Strategically Minded

Month: December, 2011

The 21st Century Organisational Paradigm

Table taken from “Managing change to win in today’s global village”, 5 & 6 February 1999.

20th Century 21st Century
Stability and Predictability Discontinous change, continuous improvement
Size and scale Speed and responsivness
Top-down “command and control” Empowerment; leadership from everybody
Organisational rigidity “Virtual” organisations, permanent flexibility
Control by rules and hierarchy Control by vision and values
Information closely guarded Information shared
Rational, quantitative analysis Creativity, intuition
Need for certainty Tolerance of ambiguity
Reactive; risk-averse Proactive; entrepreneurial
Process driven Results driven
Corporate independence and autonomy Interdependance; strategic alliances
Vertical integration “Virtual” integration
Internal organisational focus Focus on competitive environment
Consensus Constructive contention
Domestic market orientation International focus
Competitive advantage Collaborative advantage
Sustainable competitive advantage Hyper-competitive, constant reinvention of advantage
Competiting for todays market Creating tommorrow’s markets

The shift in paradigm fits a lot with other work stipulating the rise of the knowledge economy. How the organisations of the future will be very different from those of the past. Where reliance on human capital will be key to ensuring that your firm stays current in the race for competitive advantage, or as the table mentions is an environment of hyper-competition where firms are required to constantly reinvent advantage. This fits with “Blue Ocean Strategy” where you have to constantly compete by inventing market space, where innovation and risk-taking is valued.

This paradigm is visible in the technology sector, however, has it made inroads into more conventional sectors. I would argue that it has. GE now does local research in places like India and China, and the stripped down products are sold across the world as they provide greater value. Companies like 37signals which started life as a web design firm is now one of the most competitive web applications firms in the world, and according to founders’ book Rework had only 16 employees in 2 different continents who managed a company which made multi-million dollar profits annually.

Corporate Social Responsibility and Ethics

Summary of the chapter called “Corporate Social Responsibility and Ethics” in Barbara Parkers 2005 textbook “Introduction to Globalisation and Business”

CSR

CSR initiatives are argued for not just because of your philanthropic tendencies, but because studies have shown that CSR activities:

  • are important to the western public (The public’s view, 2002)
  • help attract, retain and motivate employees (Lewin and Sabater, 1996)
  • correlate to business performance if the firm pursues the triple bottom line (Green in good, 1999)

Firms attitude towards CSR can be plotted on a continuum:

  1. Maximise firms profits to the exclusion of all else
  2. Do what it takes to make a profit, skirt the law, fly below the radar
  3. Fight social responsibility initiatives
  4. Comply: do what is legally required (Friedman’s view)
  5. Do more than what is required (philanthropic giving)
  6. Articulate social value objective
  7. Integrate social objective and business goals
  8. Lead the industry and other businesses with best practices

After you get away from the Friedman view that, the business of business is to yield profits legally, than the continuum states the next stages of CSR activities start from Philanthropic Giving and advancing all the way to leading the industry with best business practices.

This process starts first by doing a little more than legally required by the law or “Philanthropic Giving”. Here many business engage with charitable causes to donate funds or time to helping them achieve their objectives. This can be achieved strategically as well by giving to a charity which aligns with your own strategies e.g. Avon “the company for women” donates funds to breast cancer research.

The next step involves articulating the firms social objectives which outline the ‘why’ and ‘how’ of CSR activities the firm will engage in.

Then we rise up to the point where we marry our social objectives with our business goals. The three ways of doing this is by:

  1. Engaging with stakeholder – follow the Clarkson Principles of Stakeholder Management
  2. Cause-related marketing to help change the companies perception in the minds of consumers favourably
  3. Cause-base partnership (CBP) – where businesses and not-for-profits partner to address social problems

The final step in the CSR continuum is to lead the industry with CSR best practices. This step involves leading the world in human right initiatives and stake the firms reputation its ethical and moral code. Prominent examples include The Body Shop which was founded by Anita Roddick and takes great care in ensuring its products provide no harm to the environment, and its suppliers are treated fairly.

Ethics

The ethical values of an organisation are shaped by many factors. In the domestic environment where the firm in based the ethical values are a function of the national culture. The national culture influences the organisations ethical responsibility, however it is not the only factor. Managers have a very strong influence on the eventual outcome of the firms ethical code, and any negative behaviour on their part can have strong and lasting effect on this within the organisation.

When a company moves into new markets abroad, it is faced with the challenge of adapting its ethics to the local context (ethical relativism) or to enforce its values (ethical absolutism). This occurs because the chances of your ethical values being present within an international setting are small due to national differences.

Ethical absolutism or ethnocentrism where the home-culture is ‘right’ and the host-culture ‘wrong’ can create conflicts within the local staff and lead to resentment of the parent company.
Ethical relativism however, is closer to to the “when in Rome, do as the Roman do” cliché. With relativism corporate conduct is tailored to the specific and unique situation often found in each country. However, this form of adaption also has its own set of problems:

  • employees being unable to substitute one set of values for another
  • managing the rules set for each country will result in a greater burden on compliance

Parker goes on to state that adaption is possibly best suited when home and host cultures are similar.

Ethics in a global context to be continued