Exam 2 Flashcards
What is company culture?
The shared beliefs and values established by the company that employees are expected to follow.
Because companies and industries vary significantly,
there is no one-size-fits-all culture template that meets the needs of all organizations
True
Essentially, company culture defines the proper way to behave within the organization.
True
Three levels of organizational culture are:
Observable artifact (physical manifestations of culture), Espoused values (Explicitly stated values and norms), Basic assumptions (Core values of the organization)
Level 1: Observable artifact is…
An artifact or symbol that is believed to bring forth more honest and constructive discussions among employees
Level 2: Espoused values are…
The norms and values of a company; for example, CVS’s contradictory selling of cigarettes stopped because it went against the values of a pharmaceutical company
Level 3: Basic assumptions is…
The core values of an organization; for example, servers are expected to serve the customers while also maintaining a fun, relaxed work environment
Culture can attract new employees and retain existing ones. There are many kinds of company cultures.
True
Adhocracy Culture
- External focus
- Values flexibility, creativity and
quick response to changes in the
marketplace - Customer responsiveness is highly valued
- Employees empowered to make decisions
- Employees are rewarded for creativity,
initiative, experimentation, and risk-taking
Market Culture
- Focuses on the external environment
- Values stability and control
- Values competition and an aggressive approach
to doing business - Values results and people who work long hours
to get them - Emphasizes winning and meeting ambitious goals
Clan Culture
- Internal focus
- Values flexibility over employees
- High value on meeting employee needs– may be
family-like and caring - Values cooperation, consideration, avoidance of
status differences
Hierarchy Culture
- Has an internal focus
- Values stability and control over flexibility
- A formalized, structured work environment that
values “Following the rules” - Rewards a methodical, orderly, rational way of
doing things - Examples include government agencies, the
military, nuclear power plants, hospitals … and
many professional sports teams
How do employees learn culture?
- Symbols
- Stories
- Heroes
- Rites and rituals
- Organizational socialization
Who was Lou Gerstner?
Was the first IBM CEO to be hired from outside the company; formerly of Nabisco and American Express
What did Lou Gerstner do?
He provided a total culture change that was not perfect but delivered fast. The biggest change was providing a company-based bonus to encourage teamwork.
From 1993 until Gerstner’s retirement in 2002, IBM’s
market capitalization rose from $29 billion to $168 billion.
True
How to find out about a culture?
- Read about the company in the media
- Read the company website
- Ask employees
- Ask interviewers
Person-Organization Fit
Reflects the extent to which your personality and values match the climate and culture of the company
How to stand out in a new job:
- Be aware of the power of first impressions
- Become an observer – arrive early, stay late –
watch people, learn the business - Network with people, and find out how the organization
works and who does what - Ask for advice
- Over-deliver
- Soak up the culture!
What is a Shareholder
anyone who owns stock in a company.
What is a Stakeholder
anyone who can affect a company or be affected by a company
The shareholder is not the only party that has a stake in a corporation
True
Stakeholders include
– employees and employees’ families
– the media
– suppliers
– customers
– competitors
– governments
– local communities … and many others …
Corporate governance
The system of rules, practices, and processes by which a company is directed and controlled
The governance of public companies (from top to bottom)
- Shareholders
- Board of directors
- CEO & Senior leadership team
Shareholders…
- Shareholders make a financial investment in the
company – they buy stock – and that makes them
the “owners” of the company - Oversee the proper management of the company
- Holds the Board of Directors and Senior Leadership
Team accountable for the performance of the
company - Shareholders may ask questions, seek clarifications
and even raise objections to the actions and
decisions of the Board of Directors and Senior
Leadership Team - Board of Directors and Senior Leadership Team
typically address Shareholders at the Annual
General Meeting - Shareholders elect the company’s Board of
Directors
Board of directors…
- Nominated by the CEO but approved by a vote of
Shareholders - Includes mostly people from other companies but
also includes a few executives from inside the
company, usually the CEO and CFO - Guides the overall direction of the company and
weighs in on major initiatives such as mergers and
acquisitions or significant shifts in strategy - Makes sure the company is acting ethically and
complying with the law - Hires (and fires) the CEO
Senior leadership team…
- Responsible for managing and operating the
company on a day-to-day basis - Led by the CEO
- Includes the senior executives in the company:
– Chief Financial Officer (CFO)
– Chief Operating Officer (COO)
– General Counsel
– Heads of Corporate Strategy … Research &
Development … Communications … Marketing …
Sales … Manufacturing … Human Resources …
Information Technology
Who is Milton Freedman?
- American economist and author
- 1976 Nobel Prize in Economics
- The ultimate free market capitalist
- Advisor to US Presidents
- Favored gay rights and the
legalization of drugs and prostitution - Came from a working-class family in Brooklyn
What was Freedman’s theory?
- His theory of the social responsibility of business, published in 1970, is one of the most controversial and heavily debated theories in business and academic history:
- “There is one – and only one – social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say engage in open and free competition without deception or fraud”
- It’s all about profits … period
Freedman believed that businesses do not have any
moral obligations or social responsibilities at all, other than to maximize their own profit although he did believe that profitable businesses do a lot of good for society.
True
What did T.J. Rogers believe about business?
- ” The sole purpose of business is to maximize
profits for investors” - Believes corporations add far more to society
by maximizing “long-term shareholder value
than they do by donating time and money to
charity”
John Mackey
- Founder and CEO of Whole Foods
- Dropped out of college to start his
own health food store that later
became Whole Foods - Reduced his salary to $1 a year, donated his stock portfolio to charity and set up a $100,000 fund for employees with personal problems
What does John Mackey say about business?
- Passionately disagrees with Friedman and Rodgers
- “The enlightened corporation should try to create value for all of its stakeholders“
- Seeking profit by responding to all stakeholders is a means to being socially responsible
- In other words, there is a humanitarian dimension to capitalism
What is the shareholder theory of governance?
- Managing the company solely according to the interests of shareholders
- Management runs the company and makes decisions that ensure that the company’s stock price rises and shareholders receive a good return on their investment
- Increasingly viewed as an “old-fashioned” way of doing business
- Companies have realized the disadvantages of managing solely according to the interests of shareholders
- Led to the demise of Enron and Worldcom, where continuous pressure on managers to increase financial returns to shareholders led them to manipulate company accounts
What is the stakeholder theory of governance?
- A company owes a responsibility to a wider group of stakeholders other than just shareholders
- Stakeholders who must be satisfied include employees, customers, suppliers, creditors, and the community
- Interests of all stakeholders should be considered even if it reduces the profitability of the company in the short term
How does the stakeholder theory of governance work?
Imagine an automobile company that has recently gone public:
Naturally, the shareholders want to see their stock values rise, and the company is eager to please those shareholders because they have invested money in the firm. However, the company has to please other stakeholders besides the shareholders:
- The company may contribute profits to help local communities
- The company may decide to pay employees a bonus for their outstanding work during Covid that kept the business operating
- The company may spend millions in new packaging that causes less harm to the environment
All of this means that in the short term less money is going directly to the bottom line and thus less profits to be shared with stockholders
What did the Business Roundtable do in 2019?
The CEOs promised to lead their companies for the benefit of all Stakeholders, including customers, employees, suppliers, communities and shareholders
Corporate Social Responsibility
- Goes a little farther than the Stakeholder Theory –
adds social and ethical elements to running the business - A business approach that aims to deliver economic, social, and environmental benefits for all stakeholders
- Balances the pursuit of profit with a commitment to ethical conduct
What are the four sectors of corporate social responsibility?
- Environmental efforts
- Philanthropy
- Ethical labor practices
- Volunteering
Who is Howard Schultz?
- Grew up in the NYC projects; first member of his family to go to college
- Visited Italy and was impressed with the culture of the coffee bars
- Served as CEO and/or Chairman since 1987; recently retired
- Net worth: $3.2 billion
Ethics
Ethics are broadly considered to be the principles, values, and beliefs that define what is right and wrong behavior
Why should companies care about ethics?
- Because doing the right thing is the right thing to do!
- It’s expensive to get into trouble
- Companies caught in ethics violations can be fined
significant amounts of money and see their reputation and brand damaged
What did Volkswagen do to repay for cheating?
- $14.7 billion fine – largest in corporate history at the time
- $10 billion to owners of half a million affected diesel cars in the U.S.
- VW pays $2.7 billion for environmental cleanup; $2 billion to promote zero-emission vehicles
- Owners who get their vehicles fixed also receive $5k-$10K to make up for lost value of the cars
Ethics investigations of companies by the US Government can be triggered by the activities of just 1 employee
True
Being ethical attracts engaged employees
True
Engaged Employees…
– Stay with the company
– are more productive
– advocate for the company and help recruit new employees
– are willing to give extra effort
Employee Theft
- Money – The most common asset stolen from employers
- Time – Getting paid for time not worked – falsifying time- keeping records or not working while on the job
- Supplies – Office supplies (paper, pens) and restaurant supplies (food, condiments, silverware)
- Information – Stealing product designs and trade secrets
- Merchandise/Company Property – Theft of products that are to be sold
You may be a victim of wage theft if…
- You work “piece rate” or off the books
- You’re forced to clock out early and keep working
- You’ve had your tips stolen
- You don’t receive meal or rest breaks
What does HR do?
- Recruits and helps hire the right people!
- Works with managers to identify high-potential people in the organization and begin grooming them for leadership roles – this is known as succession planning
- Researches the latest salary, rewards, and benefits trends in and outside of the industry to help a company figure out what to pay people in order to be competitive
- Helps the company prepare for and navigate change (mergers, acquisitions, divestitures, layoffs)
- HR helps the company figure out the right structure
of the new organization and puts the right people in the right jobs - Figures out what the company does well and what it needs to improve and then … Develops training and development programs to address those areas for improvement (e.g. develops training programs to help managers be better leaders)
- Works with managers to resolve employee relations issues (abusive bosses, sexual harassment, grievances, unfair hiring and firing)
What is attrition?
- If employees lose confidence in the company or if they find a better opportunity elsewhere, they may leave …
- Employees who leave must be replaced …
- The cost of replacing an employee is 1.5x the salary of the person who leaves
How do companies find people to hire?
- Current employees often help recruit new employees. if a person you refer is hired, many companies will give you a $1,500 bonus
- E-recruitment tools (LinkedIn, job websites)
- People you know at other companies. “Hey, I have
an opening on my team – do you know someone
who might be interested?”
Should you lie on your resume or LinkedIn?
NO!
Unstructured interviews:
- No fixed set of questions and no systematic scoring
procedure - Involves asking probing questions to find out what the applicant is like
An unstructured interview often feels like a conversation
Structured interviews:
- Asking each applicant the same questions and comparing their responses to a standardized set of answers
Type 1: Situational interview - Focuses on hypothetical situations “What would you do if you saw two of your team members arguing loudly in the work area?”
Type 2: Behavioral interview - Explore what applicants have actually done in the past “Tell me about the best idea you ever sold to a supervisor?”
Things to look for in an interviewee:
- Ability to navigate the organization and get things done
- Good judgment
- Work ethic
- Sense of humor
Measuring job performance
- Manager’s Appraisal of You “Here’s what I think you did well last year. Here’s what I think you need to improve. Let’s work together to create a development plan so that you improve.”
- Self-Appraisal How you think you did this year – your perception of how you did may differ from your manager’s perception
- 360-Degree Assessment – Feedback from peers, subordinates, “internal “customers”
- Feedback from External Customers
Exit Interviews
A formal conversation to find out why an employee is leaving the company and to learn about potential problems in the organization
Exit interviews are valuable sources of information that help companies improve
Non-disparagement agreements
The contract that prohibits one party from criticizing the other
Often used in severance agreements to prohibit former employees from criticizing their former employers
