UNIT 1: Introduction to Management

1
Management: CONCEPT, NATURE
& IMPORTANCE
 MANAGEMENT

Management is

“the act of getting people together to accomplish

desired goals and objectives using available
resources efficiently and effectively ”
• Management comprises planning,
organizing, staffing, leading or directing, and
controlling an organization.

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“Management is an art of knowing what
to do, when to do and see that it is
done in the best and cheapest way”
-According to F.W. Taylor

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 Organizations
• Organization
– A systematic arrangement of people brought together
to accomplish some specific purpose; applies to all
organizations—for-profit as well as not-for-profit
organizations.
– Where managers work (manage)
• Common characteristics
– Goals
– Structure
– People

1–5
Common Characteristics of Organizations

1–6
 People Differences
• Operatives
– People who work directly on a job or task and
have no responsibility for overseeing the work of
others
• Managers
– Individuals in an organization who direct the
activities of others

1–7
Organizational Levels

1–8
 Identifying Managers
• First-line managers
– Supervisors responsible for directing the day-to-day
activities of operative employees
• Middle managers
– Individuals at levels of management between the
first-line manager and top management
• Top managers
– Individuals who are responsible for making decisions
about the direction of the organization and
establishing policies that affect all organizational
members

1–9
 Management Defined
• Management
– The process of getting things done, effectively
and efficiently, through and with other people
– Efficiency
• Means doing the thing correctly; refers to the
relationship between inputs and outputs; seeks to
minimize resource costs
– Effectiveness
• Means doing the right things; goal attainment

1–10
Efficiency and Effectiveness

1–11
 Management Defined (Contd.)
• “The art of getting things done through
people.”
- Mary Parker Follet
• “Management is the process of planning,
organising, leading and controlling the efforts
of organisation members and of other
organisational resources to achieve stated
organisational goals.”
- James A.F. Stoner
1–12
UNIT 1: Introduction to Management

2
Management: Art and Science,
Management as a Profession
Management – An Art, Science or Profession

Science: Any branch of knowledge to be considered a

science (like – physics, chemistry, biology etc.) should
fulfill the following conditions:
• The existence of a systematic body of knowledge
encompassing a wide array of principles;
• The principle must explain a phenomenon by
establishing cause – effect relationship;
Over the years, thanks to the contributions of
many thinkers and practitioners, management, with
its own principles has emerged as a systematic body
of knowledge.
Management – An Art, Science or Profession

Management may be considered as inexact

science because,
• Management involves getting things done
through people
• The behaviour of human beings cannot be
accurately predicted
• The output also varies
Management – An Art, Science or Profession

An Art: refers to the ‘know-how’ – the ways of

doing things to accomplish a desired result.
• As the saying goes ‘practice makes a person
perfect; constant practice of the theoretical
aspects (knowledge base) contributes for the
formation and sharpening of the theory and
practice. Therefore, what is required is the
right blend of the theory and practice.
Management – An Art, Science or Profession

• Effective practice of any art requires a

thorough understanding of the science
underlying it. The executives who attempt to
manage without the conceptual
understanding of management principles and
techniques have to depend on luck or
intuition.
Therefore, management is both a science and
an art.
Management – An Art, Science or Profession

• As a Profession: These are the days where we

are hearing a lot about professional managers
and their contribution to the economic
development of the nation.
• Therefore, it is appropriate to know the other
dimension of management – whether it is a
profession.
• Since professionals are getting involved, it can
be referred to as a profession.
UNIT 1: Introduction to Management

3
Management VS. ADMINISTRATION
 Management- Defined:

“Management is the process of conducting a set of functions

(planning, organizing, staffing, directing and controlling) to get
the work done in an efficient manager.”
The process of management brings together the acts of
visualizing, initiating and combining the various components
while sustaining the feasibility of the enterprise towards
company goals.
“Management is an art of getting thing done through and with
people in formally organized groups.”

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 Administration- Defined
Definition
 “Administration means the overall determination of policies,
setting of major objectives, the identification of general
purposes and laying down of broad programmes and
projects.” – Theo Haimann
 “…[It is] guidance, leadership and control of the efforts of the
groups towards some common goals.” – William H. Newman
 The activities that relate to running an organization.

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 Administration vs Management
 Administration deals with the activities of higher level/top
level: setting up of objectives and crucial policies of the
organization
 Management involves conceiving, initiating and bringing
together the various elements: coordinating, actuating,
integrating the diverse organizational components while
sustaining the viability of the organization towards some pre-
determined goals
 In short, it is the act or function of putting into practice the
policies and plans decided upon by the administration

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 Administration vs Management (contd…)

• The difference can be summarized under two

categories:
Functions and Usage/Applicability

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Administration vs Management (contd…)

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Administration vs Management (contd…)

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OR

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 BASIS FOR
MANAGEMENT ADMINISTRATION
COMPARISON
Meaning An organized way of managing people and The process of administering an organization by
things of a business organization is called a group of people is known as the
the Management. Administration.
Authority Middle and Lower Level Top level
Role Executive Decisive
Concerned with Policy Implementation Policy Formulation
Area of It works under administration. It has full control over the activities of the
operation organization.
Applicable to Profit making organizations, i.e. business Government offices, military, clubs, business
organizations. enterprises, hospitals, religious and educational
organizations.

Decides Who will do the work? And How will it be What should be done? And When is should be
done? done?
Work Putting plans and policies into actions. Formulation of plans, framing policies and
setting objectives
Focus on Managing work Making best possible allocation of limited
resources.
Key person Manager Administrator
Represents Employees, who work for remuneration Owners, who get a return on the capital invested
by them.
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Function Executive and Governing Legislative and Determinative
UNIT 1: Introduction to Management

4
Management ROLES AND
SKILLS
 Mintzberg’s Managerial Roles

• Interpersonal • Decisional
– Figurehead – Entrepreneur
– Leader – Disturbance hander
– Liaison – Resource allocator
• Informational – Negotiator
– Monitor
– Disseminator
– Spokesperson

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30
 Is The Manager’s Job Universal?
• Level in the organization
– Do managers manage differently based on where they are in the
organization?
• Profit versus not-for-profit
– Is managing in a commercial enterprise different than managing in a
non-commercial organization?
• Size of organization
– Does the size of an organization affect how managers function in the
organization?
• Management concepts and national borders
– Is management the same in all economic, cultural, social and political
systems?

1–31
 Distribution of Time per Activity by Organizational Level

Source: Adapted from T. A. Mahoney, T. H. Jerdee, and S. J. Carroll,

“The Job(s) of Management,” Industrial Relations 4, No.2 (1965), p.103.
1–32
 Importance of
Managerial Roles in
Small and Large
Businesses

Source: Adapted from J. G. P. Paolillo, “The Manager’s Self Assessments of Managerial Roles:
Small vs. Large Firms,” American Journals of Small Business, January–March 1984, pp.61–62.
1–33
 MANAGEMENT SKILLS
Skill is an ability or proficiency in a specific
area.
Conceptual skills are the ability to formulate
ideas.
Human skills are the ability to interact effectively with
people and concerns interpersonal relations.
Technical skills are the ability to use process or
technique knowledge. They deal with things.

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 MANAGEMENT SKILLS (Contd…)
In order to perform the functions of management and to assume
multiple roles, managers must be skilled. Robert Katz identified
three managerial skills that are essential to successful management: technical, human, and
conceptual.
Technical skill involves process or technique knowledge and
proficiency. Managers use the processes, techniques and tools of
a specific area.
Human skill involves the ability to interact effectively with people.
Managers interact and cooperate with employees.
Conceptual skill involves the formulation of ideas. Managers
understand abstract relationships, develop ideas, and solve
problems creatively.
Thus, technical skill deals with things, human skill concerns
people, and conceptual skill has to do with ideas.

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MANAGEMENT SKILL
A manager's level in the organization
determines the relative importance of
possessing technical, human, and
conceptual skills. Top level managers
need conceptual skills in order to view
the organization as a whole.
Conceptual skills are used in planning
and dealing with ideas and
abstractions. Supervisors need
technical skills to manage their area of
specialty. All levels of management
need human skills in order to interact
and communicate with other people
successfully.
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 General Skills for Managers (Extended Concept)

• Conceptual skills
– A manager’s mental ability to coordinate all of the organization’s
interests and activities
• Interpersonal skills
– A manager’s ability to work with, understand, mentor, and motivate
others, both individually and in groups
• Technical skills
– A manager’s ability to use the tools, procedures, and techniques of a
specialized field
• Political skills
– A manager’s ability to build a power base and establish the right
connections

1–37
 Specific Skills for Managers
• Behaviors related to a manager’s
effectiveness:
– Controlling the organization’s environment and its
resources.
– Organizing and coordinating.
– Handling information.
– Providing for growth and development.
– Motivating employees and handling conflicts.
– Strategic problem solving.

1–38
 Management Charter Initiative Competencies for
Middle Managers
1. Initiate and implement change
and improvement in services,
products, and systems
2. Monitor maintain, and improve
service and product delivery
3. Monitor and control the use of
resources
4. Secure effective resource
allocation for activities and
projects
5. Recruit and select personnel
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6. Develop teams, individuals, and
self to enhance performance
7. Plan, allocate, and evaluate
work carried out by teams,
individuals and self
8. Create, maintain, and enhance
effective working relationships
9. Seek, evaluate, and organize
information for action
10. Exchange information to solve
problems and make decisions
How Much Importance Does The Marketplace Put
On Managers?

• Good (effective) managerial skills are a scarce

commodity.
– Managerial compensation packages are one measure
of the value that organizations place on them.
– Management compensation reflects the market forces
of supply and demand.
• Management superstars, like superstar athletes in
professional sports, are wooed with signing bonuses,
interest-free loans, performance incentive packages, and
guaranteed contracts.

1–40
UNIT 1: Introduction to Management

5
LEVELS OF Management
 MANAGERIAL LEVELS

• Management hierarchy is the arrangement in an

organization of managers by level or rank.
• Middle management includes managers below
the rank of president but above the supervisory
level.
• Supervisors are managers whose major activities
focus on supervising non-management employees
and the needs of those employees and the
objectives of the organization.
• Top management are managers accountable for
the overall success of the organization.
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MANAGERIAL LEVELS

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UNIT 1: Introduction to Management

6
CHARACTERISTICS OF QUALITY
Managers
 Top 10 Characteristics of Quality
Managers
1. Professional Competence. Professional competence refers to
having thorough knowledge of the field concerned.
2. Belief in High Achievement. Quality managers have belief in
high achievement.
3. Creativity.
4. Analytical Skills.
5. Decisive.
6. Excellent Communication Skills.
7. Leading from the Front.
8. Openness.
9. High Integrity
10. Team-based Approach

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 Top 10 Characteristics of Quality
Managers (Contd.)
1. Professional Competence
Professional competence refers to having thorough knowledge of
the field concerned. In the case of management, professional
competence involves being well-versed in management principles
and how these principles can be applied in the given situations.
2. Belief in High Achievement
Quality managers have belief in high achievement. They have
internal locus of control implying that they feel that they can
control situations and the situations cannot control them. They
have a feeling that if others can do something exceptional, they
can also do the same way. This belief instills confidence in them
for doing better and better.

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 Top 10 Characteristics of Quality
Managers (Contd.)
3. Creativity
Creativity involves conceiving of original and unique alternatives to the
solution of a problem. Creativity is required because nature of problems
goes on changing requiring innovative solutions.
4. Analytical Skills
Managers have to work in complex situations which contain both
significant and insignificant factors. With analytical skills, quality
managers may be able to identify those factors which are more relevant
for their work.
5. Decisive
Quality managers are quite decisive. They make decisions after careful
analysis of the contextual variables well in time. They do not waver
between ‘what to do‘ or ‘what not to do‘ in given situations.

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 Top 10 Characteristics of Quality
Managers (Contd.)
6. Excellent Communication Skills
Communication involves sharing of ideas and understanding with others. In
order to understand others and making himself understood by others,
excellent communication skills are required. Further, persuasive
communication may influence others favorably.
7. Leading from the Front
Quality managers lead from the front. They do not speak about themselves
but their work speaks on their behalf. This feature leads the followers to
follow the leaders enthusiastically.
8. Openness
Quality managers have quality of openness. They are change-prone and not
change-resistant. Being open, they appreciate any idea which is fruitful and
accept it from whatever source it comes.

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 Top 10 Characteristics of Quality
Managers (Contd.)
9. High Integrity
Quality managers have high integrity and
adopt ethical practices in all types of decisions and
dealings. Similarly, they expect the same pattern to
be followed by others.
10. Team-based Approach
Quality managers adopt team-based approach. For
work performance, they adopt ‘give and take‘
approach. They believe in developing themselves
as well as others.
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51
 Why Study Management?
• We all have a vested interest in improving the
way organizations are managed.
– Better organizations are, in part, the result of
good management.
• You will eventually either manage or be
managed
– Gaining an understanding of the management
process provides the foundation for developing
management skills and insight into the behavior
of individuals and the organizations.
1–52
 How Does Management Relate To Other
Disciplines?

Sociology

Political Science Psychology

Management
Economics Philosophy

Anthropology

1–53
UNIT 1: Introduction to Management

Evolution of Management: Early contributions,

Taylor and Scientific Management, Fayol’s
Administrative Management, Bureaucracy,
Hawthorne Experiments and Human Relations,
Social System Approach, Decision Theory
Approach
1–55
 The Pre-modern Era
• Ancient massive construction projects
– Egyptian pyramids
– Great Wall of China
• Michelangelo the manager

1–56
 Adam Smith’s Contribution to the Field of
Management

• Wrote the Wealth of Nations (1776)

– Advocated the economic advantages that
organizations and society would reap from the
division of labor:
• Increased productivity by increasing each worker’s skill
and dexterity.
• Time saved that is commonly lost in changing tasks.
• The creation of labor-saving inventions and machinery.

1–57
 The Industrial Revolution’s Influence on
Management Practices

• Industrial revolution
– Machine power began to substitute for human power
• Lead to mass production of economical goods
– Improved and less costly transportation systems
became available
• Created larger markets for goods.
– Larger organizations developed to serve larger
markets
• Created the need for formalized management practices.

1–58
 Classical Contributions
• Classical approach
– The term used to describe the hypotheses
of the scientific management theorists and
the general administrative theorists.
• Scientific management theorists
–Fredrick W. Taylor, Frank and Lillian
Gilbreth, and Henry Gantt
• General administrative theorists
–Henri Fayol and Max Weber

1–59
 Scientific Management
• Frederick W. Taylor
– The Principles of Scientific Management (1911)
• Advocated the use of the scientific method to define the
“one best way” for a job to be done
– Believed that increased efficiency could be achieved
by selecting the right people for the job and training
them to do it precisely in one best way.
– To motivate workers, he favored incentive wage
plans.
– Separated managerial work from operative work.

1–60
 Taylor’s Four Principles of Management

1. Develop a science for each element of an individual’s work, which

replaces the old rule-of-thumb method.
2. Scientifically select and then train, teach, and develop the worker.
(Previously, workers chose their own work and trained themselves as best
they could.)
3. Heartily cooperate with the workers so as to ensure that all work is done
in accordance with the principles of the science that has been developed.
4. Divide work and responsibility almost equally between management and
workers. Management takes over all work for which it is better fitted than
the workers. (Previously, almost all the work and the greater part of the
responsibility were thrown upon the workers).

1–61
 TAYLOR’S FOUR PRINCIPLES

1. Replacing the rule of thumb by Scientific methods.

2. Selecting, training, teaching and develop the workman.
3. Division of work and responsibility.
4. Cooperation between Management and workers.

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 Scientific Management Contributors

• Frank and Lillian Gilbreth

– Bricklaying efficiency improvements
– Time and motion studies
• Henry Gantt
– Incentive compensation systems
– Gantt chart for scheduling work operations

1–63
 Administrative Management
• General administrative theorists
– Writers who developed general theories of what
managers do and what constitutes good management
practice
– Henri Fayol (France)
• Fourteen Principles of Management: Fundamental or
universal principles of management practice
– Max Weber (Germany)
• Bureaucracy: Ideal type of organization characterized by
division of labor, a clearly defined hierarchy, detailed rules
and regulations, and impersonal relationships

1–64
Fayol’s Fourteen Principles of Management

• Henri Fayol, a French industrialist, is

now recognised as the Father of
Modern Management. In
year 1916 Fayol wrote a book
entitled "Industrial and General
Administration". In this book, he
gave the 14 Principles of
Management. These 14 principles
of management are universally
accepted and used even today.
According to Henri Fayol, all
managers must follow these 14
principles.

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 Fayol’s Fourteen Principles of Management

• Division of work • Centralization

• Authority • Scalar chain
• Discipline • Order
• Unity of command • Equity
• Unity of direction • Stability of tenure of
personnel
• Subordination of the
individual • Initiative
• Remuneration • Esprit de corps

1–66
 Fayol’s Fourteen Principles of Management

1. Division of Work
The full work of the organisation should be divided among
individuals and departments. This is because a division of work
leads to specialisation, and specialisation increases efficiency, and
efficiency improves the productivity and profitability of the
organisation.
2. Discipline
Discipline means a respect for the rules and regulation of the
organisation. Discipline may be Self-discipline, or it may be
Enforced discipline. Self-discipline is the best discipline. However,
if there is no self-discipline, then discipline should be enforced
through penalties, fines, etc. No organisation can survive without
discipline.
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 Fayol’s Fourteen Principles of Management

3. Authority and responsibility

According to Henri Fayol, there should be a balance between
Authority (Power) and Responsibility (Duties). Authority must be
equal to Responsibility. If the authority is more than responsibility
then chances are that a manager may misuse it. If responsibility is
more than authority then he may feel frustrated.
4. Subordination of Individual Interest to General Interest
In an organisation, there are two types of interest, viz., the
individual interest of the employees, and the general interest of
the organisation. The individual interest should be given less
importance, while the general interest should be given most
importance. If not, the organisation will collapse.

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 Fayol’s Fourteen Principles of Management

5. Remuneration
Remuneration is the price for services received. If an organisation wants
efficient employees and best performance, then it should have a good
remuneration policy. This policy should give maximum satisfaction to both
employer and employees. It should include both financial and non-financial
incentives.
6. Centralization
In centralization, the authority is concentrated only in few hands. However, in
decentralization, the authority is distributed to all the levels of management. No
organisation can be completely centralized or decentralized. If there is complete
centralization, then the subordinates will have no authority (power) to carry out
their responsibility (duties). Similarly, if there is complete decentralization, then
the superior will have no authority to control the organisation. Therefore, there
should be a balance between centralization and decentralization.

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 Fayol’s Fourteen Principles of Management

7. Order
There should be an Order for Things and People in the
organisation. Order for things is called Material Order. Order for
people is called Social Order. Material Order refers to "a place for
everything and everything in its place." Social Order refers to the
selection of the "right man in the right place". There must be
orderly placement of the resources such as Men and Women,
Money, Materials, etc. Misplacement will lead to misuse and
disorder.
8. Equity
The managers should use the equity while dealing with the
employees. Equity is a combination of kindness and justice. Equity
creates loyalty and devotion in the employees.

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 Fayol’s Fourteen Principles of Management

9. Initiative
Management should encourage initiative. That is, they should encourage
the employees to make their own plans and to execute these plans. This
is because an initiative gives satisfaction to the employees and brings
success to the organisation.
10. Esprit De Corps
Esprit de Corps means "Team Spirit". Therefore, the management should
create unity, co-operation and team-spirit among the employees. They
should avoid the divide and rule policy.
11. Stability of Tenure
An employee needs time to learn his job and to become efficient.
Therefore, he should be given time to become efficient. When he
becomes efficient, he should be made permanent. In other words, the
employees should have job security.

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 Fayol’s Fourteen Principles of Management

12. Unity of Direction

All activities which have the same objective must be directed by one
manager, and he must use one plan. This is called Unity of Direction. For
example, all marketing activities such as advertising, sales promotion,
pricing policy, etc., must be directed by only one manager. He must use
only one plan for all the marketing activities.
13. Scalar Chain
Scalar Chain is a line of authority. This line joins all the members
(managers and employees) from top to bottom. Every member must
know who is his superior. He must also know who is his subordinate.
Scalar Chain is necessary for good communication. Scalar Chain must
not be broken in normal circumstances. However, if quick action is
necessary, then this chain can be broken. This is done using "Gang
Plank" / "Bridge" / "Direct Contact".

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 Fayol’s Fourteen Principles of Management

14. Unity of Command

According to this principle, a subordinate
(employee) must have only one superior (boss or
manager). A subordinate must receive orders from
only one superior. In other words, a subordinate
must report to only one superior. According to
Fayol, if one subordinate receives orders from
more than one superior then there will be
disorder. This will affect the discipline, efficiency,
productivity and profitability of the organisation.
• Unity of Command is a very important principle of
management. This principle is based on the rule
"Too many cooks spoil the soup."

73
• Espirit De Corps: It means managers should create
and foster among their employees the morale,
common spirit, sense of identification, feeling of
pride, loyalty, devotion, honor, solidarity, unity and
cohesiveness with respect to their organization or
organizational department.

74
 Weber’s Ideal Bureaucracy
• Division of Labor
• Authority Hierarchy
• Formal Selection
• Formal Rules and Regulations
• Impersonality
• Career Orientation

1–75
 Human Resources Approach
• Robert Owen
– Claimed that a concern for employees was
profitable for management and would relieve
human misery.
• Hugo Munsterberg
– Created the field of industrial psychology—the
scientific study of individuals at work to maximize
their productivity and adjustment.

1–76
Human Resources Approach (Contd.)
• Mary Parker Follett
– Recognized that organizations could be viewed
from the perspective of individual and group
behavior.
• Chester Barnard
– Saw organizations as social systems that require
human cooperation.
– Expressed his views in his book The Functions of
the Executive (1938).
1–77
 Hawthorne Studies
• A series of studies done during the 1920s and
1930s that provided new insights into group
norms and behaviors
– Hawthorne effect
• Social norms or standards of the group are the key
determinants of individual work behavior.
• Changed the prevalent view of the time that
people were no different than machines.

1–78
 Human Relations Movement
• Based on a belief in the importance of
employee satisfaction—a satisfied worker was
believed to be a productive worker.
• Advocates were concerned with making
management practices more humane.
– Dale Carnegie
– Abraham Maslow
– Douglas McGregor

1–79
 The Quantitative Approach
• Operations research (management science)
– Evolved out of the development of mathematical
and statistical solutions to military problems
during World War II.
– Involves the use of statistics, optimization models,
information models, and computer simulations to
improve management decision making for
planning and control.

1–80
Social Events that Shaped Management Approaches

• Classical approach
– Desire for increased efficiency of labor intensive
operations
• Human resources approach
– The backlash to the overly mechanistic view of
employees held by the classicists.
– The Great Depression.
• The quantitative approaches
– World War II
1–81
 The Process Approach
• Management theory jungle (Harold Koontz)
– The diversity of approaches to the study of
management—functions, quantitative emphasis,
human relations approaches—each offer
something to management theory, but many are
only managerial tools.
• Planning, leading, and controlling activities
are circular and continuous functions of
management.
1–82
 Management
Process
Activities

Management process:
planning, organizing,
leading, and controlling
1–83
 Management Process
• Planning
– Includes defining goals, establishing strategy, and
developing plans to coordinate activities
• Organizing
– Includes determining what tasks
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

1–84
 Management Process
• Leading
– Includes motivating employees, directing the
activities of others, selecting the most effective
communication channel, and resolving conflicts
• Controlling
– The process of monitoring performance,
comparing it with goals, and
correcting any significant
deviations

1–85
 The Systems Approach
• Defines a system as a set of interrelated and
interdependent parts arranged in a manner
that produces a unified whole
– Closed system : a system that is not influenced by
and does not interact with its environment
– Open system: a system that dynamically interacts
with its environment
– Stakeholders: any group that is affected by
organizational decisions and policies
1–86
The Organization and
its Environment

1–87
 The Contingency Approach
• The situational approach to management that
replaces more simplistic systems and
integrates much of management theory
• Four popular contingency variables
– Organization size
– Routineness of task technology
– Environmental uncertainty
– Individual differences

1–88
UNIT 1: Introduction to Management

8
Social Responsibility of Managers
and Ethics in Managing.
 Corporate social responsibility (CSR)

• Obligation toward society assumed

by business.
 Corporate Social Responsibility
• Economic responsibilities
– Produce goods and services that society wants at
a price that perpetuates the business and satisfies
its obligations to investors.
• Legal responsibilities
– Obey local, state, federal, and relevant
international laws
 Corporate Social Responsibility
• Ethical responsibilities
– Meeting other social expectations, not written as
law.
• Philanthropic responsibilities
– Additional behaviors and activities that society
finds desirable and that the values of the business
support.
Pyramid of Global Corporate Social
Responsibility and Performance
 Contrasting Views
First - holds that managers act as agents for
shareholders and, as such, are obligated to
maximize the present value of the firm
Second - managers should be motivated by
principled moral reasoning
 CSR as Competitive Advantage
• Profit maximization and corporate social
responsibility used to be considered
antagonistic, leading to opposing policies; the
two views can converge
• Recent attention has also been centered on
the potential competitive advantage of
socially responsible actions
 Business ethics

• Ethics-system of moral principles- a sense of

right and wrong, and goodness and badness
of actions and their motives and
consequences
 Sources of ethics

religion

Legal system BUSINESS ETHICS culture

 Managing ethics

Ethics
Top management Code of ethics committees

Ethical behaviors

Training
Ethics audit Ethics hotline
programs
 Ethical Behavior
• Ethics
– The system of rules that governs the ordering of
values
• Values
– Terminal
– Instrumental
• Perspectives
– Individualism
– Utilitarianism
– Moral-Rights
– Justice
Telling the Truth and Lying: Possible
Outcomes
 Personal Ethics
• Most of us believe we are ethical but most
have unconscious biases that favor ourselves
and our own group
• Managers often:
– Hire people who are like them
– Think they are immune to conflicts of interest
– Take more credit than they deserve
– Blame others when they deserve some blame
themselves
 Is it ethical to:

• Shop online during company time?

• Using office equipment for personal use?
• Read personal emails while at work?
 Cultural Issues and Ethics
• Dimensions of justice perceptions
– Procedural
– Distributive
– Interactional
• Cultural Relativism
• Universalism
• Ethical Imperialism
 Ethical Systems
• Moral philosophy
– Principles, rules, and values people use in deciding
what is right or wrong
• Universalism
– The ethical system stating that all people should
uphold certain values that society needs to
function.
 Ethical Systems
• Egoism
– An ethical system defining acceptable behavior as
that which maximizes consequences for the
individual
• Utilitarianism
– An ethical system stating that the greatest good
for the greatest number should be the overriding
concern of decision makers.
 Ethics Systems
• Relativism
– Philosophy that bases ethical behavior on the
opinions and behaviors of relevant other people
• Virtue ethics
– Classification of people based on their level of
moral judgment.
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