1. Future Macroeconomic Environment and
Its Expected Impact on Management
Practice. What Is New in Management?
Marcin Senderski
Warsaw, 14 January 2012

2. Agenda
1. When firms innovate?
2. Macroeconomic landscape and its impact on managers
3. Determinant A: Care for the environment
4. Determinant B: Ethical conduct & CSR
5. Regulation as a conduit of macroeconomic pressure
6. Conceptualization attempt
7. Bibliography

3. When firms introduce new management practices?
• Management innovation is the introduction of management practices new to the
firm and intended to enhance firm performance
• Typically, professional networks, customers, competitors and consultants are
those, who provide important (external) sources of new ideas that can have an
influence on the introduction of these practices
• Geographic scope of a company is an important predictor of its propensity to
introduce new practices: the more internationally-focused the firm, the more likely it
is to view itself as having a global reference group, therefore it is more willing to
innovate to prevent falling behind their peers
• For example, when Toyota failed to compete successfully in the U.S. market in the
1950s and discovered the need for a radical new approach, this stimulus, among
others, led to the development of the lean production system which derived important
cues from the U.S. supermarket industry (Udagawa, 1995).
Source: Mol and Birkinshaw, 2009: 1272

4. Macroeconomic phenomena impacting managers
Financial
crisis
Wasteful Environmental Struggle for Regulatory
exploitation protection ethical
concerns standards pressure
Innovation
race
Prevailing global trends … unadressed issues of … administrative
lead to… sustainability, resulting in… restrictions on growth
• Evidence indicate that there is great potential for environmental improvements
connected to the span of management practice: innovation capability, organizational
learning, human resources, cost savings and competitive advantage1)
• Corporate ethics should be understood as a self-regulation device, intended to
support the law in three concrete ways:
- By making sure that corporate actions comply with the law
- Through efforts to complement national law
- By criticizing existing law in order to bring about and support initiatives for reform3)
1) Lee, 2009: 1119; 3) Steinmann, 2008: 143-144

5. Changing environmental mindset of managers
• On the one hand (1996)…
- Despite the increased attention that is apparently being paid at the corporate level to
environmental issues, many firms in the study actually ranked environmental issues
as the least important factor influencing their business, either at present or during the
next ten years. According to this evidence, environmental issues hardly register on
the strategic agenda of many firms. This was true even of firms that had adopted a
number of environmental management tools1)
• … but on the contrary (2010)…
- Traditionally, resource efficiency has not been a large concern for managers, but in
our study there are indications that resource savings and other environment-related
costs are becoming more important for the competitiveness of firms2)
• … however, it is not a universal approach:
- Many researchers show that size of the firm is crucial: Larger firms (…) are more
likely to find their reputation suffering if they do not perform well on social measures 2)
1) Garrod and Chadwick, 1996, pp. 48-49; 2) López-Gamero et al., 2010, p. 970

6. What are implications for management?
• Green management can play a central role in the optimization of product development
processes and new-products themselves, not only in pollution-intensive
industries, but also in the high-tech industries (King, 1999; Marcus and
Fremeth, 2009)
• Green product innovation performance had a positive influence on financial
performance. The implication is that companies which grasp green initiatives can gain
increased market share (according to a study cited in Blanchard, 2009)
• Firms operating in countries that are active in tackling environmental problems by
implementing repressive policies are likely to face growing regulatory pressure to
reduce emissions and increase use of renewable energy, as well as make the required
investments to embrace sustainability. Environmental issues are already forming
investors’ economic risk assessments and spending decisions
Source: Huang and Wu, 2010: 1560

7. Case studies: drivers for adopting green management
COMPANY A: KOREA OMYANG COMPANY B: GDS
(acoustic equipment manufacturer) (electronic products manufacturer)
Internal drivers Internal drivers
• To reduce the ratio of employee turnover • To solve the water quality from the
due to harsh working environment wastewater treatment
• To solve the wastewater treatment • To reduce environmental costs
problem in cone paper process
• To reduce environmental costs
External drivers External drivers
• To comply with stringent environmental • To comply with stringent environmental
regulations regulations
• To respond proactively for customer • To increase „green” public image
„green” demands
• To increase „green” competitiveness for
overseas markets
Source: Lee, 2009: 1115-1116

8. Environmental law and regulations are widespread
Source: T. Valiere (2010) Catch the Wave – The Coming Onslaught of Enviro-
nmental Regulations and Their Impact on the Electronic Industry, http://www.ttiinc.com

9. ‘Hold your breath’, says EPA
Source: http://dancingczars.wordpress.com/2011/09/25/epa%E2%80%99s-
absurd-defense-of-its-greenhouse-gas-regulations/epa-says-hold-your-breath/

10. Ethics: not any more a defensive asset?
• The definition of CSR by the World Business Council for Sustainable Development
(1999): “the continuing commitment by business to behave ethically and contribute
to economic development while improving the quality of life of the workforce and
their families as well as of the local community and society at large”
• Resolution of a crisis situation requires thoughtful deliberation, leadership skills and
particular attention to ethical decision-making (Maddalena, 2007)
• Corporations need to take the same proactive response to their ethical values as
they do to their product positioning. Corporate ethics should not be an afterthought
in a corporation’s planning and implementation of TQM (Svensson and Wood, 2005)
Practical perspective:
• In all the [four] case studies, poor management, unethical practices, a lack of
engagement with customers and other stakeholders, indifferent or aggressive
performances by CEOs and lack of preparedness for crisis communication
severely or terminally affected these companies (Watson, 2007: 378-379)
• For some fashion brands, the visibility of environmental management on the market in
terms of an eco-label seems to have developed from being a constraint that
interferes with marketing the brand to a prerequisite for reducing the risks of
damage to the brands’ image (Jørgensen et al., 2010: 375)

11. What are the sources for developing ethics?
• While standard business ethics texts
and programs may provide information
that assists with the development of
Judgement, this may be necessary but
insufficient1)
• While Judgement and Integrity are a
good platform on which to build ethics it
is also necessary to have the Courage
to act on these, and even better to also
include Humanity1)
• What corporate ethics requires of the
reform of managerial structures is that
these structures must allow (…), that
the profit motive does not dominate or
even repress (…) all endeavors towards
thoroughly scrutinizing the means with
which a corporation makes its profits
Source: Mol and Birkinshaw (2009) (the principle of primacy of corporate
ethics)2)
1) Holian, 2006: 1135; 2) Steinmann, 2008: 145

12. A transitional pathway toward CSR excellence
Although the
CSR is seamless
at first
sight, there are
powerful
opponents…
Sternberg (2000)
argues that there
is a human rights
case against
corporate social
responsibility, whic
h is that a
stakeholder
approach to
management
deprives
shareholders of
their property
rights
Source: Peddle, R. and Rosam, I. (2004) Finding the balance, Quality
World, Vol. 15, No. 6, pp. 18-26

13. Regulatory reform without ethical reform is not enough?
• Recent developments in the financial services industry, especially those directly
connected with the global banking industry, have prompted many shareholders and
other financial stakeholders to question the moral obligations of corporations
• However, moral obligations and business ethics are well positioned to serve as
an integral and important part of the strategic management process
• Corporate failures such as Lehman Brothers and scandals such as Adelphia
Communications, Arthur Andersen, Enron, and WorldCom have done little to build
and sustain shareholder and business confidence
• Early proponents of management, such as Barnard, highlighted the need for
corporate CEOs to have a sense of moral responsibility
• In fact, in many cases the only safeguard in place in economy is the moral
character of the managers (Weitzner and Darroch, 2009: 10)
• Economic innovations, including financial innovations, are not inherently bad – they
are ethically neutral, but the need of transparency arises so that the risk of
innovation in the system is to be both identified and managed (ibid., 6-9)
Source: McManus, 2011: 214

14. Why self-discipline is superior to external regulation?
When environmental regulation stems from command-and-control legislation, its
influence on managerial perception and proactive environmental management is not
significant. On the other hand, when environmental regulation stems from voluntary
norms, it has positive effects.
(López-Gamero et al., 2010)
If true, this would mean that managers should forge ethical actions only when they have
economic incentives to do so (or they just feel they should do so). Creative solutions and
innovations resulting from voluntary acting or introducing self-restraining measures may
then lead to mutual gains, both for a company and for its stakeholders.
Legitimization for
self-regulation efforts?

15. Core competencies of „new” managers
• Adapting to rapidly changing market conditions and technology shifts, and generating
continuous innovation, both of offering and operations, require managerial effort
• The reinvention of management entails simultaneously implementing five fundamental
shifts aimed at achieving continuous innovation and disciplined execution. The five
transformations required are:
- The firm’s goal becomes delighting and engaging customers, which embodies a shift
from an inside-out to outside-in perspective
- The role of managers changes from controller to enabler
- The mode of managerial coordination switches from command-and-control to
dynamic linking
- The values practiced shifts from a single focus on shareholder value to values
relevant to all stakeholders
- The communications mode of management changes from command to
conversation
• None of the five shifts is new in itself; success, however, requires putting all five shifts
into operation together
• As firms such as Apple, Amazon and Zappos have demonstrated, when customers
are delighted through a continuous stream of added value, the gains can be
extraordinary
Source: Denning, 2011

16. Waiting for government policy or being a step ahead?
Pathways for aligning corporate governance with global sustainability
Source: Cartwright and Craig, 2006: 747

17. Conceptualization
Channels of Management
External forces Payoffs
influence response
Repetitive social & More focus on Employee
Mindset evolution
economic crises CSR satisfaction
Individualism and Direct external Voluntary self-
Good publicity
contestation input & advice regulation
Formation of social Incorporating New dimension of Reinforcing
movements academic insights innovation brand’s strength
Institutionalized Reconsidering Tangible profits (in
New specialties
public discontent regulatory setup pecuniary terms)

18. Bibliography
• Blanchard, D. (2009) Green is the new black, IndustryWeek, 1 March.
• Cartwright, C. and Craig, J.L. (2006) Sustainability: aligning corporate governance, strategy and operations with
the planet, Business Process Management Journal, Vol. 12, No. 6, pp. 741-750.
• Castka, P. and Balzarova, M.A. (2007) Adoption of social responsibility through the expansion of existing
management systems, Industrial Management & Data Systems, Vol. 108, No. 3, pp. 297-309.
• Denning, S. (2011) Reinventing management: the practices that enable continuous innovation, Strategy &
Leadership, Vol. 39, No. 3, pp. 16-24.
• Garrod, B. and Chadwick, P. (1996) Environmental management and business strategy: Towards a new strategic
paradigm, Futures, Vol. 28, No. 1, pp. 37-50.
• Holian, R. (2006) Management decision making, ethical issues and “emotional” intelligence, Management
Decision, Vol. 44, No. 8, pp. 1122-1138.
• Huang, Y-Ch. and Wu, Y-Ch.J. (2010) The effects of organizational factors on green new product success:
Evidence from high-tech industries in Taiwan, Management Decision, Vol. 48, No. 10, pp. 1539-1567.
• Jørgensen, M.S., Jørgensen, U., Hendriksen, K., Hirsbak, S., Thomsen, H.H. and Thorsen, N. (2010)
Environmental management in Danish transnational textile product chains, Management Research Review, Vol.
33, No. 4, p. 357-379.
• King, A. (1999) Retrieving and transferring embodied data: implications for the management of interdependence
within organizations, Management Science, Vol. 45, No. 7, pp. 918-35.
• Lee, K-H. (2009) Why and how to adopt green management into business organizations?: The case study of
Korean SMEs in manufacturing industry, Management Decision, Vol. 47, No. 7, pp. 1101-1121.
• López-Gamero, M. D., Molina-Azorín, J. F. and Claver-Cortés, E. (2010) The potential of environmental regulation
to change managerial perception, environmental management, competitiveness and financial
performance, Journal of Cleaner Production, Vol. 18, pp. 963-974.

19. Bibliography
• Maddalena, V. (2007) A practical approach to ethical decision-making, Leadership in Health Services, Vol. 20 No.
2, pp. 71-75.
• Marcus, A.A. and Fremeth, A.R. (2009) Green management matters regardless, Academy of Management
Perspectives, Vol. 23, No. 3, pp. 17-26.
• McManus, J. (2010) Revisiting ethics in strategic management, Corporate Governance, Vol. 11, No. 2, pp. 214-
223.
• Mol, M.J. and Birkinshaw, J. (2009) The sources of management innovation: When firms introduce new
management practices, Journal of Business Research, Vol. 62, pp. 1269–1280.
• Okpara, J.O. and Wynn, P. (2008) The impact of ethical climate on job satisfaction, and commitment in Nigeria:
Implications for management development, Journal of Management Development, Vol. 27, No. 9, pp. 935-950.
• Sealy, I., Wehrmeyer, W., France, Ch. and Leach, M. (2010) Sustainable development management systems in
global business organizations, Management Research Review, Vol. 33, No. 11, pp. 1083-1096.
• Steinmann, H. (2008) Towards a conceptual framework for corporate ethics: problems of justification and
implementation, Society and Business Review, Vol. 3, No. 2, pp. 133-148.
• Svensson, G. and Wood, G. (2005) Corporate ethics in TQM: management versus employee expectations and
perceptions, The TQM Magazine, Vol. 17, No. 2, pp. 137-149.
• Udagawa M. (1995) The development of production management at the Toyota Motor Corporation, Bus
Hist, 37, pp. 107–19.
• Watson, T. (2007) Reputation and ethical behaviour in a crisis: predicting survival, Journal of Communication
Management, Vol. 11, No. 4, pp. 371-384.
• Weitzner, D. and Darroch, J. (2009) Why moral failures precede financial crises, Critical Perspectives on
International Business, Vol. 5, No. 1/2, pp. 6-13.