CHAPTER 8
 Explain the role of ethics in entrepreneurship.
 Discuss how entrepreneurs can demonstrate social
responsibility.
 Describe how an entrepreneur’s vision and values
contribute to the culture of the new venture.
 Discuss the relationship of core values to success.
 Describe how businesses are organized.
 Discuss the role of strategic alliances in a new
organization.
 Explain how to identify the appropriate business
site.
 Discuss the most critical issues related to
organizing people.
 The moral code by which we live and conduct
business.
 Derives from the cultural, social,
political,
and ethnic norms with which we were raised as
children.
 Ethical decision making, 4 categories:
Individual values
2. Organizational values
3. Customer satisfaction
4. External accountability
1.
 Categories of perspectives about ethical dilemma:
 Ideals
 Looking at the dilemma from an Aristotelian
perspective about one’s virtues, integrity, and values
 Obligations
 One’s duty, rights, or what is lawful or just
 Utility
 Analyzes costs and benefits of potential alternative
consequences of action or inaction
 Approaches to avoiding ethical issues:
1. Dogmatism: “I simply will never lie or
cheat or steal.”
2. Egoism: “Everyone needs to lookout for
himself.”
3. Relativism or Situational: “When in
Rome, do what the Romans do.”
4. Subjectivism: “Ethics is a point of view.”
 Four most common types of ethical dilemmas:
 Conflicts of interest: Occurs when a person’s private or
personal interests clash with professional obligations.
 Survival tactics: What an entrepreneur does today out
of desperation will follow him for the rest of his
business career.
 Stakeholder pressure: All stakeholders want what is
owed them when it is owed them.
 Pushing the legal limit: Entrepreneurs who regularly
play too close to the edge of legality eventually get
caught and the price is often their businesses and their
reputations.
 There is no better way to understand the role of
ethics in any business than to encounter real-world
dilemmas and determine how they might be
resolved.
 Small businesses are as guilty as multinational
corporations when it comes to ethical missteps.
 Code of ethics: Set of ethical standards by which a
company functions.
 When a code of ethics is spelled out and written down,
people in the organization take it more seriously.
 Guidelines from The Josephson Institute of
Ethics:
 Trustworthiness
 Respect
 Responsibility
 Fairness
 Caring
 Citizenship
 Clear and easy to understand
 Make all employees aware
 Share with customers
 Clear channel for reporting unethical behavior
 Means for rewarding ethical behavior
 Social responsibility is operating a business in
a way that exceeds the ethical, legal,
commercial and public expectations that
society has of the business.
 Socially responsible businesses start with a
social mission, which must be achievable.
 Majority of social ventures are nonprofits that
must seek their funding from philanthropists
or grants.
 First, company must set a goal.
 Second, company must get employees and
customers (if appropriate) involved.
 Ways to establish positive relationships in the
community:
 Donate products, services, or revenues
 Donate expertise
 Contribute to the community
 Core values:
 The fundamental beliefs that a company holds about
what is important in business and in life in general.
 Based on the founder’s personal values and beliefs.
 They tell the world who the company is and what it
stands for.
 Purpose
 The company’s fundamental reason to be in business
 Mission
 The company’s mission brings everyone together to
achieve a common objective.
 The mission statement communicates the mission.
 Strategies:
 Plans for achieving company goals and accomplishing
the mission
 Tactics:
 The means to execute the strategies
Figure 11.2
 Constants of success:
 Purpose
 Failure
 Sense of satisfaction with work
 No free lunch
 Organizational structure
 Finding the best fit, given the existing:
 Contextual factors (environment, technology, market)
 Design factors (strategy and models)
 Structural factors (complexity, formalization)
Figure 12.1
 Distributed forms of organizations
 Companies generally distributed on four levels:
Geographically (locally or across continents)
2. Organizationally by department or project group
3. Temporally by time zone
4. By stakeholder groups
1.
 Design the process map/flowchart that traces how
information flows through the business.
 Mapping leads to better decisions
 Number of people to hire
 Amount of equipment to purchase
 Type of facility for working
 Type of organizational structure to employ
 A virtual enterprise is a “business without
walls.”
 A temporary network of independent
companies, suppliers, customers, even
erstwhile rivals—linked by information
technology to share skills, cost, and access to
one another’s markets
 Its goal is to deliver highest-quality product at the
lowest possible cost in a timely manner.
 Outsources in a virtual world
 Forms a network of strategic alliances
 Keeps distributed employees and strategic partners
linked
 Site decisions begin at macro level
 Choosing the region, state, and community
 Economic base
 Financial incentives
 Population demographics
 Choosing a retail site
 The trade area
 Competition and character
 Accessibility
 Choosing the service/wholesale site
 Some of same considerations as retail site
(accessibility, attractiveness, trade area of sufficient
size, etc.)
 No need for upscale version
 Choosing the manufacturing site
 Access to suppliers
 Cost of labor
 Access to transportation
 Cost of utilities
 The Lease–Build–Buy decision
 Ask the right questions at each stage
 Startup
 Rapid growth
 Stable growth
 Alternatives to conventional facilities:
 Incubators
 Shared space
 Mobile locations
 Temporary tenant agreements
 Startup operations
 Organization chart tends to be flat
 Much work accomplished through informal
organization or network of relationships
 New ventures adopt team-based approach rather than
formal “departments”
 Often employ independent contractors
Figure 12.3
 Common leadership traps:
 Isolating themselves from the rest of the startup




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team
Always having the one “right” answer
Keeping people on board who are not up to the needs
of the company
Taking on too much too soon
Setting unrealistic expectations
Not building support
 The personality of the company, that intangible set of
values that determines how and why the people in the
organization respond to their business environment
the way they do
 Culture of startup derives from vision and values of
founding team
Figure 12.4
 Important for an entrepreneur to understand how
to hire
 Functions to fill
 The employee search
 Interviews
 Human resource leasing
 Professional employer organization (PEO)
 Risk management is a set of policies and their
associated decision-making processes that reduce
or eliminate risks associated with having
employees.
 Financial risks
 Obey all rules and regulations
 The major issues:
 How much of the company to sell to potential
stockholders?
 How much to pay key managers?
 Compensating with stock
 An investor does not need to be an equal partner.
 Hire talent rather than give away ownership.
 Use cash for bonuses rather than stock.
 Known as “144 stock”
 Payoff comes with liquidity event such as IPO or
acquisition by another company
 Stock is issued to the first shareholders of the
corporation
 Restricted by SEC rules
 Deferred compensation plans
 Bonus plans
 Capital appreciation rights
 Profit-sharing plans