Management 301 Week 2 Notes
Management 301 Week 2 Notes Management 301
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This 8 page Class Notes was uploaded by Eunji Cho on Friday January 29, 2016. The Class Notes belongs to Management 301 at University of Massachusetts taught by Bogdan Prokopovych in Spring 2016. Since its upload, it has received 43 views. For similar materials see Principles of Management in Business, management at University of Massachusetts.
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Date Created: 01/29/16
UMass Amherst Management 301 Professor Prokopovych Week 2 Notes: Jan 25-29 By Eunji Cho January 26, 2016 Social Responsibility & Managerial Ethics Companies that practice social responsibility • Newman’s Own: donated over $450 million to charity • Toms: donates one pair of shoes for one sold • Warby Parker: donates glasses The companies are commercially successful and creating value for the society Another story • Martin Shkreli of Turing raised the price of Daraprim, a 60- year-old drug that used to cost $13.5 to $750 • Daraprim is an important drug for those with weakened immune system • Raises a wave of criticism (including Hillary Clinton) • In December 2015, he was arrested on securities fraud charges Development of Individual Ethics • Family: background, marriage • Friends: social networks • Peers • Teachers: academic influence • Religion: values of the specific religion • Job experiences • Life experiences Kohlberg’s Moral Stages • Pre-conventional (self-centered) - SELF 1. Punishment / obedience 2. Self-interest / rewards • Conventional (conformity) - Others 3. Parental approval 4. Group approval / Law & order morality • Post-conventional (rational) - Humankind 5. Social contract 6. Principled conscience Basic Approaches to Ethics • Ethical dilemma: choice between two competing but arguably valid options • Help avoid an ethical lapse: decision that is contrary to one’s stated beliefs and company policies Ethical decision-making frameworks / approaches 1. Utilitarian: the consequences of an action o What brings the greets good? o Issue: different evaluations 2. Moral rights: moral standing of actions independent of their consequences o Some things are simply right or wrong o Issue: debatable 3. Universalism: choice of action that applies to all under any situation o Kant: actions that limit freedom and autonomy are immoral o Issue: can easily justify malfeasance (e.g. bribes) 4. Justice: equitability of distribution of costs and benefits o Distributive – performance o Procedural - fare process o Compensatory - compensation of those hurt by actions o Issue: hard to make people comply Factors of Moral Intensity: degree to which people see an issue as an ethical one 1. Magnitude of the consequences 2. Social consensus 3. Probability of effect 4. Temporal immediacy 5. Proximity 6. Concentration of effect Can managers bring different people together to the same understanding how ethical an issue is? Efficiency Perspective • Managers’ responsibility: maximize profits for the owners of the business • Managers as Owners o Self-interest: if manager of business is also its owner, the self interest of the owner are best achieved by serving the needs of society o Example: if society demands a product be made within certain environmental and safety standards, it is in the best interests of owner to produce the product to meet those standards • Managers as Agents o Separation of ownership/control: shareholders/managers o Serve as agents of the organization’s owners o Managers have no responsibility to society unless it maximizes value for shareholders Social Responsibility Perspective • Firms have responsibilities and obligations to society as a whole, not just shareholders • Key stakeholders o Firm § Employees § Suppliers § Communities § Financiers § Society § Shareholders Extending CSR: Creating Shared Value? • Approach that originates from the Harvard Business Review article by HBS professors Michael Porter and Mark Kramer • “policies and operating practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates.” Efficiency vs. Social Responsibility Perspectives: ethical dilemmas How firms make better ethical decisions • Code of ethics o A formal one to three page statement outlining the types of behavior that are and are not acceptable • Codes generally stress o Being a good “organization citizen” o Guiding employee behavior away from unlawful or improper acts that could harm the organization How firms make better ethical or pro-social decisions • Third-party certification (MSC, ISO 14000) • Industry voluntary regulation (ResopnsibleCare) Corruption • Abuse of public office for private gain (UN Global Program Against Corruption) • Abuse of power, evidence of private gain • Types: o Bribery, nepotism, fraud, embezzlement o Administrative, political o Grand, petty January 28, 2016 Decision-Making Ethical Decision Making • Choosing to kill lab rats for 10 Euros or less • 3 groups: o An individual o One seller & one buyer o Multilateral double auction: 7 buyers and 9 sellers • 45% of first group, 70% of second group, 75% of third group chose 10 Euros “Markets erode moral values”: the environment affects our decision- making calculus Examples from History • RAND Corporation (Research and Development) o Initially started under an air force grant as a Project RAND within Douglas Aircraft Company o Nonprofit private corporation in May 1948 based in Santa Monica, CA o Has been hiring natural and social scientists, engineers o Allowed for civil analysts to enter the field of military strategy Decisions and Uncertainty • Cuban Missile Crisis of 1962 o Thomas Schelling (Strategy of Conflict, 1970) o Brinkmanship Decisions and Framing • Prospect Theory o The response is more extreme if framed as elimination of risk than reduction of risk o Difference between $10-$20>$110-$120 if expressed as gains Decision-making • Individual vs. Group • Specifying the nature of a particular problem or opportunity • Selecting among available alternatives to solve a problem or capture an opportunity Decision-making process • Two distinct categories of decision-making process i. Formulation phase 1. Identifying problem/opportunity 2. Acquiring information 3. Diagnosing relevant factors ii. Solution phase 1. Generating alternatives 2. Selecting preferred solution 3. Implementing decided course of action 4. Monitor for success • Three models of decision-making i. Rational: classical model (earliest attempt) 1. Identify decision situations: problems, opportunities a. Problem: exists when a manager detects a gap between a firm’s existing and desired performance b. Opportunity: exists when a manager sees a way for the firm to achieve a more desirable state than the one it’s currently in 2. Develop objectives and criteria: specific criteria, relative weightings 3. Generate alternatives: past solutions, creative new solutions 4. Analyze alternatives: minimally acceptable results, feasibility, best results 5. Select alternative 6. Implement decision 7. Monitor and evaluate results 8. Assumptions 9. Factors that inhibit one’s ability to accurately identify and analyze problems ii. Administrative: bounded-rationality model 1. Possible solutions examined one at a time a. If 1 solution is acceptable, stop b. If 1 solution is unacceptable, discard, next 2. Use Heuristics to evaluate a. Rule that limits search to those alternatives with high probability of success 3. Satisficing a. Choosing a minimally acceptable solution – not one that produces the best or optimal result 4. Assumption a. People usually settle for acceptable rather than maximum options iii. Retrospective model: model that focuses on how decision makers attempt to rationalize their choices after they are made 1. Implicit favorites: alternative originally wanted 2. Confirmation candidate: second-best alternative identified 3. Perceptual distortion: highlighting positive features of implicit favorite 4. Intuitive decision making: primarily conscious • Types of decisions o Gresham’s law Group decisions making • Many of basic processes remain the same as individuals – models • What’s different is the social interaction, which complicates the dynamics • Groups have superior cumulative knowledge • Groups arrive at decisions more slowly: requires time for cooperation • Assets and Liabilities • Issues o The groupthink occurs when agreement among members becomes so dominant that is overrides a realistic appraisal of alternative courses of action § Causes poor quality decisions, poor performance, wasted resources, lost opportunities o Escalating commitment exhibits greater levels of commitment to a decision as time passes and investments are made, even after significant evidence emerges indicating that the original decision was incorrect • Formulating the problem o Structured debate § Devil’s advocate § Multiple advocacy § Dialectical inquiry • Implementing the solution o Brainstorming o Nominal group technique o Delphi technique
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