ENGINEERING MANAGEMENT

IE 101

MODULE 2: SOCIAL RESPONSIBILITY AND DECISION MAKING “GREEN” APPROACHES – SHADES OF GREEN
 Social Responsibility
- a business’s obligation, beyond that required by law an economics, to
pursue long-term goals that are good for society.

a) Classical View
- Management’s role is to maximize profits for the benefit of
the stockholders
- Doing “social good” unjustifiably increases costs
EVALUATING GREEN MANAGEMENT ACTIONS:
a) Socio-economic View 1. Global Reporting Initiative
- Management’s social responsibility goes beyond making 2. ISO 14000 (Environmental Management) Standards
profits but also protect and improve society’s welfare 3. Global 100 Most Sustainable Corporations in the World
- Corporations are not only responsible to stockholders but also
-----------------------------------------------------
to larger society “to do the right thing.”
MANAGERIAL ETHICS
APPROACHES TO SOCIAL RESPONSIBILITY
 Value-based Management
Obstructionist Defensive Approach Accommodative Proactive
Approach Approach Approach - an approach to managing in which managers establish, promote, and
Minimal practice an organization’s shared values.
Disregard for social commitment to Moderate Strong
responsibility social responsibility commitment to commitment to
 Shared Values
social responsibility social responsibility
- Explicit or implicit fundamental beliefs, concepts, and principles that
underline the culture of an organization, and which guide decisions
No social High social
and behavior of its employees, management, and members.
responsibility responsibility

----------------------------------------------------- PURPOSES OF SHARED VALUES:

 Green Management SHARED ORGANIZATIONAL VALUES
- when managers consider the impact of their organization on the
Guide Manager’s Decisions and Actions
natural environment.
Shape Employee Behavior
HOW DO ORGANIZATIONS GO “GREEN”?
✓ Some companies do no more than what is required by law -that is, Influence Marketing Efforts
they fulfill their social obligation. Build Team Spirit
✓ Others have radically changed their products and even their
production processes.

1
GUTIERREZ, H.L.
 ENGINEERING MANAGEMENT
IE 101

 Ethics sources, such as physical punishment, reward, or exchange

- refers to the rules, principles, values, and beliefs that define right and of favors.
wrong conduct and behavior.  conventional level - ethical decisions rely on maintaining
expected standards and living up to the expectations of
4 VIEWS OF ETHICS: others.
1) Utilitarian view  principled level – individuals define moral values apart the
- greatest good is provided for the greatest number. authority of the groups to which they belong or society in
- encourages efficiency and productivity and is consistent general.
with the goal of profit maximization.
2) Rights view 2) Stages of moral development
- Respecting and protecting individual liberties and  values – are basic convictions about what is right or wrong
privileges on a broad range of issues.
- Seeks to protect individual rights of conscience, free  personality – two personality variables have been found to
speech, life and safety, and due process. influence an individual’s actions according to his/her beliefs
about what is right or wrong.
3) Theory of justice view o Ego strength measures the strengths of a person’s
- Organizational rules are enforced fairly and impartially and convictions.
follow all legal rules and regulations. o Locus of control measures the degree to which people
- Protects the interests of underrepresented stakeholders believe they control their own life.
and the rights of employees.
4) Integrative social contracts theory 3) Structural variables
- Ethical decisions should be based on existing ethical Organizational characteristics and mechanisms that guide and
norms in industries and communities. influence individual ethics:
- Based on integration of the general social contract and a) Performance appraisal systems
the specific contract between community members. b) Reward allocation systems
c) Behaviors (ethical) of managers
FACTORS THAT DETERMINE ETHICAL AND UNETHICAL BEHAVIOR:
4) Organizational culture
- Cultures high in risk tolerance, control, and conflict tolerance are
most likely to encourage high ethical standards.
- Weak cultures have less ability to encourage high ethical
standards.
1) Stages of moral development
Research divides moral development into 3 levels, 5) Issue intensity
each having 2 stages: - How important is the ethical issue to an individual.
 preconventional level – a person’s choice between right or o Consensus of wrong
wrong is based on personal consequences from outside o Greatness of harm
2
GUTIERREZ, H.L.
 ENGINEERING MANAGEMENT
IE 101

o Concentration of effect ✓ Rewarding employees who behave ethically and punishing those
o Proximity to victim(s) who do not.
o Immediacy of consequences ✓ Protecting employees (whistleblowers) who bring to light unethical
o Probability of harm behaviors or raise ethical issues.

How managers can improve ethical behavior in an organization:
1) Hire individuals with high ethical standards.
2) Establish codes of ethics and decision rules.
3) Lead by example.
4) Delineate job goals and performance appraisal mechanisms.
5) Provide ethics training.
6) Conduct independent social audits.
7) Provide support for individuals facing ethical dilemmas.
THE VALUES OF ETHICS TRAINING:
✓ Training can make a difference in ethical behaviors.
✓ Training increases employee awareness of ethical issues in
business decisions
✓ Training clarifies and reinforces the standards of
conduct
✓ Employees are more confident of support when
taking unpopular but ethically correct stances.

 Code of Ethics ----------------------------------------------------

- a formal statement of an organization’s primary values and the ethical
rules it expects its employees to follow.  Decision
✓ Be a dependable organizational citizen. - a choice among two (2) or more alternatives
✓ Don’t do anything unlawful or improper that will harm the
 Problem
organization. - an obstacle that makes it difficult to achieve a desired goal or purpose.
✓ Be good to customers.
 Decision-making
EFFECTIVE USE OF CODE OF ETHICS - typically described as choosing among alternatives, the thought
 Develop a code of ethics to guide decision making. process of selecting a logical choice from the available options after
 Communicate the code regularly. considering the pros and cons of each option.
 Have all levels of management show commitment
to the code. STEPS IN THE DECISION-MAKING PROCESS:
1) Identifying a problem
 Publicly reprimand and consistently discipline
those who break the code. - every decision starts with a problem (the discrepancy between
an existing condition and a desired condition). Problems make it
difficult to achieve a desired goal or objective.
 Ethical Leadership
Managers must be good role models by: 2) Identifying decision criteria
✓ Being always ethical and honest. - are the standards or factors that define what’s important or
✓ Telling the truth relevant to resolving a problem, such as cost, delivery, quality,
✓ Admitting failure and not trying to cover it up. etc.
✓ Communicating shared ethical values to employees through
symbols, stories, and slogans

3
GUTIERREZ, H.L.
 ENGINEERING MANAGEMENT
IE 101

3) Allocating weights to the criteria - due to the manager’s inability to process all information on all
- criteria are not equally important, so, assigning weights to each alternatives, managers “satisfice”, rather than maximize.
criterion will define their priority or importance in the decision- - satisfice is accepting solutions that are “good enough”.
making process.
3. Intuitive decision-making
4) Developing alternatives - making decisions on the basis of experience, feelings and
- developing a list of viable alternatives that can resolve the accumulated judgment.
problem.
4. Making decisions: The role of evidence-based management
5) Analyzing alternatives - decision making process that uses relevant and reliable
- involves evaluating the individual alternatives using the decision evidence.
criteria and the weights assigned to each criteria, their strengths - evidence-based management (EBMgt) is the “systematic use
& weaknesses. of the best available evidence to improve management
6) Selecting an alternative practice.”
-----------------------------------------------------
- the alternative that gives the highest total is the best
WHAT IS INTUITION?
alternative.
7) Implementing the alternative  Experience-based decisions – managers make decisions based on
- putting the decision into action, it is recommended to involve their past experiences.
in the process the people who will play part in the implementation  Affect-initiated decisions – managers make decisions based on
of the alternative. feelings or emotions.
 Cognitive-based decisions – managers make decisions based on
8) Evaluating decision effectiveness skills, knowledge, and training.
- evaluation of the result or outcome of the decision to see  Subconscious mental processing – managers use data from
whether the problem was resolved. subconscious mind to help them make decisions.
 Values or Ethics-based decisions – managers make decisions based
----------------------------------------------------- on ethical values or culture.

FOUR (4) WAYS MANAGERS MAKE DECISIONS TYPES OF PROBLEMS AND DECISIONS:
1. Rational decision-making 1) Structured problems and programmed decisions
- making logical and consistent choices to maximize value.  Structured Problems are straight-forward, familiar and
- making decisions rationally would consistently lead to information about them are easily defined and complete.
selecting the alternative that maximizes the likelihood of Example: when a server accidentally spills a drink
achieving the goal, decisions that are to the best interest of
on a customer’s coat/dress
the organization.
 Programmed decisions are repetitive decisions that can be
2. Decision-making: Bounded rationality
handled by routine approach.
- decision making that’s rational but under the concept
Example: the manager offers to have the coat/dress
of “bounded rationality”, that is rational decision-making but
cleaned at the restaurant’s expense
limited (bounded) by a manager’s ability to process
information.
4
GUTIERREZ, H.L.
 ENGINEERING MANAGEMENT
IE 101
THREE TYPES OF PROGRAMMED DECISIONS ARE:
 Procedure is a series of sequential steps a manager uses to
respond to a structured problem.
 Rule is an explicit statement that tells a manager what can or
cannot be done, simple to follow and ensures consistency.
 Policy is a guideline for making decisions that establishes general
parameters for the decision- maker rather than specifically stating
what should or should not be done, typically contain an ambiguous
term that leaves interpretation up to the decision maker.
2) Unstructured problems and nonprogrammed decisions
 Unstructured problems are new or unusual problems, and for which
information is ambiguous or incomplete.
Example: To build or not to build a manufacturing facility outside
of the country
 Nonprogrammed decisions are unique and non-recurring decisions
for unstructured problems, which involved custom-made solutions.
DECISION-MAKING CONDITIONS:
1) Certainty - is a situation where a manager can make accurate decisions
because the outcome of every alternative is known.
2) Risk - conditions in which the decision-maker can estimate the
likelihood of certain outcomes. Under risk, managers have historical data
from past personal experiences or secondary information that lets them
assign probabilities to different alternatives.
3) Uncertainty – conditions where outcomes are not certain andreasonable
probability estimates could not be made. Under these conditions, the
choice of alternative is influenced by the limited
amount of available information and by the psychological orientation of
the decision maker.
→ An optimistic manager will follow a maximax choice (maximizing
the maximum possible payoff).
→ A pessimist will follow a maximin choice (maximizing the minimum
possible payoff)
GUTIERREZ, H.L.
→ A manager who desires to minimize his maximum “regret” will
opt for a minimax choice.
DECISION-MAKING STYLES:
1) Linear thinking is characterized by a person’s preference for using
external data and facts and processing this information through
rational, logical thinking to guide decisions and actions.
2) Nonlinear thinking - is characterized by a preference for internal
sources of information (feelings and intuition) and processing this
information with internal insights, feelings, and hunches to guide
decisions and actions.
DECISION-MAKING BIASES & ERRORS:
1) Overconfidence bias - when decision makers tend to think they know
more than they do or hold unrealistically positive views of themselves
and their performance.
2) Immediate gratification bias - describes decision makers who tend to
want immediate rewards and to avoid immediate costs.
3) Anchoring effect bias - describes how decision makers fixate on initial
information as a starting point and then, once set, fail to adequately
adjust for subsequent information.
4) Selective perception bias - decision makers who selectively organize
and interpret events based on their biased perceptions.
5) Confirmation bias - decision makers who seek out information that
reaffirms their past choices and discount information that contradicts
past judgments exhibit.
5
 ENGINEERING MANAGEMENT
IE 101

6) Framing bias - is when decision makers select and highlight certain

aspects of a situation while excluding others.
7) Availability bias – is when decisions makers tend to remember events
that are the most recent and vivid in their memory, thus, distorting their
ability to recall events in an objective manner and resulting in distorted
judgments and probability estimates.
8) Representation bias – is when decision makers assess the likelihood of
an event based on how closely it resembles other events or sets of
events.
9) Randomness bias - describes the actions of decision makers who try to
create meaning out of random events.
10) Sunk costs error - occurs when decision makers forget that current
choices can’t correct the past, they incorrectly fixate on past expenditures
of time, money, or effort in assessing choices rather than on future
consequences.
11) Self-serving bias – when decision makers who are quick to take credit
for their successes and blame failure on outside factors.
12) Hindsight bias - is the tendency for decision makers to falsely believe
that they would have accurately predicted the outcome of an event once
that outcome is known.

6
GUTIERREZ, H.L.