Transcript Ethics stakeholder expectations and organisational

Culture and Ethics
Crispin Farbrother
From: Gerry Johnson and Kevan Scholes Exploring Corporate Strategy 5th Edition 1999
Objectives
 Students are to understand and evaluate ethical
matters within business and the business
environment.
 Students are to apply basic ethical philosophies to
strategic management.
 Students are to be able to evaluate the role of culture
in an organisation’s ethical purpose or stance.
 Students are to be able to apply corporate
governance to organisations.
From: Gerry Johnson and Kevan Scholes Exploring Corporate Strategy 5th Edition 1999
Corporate governance
• Whom should the
organisation serve?
• How should purposes be
determined?
Business ethics
• Which purposes should
be prioritised?
• Why?
Organisational purposes
• Mission
• Objectives
Stakeholders
• Whom does the
organisation serve?
Cultural context
• Which purposes are
prioritised?
• Why?
Exhibit 5.1 Influences on organisational purposes
From: Gerry Johnson and Kevan Scholes Exploring Corporate Strategy 5th Edition 1999
Reports received:
Beneficiaries
Limited reports
Trustees
Limited investment performance reports
Investment managers
Board
Accounts
Analysts’ reports
Company briefings
Budgets/qualitative reporting
Executive directors
Budgets/qualitative reporting
Senior executives
Budgets/other operating reports
Managers
Exhibit 5.2 The chain of corporate governance: typical reporting structure
Source: David Pitt-Watson, Braxton Associates. Reproduced with permission
From: Gerry Johnson and Kevan Scholes Exploring Corporate Strategy 5th Edition 1999
ETHICAL STANCE
Internal
managers
Legal
minimum
Ideological
Secretive
Evangelical
Regulations
and
procedures
Political
DRIVERS
OF
STRATEGY
External
stakeholders
Exhibit 5.13 The role of mission statements
From: Gerry Johnson and Kevan Scholes Exploring Corporate Strategy 5th Edition 1999
Some common conflicts of
expectations
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Growth vs profitability
Short term vs investment
Control vs professional managers
Ownership vs funding
Ownership vs accountability
Efficiency vs jobs
Mass appeal vs quality
Exhibit 5.3
From: Gerry Johnson and Kevan Scholes Exploring Corporate Strategy 5th Edition 1999
ANGLO-SAXON MODEL (USA AND UK)
Strengths
Weaknesses
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Dynamic market orientation
Fluid capital
Internationalisation possible
EUROPEAN MODEL (GERMANY)
Strengths
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Long-term industrial strategy
Very stable capital
Strong governance procedures
ASIAN MODEL (JAPAN)
Strengths
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Long-term industrial strategy
Stable capital
Overseas investments
Volatile instability
Short-termism
Inadequate governance structures
Weaknesses
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Internationalisation difficult
Vulnerable to global market for companies
Weaknesses
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Growth of merger activity
Growth of institutional investor activism
Growth of financial speculation
Secretive, sometimes corrupt, procedures
Exhibit 5.4 A critique of some different corporate governance systems
Source: T. Clarke and E. Monkhouse (eds), Rethinking the Company, Financial Times/Pitman, 1994. Reproduced with permission
From: Gerry Johnson and Kevan Scholes Exploring Corporate Strategy 5th Edition 1999
THE ROLE OF THE BOARD (1)
 Anglo-Saxon (UK and US)
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single tier board
executives and non-executives
supervises managers
sub-committees
 European (Germany)
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
two tier board
upper tier supervises lower tier
lower tier managers
co-determination (shareholders/employees)
From: Gerry Johnson and Kevan Scholes Exploring Corporate Strategy 5th Edition 1999
THE ROLE OF THE BOARD (2)
 Asia (Japan)
 mainly executives
 a tier in management hierarchy
 cultural expectations of directors
From: Gerry Johnson and Kevan Scholes Exploring Corporate Strategy 5th Edition 1999
Activity
Read illustration 5.1 page 206, Johnson & Scholes,
1999. Exploring Corporate Strategy 5th Edition.
Hemel Hempstead: Prentice Hall. Utilising Exhibit
5.2 answer the two questions set.
From: Gerry Johnson and Kevan Scholes Exploring Corporate Strategy 5th Edition 1999
Business ethics
Is it an oxymoron?
From: Gerry Johnson and Kevan Scholes Exploring Corporate Strategy 5th Edition 1999
“The ethical stance is the extent to
which an organisation will exceed
its minimum obligation to
stakeholders.”
Johnson & Scholes, 1999,p225
From: Gerry Johnson and Kevan Scholes Exploring Corporate Strategy 5th Edition 1999
Moral Philosophies
 Ideas of right and wrong
 A system of values by which people live
 In particular refers to principles or rules that one uses to decide
right from wrong
"They present guidelines for determining how conflicts in human
interests are to be settled and for optimising mutual benefit of
people living together in groups"
(Ferrell & Freadrich, 1997)
 There is no one moral philosophy accepted by everyone.
 There are many philosophies and each one is complex. We will
only look at the basic concepts.
From: Gerry Johnson and Kevan Scholes Exploring Corporate Strategy 5th Edition 1999
Moral Philosophies
 Teleology (measure by consequences)
 Two teleological philosophies are:
egoism  maximise an individual's self interest.
Utilitarianism -
 greatest good for the greatest number of people.
Greatest total utility.
From: Gerry Johnson and Kevan Scholes Exploring Corporate Strategy 5th Edition 1999
Deontology
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"Focuses on the preservation of individual rights and on the intentions
associated with a particular behaviour rather than on its
consequences."
Act in a way that you feel comfortable with everyone in the world
seeing and be it that your rational is suitable to become a universal
principle.
Belief in the means rather than the ends.
 Split into
1) rule deontologists and 2)act deontologists.
1) The golden rule
2) Equity, fairness and impartiality
From: Gerry Johnson and Kevan Scholes Exploring Corporate Strategy 5th Edition 1999
Relativist
 "Evaluates ethicalness subjectively on the basis of
individual and group experiences."
(Ferrell)
 Group consensus (however circumstances change)
Group could be
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employees,
peers,
suppliers,
customers,
community.
From: Gerry Johnson and Kevan Scholes Exploring Corporate Strategy 5th Edition 1999
1
Short-term
shareholder
interests
2
Longer-term
shareholder
interests
3
Multiple
stakeholder
obligations
4
Shaper
of
society
Exhibit 5.7 Four possible ethical stances
From: Gerry Johnson and Kevan Scholes Exploring Corporate Strategy 5th Edition 1999
Should organisations be responsible for ...
INTERNAL ASPECTS
Employee welfare
... providing medical care, assistance with morgages, extended sickness leave, assistance for
dependants, etc.?
Working conditions
... enhancing working surroundings, social and sporting clubs, above minimum safety standards,
etc.?
Job design
... designing jobs to the increased satisfaction of workers rather than for economic efficiency?
Exhibit 5.8a Some questions of corporate social responsibility
From: Gerry Johnson and Kevan Scholes Exploring Corporate Strategy 5th Edition 1999
Should organisations be responsible for ...
EXTERNAL ASPECTS
Green issues
... reducing pollution below legal standards if competitors are not doing so?
... energy conservation?
Products
... danger arising from the careless use of product by consumers?
Markets and marketing
... deciding not to sell in some markets?
... advertising standards?
Suppliers
... ‘fair’ terms of trade?
... blacklisting suppliers?
Employment
... positive discrimination in favour of minorities?
... maintaining jobs?
Community activity
... sponsoring local events and supporting local good works?
Exhibit 5.8b Some questions of corporate social responsibility
From: Gerry Johnson and Kevan Scholes Exploring Corporate Strategy 5th Edition 1999
Seminar Preparation
 Be prepared to answer the receding
questions.
 Ensure that you can support your views.
 Can you equate this with the moral
philosophies?
From: Gerry Johnson and Kevan Scholes Exploring Corporate Strategy 5th Edition 1999
Preparation & Reading
 Much is said about culture in the
strategy books.
 You are to read around the areas
covered.
 Here are a few general pointers and
questions that are raised when
discussing culture.
From: Gerry Johnson and Kevan Scholes Exploring Corporate Strategy 5th Edition 1999
Values
Beliefs
Paradigm
Taken-for-granted
assumptions
Exhibit 5.10 Culture in three layers
Source: Adapted from E, Schein, Organisation Culture and Leadership, Jossey-Bass, 1985
From: Gerry Johnson and Kevan Scholes Exploring Corporate Strategy 5th Edition 1999
Stories
 What core beliefs do stories reflect?
 How pervasive are these beliefs (through levels)?
 Do stories relate to:
 strengths or weaknesses?
 successes or failures?
 conformity or mavericks?
 Who are the heroes and villains?
 What norms do the mavericks deviate from?
Exhibit 5.11a Analysing the cultural web: some useful questions
From: Gerry Johnson and Kevan Scholes Exploring Corporate Strategy 5th Edition 1999
Routines and rituals
 Which routines are emphasised?
 Which would look odd if changed?
 What behaviour do routines encourage?
 What are the key rituals?
 What core beliefs do they reflect?
 What do training programmes emphasise?
 How easy are rituals/routines to change?
Exhibit 5.11b Analysing the cultural web: some useful questions
From: Gerry Johnson and Kevan Scholes Exploring Corporate Strategy 5th Edition 1999
Organisational structure
 How mechanistic/organic are the structures?
 How flat/hierarchical are the structures?
 How formal/informal are the structures?
 Do structures encourage collaboration or
competition?
 What type of power structures do they support?
 Is the organisation centralised or decentralised?
The structure and its influence on ethics: some useful questions
From: Gerry Johnson and Kevan Scholes Exploring Corporate Strategy 5th Edition 1999
Control systems
 What is most closely monitored/controlled?
 Is emphasis on reward or punishment?
 Are controls related to history or current strategies?
 Are there many/few controls?
From: Gerry Johnson and Kevan Scholes Exploring Corporate Strategy 5th Edition 1999
Power structures
 What are the core beliefs of the leadership?
 How strongly held are these beliefs (idealists or
pragmatists)?
 How is power distributed in the organisation?
 Where are the main blockages to change?
From: Gerry Johnson and Kevan Scholes Exploring Corporate Strategy 5th Edition 1999
Overall
 What is the dominant culture (defender, prospector,
analyser)?
 How easy is this to change?
Exhibit 5.11g Analysing the cultural web: some useful questions
From: Gerry Johnson and Kevan Scholes Exploring Corporate Strategy 5th Edition 1999
CHARACTERISTICS
TYPE
OBJECTIVES
STRATEGIES
PLANNING
Defenders
Secure
niches
Cost-efficiency
Specialisation
Centralised
Tight control
Prospectors
Seek
new
opportunities
Product
+
Market
development
Flexibility
De-centralised
Analysers
Match
new with
old
Steady growth
Market
penetration
Co-ordinating
roles
Exhibit 5.12 Characterising culture
Source: Adapted from R.E. Miles and C.C. Snow, Organisational Strategy, Structure and Process. McGraw-Hill, 1978
From: Gerry Johnson and Kevan Scholes Exploring Corporate Strategy 5th Edition 1999
The End
But your beginning
From: Gerry Johnson and Kevan Scholes Exploring Corporate Strategy 5th Edition 1999