Activities for Today

1. Activities for Today • ETS/MFT Sign-Up [Reminder] • CEP • Meeting Time (before class – good only for yes/no questions) • Group Formation/Group Contract (1/30/07) • Simulation Enrollment • Attendance • Goals for Today • Chapter 2 • Why Be Honest If Honesty Doesn’t Pay? • Building Your Company’s Vision [Group Activity] • Homework (next class) • ETS Exam – MFT • Simulation (read it as many times you can) MQM485/Sp08/Class2

2. Group Contract • One Contract Per Group • The Contract Needs to be Typed • Your contract should contain the following • Names/Phone Numbers/E-Mail Addresses • Emergency Contact Person • Rules you have agreed to follow (e.g., If a member fails to show up for X number of meetings s/he will be fired) • Signature of all members (required even if you agree to NO rules)

3. Student Registration • Each Student must go to:www.interpretive.comclick on the login tab at top right • Login with your Individual User ID and Password. • Follow the on screen directions to complete the registration process. Each Student will receive an Individual User ID and Password via email from Interpretive. If you do not get it – college e-mail Id will be used – check your junk mail first and let me know.

4. Student Access • Once you have registered, you will receive: • An individual license to use the simulation for the course duration, • A PDF of the student manual, • Access to the course website to view results and additional online resources, • All technical simulation questions submitted online, will be answered by Interpretive within 24 hours. Each team will not be able to start the simulation until all team members have registered. Initial advantage will go to firms who understand their firm Well! So read the manual carefully.

5. The Strategic Management Process

6. Chapter Overview • Mission statement • Environmental change and the mission statement • Stakeholders and implementing the mission • Corporate governance • Social responsibility

7. Mission • Mission • Refers to a firm’s long-term purpose • Why does it exist? • gives company personnel precise knowledge of the firm’s tasks, goals, and what the firm expects of them • For managers • For company outsiders

8. Components of a Mission Statement

9. Tasks

10. Effectiveness of a Mission Statement

11. Simple Mission Statements

12. Vision

13. Values

14. Goals

15. Stake Holders Stakeholders are individuals or groups in the firm’s environment that affect, or affected by, the firm’s actions in pursuit of its mission are called stakeholders because they have a stake or an enforceable claim on the firm’s performance. Primary stakeholders are those who provide valuable inputs to the firm’s business activities and without whose support the firm cannot survive. Secondary stakeholders do not have any direct economic transaction with the firm. Businesses need stakeholder cooperation and support for their survival and growth. Strategic management aimed at achieving maximum stakeholder cooperation and support is a strategic imperative.

16. Primary Stakeholders • Employees • Stockholders • Creditors • Customers • Suppliers • Local communities • Governments

17. Media NGOs Special interest groups 2 Secondary Stakeholders

19. Corporate Governance Refers to all systems, structures, and processes employed to ensure that managerial activities focus on the goals of the corporation and itsowners.

20. Theories Impacting Corporate Governance

21. An Agency Relationship Managers (Agents) Shareholders (Principals) Agency Relationship: Owners and Managers • Firm owners • Decision makers • Risk bearing specialist (principal) pays compensation to • A managerial decision-making specialist (agent)

22. Compensation Issueshttp://www.footnoted.org/ • BOD: $200K a year for what can charitably be called a part-time job. • $890,000 Race Car Driving Lessons (for his Kid) • Use of Executive Jet, Guaranteed Consulting Opportunities, Country Club membership, Delivery of flowers to personal apartments, after Retirement • Option to buy your office car and furniture for $1 (after being fired for misreporting and receiving $50 Million sendoff bonus) • $204,000 Rental Allowance (plus couple of Million$) • Administrative Support of $30,000 including home office computer, after Retirement

23. ROLE OF CORPORATIONS • Do Companies Any Obligations to Society? • Historical Evolution of Companies • Role of Companies

24. Corporate Social Responsibility • Considering the interests of society by taking responsibility for the impact of their activities on stakeholders in all aspects of their operations. • This obligation is seen to extend beyond the statutory obligation to comply with legislation and sees organizations voluntarily taking further steps.

25. Friedman’s View Primary Responsibility is the maximize shareholder wealth Why should shareholders, workers, customers pay for this? Market mechanism will fail Outcome could result in a socially stratified society. Socio-Economic View Maximize business and social returns in the long run Society allows business to flourish because of the “potential for overall social good” not for few to make money. Who is responsible for the ills (inequality) of capitalism? Better than government regulation.

26. Why Be Honest If Honesty Doesn’t Pay?- Bhide & Stevenson • Briefly elaborate reasons as to why you think we (as individuals) are honest (or at least agree honesty is the best policy) when there seem to be “anecdotal” evidence that honesty does not pay? • Is there evidence for honesty being the best policy? • Why of do we allow this? Why aren’t we not more careful with dishonest people? • So why are we honest? • What are other alternatives for society?

27. Why Be Honest If Honesty Doesn’t Pay?- Bhide & Stevenson • Is there evidence for honesty being the best policy? • Evidence is Weak • Treachery Pays • Violators of Trust and Power are Benefited

28. Why Be Honest If Honesty Doesn’t Pay?- Bhide & Stevenson • Why of do we allow this? Why aren’t why not more careful with dishonest people? • Cognitive Inertia (search for data which fits beliefs) • Connivance (People will change this time is OK) • Ambiguity and Complexity (Not Clear) • Mistrust – Self-fulfilling Prophecy • Revenge Mentality (Self-destruction) • Retaliation • Double Loss: TIME & MONEY

29. Why Be Honest If Honesty Doesn’t Pay?- Bhide & Stevenson • So why are we honest? • Gross Exaggeration: • Loss of Power & Snipping • Pride in Family, Friends and Community • Keep Promises Because We Want Too • Honesty is Moral Choice – People are honest because they want to, not because they have to • Concepts of Trust & Virtue would be Empty – If bad faith and wickedness were not financially rewarding

30. Why Be Honest If Honesty Doesn’t Pay?- Bhide & Stevenson • What are other alternatives for society? • TIT for TAT World (punishment) –> Stagnation • All of Us Can becomes Cheats –> Chaos • World with Rules For Everything –> Do we want to live in such a world • PERFERRED OPTION: MORAL COMPASS • Trust & Tolerance for Broken Promises –> Encourages Risk Taking  Leading to Innovation & Better World Tomorrow • e.g., Watson (IBM founder); Ray Kroc; Lincoln;

31. Building Your Company’s Vision _ Collins and Porras • Core Values and Core Purpose is Fixed but Strategies Endlessly Adapt to a Changing World. • What Should Not Change and What Should Not Change -- Managing Continuity & Change • Vision Provides Guidance/Context • Guide and Inspire • Vision is made of two components • Core Ideology [Yin-what we stand for-why we exist] • Core Values • Core Purpose • Envisioned Future [Yan-what we aspire to become] • Big Hairy Audacious Goal [BHAG] • Vivid Description

32. Building Your Company’s Vision - Collins and Porras • Core Ideology [enduring character of an organization] • Core Values • What do we stand for • 3 to 5 values • Would we have it -- even if it became a competitive disadvantage • Test of time • Honesty – Start at the individual level • Core Purpose • Reason for being – Soul of the organization • Can it last 100 years? • Purpose does not change – but should inspire change • Five whys [give 5 reasons why - what you do is important] • Glue that holds the organization together through time

33. Building Your Company’s Vision - Collins and Porras • Envisioned Future [something that will require significant change and progress to attain -- also referred to Strategic Intent] • Big Hairy Audacious Goal [BHAG] • Clear Finish Goal • Reach out and Grab Attention of Stakeholders • 10 to 30 Years to Complete • Beyond Current Capabilities • Vivid Description • Description of What it Mean to Achieve BHAG • Vibrant, Engaging and Specific • Create an Image in Peoples Heads • Passion, Emotion and Conviction • Creating Effective Envisioned Future requires some unreasonable confidence and commitment.

34. Group Activity • Let us split the class into 4 groups • Each group is required to come up with a bold vision [using the guidelines of Collins and Porras] for the ISU-COB • Do write the Vision [as 4 components] on a sheet of paper • Use Large Capital Letters – So that we can use the overhead projector • Class will to vote to determine which group has the boldest vision – and give them the title “Visionaries”