The Hierachy Gap: the Importance of Creating Value Essay Example
The Hierachy Gap: the Importance of Creating Value Essay Example

The Hierachy Gap: the Importance of Creating Value Essay Example

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Executive Summary

The study investigates the impact of prioritizing the interests, fairness, transparency, and advancement opportunities for lower level employees. The findings suggest that this strategy leads to improved product service, employee retention, and increased stakeholder value.

Failure in governance has resulted in a loss of trust among stakeholders amidst the economic recession. The core argument asserts that prioritizing the bottom line necessitates better treatment of lower level employees who contribute to organizational profits and stakeholder value. It is crucial to recognize the significance of managing human capital as rigorously as financial capital, as lower level employees are responsible for ninety percent of profits and stakeholder value. Throughout history, these often overlooked workers have dutifully performed their jobs with little consideration for monetary recognition from higher-ups. Ethical leadership emphasizes the importance of v

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aluing our human capital. If an organization genuinely aims for long-term value creation, top management must invest in the frontline workforce.

The traditional managerial model is no longer effective in understanding corporate relationships. In today's global organization, the enterprise strategy is the guiding principle for all relationships with stakeholders. Therefore, all employees are working together with top management as responsible members of the organization. This is why the overall success depends on the commitment to lower-level employees.

Introduction: What is an organization's social responsibility towards its lower-level employees in order to create value for stakeholders? How important is it to consider managing human capital as carefully as financial capital, considering it as a scarce strategic resource? How can employee evaluations be fair and transparent? Does providing clarity on the corporate code of conduct positively impact the behavior of lower-level employees? Shoul

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top management take pay cuts during difficult economic times? Should there be a connection between top management's bonuses and other incentives with the productivity of lower-level employees? If leaders fail to address key issues under a stakeholder's framework, the consequences can be costly, disrupt the organization's mission and vision, and erode the trust of primary and secondary stakeholders. Many organizations recognize that by engaging with their communities and improving relationships with primary stakeholders, such as lower-level employees, they can enhance their business' success.

The role of culture and leadership is crucial in promoting continuous advocacy and guiding management towards a more ethical path. As the number of global corporations increases, the code of ethics gains significance. Frontline employees form an integral but distinct part of the organizational structure. In the traditional business model, these employees were not regarded as owners, resulting in limited power except through unions and government regulations.

The conventional business hierarchy is deeply ingrained in numerous executives, who mistakenly prioritize the shareholders, board members, and financiers. However, the crucial stakeholders possess the ability to globally influence the organization's value. By fostering collaboration between lower-level employees and top management, a strategic venture can achieve genuine value and increase profitability. Shareholder capitalism has long characterized the traditional management framework, with top management emphasizing profitability as the sole measure of value. They have shared financial reports with shareholders and board members for more than a century.

(See appendance 1) Employees may receive conflicting messages about the organization's culture. The organization's traditional mindset prioritizes profitability above all else. Pressure from stockholders pushes management to prioritize productivity and sales, which can contradict the organization's stance on valuing lower level

employees. This leads to a culture of dishonesty, where employees are at the bottom of the hierarchy and seen as replaceable resources due to the inwardly focused managerial model.

The mistrust can significantly harm the organization's efforts in guiding employees' behavior and can contradict the organization's values or mission statements. This leads to a negative consensus regarding the company's previously strong labor capital. As the ethical culture declines, there is a decrease in confidence in how the business treats its employees. The hierarchical perspective further contributes to degrading the market share of stockholders and board members. The organization is excessively valued to satisfy the stockholders and board members. In the new Stakeholder Framework called Stakeholder Value base Marketing, the stakeholders' perspective combines a resource base view with a marketing base view, thereby creating a social-political framework.

In the current business landscape, it is essential for companies to create a culture of ethics in order to withstand increased scrutiny from customers, regulatory agencies, and competitors. To successfully handle ethical challenges, companies need to establish and enforce a robust code of ethics. The presence or absence of ethics in the workplace has a significant impact on an organization's prosperity. Skillful leaders typically tackle ethical dilemmas by assessing various actions and their consequences for stakeholders.

The concept of value creation has shifted due to globalization and changing dynamics of business (see appendance 2). In current markets, both primary and secondary stakeholders are central to business operations. However, in the past three years, corporate leaders have implemented measures such as job cuts and reduced wages and benefits, particularly in health and retirement plans, to ensure sustainability. Interestingly, despite these actions negatively affecting

employees, top management officials continue to receive significant bonuses and generous severance packages for achieving high profits. This has resulted in discontent among employees and stakeholders who oppose unethical business practices. Such cases emphasize the importance of ethics in relation to value creation and corporate social responsibility within organizations. It specifically questions the practice of awarding excessive bonuses to CEOs and top executives without any tangible connection to their performance.

Should stakeholders be involved in setting limits on executive compensation relative to employee performance? What strategic planning methods can effectively promote and reward teamwork among employees? What measures have been implemented to mitigate the consequences of an flawed evaluation system? Within the stakeholder view model, organizations have a responsibility to provide equal pay and opportunities for their lower-level employees. Failing to value employees can lead to problems. Does a corporation bear a social responsibility towards its lower-level employees? When stakeholders and the public became aware of issues with commission or profit margin programs, top management teams faced ethical and moral dilemmas. Many organizations, already experiencing declining profits, needed to address the public's negative perception of their behavior and restructure the organization accordingly. Top management should promptly develop a new mission and vision statement, alongside a revised code of ethics and diversity plan. The organization should establish employment standards or provide in-house training for advancement into higher positions. If feasible, top management could follow the example of Paul Levy at Beth Israel and reduce their own pay to protect lower-level employees during difficult economic times.

Reference 3) states that organizations should strategically research for new sources of growth and innovation. It is important for them to let lower

level employees know that their ideas are welcome to be submitted. To ensure effective communication, stakeholder advocates should be appointed with a trained corporate social responsibility (CSR) team and division project managers as a direct chain of command. This way, they can address any questions or concerns raised. Management should prioritize issues and suggestions before drafting solutions. Finally, reports should be sent directly to corporate leadership teams for final decisions on how to improve value for the stakeholders.

The organization's goals and bottom line are clearly defined, leaving no room for interpretation. Once the standards are established for all levels of employees, incentive programs should include a balanced scorecard approach to ensure that rewards are given based on team success or failure. To ensure that valuable employees are recruited and retained, I recommend implementing decentralized steps that prioritize stakeholder value.

Corporate actions can be performed to redirect towards a stakeholder balance recovery and add value to lower level employees. Once that is complete, the organization needs to take the following steps:

  • Survey the employees and analyze the feedback
  • Management needs to be visible to the employees (walk the floor like in the example Lincoln Electric management)
  • Analyze Jobs and identify sources of conflict
  • Hold regular staff meetings
  • Monthly and annual training of employees and new hires
  • Alternative reward system
  • Stress on competency and efficiency over bottom line profit from top management to lower level employees
  • Formal process for reporting ethics violations

These are strategic ways to create value for the organization's stakeholders. As Nelson and Trevino (Ethics is an integral part of the organization's overall culture. Therefore, designing an ethical organization means systematically analyzing all aspects of the organization's ethical culture and aligning them to support

ethical behavior and discourage unethical behavior. This kind of analysis and alignment requires a substantial and sustained effort over a long period of time and the full involvement of senior executives (p.)

225 '12)..

Employee evaluation system

Nobody enjoys performance evaluations. Subordinates fear receiving only negative feedback. Managers believe their employees will react unfavorably to any form of criticism, causing them to become unresponsive, angry, or upset.

Unfortunately, due to fear or reluctance, individuals often refrain from discussing ways to enhance their performance and progress in their careers. This is regrettable, as many individuals require assistance in determining how they can improve. The wage disparity can be attributed to various factors such as experience, time spent in the job market, geographical location, job performance, and even sex discrimination. The issue of comparable worth in the workplace arises primarily due to gender discrimination. In order to address concerns related to fairness, transparency, and balance in wage determination structures, it is essential to comprehend where value lies within the organization's fundamental framework. However, stakeholders face challenges in questioning and prioritizing the evaluation of everyday management processes.

It is assumed by stakeholders and top management that the organization has dedicated employees at all levels. Executives and stakeholders should reassess their company's ethical culture and take action to strengthen ethical principles to protect lower-level employees. Trevino and Nelson (2004) state that roles strongly impact behavior, and workers are assigned roles that greatly influence how they act in ethical dilemmas. Roles can diminish a person's individuality by shifting focus to the role and its associated expectations (p.

When an individual's behavior in their job necessitates unethical actions, it raises the question of what

happens. When people accept a job, they typically understand the expectations and requirements that come with it. This often means sacrificing personal values to fulfill necessary responsibilities. The nature of one's job can either encourage ethical conduct or contribute to unethical behavior. As per Trevino and Nelson (2004), managers should evaluate whether the actions they request from employees are ethical or unethical.

Laying the Groundwork What if organizations could increase their market share by using corporate social responsibility to enhance the value of lower level employees? There are various motivational avenues. One approach is to restructure the organizational hierarchy to give workers a sense of ownership. Management should clearly communicate the company's code of conduct to guide the behavior of lower level employees. In a report titled "Taking Care of Bottom-Rung Employees is good Business" written by Geri Stengel, President of Ventureneer, it is highlighted that treating lower level employees with value and retaining good employees are crucial. The report presents the following findings: "The benefits that proved beneficial for both employers and employees can be categorized into five groups, some more suitable for large corporations and others that can be implemented by even the smallest business. 1.

Support employee health - It is crucial to support employee health as sick employees are not able to come in to work, and if they do, their productivity decreases and they risk spreading illnesses to others.

Absenteeism results in financial loss for the company.

Train and provide career opportunities - Offering training and promoting employees from within have proven to reduce turnover rates, enhance efficiency, and simplify the recruitment process. Employees who are promoted from within often excel as managers because

they possess a thorough understanding of the positions beneath them. Additionally, providing support for learning English as a second language improves communication skills and ultimately leads to increased efficiency among workers.

Offering incentives such as higher pay, profit-sharing, or increased autonomy in their work can motivate individuals to work harder and strive for advancement. A socially responsible baking company, known for its donations to nonprofits and commitment to environmental consciousness, implemented a stock-option program. The research conducted revealed that within a year, sales grew by 74 percent and the value of stock options rose by 40 percent. Additionally, engaging line workers and acting on their recommendations by providing rewards for identifying errors or offering valuable suggestions can further enhance productivity and performance.

Employee suggestions can save more money than the cost of an award program. Lower-level workers often notice important things that higher-level executives may overlook. It is crucial for companies to support schools as it allows communities to grow together and provide better workers. Paying fair wages can also help minimize negative community reactions to new businesses. In conclusion, neglecting the needs of lower-level employees in a stakeholders framework may result in negative recognition. There should be a connection between top executives' incentives and corporate profitability.

Management's social responsibility include being accountable and involving employees in all aspects of the organization.

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