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Taiz master program Engineering & Management Course Strategic managementStrategic position (ECS adapted)

Lecturer : John L Simonswww.jlsimons.orgj.l.simons@rug.nl

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Learning Outcomes (1)

Identify the components of the governance chain of an organisation

Understand differences in governance structures across the world and the advantages and disadvantages of these

Identify differences in the corporate social responsibility stances taken by organisations and how ethical issues relate to strategic purpose

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How about our ethics ?

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Learning Outcomes (2)

Undertake stakeholder analysis as a means of identifying the influence of different stakeholder groups in terms of their power and interest

Consider appropriate ways to express the strategic purpose of an organisation in terms of statements of values, vision, mission, or objectives

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Exhibit 4.1 Influences on Strategic Purpose

Strategicpurpose

Governancestructure

Socialresponsibility

and ethics

Stakeholderexpectations

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What are Stakeholders?

Stakeholders are those individuals

or groups who depend on an

organisation to fulfil their own goals and on

whom, in turn, the organisation

depends.

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What is Corporate Governance?

Corporate governance is concerned with the structures and

systems of control by which managers are held accountable to those who have a legitimate stake

in an organisation.

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Exhibit 4.2 The Chain of Corporate Governance

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Issues Highlighted by the Governance Chain

To whom are executives responsible?

Who are the shareholders?

What is the role of institutional investors?

What means of scrutiny and control exist?

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Reasons for Imperfect Operation of the Governance Chain

Lack of clarity on end beneficiaries Unequal division of power Different levels of access to inform Self-interest among agents Measures and targets reflect agent self-

interests rather than those of end beneficiaries

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Exhibit 4.3 Benefits and Disadvantages of Governance

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Guidelines for Boards

Operate independently of management (no old boys networking)

Be competent to scrutinize the activities of management

Have time to do job properly Behave appropriately given expectations

for trust, role fluidity, collective responsibility, and performance

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Ownership Choices

Private or public ownership of equity

Sale of all or part

Acquisition

Mutual ownership and partnership

Privatisation

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What is Corporate Social Responsibility?

Corporate social responsibility (CSR) is concerned with the ways in which an organisation exceeds

its minimum obligations to stakeholders specified through

regulation.

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Stances on Social Responsibility

Laissez-faireEnlightened self-interest

Forum for stakeholderinteraction

Shaper of society

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BP and The Gulf Disaster

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Exhibit 4.6 TI’s Approach to Ethics

Is the action legal?Does it comply

with values?

Will you feel bad?How would it

look in newspaper?

Do you know it is wrong?

Are you sure?

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Exhibit 4.7 Stakeholders of a Large Organisation

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What is Stakeholder Mapping?

Stakeholder mapping identifies stakeholder expectations

and power and helps in understanding political priorities.

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Exhibit 4.9 The Power/Interest Matrix

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Questions Addressed with Stakeholder Mapping

In determining purpose and strategy, which stakeholder expectations need to be most considered?

Do the actual levels of interest and power reflect the corporate governance framework?

Who are the key blockers and facilitators of strategy?

Is it desirable to reposition certain stakeholders? Can level of interest or power of key stakeholders

be maintained?

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What is Power?

Power is the ability of individuals or groups to persuade, induce, or

coerce others into following certain courses of action.

Different from management ???

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Sources of Power Within Organisations

HierarchyInfluence

Control of strategic

resourcesKnowledgepossession

Control of human

resources

Involvement

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Sources of Power For External Stakeholders

Control of strategic

resources

Knowledgepossession

Informal linksto internal

power

Involvement

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Indicators of Power For Within Organisations

Status

Symbols

Representation

Resourceclaims

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Indicators of Power For External Stakeholders

Status

Symbols

Negotiatingarrangements

Resourcedependence

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Organisational Purposes

Values Mission statement Vision statement Objectives

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What are Core Values?

Core values are the underlying principles that guide an organisation’s strategy.

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What are Mission and Vision Statements?

A mission statement provides employees and stakeholders with clarity

about the overall purpose of the organisation.

A vision statement is concerned with what the organisation

aspires to be.

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Mission and Vison in practice

Find on the net the mission and vision of A yemeni firm A US or UK firm A multinational

Do they underline this difference in mission and vision ?

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What are Objectives?

Objectives are statements of specific outcomes

that are to be achieved.

Objectives must be measurable. Compare with course objectives !!!

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Chapter Summary (1)

The purpose of an organisation will be influenced by expectations of shareholders

Governance chains reveal the links between ultimate beneficiaries and management

The shareholder model and the stakeholder model are the two generic governance systems

Stakeholder analysis reveals the influence of different stakeholders

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Chapter Summary (2)

Ethical dimensions of organisational purpose are expressed via organisational approach to corporate social responsibility as well as by individual resolution of ethical dilemmas

Managers must decide how the organisation should express its strategic purpose through values, vision, mission, and objectives

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Case Example: Product Red and Gap (1)

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Case Example: Product Red and Gap (2)

(Red) was created by Bono and Bobby Shriver, Chairman of DATA, to raise awareness and money for The Global Fund.

It seeks to do so by teaming up with the world’s most iconic brands to produce Red-branded products, a percentage of which is then given to the Fund.

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Case Example: Product Red and Gap (3)

Gap is a brand participant. It seeks to provide responsible sourcing of its products, some of which are produced in Red beneficiary areas.

In contrast, an article in The Times criticised the promotion of shopping as a response to societal issues, further asking whether this was a good use of shareholder funding.

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Case Example: Product Red and Gap (4)

What is the rationale of the founders of Product Red?

What views might shareholders of Gap have of Product Red?

Is Product Red an appropriate corporate activity?

Apply a stakeholder analysis to assess how you could convince management of another company to join this initiative.