3.4 Flashcards
Define short-termism
Short-termism- focusing on immediate results, especially financial performance like quarterly profits or share price.
Short term perspective/behaviour
- Maximise short term profits
- Return profits to shareholders
- Pursue external growth strategies
- Cutting R&D to boost short-term profit
- Avoiding investment in training or sustainability
- Focusing on cost-cutting to boost share prices
Impacts of short-termism
-May boost short-term profits
-Risk of harming long-term competitiveness
-Can damage employee morale and innovation
-May ignore long-term environmental or social responsibilities
Short term measures of success
-cash position
-revenue
-productivity
-profit
What is long-termism
Long-termism- Prioritising sustainable growth, innovation, and long-term strategic goals over immediate gains.
long-termist behaviour/ perspective
-Invest in R&D and training
-Building strong customer relationships
-Focusing on ethical and sustainable practices
-Pursue interest of stakeholders
-Focus on profit quality
Impacts of long termism
-Builds competitive advantage
-Encourages stakeholder trust and loyalty
-May reduce short-term profit but leads to long-term success
Long term measure of success
-Profit quality
-Employee engagement
-Sustainability
-R+D
-Investment
Define evidence-based decision making
Evidence based decision making- Using data, research, and factual analysis to make business decisions.
Adv and dis of evidence-based decision making
Advantages:
-Reduces bias and emotion
-Can improve accuracy and reliability
- Reduces risk and helps identify outcomes
- Compare alternative options
Limitations:
-Data can be incomplete or outdated
-Can be expensive and time-consuming to collect
What is subjective decision making
Subjective decision making is decisions based on experience and gut feeling without having supporting data
Adv and dis of subjective decision making
Advantages:
- Quick decision-making
- Useful when data is limited or uncertain
- Useful for making qualitative decisions
Limitations:
- Higher risk of bias or error
- Harder to justify to stakeholders
- May ignore valuable data
What is corporate culture
unwritten code that affects the attitudes and behaviours of employees within a business
Consequences of good culture
- Sense of identity
- Increased commitment from employees= increased efficiency
- Increased motivation
- Reinforce values and beliefs
Benefits of good culture
-Lower turnover
-Easier decision-making
-Better teamwork
-Strong identity and brand
Consequences of bad culture
And signs of bad caluture
- Low morale = increased staff turnover and fear in workforce
- Decreased productivity from low motivation
- Bad publicity= boycott and reduced sales
- Employees do not share the same values or are unclear on what the company stands for.
- Leads to confusion, lack of direction, and poor morale.
Signs:
-Conflicting departments
-Low motivation
-Resistance to change
Classification of Company Cultures (Handy’s Model)
Power culture- few number of individuals drive organisational decisions
- Control is centralised around a few key individuals.
- Quick decisions, strong leadership.
- Common in small businesses or start-ups.
Pros: Fast decision-making
Cons: Risk of autocracy, staff may feel undervalued
Role culture, where roles and responsibilities are clearly defined and individuals are expected to follow established procedures.
-Defined roles, rules, and procedures.
-Hierarchical and structured (e.g. civil service).
Pros: Clear expectations and stability
Cons: Can be bureaucratic and slow to adapt
Task culture, where teams are formed around specific tasks or projects and are motivated by shared goals.
-Focus on teamwork and completing projects.
-People are grouped based on expertise and collaboration.
Pros: Dynamic, flexible, good for innovation
Cons: Can lead to conflict without strong leadership
Person Culture-employees have great independancy and not associated with a group
-Individuals are the central focus — power lies with the employee, not the business.
Pros: High autonomy
Cons: Little organisational loyalty or teamwork
How is corporate structure formed
Corporate culture develops from multiple factors:
-physical environment
-rituals-events
-stories-past experience
-reward
-leadership styles
-structure
Reasons for changing organisational structure
-New leader
-Poor performance
-Corporate opbectives- change in -direction/strategy
-customer needs eg environment
Difficulties in changing corporate culture
-Long process- may require high training and education of workforce
Large firms may have more than 1 culture across teams
-Cost: Training, rebranding, or restructuring is expensive
-Time-consuming: Culture change takes months or years, not weeks
Define stakeholder
A stakeholder is a group of individualds who are interested in the business
Internal stakeholders (inside the business):
Employees – want job security, fair pay, good working conditions
Managers – want career progression, bonuses, business success
Owners/Shareholders – want profits, dividends, share price growth
External stakeholders
Customers – want quality, value, good service
Suppliers – want regular orders and fair payments
Local community – want jobs, ethical behaviour, low pollution
Government – wants taxes, compliance with
laws
Pressure groups are organisations that seek to influence the policies and actions of businesses or governments
What’s is the stakeholder approach and give adv and dis
Stakeholder Approach:
-Business decisions consider all stakeholders
-Emphasis on long-term sustainability, CSR, and reputation
Pros:
-Builds trust and loyalty (e.g. with staff and customers)
-Improves brand image and long-term stability
Cons:
-Can reduce short-term profit
-May be harder to make quick decisions
What is the shareholder approach’s and adv and dis
Shareholder Approach:
-Focus is purely on maximising shareholder returns
-Business aims to increase profits, dividends, and share price
Pros:
-Attracts investors
-Clear focus on profit
Cons:
-Can lead to short-termism
-May ignore ethical or social responsibilities
Define ethics
Ethics are the moral principles that guide the behaviours of individuals and businesses
-It can be expensive to act ethically eg
>ethical sourcing of raw materials
>caring for environment
>only trading with ethical operations
Benefits of Ethical Decisions:
-Builds customer loyalty
-Attracts ethical investors
-Enhances brand image and trust
-Can reduce long-term costs (e.g. avoiding fines, improving retention)
Drawbacks of ethical decisions
-Higher costs (e.g. fair trade, eco-packaging)
-May lose competitiveness if rivals are unethical
-Hard to measure ROI on ethics
Link pay to ethics and define CSR
Pay is used to attract workers,but the reward eg bonuses are not always distributed fairly
Corporate social responsibility- belief that a business should act responsible and protect the interest of all stakeholders and environment
Advantages of CSR
-Improves brand image and customer loyalty
-Attracts talent (especially younger workforce)
-Builds better relationships with stakeholders
-Can become a USP
DIS of CSR
-Can be expensive and reduce short-term profits
-Hard to measure impact
-May be seen as “greenwashing” - Greenwashing is when a business pretends to be environmentally friendly or ethical in order to improve its image, but in reality, it’s doing very little to actually help the environment or society.
Carolls CSR pyramid
-Philanthropic Responsibilities – BE A GOOD CITIZEN eg donate, Voluntary actions that benefit society.
-Ethical Responsibilities – DO WHAT’S RIGHt, Goes beyond legal obligations — doing what society sees as morally right. Eg Paying fair wages (even if not legally required), avoiding pollution
- Legal-Businesses must follow laws and regulations (e.g. employment law, health and safety, environmental laws).
- Economic Responsibilities – BE PROFITABLE
This is the foundation: a business must be financially stable.
>If a company isn’t profitable, it can’t survive or fund ethical or social efforts.
