Revision Questions

Chapter5SocialResponsibilityandManagerialEthics
1. Discusswhatitmeanstobesociallyresponsibleandwhatfactorsinfluencethat
decision.
Social obligation,which reflects the classicalviewof social responsibility, iswhen a firm
engages in social actions because of its obligation to meet certain economic and legal
responsibilities. Socialresponsivenessis when afirmengagesinsocialactionsinresponse
to some popular social need. Social responsibility is a businesss intention, beyond its
economic and legal obligations, topursue longterm goals that are good for society. Both
ofthesereflectthesocioeconomicviewofsocialresponsibility.
Determining whether organizations should be socially involved can be donebylookingat
arguments forand against it. Otherwaysaretoassesstheimpactofsocialinvolvementona
companys economic performance and evaluate the performance of SRI funds versus
nonSRIfunds.Wecanconcludethatacompanysbeingsociallyresponsibledoesntappear
tohurtitseconomicperformance.

2. Discussthefactorsthatleadtoethicalandunethicalbehavior.
Ethics refers to the principles, values, andbeliefs thatdefinerightandwrongdecisionsand
behavior.The factors that affectethical and unethicalbehavior include an individualslevel
of moral development (preconventional, conventional, or principled), individual
characteristics (values and personality variablesego strength and locus of control),
structural variables (structural design, use of goals, perform ance appraisal systems, and
reward allocation procedures), organizational culture (shared valuesand cultural strength),
andissueintensity (greatnessofharm,consensusofwrong,probabilityofharm,immediacy
ofconsequences,proximitytovictims,andconcentrationofeffect).
Since ethical standards arent universal, managersshould knowwhattheycanandcannotdo
legally as definedbytheForeignCorruptPracticesAct.Itsalsoimportanttorecognizeany
cultural differences and to clarify ethical guidelines for employees working in different
global locations. Finally,managersshouldknowabouttheprinciplesoftheGlobalCompact
andtheAntiBriberyConvention.

3. Describemanagementsroleinencouragingethicalbehavior.
The behavior of managers isthesinglemostimportantinfluenceonanindividualsdecision
to actethicallyorunethically.Somespecificwaysmanagerscanencourageethicalbehavior
include paying attention to employee selection, having and using a code of ethics,
recognizing theimportantethicalleadershiproletheyplayandhowwhattheydoisfarmore

important than what theysay,makingsure that goals andtheperformanceappraisalprocess

dont reward goal achievement without takinginto account how those goals were achieved,
usingethicstrainingandindependentsocialaudits,andestablishingprotectivemechanisms.

4. Discusscurrentsocialresponsibilityandethicsissues.
Managers can manage ethical lapses and social irresponsibility by being strong ethical
leaders andbyprotectingemployees whoraiseethicalissues.Theexamplesetbymanagers
has a strong influence on whether employees behave ethically. Ethical leaders also are
honest, share their values, stress important shared values, and use the reward system
appropriately. Managers can protect whistleblowers (employees who raise ethical issues
or concerns) by encouraging them to come forward,bysettinguptollfreeethicshotlines,
andbyestablishing a cultureinwhich employeescancomplainandbeheardwithoutfearof
reprisal.
Social entrepreneurs play an important role in solving social problems by seeking out
opportunitiesto improvesocietybyusingpractical, innovative,andsustainableapproaches.
Social entrepreneurs want to make the world a better place and have a driving passion to
make that happen. Businesses can promote positive social change through corporate
philanthropyandemployeevolunteeringefforts.

Chapter6DecisionMaking

1. Whatisdecisionmaking?Describetheeightstepsinthedecisionmakingprocess.
A decision is a choice. The decisionmaking process consists of eight steps: (1)identify
problem (2) identify decisioncriteria(3) weightthe criteria (4) develop alternatives(5)
analyze alternatives (6) select alternative (7) implement alternative and (8) evaluate
decisioneffectiveness.

2. Explainthefourwaysmanagersmakedecisions.
The assumptions of rationality are as follows: the problem is clear and unambiguous a
single, welldefined goalistobeachievedallalternativesandconsequencesareknownand
the final choice will maximize the payoff. Bounded rationality says that managers make
rational decisions but are bounded (limited) by their ability to process information.
Satisficing happens when decision makers accept solutions that are good enough. With
escalation of commitment, managers increase commitment to a decision even when they
have evidence it may have been a wrong decision. Intuitive decisionmakingmeans making

decisions on the basis of experience, feelings, andaccumulatedjudgment.Usingevidence

basedmanagementamanagermakesdecisionsbasedonthebestavailableevidence.
3. Classifydecisionsanddecisionmakingconditions.
Programmed decisions are repetitive decisions that can be handled by a routine approach
and are used when the problem being resolved is straightforward, familiar, and easily
defined (structured). Nonprogrammed decisions are unique decisions that require a
custommade solution and are used when the problems are new or unusual (unstructured)
and for which information is ambiguous or incomplete. Certainty isa situationin whicha
managercanmakeaccuratedecisionsbecausealloutcomesareknown.Riskisasituationin
whicha managercan estimate thelikelihoodofcertainoutcomes.Uncertaintyisasituation
in which a manager is not certain about the outcomes and cant even make reason able
probabilityestimates.
When decision makers face uncertainty, their psychological orientation will determine
whether they follow a maximax choice (maximizing the maxi mum possible payoff) a
maximin choice (maximizing the minimum possible payoff) or a minimax choice
(minimizing the maximum regretamount of money that could have been made if a
differentdecisionhadbeenmade).

4. Describe different decisionmaking styles and discuss how biases affect decision
making.
A persons thinking style reflects two things: the source of information you tend to use
(externalorinternal)andhowyouprocessthatinformation(linearornonlinear).Thesefour
dimensions were collapsed into two styles. The linear thinking style is characterized by a
persons preference for using external data and processing this information through
rational, logical thinking. The nonlinear thinkingstyleis characterizedbya preference for
internal sources of information and processing this information with internal insights,
feelings,andhunches.
The 12 common decisionmaking errors and biases include overconfidence, immediate
gratification, anchoring, selective perception, confirmation, framing, availability,
representation, randomness, sunk costs, selfserving bias, and hind sight. The managerial
decision making model helps explain how the decisionmaking process isused to choose
the best alternative(s) either through maximizing or satisficing and then implement and
evaluate the alternative. It also helps explain what factors affect the decisionmaking
process including thedecisionmakingapproach(rationality,boundedrationality,intuition),
the types of problems anddecisions (well structured and programmed or unstructured and
nonprogrammed), the decisionmaking conditions (certainty, risk, uncertainty), and the
decisionmakersstyle(linearornonlinear).

5. Identifyeffectivedecisionmakingtechniques.
Managers can make effective decisions by understanding cultural differences in decision
making, knowingwhenits timetocallitquits,usinganeffectivedecisionmakingprocess,
and building an organization thatcan spotthe unexpected and quickly adapt to the changed
environment. An effective decisionmakingprocess(1)focuses on whatsimportant(2)is
logical and consistent(3) acknowledgesboth subjective and objectivethinking and blends
both analyticalandintuitiveapproaches(4)requiresonlyenoughinformationasisneces
sary to resolve a problem (5) encourages and guides gathering relevant information and
informedopinionsand(6)isstraightforward,reliable,easytouse,andflexible.