Business Ethics

The fast growth in science, technology, economy, and politics has made ethics and professional standards an important issue which raises the concerns of the public. Ethics and professional standards refer to how an organization combines its core values with its business policies and practices. Ethics and professional standards form the moral foundation upon which an organization or profession or business builds itself decently. Ethics and standards help a company to grow and generate profits. Different business and professional areas have a code of ethics and standards that guides members to keep the profession in good standings with different stakeholders.

Project management is one of the business areas where ethics is very important. In the business world, the recent high-status corruption cases such as TYCO and Enron have brought the role that ethics plays in business under examination. Dubious dealings are presenting ethical dilemmas to businesses, especially in project management. A good example is where project managers get involved in the negotiation of contracts creating a conflict of interest between them and the stakeholders (Brenner, 2006). The ultimate goal of any business is to make a profit. The businesses, therefore, undertake new projects to expand and earn profit. There are various ethical issues that arise in regard to how businesses manage their projects. The decision to undertake a project by a business affects different stakeholders. Therefore, project managers have to make ethical decisions to ensure that the different stakeholders are not affected negatively. Ethics in project management can be summarized into four main areas, according to the project management institute, which includes accountability, respect, equality, and truthfulness (Project Management Institute). The lack of four values leads to making unethical decisions.

Globalization has brought different economies closer and increased awareness about how ethics in project management may differ from one culture to the next. This introduces new challenges, including ethical and professional dilemmas. However, it does not mean that ethics and professional standards are not applied to different cultures. The business is supposed to conduct its projects with the highest ethical and professional standards to ensure that the different stakeholders are not negatively affected by the project.

For a multinational firm with global projects in different locations across the world located in areas with different cultures, it is not easy to determine which ethics and professional standards are to be applied in each location (Global Infrastructure in the financial crisis). First of all, the company has to undertake the process of understanding the ethical issues the projects are facing in different locations. The company also has to understand the values and viewpoints of different stakeholders in these locations. The understanding can be achieved through a selection of methods such as group discussions and surveys involving different stakeholder groups such as the public, project managers, and the local authority. The company then decides which ethical and professional standards can be used from its own code of ethics and the global best practices in project management (Project Management Institute).

The majority of the ethical dilemmas are not obvious and, therefore, require careful thought first. The multinational firms, therefore, have to address the differences in ethical demands at different locations. This is done in an effort to ensure project managers are able to navigate the murky waters of an ethical issue in project management. Firms take various measures to ensure that the ethical issues are solved to the satisfaction of the stakeholders.

One of the methods that organizations use to solve the ethical dilemma caused by having projects in different global locations is establishing standards of ethics to guide their project managers. Project managers also register as members of project management institute a professional body with its own code of professional ethics. The project managers are required to learn and understand this code. The standards supported by code of ethics of project management institute have been identified as important to ensure the integrity of project management.

Another way that companies try to solve ethical dilemmas is by establishing project management offices. The offices monitor the issues that are driving change within the project management profession. These offices help in improving the project management approaches, harmonize project activities in different locations, and helping in the economical use of resources (Monique, Hobbs, & Müller, 2010).

The other method that companies use to manage the ethical issue in project management is through stakeholder management. Projects have different interest groups, including the clients, customers, and the public. Managing stakeholders is one of the biggest ethical challenges. The project manager should communicate all the information they have straightforwardly and fully to all stakeholders using an understandable language as required by Ethical and professional standards. The stakeholders should be informed swiftly by the project manager when ethical issues arise. The project managers should stay vigilant in order to identify efforts by the interest groups to manipulate their decision making in the wrong or unlawful way (Ferrell, Hirt, & Ferrell, 2009).

In conclusion, ethical and professional practices differ depending on the business profession and location. However, multinational firms should always apply the best practices in project management. The companies should use stakeholder analysis, establishing a code of ethics, and establishing a project management office to address ethical issues in a satisfactory manner.

References

Brenner, R. (2006). Dubious Dealings. Web.

Ferrell, o. c., Hirt, G., & Ferrell, L. (2009). Business: A changing world. New York: McGraw-Hill/Irwin.

Global Infrastructure in the financial crisis. (2008). Web.

Monique, A., Hobbs, B. J., & Müller, R. (2010). Identifying Forces Driving PMO Changes:Summary Report. Web.

Project Management Institute. (n.d.). Project Management Institute Code of Ethics and Professional Conduct. Web.

Summary

Social responsibility is a strategy used by organizations that focuses on fulfilling the economic, legal, ethical, and philanthropic responsibilities expected by its stakeholders (DuBrin, 2009).

Social responsibility has many benefits for both the organization and its stakeholders. Some of these benefits include; enhancement of trust in the company’s stakeholders, nurturing of customer satisfaction, increasing employee commitment, creation of investor loyalty, an increase of company profits, and improvement of the national economy (Debbie, Ferrell & Linda, 2010).

Any company, regardless of its size, can adopt a social responsibility initiative and implement it in order to reap the benefits of having the initiative.

Key Learning Points

• Social responsibility is a strategy used by organizations that focuses on fulfilling the economic, legal, ethical, and philanthropic responsibilities expected by its stakeholders (DuBrin, 2009).
• Social responsibility has many benefits for both the organization and its stakeholders. Some of these benefits include; enhancement of trust in the company’s stakeholders, nurturing of customer satisfaction, increasing employee commitment, creation of investor loyalty, an increase of company profits, and overall improvement of the national economy (Debbie, Ferrell & Linda, 2010).

Relevant Statements

Highly ethical behaviors and socially responsible acts are not always free, but they have a great number of benefits to organizations and their stakeholders.

The relationship between profits and social responsibility works in two ways. More profitable firms can better afford to invest in social responsibility initiatives, and these initiatives, in turn, lead to more profits (DuBrin, 2009).

The research found that levels of corporate social responsibility performance are affected by financial success. The result suggested that financial success creates enough money left over to invest in corporate social performance contributes to improved financial performance as measured by return on assets and return on sales (DuBrin, 2009). The relationship between social and financial performance is a virtuous circle, which means that corporate social performance and corporate financial performance feed and reinforce each other (DuBrin, 2009).

Critical Analysis

Many researchers have demonstrated that there are several benefits that organizations can reap from implementing social responsibility programs (DuBrin, 2009). Some of these benefits include an increase in daily operations efficiency, greater worker commitment, higher product quality, improved decision-making, increased customer loyalty and improved financial performance (Debbie, Ferrell & Linda, 2010).

Trust

Through implementing corporate social responsibility initiatives, organizations can build trust in their stakeholders and their customers. Trust is the glue that holds organizations together and allows them to focus on efficiency, productivity, and profits. According to Stephen R., who is the author of the 7 Habits of Highly Effective people, “Trust lies at the very core of effective human interactions” (Debbie, Ferrell & Linda, 2010). Trust is able to bring out the very best in people so that their competency can rise to the level of trust.

Trust is essential for a company to enable it to nurture a long-term relationship with its customers. A study by Conc-Roper reported that three of four consumers say they avoid or refused to buy from certain businesses (Debbie, Ferrell & Linda, 2010). Poor services and poor business conduct are key reasons why the above behavior can arise (Debbie, Ferrell & Linda, 2010).

Customer Satisfaction

Good corporate social responsibility nurtures customer satisfaction philosophy in organizations. It is widely accepted that customer satisfaction is one of the most important factors for business success (Debbie, Ferrell & Linda, 2010). Through implementing good social responsibility initiatives, a company can nurture a long-term relationship with its customers (Debbie, Ferrell & Linda, 2010). Relationships built on mutual respect facilitates the repeat purchases that are essential for a company’s success (Debbie, Ferrell & Linda, 2010).

In the Conc-Roper national survey of customers’ attitudes, 81 percent of consumers indicated they would be likely to switch to brands associated with a good cause if price and quality were equal (Debbie, Ferrell & Linda, 2010). Irresponsible behavior in companies can trigger a lack of loyalty and refusals to buy. On the other hand, good social responsibility initiatives could draw customers to a company’s products (Debbie, Ferrell & Linda, 2010). For example, many companies use cause-related marketing programs to give part of a product’s sales revenue to a charity that is meaningful to the product’s target market (Debbie, Ferrell & Linda, 2010). This, in return, makes customers prefer buying these products.

Employee Commitment

Employee commitment usually stems from employees who have a strong belief in their future being tied to the organization they are working for (Debbie, Ferrell & Linda, 2010). These employees are usually willing to make personal sacrifices for the organizations.

When a company does not indulge in any social responsibility initiative which directly honors and motivates its workers, employee loyalty and commitment suffer a great deal. A survey by Walker information Global Network done in many parts in the World found that there were low levels of employee loyalty and commitment in many organizations (Debbie, Ferrell & Linda, 2010). The study, which surveyed thousands of employees in 32 countries, revealed that only one in three workers are truly loyal to their organizations (Debbie, Ferrell & Linda, 2010). Employees spend many of their working hours at work; thus, an organization’s commitment to goodwill and respect of its employees usually results in increased employee loyalty and support of the company’s objectives (Debbie, Ferrell & Linda, 2010).

Improved Financial Performance

Social responsibility is positively associated with return on investments, return on assets, and sales growth. A company cannot continuously be socially responsible & nurture and develop an ethical organizational culture unless it has achieved financial performance in terms of profits (Debbie, Ferrell & Linda, 2010).

Various studies have identified a positive relationship between social responsibility and financial performance. For example, a survey of 500 largest public corporations in the United States found that those that commit to responsible behavior and emphasize compliance with codes of conduct show better financial performance (Debbie, Ferrell & Linda, 2010).

A meta-analysis of 25 years of research identified 33 studies demonstrating a positive relationship between corporate social responsibility performance and financial performance (Debbie, Ferrell & Linda, 2010).

Investor Loyalty

In order for organizations to achieve sustainable growth, the relationships with stakeholders and other investors must rest on dependability, trust, and the company’s commitment to thriving to greater heights (Debbie, Ferrell & Linda, 2010). But investors also look for potential cracks or flaws in a company’s performance.

Many shareholders or investors are usually concerned about the reputation of companies in which they wish to invest (Debbie, Ferrell & Linda, 2010). Investors have even been known to avoid buying the stock of firms they viewed as irresponsible (Debbie, Ferrell & Linda, 2010). For example, 15 mutual fund managers announced a boycott of Mitsubishi stock after the Japanese firm refused to cancel a plan to build a factory on a Mexican lagoon that is also a major breeding site for gray whales (Debbie, Ferrell & Linda, 2010).

Investors know that fines or negative publicity can lower a company’s stock price, customer loyalty, and long-term viability(Debbie, Ferrell & Linda, 2010). Consequently, many chief executives spend a great deal of time communicating with investors about their firms’ reputations and financial performance and trying to attract them to their stock (Debbie, Ferrell & Linda, 2010). It is important to note that social responsibility by organizations attracts investment in those companies.

Practical Implications

Corporate social responsibility is an important aspect that drives any organization to greater heights. Whether an enterprise is small or multinational, implementing social responsibility can create employee confidence, customer loyalty, and investor loyalty, which are key factors to the company’s attainment of huge profits and sustaining business in any given market niche (Debbie, Ferrell & Linda, 2010).

In order to have a sustainable business, a company can formulate social responsibility initiatives that promote customer confidence. A company can set aside part of its sales revenue so as to commit it to charity work and other philanthropic initiatives. A company can also give back to the community by supporting community development programs in education, health, infrastructure developments, and so on.

Learning Reflections

Corporate social responsibility is a broader concept that relates to an organization’s impact on society. It is imperative that organizations have to extend a helping hand to communities beyond their business and stockholders’ obligations (DuBrin, 2009). Social responsibility is not the traditional notion that a business is only responsible for its owners and stockholders, but a company is also responsible for the community’s welfare (Debbie, Ferrell & Linda, 2010).

References

Debbie, M.,Ferrell, C. and Linda, F. (2010). Business & Society: A Strategic Approach to Social Responsibility, 4th Edition. Mason, Ohio: Cengage Learning.

DuBrin, A. (2009). Essentials of management. Mason, Ohio: Thomson Business and Economics publication.

Evaluation of company Q’s attitude toward social responsibility

Company Q’s attitude towards social responsibility can be described as negative. It is clear that the company is highly sensitive to its performance and almost all of its efforts are directed towards profitability. Theoretically, corporate social responsibility concerns a company’s ability to take responsibility for its impact on the society in which it operates (Bhattacharya, Sen &Korschun, 2011).

Although it appears that corporate social responsibility concerns an expensive company’s self-regulation mechanism, it is important to note that it develops good relationships between the company and the society, creating a positive image that improves corporate performance (McWilliams & Siegel, 2011).

The aim of corporate social responsibility is to embrace responsible actions as well as encourage positive impact of the company on a number of parties, including employees, investors, consumers, the environment and communities.

By offering a limited amount of health-conscious and organic products, company Q seems to be concerned with the health issues of the society. However, it is also worth noting that the company is not willing to provide these products, especially because it has started the program only after the issue has been raised by the community.

In addition, the health-conscious and organic products are only provided in limited amounts, yet the community requires these products to cater for its health needs. Moreover, it is clear that the company does not trust its employees. By believing that the employees are a threat to its survival, the company indicates that it does not train the employees to behave responsibly at the workplace, which indicates a negative attitude towards corporate social responsibility.

It is also worth noting that the company’s decision to throw away its day-old products instead of donating to the local food bank does not help the society. In fact, the company is only concerned with making profits and is not concerned with the society in which it operates.

Although it is important to close its outlets in the high-crime areas to reduce the loss of products, it is worth noting that the company has a role to play in reducing the crime in the area. Instead of closing the shops, the company should have considered other methods such as working with the administration, the community and the police service to determine better ways of improving the state of security in the region. Overall, it can be noted that the current attitudes towards social responsibility in Company Q is negative.

Improving corporate social responsibility

An important action that the company can take is to develop a new program or approach that will allow it to change its attitudes towards social responsibility. First, the company should consider developing better relationships with the society, especially by providing healthy food and organic food products in order to improve the wellbeing of the society.

Secondly, it is recommended that the company consider training its employees to act responsibly, especially when dealing with customers and well as improving their attitudes towards the company. In this way, it is possible to ensure that the employees are trusted while at the same time improve the company’s image in the public.

Thirdly, the company should liaise with the society and the administration in the efforts towards increasing security in the area rather than closing its business. For instance, it should provide some financial support to the administration to establish security measures such as a police station in order to improve the security of the area. In this way, the company will not close its shops in the high-crime areas.

References

Bhattacharya, C. B., Sen, S., &Korschun, D. (2011). Leveraging Corporate Social Responsibility: The Stakeholder Route to Business and Social Value. Cambridge: UK: Cambridge University Press

McWilliams, A., & Siegel, D. (2011). Corporate social responsibility: A theory of the firm perspective. Academy of Management Review 26(2), 117–127