COLLEGE OF BUSINESS AND

MANAGEMENT
COURSE MODULE IN

ORGANIZATIO
N AND
MANAGEMENT

1
MODULE
 LESSON

OVERVIEW OF MANAGEMENT AND

1 ORGANIZATION
6
HOURS

This lesson gives an overview of management and organization. It emphasizes the importance of studying
management and organization, and role of managers in the efficiency and effectiveness of the
organization.

At the end of this lesson, you should be able to:

1. Explain the meaning of management;
2. Identify the scope of management;
3. Explain the importance of effectiveness and efficiency in organization;
4. Describe the characteristics of a manager;
5. Examine the levels of managers in the organization;
6. Compare types of managers;
7. Examine the skills required in managing;
8. Demonstrate the various role of managers;
9. Describe the nature of an organization;
10. Identify the basic principles of management and organization; and
11. Explain the importance of educating managers.

The satisfaction of human wants is a universal concern and this is the basic reason why organizations are
established. Governments, business firms, and even nonprofit organizations are expected to manage their
resources properly, or they will fail in the attempt to contribute their share in the alleviation of poverty and
want. Managers hold the key role in accomplishing these organizational goals. But first they must
understand their responsibilities, and how to carry them out efficiently and effectively.
This lesson attempts to support the above-mentioned statements

A. What is Management?

Management may be defined as the achievement of organizational objectives through people and other
resources. It consists of several functions, which may be briefly defined as follows:
1. Decision making is the process by which a decision maker determines the available alternatives and
chooses the best solution that suits a given problem.
 2. Planning is the process of establishing objectives and suitable courses of action before taking
action.
3. Organizing is the process of arranging an organization’s structure and coordinating its managerial
practices and use of resources to achieve its goals.
4. Staffing refers to the process of recruiting, placing, training, and developing personnel.
5. Communicating refers to transferring information from one communicator to another.
6. Motivating refers to the act of giving employees reasons or incentives to work in order to achieve
organizational objectives.
7. Leading is the process of directing and influencing task-related activities of organization members.
8. Controlling is the process of monitoring actual organizational activities to see that they conform to
planned activities and correcting deviations or flaws.

B. Effectiveness and Efficiency: A Basic Requirement

An organization can only survive if its activities are effective and efficient. It is the responsibility of the
manager to see that the organization will achieve its objectives effectively and efficiently. This is so even if
such objectives are parts of a bigger objective.

Effectiveness is a central element in the management process, which requires the achievement of an
objective. For instance, a manufacturer chooses a supplier who provides needed materials at the required
time and quantity. The action qualifies as effective.

Efficiency is also a central element in the management process, which requires that the minimum amount
of resources is used to achieve an objective. In the example cited above, the manufacturer may be able to
get supplies from the chosen source, but if the costs associated with the purchase are too excessive, the
operation will be inefficient and may place the organization in a disadvantageous position. This is especially
true if profitability is compromised. Too much emphasis on efficiency, however, may affect effectiveness
rendering any productive effort useless. An example is the trader who regularly delivers products to
consumers. If the tires of the delivery van are of the lowest price but of the poorest quality, the trader may
not be able to fulfil the commitments on time, making service ineffective and eventually jeopardizing the
business will be in trouble. It appears that the secret is to have a nice balance of both effectiveness and
efficiency. To emphasize one and disregard the other is not in keeping with good management practices.

C. What is a Manager?
A manager is one who plans, organizes, leads, and controls other individuals in the process of pursuing
organizational goals. Managers are vested titles like president, department head, dean, administrator,
supervisor, team leader, and the like. The manager is the one responsible for accomplishing the objectives
of his particular unit, which could be a whole organization, a particular department, or a work group.
Managers are responsible for using materials and talents in the most economical and productive manner.
As such, they are regarded as very important, if not the most important factor in the economic
development of the nation.

D. The Levels and Types of Managers

Managers function according to the levels they are in. in a small organization, there would normally be just
a single manager who is expected to perform all the managerial roles and tasks. In the transition from a
small to a large organization, there may be two levels of managers who divide among themselves the
managerial roles and tasks. There are times when the size of the organization justifies setting up three
levels of managers: the top management, the middle management, and the lower management. Figure 1
shows the levels at the various stages of organizational growth.
 SMALL MEDIUM LARGE
ORGANIZATIONS ORGANIZATIONS ORGANIZATIONS

Single Top Top

Manager Managers Managers

Front Line Middle

Employees
Managers Managers

Front Line
Employees Managers

Employees

Figure 1. Level of Managers (by size of organization)

Top managers are responsible for the overall performance of the organization. They formulate strategies,
provide leadership, evaluate and share the method of organizing, and control the direction of the
organization in the effort to accomplish goals. Top managers usually hold titles such as chief executive
officer, president, chairman or senior vice president.

Middle managers direct the activities of other managers and sometimes also those of operating
employees. They work with top managers and coordinate with peers to develop and implement action
plans to accomplish organizational objectives. Examples of middle managers are the data of the business
school in a university, the plant manager in a manufacturing concern, and the branch manager of a trading
firm.

Lower level managers are responsible for leading employees in the day-to-day tasks, which contribute to
the organization’s goals. Of the various levels of managers, they are the ones in direct contact with the
employees. Because of this, they are also referred to as “first line” or “front line” managers. Apart from
performing the other managerial functions of planning, directing, and organizing, their tasks include
correcting errors or solving problems directly related to the production of goods and services.

Types of Managers
Managers may be different from one another in terms of the work they do. They may be briefly described
as follows:
1. Line managers are directly concerned with accomplishing the goals of the organization. The
decisions they make with regards to operations are expected to be final and must be implemented.
For example, the university president, the dean, and the department heads all have line
responsibilities.
2. Staff managers are in charge of units that provide support to the line units. In doing their work,
they use special expertise to advise the line workers. The director of personnel and the controller
are examples of staff managers.
3. Administrators are managers working in government or in nonprofit organizations. Examples
include school administrators, provincial administrators, and hospital administrators.
 E. Management Skills
The effective and efficient performance of management functions such as planning, organizing, leading,
and controlling are possible only if the manager is well-equipped with the necessary management skills.
Such requirements may be briefly described as follows:
1. Technical skills refer to the abilities to use special tools, techniques, and specialized knowledge.
Examples of are an accountant preparing a financial report, an architect working on a building plan,
and a professor writing a book.
2. Human skills refer to the abilities to work well in cooperation with other persons; whether they are
subordinates, peers, or superiors. A person with good human skills will have a high degree of self-
awareness and a capacity for understanding or empathizing with the feelings of others.
3. Conceptual skills refer to the ability of the manager to see the organization as a whole and to solve
problems in ways that benefit the total system. Specifically, the manager who possesses these skills
is expected to analyse and solve complex problems. Thus, the manager with good conceptual skills
will have the mental capacity to perform the following:
a. Identify problems and opportunities;
b. Gather and interpret relevant information; and
c. Execute problem-solving decisions that serve the organization’s purpose.
For example, the promulgation of a new law (e.g., the Senior Citizen’s Law)

F. Managerial Roles
In order to produce results, the manager assumes roles as varied as the following:
1. Interpersonal Roles. These are the roles the manager plays when interacting with others. The
specific roles under this category are:
a. Figurehead. The manager acts as the symbolic head of the organization and as a result, is
expected to perform a number of duties of a legal or social in nature. For example, when a
manager cuts the ceremonial ribbon of a company-sponsored project.
b. Leader. This role makes the manager responsible for the motivation and activation of
subordinates.
c. Liaison. The manager makes contacts with individuals in and out of the organization to facilitate
the accomplishment of work in his department.
2. Informational Roles. If the manager wants to improve the quality of decisions, information must be
provided.
a. Monitor. The manager handles all mails and contacts categorised as concerned primarily with
receiving information.
b. Disseminator. The manager sees to it that relevant incoming information is properly shared with
subordinates.
c. Spokesperson. The manager sees to it that his views are heard on occasions when presence is
required.
3. Decisional Roles. The manager must use the information processes to make decisions that solve
problems. The manager must assume the following roles:
a. Entrepreneur. The manager participates in strategy and review sessions involving initiative or
design of projects to improve performance.
b. Disturbance Handler. The manager is expected to respond to unwelcome pressures by
formulating strategies and reviewing such disturbances.
c. Resource Allocator. The manager must be actively involved in scheduling, acting on requests for
authorization, budgeting, and the programming of subordinates’ work.

G. What is an Organization?
An organization is a collection of people working together to achieve a common purpose. A mere group of
people will not qualify as an organization unless it has some objectives to achieve. In order to do this,
people in a group must interact, use knowledge and techniques, and work together in patterned
relationships.

When we go to school, we reckon with the organization running it. Our ability to communicate was
enhanced to a great degree by organizations like Nokia, Samsung, Apple, and some others with the latest
handy phones they sell. Charitable organizations like Red Cross provide assistance to the poor and the sick.
Local governments are organizations that run the political affairs of provinces and municipalities. The
various types of organization are illustrated in Figure 2.

Organizations

Government Private

Non-profit
Corporate Non-corporate Profit-oriented
oriented

Figure 2. Types of Organizations

Common Characteristics of Organization

1. Coordination of Effort. Persons working in coordination with others will produce better outputs
than when they work independently.
2. Common Goal or Purpose
3. Division of Labor. When the total job is divided into manageable parts, workers will be more
familiar with their assignments, making them more proficient.
4. Hierarchy of Authority. Positions are established and linked by a chain of command

H. Basic Principles of Management and Organization

1. Management Principles
a. Division of Labor. For example, in an organization there is finance, administrative and technical
divisions.
b. Authority. The right of a person in position to give orders and the power to exact obedience.
c. Discipline. Uniform application of behavior to certain activities; the outcome of which is readily
predicted.
d. Unity of Command. Each employee must have only one supervisor.
e. Unity of Direction. Efforts of everyone in the organization must be coordinated and focused in
the same direction.
f. Subordination of the Individual Interest to the General Interest. The goals of the organization
must take precedence over individual goals.
g. Remuneration. Employees should be paid in accordance with their contribution to the
organizational effort.
h. Centralization. Power and authority must be centralized as much as practicable.
Decentralization must be instituted, however, when the firm grows to a considerable size.
i. Scalar Chain. Subordinates must observe the official chain of command.
j. Order. Human and non-human resources must be in their proper places.
k. Equity. This is the result of kindliness and justice and is a principle to guide management and
employee relations.
 l. Stability of Tenure. To motivate employees to stay with the company, effective manpower
planning and implementation are necessary.
m. Initiative. Management should encourage employees to act on their own volition when
confronted with an opportunity to solve a problem.
n. Esprit de Corps. Managers should emphasize teamwork by building harmony and a sense of
unity among employees.
2. Principles of Organization
a. Principle of Objective. The objective must first be determined and laid out clearly before any
activity is undertaken. This serves as the guide in determining whether a certain activity is
required or not.
b. Principle of Analysis. Managers must be able to break a problem down into its components,
analyse these components, and then come up with a feasible solution.
c. Principle of Simplicity. Only activities that are absolutely necessary must be undertaken, and
those, which are not, should be eliminated.
d. Principle of Functionalization. Business firms should be built around the main functions of the
business.

I. Educating Managers
A very important concern in management is training managers. Organizations must make sure that
managers are well qualified to handle the jobs assigned to them. As mentioned earlier, the skills required
of managers in the effective performance of their jobs are those referred to as technical, human, and
conceptual. These skills related to management are provided in universities and colleges or through
company sponsored training programs and may be developed along the stages of one’s life.

LESSON

2 BUSINESS AND ITS ENVIRONMENT

6
HOURS

Knowledge about management and organization is very useful especially in human endeavors like
operating a business firm. This will be more significant, however, if such is supplemented by a basic
knowledge of business and its environment. This chapter attempts to provide such requirement.

At the end of this lesson, you should be able to:

1. Discuss the meaning and nature of business;
2. Identify the various kinds of business;
3. Distinguish the objectives of business;
4. Assess the impacts of various business environment;
5. Evaluate the survival strategies in uncertain environments;
6. Examine the application of coping strategies; and
 7. Examine the application of environmental control measures.

Under the free enterprise system, the growth of the economy lies in the ability of private individuals to
achieve economic objectives. The quest for profit is usually undertaken by engagement in business
operations. Firms are free to compete with each other and competition leads to the offering of new and
improved products and services to the society. Business firms and the government are expected to provide
goods and services to the society. The standard of living is raised or lowered depending to a large extent on
the performance of business firms. As a student pursuing the field of public administration, you may
wonder why you have to study business and its environment. Your knowledge in business may be applied if
you will be working for government-owned and controlled corporations (GOCC) which operate for profit.
Furthermore, as public administrator you will be able to understand and effectively enforce government
regulations on business establishment and operations. Lastly, it will give you flexibility in your career
options.

A. What is Business?

Business may be defined as all profit-seeking activities and enterprises that provide goods and services
necessary to an economic system. Profits refer to the rewards for businesspersons who take the risks
involved in producing and marketing goods and services.

B. Kinds of Business

According to the nature of the principal activity performed, business may be classified into three main
divisions:
1. Commerce. Business firms, which are engaged in buying and selling of goods and services, are
classified as commerce. Also included in this category are trading, merchandising, and marketing.
Examples of commerce as a kind of business are supermarkets, dry goods stores, peddlers, sari-sari
stores, importers, and many others.
2. Industry. Industries are those, which are mainly engaged in production. Goods produces, which are
intended for ultimate consumption, are called consumer goods, while goods intended for use of
business and industry are called producer’s goods.
Industry business may be further classified into:
a. Genetic industries are those involved in agriculture, forestry, and fish culture.
b. Extractive industries are those involved in the extraction of goods from natural resources, which
include mining, lumbering, hunting, and fishing.
c. Manufacturing industries convert raw materials into finished products. Examples are firms
engaged in the manufacture of drugs, plastics, food, liquor, footwear, motorcars, tools, office
supplies, etc.
d. Construction industries are those engaged in building infrastructures like airports, seaports dams,
and highways and dwelling units.
3. Services. A service business is one, which sells service to the buyer. Service firms may be classified as:
a. Recreation—movie houses, televisions and radio stations, theaters for drama and stage
presentations, resorts, and the like;
b. Personal—restaurants, barber shops, transportation, hotels, tailoring shops, slimming salons, and
the like; and
c. Finance—banks, insurance companies, investment houses, financing institutions, credit unions,
savings and loans associations, and the like.
 C. Objectives of Business

Professional managers maintain that a business firm should achieve the following multiple objectives:
1. creation and distribution of a product or service;
2. satisfaction of personal objectives like profits for owners, salaries and other compensation for
executives, wages and other compensation for employees, psychic income for all, including pride in
work, security, recognition, and acceptance;
3. protection and enhancement of the human and physical resources of society; and
4. economy and effectiveness of operation

D. The Environment of Business Firms

Organizations will succeed or fail depending on the environment that confronts them. The manager of a
particular business organization is not entirely helpless. He can do something about the environment, or
make some adjustments in the organization. Managing the environment requires a clear orientation and
an understanding of factor in the environment that affect business and the application of the right
strategies to harness these factors to a business firm’s advantage.

The External Environment

It consists of elements outside an organization that are relevant to business operations. These elements
play important roles in business operations because these are the sources of the inputs by business firms
for conversion into outputs which, in turn, are required by the external environment (Figure 3).

THE BUSINESS as transformer

FIRM

as OUTPUTS
-products
recipient
-services
INPUTS
-raw materials as recipient
-money
-labor
as provider
-energy
THE EXTERNAL
ENVIRONMENT

Figure 3. The Main Function of the Business Firm

Types of Elements in the External Environment

1. Direct Action Elements. These directly influence the organization. These are often referred to as
stakeholders of the organization.
 Customer—could be an individual, an institution like a school, a government agency, a
business firm, or a social club
 Suppliers—they provide inputs to the business
 Labor supply—managers and employees services are in a way procured through recruitment
and hiring by human resource specialists
 Competitors—may be either direct or indirect; the intensity of competition will differ from
one situation to another:
a. Monopoly—where there is only a single producer or seller;
b. Oligopoly—when there are only a few producers or sellers of similar products
 c. Pure competition—when there are many producers or sellers of similar products
 Financial institutions—a company planning to expand its business must be well regarded by
financial institutions such as commercial banks, development banks, and other lending
institutions
 Government agencies—from the enactment of laws to the granting of business permits, the
viability of business firms could be enhanced or limited by actions of government agencies
2. Indirect Action Elements. These affect the climate in which the operations of the organization take
place. There are instances, however, when an indirect-action element of one industry is regarded as
a direct action element of another.
 Technological variables—technology refers to the tools and ideas that may be used by an
organization to pursue its goals.
 Economic variables—this concern will touch on the health of the economy in terms of
inflation, income levels, gross domestic product, employment, and job outlook.
 Socio-cultural variables—refer to society’s customs and values
 Political-legal variables—consist of laws and regulations promulgated and implemented
 International variables—for instance, a foreign government may ban the entry of products
coming from countries like Philippines

E. Matching the Organization with the Environment

Why do some organizations thrive in certain environments where others fail? The answer may be derived
from determining whether the organization in question is fitted to the environment where it operates.

Types of Business Environment

1. Static—few forces in the environment are changing to affect business; notable features are no new
competitors, no new technological breakthroughs by current competitors, and little activity by
public pressure groups to influence the organization
2. Dynamic—significant number of environmental forces that affect business are changing; rapidly
changing government regulations, new competitors, changing socio-cultural aspects of the
population, etc.

Environmental Uncertainty
This may be defined as a lack of complete information regarding what exists and what developments may
occur in the environment. The manager may perform the following:
1. Analyse constituencies and their needs;
2. Predict future state of affairs; and
3. Understand their potential implications for the organization.

Designs of Business Organizations

Uncertainties in the environment make it necessary for managers to consider the appropriate organization
design for each type of environment (Figure 4).

STATIC DYNAMIC
ENVIRONMENT ENVIRONMENT

few forces are significant number of

changing forces are changing

ORGANIC
MECHANISTIC ORGANIZATION
ORGANIZATION
the appropriate
the appropriate organization
organization
 Figure 4. Environments and Organizations

1. Mechanistic design. This is deemed appropriate for a task that is routine and unchanging;
characterized by a vertical structure that typically operates with:
a. More centralized authority;
b. Many rules and procedures;
c. A precise division of labor;
d. Narrow spans of control; and
e. Formal means of coordination.
The best example is the government, which is largely bureaucratic.
2. Organic design. This is appropriate for a task that is non-routine and changing.
a. Decentralized authority;
b. Fewer rules and procedures;
c. Less precise division of labor;
d. Wider spans of control; and
e. More personal means of coordination

F. Survival Strategies in Uncertain Environments

1. Application of coping strategies—refer to the transformation of a part or all of the organization to
make its activities more compatible with existing environmental conditions
a. Buffering—refers to setting up buffers for both input and output sides of organizational
activities in order to absorb and cope with environmental uncertainty
Input: stock file of fuel by a shipping company to provide some assurance f unhampered
operations for a certain period
Output: if finished goods are not disposed, management may choose to sell products at low
prices
b. Smoothing—refers to efforts involved in reducing changes in the environment; for example
offering discounts during slack seasons
c. Forecasting—refers to making predictions, projections, or estimates of future events or
conditions in the environment
d. Rationing—this happens when the organization ignores some operations and emphasizes
others in order to preserve the most critical functions of the technical core
e. Boundary spanning—the process of creating jobs and roles in which the individual employees
are required to “have strong communication links within their department, with people in
other units, and often with the external community”
f. Structural complexity—this is when the business adapts to the environment by setting up
departments or subsystems that will respond to specific groupings of environmental factors
g. Executive succession—the organization may have a replacement of top manager by another
manager
2. Adaptation of environmental control measures—refers to management actions to identify and
influence environmental factors to obtain more positive effects on organizational activities
a. Creating favourable linkages—this is to reduce environmental uncertainties
 Mergers—for example, a big retailer decided to acquire the supplier company
 Joint ventures—forming a temporary business partnership with distributor
 Interlocking directorates—when some members of the board of directors of one
company are also members of the board of another company
 Executive recruitment—companies hire executives who have prior experience in the
industry
 Institutional advertising—for example, a university congratulating its graduates who
were declared topnotchers in the board exams
 Resource flows—refer to the pattern of resource exchanges between the organization
and other organizations in the environment
b. Manipulating the environment
 Changing elements—a business organization may seek to manipulate its environment
by changing one or more environmental elements in which it operates
 Lobbying—the act of attempting to influence business and government to create
legislation or conduct an activity that will help a particular organization
 Forming trade associations—members of trade associations pool their resource to
influence government policies affecting their business

LESSON

3 ETHICS AND SOCIAL RESPONSIBILITY

6
HOURS

This lesson examines factors affecting ethical behavior in an organization. It focuses on the essential topics
of business ethics, ethical behavior, social responsibility and how these are applied in business
organizations.

At the end of this lesson, you should be able to:

1. Describe the nature and concept of business ethics;
2. Explain the need for ethical behavior in business;
3. Identify the areas of concern for business ethics;
4. Assess ways to improve ethical performance;
5. Discuss the meaning of social responsibility;
6. Identify the various interest groups in business;
7. Determine the costs and benefits of social actions; and
8. Choose appropriate social strategies.

Can organizations use whatever means, fair or foul, to make profits? Can a business firm hire someone to
spy on a competitor’s planned moves? Will it be alright for a company’s purchasing officer to receive gifts
from a supplier? Should a company continue to manufacture products whose chemical residues harm the
environment?
Philosophers maintain a view that a society with a low regard for morals will disintegrate after a period of
time. To avoid chaos and destruction, and to make “life in a society possible,” adherence to the practice of
moral principles regulating human relations becomes necessary.

The above concerns direct our attention to the twin topics of business ethics and social responsibility.

a. What is Business Ethics?

Ethics refers to the study of morale and moral choices of human beings. The subjects covered by ethics
include the behavior of individuals and groups, which are governed by standards, rules, and codes of
conduct. The moral principles defining right and wrong behavior of businesspersons and their agents are
called business ethics. It implores them to adhere to certain ethical conduct when dealing with people
especially those affected by their organizational activities.

b. The Need for Ethical Behavior

People in highly developed economies were the first to experience and to be aware of unethical behavior
of business firms. Many of them pushed for changes in the way businesspersons pursue their trade. Some
of their ideas found their way in the legislative bodies, which later accommodated them by passing laws in
support of their agenda on business ethics. An example is the “Truth in Lending Act” requiring financial
institutions to take some ethical actions “to protect citizens from a lack of awareness of the true cost of
credit to the user by assuring a full disclosure of such cost with a view of preventing the uninformed use of
credit to the detriment of the national economy.”

Ethical behavior is needed to make the “playing field” free and orderly. If the person does not adhere to
ethical principles, public opinion may pressure the government to act. Later, it may turn out that the
person may be in worse situation than when no law is passed to force him to act ethically.

In the case of public service, Republic Act No. 6713 otherwise known as the “Code of Conduct and and
Ethical Standards for Public Officials and Employees” was established to uphold the time-honored principle
of public office being a public trust, granting incentives and rewards for exemplary service, enumerating
prohibited acts and transactions and providing penalties for violations. This act is observed in the execution
of public service in the Philippines. This topic will be further discussed in your succeeding courses.

c. Areas of Concern for Business Ethics

Business ethics covers all areas encompassed by business transactions. The ethical conduct of
businesspersons may be measured against how the following are adhered to:
1. Laws and regulations promulgated by the government; and
2. Specific ethical required but not yet passed into law.
The following are concerns relating to laws and regulations requiring ethical behaviour:
1. Product safety and quality;
2. Fair employment practices;
3. Fair marketing and selling practices;
4. The use of confidential information for personal gain;
5. Community involvement;
6. Bribery; and
7. Illegal payments to foreign governments to obtain business.

Current Issues in Ethics

Reports on unethical practices of individuals and organizations appear every now and then in daily
newspapers, even radio and television broadcast such reports from time to time. It is not surprising for the
media to provide information on any of the following concerns, among others:
1. Owners of food stalls serving spoiled food to customers;
2. Schools awarding diplomas to undeserving persons;
3. Business owners making fictitious insurance claims;
4. A drug manufacturer making false claims regarding the efficacy of product;
5. A contributor bribing a government official to manipulate the bidding of contracts; and
6. Cheating in an election or vote buying.

Coverage of Organization Sponsored Ethics Program

The following may be used as basis for formulating organizational policies on ethical conduct are as
follows:
1. Drug and alcohol abuse;
2. Employee theft;
3. Conflicts of interest;
4. Quality control;
5. Misuse of proprietary information;
6. Abuse of expense accounts;
7. Plant closing and layoffs;
8. Misuse of company assets;
9. Environmental degradation;
10. Inaccuracy of books and records; and
11. Receiving excessive gifts and entertainment.

d. The Improvement of Ethical Performance

Ethical conduct in the organization may be improved through any of the following ways:
1. Ethics Training. Learning takes two forms through formal classroom instruction and through actual
hands-on experience and observation.
2. Ethical Advocates. An ethical advocate is a person who is knowledgeable about business ethics,
employed by the organization, and acts as the organization’s conscience. This person sits in the
board of directors and sees to it that every policy adapted conforms to ethical standards.
3. Ethical Codes. Codes of ethics are documents that specify practices that are unethical and which the
company expressly forbids. These formal documents provide clear directions to management and
employees in the performance of their duties.
4. Whistle-blowing. When almost everybody from top to lower management acts outside of ethical
norms, the employee who feels he must do something resorts to reporting the perceived unethical
practice to outsiders such as the press, government agencies, like the Ombudsman and the
Presidential Anti-Graft Commission, or public interest groups. This action is referred to as whistle-
blowing.

e. What is Social Responsibility

Social responsibility refers to the concern of business for the welfare of the society. This definition indicates
that the firm must perform its function without harming the community; it must improve the quality of life.
It must produce goods or services that will not adversely affect any component of the society.

Movies, for example, may be produced and shown to the public, but they must not be those that devalue
morals. Songs may be written, recorded, and sold to the public, but they must not disregard good taste.
Cars may be manufactured and sold, but they must not be harmful to the people when they are used.

f. Interest Groups
There are various groups with interests that are different from one another. These interests must be
properly considered by the business firm for it to be successful.
1. Owners/ administrators
2. Consumers/ public. The basic rights of consumers include those concerning representation,
information, a healthy environment, safety, basic goods and services, choice, consumer education
and redress.
3. Employees. Their points of interest include health and safety, appropriate salaries and employee
benefits, the right to speak out, the right to privacy, and the right to job security.
4. Minority groups. Various minority groups are found all over the Philippine archipelago; the Aetas, the
Igorots, the Dumagats, and the Ibanags are examples. The denigration of these groups as second-
class citizens or funny looking people including their inclusion in demeaning scenes in the media
happen every now and then.

In the organization, management must treat them as equals as far as their employment and
promotion are concerned. They must be provided with suitable sites for residence and livelihood.
5. Women. The view that management must have is to regard women as a force with potentials to lead
as much as to follow.
6. Older people. The government is slowly recognizing older people, as a group. They are regarded as
“senior citizens” with privileges like discounts in many business establishments. Moreover, retirees
may be hired to become directors or consultants.
7. The Handicapped. They must not be discriminated against in any activity like hiring and promotion.
Facilities that are especially designed for the handicapped, like special stairways and washrooms,
are now utilized by most organizations.
8. The community at large. People living in communities have problems in common. Some of these are
related to pollution, traffic, substandard products, unfair business practices, and so on. As a result
of these concerns, responsible persons have forms groups to monitor and recommend appropriate
actions to government agencies.

g. Benefits and Costs of Social Actions

Benefits
1. Improved employee satisfaction and motivation. When employees know that the products or
services, for instance, may harm people, there will be some lingering doubts in their minds on
whether or not it will be right for them to push through with the assigned tasks.
2. Becoming more aware of changing consumer tastes and preferences. When the firm’s research
includes identifying social needs that can be served, it will only be a step away from knowing any
changes in consumer taste and preferences.
3. Greater demand for the company’s products and services. As information is used by consumers in
their purchasing decisions, socially responsible companies may find greater demand for their
products and services.
4. Preference for socially responsible companies by investors.

Costs
1. Money spent in support of social projects. To support social projects, funds have to be taken from
whatever source is available within the firm.
2. Reduction of competitive power. When the company to finance social projects uses part of available
funds, this will reduce the funds that could be used for competitive purposes.
3. Government regulations may also be imposed. Even if a company is acting in a socially responsible
way, there is still a chance that the government will step in and impose regulations even along
areas covered by the company’s social actions.
Awareness of the costs and benefits of social actions, the company can compare one with the other. The
management can then decide whether or not to push through with their social projects. Factors may be
expressed in quantitative terms like sales and profits, or non-quantitative terms like moral values.

h. Social Responsibility Strategies

If the organization has already decided on becoming socially responsible, it can do so by adapting a
systematic approach. The approaches are expressed in four basic social responsibility strategies a follows:
1. Reaction strategy. In using this strategy, the company allows a condition or potential problem to go
unresolved until the public finds out about it.
2. Defense strategy. The company tries to minimize or avoid additional obligations. Among the tactics
used are legal maneuvering and seeking the support of groups that back up the company’s way of
doing business.
3. Accommodation strategy. This is done when special interest groups are taking the side of the
opposition, or when the business perceives that if it does not react, a law will be passed by
Congress to ensure compliance.
4. Proactive strategy. In using this, the firm goes beyond what is legally and ethically required. This is
undertaken through sponsorship of cultural shows offered free to the public, scholarships for
financially-handicapped but deserving students, financial support for the upkeep of endangered
animal species, and many other similar concerns.

i. Social Audits
A social audit refers to the systematic examination of all the activities comprising a firm’s social programs.
It measures a company’s progress toward achieving social goals such as employment of the handicapped
and those belonging to cultural minorities, adoption of anti-pollution measures, improvement of working
conditions, community development, donations to worthy causes, and various consumer issues.

A social audit may be done through the preparation of the following:

1. A summary of program areas such as consumer affairs, as well as the reasons for undertaking
certain social activities and not others.
2. A report of specific progress and the priorities for each set of activities.
3. A listing of objectives for each priority and a description of how the organization is striving to reach
these objectives.
4. A summary report of the costs of each program area and activity to the company.
5. A summary using quantitative measures of the extent of achievement of each social objective
whenever possible.