Chap002 bus230


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  • It is important for students to understand the what is ‘legal and what is ‘ethical’ are not necessarily the same thing. Pose some ethical questions for them to consider as they go through the chapter Would you cheat on an exam? Would you lie about being sick to skip work? Would you put extra miles or meals on your expense account?
  • Example Ethics: It Isn’t Just the Big Guys When Enron imploded, the subsequent wave of corporate scandals confirmed the cynical suspicion of unethical behavior Small Businesses, often overlooked, are not angels Simple theft, one or two bad managers, hiring unqualified relatives can all lead to disaster Suggestions for a code of ethics: Review outfit’s ethics Craft a code of conduct Train your people Solicit feedback Talk about ethics and network with ethical people
  • Culture in a small business is many times set by the owner and grows stronger as the business matures. Thus, it is very important early on to set the right tone.
  • The four elements are each discussed on a further slide.
  • The old saying is “Do as I say- not as I do” This does not work when running a small business. Employees will follow the examples set by the owner whether it is coming back late from lunch, taking personal calls, playing computer games during working hours, or other potentially harmful behaviors. It is important to set clear guidelines by your actions. It is also important to follow those guidelines daily so that they are considered the ‘norm’ by the employees.
  • Oftentimes our actions go unnoticed by others. When promoting a strong ethical culture you cannot afford your attitude and values to go unnoticed. Some ways of making sure your attitudes and values are visible are: Successories posters (values, teamwork, etc.) Sign stating “Customer is always right” Donating to a certain cause, and informing employees about it Publicly thanking employees for ethical actions Your personal values will show through to your employees. Don’t be afraid to display your beliefs in your office, or other appropriate places in the company. Examples Picture of you with family Sponsoring a team for a cancer walk Allowing employees time off for their children’s school events
  • Small businesses have the ability to be very flexible. As a new company you will face many situations for the first time. It is an opportunity to decide how to deal with each new situation. Not all things can be planned for and it is your responsibility to handle unique situations (employee theft)on an individual basis and possibly make a policy for a situation which may arise again (funeral leave).
  • As small companies become successful, large companies take note. If they feel it is a profit worth having, they will engage in competition. Small businesses have the ability to respond quickly due to fewer levels of bureaucracy. Due to fewer resources people in small business are accustomed to finding alternatives and tend to be more creative and innovative out of necessity.
  • First principles : basic ideas about what constitutes right behavior In questionable situations it may be necessary to formally consider the situation and options available. The format for doing this is presented in the next several slides.
  • These four questions are design to start you thinking about your obligations and who is obligated to you. You and your company do not operate in a vacuum. Consider Employees Customers Suppliers The community in which you operate Organizations you support
  • The distributive view is a short term view. It considers a situation as a pie split among people. The more I eat, the less there is for you This is not the best way to run a company if you want to be in business in the long term.
  • The Integrative view involves thinking long term. It has been shown to be a more profitable and positive approach. Steps are outlined on the next slide.
  • Utilitarianism : an ethical model that supports seeking the greatest good for the greatest number of people Universalism : an ethical model that suggests that there is a code of right and wrong that everyone can see and follow Golden Rule : an ethical rule which suggests you treat others in the manner you wish to be treated Billboard principle : an ethical model that asks whether someone would be comfortable having his or her decision and name advertised on a billboard for the public to see
  • While business organizations are the natural place to go for advice, there are many people available at your local college, your church, on your softball team, at your gym, or any other place you spend time, which have valuable information and experience.
  • Chap002 bus230

    1. 1. 2 Small Business Ethics: A Key to Long-Term Success McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
    2. 2. <ul><li>Ethics : a system of values that people consider in determining whether actions are right or wrong </li></ul><ul><li>Ethical Dilemma : a situation that occurs when a person’s values are in conflict, making it unclear whether a decision is the right thing to do </li></ul><ul><li>Unethical behavior in a small business leads to lower sales or even bankruptcy. </li></ul>Chapter 2 2-
    3. 3. <ul><li>Ethics: It Isn’t Just the Big Guys </li></ul><ul><li>When Enron imploded, the subsequent wave of corporate scandals confirmed the cynical suspicion of unethical behavior </li></ul><ul><li>Small Businesses, often overlooked, are not angels </li></ul><ul><ul><li>Simple theft, one or two bad managers, hiring unqualified relatives can all lead to disaster </li></ul></ul>Chapter 2 <ul><ul><ul><li> </li></ul></ul></ul>Example 2-
    4. 4. <ul><li>Trust : a feeling of fairness in all business transactions in which the firm engages, such as financial matters regulatory compliance and complaint resolution </li></ul><ul><li>Personal Accountability : a process in which people take responsibility for the decisions they make and the consequences of those decisions </li></ul>Chapter 2 2-
    5. 5. <ul><li>Organizational Culture : a set of shared beliefs, basic assumptions, or common, accepted ways of dealing with problems and challenges within a company that demonstrates how things get done </li></ul><ul><li>Business start-up is the best time for owners to communicate an ethical culture </li></ul>Chapter 2 2-
    6. 6. <ul><li>When key people behave in a consistently ethical way, employees do, too. </li></ul><ul><ul><li>Small business owners are role models . </li></ul></ul><ul><li>4 Key Elements to an Ethical Culture </li></ul><ul><ul><li>Modeling </li></ul></ul><ul><ul><li>Consistency </li></ul></ul><ul><ul><li>Visibility </li></ul></ul><ul><ul><li>Personal Values </li></ul></ul>Chapter 2 2-
    7. 7. <ul><li>4 Key Elements to an Ethical Culture </li></ul><ul><li>Modeling : when small business owners act in ways they want their employees to act </li></ul><ul><li>Consistency : maintaining of the same behavior, attitude, or values over long periods of time </li></ul>Chapter 2 2-
    8. 8. <ul><li>4 Key Elements to an Ethical Culture </li></ul><ul><li>Visibility : demonstration of a behavior, attitude, or values in ways that are evident to others </li></ul><ul><li>Personal Values : attitudes regarding what a person believes is important in life and best way to live one’s life </li></ul><ul><ul><li>Personal Ethics : beliefs about what is right and wrong which guide decisions in everyday life </li></ul></ul>Chapter 2 2-
    9. 9. <ul><li>Flexibility : the freedom of not having lots of rules, policies, and procedures </li></ul><ul><ul><li>“ First time” situations: small business owners have to deal with these very frequently on start-up </li></ul></ul><ul><li>Small businesses need to be flexible as it grows and runs into new situations . </li></ul><ul><li>Small businesses generally have fewer resources than larger corporations. </li></ul>Chapter 2 2-
    10. 10. <ul><li>Innovation : the creation of something new or trying something for the first time </li></ul><ul><li>Since small business often find a niche of customers that big business has forgotten, it’s easy for that small business to become a target if it becomes successful. </li></ul>Chapter 2 2-
    11. 11. <ul><li>Ethics planning : a process better used to consider issues of right and wrong </li></ul>Chapter 2 2-
    12. 12. <ul><li>Step One: The Four Questions </li></ul><ul><ul><li>Who will be hurt, and how badly? </li></ul></ul><ul><ul><li>Who will benefit, and how much? </li></ul></ul><ul><ul><li>What do you owe others, if anything? </li></ul></ul><ul><ul><li>What do others owe you, if anything? </li></ul></ul><ul><li>Obligations : social force which impels people to act ethically because their actions could affect many other people </li></ul>Chapter 2 2-
    13. 13. <ul><li>Step Two: Creating Options for Action </li></ul><ul><ul><li>Distributive view : an ethical overview which involves thinking of problem solving as a win-lose issue </li></ul></ul><ul><ul><ul><li>Best interest for your business </li></ul></ul></ul><ul><ul><ul><li>Short-term view </li></ul></ul></ul>Chapter 2 2-
    14. 14. <ul><li>Step Two: Creating Options for Action </li></ul><ul><ul><li>Integrative view : an ethical overview which involves considering what is best for everyone involved in a situation </li></ul></ul><ul><ul><ul><li>Best interests of everyone </li></ul></ul></ul><ul><ul><ul><li>Long-term view </li></ul></ul></ul>Chapter 2 2-
    15. 15. <ul><li>Process of Integrative View </li></ul><ul><ul><li>Check for obvious solutions </li></ul></ul><ul><ul><li>Check for creative solutions </li></ul></ul><ul><ul><ul><li>Use as a resource </li></ul></ul></ul><ul><ul><li>Fill in details </li></ul></ul><ul><ul><li>Check for mismatches </li></ul></ul><ul><ul><li>Apply the integrative view </li></ul></ul><ul><ul><li>Make a new list, rank the options, and choose </li></ul></ul>Chapter 2 2-
    16. 16. <ul><li>Step Three: The Ethical Tests </li></ul><ul><ul><li>Utilitarianism </li></ul></ul><ul><ul><li>Universalism </li></ul></ul><ul><ul><li>Golden Rule </li></ul></ul><ul><ul><li>Billboard Principle </li></ul></ul>Chapter 2 2-
    17. 17. <ul><li>The Creation of Social Capital </li></ul><ul><li>Social capital : characteristics of a business, like trust, consistency, and networks, that represent potential social obligations which are an asset of the firm or entrepreneur </li></ul>Chapter 2 2-
    18. 18. <ul><li>Two Ways to Build Social Capital </li></ul><ul><li>Legitimacy : the belief that a firm is worthy of consideration or doing business with because of the impressions or opinions of customers, suppliers, investors, or competitors </li></ul><ul><ul><li>3 Forms of Legitimacy: </li></ul></ul><ul><ul><ul><ul><li>Based on Your People </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Based on Your Product </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Based on Your Organization </li></ul></ul></ul></ul>Chapter 2 2-
    19. 19. <ul><li>Legitimacy Based on Your People: </li></ul><ul><ul><li>Goodwill </li></ul></ul><ul><ul><li>Public recognition </li></ul></ul><ul><ul><li>Product/Service name recognition </li></ul></ul><ul><ul><li>Business Network Membership </li></ul></ul><ul><ul><li>Organizational Size </li></ul></ul><ul><ul><li>Attire </li></ul></ul>Chapter 2 2-
    20. 20. <ul><li>Legitimacy Based on Your Product: </li></ul><ul><ul><li>Customer service </li></ul></ul><ul><ul><li>Quality standards </li></ul></ul><ul><ul><li>Certifications </li></ul></ul><ul><ul><li>Testimonials </li></ul></ul><ul><ul><li>Industry leadership </li></ul></ul><ul><ul><li>Media product/service visibility </li></ul></ul>Chapter 2 2-
    21. 21. <ul><li>Legitimacy Based on Your Organization: </li></ul><ul><ul><li>History </li></ul></ul><ul><ul><li>Hours of operation </li></ul></ul><ul><ul><li>Days of operation </li></ul></ul><ul><ul><li>Legal form </li></ul></ul><ul><ul><li>Physical setting </li></ul></ul><ul><ul><li>Internet identity </li></ul></ul>Chapter 2 2-
    22. 22. <ul><li>Two Ways to Build Social Capital (cont.): </li></ul><ul><li>Social network : the entrepreneur’s set of relationships and contacts with individuals and institutions </li></ul><ul><ul><li>The key is building a network of people who trust you and are willing to help you. </li></ul></ul>Chapter 2 2-
    23. 23. <ul><li>Sources for network connections: </li></ul><ul><ul><li>Family </li></ul></ul><ul><ul><li>Bank </li></ul></ul><ul><ul><li>Customer contacts </li></ul></ul><ul><ul><li>Hobbies </li></ul></ul><ul><ul><li>Business associations </li></ul></ul><ul><ul><li>Other organizations </li></ul></ul><ul><ul><li>Small business support organizations </li></ul></ul>Chapter 2 2-