the right balance while keeping interpersonal skills sharp is the challenge More and more data: challenges to decision making o Cloud computing The storing of software and data on gigantic collections of computers located away from a company’s principal site o Databases Computerized collections of interrelated files Can assemble astonishing quantities of information and make them instantly available o “Big Data” phenomenon Stores of data so vast that conventional database management systems cannot handle them o Challenge: How do we deal with this massive amount of data to make useful decisions without violating people’s right to privacy? Rise of artificial intelligence: more automation in the workforce o Software and automation are not only replacing blue collar jobs at a faster rate, but now also white collar skills o Artificial intelligence The discipline concerned with creating computer systems that simulate human reasoning and sensation o Job losses caused by automation will probably extend to other fields that have not been affected yet very soon o Challenge: What will be the implications of these events for you as a manager for staffing and training employees and for your own professional development? Organizational changes: shifts in structure, jobs, goals, and knowledge management o Telecommute Work from home or remote locations using a variety of information technologies o Videoconferencing Using video and audio links along with computers to let people in different locations see, hear, and talk with one another o Collaborative Computing Using stateoftheart computer software and hardware will help people work better together o Project Management Software Programs for planning and scheduling the people, costs, and resources to complete a project on time o Knowledge management The implementing of systems and practices to increase the sharing of knowledge and information throughout an organization Managing for Ethical Standards o With the pressure to meet sales, production, and other targets, managers can find themselves confronting ethical dilemmas o Ethical behavior is not just a nicety. It is a very important part of doing business. Example of Bernie Madoff and Ponzi Scheme o “Learning to be Ethical” and “Doing Right vs. Being Liked” Managing for Sustainability o Apparently changing climate and increased damage from natural weatherrelated disasters has brought the issue of “being green” to the forefront o Our economic system has brought prosperity, but it has also led to unsustainable business practices because it has assumed that natural resources are limitless, which they are not o Sustainability Defined as economic development that meets the needs of the present without compromising the ability of future generations to meet their own needs Managing for Happiness & Meaningfulness o Happiness is getting what you want, of having your desires fulfilled o Meaningful (which may not always make someone happy) is achieving a valued sense of one’s self and one’s purpose within the larger context of life and community o Research shows that a sense of meaningfulness in your life is associated with better health, work, life satisfaction, and performance o Managers don’t have the highest happiness rate, but have the highest meaningfulness rate Section 1.4: Levels & Areas of Management Four Levels of Management o Top Managers; Determining Overall Direction Tend to have titles such as CEO, COO, President, and Senior VP Most are the face of the organization Make long term decisions about the overall direction of the organization and establish the objectives, policies, and strategies for it. Pay a lot of attention to the environment outside of the organization, looking for longterm opportunities. o Middle Managers; Implementing Policies and Plans Implement the policies and plans of the top managers above them and supervise and coordinate the activities of the firstline managers below them Titles include “plant manager”, “district manager”, “regional manager”, “clinic director”, “dean of student services”, etc. Critical for organizational success because they implement the strategic plans created by CEO’s and top managers Have the “high touch” jobs Dealing with people rather than computer screens or voiceresponse systems that can directly affect employees, customers, and suppliers o FirstLine Managers: Directing Daily Tasks Titles such as “department head”, “foreman”, “forewoman”, “supervisor”, etc. Make short term operating decisions, directing the daily tasks of nonmanagerial personnel, who are of course all of those people who work directly at their jobs but don’t oversee the work of others o Team Leaders: Facilitating Team Activities Members of a team generally report to a firstline manager, who has the authority to hire and fire, controls resources, and is responsible for the team’s performance Defined as a manager who is responsible for facilitating team activities toward achieving key results May not have authority over other team members, but they are expected to provide guidance, instruction, and direction to the others, to coordinate team efforts, to resolve conflicts, to represent the team to the firstlevel manager, and to make decisions in the absence of a consensus Functional Managers vs. General Managers o Functional Managers: Responsible for One Activity Responsible for just one organizational activity Ex: Vice President of Production, Director of Finance, or Administrator for Human Resources o General Managers: Responsible for Several Activities Responsible for several organizational activities Ex: Executive Vice President, General Manager of Production Manager for 3 Types of Organizations o ForProfit Organizations: ForMake Money Are formed to make money (profits) by offering products or services o NonProfit Organizations: For Offering Services Often known as administrators May be either in the public sector (University of California) or the private sector (Stanford University). Either way, their purpose is to offer services to some clients, not to make a profit Ex: hospitals, colleges, socialwelfare agencies One particular type = Commonweal Organization Offer services to all clients within their jurisdictions Ex: Military services, the US postal service, local fire/police departments o MutualBenefit Organizations: For Aiding Members Voluntary collections of members (political parties, farm cooperatives, labor unions, trade associations, and clubs) whose purpose is to advance members’ interests o Different Organizations, Different Management?? Generally, yes. You would still be performing the four management functions Single biggest difference however is that… In a forprofit organization, the measure of its success is how much profit (or loss) it generates In the other two types of organizations, although income and expenditures are very important concerns, the measure of success is usually effectiveness of the services delivered o How many students graduated, how many crimes were prevented, etc.? Section 1.5: The Skills Exceptional Managers Need Technical Skills: The Ability to Perform a Specific Job o Consist of the jobspecific knowledge needed to perform well in a specialized field o Having the requisite technical skills seems to be most important at the lower levels of management That is, among employees in their first professional job and firstline managers Conceptual Skills: The Ability to Think Analytically o Are more important as you move up the management ladder o Consist of the ability to think analytically, to visualize an organization as a whole and understand how the parts work together Human Skills: “Soft Skills”, The Ability to Interact Well with People o Human Skills Consist of the ability to work well in cooperation with other people to get things done o Soft Skills The ability to motivate, to inspire trust, to communicate with others o Both are necessary for managers of all levels, but because of the range of people, tasks, and problems in any organization, developing your humaninteracting skills may turn out to be an ongoing, lifelong effort. The Most Valued Traits in Managers o The ability to motivate and engage others o The ability to communicate o Work experience outside the United States o High energy levels to meet demands of global travel and a 24/7 world Section 1.6: Roles Managers Must Play Successfully The Manager’s Roles: Mintzberg’s Useful Findings o Henry Mintzberg Late 1960’s, shadowed 5 CEO’s for a week and recorded their working lives “There was no break in the pace of activity during office hours. The mail (average of 36 pieces a day), telephone calls (average of five per day), and meetings (average of eight) accounted for almost every minute from the moment these executives entered their offices in the morning until they departed in the evening.” o 3 of Mintzberg’s Findings for any prospective manager A manager relies more on verbal than written communication Writing letters, memos, and reports takes time. Most of the managers in his research tended to get and give information through telephone and meetings. A manager works long hours at an intense pace Long hours at work are standard, with 50 hours being typical and 90 hours not being unheard of 2000 study = 72 hours per week Flexibility only exists when you make your own schedule A manager’s work is characterized by fragmentation, brevity, and variety th Only 1/10 of the managerial activities observed took more than an hour; half were completed in under 9 minutes Executives work time = “the interruptdriven day” Division of work and nonwork hours is becoming obsolete because of technology and ease of access through communication Time and Task management are major challenges for every manager Three Types of Managerial Roles o Interpersonal Roles: Figurehead, Leader, Liaison Managers interact with people inside and outside their work units Figurehead You show visitors around your company, attend employee birthday parties, and present ethical guidelines to your subordinates. You perform symbolic tasks that represent your organization Leadership You are responsible for the actions of your subordinates, as their successes and failures reflect on you. Your leadership is expressed in your decisions about training, motivating, and disciplining people. Liaison You must act like a politician, working with other people outside your work unit and organization to develop alliances that will help you achieve your organization’s goals. o Informational Roles: Monitor, Disseminator, and Spokesperson Most important part of a managers’ job (according to Mintzberg) is information handling, because accurate information is vital for making intelligent decisions Managers receive and communicate information with other people inside and outside the organization Monitor You should be constantly alert for useful information, whether gathered from a newspaper story about the competition or gathered from snippets of conversation with subordinates you meet in the hallway. Disseminator Workers complain they never know what is going on. That means their supervisor failed in this role. Managers need to constantly disseminate important information to employees. Spokesperson You are expected to be a diplomat, to put the best face on the activities of your work unit or organization to people outside it. o Decisional Roles; Entrepreneur, Disturbance Handler, Resource Allocator, Negotiator Managers use information to make decisions to solve problems or take advantages of opportunities. Entrepreneur Initiate and encourage change and innovation Disturbance Handler Unforeseen problems (from product defects to international currency crises) must be fixed Resource Allocator Because you’ll never have enough time, money, etc., you’ll need to set priorities about use of resources Negotiator Working with others inside and outside the organization to accomplish your goals Section 1.7: The Link between Entrepreneurship & Management StartUp o A newly created company designed to grow fast Entrepreneurship Defined: Taking Risks in Pursuit of Opportunity o Most businesses originate with the people with the idea, the risk takers o Entrepreneurship: the process of taking risks to try to create a new enterprise Two types Entrepreneur o Someone who sees a new opportunity for a product or service and launches a business to try to realize it. Most entrepreneurs run small businesses with fewer than 100 employees. Intrapreneur o Someone who works inside an existing organization who sees an opportunity for a product or service and mobilizes the organization’s resources to try to realize it. How do Entrepreneurs and Managers Differ? o Entrepreneur While the entrepreneur is not necessarily an inventor, he/she “always searches for change, responds to it, and exploits it as an opportunity” What it takes to start a business Initiate new goods/services o Manager What it takes to grow and maintain a business Coordinate resources to produce the goods or services o Entrepreneurial companies have been called “gazelles” for the two attributes that correlate: speed and agility o Characteristic of Both High Need for Achievement However, entrepreneurs seem to be motivated to pursue moderately difficult goals through their own efforts in order to realize their ideas and financial rewards Managers, by contrast, are more motivated by promotions and organizational rewards of power and perks Belief in Control of Destiny Internal Locus of Control (External Locus is opposite) o The belief that you control your own destiny and that external forces will have little influence High Energy Level and Action Orientation (especially in Entrepreneurs) Obviously takes long hours for managers to get to the top of an organization, but entrepreneurs have to create an entire new enterprise, which requires an extraordinary investment of time and energy While some managers may feel a sense of urgency, entrepreneurs are especially impatient and want to get things done quickly as possible, making them extremely actionoriented. High Tolerance for Ambiguity (especially in Entrepreneurs) Entrepreneurs must have more tolerance for ambiguity because they are trying to do things they have never done before Self Confidence and Tolerance for Risk (more Entrepreneurs) Precisely because they are willing to take risks in the pursuit of new opportunities o Types of Entrepreneurs Necessity Entrepreneurs People such as laidoff corporate workers, discharged military people, immigrants, and divorced homemakers who suddenly must earn a living are simply trying to replace lost income and are hoping a job comes along 25% of entrepreneurs Opportunity Entrepreneurs Those who start their own business out of a burning desire Block 1: Management 201 Chapter 3: (3.1, 3.4, 3.5, 3.6) Section 3.1: The Triple Bottom Line; People, Planet, & Profit In traditional business accounting, the “bottom line” of a revenueandexpenses statement is the organization’s profit (or loss), but according to Judy Wicks, making money should be only one goal of the business. o Triple Bottom Line The other two goals (besides profit) are to 1) foster social consciousness and 2) foster environmental consciousness. Definition: represents People, Planet, and Profit (the 3 P’s) and measures an organization’s social, environmental, and financial performance In this view of corporate performance, an organization has a responsibility to its employees and to the wider community (People), is committed to sustainable environmental practices (Planet), and includes the costs of pollution, worker displacement, and other factors in its financial calculations (Profit). Success in these areas can be measured through social audit A systematic assessment of a company’s performance in implementing responsible programs, often based on predefined goals The Millennials’ Search for Meaning o “Millennials appear to be more interested in living lives defined by meaning than by what some would call happiness.’ Less focused on financial success and more focused on making a difference. o Two factors in achieving a meaningful life Understanding the environment in which a manager operates – the community of stakeholders insider and outside the organization The ethical and social responsibilities of being a manager Section 3.4: The Ethical Responsibilities Required of You as a Manager Ethical Dilemma o 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 o Choosing between economic performance and social performance is what most ethical conflicts are about Defining Ethics & Values o Ethics The standards of right and wrong that influence behavior May vary among countries and among cultures o Ethical Behavior Behavior that is accepted as “right” as opposed to “wrong” according to those standards o Values The relatively permanent and deeply held underlying beliefs and attitudes that help determine a person’s behavior o Value System The pattern of values within an organization Two important value systems that could conflict 1) The value system stressing financial performance 2) The value system stressing cohesion and solidarity in employee relationships o Values and value systems are the underpinnings for ethics and ethical behavior Four Approaches to Deciding Ethical Dilemmas o The Utilitarian Approach: For the Greatest Good Is guided by what will result in the greatest good for the greatest number of people Managers often take this approach using financial performance (such as efficiency and profit) as the best definition of what constitutes “the greatest good for the greatest number” “Costbenefit” analysis Short term might show firing people is best, but does not accurately represent the value of those employees worth in financial dollars o The Individual Approach: For Your Greatest SelfInterest Long Term, Which Will Help Others Is guided by what will result in the individual’s best longterm interests, which ultimately are in everyone’s selfinterest Assumption is that you will act ethically in the short run to avoid others harming you in the long run Flaw is that one person’s shortterm selfgain may not by good for everyone in the long term. o The MoralRights Approach: Respecting Fundamental Rights Shared by Everyone Is guided by respect for the fundamental rights of human beings, such as those expressed in the U.S. Constitution’s Bill of Rights. Life, liberty, pursuit of happiness, etc. Ex: Should employees on the job have a guarantee of privacy? o The Justice Approach: Respecting Impartial Standards of Fairness Is guided by respect for impartial standards of fairness and equity A consideration here is whether an organization’s policies (such as those governing promotions or sexual harassment cases) are administered impartially and fairly regardless of gender, age, sexual orientation, etc. Fairness can often be a tough issue Ex: raises to CEO, unfair job security to upper management WhiteCollar Crime, SarbOx, & Ethical Training o Insider Trading The illegal trading of a company’s stock by people using confidential company information o Ponzi Scheme Using cash from newer investors to pay off older ones o The SarbanesOxley Reform Act Established requirements for proper financial record keeping for public companies and penalties of as much as 25 years in prison for noncompliance Requires a company’s CEO and CFO to personally certify the organization’s financial reports, prohibits them from taking personal loans or lines of credit, and makes them reimburse the organization for bonuses and stock options when required by restatement of corporate profits. Requires the company to have established procedures and guidelines for audit committees. o How do people Learn Ethics? Fred J. Evans “Schools bear some responsibility for the behavior of executives. If you’re making systematic errors in the business world, you have to go back to the schools and ask ‘What are you teaching?’” Laurence Kohlberg proposed three levels of personal moral development Level 1, preconventional – follows rules o Tend to follow rules and obey authority to avoid unpleasant consequences. Managers tend to be autocratic or coercive, expecting employees to be obedient for obedience’s sake. Level 2, conventional – follows expectations of others o Conformist, but not slavish, generally adhering to the expectations of others in their lives. Managers lead by encouragement and cooperation and are more group and team oriented. Most managers are at this level. Level 3, postconventional – guided by internal values o Managers are independent souls who follow their own values and standards, focusing on the needs of their employees and trying to lead by empowering those working for them. Only 20% reach this level. How Organizations Can Promote Ethics o Creating a Strong Ethical Climate Ethical Climate Represents employees’ perceptions about the extent to which work environments support ethical behavior. It is important for managers to foster ethical climates because they significantly affect the frequency of ethical behavior. Can promote ethical climates through the policies, procedures, and practices that are used on a daily basis o Screening Prospective Employees Try to screen out dishonest, irresponsible employees by checking resumes, references, and personality tests EVerify A federal program that allows employers to check for illegal immigrants Instituting Ethics Codes & Training Programs o Code of Ethics Consists of a formal written set of ethical standards guiding an organization’s actions Offer guidance on how to treat customers, suppliers, competitors, and other stakeholders. Purpose is to clearly state top management’s expectations for all employees. Ethics training Most codes prohibit bribes, kickbacks, misappropriation of corporate assets, conflicts of interests, and “cooking the books” (making false accounting statements and other records). Other areas are political contributions, workforce diversity, and confidentiality of corporate information. Rewarding Ethical Behavior: Protecting WhistleBlowers o It’s not simply enough to punish bad behavior; managers must also reward good ethical behavior, as in encouraging whistleblowers Whistle Blower: An employee, or even an outside consultant, who reports organizational misconduct to the public, such as health and safety matters, waste, corruption, or overcharging of customers o In some cases, whistle blowers may receive a financial reward. The problem is that retaliation against whistle blowers is also on the rise, ranging from giving them the cold shoulder to passing them over for promotion o In exposing unethical behavior, it’s important to be clear why you’re doing it, not report something for the wrong reason, and follow proper channels. Don’t try to report externally without speaking to those who might resolve the problem. Section 3.5: The Social Responsibilities Required of You as a Manager Social Responsibility o A manager’s duty to take actions that will benefit the interests of society as well as of the organization Corporate Social Responsibility o The notion that corporations are expected to go above and beyond following the law and making a profit Corporate Social Responsibility: The Top of the Pyramid o Archie B. Carroll “Corporate responsibility rests at the top of a pyramid of a corporation’s obligations, right up there with economic, legal, and ethical obligations.” o Some people might hold that a company’s first and only duty is to make a profit. However, Carroll suggests the responsibilities of an organization in the global economy should take the following priorities, with profit being the most fundamental (base of the pyramid) and corporate citizenship at the top. Be a good global corporate citizen, as defined by the host country’s expectations Be ethical in its practices, taking hostcountry and global standards into consideration Obey the law of host countries as well as international law Make a profit consistent with expectations for international business Is Social Responsibility Worthwhile? Opposing & Supporting Viewpoints o Against Social Responsibility Milton Friedman Unless a company focuses on maximizing profits, it will become distracted and fail to provide goods and services, benefit the stockholders, create jobs, and expand economic growth – the real social justification for the firm’s existence. o For Social Responsibility Paul Samuelson A company must be concerned for society’s welfare as well as for corporate profits. Since businesses create problems, they should help solve them. They often have the resources to solve problems in ways that the nonprofit sector does not. Finally, being socially responsible gives businesses a favorable public image that can help head off government regulation. One Type of Social Responsibility: Climate Change, Sustainability, & Natural Capital o Climate Change Refers to major changes in temperature, precipitation, wind patterns, and similar matters occurring over several decades o Global Warming One aspect of climate change. Refers to the rise in global average temperature near the Earth’s surface, caused mostly by increasing concentrations in the atmosphere of greenhouse gases, such as carbon emissions from fossil fuels. o The Benefits of Being Green Today, “going green” has entered the business mainstream, where sustainability programs are producing not only environmental benefits, but also cost savings, revenue growth, and competitive advantages o The Value of Earth’s Resources: Natural Capital “Planet” is now identified by the name natural capital, which many scholars think should figure seriously in economic decision making Natural Capital: The value of natural resources, such as topsoil, air, water, and genetic diversity, which humans depend on According to this view, we are approaching the planet’s limitations, with human activity threatening to exceed the Earth’s capacity to generate resources and absorb wastes. Another Type of Social Responsibility: Philanthropy (Not Dying Rich) o Philanthropy Making charitable donations to benefit humankind o Not only do wealthy individuals and companies practice philanthropy, so even do ordinary individuals How Does Being Good Pay Off? o Effect on Customers 88% of people are more likely to buy from companies that are socially responsible 72% would prefer to purchase products and services from a company with ethical business practices o Effect on Employees’ Work Effort Workers are more efficient, loyal, and creative when they feel a sense of purpose (when their work has meaning) When the business makes profits the only goal, the employee base develops negative feelings towards the organization o Effect on Job Applicants & Employee Retention Quality of people of who apply Key reason for job retention o Effect on Sales Growth Announcement of illegal activity is known to hugely diminish profits o Effect on Company Efficiency Honesty eliminates distraction o Effect on Company Revenue Unethical behavior in the form of employee fraud costs U.S. organizations around $652 billion a year Employee fraud, which is twice as common as consumer fraud, costs employers about 20% of every dollar earned o Effect on Stock Price Perception of a firm’s honesty directly affected their decision about whether to buy its stock Companies on average lose more than a quarter of their stock value but can nurse the stock price back to health by stepping up charitable giving along with other actions o Effect on Profits Profitability is enhanced by a reputation of honesty and corporate citizenship Section 3.6: Corporate Governance Corporate Governance o The system of governing a company so that the interests of corporate owners and other stakeholders are protected The Need for Independent Directors o Inside directors may be members of a firm, but outside directors are supposed to have been handpicked by the CEO. This outside relationship creates a dangerous friendship. o Now, more attention is being paid to strengthening corporate governance so that directors are clearly separated in their authority from the CEO The Need for Trust o Customers of employees may well think that certain people or companies are ethical (moral, honest, fair, etc.) but that does not mean they should trust them o Trust comes from asking how likely the people you’re dealing with are to serve your interests, how much they have demonstrated concern for others, how well they delivered on their promises, how much they try to keep their word, and how effectively they communicate these skills. Block 1; Chapter 4 (4.1, 4.2, 4.5) Section 4.1: Globalization; the Collapse of Time and Distance Competition & Globalization: Who will be number 1 tomorrow? o In the past, America has been the undisputed leader in so many areas of international competition (economy, education, etc.), but America’s socalled “lead” is shrinking Most competitive? US ranked number 5 Richest? US ranked number 6 Most free? US ranked number 12 o We are living in a world being rapidly changed by globalization The trend of the world economy toward becoming a more interdependent system Globalization has created a world where time and distance have virtually collapsed, as reflected in 3 main points The rise of the “global village” and electronic commerce The world’s becoming one market instead of many national ones The rise of both megafirms and Internet enabled minifirms worldwide The Rise of the “Global Village” & Electronic Commerce o From transportation to communication Transportation began to yield to the electronic exchange of information In 1844 the telegraph was invented,1876 it was fighting again
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