Strategic planning can be defined as the formulation of plans that will lead to well informed and sound decisions and actions that when implemented will help achieve all short and long term organizational goals. During this process, the creation of well defined mission and vision statements along with organizational values and policies that are directly related to the company’s goals will help the business organization achieve long term success.
Because success or failure directly impacts all stakeholders, whether employees, suppliers, investors, the local governments or community in general, special considerations of their needs should be included in the strategic planning process. Because of recent well known corporate scandals, business organizations have incorporated business ethics codes and social responsibility programs as part of their strategy to boost their public image and reputation in the community along with the reduction of potential legal fees or financial settlements resulting from legal actions against the organization.
Ethics refer to the fundamental principles of an individual or a group. Social responsibility is how a business performs its activities to meet its wider obligations toward the society and environment, such as by avoiding activities which may be harmful. Strategic planning is an essential preliminary step in the corporate world in which senior management defines the organization’s strategy, direction and decision-making. Ethical values and social responsibility serve an important role in the strategic planning process.
Social Responsibility To the Stakeholders
o Management must ensure that strategic decisions are reached after taking into account the possible impact on the stakeholders. Stakeholders are suppliers, customers, societies and anybody who is affected by the activities of the business. A socially responsible company treats stakeholders equally. Wider perspectives also have to be considered in terms of environmental and social impact of planned activities.
o Members of management should provide information transparently and honestly to help all involved discuss, debate and reach better decision-making. This enables the team to identify and monitor any potential risks which may arise and find an alternative solution. In terms of social responsibility, transparency also enhances the company’s credibility toward its external stakeholders.
o A management meeting provides an opportunity for management team members to raise concerns and come up with new ideas. It should be conducted in a professional and coherent manner and everyone should be independent in providing ideas without fear or hesitance as this helps improve the quality of the discussion and the decisions reached.
o Members should respect others’ opinions by giving them the opportunity to speak and by listening to their ideas with interest. Constructive comments develop more intellectual discussion but should be dealt with in a way which does not hurt the other members’ feelings. Discussion in a friendly environment improves the relationship among the members, strengthens the strategic planning process and results in better decision-making.
Fairness and Truthfulness
o During the planning process, the team should take a fair and truthful look at the possible risks and impact of decisions reached. These need to be thoroughly considered to maintain the welfare of the stakeholders such as employees and the society at large. Members should be truthful and frank in providing ideas and comments.
Loss of employment and retirement funds, double bonuses, tax evasion, and the dark side of office politics are some of the challenges affecting organizations like a virus causing professionalism and efficiency to be questioned. Walker and Lanis (2009) found that an organization influences and is influenced by the society within which it operates (Cengage, 2009); therefore, an organization needs to take into consideration issues such as product safety, regulations, legal, ethical and economic responsibilities to the society within which it functions. One of the methods which could be used to do so is to integrate ethical and socially responsible techniques in an organization’s strategic plan whilst taking into consideration the needs and agendas of stakeholders.
This concept is supported by Drozdenko, and Jin (2010) who suggested core values and beliefs exhibited at the strategic level influences decision making and outcomes throughout an organization. The objective of this research is to explain the role of ethics and social responsibility in developing a strategic plan while considering stakeholder needs and agendas, including an example of a company which overstepped ethical boundaries and preventative measures which could be taken to avoid this type of situation.
Ethics appears to be a subject most people take for granted. According to Ciulla (2004), most people think of ethics as practical knowledge and common sense as opposed to theoretical knowledge. Social responsibility involves operating in a society or environment not only to gain or increase profits but to do so in accordance with legal and ethical standards therefore making a positive contribution by adding to the value of life in an area of operation. What is strategic planning and what is the role of ethics and social responsibility when developing a strategic plan? Strategic planning as defined by Bryson (2004 cited from Olsen & Eadie) is “a disciplined effort to produce fundamental decisions and actions that share and guide what an organization (or other entity) is, what it does, and why it does it” (p. 6). One of the most important needs of a strategic plan is to determine the long term effects of decision making to ensure accountability. Therefore, if an organization takes into consideration its ethical and social responsibilities to its clients, employees, and stakeholders when developing its strategic plan some important areas to focus on includes:
Economic Responsibilities – A business should provide goods and services which the society wants at a fair price that provides adequate profits to ensure its long term survival and growth as well as to reward investors (Cengage, 2009). Therefore, although the main objective of an organization is to make a profit, it is imperative to remember profits made should not be made at the detriment of the society.
Legal responsibilities – These are laws and regulations under which the organization is expected to operate (Cengage, 2009), however if the organization does not abide by these laws if needed, there is a mechanism in place to seek redress.
Ethical responsibilities – The law, according to Cengage (2009) does not cover every issue or emerging issues which may be encountered by an organization. Ethics covers activities which are prohibited even though legislation may not exist at the time the unethical act occurred (Cengage, 2009).
Philanthropic responsibilities – According to Cengage (2009) this is when an organization voluntarily “gives back” to the society by providing assistance, forming relationships and making contributions to improve the community.
Kaufman, Browne, Watkins and Leigh (2003) indicated that one of the issues which caused the collapse of Enron, a giant US energy company was that the focus of its executives was for self profit as opposed to seeing to the well being of the stakeholders. By inflating stocks, presenting fraudulent financial reports, cheating, lying and intimidating employees Enron caused employees to lose their jobs, retirement plans, and stakeholders to lose billions of dollars. Additionally, hundreds of dot.com companies came crashing down, shocking international markets as stocks plummeted when it was discovered that “stocks were inflated through personal ambitions rather than the value they would deliver to shareholders and external clients” (p. 31).
Johannesen, Valde, and Whedbee (2008 cited from Odell) stated “a society without ethics is a society doomed to extinction” (p. 5). This also applies to an organization. Therefore, an organization that is not ethical or socially responsible is doomed to fail. This is supported by Rhodes, C., Pullen, A., and Clegg, R., S. (2010 cited Verschoor, 2004) who believed there was a need to create moral strength and character by reintroducing personal conscience, responsibility, and values in organizations. The best measures to use in order to incorporate this type of behaviour, beliefs, and values within an organization is to integrate ethical and socially responsible objectives, goals, and activities into the strategic plan.
Hence to prevent unethical behaviour and social irresponsibility it is important to put measures in place. Following the implementation of the Sarsbane-Oxley Act of 2002 it is imperative that organizations ensure financial reporting is done in a responsible manner. According to Cengage (2009) this legislation was implemented to minimize the use of fraudulent financial reporting and to protect the interest of all stakeholders. Creating policies and guiding principles are also measures which guides the organization to be ethically and socially responsible to its stakeholders by taking their needs into consideration. Last but not least creating a code of conduct which should be followed by all employees not only sets a standard within the organization but can be used as a criterion to reward and punish employees who adhere to or who do not adhere to the code.
To create an ethical and socially responsible atmosphere within an organization it is imperative to put in place optimistic, high, achievable standards which must be incorporated at all levels of the organization. By focusing on legal, ethical, philanthropic, and economic responsibilities when creating a strategic plan which sets the direction and guiding principles of an organization ensures transparency and accountability. The world is changing and stakeholders are becoming more ethically conscious and prefer to develop relationships with responsible organizations. Therefore, employee safety, human rights abuses and other concerns such as bribes, corruption, the abuse of cheap labour, questionable payments and child labour which could negatively affect and organization, its image, and reputation should be at the forefront of the minds of executives when creating a strategic plan for the future of the organization.