Copyright © 2003 by South- Western, a division of Thomson Learning1 Chapter Four The Corporation and Internal Stakeholders Value-Based Moral Dimensions of Leadership. Strategy, Structure, Culture, And Self-Regulation

Copyright © 2003 by South-Western, a division of Thomson Learning2 Chapter Topics 1.Stakeholder management and value- based organizational systems 2.A 10-step assessment of value-based organizational systems and stakeholders 3.Leadership and strategy 4.Culture, structure, and systems 5.Corporate self-regulation: Challenges and issues

Copyright © 2003 by South-Western, a division of Thomson Learning3 Stakeholder Management and Value-Based Organizational Systems An organization’s enacted purpose, values, and mission are central to its internal alignment and external market effectiveness. The stakeholders management approach argues that organizations succeed in market and nonmarket environments through open dialogue and a duty to assist stakeholders. The digital information technology revolution has increased pressure on industries and corporations to question to what extent ethical and stakeholder value-based management principles and practices still work.

Copyright © 2003 by South-Western, a division of Thomson Learning4 Stakeholder Management and Value-Based Organizational Systems The visionary built-to-last companies are premier institutions, widely admired by their peers, and having a long track record of making a significant impact on the world around them. Not all organizations have the characteristics of built-to-last companies, nor would all companies agree with or support some of the ideologies, products, and strategies of visionary firms. Phillip Morris The concept of creative destruction.

Copyright © 2003 by South-Western, a division of Thomson Learning5 Stakeholder Management and Value-Based Organizational Systems Internal organizations are composed of systems and stakeholders, regardless of the nature of external environments. An interesting concept, and counterpart to the creative destruction argument is creative reconstruction. Dot-com survivors The internal dimensions of an organization are illustrated in the diagnostic contingency model in Figure 4.1.

Copyright © 2003 by South-Western, a division of Thomson Learning6 Stakeholder Management and Value-Based Organizational Systems The purpose and core ideology of organizations are modeled by its leaders and embedded in its enterprise strategy. The culture of a company is at the center spoke of the wheel of transformation. The vision and strategy, people, systems, structure, technology, and nature of work comprise the internal operations of the organization. Stakeholder management theory, states that an organization should treat its internal & external stakeholders ethically to be effective with its marketplace communities.

Copyright © 2003 by South-Western, a division of Thomson Learning7 Stakeholder Management and Value-Based Organizational Systems From a stakeholder management perspective, it is the role of an organization’s leaders, with the support of each professional, to ensure that the integration and market effectiveness of a company is based on the types of relationship and values that embody trust, collaboration, and a “win-win” goal for stakeholders and stockholders.

Copyright © 2003 by South-Western, a division of Thomson Learning8 A 10-Step, Value-Based Stakeholder Management Assessment A stakeholder management approach that is value-based is argued to be more effective in implementing organizational change programs that include ethics and compliance training. There are many stakeholder management audits and assessment frameworks. Companies can use management, human resources, and ethics consultants to design and deliver these types of assessments.

Copyright © 2003 by South-Western, a division of Thomson Learning9 A 10-Step, Value-Based Stakeholder Management Assessment The 10-step assessment is as follows: Determine the problem or opportunity and gain top leader support Review and develop the vision, mission, values, and ethics code Use a value-based stakeholder readiness checklist Develop performance and responsibility measures and get feedback Identify stakeholder level of responsiveness and responsibility in the corporate strategy Determine the organization's systems alignment Conduct baseline and gap analysis between current and desired future states Create benchmarks Develop summary report with recommendations Review results

Copyright © 2003 by South-Western, a division of Thomson Learning10 Leadership And Strategy Leadership is a shared process, although the values and behaviors of company founders and CEOs often frame and set the cultural tone for the organizations. A starting point for identifying a leader’s values is the vision and mission statement of a company.

Copyright © 2003 by South-Western, a division of Thomson Learning11 Leadership And Strategy From a stakeholder management, value-based assessment, a CEO and other organizational leaders would demonstrate the following skills: Define and lead the social and ethical, as well as the competitive, mission of organizations Build and sustain relationships with stakeholders Talk with stakeholders, showing interest and concern for other’s need beyond the economic and utilitarian dimensions Demonstrate collaborations and trust in shared decision making and strategy sessions Show awareness and concerns for employees and other stakeholders in the policies and practices of the company

Copyright © 2003 by South-Western, a division of Thomson Learning12 Leadership And Strategy An emerging body of literature and practice describes leadership from a deeper spiritual and value-based perspective. Theological and philosophical literature has helped redefine leadership to include new concepts and vocabulary that capture the human and spiritual domains from which business leaders already work.

Copyright © 2003 by South-Western, a division of Thomson Learning13 Leadership And Strategy Leadership styles: Manipulator Bureaucratic Professional Transforming Seven symptoms of the failure of ethical leadership: Ethical blindness Ethical muteness Ethical incoherence Ethical paralysis Ethical hypocrisy Ethical schizophrenia Ethical complacency

Copyright © 2003 by South-Western, a division of Thomson Learning14 Leadership And Strategy Strategy influences the goals and objectives of the company and its stakeholders. Sets the overall direction of business activities Reflects and models activities that management values and prioritizes Sets the tone and tenor of business activities and transactions inside the organization

Copyright © 2003 by South-Western, a division of Thomson Learning15 Leadership And Strategy Corporations formulate at least four levels of strategies: Enterprise Corporate Business Functional The strategy management process involves: Formulating goals Formulating strategies Implementing strategies Controlling strategies Evaluating strategies Analyzing the environment

Copyright © 2003 by South-Western, a division of Thomson Learning16 Culture, Structure, and Systems A corporation’s culture is the shared values and meanings its members hold in common, which are articulated and practiced by an organization’s leaders. Organizational cultures are: Visible and invisible Formal and informal Organizational cultures can be studied by: Observation Listening to and interacting with people Other ways

Copyright © 2003 by South-Western, a division of Thomson Learning17 Culture, Structure, and Systems Signs of cultures in trouble or weak cultures include: An inward focus A short-term focus Morale and motivational problems Emotional outbursts Fragmentation and inconsistency Clashes among subcultures Ingrown subcultures Dominance of subculture values No clear values or beliefs Many beliefs Different beliefs Destructive or disruptive cultural heroes Disorganized or disruptive daily routines

Copyright © 2003 by South-Western, a division of Thomson Learning18 Corporate Self-Regulation: Challenges And Issues Establishing codes of ethical and legal conduct, implementing stakeholder management assessments, and enacting ethics programs can help a company financially and morally. Ethics codes Value statements that define an organization Ombudspersons and peer review programs To manage the legal and moral aspects of potentially problematic activities Ethics programs Another method for handling moral questions