PAN African eNetwork Project

Masters of Finance and Control

Organization Theory and management
Ms. Neha Puri

Copyright@ Amity University

LECTURE 2

 Module 2 :- Management in Era of change

 Course Objective:
The objective of this course is to familiarize the
students with theoretical concepts of modern
Economic Analysis so that they can use these as
inputs in Managerial Decision making process.
The emphasis should be laid on the
understanding of key Economic Variables both
at micro and macro levels, which influence the
business operations and strategies of the firm
and business environment under which they
operate.

Contents
1 Multiple stakeholder Relationship
2 Ethics
3 Social Responsibility: - The modern
challenges
4 Values
5 Values & Corporate Culture

 1 Multiple Stakeholder Relationship

Organisation exist because of their ability to create value and
acceptable outcome for various groups of stakeholders,
people who have an interest, claim, or stake in organisation,
in what is does, and in how well performs. In general,
stakeholders are motivated to participate in an organisation if
they receive inducements exceed the value of the
contributions they are required to make. Inducements rewards
such as money, power, and organisational status.
Contributions are the knowledge, and expertise that
organisations require of their members during the
performance.
There are two main groups of organisational stakeholders:
inside stakeholders and outside stakeholders. The
inducements and contributions of each group are summarized
in table given below

 Inside Stakeholders
Inside stakeholders are people who are closest to an
organisation and have the strongest or most direct claim on
organisational resources: shareholders, managers, and the
work force.
SHAREHOLDERS. Shareholders are the owners of the
organisation, and, as such, their claim on organisational
resources is often considered superior to the claims of other
inside stakeholders. The shareholders contribution to the
organisation is to invest money in it by buying the
organisations stock. The shareholders inducement to
invest is the prospective money they can earn on their
investment in the form of dividends and increase the price
of stock. Investments in stock are risky, however, because
there is no guarantee of return.

 One who owns shares of stock in a corporation or

mutual fund. For corporations, along with the ownership
comes a right to declared dividends and the right to vote
on certain company matters, including the
board of directors. also called stockholder.

Shareholders who do not believe that the inducement (the

possible return on their investment) is enough to warrant
their contribution (the money they have invested) sell their
shares and withdraw support from the organisation.

 A mutual shareholder or stockholder is an

individual or company (including a corporation)
that legally owns one or more shares of stock in
a joint stock company. A company's
shareholders collectively own that company and
are the members of the company by signing the
memorandum of association . Thus, the typical
goal of such companies is to enhance
shareholder value.
Stockholders are granted special privileges
depending on the class of stock. These rights
may include:

 The right to vote on matters such as elections to

the board of directors. Usually, stockholders
have one vote per share owned, but sometimes
this is not the case.[citation needed]
The right to propose shareholder resolutions.
The right to share in distributions of the
company's income.
The right to purchase new shares issued by the
company.
The right to a company's assets during a
liquidation of the company

 MANAGERS
Managers are the employees who are
responsible for coordinating organisational
resources and ensuring that an organisations
goals are successfully met. Top managers are
responsible for investing shareholder money in
resources in order to maximize the future output
of goods and services. Managers are, in effect,
the agents or employees of shareholders and
are appointed indirectly by shareholders through
an organisations board of directors to manage
the organisations business.

 Managers contributions are the skills they use to direct

the organisations response to pressures from within and
outside the organisation. For example, a managers skills
at opening up global markets, identifying new product
markets, or solving transaction-cost and technological
problems can greatly facilitate the achievement of the
organisations goals. Various types of rewards induce
managers to perform their activities well:

 monetary compensation (in the form of salaries,

bonuses, and stock options) and the psychological
satisfaction they get from controlling the corporation,
exercising power, or taking risk with others peoples
money. Managers who do not believe that the
inducements meet or exceed their contributions are likely
to withdraw their support by leaving the organisation.
One of the most important interactions between an
organization and the environment is that of information. A
manager who has information about the impending
government legislation which will affect his organization
can suitably modify his decision and avoid costly
mistakes.

 Similarly, a manager who is well informed about his

employees activities, expectations, opinions and
grievances can take corrective action much before a
crisis develops. We now turn our attention to this
information flow and see how best it can be organized
from the managers viewpoint.

 The role played by a manager in a business organization may

be stated as follows.
(i) To Have Contacts:
He has to establish and maintain contacts with many people both
within and outside the business. The persons with whom he has
regular contacts within the organization include his subordinates,
fellow managers and so on. Government officials, suppliers etc., are
the outsiders with whom the manager may have frequent contacts.
(ii) To Supervise:
Every manager has to supervise the work of subordinates while the
latter are doing their work and offer necessary help. Supervision
also needs to be undertaken to ensure that the subordinates do not
waste their time during working hours.

 (iii) To Attain Targets:

Managers may work under pressure most of the time as
they have targets to achieve. This is particularly true in
the case of production and sales managers who are the
line managers.
(iv) To Delegate Authority:
Managers have to get done things by their subordinates.
For this they have to delegate authority to the latter to
enable them to perform the tasks assigned. The
managers must ensure that the authority delegated is
just sufficient to carry out the duties by the subordinates.
If authority exceeds responsibility there may be misuse
of authority. On the other hand, if authority is inadequate,
the subordinates may not be able to carry out the task.

 (v) To Hold Meetings:

Managers, often, may have to hold meetings to put forth their
views before their subordinates. Such meetings are also
necessary to get feedback information from the subordinates on
the progress of their work. Managers of different departments
also may have to meet at regular intervals to secure proper coordination and to review progress.
(vi) To Make Decisions:
Managers also have to make certain routine decisions in
connection with matters pertaining to the daily operations of the
business. Purchase of raw materials, payment of wages,
sanctioning leave to subordinate staff, etc., are examples of such
routine decisions.

 THE WORK FORCE

An organisations work force consists of all non
managerial employees. Members of the work force have
responsibilities and duties (usually outlined in a job
description) that they are responsible for performing. An
employees contribution to the organisation is the
performance of his or her duties and responsibilities. How
well an employee performs is, in some measure, within
the employees control. An employees motivation to
perform well relates to the rewards and punishments that
the organisation uses to influence job performance.
Employees who do not feel that the inducements meet or
exceed their contributions are likely to withdraw their
support for the organisation by reducing the level of their
performance or by leaving the organisation.

 Workforce Management (WFM) encompasses

all the activities needed to maintain a productive
workforce. Sometimes referred to as HRMS
systems, or even part of ERP systems. Recently,
the concept of workforce management has
begun to evolve into Workforce Optimisation.
Specifically, workforce management includes:

Payroll & benefits

HR administration
Time & attendance
Career & succession planning
Talent management and/or applicant tracking
Learning management and/or training
management
Performance management
Forecasting and scheduling
Workforce tracking and emergency assist

 Outside stakeholders
Outside stakeholders are people who do not own the
organisation, are not employed by it, but do have some
interest in it. Customers, suppliers, the government,
trade unions, local communities, and the general public
are all outside stakeholders.
CUSTOMERS. Customers are usually an organisations
largest outside stakeholders group. Customers are
induced to select a product (and thus an organisation)
from alternative products by their estimation of what they
are getting relative to what they have to pay.

 The money they pay for the product is their contribution

to the organisation and reflects the value they feel they
receive from the organisation. As long as the
organisation produces a product whose price is equal to
or less than the value customers feel they are getting,
they will continue to buy the product and support the
organisation. If customers refuse to pay the price the
organisation is asking, they withdraw their support, and
the organisation loses a vital stakeholder. Southwest
Airlines attention to its customers has resulted in their
loyal support.

 The primary purpose of a business is to create a

customer because it is the customer that will
determine the growth potential of a business.
Though, it is imperative to create time and effort
on how you are going to improve your business
and services, it is still the customers that will
dictate the success of your business. So,
customer service is very vital if you want your
business to succeed.

 Customer service is a major factor in making

sure you achieve business growth and success.
It can affect your business positively or
negatively. This is reason why the whole
business plan, marketing strategies, sales and
profit will largely depend on its impact on the
customers. Primarily, you are in business to
generate revenue through selling your products
and services to people who are in need of the
services. All these people want to know if your
products and services will make impact in their
lives and meet their needs.

 To make sure that you generate income for your

business, you must be willing to satisfy the
desires and needs of your customers. Your
whole business is resting on that foundation.
Every decision making must take into
cognisance how it is going to affect the
customers. You should make it a point of duty
ensure that you have an excellent customer
service system.

 SUPPLIERS. Suppliers, another important stakeholder

group, contribute to the organisation by providing reliable
raw materials and component parts that allow the
organisation to reduce uncertainty in its technical or
production operations and thus reduce production costs.
Suppliers have a direct effect on the organisations
efficiency and an indirect effect on its ability to attract
customers. An organisation that has high- quality inputs
can make high-quality products and attract customers. In
turn, as demand for its products increases, the
organisation demands greater quantities of high-quality
inputs from its suppliers.

 Anyone who supplies products into the

Australian market is part of the supply chain,
including manufacturers, importers, wholesalers,
retailers and hire companies.
All parts of the supply chain can contribute to
safety. Each has a role to play in ensuring
products meet safety standards and unsafe
goods do not go on the market. There are
opportunities to make products safer at every
stage of the supply chain including:

design
manufacture
testing
marking
labelling
assembly and instructions for consumer assembly
storage
packaging
marketing
consumer advice

 One of the reasons why Japanese cars remain so

popular with U.S. consumers is that they still require
fewer repairs than the average U.S. made vehicle. This
reliability is a result of the use of component parts that
meet incredibly stringent quantity control standards. In
addition, Japanese parts suppliers are constantly
improve their performance. The close relationship
between the large Japanese automakers and their
suppliers is a stakeholder relationship that pays longterm dividends for both parties. Realizing this, in the last
decade U.S. car manufacturers have also moved to
establish strong relationships with their suppliers to
increase quality, and the reliability of their vehicles has
increased as result.

 THE GOVERNMENT. The government has several

claims on an organisation. It wants companies to
compete in a fair manner and obey the rules of free
competition. It also wants companies to obey agreedupon rules and laws concerning the payment and
treatment of employees, workers health and laws
concerning the payment and treatment of employees,
workers health and workplace safety, nondiscriminatory
hiring practices, and other social economic issues about
which Congress has enacted legislation. The
government makes a contribution to the organisation by
standardizing regulation so that they apply to all
companies and no company can obtain an unfair
competitive advantage.

 The government controls the rules of good business

practice and has the power to punish any company that
breaks these rules by taking legal action against it. Thus
its contribution is to leave a company alone. Sometimes,
however, it may leave companies too alone.

The Govt. forms Industrial policies,provides

infrastructural facilities,provides financial
assistance(both loans n subsidies),provides
training to entrepreneurs n helps in marketing
the product of small n medium sector
enterprises.

 Government frame the policies regarding the business.

Govt make plans, assist businesses by providing
financial aid, technical aid, tax exemptions etc.
Businesses that take a proactive stance toward
understanding and complying with federal regulatory
agencies will minimize their chance of fines, prosecution,
or other regulatory action. Therefore, it is in the best
interest of businesses to maintain healthy relationships
with regulatory agencies at all levels of government.
Among the business activities regulated by government
are competitive practices, industry-specific activities,
general issues of concern, and monetary regulations

 TRADE UNIONS. The relationship between a trade

union and an organisation can be one of conflict or
cooperation. The nature of the relationship has a direct
effect on the productivity and effectiveness of the
organisation and the union. Cooperation between
managers and the union can lead to positive long-term
outcomes if both parties agree on an equitable division
of the gains from an important in a companys fortunes.
Managers and the union might agree, for example, to
share the gains from cost saving due to productivity
improvements that resulted from a flexible work
schedule.

 Traditionally, however, the managements-union

relationship has been antagonistic because unions
demands for increased benefits conflict directly with
shareholders demands for greater company profits and
thus greater returns on their investments. Although trade
unions look after the interests of their members, they
also recognise the advantages of working in partnership
with employers. This is because a successful, profitable
business is good for workers and therefore good for the
union and its members.

 LOCAL COMMUNITIES. Local communities have a stake

in the performance of organisations because employment,
housing, and the general economic well-being of a
community are strongly affected by the success or failure
of local businesses.
THE GENERAL PUBLIC. The public is happy when
organisations do well against foreign competitors. This is
hardly surprising, given that the present and future wealth
of a nation is closely related to the success of its
businesses and its economic institutions. The French and
Italians, for example, are notorious for preferring
domestically produced cars and other products, even when
foreign products are clearly superior. To some degree, they
are induced by pride in their country to contribute to their
countrys organisations by buying their products.

 Typically, U.S. consumers do not support their

companies in the same way. They prefer competition to
loyalty as the means to ensure the future health of
American businesses
A nations public also wants its corporations to act in a
socially responsible way, which means that corporations
refrain from taking any actions that may injure or impose
costs on other stakeholders.

ETHICS
The Advantages of Ethical Behavior

Ethics- the moral values, beliefs, and rules that govern the way
organisational stakeholders should act toward one another- from an
important part of organisations cultural values. In an age when
many different stakeholders scrutinize an organisations action, and
competition is fierce, organisations cannot afford to engage in
actions that will be hurt their reputation. Neither can they allow
employees to take advantage of their position to commit unethical
acts.

 Thus creating an ethical organisational culture is one of

top managements major priorities. Managers create an
ethical culture by making a personal commitment to
uphold ethical values and transmit them to subordinates.
All organisations are expected to develop and follow
ethical values because of the advantages that ethical
behavior confers on an organisation and on society.
Ethical values and rules control self-interested behavior
that might threaten societys collective interests.

 Ethical values establish desired end states for example

equitable or good business practices and the modes of
behavior needed to achieve those end states, such as
being honest or being fair
. Free and fair competition between organisations is
possible only when values and norms constrain people
action in certain situation. It is ethical for a business person
to compete with rival and drive that rival out of business if
the basis for competition is legal. Competition based on
price and quality is legal and ethical. It is not ethical to
compete by shooting a rival, blowing up a rivals factory,
spreading false rumors about competition products, or
stealing information from a rivals organisation.

 Quality and price competition creates value for an

organisations stakeholders and the general public
competition by underhanded means hurts stakeholders
and goes against the public interest. Note that ethical
practices do not ensure that nobody gets hurt the rival
forced out of business does get hurt but the harm done
rival has to be weighed against the gain to consumers.
Ethical values in an organisations culture reduce the
costs people incur in deciding what the right is or
appropriate. By reflexively following an ethical rule,
people spend less time and effort trying to weigh,
measure, or balance, and decide what the right thing to
do is.

 When an organisations behavior follows accepted

ethical rules, the organisation gains a positive reputation
effect. Over time, people will most likely view with
suspicion and hostility an organisation that is known for
engaging in illegal acts. However an organisation that
always follows the rules and is known for its ethical
business practices over and above strict legal
requirements will have a good reputation valuable asset
that makes people want to deal with it. Although
unethical organisations might reap short term benefits,
they are penalized in the long run because eventually
people will refuse to deal with them.

 Why Does Unethical Behavior Occur?

If there are good reasons for individuals and organisations
to behave ethically, why do we see so many instances of
unethical behavior?
Lapses in Individual Ethics
In the theory, individuals learn ethical principles and codes
of morality as they mature. Ethics are learned from family,
friends, religious institutions, schools, professional
associations, and other organisations. From their
experiences, people learn to differentiate right from wrong.
However, imagine that your father is a mobster, your other is
a political terrorist, or your family belongs to a warring ethnic
or religious group. Brought up in such a context, you may
believe that it is ethical to do anything and to perform any
act - including murder -

 perform any act - including murder to benefit

your family, friends, or group. In a similar way,
individuals within an organisation may come to
believe that any action that promotes or protects
the organisation is acceptable, even if it does
harm to others. That sort of thinking prompted
the Beech Nut management team to approve
the sale of sugar water labeled as apple juice.

 Outside Pressure
Many studies have found that the likelihood of unethical or
criminal behavior increases when people feel outside
pressure to perform. If company performance is
deteriorating, for example, top managers may feel pressures
from shareholders to boost performance, and fearful of losing
their jobs, they may engage in unethical behavior to increase
the value of corporate stock. If outside pressures work in the
same direction, it is easy to understand why unethical
organisational cultures develop. Managers at all levels buy
into unethical acts and the view that the end justifies the
means comes to permeate the organisation. As
organisational members pull together to disguise their
unethical action and to protect another from prosecution, the
organisation becomes increasingly defensive.

 The temptation for organisations to collectively engage in

unethical and illegal behavior is very great. Industry
competitors can clearly see the advantages of acting
together to raise prices because of the extra profits they
will earn. The harm they inflict as a result of their
collusion is difficult to see because their customers may
number in the millions. Unethical companies may
rationalize by saving that individual customers are
affected so slightly that they are hardly hurt at all.

 However if every company in every industry behaved

unethically, and if all companies tried to extract money
from their customers, customers would have much less
to spend and the nations economy as a whole would
suffer. Moreover, price fixing results in a misallocation of
societys resources. Companies spend less and less on
improving their products because they have no incentive
to improve them.

 In sum, if an organisations ethics violate

societys ethics are embodied in law; the
organisation is acting illegally and will be subject
to sanction. If organisational ethics violate
generally accepted business and social customs
and practices, organisations may lose their
reputations. Beyond these two limits on ethical
behavior, an organisations ethics are a function
of the moral values of its stakeholders and of the
power of the different stakeholder groups to
impose these values on the organisation

 Creating an Ethical Organisation

An organisation is ethical if the people inside the
organisation are ethical. How can people judge if they
are making ethical decisions and thus acting ethically?
One way is as follows: If a person (a) makes a decision
(or takes an action) that falls within the accepted values
or standards that typically apply in the organisations
environment; (b) is willing to see the decision
communicated to all the parties affected by it for
example, having it reported in newspapers or on
television; and (c) believes that other people with whom
the person has a significant personal relationship, such
as family members, friends, or even managers in other
organisations, would approve the decision, then the
decision is probably acceptable on ethical ground.

 Beyond personal considerations, an organisation can

encourage people to act ethically by putting in place
incentives for ethical behavior and disincentives to
punish those who behave unethically. Because top
managers have the ultimate responsibility for setting
policy, they establish the ethical culture of the
organisation. There are many ways in which they can
influence organisational ethics. A manager outlining a
companys position on business ethics acts as a
figurehead and personifies the organisations ethical
position. As a leader, a manager can promote moral
values that result in the specific ethical rules and norms
that people use to make decisions.

 Out side the organisation, as a liaison or spokesperson,

a manager can inform prospective customers and other
stakeholders about the organisations ethical values and
demonstrate those values through his or her behavior
toward stakeholders such as by being honest and
acknowledging errors.
A manager also sets employees incentives behave
ethically and can develop rules and norms that state the
organisations ethical position. Finally, a manager can
make decisions to allocate organisational resources and
pursue policies based on the organisations ethical
position.

 Social Responsibility The Modern Challenges

According to Keith Davis, Social responsibilities refer to
the businessmans decisions and actions taken to
reasons at least partially beyond the firms direct
economic or technical interest. To quote Andrews, by
social responsibility, we mean intelligent and objective
concern for the welfare of society that restrains individual
and corporate behaviour from ultimately destructive
activities, no matter how immediately profitable and
leads in the direction of positive contribution to human
betterment variously as the latter may be defined.

 The concept of social responsibility is not new.

Although the idea was already considered in the
early part of the 20th century, the modern
discussion of social responsibility got a major
impetus with the book Social Responsibilities of
the Businessman by Howard R.Bowen suggests
that business managers are bound to pursue
those policies, to make those decisions or to
follow those lines of action which are desirable in
terms of the objectives and values of our society

 In other words businesses should consider the social

implications of their decisions. AS one may expect, there
is no complete agreement on the definition of social
responsibility. A survey conducted on the matter revealed
Corporate social responsibility is seriously considering
the impact of the companys actions on society. In a
broad sense, business owes a lot to the various groups
such as customers, employees, shareholders,
government and the community at large in which it
exists. As one argues for business involvement in social
activities, there are also arguments against it, as follows:

Arguments for social involvement of business

1. Public needs have changed, leading to changed
expectations. Business, it is suggested, received its
charter from society and consequently had to respond to
the needs of society.
2. Improvement of the social environment benefits both
society and business. Society gains through better
neighborhoods and employment opportunities; business
benefits from a better community, since the community is
the source of its work force and the consumer of it
products and services.
3. Social involvement discourages additional government
regulation and intervention. The result is greater freedom
and more flexibility in decision making for business.

4. Business has a great deal of power which, it is reasoned,

should be accompanied by an equal amount of
responsibility.
5. Modern society is an interdependent system and the
internal activities of the enterprise have an impact on
the external environment.
6. Social involvement may be in the interest of stockholders.
7. Problems can become profits. Items that may once have
been considered waste (for example, empty soft drink
cans) can be profitably used again.
8. Social involvement creates a favorable public image.
Thus, a firm may attract customers, employees and
investors

9. Business should try to solve the problems which

other institutions have not been able to solve.
After all business has a history of coming up
with novel ideas.
10. Business has the resources. Specifically,
business should use its talented managers and
specialists, as well as its capital resources to
solve some of societys problems.
11. It is better to prevent social problems through
business involvement than to cure them. It
may be easier to help the hard-core
unemployed than to cope with social unrest.

Arguments against social involvement of business

1.. The primary task of business is to maximize profit buy
focusing strictly on economic activities. Social involvement
could reduce economic efficiency.
2. In the final analysis, society must pay for the social
involvement of business through higher prices. Social
involvement would create excessive costs for business, which
cannot commit its resources to social action.
3. Social involvement can weaken the international balance of
payments. The cost of social programs, the reasoning goes,
would have to be added to the price of the product. Thus
American companies selling in international markets would be
at a disadvantage when competing with companies in other
countries which do not have these social costs to bear.

4. Business has enough power and additional social

involvement would further increase its power and
influence.
5. Business people lack the social skill to deal with the
problems of society. Their training and experience is
with economic matters and their skills may not be
pertinent to social problems.
6. There is a lack of accountability of business to society.
Unless accountability can be established, business
should not get involved.
7. There is not complete support for involvement in social
actions. Consequently, disagreements among groups
with different viewpoints will cause friction.

Values
Milton Rokeach, a noted psychologist, has defined values as
global beliefs that guide actions and judgments across a
variety of situations. He further said, Values represent
basic convictions that a specific ode of conduct (or endstate of existence) is personally or socially preferable to an
opposite mode of conduct (or end-state of existence).
They contain a judgmental element, i.e., they carry an
individuals ideas as to what is right, good, or desirable.
Values have both content and intensity attributes. The
content attribute emphasizes that a mode of conduct or
end-state of existence is important. The intensity attribute
specifies how important it is. When we rank an individuals
values in term of their intensity, we obtain the value
system of that person.

Definition of Values for a Company

A value is a belief, a mission, or a philosophy
that is really meaningful to the company. An
example of a business value is: "Customer
Satisfaction." Another example of a value is
"Being Ethical and Truthful." Every company has
one or more values, whether they are
consciously aware of it or not. Another way of
saying it is that a value is a statement of the
company's intention and commitment to achieve
a high level of performance on a specific
QUALITATIVE factor.

 All of us have a hierarchy of values that forms our value

system. This system is identified by the relative
importance we assign to such values as freedom, selfrespect, honesty, obedience, equality, and so on.
Values are so embedded that they can be inferred from
peoples behavior and their perception, personality and
motivation. They generally influence their behavior.
Values are relatively stable and enduring. This is
because of the way in which they are originally learnt.
The values learnt can be divided into two broad
categories: (i) terminal values, and (ii) instrumental
values the person gets the

 Terminal values lead to ends to be achieved,

e.g., comfortable life, family security, self respect
and sense of accomplishment. Instrumental
value; relate to means for achieving desired
ends, e.g., ambition, courage, honesty and
imagination. Terminal values reflect what person
is ultimately striving to achieve, whereas
instrumental values reflect how the person gets
there.

Types of Values
All port and his associates have categorized values into six
types as follows:
Theoretical. Interest in the discovery of truth through
reasoning and systematic thinking.
Economic. Interest in usefulness and practicality, including
the accumulation of wealth.
Aesthetic. Interest in beauty, form and artistic harmony.
Social. Interest in people and human relationships.
Political. Interest in gaining power and influencing other
people.
Religious. Interest in unity and understanding the cosmos

Different people place different importance to the

above six value types. In other words, every
individual has a system of values ranking from
first to sixth. This is very important from the point
of view of understanding the behavior of people.
The fact that people in different occupations
have different value systems has led the
progressive organisations to improve the valuesjob fit in order to increase employee
performance and satisfaction.

Sources of Values
Parents, friends, teachers and external reference
group can influence individual values. Indeed, a
persons values develop as a product of learning
and experience in the cultural setting in which he
lives. As learning and experiences vary from one
person to another, value differences are the
inevitable result. Not only the values but also
their ranking in terms of importance differs from
person to person.

A person learns and develops values because of the

following factors:
Familial factors. A significant factor influencing the
process of socialization of an individual is role of the
family. The child rearing practices that parents use
shape the individuals personality. The learning of
social behavior, values and norms come through these
practices. For example, through reward and
punishment, parents show love and affection to
children, indicating the typical ways in which a child
should behave in difficult conditions.

Social Factors. Of the societal factors, school

has a major role to play in the development of
values. Through discipline in school, a child
learns desirable behaviors important in the
school setting. Interactions with teachers,
classmates and other staff members in the
educational institutions make the child
inculcate values important to the teachinglearning process. Other institutions that may
influence the values are religious, economic
and political institutions in the society.

Personal Factors. Personal attributes such as

intelligence, ability, appearance and
educational level of the person determine his
development of values. For example, ones
higher level of intelligence may result in faster
understanding of values.

Utility of Values in Business:

Values release energy because they motivate people.
Values motivate people to work together collectively.
Values are like ever-receding or never-ending goals. The
higher the values, the more the energy and effort
required to achieve and sustain them. The more you
pursue them, the greater the energy they release and
put into action.
Quality of performance on every job, every activity, and
every act can be accurately assessed in terms of values.

Companies which rated their implementation of

key corporate values the highest also reported
the highest levels of revenue growth and
profitability in their respective industries.
Improving corporate performance on a single value
can virtually transform the way a company
functions.
Values are the most powerful way to release and
harness the company's latent, unutilized
energies for growth.

Benefit of Values
We consider lower costs, more access to
money, better products, more technology, etc.
the key to advancement, profitability, and
success in business. Though these should not
be underestimated, business values -- like
customer delight, deep concern for the well
being of employees, maximum utilization of
resources, innovation, tapping into the emerging
opportunities of society, etc. -- have 10 to 100
times as much power to produce such results.

2.5 Values and Corporate Culture

Corporate culture is the term used to describe a system of
shared values (what is important) and beliefs (how things
work) that create behavioral norms (the way we do
things) to guide the activities of organisational members.
It is believed that strong corporate culture facilitates
higher performance. Thomas J. Peters and Robert H.
Waterman, Jr., authors of In search of Excellence state,
for example: Every excellent company we studied is
clear on what stands for, and takes the process of value
shaping seriously.

As a system of shared values, the corporate culture reflects

a climate within which people value the same things and
apply these values to benefit the corporation as a whole.
One example is the dominate value of customer service.
This value shall help to keep everyone from top
management down to persons on the factory floor pulling
in the same direction. Corporate values may be put in
the form of slogans such as The family Feeling by an
Airline or Quality at a good price by a Pharmaceutical
giant. The strength of such slogans in communicating
values lies in the basic premise that values can influence
behavior. To the extent employees understand and share
corporate values, their behavior should be more uniform
and consistent.

The performance of individuals, group and the

organisation as a whole will increase and benefit
all. The managers who sense compatibility
between their personal values and those of the
organisation experience feelings of success in
their lives, show high regard for organisational
objectives and significant stakeholders, and
have healthy assessment of the values and
ethics of their colleagues, subordinates, and
bosses.

 Big organisations develop different cultures

which have different performance implications.
Organisations with strong cultures that fit the
needs and challenges of the situations survive
and grow while organisations with weak cultures
are phased out. That is why, the study of
corporate culture is important in the field of
organisational behavior. It may be noted that
corporate culture and its companion notion of
shared values are not static concepts. They
could be changed or modified to meet the need
of changing environment.

To fully implement and thus institutionalize a value in a

company the following steps need to all occur:
SELECTION -- Choose the values that you are interesting in
fully implementing in the company.
COMMITMENT -- There needs to be a full commitment to
implement the chosen values. Senior and middle
management, and other employees need to fully commit
to those values; commit to improving performance on
those values.
STANDARDS -- A set of standards for each activity in the
company needs to be implemented for each value.
STRUCTURE -- The company needs to have the right
structure (of job positions, divisions, departments, etc.) to
implement the values.

JOBS, ACTIVITIES & SYSTEMS -- The company must have clearly

defined job positions, activities, and streamlined systems to
facilitate to implement the values. Values need to be incorporated
into every job position, activity, every system. Standard operating
procedures and even individual job position tasks need to be
linked to these values.
EMPLOYEE RESPONSIBILITY -- The responsibility of each person to
implement each value must be clearly defined and understood
(e.g. in their job orientation, in their job descriptions, from their
manager, etc.).
SKILLS -- Everyone must have the skills to achieve high performance
on the values. Everyone must have the skills they need to fulfill
their responsibilities for the value. If necessary, additionall training
should be implemented to upgrade the skills for value
implementation.
For a full explanation of how to go through

Thank You
Please forward your query
To: nehabajaj1984@gmail.com
CC: manoj.amity@panafnet.com

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