Copyright@ Amity UniversityPAN African eNetwork Project Masters of Finance and Control Organization Theory and management Ms. Neha Puri

LECTURE 2

Module 2 :- Management in Era of change

Course Objective: The objective of this course is to familiarize the students with theoretical concepts of modern Economic Analysis so that they can use these as inputs in Managerial Decision making process. The emphasis should be laid on the understanding of key Economic Variables both at micro and macro levels, which influence the business operations and strategies of the firm and business environment under which they operate.

Contents1 Multiple stakeholder Relationship2 Ethics3 Social Responsibility: - The modern challenges4 Values5 Values & Corporate Culture

1 Multiple Stakeholder Relationship Organisation exist because of their ability to create value and acceptable outcome for various groups of stakeholders, people who have an interest, claim, or stake in organisation, in what is does, and in how well performs. In general, stakeholders are motivated to participate in an organisation if they receive inducements exceed the value of the contributions they are required to make. Inducements rewards such as money, power, and organisational status. Contributions are the knowledge, and expertise that organisations require of their members during the performance.There are two main groups of organisational stakeholders: inside stakeholders and outside stakeholders. The inducements and contributions of each group are summarized in table given below

Inside StakeholdersInside stakeholders are people who are closest to an organisation and have the strongest or most direct claim on organisational resources: shareholders, managers, and the work force.SHAREHOLDERS. Shareholders are the owners of the organisation, and, as such, their claim on organisational resources is often considered superior to the claims of other inside stakeholders. The shareholders contribution to the organisation is to invest money in it by buying the organisations stock. The shareholders inducement to invest is the prospective money they can earn on their investment in the form of dividends and increase the price of stock. Investments in stock are risky, however, because there is no guarantee of return.

One who owns shares of stock in a corporation or mutual fund. For corporations, along with the ownership comes a right to declared dividends and the right to vote on certain company matters, including the board of directors. also called stockholder. Shareholders who do not believe that the inducement (the possible return on their investment) is enough to warrant their contribution (the money they have invested) sell their shares and withdraw support from the organisation.

A mutual shareholder or stockholder is an individual or company (including a corporation) that legally owns one or more shares of stock in a joint stock company. A company's shareholders collectively own that company and are the members of the company by signing the memorandum of association . Thus, the typical goal of such companies is to enhance shareholder value.Stockholders are granted special privileges depending on the class of stock. These rights may include:

The right to vote on matters such as elections to the board of directors. Usually, stockholders have one vote per share owned, but sometimes this is not the case.[citation needed] The right to propose shareholder resolutions. The right to share in distributions of the company's income. The right to purchase new shares issued by the company. The right to a company's assets during a liquidation of the company

MANAGERS Managers are the employees who are responsible for coordinating organisational resources and ensuring that an organisations goals are successfully met. Top managers are responsible for investing shareholder money in resources in order to maximize the future output of goods and services. Managers are, in effect, the agents or employees of shareholders and are appointed indirectly by shareholders through an organisations board of directors to manage the organisations business.

Managers contributions are the skills they use to direct the organisations response to pressures from within and outside the organisation. For example, a managers skills at opening up global markets, identifying new product markets, or solving transaction-cost and technological problems can greatly facilitate the achievement of the organisations goals. Various types of rewards induce managers to perform their activities well:

monetary compensation (in the form of salaries, bonuses, and stock options) and the psychological satisfaction they get from controlling the corporation, exercising power, or taking risk with others peoples money. Managers who do not believe that the inducements meet or exceed their contributions are likely to withdraw their support by leaving the organisation. One of the most important interactions between an organization and the environment is that of information. A manager who has information about the impending government legislation which will affect his organization can suitably modify his decision and avoid costly mistakes.

Similarly, a manager who is well informed about his employees activities, expectations, opinions and grievances can take corrective action much before a crisis develops. We now turn our attention to this information flow and see how best it can be organized from the managers viewpoint.

The role played by a manager in a business organization may be stated as follows.(i) To Have Contacts:He has to establish and maintain contacts with many people both within and outside the business. The persons with whom he has regular contacts within the organization include his subordinates, fellow managers and so on. Government officials, suppliers etc., are the outsiders with whom the manager may have frequent contacts.(ii) To Supervise:Every manager has to supervise the work of subordinates while the latter are doing their work and offer necessary help. Supervision also needs to be undertaken to ensure that the subordinates do not waste their time during working hours.

(iii) To Attain Targets:Managers may work under pressure most of the time as they have targets to achieve. This is particularly true in the case of production and sales managers who are the line managers. (iv) To Delegate Authority:Managers have to get done things by their subordinates. For this they have to delegate authority to the latter to enable them to perform the tasks assigned. The managers must ensure that the authority delegated is just sufficient to carry out the duties by the subordinates. If authority exceeds responsibility there may be misuse of authority. On the other hand, if authority is inadequate, the subordinates may not be able to carry out the task.

(v) To Hold Meetings:Managers, often, may have to hold meetings to put forth their views before their subordinates. Such meetings are also necessary to get feedback information from the subordinates on the progress of their work. Managers of different departments also may have to meet at regular intervals to secure proper co-ordination and to review progress. (vi) To Make Decisions:Managers also have to make certain routine decisions in connection with matters pertaining to the daily operations of the business. Purchase of raw materials, payment of wages, sanctioning leave to subordinate staff, etc., are examples of such routine decisions.

THE WORK FORCE An organisations work force consists of all non managerial employees. Members of the work force have responsibilities and duties (usually outlined in a job description) that they are responsible for performing. An employees contribution to the organisation is the performance of his or her duties and responsibilities. How well an employee performs is, in some measure, within the employees control. An employees motivation to perform well relates to the rewards and punishments that the organisation uses to influence job performance. Employees who do not feel that the inducements meet or exceed their contributions are likely to withdraw their support for the organisation by reducing the level of their performance or by leaving the organisation.

Workforce Management (WFM) encompasses all the activities needed to maintain a productive workforce. Sometimes referred to as HRMS systems, or even part of ERP systems. Recently, the concept of workforce management has begun to evolve into Workforce Optimisation.Specifically, workforce management includes:

Payroll & benefits HR administration Time & attendance Career & succession planning Talent management and/or applicant tracking Learning management and/or training management Performance management Forecasting and scheduling Workforce tracking and emergency assist

Outside stakeholdersOutside stakeholders are people who do not own the organisation, are not employed by it, but do have some interest in it. Customers, suppliers, the government, trade unions, local communities, and the general public are all outside stakeholders. CUSTOMERS. Customers are usually an organisations largest outside stakeholders group. Customers are induced to select a product (and thus an organisation) from alternative products by their estimation of what they are getting relative to what they have to pay.

The money they pay for the product is their contribution to the organisation and reflects the value they feel they receive from the organisation. As long as the organisation produces a product whose price is equal to or less than the value customers feel they are getting, they will continue to buy the product and support the organisation. If customers refuse to pay the price the organisation is asking, they withdraw their support, and the organisation loses a vital stakeholder. Southwest Airlines attention to its customers has resulted in their loyal support.

The primary purpose of a business is to create a customer because it is the customer that will determine the growth potential of a business. Though, it is imperative to create time and effort on how you are going to improve your business and services, it is still the customers that will dictate the success of your business. So, customer service is very vital if you want your business to succeed.

Customer service is a major factor in making sure you achieve business growth and success. It can affect your business positively or negatively. This is reason why the whole business plan, marketing strategies, sales and profit will largely depend on its impact on the customers. Primarily, you are in business to generate revenue through selling your products and services to people who are in need of the services. All these people want to know if your products and services will make impact in their lives and meet their needs.

To make sure that you generate income for your business, you must be willing to satisfy the desires and needs of your customers. Your whole business is resting on that foundation. Every decision making must take into cognisance how it is going to affect the customers. You should make it a point of duty ensure that you have an excellent customer service system.

SUPPLIERS. Suppliers, another important stakeholder group, contribute to the organisation by providing reliable raw materials and component parts that allow the organisation to reduce uncertainty in its technical or production operations and thus reduce production costs. Suppliers have a direct effect on the organisations efficiency and an indirect effect on its ability to attract customers. An organisation that has high- quality inputs can make high-quality products and attract customers. In turn, as demand for its products increases, the organisation demands greater quantities of high-quality inputs from its suppliers.

Anyone who supplies products into the Australian market is part of the supply chain, includingmanufacturers, importers, wholesalers, retailers andhire companies.All parts of the supply chain can contribute to safety. Each has a role to play in ensuring products meet safety standards and unsafe goods do not go on the market.There are opportunities to make products safer at every stage of the supply chain including:

designmanufacturetestingmarkinglabellingassembly and instructions for consumerassemblystoragepackagingmarketingconsumer advice

One of the reasons why Japanese cars remain so popular with U.S. consumers is that they still require fewer repairs than the average U.S. made vehicle. This reliability is a result of the use of component parts that meet incredibly stringent quantity control standards. In addition, Japanese parts suppliers are constantly improve their performance. The close relationship between the large Japanese automakers and their suppliers is a stakeholder relationship that pays long-term dividends for both parties. Realizing this, in the last decade U.S. car manufacturers have also moved to establish strong relationships with their suppliers to increase quality, and the reliability of their vehicles has increased as result.

THE GOVERNMENT. The government has several claims on an organisation. It wants companies to compete in a fair manner and obey the rules of free competition. It also wants companies to obey agreed-upon rules and laws concerning the payment and treatment of employees, workers health and laws concerning the payment and treatment of employees, workers health and workplace safety, nondiscriminatory hiring practices, and other social economic issues about which Congress has enacted legislation. The government makes a contribution to the organisation by standardizing regulation so that they apply to all companies and no company can obtain an unfair competitive advantage.

The government controls the rules of good business practice and has the power to punish any company that breaks these rules by taking legal action against it. Thus its contribution is to leave a company alone. Sometimes, however, it may leave companies too alone.The Govt. forms Industrial policies,provides infrastructural facilities,provides financial assistance(both loans n subsidies),provides training to entrepreneurs n helps in marketing the product of small n medium sector enterprises.

Government frame the policies regarding the business. Govt make plans, assist businesses by providing financial aid, technical aid, tax exemptions etc.Businesses that take a proactive stance toward understanding and complying with federal regulatory agencies will minimize their chance of fines, prosecution, or other regulatory action. Therefore, it is in the best interest of businesses to maintain healthy relationships with regulatory agencies at all levels of government. Among the business activities regulated by government are competitive practices, industry-specific activities, general issues of concern, and monetary regulations

TRADE UNIONS. The relationship between a trade union and an organisation can be one of conflict or cooperation. The nature of the relationship has a direct effect on the productivity and effectiveness of the organisation and the union. Cooperation between managers and the union can lead to positive long-term outcomes if both parties agree on an equitable division of the gains from an important in a companys fortunes. Managers and the union might agree, for example, to share the gains from cost saving due to productivity improvements that resulted from a flexible work schedule.

Traditionally, however, the managements-union relationship has been antagonistic because unions demands for increased benefits conflict directly with shareholders demands for greater company profits and thus greater returns on their investments. Although trade unions look after the interests of their members, they also recognise the advantages of working in partnership with employers. This is because a successful, profitable business is good for workers and therefore good for the union and its members.

LOCAL COMMUNITIES. Local communities have a stake in the performance of organisations because employment, housing, and the general economic well-being of a community are strongly affected by the success or failure of local businesses.THE GENERAL PUBLIC. The public is happy when organisations do well against foreign competitors. This is hardly surprising, given that the present and future wealth of a nation is closely related to the success of its businesses and its economic institutions. The French and Italians, for example, are notorious for preferring domestically produced cars and other products, even when foreign products are clearly superior. To some degree, they are induced by pride in their country to contribute to their countrys organisations by buying their products.

Typically, U.S. consumers do not support their companies in the same way. They prefer competition to loyalty as the means to ensure the future health of American businesses A nations public also wants its corporations to act in a socially responsible way, which means that corporations refrain from taking any actions that may injure or impose costs on other stakeholders.

ETHICS

The Advantages of Ethical Behavior

Ethics- the moral values, beliefs, and rules that govern the way organisational stakeholders should act toward one another- from an important part of organisations cultural values. In an age when many different stakeholders scrutinize an organisations action, and competition is fierce, organisations cannot afford to engage in actions that will be hurt their reputation. Neither can they allow employees to take advantage of their position to commit unethical acts.

Thus creating an ethical organisational culture is one of top managements major priorities. Managers create an ethical culture by making a personal commitment to uphold ethical values and transmit them to subordinates. All organisations are expected to develop and follow ethical values because of the advantages that ethical behavior confers on an organisation and on society. Ethical values and rules control self-interested behavior that might threaten societys collective interests.

Ethical values establish desired end states for example equitable or good business practices and the modes of behavior needed to achieve those end states, such as being honest or being fair

. Free and fair competition between organisations is possible only when values and norms constrain people action in certain situation. It is ethical for a business person to compete with rival and drive that rival out of business if the basis for competition is legal. Competition based on price and quality is legal and ethical. It is not ethical to compete by shooting a rival, blowing up a rivals factory, spreading false rumors about competition products, or stealing information from a rivals organisation.

Quality and price competition creates value for an organisations stakeholders and the general public competition by underhanded means hurts stakeholders and goes against the public interest. Note that ethical practices do not ensure that nobody gets hurt the rival forced out of business does get hurt but the harm done rival has to be weighed against the gain to consumers.Ethical values in an organisations culture reduce the costs people incur in deciding what the right is or appropriate. By reflexively following an ethical rule, people spend less time and effort trying to weigh, measure, or balance, and decide what the right thing to do is.

When an organisations behavior follows accepted ethical rules, the organisation gains a positive reputation effect. Over time, people will most likely view with suspicion and hostility an organisation that is known for engaging in illegal acts. However an organisation that always follows the rules and is known for its ethical business practices over and above strict legal requirements will have a good reputation valuable asset that makes people want to deal with it. Although unethical organisations might reap short term benefits, they are penalized in the long run because eventually people will refuse to deal with them.

Why Does Unethical Behavior Occur?If there are good reasons for individuals and organisations to behave ethically, why do we see so many instances of unethical behavior? Lapses in Individual EthicsIn the theory, individuals learn ethical principles and codes of morality as they mature. Ethics are learned from family, friends, religious institutions, schools, professional associations, and other organisations. From their experiences, people learn to differentiate right from wrong. However, imagine that your father is a mobster, your other is a political terrorist, or your family belongs to a warring ethnic or religious group. Brought up in such a context, you may believe that it is ethical to do anything and to perform any act - including murder -

perform any act - including murder to benefit your family, friends, or group. In a similar way, individuals within an organisation may come to believe that any action that promotes or protects the organisation is acceptable, even if it does harm to others. That sort of thinking prompted the Beech Nut management team to approve the sale of sugar water labeled as apple juice.

Outside Pressure Many studies have found that the likelihood of unethical or criminal behavior increases when people feel outside pressure to perform. If company performance is deteriorating, for example, top managers may feel pressures from shareholders to boost performance, and fearful of losing their jobs, they may engage in unethical behavior to increase the value of corporate stock. If outside pressures work in the same direction, it is easy to understand why unethical organisational cultures develop. Managers at all levels buy into unethical acts and the view that the end justifies the means comes to permeate the organisation. As organisational members pull together to disguise their unethical action and to protect another from prosecution, the organisation becomes increasingly defensive.

The temptation for organisations to collectively engage in unethical and illegal behavior is very great. Industry competitors can clearly see the advantages of acting together to raise prices because of the extra profits they will earn. The harm they inflict as a result of their collusion is difficult to see because their customers may number in the millions. Unethical companies may rationalize by saving that individual customers are affected so slightly that they are hardly hurt at all.

However if every company in every industry behaved unethically, and if all companies tried to extract money from their customers, customers would have much less to spend and the nations economy as a whole would suffer. Moreover, price fixing results in a misallocation of societys resources. Companies spend less and less on improving their products because they have no incentive to improve them.

In sum, if an organisations ethics violate societys ethics are embodied in law; the organisation is acting illegally and will be subject to sanction. If organisational ethics violate generally accepted business and social customs and practices, organisations may lose their reputations. Beyond these two limits on ethical behavior, an organisations ethics are a function of the moral values of its stakeholders and of the power of the different stakeholder groups to impose these values on the organisation

Creating an Ethical Organisation An organisation is ethical if the people inside the organisation are ethical. How can people judge if they are making ethical decisions and thus acting ethically? One way is as follows: If a person (a) makes a decision (or takes an action) that falls within the accepted values or standards that typically apply in the organisations environment; (b) is willing to see the decision communicated to all the parties affected by it for example, having it reported in newspapers or on television; and (c) believes that other people with whom the person has a significant personal relationship, such as family members, friends, or even managers in other organisations, would approve the decision, then the decision is probably acceptable on ethical ground.

Beyond personal considerations, an organisation can encourage people to act ethically by putting in place incentives for ethical behavior and disincentives to punish those who behave unethically. Because top managers have the ultimate responsibility for setting policy, they establish the ethical culture of the organisation. There are many ways in which they can influence organisational ethics. A manager outlining a companys position on business ethics acts as a figurehead and personifies the organisations ethical position. As a leader, a manager can promote moral values that result in the specific ethical rules and norms that people use to make decisions.

Out side the organisation, as a liaison or spokesperson, a manager can inform prospective customers and other stakeholders about the organisations ethical values and demonstrate those values through his or her behavior toward stakeholders such as by being honest and acknowledging errors. A manager also sets employees incentives behave ethically and can develop rules and norms that state the organisations ethical position. Finally, a manager can make decisions to allocate organisational resources and pursue policies based on the organisations ethical position.

Social Responsibility The Modern Challenges

According to Keith Davis, Social responsibilities refer to the businessmans decisions and actions taken to reasons at least partially beyond the firms direct economic or technical interest. To quote Andrews, by social responsibility, we mean intelligent and objective concern for the welfare of society that restrains individual and corporate behaviour from ultimately destructive activities, no matter how immediately profitable and leads in the direction of positive contribution to human betterment variously as the latter may be defined.

The concept of social responsibility is not new. Although the idea was already considered in the early part of the 20th century, the modern discussion of social responsibility got a major impetus with the book Social Responsibilities of the Businessman by Howard R.Bowen suggests that business managers are bound to pursue those policies, to make those decisions or to follow those lines of action which are desirable in terms of the objectives and values of our society

In other words businesses should consider the social implications of their decisions. AS one may expect, there is no complete agreement on the definition of social responsibility. A survey conducted on the matter revealed Corporate social responsibility is seriously considering the impact of the companys actions on society. In a broad sense, business owes a lot to the various groups such as customers, employees, shareholders, government and the community at large in which it exists. As one argues for business involvement in social activities, there are also arguments against it, as follows:

Arguments for social involvement of business 1. Public needs have changed, leading to changed expectations. Business, it is suggested, received its charter from society and consequently had to respond to the needs of society. 2. Improvement of the social environment benefits both society and business. Society gains through better neighborhoods and employment opportunities; business benefits from a better community, since the community is the source of its work force and the consumer of it products and services. 3. Social involvement discourages additional government regulation and intervention. The result is greater freedom and more flexibility in decision making for business.

4. Business has a great deal of power which, it is reasoned, should be accompanied by an equal amount of responsibility. 5. Modern society is an interdependent system and the internal activities of the enterprise have an impact on the external environment. 6. Social involvement may be in the interest of stockholders. 7. Problems can become profits. Items that may once have been considered waste (for example, empty soft drink cans) can be profitably used again. 8. Social involvement creates a favorable public image. Thus, a firm may attract customers, employees and investors

9. Business should try to solve the problems which other institutions have not been able to solve. After all business has a history of coming up with novel ideas. 10. Business has the resources. Specifically, business should use its talented managers and specialists, as well as its capital resources to solve some of societys problems. 11. It is better to prevent social problems through business involvement than to cure them. It may be easier to help the hard-core unemployed than to cope with social unrest.

Arguments against social involvement of business

1.. The primary task of business is to maximize profit buy focusing strictly on economic activities. Social involvement could reduce economic efficiency. 2. In the final analysis, society must pay for the social involvement of business through higher prices. Social involvement would create excessive costs for business, which cannot commit its resources to social action. 3. Social involvement can weaken the international balance of payments. The cost of social programs, the reasoning goes, would have to be added to the price of the product. Thus American companies selling in international markets would be at a disadvantage when competing with companies in other countries which do not have these social costs to bear.

4. Business has enough power and additional social involvement would further increase its power and influence. 5. Business people lack the social skill to deal with the problems of society. Their training and experience is with economic matters and their skills may not be pertinent to social problems. 6. There is a lack of accountability of business to society. Unless accountability can be established, business should not get involved. 7. There is not complete support for involvement in social actions. Consequently, disagreements among groups with different viewpoints will cause friction.

Values

Milton Rokeach, a noted psychologist, has defined values as global beliefs that guide actions and judgments across a variety of situations. He further said, Values represent basic convictions that a specific ode of conduct (or end-state of existence) is personally or socially preferable to an opposite mode of conduct (or end-state of existence). They contain a judgmental element, i.e., they carry an individuals ideas as to what is right, good, or desirable. Values have both content and intensity attributes. The content attribute emphasizes that a mode of conduct or end-state of existence is important. The intensity attribute specifies how important it is. When we rank an individuals values in term of their intensity, we obtain the value system of that person.

Definition of Values for a Company A value is a belief, a mission, or a philosophy that is really meaningful to the company. An example of a business value is: "Customer Satisfaction." Another example of a value is "Being Ethical and Truthful." Every company has one or more values, whether they are consciously aware of it or not. Another way of saying it is that a value is a statement of the company's intention and commitment to achieve a high level of performance on a specific QUALITATIVE factor.

All of us have a hierarchy of values that forms our value system. This system is identified by the relative importance we assign to such values as freedom, self-respect, honesty, obedience, equality, and so on.Values are so embedded that they can be inferred from peoples behavior and their perception, personality and motivation. They generally influence their behavior. Values are relatively stable and enduring. This is because of the way in which they are originally learnt.The values learnt can be divided into two broad categories: (i) terminal values, and (ii) instrumental values the person gets the

Terminal values lead to ends to be achieved, e.g., comfortable life, family security, self respect and sense of accomplishment. Instrumental value; relate to means for achieving desired ends, e.g., ambition, courage, honesty and imagination. Terminal values reflect what person is ultimately striving to achieve, whereas instrumental values reflect how the person gets there.

Types of Values

All port and his associates have categorized values into six types as follows:Theoretical. Interest in the discovery of truth through reasoning and systematic thinking.Economic. Interest in usefulness and practicality, including the accumulation of wealth.Aesthetic. Interest in beauty, form and artistic harmony.Social. Interest in people and human relationships.Political. Interest in gaining power and influencing other people. Religious. Interest in unity and understanding the cosmos

Different people place different importance to the above six value types. In other words, every individual has a system of values ranking from first to sixth. This is very important from the point of view of understanding the behavior of people. The fact that people in different occupations have different value systems has led the progressive organisations to improve the values- job fit in order to increase employee performance and satisfaction.

Sources of ValuesParents, friends, teachers and external reference group can influence individual values. Indeed, a persons values develop as a product of learning and experience in the cultural setting in which he lives. As learning and experiences vary from one person to another, value differences are the inevitable result. Not only the values but also their ranking in terms of importance differs from person to person.

A person learns and develops values because of the following factors:Familial factors. A significant factor influencing the process of socialization of an individual is role of the family. The child rearing practices that parents use shape the individuals personality. The learning of social behavior, values and norms come through these practices. For example, through reward and punishment, parents show love and affection to children, indicating the typical ways in which a child should behave in difficult conditions.

Social Factors. Of the societal factors, school has a major role to play in the development of values. Through discipline in school, a child learns desirable behaviors important in the school setting. Interactions with teachers, classmates and other staff members in the educational institutions make the child inculcate values important to the teaching-learning process. Other institutions that may influence the values are religious, economic and political institutions in the society.

Personal Factors. Personal attributes such as intelligence, ability, appearance and educational level of the person determine his development of values. For example, ones higher level of intelligence may result in faster understanding of values.

Utility of Values in Business:

Values release energy because they motivate people. Values motivate people to work together collectively. Values are like ever-receding or never-ending goals. The higher the values, the more the energy and effort required to achieve and sustain them. The more you pursue them, the greater the energy they release and put into action. Quality of performance on every job, every activity, and every act can be accurately assessed in terms of values.

Companies which rated their implementation of key corporate values the highest also reported the highest levels of revenue growth and profitability in their respective industries. Improving corporate performance on a single value can virtually transform the way a company functions. Values are the most powerful way to release and harness the company's latent, unutilized energies for growth.

Benefit of Values We consider lower costs, more access to money, better products, more technology, etc. the key to advancement, profitability, and success in business. Though these should not be underestimated, business values -- like customer delight, deep concern for the well being of employees, maximum utilization of resources, innovation, tapping into the emerging opportunities of society, etc.-- have 10 to 100 times as much power to produce such results.

2.5 Values and Corporate Culture Corporate culture is the term used to describe a system of shared values (what is important) and beliefs (how things work) that create behavioral norms (the way we do things) to guide the activities of organisational members. It is believed that strong corporate culture facilitates higher performance. Thomas J. Peters and Robert H. Waterman, Jr., authors of In search of Excellence state, for example: Every excellent company we studied is clear on what stands for, and takes the process of value shaping seriously.

As a system of shared values, the corporate culture reflects a climate within which people value the same things and apply these values to benefit the corporation as a whole. One example is the dominate value of customer service. This value shall help to keep everyone from top management down to persons on the factory floor pulling in the same direction. Corporate values may be put in the form of slogans such as The family Feeling by an Airline or Quality at a good price by a Pharmaceutical giant. The strength of such slogans in communicating values lies in the basic premise that values can influence behavior. To the extent employees understand and share corporate values, their behavior should be more uniform and consistent.

The performance of individuals, group and the organisation as a whole will increase and benefit all. The managers who sense compatibility between their personal values and those of the organisation experience feelings of success in their lives, show high regard for organisational objectives and significant stakeholders, and have healthy assessment of the values and ethics of their colleagues, subordinates, and bosses.

Big organisations develop different cultures which have different performance implications. Organisations with strong cultures that fit the needs and challenges of the situations survive and grow while organisations with weak cultures are phased out. That is why, the study of corporate culture is important in the field of organisational behavior. It may be noted that corporate culture and its companion notion of shared values are not static concepts. They could be changed or modified to meet the need of changing environment.

To fully implement and thus institutionalize a value in a company the following steps need to all occur:SELECTION -- Choose the values that you are interesting in fully implementing in the company. COMMITMENT -- There needs to be a full commitment to implement the chosen values. Senior and middle management, and other employees need to fully commit to those values; commit to improving performance on those values. STANDARDS -- A set of standards for each activity in the company needs to be implemented for each value. STRUCTURE -- The company needs to have the right structure (of job positions, divisions, departments, etc.) to implement the values.

JOBS, ACTIVITIES & SYSTEMS -- The company must have clearly defined job positions, activities, and streamlined systems to facilitate to implement the values. Values need to be incorporated into every job position, activity, every system. Standard operating procedures and even individual job position tasks need to be linked to these values. EMPLOYEE RESPONSIBILITY -- The responsibility of each person to implement each value must be clearly defined and understood (e.g. in their job orientation, in their job descriptions, from their manager, etc.). SKILLS -- Everyone must have the skills to achieve high performance on the values. Everyone must have the skills they need to fulfill their responsibilities for the value. If necessary, additionall training should be implemented to upgrade the skills for value implementation. For a full explanation of how to go through

Thank You*Please forward your query

To: nehabajaj1984@gmail.comCC: manoj.amity@panafnet.com

Amity Business School*