BACHELOR OF BUSINESS ADMINISTRATION

Transcription

1 BACHELOR OF BUSINESS ADMINISTRATION (YEAR 3) BUSINESS MANAGEMENT 3 A STUDY GUIDE Copyright 2013 MANAGEMENT COLLEGE OF SOUTHERN AFRICA All rights reserved; no part of this book may be reproduced in any form or by any means, including photocopying machines, without the written permission of the publisher REF: BMG3A

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3 TABLE OF CONTENTS SECTION TITLE PAGE Aims of the module 2 Learning Outcomes 3-4 How to use this module Introduction Managing Conflict Business Ethics Corporate Social Responsibility Industrial Relations The Legislative Framework Bibliography MANCOSA- BBA Year 3 1

4 AIMS OF THIS MODULE Upon completion of this module, the learner will be able to: Apply skills in the management of conflict within the workplace. Apply the principles of business ethics in the workplace. Discuss the role of corporate social responsibility in the business environment. Display knowledge of industrial relations and its impact on human resources. Describe the legislative framework in which a business operates. Analyse and evaluate how skills in managing conflict, business ethics, corporate social responsibility, industrial relations and the legislative environment enable effective performance within a business context of transformation. MANCOSA- BBA Year 3 2

5 LEARNING OUTCOMES Section 1: Introduction 1. Understand the structure of the module. 2. Understand the learning areas and content of the module. 3. Understand how the learning areas are relevant to each other. Section 2: Managing Conflict 4. Define conflict. 5. Distinguish between functional and dysfunctional conflict. 6. Identify and describe types of conflict. 7. Discuss sources of conflict. 8. Identify and discuss outcomes of functional and dysfunctional conflict. 9. Identify and apply appropriate strategies for the management of conflict. Section 3: Business Ethics 10. Define ethics 11. Discuss the importance of ethics within the field of business. 12. Discuss the identification and the resolution of ethical dilemmas. 13. Compare, contrast and apply the ethical models of utilitarianism, moral rights and justice. 14. Discuss how to improve an organisation s ethical climate. 15. Discuss the impact of gender on ethical practice. Section 4: Corporate Social Responsibility 16. Define social responsibility. 17. Discuss the three levels of social responsibility. 18. Identify the stakeholders to whom business is responsible and discuss their respective concerns. 19. Discuss the evaluation of corporate social performance. MANCOSA- BBA Year 3 3

6 Section 5: Industrial Relations 20. Define industrial relations. 21. Identify the participants in industrial relations. 22. Explain the tripartite relationship in industrial relations. 23. Discuss the key features of the Labour Relations Act. 24. Discuss the key features of the Basic Conditions of Employment Act. 25. Discuss the key features of the Employment Equity Act. 26. Discuss the key features of the Skills Development Act and Skills Development Levies Act. 27. Discuss the key features of the Occupational Health and Safety Act. 28. Discuss the key features of the Unemployment Insurance. Section 6: The Legislative Framework 29. Identify the legislation which impacts on organisations. 30. Explain how the legislation facilitates socio-economic transformation. 31. Identify how the Constitution is relevant to organisations. 32. Discuss the key principles and application of Black Economic Empowerment. 33. Identify the labour legislation which impacts organisations. 34. Identify the key features of the Preferential Procurement Policy Framework Act, the Competition Act, the Promotion of Access to Information Act, environmental legislation as well as key industrial and trade regulations. MANCOSA- BBA Year 3 4

7 HOW TO USE THIS MODULE This module, Business Management 301, should be studied using this Study Guide together with the prescribed texts. Prescribed Texts The prescribed textbooks for Business Management 301 are: Hellriegel, D., Jackson, S.E., Slocum, J., Staude, G., Amos, T., Klopper, H.B., Louw, L. & Oosthuizen, T. (2011) Management. Third South African Edition. Cape Town: Oxford University Press. Nieman, G. (Ed) & Bennett, A. (Ed) (2006) Business Management. A Value Chain Approach. 2 nd Ed. Pretoria: Van Schaik Publishers. These prescribed textbooks will also be used for BMG302. Recommended Reading At the beginning of each section in this Study Guide the relevant pages in your prescribed texts, which you are required to read, will be indicated. A number of recommended texts will also be listed. You are encouraged to read the recommended texts to enhance your knowledge and your learning experience. Learning Outcomes At the beginning of each section in this Study Guide you will find a list of learning outcomes. These outcomes detail the competence which you should have achieved on completion of the section. Exercises Throughout this Study Guide you will find exercises which you need to engage with. The purpose of these exercises is to: facilitate your engagement with the prescribed texts; develop your critical and reflective thinking abilities; provide you with opportunities to apply your knowledge; assess what you have learnt. MANCOSA- BBA Year 3 5

8 The exercises which you will be required to complete are Think Points ; Activities ; Reading Activities ; and Self Check Activities. THINK POINT A Think Point requires that you stop and think about an issue. It may require you to think about your own experience or provide an example. ACTIVITY An Activity provides you with an opportunity to apply what you have learnt. In most cases there are no right or wrong answers to these activities. READING ACTIVITY A Reading Activity requires that you read, reflect on and summarise a journal article relevant to the subject matter being studied. The journal articles that are referred to are available from Mancosa s electronic library (EBSCO). MANCOSA- BBA Year 3 6

9 SELF CHECK ACTIVITY At the end of each section there will be a Self Check Activity. These activities comprise multiple choice questions and provide you with an opportunity to assess your understanding of what you have learnt. Answers to these activities are provided at the end of each section. MANCOSA- BBA Year 3 7

10 SECTION 1 INTRODUCTION MANCOSA- BBA Year 3 8

11 LEARNING OUTCOMES The specific outcomes for this introductory section are that on its completion learners will: 1. Understand the structure of the module. 2. Understand the learning areas and content of the module. 3. Understand how the learning areas are relevant to each other. READING There is no prescribed reading or recommended reading for this introductory section. MANCOSA- BBA Year 3 9

12 1.1 Introduction This module, Business Management 301, forms an integral part of the MANCOSA Bachelor of Business Administration (BBA) qualification. It develops the learners understanding of the management of conflict, business ethics, corporate social responsibility, industrial relations and the legislative framework within which businesses operate. The knowledge and skills which the learner will develop in this regard will aid him / her in effectively functioning in organisations undergoing transformation. Enables effective performance within a business context characterized by transformation Legislative Framework (Section 6) Industrial Relations (Section 5) Corporate Social Responsibility (Section 4) Business Ethics (Section 3) Managing Conflict (Section 2) Figure 1: Overview of Business Management 301 MANCOSA- BBA Year 3 10

13 1.2 Contents and Structure Section 1: Introduction This is the first section of the Study Guide. It provides the learner with an overview of the key learning areas. Section 2: Organisational Culture Section 2 explores Managing Conflict and addresses: What is conflict? Functional and dysfunctional conflict Types of conflict Sources of conflict Outcomes of conflict Conflict management styles Strategies for the management of conflict Section 3: Business Ethics Section 3 explores Business Ethics and addresses: What are ethics? The importance of ethics in business Resolving ethical dilemmas Ethical models How to improve an organisation s ethical climate Gender and ethics MANCOSA- BBA Year 3 11

14 Section 4: Corporate Social Responsibility Section 4 explores Corporate Social Responsibility and addresses: What is social responsibility? Levels of social responsibility Stakeholders to whom business is responsible Evaluating corporate social performance Section 5: Industrial Relations Section 5 explores Industrial Relations and addresses: What is industrial relations? Who are the participants in industrial relations? Labour Relations Act Basic Conditions of Employment Act Employment Equity Act Skills Development Act Occupational Health and Safety Act Unemployment Insurance Act Section 6: The Legislative Framework Section 6 explores the Legislative Framework in which organisations operate and addresses: The Constitution Broad Based Black Economic Empowerment Act Labour Legislation Other Legislation Preferential Procurement Policy Framework Act Competition Act Promotion of Access to Information Act Environmental Legislation Industrial and Trade Regulations MANCOSA- BBA Year 3 12

15 1.3 Summary This section provided an introduction to this module. It outlined the contents and structure of the key learning areas, and identified how these learning areas enable the learner to effectively perform within a business context of transformation. MANCOSA- BBA Year 3 13

16 SECTION 2 MANAGING CONFLICT MANCOSA- BBA Year 3 14

17 LEARNING OUTCOMES The overall outcome for this section is that, on its completion, the learner should be able to demonstrate an understanding of managing conflict within organisations. This overall outcome will be achieved through the learner s mastery of the following specific outcomes, in that the learner will be able to: 1. Define conflict. 2. Distinguish between functional and dysfunctional conflict. 3. Identify and describe types of conflict. 4. Discuss sources of conflict. 5. Identify and discuss outcomes of functional and dysfunctional conflict. 6. Identify and apply appropriate strategies for the management of conflict. MANCOSA- BBA Year 3 15

18 READING Prescribed Reading: Note: Managerial conflict is not directly addressed in either of the prescribed texts. Learners are therefore advised to use this Study Guide as the primary text. As with all sections, it is also recommended that learners consult some or all of the recommended reading. Recommended Reading: Books Cook, C.W. & Hunsaker, P.L. (2001) Management and Organisational Behaviour. Third Edition. New York: McGraw-Hill Irwin. pp Jones, G.R. & George, J.M. (2003) Contemporary Management. Third Edition. Boston: McGraw Hill. pp Kreitner, R. & Kinicki, A. (2001) Organisational Behaviour. Fifth Edition. New York: McGraw-Hill Irwin. pp Robbins, S.P. (2001) Organisational Behaviour 9 th Ed. New Jersey: Prentice Hall. pp Journals Pondy, L.R. (1967) Organisational Conflict: Concepts and Models. Administrative Science Quarterly. September, pp Wall, J.A. & Callister, R.R. (1995) Conflict and Its Management. Journal of Management. 21 (3), pp MANCOSA- BBA Year 3 16

19 2.1 Introduction Today s organisations operate within a changing environment. The ongoing developments in technology require that organisations regularly update their processes and equipment; the need for socio-economic transformation requires that organisations enhance the diversity of their workforces and manage it effectively for business benefit; and current labour and BEE legislation impacts on the ownership, control, human resource practices, procurement practices and social responsibility practices of an organisation. These are but some of the dynamics within the external environment which require organisations to change and adapt. Change generally places considerable pressure on both managers and employees, which ultimately leads to conflict. This section explores Managing Conflict through addressing the following areas: What is conflict? Functional and dysfunctional conflict Types of conflict Sources of conflict Outcomes of conflict Conflict management styles Strategies for the management of conflict 2.2 What is Conflict? Make no mistake about it. Conflict is an unavoidable aspect of modern life (Kreitner & Kinicki, 2001: 447). Kreitner & Kinicki (2001) argue that conflict is prevalent within organisations due to: Ongoing change and transformation Enhanced workforce diversity Greater use of teams A decrease in face to face communication due to electronic communication (e.g. ) Competition within a global economy which requires cross-cultural dealings. MANCOSA- BBA Year 3 17

20 THINK POINT How would you define conflict within organisations? Comment on Think Point A number of definitions of conflict are provided below: the interaction of interdependent people who perceive opposition of goals, aims and values, and who see the other party as potentially interfering with the realization of these goals (Putnam and Poole cited in Smit & Cronje, 1997: 347). conflict is a disagreement between two or more parties for example, individuals, groups, departments, organisations, countries who perceive that they have incompatible concerns ( Cook & Hunsaker, 2001: 374). conflict is a process in which one party perceives that its interests are being opposed or negatively affected by another party (Kreitner & Kinicki, 2001: 447). organisational conflict is the discord that arises when the goals, interests, or values of different individuals or groups are incompatible and those individuals or groups block or thwart each other s attempts to achieve their objectives (Jones & George, 2003: 549). MANCOSA- BBA Year 3 18

21 These definitions highlight some important characteristics of conflict: Goal incompatibility: this takes various forms within organisations. It could relate to contradictory ideas about the distribution of resources within the organisation, or it could relate to management and employees having different goals about the conditions of work (Smit & Cronje, 1997). Interdependency: for there to be conflict, there needs to be some degree of interdependency between parties. For example, management and workers are interdependent, in that management provides the vision and the workers operationalise the vision. Interaction: for there to be conflict, it needs to be expressed whether overtly or covertly. Effective communication is therefore key to resolving conflict (Smit & Cronje, 1997). Perception: it is possible for conflict to be perceived, and therefore the sources of conflict can be real or imagined. 2.3 Functional and Dysfunctional Conflict Conflict is not always dysfunctional and does not always lead to negative outcomes. Conflict can be functional as it has the potential to stimulate creative resolution of problems and corrective actions and to keep people and organisations from slipping into complacency (Cook & Hunsaker, 2001: 374). Conflict therefore needs to be understood as a dynamic which should be effectively managed rather than eliminated. As Figure 2 on the following page shows, functional conflict is essential to the effective performance of an organisation: When there is little or no conflict, organisational performance suffers. At this level, managers tend to resist new ideas and are resistant to change. When there is too much conflict, organisational performance suffers. At this level, it is likely that managers and employees are self absorbed in the achievement of their own goals and waste resources. An optimum level of conflict is required for organisational performance. This level is reached when the organisation, its managers and employees are open to a variety of perspectives and utilise disagreements and debates to promote effective decision making (Jones & George, 2003). MANCOSA- BBA Year 3 19

22 Figure 2: The Effect of Conflict on Organisational Performance (from Jones & George, 2003: 549). High Optimum level of conflict results in high performance Level of Organisational Performance Low Low Too little conflict results in performance suffering Level of Conflict High Too much conflict results in performance suffering MANCOSA- BBA Year 3 20

23 ACTIVITY Consider your experience of conflict situations. Identify a situation where the conflict was functional and a situation where the conflict was dysfunctional. Describe each of the situations in the space provided below. 1. My Experience of a Dysfunctional Conflict Situation 2. My Experience of a Functional Conflict Situation Comment on Activity Responses will vary across learners due to their different experiences. However, the outcome of the dysfunctional conflict situation will be negative and will not be acceptable to all parties, while the outcome of the functional conflict situation will be positive and acceptable to all parties.

24 2.4 Types of Conflict Figure 3 below summarises the types of organisational conflict: Interpersonal Intragroup Organisational Conflict Intergroup Interorganisational Figure 3: Types of Organisational Conflict A description of each type of organisational conflict is provided below: Interpersonal Conflict: This occurs between individuals within an organisation due to differences in their goals, values or personality. Interpersonal conflict can emerge from seemingly insignificant irritations, such as an employee becoming irritated by the way in which his colleague in the next cubicle talks loudly about his personal problems on the telephone. This irritation can escalate to dislike and ultimately result in conflict (Kreitner & Kinicki, 2001). Intragroup Conflict: This arises within a department, team or group, and relates to differences in goals, values, perspectives and personality. For example, certain members of a group may wish to spend the advertising budget on a print campaign, whereas others may feel that it would be more effectively spent on a radio campaign. MANCOSA- BBA Year 3 24

25 Intergroup Conflict: This refers to conflict between groups, teams and departments (Jones & George, 2003). A common example is the conflict between an organisation s sales department and production department where the sales department may make promises to a client which are difficult for the production department to deliver on. Interorganisational Conflict: This conflict manifests between two or more organisations. It could arise as a result of one organisation objecting to the practices of another organisation as they believe them to be unethical (Jones & George, 2003). ACTIVITY Consider the organisational conflicts that you have experienced. Provide an example of an interpersonal, intragroup, intergroup and interorganisational conflict that you have experienced or observed within your workplace. (If you are not currently employed, think about an organisation for which you worked in the past.) 1. Interpersonal Conflict: 2. Intragroup Conflict: 3. Intergroup Conflict: 4. Interorganisational Conflict: MANCOSA- BBA Year 3 25

26 Comment on Activity Responses will vary across learners, given their different experiences of organisations and conflict. Generally, however, it is likely that learners will find that they have a greater number of examples for interpersonal conflict and intragroup conflict than for intergroup conflict and interorganisational conflict. 2.5 Sources of Conflict THINK POINT Think about the conflict which you have experienced or observed within organisations. What do you think was the source of the conflict? Comment on Think Point Figure 4 below summarises the sources of conflict. Goal Incompatibility Structural Design Sources of Conflict Degenerative Climate Personal Differences Different Role Expectations Figure 4: Sources of Organisational Conflict MANCOSA- BBA Year 3 26

27 2.5.1 Goal Incompatibility Goal incompatibility is a source of conflict and can result due to: Mutually Exclusive Goals where the achievement of one party s goal is viewed as threatening to the achievement of another party s goal. An example would be the goal of a company s credit department wanting to limit sales to people who are able to pay cash versus the sales department s goal which would be to increase the volume of sales and market share (Cook & Hunsaker, 2001). Insufficient Shared Resources where an organisation has a limited number of resources (money, personnel and equipment) to distribute across the departments, each of which have different goals. Different Time Orientations where the goals of different departments have different time lines. For example, the research and development department would ordinarily have goals with longer time frames than the sales department. If departments are unable to understand and acknowledge these differing time frames, dysfunctional conflict could result (Cook & Hunsaker, 2001) Structural Design In section 2.2 we saw that one of the characteristics of conflict is interdependence. Interdependence requires that parties interactions need to be appropriately managed and structured to ensure performance. In terms of structural design, the sources of conflict include: The Nature of the Interdependence, where the nature of the interdependence determines the potential for conflict: Pooled interdependence exists when two parties are independent of each other for their own performance outcomes, but each makes a contribution to the overall organisation that affects the well-being of both parties. (Cook & Hunsaker, 2001: 378). The parties therefore produce their individual outputs independently and have little if any contact with other parties. Conflict is therefore unlikely to arise from pooled interdependence. Sequential interdependence occurs when the output of one party provides necessary inputs for another to accomplish its goals. (Cook & Hunsaker, 2001: 379). This provides opportunities for conflict in that the output of one party will affect the output of another party. Reciprocal interdependence exists if the outputs of two parties are inputs for each other (Cook & Hunsaker, 2001: 379), and the potential for conflict is considerable in such situations, due to the high need for coordination, communication and joint decision making. MANCOSA- BBA Year 3 27

28 Lack of Substitutability, where the more alternative sources of needed resources and services available to a party, the greater its degree of substitutability (Cook & Hunsaker, 2001: 380). Certain organisations are prescriptive about the use of resources. For example, some organisations prescribe that services produced elsewhere in the organisation should be utilised to ensure full resource utilisation. This creates a situation where the supplying party has power over the receiving party and this can result in conflict (Cook & Hunsaker, 2001). For example, an education institution may prescribe that faculties must make use of the internal marketing department to market their programmes. This prescription provides the marketing department with power over the faculty, and can result in the marketing department not delivering according to the brief of the faculty and not meeting the time lines specified by the faculty. Power Differentials: Both interdependence and lack of substitutability impact on the power relations between two different parties, which creates the potential for conflict. For example, if party A makes certain decisions that impact on party B s ability to accomplish its goals, party A has power over party B. The more dependent party C is on receiving vital inputs from party D, the more power supplier party D has over received Party C. (Cook & Hunsaker, 2001: 380) Different Role Expectations A role is a set of tasks and behaviours that an individual or group is expected to carry out. Different role expectations are often the source of conflict, and can take the form of: Role Ambiguity, which occurs when the tasks and behaviours expected from an individual holding a particular role are not clear, as a result of vague communication about the role. Role Conflict occurs where expectations by the party holding the role are different to expectations for other parties (such as managers, fellow employees, clients, etc.) Role Overload occurs when role expectations exceed a party s ability to respond effectively (Cook & Hunsaker, 2001: 381). While role conflict is more prevalent at lower levels of the organisation, role ambiguity is more likely at higher levels. For example, the expectations of a first line supervisor will differ across employees, union representatives and middle management, thus amounting to role conflict. An example of role ambiguity would be where the board informs a new CEO that his role is to increase profits without providing him with an understanding of the relevant factors and dynamics that impact on profits within the organisation. MANCOSA- BBA Year 3 28

29 2.5.4 Degenerative Climate A degenerative climate is one which encourages dysfunctional conflict and where win-lose attitudes are prevalent (Cook & Hunsaker, 2001). Degenerative climates usually result when there is a clash between values and expectations of individuals or groups. For example, an accounting department may decide to flaunt its power by informing higher level management of all expense-account errors and publicising the names of managers who violated established procedures (Cook & Hunsaker, 2001). There is also a danger of a degenerative climate resulting after a merger or acquisition. For example, the culture clash between two merged companies may result in different behaviours from both parties which could lead to irritation and resentment towards employees from the different party Personal Differences We have a natural affinity with certain people and an immediate dislike of others. Personal differences often lead to conflict due to contrasts in values, behaviours and perspectives (Kreitner & Kinicki, 2001) MANCOSA- BBA Year 3 29

30 ACTIVITY Read the following case study and then answer the question which follows: Sohan recently joined Medical Caring, a medical aid company. He has been appointed as a Team Leader within the call centre. After two weeks of work, Sohan is irritated and angry. He feels overly stretched in all directions. The call centre agents seem to think that Sohan is there to educate them on how to use the new call centre system. The customers that call in often refuse to speak to the call centre agents and want to speak to Sohan who they believe is there to solve their problems. Middle management is constantly asking Sohan for statistical reports on the call centre s performance and seems to think that Sohan has nothing to do all day but prepare these reports. To make matters worse, Sohan has had a run in with one of his fellow team leaders, Jason. While Sohan gets along with many people, Jason is one of those people who press Sohan s buttons and easily irritate him. Jason sits in the cubicle next to Sohan and likes to listen to Kwaito music. At 3pm today, Sohan was so irritated by the Kwaito music which Jason had been playing the whole day that he asked Jason to turn it off for an hour. Jason refused, saying that the music helped him think. This was the last straw for Sohan who stormed off to the canteen in an attempt to cool off. Discuss Sohan s sources of conflict: MANCOSA- BBA Year 3 30

31 Comment on Activity Sohan is experiencing conflict from two key sources: Different role expectations: Sohan is experiencing role conflict in that customers, call centre agents and management have different understandings of Sohan s role and therefore make different demands on him. Furthermore, it appears that Sohan is suffering from role overload in that he does not seem to be responding effectively to all the demands placed on him. Personal differences: the personal differences between Jason and Sohan are a further source of conflict. 2.6 Outcomes of Conflict THINK POINT Think about the conflict which you have experienced or observed within organisations. What has been the outcome of the conflict? Comment on Think Point Sections and below outline the outcomes of functional and dysfunctional conflict Functional Conflict Functional conflict has positive results for an organisation in that it stimulates innovation and production. The benefits which can result from functional conflict include: Managers and employees become more aware of problems and are more able to cope with problems as a result of discussing existing and potential conflicts Organisational practices are challenged and improved. Relationships between team, department and / or organisational members are strengthened as a result of releasing the tension and achieving a win-win solution Personal development occurs as individuals learn about how they handle conflict Conflict can stimulate fun as managers and staff engage in solving interesting problems (Cook & Hunsaker, 2001) MANCOSA- BBA Year 3 31

32 Intragroup Benefits The benefits of functional conflict are most visible within teams who experience: o Increased cohesiveness o Increased loyalty o In crisis situations, acceptance of autocratic leadership o Emphasis on task accomplishment (Cook & Hunsaker, 2001) Intergroup Benefits Positive outcomes of functional conflict between teams / groups include: o Increased problem awareness o A decline in tensions between groups after resolution of conflict o Appropriate readjustment and realignment of tasks o Establishing means to facilitate feedback on intergroup problems o Clarification of priorities and tasks for respective teams (Cook & Hunsaker, 2001) Dysfunctional Conflict The outcome of dysfunctional conflict ultimately hinders the achievement of the organisation s goals. Intergroup Problems Common intergroup consequences of dysfunctional conflict include: o Hostility between groups and the establishment of an us-and-them mentality o Distorted perceptions which emphasise the negative traits of a particular group o Negative stereotyping which results in decreased communication which is also distorted o Decreased communication as a result of the distorted perceptions and negative stereotyping (Cook & Hunsaker, 2001) MANCOSA- BBA Year 3 32

33 Intragroup Problems Common consequences of dysfunctional conflict within a group include: o Lack of trust o Decline in cooperation o Decreased communication o Decreased cohesion o Decline in productivity (Cook & Hunsaker, 2001) 2.7 Conflict Management Styles Figure 5 below provides an overview of the various conflict management styles: Conflict Management Styles Assertive Competing Collaborating Compromising Avoiding Accommodating Unassertive Uncooperative Cooperative Figure 5: Conflict Management Styles (K. Thomas cited in Robbins, 2001) MANCOSA- BBA Year 3 33

34 Competing Style This style is assertive and uncooperative, and is evident where an individual or group seeks to satisfy their own interests without regard for others (Robbins, 2001). A competing style is beneficial where quick decision and action is imperative, such as in an emergency. Collaborating Style This style is assertive and cooperative. Parties to a conflict seek a mutually beneficial outcome through cooperation (Robbins, 2001). A collaborating style, however, takes time as it involves gaining a good understanding of the other parties needs, incorporating their concerns and working through hard feelings to achieve an optimal solution (Cook & Hunsaker, 2001). Given the time that the collaborating style requires, it should not be utilised to address trivial problems. Avoiding Style This style is unassertive and uncooperative (Robbins, 2001). People who adopt this style do not pursue the goals of the other party, nor do they pursue their own. It involves recognising that conflict exists, but instead of seeking to address it, attempts are made to ignore or suppress the conflict. Examples include ignoring a conflict (pretending it isn t there) and avoiding individuals and groups with whom you disagree. The avoiding style is most appropriate when a conflict is not really of relevance to you (Cook & Hunsaker, 2001). Accommodating Style This style is unassertive and cooperative. People who adopt this style seek to put the other parties interest over their own (Robbins, 2001). This style is appropriate when the issues at stake are of much greater importance to the other party. The benefit of this style is that it facilitates the maintenance of good relationships (Cook & Hunsaker, 2001). Compromising Style This style falls between assertive and cooperative behaviours. People who demonstrate a compromising style are prepared to give something up in the interests of reaching a comprised outcome (Robbins, 2001). An example of compromising is accepting a raise of R2 per hour rather than R4 per hour. MANCOSA- BBA Year 3 34

35 ACTIVITY Of the five conflict management styles, which is the best? Provide a reason for your answer. Comment on the Activity There is no best conflict management style. The choice of conflict management style depends wholly on the nature of the conflict situation. For example, adopting an avoiding style would be appropriate when the issue of conflict is relatively unimportant to you, while adopting a competing style is appropriate in situations that require quick decision making. MANCOSA- BBA Year 3 35

36 2.8 Strategies for the Management of Conflict Strategies for Avoiding Intergroup Conflict Strategies for Reducing Dysfunctional Conflict Rules and Procedures Superordinate Goals Hierarchy Increased Communication Planning Problem Solving Liaison Roles Task Forces Expansion of Resources Third-Party Judgement Teams Integrating Departments Changing Organisational Structure Avoidance Figure 6: Strategies for Conflict Management The management of conflict is essential. Conflict management strategies can be employed to ensure that functional conflict results in stimulation, innovation and improvement. Conflict management strategies are also necessary to ensure that dysfunctional conflict is checked and that its potential destructive consequences are not achieved. Figure 6 provides an overview of strategies for managing conflict. MANCOSA- BBA Year 3 36

37 2.8.1 Strategies for Avoiding Intergroup Conflict Intergroup conflict often results from a lack of coordination. Strategies can be employed to effectively coordinate intergroup performance and in so doing avoid dysfunctional conflict. These strategies are: Rules and Procedures Expected performance, behaviour and processes need to be written down. These will provide guidance as to how to act and what takes precedence in specific situations, and in so doing will ultimately reduce intergroup conflict (Cook & Hunsaker, 2001). Hierarchy If conflict within a group or between groups cannot be addressed through rules and procedures, it can be escalated to the next level of the hierarchy. Planning Within complex situations, rules, procedure and hierarchy are insufficient for the avoidance of potential conflict and planning is required. Through planning all groups will know what is required of them at which stage of the project (Cook & Hunsaker, 2001). Liaison Roles In complex situations, staff should be contracted to perform liaison roles. Such liaison staff promote lateral communication between groups and in so doing avoid potential dysfunctional conflict (Cook & Hunsaker, 2001). Task Forces In addition to utilising planning and liaison roles to avoid conflict in complex situations, task forces can be implemented. Task forces comprise representatives from the various groups involved in a project. Their focus is to facilitate communication between groups and to investigate problems and come up with solutions (Cook & Hunsaker, 2001). Teams While a task force is relevant to a complex situation extending over a relatively short period of time, teams are relevant to complex situations extending over a long period of time. Cross-functional teams, where members of particular departments / functions are represented, are most effective in facilitating coordination between departments / functions as well as providing for knowledge sharing and communication. MANCOSA- BBA Year 3 37

38 Integrating Departments When the situation is so complex that planning, liaison roles, task forces and permanent teams are not sufficient, an integrating department would need to be established. An integrating department is a permanent department with full time staff whose responsibility is coordinating the work of all departments / groups. This is an expensive initiative, and therefore the setting up of an integrating department must be warranted by the need for non-routine problem solving, conflicting goals between groups and the need for a lot of ongoing cooperation between groups (Cook & Hunsaker, 2001) Strategies for Reducing Dysfunctional Conflict While section focused on strategies for the avoidance of intergroup conflict, it is also important that recurring dysfunctional conflict is confronted (rather than avoided). Dysfunctional conflict can be confronted by utilising the strategies of focusing on superordinate goals, increasing communication, problem solving, expanding resources, third party judgment, changing the organisational structure and avoidance. Superordinate Goals One of the most effective ways to reduce conflict is to determine an overriding goal that requires the cooperative effort of both conflicting parties such a goal must be unattainable by either party alone and of sufficient importance to supersede all their other goals (Cook & Hunsaker, 2001: 399). Examples of superordinate goals include increasing responsiveness to customers, increasing organisational effectiveness and gaining competitive advantage (Jones & George, 2003). Superordinate goals ultimately eliminate win-lose situations in that parties seek to cooperate in the interest of attaining the superordinate goal. Increased Communication Increasing communication provides a means to address and correct misunderstandings, diminish the prevalence of negative stereotypes and ultimately provide for the development of positive feelings amongst parties (Cook & Hunsaker, 2001) Problem Solving Problem solving is a formal means of bringing conflicting parties together to discuss their differences and craft a way forward. It is a time consuming process, but can be very effective (Cook & Hunsaker, 2001). MANCOSA- BBA Year 3 38

39 Expansion of Resources Scarce resources are frequently the source of conflict within organisations. To address this, where possible, organisations should expand the available resources. This will ultimately lead to less dysfunctional conflict which in turn will provide for greater productivity and return on investment (Cook & Hunsaker, 2001). Third Party Judgement A less time consuming and less expensive approach to managing conflict than the problem solving strategy is the strategy of third party judgement. Here a third party, such as a common boss, serves as a mediator to resolve a conflict (Cook & Hunsaker, 2001). This approach is also known as a conflict triangle (Kreitner & Kinicki, 2001). Changing Organisational Structure Conflict could be a signal that the organisation s structure needs to be changed, bringing about new organisation to tasks and groupings of staff as well as new levels of integration (Jones & George, 2003). Cook & Hunsaker (2001) identify that scarce resources, power imbalances and status differences indicate the need for a change in organisational structure. Avoidance At times conflicting parties can ignore the dysfunctional situation in the hope that the conflict will resolve itself. However, it is seldom that dysfunctional conflict disappears and it frequently escalates with time. It may be appropriate however, in certain dysfunctional situations, to employ an avoidance strategy by separating conflicting groups temporarily or limiting the amount of interaction between them (Cook & Hunsaker, 2001). 2.9 Summary This section focused on Managing Conflict. Definitions of conflict were explored, and the difference between functional and dysfunctional conflict was highlighted. The types of conflict were examined, as were the sources of conflict. Outcomes or consequences of conflict were explored and the various conflict management styles were unpacked. In concluding this section, various strategies to managing conflict were examined. The next section, Section 3 will focus on Business Ethics. MANCOSA- BBA Year 3 39

40 SELF CHECK ACTIVITY Now that you have completed this section on Managing Conflict, check your understanding by completing the multiple choice questions below: 1. Conflict tends to be prevalent within organisations due to: A. Ongoing change and transformation B. Greater workforce diversity C. A decrease of face-to-face communication D. All of the above 2. Jerry Abell, CEO of Architecture Inc is puzzled. The latest financial results show that the company s performance is deteriorating. In fact, profitability has dropped by 30% since this time last year. Jerry cannot understand why as, in comparison to last year, there has been very little disagreement and conflict in the company this year. Staff and managers have thought along the same lines and have easily reached agreement on designs and courses of action. If conflict has been limited, why has the company not been performing well? The situation at Architecture Inc proves that: A. Conflict needs to be limited in order for an organisation to perform well B. Conflict has no impact on organisational performance C. An optimal level of conflict is required for organisational performance D. None of the above 3. Functional conflict within organisations is necessary to: A. Prevent people and organisations from becoming complacent B. Stimulate creative problem solving and innovation C. Improve organisational practices D. All of the above MANCOSA- BBA Year 3 40

41 4. Jabu is angry. He is part of a cross-functional team at Sports Inc which is a company which manufactures sports clothing. He has just come out of a team meeting where the use of the advertising budget was furiously debated. Jabu and a couple of other team members strongly believe that the advertising budget should be spent on a radio campaign. However, other team members feel strongly that the advertising budget should be used for billboard adverts as well as adverts to be placed on buses and taxis. The team meeting concluded without this matter being resolved. This is an example of: A. Interpersonal conflict B. Intragroup conflict C. Intergroup conflict D. Inter-organisational conflict 5. Zanele works at Millennium Trucks, a company which manufactures trucks. Zanele was originally working for Trucks For You, which merged with Trucking Inc three weeks ago to form Millennium Trucks. The merger has been difficult due to the clash of two different organisational cultures. Zanele is furious as she has just dealt with a representative (previously from Trucking Inc) from the manufacturing department who was flippant and refused to address her query. This type of behaviour is quite different from the behaviour which she experienced at Trucks For You where there was a climate which promoted interdepartmental support. This is an example of the following source of conflict: A. Goal incompatibility B. Structural design C. Degenerative Climate D. None of the above MANCOSA- BBA Year 3 41

42 6. Intragroup benefits of functional conflict include: A. Increased loyalty B. Increased cohesiveness C. Emphasis on task completion D. All of the above 7. Vusi and Eric, two IT Engineers from the IT department at Cellular Future are frustrated with the lack of progress made on a project on which they are working together with the Marketing Department. Don t you think the marketing department is useless, Vusi? questions Eric. I mean, what have they actually contributed to this project? he continues. Yes, they sure are useless, responds Vusi. The entire department is just a bunch of airhead women who are paid large sums of money to look pretty. What value did they think they could add to this project? Vusi s comment is an example of: A. Hostility that results from dysfunctional intergroup conflict B. Decreased communication that results from dysfunctional intergroup conflict. C. Negative stereotyping that results from dysfunctional intergroup conflict. D. None of the above MANCOSA- BBA Year 3 42

43 8. Andile and Rebecca are two managers who have been tasked to improve customer service within Hawk Insurance. Andile and Rebecca have both come up with very different approaches to the improvement of customer service. Both of them, however, believe that their respective solution is the best and each of them refuses to accept the other s proposal. This is an example of a / an management style. A. Avoiding B. Accommodating C. Compromising D. Competing 9. As Rebecca and Andile have reached a deadlock, they decide to call in their manager to resolve the conflict. This is an example of : A. A third party judgement B. A conflict triangle C. Both A and B D. Neither A nor B 10. Which of the following intergroup conflict management strategies is the most expensive, but is appropriate for complex situations which extend over long periods of time? A. Integrating departments B. Task force C. Planning D. Rules and procedures MANCOSA- BBA Year 3 43

44 11. As a means to reduce dysfunctional conflict between the Sales Department and the Manufacturing Department, the managers of these departments have decided to focus on increasing responsiveness to customers to guide their work, interdependence and interaction. Increasing responsiveness to customers is an example of a: A. Value B. Problem solving approach C. Superordinate goal D. Stereotype 12. Which of the following is not a strategy for reducing dysfunctional conflict? A. distorted perceptions B. avoidance C. enhanced resources D. None of the above Answers to Self-Check Questions 1. D 2. C 3. D 4. B 5. C 6. D 7. C 8. D 9. C 10. A 11. C 12. A MANCOSA- BBA Year 3 44

45 SECTION 3 BUSINESS ETHICS MANCOSA- BBA Year 3 45

46 LEARNING OUTCOMES The overall outcome for this section is that, on its completion, the learner should be able to demonstrate an understanding of business ethics within organisations. This overall outcome will be achieved through the learner s mastery of the following specific outcomes, in that the learner will be able to: 1. Define ethics 2. Discuss the importance of ethics within the field of business. 3. Discuss the identification and the resolution of ethical dilemmas. 4. Compare, contrast and apply the ethical models of utilitarianism, moral rights and justice. 5. Discuss how to improve an organisation s ethical climate. 6. Discuss the impact of gender on ethical practice. MANCOSA- BBA Year 3 46

47 READING Prescribed Reading: Hellriegel, D., Jackson, S.E., Slocum, J., Staude, G., Amos, T., Klopper, H.B., Louw, L. & Oosthuizen, T. (2011) Management. Third South African Edition. Cape Town: Oxford University Press. pp Nieman, G. (Ed) & Bennett, A. (Ed) (2006) Business Management. A Value Chain Approach. 2 nd Ed. Pretoria: Van Schaik Publishers. pp Recommended Reading: Books Cook, C.W. & Hunsaker, P.L. (2001) Management and Organisational Behaviour. Third Edition. New York: McGraw-Hill Irwin. pp Jones, G.R. & George, J.M. (2003) Contemporary Management. Third Edition. Boston: McGraw Hill. pp Kreitner, R. & Kinicki, A. (2001) Organisational Behaviour. Fifth Edition. New York: McGraw-Hill Irwin. pp Journals Dawson, L.M. (1995) Women and Men, Morality and Ethics. Business Horizons. July / August, pp MANCOSA- BBA Year 3 47

48 3.1 Introduction Constant change and limited resources, together with demands for high performance, all place considerable pressure on managers and employees today. This pressurized environment could potentially result in managers and employees engaging in behaviour which could be construed as unethical. Ethics is therefore receiving more and more attention in business today. This section explores Business Ethics through addressing the following areas: What are ethics? The importance of ethics in business Resolving ethical dilemmas Ethical models How to improve an organisation s ethical climate Gender and Ethics 3.2 What are Ethics? THINK POINT Based on your experience of ethics in the workplace and outside of the workplace, how would you define the term ethics? MANCOSA- BBA Year 3 48

49 Comment on Think Point Various definitions of ethics are provided below: Ethics are moral principles or beliefs about what is right and wrong. These beliefs guide individuals in their dealings with other individuals and groups (stakeholders) and provide a basis for deciding whether behaviour is right and proper (Jones & George, 2003: 89). Ethics is the study of moral issues and choices. It is concerned with right versus wrong, good versus bad, and the many shades of gray in supposedly black-and-white issues (Kreitner & Kinicki, 2001: 91). Ethics can be defined as the code of moral principles and values that directs the behaviour of an individual in terms of what is right and wrong. Ethics sets standards about what is good or bad in behaviour and decision making (Smit & Cronje, 1997:490). In the most elementary sense, ethics is a set of values and rules that define right and wrong behaviour. These values and rules indicate when behaviour is acceptable and when it is unacceptable (Hellriegel, et al 2011: 108). Management (business) ethics can be regarded as the discipline that occupies itself with the behavioural rules and values of society while pursuing the objectives of the business. Management ethics consequently takes into account all the stakeholders and means applied in the business (Nieman & Bennett, 2006: 318). Ethics are related to morality. While morality distinguishes between right and wrong, ethics are the guidelines as to how morality is achieved (Nieman and Bennett, 2006). Morality (i.e. what is right or wrong) is determined by the community or society in which a business operates. Therefore, different communities and societies will have different beliefs as to what is right and wrong. Ethics are therefore relative to the morals of a particular society. For example, in Spain abortion is regarded to be wrong and is therefore prohibited, while in Japan, abortion is considered to be acceptable and is frequently utilised as a means of birth control (Nieman and Bennett, 2006). MANCOSA- BBA Year 3 49

50 3.3 The Importance of Ethics in Business Ethical behaviour is imperative in business, primarily because unethical behaviour inflicts harm on others (Jones & George, 2003). The pursuit of self interest with no consideration of the societal interest results in disaster not only for the individual but also for the entire society as scarce resources are wasted and destroyed. Unethical behaviour results in the loss of a manager s and / or organisation s reputation (Jones & George, 2003). Customers and other stakeholders will come to view the organisation with suspicion and mistrust, which will ultimately be bad for business. MANCOSA- BBA Year 3 50

51 ACTIVITY Unethical behaviour ultimately inflicts harm on others. Read the following scenarios and identify the stakeholders who are harmed as a result of the unethical behaviour. Josie, a newly appointed HR Consultant at Excellence International, is experiencing an ethical dilemma. She has been instructed by the management to test all new job applicants for HIV and not to recruit any applicant whose test result is positive. She has also been told that when screening applicants for a job, she needs to screen out women in their 30s, due to the management s concerns that they will miss a lot of work due to child care issues. If the HR Consultant is to carry out the instructions of management, which stakeholders will be harmed? Ketso is a manager at Skyward Corporation. She is responsible for implementing a new IT system for the company. Her cousin owns an IT company and she would like to give him the business. However, Skyward Corporation s procurement policies and procedures require that the selection of a service provider be put out for tender. Ketso puts the new IT system out for tender, but informs her cousin about the proposals that are received from other potential service providers. This provides her cousin with information which enables him to make his proposal the most competitive one, which ultimately results in him winning the tender. Identify the stakeholders that are being harmed by Ketso s behaviour. Comment on Activity In the case of Josie, the HR consultant at Excellence International, the stakeholders that will be harmed if management s instructions are implemented are HIV positive people as well as women. profession could also be harmed. MANCOSA- BBA Year 3 51 The HR In the case of Ketso at Skyward Corporation, not only are IT companies being harmed, but so too is Skyward Corporation in that Ketso s unethical behaviour is a direct reflection on the company and can be damaging to its reputation.

52 3.4 Resolving Ethical Dilemmas Managers and employees are presented with a range of ethical dilemmas in the workplace. The ethical dilemmas of Skyward Corporation and Excellence International presented in the Self Activity above provide examples of the types of unethical behaviours that could exhibit in organisations. Other ethical dilemmas could include: Price fixing Favouritism Advancing within the business by stepping on others Failing to inform employees of key issues in the interests of protecting management Failing to address discrimination Abusing privileges and perks Producing products and services which are harmful to the environment (Nieman & Bennett, 2006). THINK POINT Consider the following ethical dilemma: Your boss says he cannot give you a raise this year because of a budget deficit, but he will look the other way if you load your expense accounts for a couple of months (Smit & Cronje, 1997: 492). How would you deal with this ethical dilemma? Comment on Think Point Managers and employees, when presented with an ethical dilemma, sometimes seek ways to justify and rationalise the unethical behaviour. For example, they might argue that everybody does it so why can t I or if I don t do it, someone else will or it is not really going to harm anyone (Nieman & Bennett, 2006). Obviously, rationalisation of unethical practices is not appropriate to resolving ethical dilemmas. MANCOSA- BBA Year 3 52

53 Blanchard and Peal (cited in Nieman and Bennett, 2006) provide the following questions which managers and employees should ask themselves when faced with an ethical dilemma: o Is it legal? o Is it balanced? o How does it make you feel? (Nieman & Bennett, 2006: 319). These simple questions will help one to face up to what is the right thing to do. 3.5 Ethical Models Ethical models provide different and complementary ways of determining what is ethical. An overview of the three models is provided in figure 7 below. Ethical Models Utilitarian Model Moral Rights Model Justice Model Focus on the greatest good for the greatest number of people Focus on the protection of the fundamental rights and privileges of people Distributes benefits and harms amongst stakeholders fairly and equitably Figure 7: Ethical Models (Jones & George, 2003). MANCOSA- BBA Year 3 53

54 3.5.1 Utilitarian Model Utilitarianism means to act in such a way that the greatest good is achieved for the greatest number it guides the decision maker to choose the alternative that produces the greatest net social good when all the stakeholders are considered (Cook & Hunsaker, 2001: 430). When confronted with an ethical dilemma, the utilitarian model should be used as follows: o Identify alternative courses of action o Determine both the benefits and harms of each alternative course of action for all groups of stakeholders o Select the alternative which provides for the most benefits and least harm to the greatest number of stakeholders (Cook & Hunsaker, 2001). The utilitarian model places considerable emphasis on business performance and the financial bottom line. All employees need to utilise company resources in a way that will enhance company performance and profitability. The focus of ethical behaviour is around organisational goals, efficiency and conflicts of interest (Hellriegel, et al, 2011:115). Organisational Goals: providing the greatest good for the greatest number in a competitive market system means focusing on maximizing profits (Hellriegel, et al, 2011:115). Profits should be kept at an optimal level which ensures the competitiveness of the organisation. If profits increase too much, this will provide an opportunity for competitors to enter the market, pushing down the prices and pushing up the quality. Efficiency: In pursuing the achievement of organisational goals, managers and employees need to be efficient. This entails minimising inputs and maximising outputs (Hellriegel, et al, 2011:116). Conflicts of Interest: It is important that managers and employees do not have personal interests which conflict with the achievement of organisational goals. MANCOSA- BBA Year 3 54

55 The utilitarian model has a strong capitalistic orientation and supports profit maximisation, self-interest, rewarding hard work and competition (Hellriegel, et al, 2004). However, its key weakness is its focus on the outcome rather than the process and means of achieving the outcome (Cook & Hunsaker, 2001). This is problematic in that the processes which are utilised to attain the outcome may themselves be unethical. While the utilitarian model tends to be supported by economists, it is not always supported by the greater community (Hellriegel, et al, 2011:116) Moral Rights Model Ethical decisions and behaviours within the moral rights framework focus on the protection of the fundamental rights and privileges of individuals. Any decision or behaviour that violates the rights of an individual is therefore wrong and unethical (Cook & Hunsaker, 2001). Key areas of focus of the moral rights model include: Life and Safety: Employees, customers and other stakeholders have the right to safety and to not have their life endangered in any way (Hellriegel, et al, 2011:116). The Occupational Health and Safety Act facilitates ethical behaviour relating to the right to life and safety. Truthfulness: Employees, customers and other stakeholders have the right to know the truth, and not to be intentionally deceived (Hellriegel, et al, 2011:116). Privacy: Employees, customers and other stakeholders have the right to privacy and therefore access to personal information about themselves needs to be controlled (Hellriegel, et al, 2011:116). Freedom of Conscience: Stakeholders have the right not to engage in behaviours that are contradictory to their moral or religious beliefs (Hellriegel, et al, 2011:117). Freedom of Speech: Stakeholders have the right to voice their opinion. For example, employees have the right to criticise the ethics of their company s actions (Hellriegel, et al, 2011:117). Private Property: Stakeholders have the right to acquire and utilise private property for their own purposes. MANCOSA- BBA Year 3 55

56 The value of the moral rights model to business is that it balances the strong capitalistic orientation of the utilitarian model in that it provides clear guidelines on the moral rights of employees, customers and other stakeholders which an organisation should not violate (Hellriegel, et al, 2011:116). However, its weakness is the focus on individual rights with limited attention given to societal rights (Cook & Hunsaker, 2001) Justice Model While the moral rights model focused on individual rights, the justice model incorporates both individuals and groups. It evaluates whether decisions and behaviour are ethical by looking at how equitably benefits and harm are spread across all stakeholders. The following three principles are the focus of this model: Distributive Justice Principle: This principle requires that individuals should not be arbitrarily treated differently (Hellriegel, et al, 2011:117). Individuals need to be treated the same, unless they differ in ways which are relevant to the situation. For example, two employees who have the same level of skill, hold the same job and have similar performance should receive similar pay. On the other hand, remuneration should be different for two employees who hold the same job, but have different levels of skills and different levels of performance. Fairness Principle: This principle focuses on the obligations which both the organisation and employees have as a result of their relationship. It emphasises that both the organisation and employees need to fulfill their responsibilities (Nieman & Bennett, 2006). Natural Duty Principle: This requires that employees and organisations engage in behaviour as responsible members of society. This principle is about accepting responsibility in exchange for certain rights. It involves: Helping others in need Not inflicting harm on another person Not causing unnecessary suffering to other people Supporting and complying with just institutions (Hellriegel, et al, 2011:118). MANCOSA- BBA Year 3 56

57 The justice model, together with the moral rights model, places emphasis on the long term well being of employees, rather than short term organisational efficiency which is supported by the utilitarian model. Although the three models are different, they are also complementary and should be used in tandem when engaging in ethical decision making and behaviours. ACTIVITY Identify the dominant ethics model that you utilise to guide your decisions and behaviour by completing the questionnaire on pages of your prescribed text Hellriegel, et al (2011). Once you have completed and scored the questionnaire, answer the questions which follow. 1. Based on the results of the questionnaire, what is the dominant ethics model that you utilise to guide your decisions and behaviour? 2. How can you use the results of this questionnaire to improve your ethical decision making and actions? Comment on Activity The responses to the questionnaire will vary. The questionnaire will show the dominant ethical model which guides decision making and behaviour. In being aware of the dominant ethical model, it is important that the respondent try to incorporate aspects of the other two ethical models to improve ethical decisionmaking and behaviour. MANCOSA- BBA Year 3 57

58 3.6 How to Improve an Organisation s Ethical Climate THINK POINT Think about the organisation for which you work (if you are not employed, think about an organisation for which you worked in the past, or for which you did volunteer work). How could you go about improving the ethical climate of the organisation? Comment on Think Point The following strategies and tactics can be utilised to improve an organisation s ethical climate: Role Models: Act as a role model and behave ethically yourself. Screen Potential Employees: When employing, organisations frequently do not do reference checks and confirm the credentials of the job applicant (Kreitner & Kinicki, 2001). It is important that this is done as it can provide information on previous unethical actions. Ethics Training: Train employees on how to identify and address unethical practices. Reinforce Ethical Behaviour: Sometimes within organisations the outcome of unethical practice is reinforced and rewarded and ethical practice is either not noticed or punished. Ensure that there are systems within the organisation to reinforce ethical behaviour and punish unethical behaviour (Kreitner & Kinicki, 2001). Whistle Blowing: This involves an employee reporting the unethical practices of other employees, managers or the organisation to management, the media or to the police. It can be an effective strategy if the whistle blowers are protected (Smit & Cronje, 1997) Develop a Meaningful Code of Ethics: Ethical codes are important for promoting ethical practices within the organisation and discouraging unethical practices. The following guidelines should be followed in drawing up an organisation s ethical code: MANCOSA- BBA Year 3 58

59 The golden rule of do unto others what you would like them to do unto you should underpin the code (Nieman & Bennett, 2006). Commitment to the environment and society should be made clear. Commitment to public interest (and not only business interest) needs to be clearly stated. This includes commitment to social responsibility initiatives. A stipulation regarding honest dealings and practices at all levels of the organisation needs to be made. Confidentiality of disclosure should be detailed. The position with regards to discrimination and equal opportunity should be addressed. The code must detail the training and development required to capacitate employees to deal with unethical practices. The code must be regulatory, i.e. it should clearly identify behaviours which are acceptable and unacceptable and detail the punitive measures appropriate to specific unacceptable behaviours. The dignity of all involved must be respected Professional codes of conduct need to be honoured (Nieman & Bennett, 2006). For organisational codes of ethics to be impactful they need to meet the following four criteria: Distributed to all employees Supported unequivocally by top management Specific about what constitutes an unethical practice and how to deal with it Enforced through reinforcement and rewards for ethical compliance and punishment for noncompliance (Kreitner & Kinicki, 2001). MANCOSA- BBA Year 3 59

60 ACTIVITY Consider the following extract about Honeywell Inc. s code of ethics: Honeywell Inc. recently has translated its formal code of ethics into six foreign languages. Senior management regularly communicates the importance of ethics and compliance in newsletters, ethics presentations, and other periodic communications. For example, a recent newsletter for the Asia Pacific region included a letter from the president talking about bribery. He reiterated that bribery will not be tolerated at all and that the company will walk away from business rather than engage in bribery (Solomon, cited in Kreitner & Kinicki, 2001: 96) Comment on Honeywell Inc. s approach to its code of ethics, particularly in terms of how it meets the four criteria. Comment on Activity Honeywell Inc. clearly meets the four criteria for ensuring that codes of ethics are impactful: The code was translated into 6 languages which facilitates distribution to, and understanding by, all employees. Top management s support is evident through their regular communication about the importance of ethics. The detail about the company s position on bribery is evidence that suggests that the code is specific about what constitutes unethical practice. Consequences of unethical behaviour are made clear with respect to the bribery example which states that bribery will not be tolerated. MANCOSA- BBA Year 3 60

61 3.7 Gender and Ethics Research shows that while men view moral problems from a justice perspective, women tend to view them from a care perspective. So while men focus on the rules of the game, women focus on the dynamics of the situation and the people involved (Kreitner & Kinicki, 2001). READING ACTIVITY Read the following journal article: Dawson, L.M. (1995) Women and Men, Morality and Ethics. Business Horizons. July / August, pp Note: this article is available to all MANCOSA students on EBSCO which can be accessed through the MANCOSA website ( Summarise Dawson s (1995) findings on gender and ethics is the space provided below and on the following page. MANCOSA- BBA Year 3 61

62 Comment on Reading Activity Dawson s (1995) findings show that women cannot be said to be more ethical than men. Nor can men be said to be more ethical than women. The differences in men and women lie in the different moral reasoning processes which they use to reach a decision. A summary of the differences in moral reasoning between men and women is presented in figure 8 below. In dealing with ethical dilemmas, WOMEN are likely to: Respect feelings Ask who will be hurt? Try not be judgemental Look for a compromise Find solutions that minimize hurt Rely on communication Be influenced by the dynamics of the situation Be guided by their emotions Question and challenge authority In dealing with ethical dilemmas, MEN are likely to: Respect rights Ask who is right? Value decisiveness Make clear and unambiguous decisions Find solutions that are objectively fair Rely on rules Be impartial Be guided by logic Accept authority Figure 8: Differences in Moral Reasoning Between Men and Women (Dawson, 1995: 68) MANCOSA- BBA Year 3 62

63 Dawson (1995) identifies that as women move into the workforce and up the corporate ladder the ethical climate of an organisation could improve in that women would provide for more sensitive and caring treatment of customers, more creative approaches to problem solving, more effective relationship building, creating greater trust in interpersonal affairs, more supportive and understanding supervisory styles (p 68). When the approaches to moral reasoning and ethical decision making of both women and men are combined, an optimal ethical climate should result. 3.8 Summary This section focused on Business Ethics. The term ethics was defined and the importance of ethics within business was explored. The resolution of ethical dilemmas was examined and three ethical models were compared and contrasted. Approaches to improving the organisation s ethical climate were investigated. In conclusion, the different approaches employed by men and women in engaging in ethical practice within organisations was examined. The next section will focus on Corporate Social Responsibility. MANCOSA- BBA Year 3 63

64 SELF CHECK ACTIVITY Now that you have completed this section on Business Ethics, check your understanding by completing the multiple choice questions below. Choose the best possible answer. 1. Ethics : A. Are a set of rules B. Are moral guidelines about what is right and wrong C. Are determined by the morals of a particular society or community D. All of the above 2. Unethical behaviour must be avoided as it A. Inflicts harm on others B. causes scarce resources to be wasted or destroyed C. ruins the reputation of an organisation D. All of the above 3. George, the Operations Director of Bytes Incorporated owns 50% of IT Programming Today. Bytes Incorporated requires that a new computer programme be written for them. In line with company procedures, George obtains three quotes, one of which is from IT Programming Today. George awards the contract to IT Programming Today even though their proposal did not offer the best solution and was the most expensive. This presents an ethical dilemma due to George s. A. Conflict of interest B. Focus on the profits of Bytes Incorporated C. Focus on the interests of Bytes Incorporated D. All of the above MANCOSA- BBA Year 3 64

65 4. In terms of the utilitarian model, George s decision to contract IT Programme Today, is problematic in that it does not facilitate the. A. Minimisation of profits B. Maximisation of profits C. Protection of the rights of the employees D. Equitable treatment of stakeholders 5. Aman, a chemist at Clean and Wax, a detergent manufacturing company, is feeling uneasy. Aman has come up with a recipe for a new carpet cleaning detergent, and production of the detergent is to commence tomorrow. However, the detergent contains an ingredient that is dangerous to employees. The dangerous effects of the ingredient will not be seen immediately. The ingredient will take about a year to build up in the employees bodies before they start getting ill. Aman has alerted management to the toxicity of the ingredient, but they have decided to go ahead with the manufacture of the detergent without telling the employees. Management argued that the company would make such large profits from this new detergent, that the few employees that fall ill cannot be regarded as important in the greater scheme of things. Aman however, is concerned about the employees right to life, safety and truthfulness. Aman, in focusing on the employees rights, is operating from which model of ethics? A. Utilitarian model B. Moral rights model C. Justice model D. None of the above MANCOSA- BBA Year 3 65

66 6. The management at Clean and Wax, in focusing on the considerable profit which will come from the manufacture of the new carpet cleaning detergent, are operating from which model of ethics? A. Utilitarian model B. Moral rights model C. Justice model D. None of the above 7. The ethical climate within Clean and Wax is clearly very poor. Which of the following strategies would be appropriate to improving Clean and Wax s ethical climate? A. Ethics training for management and employees B. Employing a consultant to remove the toxic ingredient from the new carpet cleaning product C. Stopping the production of the new carpet cleaning product D. All of the above 8. Aman, in trying to improve the ethical climate of Clean and Wax has drafted a Code of Ethics for the organisation which he has submitted to the CEO for review and approval. The CEO calls Aman to give him feedback on the Code of Ethics and says the following, I suppose this is something which is nice to have, and will put workers at ease. It really isn t very important to me, but if you feel that it will help improve the level of trust within the organisation you can distribute it to all the employees. It is probable that the Code of Ethics will not be impactful, primarily because: A. It was distributed to all employees B. It does not have the support of top management C. Both A and B D. Neither A nor B MANCOSA- BBA Year 3 66

67 Answers to Self-Check Questions 1. D 2. D 3. A 4. B 5. B 6. A 7. A 8. B MANCOSA- BBA Year 3 67

68 SECTION 4 CORPORATE SOCIAL RESPONSIBILITY MANCOSA- BBA Year 3 68

69 LEARNING OUTCOMES The overall outcome for this section is that, on its completion, the learner should be able to demonstrate an understanding of corporate social responsibility within organisations. This overall outcome will be achieved through the learner s mastery of the following specific outcomes, in that the learner will be able to: 1. Define social responsibility. 2. Discuss the three levels of social responsibility. 3. Identify the stakeholders to whom business is responsible and discuss their respective concerns. 4. Discuss the evaluation of corporate social performance. MANCOSA- BBA Year 3 69

70 READING Prescribed Reading: Hellriegel, D., Jackson, S.E., Slocum, J., Staude, G., Amos, T., Klopper, H.B., Louw, L. & Oosthuizen, T. (2011) Management. Third South African Edition. Cape Town: Oxford University Press. pp Nieman, G. (Ed) & Bennett, A. (Ed) (2006) Business Management. A Value Chain Approach. 2 nd Ed. Pretoria: Van Schaik Publishers. pp Recommended Reading: Books Jones, G.R. & George, J.M. (2003) Contemporary Management. Third Edition. Boston: McGraw Hill. pp Smit, P.J. & Cronje, G.J. de J. (1997) Management Principles. 2 nd Edition. Cape Town: Juta. pp MANCOSA- BBA Year 3 70

71 4.1 Introduction This section focuses on Corporate Social Responsibility and in so doing builds on what was learnt in the previous section on Business Ethics. A company s corporate social responsibility initiatives to a large degree are underpinned by a company s code of ethics. Corporate Social Responsibility will be addressed in this section through exploring the following: What is social responsibility? Levels of social responsibility Stakeholders to whom a business is responsible Evaluating corporate social performance 4.2 What is Social Responsibility? THINK POINT Think about the corporate social responsibility initiatives which your company is implementing. What are the key characteristics of these initiatives? How would you define corporate social responsibility? Comment on Think Point Various definitions of social responsibility are provided below: being socially responsible essentially means that a business tries to reconcile the interests of its different stakeholders with each other. (Cronje, Du Toit & Motlatla, 2000: 273) social responsibility refers to a manager s duty or obligation to make decisions that promote the welfare and well-being of stakeholders and society as a whole (Jones & George, 2003). social responsibility involves the managerial obligation to protect and improve the welfare of interest groups (stakeholders), society as a whole, and the interests of the business (Nieman & Bennett, 2006: 328). MANCOSA- BBA Year 3 71

72 Nieman & Bennett (2006) expand on their definition and identify that social responsibility includes: Improving the quality of life of employees Creating a social infrastructure which benefits the community, particularly in terms of development and educational opportunities Fulfilling an obligation to create a better social, ecological and aesthetic environment for the benefit of employees, their families and the greater community 4.3 Levels of Social Responsibility As outlined in Figure 9, there are three levels of social responsibility. Three Levels of Social Responsibility Level 3 Social Responsiveness Level 2 Social Reaction Level 1 Social Obligation Figure 9: Levels of Social Responsibility Social Obligation At the level of social obligation it is argued that organisations, in maximising their profits, are automatically being socially responsible as this provides for economic growth and has positive spin offs for the wider community (Smit & Cronje, 1997). Social responsibility is seen to be limited to two responsibilities: Economic responsibility where the organisation is responsible for maximising profits and providing goods and services to the market at reasonable prices. Legal responsibility where the organisation is required to comply with the regulatory business framework and labour legislation (Smit & Cronje, 1997). MANCOSA- BBA Year 3 72

73 4.3.2 Social Reaction At this level it is argued that an organisation s maximisation of profits and provision of goods and services does not amount to social responsibility. Rather, focus should be given to societal, environmental and ecological consequences of an organisation s actions. Socially responsible behaviour at this level therefore involves the organisation s voluntary participation in projects that assist in solving societal and environmental problems (Smit & Cronje, 1997) Social Responsiveness At this level, social responsibility involves the organisation being proactive, and actively seeking to prevent or find solutions to societal and environmental problems. At this level organisations also engage with the government about legislation and anticipated social and environmental problems (Smith & Cronje, 1997). ACTIVITY Read the insert entitled A South African Insight: Absa-the best beginning on page 106 of your prescribed text, Hellriegel et al (2011). At which social responsibility level is First National Bank s initiative pitched? Provide reasons for your answer. Comment on Activity First National Bank s social responsibility initiative addresses the third level of social responsibility known as social responsiveness, as they are actively seeking to address a problem. Their initiative is future oriented and is addressing a lack in the current educational system which would have a considerable impact on the labour market pool at a later stage. MANCOSA- BBA Year 3 73

74 4.4 Stakeholders to Whom Business is Responsible The term stakeholders refers to individuals or groups with interests and rights in, or ownership of, an organisation and its activities (Hellriegel, et al, 2011:119). Stakeholders benefit, or are harmed, either directly or indirectly by the actions of an organisation. Similarly an organisation will suffer if a stakeholder group broke off the relationship (Hellriegel, et al, 2004). Certain stakeholders are regarded to be primary in that they are the most important, while others are secondary. Figure10 identifies some of the common stakeholders to an organisation. Stakeholders to an Organisation Unions Customers Employees Owners Suppliers Competitors Community Government Strategic Partners Society Figure 10: Stakeholders to an organisation MANCOSA- BBA Year 3 74

75 ACTIVITY Identify the stakeholders relevant to the organisation in which you work. What are their specific concerns? Comment on Activity Learner responses will vary depending on the organisation for which they work. However, each stakeholder grouping will have different concerns. A summary of the general concerns per stakeholder grouping is provided in the table below. Stakeholder Customers Employees Society & Environment Owners & Shareholders Concerns Customers are generally concerned about the quality of product and service which they are purchasing, as well as its availability and price. Many consumers are also concerned about the company s social responsibility reputation. At times the concerns of the shareholders, who are seeking to maximise profit, may be in conflict with that of the customers (Hellriegel, et al, 2011:119). Employee concerns relate to the remuneration which they receive as well as the conditions under which they work, the training and development which they receive and sound labour relations (Hellriegel, et al, 2011:120). In carrying out their business, companies ultimately have to achieve sustainable development. This involves protecting the natural environment while making economic progress (Hellriegel, et al, 2011:120). There are both national and international rules which regulate organisations engagement with the environment. The primary concern of owners and shareholders of private companies is the generation of profit. There focus is therefore on dividends, the growth of the business and the value of the shares (Nieman & Bennett, 2006). This concern is usually in conflict with the concerns of other stakeholders (Hellriegel et al, 20011:122. MANCOSA- BBA Year 3 75

76 4.5 Evaluating Corporate Social Performance Given the heightened public interest in corporate social performance, it would make good business sense for organisations to implement social responsibility initiatives at the level of social responsiveness. In this regard, the King II report emphasises the need for a move away from single accountability to triple bottom line accountability (Hellriegel, et al, 2011). The triple bottom line involves companies disclosing their social and environmental performance alongside their financial results. (Hellriegel, et al, 2011:123). Such an approach not only meets immediate organisational needs but also the needs of future generations. Progress toward five broad obligations should be considered when evaluating an organisation s approach towards corporate social responsibility. These obligations are: Broad performance criteria: Companies need to broaden the focus of their organisational performance evaluation to include a focus on social and environmental initiatives. Ethical norms: Companies need to advocate ethical norms for the organisation, industry and business in general. Operating strategy: Organisations need to maintain and improve current standards of the physical and social environment. The potentially negative effects of an organisation s actions need to be investigated and addressed (Hellriegel, et al, 2011). Response to Social Pressure: Companies should participate actively in solving existing problems. Legislative and Political Activities: Organisations need to work with external bodies, such as the government to promote and facilitate the drafting of legislation and regulations regarding the protection of the natural and social environments in which they operate (Hellriegel, et al, 2011). Companies that meet all five obligations are essentially at the level of social responsiveness, as discussed in section 4.3. MANCOSA- BBA Year 3 76

77 ACTIVITY To what extent does the organisation for which you work meet the five categories of obligation outlined above? Provide reasons for your answer. Comment on Activity Learner responses will vary and will be dependent on the organisations in which they work. 4.6 Summary This section focused on Corporate Social Responsibility. The concept of social responsibility was defined and the levels of social obligation, social reaction and social responsiveness were explored. The stakeholders to whom business is responsible and their respective concerns were also examined. In closing, the evaluation of corporate social performance was investigated. The next section will focus on Industrial Relations. MANCOSA- BBA Year 3 77

78 SELF CHECK ACTIVITY Now that you have completed this section on Corporate Social Responsibility, check your understanding by completing the multiple choice questions below. Choose the best possible answer. 1. JC Partners have decided not to implement a formal social responsibility programme. They argue that they don t need to as, in running a business and maximising their profits, they are automatically being social responsible. At which level of social responsibility is JC Partners reasoning pitched? A. Social obligation B. Social reaction C. Social responsiveness D. None of the above 2. Reba Bank has recently implemented two social responsibility initiatives. The one is a school enrichment programme where additional communication and mathematics classes are given to support learners in their learning. A further programme is the provision of R1,000,000 in bursaries each year to learners who are studying towards a BCom degree At which social responsibility level do these social responsibility initiatives fall? A. Social obligation B. Social reaction C. Social responsiveness D. None of the above MANCOSA- BBA Year 3 78

79 3. Jason has always bought his clothing from Trendy Men. However, recently he noticed that the quality of the clothing had gone down and the pricing had gone up. Which stakeholder grouping does Jason represent? A. Employees B. Customers C. Owners D. Suppliers 4. Dali was addressing a meeting. He emphasized that my concern is that we are not doing enough to maximize profits. Which stakeholder grouping does Dali represent? A. Employees B. Customers C. Owners D. Suppliers 5. The triple bottom line refers to: A. Three financial reports B. Increased profits C. Disclosure of a company s social and environmental results alongside financial results D. None of the above MANCOSA- BBA Year 3 79

80 Answers to Self-Check Questions 1. A 2. C 3. B 4. C 5. C MANCOSA- BBA Year 3 80

81 SECTION 5 INDUSTRIAL RELATIONS MANCOSA- BBA Year 3 81

82 LEARNING OUTCOMES The overall outcome for this section is that, on its completion, the learner should be able to demonstrate an understanding of industrial relations. This overall outcome will be achieved through the learner s mastery of the following specific outcomes, in that the learner will be able to: 1. Define industrial relations. 2. Identify the participants in industrial relations. 3. Explain the tripartite relationship in industrial relations. 4. Discuss the key features of the Labour Relations Act. 5. Discuss the key features of the Basic Conditions of Employment Act. 6. Discuss the key features of the Employment Equity Act. 7. Discuss the key features of the Skills Development Act and Skills Development Levies Act. 8. Discuss the key features of the Occupational Health and Safety Act. 9. Discuss the key features of the Unemployment Insurance MANCOSA- BBA Year 3 82

83 READING Recommended Reading: Books Cronje, G.J. de J., Du Toit, G.S. du & Motlatla, M.D.C. (2001) Introduction to Business Management. 5 th Ed. Cape Town: Oxford University Press. pp Nel, P.S., Van Dyk, P.S., Haasbroek, G.D., Schultz, H.B., Sono, T. & Werner, A. (2004) Human Resources Management. 6 th Ed, Cape Town: Oxford. pp Swanepoel, B., Erasmus, B., Van Wyk, M. & Schenk, H. (2003) South African Human Resource Management. Theory & Practice. 3 rd Ed. Cape Town: Juta Legislation RSA (1995) Labour Relations Act. No 66 of 1995 Government Gazette. No Pretoria: Government Printer. RSA (1997) Basic Conditions of Employment Act. No75 of Government Gazette. No Pretoria: Government Printer RSA (1998a) Employment Equity Act. No 55 of Government Gazette. No Pretoria: Government Printer RSA (1998b) Skills Development Act. No 97 of Government Gazette. No Pretoria: Government Printer RSA (1999) Skills Development Levies Act. No 9 of Government Gazette. No Pretoria: Government Printer Websites (2006), Basic Guide to Unfair Dismissal and Unfair Labour Practices. 5.1 Introduction This section focuses on Industrial Relations and in so doing explores the various pieces of legislation which regulate employment practices within South Africa. This section is structured as follows: MANCOSA- BBA Year 3 83

84 What is industrial relations? Who are the participants in industrial relations? Labour Relations Act Basic Conditions of Employment Act Employment Equity Act Skills Development Act Occupational Health and Safety Act Unemployment Insurance Act In sections the key aspects of the important pieces of labour legislation have been summarised. These summaries sensitise the learner to the key aspects of the labour legislation so as to facilitate an understanding of the current world of work within South Africa. However, should learners require a legal interpretation of an actual workplace occurrence or situation they should refer to the actual piece of legislation, which is obviously more detailed than the summaries provided here. 5.2 What is Industrial Relations? THINK POINT How would you define industrial relations? Comment on Think Point Two definitions of industrial relations are provided below: Industrial relations can be viewed as being concerned with the relations (primarily collective but also to a lesser extent individual) between employer(s) (and/or manager(s) as the representative of the employer) and workers (and/or their representatives such as trade unions) which develop from MANCOSA- BBA Year 3 84

85 employment relationships and which are essentially concerned with balancing the various interests of, and regulating the levels of cooperation and conflict between, the parties involved. In all of this, the government and its relevant representatives, institutions, structures and systems and laws play an important, though secondary role (Swanepoel, Erasmus, Van Wyk, Schenk, 2003: 616). Industrial relations can be described as a complex system of individual and collective actions as well as formal and informal relationships existing between the state, employers, employees and related institutions concerning all aspects of the employment relationship (Cronje, Du Toit & Motlatla, 2001: 460). Industrial relations are also frequently referred to as employment relations or labour relations. 5.3 Who are the Participants in Industrial Relations? THINK POINT Based on the definitions provided in section 5.2 above, are you able to identify who are the participants in industrial relations? MANCOSA- BBA Year 3 85

86 Comment on Think Point Figure 11 below highlights the participants in industrial relations. Tripartite Relationship Secondary Participant STATE (Government) WORKERS (trade unions) EMPLOYERS (management) Primary Participants Figure 11: Participants in Industrial Relations (Cronje, et al, 2001: 461) In industrial relations a tripartite relationship exists between the state, the workers and the employers. A tripartite system within industrial relations is a characteristic of a democratic economy (Cronje, et al, 2001). Each of the participants in industrial relations has a specific role: The workers role is to sell their labour to employers, and through the trade union protect themselves at work and facilitate the improvement of working conditions. Workers are primary participants. The employers role is to improve the profitability of the business. Employees in managerial positions represent the interests of the owners of the business. Employers are primary participants. The State s role, as a secondary participant, is to create a framework through legislation to facilitate the engagement of the primary participants (Cronje, et al, 2001). MANCOSA- BBA Year 3 86

87 5.4 Labour Relations Act (Act 66 of 1995) The purpose of the Labour Relations Act is to advance economic development, social justice, labour peace and a democratization of the workplace (Nel, et al, 2004: 91). An overview of the key features of the Labour Relations Act is provided in figure 12 below. LABOUR RELATIONS ACT OF 1995 Rights & obligations of employees, unions, employers and employers organisations Promotion of collective bargaining and worker participation Dispute resolution & labour peace Freedom of Association Collective Agreements CCMA Organisational Rights Bargaining Councils Labour Court Unfair Dismissal Statutory Councils Labour Appeal Court Unfair Labour Practice Workplace Forums Strikes & Lockouts Figure 12:Overview of the Labour Relations Act of 1995 (adapted from Finnemore & Van der Merwe, 1996: 145). MANCOSA- BBA Year 3 87

88 5.4.1 Rights and Obligations of Employees, Unions, Employers and Employers Organisations The Labour Relations Act addresses the rights and obligations of employees, unions, employers and employer organisations through a focus on freedom of association, organisational rights, unfair dismissal, unfair labour practice as well as strikes and lockouts. Freedom of Association The right to freedom of association allows workers to join trade unions and employers to join employer bodies (Cronje, et al, 2001). The right to freedom of association is key to collectivism and is considered to be of utmost importance by the International Labour Organisation (ILO). Organisational Rights Organisational rights allow the trade union to have access to the workplace for the purposes of recruiting members or communicating with members. Union meetings may be held at the workplace as long as they are outside of working hours. However, the interests of the employer are protected in that access to the workplace is subject to certain conditions (such as time and place) (Cronje, et al, 2001). Members of trade unions may also authorize the employer to deduct trade union subscriptions from their wages. Strikes & Lockouts Industrial action in South Africa is quite common, with most strikes occurring because of wage disputes (Nel, et al, 2004). The Labour Relations Act acknowledges the right of employees to strike, within certain boundaries. The Labour Relations Act defines a strike as a partial or complete considered refusal to work or the retardation or obstruction of work by persons who are or have been employed by the same employer, or by different employers, for the purpose of remedying a grievance, or resolving a dispute in respect of any matter of mutual interest between employer and employee, and every reference to work in this definition includes overtime work whether it is voluntary or compulsory (RSA, 1995:214). MANCOSA- BBA Year 3 88

89 A lock out is defined as: the exclusion by an employer of employees from the employer s workplace, for the purpose of compelling the employees to accept a demand in respect of any matter of mutual interest between employer and employee, whether or not the employer breaches those employees contracts of employment in the course of or for the purpose of that exclusion (RSA, 1995: 212). The implementation of a strike or lock-out needs to be effected according to certain procedures which include: Referral of a dispute to a bargaining or statutory council or to the CCMA. There are then thirty days for these parties to try to resolve the dispute. Notice needs to be given in writing at least 48 hours prior to a strike or lock out. Strikes or lock-outs implemented in accordance with the right procedures are known as protected. An employer is not required to pay employees who are not working due to strike action (protected or unprotected). An employer may not dismiss an employee due to him / her participating in a protected strike. Certain strikes and lockouts are forbidden. For example, if there is a collective agreement which disallows strike or lockout action (Nel, et al, 2004). Unfair Dismissal Section 185 of the Labour Relations Act specifies that every employee has the right not to be unfairly dismissed. Dismissal amounts to an employer terminating a contract of employment with or without notice (Nel, et al, 2004). The Act distinguishes between fair and unfair dismissal. Dismissal is fair if: the specific needs of a job are not being met a worker has reached retirement age MANCOSA- BBA Year 3 89

90 Dismissal is unfair if: a worker intended to or did take part in or supported a protected strike or protest a worker refused to do the work of a striking or locked out co-worker, unless his refusal will endanger life or health a worker is forced to accept a demand a worker intended to or did take action against an employer by - o exercising a right o taking part in proceedings a worker is pregnant or intends to be pregnant an employer discriminated against a worker because of race, gender, sex, ethnic or social origin, colour, sexual orientation, age, disability, religion, conscience, belief, political opinion, culture, language, marital status or family responsibility an employer cannot prove - o a worker s misconduct or inability o that the employer s operational needs are valid o that the dismissal procedure was fair (from Basic Guide to Unfair Dismissal and Unfair Labour Practices, 2006) Disputes as a result of unfair dismissals need to be referred in writing by the employee to the CCMA or relevant bargaining or statutory council. The penalties for an unfair dismissal are considerable. Compensation to an employee whose dismissal was automatically unfair can be as much as 24 months of pay (Nel, et al, 2004). MANCOSA- BBA Year 3 90

91 Unfair Labour Practice Unfair labour practice amounts to a failure to act or the unfair act of an employer towards an employee in terms of: promotion, demotion, trial periods, training or benefits suspending a worker or disciplinary action refusing to re-employ a worker, as agreed an employer making circumstances difficult for a worker who was forced to make a protected disclosure (from Basic Guide to Unfair Dismissal and Unfair Labour Practices, 2006) Disputes as a result of unfair labour practice need to be referred in writing by the employee to the CCMA or relevant bargaining or statutory council (Nel, et al, 2004). Organisational Grievance and Disciplinary Procedures Grievance and disciplinary procedures are internal dispute resolution tactics at the level of the individual within the organisation. The Labour Relations Act provides guidelines as to how to draft and implement grievance and disciplinary procedures. Grievances: a grievance constitutes a real, perceived or alleged breach of the terms of employment contract (Nel, et al, 2004: 145). Sound grievance procedures facilitate sound employment relations in that they dissipate tension and latent aggression; they allow the worker to voice his concerns without fear of victimization; and they facilitate an open and honest relationship between managers and employees (Cronje, et al, 2001). Discipline: Discipline refers to action or behaviour on the part of authority (employer) in a social system aimed at stopping member behaviour that threatens to disrupt the functioning of the system (Cronje, et al, 2001: 465). It is important that organisations put in place disciplinary codes and procedures to guide employee behaviour and disciplinary actions within the organisation. A disciplinary code and procedure should specify possible offences as well as concomitant sanctions (Swanepoel, et al, 2003). MANCOSA- BBA Year 3 91

92 5.4.2 Promotion of Collective Bargaining and Worker Participation The Labour Relations Act facilitates collective bargaining and worker participation through collective agreements, bargaining councils, statutory councils and workplace forums. Collective Agreements The focus of collective bargaining is to reach agreement. Collective agreements are either procedural or substantive in nature. Procedural agreements are recognition agreements which outline how the parties to the relationship will engage with each other. Substantive agreements address the content of the relationship and service conditions (Cronje, et al, 2001). Bargaining Councils A bargaining council is a bargaining and dispute resolution structure at sectoral level. Their functions include putting in place and implementing collective agreements and preventing and resolving labour disputes (Cronje, et al, 2001). Statutory Councils A statutory council may be formed where there is no bargaining council. The powers and functions of the statutory council include preventing and settling labour disputes, establishing training schemes and administering pension, provident, medical aid and other schemes for the benefit of members (Swanepoel, et al, 2003). Workplace Forums Workplace forums are a means to provide for joint problem solving and decision making between management and employees. Their focus is not on wage related matters, but rather on issues relating to restructuring, the introduction of new technologies, health and safety and other issues that can be resolved at the level of the workplace (Cronje, et al, 2001). The function of a workplace forum is ultimately to promote the interests of employees within a workplace, regardless of whether they are union members. MANCOSA- BBA Year 3 92

93 5.4.3 Dispute Resolution & Labour Peace The structures which the Labour Relations Act has put in place to facilitate dispute resolution and promote labour peace are the CCMA, the Labour Court and the Labour Appeal Court. CCMA ACTIVITY Visit the CCMA s website (www. ccma.org.za). Explore the website and then answer the questions which follow. 1. What does CCMA stand for? 2. What is the CCMA? 3. What does the CCMA do? 4. What disputes will the CCMA not address? MANCOSA- BBA Year 3 93

94 Comment on Activity Information on the CCMA is presented below: What does CCMA stand for? Commission for Conciliation, Mediation and Arbitration What is the CCMA? The CCMA is an independent dispute resolution body, with jurisdiction in all provinces of South Africa. What does the CCMA do? The CCMA: Conciliates workplace disputes Arbitrates disputes that remain unresolved after conciliation Facilitates the establishment of workplace forums and statutory councils Compiles and publishes information and statistics about its activities Considers applications for accreditation and subsidy from Bargaining Councils and private agencies. ( What disputes will the CCMA not address? The CCMA will not address disputes where: There is an independent contractor involved The case does not deal with the Labour Relations Act or Employment Equity Act Where there is a bargaining council or statutory council for the sector Where a private agreement is in place for resolving disputes ( MANCOSA- BBA Year 3 94

95 Labour Court The Labour Court has the same status and powers as a provincial division of the Supreme Court. The Labour Court s powers include granting urgent interim relief, granting an interdict, awarding compensation, awarding damages, order compliance with the Labour Relations Act, and making an arbitration award, amongst others (Swanepoel, et al, 2003). Labour Appeal Court The Labour Appeal Court is the final court of appeal against any judgements made by the Labour Court (Nel, et al, 2004). ACTIVITY Set up an interview with the person responsible for industrial relations within your organisation. This may be the HR Manager, an HR Consultant, or an IR Officer. Find out how your organisation complies with the Labour Relations Act of 1995, and what is particularly challenging about the implementation of the Act. MANCOSA- BBA Year 3 95

96 Comment on Activity Learners responses will vary given the different organisations in which they work. 5.5 Basic Conditions of Employment Act (No 75 of 1997) The Basic Conditions of Employment Act seeks to advance economic development and social justice through establishing basic conditions of employment which organisations need to provide their workers (Nieman & Bennett, 2006). The Act regulates the following employment conditions: Work time and rules, addressing ordinary hours of work, overtime, extended ordinary daily hours of work, meal intervals, daily and weekly rest periods, night work, Sunday work and public holidays, emergency work, annual leave, sick leave, maternity leave and family responsibility leave (Nel, et al, 2004). Remuneration and deductions, where payment of remuneration needs to take place in accordance with the arrangement made by the employer and employee. The employer may only make deductions from the employee s remuneration if agreed with the employee or as a result of a collective agreement, court order or arbitration award (Nel, et al, 2004). Termination of employment, which addresses notice periods, communication of notice and severance pay (Nel, et al, 2004). Administrative obligations, which addresses the recording of the employment contract, providing the employee with particulars regarding remuneration and deductions and keeping records of hours worked and remuneration (Nel, et al, 2004). Prohibition of the employment of children, which disallows the employment of children under the age of 15 (Nel et al, 2004). Variation of basic conditions of employment, which acknowledges that a collective agreement may replace the basic conditions of employment which are specified in the Act. MANCOSA- BBA Year 3 96

97 Monitoring, enforcement and legal proceedings, where labour inspectors may visit workplaces to monitor and enforce the implementation of the Act (Nel, et al, 2004). ACTIVITY Set up an interview with the person responsible for industrial relations within your organisation. This may be the HR Manager, an HR Consultant, or an IR Officer. Find out how your organisation complies with the Basic Conditions of Employment Act, and what is particularly challenging about the implementation of the Act. Comment on Activity Learner responses will differ based on the different organisational contexts within which they work. Certain organisations will simply meet the requirements of the Act, while other organisations will exceed the requirements of the Act through, for example, providing a greater number of leave days than the number prescribed in the Act. MANCOSA- BBA Year 3 97

98 5.6 Employment Equity Act (Act 55 of 1998) THINK POINT Are you familiar with your organisation s Employment Equity initiatives? Have you seen, or at least heard about, your organisation s Employment Equity Plan? Do you know who sits on your organisation s Employment Equity Committee? Comment on Think Point Learner s responses will vary and will be dependent on the nature of the organisation in which they learner works. In particular, an organisation s level of commitment to Employment Equity will determine whether or not the learner is familiar with what the company is doing in this regard. A summary of the key aspects of the Employment Equity Act are provided below. The Employment Equity Act seeks to facilitate transformation within South African organisations. The focus of the Act is on improving the diversity of the workforce through the elimination of unfair discrimination and affirmative action measures. Key aspects of the Act include: The beneficiaries of the Act are known as the designated group. The designated group includes African, Indian and Coloured people as well as women and people with disabilities. Companies that are required to comply with the Act are known as designated employers A designated employer has a workforce of 50 employees or more (RSA, 1998a). MANCOSA- BBA Year 3 98

99 The Act prohibits unfair discrimination and requires that affirmative action measures be implemented. These affirmative action measures include: o the identification and elimination of barriers to diversity within the workplace o implementing measures to further diversity within the workplace (e.g. this could include diversity awareness training) o reasonably accommodating people from the designated group so that they become equitably represented in the workforce (e.g. through mentoring, coaching, development programmes) (RSA, 1998a). In implementing Employment Equity, the Act requires the following: Consultation with employees, which could take place through an Employment Equity Committee. Conducting an analysis to identify barriers and enablers to diversity within the workplace. Preparing an Employment Equity Plan which outlines the qualitative and quantitative diversity related goals for the organisation. Implementing the Employment Equity Plan. Submitting annual reports to the Department of Labour on progress made (RSA, 1998a) Failure to comply with the Employment Equity Act will result in organisations having to pay considerable fines. Employment Equity forms an integral part of an organisation s Black Economic Empowerment strategy. This will be explored in section Skills Development Act (Act 97 of 1998) and Skills Development Levies Act (No 9 of 1999) Both research and experience have shown that South Africa does not have optimal levels of skills to support the required economic growth and social transformation. The Skills Development Act and Skills Development Levies Act therefore provide the incentive for employers to become actively involved in economically relevant skills initiatives. Companies are encouraged to implement training initiatives within their organisations that are linked to greater sectoral and national goals. MANCOSA- BBA Year 3 99

100 The key aspects of these Acts include: Companies pay 1% of their payroll to Sector Education Training Authorities (also known as Setas) as a Skills Development Levy (RSA, 1999) Companies are able to claim back at least a portion of their Skills Development Levy by engaging in annual workplace skills planning and implementation. In this regard, a skills development facilitator (SDF) needs to be appointed and an annual workplace skills plan needs to be submitted to the Seta. At the end of the year, an annual training report needs to be submitted to the Seta, showing the implementation of planned and unplanned training Companies are able to claim back further money from their Seta by engaging in strategic skills initiatives. An example of a strategic skills initiatives is that of learnerships. Learnerships lead to a qualification and involve a structured learning component (in the classroom, at the training provider) as well as an on-the-job learning component (at the workplace). They require that a contract between the employer, employee (learner) and training provider be implemented (RSA, 1998b). The advantage of learnerships is that they provide for learners to receive workplace experience and therefore develop employable skills. Furthermore, the implementation of learnerships provides the employer with access to tax concessions as well as various monetary grants (RSA, 1998b) ACTIVITY The Skills Development Act and Skills Development Levies Act may be described as a mechanism to support the effective implementation of Employment Equity within organisations. Do you agree with this statement? Provide reasons for your answer MANCOSA- BBA Year 3 100

101 Comment on Think Point The Skills Development Act and Skills Development Levies Act are indeed a mechanism to support the effective implementation of Employment Equity. Skills development processes identify areas of skills needs within the organisation, and an organisation implementing Employment Equity would have the need to recruit and advance people from the designated group. Skills development processes would therefore strategically plan learning programmes, mentoring and coaching initiatives to facilitate the development, recruitment and advancement of people from the designated group. 5.8 Occupational Health & Safety Act (No 85 of 1993) The Occupational Health and Safety Act details employer and employee duties with respect to providing a safe working environment. Some of the duties of employers include: Ensuring that the work systems, plant and equipment is safe to use Providing instruction and training on safety issues within the workplace Establishing what hazards are associated with a particular job, and take precautionary measures Informing all employees of the danger involved in their work (Nel, et al, 2004) Some of the duties of employees include: Taking care of one s own health and safety, as well as others who may be affected by one s actions Carrying out orders relating to health and safety rules (Nel, et al, 2000) MANCOSA- BBA Year 3 101

102 5.9 Unemployment Insurance Act (No 63 of 2001) This Act provides for the financial support of people, who are willing to work but are unable to, for a short period of time. Only contributors to the fund are entitled to its benefits (Nel, et al, 2004). The Act provides for the following benefits and allowances: Illness benefits Maternity benefits Adoption benefits Dependant benefits Unemployment benefits (Nel, et al, 2004) 5.10 Summary This section focused on industrial relations. In so doing, the term industrial relations was defined and the tripartite relationship was examined. Key pieces of legislation were also examined. These included the Labour Relations Act, the Basic Conditions of Employment Act, the Employment Equity Act, the Skills Development Act, the Occupational Health and Safety Act as well as the Unemployment Insurance Act. The next section will focus on the Legislative Framework in which organisations operate. MANCOSA- BBA Year 3 102

103 SELF CHECK ACTIVITY Now that you have completed this section on Industrial Relations, check your understanding by completing the multiple choice questions below. Choose the best possible answer. 1. Industrial relations is also frequently referred to as: A. Labour relations B. Employment relations C. A and B D. Neither A nor B 2. Who are the participants in industrial relations? A. Employees and unions B. Management, employees and unions C. Government, management and employees D. Government and employees 3. The role of workers in the tripartite relationship is to A. Sell their labour to employers B. Protect themselves at work C. Facilitate the improvement of working conditions D. All of the above 4. Thandi is concerned. She was in the process of signing up with a trade union. However, her boss found out and warned her that if she did so, she would be sidelined in the department. Thandi s boss is going against her right to: A. Freedom of expression B. Freedom of association MANCOSA- BBA Year 3 103

104 C. Freedom of being unionised D. Freedom of connection 5. Josie is distraught. It is now two months after the birth of her baby and she is still on maternity leave. However, today her manager called her and indicated that they could no longer keep her on at the company. When she asked for the reason why, her manager indicated that the top management team had decided that the company could not accommodate employees who have mothering responsibilities. This is an example of: A. Fair dismissal B. Unfair dismissal C. Disciplinary action D. None of the above 6. What is the CCMA? A. A labour court B. An independent dispute resolution body C. A trade union D. An employer s organisation 7. Vusi is concerned. He has recently been employed as an IT consultant at Technology Future. Today was his first day and he received his contract of employment from the HR department. However, he suspects that the number of days leave they have given him as well as the daily rest periods are not in line with the law. Which piece of legislation should Vusi consult to determine whether his conditions of employment comply with legal requirements? MANCOSA- BBA Year 3 104

105 A. Unemployment Insurance Act B. Employment Equity Act C. Skills Development Act D. Basic Conditions of Employment Act 8. In terms of the Employment Equity Act, people with disabilities form part of the: A. Non-designated group B. Designated group C. Non-employable group D. None of the above 9. Mthandeki is a learner contracted on a learnership at PB Oil. Benefits of learnerships include: A. Learners receive both classroom / institution based training, as well as on the job training B. Employers receive tax concessions when employing a learner on a learnership C. Learners develop skills which make them employable D. All of the above 10. Which of the following benefits does the Unemployment Insurance Act not provide? A. Illness benefits B. Pension benefits C. Dependent benefits D. Unemployment benefits Answers to Self-Check Questions MANCOSA- BBA Year 3 105

106 1. C 2. C 3. D 4. B 5. B 6. B 7. D 8. B 9. D 10. B MANCOSA- BBA Year 3 106

107 SECTION 6 THE LEGISLATIVE FRAMEWORK LEARNING OUTCOMES MANCOSA- BBA Year 3 107

108 The overall outcome for this section is that, on its completion, the learner should be able to demonstrate an understanding of the legislative framework in which organisations operate. This overall outcome will be achieved through the learner s mastery of the following specific outcomes, in that the learner will be able to: 1. Identify the legislation which impacts on organisations. 2. Explain how the legislation facilitates socio-economic transformation. 3. Identify how the Constitution is relevant to organisations. 4. Discuss the key principles and application of Black Economic Empowerment. 5. Identify the labour legislation which impacts organisations. 6. Identify the key features of the Preferential Procurement Policy Framework Act, the Competition Act, the Promotion of Access to Information Act, environmental legislation as well as key industrial and trade regulations. READING Prescribed Reading: MANCOSA- BBA Year 3 108

109 Hellriegel, D., Jackson, S.E., Slocum, J., Staude, G., Amos, T., Klopper, H.B., Louw, L. & Oosthuizen, T. (2011) Management. Third South African Edition. Cape Town: Oxford University Press. pp Nieman, G. (Ed) & Bennett, A. (Ed) (2006) Business Management. A Value Chain Approach. 2 nd Ed. Pretoria: Van Schaik Publishers. pp 71 74, , Recommended Reading: Books Nel, P.S., Van Dyk, P.S., Haasbroek, G.D., Schultz, H.B., Sono, T. & Werner, A. (2004) Human Resources Management. 6 th Ed, Cape Town: Oxford. pp Legislation RSA (1996) The Constitution, Act No. 108 o f1996. Government Gazette. Vol 367. Pretoria: Government Printer Websites Introduction MANCOSA- BBA Year 3 109

110 This section focuses on the Legislative Framework in which businesses operate. In South Africa, the legislation with which organisations need to comply focuses to a large degree on the social and economic transformation of the organisation, the industry in which it operates and the country as a whole. In addressing the legislative framework, this section explores the following: o The Constitution o Broad Based Black Economic Empowerment Act o Labour Legislation o Other Legislation Preferential Procurement Policy Framework Act Competition Act Promotion of Access to Information Act Environmental Legislation Industrial and Trade Regulations 6.2 The Constitution The Constitution is the highest level of law; it is the supreme Act of the country and guides all other legislation. The Constitution enshrines the rights of all South Africans and focuses on addressing historical inequalities (Hellriegel, et al, 2011). Therefore, at the heart of the Constitution is the need and drive for social and economic transformation. This is carried through in varying degrees to most other pieces of legislation which impact on organisations. 6.3 Broad Based Black Economic Empowerment Act (No 53 of 2006) The Broad Based Black Economic Empowerment Act (no 53 of 2003) is key to social and economic transformation within South Africa. It is a piece of legislation which is presently the focus of many organisations transformation efforts. MANCOSA- BBA Year 3 110

111 THINK POINT Black Economic Empowerment or BEE is a commonly used term nowadays. What does the term mean to you? Black Economic Empowerment or BEE is essentially a means of redress aimed at increasing the number of black persons who participate in and manage the South African economy (Nieman & Bennett, 2006: 428). It is important to understand BEE not just as a black ownership initiative, but a holistic transformation strategy incorporating procurement, employment equity, skills development, black enterprise development, management / control in addition to ownership. Categories of Black Ownership Organisations can now be categorized according to their black shareholding and black control: A black company has at least 50.1% ownership and control in the company A black empowerment company has between 25.1 % and 50.1 % ownership in the company A black influenced company has between 5% and 25% black ownership and control in the company An engendered company has at least 30% of black women who own and control the company (Nieman & Bennett, 2006). BEE Industry Charters BEE industry charters, which provide for the implementation of the Broad Based Black Economic Empowerment Act, need to be developed. As at mid-year 2006, industry charters that had been drafted included the Mining Charter, the Financial Services Charter, the ICT Charter, the Maritime Transport and Service Industry Charter, the Forwarding and Clearing Industry Charter, the Tourism Charter and the Petroleum and Liquid Fuels Charter ( 2006). Many other sectors were in the process of drafting their BEE charters. BEE Scorecard MANCOSA- BBA Year 3 111

112 BEE is implemented by means of a scorecard. BEE scorecards particular to an industry will be developed when a charter for that sector is drafted. The scorecard comprises four major categories: Category Direct Empowerment Human Resources Development Indirect Empowerment Sector Factors Criteria Shareholding Management Skills Development Employment Equity Preferential Procurement Black Enterprise Development To be determined by sector charters, but likely to include CSI initiatives A company will be assessed against the above criteria and receive a score for each category, which will be weighted according to sector guidelines. The total score which an organisation receives will be interpreted as follows: 0 40: the organisation is seen to make a limited contribution to BEE 40 65: the organisation is seen to make an acceptable contribution to BEE 65 or more: the organisation is seen to make a good contribution to BEE (Nieman & Bennett, 2006). Relevance of Other Legislation to the BBBEEE Act The BEE scorecard incorporates the effective implementation of a number of other pieces of legislation: The BEE category of human resources development provides for the effective implementation of the Skills Development Act and the Employment Equity Act (this legislation was addressed in section 5). The BEE category of indirect empowerment provides for the application of the Preferential Procurement Policy Framework Act. This Act provides a points system where tenders are awarded according to price criteria and the involvement of people from the designated groups. BEE & Competitive Advantage MANCOSA- BBA Year 3 112

113 Given the transformation of South Africa and the changing consumer base, it is unlikely that organisations that fail to transform in terms of BEE will be able to maintain their competitive advantage or even survive. Research shows that BEE compliant organisations are on the increase and that they have a definite advantage over those that are not compliant (Nieman & Bennett, 2006). ACTIVITY Interview a manager from an organisation engaged in the implementation of BEE (the organisation that you choose may be the organisation at which you are employed, or an organisation that you have easy access to as a result of being friends with one of the managers, etc.). Ask the manager the following questions, and note his / her responses: 1. What has your organisation done in terms of the implementation of BEE? 2. What do you see to be the benefits of BEE within your organisation? 3. What are the challenges of effectively implementing BEE within your organisation? Comment on Activity MANCOSA- BBA Year 3 113

114 Learners responses will vary and will be dependent on the nature of the organisation that they investigate. While certain organisations would have made considerable progress in terms of BEE, many other organisations would still be resistant to any form of change in this regard. 6.4 Labour Legislation There are various pieces of labour legislation which facilitate economic and social transformation within and outside of the workplace. These include: The Labour Relations Act The Basic Conditions of Employment Act The Occupational Health and Safety Act The Unemployment Insurance Act The Employment Equity Act The Skills Development Act The Skills Development Levies Act These pieces of legislation were addressed in section 5 of this Study Guide. 6.5 Other Legislation THINK POINT What other pieces of legislation are you aware of that impact on the organisation? Comment on Think Point MANCOSA- BBA Year 3 114

115 While the Constitution, Broad Based Black Economic Empowerment Act and labour legislation have a strong focus on economic and social transformation, there are other pieces of legislation which are also important to organisations, all of which give varying degrees of attention to transformation Preferential Procurement Policy Framework Act This piece of legislation provides a point system focusing on price and criteria related to ownership, control and participation of people from the designated groups (i.e. African, Indian, Coloured, women and people with disabilities). It is utilised by government and state organs to facilitate the evaluation of tenders (Hellriegel, et al, 2004) Competition Act The Competition Act addresses excessive ownership and control in the economy, which results in unjust restrictions on the full participation of blacks in the economy (Hellriegel, et al, 2004: 116). In situations which promote BEE, the Act also makes exemptions for anti-competitive behaviour Promotion of Access to Information Act The Promotion of Access to Information Act requires that all organisations maintain certain records. These records pertain to employment contracts, share options, taxation, schemes and bank details (Nieman & Bennett, 2006). The Act recognises the need to promote human rights and therefore these records are only available to certain authorities Environmental Legislation Globally there is a move towards the protection of the environment. In this regard, there are numerous regulations relating to the environment and it is therefore important that organisations fully understand the constraints related to noise pollution, air pollution and waste disposal (Nieman & Bennett, 2006). A key piece of legislation in this regard is the National Environmental Management Act (No 107 of 1998) Industrial and Trade Regulations MANCOSA- BBA Year 3 115

116 Different organisations are subject to different pieces of legislation. For example: The Factories Act which addresses aspects of manufacturing, including safety issues The Liquor Act which is relevant to companies that manufacture and sell alcoholic products The Machinery & Building Works Act which addresses safety issues on building sites, such as the wearing of hats The Mines and Works Act which is relevant to organisations engaged in mining and excavation The Shops and Offices Act which addresses safety issues related to offices and retail space (Nieman & Bennett, 2006) 6.6 Summary This section addressed the Legislative Framework in which organisations operate. In so doing the Constitution, the Broad Based Black Economic Empowerment Act and labour legislation were identified to be key to promoting organisational, industry and national socio-economic transformation. Other legislation, such as the Preferential Procurement Policy Framework Act, as well as the Access to Information Act and relevant environmental legislation were also studied. MANCOSA- BBA Year 3 116

117 SELF CHECK ACTIVITY Now that you have completed this section on the Legislative Framework, check your understanding by completing the multiple choice questions below. Choose the best possible answer. 1. The Constitution: A. is the highest level of law B. is the supreme Act of the country C. guides all other legislation D. All of the above 2. In terms of the categories of black ownership, a black empowerment company has the following percentage of black ownership and control: A. 50.1% B. 25.1% 50.1% C. 5% - 25% D. 1% - 4% 3. Indirect Empowerment within a BEE framework refers to: A. Preferential procurement and black enterprise development B. Social responsibility and black enterprise development C. Social responsibility and skills development D. Preferential procurement and skills development MANCOSA- BBA Year 3 117

118 4. Thandi holds a 25% share in Luseka Investments. Thandi s share is relevant to in the company s BEE score card: A. Indirect empowerment B. Direct empowerment C. Human resources development D. All of the above 5. The following legislation is directly relevant to the BBE Scorecard. A. Skills Development Act B. Employment Equity Act C. Preferential Procurement Policy Framework Act D. All of the above Answers to Self-Check Questions 1. D 2. B 3. A 4. B 5. D MANCOSA- BBA Year 3 118

119 BIBLIOGRAPHY MANCOSA- BBA Year 3 119

120 Cook, C.W. & Hunsaker, P.L. (2001) Management and Organisational Behaviour. Third Edition. New York: McGraw-Hill Irwin. Cronje,G.J. de J., Du Toit, G.S. & Motlatla, M.D.C. (2001) Introduction to Business Management. Fifth Edition. Cape Town: Oxford University Press. Dawson, L.M. (1995) Women and Men, Morality and Ethics. Business Horizons. July / August, pp Finnemore, M. & Van der Merwe, R. (1996) Introduction to Labour Relations in South Africa 4 th Ed. Durban: Butterworths. Hellriegel, D., Jackson, S.E., Slocum, J., Staude, G., Amos, T., Klopper, H.B., Louw, L. & Oosthuizen, T. (201) Management. Third South African Edition. Cape Town: Oxford University Press. Jones, G.R. & George, J.M. (2003) Contemporary Management. Third Edition. Boston: McGraw Hill. Kreitner, R. & Kinicki, A. (2001) Organisational Behaviour. Fifth Edition. New York: McGraw-Hill Irwin. Nel, P.S., Van Dyk, P.S., Haasbroek, G.D., Schultz, H.B., Sono, T. & Werner, A. (2004) Human Resources Management. 6 th Ed, Cape Town: Oxford. Nieman, G. (Ed) & Bennett, A. (Ed) (2006) Business Management. A Value Chain Approach. 2 nd Ed. Pretoria: Van Schaik Publishers. Pondy, L.R. (1967) Organisational Conflict: Concepts and Models. Administrative Science Quarterly. September, pp Robbins, S.P. (2001) Organisational Behaviour 9 th Ed. New Jersey: Prentice Hall. MANCOSA- BBA Year 3 120

121 RSA (1995) Labour Relations Act. No 66 of 1995 Government Gazette. Government Printer. No Pretoria: RSA (1996) The Constitution, Act No. 108 o f1996. Government Gazette. Vol 367. Pretoria: Government Printer RSA (1997) Basic Conditions of Employment Act. No75 of Government Gazette. No Pretoria: Government Printer. RSA (1998a) Employment Equity Act. No 55 of Government Gazette. No Pretoria: Government Printer. RSA (1998b) Skills Development Act. No 97 of Government Gazette. No Pretoria: Government Printer. RSA (1999) Skills Development Levies Act. No 9 of Government Gazette. No Pretoria: Government Printer. Smit, P.J. & Cronje, GJ de J (1997) Management Principles. 2 nd Edition. Cape Town: Juta. Swanepoel, B., Erasmus, B., Van Wyk, M. & Schenk, H. (2003) South African Human Resource Management. Theory & Practice. 3 rd Ed. Cape Town: Juta. Wall, J.A. & Callister, R.R. (1995) Conflict and Its Management. Journal of Management. 21 (3), pp MANCOSA- BBA Year 3 121

122 (2006) Basic Guide to Unfair Dismissal and Unfair Labour Practices. MANCOSA- BBA Year 3 122