BUSINESS AND SOCIETY
By the end of this lesson, you should be able to:
- Understand the organization as a system and its various
- Understand organization-environment interface and adopt strategies to deal with the
- Understand the basic nature of the organization by defining and classifying it.
Changing concept and objectives of business.
Setting of organizational objectives is the starting point of managerial actions. Since organizations are deliberate and purposive creations, they have some objectives; the end results for which they strive. These end results are referred to as mission, purpose, objective, goal, target, and etc. many times, these terms are used interchangeable as all these denote end results. However, there are differences in the context in which these are used.
The mission of an organization has external orientation and relates the organization to the society in which it operates. A mission statement helps the organization to link its activities to the needs of the society and legitimize its existence. As opposed to the mission, objectives of an organization are precise and are used to specify and end results, which an organization wants to achieve.
Objectives and goals are the end results, which an organization strives for. Since there may be different ways be different ways in expressing end results like market leadership (a qualitative measurement), or a certain percentage of increase in sales in a particular year (a quantitative measurement), the question is: for which result the term objectives should be used and for which result the term goal should be used. This problem arises because these two terms are used in a variety of ways; many of which are conflicting.
According to Ackoff, “Desired states or outcomes are objectives. Goals are objectives that are scheduled for attainment during planned period.
Elements of goals
To make sense in planning, we need to set specific, measurable goals with realistic and achievable deadlines. Goals are important for at least four reasons:
- They provide a sense of direction.
- They focus team efforts.
- They guide plans and decisions, and
- They help in evaluating progress.
The need to develop management as a separate study came as result of the increasing size of business and the undertakings since the later part of the nineteenth century. At first there were only two divisions, capital and labor. The owner, who provided the physical and financial resources to promote industrial and commercial activity, was also the one who managed the enterprise, decided policy and directed the human and physical resources under his control to attain his objectives. His undertaking failed or flourished according to his business acumen, management flair or expertise. The attribute of management ability was looked upon as natural talent and no training was expected or available except through experience on the job.
In the smaller enterprises, the owner was an active member of the working team as, of course, he is today. In the larger enterprise the owner was normally present to oversee the diligence of his senior staff that might or might not, have been called managership. What training they received was at his hands, in his example and to his pattern.
However, the rapid development of the joint-stock company and the increasing size of the capital investment required to operate competitively in the face of ever more complex manufacturing and other techniques eventually led to the position where the true owners of an enterprise were not personally involved in its management. These owners – shareholders – who invested in large undertakings did not do so because they had personal interest in the technical activities of their firms, nor because they thought they saw a need in the market that could be fulfilled to some to some advantage to themselves: these attributes are the preserve of the entrepreneur and the real merchant adventurer. The modern investor is almost entirely interested in the financial returns that this capital will bring, either by way of income or by way of capital growth. In fact, unless the firm is being grossly mismanaged, the average shareholder has only on chance a year to influence his firm’s affairs, and that is at the Annual General Meeting (AGM).
Thus, professionalism in management is here with and it gives the owners of business firms the best option of conducting their business activities.
Managing a business is no longer just a matter of intuition or family ability. It has now come to be studied and taught as a subject by itself.
Fig… The structure of modern management
Social and ethical issues of business
Social responsibility of managers particularly in business organizations has, of late, been one of the most talked about and widely supported subjects.
Traditionally, business’s basic objective has been defined in terms of profits maximization. The first break came in the 1930s when the view was advanced and accepted that managers of large organizations must make decisions, which maintain an equitable balance among the shareholders, employees, customers, suppliers and general public. Managers were considered trustees for these interests. Such a view was later developed as the social responsibility.
Thus, social responsibility refers to the intelligent and objective concern for the welfare of society that restrains individuals and corporate behavior from ultimately destructive activities, no matter how immediately profitable, and leads in the destruction of positive contribution to human betterment, variously as the later may be defined.
Social responsibility requires the identification of various interest groups, which may affect the functioning of a business organization and may also be affected by its functioning. Normally various group associated with a business organization are shareholders, workers, customers, creditors, suppliers, government and society in general. The management owes responsibilities towards all these groups. Therefore, management should show a standardardized norm of behavior. However, the standard norm of behavior may not be universal. We are more concerned with Kenyan situation while prescribing the norms of behavior in respect of fulfilling obligations various interest groups.
The arguments of those who argue that business organizations have to do with social responsibility except the maximization of shareholders’ wealth are weak on two points.
- First, they overstate the trend and ultimate magnitude of business’s voluntary assumption of social responsibility.
- Second, they want business organizations to do something they cannot do and, that is, to ignore societal demands on them.
In fact, no business can survive for long in total disregard to its social concern. Many forces will come in its way to destroy it. Therefore if business is involved in making profit, it is done through creation of utility to the social needs. The society is not substituting one set of expectations for another. Rather, it is broadening the standards by means of which corporate performance is to be judged.
The correct position is according to the second figure above. What the figure shows is that although there may be some clearly distinct economic versus social concerns, there is a rather broad area in which economic and social concerns are consistent with one another. It is the corporate activities that fall into this overlapped area that the more realistic view of social responsibility. Therefore, the issue is not whether business has social responsibility; it has. The fundamental issue is to identify this responsibility in general and for individual company in particular.
In order to make social responsibility operational, other than the managers accepting that they are socially responsible, the following should be in place:
- There should be commitment from top management;
- Policies should be developed to undertake social responsibility programs;
- The implementation of the policies should become a part of day-to- day routine decision-making process throughout the organization;
- Finally, creation of performance measurement systems which would assist managers.
- by setting specific goals to which to attend.
Besides the social issues in management process are equally important particularly in the contemporary society. Ethical issues are in the form business ethics. Since professionals run businesses, this has the form of professional ethics.
The world of business is quite broad and its outer edges spread into a number of areas in the larger sphere of business-society relationships. The social responsibility of business, for instance, involves ethics. All individuals, whether in business or non-business activities, are concerned with some standardized form of behavior, commonly known as ethics.
However, business ethics are filled with abstractions and precepts very difficult to apply with certainty to many business problems.
The business ethics relate to the behavior of a businessperson in a business situation. They are primarily concerned with the impacts of decisions on people, within and without the organization, individually and collectively in communities or other groups. They are concerned with actions measured by ethical rules, as contrasted with strictly economic or financial rules. Business ethical behavior is conduct that is fair and just over and over the various rules and regulations. It is always ethical for the businessperson to obey the laws even though he may personally believe them to be unjust or immoral. If he feels that the laws are unjust, he can seek remedy through proper procedure and not through disobedience of the same.
Human values are the core of ethical or unethical behavior. Values are convictions and a frame of philosophy of an individual on the basis of which he judges what is good or bad, ethical or unethical, desirable or undesirable. Rokeach, a noted socio-psychologist, has defined values as “global beliefs that guide actions and judgment across a variety of situations” in the same context, Sumantra Ghoshal has observed that:
Worldwide, managers are recognizing that while processing reengineering, financial restructuring and strategic repositioning are important means to corporate renewal, the bedrock of competitiveness ultimately lies in the behavior of people. To stimulate initiative, trust, commitment, and cooperation within the organization and its external relationships, to-level managers are increasingly recognizing that the shaping and embedding organizational values are perhaps their most important challenges.
Corporate governance is the newly introduced system of managing a company in the best interest of all its stakeholdership. It is a system by which companies are directed and controlled based on code for good corporate practices. This is necessary because the company laws, which prescribed a company can be managed, only prescribe procedural matters and penal provisions if any offence is committed in the form of non- conformity to these procedures. These do not prescribe good corporate management practices. Code of corporate governance prescribes such practices.
Business and culture
Social and cultural environment is quite comprehensive because it may include the total social factors within which an organization operates. In fact, the political and legal environment is closely intertwined with social pressures and problems. The social cultural environment of business can be defined as follows:
Social cultural environment consist of attitudes, beliefs, desires, expectations, education and customs of the society at a given point of time.
Thus social and cultural environment, in its broad sense, includes many aspects of society and its various constituents. From business organization’s point of view, it may include:
- Expectations of the society from the business;
- Attitudes of society towards business and its management;
- Views towards authority, structure, responsibility and organizational positions;
- Views towards achievement of work;
- Views towards customs, traditions, and conventions;
- Class structure and labor mobility; and
- Level of education.
Technological development and social change
Technological environment refers to the sum-total of knowledge providing ways to do things. Technological development is important for business as it affects the type of conversion process that it may adopt for its purpose. It may include rate of technological changes, state of technology, and organizations’ approach to technological development, i.e., designing, producing and distributing products. A given technology affects an organization in the way it is organized and faces competition. Petrov has analyzed the strategic implications of technological environment as follows:
- It can change relative competitive cost position within a business;
- It can create new markets and new business segments; and
- It can collapse or merge previously independent business by reducing or eliminating their segment cost barriership.
In analyzing technological environment, the organization may ask the following questions:
- What is the level of technological development in the country asa whole and specific business sectors?
- What is the pace of technological changes and technological obsolescence?
- What are the sources from which technology can be required?
- What are the restriction and facilities for technology transfer and time taken for absorption of technology?
The study of culture is the study of all aspects of a society – its language, personality, laws, and customs – which give that society its distinctive character and personality. Its impact on the society is so natural and so ingrained that its influence on behavior is rarely noted. Yet culture offers orders, direction, and guidance to members of society in all phases of human problem solving. Culture is dynamic, and gradually and continually evolves to meet the needs of society.
All said and done, it is important to note that, much as culture is dynamic in the sense that it changes, the rate at that is very slow. This is a fact that managers must recognize and appreciate if they have to be effective in respect to cultural issues. The other variables in the business environment tend to change faster which in most cases becomes a course for discomfort on the part of managership. Policy guidelines in respect cultural issues should be clear and supportive to management.