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Chapter 3 - Management: a Practical Introduction
Prins Of Management (University of Florida)
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Chapter 3: The Environment of Management
3.1 The Goals of Business: More than Making Money
- Triple bottom line: represents people, planet, profit (3 Ps) that measures an
organization’s social, environmental, and financial perfomance
- Social audit: a systematic assessment of a company’s performance in implementing
socially responsible programs, often based on predefined goals
- Millennials and Gen Zers care about the triple bottom line (these workers are ⅓ of US
workforce, 58% by 2029)
- This chapter discusses 2 factors for achieving a meaningful life:
1. Understanding the environment in which a manager operates
2. The ethical and social responsibilities of being a maanger
3.2 The Community of Stakeholders Inside the Organization
- Stakeholders: the people whose interests are affected by an organization’s activities
- Internal stakeholders: consists of employees, owners, and the board of directors
1. Employees
● Today, employees are considered “the talent,” most important resource
2. Owners: all of those who claim an organization as their legal property
a. Sole proprietorship- one person
b. Partnership- two or more people people
c. Private investors- members of a family running a private business
d. Employee owners- more than half owned by employees (ESOP)
e. Stockholders- owning shares of stock
3. Board of Directors: the group of people elected to oversee the firm’s activities
and ensure that management acts in its shareholders’ best interests
● In nonprofits, they are known as the board of trustees or regents
● Set overall strategic goals and make decisions
3.3 The Community of Stakeholders Othe Organization
- External stakeholders: the people or groups in the organization’s external environemnt
that are affected by it; consists of:
1. The task environment: consists of 10 groups that interact with the organization
on a regular basis
a. Customers - those who pay for the organization’s goods or services
● Recall first rule of business- take care of customer
b. Competitors - people or organizations that compete for customers or
resources, such as talented employees or raw materials
c. Suppliers - also known as vendors; people or organizations that provides
supplies (raw materials, services, equipment, labor, energy) to other
organizations
d. Distrubitors - also known as middlemen; people or organizations that help
another organization sell their goods and services to customers
● Ex: publishers of managzines sell via grocery stores, etc, concert
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tickets
e. Strategic allies - describes the relationship of two organizations who join
forces to acheive advantages neither can perform as well alone
f. Employee organizations - includes labor unions, professional
associations, and represent salaried workers
● In the US, the labor force represented by unions is decreasing, but
common in the EU
g. Local community - many organizations rely on the communities for taxes,
they add benefits in the community, etc
● Clawbaks: when the community rescieds the tax breaks on the
organization when they don’t deliver promised jobs
h. Financial institutions - organizations like banks, credit unions, savings and
loans, ertc
● Venture capital: money provided by investors to start up firms and
business with high risk but perceived long term growth potential, in
return for an ownership stake in the company
● Crowdfunding: raising money for a project or venture by obtaining
many small amounts of money from many people using websites
i. Government regulators - regulatory agencies that establish ground rules
under which organizations may operate
j. Special-interest groups - groups whose members try to influence specific
issues, some of which may affect your organization
● May try to exert political infleunce by donating to lawmakers’
election campaign, writing letters, or organizing marches
2. The general environment: also known as the macroenvironment; the set of
board, uncontrollable, forces in the external environment that impact the
organization; includes 6 forces
a. Economic: the general economic conditions and trends (such as
unemployment, interest rates, and the trade balance) that may affect an
organization’s performance
● Unemployment → national unemployment rotate hit 3.5%
in 2019- the lowest in 50 years, and rose to highest since
Great Depression during COVID pandemic
● Trade balance: the difference between the monetary value of a
countries’ imports and exports (trade deficit or surplus)
b. Technological: new developments in methods for transforming resources
into goods or services
● Technology and work arrangements (work from home)
● Technology and automation
c. Sociocultural: influences and trends originating from a country’s, society’s
or culture’s human relationships and values that may affect an
organization or a whole industry; examples include:
● Automotive, tourism, weddings, smoking
d. Demographic: influences on an organization arising from changes in the
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characteristics of a population, such as age, gender, or ethnic origin
● Inerracial marriages increasing, birth rate low, divorce rate down,
support rising for same-sex maeriages, etc
e. Political-legal: changes in the way politics shape laws and laws shape the
opportunities for and threats to an organziation
f. International: changes in the economic, political, legal, and technological
global system that may affect an organization
3.4 The Ethical Responsibilities Required of You as a Manager
- One of a manager’s hardest challenges is managing for ethical standards
- Most ethical conflicts in business are about choosing between economic performance
and social performance
- Ethical dilemma: a situation in which you have to decide whether to pursue a course of
action that may benefit your organzation but that is unethiucal or even illegal
- Ethics: standards of right and wrong that influence behavior (vaires among
countries/cultures)
- Ethical behavior: behavior that is accepted as “right” as opposed to “wrong” according to
prevailing standards
- 6 most common workplace behaviors that are considered ethical misconduct incldue:
1. Conflicts of interest
2. Abusive behavior
● Abusive supervision: occurs when supervisors repeatedly display verbal
and nonverbal hostility toward their subordinates
3. Violations of health and safety regulations
4. Corruption
5. Discrimination
6. Sexual harrasment
- Values: the relatively permanent and deep underlying beliefs and attitudes that help
determine a person’s behavior, such as the belief that “fairness means hiting according
to ability, not family background”
- Value system: the pattern of values of an organization
- 4 approaches to resolving ethical dilemmas
1. Utilitarial approach: guided by what will result in the greatest good for the
greatest number of people
● Drawback of this approach is that it may result in damage to workforce
morale and the loss of employees with experience and skills
2. Individual approach: guided by what will result in the individual’s best long-term
interests, which ultimately are in everyone’s self interest
● Assumption that you act ethically in the short run to avoid others harming
you in the long run
3. Moral-rights approach: guided by respect for the fundamental rights of human
beings, such as those expressed in the US constitution’s Bill of Rights
● Difficult for employer/employee rights like privacy
4. Justice approach: guided by respect for impartial standards of fairness and equity
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- Insider trading: the illegal trading of a company’s stock by people using confidential
company information
- Sarbanes-Oaxley Act of 2002: established requirements for proper financial record
keeping for public companies and penalties of as much as 25 yrs in prison for
noncompliance
- Many universities and graduate schools and teaching ethics in their curriculums
- Workplace cheating: consists of unethical behaviors that result in employees receiving
benefits or advantages to which they are otherwise not entitled
- Kholberger has proposed 3 levels of personal moral development: preconventional
(follow rules), conventional (follow expectations of others), postconventional (guided by
internal values)
- Several ways an organization can promote ethics include:
● Creating a strong ethical climate: employees’ perceptions about the extent to
which work enviomnrments support ethical behavior
● Screening prospective employees
● Instituting ethics codes and training programs
→ ethics code: formal written set of ethical standards guiding an organization’s
actions
● Rewarding ethical behavior
→ whistleblower: an employee, or outside consultant, who reports organizational
misconduct such as health and safety violations, waste, corruption, or
overcharging
● Using a multi-faceted approach
3.5 The Social Responsibilities Required of You as a Manager
- Social responsibility: a manager’s duty to take actions that will benefit the interests of
society as well as of the organization
- Corporate social responsibility: the notion that corporations are expected to go above
and beyond following the law and making a profit
● Environmental, philanthropic, ethical labor practices
- Responsabilities of a corporation (Caroll) should be prioritized as:
1. Be a good global and corporate citizen
2. Be ethical in its practices
3. Obey the law
4. Make a profit
- Not everyone agrees with social responsibilities of a corporation
- Climate change: major changes in temperature, precipitation, wind patterns, and similar
matters occurring over several decades
- Global warming: an aspect of climate change referring to the rise in global average
temperature near Earth’s surface due to increasiongf atmospheric concentrations of
greenhouse gases
- Nature capital: the value of natural resources which humans depend on
- Philanthropy: making charitable donations to benefit humankind
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3.6 Corporate Governance
- Corporate governance: the system of governing a company so that the interests of
corporate owners and other stakeholders are protected
- More attention is being paid to additional trends in board composition:
1. Move towards increasing number of board members who are independent
2. Boards are taking preventative steps to elect members with more varied
backgrounds and skill sets
- CSR contracting: the linking of executive compensation to CSR criteria such as
environmental and social performance
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3.7 Career Corner: Managing Your Career Readiness
Becoming more ethical:
- Reduce your carbon footprint
- Foster positive emotions in yourself and others
- Spend time in nature
- Get the proper amount of sleep
- Increase level of exercise
- Expand your awareness of social realities
- Fulfill your promises and keep appointments
- Avoid people who lack integrity
Becoming an ethical consumer:
- Purhcase fair trade itmes
- Bring your own grocery bags
- Don’t purchase items that aren’t ethically made or sourced
- Don’t buy knockoffs
