economics of the sustainable enterprise (ese) · economics of the sustainable enterprise (ese)...

Technische Universität München

Economics of the sustainable enterprise

(ESE)

Summer term 2013


Aim

The core aim of the module is:

to analyze the key concepts and central debates in

corporate responsibility, sustainable enterprise theory and

practice.

Dr. Andreas Wiendl


Learning objective

At the end of the module the students are able to:

1. Understand economic concepts and theories for analyzing sustainable

development,

2. Understand sustainable reporting principles and concepts,

3. Understand major certifications and how to use them,

4. Establish an organizational culture in which sustainability is

institutionalized, and

5. Understand the impact, benefits, and best practices of sustainability.

Dr. Andreas Wiendl


Structure

Four lectures, chapters are (clue):

1) Management of enterprises

2) Organising, leading and communicating

3) The sustainable enterprise: instruments and concepts

4) Control and change: sustainability reporting

One blocked seminar (optional)

One written test

Dr. Andreas Wiendl

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John Naylor, Management, Second edition © Pearson Education Limited 2004 1.5

Management and managers

• What is management?

It is a process of achieving organisational objectives within a changing environment, by balancing efficiency, effectiveness and equity, obtaining the most from limited resources and working with and through other people.

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The management process

• achieving organisational objectives,

• within a changing environment,

• balancing efficiency, effectiveness and

equity,

• obtaining the most from limited

resources,

• working with and through people.

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Balancing the 3 Es

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Looking at management …

• Roles

• Styles

• Abilities

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Management roles

• Interpersonal

– Figurehead; leader; connecter

• Informational

– Nerve centre; disseminator; speaker

• Decisional

– Entrepreneur; disturbance handling;

resource allocator; negotiator

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Management styles

• Decision styles

– Directive (e.g. practical, authoritarian, power centered)

– Analytical (e.g. intellectual, control oriented)

– Conceptual (e.g. enthusiastic, personal and flexible)

– Behavioural (e.g. sociable, friendly, supportive)

[Rowe and Mason]

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Styles: leadershipC

on

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eo

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Concern for production

High 9

High 9

Low 1

1 Low

1,9 Country Club

Impoverished

1,1

Authority-compliant

9,1

5,5

Middle of the road

Team 9,9

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Ability: robust action

Acting under uncertainty

Preserving flexibility

Political awareness

Timing

Judgement

Using rhetoric effectively

Running multiple agendas- Eccles and Nohria

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Theory in management

• Descriptive theories - the world as it

is

– Multinational enterprises usually have

decentralised personnel functions.

• Prescriptive theories - the way the

world ought to be

– Multinational enterprises should decentralise

their personnel functions.

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Theory and common sense

• During the fighting, US servicemenwere more desirous of returninghome than they were after the fall ofGermany.

• Soldiers from the southern statesstood the tropical climate of thesouth Pacific better than northernersdid.

- Vecchio

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Becoming a manager

• School of hard knocks

– Making a big mistake

– Overstretched by a difficult task

– Feeling threatened

– Getting stuck in an impasse or dilemma

– Being treated unjustly at work

– Losing out to another

– Being attacked personally

- Snell

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Managing diversity

• Parochial

‘Our way is the only way.’

• Ethnocentric

‘Our way is the best way.’

• Synergistic

‘We combine the best.’- Adler

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Bureaucracy

Elements of Bureaucracy

• Division of labour

• Organisation of positions into a hierarchy, with each under the authority of a higher position

• People assigned to positions

• Decisions and actions recorded in writing

• The management and ownership of the organisation separated

• Subject to rules and procedures

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Human relations

• Origins

– Trade unions

– Industrial humanism

• Follett (ideas), Rowntree (philanthropy)

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Theories X and Y

• Theory X managers believe the average person

– hates work; must be coerced; prefers

direction; avoids responsibility; is unambitious

• Theory Y managers believe the average person

– finds effort natural; exercises self-control and

self-direction; seeks responsibility; is creative

– McGregor

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Systems approach

• A system is a set of connected parts that

behave together in significant ways.

• Features

– Synergy and holism (a system is more than the sum of its

parts)

– Open system (systems interact with other systems in order to

survive)

– Hierarchy (systems contain parts that are themselves systems)

– Significance (system definitions are subjective)

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Rich picture

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Review Questions


1. Define management and give a short description of the five

components that make up the management process?

2. What do you understand by management roles? List the three

different types of management roles?

3. What are management styles and abilities of managers? List

three examples of each?

4. What do you understand by prescriptive and descriptive

theories in management? Give an example of each?

5. What are the three schools of thought which managers use in

managing diversity in organizations?

6. Distinguish between theory X managers and theory Y

managers?

7. Define a system and list its features?


Outside the Organisation:

Understanding the environment

• What is the environment of an organisation?

• Model the environment in its operating and wider layers

• Describe the operating environment in relationship to the

organisation

• Use the PEST categories to describe the wider

environment

• Forecasting models

• Summary of the main forecasting methods

• An example of a forecasting model in Excel

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„The best architects always design a thing by considering it in a

larger context- a chair in a room, a room in a house, a house in an

environment, an environment in a city plan“

Eliel Saarinen

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What is an organisations

environment?

An organisations environment refers to all those

elements that lie outside its boundary with which

the organisation interacts.

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Two major types of an

organisation’s environment

• Operating environment

– Consist of specific elements that have clear

and direct interactions with the organisation

often on a day to day basis.

• Wider environment

– Comprises the broader factors that establish

the context within which the operating

environment exists.

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The organisation and its environments


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Regulators Competitors

Investors

Products Cash Information Influence

Suppliers

Distributors

CustomersThe Organisation

• Operating environment


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Operating Vs. Wider environments

• Operating

– Regular two-way interaction

• Wider (or remote)

– Influence is usually one-way


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Environments are unique


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Economic

factors are

advantageous

Demand

conditions are

favourable

Firms'

strategies,

structures and

rivalry lead to

international

strength

There are

strong related

industries

A nation is a favourable home base when ...

... and the government maintains a supportive climate

Relative advantages of nations


Forecasting

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„The dream of predicting the future is

itself as old as mankind“

A. Einstein

“Forecasting is difficult especially when it

concerns the future”

W. Churchill


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• Forecasting models

• Quantitative

–Causal models

–Time series models

• Qualitative

–Delphi method

–Sales force surveys

–Customer surveys


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Quantitative models

• Causal models establish patterns of

relationships deciding the behaviour

of the variables in question.

• Time series models are based on the

notion that the future depends on the

past


Example of a Forecast

„Limits to Growth“ forecast

Meadows, 1972

Contract from the Club of Rome to do a

forecast on the global development

trend in the following sectors until 2100:

• Population growth

• Food production

• Environmental pollution

• Raw material consumption

• Industrial output

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Example of a forecast

Modified trend in the new

„Limits to Growth“

Meadows 1992/scenario 5

Assumptions:

• Doubling of resources

• Fight against emissions

• Promotion of crop yield

• Protection against erosion

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Considering the new assumptions and knowledge base,

meadows published his new Limits of Growth forecast in 1992

under the title „Beyond limits“


Review Questions

1. What is an organizations environment?

2. An organization has two major environment types. Define

them and list 4 examples of the elements of each?

3. What do you understand by the political, economic, social

and technological (PEST) environment of an organization?

4. How would you distinguish the wider environment from the

operating environment in organizations?

5. List the two major types of forecasting models and 2

examples of each.

6. Distinguish between causal and time series models

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Inside the organisation: Adapting to

change

• Types of environmental changes

• The impact of changes faced by an organisation

• Uncertainty clouds faced by organisations

• Population ecology perspective

• Methods of adapting to changing environments

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“Notice that the stiffest tree is most easily cracked,

while the Bamboo survives by bending with the

Wind”

Bruce Lee, actor, writing on Kung Fu

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Types of environmental

changes

• Reversible

– cyclical and random disturbances

– Mostly in the operating environment; matched by

operational responses

• Irreversible

– permanent shifts

– Mostly in the wider environment; require more

fundamental responses

Rhenman


Overall impact of changes faced by

an organisation

• Simple vs. Complex environments

– Simple environments have few important

factors and little variety and vice versa

• Static vs. Dynamic environments

– Stable environments are easier to predict

as opposed to changing environments

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Uncertainty clouds resulting from

complex and dynamic environments...

• Identifying key environmental

factors;

• Forecasting the environment;

• Evaluating the impact of potential

changes;

• Knowing the costs of making the

wrong choices.


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MutationMany different

organisations

emerge

SelectionSome find

a niche

and survive

SurvivalA few prosper

and achieve

long life

Early end Eventual end

Population ecology perspective


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Adapting to the changing

environment

• Forecasting and planning

– Forecast to reduce uncertainty; more than one plan may be needed.

• Information management

– Information to be both accurate and early.

• Flexibility

– Structure allows required responses to change

• Mergers

– Taking direct control to cut external uncertainty.


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Adapting to the changing

environment• Advertising and promotion

– Cuts uncertainty in the operating environment.

• Public relations

– Lobbying is PR focussed on a narrow group.

• Bargaining

– One outcome can be the removal of uncertainty.

• Boundary extension

– Exercising controlling influence without ownership.

• Supra-organisational groups

– Comprising organisations with common interests.


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Adaptation

strategy

SizeSmall Large

Change the

environment

Change the

organisation

Adaptation strategies

Merger

Supra-organisations

FlexibilityForecasting & planning

Information management

Boundary extension

Bargaining Public

relationsLobbying

Advertising


Review Questions

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1. List the two major changes that occur in an organizations environment

and indicate where (wider/operating) these changes usually occur. Give

an example of each change type?

2. How will you distinguish between:

Simple and complex environments

Static and dynamic environments

3. A combination of complex and dynamic environments lead to

uncertainty clouds. List the four factors which become difficult to

determine under this circumstance.

4. The process of adaptation of organizations to their environments can be

compared to the Darwinian theory of evolution. Draw a well labeled

sketch representing this view?

5. Organizations have several strategies of adapting to changes in their

environments. List 5 of these strategies and attach short practical

examples to each from your experience.


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Social responsibility and ethics

• What is social responsibility?

• Arguments for and against social responsibility

• Strategies and advantages of social responsibility

• Stake holders

• Ethics and reasons for ethical leadership

• Human resource management (HRM) and the elements of the HRM practice


“A task becomes a duty from the moment you suspect

it to be an essential part of that integrity which alone

entitles a man/woman to assume responsibility”

Dag Hammarsjöld, UN Secretary-General, 1953-61


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What is social responsibility?

Managers’ obligation to choose and

act in ways that benefit both the

interests of the organisation and

those of society as a whole

Who and what else

should be

included?

Winners

& losersAdds

complexity


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Arguments for social

responsibility• Potential to do good

– Businesses have a high capability

• Anticipation of emerging problems

– Good behaviour may avoid intervention

• Investment should yield benefits for all

– Extra spending leads to more riches later

• Responsibilities linked to rights

– Rights should be exercised responsibly


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Arguments against social

responsibility

• Purpose of business

– To make profit, not to achieve social goals

• Capability of managers is limited

– Managers lack expertise in the social arena

• Power should be restricted

– Business already has too much power

• Legitimacy confined to legal purposes

– Owners and managers are not elected.


Stakeholders

A stakeholder is an individual or group,

inside or outside the organization, who

has a meaningful stake in its performance.


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Stakeholder map

Norske

Skog

Owners Investors

Legal system

Education system

Norwegian Government

Local communities

Local governments

Other governments

European Union

Lenders

Trade associations

Media companies

Transport companies

Suppliers

Recycling companies

Customers

Pressure groups -

pollution, forests

Trades unions

membership

Employees


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Obstructive Gre

ate

r so

cia

l re

sp

on

sib

ilit

y

Proactive

Adaptive

Defensive

Social Responsibility

strategies


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Gains from being responsible

Markets for green products and processes

Supplying products to disadvantaged groups

Influencing governments and public opinion

Obtaining and keeping good employees

Manager training in community programmes

Stakeholders see some funds diverted to favourite organisations

Positive image as a defence against possible accusations of malpractice

Building an image of high ethical standards

Attracting ethical investors


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Ethics

Code of values and principles that

enables one to choose between right

and wrong.

LawEthics

Free

choice


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John Naylor, Management, Second edition © Pearson Education Limited 2004 5.58R

ep

uta

tio

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gu

ide

line

s

Exp

ecta

tio

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gu

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line

s

Telling

the truth

is morally

required if ...

... the receiver has

a right to the truth

or a ‘reasonable person’

would expect the truth

or the receiver expects

the truth in this case

or reputation demands

the truth in this case

or reputation demands

the truth in such cases

Example: Why tell the truth?


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Why ethical leadership?

• Is good for business

• Makes members feel good about what they do

• Helps senior managers pursue the organisations

interest

• Reflects societal desires not to harm others and

concern for the disadvantaged

• Matches societal expectations of good business

conduct


Review Questions1. What do you understand by social responsibility in an

organization?

2. There are disputed arguments for and against social responsibility.

List 3 Arguments for and against social responsibility? Give

examples of each?

3. What do you understand by the term stakeholder? Give an

example?

4. Distinguish between a stakeholder and a shareholder?

5. Organizations respond differently to questions on social

responsibility. List the four major social responsibility strategies of

organizations. Explain each briefly?

6. Social responsibility has its benefits to organizations that practice

it. List 4 benefits?

7. What is ethics? List 4 reasons in favor of an ethical leadership?


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Human Resource

Management (HRM)

„Hire the best. Pay them fairly. Communicate

frequently. Provide challenges and awards. Believe

in them. Get out of their way- they‘ll knock your

socks off“

Mary Ann Allison, American banker


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What is HRM?

HRM is the creation, development and maintenance

of an effective workforce, matching the requirements

of the organisation and responding to the

environment.


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Elements of the HRM

practice

• Create an effective workforce

– Planning, Recruitment, Selection

• Develop an effective workforce

– Appraisal, Training and Development

• Maintain an effective workforce

– Rewards, Welfare, Employee relations

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Review Questions

1. What is HMR?

2. List the elements of the human resource management

practice and give a short description of their corresponding

activities?


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Five Case studies:

1.DuPont Plant in Belle, West Virginia

2.PSE&G

3.Eileen Fisher

4.Alcoa Howmet

5.T-Systems

Dr. Andreas Wiendl

4. Employee engagement for a sustainable

enterprise


4.1 DuPont Plant in Belle, West Virginia

A story from the DuPont Plant in Belle, West Virginia

Summary:

The author describes his own experience dealing with a

potentially hazardous manufacturing plant by enabling self-

organization practices that lead to dramatic improvements in

safety, operating results, and morale.

Dr. Andreas Wiendl



Key learnings:

• Can see the patterns and processes of behavior involved in how work really gets

done

• Understand that different situations require different leadership approaches

• Are willing to share information freely with employees and be as transparent as

possible, maintaining conversations across all levels

• Can build trust and interdependence between workers and managers

• Help people create a vision and mission that is credible and important for everyone,

allowing them to see how they fit into the large picture

• Have the courage, caring, and commitment to stay in the process and help make it

happen.

Dr. Andreas Wiendl



Key ideas and tools:

• Taking a stand for high standards and human practices

• Seeing the limitations of top-down management and

transitioning to more employee-driven methods

• Inviting all levels of an organization into dialogue and

acting on resulting ideas

• Building engagement around self-organizing teams

Dr. Andreas Wiendl


4.2 PSE&G

Energizing people to create a safer, healthier workforce at

PSE&G

Summary:

A multistage effort brings union members and management

together with new initiatives reducing accidents and

stimulating creative solutions

Dr. Andreas Wiendl


4.2 PSE&G


• Building a strong working relationship between

management and union leadership

• Visible senior leadership support as a critical lever

• Use of total quality management tools in supporting health

& safety initiatives

• Importance of having a clear and compelling vision that

everyone creates and supports

Dr. Andreas Wiendl


4.3 Eileen Fisher

Engaging employees in social consciousness at Eileen

Fisher

Summary:

A clothing manufacturer founded on principles of simplicity,

joy, and human connection achieves consistent profitability

while remaining devoted to improving the lot of women and

environment.

Dr. Andreas Wiendl


4.3 Eileen Fisher


• Creating a culture that is aligned with the enterprise’s distinctive

values, vision, and performance standards, including consistent

messages through peer partners, lunch-time discussions,

newsletters, and community service events

• Engaging employees by emphasizing social consciousness,

which incorporates individual growth and well being,

collaboration and teamwork, and a joyful atmosphere

• Integrating sustainability concerns into fundamental human

resource practices, product design, and corporate facilities

• Extending the company's social consciousness agenda by

working actively with it’s network of suppliers

Dr. Andreas Wiendl


4.4 Alcoa Howmet

Environment, health & safety issues at Alcoa Howmet

Summary:

One man conducts a long-standing campaign to ensure that

safety concerns are infused into every activity and person in

a high- precision metals fabricator

Dr. Andreas Wiendl


4.4 Alcoa Howmet


• Going beyond demanding safe work practices and

engendering employee-driven improvements

• Training the managers to train others in safe an proper

practices

• Conducting peer safety audits between departments and

across facilities to identify potentially dangerous conditions

and practices and raise awareness for all

• Living out a passion for safety to achieve humane goals

as well as pragmatic corporate objectives

Dr. Andreas Wiendl


4.5 T-Systems

Employee engagement at T-Systems: sustaining the

organization and beyond

Summary:

A grassroots employee effort to deal with intolerable traffic

conditions becomes an organization-wide change project that

spreads over the whole community, with clear human and

environmental benefits

Dr. Andreas Wiendl


4.5 T-Systems


• Listening to the serious concerns of employees about their

welfare

• Endorsing grassroots efforts by providing management

participation and support

• Sparking increased self-reliance through projects outside

people's job description

• Aiding employees with the practical concerns of getting to

work and contributing to broader community welfare as

well

Dr. Andreas Wiendl


4. Employee engagement for a sustainable

enterprise

Conclusion

The five case studies illustrated how certain well-established

psychological dynamics form a foundation for strong

engagement by employees.

The cases share a number of strategies and tactics that

managers can use to bring about sustainability management

with highly desirable outcomes.

Dr. Andreas Wiendl

economics of the sustainable enterprise (ese) · economics of the sustainable enterprise (ese)...

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