Who is a manager?

A manager is someone who coordinates and oversees the work of other people
so that organizational goals can be accomplished. A manager’s job is not about personal achievement—it’s
about helping others do their work. That may mean coordinating the work of a departmental group, or it
might mean supervising a single person. It could involve coordinating the work activities of a team with
people from different departments or even people outside the organization, such as temporary employees
or individuals who work for the organization’s suppliers.

Role of managers:
1. Managers play an important role in identifying critical issues and crafting responses.
2. managers are important to organizations is that they’re critical to getting things done. Although the
manager him/herself will not do the tasks, he/she is the person who creates and coordinates the
workplace systems and conditions so that others can perform those tasks. He/she often pitches in
when and where needed, her job as manager is to ensure that all the employees are getting their
jobs done efficiently and effectively so the organization can do what it’s in business to do. If work
isn’t getting done or isn’t getting done as it should be, she’s also the one who must find out why
and get things back on track.
3. the single most important variable in employee productivity and loyalty isn’t pay or benefits or
workplace environment; it’s the quality of the relationship between employees and their direct
supervisors. the way a company manages and engages its people can significantly affect its
financial performance. managerial ability was important in creating organizational value. What can
we conclude from such reports? That managers are important and they do matter!

Efficiency refers to getting the most output from the least amount of inputs. Because managers deal with
scarce inputs—including resources such as people, money, and equipment—they’re concerned with the
efficient use of those resources.

Management is also concerned with being effective, completing activities so that organizational goals are
attained. Effectiveness is often described as “doing the right things”—that is, doing those work activities
that will help the organization reach its goals.

At the lowest level of management, first-line managers manage the work of nonmanagerial employees
who typically are involved with producing the organization’s products or servicing the organization’s
customers. First-line managers may be called supervisors or even shift managers, district managers,
department managers, or office managers. Middle managers manage the work of first-line managers and
can be found between the lowest and top levels of the organization. They may have titles such as regional
manager, project leader, store manager, or division manager. At the upper levels of the organization are
the top managers, who are responsible for making organization-wide decisions and establishing the plans
and goals that affect the entire organization. These individuals typically have titles such as executive vice
president, president, managing director, chief operating officer, or chief executive officer.

Organization: First, an organization has a distinct purpose. This purpose is typically expressed through
goals that the organization hopes to accomplish. Second, each organization is composed of people. It takes
people to perform the work that’s necessary for the organization to achieve its goals. Third, all organizations
develop some deliberate structure within which members do their work. That structure may be open and
flexible, with no specific job duties or strict adherence to explicit job arrangements.
Functions of managers (Henri Fayol):
1. As managers engage in planning, they set goals, establish strategies for achieving those goals,
and develop plans to integrate and coordinate activities.
2. Managers are also responsible for arranging and structuring work to accomplish the organization’s
goals. We call this function organizing. When managers organize, they determine what tasks are to
be done, who is to do them, how the tasks are to be grouped, who reports to whom, and where
decisions are to be made.
3. Every organization has people, and a manager’s job is to work with and through people to
accomplish goals. This is the leading function. When managers motivate subordinates, help resolve
work group conflicts, influence individuals or teams as they work, select the most effective
communication channel, or deal in any way with employee behavior issues, they’re leading.
4. The final management function is controlling. After goals and plans are set (planning), tasks and
structural arrangements put in place (organizing), and people hired, trained, and motivated
(leading), there has to be some evaluation of whether things are going as planned. To ensure that
goals are being met and that work is being done as it should be, managers must monitor and evaluate
performance. Actual performance must be compared with the set goals. If those goals aren’t being
achieved, it’s the manager’s job to get work back on track. This process of monitoring, comparing,
and correcting is the controlling function.

Managerial roles (Mintzberg): The term managerial roles refer to specific actions or behaviors
expected of and exhibited by a manager.
 The interpersonal roles are ones that involve people (subordinates and persons outside the
organization) and other duties that are ceremonial and symbolic in nature. The three interpersonal
roles include figurehead, leader, and liaison.
 The informational roles involve collecting, receiving, and disseminating information. The three
informational roles include monitor, disseminator, and spokesperson.
 Finally, the decisional roles entail making decisions or choices. The four decisional roles include
entrepreneur, disturbance handler, resource allocator, and negotiator.

As managers perform these roles, Mintzberg proposed that their activities included both reflection
(thinking) and action (doing). The emphasis that managers give to the various roles seems to change with
organizational level. At higher levels of the organization, the roles of disseminator, figurehead, negotiator,
liaison, and spokesperson are more important; while the leader role (as Mintzberg defined it) is more
important for lower-level managers than it is for either middle or toplevel managers.

Basically, managing is about influencing action. It’s about helping organizations and units to get things
done, which means action.” Based on his observations, Mintzberg went on to explain that a manager does
this in three ways:
(1) by managing actions directly (for instance, negotiating contracts, managing projects, etc.)
(2) by managing people who take action (for example, motivating them, building teams, enhance the
organization’s culture, etc.)
(3) by managing information that propels people to take action (using budgets, goals, task delegation, etc.).
The manager at the center of the model has two roles—framing, which defines how a manager approaches
his or her job; and scheduling, which “brings the frame to life” through the distinct tasks the manager does.
A manager enacts these roles while managing action in the three “planes:” with information, through
people, and sometimes by taking action directly.

Katz’s Managerial Skills: Three critical skills in managing: technical, human, and conceptual.
1. Technical skills are the job-specific knowledge and techniques needed to proficiently perform work
tasks. These skills tend to be more important for first-line managers because they typically are
managing employees who use tools and techniques to produce the organization’s products or
service the organization’s customers. Often, employees with excellent technical skills get promoted
to first-line manager.
2. human skills, which involve the ability to work well with other people both
individually and in a group. Because all managers deal with people, these skills are
equally important to all levels of management. Managers with good human skills get the best out
of their people. They know how to communicate, motivate, lead, and inspire enthusiasm and trust.
3. Finally, conceptual skills are the skills managers use to think and to conceptualize about abstract
and complex situations. Using these skills, managers see the organization as a whole, understand
the relationships among various subunits, and visualize how the organization fits into its broader
environment. These skills are most important to top managers.

Innovation means doing things differently, exploring new territory, and taking risks. And innovation isn’t
just for high-tech or other technologically sophisticated organizations. Innovative efforts can be found in
all types of organizations. at Tata of India, the company’s top manager, chairman Ratan Tata, told his
employees during the bleak aspects of the global economic downturn to “Cut costs. Think out of the box.
Even if the world around you is collapsing, be bold, be daring, think big.”37 And his employees obviously
got the message. The company’s introduction of the $2,000 minicar, the Nano, was the talk of the global
automotive industry.

What’s emerging in the twenty-first century is the concept of managing in a sustainable way, which has
had the effect of widening corporate responsibility not only to managing in an efficient and effective way,
but also to responding strategically to a wide range of environmental and societal challenges. From a
business perspective, sustainability has been defined as a company’s ability to achieve its business goals
and increase long-term shareholder value by integrating economic, environmental, and social opportunities
into its business strategies. Sustainability issues are now moving up the agenda of business leaders and the
boards of thousands of companies. managers have to make informed
business decisions based on thorough communication with various stakeholders, understanding their
requirements, and starting to factor economic, environmental, and social aspects into how they pursue their
business goals.
Evolution of management thought:
The formal study of management didn’t begin until early in the twentieth century. These first studies of
management, often called the classical approach, emphasized rationality and making organizations and
workers as efficient as possible. Two major theories comprise the classical approach: scientific management
and general administrative theory. The two most important contributors to scientific management theory
were Frederick W. Taylor and the husband-wife team of Frank and Lillian Gilbreth. The two most important
contributors to general administrative theory were Henri Fayol and Max Weber.

Scientific Approach:

The best known example of Taylor’s scientific management efforts was the pig iron experiment. Taylor
was able to define the “one best way” for doing each job. Overall, Taylor achieved consistent productivity
improvements in the range of 200 percent or more. Based on his groundbreaking studies of manual work
using scientific principles, Taylor became known as the “father” of scientific management. His ideas spread
in the United States and to other countries and inspired others to study and develop methods of scientific
management.

His most prominent followers were Frank and Lillian Gilbreth. Frank and his wife Lillian studied work
to eliminate inefficient hand-and body motions. The Gilbreths also experimented with the design and use
of the proper tools and equipment for optimizing work performance. The Gilbreths invented a device called
a microchronometer that recorded a worker’s hand-and-body motions and the amount of time spent doing
each motion. Wasted motions missed by the naked eye could be identified and eliminated. The Gilbreths
also devised a classification scheme to label 17 basic hand motions (such as search, grasp, hold), which
they called therbligs (Gilbreth spelled backward with the th transposed). This scheme gave the Gilbreths a
more precise way of analyzing a worker’s exact hand movements.

Many of the guidelines and techniques that Taylor and the Gilbreths devised for improving production
efficiency are still used in organizations today. When managers analyze the basic work tasks that must be
performed, use time-and-motion study to eliminate wasted motions, hire the best-qualified workers for a
job, or design incentive systems based on output, they’re using the principles of scientific management.

Administrative Approach
General administrative theory focused more on what managers do and what constituted good management
practice. While Taylor was concerned with first-line managers and the scientific method, Fayol’s attention
was directed at the activities of all managers. Fayol described the practice of management as something
distinct from accounting, finance, production, distribution, and other typical business functions. His belief
that management was an activity common to all business endeavors, government, and even the home led
him to develop 14 principles of management—fundamental rules of management that could be applied to
all organizational situations and taught in schools.

These 14 principles serve as a frame of reference from which many current management concepts—such
as managerial authority, centralized decision making, reporting to only one boss, and so forth—have
evolved.

Weber was a German sociologist who studied organizations. Writing in the early 1900s, he developed a
theory of authority structures and relations based on an ideal type of organization he called a bureaucracy—
a form of organization characterized by division of labor, a clearly defined hierarchy, detailed rules and
regulations, and impersonal relationships. Weber recognized that this “ideal bureaucracy” didn’t exist in
reality. Instead he intended it as a basis for theorizing about how work could be done in large groups. His
theory became the structural design for many of today’s large organizations. Although Weber’s ideas were
less practical than Taylor’s, the fact that his “ideal type” still describes many contemporary organizations
attests to their importance.

Weber’s bureaucracy was an attempt to formulate an ideal prototype for organizations. Although many
characteristics of Weber’s bureaucracy are still evident in large organizations, his model isn’t as popular
today as it was in the twentieth century. Many managers feel that a bureaucratic structure hinders individual
employees’ creativity and limits an organization’s ability to respond quickly to an increasingly dynamic
environment. However, even in flexible organizations of creative professionals—such as Microsoft,
Samsung—some bureaucratic mechanisms are necessary to ensure that resources are used efficiently and
effectively.
Human Relations Approach:
In the 1920s, Elton Mayo, an Australian-born psychologist and organizational theorist, began his research
on the behavior of people in groups and how it affects individuals in the workplace, known as the
Hawthorne studies. At the time, Taylorism, or the application of science in the workplace to improve
productivity, viewed individuals as machines that could work in unethical or unrealistic environments.
Mayo, in contrast, popularized the idea of the "social person," meaning organizations should treat people
as individuals – not machines – with individual needs.

The human relations management theory is a researched belief that people desire to be part of a supportive
team that facilitates development and growth. Therefore, if employees receive special attention and are
encouraged to participate, they perceive their work as having significance and are motivated to be more
productive, resulting in high-quality work. A human relations-centric approach to management and
business requires a special skill set on the part of employers and managers. To effectively carry out a human
relations-focused workplace culture, five skills are essential.

1. Communication: Open lines of communication are essential to any workplace, but this is especially vital
for leaders practicing human relations management. Effective communication helps ensure that all
employees not only are on the same page, but also feel motivated and valued in their work. This refers to
in-person conversations as well as written communication such as emails and social media.

As a leader, you should be able to adapt your language to various situations, such as by modifying your
word choice and formality for high-level executives versus the customer base. One useful communication
technique is mirroring the other person's approach – people are more likely to respond well to those similar
to them. Finding your common interests with them and matching their tone of voice or physical stance are
great ways to subtly connect with your conversational partner.
2. Conflict resolution: Managing individuals with differing personality types, worldviews and goals can
make universal agreement incredibly difficult, if not impossible, to achieve. Therefore, you must be
comfortable and well versed in conflict resolution. You will help your team work together in a civil manner
– even if they don't agree with each other on all points – to ensure the work gets done in a timely manner.

When dissent arises, you must be able to take individual perspectives into account and make each person
feel heard and understood. Once you've synthesized the presented information, you must work with all
parties to come up with a solution where everyone feels comfortable moving forward. While it's impossible
to make everyone happy 100% of the time, good conflict resolution skills can maintain or restore team
harmony in the face of disagreement.

3. Multitasking: Managers face countless tasks, questions and issues to solve on a daily basis. They are
responsible for not only themselves, but the success of their team, which means time spent checking in with
their team and ensuring things are moving smoothly.

A good leader must be able to manage multiple, often competing priorities at once, without missing
deadlines. Another important aspect of multitasking is flexibility; as a manager, you must adapt to policy
or workplace changes that affect your employees' daily workflow.

4. Negotiation: Whether there's an employment offer to navigate, an agreement to establish between

stakeholders and the company, or just opposing viewpoints to manage, negotiation happens regularly in the
workplace. Strong negotiation skills are key to keeping the peace between two parties while reaching an
agreement where all parties are satisfied. Effective communication techniques such as mirroring and
adapting your language to your audience can also be useful in negotiations.

5. Organization: Organization is one of the most important human relations skills, as it impacts all other
areas of work. You must keep your physical workspace, as well as your workflow process, highly organized.
This is especially important when you're filing paperwork or employee records, because everything must
be completed correctly and on time. Staying organized is also a key part of time management and an
efficient workflow.

As a leader, you must work efficiently and manage your time appropriately, especially when tackling
multiple and often time-sensitive priorities, which is only possible when there is an organized process.

From the way that managers design jobs to the way that they work with employee teams to the way that
they communicate, we see elements of the behavioral approach. Much of what the early HR advocates
proposed and the conclusions from the Hawthorne studies have provided the foundation for our current
theories of motivation, leadership, group behavior and development, and numerous other behavioral
approaches.
Systems Approach:
In 1938, Chester Barnard, a telephone company executive, first wrote in his book, The Functions of an
Executive, that an organization functioned as a cooperative system. A system is a set of interrelated and
interdependent parts arranged in a manner that produces a unified whole. The two basic types of systems
are closed and open. Closed systems are not influenced by and do not interact with their environment.
In contrast, open systems are influenced by and do interact with their environment. Organizations are open
systems. An organization takes in inputs (resources) from the environment and transforms or processes
these resources into outputs that are distributed into the environment. The organization is “open” to and
interacts with its environment.

Researchers envisioned an organization as being made up of “interdependent factors, including individuals,

groups, attitudes, motives, formal structure, interactions, goals, status, and authority.” What this means is
that as managers coordinate work activities in the various parts of the organization, they ensure that all
these parts are working together so the organization’s goals can be achieved. For
example, the systems approach recognizes that, no matter how efficient the production department might
be, the marketing department must anticipate changes in customer tastes and work with the product
development department in creating products customers want or the organization’s overall performance
will suffer.

In addition, the systems approach implies that decisions and actions in one organizational area will affect
other areas. For example, if the purchasing department doesn’t acquire the right quantity and quality of
inputs, the production department won’t be able to do its job. Finally, the systems approach recognizes that
organizations are not self-contained. They rely on their environment for essential inputs and as outlets to
absorb their outputs. No organization can survive for long if it ignores government regulations, supplier
relations, or the varied external constituencies upon which it depends.

Nudge Theory
The concept is a relatively subtle policy shift that encourages people to make decisions that are in their
broad self-interest. It’s not about penalising people financially if they don’t act in certain way. It’s about
making it easier for them to make a certain decision. “By knowing how people think, we can make it easier
for them to choose what is best for them, their families and society,” wrote Richard Thaler and Cass
Sunstein in their book Nudge, which was published in 2008.
Nudge theory is a flexible and modern concept for
 Understanding of how people think, make decisions, and behave,
 Helping people improve their thinking and decisions,
 Managing change of all sorts, and
 Identifying and modifying existing unhelpful influences on people.

A good recent example can be found in UK pension policy. In order to increase worryingly low pension
saving rates among private sector workers the Government mandated employers to establish an “automatic
enrolment” scheme in 2012. This meant that workers would be automatically placed into a firm’s scheme,
and contributions would be deducted from their pay packet, unless they formally requested to be exempted.
The theory was that many people actually wanted to put more money aside for retirement but they were put
off from doing so by the need to make what they feared would be complicated decisions. The idea was that
auto enrolment would make saving the default for employees, and thus make it easier for them to do what
they really wanted to do and push up savings rates. Has it worked? Very much so. Since auto enrolment
was introduced by the Government in 2012, active membership of private sector pension schemes
has jumped from 2.7 million to 7.7 million in 2016.

Organizational behavior (OB)

It is a field of study that investigates the impact individuals, groups, and structure have on behavior within
organizations, for the purpose of applying such knowledge toward improving an organization’s
effectiveness. OB studies three determinants of behavior in organizations: individuals (this area includes
such topics as attitudes, personality, perception, learning, and motivation), groups (includes norms, roles,
team building, leadership, and conflict), and structure (including organization, culture, and human resource
policies and practices). In addition, OB applies the knowledge gained about individuals, groups, and the
effect of structure on behavior in order to make organizations work more effectively. OB is the study of
what people do in an organization and the way their behavior affects the organization’s performance.

The goals of OB are to explain, predict, and influence behavior. Managers need to be able to explain why
employees engage in some behaviors rather than others, predict how employees will respond to various
actions and decisions, and influence how employees behave.

Six important ones have been identified:

1. Employee productivity is a performance measure of both efficiency and effectiveness. Managers want
to know what factors will influence the efficiency and effectiveness of employees.

2. Absenteeism is the failure to show up for work. It’s difficult for work to get done if employees don’t
show up. Although absenteeism can’t be totally eliminated, excessive levels have a direct and
immediate impact on the organization’s functioning.

3. Turnover is the voluntary and involuntary permanent withdrawal from an organization. It can be a
problem because of increased recruiting, selection, and training costs and work disruptions. Just like
absenteeism, managers can never eliminate turnover, but it is something they want to minimize,
especially among high-performing employees.

4. Organizational citizenship behavior (OCB) is discretionary behavior that’s not part of an employee’s
formal job requirements, but which promotes the effective functioning of the organization. Examples
of good OCBs include helping others on one’s work team, volunteering for extended job activities,
avoiding unnecessary conflicts, and making constructive statements about one’s work group and the
organization. Organizations need individuals who will do more than their usual job duties, and the
evidence indicates that organizations that have such employees outperform those that don’t. However,
drawbacks of OCB occur when employees experience work overload, stress, and work–family life
conflicts.

5. Job satisfaction refers to an employee’s general attitude toward his or her job. Although job satisfaction
is an attitude rather than a behavior, it’s an outcome that concerns many managers because satisfied
 employees are more likely to show up for work, have higher levels of performance, and stay with an
organization.

6. Workplace misbehavior is any intentional employee behavior that is potentially harmful to the
organization or individuals within the organization. Workplace misbehavior shows up in organizations
in four ways: deviance, aggression, antisocial behavior, and violence. Such behaviors can range from
playing loud music just to irritate coworkers to verbal aggression to sabotaging work, all of which can
create havoc in any organization.

Personality
When we describe people using terms such as quiet, passive, loud, aggressive, ambitious, extroverted, loyal,
tense, or sociable, we’re describing their personalities. An individual’s personality is a unique combination
of emotional, thought, and behavioral patterns that affect how a person reacts to situations and interacts
with others. Personality is most often described in terms of measurable traits that a person exhibits. We’re
interested in looking at personality because it affects how and why people behave the way they do.
Over the years, researchers have attempted to identify those traits that best describe personality. The two
most well-known approaches are: The Myers Briggs Type Indicator (MBTI) and the Big Five model.

The Big Five Model

In recent years, research has shown that five basic personality dimensions underlie all others and
encompass most of the significant variation in human personality. The five personality traits in the Big
Five Model are:
1. Extraversion: The degree to which someone is sociable, talkative, assertive, and comfortable in
relationships with others.
2. Agreeableness: The degree to which someone is good-natured, cooperative, and trusting.
3. Conscientiousness: The degree to which someone is reliable, responsible, dependable, persistent, and
achievement oriented.
4. Emotional stability: The degree to which someone is calm, enthusiastic, and secure (positive) or tense,
nervous, depressed, and insecure (negative).
5. Openness to experience: The degree to which someone has a wide range of interests and is imaginative,
fascinated with novelty, artistically sensitive, and intellectual.
The Big Five Model provides more than just a personality framework. Research has shown that important
relationships exist between these personality dimensions and job performance.

One study examined five categories of occupations: professionals (such as engineers, architects, and
attorneys), police, managers, salespeople, and semiskilled and skilled employees. The results showed that
conscientiousness predicted job performance for all five occupational groups. Predictions for the other
personality dimensions depended on the situation and on the occupational group. For example, extraversion
predicted performance in managerial and sales positions—occupations in which high social interaction is
necessary. Openness to experience was found to be important in predicting training competency. Ironically,
emotional security wasn’t positively related to job performance in any of the occupations.
 Factors Effecting Personality:
 Environmental Factors: Among the factors that exert pressures on our personality formation are the culture
in which we are raised; our early conditioning; the norms among our family, friends, and social groups; and
other influences that we experience. These environmental factors play a substantial role in shaping our
personalities. It establishes the attitudes, values, norms, and perceptions of an individual. Based on the
cultures and traditions, different senses of right and wrong are formed in individuals.
 Physical Factors: There are many physical factors which will determine a person’s personality. These
physical factors include the overall physical structure of a person: his height, weight, color, sex, beauty,
body language, etc.
 Situational Factors: The situational factors can be commonly observed when a person behaves
contrastingly and exhibits different traits and characteristics. An individual’s personality, although
generally stable and consistent, does change in different situations. They often bring out the traits of a
person that are not commonly seen.
 Hereditary: Heredity refers to those factors that were determined at conception. Physical structure, facial
attractiveness, gender, temperament, muscle composition, and reflexes, energy level, and biological
rhythms are characteristics that are generally considered to be either completely or substantially influenced
by the parents. Hereditary predisposes a certain mental, physical and emotional states.
 Family and Social Factors: Family and social groups have the most significant impact on personality
development. Parents and other family members have a strong influence on the personality development of
the child. Parents have more effect on personality development as compared to other members of the family.
 Identification Process: The identification process occurs when a person tries to identify himself with some
person to whom he feels ideal in the family. First identification can be viewed as the similarity of behavior
between the child and the model. Second identification can be looked in as the child motives or desires to
be like the model. Third, it can be viewed as the process through which the child actually takes on the
attributes of the model.
 Cultural Factors: Culture is the underlying determinant of human decision making. It generally determines
attitude towards independence, aggression competition, and cooperation. Each culture expects and trains
its members to behave in a way that is acceptable to the group.
 Intelligence: Intelligence is mainly hereditary. Persons who are very intelligent can make a better
adjustment in home, school, and society than those persons who are less intelligent.
 Sex Differences: Boys are generally more assertive, tough-minded and vigorous. They have better need to
succeed with regard to interest and aptitudes. Boys show interest in machinery and outdoor activities. They
prefer adventures. But girls are less vigorous games. They are quieter and interested in personal appearance.
They are more injured by personal, emotional and social problems.
 Psychological Factors: Psychological factors play a big role in the functioning of human behavior and the
development of one’s personality. Some of the psychological factors are- motives, acquired interests,
attitudes, character, intellectual capacities etc.

Beyond the joint influence of these factors however, the relative contribution of each factor to personality
varies with the character or personality process involved and perhaps with the individual concerned.

Concept of Reinforcement
Reinforcement is a term used in the context of behavioral analysis and in a specific kind of intentional
behavior change known as operant conditioning (learning theory). It is a process of increasing the incidence
of a (measurable) behavior. In reinforcement, the rate of the target behavior is increased by giving a reward
(i.e., “positive reinforcement”) or by removing an unpleasant stimulus (i.e., “negative reinforcement”).

 Positive reinforcement attempts to increase the frequency of a behavior by rewarding that behavior. For
example, if an employee identifies a new market opportunity that creates profit, an organization may
give her a bonus. This will positively reinforce the desired behavior.
 Negative reinforcement, on the other hand, attempts to increase the frequency of a behavior by
removing something the individual doesn’t like. For example, an employee demonstrates a strong work
ethic and wraps up a few projects faster than expected. This employee happens to have a long commute.
The manager tells the employee to go ahead and work from home for a few days, considering how
much progress she has made. This is an example of removing a negative stimulus as way of reinforcing
a behavior.

One particularly common positive-reinforcement technique is the incentive program, a formal scheme used
to promote or encourage specific actions, behaviors, or results from employees over a defined period of
time. Incentive programs can reduce turnover, boost morale and loyalty, improve wellness, increase
retention, and drive daily performance among employees. Motivating staff will in turn help business
outcomes and increase efficiency.

Reinforcement theory is based on work done by B. F. Skinner in the field of operant conditioning. In a
management context, reinforcers include salary increases, bonuses, promotions, variable incomes, flexible
work hours, and paid sabbaticals.
Managers are responsible for
identifying the behaviors that should
be promoted, the ones that should be
discouraged, and carefully
considering how those behaviors
relate to organizational
objectives. Implementing rewards
and punishments that are aligned
with the organization’s goals helps to
create a more consistent, efficient
work culture.

Perception
Perception is a process by which we give meaning to our environment by organizing and interpreting
sensory impressions. Individuals may look at the same thing yet perceive it differently. What we perceive
can be substantially different from objective reality. For example, all employees in a firm may view it as a
great place to work—favorable working conditions, interesting job assignments, good pay, excellent
benefits, understanding and responsible management—
but, as most of us know, it’s very unusual to find
agreement universal opinion. People’s behavior is based
on their perception of what reality is, not on reality itself.
The world as it is perceived is the world that is
behaviorally important. In other words, our perception
becomes the reality from which we act.

One manager, for instance, can interpret the fact that her
assistant regularly takes several days to make important
decisions as evidence that the assistant is slow,
disorganized, and afraid to make decisions. Another
manager with the same assistant might interpret the same
tendency as evidence that the assistant is thoughtful,
thorough, and deliberate. The first manager would
probably evaluate her assistant negatively; the second
manager would probably evaluate the person positively.
The point is that none of us sees reality. We interpret
what we see and call it reality. And, of course, as the example shows, we behave according to our
perceptions.
Motivation
Motivation refers to the process by which a person’s efforts are energized, directed, and sustained toward
attaining a goal. This definition has three key elements: energy, direction, and persistence.
The energy element is a measure of intensity, drive, and vigor. A motivated person puts forth effort and
works hard. However, the quality of the effort must be considered as well as its intensity. High levels of
effort don’t necessarily lead to favorable job performance unless the effort is channeled in a direction that
benefits the organization. Effort that’s directed toward, and consistent with, organizational goals is the kind
of effort we want from employees. Finally, motivation includes a persistence dimension. We want
employees to persist in putting forth effort to achieve those goals. Motivating high levels of employee
performance is an important organizational concern and managers keep looking for answers.

Content Theory: Maslow’s hierarchy of needs theory

The best-known theory of motivation is probably Abraham Maslow’s hierarchy of needs theory. Maslow
was a psychologist who proposed that within every person is a hierarchy of five needs:
1. Physiological needs: A person’s needs for food, drink, shelter, sex, and other physical requirements.
2. Safety needs: A person’s needs for security and protection from physical and emotional harm, as well
as assurance that physical needs will continue to be met.
3. Social needs: A person’s needs for affection, belongingness, acceptance, and friendship.
4. Esteem needs: A person’s needs for internal esteem factors such as self-respect, autonomy, and
achievement and external esteem factors such as status, recognition, and attention.
5. Self-actualization needs: A person’s needs for growth, achieving one’s potential, and self-fulfillment;
the drive to become what one is capable of becoming.
Maslow argued that each level in the needs hierarchy must be substantially satisfied before the next need
becomes dominant. An individual moves up the needs hierarchy from one level to the next. In addition,
Maslow separated the five needs into higher and lower levels. Physiological and safety needs were
considered lower-order needs; social, esteem, and self-actualization needs were considered higher-
order needs. Lower-order needs are predominantly satisfied externally while higher-order needs are
satisfied internally. Once a need is substantially satisfied, an individual is no longer motivated to satisfy
that need. Therefore, to motivate someone, you need to understand what need level that person is on in
the hierarchy and focus on satisfying needs at or above that level.

Content Theory: Herzberg’s Two-Factor Theory

Frederick Herzberg’s two-factor theory (also
called motivation-hygiene theory) proposes that
intrinsic factors are related to job satisfaction,
while extrinsic factors are associated with job
dissatisfaction. Herzberg wanted to know when
people felt exceptionally good (satisfied) or bad
(dissatisfied) about their jobs. He concluded that
the replies people gave when they felt good
about their jobs were significantly different from
the replies they gave when they felt badly.
Certain characteristics were consistently related
to job satisfaction, and others to job dissatisfaction.

When people felt good about

their work, they tended to cite
intrinsic factors arising from
the job itself such as
achievement, recognition,
and responsibility. On the
other hand, when they were
dissatisfied, they tended to cite extrinsic factors arising from the job context such as company policy and
administration, supervision, interpersonal relationships, and working conditions.
In addition, Herzberg believed that the data suggested that the opposite of satisfaction was not
dissatisfaction, as traditionally had been believed. Removing dissatisfying characteristics from a job would
not necessarily make that job more satisfying (or motivating).

Herzberg proposed that a dual continuum existed: The opposite of

“satisfaction” is “no satisfaction,” and the opposite of “dissatisfaction” is “no dissatisfaction.”
Again, Herzberg believed that the factors that led to job satisfaction were separate and distinct from those
that led to job dissatisfaction. Therefore, managers who sought to eliminate factors that created job
dissatisfaction could keep people from being dissatisfied but not necessarily motivate them. The extrinsic
factors that create job dissatisfaction were called hygiene factors. When these factors are adequate, people
won’t be dissatisfied, but they won’t be satisfied (or motivated) either. To motivate people, Herzberg
suggested emphasizing motivators, the intrinsic factors having to do with the job itself.
Content Theory: McClelland’s Three-Needs Theory
It says there are three acquired (not innate) needs that are major motives in work. These three needs include
the need for achievement, which is the drive to succeed and excel in relation to a set of standards; the need
for power, which is the need to make othersbehave in a way that they would not have behaved otherwise;
and the need for affiliation, which is the desire for friendly and close interpersonal relationships. Of these
three needs, the need for achievement has been researched the most.

People with a high need for achievement are striving for personal achievement. They prefer jobs that offer
personal responsibility for finding solutions to problems, in which they can receive rapid and unambiguous
feedback on their performance in order to tell whether they’re improving, and in which they can set
moderately challenging goals. High achievers avoid what they perceive to be very easy or very difficult
tasks. Also, a high need to achieve doesn’t necessarily lead to being a good manager, especially in large
organizations. That’s because high achievers focus on their own accomplishments, while good managers
emphasize helping others accomplish their goals. McClelland showed that employees can be trained to
stimulate their achievement need by being in situations where they have personal responsibility, feedback,
and moderate risks. The best managers tend to be high in the need for power and low in the need for
affiliation.

Content Theory: Alderfer’s ERG Theory

Clayton Paul Alderfer is an American psychologist who developed Maslow’s hierarchy of needs into a
theory of his own. Alderfer’s ERG theory suggests that there are three groups of core needs: existence (E),
relatedness (R), and growth (G)—hence the acronym ERG. These groups align with Maslow’s levels of
physiological needs, social needs, and self-actualization needs, respectively.

Existence needs concern our basic material requirements for living. These include what Maslow
categorized as physiological needs (such as air, food, water, and shelter) and safety-related needs (such as
health, secure employment, and property).

Relatedness needs have to do with the importance of maintaining interpersonal relationships. These needs
are based in social interactions with others and align with Maslow’s levels of love/belonging-related needs
(such as friendship, family, and sexual intimacy) and esteem-related needs (gaining the respect of others).

Growth needs describe our intrinsic desire for personal development. These needs align with the other
portion of Maslow’s esteem-related needs (self-esteem, self-confidence, and achievement) and self-
actualization needs (such as morality, creativity, problem-solving, and discovery).

According to Maslow, an individual remains at a particular need level until that need is satisfied. While
according to ERG theory, if a higher- level need isn’t being met, an individual may redouble their efforts
to fulfill the satisfaction of a lower- level need. This is called frustration- regression aspect of ERG theory.
While Maslow’s need hierarchy theory is rigid as it assumes that the needs follow a specific and orderly
hierarchy and unless a lower-level need is satisfied, an individual cannot proceed to the higher-level need;
ERG Theory of motivation is very flexible as he perceived the needs as a range/variety rather than
perceiving them as a hierarchy. At a given point of time, more than one need may be operational. an
individual can work on growth needs even if his existence or relatedness needs remain unsatisfied. Thus,
he gives explanation to the issue of “starving artist” who can struggle for growth even if he is hungry.

Managers must understand that an employee has various needs that must be satisfied at the same time.
According to the ERG theory, if the manager concentrates solely on one need at a time, this will not
effectively motivate the employee. Also, the frustration- regression aspect of ERG Theory has an added
effect on workplace motivation. The sooner the manager realizes and discovers this, the more immediate
steps they will take to fulfill those needs which are frustrated until such time that the employee can again
pursue growth.

Process Theory: Adam’s Equity Theory

Equity theory, developed by J. Stacey Adams, proposes that employees compare what they get from a job
(outcomes) in relation to what they put into it (inputs), and then they compare their inputs–outcomes ratio
with the inputs–outcomes ratios of relevant others. If an employee perceives her ratio to be equitable in
comparison to those of relevant others, there’s no problem. However, if the ratio is inequitable, she views
herself as underrewarded or overrewarded. When inequities occur, employees attempt to do something
about it.47 The result might be lower or higher productivity, improved or reduced quality of output,
increased absenteeism, or voluntary resignation.

The referent—the other persons, systems, or selves individuals compare themselves against in order to
assess equity—is an important variable in equity theory. Each of the three referent categories is important.
The “persons” category includes other individuals with similar jobs in the same organization but also
includes friends, neighbors, or professional associates. Based on what they hear at work or read about in
newspapers or trade journals, employees compare their pay with that of others. The “system” category
includes organizational pay policies, procedures, and allocation. The “self” category refers to inputs–
outcomes ratios that are unique to the individual. It reflects past personal experiences and contacts and is
influenced by criteria such as past jobs or family commitments.
Originally, equity theory focused on distributive justice, which is the perceived fairness of the amount and
allocation of rewards among individuals. More recent research has focused on looking at issues of
procedural justice, which is the perceived fairness of the process used to determine the distribution of
rewards. This research shows that distributive justice has a greater influence on employee satisfaction than
procedural justice, while procedural justice tends to affect an employee’s organizational commitment, trust
in his or her boss, and intention to quit.
What are the implications for managers? They should consider openly sharing information on how
allocation decisions are made, follow consistent and unbiased procedures, and engage in similar practices
to increase the perception of procedural justice. By increasing the perception of procedural justice,
employees are likely to view their bosses and the organization as positive even if they’re dissatisfied with
pay, promotions, and other personal outcomes.
Process Theory: Vroom’s Expectancy Theory
The most comprehensive explanation of how employees are motivated is Victor Vroom’s expectancy
theory. Expectancy theory states that an individual tends to act in a certain way based on the expectation
that the act will be followed by a given outcome and on the attractiveness of that outcome to the individual.
It includes three variables or relationships:

1. Expectancy or effort–performance linkage is the probability perceived by the individual that exerting a
given amount of effort will lead to a certain level of performance.
2. Instrumentality or performance–reward linkage is the degree to which the individual believes that
performing at a particular level is instrumental in attaining the desired outcome.
3. Valence or attractiveness of reward is the importance that the individual places on the potential outcome
or reward that can be achieved on the job. Valence considers both the goals and needs of the individual.
[How hard do I have to work to achieve a certain level of performance, and can I actually achieve that level? What
reward will performing at that level of performance get me? How attractive is the reward to me, and does it help me
achieve my own personal goals?]

Whether you are motivated to put forth effort (that is, to work hard) at any given time depends on your
goals and your perception of whether a certain level of performance is necessary to attain those goals.
The key to expectancy theory is understanding an individual’s goal and the linkage between effort and
performance, between performance and rewards, and finally, between rewards and individual goal
satisfaction. It emphasizes payoffs, or rewards. As a result, we have to believe that the rewards an
organization is offering align with what the individual wants. the theory is concerned with perceptions.
Reality is irrelevant. An individual’s own perceptions of performance, reward, and goal outcomes, not the
outcomes themselves, will determine his or her motivation (level of effort).
Leadership
Leadership is what leaders do. It’s a process of leading a group and influencing that group to achieve its
goals. Because leading is one of the four management functions, yes, ideally, all managers should be
leaders.

Leadership Trait Theories

Leadership trait theories have attempted to identify certain traits that all leaders have. Leadership research
in the 1920s and 1930s focused on isolating leader traits—that is, characteristics—that would differentiate
leaders from nonleaders. Some of the traits studied included physical stature, appearance, social class,
emotional stability, fluency of speech, and sociability. Despite the best efforts of researchers, it proved
impossible to identify a set of traits that would always differentiate a leader (the person) from a nonleader.
However, later attempts to identify traits consistently associated with leadership (the process of leading,
not the person) were more successful.

Researchers eventually recognized that traits alone were not sufficient for identifying effective leaders since
explanations based solely on traits ignored the interactions of leaders and their group members as well as
situational factors. Possessing the appropriate traits only made it more likely that an individual would be
an effective leader.
Therefore, leadership research from the late 1940s to the mid-1960s concentrated on the preferred
behavioral styles that leaders demonstrated. Researchers wondered whether something unique in what
effective leaders did—in other words, in their behavior—was the key.
Behavioral Theory:

THE MANAGERIAL GRID The behavioral dimensions from these early leadership studies provided the
basis for the development of a two-dimensional grid for appraising leadership styles. This managerial grid
used the behavioral dimensions “concern for people” (the vertical part of the grid) and “concern for
production” (the horizontal part of the grid) and evaluated a leader’s use of these behaviors, ranking them
on a scale from 1 (low) to 9 (high).11 Although the grid had 81 potential categories into which a leader’s
behavioral style might fall, only five styles were named: impoverished management (1,1 or low concern
for production, low concern for people), task management (9,1 or high concern for production, low concern
for people), middle-of-the-road management (5,5 or medium concern for production, medium concern for
people), country club management (1,9 or low concern for production, high concern for people), and team
management (9,9 or high concern for production, high concern for people). Of these five styles, the
researchers concluded that managers performed best when using a 9,9 style. Unfortunately, the grid offered
no answers to the question of what made a manager an effective leader; it only provided a framework for
conceptualizing leadership style. In fact, little substantive evidence supports the conclusion that a 9,9 style
is most effective in all situations.
Contingency theories:
Three contingency theories—Fiedler, Hersey-Blanchard, and path-goal. Each looks at defining leadership
style and the situation, and attempts to answer the if-then contingencies (that is, if this is the context or
situation, then this is the best leadership style to use).

The Fiedler contingency model proposed that effective group performance depended upon properly
matching the leader’s style and the amount of control and influence in the situation. The model was based
on the premise that a certain leadership style would be most effective in different types of situations. The
keys were to (1) define those leadership styles and the different types of situations, and then (2) identify the
appropriate combinations of style and situation. Fiedler proposed that a key factor in leadership success
was an individual’s basic leadership style, either task oriented or relationship oriented. To measure a
leader’s style, Fiedler developed the least-preferred coworker (LPC) questionnaire. If the leader described
a “high” LPC score, a score of 64 or above, then the respondent was primarily interested in good personal
relations with coworkers and the style would be described as relationship oriented. In contrast, a low LPC
score (57 or below), you were primarily interested in productivity and getting the job done; thus, your style
would be labeled as task oriented.

Hersey and Blanchard’s situational leadership theory (SLT), is a contingency theory that focuses
on followers’ readiness. The emphasis on the followers in leadership effectiveness reflects the reality that
it is the followers who accept or reject the leader. Regardless of what the leader does, the group’s
effectiveness depends on the actions of the followers. And readiness refers to the extent to which people
have the ability and willingness to accomplish a specific task. SLT combines them into four specific
leadership styles described as follows:
Telling (high task–low relationship): The leader defines roles and tells people what, how, when, and
where to do various tasks.
Selling (high task–high relationship): The leader provides both directive and supportive behavior.
Participating (low task–high relationship): The leader and followers share in decision making; the main
role of the leader is facilitating and communicating.
Delegating (low task–low relationship): The leader provides little direction or support.

SLT essentially views the leader–follower relationship as like that of a parent and a child. Just as a parent
needs to relinquish control when a child becomes more mature and responsible, so, too, should leaders. As
followers reach higher levels of readiness, the leader responds not only by decreasing control over their
activities but also decreasing relationship behaviors. The SLT says if followers are at R1 (unable and
unwilling to do a task), the leader needs to use the telling style and give clear and specific directions; if
followers are at R2 (unable and willing), the leader needs to use the selling style and display high task
orientation to compensate for the followers’ lack of ability and high relationship orientation to get followers
to “buy into” the leader’s desires; if followers are at R3 (able and
unwilling), the leader needs to use the participating style to gain their support; and if employees are at R4
(both able and willing), the leader doesn’t need to do much and should use the delegating style.

Path-goal theory states that the leader’s job is to assist followers in attaining their goals and to provide
direction or support needed to ensure that their goals are compatible with the goals of the group or
organization. Developed by Robert House, path-goal theory takes key elements from the expectancy theory
of motivation. The term path-goal is derived from the belief that effective leaders remove the roadblocks
and pitfalls so that followers have a clearer path to help them get from where they are to the achievement
of their work goals. House identified four leadership behaviors:
Directive leader: Lets subordinates know what’s expected of them, schedules work to be done, and gives
specific guidance on how to accomplish tasks.
Supportive leader: Shows concern for the needs of followers and is friendly.
Participative leader: Consults with group members and uses their suggestions before making a decision.
Achievement oriented leader: Sets challenging goals and expects followers to perform at their highest
level.
In contrast to Fiedler’s view that a leader couldn’t change his or her behavior, House assumed that leaders
are flexible and can display any or all of these leadership styles depending on the situation.

Transactional-Transformational leadership:
Transactional leaders are leaders that lead primarily by using social exchanges (or transactions).
Transactional leaders guide or motivate followers to work toward established goals by exchanging rewards
for their productivity. But another type of leader—a transformational leader—stimulates and inspires
(transforms) followers to achieve extraordinary outcomes. They pay attention to the concerns and
developmental needs of individual followers; they change followers’ awareness of issues by helping those
followers look at old problems in new ways; and they are able to excite, arouse, and inspire followers to
exert extra effort to achieve group goals. Transformational leadership develops from transactional
leadership. Transformational leadership produces levels of employee effort and performance that go beyond
what would occur with a transactional approach alone. Moreover, transformational leadership is more than
charisma, because the transformational leader attempts to instill in followers the ability to question not only
established views but those views held by the leader.

Charismatic Leadership
Jeff Bezos, founder and CEO of Amazon.com, is a person who exudes energy, enthusiasm, and drive. He’s
fun-loving (his legendary laugh has been described as a flock of Canadian geese on nitrous oxide), but has
pursued his vision for Amazon with serious intensity and has demonstrated an ability to inspire his
employees through the ups and downs of a rapidly growing company. Bezos is what we call a charismatic
leader—that is, an enthusiastic, self-confident leader whose personality and actions influence people to
behave in certain ways.

Five characteristics: they have a vision, the ability to articulate that vision, a willingness to take risks to
achieve that vision, a sensitivity to both environmental constraints and follower needs, and behaviors that
are out of the ordinary. An increasing body of evidence shows impressive correlations between charismatic
leadership and high performance and satisfaction among followers.

Although the term vision is often linked with charismatic leadership, visionary leadership is different; it’s
the ability to create and articulate a realistic, credible, and attractive vision of the future that improves upon
the present situation. This vision, if properly selected and implemented, is so energizing that it “in effect
jump-starts the future by calling forth the skills, talents, and resources to make it happen.”
Emotional intelligence
Emotional intelligence (EI) is a person’s ability to (1) perceive emotions in the self and others, (2)
understand the meaning of these emotions, and (3) regulate his or her own emotions accordingly. People
who know their own emotions and are good at reading emotional cues— for instance, knowing why
they’re angry and how to express themselves without violating norms—are most likely to be effective.

It’s composed of five dimensions:

Self-awareness: The ability to be aware of what you’re feeling.
Self-management: The ability to manage one’s own emotions and impulses.
Self-motivation: The ability to persist in the face of setbacks and failures.
Empathy: The ability to sense how others are feeling.
Social skills: The ability to handle the emotions of others.

EI has been shown to be positively related to job performance at all levels. For instance, one study looked
at the characteristics of Lucent Technologies’ engineers who were rated as stars by their peers. The
researchers concluded that stars were better at relating to others. That is, it was EI, not academic intelligence
that characterized high performers. A study of Air Force recruiters generated similar findings. Top-
performing recruiters exhibited high levels of EI. Despite these findings, EI has been a controversial topic
in OB. Supporters say that EI has intuitive appeal and predicts important behavior. Critics say that EI is
vague, can’t be measured, and has questionable validity. One thing we can conclude is that EI appears to
be relevant to success in jobs that demand a high degree of social interaction.

Managers are likely to have higher-performing and more-satisfied employees if consideration is given to
matching personalities with jobs. The best-documented personality-job fit theory was developed by
psychologist John Holland who identified six basic personality types. His theory states that an employee’s
satisfaction with his or her job, as well as his or her likelihood of leaving that job, depends on the degree to
which the individual’s personality matches the job environment.
Holland’s theory proposes that satisfaction is highest and turnover lowest when personality and occupation
are compatible. Social individuals should be in “people” type jobs, and so forth. The key points of this
theory are that (1) intrinsic differences in personality are apparent among individuals; (2) the types of jobs
vary; and (3) people in job environments compatible with their personality types should be more satisfied
and less likely to resign voluntarily than should people in incongruent jobs.

In addition, other benefits arise from understanding personality. By recognizing that people approach
problem solving, decision making, and job interactions differently, a manager can better understand why
an employee is uncomfortable with making quick decisions or why another employee insists on gathering
as much information as possible before addressing a problem. Or, for instance, managers can expect that
individuals with an external locus of control may be less satisfied with their jobs than internals and also
that they may be less willing to accept responsibility for their actions.
Finally, being a successful manager and accomplishing goals means working well together with others both
inside and outside the organization. In order to work effectively together, you need to understand each
other. This understanding comes, at least in part, from an appreciation of personality traits and emotions.
Also, one of the skills you have to develop as a manager is learning to fine-tune your emotional reactions
according to the situation. In other words, you have to learn to recognize when “you have to smile and when
you have to bark.”

Analysis of Interpersonal Relationships:

Talking of interpersonal relations, one is reminded of Herzberg’s two factor theory of motivation in which
interpersonal relations at the workplace, be it with your colleagues, subordinates or superiors is treated as
a hygiene factor; the presence of which does not contribute to job satisfaction but its absence leads to
dissatisfaction. Thereby establishing the importance of interpersonal relations. Hence it can be viewed as
one of the significant aspect in the achievement of the organizational goals. It is therefore important that
good interpersonal relations prevail at all levels in the organizational hierarchy.

Transactional analysis aims at improving the communication and interpersonal relations between the
individuals which is one proven method that helps two persons communicate and behave on the job in a
mature manner by understanding each other’s motives by entering into complimentary transactions. The
Johari window helps in opening up the hidden area of the individuals through feedback and critical appraisal
which in turn leads to better communication and interpersonal relations amongst the individuals and
enhances organizational effectiveness and commitment. All these initiatives are not only important but are
absolutely necessary in today’s stressful working conditions where the child ego states of the individuals
tend to predominate the work stations and leads to communication gaps which in turn hampers
organizational effectiveness.

Transactional analysis, developed by Eric Berne can be understood as a method of improving and
maintaining healthy interpersonal relations in the organizations by identifying the three ego states (parent,
child, adult) whereby it enables the individuals to communicate and behave in a mature manner while
interacting with each other where people develop the capacity to understand each other’s viewpoint better.
These ego states have nothing to do with chronological age of the individuals but refers to the psychological
age which is reflected in one’s behavior and interactions with others. As Berne states, "Although we cannot
directly observe these ego states, we can observe behavior and from this infer which of three ego states is
operating at that moment".
1. The Parent Ego State: In this ego state an individual tends to behave more in the nature of a parent by
always dictating the right and the wrong behavior which can be of two kinds: The Nurturing Parent and
the Critical parent. The Nurturing parent is that part of a person which is understanding and caring
about other people but at the same time set limits on and provide direction for people behavior. It will
not put the people down and make them feel not OK as individual. Critical parent behavior attacks
people's personalities as well as their behavior by being evaluative and judgmental and makes them
feel that they are not OK.
2. The Adult Ego State: This state evokes behavior that could be described simply as logical, reasonable,
rationale and unemotional. Behavior from the adult ego state is characterized by problem solving
analysis and rationale decision-making. People operating from the adult ego state are taking emotional
content of their child ego state, the value-laden content of their parent ego state and checking them out
in the reality of the external world. These people are examining alternatives, probabilities and values
prior to engaging in behavior.
3. The child ego State: This state is associated with behaviors that appear when a person is responding
emotionally encompassing the 'natural' impulses and attitudes learned from child experiences. There
are several forms of the child ego state. However, two kinds of ego states viz. happy child and
destructive child are commonly relevant in their behavior. People behaving from their happy child are
doing things they want to do it but it is not destructive to others. However, people in their destructive
child are also doing things but their behavior is either destructive to others or to themselves, or to their
environment.

Thus, an individual with a healthy personality is able to balance all the three ego states; the Nurturing
Parent, the Adult ego and a Happy Child and is able to establish good interpersonal relations at the
workplace between the managers and his subordinates.
 This means that these people are able to lead the adult ego state take over and think very rationally
and engage in problem solving.
 At other times these people are able to free the Child ego state and be spontaneous and emotional.
 At other times healthy people are able to defer to the Parent ego state and learn from experience.

While a balance amongst all three ego states seems to be most healthy, this is especially a problem when
the Adult ego state is not in the executive position and peoples' personality is being dominated by the
Critical Parent or the Destructive child. When this occurs in people, it poses problems for their managers
in the world of work. More specifically, child dominated people who are mainly coming from Destructive
Child do not engage in much rational problem solving. They learn in their early years that they could get
things by screaming and being emotional. It is difficult to reason with them in such circumstances. Rather
than solving their own problems, these people want their managers or some other persons to tell them what
to do, where to do it, how do it or what is right, what's wrong, what's good and what's bad. Parent dominated
people who are mainly coming from Critical Parent also do not engage in much emotional problem solving
because they already know what is right and what is wrong. They seem to have an answer for everything.
Organizations that have used TA approach were found moderately successful. Training in TA can give
employees fresh insights into their own personalities, and it also can help them to understand why others
sometimes respond as they do. A major benefit is improved interpersonal communication. Employees in
organization can sense when crossed communication occurs and then take steps to restore complementary
communication, preferably in the Adult-to-Adult pattern. The result is a general improvement in
interpersonal transactions.

Johari Window Approach:

The Johari window is a technique created by Joseph Luft and Harrington Ingham in 1955 in the United
States, which can be applied
to help people better
understand their relationship
with self and others. It is used
primarily in self-help groups
and corporate settings as a
heuristic exercise. A model
known as the Johari Window
illustrates the process of
giving and receiving
feedback. The window was
developed for their group
process program.
The two columns represent
the self; the two rows
represent the group. Column
one contains "things that I
know about myself;" column
two contains "things that I do not know about myself." The information in these rows and columns moves
from one pane to another as the level of mutual trust and the exchange of feedback varies in the group. As
a consequence of this movement, the size and shape of the panes within the window will vary.

1.The first pane, the "Arena," contains things that I know about myself and about which the group knows.
This window is characterized by free and open exchanges of information between myself and others, this
behavior is public and available to everyone. The Arena increases in size as the level of trust increases
between individuals or between an individual and the group. Individuals share more information,
particularly personally relevant information.

2. The second pane, the "Blind Spot," contains information that I do not know about myself but of which
the group may know. As I begin to participate in the group, I am not aware of the information I communicate
to the group. The people in the group learn this information from my verbal cues, mannerisms, the way I
say things, or the style in which I relate to others. For instance, I may not know that I always look away
from a person when I talk... or that I always clear my throat just before I say something. The group learns
this from me.

3. Pane three, the "Facade" or "Hidden Area," contains information that I know about myself but the group
does not know. I keep these things hidden from them. I may fear that if the group knew my feelings,
perceptions, and opinions about the group or the individuals in the group, they might reject, attack, or hurt
me. As a consequence, I withhold this information. Before taking the risk of telling the group something, I
must know there are supportive elements in our group. I want group members to judge me positively when
I reveal my feelings, thoughts, and reactions. I must reveal something of myself to find out how members
will react. On the other hand, I may keep certain information to myself so that I can manipulate or control
others.

4. The fourth and last pane, the "Unknown," contains things that neither I nor the group knows about me. I
may never become aware of material buried far below the surface in my unconscious area. The group and
I may learn other material, though, through a feedback exchange among us. This unknown area represents
intrapersonal dynamics, early childhood memories, latent potentialities, and unrecognized resources. The
internal boundaries of this pane change depending on the amount of feedback sought and received.
Knowing all about myself is extremely unlikely, and the unknown extension in the model represents the
part of me that will always remain unknown (the unconscious in Freudian terms).

The main objective of this model is to increase mutual understanding that encourages disclosure and
feedback to increase our own open area so that both you and your colleagues are aware of your perceptual
limitations and reduce the blind, hidden and the unknown areas through disclosure i.e. informing others of
your beliefs, feelings and experiences that may influence the work relationships.

The open area also increases through feedback from others about your own behavior, which sounds easy
but very difficult to seek. But this kind of feedback will invariably help you to reduce your blind area,
because your coworkers often see things in you which you cannot see for yourself. And finally, the
combination of disclosure and feedback occasionally produces revelations about information in the
unknown area.

Conflict
We define conflict broadly as a process that begins when one party perceives another party has affected or
is about to negatively affect something the first party cares about. Conflict describes the point in ongoing
activity when interaction becomes disagreement. People experience a wide range of conflicts in
organizations over an incompatibility of goals, differences in interpretations of facts, disagreements over
behavioral expectations, and the like. Our definition covers the full range of conflict levels, from overt and
violent acts to subtle forms of disagreement.

Contemporary perspectives differentiate types of conflict based on their effects. Functional conflict
supports the goals of the group, improves its performance, and is thus a constructive form of conflict. For
example, a debate among members of a work team about the most efficient way to improve production can
be functional if unique points of view are discussed and compared openly. Conflict that hinders group
performance is destructive or dysfunctional conflict. A highly personal struggle for control in a team that
distracts from the task at hand is dysfunctional.
Types of Conflict
Although each conflict is unique,
researchers have classified conflicts
into three categories: task,
relationship, or process. Task
conflict relates to the content and
goals of the work. Relationship
conflict focuses on interpersonal
relationships. Process conflict is
about how the work gets done.

Relationship conflicts, at least in

work settings, are almost always
dysfunctional. It appears that the
friction and interpersonal hostilities
inherent in relationship conflicts
increase personality clashes and
decrease mutual understanding,
which hinders the completion of
organizational tasks. Of the three
types, relationship conflicts also
appear to be the most
psychologically exhausting to
individuals.

If task conflict is very low, people aren’t really engaged or addressing the important issues. If task conflict
is too high, however, infighting will quickly degenerate into relationship conflict. Moderate levels of task
conflict may thus be optimal. It matters whether other types of conflict were occurring at the same time. If
task and relationship conflict occurred together, task conflict was more likely negative, whereas if task
conflict occurred by itself, it more likely was positive. Teams of individuals who are, on average, high in
openness and emotional stability are better able to turn task conflict into increased group performance.

Process conflicts are about delegation and roles. Conflicts over delegation often revolve around the
perception of some members as shirking, and conflicts over roles can leave some group members feeling
marginalized. Thus, process conflicts often become highly personalized and quickly devolve into
relationship conflicts.

Another way to understand conflict is to consider its locus, or the framework within which the conflict
occurs. Here, too, there are three basic types. Dyadic conflict is conflict between two people. Intragroup
conflict occurs within a group or team. Intergroup conflict is conflict between groups or teams.
Conflict Management

Organizational Change
If it weren’t for change, a manager’s job would be relatively easy.
Planning would be simple because tomorrow would be no
different from today. The issue of effective organizational design
would also be resolved because the environment would not be
uncertain and there would be no need to redesign the structure.
Similarly, decision making would be dramatically streamlined
because the outcome of each alternative could be predicted with
almost certain accuracy. But that’s not the way it is. Change is an
organizational reality. Organizations face change because
external and internal factors create the need for change.

Kurt Lewin’s three-step change process (Calm Waters metaphor)

According to Lewin, successful change can be planned and requires unfreezing the status quo, changing to
a new state, and refreezing to make the change permanent.
The status quo is considered equilibrium. To move away from this equilibrium, unfreezing is necessary.
Unfreezing can be thought of as preparing for the needed change. It can be done by increasing the driving
forces, which are forces pushing for change; by decreasing the restraining forces, which are forces that
resist change; or by combining the two approaches. Once unfreezing is done, the change itself can be
implemented. However, merely introducing change doesn’t ensure that it will take hold. The new situation
needs to be refrozen so that it can be sustained over time. Unless this last step is done, there’s a strong
chance that employees will revert back to the old equilibrium state—that is, the old ways of doing things.
The objective of refreezing, then, is to stabilize the new situation by reinforcing the new behaviors. Lewin’s
three-step process treats change as a move away from the organization’s current equilibrium state. It’s a
calm waters scenario where an occasional disruption (a “storm”) means changing to deal with the
disruption. Once the disruption has been dealt with, however, things can continue on under the new changed
situation. This type of environment isn’t what most managers face today.

White Water Rapid Metaphor managers are realizing that the stability and predictability of the calm
waters metaphor don’t exist. Disruptions in the status quo are not occasional and temporary, and they are
not followed by a return to calm waters. Managers face constant change. Today, any organization that treats
change as the occasional disturbance in an otherwise calm and stable world runs a great risk. Too much is
changing too fast for an organization or its managers to be complacent. It’s no longer business as usual.
And managers must be ready to efficiently and effectively manage the changes facing their organization or
their work area.

Most managers, at one point or another, will have to change some things in their workplace. We classify
these changes as organizational change, which is any alteration of people, structure, or technology.
Organizational changes often need someone to act as a catalyst and assume the responsibility for managing
the change process—that is, a change agent. Change agents can be a manager within the organization, but
could be a nonmanager—for example, a change specialist from the HR department or even an outside
consultant.

CHANGING STRUCTURE. Changes in the external environment or in organizational strategies often lead
to changes in the organizational structure. Because an organization’s structure is defined by how work gets
done and who does it, managers can alter one or both of these structural components. For instance,
departmental responsibilities could be combined, organizational levels eliminated, or the number of persons
a manager supervises could be increased. More rules and procedures could be implemented to increase
standardization. Or employees could be empowered to make decisions so decision making could be faster.

CHANGING TECHNOLOGY. Managers can also change the technology used to convert inputs into
outputs. Most early management studies dealt with changing technology. For instance, scientific
management techniques involved implementing changes that would increase production efficiency. Today,
technological changes usually involve the introduction of new equipment, tools, or methods; automation;
or computerization. Competitive factors or new innovations within an industry often require managers to
introduce new equipment, tools, or operating methods. Automation is a technological change that replaces
certain tasks done by people with tasks done by machines. The most visible technological changes have
come from computerization. Most organizations have sophisticated information systems.

CHANGING PEOPLE. Changing people involves changing attitudes, expectations, perceptions, and
behaviors, something that’s not easy to do. Organizational development (OD) is the term used to describe
change methods that focus on people and the nature and quality of interpersonal work relationships. The
OD techniques shown below seek to bring about changes in the organization’s people and make them work
together better.
6th OD technique: Appreciative inquiry
Most OD approaches are problem-centered. They identify a problem or set of problems, then look for a
solution. AI instead accentuates the positive. Rather than looking for problems to fix, it seeks to identify
the unique qualities and special strengths of an organization, which members can build on to improve
performance. That is, AI focuses on an organization’s successes rather than its problems.

Planned Change:
What are the goals of planned change? First, it seeks to improve the ability of the organization to adapt to
changes in its environment. Second, it seeks to change employee behavior. Who in organizations is
responsible for managing change activities? The answer is change agents. They see a future for the
organization others have not identified, and they are able to motivate, invent, and implement this vision.
Change agents can be managers or non-managers, current or new employees, or outside consultants.
Some change agents look to transform old industries to meet new capabilities and demands. OD, Action
Research and Positive Model are methods of planned change.

Action Research Model of Managing Change:

Action research is a change process based on the systematic collection of data and selection of a change
action based on what the analyzed data indicate. Its value is in providing a scientific methodology for
managing planned change. Action research consists of five steps (note how they closely parallel the
scientific method): diagnosis, analysis, feedback, action, and evaluation.

The change agent, often an outside consultant in action research, begins by gathering information about
problems, concerns, and needed changes from members of the organization. Diagnosis is followed by
analysis. The change agent synthesizes this information into primary concerns, problem areas, and possible
actions. Action research requires the people who will participate in a change program to help identify the
problem and determine the solution. So the third step—feedback—requires sharing with employees what
has been found from the first and second steps. Now the action part of action research is set in motion. The
employees and the change agent carry out the specific actions they have identified to correct the problem.
The final step, consistent with the scientific underpinnings of action research, is evaluation of the action
plan’s effectiveness, using the initial data gathered as a benchmark.

Benefits: 1. it’s problem focused. The change agent objectively looks for problems, and the type of problem
determines the type of change action. This is a process that makes intuitive sense. 2. The lowering of
resistance. Because action research engages employees so thoroughly in the process, it reduces resistance
to change.

Positive Model of Managing Change

The positive model is often orientated towards the future, and is not only concerned with what is, but also
what it should be. The positive model focuses on what the organization is doing right. It helps members
understand their organization when it is working at its best and builds off those capabilities to achieve even
better results. Similar to the action research model, collectiveness is the philosophy it rests on. Therefore,
the positive model has the unique advantage of being future-oriented and longer-tem focused, rather than
present-oriented like the other two models. 5 Stages of Positive Model are:
1. Initiate the Inquiry
2. Inquire into Best Practices
3. Discover the Themes
4. Envision a Preferred Future
5. Design and Deliver Ways to Create the Future

Communication
Communication must include both the transfer and the understanding of meaning. Communicating is more
than merely imparting meaning; that meaning must also be understood. It is only thus that we can convey
information and ideas. Communication serves five major functions within a group or organization:
1. It acts to manage member behavior in several ways. When employees follow their job descriptions or
comply with company policies, communication performs a management function. Informal
communication controls behavior too.
2. It creates feedback by clarifying to employees what they must do, how well they are doing it, and how
they can improve their performance.
3. It is a fundamental mechanism by which members show satisfaction and frustration. Communication,
therefore, provides for the emotional sharing of feelings and fulfillment of social needs.
4. It helps in persuasion. persuasion can be good or bad or can benefit or harm an organization.
5. It’s final function of communication is information exchange to facilitate decision making.
Communication provides the information individuals and groups need to make decisions by
transmitting the data needed to identify and evaluate choices.
Almost every communication interaction that takes place in a group or organization performs one or more
of these functions, and none of the five is more important than the others. To perform effectively, groups
need to maintain some control over members, provide feedback to stimulate members to perform, allow
emotional expression, monitor the persuasive efforts of individuals, and encourage information exchange.

Steps of Communication Process.

The key parts of this model are (1) the sender, (2) encoding, (3) the message, (4) the channel, (5)
decoding, (6) the receiver, (7) noise, and (8) feedback.

The sender initiates a message by encoding a thought. The message is the actual physical product of the
sender’s encoding. When we speak, the speech is the message. When we write, the writing is the message.
When we gesture, the movements of our arms and the expressions on our faces are the message.

The channel is the medium through which the message travels. The sender selects it, determining whether
to use a formal or informal channel. Formal channels are established by the organization and transmit
messages related to the professional activities of members. They traditionally follow the authority chain
within the organization. Other forms of messages, such as personal or social, follow informal channels,
which are spontaneous and subject to individual choice.

The receiver is the person(s) to whom the message is directed, who must first translate the symbols into
understandable form. This step is the decoding of the message.

Noise represents communication barriers that distort the clarity of the message, such as perceptual
problems, information overload, semantic difficulties, or cultural differences.

The final link in the communication process is a feedback loop. Feedback is the check on how successful
we have been in transferring our messages as originally intended. It determines whether understanding has
been achieved.

Flow of Communication:
Communication can flow vertically or laterally, through formal small-group networks or the informal
grapevine. We subdivide the vertical dimension into downward and upward directions.

Downward Communication: Communication that flows from one level of a group or organization to a
lower level is downward communication. Group leaders and managers use it to assign goals, provide job
instructions, explain policies and procedures, point out problems that need attention, and offer feedback. In
downward communication, managers must explain the reasons why a decision was made. Explanations
increase employee commitment and the support of decisions. problem in downward communication is its
one-way nature; generally, managers inform employees but rarely solicit their advice or opinions. In
downward communication, the delivery mode and the context of the information exchange are of high
importance.

Upward communication: It flows to a higher level in the group or organization. It’s used to provide
feedback to higher-ups, inform them of progress toward goals, and relay current problems. Upward
communication keeps managers aware of how employees feel about their jobs, coworkers, and the
organization in general. Managers also rely on upward communication for ideas on how conditions can be
improved.

Lateral communication: When communication occurs between members of the same workgroup,
members at the same level in separate workgroups, or any other horizontally equivalent workers, we
describe it as lateral communication. Lateral communication saves time and facilitates coordination. Some
lateral relationships are formally sanctioned. More often, they are informally created to short-circuit the
vertical hierarchy and expedite action. So from management’s viewpoint, lateral communications can be
good or bad. Because strictly adhering to the formal vertical structure for all communications can be
inefficient, lateral communication occurring with management’s knowledge and support can be beneficial.
But dysfunctional conflict can result when formal vertical channels are breached, when members go above
or around their superiors, or when bosses find actions have been taken or decisions made without their
knowledge.

Oral Communication:
A primary means of conveying messages is oral communication. Speeches, meetings, video-conferencing,
calls, formal one-on-one and group discussions, and the informal rumor mill or grapevine are popular
forms of oral communication.

The advantages of oral communication are speed, feedback, and exchange. We can convey a verbal message
and receive a response in minimal time. As one professional put it, “Face-to-face communication on a
consistent basis is still the best way to get information to and from employees.” If the receiver is unsure of
the message, rapid feedback allows the sender to quickly detect and correct it. The feedback we receive
includes information and emotional content. The exchange given through oral communication has social,
cultural, and emotional components. It can build trust, cooperation, and agreement between individuals and
teams.
One major disadvantage of oral communication surfaces whenever a message has to pass through a number
of people: the more people, the greater the potential distortion. The message’s content, when it reaches its
destination, is often very different from the original, even when we think the message is simple and
straightforward. Therefore, oral communication “chains” are generally more of a liability than an effective
tool in organizations.

Written Communication:
Written communication includes letters, e-mail, instant messaging, organizational periodicals, and any
other method that conveys written words or symbols. Written business communication today is usually
conducted via letters, PowerPoint, e-mail, instant messaging, text messaging, social media, apps, and blogs.
Non-verbal Communication:
Every time we deliver a verbal message, we also impart an unspoken message. Sometimes the nonverbal
component may stand alone as a powerful message of our business communication. No discussion of
communication would thus be complete without consideration of nonverbal communication—which
includes body movements, the intonations or emphasis we give to words, facial expressions, and the
physical distance between the sender and receiver. We act out our state of being with nonverbal body
language. For example, we smile to project trustworthiness, uncross our arms to appear approachable, and
stand to signal authority. Body language can convey status, level of engagement, and emotional state. Body
language adds to, and often complicates, verbal communication. In fact, studies indicate that people read
much more about another’s attitude and emotions from their nonverbal cues than their words! If nonverbal
cues conflict with the speaker’s verbal message, the cues are sometimes more likely to be believed by the
listener.

If you read the minutes of a meeting, you wouldn’t grasp the impact of what was said the same way as if
you had been there or could see the meeting on video. Why not? There is no record of nonverbal
communication, and the emphasis given to words or phrases is missing. Both make the meaning clear.
Facial expressions, along with intonations, can show arrogance, aggressiveness, fear, shyness, and other
characteristics. Both are missing here.
Physical distance also has meaning. What is considered proper spacing between people largely depends on
cultural norms. If someone stands closer to you than is considered appropriate, it may indicate
aggressiveness or sexual interest; if farther away, it may signal disinterest or displeasure with what is being
said.

Verbal vs Nonverbal Communication:

Verbal communication is a structured communication as it has grammar rules and gives clear messages.
Non-verbal communication is not structured; it does not have specific patterns. It can be interpreted as
anyones wish. however, non-verbal communication is important as it supports verbal communication by
adding flavor to it. But, it does not happen the other way round.
Discretion and Continuousness
 Verbal communication has start point and stop points.
 Non-verbal communication keeps going on without interruptions. Even when alone, interpersonal
processes keep occurring at individual level. Even after people stop talking, they keep showing non-
verbal cues. For example, glares after a fight or smiles after something good.
Chances of Miscommunication
 Each word in verbal communication has distinct meanings and has less chance of being
misinterpreted.
 There are about 4000 distinct facial expressions that people can make with 20 muscles in the face.
Along with that, there are so many other types of non-verbal communications. So, there is a greater
chance of those signs that can be misinterpreted
Neuro-physiological processing
 Verbal stimuli are interpreted by the left hemisphere of brain which helps in analyzing and reasoning.
This happens most of the time but brain does not follow it all the time.
 Non-verbal communications are interpreted by right hemisphere of the brain. These interpretations
involve spatial, pictorial and gestalt activities in the brain, and create elicit responses.
Time consumption
 Verbal communication is fast and efficient.
 Non-verbal communication is more time consuming than verbal communications. For example, sign
language news is more time consuming than others presented verbally.
Miscommunication according to places and situations
 Verbal communication also has immediate feedback, whereas it is not always possible in non-verbal.
This is because people do not show emotions right then but take some time.
 Miscommunication in verbal communication happens less than in non-verbal communication. For
example, in Russia, smile is considered to be impolite. Whereas in most of other parts of the world
it is a positive gesture.
But, this doesn’t mean non-verbal is misinterpreted in all the situations. It is better at communicating
feelings and emotions, even though it is slow. It even shows what a sentence might mean in a particular
situation. For example, a sarcastic sentence and a compliment seems the same verbally. But, the intentions
can only be interpreted through non-verbal cues.
Presence and distance
 Verbal communication can use any means like letters, chat, phone, etc. Distance does not matter in
verbal communication
  People must be face to face to show and receive non-verbal communication. Non-verbal
communication cannot occur in long distance
Documentary Evidences
 Verbal communication is loud and people witness it. So, there can be documentary evidences of it
as other people might have heard. It can be taken as an evidence.
 In non-verbal communication, many people do not witness and have less evidences. Conclusive
documentary evidences are less in non-verbal communication. It only happens if there are eye-
witnesses as it is visual cues.

Barriers to Effective Communication

Filtering refers to a sender’s purposely manipulating information so the receiver will see it more favorably.
A manager who tells his boss what he feels the boss wants to hear is filtering information. The more vertical
levels in the organization’s hierarchy, the more opportunities there are for filtering. But some filtering will
occur wherever there are status differences. Factors such as fear of conveying bad news and the desire to
please the boss often lead employees to tell their superiors what they think they want to hear, thus distorting
upward communications.

Selective perception is important because the receivers in the communication process selectively see and
hear based on their needs, motivations, experience, backgrounds, and other personal characteristics.
Receivers also project their interests and expectations into communications as they decode them.

Information Overload: Individuals have a finite capacity for processing data. When the information we
have to work with exceeds our processing capacity, the result is information overload. It has become a huge
challenge for individuals and for organizations. when individuals have more information than they can sort
and use they tend to select, ignore, pass over, or forget it. Or they may put off further processing until the
overload situation ends. In any case, lost information and less effective communication results, making it
all the more important to deal well with overload. As information technology and immediate
communication have become a more prevalent component of modern organizational life, more employees
find they are never able to get offline. The negative impacts of these communication devices can spill over
into employees’ personal lives as well.

Emotions: You may interpret the same message differently when you’re angry or distraught than when
you’re happy. People in negative moods are more likely to scrutinize messages in greater detail, whereas
those in positive moods tend to accept communications at face value. Extreme emotions such as jubilation
or depression are most likely to hinder effective communication. In such instances, we are most prone to
disregard our rational and objective thinking processes and substitute emotional judgments.

Language: Even when we’re communicating in the same language, words mean different things to different
people. Age and context are two of the biggest factors that influence such differences. Our use of language
is far from uniform. If we knew how each of us modifies the language, we could minimize communication
difficulties, but we usually don’t know. Senders tend to incorrectly assume the words and terms they use
mean the same to the receivers as to them.

Silence: It’s easy to ignore silence or lack of communication because it is defined by the absence of
information. This is often a mistake—silence itself can be the message to communicate non-interest or
inability to deal with a topic. Silence can also be a simple outcome of information overload, or a delaying
period for considering a response. The impact of silence can be organizationally detrimental. Employee
silence can mean managers lack information about ongoing operational problems; management silence can
leave employees bewildered. Silence regarding discrimination, harassment, corruption, and misconduct
means top management cannot take action to eliminate problematic behavior.

Communication apprehension: An estimated 5 to 20 percent of the population suffers debilitating

communication apprehension, or social anxiety. These people experience undue tension and anxiety in oral
communication, written communication, or both. They may find it extremely difficult to talk with others
face-to-face or become extremely anxious when they have to use the phone, relying on memos or e-mails
when a phone call would be faster and more appropriate.

Lying: The final barrier to effective communication is outright misrepresentation of information, or lying.
While the definition of a lie befuddles ethicists and social scientists, there is no denying the prevalence of
lying. Compounded across a large organization, this is an enormous amount of deception happening every
day. People are more comfortable lying over the phone than face-to-face, and more comfortable lying in e-
mails than when they have to write with pen and paper. The frequency of lying and the difficulty in detecting
liars makes this an especially strong barrier to effective communication.

Cultural Barrier: There are a number of problems related to language difficulties in cross-cultural
communications. First are barriers caused by semantics. Words mean different things to different people,
particularly people from different national cultures. Some words don’t translate between cultures. Second
are barriers caused by word connotations. Words imply different things in different languages. Third are
barriers caused by tone differences. In some cultures, language is formal; in others, it’s informal. In some
cultures, the tone changes depending on the context. Fourth are differences in tolerance for conflict and
methods for resolving conflicts. People from individualist cultures tend to be more comfortable with direct
conflict and will make the source of their disagreements overt. Collectivists are more likely to acknowledge
conflict only implicitly and avoid emotionally charged disputes.

Cultures tend to differ in the degree to which context influences the meaning individuals take from
communication. In high-context cultures such as China, Korea, Japan, and Vietnam, people rely heavily on
nonverbal and subtle situational cues in communicating with others, and a person’s official status, place in
society, and reputation carry considerable weight. What is not said may be more significant than what is
said. In contrast, people from Europe and North America reflect their low-context cultures. They rely
essentially on spoken and written words to convey meaning; body language and formal titles are secondary

Role of IT
The world of communication isn’t what it used to be! Although changing technology has been a significant
source of the environmental uncertainty facing organizations, these same technological changes have
enabled managers to coordinate employees’ work efforts in more efficient and effective ways. Information
technology (IT) now touches every aspect of almost every company’s business. The implications for the
ways managers communicate are profound. IT has radically changed the way organizational members
communicate.

 It has significantly improved a manager’s ability to monitor individual and team performance,
 Has allowed employees to have more complete information to make faster decisions
 Has provided employees more opportunities to collaborate and share information.
 Has made it possible for people in organizations to be fully accessible, any time, regardless of where
they are.
 Employees don’t have to be at their desk with their computer running to communicate with others in
the organization.

Two IT developments that are most significant for managerial communication are networked systems and
wireless capabilities.

NETWORKED SYSTEMS. In a networked system, an organization’s computers are linked. Organizational

members can communicate with each other and tap into information whether they’re down the hall, across
town, or halfway across the world. We’re not looking at the mechanics of how a network system works,
but some of its communication applications include e-mail; instant messaging; social media such as blogs,
wikis, and Twitter; webinars; voice-mail; fax; teleconferencing and videoconferencing; and intranets.

WIRELESS CAPABILITIES. wireless communication technology has the ability to improve work for
managers and employees. Even Internet access is available through Wi-Fi and WiMax hot spots. The
number of these hot spot locations continues to grow. With millions of “mobile” workers in the world,
smartphones, notebook computers, computing devices such as iPad, and other pocket communication
devices have generated whole new ways for managers to “keep in touch.” And the number of mobile
communication users keeps increasing. Employees don’t have to be at their desks to communicate with
others in the organization. As wireless technology continues to improve, we’ll see more organizational
members using it as a way to collaborate and share information.

Communication and the exchange of information among organizational members are no longer constrained
by geography or time. Collaborative work efforts among widely dispersed individuals and teams, sharing
of information, and integration of decisions and work throughout an entire organization have the potential
to increase organizational efficiency and effectiveness.

And while the economic benefits of IT are obvious, managers must not forget the psychological drawbacks.
For instance, what is the psychological cost of an employee always being accessible? Will it lead to
increased pressure for employees to “check in” even during their off hours? How important is it for
employees to separate their work and personal lives? These questions don’t come with easy answers, and
managers will have to face these and similar issues.
Ethics
The term ethics is derived from the Greek word, Ethikos meaning conduct, custom or habit. These meanings
are quite similar to the meaning of a Latin word, “mores”. Therefore, ethics is regarded as the science of
morality or simply, ethics is moral philosophy which deals with moral conduct, judgment, habit, character,
rules or principles. (Habit needs to be distinguished from character. Habit is the outward expression of
character, which is the inner disposition or bent of mind.)
Human conduct which is the foundation of ethics, deals with right or wrong conduct with reference to the
supreme ideals of human life. These ideals are deeply rooted in religion and handed down from generation
to generation. These ideals comprise truth, honesty, non-injury to others, compassion, kindness, and peace,
to name a few.

Ethics is “the study of what is right or good human conduct”.

Ethics is “the science of ideal involved in human life”.
Ethics is “the science of moral judgment”.
Ethics is “the science of morals in human conduct”.
Ethics is “the study of the general nature of morals and of specific moral choices”

Theories of Ethics
Utilitarianism
Utilitarianism is a teleological theory regarding what we ought to do. It is a normative ethical principle of
judging the right or wrong of a human action. According to this theory, social welfare is the sum of the
well-being of all individuals. What should human beings do? The answer can be teleological or
deontological. Deontological theory says that one’s duty is of ultimate importance.
Teleological theory points out than in the ultimate analysis, we should do only those things which can bring
the highest level of happiness to the greatest number of people. It considers the utility of rules or laws, and
is therefore, more concerned with policy formulation. Utilitarianism states that man’s worldly happiness is
the only good. This is a normative-positive test of all policies, actions and institutions.
Motto: “greatest good of the greatest number”. Jeremy Bentham is revered as the father of utilitarianism.

The following are the basic meanings of utilitarianism:

● Greatest good of the greatest number
● Maximization of pleasure
● Minimization of pains
● Maximization of happiness
● Satisfaction of desire

Although there are various meanings and versions of utilitarianism, there is one common philosophy
underlying all these notions. They are basically concerned with the consequences of an action or judgment.
In the case of utilitarianism, the end justifies the means.

Limitations of Utilitarianism
● The theory is incoherent simply because you cannot maximize two numbers at the same time (greatest
happiness and greatest number).
● Utility is essentially a subjective concept. There is no acceptable definition of “good”.
● The concept (happiness) means different things to different people. There are also multiple meanings of
the concept of utilitarianism.
●The idea ‘the end justifies the mean’ has been vehemently criticized by many. It is said by critics that for
a moral action, both the end and the means must be good. To many, the means justify the ends, and not
the other way round.
● Utilitarianism does not consider individuals or minorities. It does not care for individual entitlements,
rights and distributive justice.
● If some actions are by nature morally wrong, but their consequences are good. Utilitarianism will
support those actions. But then this will not prima facie entitle the theory to be a moral theory.

However, in spite of its many conceptual limitations, the movement of utilitarianism has been instrumental
in saving the conditions of common people. The philosophy of utilitarianism stood for the aspirations of
the middle class. It has been the basis of many reformative movements in the fields of legislation, politics
and socio-economic institutional changes around the world.

A consequentialist philosophy is based on consequences of actions. Some human actions which are good
for society at large are regarded as good actions. It is the outcome of the action on the society which is
important. A consequentialist theory is end-based (teleology). If the consequences and end are good, then
it can be recommended for implementation; otherwise not. Consequentialism embodies in itself two
important schools of moral philosophy. These two schools are utilitarian and teleological schools.

Teleological Theory
Greek philosophers, in particular Aristotle, popularized the teleological theory. The word teleology is
derived from telos which means the end or consequences. Thus, the theory of consequentialism is directly
associated with the teleological theory. There are indeed many variations of the theory of teleology. At the
one extreme of the teleological theme, there may be egoism and at the other extreme, there is utilitarianism.
Utilitarianism provides a criterion for the concrete decision-making process to choose an action or policy.
An action is taken only if it maximizes the net utility or benefits from the given circumstances, and also,
the project is accepted if it is the best among all the available projects in terms of net benefits. Thus, there,
apparently is a moral basis of choosing the project. However, the net gains or benefits may also be yielded
by a project which is otherwise not supportable on moral grounds. The cost-benefit calculus that is used for
the calculation of projects in the context of utilitarianism does not say much about morality.
Egoism which is a form of teleology accepts any decision which produces individual gain or benefit. These
benefits include pleasure, power, name and fame. An egoist will choose a situation which will increase his
personal gain or satisfy his ego. The basis of egoism is self-interest. Many people are of the opinion that an
egoistic person or organization is governed by self-interest. They will go to any extent to maximize their
gains and objective functions. They are short-sighted and unethical in principle. However, there is another
variety of egoism known as enlightened egoism which is socially better than pure egoism. Enlightened
egoism takes into account a long-run perspective and also allows for the welfare of people and society, but
in every case, the self-interest remains the primary consideration.

Another aspect of teleological theories, especially utilitarianism is the focus on minimizing harm to affected
individuals. This makes the theory popular in the public eye. Rule-utilitarians follow certain rules to
maximize their gains or net utility. They support the rule of laws in a country as they believe that by
following rules, the society can maximize the total gains. However, if there are alternative rules in a
particular situation, the utilitarians will choose that rule which would promote greater utility. There may be
a problem with the rule-utilitarians. They will not bribe anybody because this is the law of the land.
However, if bribe giving can lead to larger benefits than the cost, then they will perhaps bribe officials to
gain some favours. for a rule utilitarian, rules give him a guideline and at times, he violates them. To an act
utilitarian, bribery is acceptable if it leads to maximum gains or net utility. If corruption can save many
lives, both act and rule utilitarians will perhaps support it.
Teleological theories do give a definite perspective to make moral choices by comparing competitive
alternatives, and the relative impact on people. On this count, the consequentialist theory fares better than
the theory of deonticism. Teleological theories are, however, criticized on the ground that they rely too
much on unknown and uncertain results, and neglect the rights and needs of minorities. These right and
needs may be in conflict with those of the majority.

Relativism Theory
In the materialistic sense, right or wrong can be explained with reference to context, and in the ethical sense,
there is something known as ethical relativism which implies that ethical behaviour is to be judged with
reference to time, place and circumstances. Thus, whether MNCs are good or bad is difficult to determine
in isolation.”
It is an empirical fact that all ethical norms and practices are not equally valid and applicable to all societies.
Some ethical norms or practices are acceptable in some countries but not acceptable in others. For example,
caste system or untouchability was accepted in India, but not in other countries. Matrimony between
homosexuals is legally acceptable in the United Kingdom; based on marital ethics; but is considered
unethical and immoral in other countries. Thus, ethical standards differ from country to country or from
place to place, and hence the birth of ethical relativism. Ethical standards are relative to a situation, place,
time and circumstances.

Criticism Against Ethical Relativism (ER)

1. If ER is correct, then the same practices cannot be criticized in other parts of the world. For instance, if
drinking is not prohibited in the UK, it should not be prohibited in India. Such a reasoning is not tenable
because circumstances may be different.
2. It seems that to the proponents of ER, all local moral standards are equally acceptable without
exceptions. Morality in that case becomes a flexible concept without any rational basis.
3. ER believes that the only criteria for judging right and wrong are the local standards and practices.
Such a standard of judgment is too constricted.
4. ER tends to believe that the moral standards of a particular society are the fundamental basis of judging
it or for subsequent policy actions. This view is incorrect.
5. If injustice prevails in a particular country, it should not be the yardstick for others. For instance, the
argument that the Indian caste system is good because it is steeped in tradition and hence should be
emulated elsewhere, is objectionable.
6. ER does not lay emphasis on the universal moral standard. In fact, some moral standards are
unchanged, and live on.

Ethical Absolutism: EA relies on the fact that some ethical standards are universal, permanent and absolute
and are applicable to all countries and places. They do not change over time. For instance, the maxims like
“Don’t steal”, “Don’t lie” or “Respect your parents” have universal appeal and applicability. This is ethical
absolutism.

Deontology: The Greek word “deon” means duty. Deontology refers to a particular type of ethical
behavior based on rights and duties and not merely its consequences—it is the intention or motive that
matters rather than the consequences of the overt action. Thus, deontologists are non-consequentialists
which is governed by certain dos and do nots. As per the principle you should not steal or kill even if they
lead to maximum gain or happiness. It is based on the idea of correctness or rightness of moral behavior.
Kant is the leading founder of the principle of universalism, also known as deontological ethics. It is a kind
of non-consequentialist ethics. The basic idea of this ethical principle is that the ends can never justify the
means of an action. Universal ethical principles are based on justice, rights, fairness, honesty and respect.

Rights and Duties

Right is the entitlement or empowerment to do certain things. For instance, a teacher is entitled to teach in
a class and a priest is entitled to worship. Rights are moral claims of individuals recognized by society.
There are many types of rights, like, legal, constitutional, fundamental and moral. Right gives us the liberty
and choice and empowerment. There are many basic rights given to every citizen of a country. These rights
include life and security, education, freedom of speech, employment, express opinion, legal remedies,
contractual right, equality and human rights. Moral rights give individuals the freedom to pursue one’s own
interest so long as the interests of others are not violated. Moral rights need to be justified, and they are
necessary for self-realization. These rights are essential for the highest personal good and social benefits.

Negative rights are rights to be free from interference by others; life, liberty and property rights, Positive
rights are those that others have a duty to supply. If you have a right to education, others must supply
schools, teachers and books.

Rights and duties are correlative terms. Duties are moral obligations. The main duties that a person
should perform are as follows:
● Respect for truth
● Respect for laws
● Respect for society and the state
● Respect for life
● Respect for freedom and personality
Duties are determined by the status and particular station of life. There are generally three classes of
duties:
● Duties to self (health, self-development, capability expansion and so on).
● Duties to others (duties to family and friends, relatives, neighbors, society, humanity, animals
and plants, and the country).
● Duties to God (devotion, prayer, meditation, worship, communion and love for God)

Justice
Philosophers observe that there are three worthwhile things in this universe: truth, beauty and justice.
The term “justice” is derived from the word “just”, which means “appropriate”, “proper” and “fair”.
The word “fairness” is regarded as the most appropriate equivalent to the term “justice”. When a treatment
is accorded to a person in proportion to what he deserves, he can be said to be treated in a just way. For
instance, when a labourer is asked to work and paid wage equal to the market value of his physical
productivity, the payment is based on justice. Justice is something which can be regarded as reasonable on
both moral and empirical grounds. Justice is a normative social order. It is a form of righteousness. When
some people are in bondage, justice implies freedom to them. Absolute justice is divine and is difficult to
achieve in the real world. In the actual practice, we come across what is known as relative justice. There
are six types of justice:
1. Procedural Justice
There may be justice in an act. However, what is important is to see whether that action has been
performed complying to the law or through a correct procedure

2. Commutative Justice
Commutative justice is a form of justice where fairness or justice is ensured at the beginning and all
people are treated equally. In other words, people start on the level field.

3. Compensatory Justice
Some compensation is given to the person who has been treated unequally in the past. The point is that
the compensation for the injustice done in the past must be proportional or equivalent to the loss sustained
by an individual in question.

4. Retributive Justice
This ensures some form of punishment to a defaulter. The imposition of fines or penalties, however, may
not be adequate or just in a particular situation.

5. Communitarian Justice
This refers to a system of justice shown to a particular community which has been suffering in the past
from injustice (say, giving political and economic rights to the tribal people in Australia).

6. Distributive Justice
Distributive justice is very critical for human society as a whole. The basic idea of distributive justice is to
treat equal people equally and unequal people unequally. Therefore, it can be either vertical or horizontal
in character. The principle of distributive justice upholds the view that the benefits and burdens in a
society must be distributed equally among its members.
Care
Care is a particular type of enduring love and affection that is reciprocated by an individual to those people
in his family whom he loves. The same is true of friends and near and dear ones. Care is an expression of
regard coming from esteem. Care for somebody depends primarily on the nature of the relationship. If the
relationship is very intimate, the care becomes deep. On the contrary, if the relationship gets sour, the care
for the person gradually diminishes. When the relationship becomes very strained, the care degenerates into
hate and can no longer be sustained.

Ethics of care is a study of all the factors concerning care, care-based relations, sources and motivation for
care, costs and conflicts of care, care and justice, and many other related issues. There are two broad
domains of care:

The conventional analysis that care is only related to one’s near and dear ones, family and friends is indeed
a narrow view. This can be called the esoteric concept of care. According to this concept, care is shown
only to a person’s own family and to some intimate friends. These people are shown care by sacrifice in
terms of physical or mental efforts or monetary expenditure whenever needed.

Care can also be exoteric in nature and, in some cases, temporary or for a limited period of time. Thus, one
may take an unknown victim of a road accident to a hospital and spend time and money to look after him
until he is discharged. This type of care can be called Exoteric Care and is shown to people outside the
domain of family and friends. Exoteric care can also be about a community or a tribe. In this case, a person
takes pride in or takes care of his own community. This care is called Communitarian Care. It arises out of
compassion and kindness and serves the people at large irrespective of caste, colour, creed or religion.

In a sense, out of all these theories of ethics, the care-based ethics seems to be the best. Rule-based ethics
is too mechanical and as such cannot take care of the relativity of many ethical issues in terms of time,
circumstances and situations. Some rules may prove to be irrelevant with changing time and circumstances.
Thus, it is not always proper to blindly follow the rule-based ethics. The duty-based ethics may follow mere
routine duties. It consists of a job that somebody has asked you to do.
Similar is the case with consequence-based utilitarian ethics. Utilitarian ethics is basically concerned with
the social well-being or the welfare of the majority of population, but it neglects the welfare of the
minorities. The utilitarian principles may be in conflict with many of our core moral standards.

Care ethics is above and beyond any cognitive theory of justice and ethics. Since care comes out of love, it
conquers everything, transgression and inequity. Care ethics is above and beyond any cognitive theory of
justice and ethics. Since care comes out of love, it conquers everything, transgression and inequity. If one
has made a habit of caring about others, he may even forget the relationship he has with the person he is
caring for. The victim may be a friend or a stranger or even an enemy.

However, the satisfaction of the needs of the poor is an important part of the ethics of care. Though not all
the theories, the socialist theory of justice comes a long way towards the ethics of care. Under socialism
the payment is based not on contribution but on needs. To supply the needs of people is equivalent to taking
care of them. ey can take care of themselves. In the capitalist principle of justice, payment to the labour is
based on the contributions of labour. If the contribution is low, he gets low wages. There is no scope for
care in such a situation, even if the need for more is genuine. The equity principle of justice is also silent
about the special needs of people to take care of their families and loved ones. Most of the theories of justice
are thus inadequate and cannot supersede the ethics of care and compassion.

Virtue Ethics
Virtue ethics is a special branch of ethics founded by Plato and his disciple, Aristotle. The traditional
theories of ethics are based on actions. For instance, the theory of utilitarianism observes that an action
which maximizes net utility of the society is the right kind of action. Utilitarianism puts more emphasis on
the greatest good of the greatest number of people. This idea is the same as the theory of consequentialism
which says that a right action is the one which leads to good consequences. The theory of deontology
believes that a right action is to be judged in terms of duty. Thus a person doing his duty well is performing
the right action. The same notion applies to theories of justice, caring and compassion. However, the
problem is that even if a person is doing the right action, his character may be morally unethical. It is not
the action that matters, but more importantly the character of the person performing the action. Hence, what
is needed is a combination of both right action as well as correct character. Virtue ethics emphasizes the
importance of right character among human beings. This is, however, not to say that all the alternative
ethical theories mentioned above are devoid of the quality of virtue. But virtue theory exclusively puts an
emphasis on character based on virtues. A man of virtue is always respected and praised because virtue is
a special type of achievement which needs hard work and determination.

Moral virtue is an acquired mental disposition which forms a part of the character of a morally upright
person which is further reflected in the behaviour pattern of that person (Velasquez). There can be a long
list of virtues. However, the major virtues are honesty, sincerity, truth, courage, temperance, integrity,
compassion and kindness. Virtue is the habit of deliberate choice of right activities and performance of
duties in the correct way. Virtue is excellence of character. According to Aristotle, virtue is a permanent
state of mind to perform the best things in life.

Virtue is a relative concept. Virtue is relative to society, the nature of the state and social position and
responsibility. While some virtues like patriotism and nationalism are virtues in all types of states, for some
states, like a communist state, religious activities are not looked upon as virtues. For a totalitarian state,
loyalty to ruler is a higher virtue than devotion to God. People are given different social power, position
and functions, and accordingly their virtues will differ. Thus, the virtue of a teacher is different from the
virtue of a priest. In the Varnashram Dharma (caste-based classification of duties) of Hindu philosophy,
the four different classes of people are to perform different functions, and therefore their virtues will be
different.

The nature of virtue also differs from country to country and from time to time. In Greek society, pride is
regarded as a great elite virtue, but it is not so in India. In some countries, courage is the most important
virtue but not in others. In the olden days, simplicity was regarded as a prime virtue, but now it is regarded
as foolishness to many. To be clever is an ideal virtue in the modern world. Thus, virtue has a contextual
connotation, and therefore, it is a relative term.

Criticisms against Virtue Ethics

● Virtues are not enough for enhancing social welfare which depends on some right overt action. Virtues
are covert qualities. Unless virtues are translated into action, there is no social welfare or personal
improvement or gratification.
● At times, it becomes very difficult to distinguish between virtues and values, and to that extent, virtue
ethics loses its importance as a separate branch of ethics.
● Virtues may be looked upon as vice. For instance, in Aristotle’s Greece, humility was a vice but to
Christians, it was a virtue. There is no clear-cut classification of unique virtues.
● A man may possess some virtues, yet he may be a bad man. For instance, a man may possess courage,
prudence, justice and temperance (the four classic virtues) and yet he may be angry, cruel, nasty and
vengeful.
● Virtue ethics fails to address the dilemmas that arise in applied ethics. For instance, in the case
of abortion virtue ethics does not give any direction.

Integrating Utility, Rights, Justice, and Caring

So far, we have outlined four main kinds of basic moral considerations:

1. Utilitarian standards - must be used when we do not have the resources to attain everyone's objectives,
so we are forced to consider the net social benefits and social costs consequent on the actions (or policies
or institutions) by which we can attain these objectives.

2. Standards that specify how individuals must be treated - must be employed when our actions and policies
will substantially affect the welfare and freedom of specifiable individuals. Moral reasoning of this type
forces consideration of whether the behavior respects the basic rights of the individuals involved and
whether the behavior is consistent with one's agreements and special duties.

3. Standards of justice - indicate how benefits and burdens should be distributed among the members of a
group. These sorts of standards must be employed when evaluating actions whose distributive effects differ
in important ways.

4. Standards of caring - indicate the kind of care that is owed to those with whom we have special concrete
relationships. Standards of caring are essential when moral questions arise that involve persons embedded
in a web of relationships, particularly persons with whom one has close relationships, especially those of
dependency.

One simple strategy for ensuring that all four kinds of considerations are incorporated into one's moral
reasoning is to inquire systematically into the utility, rights, justice, and caring involved in a given moral
judgment. One might, for example, ask a series of questions about an action that one is considering: (a)
Does the action, as far as possible, maximize social benefits and minimize social injuries? (b) Is the action
consistent with the moral rights of those whom it will affect? (c) Will the action lead to a just distribution
of benefits and burdens? (d) Does the action exhibit appropriate care for the well-being of those who are
closely related to or dependent on oneself? Unfortunately, there is not yet any comprehensive moral theory
to show when one of these considerations should take precedence.
Why Ethical Problems in Business?
Business ethics is the systematic analysis of ethical principles pertaining to business, industry, commerce,
trade and other related activities, institutions, beliefs and practices. Business ethics is the sum-total of
rules and principles which can be regarded as the standard norm to evaluate and guide business activities.

Business ethics is necessary to give guidance to uphold the interests of stakeholders including consumers,
shareholders, suppliers, distributors and investors. Business ethics is necessary to remind the business
firm that it is the moral duty of the firm as a part of society to undertake some social responsibilities. The
following are the five primary objectives of business ethics:

Objectives/Purposes
● Business ethics teaches us the ethical rules and principles that are relevant for business.
● Business ethics is concerned with the application of ethical standard and values to business.
● Business ethics teaches the manager as to how to run the business on ethical lines.
● The rules of business ethics enable a business firm to identify the areas which are not practicing ethical
principles and therefore can prescribe the necessary ethical code.
● Business ethics can help a firm to make business decisions and strategy which are morally fair, just and
consistent.

Business behaviour in the macro perspective is based on mutual trust, faith and consideration. This trust is
found generally between employer and employee, customers and sellers and suppliers and purchasers.
These relations have to be based on some tacit normative moral standards. Thus, ethics can be very useful
for running a business successfully. The importance and significance of BE can be summarized as given
below.
● BE provides a broad framework for giving guidance to all those who run the business. This guidance is
based on certain moral principles that we derive from ethics. Without such a framework, business may go
haywire.
● A company based on ethical principles is trusted by all the stakeholders like customers, suppliers,
employees and the public. The visible and invisible benefits of such a trust may not be quantified in the
short-run under all circumstances but its benefits can be realized in the long-run.
● A business based on ethics improves its social image which gives it a long standing goodwill and
financial pay off at the end. A better public image brings about many types of positive externalities and
consequences.
● Business ethics improves and strengthens organizational culture at all levels both within and without.
When the whole organization is motivated by a unified culture, the milieu of work and motivation,
compliance and respect for the company automatically improves. This is indeed a great advantage for not
only making a policy but for its implementation as well.
● The strategic value and decision-making goals of a business concern are founded on ethical beliefs and
values and not on its balance sheet position and profit mark-up. While monetary norms are transitory,
ethical values create a solid foundation for all time to come.
● A company run on the basis of business ethics can avoid many types of work-related conflicts both
within and outside the firm. The principles of fairness and justice in running the firm save it from many
possible harms, injustice, unfair discrimination and exploitation. Even if there is any conflict, it can be
hoped to be solved on the basis of cooperation, justice and fairness.
● A business firm that is run on ethical principles can save a lot of money every year as it can avoid
criminal and legal involvement. Indeed, the economic costs of sin are very high.
● Many types of market failures that arise from misleading information, lack of transparency, non-
absorption of harmful externalities of firms can be prevented by ethically run organizations. Needless to
add, the economic cost of market failure in any society is indeed prohibitively high.

Ethics in Marketing
What is Marketing Ethics?
● Honesty in all marketing transactions
● Responsibility for the goods sold
● Openness in all dealing
● Fairness in all the deals (absence of cheating or deception at any stage)
● Respect for human dignity
● Disclosure of information regarding the product
● Selling products that are not harmful or injurious
● Absence of unethical means to sell the product (no unethical advertisements)
● Charging fair prices
● Truthfulness in disclosing the quality and effect of the product being sold (no hiding of information)

The British Code of Advertising Practice is based on the four fundamental ethical principles— Truthfulness,
Legality, Honesty and Decency. CP Act 2019.

Unethical Practices in Marketing

Products: These are not always safe and harmless. They may be adulterated, qualitatively poor and may
contain some substances whose effect on health may be dangerous. The buyers may be ignorant about the
long-run impact of the ingredients.

Pricing: Dealers and manufacturers often charge either too high (skimming or gouging) or too low
(predatory or penetrating) pricing. There are many methods of price fixation but manufacturers often
indulge in charging unethical prices and not just prices. Predatory prices are charged to eliminate
competition, often unethically.

Packaging: Does not often mention the safety instruction or level and no expiry date. Packaging may be
done with harmful materials like plastics.

Placing (Distribution): May be often uneven but, certain products are not distributed in all the areas and an
artificial scarcity is created by the dealers to charge higher prices.

Promotion (Advertisements): Promotion of the product through advertisement is the most unethical part of
marketing.

Advertisements: As H.G. Wells once remarked, advertisement is a sort of legalized lying. Very often it
makes false claims, and is deceitful and implies cheating. The products which are used for slimming,
improving skin colour and hair growth might be misleading and false.
Ethical consumerism has therefore take into account many policies, rules and provisions to ensure
consumers’ rights. The following are the major issues that consumer ethics is now trying to address:
● The first and foremost issue is the consumer protection and safety.
● Consumer organization is looking after the interest and welfare.
● Assurance about product life, product safety, reliability and maintenance.
● Disclosure of all necessary and relevant information about the product.
● There should be no information asymmetry about the product between the seller and the buyer.
● Proper marketing and advertisement ethics for selling products.
● Proper product labeling with warnings and methods of use.
● Protection against unfair trade practices and unfair and false advertisement.
● Consumers’ grievance cells run by the state.
● Strong consumer organizations and agencies.
● Consumer-seller relations agencies.
● Consumers law and policy.

Ethics in Finance
There are, fundamentally, two objectives of financial management. First, in the short-run to maximize
profits and to plough back some part of this profit. And second, to maximize wealth or company assets.
Ideally, the financial sector of a company is motivated by some operational and social desiderata. These
are:
Operational Desiderata: ● To ensure that adequate amount of finance is available when it is necessary to
make an investment. ● To efficiently use the financial resources for the benefit of the company. ● To make
safe and sound investment that generates a stream of cash flow. ● To ensure that investments lead to net
benefits over costs.

Social Desiderata: ● To make timely payments of wages, interest and taxes, a reasonable amount of
dividend. The social desiderate also may include, in some cases, a payment for social work to fulfill social
responsibilities.

A proper financial management, however, depends on the correctness of information and its flow. If there
is an uneven flow of information across the market, the financial market dynamics cannot work in an
optimum way.

The manager is accountable and answerable to the management authorities or board about the justification
for each and every type of payment made by him or his department. This accountability is a sort of
ownership corporate financial responsibility. Accountability slots well with transparency in a responsible
managerial function. Transparency implies the openness with which the financial functions are discharged;
there is nothing secret or confidential and everything is available for examination and verification.
However, a business world is not the citadel of ethicists or philosophers. It is a world of materialist
acquisitions. Here, growth or development does not mean what you are but what you have, and in
discharging the duties as a financial manager or officer, many unethical activities are performed by them,
some of which are listed as under:
Unethical Financial Practices
● For gathering money for investment it is necessary to show that the financial health of the company is
very safe and sound. Hence, the company cooks the financial data and manipulates them to suit the
requirements. The cooking of data is also known as creative accounting.
● The share prices are artificially raised without any economic fundamentals justifying this action. In
this context, the Harshad Mehta case of Financial Scam is a pointer. In order to raise the share prices, in
the prospectus, the company’s performance is glorified. The public is cheated this way. There may be
some government rules and regulations, but there is a regulatory capture where government officials are
bribed.
● Insider Trading is a very notorious form of financial practice. People having inside information buy
most of the shares of a company when the conditions are very favourable, and the outsiders get less
number of such shares. It is one of the undesirable situations when company executives pass the
information on to some selected people.
● Merger of companies may be a financial stunt. A good company merges with an old company in order
to evade taxes or to reduce competition. creating unusual delay in making payments to suppliers, taxes,
excise duties and other legal payments.
● Many companies open accounts in different banks to avoid taxes and avoid adjustments against loans.
● Companies may create many independent subsidiaries and make ‘benami’ property transactions to
avoid payments to government and taxes.
● Financial irregularities also include cheating employees in the matter of payment of regular wages,
medical bills, bonus, LTC, children’s tuition fees, and so on.
● Companies falsify bills of purchase to inflate cost in order to reduce taxes.
● Loans are often taken from those institutions which are ready to do some personal favour.
● Sometimes, excessive or inappropriate trading on behalf of a client is done by a broker. This is called
churning. It is a breach of fiduciary duty.
●Many a time a company does not share the correct information in the stock market. It commits fraud and
there is information asymmetry. The practice is unethical.
● The banking sector is not free from fraud. Several types of frauds are committed in the banking sector
as well.

Unethical Practices in Accounting

● Misappropriation by not recording the cash receipts.
●Misappropriation of cash payments..
● Misappropriation of goods by wrong recording of sales and supply or by theft, or by showing damages,
and so on.
● Manipulation of accounts may be done by showing higher values of assets, lower liabilities, higher
sales, and so on.

The basic task of an auditor is to bring to the surface the financial problems and loopholes of a company
and give it a direction and point out how to improve the situation and manage the company in a better
way in terms of finance and accounts.
Ethics in Human Resource Management
Narrowly defined, HRM consists of acquisition, development and utilization of workforce for the benefit
of a business organization. Broadly speaking, it includes recruitment, training, positioning, allocation,
motivation, performance appraisal, promotional policy, welfare consideration, workforce strategy and
policy, forecasting of workforce demand and supply, and developing a committed workforce through a
healthy relationship between the employer and the employees and also between the employees themselves
to work as an organized team.

There has been a paradigm shift of emphasis on the recruitment of people based on hard skill or academic
qualifications to overall personality endowment, or what is called soft skill development. In the days of
value-based management, the emphasis has shifted from the creation of physical productivity to value
creation that includes the idea of value added as well as ethicality and human values.

Challenges in HRM
 The training of workforce poses a challenge. Not only does it involve funds but also a choice of the
right type of training that the organization will need both in the short-run and in the long-run.
 The problem of brain drain is a real challenge to those organizations that need highly qualified
workforce.
 To maintain allocative efficiency where the productivity of a factor is just equal to its remuneration, is
also a challenge.
 The removal of discrimination is a tricky issue. The discrimination may be due to age, race, caste,
religion, and so on.
 Pay differences among various ladders of services or jobs are substantial in some firms.
 There may also be a problem of alienation among some employees; it may be an alienation from the
product, alienation from organization and alienation from the working environment.
 Many foreign organizations believe that there is an economy in high wages. High wages should lead
to higher labour productivity. It comes under the scheme of incentives. But how the individual firm
should go about it and how to make sure about its effectiveness in micro perspective are some of the
critical challenges in HRM.
 While it is accepted in principle that there should be a balance between the economic efficiency of a
firm and its ethical policy-making, nobody is sure as to how to bring this balance through a change in
wages and salaries.
 To enhance the contestability of employees through capability expansion is perhaps one of the
greatest challenges in HRM today.

Ethical Dilemmas in HRM

●In the matter of promotion, whether one should give special preference to his relatives or friends, or
caste and religion?
● Should the manager follow the policy of divide and rule by making a rift in the trade union leaderships?
If he does so, he can control the work perhaps in a better way. But is it moralistic to do so?
● The use of women and children will reduce the wage cost. Is it morally all right to use child labour?
● Many MNCs practice what is called the policy of race to the bottom so that at the lower end of the
employment ladder, wages are reduced, and the workers who are affected are mostly women and manual
workers. This is profitable for the firm, but is it morally correct?
● Should the firm declare a generous bonus at the end of the year or a stingy one?
● By exploiting labour (that is, by paying less wage than productivity) the company can gain much, but is
it morally permissible?
● Should discrimination be permitted? It may allow the firm to get some egoistic satisfaction or earn
more profit. But is it not morally oblique?
● Given the resource endowment, a firm can increase the wage level and reduce the level of employment
or wages may be lowered to employ more people. Which alternative is ethically correct?
● The firm can practice the policy of hiring and firing of labour without giving any prior notice. This is
done in China with the connivance of the government. But is it morally justified?
● The choice of technique of production is itself an ethical issue. If labour-intensive method of production
is used, productivity per labour may be lower but employment can be given to a large number of
labourers. However, if the capital-intensive method of production is used, labour productivity will go up
but labour employment will go down.

Unethical Practices in HRM

There are rampant unethical practices in HRM. Some of those practices are listed as under:
● Many firms use discriminatory policies in recruitment, promotion, wages payment and even in work
allocation. This includes gender and caste or religious discrimination.
● Firms often do not care for safety, health, job satisfaction and comfortable working environment.
● HRM policies may be absent or biased with respect to promotion, recruitment, reward and punishment.
● Workers’ rights and unionism are not looked upon favourably by employers.
● While practicing downsizing and lay-offs, sufficient prior notice is not given to employees.
● Many firms are engaged in exploiting workers by giving them unjustifiably lower wages.
● Sometimes privacy is not allowed and this goes against the women workers.
● Forced labour and child labourers are used by many firms.
● Hiring and firing policy is extended too far to threaten the workers.
● Sexual harassment prevails in many firms in both overt and covert forms.
● Industrial disputes are solved high-handedly without much consideration for the inferior economic
status of workers. Conflicts are not settled through negotiations and co-operations.
● For the exploited workers, compensatory justice policy is either delayed or completely denied. No
affirmative actions are permitted.

Ethics in Compliance
In business ethics contexts, compliance generally refers to a company’s or a business person’s conformity
with relevant laws and regulations—that is, following the rules set out by government. In its slightly broader
sense, a focus on compliance may also imply a focus on adherence by employees on the organization’s own
internal rules.
Many large businesses today have entire compliance departments, typically consisting of a special team of
lawyers (and others) whose job it is to make sure that the company remains in conformity with the laws
and regulations applying to its activities. Given the very wide range of laws and regulations to which
modern businesses are subject, this can be a very substantial task. Big companies regularly engage in
compliance training, which both expose employees to the relevant laws and regulations to which the
company is subject and the practices and procedures for conforming to them in the performance of their
duties.
Compliance and the means by which companies seek to ensure it give rise to interesting issues of corporate
culture. One worry is that a corporate culture emphasizing compliance is or may become a legalistic
culture—one emphasizing being (barely) on the right side of the law. Legalistic cultures may be corrosive
of creating or maintaining a values-based corporate culture—one in which a company’s norms and practices
reflect a commitment to ethical values greater than merely avoiding legal liability or punishment. The
converse worry is that a corporate culture emphasizing ethical values may find employees engaging in well-
meaning activity that may inadvertently expose the company to legal liability or punishment for failing to
observe the often arcane, technical requirements of the law. Thus, finding and maintaining the right balance
of commitment to legal compliance and to ethical values is an ongoing challenge of corporate culture.

Principles of Business Ethics

1. Principle of Conscience – This principle is based on inner-feeling of persons to analyse the sense of right
and wrong. On this basis the businessmen can determine different roles and behaviour at their levels.
2. Principle of Wishless Work – This principle emphasise that there is no need to perform all the task to be
self-centered or self-interest. Accordingly, we should perform all the role and behaviour to another person’s
for their esteemed interest. We should be devoted to our efforts to do the work for others.
3. Principle of Esprit – According to this principle, businessmen should give due attention to make best
possible services and try to develop the feelings of devotion and truthfulness in services. All the behaviour
and activities should be based on values and service motive in business.
4. Principle of Publicity – According to this principle, all the activities and performance as conducting in
business houses, should be well informed to every person or organisation who are directly or indirectly
attached with business. It aims to remove the doubtfulness and misunderstanding among people.
5. Principle of Purity – It is most needful that every businessman should follow the politeness, truthfulness
and tolerance for developing the feelings of mental peace. At the same time, the mental peace and purity
also becomes the ways for politeness and tolerances etc.
6. Principle of Humanity – It is needful that every businessman should follow the human values, human
decorum and human aspects within their policies, programmes and different working areas. The ethical
behaviour may determine the path of humanity.
7. Principle of Universal Values – It is required that every businessmen should conduct and perform the
task and different business activities to be based on universal assumptions, customs and overall accepted
norms and principles by society.
8. Principle of Commitment – According to this principle, every businessmen should be able to fulfill their
commitments and assurances as given to other persons. The implementation of commitments should be
based on honesty and responsiveness.
9. Principle of Rationality – On the basis of the ethical code of conduct, every businessmen should analyse
and evaluate the good or bad, right or wrong, ethical or unethical aspects within their business transaction
and day to day working of the business houses. They must follow the rational attitudes and behaviour.
10. Principle of Communicability – According to this principle, there is a need to make effective means of
communication with the internal and external persons as engaged with business houses. The
communication should be in cleared, open and justified manners.
11. Principle of non-Cooperation in Evils – It is needful that businessmen should try to make non-
cooperation or discourage the evils, misconduct and unethical behaviour not only with different customers
but with society also.
12. Principle of Cooperation with Other – Ethical norms motivate the feeling of collaboration and team
spirit. It is required that on the basis of capacity and available resource, the businessmen should make full
cooperation to different other persons as per their good conduct and value based behaviour.
13. Principle of Satisfaction – Every businessmen are required to create and develop their role and
behaviour to establish pleasure and happiness with other persons and the society at large. Fore mostly, in
business as per their products and services, the customers should be satisfied at every stage.
14. Principle of Coordinate Ends and Means – The businessmen should try to make a coordinating or
balancing form between their ends and means within their work performance and its allied activities. They
should develop their ventures within the limitations of resources and capacities.
15. Principle of Due Process – All the persons and different employees, as engaged in business are required
to involve in decision making process and different important task. Businessmen should follow a reasonable
and justified working process in their organisation.
16. Principle of Liking in Expectations – In order to establish the ethical norms and conducts in business, it
is required to follow all these good and acceptable behaviour by businessmen. They must give and perform
some excellence examples as per the expectations of others.
17. Principle of Transparency – Ethics denotes the concept of purity and truth. All the business activities
and transactions should be well informed with justified manners with their different stakeholders and
society.

Ethical Implications of Organization Structure

In general, in a centralized organization structure, the down-top communication is few and far between,
and there is also an absence of personal contact, relationship and concern. Thus, the employees at the bottom
have practically no chance to communicate to the top level bosses. It is this distance that makes the medium
level and lower level employees somewhat aloof and alienated from the mainstream culture and ethos of
the organization, and because of the communication gap, the lower level employees often engage in many
unethical activities such as bribe, gift-taking and so on for favours done to outsiders. They may also run
sweat shops, use forced labour and illegal immigrants for the factory work. This may be done without the
knowledge of top level bosses as they never visit the production centre of the factory. In fact, lack of
communication, and absence of direct supervision by top level employers can lead to many unethical
practices in and outside the factory premises. Unless the ethical culture is put into the communication flow
and all the official activities by a motivated leader, the employees in a centralized system do not have the
feel and compulsion to work ethically.

Contrary to the ethos of a centralized system, a decentralized system is more informal with personal contact
and communication. In such a system, the flow of information is very quick and information asymmetry is
almost conspicuous by its absence. So, any unethical behaviour by an employee promptly comes to the
notice of everybody through grapevines. It is very difficult for an unethical person to survive there for a
long time, as he is caught and condemned sooner or later. Official ostracism is the cost of an unethical
behaviour. Thus, an unethical aberration can be corrected more easily in a decentralized system than in a
system which is centralized. A decentralized system can resolve, or even avoid, many ethical dilemmas
more promptly through informal discussion, as the system is more democratic.
In a centralized system, however, corruption and similar other unethical practices get institutionalized over
time, and it is very difficult to remove them. In fact, it takes a long time to unearth unethical practices as
they get entrenched. The procedure is too formal, cumbersome and lengthy. However, if a person is found
guilty of any serious unethical aberration, he is dismissed from the job. However, the bottom line is that
certain unethical practices are possible in both centralized and decentralized types of organizations. But in
a centralized system, it takes a long time for the unethical cultural rooting and the elimination of such a
behaviour, as compared to a decentralized system where minor unethical aberrations may come and go
without rooting and sprawling.

The following are some of the ways through which both personal and organizational integrity can be
strengthened:
● The employees must be held responsible for any unethical action whether that action is taken on behalf
of the organization or on a particular employee’s own behalf.
● The organization must develop a code of ethical conduct for everybody.
● Personal integrity should be the guiding principle everywhere whether at work or in the private domain.
Once this is distilled in the sub-conscious mind, it will become a part of individual behaviour.
● It is necessary to understand right and wrong very objectively both in the case of personal activities and
also in organizational matters.
● The organization must encourage right, ethical leadership and it will ensure that ethical personal
behaviour converges with that of organizational behaviour. The leader must circulate the advantages of
ethical behaviour and action for all concerned and also for the growth of organization.
● The manager should be responsible for the maintenance of an ethical ambience through the functioning
of ethics committee which will work on the basis of reward-punishment principle. A carrot-and-stick
policy should be used to carry out proper functioning.
● Consistent ethical behaviour and commitment to the idea of growth of the company will strengthen both
personal and organizational integrity.

SOME MAJOR UNETHICAL BUSINESS PRACTICES

Sexual Harassment at Workplaces: It includes many types of offences including sexual advances, requests
for sexual favours, avoidable physical contacts, request for dates, and so on. In the name of good business,
girls of nubile age-groups are sent to different places and persons to gain business favour, contract and
orders. This is often done sometimes by alluring the poor girls with higher pay and promotions, and
sometimes, it is done without the consent of these helpless girls.

Forced Labour and Bonded Labour: In India, bonded labour and forced labour in the rural and urban areas
is around two per cent of the total labour force in the country. The incidence is higher in the rural than in
the urban labour market. Bonded child labour is widespread in many parts of Andhra Pradesh, Uttar
Pradesh, Orissa and Bihar. Child labour is rampant in the carpet industry of Uttar Pradesh in India. Other
industries include tea faming, stone quarrying, fireworks, fishing and cigarette making. Children are also
forced to serve as domestic servants, road-side beggars, prostitutes and shop boys in many Third World
countries. These children never get the opportunity to go to school.

Sweat Shops: These shops are abundant in a country like India and include the places where all types of
manual, unskilled and women labourers have to work to eke out a living. They make toys, shoes, and cheap
quality consumer goods. The wage is very low and irregular and the working conditions are inhuman, to
say the least, with no fans, sometimes no electricity, no pure drinking water and no sanitation facilities.
Numerous abuses are reported in sweat shops but no one cares.

Discriminations: Various types of discriminations including gender discrimination, age discrimination, and
racial and minorities discrimination are openly practiced by business houses. Favouritism, nepotism and
casteism dominate the job market in India. Discrimination is prevalent not only at the entry point but also
in job allocation and promotion. There are also glass ceilings that prevent the ethnic minorities and women
to reach the upper echelons of the corporate sector in many countries including the United States. In United
Sates, the Hispanic, the Asian American and the African labourers do not have the same wage structure.
There are serious wage and job discriminations.

Fraud: A fraud is a type of theft by deception. Fraud may be a violation of civil law (Law of Tort) and/or
a violation of criminal law. A fraud is a deliberate misrepresentation of facts that causes the other party to
suffer loss or damage.

Theft: The corporate sector every year loses a huge amount of money through theft by disgruntled workers,
security personnel, store operators, suppliers, waste contractors, staff purchasers, and so on. Both big
officials and lower grade persons are involved in company theft.

Corruption: Corruption is the abuse of public offices and power for private gain. The gain may be financial
or in kind or any other temptation. There are many forms of corruption such as bribery, kickbacks, extortion
and the like. Absence of accountability and transparency and lack of proper control are the basic causes of
corruption. Corruption is anti-development as it misallocates resources, is anti-poor, anti-democratic and
anti-national, to say the least. Corruption is a function of many factors including personal values, social
values, nature of governance, the legal framework and institutional competence to combat corruption.

Code of conduct
Code of conduct in business is important to organize certain business activities. All codes of conduct in
business are based on the core values of the company, its mission and vision. Core values are the guiding
practices of the company and they are meant to be strictly adhered to by its employees and stakeholders.
The following are the standard codes of conduct in business:
● Compliance with laws, rules and regulations.
● Working with honesty, integrity and diligence and on the basis of work ethics.
● Respect and honour for human rights.
● Everybody should follow the policy of the company and nothing should be done against the company.
● Confidentiality should be maintained and there should be no disclosure of confidential information at
any cost.
● Maintenance of company’s goodwill, assets and property.
● There should no manipulation, abuse or misuse of power and position and non-acceptance of bribery
and favour from others.
● Political connection and subscription to political parties are discouraged.
● No discrimination and harassment against any employee or stakeholders.
● Competition with another company can be done with honesty and fair trade practices.
● Non-development of cartels and monopoly practices.
● No insider trading.
● There should be accountability and transparency.
● Adequate disclosure of useful information inside the company is needed.
● The company should serve well the consumers and ensure adequate after-sales services.
● Goods to be produced by the company should be qualitatively good, reliable and moderately priced.
● To maintain adequate and effective health and safety measures and employees’ privacy.
● The company employees are to protect the environment and help the government in the achievement of
sustainable development.
● The company has to carry out the corporate social responsibilities.
● The whole business will be run on ethical principles for all concerned.

The aforesaid codes will have to be strictly observed by all concerned and if there is any willful violation
of the code, the offender will run the risk of departmental enquiry and even dismissal from the service. Any
conflict in this matter may be brought to the notice of the supervisor. If any other regulation comes in
conflict with the code of conduct in business, the code will be overpowering.

Code of Ethics
Beneficence: Concern for well-being and safety of clients
Nonmeleficence: Refrain from causing intentional harm to clients
Autonomy/Confidentiality: Respect client's rights and opinions
Social Justice: Provide services in a fair and equitable manner
Procedural Justice: Comply with institutional rules, local, state, federal, and international laws
Veracity: Provide comprehensive, accurate, and objective information
Fidelity: Treat colleagues and other professionals with respect, fairness, discretion, and integrity
Organisations have their own code of ethics, different professions have their respective code of ethics.

Best practices in ethics programme

1. Vision statement. A vision statement defines the long-term, most desirable future state for the
organization. The vision gives employees and managers a first screening test for decisions.
2. Values statement. A values statement defines general principles of required behavior. It’s the standard
against which decisions and actions are evaluated to determine if they meet the company’s and
employees’ requirements
3. Organizational code of ethics. A code of ethics gives organization-specific definitions of what’s
expected and required. The code of ethics should clarify the organization’s expectations. The code also
defines the consequences for failure to meet the standard.
4. Ethics officer. An ethics officer ensures that the ethics systems are in place and functioning. This
person monitors the organization to determine if it’s making a good faith effort to abide by its stated
values, that the code of conduct supports those values and that violations of those values are prevented
or detected and addressed.
5. Ethics committee. The ethics committee oversees the organization’s ethics initiative and supervises
the ethics officer. It’s the final interpreter of the ethics code and the final authority on the need for new
or revised ethics policies.
6. Ethics communication strategy. If employees are to know what’s expected of them and what
resources are available to them, the ethics officer must create a cohesive ethics communication strategy.
This strategy ensures that employees have the information they need in a timely and usable fashion and
that the organization is encouraging employee communication regarding the values, standards and the
conduct of the organization and its members
7. Ethics training. Ethics training teaches employees what the organization requires, gives them the
opportunity to practice applying the values to hypothetical situations and challenges, and prepares them
to apply those same standards in the real world
8. Ethics help line. Help lines aren’t just for reporting unethical conduct. They also make it easier for the
organization to provide guidance and interpretation of its expectations when the intent of an ethics
policy is unclear. Establishing an ombudsperson.
9. Measurements and rewards. In most organizations, employees know what’s important by virtue of
what the organization measures and rewards. If ethical conduct is assessed and rewarded, and if
unethical conduct is identified and dissuaded, employees will believe that the organization’s principals
mean it when they say the values and code of ethics are important.
10. Monitoring and tracking systems. It isn’t enough to track and monitor employee behavior. It’s also
critical to assess the extent to which employees accept and internalize the organization’s values and
ethics code.
11. Periodic evaluation. It’s important to assess periodically the effectiveness of any initiative, especially
an ethics program.
12. Ethical leadership. The bottom line is that ethics is a leadership issue. Leaders set the tone, shape the
climate and define the standards. If managers are trustworthy and trusted, if their motivations are
honorable and their expectations crystal clear, and if they’re paying attention to ethics as an integral
element of every business decision, then ethical problems will be rare.

Corporate Governance
Corporate governance is defined as holding the balance between economic and social goals and between
individual and communal goals. The governance is there to encourage the efficient use of resources and
equally to require accountability for the stewardship of those resources”. World Bank has given two
definitions of corporate governance (1999): From public policy perspective, “it is about nurturing a
company with accountability in the exercise of power and control over the company” and from the
perspective of the corporation, “corporate governance is relations between owners, management board
and stakeholders”.

Importance of corporate governance

● Accountability and transparency encouraged by corporate governance are essential for capital market
development in LDCs (less developed countries). All these ensure investors’ confidence and can help
overall investment climate in a country.
● Enhanced corporate productivity and efficiency through good corporate governance ensures economic
growth with social justice and development. Thus, it not only improves the economic conditions of people
but also enhances social welfare.
● A disciplined and controlled corporate governance can considerably reduce financial turmoil and can
ensure financial stability, both of which are crucial for economic growth and development.
● A good corporate governance can considerably reduce corporate fraud and corruptions. In such cases, not
only is public confidence raised but also the national prestige is enhanced.
● Competitive product and factor markets can be promoted and sustained by corporate governance. This
can ensure allocative efficiency in the management of scarce resources.
● A good corporate governance is necessary for successful international business as it increases confidence,
product quality, prices, social responsibility and environmental protection.
● A better social responsibility generated by a good corporate governance can enhance social development,
social welfare and public image and confidence. All these can help the corporations to build social capital
and trust.
● A good corporate governance ensures environmental protection and a sustainable development. This not
only reduces the public cost but can also ensure better human health.
● An ethically inspired CG ensures employees’ welfare and consumers’ welfare and is in favour of the
stakeholders’ interests. A good corporate governance does take into account the welfare of all the
stakeholders and thereby ensures justice and fairness to all concerned.

Mechanism of corporate governance

The mechanism of corporate governance works in two ways: control and promotion. The mechanism,
therefore, can be called the mechanism of controlled expansion. The mechanism of control aims at reducing
various types of inefficiencies and irregularities. The control mechanism works in the following ways:
● Control of executives. In order to make such controls effective, the controlling authority (may be Board
of Directors) has to have access to all the necessary information stock.
● The monitoring by the Board of Directors can be made effective through regular meetings of the Board
of Directors to identify and rectify the areas of potential conflicts, mismanagement and problems.
● The control mechanism encompasses both internal and external controls. The internal control mechanism
works through the Board of Directors’, internal audit committee and other personnel who can provide
intelligence about the operational efficiency or otherwise of the company, and the level of compliance with
laws and regulations. (Internal auditing is an important controlling mechanism to look into the veracity of
financial reporting and the financial status of the firm.)
● The provision of exernal and independent auditing is also an important mechanism to authenticate the
reports of internal auditing system. Sometimes, the internal auditing system may be engaged in window
dressing without caring for the actual status of the company. In such a case, independent external auditing
is very helpful. Statutory auditing is a good controlling mechanism for checking the corporate financial
mismanagement.
● Another mechanism of control over inefficiency is to introduce the system of efficiency based
remuneration for executives and employees. It should combine a system of incentive and punishment for
the assigned work.
● Overall, a system of checks and balances at all the levels of the company is what is urgently needed for
the success of a company. For this purpose, a committee may be constituted by indicting some honest
insiders and outsiders. The basic duty of such a committee will be to observe study and report against certain
abnormalities and irregularities.
● In any country, government regulations can be a good mechanism for controlling many odd practices
and aberrations. In India, Companies Act (1956) and SEBI (1992) form an important part of controlling
mechanism.
● A proper code of conduct for the managers and directors of a company can indeed go a long way as a
controlling mechanism. A code of conduct is both principle of corporate governance and also of corporate
mechanism to guide all the activities and duties.

Having said all this, it needs to be mentioned that a fool-proof corporate mechanism is necessary to control
all those inefficiencies which also arise out of moral hazards and adverse selection. Moral hazards occur
when the agent becomes too much dependent on a particular person (may be his boss or supervisor). Since
he thinks that his boss will do everything, he becomes inactive and inefficient. A wrong or adverse selection
may occur when a person has been selected wrongly because he might have suppressed any relevant
information. In both these cases, there may be a corporate inefficiency that needs to be eliminated.
Corporate governance mechanism, in order to be effective, must be made free from political interference
and control. In particular, inefficiency due to adverse selection is very likely to emerge because of political
pressure to accommodate sub-standard people in the corporate sector.

Principles of corporate governance

 The system must perform well in terms of economy and efficiency.
 It must be based on a comprehensive code of conduct for the participants.
 CG should be free from political interference
 Honesty and integrity on the part of all concerned
 based on all types of disclosures and transparency
 Accountability and responsibility both individually and severally
 proper recognition of the rights of every type of shareholders
 The Board of Directors should be properly constituted keeping a balance between the directors
coming from both inside and outside.
 The external auditors should be independent
 Presence of a clear dividend policy.
 Promotion of social safety and environmental sustainability

Duties and Responsibilities of Board of Directors

Since the Board of Directors is the heart and soul of corporate governance, it is empowered with many
duties and responsibilities of which the following are crucial:
● It works as a friend, philosopher and guide for the whole company. It gives direction, defines the
company’s strategy and plans and ensures that management translates those plans into action.
● It appoints independent directors.
● One of the important responsibilities of the board is to ensure that shareholders’ interest is given the top
priority.
● It gives direction and supervises the critical activities of the company.
● It is responsible for the maintenance of accountability and transparency.
● Monitoring the overall activities of the company (and also that of the CEO) is an important function of
the board.
● The fiduciary duties need to be performed with loyalty and good faith, and care and circumspection.
● It has been pointed out by many experts that the Chairman and the CEO should not be the same person,
as there may be a concentration of power, and it is argued that power corrupts itself. However, there is
no denying the fact that for the best functioning of the company their roles should be complementary and
not competitive.
● The board has to ensure that for the smooth functioning of the organization, the flow of information is
optimum and there is no asymmetry anywhere. There should be a maximum flow of information for all
concerned.
● The board draws critical action plans and programs and formulates policies for fulfilling corporate
social responsibilities which are now regarded as an essential corporate objective.
● The Board ensures the availability of financial resources.
● It approves annual budgets.
● It fixes up salaries and compensation.
● The board is obviously involved in all types of crucial decision-making processes. The board conducts
frequent meetings and makes plans and resolves issues.
● The board makes sure that the company is based on ethical principles and it is supposed to give ethical
leadership at different levels.
● The board appoints various critical committees and functions through them. The major committees are:
audit committee, remuneration committee and nomination committee.