Chapter 3 - The Manager's

Changing
Work Environment & Ethical
Responsibilities
Doing the Right Thing
Managers operate in two organizational environments-internal and external both
made up of stakeholders, the people whose interests are affected by the
organization. The first, or internal, environment consists of employees, owners,
and the board of directors.

Internal & External Stakeholders

Should a company be principally responsible to just its stockholders? A broader
term to indicate all those with a stake in an organization is stakeholders-the
people whose interests are affected by an organization's activities.
Managers operate in two organizational environments, both made up of various
stakeholders.
-

Internal stakeholders
External stakeholders

Internal Stakeholders
Whether small or large, the organization to which you belong has people in it
who have an important stake in how it performs. These internal stakeholders
consist of employees, owners, and the board of directors.

Employees
-

conflict may lower the performance of the organization, thereby

hurting everyone's stake
employees are considered "the talent"-the most important resource
o Even during the recent Great Recession, when there were six
unemployed workers for every available U.S. job opening,
SAS continued to treat employees exceptionally well,
resulting in a turnover rate of only 2% in 2009, compared
with a software industry average of 22%.

Owners
-

The owners of an organization consist of all those who can claim it

as their legal property, such as Walmart's stockholders.
In the for-profit world, if
o If you're running a one-person graphic design firm, the owner
is just you-you're what is known as a sole proprietorship.

o
o

If you're in an Internet start-up with your brother-in-law,

you're both owners-you're a partnership.
If you're a member of a family running a car dealership,
you're all owners-you're investors in a privately owned
company.
If you work for a company that is more than half owned by its
employees (such as Lakeland, Florida-based, Publix Super
Markets or W L. Gore & Associates, maker of Gore-Tex fabric
and No. 13 on Fortune's 2010 "Best Companies to Work For"
list), you are one of the joint owners-you're part of an
Employee Stock Ownership Plan (ESOP).
And if you've bought a few shares of stock in a company
whose shares are listed for sale on the New York Stock
Exchange, such as General Motors, you're one of thousands
of owners-you're a stockholder.

Board of Directors
-

In a corporation, it is the board of directors, whose members are

elected by the stockholders to see that the company is being run
according to their interests.
In non-profit organizations, such as universities or hospitals, the
board may be called The Environment of Management the board of
trustees or board of regents. Board members are very important in
setting the organization's overall strategic goals and in approving
the major decisions and salaries of top management.

External Stakeholders
People or groups in the organization's external environment that are affected by
it. The external environment consists of the task environment and the general
environment.

The Task Environment

The task environment consists of 11 groups that present you with daily tasks to
handle: customers, competitors, suppliers, distributors, strategic allies, employee
organizations, local communities, financial institutions, government regulators,
special-interest groups, and mass media.
1. Customers
a. The first law of business (and even nonprofits) is to take
care of the customer.
b. Customers are those who pay to use an organization's goods
or services.
c. Many customers value service over price, according to a
Forrester Research report, with 54% thinking it would be
easy to have a customer service issue resolved in clothing
and apparel outlets but only 30% thinking the same in

health insurance companies.

2. Competitors
a. Compete for customers or resources, such as talented
employees or raw materials
b. Every organization has to be actively aware of its
competitors.
c. Customers can buy the same products at their rivals stores.
3. Suppliers
a. Provides supplies-that is, raw materials, services,
equipment, labour, or energy to other organizations.
b. Suppliers in turn have their own suppliers:
i. The publisher of this book buys the paper on which it
is printed from a paper merchant, who in turn is
supplied by several paper mills, which in turn are
supplied wood for wood pulp by logging companies
with forests in the United States or Canada.
4. Distributors
a. A distributor is a person or an organization that helps
another organization sell its goods and services to
customers.
b. Distributors can be quite important because in some
industries there is not a lot of competition, and the
distributor has a lot of power over the ultimate price of the
product.
c. However, the rise in popularity of the Internet has allowed
manufacturers of personal computers, for example Dell, to
cut out the "middleman"-the distributor-and to sell to
customers directly.
5. Strategic Allies
a. Companies, and even non-profit organizations, frequently
link up with other organizations (even competing ones) in
order to realize strategic advantages.
b. The term strategic allies describes the relationship of two
organizations that join forces to achieve advantages which
neither can perform as well alone.
6. Employee Organizations: Unions & Associations
a. Labour unions tend to represent hourly workers;
professional associations tend to represent salaried
workers.
7. Local Communities
a. Local communities are important stakeholders, as becomes
evident not only when a big organization arrives but also
when it leaves, sending government officials scrambling to
find new industry to replace it.
8. Financial Institutions
a. Established companies often need loans to tide them over
when revenues are down or to finance expansion, but they
rely for assistance on lenders such as commercial banks,
investment banks, and insurance companies.

9. Government Regulators
a. The preceding groups are external stakeholders in your
organization since they are clearly affected by its activities.
b. Government regulators-regulatory agencies that establish
ground rules under which organizations may operate are
considered stakeholders, because they have the legal
authority to prescribe or proscribe the conditions under
which you may conduct business.
i. Such government regulators can be said to be
stakeholders because not only do they affect the
activities of your organization, they are in turn
affected by it.
ii. The Federal Aviation Agency (FAA), for example,
specifies how far planes must stay apart to prevent
mid-air collisions. But when the airlines want to add
more flights on certain routes, the FAA may have to
add more flight controllers and radar equipment, since
those are the agency's responsibility.
10.
Special-Interest Groups
a. Special-interest groups are groups whose members try to
influence specific issues, some of which may affect your
organization.
b. Special-interest groups may try to exert political influence,
as in contributing funds to lawmakers' election campaigns
or in launching letter-writing efforts to officials. Or they may
organize picketing and boycotts - holding back their
patronage of - certain companies
11.
Mass Media
a. Communicate clearly with the public about a crisis,
cooperate with government officials, swiftly begin its own
investigation of a problem, and, if necessary, quickly
institute a product recall.
b. No manager can afford to ignore the power of the mass
media-print, radio, TV, and the Internet-to rapidly and
widely disseminate news

The General Environment

Beyond the task environment is the general environment, or macroenvironment,
which includes six forces: economic, technological, sociocultural, demographic,
political-legal, and international.
You may be able to control some forces in the task environment, but you can't
control those in the general environment.

Economic Forces
o Economic forces consist of the general economic conditions
and trends-unemployment, inflation, interest rates,

economic growth-that may affect an organization's

performance.
Technological Forces
o Technological forces are new developments in methods for
transforming resources into goods or services.
Sociocultural Forces
o Sociocultural forces are influences and trends originating in
a country's, a society's, or a culture's human relationships
and values that may affect an organization.
Demographic Forces
o Demographic forces are influences on an organization
arising from changes in the characteristics of a population,
such as age, gender, or ethnic origin.
Political-Legal Forces
o Political-legal forces are changes in the way politics shape
laws and laws shape the opportunities for and threats to an
organization.
International Forces
o International forces are changes in the economic, political,
legal, and technological global system that may affect an
organization.

The Ethical Responsibilities of a Manager

Imagine having to choose between economic performance and social
performance, which in business is what most ethical conflicts are about.
This is known as an ethical dilemma, a situation in which you have to decide
whether to pursue a course of action that may benefit you or your organization
but that is unethical or even illegal.
Ethics are the standards of right and wrong that influence behaviour.
Ethical behaviour is behaviour that is accepted as "right" as opposed to
"wrong" according to those standards.
Ethical dilemmas often take place because of an organization's value system,
the pattern of values within an organization.
Values are the relatively permanent and deeply held underlying beliefs and
attitudes that help determine a person's behaviour
Organizations may have two important value systems that can conflict:
1. the value system stressing financial performance versus
2. the value system stressing cohesion and solidarity in employee
relationships.

The Utilitarian Approach: For the Greatest Good

Ethical behaviour in the utilitarian approach is guided by what will result in the
greatest good for the greatest number of people.
Managers often take the Utilitarian Approach,
o

Using financial performance-such as efficiency and profit-as the best

definition of what constitutes "the greatest good for the greatest number."

The Individual Approach: For Your Greatest Self-Interest Long Term, Which Will
Help Others.
o

Ethical behavior in the individual approach is guided by what will result in

the individual's best long-term interests, which ultimately are in
everyone's self-interest. The assumption here is that you will act ethically
in the short run to avoid others harming you in the long run.

The Moral-Rights Approach: Respecting Fundamental Rights Shared by

Everyone
o
o

Ethical behaviour in the moral-rights approach is guided by respect for the

fundamental rights of human beings.
We would all tend to agree that denying people the right to life, liberty,
privacy, health and safety, and due process is unethical.

The Justice Approach: Respecting Impartial Standards of Fairness

o
o

Ethical behavior in the justice approach is guided by respect for impartial

standards of fairness and equity.
One consideration here is whether an organization's policies-such as those
governing promotions or sexual harassment cases-are administered
impartially and fairly regardless of gender, age, sexual orientation, and the
like.

Unethical Practices
Insider trading is the illegal trading of a company's stock by people using
confidential company information.
Ponzi scheme is the act of using cash from newer investors to pay off older
ones.
Sarbanes-Oxley Act of 2002, often shortened to SarbOx or SOX, established
requirements for proper financial record keeping for public companies and
penalties of as much as 25 years in prison for noncompliance.

How do people learn ethics?

1. Level 1, pre-conventional - follows rules.
a. People who have achieved this level tend to follow rules and

to obey authority to avoid unpleasant consequences.

b. Managers of the Level 1 sort tend to be autocratic or
coercive, expecting employees to be obedient for
obedience's sake.
2. Level 2, conventional - follows expectations of others.
a. People whose moral development has reached this level are
conformist but not slavish, generally adhering to the
expectations of others in their lives.
b. Level 2 managers lead by encouragement and cooperation
and are more group and team oriented.
c. Most managers are at this level.
3. Level 3, post-conventional - guided by internal values.
a. The farthest along in moral development, Level 3 managers
are independent souls who follow their own values and
standards, focusing on the needs of their employees and
trying to lead by empowering those working for them.
b. Only about a fifth of American managers reach this level.

How Organisations can Promote Ethics

Creating a Strong Ethical Climate

o An ethical climate represents employees' perceptions about the
extent to which work environments support ethical behavior.
o It is important for managers to foster ethical climates because they
significantly affect the frequency of ethical behavior.
Screening Prospective Employees
o Companies try to screen out dishonest, irresponsible employees by
checking applicants' resumes and references.
o Some also use personality tests and integrity testing to identify
potentially dishonest people.
Instituting Ethics Codes & Training Programs
o A code of ethics consists of a formal written set of ethical standards
guiding an organization's actions.
Rewarding Ethical Behavior: Protecting Whistle-Blowers
o A whistle-blower is an employee who reports organizational
misconduct to the public, such as health and safety matters, waste,
corruption, or overcharging of customers.

Social Responsibilities Required of a Manager

Social Responsibility
o is a manager's duty to take actions that will benefit the interests of
society as well as of the organization.

When generalized beyond the individual to the organization, social

responsibility is called corporate social responsibility (CSR),
o the notion that corporations are expected to go above and beyond
following the law and making a profit.

Is Social Responsibility Worthwhile?

No it is not worthwhile

Yes it is worthwhile

"The social responsibility of

business is to make profits." That
is, unless a company focuses on
maximizing profits, it will become
distracted and fail to provide
goods and services, benefit the
stockholders, create jobs, and
expand economic growth-the real
social justification for the firm's
existence.
This view would presumably
support the efforts of companies
to set up headquarters in name
only in offshore Caribbean tax
havens (while keeping their actual
headquarters in the United States)
in order to minimize their tax
burden .

"A large corporation these days not

only may engage in social
responsibility,"
Beyond the fact of ethical obligation,
the rationale for this view is that since
businesses create problems
(environmental pollution, for example),
they should help solve them.
Moreover, they often have the
resources to solve problems in ways
that the nonprofit sector does not.
Finally, being socially responsible gives
businesses a favourable public image
that can help head off government
regulation.

Corporate Social Responsibility: The Top of the Pyramid

According to University of Georgia business scholar Archie B. Carroll, corporate
social responsibility rests at the top of a pyramid of a corporation's obligations,
right up there with economic, legal, and ethical obligations. That is, while some
people might hold that a company's first duty is to make a profit, Carroll
suggests the responsibilities of an organization in the global economy should
take the following priorities

Be a good global corporate citizen, as defined by the host country's

expectations.
Be ethical in its practices, taking host-country and global standards into
consideration.
Obey the law of host countries as well as international law.
Make a profit consistent with expectations for international business.

One Type of Social Responsibility: Philanthropy, Not

Dying Rich"
From a hardheaded manager's point of view, do ethical behavior and high social
responsibility pay off financially?

Effect on Customers
o more apt to buy from companies that are socially responsible than
from companies that are not
o prefer to purchase products and services from a company with
ethical business practices and higher prices
Effect on Employees' Work Effort
o workers are more efficient, loyal, and creative when they feel a
sense of purpose-when their work has meaning
Effect on Job Applicants & Employee Retention
o Ethics can also affect the quality of people who apply to work in an
organization.
Effect on Sales Growth
o The announcement of a company's conviction for illegal activity has
been shown to diminish sales growth for several years.
o people said they decide to buy a firm's goods or services partly on
their perception of its ethics.
Effect on Company Efficiency

Effect
o

Effect
o
o

Effect
o
o

71% of employees who saw honesty applied rarely or never in their

organization had seen misconduct in the past year, compared with
52% who saw honesty applied only occasionally and 25% who saw it
frequently
on Company Revenue
Unethical behavior in the form of employee fraud costs U.S.
organizations around $652 billion a year, according to the
Association of Certified Fraud Examiners. 103 Employee fraud,
which is twice as common as consumer fraud (such as credit card
fraud and identity theft), costs employers about 20% of every dollar
earned.
on Stock Price
74% of people polled said their perception of a firm's honesty
directly affected their decision about whether to buy its stock
Earlier research found that investments in unethical firms earn
abnormally negative returns for long periods of time.
on Profits Studies
Suggest that profitability is enhanced by a reputation for honesty
and corporate citizenship.
Ethical behaviour and social responsibility are more than just
admirable ways of operating. They give an organization a clear
competitive advantage.

Personality
At the centre of the diversity wheel is personality. It is at the centre because
personality is defined as the stable physical and mental characteristics
responsible for a person's identity.

Internal Dimensions
Internal dimensions of diversity are those human differences that exert a
powerful, sustained effect throughout every stage of our lives: gender,
age, ethnicity, race, sexual orientation, physical abilities.
These are referred to as the primary dimensions of diversity because they are
not within our control for the most part.
Yet they strongly influence our attitudes and expectations and
assumptions about other people, which in turn influence our own behaviour.

External Dimensions
External dimensions of diversity include an element of choice; they consist of
the personal characteristics that people acquire, discard, or modify
throughout their lives: educational background, marital status, parental
status, religion, income, geographic location, work experience, recreational
habits, appearance, personal habits.
They are referred to as the secondary dimensions of diversity because we have a
greater ability to influence or control them than we do internal dimensions.
These external dimensions exert a significant influence on our perceptions,
behaviour, and attitudes.

Organizational Dimensions
Organizational dimensions include management status, union affiliation, work
location, seniority, work content, and division or department.

Trends in Workforce Diversity

Age: More older people in the workforce

o Number and proportion of younger people is rapidly shrinking.
Those shrinking numbers of younger people will have to both drive
their economies and help support much larger numbers of older
people

Gender: More women working

o glass ceiling-the metaphor for an invisible barrier preventing women
and minorities from being promoted to top executive jobs.
o Women slowly making up an increasing percentage of the workforce

Race & Ethnicity: More People of Colour in the Workforce

o more minorities hitting the glass celling

Sexual Orientation: Gays & Lesbians Become More Visible

o harassed, pressured to quit, or denied a promotion because of their
sexual orientation.
o if managers are concerned about hiring and keeping workplace

talent, they shouldn't ignore the motivation and productivity of 6%

of the workforce

People with Differing Physical & Mental Abilities

o People with disabilities have difficulty finding work

Educational Levels: Mismatches between Education & Workforce Needs

o College graduates may be in jobs for which they are overqualified.
some are underemployed working at jobs that require less
education than they have such as tending bar, managing
video stores, or other jobs that someone with less education
could do.
o High-school dropouts and others may not have the literacy skills
needed for many jobs.

Barriers to Diversity
Resistance to change in general is an attitude that all managers come up against
from time to time, and resistance to diversity is simply one variation.
1. Stereotypes & Prejudices
a. Ethnocentrism is the belief that one's native country,
culture, language, abilities, or behaviour is superior to that
of another culture.
b. When differences are viewed as being weaknesses, this may
be expressed as a concern that diversity hiring will lead to a
sacrifice in competence and quality.
2. Fear of Reverse Discrimination
a. Some employees are afraid that attempts to achieve greater
diversity in their organization will result in reverse
discrimination.
3. Resistance to Diversity Program Priorities
a. Some companies, such as 3M, offer special classes teaching
tolerance for diversity, seminars in how to get along.
i. Some employees may see diversity programs as
distracting them from the organization's "real work."
1. In addition, they may be resentful of diversity
promoting policies that are reinforced through
special criteria in the organization's performance
appraisals and reward systems.
4. Unsupportive Social Atmosphere

a. Diverse employees may be excluded from office camaraderie

and social events.
5. Lack of Support for Family Demands
a. more and more women are moving back and forth between
being at-home mothers and in the workforce, as economic
circumstances dictate
i. Yet in a great many households, it is still women who
primarily take care of children, as well as other
domestic chores.
b. When organizations aren't supportive in offering flexibility
in hours and job responsibilities, these women may find it
difficult to work evenings and weekends or to take
overnight business trips.
6. Lack of Support for Career-Building Steps
a. Organizations may not
i. provide diverse employees with the types of work
assignments that will help qualify them for positions
in senior management.
ii. provide the kind of informal training or mentoring that
will help them learn the political savvy to do
networking and other activities required to get ahead.