15: Business ethics and ethical behaviour

1 Definition of business ethics
-analysis of right and wrong, and associated responsibility.
-is the application of ethical values to business behavior.
Approaches to deciding what is right or wrong include discussion of the following:
a. The consequences – ‘the end justifies the means’
b. The motivation of the parties concerned
c. Guiding principles
d. Duties
e. Key values

2 Why business ethics is important
-Business are part of society. Society expects its individuals to behave properly, similarly expects companies to operate to certain standards.
For the organization
For the individual
· Good ethics should be seen as a driver of profitability rather than a burden on business.
· Consumer and employee expectations have evolved over recent years
· An ethical framework is part of good corporate governance and suggests a well-run business
· Consumer may choose to purchase ethical items
· Investors are reassured about the company’s approach to risk management
· Employees will not blindly accept orders to act in a manner that they personally believe to be unethical.
· Employees will be motivated in the knowledge that they operate in an environment of good ethical cooperate behavior


3 How can the ethics of a business decision be judged?

Organisation can draft sets of criteria to be used in making difficult decision:-
-Is it legal?
- Is it contrary to our company's adopted code of ethics?
-Is it contrary to any other published official code of ethics?
- Would you mind other people knowing what you have decided?
-Who is affected by this decision?Would they regard the decision as fair?

4 How is a profession distinguished from other occupations?

A profession is characterised by the following factors:

-the mastering of specialised skills during a period of training
-governance by professiona; association
-compliance with an ethical code
-a process of certification before being allowed to practice

Eg; accounting, law, teaching and medicine

In many countries,it is possible for unqualified people to call themselves accountants and set themselves up in business offering accountancy device. They are not professional accountants because tehy belong to no professional accountancy body (eg ACCA) and have no obligation to follow an ethical code.

5 The accountant's role in promoting ethical behaviour

An ethical dilemma involves a situation where a decision-maker has to decide what is the 'right' and 'wrong' thing to do.

Accounting issues:
-Creative accounting to boost or suppress reported profits
-Director's pay arrangement-should directors continue to receive large pay packets even if the company is performing poorly?
-Should bribes be paid to facilitate contracts, especially in countries where such payments are commonplace?
-Insider trading, where for example directors may be tempted to buy shares in their company knowing that a favourable announcement about to be made should boost the share price.

Production issues:
-Should the company produce certain products at all (eg guns and tobacco) aimed at teenagers?
-Should the company be concerned about the effects on the environment of its production processes?
-Should the company test its products on animal?

Sales and marketing issues:
-Price fixing and anti -competitive behaviour may be overt and illegal or may be more subtle
-Is it ethical to target advertising at children?
-Should products be advertised by junk mail or spam mail?

Personnel (HRM) issues:
-Employees should not be favoured or discriminated against on the basis of gender,race,religion,age and disability?
-The contract of employment must offer a fair balance of power between employee and employer.
-The workplace must be a safe and healthy place to operate in


6. Codes of ethics and codes of conduct

• Most companies (especially large companies) have approached the business ethics issues by formulating a set of internal policies and instructing employees to follow them.
• Ethics officer are appointed to monitor the application of the policies and to be able to discuss ethical dilemmas with employees who approach them.
• The policies can either be broad generalisations (a corporate ethics statement) or can contain specific detailed rules (a corporate ethics code).
• When employees is caught doing something wrong, the company can try to claim that is not the company's fault when a rogue employee acts outside the stated rules.
• Codes of conduct can also be a marketing tool that companies can use to highlight to the public how well they behave.

7.IFAC and ACCA codes of ethics.

Both IFAC and ACCA have developed codes of ethics for their members. Both of the organisation have the same Fundamental Principles :

• Integrity
• Objectivity
• Professional competence and due care
• Confidentiality
• Professional behaviour

14: Committees in the Business Organisation (Part 2)

Just click on the image to view it. hehe

14: Commettees in the business organisation (Part 2)

1 What is a committee?
-a group of people to which some matter is committed
a) Ad hoc committees- temporary and are created for specific purpose for a short-term
b) Formal committees- part of organisationalstructure with specific delegated duties and authority

Committees:
-Permenant
-Authority
-provide a well tried way of resolving difficult decisions because all are involved in decision making process

Features
- Rules of procedure
- Chairperson and secretary
- Committee papers and reports to help committee make well-informed decisions or proposals
- Notice-announcement of the meeting prepared and circulated in advance
- Agenda-setting out what is to be discussed and in what order
- The minutes of the meeting which are the official record of what has taken place

Rigid procedure
- Speaking
- Voting rights
- Proposing the motion and meetings
- Rights of attendance
- The construction of the agenda
- Adding emergency items to the agenda
- Quorum

1.1 The rules of procedure
- To promote the smooth running of a committee
- To ensure that consistancy and fair play are maintained
- To enable both sides in an argument to state their case
- To help to minimise the effect of bullyinh tactics
- To ensure a proper record of all the proceedings is kept

1.2 The size and success of a committee
- too large: not giving individual time to give their view but if everybody speaks waste of time
- too few: lack of breadth of expertise and insufficient deliberation

successful committee should
- representative of all interests
- have a chairperson with qualities of leadership
- suitable subjects for actions and make precise proposals
- circulate reports
- clear cut terms of reference
- necessary skills and experience
- worth the cost of its operation

2. The purposes of committees in an organisation
Task
- decision making
- relaying decisions and instructions
- brainstorming- free exchange to generate new ideas and approaches
- participative problem-solving
- providing advice and information
- consultation

purpose of committee
- gather information
- disseminate information
- generate ideas
- coordinate people
- delaying mechanism
- oversee a dunction or procedure

6 The role of the chair and secretary of a committee
6.1 The Chair
Responsibilities
· Keeping the meeting to a schedule and to the agenda.
· Maintaining order
· Ensuring correct procedure is observed in convening and constituting the meeting , and during the meeting
· Ensuring impartiality and giving all parties a reasonable opportunity to express their views.
· Putting the issue to the vote and declaring the result.
· Depending on the level of formality of the meeting.
Chairperson must have :
· Ability to be decisive
· The ability to silence people in a firm and friendly manner
· Skill in communicating rulings clearly but tactfully.
· The skill of summarizing.
· An awareness of non-verbal behavior
· Sound knowledge of the relevant regulations
6.2 The Secretary
Responsibility of secretary to the committee meeting
· Before meeting
-fixing the date and time of meeting
-booking the venue
-preparing and issuing the agenda and other relevant document
· During meeting
-assisting the chairperson
-making notes
-advising the chairperson on points of procedure
· After meeting
-preparing the minutes
-acting on and communicating decisions
-dealing with correspondence

Stakeholders

3 External Stakeholders

Stakeholder	Need/expectation	Example
Community at large	General public can be a stakeholder,esp if their lives are affected by an organisation’s decision	Local residents’ attitude towards out-of-town shopping centres
Environmental pressure groups	Does not harm the external environment	If airport wants to buy a new runway, the pressure groups may stage a ‘sit in’
Government	Company activities=central to the success of economy.Eg. providing jobs& paying taxes. Legislation (e.g health&safety) must be met by the company	Actions by companies could break the law, or damage environment &governments therefore control what organizations can do.
Trade unions	Active in the decision-making process	If a dept is to be closed, union’ll want to be consulted & there should be a scheme in place to help employees find alternative employment.

4 Stakeholder conflict

Stakeholders	Conflict
Employees vs managers	Jobs/wages vs bonus (cost efficiency)
Customers vs shareholders	Product quality/service levels vs profits/dividends
General public vs shareholders	Effect on the environment vs profit/dividends
Manages vs shareholders	Growth vs independence

*The problem with analysing stakeholders-
they tend to belong to > than 1 group& will change their groupings depending on the issue in hand

-Meeting the needs of most dominant stakeholders is important but other stakeholders' needs have to be considered-nearly every decision becomes a compromise.

Mendelows' power-interest matrix is used when org has difficulty deciding who the dominant stakeholder is.

Level of interest
Low	High	Level of power
Minimal effort	Keep informed	Low
Keep satisfied	Key players	high

-With this, dominant stakeholders/the key players can be identified.
-The needs of the key players must be considered during the formulation and evaluation of new strategies.
-Stakeholder groups can emerge& move from quadrant to quadrant due to specific event-->Change of position in the matrix occur.

Sources of stakeholder power:
Hierarchy: provides people/groups with formal power over others
Influence: may arise from personal qualities (leadership)
control of the government: knowledge, contact& influence of the environment.

13: Stakeholders (Part 1)

Stakeholder is an individual or group, who has an interest in what the organization does, or an expectation of the organization.

1 Internal Stakeholders
They are intimately connected to the organization, and their objective are likely to have a strong influence on how it is run.

Internal stakeholders include:
1. Employees are those who get paid from working and concern about their job security.
Example: If workers are to be given more responsibility, they will expect increased pay.

2. Managers/Directors are those who have higher status in the organization, they also get paid, bonus from working and they concern about their job security too.
Example: If growth is going to occur, the managers will want increased profits, leading to increased bonuses.


2 Connected Stakeholders
They are having a contractual relationship with the organization.

Connected Stakeholders include:
1. Shareholders are those who want steady flow of income so possible capital growth and the continuation of the business will give them confident on the organization.
Example: If capital is required for growth, the shareholders will expect a rise in the dividend stream .

2. Customers are those who want satisfaction from the services and goods/products.
Example: Any attempt to for example increase the quality and the price, may lead to customer dissatisfaction.

3. Suppliers are those will get paid promptly while they supplying the goods/products.
Example: If a decision is made to delay payment to suppliers to ease cash flow, existing suppliers may cease supplying goods.

4. Finance Providers are those who invest or buy the security of the company hence they are looking for the ability to repay the finance.
Example: The firm’s ability to generate cash.

3: Organizational culture

1 Defining organizational culture
1.1 Definition
-organizations have distinctive cultures, and behavior acceptable in one organizational culture may be inappropriate in another
-can change instantly as a result of a single major event.
1.2 Components of culture
• Norms guide people’s behavior
• Symbols or symbolic action
• A set of shared values and beliefs
2 The factors that shape the culture of the organsiation
• Size
• Technology
• Diversity
• Age
• History
• Ownership
3 Writers on culture
3.1 Schien
-First leader of the company create the culture of an organization, thus the link between culture and leadership is very strong.
• Artefacts –these are the aspects of culture that can be easily seen, e.g. the way that people dress.
• Espoused values – these are the strategies and goals of an organization, including company slogans etc.
• Basic assumptions and values- these are difficult to identify as they are unseen, and exist mainly at the unconscious level.
3.2 Handy
- ‘the way we do things around here’, by this handy means the sum total of the belief, knowledge, attitudes, norms and customs that prevail in an organization.
• Power – rely on a central figure, most likely to be the owner of the organization, who strive to maintain absolute control over subordinates
• Role – everything and everyone are in their proper place doing own job, it’s a bureaucratic organization, where the structure determines the authority and responsibility of individual.
• Task – teams established to achieve specific tasks. People describe their position in terms of the results they are achieving. This is often associated with matrix structure.
• Person – is characterized by the fact it exists to satisfy the requirements of the particular individual involved in the organization.
3.3 Hofstede
-an attempt to find aspects of culture that might influence business behavior.
• Individualism vs. collectivism –some cultures are more cohesive than others. Anglo Saxon cultures are generally more individualistic than the collectivist cultures of South America.
• Uncertainty – some cultures, e.g. France and Japan use bureaucracy to reduce uncertainty because they dislike it.
• Power distance - the degree to which culture are willing to accept an inferior position. In south America societies, differences in power were tolerated more than in North European cultures.
• Masculinity vs. femininity – a masculine role is one where the distinction between the roles of the gender is large and the males focus on work, power and success.
• Confucianism vs. dynamism – this look at the attitude to change over the long term, emphasis love to a humanity.

2: Organisational Structure (Part 2)

2: Organizational structure (Part 1)

1.1 Different types of structure

Entrepreneurial - Owner of small companies, usually is built around the boss and his/her employees.

Advantages - One person taking decision lead to decisions is being made quickly so the entrepreneur should recognize the market alters fast act quickly. Also the owner can control over the work force easily.

Disadvantages - The structure is suited to small companies so there is no career path for the employees, when organization growth is hard to cope with the increase volume of decisions.



Functional structure - Organization that have outgrown the entrepreneurial structure and it is on a functional basis, usually exist in a relatively stable environment.

Advantages - Not much of duplicating so similar activities are grouped together. Hence, there are lower costs, standardization of output, specialization and there is a career path for the employees.

Disadvantages - Empire building (Manager will try to gain control over the key project and maximize their job security. As a result some other part of the project may not be achievable and ruin the ultimate goal of the entire project). Decision making in company will be slower due to longer chain of command and the structure is not suited for rapidly growing and diversifying organization too.



Product/Division/Department - Organization structured in accordance with product lines, usually general managers who enjoy responsibility for their own resources.

Advantages - It is easier to grow and diversify, also division managers can clearly see their area so top management can concentrate on strategic matters. As a result general managers are able to train up.

Disadvantages - There will be lack of control and duplication in companies. Also specialists may feel isolated and allocation of central costs problem may occurred.



Geographically structured - Grouping activities on the basis of location, commonly operate over a wide geographic area.

Advantages - It’s enable geographic growth. Also, clear responsibility for areas and top management free to concentrate on strategic matters. General managers are able to train up.

Disadvantages - It’s almost same as divisional structure.



Matrix structure - It aims to combine the benefits of decentralization.

Advantages - It got the advantages of both functional and divisional structures. It is flexible, customer orientation and able to encourage teamwork and the exchange of opinions and expertise.

Disadvantages - It may cause difficulty is in the lines of control and dilution of functional authority, meetings are quite time consuming, also the admin cost is higher.

1.2 Further aspects of organisational structure

Ownership and managers are normally seperated in large companies. This is because managers does not have enough money and they need to rely on bankers or the market ( the owners ).
In order the managers to manage the company in the best interest of the owners and this causes many safeguard/ controls are put in the place such as the formal organisation structures.

Scalar chain
the line of authority that can be traced up or down. This relates the nember of management levels within the organisation.

Span of control
The number of people that she or he is directly responsible.

There are 2 types of span of control:
Tall- narrow span of control
Flat- wide span of control

There are many factors that will influence the span of control:
Nature of work - more repetitive of work wider is the span of control
Type of personnel - better managers have wider span of control
Location of personnel - widely spread personnel have narrower span of control

1.3 Centralisation and decentralisation

analysing structures by refrence of the level which decisions are made

Centralisation
upper levels retain the authority to make decision

Decentralisation
lower levels people are able to take decisions

Factors that will affect the amount of decentralisation:
- management style
- ability of management/employees
- location spread
- size of organisation
- scale of activities

advantages of decentralisation
- senior management can concentrate on strategy
- better decision due to local expertise
- better motivation due to increased training and career path
- quicker responses due to smaller cain of command

disadvantages of decentralisation
- loss of control
- dysfunctional decisions
- lack of goal congruence
- poor decision from inexperience managers
- training cost
- duplication of cost
- extra cost in obtaining information

The business organisation

3. Strategic, tactical and operational planning levels in the organization

Strategic planning

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Tactical planning

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Operational planning

Levels	Definition
Strategic planning	Long term looks at the whole organization defines resource requirements
Tactical planning	Medium term Looks at department/divisional level specifies how to use resources
Operational planning	very short term Very detailed Mainly concerned about control

Strategic plans translated ---> Medium term tactical plans converted --->Detailed performance targets and budgets

3.2 The nature of strategic plan

3.3 The strategic planning process

Process	Definition
Strategic analysis	external analysis of markets,competitors, business environment--> identify opportunities & threats internal analysis of the firm’s resources, competences--> identify strength & weaknesses stakeholder analysis- to understand stakeholder expectations/influenc--> clarify objectives
Strategic choice-	What’s the basis of our strategy?How are we going to compete-high quality/low cost? Where do we want to compete? Which markets,countries,products? How do we want to get there? Organic growth,. Acquisition or joint arrangement such as franchising?
Strategic implementation	Once determined, the long-term strategy needs to be translated into plans for marketing, human resources management, IT, production, organizational structure, etc May involve major changes that have to be managed