Transcript Principles of Management - Harford Community College

Certification Study Group
Business Ethics and Social
Responsibility
Comparison of Business Ethics
and Social Responsibility
Business Ethics
Social
Responsibility
Refers to the principles and
standards that define
acceptable conduct in the world
of business.
Refers to a business’s obligation
to maximize its positive impact
and minimize its negative impact
on society.
©The McGraw-Hill Companies, 2000
Comparison of Business Ethics and
Social Responsibility
Business ethics deal with the right and
wrong actions that arise in any work
environment
Social responsibility refers to
management’s consideration of the
social and economic effects of its
decisions
The Role of Ethics in Business
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Laws and regulations codify the most
basic ethical and responsibility
concerns.
Business ethics goes beyond legal
issues.
All actions deemed unethical by society
are not necessarily illegal.
Ethical Issue
3-2
An identifiable problem, situation, or
opportunity that requires a person to
choose from among several actions that
may be evaluated as right or wrong,
ethical or unethical.
Ethical Issue Categories
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Conflict of interest
Fairness and honesty
Communications
Business relationships
Plagiarism
Company Loyalty vs. Truth
The Pyramid of Social
Responsiblity
Voluntary
Responsibilities
being a
“good corporate citizen”;
contributing to the
community and quality of life
Ethical Responsibilities
being ethical; doing what is right, just,
and fair; avoiding harm
Legal Responsibilities
obeying the law (society’s codification of right
and wrong); playing by the rules of the game
Economic Responsibilities
being profitable
Source: Adapted from Archie B. Carroll, “The Pyramid of Corporate
Social Responsibility: Toward the Moral Management of
Organizational Stakeholders.” Business Horizons 34 (July/August 1991): 42.
Responsibility Issues
To The General Public
and the Environment
To The Consumer
Responsibilities of
Business
To Owners & Stockholders
To The Employee
Arguments for Social
Responsibility
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Business helped to create many of the social
problems that exist today, so it should play a
significant role in solving them
Businesses should be more responsible because they
have the financial and technical resources to help
solve social problems.
As members of society, businesses should do their
fair share to help others.
Socially responsible decision making by businesses
can prevent increased government regulation.
Social responsibility is necessary to ensure economic
survival
Arguments Against Social
Responsibility
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It sidetracks managers from the primary goal of
business–earning profits.
Participation in social programs gives businesses
greater power, perhaps at the expense of particular
segments of society.
Some people question whether business has the
expertise needed to assess and make decisions
about social problems.
Many people believe that social problems are the
responsibility of government agencies and officials,
who can be held accountable by voters.
Certification Study Group
The Control Process
The Nature of Control

Control

The regulation of organizational activities
so that some targeted element of
performance remains within acceptable
limits.
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Provides organizations with indications of how
well they are performing in relation to their
goals.
Provides a mechanism for adjusting
performance to keep organizations moving in
the right direction.
The Planning—Controlling Link
Source: Van Fleet, David D., and Tim Peterson, Contemporary Management, Third Edition. Copyright © 1994 by Houghton Mifflin Company. Used with permission.
The Nature of Control

The Purpose of Control

Control is one of the four basic management functions. The
control function, in turn, has four basic purposes.
Adapt to environmental change
Limit the accumulation of error
Control helps the organization
Cope with organizational complexity
Minimize costs
Types of Resource Controls
Physical
Financial
Human
Information
The Nature of Control

Types of Controls
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Areas of Control
 Physical resources — inventory management, quality
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control, and equipment control.
Human resources — selection and placement, training
and development, performance appraisal, and
compensation.
Information resources — sales and marketing
forecasts, environmental analysis, public relations,
production scheduling, and economic forecasting.
Financial resources — managing capital funds and cash
flow, collection and payment of debts.
The Nature of Control

Steps in the Control Process
1
Establish
standards
2
Measure
performance
3
Compare
performance
against standards
Maintain the
status quo
Correct the
deviation
4
Determine need
for corrective
action
Change
standards
Figure 14.3
Steps in the Control Process
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Establish Standards
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Control standard—a target against which
subsequent performance will be compared.
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Control standards should be expressed in
measurable terms.
Control standards should be consistent with
organizational goals.
Control standards should be identifiable indicators of
performance.
Steps in the Control Process
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Measure Performance
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Performance measurement is an ongoing
process.
Performance measures must be valid indicators
(e.g., sales, costs, units produced) of
performance.
Steps in the Control Process
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Compare Performance Against Standards
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Define what is a permissible deviation from the
performance standard.
Utilize the appropriate timetable for measurement.
Determine the Need for Corrective Action
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Maintain the status quo (do nothing).
Correct the deviation to bring operations into
compliance with the standard.
Change the standard if it was set too high or too
low.
Forms of Operations Control
Feedback
Inputs
Transformation
Outputs
Preliminary control
Screening control
Postaction control
Focuses on inputs
Focuses on how
Focuses on outputs
to the organizational
inputs are being
from the organiza-
system
transformed into
tional system
outputs
Figure 14.4
Financial Control
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Financial Control
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Control of financial resources (i.e.,
revenues, shareholder investment) as they
flow into the organization, are held by the
organization (i.e., working capital, retained
earnings), and flow
out of the
organization
(i.e., payment of expenses).
Financial Control
Budgets
 Budget
 A plan expressed in numerical terms
 Financial
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Operating
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Sources and uses of cash
Planned operations in financial terms
Nonmonetary
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Planned operations in nonfinancial terms
Financial Control
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Financial Control
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Budgetary Control
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Budgets may be established at any
organizational level.
Budgets are typically for one year or less.
Budgets may be expressed in
financial terms, units of
output, or other quantifiable
factors.
Financial Control
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Budgets serve four purposes:
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Help managers coordinate resources and projects.
Help define the established standards for control.
Provide guidelines about the
organization’s resources
and expectations.
Enable the organization
to evaluate the
performance of
managers and
organizational units.
Operating unit
budget requests
Division budget
requests
Organizational budget
• Prepared by budget
committee
• Approved by budget
committee, controller,
and CEO
Financial
Control

Developing
Budgets in
Organizations
Figure 14.5
Other Tools of Financial
Control
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Ratio Analysis
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The calculation of of one or more financial ratios
to assess some aspect of the organization’s
financial health.
Financial Audits

Audit—an independent appraisal of an
organization’s accounting, financial, and
operational systems.
 External audits—financial appraisals conducted
by experts who are not employees of the
organization. Internal audits—appraisals
conducted by employees of the organization.
Managing Control in
Organizations
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Characteristics of Effective Control
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Integration with Planning
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Flexibility
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the more control is linked to planning, the more
effective the control system.
the control system must be flexible enough to
accommodate change.
Accuracy
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Inaccurate information results in bad decision
making and inappropriate managerial actions.
Managing Control in
Organizations
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Characteristics of Effective Control
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Timeliness
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A control system should provide information as
often as necessary.
Objectivity
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A control system
must be free from bias
and distortion.
Managing Control in
Organizations
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Resistance to Control
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Overcontrol
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Trying to control too many details becomes
problematic when control affects employee
behavior and employees perceive control
attempts as unreasonable.
Inappropriate Focus
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The control system may be too narrow or it
may focus too much on quantifiable variables
and leave no room for analysis or
interpretation.
Managing Control in
Organizations
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Resistance to Control
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Rewards for Inefficiency
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Rewarding operational inefficiency can lead
employees to behave in ways that are not in
the best interests of the organization.
Too much accountability
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Efficient controls are resisted
by poorly performing
employees.
Overcoming Resistance to
Control
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Resistance to control can be overcome by:
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Designing effective controls that are properly
integrated with organizational planning and
aligned with organizational goals and standards.
Creating controls that are flexible, accurate,
timely, and objective.
Avoiding overcontrol in the implementation of
controls.
Guarding against creating controls that reward
inefficiencies.
Overcoming Resistance to
Control
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Resistance to control can be overcome by:
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Encouraging employee participation in the
planning and implementing of control systems.
Developing a system of checks and balances in
the control systems through the use of multiple
standards and information systems that allow the
organization to verify the accuracy of performance
indicators.
Certification Study Group
Organizational Structure and
Authority
Organizational Culture
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Refers to an organization’s shared values,
beliefs, traditions, philosophies, rules, and
heroes.
Also referred to as corporate culture
Organizational culture gives employees’ roles
meaning and suggests rules for how to
behave and deal with problems
Organizational culture
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A firm’s culture may be expressed formally
through codes of ethics, memos, manuals,
and ceremonies.
A firm’s culture may be expressed informally
through
dress
codes,
work
habits,
extracurricular activities, and stories.
Should be shared by all members of the
organization and in turn expressed to
outsiders
Structure in Organizations
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Structure
Organizing
Organization
Human Interaction
Structure
Goal Directed Activities
Assigning Tasks
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Specialization
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The division of labor into small, specific
tasks and the assignment of employees to
do a single task
Rationale for specialization is efficiency
Steps in the Organizing Process
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Determine specific work activities necessary
to implement plans and objectives
Group work activities into logical patterns or
structures
Assign activities to specific positions and
people, and allocate necessary resources
Coordinate activities of different groups and
individuals
Evaluate results of the organizing process
The Organization Chart

The visual representation of a firm’s
structure that illustrates:
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Job positions and functions
Lines of authority
Staff relationships
Lines of communication
Common Bases of
Departmentalization
Geographic
Eastern
Region
Southern
Region
Accounting
Midwest
Region
Human
Resources
Rocky
Mountain
Region
Western
Region
Tide
Detergent
Sure
Deodorant
Function
Manufacturing
Military
Accounts
Corporate
Accounts
Quality
Control
Product
Crest
Toothpaste
Customer
Government
Accounts
Research &
Development
Small
Business
Accounts
Non-Profit
Accounts
Jif
Peanut
Butter
Folgers
Coffee
Functional Departmentalization
Accounting
Human
Resources
Research &
Manufacturing
Development
Quality
Control
Product Departmentalization
Tide
Detergent
Sure
Deodorant
Crest
Toothpaste
Jif
Peanut
Butter
Folgers
Coffee
Geographic Departmentalization
Eastern
Region
Southern
Region
Midwest
Region
Rocky
Mountain
Region
Western
Region
Customer Departmentalization
Government
Accounts
Military
Accounts
Corporate
Accounts
Small
Business
Accounts
Non-Profit
Accounts
Authority and Delegation
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The act of assigning work activities to
subordinates
Delegation is a transfer of authority
Three Types of Authority
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Line Authority
Staff Authority
Functional Authority
Line Structure/Organizations
Owner
Manager
Assistant
Manager
Hourly
Employees
A Line-and-staff Organization
President
Assistant to
President
Director of
Human
Resources
Director of
Operations
Director of
Purchasing
Unit 1
Plant Manager
Sup.of
Human
Resources
Other
Supervisors
Sup. Of
Operations
Authority Relationships
Line
Staff
Functional
Other
Directors
Unit 2
Plant Manager
Sup. of
Purchasing
Sup.of
Human
Resources
Other
Supervisors
Sup. Of
Operations
Sup. of
Purchasing
Chain of Command
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More commonly known as unity of
command - an employee should have
only one supervisor to whom he/she is
directly responsible
This principle should not be violated
Span of Management:
Wide Span and Narrow Span
8-6
Wide Span: Flat Organization
Narrow Span: Tall Organization
©The McGraw-Hill Companies, 2000
Also Known As Span of
Control
There are contrasting spans of control
Wide span of control
Contemporary organizations
Narrow span
of control
The 1970s
Span of Control
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Wide span of control
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Fewer levels of management
Reduces costs
Requires improvements in skill levels
Requires redesigning jobs
Degree of Centralization
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The extent to which authority is
delegated throughout an organization
determines its degree of centralization.
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Centralized
Decentralized
Other Forms of Organization
Structure
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8-7
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Multidivisional
Matrix
©The McGraw-Hill Companies, 2000
An Example of Multidivisional
Structure: The Walt Disney Company
CEO
Michael
Eisner
Walt Disney
Attractions
Motion
Pictures
Walt
Disney
World
Magic
Kingdom
FL
Walt Disney
Studios
TV
Consumer
Products
Animation
Magic
Kingdom
CA
Tokyo
Disneyland
EuroDisney
Disney
Stores
Licensing
Publishing
Epcot
Center
DisneyMGM
Studios
Disney
Channel
Disney
Music
Software
and
Education
Catalog
Marketing
Source: The Walt Disney Company Annual Report
Matrix Design
Design
MFG
Contract
Admin
Purchasing
Accounting
HR
Alpha
Project
Design
Group
MFG
Group
Contracts
Group
Purchasing
Group
Accounting
Group
Human
Resources
Group
Beta
Project
Design
Group
MFG
Group
Contracts
Group
Purchasing
Group
Accounting
Group
Human
Resources
Group
Gamma
Project
Design
Group
MFG
Group
Contracts
Group
Purchasing
Group
Accounting
Group
Human
Resources
Group
Omega
Project
Design
Group
MFG
Group
Contracts
Group
Purchasing
Group
Accounting
Group
Human
Resources
Group