3.4 Flashcards
Define Short-termism
Where a business prioritises short-term rather than long-term performance
What performance measures does short-termism emphasise?
-Maximise short term profits
-Minimise R&D investment
-Maximise returns to shareholders
-Pursue external growth
-Invest less in HR
Problems faced bt short-termism businesses?
-Loss of profitability & competitive edge as lucrative long term opportunities ignored
-Need to produce regular financial reports so managers lack time to consider long term strategic decisions
-Higher than necessary costs due to reliance on short term contracts
What are some key features of long-termism businesses?
-Long term investment on R&D
-Investment into workforce eg recruitment, training & staff retention
-Establishing lasting relationships with suppliers
Define subjective decision making
Based on intuition and gut feeling, quick but hard to justify
Define evidence based decision making
Making decisions based on analysis & evaluation of evidence and adopting a systematic approach
Define Corporate culture
The values, attitudes, beliefs, meaning and norms shared by people within an organisation
What are Handy’s four classes of culture?
-Power
-Role
-Task
-Person
Features of a Power culture?
-Concentrates power among a few at top of hirachy where decisions are made
-Few rules and little bureaucracy
-Swift decisons are posible
Features of Role culture
-Power derives from a persons job title
-Clear hierachal structure
-Employees adhere to rules & understand roles
-May find it difficult to adapt to changing market conditions
Features of Task culture
-Decisions made by teams made up of employee with specific skills
-Power lies with those with task related skills
-Teams created & dissolved as projects completed
-Emphasis on adaptability & team work
Features of Person culture
-Individuals have significant levels of power to determine their own decision making
-Common in firms of professionals
What leadership style is power culture?
Autocratic
What leadership style is Role Culture?
Autocratic or Paternalistic
What leadership style in Task culture?
Paternalistic / democratic
What leadership style in Person culture?
Democratic
Why do businesses change culture?
-Improve business performance
-Respond to significant change
Signs that culture may need changing?
-Internal fighting
-High levels of staff turnover
-Greater absenteeism
-Innovation no longer valued
-Declining customer service
Features of a weak culture?
-Little alignment with business values
-Inconsistent behaviour
-A need for extensive bureaucracy & procedures
Define Stakeholder
Any individual or organisation who has a vested interest in the activities and decision making of a business
Define Shareholder
Owns the business, may also work in the business. Interested in growing the value of their shareholding.
Define Internal stakeholder
Individuals inside the business eg employees, mangers and owners
What are Shareholders/Owners interest in?
-Return on investment
-Success and growth of business
-Provide an income
What are Employees interested in?
-Rewards
-Job security & working conditions
-Promotion opportunities
What are Customers interested in?
-Value of money
-Product quality & customer service
What are Suppliers interested in?
-Businesses to pay what it owes promptly
-Establish long term contracts
What is the Government invested in?
-Creation of jobs
-Correct collection and payment of taxes
-Compliance with business legislation
What is Stakeholder conflict?
A situation in which the interests or goals of different stakeholders in an organisation are in conflict with one another.
Define Ethics
Moral guidelines which govern acceptable behaviour
What is the ethical code of practice?
-Informs decision making and sets out how businesses behave responsibly regarding the environment, animals and adopt fair working practises.
Advantages of behaving ethically?
-Higher revenues
-Improved brand awareness & recognition
-Better employee motivation
-New sources of finance eg ethical investors
Disadvantages of behaving ethically
-Higher costs
-Danger of building fake expectations
-All elements of supply chain must comply
What do salaries, wages & financial rewards play an important role in?
-Rewarding and motivating existing staff
-Attracting new employees
-Maximising productivity levels
What is Corporate social responsibility?
Conducting business activities in an ethical way & balancing the interest of shareholders with those of wider community.
How does supply chain effect business ethics?
A business can’t claim to be ethical if it ignores unethical practices by its suppliers eg use of child labour
Features of a strong culture
Values, attitudes easily recognised and embedded in the way the business operates
Define External stakholder
Outside the business eg customers, suppliers, Gov, community
What is the stakeholder apporach?
-Business recognises impacts it has on stakeholders
-Communicates effectively with stakeholders
-Tries to minimise negative impacts on stakeholders
What is the shareholder approach?
-Focuses on meeting needs of shareholders
-Maximising profits to increase dividends and improve share price
Examples of socially responsible activities?
-Sustainable sourcing of raw materials
-Responsible marketing
-Protecting the environment
-Responsible customer service
Benefits of Corporate Social responsibility
-Enhance business images & reputation
-Helps recruit strong candidates
-Improves employee motivation & productivity
-CSR is attractive to many stakeholders
