Mgmt Reading 3 & 4

Front 1

balanced scorecard

Back 1

a method of evaluating a firm's performance using performance measures from the customers' internal, innovation and learnings, and financial perspectives

Front 2

four key perspectives the scorecard enables managers to consider from:

Back 2

customers, internal, innovation and learnings, and financial

Front 3

customer perspectives

Back 3

measures of firm performance that indicate how well firms are satisfying customers' expectations

Front 4

four key categories of customer concerns:

Back 4

time, quality, performance and service, and cost

Front 5

Four Questions the scorecard enables to be asked:

Back 5

-How do customers see us? (customer perspective)
-What must we excel at? (internal business perspective)
-Can we continue to improve and create value? (innovation and learning)
-How do we look to shareholders (financial perspective)

Front 6

internal business perspective

Back 6

measures of firm performance that indicate how well firms' internal processes, decisions and actions are contributing to customer satisfaction

Front 7

4 factors that effect internal business:

Back 7

time, quality, employee skills, and productivity

Front 8

innovation and learning perspectives

Back 8

measures of firm performance that indicate how well firms are changing their product and service offerings to adapt to changes in the internal and external environments

Front 9

3 categories of intangible assets critically important to innovation and learning perspective:

Back 9

1.) human capital (skills, talents, and knowledge)
2.) information capital (information systems, networks)
3.) organization capital (culture, leadership)

Front 10

financial perspective

Back 10

measures of firms' financial performance that indicate how well strategy, implementation and execution are contributing bottom line improvement

Front 11

3 goals of financial perspective:

Back 11

profitability, growth, and shareholder value

Front 12

key to score card:

Back 12

organizational scorecards must be aligned with individuals scorecards to turn the balanced scorecards into a powerful tool for sustained performance

Front 13

potential limitations of the balanced scorecard:

Back 13

-lack of clear strategy
-limited or ineffective executive sponsorship
-too much emphasis on financial measures rather than non financial measures
-poor data on actual performances
-inappropriate links of scorecard measures to compensation (managers looking to cash in)
-inconsistent or inappropriate terminology (everyone has to speak and agree upon the same strategic language)

Front 14

Start of Reading 4:

Back 14

NOW!

Front 15

stakeholders

Back 15

the people and groups that supply a company with its productive resources and so have a claim on and stakes in the company

the people and groups affected by how a company and its managers behave

Front 16

6 categories of stakeholders:

Back 16

1.) stockholders
2.) managers
3.) employees
4.) suppliers and distributers
5.) customers
6.) community, social, and nation-state

Front 17

figure pg. 51

Back 17

types of company stakeholders

Front 18

Stockholders

Back 18

-have claims on a company because they buys its stock or shares and thereby become owners
-want to maximize the return on their investment
-want to ensure that managers are behaving ethically and not risking investors' capital by engaging in actions that could hurt the company's reputation

Front 19

managers

Back 19

-responsible for using a company's financial, capital, and human resources to increase its performance and thus its stock price
-bring to it their skills, expertise, and experience
-invest their human capital to improve a company's performance
-have to juggle the interests of different stakeholders, including their own
Ex: layoffs may help cut costs (benefiting shareholders) at the expense of the employees laid off

Front 20

debate: is it ethical for top mangers to receive such vast amounts of money from their companies?

Back 20

-money could've gone to shareholders in the form of dividends
-CEOS pay has skyrocketed (they set and control one another's salaries and bonuses
-Ex: CEOS of mortgage firms having high salaries even during the subprime mortgage crisis

Front 21

Nonprofit organizations ethical practices

Back 21

-not as ethical as you would think
-top executives get paid A LOT
-boards enjoy perks and compensation for attendance at board meetings (noted accounts)
-DO NOT have shareholders, so the laws governing disclosure are far weaker

actually MORE difficult to monitor unethical behavior in non-profit organizations

Front 22

allegations against the Red Cross

Back 22

mishandling the hundreds of millions of dollars they received in donations after Hurricane Katrina

Front 23

Employees

Back 23

-expect to receive rewards consistent with their performance
-companies need to develop recruitment, training, performance appraisal, and reward systems that do not discriminate against employees and that employees believe are fair

Front 24

Suppliers and Distributors

Back 24

ethical issues arise in how companies contract and interact with their suppliers and distributors
-how and when payments are made
-product quality and safety specifications

EX: PCA peanut products
-Nestle inspectors found feces and live beetles on two separate occasions: decided to find a new peanut supplier & SAVED $$$ b/c it did not suffer from product recalls
-Kellogg, relies on 3rd party inspectors, continued buying PCA's products, and lost A LOT of $$$ b/c it had to recall its peanut products

Front 25

Customers

Back 25

-most critical stakeholders**
-companies want to create loyal customers and attract new ones
-do so by selling customers quality products at a fair price and providing good after-sales services
-laws protect customers from companies that attempt to provide dangerous or shoddy products

Front 26

Table 4.1: Some principles from Gap code of conduct

Back 26

pg. 56

Front 27

Ethics of Whole Foods

Back 27

-natural and organic foods --"purest" possible
-100% organic, hormone-free, or as represented
-cows pastured on grass, not corn-fed in feed lots
-chicken to sells from free-range hens and not hens that have been confined in tiny cages that prevent movement
-employees = team members
-putting customers first
-developed by 2 hippies

Front 28

Exhibit 4.2: Whole Foods Market's Stakeholder Approach to Ethical Business

Back 28

pg. 58

Front 29

community, society, and nation

Back 29

-businesses have a large effect on the community in which they locate themselves in
-community refers to physical locations like towns or cities or to social milieus like ethnic neighborhoods in which companies are located
-a company contributes to the economy of its town or region and often determines whether the community prospers or declines

Ex: combined effects of McDonalds and other fast-food companies
-500,000 people work in the industry
-many suppliers like farmers, paper cup manufacturers, builders, and so on depend on it for their livelihood
-debate against higher minimum wage: would substantially increase its operating costs
-McDonalds issued new standards concerning cage size its egg suppliers must abide by

the failure of a company can have catastrophic effects on a community --> pollution
Ex: US companies dumping waste in the Rio Grande (legal in Mexico): now causing US rivers to experience the pollutions negative effects

Front 30

Rules for Ethical Decision making: in regards to PRICES

Back 30

High prices charged to customers may bring high returns to shareholders and high salaries to mangers in the short run. If in the long run customers turn to companies that offer lower-cost products, however, the result may be declining sales, laid-off employees, and the decline of the communities that support the high-priced company's business activity

Front 31

4 ethical rules or principles to analyze the effects of business decisions on stakeholders

Back 31

1.) utilitarian
2.) moral rights
3.) justice
4.) practical rules

= guidelines that help mangers decide on the appropriate way to behave in situations where it is necessary to balance a company's self-interest of its stakeholders

Front 32

Utilitarian rule

Back 32

that an ethical decision is a decision that produces the greatest good for the greatest number of people

most benefits / least harm

***Ex: managers might face a choice of using global outsourcing to reduce costs and lower prices or continuing with high-cost production at home: A decision to use global outsourcing benefits shareholders and customers but will result in major layoffs that will harm employees and the communities in which they live.
(The interest of the shareholders are put above those of employees in most capitalist societies)

In the LR, the alternative, home production, might cause the business to collapse and go bankrupt, in which case greater harm will be done to all stakeholders!!!!! BAM!!!!

Front 33

Moral rights rule

Back 33

an ethical decision is one that best maintains and protects the fundamental or inalienable rights and privileges of the people affected by it.

(treat other how you'd like to be treated)

protect people's rights to freedom, life and safety, property, free speech, and freedom of conscience

--decisions that might harm the safety or health of employees or customers would clearly be unethical choices

Front 34

Justice Rules

Back 34

an ethical decision distributes benefits and harms among people and groups in a fair, equitable, or impartial way.

Ex: employees who are similar in their level of skill, performance, or responsibility should receive similar pay --> should not be based on differences such as gender, race, or religion

Ex: Managers can't just give people they like better, better pay

Ex: employees need to act fairly towards their companies by working hard and being loyal

Front 35

Practical Rule

Back 35

an ethical decision is one that a manager has no reluctance about communicating to people outside the company, because the typical person in society would think it is acceptable

Ex: individuals copying digital content from the internet debate --> Napster

Front 36

unethical behavior negative effect chain:

Back 36

unethical behavior -->
reduces efficiency and effectiveness of production and trade -->
reduces company performance -->
reduces standard of living, well-being, and prosperity


the pursuit of self-interest with no consideration of societal interests leads to disaster for each individual and for the whole society because scarce resources are destroyed

Front 37

ethical behavior positive effect chain:

Back 37

ethical behavior -->
increases efficiency and effectiveness of production and trade -->
increases company performance -->
increases national standard of living, well-being, and prosperity

creates TRUST and improves REPUTATION

Front 38

trust

Back 38

the willingness of one person or group to have faith or confidence in the goodwill of another person, even though this puts them at risk

allows cooperating more efficiently and effectively, which raises company performance

Front 39

reputation

Back 39

-important safeguard against unethical behavior is the loss of this
-ability to earn a living and obtain resources in the long run depends on how they behave

Front 40

social responsibility

Back 40

NOTE: a company's ethics are the result of differences in societal, organizational, occupational, and individual ethics

-the way a company's managers and employees view their duty of obligation to make decisions that protect, enhance, and promote the welfare and well-being of stakeholders and society as a whole

Ex: decision to spend $ on training and educating employees

Ex: decision to act promptly and warn customers when a batch of defective merchandise has been accidentally sold
HD did (cameras catching fire)
Toyota did not (accelerating randomly)

Front 41

forms of socially responsible behavior

Back 41

-allow employes health care and pension benefits
-keep open a factory whose closure would devastate the local community
-keep a company's operations in the US
-improve a new factory so it will not pollute the environment

Front 42

four different approaches to social responsibility (scale):

Back 42

obstructionist --> Defensive --> accommodative --> proactive

Front 43

obstructionist

Back 43

companies and their managers choose not to behave in a socially responsible way and instead behave unethically and illegally

Ex: tobacco companies hiding evidence that cigarette smoking causes lung cancer

Ex: PCA, Enron, Lehman Brothers

Front 44

Exhibit 4.6: Approaches to Social Responsibility

Back 44

pg. 68

Front 45

Defensive approach

Back 45

companies and their managers behave ethically to the degree that they stay within the law and strictly abide by legal requirements; some commitment to ethical behavior.

Ex: giving managers large stock options and bonuses even as company performance is declining rapidly; managers put their own interests first and commonly harm other stakeholders

Front 46

accommodative approach

Back 46

companies and their managers behave legally and ethically and try to balance the interests of different stakeholders as the need arises; try to balance the interest of different stakeholders

Generally, the older and more reputable a company, the more likely its managers are to curb attempts by their subordinates to act unethically
Ex: GM, Dell, DuPoint

Front 47

Proactive approach

Back 47

companies and their managers actively embrace socially responsible behavior, going out of their way to leaner about the needs of different stakeholder groups and using organizational resources t promote the interests of all stakeholders; actively embrace the need to behave in socially responsible ways

Ex: Nucor -- never laid off one employee, even though a major recession was raging. both managers and employees took major cuts in pay and bonuses to weather the storm together

These type of approach companies are often at the forefront of campaigns for causes such as the pollution-free environment; recycling and conservation of resources; the minimization or elimination of the use of animals in drug and cosmetic testing; and the reduction of crime, illiteracy, and poverty
Ex: McDonalds, Google, Green Mountain Coffee, Whole Foods, and Target

Front 48

Why be socially responsible?

Back 48

-Reputation
-if all companies in a society act responsibly, the quality of life as a whole increases
Ex: Japan, Sweden, Germany, and Netherlands and Switzerland