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Culture Clash in the Boardroom

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Shona Beswick

on 28 October 2015

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Transcript of Culture Clash in the Boardroom

Week 12 Case Study: Ethics
Impact on Stakeholders
- Customers: violation of psychological contract and trust.

- Employees: harmful practises, criminal charges, additional paperwork, health issues and lack of motivation, therefore decrease in performance.
Issues
1. Almond China is required to comply with US government’s Foreign Corrupt Practices Act, executives of Almond China and Chongqing N° 2 Chemical are discussing if they should or should not pay 1% commission of a huge sale (30 million yuan) to the customer purchasing manager in order to close the deal.


To convince the Chongqing’s executives to comply with policies and ethics regulations in accordance with US government’s Foreign Corrupt Practices Act.
Issues
3. Almond China is a chemical company and they are aware of the safety and environmental practices, so in compliance with the German national standards, all safety equipment comes from Europe, however its partner called these investments “wasteful, frivolous and luxurious expenditures.
Background
Culture Clash in the Boardroom
- Ethics concern an individual's moral judgements on what's right and wrong.

- Decisions made in an organisation will be influenced by the culture of the company.
- Almond Chemical has an established joint venture with Chinese company, Chongquing.

- Cultural differences causing issues, in terms of generating sales and profit.

- Liu is thinking of the company's long-term reputation and ethics, whilst Chinese executives are thinking of instant profits.
Challenges
To make the Chongqing’s executives understand that the investment in safety and environmental practices are non-negotiable, because the rules and regulations in this area is highly important.
2. Almond China is not going through good times and they are experiencing some financial problems as they made only 60% of their target for the last quarter which means that their sales are not becoming concrete.
To accomplish target sales, attracting new customers without considering any type of bribery, they need to reject unethical offers in order to keep their prestige clean.
4. It seems that there is an evident culture clash in the case, Almond China must follow German standards which considers commissions and gifts, as a bribery, in comparison with their Chinese partners who has an embedded culture of lavish gifts, such as travels, dining, wining, etc.
To differentiate Chinese and German culture, convince executives of Almond's partner that they must follow International Regulations.

Alternative Two: Act Ethically

Outcomes of acting ethically based on three frameworks
Teleological
Deontological
Virtue ethics
Teleological Ethics

Applies more to unethical actions, as Jeffrey discussed
perceived outcomes
Almond China needs to refocus to the long term view
Then can develop strategy and implement policies and guidlines,
Deontological ethics
Based on social understanding of what is good/right
issue: Chinese emphasis on honour, respect and gift giving
simplistic
lacks strategic approach and adequate assessment of long term goals
Virtue Ethics
Individual moral education
difficult to apply to companies
moral understanding must be shared for company to have incentive to act this way
develops later in process as company's public and personal identity adjusts.

Overall Outcomes of Acting Ethically
Long term profit and economic sustainability
avoidance of "catch up" ethics
Competitive edge
reinvent public identity as ethically focused
Improve long term sustainability in both markets
Avoid catch up ethics
By focusing on improving strategies and procedures for safety
Less necessity to rush costly and inadequate procedures AFTER something goes wrong.
Improves reputation among consumers and other stakeholders
Improve profitability and sustainability
Long term commitment to ethical actions and motives leads to:
Improved competitive edge, enter into niche market of those who value ethical focus
Stronger personal and public identity; improving long term direction and decision making ability
Gradual adjustment in organisational culture to ethical one as changes are made and reputation improves.
2 Alternatives
1. Act ethically
2. Stay the same/do not act ethically

whats involved in these choices?
Stakeholders
laws
WHS (ohs)
Reputation
3 Sub-categories
1. Teleological ethics: Decisions based on perceived outcomes (good vs bad)
2. Deontological: decisions based on the right vs the wrong thing to do
3. Individual Character: A persons capacity to make the right choice (morals)
3 Perspectives
Shareholder Capitalism
- Viewing the company as property of the shareholders and act in their best interest only, i.e Only profiting matters
Corporate Social Responsibility CSR and Stakeholder cap
- Viewing the company as more than just a money making machine, but to service the community it operates in (Henry Ford)
Ethical Capitalism
- Not just appearing ethical, practicing ethically throughout the companies entire operation.
Carroll's model below illistrates the pyramid of ethics
Outcomes of Acting Unethically
Legal Issues
Businesses that fail to meet regulations and guidelines often face large penalties
Susceptible to ethical egoism
Based on rational self interest
Motivation from profits
Adam Smiths "invisible hand"
Teleological Ethics
Actions that produce the most happiness and pleasure as an ends, regardless of it being morally wrong or right
Often results in unethical actions
Limited scope of long term consequences
Focuses on short term Profit maximization pursued by Wang and Chen
Deontological Ethics
Looks at the means rather than the ends of an action
Moral duty to complete objectives and goals of a business
May not always benefit the company
Wang and Chen veers away from business policies to benefit the comany
Evaluation
- Some form of governing ethical framework should be implemented
- "Doing Right" and "Doing Good" underlie the ethical frameworks we have discussed
- An amalgamation of ethical capitalism and stakeholder capitalism would be the most beneficial
- These represent an unbending approach to values and ethics
- Both offer better performance, general and moral outcomes in the long-term
Week 12 - Ethics

Susan
Sonali
Jeffery
Shona
Norah
Jessica
Guanxi
- China's system of social networks and influential relationships which facilitate business and other dealings. e.g. bribes commissions is not accepted with the foreign corrupt practices.
- Chinese Approach: Emotion, Law, Reason
- Commonality? Reason.
- So the resolution should be focused not on policy implementation but relational, interactional and cultural change within the organisaiont
- European Approach: Law, Reason and then emotion
Execution
Sources of Conflict:
- Misunderstandings
-
Differences of Values
-
Differences in Viewpoints
- Differences in Interests
- Interpersonal differences
Power and Politics
- Though the difficulties faced by Almond China appear to be power based
- Important to note that the stakeholders involved in the power struggle share the same interests regarding organizational performance

Organizational Change
- Due to shared interests, an organisational change model is necessary rather than a power based solution
- Change is an emotional process
- German directors need to focus on adressing resistance and dissent rather than the politics behind it
- Encourage the Chinese to "buy into" the vision
- Education is KEY
- Exploit the 'middleground'/shared interests!
Resistance to change
Possibly a conciliatory approach is necessary
Address mental models
Take an emergent approach to future change processes
Take Home Message
If Liu persuades the Chinese side with emotion and the German side with reason, his job of mediating a resolution will be far easier
1. An ethical approach is necessary
2. A negotiation and conciliatory approach to conflict resolution is also necessary to minimise resistance
3. Organisational Change models must be addressed when analysing the best-fit solution to the issue
ACTIVITY TIME!

References:

Cots, E. (2011). Stakeholder social capital: a new approach to stakeholder theory. Business Ethics: A European Review, 20(4), 328-341.

Eckerd, S, Greer, B, Hill, J, & Wilson, D 2008, ‘The effect of unethical behavior on trust in a buyer–supplier relationship: The mediating role of psychological contract violation’, Journal of Operations Management, vol. 27, no. 4, pp. 281-293

King D and Lawley S (2013) Organizational Behaviour. Oxford: Oxford University Press

Xin, Katherine; Wang Haijie; Xu Shuibo; Zhang Tianbing. Culture clash in the boardroom, Harvard Business Review. Sep2011, Vol. 89 Issue 9, p129-133.
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