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IV. TECHNOLOGY AND BUSINESS
Technology refers to the methods used to create products, including both physical goods and
intangible services.
Three specific areas of technology worth noting here are: (1) the shift toward a service-based
economy, (2) the growing use of technology for competitive advantage, and (3) mushrooming
change in information technology
A. Manufacturing and Service Technologies
Manufacturing is a form of business that combines and transforms resources into tangible
outcomes that are then sold to others.
Manufacturing was once the dominant technology in the United States. During the 1970s,
manufacturing entered a long period of decline, primarily because of foreign competition. Over
the last decade or so U.S. manufacturing has regained a competitive position in many different
industries.
During the decline of the manufacturing sector, a tremendous growth in the service sector kept
the overall U.S. economy from declining at the same rate.
A service organization is one that transforms resources into an intangible output and creates
time or place utility for its customers. Moreover, employment in service occupations is
expected to grow 20.9 percent between 2012 and 2022.
Managers have come to see that many of the tools, techniques, and methods that are used in a
factory are also useful to a service firm. At the same time, though, service-based firms must
hire and train employees based on a different skill set than is required by most manufacturers.
B. Technology and Competition
Technology is the basis of competition for some firms, especially those whose goals include
being the technology leaders in their industries. But because of the rapid pace of new
developments, keeping a leadership position based on technology is becoming increasingly
challenging.
Businesses have increasingly found that they can be more competitive if they can
systematically decrease cycle times (the time that it takes a firm to accomplish some recurring
activity or function from beginning to end).
Twenty years ago, it took a carmaker about five years from the decision to launch a new
product until it was available in dealer showrooms. Now most companies can complete the
cycle in less than two years. The speedier process allows them to more quickly respond to
changing economic conditions, consumer preferences, and new competitor products while
recouping their product-development costs faster.
C. Information Technology
Most people are very familiar with the swift advances in information technology.
Breakthroughs in information technology have resulted in leaner organizations, more flexible
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operations, increased collaboration among employees, more flexible work sites, and improved
management processes and systems.
On the other hand, they have also resulted in less personal communication, less “down time”
for managers and employees, and an increased sense of urgency vis-à-vis decision making and
communication—changes that have not necessarily always been beneficial.
V. ETHICS AND CORPORATE GOVERNANCE
Ethics and related issues have also engendered renewed interest in recent years. One special aspect
of business ethics, corporate governance, has also taken on increased importance. Ethics also
increasingly relate to information technology.
A. Framing Ethical Issues
Figure 2.3 illustrates how many ethical situations can be framed. Specifically, most ethical
dilemmas faced by managers relate to how the organization treats its employees, how
employees treat the organization, and how employees and organizations treat other economic
agents.
1. How an Organization Treats Its Employees
This area includes policies such as hiring and firing, wages and working conditions, and
employee privacy and respect.
Wages and working conditions, although tightly regulated, are also areas for potential
controversy. The same goes for employee benefits, especially if an organization takes
action that affects the compensation packages—and welfare— of an entire workforce or
segment of it.
Finally, most observers would also agree that an organization is obligated to protect the
privacy of its employees.
2. How Employees Treat the Organization
Numerous ethical issues also stem from how employees treat the organization, especially in
regard to conflicts of interest, secrecy and confidentiality, and honesty.
A conflict of interest occurs when a decision potentially benefits the individual to the
possible detriment of the organization.
Divulging company secrets is also clearly unethical.
A third area of concern is honesty in general. Relatively common problems in this area
include such activities as using a business telephone to make personal calls, stealing
supplies, and padding expense accounts.
In recent years, new issues regarding such behaviors as personal Internet use at work have
also become more pervasive. Another disturbing trend is that more workers are calling in
sick simply to get extra time off.
Although most employees are basically honest, organizations must nevertheless be vigilant
to avoid problems resulting from such behaviors.
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3. How Employees and the Organization Treat Other Economic Agents
Managerial ethics also come into play in the relationship between the firm and its
employees with other economic agents. As shown in Figure 2.3, the primary agents of
interest include customers, competitors, stockholders, suppliers, dealers, and unions.
The interactions between the organization and these agents that may be subject to ethical
ambiguity include advertising and promotions, financial disclosures, ordering and
purchasing, shipping and solicitations, bargaining and negotiation, and other business
relationships.
Another area of concern in recent years involves financial reporting by some e-commerce
firms. In at least a few cases, some firms have substantially overstated their earnings
projections to entice more investment.
Additional complexities faced by many firms today include the variations in ethical
business practices in different countries. In some countries, bribes and side payments are a
normal and customary part of doing business. However, U.S. laws forbid these practices,
even if a firm’s rivals from other countries are paying them.
B. Ethical Issues in Corporate Governance
A related area of emerging concern relates to ethical issues in corporate governance— the
oversight of a public corporation by its board of directors.
The board of a public corporation is expected to ensure that the business is being properly
managed and that the decisions made by its senior management are in the best interests of
shareholders and other stakeholders. But in far too many cases the recent ethical scandals
alluded to previously have actually started with a breakdown in the corporate governance
structure.
Boards of directors are also increasingly being criticized even when they are not directly
implicated in wrongdoing. The biggest complaint here often relates to board independence.
C. Ethical Issues and Information Technology
Another set of issues that have emerged in recent times involves information technology.
Among the specific questions in this area are individual rights to privacy and the potential
abuse of information technology by companies.
One-way management can address these concerns is by posting a privacy policy on its website.
The policy should explain exactly what data the company collects and who gets to see the data.
It should also allow people a choice about having their information shared with others and
indicate how people can opt out of data collection.
In addition, companies can offer web surfers the opportunity to review and correct information
that has been collected, especially medical and financial data.
Despite the technical difficulties, government agencies are already working on Internet privacy
guidelines; this means, in turn, that companies will also need internal guidelines, training, and
leadership to ensure compliance.
D. Social Responsibility
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A related business challenge relevant to OB is adopting a broader stakeholder perspective and
looking beyond shareholder value or the short-term stock price. In general, this view is called
social responsibility. Definitions of corporate social responsibility often include businesses
living and working together for the common good and valuing human dignity. An important
part of this is how employers treat their employees.
Is it really the responsibility of businesses to be good citizens? Doing so can help a firm attract
the best talent, and customers are increasingly favoring companies that do the right thing.
Although most agree with their importance in principle, some people still believe that managers
should focus solely on stockholders’ interests. Others argue that because business is an
influential element of society, it has an obligation to solve problems of public concern, that it is
in the enlightened self-interest of organizations to be socially responsible.
To have lasting effects, social responsibility efforts should be integrated into the culture of the
organization.
Corporate sustainability initiatives can be top-down, with someone in a position of authority
dictating to managers and employees what to do. Corporate sustainability efforts can also be
grassroots, with employees identifying projects and taking the initiative to organize their own
activities.
The International Organization for Standardization (ISO) has created a variety of standards that
help organizations gain international acceptance of their practices and outcomes. In addition to
environmentally related standards such as sustainability and carbon emissions, the ISO
publishes management standards including those for leadership, customer focus, involvement
of people, and continual improvement.
VI. NEW EMPLOYMENT RELATIONSHIPS
A final significant area of environmental change that is particularly relevant for businesses today
involves what we call new employment relationships.
Two particularly important areas today involve the management of knowledge workers and the
outsourcing of jobs to other businesses, especially when those businesses are in other countries.
Managing temporary and contingency workers and tiered workforces is also becoming increasingly
complex. The nature of psychological contracts is also changing.
A. The Management of Knowledge Workers
Traditionally, employees added value to organizations because of what they did or because of
their experience. However, during today’s “information age,” many employees add value
simply because of what they know. These employees are often referred to as knowledge
workers.
As the importance of information-driven jobs grows, the need for knowledge workers will grow
as well. However, these employees require extensive and highly specialized training, and not
everyone is willing to make the human capital investments necessary to move into these jobs.
Compensation and related policies for knowledge workers must also be specially tailored.
B. Outsourcing and Offshoring
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a
license distributed with a certain product or service or otherwise on a password‐protected website or school-approved learning management system for classroom use.
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Outsourcing is the practice of hiring other firms to do work previously performed by the
organization itself; when this work is moved overseas, it is often called offshoring.
It is an increasingly popular strategy because it helps firms focus on their core activities and
avoid getting sidetracked by secondary activities. Firms today often outsource numerous
activities, including payroll, employee training, facility maintenance, and research and
development.
Up to a point, at least, outsourcing makes good business sense in areas that are highly unrelated
to a firm’s core business activities. However, what has attracted considerably more attention in
recent years is the growing trend toward outsourcing abroad in order to lower labor costs; this
practice is often called offshoring.
C. Temp and Contingency Workers
Another trend that has impacted employment relationships in business involves the use of
contingent or temporary workers.
A contingent worker is a person who works for an organization on something other than a
permanent or full-time basis. Categories of contingent workers include independent contractors,
on-call workers, temporary employees (usually hired through outside agencies), and contract
and leased employees. Another category is part-time workers.
Managing contingent workers is not always straightforward, however, especially from a
behavioral perspective. Expecting too much from such workers, for example, is a mistake that
managers should avoid.
Managers must understand that they need to develop a strategy for integrating contingent
workers according to some sound logic and then follow that strategy consistently over time.
D. Tiered Workforce
Yet another emerging issue in new employment relationships is what we call the tiered
workforce. A tiered workforce exists when one group of an organization’s workforce has a
contractual arrangement with the organization objectively different from that of another group
performing the same jobs.
These and similar arrangements, of course, may pose new challenges in the future. For instance,
recently hired workers may come to feel resentment towards their more senior colleagues who
are getting paid more for the same work. Likewise, as the job market improves and workers
have more options, firms may face higher turnover among their newer lower-paid employees.
E. The Changing Nature of Psychological Contracts
A final element of the business environment that both affects and is affected by employment
relationships such as those discussed above is the psychological contract.
A psychological contract is a person’s overall set of expectations regarding what he or she will
contribute to the organization and what the organization will provide in return.
Figure 2.4 illustrates the essential nature of a psychological contract. The individual makes a
variety of contributions to the organization—such things as effort, skills, ability, time, and
loyalty.
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a
license distributed with a certain product or service or otherwise on a password‐protected website or school-approved learning management system for classroom use.
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In return for these contributions, the organization provides inducements to the individual. Some
inducements, such as pay and career opportunities, are tangible rewards. Others, such as job
security and status, are more intangible.
If either party sees an inequity in the contract, that party may initiate a change. The employee
might ask for a pay raise or promotion, put forth less effort, or look for a better job elsewhere.
The organization can also initiate change by training the worker to improve his skills, by
transferring him to another job, or by firing him.
All organizations face the basic challenge of managing psychological contracts.
They want value from their employees, and they need to give employees the right inducements.
Recent trends in downsizing and cutbacks have complicated the process of managing
psychological contracts, especially during the recession of 2008–2010.
Increased globalization of business also complicates the management of psychological
contracts.
A related problem faced by international businesses is the management of psychological
contracts for expatriate managers. In some ways, this process is more like a formal contract
than are other employment relationships.
Summary and Application
Diversity is much more than demographics and can reflect combinations of characteristics in addition to a
single attribute. There are many types of diversity, including surface-level and deep-level diversity.
Diversity affects individual and organizational outcomes through processes including social integration,
differences in status and power, task conflict, relationship conflict, inclusion, and information processing.
Barriers to inclusion include the “like me” bias, stereotypes, prejudice, perceptions of loss by persons
who feel threatened by diversity initiatives, ethnocentrism, and unequal access to organizational
networks. Organizations promote diversity through top management commitment, staffing, training, and
mentoring.
Because societal culture influences the diverse values, customs, language, and expectations we bring with
us to work, it is important to understand its effects on our own as well as on other people’s behaviors.
Societal cultures can differ on a variety of characteristics, including collectivism, power distance, future
orientation, and gender egalitarianism as well as determine what employees consider desirable leadership
characteristics.
Globalization is playing a major role in the environment of many firms today. The volume of international
trade has grown significantly and continues to grow at a very rapid pace. There are numerous cross-
cultural differences and similarities that affect behavior within organizations.
Technological change has become a major driver for other forms of organizational change. It also has
widespread effects on the behaviors of people inside an organization.
Although ethics has long been relevant to businesses and managers, one special aspect of business ethics,
corporate governance, has also taken on increased importance. Ethics also increasingly relate to
information technology.
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a
license distributed with a certain product or service or otherwise on a password‐protected website or school-approved learning management system for classroom use.
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A final significant area of organizational change facing organizations today involves new employment
relationships. How well these employees are managed is seen as a major factor in determining which
firms will succeed. Outsourcing is the practice of hiring other firms to do the work previously performed
by the organization itself. Contingent and temporary workers and the creation of a tiered workforce also
pose special challenges.
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a
license distributed with a certain product or service or otherwise on a password‐protected website or school-approved learning management system for classroom use.
