Business Characteristics, Benefits, Ethics, and Structures
Characteristics of Businesses
Businesses consist of a number of people.
The people who belong to them will share some values and views about the purpose of the businesses.
They will have incomes and costs, profits and losses.
They need different types of resources to produce different goods and services.
They need to coordinate a number of different activities done by different individuals.
Benefits of Small Businesses
- Creating employment: more than 90% are employed in SMEs in the western world.
- Their output is an input to big firms: They provide specialized services and are more innovative as they are less bureaucratic and more flexible in responding to market trends.
- Contribute more to industrial and economic growth
Definitions of Organizational Culture
Culture is a pattern of beliefs and expectations shared by the organizational members. These beliefs and expectations produce norms that powerfully shape the behavior of individuals and groups within the organization.
Factors Influencing Culture
- The dominant leader: vision, management style, personality
- The history and tradition of the business
- The type of technology used
- The industry or sector the business is in.
- The customers of the business, who they are and what they expect
Defining Business Ethics
A system of values and principles that guide the behavior of a specified group.
A set of moral principles or values that governs the conduct of an individual or a group.
The branch of philosophy that deals with what is considered to be right and wrong.
Ethics consists of the standards of behavior that our society accepts.
Business Structures
A structure gives a business an identity and provides continuity.
Structure provides a framework for the allocation of roles and responsibilities.
How to group activities to achieve desired objectives (organizational chart)
Advantages of Having a Business Structure
- It enables participation.
- It provides a framework for the allocation of responsibilities and authority.
- It establishes an identity for the business.
- It leads to prompt continuity and change reacting to the environment.
The Psychological Contract
The Psychological Contract is a variant from Vroom’s expectation theory.
The psychological contract between the employer and the employee differs from a written employment contract in that it is concerned with implicit expectations, obligations, and promises that both parties believe have been made with regard to what each owes and expects to receive from the other.
Advantages of Having a Business Structure
It enables participation.
It provides a framework for the allocation of responsibilities and authority. It establishes an identity for the business.
It leads to prompt continuity and change reacting to the environment.
Standardisation
The extent to which a business has standard procedures.
Formalisation
The extent to which rules, procedures, instructions, and so on are written down, or formalized.
Defining Business Ethics
A system of values and principles that guide the behavior of a specified group.
A set of moral principles or values that governs the conduct of an individual or a group.
The branch of philosophy that deals with what is considered to be right and wrong.
Ethics consists of the standards of behavior that our society accepts.
Stakeholders
Stakeholders are people or groups who have a legitimate interest in the activities of businesses and other organizations in their society.
All businesses have internal stakeholders: shareholders, employees, managers, directors, trustees. They also have stakeholders external to the business but strongly linked and affected by it such as competitors, customers, suppliers, buyers.
Different stakeholders have different interests, and these interests may be in conflict.
The culture, structure, and control systems within a business will determine how these conflicts or trade-offs are resolved. Some stakeholders are protected by law but not all.
Stakeholders and their Expectations
Owners
- Financial Return
- Capital growth
Employees
- Pay
- Work satisfaction, training, social integration
Customers
Supply of
- goods/services
- Quality
Job Design
Job design is how work is organized to meet the objectives of the business.
The Job design should be reviewed frequently as jobs change constantly.
For example, some appropriate times for reviewing job design are at times of:
- Recruitment
- The annual performance appraisal
- Times of major changes such as technological and innovational changes
The Job Characteristics Model by Hackman & Oldham (1980)
- Skill variety (People like to use a variety of their skills)
- Task Identity (what is your job)
- Task Significance (How great is your job)
- Autonomy (doing a job personally without interference from others)
- Feedback from the job (does the job provide information as to how the employee is performing)
Douglas McGregor (1960)
Two fundamentally different views of human nature spawn two fundamentally different leadership approaches:
Theory X: managers believe that workers are motivated only by money; they are lazy, dislike work and lack ambition and thus they need to be controlled.
Theory Y: managers believe that workers are motivated by many needs; Managers should trust workers and help them to their best.
Abraham Maslow (1943)
Identifies five levels of individual needs.
Assumes that some needs are more important than others and must be satisfied before the other needs can serve as motivators.
People seek to satisfy 5 basic needs:
- Self Actualization: Achieving one’s potential
- Self Esteem: Awards, public recognition, informal recognition
- Social: belongingness, feeling welcomed, part of the group or organization
- Safety: safe working conditions, job security (secure environment)
- Physiological: (food, drink, shelter)
Why people might go to work?
Financial reasons: to earn their living
Non-financial reasons:
- Job satisfaction
- Going to work is a good way of meeting people and making friends
- Work can give people an identity
- Some people are drawn to work that does good for others
- Some people are keen to build a career