CH-7-8 Entrepreneurship: Value Added Ventures – Principles of Responsible Management: Global Sustainability, Responsibility, and Ethics : Book Guide

This Document Contains Chapters 7 to 8 CHAPTER 7 ENTREPRENEURSHIP: VALUE ADDED VENTURES GET IN TOUCH! This instructor’s manual can only cover a small initial selection of relevant advice. Please visit the website of the Center for Responsible Management Education www.responsiblemanagement.net, write to the editor Oliver Laasch at [email protected] or the authors of this chapter ([email protected] and [email protected]) to share your ideas for new contents, experiences in teaching with the book, constructive criticism, and, of course, questions. The textbook is a snapshot of a quickly developing field that aims to educate responsible managers, and to create responsible businesses, which requires constant updating. We invite you to become part of a growing community of academics and practitioners taking on this task. THE INSTRUCTOR’S MANUAL This Instructor’s Manual contains a brief chapter introduction, a listing of chapter objectives, an expanded outline, chapter summary, teaching points, answers to end of chapter questions and exercises, and test questions. INTRODUCTION This chapter outlines approaches to social entrepreneurship by grounding its argument in Polanyi’s three economic systems. As these interact in accordance with prevailing socio-political systems, we link them to arguments for different ‘schools’ of social entrepreneurship. By examining their socio economic origins, a deeper understanding of ‘internal’ and ‘external’ social value creation can be presented. We identify early developments that frame social entrepreneurship with reference to social innovation, social purpose, and socialization. As the chapter develops, an argument is made for a hybridization perspective that more closely reflects practice. In the remaining sections of the chapter, we explore how responsible management practices can be grounded in the challenges associated with a given starting point. We examine three journeys: 1) from Third Sector to Social Economy; 2) from Private to Social Economy, and; 3) from Public Service to Social Entrepreneurship. Each initiating context requires a responsible manager to identify bodies of knowledge that inform the development of new skill sets. The journey from Third Sector to Social Economy requires a shift from the mindset of philanthropy (helping only others) to mutuality (helping self and others). Outlining a pathway from Private to Social Economy requires a shift from profit maximizing for shareholders to wealth-maximizing for stakeholders. Lastly, the transition from public servant to social entrepreneur requires a new capacity to select and commission non-profit, public-private, or mutual/co-operative solutions to satisfy public policy. CHAPTER OBJECTIVES After reading this chapter, students should be able to…  . . . analyze an organization’s relationship to the social economy.  . . . select social entrepreneurial strategies.  . . . create value-added ventures. CHAPTER OUTLINE Opening Case: Mondragon Co-operatives: This case provides a living example of the way social innovation, social purposes and socialized ownership and control can give rise to an enduring value-added venture: • Social innovation: identifying the heroes behind social change in institutions • Social purpose and mission: identifying social objectives and creating social transformation. • Socialized ownership and control: identifying how mutuality and co-operation can turn individual initiatives into coordinated collective actions. I. Social Entrepreneurship and Responsible Management: In this chapter, we clarify issues by problematizing three dominant “schools” of social entrepreneurial thought. We argue that a more useful perspective is to examine the socioeconomic origins of different schools to identify the challenges that arise when responsible managers pursue socio-entrepreneurial goals from different starting points. II. Goal: The Value-Added Venture: The goal of social entrepreneurship as we describe it in this chapter is a value-added venture. A venture is an undertaking that involves uncertainty and the pursuit of reward or opportunity. The term value-added here refers to social-value added, often through the solution or mitigation of a social issue. In the case of social entrepreneurship, such social value can be added either through the socialization of the organization, or through an external social mission that, when fulfilled, benefits society, often transforming the society and its systems. III. Phase 1: Understanding Social Entrepreneurship and Social Innovation A. Elementary Perspectives of Social Entrepreneurship: To understand social entrepreneurship and the related social innovation process, we illustrate the following three elementary perspectives of social entrepreneurship: • Social innovation • Social purposes (leading to social impact and transformation) • Socialized ownership and control B. Economic Systems: Polanyi offered a critique of economic exchange systems, outlining as follows: • Communal system – operates on a large scale, based on mutuality and reciprocity • Redistribution systems – pooling produce for reciprocal exchange and to ensure provision for public events and economic uncertainty • Production for markets – the notions of gain, profit, and loss become more important C. Identifying the Starting Point for Social Innovation: Before we examine the challenges encountered during the pursuit of social entrepreneurship, it is worth setting out a theoretical framework to guide discussion. We start by linking Polanyi’s concept of reciprocity to Pearce’s model of a third system (see Figure 7.2). Charting a social entrepreneurial path requires a reflexive awareness of the way economic thought orients a manager’s decision-making. Three schools of social entrepreneurship reflect interactions between three economic systems. • First system: Private – for-profit oriented – micro-businesses, SMEs, large businesses, multi-national corporations. • Second system: Public – planned provision – community councils, local authorities, national/regional governments, European Union, United Nations. • Third system: Social – family, voluntary organizations and social enterprises – clubs/ community enterprises, social firms, social businesses/charities, mutuals, fair trade companies, worker co-operatives. D. Implications for Social Entrepreneurship: By linking Polanyi’s work on economic systems to Pearce’s theory of social enterprise, we gradually build up the argument for a ‘hybridization’ approach to the topic. Building on acceptance that hybridization of economic systems can occur, it follows that social entrepreneurship can occur both inside and outside the third sector. We argue that the areas between the third and public sectors, between the public and private sectors, and between the third and private sector catalyze social entrepreneurship. E. Money, Labor, and Land: Polanyi does not argue against market logic in its entirety, only against the commoditization of “fictitious goods.” Money, labor, and land, he asserts, cannot be treated as commodities. If they are, each will be degraded and their value destroyed or distorted. • Real and Fictitious Goods: introduces the difference between ‘householding’, ‘production for market’ and identifies ‘fictitious goods’. • Four approaches to social entrepreneurship: identifies non-profit, CSR, more-than-profit and multi-stakeholder approaches to social entrepreneurship. • Types of Hybridisation: the synthesis of different exchange systems. A multistakeholder model based on social economy principles is put forward as a “socially rational” approach to integrating economic systems. In this model, there are a number of variants where integration of different systems of exchange is partial rather than complete: • A. Nonprofit: Redistribution and Reciprocity • B. Corporate Social Responsibility: Redistribution and Market • C. More-than-Profit: Reciprocity and Market • D. Multistakeholder (Social Economy): Reciprocity, Redistribution, and Market III. Phase 2: Envision Your Pathway A. From Third Sector to Social Economy: In the following bullet points, challenges in the transition to social economy are identified along with macro-economic considerations. • How do you know you are in the Third Sector: This topic identifies language cues associated with philanthropy and mutuality. • Cultural Influences on Income Streams: Different cultural attitudes to trading and government support. • Classifying Activities: Wei-Skillern’s matrix for deciding between different project activities. • Steps to achieve change: Skill sets for non-profit (Type A); more-than-profit (Type B) and social economy (Type D) enterprise development. B. From Private to Social Economy: The mindset of the market and its limitations. The difference between production for members (‘householding’) and production for market leads into a series of clarifying examples. • Barcelona FC v Arsenal FC: are you member-led or investor-led? • Challenges and opportunities: differences and tensions between manager and member power: step changes in the transition to social economy. • From employee to co-operative ownership: how Mondragon co-operatives make the transition. • Steps to achieve change: Skills sets for Type A, B and D social enterprise development. C. From Public Service to Social Entrepreneurship: The influence of New Public Management (NPM) as a theory of public sector transformation is outlined. By considering the difference between privatization and localization we contextualise how NPM might trigger a range of changes in the delivery health and public services. • The loss of public sector distinctiveness: NPM doctrines that erode professional judgment in favor of accountability of (and to) managers. • From bureaucratic rules to management discretion: NPM doctrines that encourage top management control of targets and performance management. • Contrasting Cases: the case of Eaga plc v Italian social co-ops. • Steps to achieve change: Skills sets for Type B, C and D social enterprise development PRINCIPLES OF MANAGEMENT: ENTREPRENEURSHIP I. Social entrepreneurship describes the discovery and sustainable exploitation of opportunities to create social and environmental benefits. II. The goal of the social entrepreneurship process is to create a value-added venture that at the same time “socializes” the organization internally and creates social value systemically externally. III. The market is only one type of economic system. There are alternatives. IV. The nonprofit model of social entrepreneurship emphasizes reciprocity and redistribution facilitated by voluntary and political action. V. The corporate social responsibility model of social entrepreneurship emphasizes redistribution through new types of market exchange. VI. The more-than-profit model of social entrepreneurship emphasizes market exchanges that encourage reciprocity. VII. The social economy model of social entrepreneurship emphasizes the hybridization of reciprocity, redistribution, and market exchange to maximize human well-being. TEACHING POINTS 1. Take home message(s): Early developments in social entrepreneurship theory focus on ‘schools’ without considering their socio-economic underpinnings: ‘social innovation’ focuses on heroic efforts to achieve social change; ‘social purpose and mission’ focuses on the task (rather than process) of social transformation; ‘socialization of ownership and control’ focuses on the sharing and spreading of ownership through member-owned (co-operative) enterprises. A more productive perspective is to consider the way different modes of economic exchange contribute to social and environmental well-being: this is a hybridization perspective. 2. Responsible management in all three sectors: This chapter explores and applies economic and organization theory to understand social entrepreneurship orientations and preferred practices. Within the chapter, different orientations and pathways to social entrepreneurship are explored to highlight the ‘responsible management’ skill sets needed to effect socio-economic change. This leads us to an important message of this chapter: Responsible managers are not restrained to working in the for-profit sector. The chapter outlines the particular characteristics and challenges of working in each of the three sectors. Once this basic insight has been achieved, it is easy to shift the concepts in other chapters mostly presented from a private sector perspective to responsible management in the public sector or the third system. 3. Does this chapter belong in the planning or organization section? While this chapter is part of the planning section (understanding an initial sectorial position and planning a transition) of the book, it also contains many elements of how the organizational architectures differ among different sectors. Therefore, it would make much sense to use this chapter together with Chapter 8, “Organization” which further illustrates organizational aspects and structures. 4. Boundaries and overlaps: Social innovation, social purposes, and socialized ownership and control are interrelated and often overlap in theory and in practice. The strategy of this chapter is to encourage students to think about the mindset that guides different economic systems (redistribution, reciprocity and market exchange) and consider how they can be combined to create greater benefits. The core concept of hybridization captures the task of combining redistribution, reciprocity, and market exchange to achieve social entrepreneurial results. 5. Ideal type: An important goal of the chapter is to present social economy as an ‘ideal type’ of value-added venture capable of supporting social innovation in pursuit of a social purpose, and embedding it through socialised (member-owned) systems of governance and management. However, there is significant educational value in debating whether the ideal of social economy is too costly (in time and/or money) and what compromises might be made to balance inclusivity with efficiency. Alternatively, has technology reduced the costs of democratic management so much that it is not just a preferred option, but also fully realizable? It is also worth debating why people resist or oppose democracy in business. What interests are being defended? 6. Sectorial sustainability: A key argument in this chapter is that the chances of achieving sustainable business practices increase when different modes of economic exchange are combined (rather than presented as alternatives in a zero-sum game). Cultivate your students’ capacity to debate whether sustainable businesses should reject the trading of ‘fictitious goods.’ 7. Macro-perspective and regional bias: The perspective on social entrepreneurship presented here aims to draw a map to distinguish and manage different kinds of entrepreneurship. This approach was chosen as entrepreneurship, together with strategic management, are complementary parts of the planning process in responsible management. This map shows different pathways of social entrepreneurship that are required to be used in practice with more particular concepts and tools of social entrepreneurship. For this purpose we recommend additional readings on social innovation, business models for social entrepreneurship, both in theory and in practice. Additional cases on “U.S.-Style” social entrepreneurship (e.g. Terracycle, TOMS Shoes, Better Place) might be employed to broaden the somewhat Europe- and United Kingdom-centric perspective in this chapter. Also the literature on “intrapreneurship” and “corporate social entrepreneurship” might provide valuable complementary perspectives. 8. Inspirational interviews and alternative perspectives: The end-of-chapter interviews provide additional materials on the challenges of creating a value-added venture. Mark Kramer describes the differences in running private and social businesses, with particular attention to differences in ‘management control.’ The practitioner profile of Doru Mitrana describes the day-to-day life of a social entrepreneur and how practical activities must be combined with social action. Lastly, a ‘primer’ outlines four aspects of sustainable innovation: redesigning products; re-engineering processes; creating more while using less; rethinking the selling/leasing dichotomy to reform market relations. ANSWERS TO END-OF-CHAPTER QUESTIONS AND EXERCISES A. Remember and Understand A.1. Define social entrepreneurship. What is the difference between social and mainstream entrepreneurship? What social entrepreneurship means is still in flux and changes in different contexts, cultures, and traditions. Our working definition of social entrepreneurship is that it ”describes the discovery and sustainable exploitation of opportunities to create social and environmental benefits”. Mainstream entrepreneurship instead focuses on the exploitation of primarily economic opportunities for the creation of economic benefits. A.2. Mention the three perspectives of social entrepreneurship and explain each briefly. Must a social enterprise always have elements of all three perspectives? The three perspectives or aspects of social entrepreneurship are social innovation, social purposes (leading to social impact and transformation), and socialized ownership and control. Social enterprises exist in varying configurations that integrate one or several elements of the three perspectives. A.3. Which three economic models were mentioned in the chapter? Give one example of each. Students are expected to explore the idea that ‘responsible management’ is the capacity to create hybrid enterprise forms that combine different modes of economic exchange to improve social and environmental outcomes. • Once students have the ability to classify examples, help them move beyond this and explore the interaction between systems and modes of economic thought. Use the Mondragon Co operative Corporation as an example that effectively balances different approaches. • Encourage students to describe models of social entrepreneurship in terms of the systems of economic exchange that they combine. A.4. Explain each of the following terms in writing or by developing an illustration of it: Nonprofit model, corporate social responsibility, more-than-profit model For this exercise students should be able to understand the concepts around Figure 7.5 and either describe them with their own words, or to be able to illustrate and interrelate the terms through an own illustration. B. Apply and Experience B.5. Conduct Internet research to find examples in your country of the following organization types: nonprofit model, corporate social responsibility, more than- profit model, social economy. Explain for each example why you think the respective model applies to it. In seeking out examples of social entrepreneurship, help students to increase their capacity by discussing the variety of terms that are assumed to describe social enterprise. Encourage sensitivity to different cultural definitions. For example: • Non-profits in the USA may be referred to as NGOs (non-governmental organizations) in Africa and Asia. • In some parts of the world, ‘non-profits’ use trading income more than public subsidy or philanthropy (see Table 7.2). • Students may conflate non-profits and not-for-profits (without being aware that the former is more associated with philanthropy and the latter with mutuality). • In some countries, the term ‘social enterprise’ may be restricted to ventures that help people disadvantaged in the labor market. In others, it covers a broad range of trading charities, voluntary sector organizations, co-operatives and fair trade organizations that produce goods and services for people. • In the UK, ‘social enterprise’ can include John Lewis and the Co-operative Group, while in the USA, employee-owned business and co-operatives are rarely conceived as social enterprises. • Discuss the extent to which ‘spin outs’ (from the state) or ‘substitutes’ (for the state) are examples of social entrepreneurship? B.6. Conduct Internet research on quantifiable data about social entrepreneurship in your country (“Social Entrepreneurship in …”). Write a one-page research report, citing the most important facts and figures. The information sources used to answer this question might, for instance, be official governmental reports and statistics, enterprise associations and incubators, scientific research papers, or books with a local or comparative perspective, such as “The World Guide to CSR”. C. Analyze and Evaluate C.7. Look up the GRI (sustainability or responsibility) reports of several multinational companies. Based on that information, determine where the company is located in the model represented by Figure 7.5. Alert students that the GRI database includes co-operatives and non-profits as well as private sector businesses. Can they compare the sustainability reporting of well-known companies with co-operatives and non-profits? Early research on sustainability reporting suggests that co-operatives and non-profits are not necessarily more likely to produce sustainability reports. It might be worth discussing with students why this might be the case. For example, you might ask: • Who is interested in sustainability reports? • What purpose(s) do sustainability reports serve? • Who do co-operatives serve? • Who do non-profits aim to benefit? • Might these differences explain different levels of reporting amongst for-profit (commercial), not-for-profit (mutual) and non-profit (philanthropic) enterprises? • Is organization size a factor in the frequency and quality of sustainability reporting? C.8. Look up information on the business model of the organization OXFAM. Analyze the organization using the three perspectives on social entrepreneurship. Oxfam is one of the best-documented cases of a hybrid organization. Students should make sure to do both, to apply concepts covered in the chapter and match them with real-life facts from Oxfam. C.9. Polanyi states that market economies are a recent phenomenon. Discuss what type of economic system and coordination might be prevalent in the future. A novel way to stimulate debate might be to ask if any students have read the Mars Trilogy (Red Mars, Green Mars and Blue Mars) by Kim Stanley Robinson. What earth-based sustainability problems does the author tackle? What socio-economic systems do the settlers on Mars seek to implement to address concerns about sustainability? If students have not read the novel, ask them to find reviews and synopses of the trilogy in their search for understanding. D. Change and Create D.10. Conduct research about a real organization and classify it as a third sector, private, or public sector organization. Develop a social entrepreneurship plan for the organization, based on the recommendations of this chapter. Summarize your plan and send it to the organization. A social entrepreneurship plan can follow many formats. Students can contact their national or regional body to see if they have developed a template for social enterprise planning. If yes, part of the exercise might be to compare and critique different templates. Ask students to devise or improve a template of their choice. Whichever template is adopted, encourage students to create a ‘theory of social change’ (i.e. a set of inter-related assumptions that tie together the inputs needed, project activities/designs, outputs sought, outcomes that it is believed will occur, and to commit to ‘scaling up’ or ‘scaling out’). Encourage students to consider micro-processes needed to build relationships, secure sales (or other forms of income), negotiate contracts, and measure impacts. Will there be social, political, legal, or economic obstacles? How might obstacles be overcome? • The assumptions that underpin a change from ‘public service’ to a foundation will be different to the assumptions required to help a private business convert to an employee-owned business or worker co-operative. • Ask students to chart the path that they envisage, the skill sets needed for development, the legal awareness they will need to acquire, and where they will seek advice/professional support that does not create new obstacles to enterprise development. • Encourage students to develop an awareness of professions whose professional norms/practices act as obstacles social change. Share knowledge of any professional practices / consultants who have developed specialist expertise in providing the necessary knowledge and support. TEST QUESTIONS 1. Which of the following is not one of the three elementary perspectives of social entrepreneurship? a. An exclusive non-profit condition. b. Enterprises that have socialized ownership and control. c. A focus on a social mission. d. An action that leads to social innovation. Answer: a 2. The discovery and sustainable exploitation of opportunities to create social and environmental benefits is a. Social mission statement. b. Social entrepreneurship. c. Social innovation. d. Corporate social responsibility. Answer: b 3. Communal systems, operating based on mutuality and reciprocity and being an alternative to market exchange, are a main thought brought forward by: a. Father Arizmendi. b. Muhammad Yunus. c. Karl Polanyi. d. David Ellerman. Answer: c 4. The Mondragon Corporation a. has experienced high wage levels due to its cooperative model. b. was funded with the main goal of profit maximization in mind. c. is the perfect example of a typical private sector company. d. employs a cooperative model of democratic ownership and member-control. Answer: d 5. The creation of structures that share characteristics of more than one sector is called a. Hybridization. b. Social enterprise. c. the Third sector. d. the nonprofit model. Answer: a 6. Which of the following statements is true? Value-added ventures: a. May create value externally through their social mission and internally through the socialization of the organization. b. Have the creation of internal democratic and participative structures as number one priority. c. Have to mainly focus on the societal mission. d. Should add internal value through their social mission and external value through the socialization of the organization. Answer: a 7. ________________ consists of organizations that undertake social activity without profit purpose, which is typically based on reciprocity. a. The public service system b. The first system c. The third sector d. The private sector Answer: c 8. A friend of yours tells you that the owner of the bike store he is working at has recently begun to restructure the company to include democratic decision-making structures and a cooperative membership system among its employees. How can you classify this transition? a. From profit maximization to non-profit. b. From public service to social entrepreneurship. c. From social entrepreneurship to corporate social responsibility. d. From private economy to social economy. Answer: d 9. TOMS Shoes is a company that was founded to create access to shoes for poor children. TOMS reached this goal through inventing and implementing the two-for-one model, where every time a pair of shoes is bought, a second pair is automatically donated to a child in need. Which of the following answers describes most fully the elementary perspectives of social entrepreneurship displayed? a. Socialized ownership and control, social mission, social innovation b. None c. Social mission and social innovation d. Social value proposition Answer: c 10. Among the different types of hybridization, an organization that combines reciprocity (community benefit), redistribution (public benefit), and market (private benefit) is called a. a nonprofit model. b. the CSR model. c. a more-than-profit model. d. a multi-stakeholder model, or social economy. Answer: d 11. Which of the following organizations belongs to the first system of the economy? a. The United Kingdom Public Healthcare System b. Walmart c. The World Wildlife Fund (WWF) d. A public energy company Answer: b 12. Which of the following organizations belongs to the third system of the economy? a. A communal government. b. A charity. c. The United Nations Environmental Development Agency. d. Starbucks. Answer: b 13. Among the different types of hybridization, an organization that combines reciprocity (community benefit), and redistribution (public benefit) is called a. a nonprofit model. b. the CSR model. c. a more-than-profit model. d. a multi-stakeholder model, or social economy. Answer: a 14. The transformation of an organization deeply rooted in one sector to a hybridized organization will typically involve a. A change in the legal form, and acquisition of new skills and competences. b. Acquisition of new skills and competences and a change of the company name. c. A change in the legal form and a change of the company name. d. New public management. Answer: a 15. Which of the following word clusters are typical for the second sector? a. Shareholder value maximization b. Public good, state ownership. c. Patronage, internal activities, donations. d. Shareholders, profit and loss, commodities. Answer: b 16. Which of the following word clusters are typical for the third sector? a. Public good, state ownership. b. Shareholder value maximization c. Patronage, internal activities, donations. d. Shareholders, profit and loss, commodities. Answer: c 17. Which of the following statements on new public management (NPM) is untrue? a. NPM aims to modernize public administration to make it more efficient. b. NPM centrally highlights the importance of going back “to the old ways,” when governments still worked effectively. c. NPM may be summarized in seven doctrines related to considerations of the sector distinctiveness, and of the question of rules versus discretion. d. NPM may be summarized in seven doctrines, including, for instance, an emphasis on private sector styles of management, and formal standards and measures of performance and success. Answer: b 18. In Practice: Which of the following In Practice descriptions is summarized incorrectly? a. In Arsenal FC the chair of the board is decided by the majority shareholder. b. The Mondragon Corporation has a process for the acquisition of private companies and for turning them into cooperatives. c. Many European countries have implemented laws to support social enterprise development. d. Barcelona FC is organized in a private sector for-profit-model while Arsenal FC is organized like a cooperative. Answer: d 19. In Practice: Which of the following short case descriptions is summarized incorrectly? a. The National Health Service (NHS) of the UK, through the “right to request,” allows any health professional to put forward a business case for a social enterprise. b. Eaga PLC started as a company limited by guarantee (CLG), but decided to switch to the model of ownership and control based on ownership by an employee benefit trust (EBT). c. The Mondragon Corporation was initially founded to create a local farming cooperative that attacked food scarcity. d. New Zealand Public Agency Reform Separates Market and Public Good Activity for publicly-owned land. Answer: c 20. In Practice: Which of the following short case descriptions is summarized correctly? a. The example where two police officers looking over each other’s´ children while the other was at work is a typical example of a redistribution-based exchange. b. The organization Te Whanau o Waipareira Trust aims to advance the position of the Mäori living in the western suburbs of New Zealand’s largest city, Auckland, by teaching them Western philosophy in order to substitute the primitive Mäori kaupapa and tikanga (values and ethics). c. “The great transformation” explains how Walmart is currently transforming to become a social enterprise. d. Coin Street Community Builders (CSCB) in London is an example of a voluntary group making the transition from voluntary action to social entrepreneurship, evolving into an incorporated company and diversifying its income-generating activities through social purpose commercial activities using a variety of social enterprise forms. Answer: d CHAPTER 8 ORGANIZATION: RESPONSIBLE INFRASTRUCTURE GET IN TOUCH! This instructor’s manual can only cover a small initial selection of relevant advice. Please visit the website of the Center for Responsible Management Education www.responsiblemanagement.net or write to Oliver Laasch through [email protected] to share your ideas for new contents, experiences in teaching with the book, constructive criticism, and, of course, questions. The textbook is a snapshot of a quickly developing field that aims to educate responsible managers, and to create responsible businesses, which requires constant updating. We invite you to become part of a growing community of academics and practitioners taking on this task. THE INSTRUCTOR’S MANUAL This Instructor’s Manual contains a brief chapter introduction, a listing of chapter objectives, an expanded outline, chapter summary, teaching points, answers to end of chapter questions and exercises, and test questions. INTRODUCTION This chapter is designed to help businesses move toward full integration of business responsibility, sustainability, and ethics throughout the structure of the organization. We look at how to create a responsible infrastructure in a mainstream for-profit business. The goal of responsible infrastructure is an enabler for responsible business performance that includes organizational structures and culture. When a responsibly managed business reaches this goal, it will be prepared to create a positive triple bottom line, optimize stakeholder value, and achieve moral excellence. CHAPTER OBJECTIVES After reading this chapter, students should be able to…  …design an organizational architecture, centrally integrating elements of responsible infrastructure.  …restructure an organization to create responsible infrastructure.  …develop an organization responsibly through change management and cultural change. CHAPTER OUTLINE I. Overview: Process of Creating a Responsible Organization (Slides 3-6). In the chapter we make a strong case for restructuring or reinventing an organization toward full integration of sustainability, responsibility, and ethics throughout the organization. We call this responsible infrastructure. After the introductory SEMCO case and an overview of the chapter, we define organizational theory and describe the goal of an organization’s responsible infrastructure. A. Responsible Management and Organizational Theory: • Definition of Organizational Theory: a “branch of the social sciences that studies the design and evolution of the social structures comprising modern complex organizations, as well as the adaptation of those structures to task environments and institutional or environmental contingencies.” B. The Goal: Responsible Infrastructure: • Goal of Responsible Infrastructure: Responsible infrastructure is an enabler for responsible business performance that includes organizational structures and culture. When a responsibly managed business reaches the goal of responsible infrastructure, it will be prepared to realize a positive triple bottom line, to optimize stakeholder value, and to achieve moral excellence. The purpose of responsible infrastructure is to integrate responsible management, sustainability principles, and ethical practices throughout the organization. II. Phase 1: Understanding the Organization: The question “What is an organization for?” is the point of departure of organizational theory. A. Opposing Viewpoints: Before addressing specifics of how to re-interpret organizations, we introduce three common contrasting viewpoints currently existing in the field of organizational theory. 1. Individualism versus Collectivism • Individualism: individual employees are responsible for their decisions, not the larger entity of the organization itself. • Collectivism: organizations are an entity that can be held accountable for its actions. 2. Realism versus Constructivism • Realism implies the rightness of an action (Kant) is determined by considering obligations to apply universal standards and principles. • Constructivism denies that “the social world has a settled meaning and character, and argues that our cognitive schemes, frames, and categories do critically influence the social world”. 3. Instrumentalism versus Institutionalism • Instrumentalists tend to view organizations as rational entities that are run by dominant members who achieve their own ends • Institutionalism views organizations as having intrinsic worth over and beyond the value of its assets. Organizations “institutionalize” over time and form identities with which individuals wish to associate. C. The Organization and Management Theory: The understanding of who the people in an organization are and how they work together crucially influences the design of an organization. Because employees are one of the main stakeholder groups of a business, this understanding has even more influence on the design of responsible organizational structure. Global and local institutions related to sustainability have been created in an overwhelming variety, discussion of which exceeds the scope of this chapter. The following institutional developments reflect some of the most influential entities: 1. Traditional Model Implications: • Superior managers take responsibility and action for assuring front-line employees´ responsible performance. • Procedures, checklists, and handbooks include sustainability, responsibility and ethics tasks. • Strict control mechanisms, such as individual scorecards for responsible performance, are implemented. 2. Human Relations Model Implications: • Responsible managers must create an internal community that gives each person the strong feeling to be meaningful. • Social, environmental, and ethical topics, as the ones promoted in responsible management, have a big potential to be perceived as meaningful by employees. 3. Human Resources Model Implications • The human resources model can create win-win situations for employee and company, always when employees are led to the job that satisfies them, which in turn increases their work satisfaction. • Seeing human beings as a resource to create economic performance is ethically questionable; the same holds true for the term human capital. II. PHASE 2: CREATING STRUCTURES FOR RESPONSIBLE BUSINESS: RESTRUCTURING THE ORGANIZATION Organizational structure refers to the formal framework organizations adopt to control how managers and employees conduct their activities and move toward organizational goals. Organizational architecture refers to the totality of organizational structure and implies an alignment of organizational institutions and their interaction. Organizational architecture is often used synonymously with organizational design. As an orientation, seven central questions may be addressed to create an architecture that effectively contributes to an organization’s responsible business goals: Creation, Integration, Alignment, Naming, Displacement, Communication, and Empowerment. A. Organizational Design Patterns: Organizational design has come a long way from the classic bureaucratic, hierarchical organization. Today we find an array of different types of organizational architectures. We summarize the five main types of organizations found today and their main characteristics. We further explain how those characteristics may influence the organizational design for responsible management. 1. Self-contained: Conduct of processes without external support 2. Horizontal: Core-process and team focus. 3. Hollow: Outsourcing of internal processes. 4. Modular: Modular production 5. Virtual: Joint ventures B. Elements of Responsible Organizational Structure: Structural elements for responsible business are parts of the organizational architecture that jointly create an infrastructure for responsible business and management. Such elements may be of many different kinds, fulfilling many different functions. The following list defines the most common groups of structural elements for responsible business and their respective functions. Each of these elements will be explained in this section in further detail. 1. Normative documents such as vision, mission, and value statements, policies and codes of conduct, fulfill a “lighthouse function” of providing guidance. 2. Programs, such as a diversity program or an eco-efficiency program, are bundles of activities and structural elements with a common theme and purpose. 3. Departments, such as an ethical office or a sustainability department, serve as institutional entities, organizations inside the organization, to which a responsibility for certain types of activities or performance to a predetermined group of people is assigned. 4. Job Positions, such as the ones of a “green collar worker” or of the Chief Responsibility Officer, tie specific responsible management tasks to the person fulfilling the respective job. Typically, they are employees with operational jobs actively working on social and environmental value creation. 5. Engagement platforms, such as multi-stakeholder forums or open innovation platforms, facilitate collaboration and co-creation between the business and external stakeholders and mutual learning. 6. Communication tools such as whistleblowing hotlines, sustainability reports, and a sustainability controlling system, facilitate transparency and dialogue with stakeholders to improve responsible business performance. 7. A process, such as a stakeholder engagement or a volunteering process, is a concrete series of actions leading to a pre-determined outcome and performance. 8. Procedures, such as a sustainable purchasing procedures, describe, standardize, and improve processes. These structural elements of responsible organizational structure can be integrated into a typical organizational chart. Such responsible business architecture provides an overview of existing infrastructure for responsible business and management. The organizational chart, which is the scaffold of the responsible business architecture drafted, can be divided into four main areas. • Top management: The highest tier of managers is led by the CEO. • Board of directors: The board (originally developed as a tool of corporate governance) serves as a control mechanism and includes internal and external directors, and committees focusing on central topics. • Staff function: The support functions provide central services important for the work of line functions. • Line functions: The main functions are directly involved in the main value creating activities of the company. The decision about which functions to include in staff and line functions depends on the focus of the respective organization. III. Developing the Organization Responsibly Organizational development is the process of leading an organization towards its goals by changing its structures and culture. The development of an organization´s responsible business performance may be tracked through the dimensions of sustainability, responsibility, and ethics performance: • Sustainability performance ranges from a largely undeveloped organization that is below-average unsustainable, even in comparison to a typical company in its industry, to the perfect situation of a restoratively sustainable organization that is able to simultaneously create social, environmental, and economic capital. • Responsibility performance illustrates a continuum of different organizational behavior patterns with regard to stakeholders. • Ethics performance represents how morally desirable is the decision making in the organization. A. Organizational Leadership: A leader guides followers to an envisioned goal: • Sustainable (or sustainability) leadership describes a leader who promotes sustainability in a certain group or a system. • Responsible (or responsibility) leadership follows the goal of the creation of stakeholder value. • Ethical (or ethics) leadership refers to leaders who inspire to act ethically. Ethics leaders lead their followers to moral excellence. Ethics leaders are also called moral leaders. Leaders typically have to fulfill three main tasks to lead followers toward goals. 1. Create direction: Leaders must convincingly convey the vision and goals associated with the change to be implemented. 2. Create alignment: Leaders must assure the initial implementation of internal responsible business practices. 3. Maintain commitment: Reaching sustainability, a stakeholder responsibility is a long run goal. It is of crucial importance for successful sustainability leaders to assure that followers´ commitment is maintained over long periods of time. A change agent for responsible business is an employee (and in some cases an external stakeholder) instrumental in changing business structures to more sustainability, responsibility, and ethics. A social intrapreneur applies entrepreneurial methods to change the organization from within or to use the organizational structures to solve external social issues. B. Responsible Culture: Organizational culture describes the shared values, attitudes, and beliefs underlying the decisions made and actions made in an organization. • Attention • Reactions to crises • Role modeling • Allocation of rewards • Criteria for selection and dismissal C. Managing Change: Organizational change is the process of changing structures and culture in order to reach a predetermined goal. Change Management is the process of effectively and efficiently transforming an organization towards a pre-set goal by overcoming barriers and facilitating drivers for change. John Kotter, a global authority in change management, has encountered eight important errors that occur when transforming an organization: 1. Not establishing a great enough sense of urgency. 2. Not creating a powerful enough guiding coalition. 3. Lacking a vision. 4. Under communicating the vision by a factor of ten. 5. Not removing obstacles to the new vision. 6. Not systematically planning for and creating short-terms wins. 7. Declaring victory too soon. 8. Not anchoring changes in the corporation’s culture. PRINCIPLES OF ORGANIZATION: RESPONSIBLE INFRASTRUCTURE (SUMMARY) I. The goal of responsible organization is responsible infrastructure. Responsible infrastructure is an enabler for responsible business performance that includes organizational structures and culture. II. To understand the initial position of an organization, responsible managers should assess where the organization stands regarding the opposing viewpoints of organizational theory: individualism-collectivism, realism-constructivism, instrumentalism-institutionalism. III. Responsible organizational architecture integrates structural elements of responsible organizations (normative documents, programs, departments, job positions, engagement platforms, communication tools, processes, procedures) into organizational design patterns (self-contained, horizontal, hollow, modular, virtual). IV. A main goal of organizational development in a responsible organization must be to simultaneously reach or exceed benchmarks in triple bottom line performance, stakeholder value creation, and moral excellence. Only if the minimum benchmarks are met can the organization be considered a responsible organization. V. Organizational development for responsible business is achieved between effective change management, responsible leadership, and the creation of an organizational culture for responsible business. TEACHING POINTS 1. Bottom line messages: (1) the concept of what is responsible infrastructure, (2) how to create structures for responsible business and (3) to understand how to create an organizational development path toward advanced sustainability, responsibility, and ethics performance. 2. Integrating static and dynamic perspectives on organizations: This chapter centers on responsible organizational structure, how to design an organizational architecture that centrally integrates elements of responsible structure, restructure an organization toward responsible infrastructure, and continue the organization responsibly through change management and cultural change. For students it is important to catch both the static perspective of organizational structure and the dynamic element of developing organizations to be better positioned to become truly responsible businesses. 3. Degrees and interpretations of responsible business: An important goal of the chapter is to have students assess to what degree the infrastructure in their organizations enables responsible business performance. Through the assessment, students can determine how well their organization’s responsible organizational architecture integrates structural elements (normative documents, programs, departments, job positions, engagement platforms, communication tools, processes, procedures) into organizational design patterns (self-contained, horizontal, hollow, modular, virtual). 4. Digging Deeper: This chapter focuses on internal organizational infrastructures. Some lecturers, depending on the course curriculum, might want to delve deeper into organizational design patterns, structural elements of responsible organizational structures, especially normative documents and communication tools. We recommend doing so through excellent complementary materials available online. For concrete recommendations, please get in touch with Oliver Laasch through [email protected]. 5. Inspirational interviews: The end-of-chapter interviews provide outstanding additional material. Simon Zadeck is credited with pioneering primary global responsibility standards. He has led the development and promotion of important concepts such as responsible competitiveness and materiality. In a Harvard Business Review article, he drafted a “path to corporate responsibility” that included stages of organizational learning as a clear guide for creating responsible businesses—which is a central concept in this chapter. A second interview is by Thomas Hügli, Chief Communication & Corporate Responsibility Officer for AXA Winterthur, part of the AXA Group, which is the leading all-line insurer in Switzerland. Hügli describes his responsibilities as CCRO, typical activities during an average day at work, and how sustainability, responsibility, and ethical topics play a role in his job. He closes the interview with insights and challenges that apply to practitioners. ANSWERS TO END-OF-CHAPTER QUESTIONS AND EXERCISES A. Remember and Understand A.1. Mention the main groups of elements of responsible organizational architecture and give examples for each group. Sustainability departments, ethics hotlines, chief responsibility officers, multi-stakeholder forums, and responsibility programs in responsible management describe just a few of the structural elements that are created by organizations in order to support their efforts to become a responsible business. Specific examples that can be used are departments, such as an ethics office or a sustainability department. Responsible job positions can be created, such as vice president for responsible business or a “green collar” workforce, and programs for responsible business, such as a diversity or CO2 policy. Reports, ethics hotlines (feedback or online forums), and codes of conduct also can be incorporated into structure. A.2. Describe the traditional model, the human relations model, and the human resources model of organizational theories. In the Traditional Model, managers assume work is inherently distasteful to most people. What workers do is less important than what they earn for doing it and few want or can handle work that requires creativity, self-direction, or self-control. The implications are that superior managers take responsibility and action for assuring front-line employees´ responsible performance. Procedures, checklists, and handbooks include sustainability, responsibility, and ethics tasks, and strict control mechanisms exist, such as individual scorecards for responsible performance. In contrast to traditional models, the Human Relations Model asserts people want to feel useful and important. People desire to belong and to be recognized as individuals and their needs are more important than money in motivation for work. The implications are that responsible managers must create an internal community that gives each person the strong feeling to be meaningful. Additionally, social, environmental, and ethical topics, as the ones promoted in responsible management, have a big potential to be perceived as meaningful by employees. Finally, the Human Resources Model assumes that work is not inherently distasteful. People want to contribute to meaningful goals that they have helped to establish. Most people can exercise far more creative, responsible self-direction and self-control than their present jobs demand. The human resources model can create win-win situations for employee and company, always when employees are led to the job that satisfies them, which in turn increases their work satisfaction. Seeing human beings as a resource, as a means to create economic performance, is ethically questionable; the same holds true for the term human capital. The Human Relations model can be contrasted with Human Resources. Human relations focuses on feelings and recognition, while resources focuses on goals and realizing an employee’s talent and abilities. A.3. Explain the terms green collar worker, CRO, and change agent, and explain how they are related. A “green collar” workers are typically employees with operational jobs actively working on social and environmental value creation. A Chief Responsibility Officer (CRO) ties specific responsible management tasks to the person fulfilling the respective job. A change agent is an employee (or an external stakeholder) who is instrumental in changing business structures to focus on sustainability, responsibility, and ethics. The three terms are highly interrelated. For instance, both CROs and green collar workers might be change agents at different levels of the organizational structure. A.4. Explain the terms GRI report, whistleblowing hotline, and values statement, and explain how they are related. The Global Reporting Initiative (GRI) Report is a communication tool of an organization that reports responsible, sustainable, and ethical activities according to global standards set by the GRI independent organization. This external benchmarking allows organizations to communicate with stakeholders in an objective way about their activities. “Whistleblowing” is a venue and communication tool. A whistleblower is typically an employee who exposes wrongdoing by an organization or its members. For instance, the alleged wrongdoing can be ethical misconduct, dishonesty, or an illegal activity, or an employee discrimination event occurring in an organization. The whistleblowing tool allows the employee to report the incident confidentially and without fear of recrimination. Values statements highlight the normative values that should be the underlying fabric of organizational culture and that should guide all actions taken. Values statements are often closely aligned with the mission. Values differ from Mission and Vision statements and Codes of Ethics by the emphasis on values. Interrelation: GRI reports serve as an information tool, summarizing the relevant results from many other communication platforms of an organization. Often values statements and the results of whistleblowing activities are covered in GRI reports. Whistleblowing hotlines are often used to report incidents of non-compliance with the values mentioned in a values statement. B. Apply and Experience B.5. Think about one organization that you know well. Assess the organization in the three dimensions of opposing viewpoints in organizations. The goal of this exercise is to make students reflect about the different basic assumptions upon which organizational behavior and structures are based. The following brief paragraphs provide a summary that may help in the process of analyzing a given organization, based on observations related to responsible business topics: 1. In an organization that takes the individualistic perspective, organizational change toward responsible business will focus on working with every single employee. Responsibility, sustainability, and ethics will most likely be mentioned explicitly in individuals’ job descriptions. Responsible management trainings will aim to empower and prepare each employee for his or her respective contribution to the goal of becoming a responsible business. In an organization with a collectivist understanding, the focus of responsible management will be to create an organizational culture that is one of sustainability, responsibility, and ethics. Typical responsible management structures that will be created are team meetings, jointly reviewing responsible business performance, organizational climate surveys, and collaborative projects including a broad set of external stakeholders. 2. An organization basing responsible business conduct in realism will highlight the importance of normative and control systems, such as codes of ethics and sustainability scorecards. Organizations with the constructivist perspective will favor the development of a dialogue culture and high interaction. Typical elements of responsible infrastructure based on constructivism are stakeholder dialogue forums and open innovation platforms. 3. Students can identify Instrumentalism and Institutionalism by stating how organizations are rational entities that are run by dominant members who achieve their own ends. In contrast, institutionalism views organizations as having intrinsic worth over and beyond the value of its assets. This institutionalization impacts ethical decisions because assumptions about the character of organizations are a precondition for notions like the organization’s moral identity, collectively upheld norms and values, and the organization’s moral agency in general. Instrumentalist thinking may lead to pure business-case thinking, in which the only responsible management activities that are realized are those that pay off. B.6. Think about the organization from question B.5 and decide which of the organizational development patterns from Figure 8.6 would be the most appropriate ones for the organization. The aim of this question is to make students reflect about how different patterns of transition to responsible business are of different adequateness for different businesses. For instance, a student who looked at a petroleum business in question B.5 would probably discard the “born CSR oriented” tactics of transformation, as the core business itself can hardly ever be called a responsible business due to its inherent ecological unsustainability. This student might state that the patching or trimming tactic might work best for the business. In patching, the organization creates significant new responsible business activity in order to balance the irresponsible core-business. In trimming, the business actively abandons irresponsible business practices, often significant parts of the core business, and substitutes them with more responsible activities. C. Analyze and Evaluate C.7. Look at a company’s responsibility or sustainability report and draft a figure of the responsible organizational architecture, similar to the map in Figure 8.3. When students choose a company, they may begin with an analysis of Top Management, similar to the way Figure 8.3 is organized. They could analyze if the organization has a CRO, Chief sustainability officer, Chief ethics & compliance officer, or Chief Integration officer or similar positions. Students could next examine whether foundations or staff functions exist. Does the organization have a formal non-profit program? Do responsible business programs exist? The analysis could focus on the GRI report (or lack of) or how sustainable HRM exists. Students could analyze why many HR departments are being renamed Talent and Culture departments. To illustrate, students could enter the Proctor and Gamble web site at http://www.pg.com. They could find the 2012 Sustainability Report and examine the letter on page 6 from Len Sauers, Vice President, Global Sustainability, representing a high ranking officer dedicated to sustainability at P&G. Students can further examine the social sustainability programs, such as P&G’s Children Safe Drinking Water (CSDW) program, or One Pack = One Vaccine partnerships with UNICEF. There is also a P&G education programs in India called Shiksha (meaning “Education”), established in 2005. The GRI report is readily available and readable. Sustainable procurement through P&G’s supply chain can be investigated. Finally, students can investigate the human resources part of the report to see how well human rights, diversity and inclusion, and treatment of employees are communicated. C.8. Look up the website of SEMCO and assess where the company is located on the responsible business performance scale in the three dimensions of sustainability, responsibility, and ethics (Figure 8.5). As students analyze SEMCO, they will find an amazing turnaround of a company structure that became responsible to the core. Have them first re-read the case at the beginning of the chapter and then check the SEMCO Partner’s website in Brazil: http://www.semco.com.br. An English translation of the site is available at the top of the page. The opening page is a long one and students may be challenged to find information. They should also be encouraged to check other sources online, such as www.theguardian.com and www.greenbiz.com to answer this question. This information should also help them answer question D.9. When it comes to assessing SEMCO through the performance scale, we could argue that SEMCO is an “average unsustainable” company. Little information is provided about how the company creates positive triple bottom line impacts, nor can we see any below-average unsustainable behavior. SEMCO can be assessed between compliant and civil in the responsibility performance dimension. On one hand, the company assumes advanced employee stakeholder measures of strategic importance through their innovative employee centered business structure. This structure has become a template for many other companies, which is an indicator for a stakeholder responsibility assumed on a “civil” level. On the other hand, there is little information about the how SEMCO realizes its responsibilities toward other stakeholders, which is why we assume at least a compliant relationship. Similarly, we can assume that SEMCO is on a legalistic to responsive level of ethical performance. Neither negative nor positive information about ethical conduct are visible through its website and external media. D. Change and Create D.9. Based on your analysis in question C.8, write a one-page change plan for SEMCO, using Kotter’s model. First, have students review the chapter material on Kotter´s organizational change and change management, including the eight important errors that are made when transforming an organization. Figure 8.8, Stages of Responsible Business Implementation, provides a positive formulation of Kotter’s “don’ts.” SEMCO is a success story that has created value for the employee stakeholder and social sustainability for employees. Yet students should examine whether the company has truly created a “responsible infrastructure” that furthers sustainability, responsibility, and ethics. The questions asked in the case study are an excellent place to start. “Is there a chief responsibility officer (CRO), a sustainability department, a corporate foundation, or an ethics office? (No) Does the company report on social, environmental, and ethical performance? (No) Is there a sustainability management system, responsible business programs, and stakeholder engagement platforms? (No) Are there normative documents like a stakeholder mission, a values statement, a code of ethics, responsible business policies, and sustainability operating procedures? (No) Help students to make basic suggestions at first. They could comment about the lack of responsibility, sustainability, and or ethical reporting and communication on SEMCO’s web page. They could compare another Brazilian company, such as the aircraft manufacturer Embraer that has Environmental Responsibility links on its web page, and make suggestions for SEMCO. Students also could ask if SEMCO has a great enough sense of urgency. Does the company include sustainability words or phrases in the mission or vision statements? Thus, the one-page plan could begin with very basic suggestions for internal communication. D.10. Based on your analysis in question C.7, propose changes to the architecture you found with the goal of creating an even better responsible business infrastructure for the business. Professors should ensure question C.7 has been completed satisfactorily by students. Once they have analyzed and evaluated a company’s responsibility or sustainability report and drafted a figure of the responsible organizational architecture, they can propose changes. TEST QUESTIONS 1. A definition of responsible infrastructure is best described by which of the following statements? a. Restructuring or reinventing an organization toward full integration of sustainability, responsibility, and ethics throughout the organization. b. The type of organizational change toward responsible business that will focus on working with every single employee c. The type of infrastructure where organizational members cannot be reduced to the actions of a single individual d. Reinventing an organization toward full integration of responsible management, organizational theory principles, and practical perspectives throughout the organization. Answer: a 2. The viewpoint of institutionalization in an organization is best described by which of the following? a. An organizational structure that will focus on working with every single employee b. An organizational structure where organizational members cannot be reduced to the actions of a single individual c. A structure having intrinsic worth over and beyond the value of its assets and, over time, forms identities with which individuals wish to associate. d. A structure where the rightness of an action (Kant) is determined by considering obligations to apply universal standards and principles Answer: c 3. A traditional model in organizational theory assumes a. work is not inherently distasteful and people want to contribute to meaningful goals which they have helped establish. b. work is inherently distasteful to most people and what workers do is less important than what they earn for doing it. c. a manager's basic task is to make use of the "untapped" human resources of subordinates. d. people desire to belong and to be recognized as individuals and needs are more important than money in motivating people to work. Answer: b 4. A human relations model in organizational theory assumes a. work is not inherently distasteful and people want to contribute to meaningful goals which they have helped establish. b. work is inherently distasteful to most people and what workers do is less important than what they earn for doing it. c. a manager's basic task is to make use of the "untapped" human resources of subordinates. d. people desire to belong and to be recognized as individuals and needs are more important than money in motivating people to work. Answer: d 5. Organizational architecture is a term that refers to the a. totality of organizational structure. b. field of responsible infrastructure. c. actual drawing of an organizational structure. d. new way of referring to an organizational chart. Answer: a 6 Which of the following is NOT a type of organizational design pattern? a. Self-contained b. Modular c. Partnership d. Horizontal Answer: c 7. Which of the following best describes a hollow organizational design pattern? a. The organization conducts processes without external support. b. The organization has team initiatives, such as “green-teams,” and focuses on core processes. c. The organization has great potential to pool know-how and resources with other organizations to quickly react to challenges. d. The organization outsources internal processes. Answer: d 8. Normative documents provide a. assignment of responsibility for a certain type of responsible management activity and performance in an organization within an organization. b. sets of activities and structural elements with a common theme and purpose. c. collaboration and co-creation between the organization and external stakeholders and mutual learning. d. broad guidance on responsible business conduct without specifying a concrete course of action for single situations. Answer: d 9. A code of ethics a. describes what the organization ultimately should become in the long run. b. provides concrete rules for ethical decision making or highlights specific ethical issue areas of the organization with the goal of fostering morally right behavior. c. defines what the business should be and do in the present to fulfill its purpose. d. is a cause-related program that has a narrower scope as it focuses on few or single causes. Answer: b 10. Assume you began writing a value statement for your organization. You would begin by a. describing what the organization ultimately should become in the long run. b. defining what the business should be and do in the present to fulfill its purpose. c. highlighting the normative values that should be the underlying fabric of organizational culture and which should guide all actions taken. d. giving broad guidance on responsible business conduct without specifying a concrete course of action for single situations. Answer: c 11. If you were responsible for drafting a vision statement for board consideration, you would begin by a. describing what the organization ultimately should become in the long run. b. defining what the business should be and do in the present to fulfill its purpose. c. highlighting the normative values that should be the underlying fabric of organizational culture and which should guide all actions taken. d. outlining broad guidance on responsible business conduct without specifying a concrete course of action for single situations. Answer: a 12. Unilever’s Sustainable Living Plan and General Electric’s Ecomagination are examples of a. sustainable normative documents. b. flagship programs that embrace all parts of the organizational architecture. c. middle and line management job positions. d. world class organizational infrastructures. Answer: b 13. A line function in the organizational chart is a. the highest tier of managers, led by the CEO. b. a control mechanism that includes internal and external directors and committees focusing on central topics. c. directly involved in the main value creating activities of the company. d. a function that provides central services to other departments. Answer: c 14. When developing paths toward a responsible organization, ethics performance a. illustrates a continuum of different stakeholder behavior patterns with regard to the organization. b. illustrates the perfect situation of a restoratively sustainable organization that is able to simultaneously create social, environmental, and economic capital. c. represents CEO guided external training on responsible behavior. d. represents morally desirable decision making and actions in the organization. Answer: d 15. Sustainable (or sustainability) leadership primarily describes someone who a. promotes sustainability in a certain group or system and who might lead a work team, the organization, a complete region, or even a whole industry toward sustainability. b. follows the goal of the creation of stakeholder value and who goes far beyond hierarchical relationships. c. furthers a renowned social cause. d. inspires others to act ethically and who lead their followers to moral excellence. Answer: a 16. A change agent for responsible business a. is a function that provides central services to other departments. b. is an employee (and in some cases an external stakeholder) instrumental in changing business structures to more sustainability, responsibility, and ethics. c. applies entrepreneurial methods to change the organization from within or to use the organizational structures to solve external social issues. d. someone who developed a renowned cause in social sustainability. Answer: b 17. Which of the following best describes organizational culture? a. It describes the international operations of a company. b. It describes the shared values, attitudes, and beliefs underlying the decisions made and actions made in an organization. c. It is characterized by Peters and Waterman’s companies of excellence. d. It represents the family-like atmosphere present in the business. Answer: b 18. SEMCO is a Brazilian industrial equipment manufacturer known for its infrastructure change toward a. participatory style . b. bureaucratic style. c. human relations style. d. scientific style. Answer: a 19. The In Practice box about the company American President Lines, highlighting Multi-organizational Architectures, illustrates how a a. Brazilian company positively impacted the water systems in Brazil. b. German company moved toward restorative balance with internal energy usage. c. U.S. company developed a new solar light bulb for Bottom of the Pyramid individuals. d. Japanese firm provided large-scale support to Refugees International Japan. Answer: d 20. The Think Ethics box describing the “A future” program highlights a. BMW and the new future code of ethics for employees. b. British Airways and its dramatic shift toward ethical treatment of employees. c. the company Auto grill’s program applying sustainability thinking to the relationships with people, the environment, and to product and services. d. A Mexican university’s statement of sustainable conduct for faculty and employees. Answer: c Solution Manual for Principles of Responsible Management: Global Sustainability, Responsibility, and Ethics Roger N. Conaway, Oliver Laasch 9781285080260, 9789387994904