Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © 2003 Management, Organizational Policies & Practices Lecture 7 Dr. Amna Yousaf PhD (HRM) University of Twente, the Netherlands

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © 2003 Recap Lecture 6 ØEthics ØManagerial Influence ØWorkplace Deviance  Organizational Deviance  Personal Deviance ØInfluences on Ethical Decision Making  Ethical Intensity of Decision  Moral Development  Principals of Ethical Decisions

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © 2003 Recap Lecture 6 ØPractical Steps to Ethical Decision Making  Overt Integrity Tests  Personlaity based Integrity Tests

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © 2003 Organizational Stakeholders, Social Responsibility & Planning Lecture 7

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © 2003 Learning Outcomes 1.Understanding Organizational Stakeholders 2.To whom organizations are socially responsible. 3.For what organizations are socially responsible. 4.How organizations can choose to respond to societal demands for social responsibility. 5.Whether social responsibility hurts or helps an organization’s economic performance. 6.Discuss the costs and benefits of planning. 7.Describe how to make a plan that works. 8.Discuss how companies can use plans at all management levels, from top to bottom. 9. Describe the different kinds of special-purpose plans that companies use for change and contingencies.

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © 2003 Stakeholders ØIndividuals who affect and are affected by the strategic outcomes achieved and who have enforceable claims on firm’s performance.  Influence through withholding participation in organization.  Not all stakeolders can influence equally, depends on the respective strategic role.

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © 2003 Classification of Stakeholders ØStakeholders could be broadly classified as under:  Capital Market Stakeholders  Product Market Stakeholders  Organziational Stakeholders  General Public ØObjectives of various stakeholder groups often differ from one another

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © 2003 Capital Market Stakeholders ØMost obvious stakeholders are shareholders-invest capital in firm with view to earn returns on investments  Shareholders want maximization of returns which could be acheived by cutting down investment on R&D by firm. Such effort will increase returns in shortrun but may seriously hamper firms’s long run competitive ability.  Serious shareholders may not be in the favor ØMajor suppliers of Capital such as Banks

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © 2003 Capital Market Stakeholders  Dissatsified shareholders may show their concerns through several means such as imposing stricter covenants or selling their stocks altogether  Firms reaction depends on the degree of its dependency relationship with capital market stakeholders.

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © 2003 Product Market Stakeholders ØInclude: primary customers and suppliers ØBoth customers and suppliers can have diverse interests  Customers looking for quality products at lower prices  Suppliers look for clients who can give high prices for their products.  Kmart-suppliers & customers

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © 2003 Organziational Stakeholders ØEmployee’s provide the firm with dynamic, stimulating and rewarding work environment  Union officials are interested in secure jobs under smooth working conditions ØCISCO had to lay off employees, cut costs owing to huge inventroy base from agreement with suppliers. ªUnhappy employees! ØKnowledge intensity of workers make them competeitve weapons affecting strategy implementation and firm performance

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © 2003 General Public/Media ØMedia, public health, safety and protection, conservation of energy and materials ØTuna sandwiches in America and response of environmental groups ØJohnson & Johnson, GE & Sears ØGillette product testing on rats & Rabbits- protest by school teachers Ø81 year old woman paid 2.9million on account of 180 degree hot coffee  700 complaints-response

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © 2003 Strategic Implications ØStrategic decision makers are responsible for a fit between long term and short term challanges ØFirms must carefully identify all important stakeholders ØPrioritise them in case it can not satisfy all (power most important tool to do so followed by urgency and degree of importance of each). ØFirms earning above average returns can easily satisfy all stakeholders.  Others have to make trade offs to minimally satisfy all ØFirms with below average returns can’t even minimally satisfy all  trade off on where to loose least possible support.

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © 2003 To Whom Are Organizations Socially Responsible? Shareholder Model Stakeholder Model Stakeholder Model Maximize Profits Satisfy Interests of Multiple Stakeholders Satisfy Interests of Multiple Stakeholders 6 More

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © 2003 Shareholder Model 6 ØManagers cannot act effectively as moral agents for shareholders ØTime, money, and attention diverted to social causes undermine market efficiency

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © 2003 Stakeholder Model 6 Primary Stakeholders: Shareholders Employees Customers Suppliers Governments Local Communities Primary Stakeholders: Shareholders Employees Customers Suppliers Governments Local Communities Secondary Stakeholders: Media Special Interest Groups Trade Associations Secondary Stakeholders: Media Special Interest Groups Trade Associations

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © 2003 Organization’s Social Responsibilities 7 Don’t violate principles of right and wrong Obey the Law. Ethical Legal Economic Discretionary Make a Profit Social responsibilities

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © CHAPTER THREE Responses to Demands for Social Responsibility 8 StrategiesStrategies Reactive Defensive Accommodative Proactive More

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © CHAPTER THREE Responses to Demands for Social Responsibility 8 Reactive Defensive Accommo- dative Proactive Fight all the way DO NOTHIN G DO MUCH Withdrawal Do only what is required Legal Approach Bargaining Problem Solving Public Relations Approach Be progressive Lead the industry

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © CHAPTER THREE Social Responsibility and Economic Performance 9 Realities of Social Responsibility Can cost a company Sometimes it does pay Does not guarantee profitability

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © 2003 Planning ØThe Benefits ØThe Pitfalls of Planning

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © 2003 The Benefits Intensified Effort Persistence Direction Creation of Task Strategies It Works!

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © 2003 Planning Pitfalls Impede Change & Prevent Adaptation Create a False Sense of Certainty Detachment of Planners

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © 2003 Blast From The Past ØLeaders must have a vision ØPlanners must be close to events ØPlans must be flexible

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © 2003 How to Make a Plan That Works Set Goals Develop Commitment to Goals Develop Effective Action Plans Track Progress Toward Goal Achievement Maintain Flexibility in Planning Adapted from Exhibit 4.1

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © 2003 Setting Goals S pecific M easurable A ttainable R ealistic T imely

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © 2003 Goal Commitment ØThe determination to achieve a goal ØIncreased by:  Setting goals through participation  Making goals reasonable  Making goals public  Obtaining top management support

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © 2003 Developing Effective Action Plans ØFor accomplishing a goal, these list the:  specific steps  people  resources  time period

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © 2003 Tracking Progress ØOne method, setting:  proximal goals - short-term  distal goals - long-term ØSecond method:  gather and provide performance feedback  make adjustments in: ªeffort ªdirection ªstrategies

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © 2003 Maintaining Flexibility ØOption-based planning  keep options open through simultaneous investment  invest more in promising options ØLearning-based planning  plans need to be continuously adjusted  encourages frequent reassessment and revision of goals

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © 2003 Planning from Top to Bottom Vision Adapted from Exhibit 4.3

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © 2003 Planning from Top to Bottom (cont’d) Vision Mission Tactical Plans Management by Objectives Operational Plans Standing Plans Single-Use Plans Adapted from Exhibit 4.4 Top Managers Middle Managers First-Level Managers

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © 2003 Starting at the Top ØVision  statement of purpose  enduring, inspirational, clear, and consistent with company beliefs and values ØMission  flows from vision  more specific goal statements

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © 2003 Setting Vision & Missions ØImportance ØFormation ØComponents ØCommunication

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © 2003 Bending in the Middle ØTactical Plans  specify how a company will use resources, budgets, and people to accomplish goals ØManagement by Objectives  develop and carry out tactical plans  four steps ªdiscuss goals ªparticipatively select goals ªjointly develop tactical plans ªmeet to review performance

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © 2003 What Really Works? Management by Objectives (MBO) MBO & Production 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Probability of success 97% 68% MBO is based on goals, participation and feedback. Companies that use MBO are 97% more likely to outproduce companies that don’t!

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © 2003 Finishing at the Bottom ØOperational plans  day-to-day plans ØSingle-use plans  cover one-time-only events ØStanding plans  plans for recurring events  three kinds ªPolicies – Boxing-blood sport ªprocedures ªrules & regulations – reference letters ØBudgeting

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © 2003 Special-Purpose Plans Planning for Change Planning for Contingencies Planning for Product Development

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © 2003 Planning for Change ØStretch goals  extremely ambitious goals  initially employees don’t know how to accomplish ØBenchmarking  identify outstanding practices in other companies  adapt them to your company

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © 2003 Been There, Done That ØStretch goals are more than just demanding more from employees ØGive employees the tools to succeed ØDon’t punish failure Steve Kerr on Stretch Goals at GE

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © 2003 Planning for Contingencies Planning for Contingencies Scenario Planning ØDefine the scope of the scenario ØIdentify the major stakeholders ØIdentify environmental trends ØIdentify key uncertainties and outcomes of these trends ØUsing steps 1-4, create initial scenarios ØCheck each scenario for consistency and plausibility of facts ØCreate contingency plans from each scenario

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © 2003 Planning for Product Development ØAggregate product plans  Because very few companies can survive by relying on just one product, companies develop aggregate product plans to manage and monitor all new products in development at any one time. Aggregate product plans should indicate the resources (funds, equipment, facilities, materials, and employees) being used for each product, and how that product fits with the company’s mission and strategic plan.

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © 2003 Four keys to faster product development  cross-functional teams ªwhich are made up of individuals from different functional backgrounds (i.e., manufacturing, engineering, marketing), make better product-development decisions. The diversity of functional backgrounds means that cross-functional teams have a greater amount and variety of information, knowledge, and experience available as they develop new products.

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © 2003 Four keys to faster product development  internal and external communication ªis the second critical factor in the product- development process. Like cross-functional teams, frequent internal communication between product-development team members increases the amount of relevant information used to make decisions.

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © 2003 Four keys to faster product development  overlapping development phases ª the third critical factor when planning the product-development process. In contrast to a sequential design process, where each step (product plans and specs, product testing, product roll-out) must be completed before beginning the next step, overlapping development means multiple product- development steps and phases are started and completed at the same time.

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © 2003 Four keys to faster product development Øfrequent testing of product prototypes  The last critical component in the product- development process is frequent testing of product prototypes. A product prototype is a full-scale, working model that is being tested for design, function, and reliability. A good product plan or blueprint is essential. Very few new products succeed without them.

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © 2003 Thank you