Business, Society and the Environment

Session 3

Management: Environmental Issues

By Paul Gauci

Environmental Influences on the Firm

Legal Factors E.g. Employment Acts; Financial Services Act

Ethical Factors E.g. Relationships with customers; Shareholders;

Employees and Suppliers

Political Factors E.g.Government Policies, Privatization, Single European

Market, Globalization.

Economic Factors

External: E.g. state of bank’s markets, competition, trade, purchasing power, transition from manufacturing to services industries

Internal: E.g. trend of specialization and centralized processing, decentralization of services, cost cutting measures and redundancies, widespread role of IT, flexible working

Social Factors E.g.

Role of banks in country.

Changing patterns in population distribution (aging)

Role of woman employees

Values and attitudes

Social responsibility and pricing strategies.

Profit maximisation (shareholder interest) vs maximum social contribution (society interest)

Focus on ‘accountability’ view

Ethical issues, code of practice, customer charters, dilemma: procedures vs ‘quality’ service

Four Interrelated approaches to Organisational Effectiveness:

Technology Factors E.g.

Impact of IT during last two decadesIT and job design; work processes; and business

process re-engineeringDemand for specialist staff (knowledge workers)Creation of IT based products and servicesImprovement of internal communication

Competition

Existing players who provide similar services and can launch, in response to a new product, an imitation just days later.Niche players who provide a restricted range of

services and can act as strong competitors in those specialist areas.Non-financial companies who have diversified and

offer restricted financial services, e.g. unit trusts, personal loans, credit cards, etc.Foreign banks; emerging role of building societies and

new players like retail organizations

Example: UK Banks have responded by:

Extending into the overseas market, particularly Europe;

Offering a wider range of investment services;Offering share dealing services;Developing mortgage lending business;Developing accountancy services;Developing insurance services;

Marketing and providing services geared to different customer needs: pensioners, women, students etc.

Using more sophisticated customer information services;

Making premises more user friendly.

The amount of competition has also led to stringent efforts to control costs, thereby trying to maximize profitability and competitive pricing.

It has also led to changes in structure, for example the retail/corporate split, the geographic or relationship/transaction split.

TheOrganisation

The Micro-environmentSuppliers

Competition

Labour & Industrial Relations

Customers

Finance

Local Community

The Macro-environment Political

EconomicalTechnological

Social

The Organisation – Its Environment

The Environment of Business

The distinction between macro-environment and the

micro-environment the two is significant – firms have

little or no control over their macro-environment yet

by their actions may affect, or be affected by their

micro-environment.

THE SOCIALLY RESPONSIBLE FIRM

EMPLOYEE RELATIONS

Employee education and training.The working environmentAttitudes to disadvantaged groups

CONSUMER PROTECTION

Product SafetyMisleading AdvertisingConsumer complaintsAfter-sales service

THE ENVIRONMENTCommunity InvolvementPollutionPolitical contributionsRelationships with other firmsAvoid dealing with certain productsAvoid dealing with certain countries

FINANCIAL OPENNESS

Bribery and corruptionExecutive pay and compensationCompany ownership and controlaccounting policiesPresentation of information

Approaches to Ethics ManagementCharacteristics of Compliance Strategy

Vision Conformity to imposed standards

Objective Prevention of Criminal Misconduct

Leadership Lawyer Driven

Methods Education, reduced discretion, auditing and controls and penalties

Characteristics of Integrity Strategy

Vision Self -governance according to chosen standards

Objective Enable responsible conduct

Leadership Management driven

Methods Education, leadership, accountability, organisational systems and decision processes auditing and controls, and penalties.

Source: Adapted from Paine, L.W. Managing for organisation integrity. Harvard Business Review, March-April, 1994, 113.

Tomorrow’s Company in Action

Customers

Suppliers

Employees

Investors

Community

C

O

M

P

A

N

Y

WIN -WIN

RELATIONSHIPS

Managers’ Agenda

1 Purpose Purpose Do we articulate the company’s

purpose consistently? Does the company’s purpose serve to inspire commitment.

2 Values Are we clear and consistent about values? Are

those values explicit? Do we practise what we preach on openness, fairness and diversity?

Managers’ Agenda

3 Success model Can we articulate the company’s success model to

key groups? Can they describe the model to us? Do they understand their part in adding value to business?

4 Leadership How successful are we in gaining the commitment

of those whose contribution is crucial to the sustainable success of the business? How do we know about their level of commitment?

Managers’ agenda

5 Communication and Involvement

Is our communication process aimed at raising levels of understanding on all sides and aligning the interests of those important to the success of the company?

Do we adapt the company as a result of communication? What programmes have we put in place aimed at enhancing the company’s key relationships.

Managers’ agenda

6 Reward system

How do we ensure the company behaves successfully?

Do we use a success language and operate a reward system which encourages behaviours that drive performance?

Managers’ agenda

7 Measurement

Do we have a useful overall measurement of management effectiveness?

Do our measures match our success model?

Do we measure progress in each relationship?

Are we fully reflecting the level of public interest in our business in terms of measuring our licence to operate?

Managers’ agenda

8 Organisation

Does our structure match our sources of success?

Is it flexible enough to adapt to change?

How do we identify organisational barriers to flexibility and to the achievement of our company purpose?

Managers’ agenda

9 Learning Organisation

Do we inspire our people to learn? Is our appraisal system effective in linking personal development and learning with business goals? Do we have a systematic approach to becoming a learning organisation?Do our people have personal development plans? Do we equip our people with transferable skills?

“The best business management is about creating

tomorrow out of today”

Sir John Harvey-Jones