Wednesday, July 23, 2008

Business Ethics and Leadership


How does one link between business ethics and leadership? American Heritage Dictionary (2006) defines ethics as the moral quality of a course of action; any set of moral principles or values; the study of the general nature of morals and of the specific moral choices to be made by the individual in his [or her] relationship with others. Business ethics is a subset of the study of ethics and is defined as the study of what makes up good and bad business conduct, (Bowen, 2003). This conduct occurs when the firm acts as an organization, as well as when individual managers make decisions inside the organization.

Examining what comprises the organizational culture should reveal some key attributes that encourage ethical behavior. Scholars who studied organizational reputation (Dutton and Dukerich, 1991) maintained that a positive reputation, such as one for ethical behavior, had a beneficial effect in the marketplace. Stormer (2003) credited neoclassical economic theory with the idea that ethical corporate behavior enhanced profitability, but called for a theory that encouraged ethical behavior from a philosophical standpoint of benefit to society. The sum total of individual employees’ ethical values influences corporate conduct, especially in a corporation’s early years. The activities during these years, in turn, form the basis of what constitutes a corporate culture, or an environment for doing business. In a free-market society, values of productivity, efficiency, and profits become part of the culture of all companies, (Small, 2002).

Theories of ethical thought

Consequential theories

Ethicists, business people, and workers who adhere to a consequential theory of ethics judge acts as ethically good or bad based on whether the acts have achieved their desired results. The actions of a business or any other societal unit are looked at as right or wrong only in terms of whether the results can be rationalized. This theory is best exemplified by the utilitarian school of thought, which is divided into two sub-schools: act utilitarianism and rule utilitarianism, Kubasek, Brennan & Browne (2003). In general, adherents of this school judge all conduct of individuals or businesses on whether it brings net happiness or pleasure to a society. They judge an act ethically correct after adding up the risks (unhappiness) and the benefits (happiness) to society and obtaining a net outcome.

Act utilitarians determine if an action is right or wrong on the basis of whether that individual act (the payment of a bribe) alone brings net happiness to the society as opposed to whether other alternatives (e.g., not paying the bribe or allowing others to pay the bribe) would bring more or less net happiness, Kubasek, Brennan & Browne (2003).

Rule utilitarians argue that an act (the payment of the bribe) is ethically right if the performance of similar acts by all similar agents (other contractors) would produce the best results in society or has done so in the past. Rule utilitarians hold the position that whatever applicable rule has been established by political representatives must be followed and should serve as a standard in the evaluation of similar acts, Kubasek, Brennan & Browne (2003).

Deontological theories

Deontology is derived from a Greek word meaning “duty.” For advocates of deontology, rules and principles determine whether actions are ethically good or bad. The consequences of individual actions are not considered. The Golden Rule, “Do unto others as you would have them do unto you,” is the hallmark of the theory. Absolute deontology claims that actions can be judged ethically good or bad on the basis of absolute moral principles arrived at by human reason regardless of the consequences of an action; that is, regardless of whether there is net happiness. Immanuel Kant (1724–1804) provided an example of an absolute moral principle in his widely studied “categorical imperative.” He stated that a person ought to engage only in acts that he or she could see becoming a universal standard.

Humanist theories

A third school of thought, the humanist school, evaluates actions as ethically good or bad depending on what they contribute to improving inherent human capacities such as intelligence, wisdom, and self-restraint, Kubasek, Brennan & Browne (2003).

Profit-oriented theory

The profit-oriented theory of social responsibility begins with a market-oriented concept of the firm that most readers were exposed to in their first or second course in economics, Kubasek, Brennan & Browne (2003). Holders of this theory argue that business entities are distinct organizations in our society and that their sole purpose is to increase profits for shareholders. Businesses are to be judged solely on criteria of economic efficiency and how well they contribute to growth in productivity and technology. Corporate social responsibility is shown by managers who maximize profits for their shareholders, who, in turn, are able to reinvest such profits, providing for increased productivity, new employment opportunities, and increased consumption of goods, Rost (1995).

Managerial theory

Advocates of the managerial theory of social responsibility argue that businesses, particularly large institutions, have a number of interest groups or constituents both internally and externally that they must deal with regularly, not just stockholders and a board of directors, Kubasek, Brennan & Browne (2003). A business has employees, customers, suppliers, consumers, activist groups, government regulators, and others that influence decision making and the ability of the entity to make profits.


American Heritage Dictionary (2006) Retrieved March 25, 2006, from

Bowen, S. A., (2004). Organizational Factors Encouraging Ethical Decision Making: An exploration into the Case of an Exemplar. Journal of Business Ethics, Part 2, Vol. 52 Issue 4, p311-324, Retrieved March 25, 2006, from EBSCOhost

Dutton, J. E. & J. M. Dukerich: (1991). Keeping an Eye in the Mirror: Image and identity in Organizational Adaptation, Academy of Management Journal 34(3)

Kubasek, N.K., Brennan, B.A., & Browne, M.N. (2003). The legal environment of business: A critical thinking approach (3rd. ed.). Upper Saddle River, NJ: Pearson Education, Inc.

Rost, J.C. (1995). Leadership: A discussion about ethics. Business Ethics Quarterly. 5(01), 129-142. Retrieved March 16, 2006, from University of Phoenix rEsource database.

Small, M. W.,(2002). Practical Problems and Moral Values: Things We Tend to Ignore
Revisited. Journal of Business Ethics, Part 2, Vol. 39 Issue 4, p401-407, 7p. Retrieved on March 16, 2006 from EBSCOhost

Stormer, F.(2003). Making the Shift: Moving from ‘‘Ethics Pays’’ to an Inter-Systems Model of Business’, Journal of Business Ethics. Retrieved on March 16, 2006 from EBSCOhost

Global Business Operating Strategy: Trends, Issues, and Problems

Business Positioning

The growing trend towards globalization brings opportunities for companies to expand overseas and grow revenues. As many companies have experienced, expanding the geographic scope of the market can indeed offer rewarding growth opportunities (Knight, Dyer, 2005). However, expanding to new geographic market offers serious challenges to companies. In particular, attractive markets are hardest to penetrate, as incumbents or existing competition will fight back to defend their market position.

Bryce, and Dryer (2007) propose a low profile and indirect business positioning to penetrate attractive market, so as not to catch attention of existing competition until it’s too late for them to react. The authors propose three business positioning approach in pursuing attractive markets, which compose of leveraging existing strengths and resources, reconfiguring the value chains by changing activities or sequence of activities in delivering value to customers, establish niches attracting customers in the fringe segments. Given the need for a global perspective in business positioning, Gupta and Govindarajan (2004) recommend that companies consider the star framework of global competitive advantage. The star framework recommends that the companies select the business positioning that contributes in improving global competitive advantage of the company in terms of expanded global activity architecture, maximized location competencies, and improvement of global coordination.

Mergers and Acquisitions

Marzulli, and Haskamp (2007) mentioned that there has been an increase in mergers and acquisitions activities in Northern America and worldwide. In particular, there have been significant acquisition activities done by private equity firms through leveraged buyout. The strong leveraged buy-out activities were fueled by low interest rates during the past years. However, the recent trend of increasing interest rates is creating challenges to private equity firms, as this increases their cost to acquire companies. Another noted trend is the increase activity of hostile takeover in the U.S., with hostile bids doubled from 14 to 32 in the last two years (Marzulli, and Haskamp, 2007).

The intention of pursuing mergers and acquisitions is to attain synergies between companies. However, it is disturbing that only 20% of completed mergers and acquisitions are able to achieve the intended level of synergies (Atkinson, and Clarke, 2007). As the cultural difference between companies increase, the higher is the risk that such mergers and acquisitions will not yield the required results. This makes mergers and acquisition involving companies based in different countries to be more challenging. Atkinson, and Clarke (2007) point to the destructive effect of culture divide in hindering business integration post the merger and acquisition. In order for the merger and acquisition to work will require that a unified culture of the combined organization be shaped to deliver outstanding values to all stakeholders. This then requires companies to conduct pre-merger and pre-acquisition analysis that goes beyond the financial aspect to include the organizational culture perspective.
Best Practice in Global Acquisition:

Cisco Systems demonstrates successful formula for global acquisitions that is worthy of emulation. Global acquisition has been an integral part of the company’s operation and business model. Acquiring technology companies at a fast pace allows Cisco to absorb new technology, acquire top technical talents, increase the company’s product portfolio, and neutralize upcoming competitors. Cisco acquires companies in different parts of the world to capture not only new products, but the best engineering and entrepreneurial talents as well. Upon completion of the acquisition, Cisco gives the acquired organization autonomy to operate independently. The 2004 annual report of Cisco Systems mentioned that the company completed twelve acquisitions during that year, and expected to follow the same rate of acquisitions the next year.
Chang, Chatman, and O’Reilly (2005) mentioned that the two key factors instilled in Cisco’ culture serving as the foundation for its successful acquisitions are not adapting technology religion, and listening carefully to customer. Cisco did not rigidly impose one technology to the customer; instead, the organization listens to the needs and problems of the customer, and matches this with appropriate technology solution. Likewise, Chang, Chatman, and O’Reilly (2005) also mentioned that Cisco’s culture is based on the principles of open communication, empowerment, trust, and integrity. Such form of organizational culture is able to support Cisco’s acquisition efforts.

Strategic Partnership:

Companies seek to establish strategic partnership to look for synergies in cost, capital, revenue, and growth for mutual benefit ( Dobbs, Suoni, Tortorici, 2007). Strategic partnership can only exist by sustaining relationship that is mutually beneficial for both parties. Likewise, a key factor influencing partnership and collaboration is the desire to maintain such relationship between the involved companies (Gustafson, Johnson, and Roos, 2005). Partnership requires the highest level of relationship, needed for industries characterized as complicated, fast changing, and rapidly developing (Jacobs, 2005). Larzelere and Huston (1980) further emphasized that trust is the prerequisite for developing long-term commitments. Trust serves as the foundation for nurturing and sustaining strategic partnership that requires time to build, but can be quickly damage due to miscommunication, lack of business integrity, and conflicting objectives.

Global Alliances:

Colteryahn and Davis (2004) describe the evolving global environment as having increasing uncertainty, increasing global interdependence and competition, and increasing rate of change. The challenges from such an environment can be too much for an organization to face alone by itself. Such environmental trends point to the need for companies to collaborate with partners and even with competitors at a global scale. The ability of companies to build collaborative advantage will help those companies thrive in the ever increasingly complex environment (Hansen, Nohria, 2006).

Global alliance was popularly adapted by different industries, ranging from the high technology sector to the airline industry. Global companies form alliance with foreign partners, channel partners, or even with competitors to share risk, share assets, and eventually share the pie of the market. Gupta and Govindarajan (2004) mentioned that based on the theory of cross border scalability, the risk of success of global strategy increases as the level of local infrastructure and local adaptation increases.

The formation of global alliance is the recommended mode of entry when the level of local infrastructure and local adaptation increases. Alliance will be able to leverage the strengths and assets of local partners reducing the risk and capital investment by the company. However, the challenges for global alliance pertains to the complexity of managing the relationship with alliance members due to conflicting goals, and the company’s lack of control in dictating the pace of the global expansion.


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Friday, February 1, 2008

Systems thinking

Systems thinking is a social approach using systems theories to create desired outcomes, or change. It is a unique approach to problem solving, in that it views certain 'problems' as a part of the overall system so focusing on these outcomes will only further develop the undesired element or problem. Systems thinking is a framework that is based on the belief that the component parts of a system will act differently when the systems relationships are removed and it is viewed in isolation. The only way to fully understand why a problem or element occurs and persists is to understand the part in relation to the whole. Standing in contrast to Descartes', scientific reductionism and philosophical analysis, it proposes to view systems in a holistic manner. Consistent with systems philosophy, systems thinking concerns an understanding of a system by examining the linkages and interactions between the elements that comprise the entirety of the system.

Systems thinking attempts to illustrate that events are separated by distance and time and that small catalytic events can cause large changes in complex systems. Acknowledging that an improvement in one area of a system can adversely affect another area of the system, it promotes organizational communication at all levels in order to avoid the silo effect.


• Russell L. Ackoff (1999) Ackoff's Best: His Classic Writings on Management. (Wiley) ISBN 0-471-31634-2
• Bela H. Banathy (1996) Designing Social Systems in a Changing World (Contemporary Systems Thinking). (Springer) ISBN 0-306-45251-0

Friday, January 25, 2008

Smile When You Bleed!

This may look very funny for many people. But, how do you respond to the most difficult question when someone is fully aware that you are bleeding? You offer an unconditional smile. Smiling is the secret to health and serenity according to several spiritual traditions. The Inner Smile practice propounds that when we smile like a Buddha, the world beams back.

A deep inner smile spreads like a relaxing elixir making us receptive to transform negative energy into positive. Conversely, a scowl suppresses our immune system by increasing stress, contracting channels and blocking energy. Research by French physiologist Dr Israel Waynbaum indicates that facial muscles used to express emotion trigger specific brain neurotransmitters. Smiling signals happy healing hormones such as ecstatic endorphins and immune boosting killer T-cells whereas frowning triggers the secretion of stress hormones. Smile therapy actually lowers the stress hormones cortisol, adrenalin and noradrenaline and produces hormones which stabilize blood pressure, relax muscles, improve respiration, reduce pain, accelerate healing and stabilize mood. If you’re feeling down the stress hormones secreted with a scowl may increase blood pressure, weaken the immune system, increase susceptibility to infections, and exacerbate depression and anxiety.

But what if we don’t feel like smiling? Can we fake it till we make it? Though a heart-felt smile has a deeper effect, even a surface smile tricks the brain into releasing happy hormones according to facial biofeedback research. And the more we smile, the more we want to smile concluded a study where people allowed to smile found cartoons funnier than those suppressed from smiling by holding pencils in their lips. This is because each time we smile we reinforce happy neural pathways that fire more spontaneously with each subsequent use. Self- love smiling circuits then release healing nectar and self-hate messages release poisons that breed disease according to Taoism.

A challenge many experience in practicing the inner smile is the tendency towards negativity. We can catch an inner frown from others negative outlook or our own. When you get tense simply remind yourself to smile again and any inner wrinkles will soon smooth over, uplifting others energy. Strengthen your inner smile by practicing it in difficult situations such as during exercise, traffic jams, long queues and when annoyed.

The bottom line: Keep the worries at bay, and practice your inner smile!


1. Caroline, Robertson, (2007). The Inner Smile. Retrieved on January 25, 2008

2. Davis & Palladino, (2000) In a research study, participants were either prevented or encouraged to smile by being instructed how to hold a pencil in their mouths. Those who held a pencil in their teeth and thus were able to smile rated cartoons as funnier than did those who held the pencil in their lips and thus could not smile.

3.Strack, F., Martin, L.L. and Stepper, S. (1988) Inhibiting and facilitating conditions of the human smile: A nonobstrusive test of the facial feedback hypothesis. J. Pers. Soc. Psychol. 54: 768-777

Thursday, January 17, 2008

Global Leader Roles – Do organizations follow the right approach?

Leaders who tend to be remembered over the course of history are probably, in most cases, those who transform organizations or, more generally, ways of thinking, Stormer (2003).

The most important point for a leader in a multinational company is how the management is able to harmonize between individualism and collectivism points of view in order to achieve high productivity.

According to Muna (2006), there are seven roles that global leaders must play:
1. Leaders have a responsibility for preparing and selecting human resources, taking care of them, and developing them.
2. Leaders must be able to work in a team, wise in delegating and empowering, and helping each other when their subordinates and colleagues are in trouble.
3. Leaders have excellent versatility as they may create the company’s long-term value.
4. Leaders must know how to give direction towards goals that must be achieved.
5. Leaders must possess global mindset, have a broad point of view, be aware of cultural differences, and be able to handle different consumer preferences.
6. Leaders must have an ability to negotiate with different customers, clients, suppliers, government officials, etc.
7. Leaders must be able to handle multiple tasks and to balance work, family, and personal life. Besides, there are alternative improvements that could develop the relationship between headquarters and subsidiaries.

Do organizations follow these basic principles. Its worth evaluating the options!!

Reference: Muna, A. F. (2006). Seven leadership roles. International Journal of Commerce and Management 16 (1): 51-57.

Offshore Centric Enterprises – Some Thoughts

The offshore centric enterprise can deliver enormous economic benefits to both developed and developing nations. The integration of the work force in developing countries into global systems of production is already raising living standards, improving working conditions, and creating more jobs in those countries. Small and medium-sized businesses everywhere, particularly, are benefiting: as new services— from back-office administration to sales support—create infrastructures once only affordable to large organizations, these businesses can now participate in the global economy.

Shifting to the offshore model also presents big challenges for leaders in every sector of society. The very fact that so many more people all over the world are gaining equal access to the production process and the marketplace means much more trade and competition. Although this will create wealth and opportunity, it will also bring disruption and fear, both of which could threaten global integration. Legitimate concerns about job loss and skill shortages must be addressed in realistic and constructive ways.

The single most important challenge in shifting to offshore model—and the consideration driving most business decisions today—will be securing a supply of high-value skills. Nations and companies alike must invest in better basic educational and training programs. New kinds of managerial skills are also needed. Hierarchical, command-and-control approaches simply do not work anymore. They impede information flows inside companies, hampering the fluid and collaborative nature of work today. This is a key consideration in modern day organizations.

Global Competition in the Flat World

The cliché that the world is getting flat is dramatically true for today’s organizations. With rapid advances in technology and communications, the time it takes to exert influence around the world from even the most remote locations has been reduced from years to only seconds. Business is becoming a unified global field as trade barriers fall, communication becomes faster and cheaper, and consumer tastes in everything from clothing to cellular phones converge, Chowdhury (2004). In the twenty first century, organizations will have to feel “at home” anywhere in the world. Companies can locate different parts of the organization wherever it makes the most business sense; top leadership in one country; technical brainpower and production in other locales. Although this growing interdependence brings many advantages, it also means that the environment for companies is becoming extremely complex and extremely competitive. Organizations have to learn to cross lines of time, culture, and geography in order to survive. Every company, large and small, faces international competition on its home turf at the same time it confronts the need to be more competitive in international markets. Rising managers today need to know a second or third language and develop cross-cultural understanding. Large companies are working to globalize the management structures to remain competitive internationally, while even the smallest companies are searching for structures and processes that help them reap the advantages of global interdependence and minimize the disadvantages.

Organizational Turbulence

For much of the twentieth century, organizations operated in a relatively stable business environment, so managers could focus on designing structures and systems that kept the organization running smoothly and efficiently. There was little need to search for new ways to cope with increased competition or shifting customer demands. All that began to change in the 1980s, and today’s organizations are struggling to catch up with the changes that have proliferated since then. Advances in computers and information technology are driving many of these changes at the same time they provide ways to cope with them. We’ll see more turbulence in the days ahead. Fasten your seat belts and get ready for the ride!!

Reference: Chowdhury, S. (2002). Organization 21C: Someday all organizations will lead this way. Upper Saddle River, NJ: Prentice Hall.

Value adding aspects of the product and/or service to the organization

There is an urgent need for Corporations to move toward value added services and away from general commodity-type services, Birks (2000). In order to remain a leader in customer service and compete in a highly competitive market, organizations looks for ways to foster efficiencies by improving collaboration within the company and by offering value-added services that benefit its customers. “Our business is taking place at the customer’s location, so what we try to do is streamline collaboration with our customers and internally with our employees,” a CEO remarked. “That partnership helps us develop value-added services that can increase efficiencies for both the organizations and its customers, which makes everyone happy.”
Market leaders across industries recognize services is key to driving revenue, differentiating offerings and meeting customer needs.
•Increasing global competition
•Mounting product price pressure
•Decreasing product margins
Cycle Time
•Decreasing product life cycles
Integrated customer needs
•Meeting wider set of related customer needs & customer out comes
•Creating new sources of differentiation
•Diversifying revenue stream
•Higher Margins
•Longer contracts

Reference: Birks, G., (2000). Value-added Information Services. The Art of Being Synchronous with Your Corporation. Retrieved on January 15, 2008 from:

Improving communication among cultures in a Global Context

To thrive in a dynamic and often stressful environment, companies must make every effort to build effective communications with those from different cultures. By recognizing and being familiar with global cultural differences, managers can become more sensitive to potential problem areas at the international, national, and business levels. Establishing organization wide communication guidelines for all individuals will go a long way in eliminating unnecessary communication problems. Such guidelines must stress the use of precise and clear language both for in-person meetings and in less personal mediums such as email. The extra time spent by organizations in communications preparation and screening as well as cultural understanding will be repaid immeasurably through improved relations not only with foreign business partners but also with all the individuals from other cultures who comprise an essential and critical part of the global business environment— the international consumer base.

Ten Ways to Improve Communications among cultures.
1. Recognize that cultural differences exist between communicating parties.
2. Become familiar with cultural generalizations, as they may affect communications.
3. Try role reversal as a means to provide clues about cultural behaviors in communications.
4. Gather background data on communicating parties that may modify cultural
5. Communicate using precise and clear statements rather than idioms or acronyms.
6. Consider the implications to non-native speakers when assessing the use of single-
language communications.
7. Recognize that translators limit the ability of communicators to have real-time exchanges.
8. Respect the different cultures as “different voices” that can be used to find common-
ground agreement.
9. Review communications content prior to distribution to assure that information is
presented without cultural or language bias.
10. Confirm the validity of message content at the completion of the communication

Friday, January 11, 2008

Ethical Issues in Information Technology

The term “ethics” comes from the Greek word ethike that means “character,” and indeed the ancient Greeks conceived issues about what people should do in terms of impact upon character (Aristotle, 350 BCE). Nowadays, “ethics” is an inclusive term for concerns also referred to by “morality,” “value,” and “justice.” Besides character and action, ethics in this inclusive sense is also concerned with the value or goodness of things and situations and with the justness of institutions (both formal and informal).

Much professional ethics for IT consultants, for example, revolves around preserving and developing a good reputation for being the sort of person who will regularly do good work, make sure a project is done well, and the like. One’s reputation is for being the kind of person who will consistently behave well, but good character is by no means our only concern with regard to what people should do. Bad actions and bad performance can be more important than any amount of good reputation if they are bad enough. People sometime surprise us when they act “out of character.” On the other hand, it is the belief in enduring character that allows people to “coast on their (good) reputations.” And IT firms affirm their belief in the enduring character of technical expertise when they hire previously convicted hackers like Kevin Mitnick.

The business discipline

The business discipline under consideration is Information Technology Statement of ethical issue:

There are at least three sets of conflicting interests in Information Technology outsourcing: 1) the corporations who save large amounts of money on labor costs; 2) the offshore workers who receive better salaries in their home economies; and 3) the United States workers who lose their jobs.

Each of these parties has important considerations involving their own interests: the corporation for maximizing profits and shareholder return, the global workers for improving their income, and the U.S. workers for keeping their jobs. There are additional self- interested considerations for the corporation: Some jobs simply do not outsource well, even if the technical abilities of the workers in the two countries are the same. But even when all self-interested considerations are taken into account, there remains an ethical issue, an issue of justice. Defenders of globalization maintain that free trade of jobs will make everyone better off in the long run. This claim goes beyond considerations of self-interest and it may be true or false. Due to globalization jobs occur within a social and economic context, and it is within that context that economic inequalities are ethically justified. So why is globalization of employment any more justified than globalizing of tax liabilities? It is clear in both cases that corporations benefit from the social and economic institutions that allow them to function in their home country. It might be expected that they make corresponding contributions to their home country even when they could do better otherwise. On an institutional level, many such principles are laws, but the ethical component of such discussion is implied in the famous statement, “There ought to be a law.” The ethical question behind this statement is “Ought there to be a law?” And even if there is a law, the ethical question is “Is it a just law?” And behind this question is a major theoretical question, “What is justice?”

Identification of the business decision to be made

The range of ethical issues important for IT is perhaps broader than one might have thought. But are the issues really any different from other ethical issues? Does IT itself produce circumstances that don’t fit into pre-existing ethical categories? The second question is: What features of Information Technology create new ethical issues? There are many questions and there may not be very many answers!