3.4 Flashcards
What is short termism?
Where a business prioritises short term rather than long term performance
Short terms: performance measures
- share price and market capitalisation
- revenue growth
- gross and operating profit
- unit costs and productivity
- ROCE
Symptoms of short termism management
- low investment in R&D
- high dividend payments rather than reinvesting profits
- overuse of takeovers rather than internal growth
Biggest criticism of short termism
Does not focus on what the business needs to do in order to build a sustainable competitive advantage
What id=s long termism?
Where a business priorities long term rather than short term performance
Influences on decision making
- business objectives/ budgets
- organisational structure
- external environment
- availability and reliability of data
Subjective decision making
Based on intuition and experience
Key benefit- quick
Criticism- hard to justify for business decisions involving significant risk
Evidence based decision making
Based on data and analysis
Key benefit- increasingly common and automated, supported by big data and data analytics
Criticism- time consuming and costly; no guarantee of the right decision
Reasons why evidence based decision making is becoming more popular
- more widespread availability of data
- greater sophistication of data analytics and skills/ experience of data analysts
What is business culture?
Culture illustrates the accepted norms and values and traditional behaviour of a group.
Culture. consists of factors such as:
- shared values of a business
- beliefs and norms that affects every aspect of work life
- behaviours typical of day to day behaviour
Signs of a strong culture
- staff understand and respond to culture
- little need for policies and procedures
- consistent behaviour
- culture ids embedded
Signs of weak culture
- conflict between staff
- little alignment with business values
- inconsistent behaviour
- a need for extensive bureaucracy and procedures
Types of culture
Power
Role
Task
Person
Power culture
Power is held by one whose influence spreads throughout the organisation
Few rules and regulations
Employees are generally judged by what’s they achieve rather than how they do things/ act
+ quick decision making
Role culture
Based on rules
Highly controlled, with everyone in the organisation knowing what their roles and responsibilities are
Power is determined by a person’s position in the organisational structure
- decision making can be painfully slow and less likely to take risks
- very bureaucratic
Task culture
When teams in an organisation are formed to address specific problems or progress projects
Power within the team will often shift depending on mix of the team members and the status of the problem or project
Largely determined by the team dynamic
+ with the right mix of skills, personalities and leadership can be incredibly productive and effective
Person culture
Individuals very much see themselves as unique and superior to the organisation
Simply exists in order for people to work
A collection of individuals who happen to be working for the same organisation
Key influences on organisational structure
- influence of the founder
- size and development stage of business
- leadership and management style
- organisational structure, policies and practices
- market/ industries it operates in
Signs that organisational structure might need change
- declining profit and sales
- inadequate returns on investment
- low quality or standards of customer service
- loss of market share
- failure to innovate
Culture related signs that show culture change needs to be addressed
- internal fighting
- high levels of voluntary staff turnover
- greater absenteeism
- innovation is no longer valued
- declining customer service
What is a stakeholder?
Any individual or organisation who has a vested interest in the activities and decision making of a business
Stakeholders in a business
- managers and employees
- shareholders and owners
- customers
- suppliers
- creditors
- government
- competitors
- society
What are ethics?
Moral guidelines which govern acceptable behaviour
Doing what is morally right
