Instructor Manual for Management Sixteenth Edition. Stephen P. Robbins Mary A. Coulter Lori K. Long

Chapter 1 Managers and You in the Workplace In this introductory chapter, your students will explore managers, management functions and roles, trends impacting the job of a manger, and the value of studying management.

LEARNING OBJECTIVES 1.1 Describe who managers are and where they work.

1.2 Explain why managers are important to organizations.

1.3 List the functions and roles of managers.

1.4 Describe the factors that are reshaping and redefining the manager’s job.

1.5 Identify career options in management and skills that lead to career success.

1.6 Explain the value of studying management.

CHAPTER OUTLINE 1.1

WHO ARE MANAGERS AND WHERE DO THEY WORK? A. Who Is a Manager? The changing nature of organizations and work often requires employees in formerly nonmanagerial jobs to perform managerial activities. Students who are preparing for careers on any organizational level can benefit from acquiring management skills. Today’s employees need to be crosstrained and multi-skilled.

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The changing nature of work has blurred the distinction between managers and nonmanagerial employees. Many traditional nonmanagerial jobs now include managerial activities, and many organizations no longer have formal managers. A holacracy is defined as an organizational structure that aims to distribute decision making throughout the organization by requiring teams or workgroups to manage themselves, rather than centralizing decision making in a traditional hierarchy. See Exhibit 1-1.

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How do we define a manager? A manager is someone who coordinates and oversees the work of other people so that organizational goals can be accomplished. However, keep in mind that managers may have additional work duties not related to coordinating the work of others.

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Managers can be classified by their level in the organization, particularly in traditionally structured organizations—those shaped like a pyramid (see Exhibit 1-2). a.

First-line (or front-line) managers (often called supervisors) are typically involved with producing the organization’s products or servicing the organization’s customers. These managers are located on the lowest level of management. b.

Middle managers include all levels of management between the first level and the top level of the organization. They may have titles

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such as regional manager, project leader, store manager, or division manager. c.

Top managers include managers at or near the top of the organization who are responsible for making organization-wide decisions and establishing plans and goals that affect the entire organization.

B. Where Do Managers Work? An organization is a deliberate arrangement of people to accomplish some specific purpose.

Organizations share three common characteristics (see Exhibit 1-3): (1) each has a distinct purpose; (2) each is composed of people; and (3) each develops some deliberate structure so members can do their work.

1. An organization’s structure may be open and flexible, with no specific job duties, or it may require strict adherence to explicit job arrangements. Many of today’s organizations are structured with flexible work arrangements, employee work teams, open communication systems, and supplier alliances.

1.2 WHY ARE MANAGERS IMPORTANT? A. Managers have an important impact on both employees and the organizations in which they work. The following three reasons address their importance: 1.

Organizations need their managerial skills and abilities more than ever in these uncertain, complex, and chaotic times.

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Managers are critical to getting things done.

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Managers do matter to organization’s performance. According to a Gallup poll of tens of thousands of managers and millions of employees, the relationship of manager to their employees and supervisors is the single most important variable in employee success.

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MANAGEMENT VS. MANAGERS A. What Is Management? Management involves coordinating and

overseeing the work activities of others so that their activities are completed efficiently and effectively.

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Efficiency is getting the most output from the least amount of inputs in order to minimize resource costs. Efficiency is often referred to as “doing things right” (see Exhibit 1-4).

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Effectiveness is completing activities so that organizational goals are attained and is often described as “doing the right things” (see Exhibit 1-4).

B. What Do Managers Do? Management researchers have developed different approaches to describe what managers do.

1. Management Functions—Henri Fayol, a French industrialist in the early 1900s, proposed that managers perform five management functions: planning, organizing, commanding, coordinating, and controlling (see Exhibit 1-5). a.

Planning involves defining goals, establishing strategies for achieving those goals, and developing plans to integrate and coordinate activities. b.

Organizing involves arranging and structuring work to accomplish the organization’s goals. c.

Leading involves working with and through people to accomplish organizational goals. d.

Controlling involves monitoring, comparing, and correcting work performance.

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In practice, managing is not always performed in a sequence as outlined above. However, regardless of the order in which these functions are performed, managers do plan, organize, lead, and control as they manage.

Management Roles—Henry Mintzberg, a management researcher, conducted a precise study of managers at work. He concluded that managers perform 10 different roles, which are highly interrelated.

Managerial roles refer to specific categories of managerial behavior (see Exhibit 1-6). a.

Interpersonal roles include figurehead, leadership, and liaison activities. b.

Informational roles include monitor, disseminator, and spokesperson. c.

Decisional roles include entrepreneur, disturbance handler, resource allocator, and negotiator.

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Follow-up studies of Mintzberg’s role categories in different types of organizations and at different managerial levels within organizations generally support the idea that managers perform similar roles.

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The functions approach represents the generally accepted way to describe the manager’s job; Mintzberg’s roles give additional insight into what managers do while planning, leading, organizing, and controlling.

MANAGERIAL CHALLENGES TODAY AND INTO THE FUTURE Three trends that will continue to disrupt and transform management practices are the normalization of remote or hybrid work, the use of technology, and the changing expectations of employees on how organizations support their overall well-being.

A. Focus on Remote or Hybrid Work. Remote work is the practice of accomplishing work tasks away from the company’s worksite; hybrid work is the practice of working remotely part of the time and on site part of the time. Gartner estimates that nearly 70 percent of manager– employee relationships today are at least partly asynchronous, which means the manager and the employee are not physically together interacting in real-time. As a result, managers will have less involvement in workers’ day-to-day activities and will need to focus more on managing the outputs of employees’ work, and less on the process to get to those outputs.

B. Focus on Technology. Many organizations are engaging in strategic digital transformation by rethinking how they use technology, people, and processes to accomplish the work of the organization. Organizations are using technology such as artificial intelligence to provide employees feedback on their work. Artificial intelligence (AI) refers to hardware or software systems that learn to make decisions and carry out actions on behalf of the people that operate the systems.

1. Technology has also impacted companies’ use of temporary or contract workers. Contract workers are not company employees; rather, they work for a company on an as-needed basis. The evolution 3

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of apps such as Door Dash and Uber has transformed the contract labor market. This evolution is often referred to as the gig economy because it describes a new labor market of workers doing freelancetype work.

C. Focus on Employee Well-Being. Managers are becoming more critical to improving employee well-being. For example, a Gallup study in 2002 found that 10 percent of workers reported their boss as a source of stress that affected their engagement with work. Twenty years later that number had grown to 70 percent, which means now more than ever, the manager’s role is important in reducing employees’ stress. Companies have realized the need to support employee well-being and expand managerial skillsets.

1.5

WHAT CAREERS ARE IN MANAGEMENT There are real rewards from holding a managerial position. Managers get the satisfaction of creating a work environment in which organizational members can do their work to the best of their ability and thus help the organization achieve its goals. Other rewards may include receiving recognition and status in your organization and in the community, playing a significant role in influencing organizational outcomes, and receiving attractive compensation in the form of salaries, bonuses, and stock options (see Exhibit 1-7).

A. What Skills Do Managers Need? Managers need certain skills to perform the challenging duties and activities associated with being a manager. Robert L. Katz proposed that managers need three critical skills in managing: technical, human, and conceptual (see Exhibit 1-8).

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Technical skills are job-specific knowledge and techniques needed to proficiently perform specific tasks. b.

Interpersonal skills involve the ability to work well with other people individually and in a group. c.

Conceptual skills involve the ability to think and to conceptualize about abstract and complex situations.

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Developing management skills is important for aspiring managers. managers may require specific skills. For example, managing workers in today’s means paying attention to workers’ mental health, which requires managers to develop their skills in empathy and respond with compassion.

1.6 WHY STUDY MANAGEMENT? The importance of studying management in today’s dynamic global environment can be explained by looking at the universality of management, the reality of work, and the rewards and challenges of being a manager.

A. The Universality of Management. Without a doubt, management is needed in all types and sizes of organizations, at all organizational levels, and in all organizational work areas throughout the world (see Exhibit 19).

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We interact with organizations every day of our lives. Every product we use, every action we take, is provided by or affected by organizations. Well-managed organizations develop a loyal customer base, grow, and prosper.

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Students who study management gain the ability to recognize and encourage good management practices; just as important, they learn to recognize poor management and how to correct it.

The Reality of Work. After graduation, students will either manage or be managed. A course in management provides insight and understanding about behaviors of supervisors and the internal operations of organizations. An individual does not have to aspire to be a manager in order to benefit from taking a course in management.

Gaining Insights into Life at Work. A good number of students regularly remind your authors that they’re not planning a career in management.

These students’ career goals are to be accountants or financial analysts or marketing researchers or computer programmers. They ask us: Why do I need to take a management course?

ANSWERS TO REVIEW AND DISCUSSION QUESTIONS Student answers to these questions will vary.

1-1. Describe what a manager does. How does the work of managers differ from that of nonmanagerial employees?

The answer to this question used to be straightforward, but the line between managerial and nonmanagerial employees has blurred as more employees take on tasks once reserved for managers. To keep the answer from becoming too complicated, the best way to address this question is to focus on the fact that a manager’s job is about helping others do their work. (LO: 1, Tell who managers are and where they work, AACSB: Analytical thinking) 1-2. Are managers important to organizations? Explain.

There are three key reasons why managers are important to organizations. First, organizations need the managerial skills and abilities that managers provide. Second, managers are essential to getting things done. Third, research shows that the single most important variable in employee productivity and loyalty is the quality of the relationship between employees and their direct supervisors. (LO: 2, Explain why managers are important to organizations, AACSB: Analytical thinking)

1-3. What is the difference between efficiency and effectiveness? Explain why both are valuable to managers.

Both are integral to effective management. Efficiency is getting the most output from the least amount of inputs, the goal of which is to minimize resource costs (see Exhibit 1-3).

Effectiveness is completing activities so that organizational goals are attained; often described as “doing the right things” (see Exhibit 1-3). (LO: 3, Describe the functions, roles, and skills of managers, AACSB: Analytical thinking) 1-4. Is there one best “style” of management? Discuss in terms of managerial functions, roles.

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This answer requires students to form an opinion, so answers will vary. A possible answer is there is no one best style of management. Organizations have different structures, and managers are tasked with achieving different goals and work with different personalities. Managerial styles can differ from organization to organization, task to task, and person to person. Managers need to cultivate the ability to recognize when they need to use a different approach and be flexible. (LO: 5, Explain the value of studying management, AACSB: Reflective thinking) Course instructors (in contrast to individuals who hold positions such as department head) are not usually classified as managers. In most situations, a course instructor does not fall within the definition of a manager when utilizing managerial functions, mainly because students are clients rather than employees. In some cases, an instructor has little input about course content or how it should be taught. In these instances, the instructor makes few managerial decisions.

In terms of managerial roles, course instructors may be involved in some ways in the interpersonal, informational, and decisional roles. For example, a course instructor could be seen as a liaison (interpersonal role), a monitor and disseminator (both informational roles), and a disturbance handler and negotiator (both decisional roles).

Regarding managerial skills, course instructors certainly need technical skills— knowledge about the latest research and conceptual developments in a particular discipline. They also need significant human skills as they interact with their students. To a limited extent, the instructor utilizes conceptual skills as courses are planned or as departmental curriculums are debated. (LO: 3, Describe the functions, roles, and skills of managers, AACSB: Reflective thinking) 1-5. How are technology, social media, and other technological advances making a manager’s job easier? More complex?

There are numerous technologies in development that have the potential to radically alter the way some organizations function. Self-driving vehicles and alternative energy automobiles are already affecting the auto industry in terms of resource allocation and investment, and these technologies may soon disrupt the trucking industry and others that deliver products. Nanotechnology and smart metals have the potential to change many sectors of the economy. And, artificial intelligence (AI) is already reshaping production and has the potential to change almost any organization and job. (LO: 4, Describe the factors that are reshaping and redefining the manager’s job, AACSB: Reflective thinking) 1-6. Are the skills managers need different for lower-level and middle managers? Do managers at Amazon use managerial skills differently than those at UPS or Uber?

(LO: 4, Describe the factors that are reshaping and redefining the manager’s job, AACSB: Reflective thinking) 1-7. Will the universality of management continue to be true in the future? Why or why not?

Management principles are needed for the efficient and effective operation of organizations, regardless of the level of the manager or the industry in which they operate. This is true for today’s organizations now more than ever. The global 6

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environment of today ensures that organizations will face staunch competition. Failure and weakness on the part of management ultimately leads to loss of market share and organizational closure. Also, gone are the days when managers could ‘bluff’ their way through their dealings with employees who have become more demanding and aware of their legal rights. (LO: 5, Explain the value of studying management, AACSB: Reflective thinking)

ETHICS DILEMMA The gap between the career development conversations managers provide and what employees want them to deliver is strikingly large. Unfortunately, 40 percent of managers never talk with employees about career goals and how to meet them, while 82 percent of employees would like to have career-related discussions with their managers between one and four times a year. Moreover, younger employees place greater importance on these conversations, career development opportunities, and job training than older generations do.

Student answers to these questions will vary.

1-8. Does an organization have an ethical responsibility to provide career development advice to employees? Explain your position.

Organizations of today should help employees develop to their fullest potential. This practice will benefit the employee and the organization. Employees will be more likely to stay with the organization and advance through the ranks, and it will create loyalty to the organization and contribute to a positive work environment. Should a student believe that hiring an employee also means providing opportunities in good faith for them to improve the student will perceive organizations have an ethical responsibility to do so. Managers should be forthright and this practice also falls under the practice of supporting, coaching, and nurturing others. Employees expect managers are ethical and, therefore, honest when explaining employees’ standing within their organization.(LO: 3, Describe the functions, roles, and skills of managers, AACSB: Ethical understanding and reasoning) 1-9. If career opportunities in an organization are limited, do managers have a responsibility to convey this information to employees? Explain your position.

Many workers are expected to hold multiple roles in their organizations. Managers are expected to tell them that their roles might change depending on the assignment or project, with different people taking the lead at different times; thus, everyone performs some management duties. Managers also need to clarify the degree to which career opportunities are available within the organization. In recent years, managers have increasingly been called upon to pay attention to their workers’ mental health and well-being at work. Failure to do so would be detrimental to employees’ mental health. (LO: 3, Describe the functions, roles, and skills of managers, AACSB: Ethical understanding and reasoning)

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SKILLS EXERCISE: DEVELOPING YOUR SKILLS AS A MANAGER As referenced in Exhibit 1-8, there are many skills important to managers. The importance of each skill changes depending on the level of the manager. All managers need to develop conceptual skills, interpersonal skills, and technical skills. Nine managerial skills are listed in this exercise. Students are encouraged to select two skills and spend one week practicing the skills. As they rotate through the skills, encourage them to take notes to track their progress and then to evaluate their own level of skill development. (LO: 3, Describe the functions, roles, and skills of managers, AACSB: Analytical thinking)

WORKING TOGETHER: TEAM EXERCISE If you have worked for a manager, played for a coach, or been part of a group that had a leader, you have probably noticed management skills that those individuals could have improved. In groups of three or four, each student should describe a specific situation where the management skills they observed could have been improved. As a group, decide what commonalities, if any, exist in the various situations. Using Mintzberg’s roles, where were these individuals deficient? Now, brainstorm ways that these individuals might improve their skills. Be prepared to share what you learned with the class. (LO: 3, Describe the functions, roles, and skills of managers, AACSB: Written and oral communication)

MY TURN TO BE A MANAGER •

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Use the most current Occupational Outlook Handbook (US Department of Labor, Bureau of Labor Statistics) to research three different categories of managers.

For each, prepare a bulleted list that describes the following: the nature of the work, training and other qualifications needed, earnings, and job outlook and projections data.

Get in the habit of reading at least one current business periodical (Wall Street Journal, Bloomberg Businessweek, Fortune, Fast Company, Forbes, etc.). Sign up to follow a few of these publications on Twitter (now X), Instagram, LinkedIn, and/or any other social media outlet the company uses.

Explore the social media presence of your favorite company. Like them on Facebook and follow them on Twitter, Instagram, LinkedIn, and/or any other social media outlet the company uses.

Interview two different managers and ask them the following questions: What are the best and worst parts about being a manager? What’s the best management advice you ever received? What are the traits or skills good managers you work with possess? Tell them research in the Harvard Business Review reported that great managers discovered what was unique about each employee and learned how to use their knowledge of each employee to get the work done in the best way possible. Do they agree? Why or why not? Type up the questions and their answers to turn in to your professor.

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Accountants and other professionals have certification programs to verify their skills, knowledge, and professionalism. What about managers? Two certification programs for managers are the Certified Manager (Institute of Certified Professional Managers) and the Certified Business Manager (Association of Professionals in Business Management). Research each of these programs.

Prepare a bulleted list of what each involves.

ANSWERS TO CASE APPLICATION 1 QUESTIONS Student answers to these questions will vary.

Working with Artificial Intelligence 1-10. Which of the four management functions of a manager’s work do managers most need guidance on from AI? The four functions to describe a manager’s work are planning, organizing, leading, and controlling (see Exhibit 1-5). Research has found that larger performance gains occurred when humans and machines worked together than when either humans or artificial intelligence worked alone. AI could help with leading and controlling by providing employees feedback on their work. AI can also, help managers by providing options to optimize planning and organization tasks. While AI may make rote decisions easier, the more complex decisions will still require a human touch. (LO: 4, Describe the factors that are reshaping and redefining the manager’s job, AACSB: Analytical thinking) 1-11. How might AI change a lower-level manager’s job differently than a top manager’s job by 2030?

Responses to this question will vary. However, managers at lower levels will be aided with more technical aspects of their job, while top managers will use AI to help them with the conceptual aspects of their jobs. Technical assistance will help with providing the knowledge and techniques needed to perform work tasks more effectively. Assistance with the conceptual work will come in forms of helping top managers better understand abstract and complex situations. (LO: 4, Describe the factors that are reshaping and redefining the manager’s job, AACSB: Analytical thinking) 1-12. What kinds of tasks do you think can be done by machines or computers in the future to help managers improve their employees’ well-being?

Responses to this question will vary. However, AI does not make complex decisions as well as humans. But if employees are feeling overwhelmed at work they can lean on AI to take care of some work tasks so the employee is freed up to deal with more important work. AI can be particularly helpful at completing repetitive task that are part of the employee’s daily work routine. At the more advanced level AI could detect an employee’s mental health conditions from their voice or from data provided by wearable biometric technologies. In instances where employees are sounding stress or unhappy 9

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the AI can suggest work breaks, breathing exercise, etc. as steps to improve the employees well being. AI can also be used to help managers frame project assignments and work requests in positive and thoughtful language. (LO: 4, Describe the factors that are reshaping and redefining the manager’s job, AACSB: Analytical thinking) 1-13 What can you do to make yourself more valuable to companies so that they need you (and not a machine) to get work done?

Responses to this question will vary. Students should begin developing the technical skills needed to understand and potentially program AI. However, perhaps most important is to develop critical thinking skills that cannot be easily replicated by a machine. Ethical reasoning skills are also not likely to be easily replicated and require human interaction. Analytical skills can also be necessary to evaluate the accuracy of AI’s recommendations. (LO: 4, Describe the factors that are reshaping and redefining the manager’s job, AACSB: Analytical thinking)

CASE APPLICATION 2 QUESTIONS Student answers to these questions will vary.

Nike: Taking a Customer Focus to a New Level 1-14. What makes Nike’s focus on the customer efficient and effective?

Answers will vary, but Nike takes the customer focus to an entirely new level. Nike focused data collection is an efficient way to determine customer wants and customizes products based on that data. Building one-on-one relationships with customers can be expensive by it is effective in terms of building a loyal customer base. The process as working as it plans to add 200 more Live stores. (LO: 1, Tell who managers are and where they work, AACSB: Analytical thinking) 1-15. If you were in charge of taking Nike’s focus on the customer to the next level, what would you do?

Answers will vary, but the next level might involve the customer using a portal to design their own unique shoe. Of course, manufacturing capabilities will need to be developed that enable these shoes to be made at a reasonable cost. Stores could hold design contests that are unique to a geographic region and roll out the winning shoe. (LO: 4, Describe the factors that are reshaping and redefining the manager’s job, AACSB: Analytical thinking) 1-16. What advantages of online shopping and in-person shopping do Nike Live stores try to combine? Why do you think (or why do you not think) Live stores will continue to be successful for Nike?

Answers will vary, but Nike wants customers to be able to order shoes online and have them pick up the shoes in the store. They are attempting to combine the convenience of online shopping with a customer-focused in-store experience that makes the customer

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feel special. (LO: 4, Describe the factors that are reshaping and redefining the manager’s job, AACSB: Analytical thinking) 1-17. What do you think a focus on the customer will look like for companies in 2030?

Answers will vary, but the ability to extract customer likes and dislikes from big data will only improve a firm’s ability to customize products to existing demand. Nike has a continued focus on innovation, but it is likely to remain in the wholesale market, its Live stores, and in something yet to be invented. Nike knows that the firms that fail to compete based on consumer preferences may find they will not survive long. (LO: 5, Explain the value of studying management, AACSB: Analytical thinking)

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Chapter 2: The Evolution of Management This chapter will summarize how the field of study called management has evolved. You will discover that today’s managers still utilize techniques introduced 30, 50, or more than 100 years ago. This chapter will help you put much of what is learned in future chapters into a historical perspective. Focus on the following learning objectives as you read and study this chapter.

LEARNING OBJECTIVES 1. Describe some examples of early management practices.

2. Explain the various theories of the classical approach to management.

3. Discuss the development and uses of the social-person approaches to management.

4. Describe the quantitative approach to management.

5. Explain the systems and contingency approaches to management.

6. Identify important recent evolutions in the field of management.

Since the birth of modern management theory in the early 1900s, management experts have developed theories to help organizations and their managers coordinate and oversee work activities as effectively and efficiently as possible. Presenting the history of modern management to students allows them to explore the evolution of management thought and practice during the twentieth and twenty-first centuries. Students discover how knowledge of management history can help us better understand current management practices while avoiding some mistakes of the past.

CHAPTER OUTLINE 2.1

EARLY MANAGEMENT Many fascinating historical examples illustrate how management has been practiced for thousands of years.

A. Organizations and managers have existed for thousands of years. The Egyptian pyramids and the Great Wall of China were projects of tremendous scope and magnitude, requiring the efforts of tens of thousands of people. How was it possible for these projects to be completed successfully? The answer is management. Regardless of the titles given to managers throughout history, someone has always had to plan what needs to be accomplished, organize people and materials, lead and direct workers, and impose controls to ensure that goals are attained as planned.

B. Adam Smith, author of the classical economics doctrine The Wealth of Nations, argued brilliantly for the economic advantages that he believed division of labor or job specialization (the breakdown of jobs into narrow, repetitive tasks) would bring to organizations and society.

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The Industrial Revolution is possibly the most important pre-twentiethcentury influence on management. The introduction of machine powers combined with the division of labor made large, efficient factories possible. Planning, organizing, leading, and controlling became necessary activities.

CLASSICAL APPROACHES A. The first studies of management are called the classical approach, which emphasized rationality and making organizations and workers as efficient as possible. Two major theories compose the classical approach: scientific management and general administrative theory. Scientific management is defined as an approach using the scientific method to determine the “one best way” for a job to be done.

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Frederick W. Taylor is known as the “father” of scientific management. Taylor’s work at the Midvale and Bethlehem Steel companies stimulated his interest in improving efficiency. a.

Taylor sought to create a mental revolution among workers and managers by defining clear guidelines for improving production efficiency. He defined four principles of management (Exhibit 2-1). b.

His pig iron experiment is probably the most widely cited example of his scientific management efforts. c.

Using his scientific management principles, Taylor could define the “one best way” for doing each job. d.

Frederick W. Taylor achieved consistent improvements in productivity in the range of 200 percent. He affirmed the role of managers was to plan and control and the role of workers was to perform tasks as they were instructed.

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Frank and Lillian Gilbreth were inspired by Taylor’s work and proceeded to study and develop their own method of scientific management. a.

Frank Gilbreth is probably best known for his experiments in reducing the number of motions in bricklaying. b.

The Gilbreths were among the first to use motion picture films to study hand-and-body motions in order to eliminate wasteful motions. c.

They also devised a classification scheme to label 17 basic hand motions called therbligs (Gilbreth spelled backward, with the th transposed).

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Putting scientific management into perspective Guidelines devised by Taylor and others to improve production efficiency are still used in today’s organizations. Scientific management was vital because it could raise the standard of living of entire countries. Spending months studying one job, as Taylor did, made sense during his time because the work was laborintensive, and many workers performed the same tasks.

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B.

2.3

General Administrative Theorists. This group of writers, who focused on the entire organization, developed more general theories of what managers do and what constitutes good management practice.

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Henri Fayol, a contemporary of Frederick W. Taylor, was the managing director of a large French coal-mining firm. a.

Fayol focused on activities common to all managers. b.

He described the practice of management as distinct from other typical business functions. c.

He stated 14 principles of management (fundamental or universal truths of management that were taught in schools; see Exhibit 2-2).

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Max Weber (pronounced VAY-ber) was a German sociologist who wrote in the early twentieth century. a.

Weber developed a theory of authority structures and described organizational activity based on authority relations. b.

He described the ideal form of organization as a bureaucracy marked by a division of labor, a clearly defined hierarchy, detailed rules and regulations, and impersonal relationships (see Exhibit 2-3).

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Putting the general administrative theories into perspective.

Current management concepts and theories can be traced to some of the work of the general administrative theorists. a.

The functional view of a manager’s job relates to Henri Fayol’s concept of management. b.

Weber’s bureaucratic characteristics are evident in many of today’s large organizations—even in highly flexible organizations that employ talented professionals. Some bureaucratic mechanisms are necessary in highly innovative organizations to ensure that resources are used efficiently and effectively.

SOCIAL-PERSON APPROACHES Managers get things done by working with people. The fields of human resource management and organizational behavior have come out of the work of those we have categorized as being part of the social-person approaches to management.

A. Early Advocates of the social-person approaches.

Robert Owen, Louis Brandeis, Hugo Munsterberg, Mary Parker Follett, and Chester Barnard.

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Barnard introduced the dominant or traditional view of authority, suggesting that a superior’s right to exact compliance from subordinates develops at the top and moves down through an organization. In the traditional view, the ultimate source of a manager’s authority was the society that allows the creation of social institutions. His acceptance view of authority proposed that authority comes from the willingness of subordinates to accept it.

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The Hawthorne Studies were the most important contribution to the development of organizational behavior.

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This series of experiments conducted from 1924 to the early 1930s at the Western Electric Company Works in Cicero, Illinois, were initially devised as a scientific management experiment to assess the impact of changes in various physical environment variables on employee productivity.

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After Harvard professor Elton Mayo and his associates joined the study as consultants, other experiments were included to look at redesigning jobs, making changes in workday and workweek length, introducing rest periods, and introducing individual versus group wage plans.

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The researchers concluded that social norms or group standards were key determinants of individual work behavior.

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Although not without criticism (concerning procedures, analyses of findings, and the conclusions), the Hawthorne Studies stimulated interest in human behavior in organizational settings.

The Human Relations Movement included people who uniformly believed in the importance of employee satisfaction—a satisfied worker was believed to be a productive worker. Members of this social-person approach group included Dale Carnegie, Abraham Maslow, and Douglas McGregor.

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Putting the human relations movement into perspective. The common thread that united human relations supporters was an unshakeable optimism about people’s capabilities.

D. Behavioral Science theorists.

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Unlike the theorists of the social-person movement, behavioral science theorists engaged in objective research of human behavior in organizations. They sought to develop rigorous research designs that other behavioral scientists could replicate.

In so doing, they hoped to build a science of organizational behavior.

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Fred Fiedler, Victor Vroom, Fredrick Herzberg, Edwin Locke, David McClelland, Robert House, and Richard Hackman have made important contributions to our current understanding of leadership, employee motivation, and the design of jobs.

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Researchers with a sociological perspective, like Jeffrey Pfeffer, Karen Jehn, and Charles Perrow, have added important insights to our understanding of power, conflict, and organization design.

2.4

QUANTITATIVE APPROACH The quantitative approach to management, sometimes known as management science, uses quantitative techniques to improve decision-making. This approach includes applications of statistics, optimization models, information models, and computer simulations.

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B.

2.5 A.

The quantitative approach originated during World War II as mathematical and statistical solutions to military problems and was developed for wartime use.

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As often happens after wartime, methods that were developed during World War II to conduct military affairs were applied to private industry following the war. For instance, a group of military officers—the Whiz Kids—used quantitative methods to improve decision-making at Ford Motor Company in the mid-1940s.

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In the 1950s, the ideas and techniques of W. Edwards Deming and Joseph M. Juran were embraced by Japanese organizations.

Later, Western managers also incorporated their ideas.

3.

Total quality management or TQM is the management philosophy devoted to continual improvement and responding to customer needs and expectations. (See Exhibit 2-4.)

4.

TQM represents a counterpoint to earlier management theorists who believed low costs were the only road to increased productivity.

5.

Quality management aims to create an organization committed to continuous improvement in work processes.

Putting the quantitative approach into perspective.

1.

The quantitative approach has contributed most directly to managerial decision-making, particularly in planning and controlling.

2.

The availability of sophisticated computer software programs has made using quantitative techniques more feasible for managers.

SYSTEMS AND CONTINGENCY APPROACHES The systems approach is based on a basic theory in the physical sciences but had never been applied to organized human efforts. In 1938, Chester Barnard first wrote that an organization functioned as a cooperative system. However, it was not until the 1960s that management researchers began to look more carefully at systems theory and how it related to organizations. A system is a set of interrelated and interdependent parts arranged in a manner that produces a unified whole.

The two basic types of systems are closed and open. A closed system is not influenced by and does not interact with its environment. An open system interacts with its environment (see Exhibit 2-5).

1.

Using the systems approach, managers envision an organization as a body with many interdependent parts, each of which is important to the well-being of the organization as a whole.

2.

Managers coordinate the work activities of the various parts of the organization, realizing that decisions and actions taken in one organizational area will affect other areas.

3.

The systems approach recognizes that organizations are not selfcontained; they rely on and are affected by factors in their external environment.

18 Copyright © 2025 Pearson Education, Inc.

B.

The Contingency Approach. The contingency approach recognizes that different organizations require different ways of managing.

1.

The contingency approach to management is a view that the organization recognizes and responds to situational variables as they arise.

2.

Some popular contingency variables are shown in Exhibit 2-6.

2.6 RECENT HISTORY A. The New Industrial Revolution: Technology and Computerization. No contemporary history of management would be complete without recognizing the important influence that technology and computerization have played in defining current practices. Artificial intelligence's evolving role is highlighted because it plays a role in changing the future of management in Chapter 1. Additional insights on AI are provided in subsequent chapters. A few more technology considerations for the future are: 1. Technology has made computerized manufacturing a mainstay of today’s “factory.” Managing today’s skilled technicians differs from managing a group of unskilled, minimum-wage workers of the past.

2. Technology also has allowed organizations to create virtual teams—people who work together but are geographically dispersed.

3. Technology has helped create the gig economy, which provides flexibility and freedom to employers and independent workers by replacing career jobs with short-term engagements. This includes freelance, independent, and contract work.

4. The technology could make established businesses obsolete.

Managers must now be constantly attuned to new competitors using technology to disrupt long-established products and services.

B. Globalization. Management began to break down national borders and aggressively pursue global strategies in the 1960s. Companies began to realize the potential of foreign markets, the idea of off-shoring production became popular, and domestic producers became increasingly aware that competitors were as likely to come from across the ocean as from across town.

C. Sustainability and the ESG Movement. The world is experiencing destabilizing climate change. History suggests that our environmental crisis is an unintended effect of the Industrial Revolution, where mass production required the use of fossil fuels and manufacturing operations led to pollution.

1. In the 1990s, sustainability expanded to examine a company’s broader impact on society, including their business practices' economic and social impacts. Often referred to as the “triple bottom line,” today’s sustainability practices focus on the planet, people, and profits.

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2. There is an increasing focus on reporting sustainable business practices to company stakeholders such as investors. Many companies are using ESG (environment, social, and governance (ESG) reporting frameworks, which measure and quantify a company’s commitment to environmental sustainability, social responsibility, and good corporate governance.

ANSWERS TO REVIEW AND DISCUSSION QUESTIONS 2-1. Why is the Industrial Revolution significant for managers?

Before the Industrial Revolution, an item, such as a blanket, was made by one person, typically at home, and required no manager. This craftsperson completed all tasks, from shearing wool to twisting it into yarn, weaving the blanket, and then selling it. The Industrial Revolution’s introduction of machine power, combined with the division of labor, made it possible to have large, efficient factories using power-driven equipment. A blanket factory with 100 people could manufacture large numbers of blankets at a fraction of their previous cost. However, these new factories required managerial skills.

Managers were needed to forecast demand, ensure that enough wool was on hand to make the yarn, hire workers, assign tasks to people, direct daily activities, coordinate the various tasks, ensure machines were kept in good working order and that output standards were maintained, find markets for the finished blankets, and so forth. (LO: 1, Describe some examples of early management practices, AACSB: Application of knowledge) 2-2. How have the classical approaches of management shaped management in today’s organizations? Are any of the classical approaches of management still relevant?

The practical side of the study of management history shows the techniques and implementations that companies use today. For example, the principles learned from Scientific Management are still useful. Fayol’s principles of management still relate to modern workplaces. Many of our current management ideas and practices are the culmination of the contributions of the general administrative theorists. Although not as popular as in the twentieth century, many of bureaucracy’s components are also still found in large organizations today. Many current managers will argue that bureaucratic structures hinder individual employees’ creativity and limit an organization’s ability to respond quickly to an increasingly dynamic environment. (LO: 2, Explain the various theories of the classical approach to management, AACSB: Analytical thinking) 2-3. In what ways did the social-person and human relations approach influence management?

In the era of scientific management, the social-person approach emerged as important

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because these researchers stimulated an interest in human and social factors. Humanistic ideas influenced managers' views of motivation, leadership, power, and authority. These approaches were among the first to see that the manager’s job was to harmonize and coordinate group efforts. Humanistic ideas also suggested managers and workers should view themselves as partners of a common group. Organizations are places made up of people who interact in social relationships. The manager’s major roles were to communicate and stimulate subordinates to high levels of effort. Members of the human relations movement uniformly believed in the importance of employee satisfaction—a satisfied worker was believed to be productive. The common thread that united human relations supporters was an unshakeable optimism about people’s capabilities. (LO: 3, Discuss the development and uses of the social-person approaches to management, AACSB: Analytical thinking) 2-4 What is a bureaucracy? Do bureaucracies still exist today?

Max Weber described the bureaucracy as an organization characterized by a division of labor, a clearly defined hierarchy, detailed rules and regulations, and impersonal relationships. While Weber recognized that the “ideal bureaucracy” did not exist in reality, it provided a basis for understanding how work could be done in large groups.

Weber’s “ideal type” seems to describe many contemporary organizations.

Bureaucracies also exist in the minds of today’s managers, as many current managers will argue that bureaucratic structures hinder individual employees’ creativity and limit an organization’s ability to respond quickly to an increasingly dynamic environment(LO: 2, Explain the various theories in the classical approach, AACSB: Analytical thinking) 2-5. Is the quantitative approach to management still useful to managers? Explain.

The quantitative approach is still useful to managers as it contributes directly to decisionmaking in the areas of planning and control. For instance, when managers make budgeting, queuing, scheduling, quality control, and similar decisions, they typically rely on quantitative techniques. Specialized software has expanded in recent years to continue its usefulness to managers today.

Although “people” problems can rarely be resolved using quantitative techniques exclusively, mathematical techniques can help managers solve these issues. Statistical methods, information models, computer simulations, and other quantitative techniques are tools used to make better decisions. Accordingly, they could help a manager address people problems encountered in the workplace.

(LO: 4, Describe the quantitative approach to management, AACSB: Application of knowledge) 2-6. Describe total quality management.

Total quality management is a philosophy devoted to continually improving and responding to customer needs and expectations. Its characteristics include an intense focus on the customer, concern for continual improvement, process focus,

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improvements in the quality of everything the organization does, accurate measurement, and empowerment of employees. When implemented correctly, it encompasses employees, suppliers, and the people who purchase the organization’s goods or services. Much of this is impossible without statistical techniques that measure every critical variable in the organization’s work processes. LO: 4, Describe the quantitative approach to management, AACSB: Analytical thinking) 2-7. How do systems theory and the contingency approach make managers better at what they do?

Returning to Scientific Management’s view, Taylor sought the best way to organize work.

The systems theory teaches managers success depends on successful interactions with their environment—that is, those groups or institutions upon which it is dependent. This means that as managers coordinate work activities in the various parts of the organization, they ensure that all these parts work together to achieve the organization’s goals. However, no organization can survive for long if it ignores government regulations, supplier relations, or the varied external constituencies on which it depends.

What we know about the contingency view is that it would be surprising to find universally applicable management principles that would work in all situations. Too many internal and external factors affect employee and organizational performance. Managers must understand that the workplace is both complex and dynamic. The primary value of the contingency approach is that it stresses there are no simplistic or universal rules for managers to follow.(LO: 5, Explain the systems and contingency approaches to management, AACSB: Analytical thinking) 2-8. Explain sustainability and the ESG movement in the field of management. What implications do they have for someone studying management?

Sustainability practices are focused on conserving natural resources, reducing waste, and acting to protect the environment. Managers are expected to examine their company’s impact on society (i.e., the “triple bottom line,” planet, people, and profits).

Managers today increasingly focus on reporting sustainable business practices to company stakeholders. Many companies use environmental, social, and governance (ESG) reporting frameworks, which measure and quantify a company’s commitment to environmental sustainability, social responsibility, and good corporate governance. (LO: 6, Identify important recent history evolutions in the field of management, AACSB: Application of knowledge) PREPARING FOR: My Career ETHICS DILEMMA Student answers to these questions will vary based on their knowledge of Elon Musk, the purchase of Twitter, and the demands Musk is known for putting on his workforce.

2-9. Can managers focus too aggressively on productivity?

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Managers can be too focused on productivity. As this occurs, managers lose the benefits associated with the social-person approaches to management. This internal focus can also prevent managers from understanding the large systems affecting their situation.

(LO: 2, Explain the various theories of the classical approach to management, AACSB: Ethical understanding and reasoning) 2-10. Should there be concerns about safety, quality, or customers’ cybersecurity at Twitter?

Student answers will vary, but quality, safety, and cybersecurity will likely suffer as employees and managers burnout. (LO: 4, Describe the quantitative approach to management, AACSB: Ethical understanding and reasoning) 2-11. How will the changes at Twitter affect employee commitment and turnover?

Student answers will vary. Some employees interested in working in this environment could become more committed. Over a long period, employees who preferred the old ways or were unwilling to meet the new executive’s commitments will become less attached to their jobs and organization. Once this occurs, they become more willing to look for new jobs. (LO: 5, Explain the systems and contingency approaches to management, AACSB: Ethical understanding and reasoning) SKILLS EXERCISE: DEVELOPING YOUR ENVIRONMENTAL SCANNING SKILL Continuous improvement is an important concept to organizations, and most expect managers to have a continuous improvement mindset. Many students will perceive they already possess the willingness or ability to improve continuously. Most need guidance on determining the current performance level and setting measurable improvement goals. Generally, students lack the discipline to set specific targets, measure results, and make evaluations using data about their improvement efforts. In this exercise, students practice this skill by: • Choosing a task they do regularly (laundry, fixing dinner, grocery shopping, studying for exams, etc.). Analyze it by writing down the steps involved in completing that task. See if any activities could be combined or eliminated. Find “one better way” to do this task. And the next time you have to do the task, try to look for other improvements! Students are also asked to post a demonstration or description on social media and ask followers for suggestions on how to make it even more efficient. How much time was saved?

Seeking feedback about the responses received to their social media responses is likely to be informative. Gaining feedback from outlets like social media is a way to develop these skills for the modern workplace, where virtual communication by chat or text is familiar. (LO: 4, Describe the quantitative approach to management, AACSB: Application of knowledge)

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WORKING TOGETHER: TEAM EXERCISE Have students work in teams of three or four. Student responses will vary. For many students, it will be a surprise to learn they may be working in a time when technology is likely to be as disruptive to the way work is done as the Industrial Revolution did in its time. Large companies like McKinsey & Co. have several online descriptions of their thoughts on how technological advances will impact the workplace and management.

Several summaries also describe the fourth Industrial Revolution and its potential impacts on YouTube. Instructors can improve discussion by making their favorite online resources available to students before their in-class discussion. (LO: 6, Identify important recent evolutions in the field of management, AACSB: Analytical thinking)

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MY TURN TO BE A MANAGER The following supplemental exercises are offered for students looking to develop their knowledge of this chapter’s topics further. Students who have completed these exercises tend to be better prepared for in-class or virtual discussions. Asking students to consider how theories will impact the future, the longevity of organizations, and ways to be more sustainable will be a novel request for most students.

• Conduct research and identify a new management theory proposed in the last 5 years. Write a brief opinion on whether you think the new theory will impact future management practices. (LO: 6, Identify important recent evolutions in the field of management, AACSB: Analytical thinking) • How do business organizations survive for 100+ years? Obviously, they’ve seen a lot of historical events come and go. Choose one of these companies and research its history: Avon, Coca-Cola, General Electric, Procter & Gamble, or Target. How has it changed over the years? From your research on this company, what did you learn that could help you be a better manager? (LO: 5, Explain the systems and contingency approaches to management, AACSB: Analytical thinking) • Pick one historical event from the twenty-first century and do some research on it. Write a paper describing the impact this event might be having or has had on how workplaces are managed. (LO: 5, Explain the systems and contingency approaches to management, AACSB: Analytical thinking) • Come on, admit it. You could be more sustainable, and you probably know managers who could be more sustainable, too. Talking about sustainability is more common than creating a more sustainable workplace, but do managers need to get employees to be more sustainable? Pretend you are the manager in charge of a department in a bigbox retailer. Describe how you would increase the department’s sustainability using any of the following management approaches or theories: scientific management, general administrative theory, quantitative approach, behavioral approach, systems theory, and contingency theory. (LO: 6, Identify important recent evolutions in the field of management, AACSB: Analytical thinking)

ANSWERS TO CASE APPLICATION 1 QUESTIONS 2-12. Does Uber’s method for improving its drivers’ experience match the quantitative method? Explain. How could executives at Uber improve their data collection?

Answers will vary. However, some data is collected, and, likely, Uber’s method falls short of the quantitative approach because it does not yet involve applying statistics, optimization models, information models, computer simulations, and other quantitative techniques to management activities. Each of these is an example of quantitative

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techniques that should be applied in the next phase to improve managerial decisionmaking further. (LO: 4, Describe the quantitative approach to management, AACSB: Application of knowledge) 2-13. How would the early advocates for the social-person approaches feel about Uber’s CEO’s decision to get behind the wheel?

Answers will vary. These advocates would likely applaud the decision to get behind the wheel because they believe managers get things done by working with people. The CEO seems to be trying to find ways to harmonize and coordinate processes for the employees and customers. In this instance, the CEO appears to match the social-person approach by working as an Uber driver to become more familiar with the Uber driver experience. As such, the CEO relies more on their expertise and knowledge to lead changes in the company rather than on the formal authority alone. (LO: 3, Discuss the development and uses of the social-person approaches to management, AACSB: Application of knowledge)

ANSWERS TO CASE APPLICATION 2 QUESTIONS 2-14. What data should managers collect to determine the best hybrid work arrangements?

Like in Frederick Taylor’s time, hybrid work arrangements may have many inefficiencies.

Employees likely use vastly different techniques to do the same job. Virtually no work standards exist, and workers were placed in jobs with little concern for matching their abilities and aptitudes with doing tasks virtually and in person. As a result, almost any data might be meaningful to managers. (LO: 6, Identify important recent evolutions in the field of management, AACSB: Analytical thinking) 2-15. Do managers have to offer hybrid work arrangements to remain competitive?

Explain.

Student answers will vary. Administrators of universities have felt it necessary to offer more virtual and hybrid instruction arrangements to remain competitive. These virtual offerings will likely result in many young professionals expecting hybrid work arrangements after graduation. Organizations best able to take advantage of employees’ potential, whether in person, hybrid, virtual, or a combination of these, will generally be the most successful. (LO: 6, Identify important recent evolutions in the field of management, AACSB: Analytical thinking) 2-16. Because hybrid work arrangements are driven by employee preferences that will change over time, is it possible to find the “best way” to work remotely? Explain.

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It is likely managers can find the best way for now, and through continual improvement, it will be possible to continue to make improvements as management and employee preferences evolve. While there probably is not one best way, there is likely a limited number of very good ways to work remotely and a substantially large number of adequate ways to work remotely. Taking measurements for comparison against standards will be needed to identify and make improvements. (LO: 6, Identify important recent evolutions in the field of management, AACSB: Analytical thinking) 2-17. How can managers find the best way to do hybrid work and still put people first?

Student answers will vary. Generally, managers can use the quantitative approach to find the best way to do remote work. Using productivity and employee satisfaction as equally desirable goals would be a way to improve work procedures while still putting employees first. (LO: 6, Identify important recent evolutions in the field of management, AACSB: Analytical thinking)

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Chapter 3 Making Decisions In this chapter, students will examine the concept of decision-making and how managers make decisions.

LEARNING OBJECTIVES 1.

2.

3.

4.

5.

Describe the eight steps in the decision-making process.

Explain the four approaches managers can use when making decisions.

Classify decisions and decision-making styles.

Describe how biases affect decision-making.

Explain how technology can improve decision-making.

CHAPTER OUTLINE 3.1

.

THE DECISION-MAKING PROCESS A decision is a conclusion or resolution made after considering alternatives. The decision-making process is a set of eight steps that include identifying a problem, selecting an alternative, and evaluating the decision’s effectiveness.

A. Step 1: Identify a Problem. A problem is a discrepancy between an existing and a desired condition. Managers have to be cautious not to confuse problems with symptoms of the problem.

B. Step 2: Identify Decision Criteria. Decision criteria are criteria that define what is important or relevant to resolving a problem.

C. Step 3: Allocate Weights to the Criteria. The criteria identified in step 2 of the decision-making process do not have equal importance, so the decision maker must assign a weight to each item to give each item accurate priority in the decision. Exhibit 3-1 lists the criteria and weights for Amanda’s decision to purchase new standing desks.

D. Step 4: Develop Alternatives. The decision maker must now identify viable alternatives that could resolve the problem.

E. Step 5: Analyze Alternatives. Each alternative must be critically analyzed by evaluating it against the criteria established in steps 2 and 3.

Exhibit 3-2 shows the values that Amanda assigned to each of her alternatives for a new standing desk. Exhibit 3-3 reflects the evaluation for each alternative.

F. Step 6: Select an Alternative. This step, where the decision maker selects the best alternative from those identified and assessed, is critical.

If criteria weights have been used, the decision maker chooses the alternative with the highest score in step 5.

G. Step 7: Implement the Alternative. The selected alternative must be implemented by effectively communicating the decision to the individuals who will be affected by it and winning their commitment to the decision.

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H.

3.2

APPROACHES TO DECISION MAKING At this point in the study of Chapter 3, students will learn about the manager as a decision maker and how decisions are actually made in organizations. Exhibit 34 shows how decision-making fits into the four functions of management.

In this section, students examine how decisions are made, the types of problems and decisions faced by real-life managers, the conditions under which managers make decisions, and decision-making styles.

A. Rationality. Managers will use rational decision making; that is, they will make logical and consistent choices to maximize value.

1.

Assumptions of Rationality. Rational decision making assumes: a. A rational decision maker would be fully objective and logical. b. The problem faced would be clear and unambiguous, and the decision maker would have a clear and specific goal and know all possible alternatives and consequences. c. The manager’s rational decision would consistently lead to selecting the alternative that maximizes the likelihood of achieving that goal.

B.

C.

D.

.

Step 8: Evaluate Decision Effectiveness. This last step in the decisionmaking process assesses the result of the decision to determine whether or not the problem has been resolved.

Bounded Rationality. Despite these limits to perfect rationality, managers are expected to be rational as they make decisions. Because the perfectly rational model of decision making is not realistic, managers tend to operate under assumptions of bounded rationality, which is decision-making behavior that is rational, but limited (bounded) by an individual’s ability to process information.

1.

Under bounded rationality, managers satisfice rather than maximize decisions, in which they accept solutions that are “good enough.”

Intuition. Managers also regularly use their intuition. Intuitive decision making is a subconscious process of making decisions based on the manager’s experience and accumulated judgment. Exhibit 3-5 describes the five different aspects of intuition.

1.

Making decisions based on gut feeling doesn’t necessarily happen independent from rational analysis; the two complement each other.

2.

Although intuitive decision-making will not replace the rational decision-making process, it does play an important role in managerial decision-making.

Evidence-Based Management. The premise behind evidence-based management (EBMgt) is that any decision-making process is likely to be enhanced through the use of relevant and reliable evidence. EBMgt promotes the use of the best available evidence to improve management practice.

1.

The four essential elements of EBMgt are the decision maker’s expertise and judgment; external evidence that’s been evaluated by the decision maker; opinions, preferences, and values of those who have a stake in the decision; and relevant organizational

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2.

3.

3.3

.

(internal) factors such as context, circumstances, and organizational members.

The strength or influence of each of these elements on a decision will vary with each decision.

The key for managers is to recognize and understand the mindful, conscious choice as to which element(s) are most important and should be emphasized in making a decision.

TYPES OF DECISIONS A. Structured Problems and Programmed Decisions. Managers encounter different types of problems and use different types of decisions to resolve them.

1.

Structured problems are straightforward, familiar, and easily defined. In dealing with structured problems, a manager may use a programmed decision, a repetitive decision that a routine approach can handle. Managers rely on three types of programmed decisions: a.

A procedure is a series of interrelated sequential steps that can be used to respond to a structured problem. b.

A rule is an explicit statement that tells managers what they can or cannot do. c.

A policy is a guideline for making decisions.

B. Unstructured Problems and Nonprogrammed Decisions.

Unstructured problems are problems that are new or unusual and for which information is ambiguous or incomplete. These problems are best handled by a nonprogrammed decision that is a unique decision that requires a custom-made solution.

C. Comparing Decision Types. Exhibit 3-6 describes the differences between programmed and nonprogrammed decisions.

1.

Lower-level managers mostly rely on programmed decisions (procedures, rules, and policies) because they confront familiar and repetitive problems.

2.

As managers move up the organizational hierarchy, the problems they confront become more unstructured.

3.

Upper-level managers delegate routine decisions to their subordinates so they can deal with more difficult issues.

D. Decision-Making Styles.

1.

Each person has an individual decision-making style.

2.

Research shows there are four different individual approaches to making decisions. People differ along two dimensions: way of thinking and tolerance for ambiguity. Exhibit 3-7 shows this Decision-Style Model.

3.

The matrix generates four types of decision makers which are: a.

Directive—people with a directive style have low tolerance for ambiguity and seek rationality. They are efficient and logical but may be prone to making decisions too fast with limited information. b.

Analytic—analytic decision makers are more comfortable with ambiguity relative to directive styles. They are more willing to adapt to change or new situations.

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c.

Conceptual—conceptual decision makers have a broad scope and consider many alternatives. They are good at finding creative solutions to problems. d.

Behavioral—behavioral decision makers work well with others. They tend to avoid conflict and seek acceptance from others. This tendency makes them receptive to suggestions from others.

While each of the four categories is distinct, people typically display characteristics from more than one style. Most business students score high on the analytic style.

3.4

.

DECISION-MAKING BIASES AND ERRORS Managers use different styles and “rules of thumb” (heuristics) to simplify their decision making.

A. See Exhibit 3-8 for the common decision-making biases.

1.

Overconfidence bias occurs when decision makers tend to think that they know more than they do or hold unrealistically positive views of themselves and their performance.

2.

Immediate gratification bias describes decision makers who tend to want immediate rewards and avoid immediate costs.

3.

Anchoring effect describes when decision makers fixate on initial information as a starting point and then, once set, fail to adequately adjust for subsequent information.

4.

Selective perception bias occurs when decision makers selectively organize and interpret events based on their biased perceptions.

5.

Confirmation bias occurs when decision makers seek out information that reaffirms their past choices and discount information that contradicts their past judgments.

6.

Framing bias occurs when decision makers select and highlight certain aspects of a situation while excluding others.

7.

Availability bias is seen when decision makers tend to remember events that are the most recent and vivid in their memory.

8.

Representation bias occurs when decision makers who show representation bias assess the likelihood of an event based on how closely it resembles other events or sets of events.

9.

Randomness bias describes the effect when decision makers try to create meaning out of random events.

10.

Sunk costs error is when a decision maker forgets that current choices cannot correct the past. Instead of ignoring sunk costs, the decision maker cannot forget them. In assessing choices, the individual fixates on past expenditures rather than on future consequences.

11.

Self-serving bias is exhibited by decision makers who are quick to take credit for their successes and blame failure on outside factors.

12.

Hindsight bias is the tendency for decision makers to falsely believe, once the outcome is known, that they would have accurately predicted the outcome.

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3.5

1.

Managers need to be aware of these decision-making biases to avoid them. Research shows that training can help managers learn to recognize situations where these biases occur.

2.

Organizational leaders can also improve decisions by looking at how decisions are made and taking steps to eliminate the biases that might be present.

USING TECHNOLOGY TO IMPROVE DECISION MAKING The last 20 years have seen a dramatic change in the ability of managers to access data and information. A major impetus for this change has been technology. This section explores the use of technology to support and improve organizational decision making.

A. Big Data. Big data is the vast amount of quantifiable information that can be analyzed by highly sophisticated data processing. Emerging evidence shows that organizations that collect various types of data and invest the time into analyzing the data have improved performance.

B. Artificial Intelligence (AI) harnesses computing power to replicate the decision-making functions of humans. AI now can learn and solve complex problems, such as the technology used in self-driving autos.

C. Machine learning and Analytics. Machine learning is a method of data analysis that automates analytical model building. It is a branch of AI based on the idea that systems can learn from data, identify patterns, and make decisions with little or no human assistance.

1. Deep learning is a subset of machine learning. Deep learning simulates functions of the human brain by using algorithms to create a hierarchical level of artificial neural networks. This network of connected nodes processes information in a nonlinear fashion and has been used to improve the identification of skin cancers.

2. Analytics uses mathematics, statistics, predictive modeling, and machine learning to find meaningful patterns in data sets.

D. Technology and Human Judgment 1. Although human judgment is far from perfect, it is not wise for companies to rely entirely on AI for decision-making, especially in unstructured or uncertain decision environments.

2. Salesforce’s AI software, called Einstein, helps executives make decisions by providing information and suggestions, but the managers ultimately make the decisions.

3. AI usage among all businesses is sure to expand in the near future, and there will be less need to rely only on intuition.

ANSWERS TO REVIEW AND DISCUSSION QUESTIONS Student answers to these questions will vary.

3-1. Why is decision making described as the essence of the manager’s job?

Decisions are made throughout the performance of all four functions of management.

Almost anything a manager does in terms of planning, organizing, leading, and

.

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controlling involves decision making. The pervasiveness of decision making in management explains why managers are often called decision makers. (LO: 1, Describe the eight steps in the decision-making process, AACSB: Analytical thinking) 3-2. Describe the decision-making process.

The decision-making process consists of eight steps: (1) identify problem; (2) identify decision criteria; (3) weight the criteria; (4) develop alternatives; (5) analyze alternatives; (6) select alternative; (7) implement alternative; and (8) evaluate decision effectiveness.

(LO: 1, Describe the eight steps in the decision-making process, AACSB: Analytical thinking) 3-3. Compare and contrast the five ways managers use intuition and evidence to make decisions. Can bounded rationality impact intuition and evidence-based management?

Intuitive decision making means making decisions on the basis of experience, feelings, and accumulated judgment. Managers use five different aspects of intuition (see Exhibit 3-5), which are experience-based decision, affect-initiated decision, cognitive-based decisions, subconscious mental processing, and values and ethics-based decisions.

Experiences and cognitive based decisions are intentional applications of intuition, while the other aspects represent decisions based on feelings or less intentional decision making approaches.

Bounded rationality says that managers make rational decisions but are bounded (limited) by their ability to process information. Bounded rationality means managers will be less able to use good judgment and more susceptible to decision-making biases and errors. In situations with limited time or overwhelming information, relying on intuition can be a practical and efficient way to make decisions. Also, struggling to find optimal, effective, or consistent solutions while using intuition can lead managers to have a greater appreciation for evidence-based management. Hence, working with intuition may be the spark that leads managers to be more accepting of the evidence-based approach. Choosing to use evidence-based management means a manager makes decisions based on the best available evidence. (LO: 2, Explain the five approaches managers use when making decisions, AACSB: Analytical thinking) 3-4. Explain the two types of problems and decisions. Contrast the four decision-making styles.

Programmed decisions are repetitive decisions that can be handled by a routine approach and are used when the problem to be resolved is straightforward, familiar, and easily defined (structured). Nonprogrammed decisions are unique decisions that require a custom-made solution and are used when the problems are new or unusual (unstructured) and for which information is ambiguous or incomplete. The four decisionmaking styles are directive, analytic, conceptual, and behavioral. People with a directive style have a low tolerance for ambiguity and seek rationality. They are efficient and logical but may be prone to making decisions too fast with limited information. Analytic decision makers are more comfortable with ambiguity relative to directive styles. They are more willing to adapt to change or new situations. Conceptual decision makers have a broad scope and consider many alternatives. They are good at finding creative solutions to problems. Behavioral decision makers work well with others. They tend to

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avoid conflict and seek acceptance from others. This tendency makes them receptive to suggestions from others. (LO: 3, Classify decisions and decision-making styles, AACSB: Analytical thinking) 3-5. Is there a difference between wrong decisions and bad decisions? Why do good managers sometimes make wrong decisions? Bad decisions?

A bad decision is making an incorrect choice even when faced with the information needed to make a better decision. A bad decision tends to carry a strong negative perception because it suggests that the decision was morally or ethically questionable or not aligned with values. A wrong decision is made with incomplete data, which is a poor choice in hindsight. The term wrong decision often implies an objective assessment that the decision was incorrect based on facts, information, or criteria. Time pressures, incomplete information, and higher levels of uncertainty in business environments lead to ineffective decision making. Wrong decisions are typically due to one of the biases listed in Exhibit 3-8. (LO: 4, Describe how biases affect decision making, AACSB: Ethical understanding and reasoning) 3-6. Describe some of the decision errors and biases. How do managers reduce errors and biases in their decisions?

Exhibit 3-8 identifies 12 common decision errors of managers and biases they may have. Students can frequently name these decision biases, but biases like availability, representation, randomness, and self-serving bias can require more instruction.

Managers can reduce errors and biases by being aware of them and then not using them. Training can help employees recognize particular decision-making biases and improve decision-making over the long term. Managers should ask trusted individuals to help them identify weaknesses in their decision-making style and try to use this feedback to improve. At the same time, leaders can also improve decisions by investigating how decisions are made in their organization and striving to eliminate bias when they are present. (LO: 4, Describe how biases affect decision making, AACSB: Analytical thinking) 3-7. Explain why blending technology with decision making will improve managers'’ judgment.

Big data, artificial intelligence, machine learning, deep learning, and analytics each present a way to improve managers’ decision-making. However, applying some or all of these technologies together with human judgment will likely lead to the most extensive improvements. For example, AI can be used to confirm or test a decision made by a human expert, or AI could support the expert by generating several decision alternatives.(LO: 5, Explain how technology can improve decision making, AACSB: Analytical thinking)

ETHICS DILEMMA Student answers to these questions will vary.

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This dilemma describes a situation where IKEA designed a belt-driven bike called Sladda to market to consumers wanting to drive less and reduce their carbon footprint.

However, the belt drives snapped on some bikes and injured riders. IKEA determined replacing all the belts with traditional chains was too expensive, so the firm recalled the Sladda bikes and halted new sales. Some skeptics felt the decision was driven more by slow sales and that IKEA abandoned the sustainability solution offered by the Sladda bike.

Ask the students: 3-8. Was the decision by Ikea to recall and stop production of the Sladda appropriate?

Explain both “why” and “why not.”

A possible answer is that IKEA is a for-profit firm and cannot exist in the long run without making money. If the fix was too expensive to undertake, then it is a rational decision to recall the bikes and cease production. However, the entire fiasco could tarnish IKEA’s reputation and highlight a lack of commitment to sustainability. The firm could have redesigned the bike with a chain drive and launched again. (LO: 2, Explain the four approaches managers can use when making decisions, AACSB: Ethical understanding and reasoning) 3-9. If you were a manager, how would you use this incident to “teach” employees about ethics and decision making?

A possible answer is that IKEA needs to consider factors other than profit when making a decision. Sometimes, it is costly to do the right thing. Employees need to understand innovation does not always work or that good ideas do not always lead to good business outcomes. Also, this bike represents IKEA’s commitment to ethical decision-making, even if the consequences of an ethical decision reduce the firm’s profitability. (LO: 2, Explain the four approaches managers can use when making decisions, AACSB: Ethical understanding and reasoning)

SKILLS EXERCISE: DEVELOPING YOUR CREATIVITY SKILL Selecting the best alternative is an important skill for all managers. Determining the best city to call home after graduation is a chance for students to practice this skill. Answers will vary but this exercise askes students to rate different cities using four characteristics.

Once they create a total score for each city by determining the weighted average it is possible for them to determine who this decision making process works. Some students may struggle to calculate total scores, and a discussion of how scores were calculated in Exhibit 3-3 can be illuminating for these students. (LO: 1, Describe the eight steps in the decision-making process., AACSB: Application of knowledge)

WORKING TOGETHER: TEAM EXERCISE

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In this team-based activity, small groups of students are to list important decisions being made on their campus. The groups should select a decision that interest them and describe how their campus’s administration will or could use the decision-making process to identify the best solution. Teams could also guided by the instructor on how to share the best solution with campus administrators. This class activity should help students become more aware of how managers use decision-making. (LO: 1, Describe the eight steps in the decision-making process, AACSB: Analytical thinking)

MY TURN TO BE A MANAGER The following supplemental exercises are offered to students looking to further develop their knowledge of this chapter’s topics. Students who have completed these exercises tend to be better prepared for in-class or virtual discussions. Asking students to consider how big decisions can be improved, find examples of decisions made by real-life managers, learn from big mistakes in business history, and see tools available to help decision makers will be a novel experience for most.

•

Consider a big decision that you have made. Write a description of the decision using the steps in the decision-making process as your guide. What could you have done differently in the process to improve your decision? (LO: 1, Describe the eight steps in the decision-making process, AACSB: Application of knowledge)

•

Write a procedure, a rule, and a policy for your instructor to use in your class. Be sure that each one is clear and understandable, and be sure to explain how it fits the characteristics of a procedure, a rule, or a policy. (LO: 3, Classify decisions and decision-making styles, AACSB: Application of knowledge)

•

Find three examples of managerial decisions described in any of the popular business periodicals (Wall Street Journal, Bloomberg Businessweek, Fortune, etc.).

Write a paper describing each decision and any other information, such as what led to the decision and what happened as a result of the decision. What did you learn about decision-making from these examples? (LO: 2, Explain the four approaches managers can use when making decisions, AACSB: Analytical thinking)

•

Interview two managers and ask them for suggestions on the decision-making steps and styles you need to learn more about to be a good decision maker. Write down their suggestions and be prepared to present them in class. (LO: 3, Classify decisions and decision-making styles, AACSB: Analytical thinking)

•

Do a web search on the phrase “eight of the biggest business mistakes in history.”

Pick three of the examples and describe what happened. What’s your reaction to the examples? How could the managers have made better decisions? (LO: 4, Describe how biases affect decision making, AACSB: Analytical thinking)

•

Visit the Mindtools website (www.mindtools.com) and find the decision-making toolkit. Explore the decision-making tools suggestions and evaluate how they compare to this chapter’s recommendations. Identify ways both are similar and

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different.(LO: 1, Describe the eight steps in the decision-making process, AACSB: Analytical thinking)

CASE APPLICATION 1 QUESTIONS Student answers to these questions will vary.

Making Decisions with Bad Data 3-10. What should managers and companies do to minimize their use of bad data?

Managers need to be able to verify the accuracy of the data in some way to prevent the use of fake data in decision-making. Firms and managers must also ensure the data is current and transferrable between departments or divisions if applicable. Artificial intelligence and machine learning are other ways to enhance decision-making and evaluate data accuracy.(LO: 5, Explain how technology can improve decision making, AACSB: Analytical thinking) 3-11. How might intuition, the analytical decision style, and the conceptual decision style help to work against problems arising from using bad data?

Managers using intuition may not be able to evaluate all of the variables appropriately and would be more prone to decision-making biases. However, learning about bad data and its negative impact may make intuitive decision makers more skeptical and less willing to use data. As a result, they would not use the bad data and, by coincidence, avoid the problems arising from bad data. The analytical and conceptual decisionmaking styles have a greater tolerance for ambiguity and the ability to consider numerous alternatives. Analytic types would be more careful and conceptual types have a focus on the long term. Both of these styles would be able to adapt, avoid, or find creative solutions to short term problems arising form bad data. These managers will also be less likely to accept bad data as accurate. (LO: 2, Explain the four approaches managers can use when making decisions, AACSB: Analytical thinking) 3-12. What does this case illustrate about big data and analytics?

Making good decisions still requires managers to use judgment. Just because managers have a lot of data, it may not always lead to good decisions. Use good judgment to interpret the results; reevaluate it if it does not make sense. Although big data is important and can support decision-making, managers are beginning to understand how to use big data best to improve organizational performance. Collecting various types of data and investing time into analyzing the data instead of relying on a single piece of data will most likely lead to improved performance. (LO: 5, Identify cutting-edge approaches for improving decision making, AACSB: Analytical thinking)

ANSWERS TO CASE APPLICATION 2 QUESTIONS

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Student answers to these questions will vary.

Pitch Clock and a Major League Baseball Rule Change 3-13. What do you think Major League Baseball needs to do to evaluate if the pitch clock is effective over the next five years?

Student answers will vary. Major League Baseball used data and evidence-based management before deciding to use a pitch clock. Continuing to collect data, sports analytics, and fan feedback should be a top choice. (LO: 2, Explain the four approaches managers can use when making decisions, AACSB: Analytical thinking) 3-14. How might rational and intuitive decision making both be involved when Major League Baseball changes the rules of the game?

Student answers will vary. Students should identify that rational decision makers will be more receptive to data-driven recommendations. However, intuition combines collective experiences and gut feeling, which can often result in faster decisions that are very accurate. Intuitive decision making can complement rational decision making. First, league officials with experience may be able to make rule changes more quickly and need less data. These officials may also have a better feel for when further data gathering will not make the right decision any clearer. League officials using intuition who experienced intense feelings and emotions during the rule-change discussion could have led the rational decision makers to present better and more complete data. This caused the alternatives to be thoroughly researched before one was selected. (LO: 3, Classify decisions and decision-making styles, AACSB: Analytical thinking) 3-15. What decision-making errors might Major League Baseball fall victim to as it tries to improve the game for its fans?

Student answers will vary. Overconfidence bias, confirmation bias, availability bias, and sunk costs errors are common choices. (LO: 4, Describe how biases affect decision making, AACSB: Analytical thinking)

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Chapter 4 Influence of the External Environment and the Organization’s Culture In this chapter, students will look at the challenges incurred by the external environment and explore the characteristics of organizational culture. First, students will read about two perspectives that discuss the degree to which managers actually influence an organization’s success or failure.

LEARNING OBJECTIVES 1. Contrast the actions of managers according to the omnipotent and symbolic views.

2. Describe the constraints and challenges facing managers in today’s external environment.

3. Discuss the characteristics and importance of organizational culture.

CHAPTER OUTLINE 4.1

THE MANAGER: OMNIPOTENT OR SYMBOLIC? Two perspectives concerning the role that managers play in an organization’s success or failure have been proposed.

A. The Omnipotent View. This maintains that managers are directly responsible for the success or failure of an organization.

1.

This view of managers as being omnipotent is consistent with the stereotypical picture of the “take-charge” executive who can overcome any obstacle in carrying out the organization’s objectives.

2.

When organizations perform poorly, someone must be held accountable. According to the omnipotent view, that “someone” is the manager.

B. The Symbolic View. This view of management upholds the view that much of an organization’s success or failure is due to external forces outside managers’ control.

1.

The influence that managers do have is seen mainly as a symbolic outcome.

2.

Organizational results are influenced by factors outside of the control of managers, including the economy, customers, governmental policies, competitors’ actions, the state of the particular industry, the control of proprietary technology, and decisions made by previous managers in the organization.

3.

The manager’s role is to create meaning out of randomness, confusion, and ambiguity.

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4.

C.

4.2

According to the symbolic view, the actual part that management plays in the success or failure of an organization is minimal.

Reality Suggests a Synthesis. Managers are neither helpless nor all powerful. Instead, the more logical approach is to see the manager as operating within constraints imposed by the organization’s culture and environment (see Exhibit 4-1).

THE EXTERNAL ENVIRONMENT: CONSTRAINTS AND CHALLENGES The impact of the external environment on a manager’s actions and behaviors cannot be overemphasized. Forces in the external environment play a major role in shaping managers’ endeavors.

A. Defining the Environment and Environmental Uncertainty.

The environment consists of those factors and forces outside the organization’s control that have the potential to affect the organization’s performance. Not all firms operate in the same environment.

Environments differ based on their degree of environmental uncertainty.

1. Environmental uncertainty refers to the degree of change and complexity in an organization’s environment. The Environmental Uncertainty Matrix in Exhibit 4-2 shows these two aspects. a. Degree of change is characterized as being dynamic or stable. b. In a dynamic environment, components of the environment change frequently. If change is minimal, the environment is called a stable environment. c. The degree of environmental complexity is the number of components in an organization’s environment and the extent of an organization’s knowledge about those components. d. If the number of components and the need for sophisticated knowledge is minimal, the environment is classified as simple. If a number of dissimilar components and a high need for sophisticated knowledge exist, the environment is complex. e. Because uncertainty is a threat to organizational effectiveness, managers try to minimize environmental uncertainty.

B. Monitoring the General Environment. The general environment includes everything outside the organization. The general environment can be divided into several components as shown in Exhibit 4-3. These components include economic, political/legal, sociocultural, demographic, technological, and global conditions.

1.

Economic conditions include factors such as interest rates, inflation, changes in disposable income, and others.

2.

Political/legal conditions include the general political stability of countries in which an organization does business and the specific attitudes that elected officials have toward business. Federal, state, and local governments can influence what organizations can and cannot do.

3.

Sociocultural conditions include the changing expectations of society. Societal values, customs, and tastes can change, and managers must be aware of these changes.

4.

Demographic conditions include the physical characteristics of a population (e.g., gender, age, level of education, geographic

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C.

D.

4.3

location, income, composition of family) which can change over time and managers must adapt to these changes.

5.

Technological conditions include any scientific or industrial innovation. This component has changed more rapidly than any other element of the general environment.

6.

Global factors include global competitors and global consumer markets.

The Specific Environment. Most of management’s attention will focus on the organization’s specific environment. The specific environment consists of crucial constituencies or stakeholders that can positively or negatively influence the organization’s effectiveness. It can include suppliers, customers, competitors, government agencies, and special interest groups.

1.

Suppliers—Suppliers include any entity that provides the organization with labor, components, raw materials, or equipment.

Managers need to ensure a steady flow of these resources at the lowest price possible.

2.

Customers—All organizations exist to satisfy customers. However, customers can be fickle and managers need to be attuned to changing needs and preferences.

3.

Competitors—Every organization faces competition; even nonprofits compete for donor dollars. Managers need to pay attention to any changes the competition introduces to gain customers or market share.

4.

Government—Federal, state, and local governments influence what organizations can and cannot do. Legislation can change organizational demands or requirements overnight so managers need to be aware of these changes and be ready to respond.

5.

Investors—Public companies are under the scrutiny of stockholders as well as potential investors as because organizational decisions should enhance shareholder value. many companies are engaging an ESG (environmental, social, and governance (ESG) strategy to address the concerns of diverse shareholders.

6.

Special Interest Groups—Special interest groups often influence organizations. These groups typically represent an organized attempt for change, such as the Coalition to Stop Gun Violence, whose work to promote gun safety impacts gun manufacturers.

Managing the Environment. Organizations do not operate in a vacuum and must be prepared to respond to the overall environment summarized in Exhibit 4-4. A manager’s job is to operate within these environmental constraints and gain as much control as possible over the organization’s environment.

ORGANIZATIONAL CULTURE: GUIDING EMPLOYEE BEHAVIOR Just as individuals have a personality, so, too, do organizations. We refer to an organization’s personality as its culture.

A. What Is Organizational Culture? Organizational culture is the shared values, principles, traditions, and ways of doing things that influence the way organizational members act. This definition implies:

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1.

B.

C.

Individuals perceive organizational culture based on what they see, hear, or experience within the organization.

2.

Organizational culture is shared by individuals within the organization.

3.

Organizational culture is a descriptive term. It describes how members perceive the culture, rather than evaluates.

4.

Six dimensions of an organization’s culture have been proposed. a.

Adaptability (the degree to which employees are encouraged to be innovative and take risks) b.

Attention to detail (the degree to which employees are expected to exhibit precision, analysis, and attention to detail) c.

Outcome orientation (the degree to which managers focus on results or outcomes rather than on the techniques and processes used to achieve those outcomes) d.

People orientation (the degree to which management decisions take into consideration the effect on people within the organization) e.

Team orientation (the degree to which work activities are organized around teams rather than individuals) f.

Integrity (the degree to which people exhibit honesty and high ethical principles in their work) 5.

Exhibit 4-5 highlights how the cultural dimensions can dimensions can create significantly different cultures.

Strong Cultures.

1.

Strong cultures are found in organizations where key values are intensely held and widely shared.

2.

Whether a company’s culture is strong, weak, or somewhere in between depends on organizational factors such as size, age, employee turnover rate, and intensity of original culture.

3.

A culture has increasing impact on what managers do as the culture becomes stronger.

4.

Most organizations have moderate-to-strong cultures. In these organizations, high agreement exists about what is important and what defines “good” employee behavior, for example.

5.

Studies of organizational culture have yielded various results. One study found that employees in firms with strong cultures were more committed to their firm than were employees in firms with weak cultures. Organizations with strong cultures also used their recruitment efforts and socialization practices to build employee commitment. An increasing body of research suggests that strong cultures are associated with high organizational performance.

6.

Exhibit 4-6 contrasts strong cultures vs. weak cultures.

Where Culture Comes from and How It Continues.

1.

The original source of an organization’s culture is usually a reflection of the vision or mission of the organization’s founders.

The culture is a result of the interaction between the founders’ biases and assumptions and what the first employees subsequently learned from their own experiences.

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D.

2.

An organization’s culture continues when certain practices help maintain it: a. In the selection process the organization seeks to identify individuals whose values are consistent with at least a good portion of the organization’s. Selection is a two-way street, allowing both the organization and job candidates to avoid a mismatch and sustain the organization’s culture by weeding out those who might undermine or attack its core values.

Actions of top executives help to maintain the culture. b. New employees learn the organization’s way of doing things through socialization—the process that helps employees adapt to the organization’s culture.

3.

Exhibit 4-7 shows how organizations establish and maintain culture.

How Culture Is Sustained.

1.

STORIES. Organizational stories provide explanations and legitimacy for current practices, exemplify what is important to the organization, and provide compelling pictures of an organization’s goals.

2.

RITUALS. These are repetitive sequences of activities that express and reinforce the key values of the organization, which goals are most important, and which people are important or expendable.

3.

MATERIAL ARTIFACTS AND SYMBOLS. The use of material artifacts and symbols is another way in which employees learn the culture, learn the degree of equality desired by top management, discover which employees are most important, and learn the kinds of behavior that are expected and appropriate.

4.

LANGUAGE. Once learned, the organization’s language acts as a common denominator that bonds members. Learning this language indicates members’ willingness to accept and preserve the culture. This special lingo acts as a common denominator to unite members of a particular culture.

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E. Remote Work and Culture. Much of what we know about workplace culture was learned by studying traditional workplace environments. That is, workplaces where people all work together, in person. Often remote workers have little or no interaction with others, which makes it difficult to build a culture. So managers must be intentional about connecting workers to the company. . A company also should understand also that the technology that workers use matters. For example, if team collaboration is important to the culture, the technology platform should make it easy to connect and work with others. Finally, building culture with remote workers requires managers to be more explicit in articulating cultural values and helping employees see when their behaviors align with the culture.

F. How Culture Affects Managers. An organization’s culture is important because it establishes constraints on what managers can do.

1.

The link between corporate values and managerial behavior is fairly straightforward.

2.

The culture conveys to managers what is appropriate behavior.

3.

An organization’s culture, particularly a strong one, constrains a manager’s decision-making options in all managerial functions (see Exhibit 4-8).

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ANSWERS TO REVIEW AND DISCUSSION QUESTIONS Student answers to these questions will vary.

4-1. Describe the two views on how much impact managers have on an organization’s success or failure.

The omnipotent and symbolic views are conflicting perspectives on how much a manager actions can impact their organization’s performance. The omnipotent view supports the idea that a manager is directly responsible for the success and failure of the organization. Top CEO’s (and head football coaches) would be more likely to be held accountable for the entire organization’s outcomes, while lower-level managers would be held responsible for the outcomes in their respective departments. This view adopts the premise that managers set the priorities/goals of the organization and are responsible for making major success oriented decisions. If the goals and decisions managers choose are correct, then the organization should thrive. The symbolic view is a counterpart to the omnipotent view and asserts that much of an organization’s success or failure can be attributed to factors in the external environment, such as competition, economic conditions, or governmental influences. According to this view, management creates the illusion of control for the benefit of stockholders, customers, employees, and the public.

Managers play the role of accepting praise when things go well and accepting the blame when things go poorly even though they did little to create success or failure. (LO: 1, Contrast the actions of managers according to the omnipotent and symbolic views, AACSB: Analytical thinking) 4-2. Be aware of your environment. What do you think this statement means for an organization? What are implications for managing the external environment?

Organizations depend on their environment, which may be complex or uncertain. The general environment includes everything outside the organization (see Exhibit 4-3).

What this means for an organization is that its stakeholders are a source of inputs and a recipient of outputs. Good relationships can lead to organizational outcomes such as improved predictability of environmental changes, more successful innovations, greater degrees of trust among stakeholders, and greater flexibility in acting to reduce the impact of change. In addition, relationship management and maintaining good relationships have been proven by many researchers to have an effect on organizational performance. High-performing companies tend to consider the interests of all major stakeholder groups as they make decisions.

The general environment encompasses conditions that may affect the organization but whose relevance is not clear. The implications for managing means the bulk of management’s attention is usually given to the organization’s specific environment. This is the part of the environment that is directly relevant to the achievement of an organization’s goals. When managing the environment (see Exhibit 4-4) managers should identify key external constituencies and build a relationship with them. It consists of the crucial constituencies or stakeholders that can positively or negatively influence an organization’s effectiveness. Managing suppliers, customers, competitors, investors, and

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special interest groups. If managers scan their environment for insights into potential shifts, in the general environment, they can better navigate the challenges that those shifts can cause. By scanning the environment broadly and conducting research on signals, they can act decisively. (LO: 2, Describe the constraints and challenges facing managers in today’s external environment, AACSB: Reflective thinking) 4-3. Refer to Exhibit 4-5. How would a first-line manager’s job differ in these two organizations? How about a top-level manager’s job?

In Organization A, strong attention would be given to detail, with little innovation and risk taking. Teamwork would not be encouraged, and employees would be viewed as a means to an end. Strict controls would be placed on workers, and the first-line manager’s job is to ensure task achievement is accomplished. The supervisor would have little latitude and would create a work environment focused on doing things “by the book.” Top-level managers reward attention to detail. The culture of the organization would be less focused on the people or teams, but instead offer a culture focused on how work is done. Top-level managers would also see to hire employees and managers who also value this approach. In Organization B, innovation and risk taking would be highly encouraged. The supervisor would have and give more autonomy in how workers went about achieving goals. Employees would be given the opportunity to provide input, and a team approach would be used. People would be viewed as important contributors.

The supervisor’s job would be more like that of a coach, encourager, and facilitator. Toplevel managers reward adaptability, the use of teams, and an orientation on the people.

When hiring, Top-managers would seek those with the ability to adapt and know how to get work done in a team environment. (LO: 3, Discuss the characteristics and importance of organizational culture, AACSB: Reflective thinking) 4-4. Describe your ideal organizational culture using the seven dimensions of organizational culture. What constraints would this culture put on organizational managers’ behavior? How? Does it constrain employees’ behavior? How? Answers to this question will vary. Have students look at the seven dimensions of organizational culture described in the text and rate them from high to low for the class.

One point you might want to explore is students’ preferences for working in organizations with a strong versus weak culture. Exhibit 4-1 highlights that managers' discretion would be constrained by organizational culture, and some answers will reveal this in relation to Exhibit 4-8 showing the types of managerial decisions affected by culture. Socialization, as shown in Exhibit 4-7 may also be described as students may highlight how it feels to join and become a member of an organization. (LO: 3, Discuss the characteristics and importance of organizational culture, AACSB: Reflective thinking) The organization’s culture is likely to reduce or enhance managerial discretion.

Ask students to relate this information to the role a manager might play in establishing the culture of a business organization. (LO: 3, Discuss the characteristics and importance of organizational culture, AACSB: Analytical thinking) 4-5. Can offering remote work to employees weaken an organization’s culture? Explain.

Student answers will vary. In instances where meaningful interactions do not occur, the culture is likely to weaken. Choosing a technology for remote workers to use that is

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incongruent with the culture of the organization will also result in a weaker culture.

Finally, the culture will be weaker if managers do not take the time to explicitly articulate cultural values and describe employee behaviors that align with the culture in the eyes of remote workers. LO: 3, Discuss the characteristics and importance of organizational culture, AACSB: Analytical thinking) 4-6. Discuss the impact of a strong culture on organizations and managers.

At one time, researchers supported a direct connection between the strength of an organization’s culture and its performance. Today, we know that the strength of an organization’s culture is more closely tied to acceptance of an organization’s values.

Exhibit 4-6 gives five employee related outcomes of strong vs. weak cultures. In the end, strong cultures aid a manager in fulfilling their functions: planning, organizing, leading, and controlling (see Exhibit 4-8). (LO: 3, Discuss the characteristics and importance of organizational culture, AACSB: Analytical thinking) 4-7. What are the ways an organization sustains its culture An organization communicates its culture through stories, rituals, material artifacts and symbols, and language. The organization also sustains its culture through careful employee selection and socialization. (LO: 3, Discuss the characteristics and importance of organizational culture, AACSB: Analytical thinking)

ETHICS DILEMMA Student answers to these questions will vary.

In many ways, technology has made all of us more productive. However, ethical issues do arise in how and when technology is used. Take competitive amateur and professional sports as an example.. Access to technology is expensive, meaning technology use in sports is not equally available to everyone.

4-8. Do you think the use of technology in sports is based on the desire to gain an advantage or the fear of competing at a disadvantage? Is this an ethical concern for the use of technology?

Possible answer: As long as all athletes competing in the sport have the ability to take advantage of the technology, then it is ethical. However, making these advances available to all athletes has ethical applications, as not all athletes have access to equal funding, technology, or coaching. Most feel the ethical concerns are bigger in amateur sports. In amateur sports wealth and access does generate an unfair advantage if this is the case. (LO: 2, Describe the constraints and challenges facing managers in today’s external environment, AACSB: Ethical understanding and reasoning) 4-9. What if your school (or country) was competing for a championship and couldn’t afford to outfit athletes in such equipment and it affected your ability to compete? Would that make a difference?

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Possible answer: Yes, if the technology is not available to everyone, then the victory is not due solely to ability. (LO: 2, Describe the constraints and challenges facing managers in today’s external environment, AACSB: Ethical understanding and reasoning) 4-10. Given the degree of complexity and change technology has brought to amateur and professional sports, what can (i.e., management) do to gain some control over their environment?

Possible answer: Clearly, it is difficult to ensure all athletes and teams have equal access to the technology. Some feel when unequal access exists the technology should be banned. Yet the culture of the sport can be explicitly communicated to ensure the athletes understand the way competition will occur clearly. For example, a culture of integrity would reinforce competition according to the rules and policies. A people orientation may reinforce an environment ensuring competition is equal across all competitors, while an outcome orientation might reinforce competition that is a win-at-allcosts mentality where technology is another tool available to attain victory. (LO: 2, Describe the constraints and challenges facing managers in today’s external environment, AACSB: Ethical understanding and reasoning)

SKILLS EXERCISE: DEVELOPING YOUR ENVIRONMENTAL SCANNING SKILL Environmental scanning is an important managerial skill. In this exercise, students are asked to practice this skill using five suggestions: • Decide which type of environmental information is important to your work.

• Regularly read and monitor pertinent information.

• Incorporate the information that you get from your environmental scanning into your decisions and actions.

• Regularly review your environmental scanning activities.

• Encourage your subordinates to be alert to information that is important.

Students are asked to identify different sources of business information. They are asked to subscribe to a news feed to make checking the external environment part of their daily routine. (LO: 2, Describe the constraints and challenges facing managers in today’s external environment, AACSB: Analytical thinking)

WORKING TOGETHER: TEAM EXERCISE Have students work in teams of three or four. Student responses will vary.

The most common ways to learn organizational culture is through stories, rituals, material artifacts and symbols, and language. Some questions that students to facilitate their group’s discussion on what they want, in terms of culture, from their future employer include: • Physical design (buildings, furnishings, parking lot, office or store design)— Where are they located and why? Where do customers and employees park?

What does the office/store layout look like? What activities are encouraged or

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•

•

•

discouraged by the physical layout? What do these things say about what the organization values?

Symbols (logos, dress codes, slogans, philosophy statements)—What values are highlighted? Where are logos displayed? Whose needs are emphasized? What concepts are emphasized? What actions are prohibited? What actions are encouraged? Are any artifacts prominently displayed? What do those artifacts symbolize? What do these things say about what the organization values?

Words (stories, language, job titles)—What stories are repeated? How are employees addressed? What do job titles say about the organization? Are jokes/anecdotes used in conversation? What do these things say about what the organization values?

Policies and activities (rituals, ceremonies, financial rewards, policies for how customers or employees are treated)—(Note: You may be able to assess this one only if you’re an employee or know the organization well.) What activities are rewarded? Ignored? What kinds of people succeed? Fail? What rituals are important? Why? What events get commemorated? Why? What do these things say about what the organization values?

(LO: 3, Discuss the characteristics and importance of organizational culture, AACSB: Analytical thinking)

MY TURN TO BE A MANAGER The following supplemental exercises are offered for students looking to develop their knowledge of this chapter’s topics further. Students who have completed these exercises tend to be better prepared for in-class or virtual discussions. Asking students to evaluate if articles about a particular business have a theme that reinforces the omnipotent or symbolic views of management is informative. Assigning students to identify all the potential organizational stakeholders, learn about activist investors, and research work nomads will be novel assignments for most.

• Find current examples in any of the popular business periodicals of the omnipotent and symbolic views of management. Write a paper describing what you found and how the two examples your examples represent the views of management. (LO: 1, Contrast the actions of managers according to the omnipotent and symbolic views, AACSB: Reflective thinking) •

Consider a business that you frequent (for example, a restaurant or coffee shop) and review the six aspects of the external environment discussed in the text.

Create a list of factors in the external environment that could affect the management of the business you selected. (LO: 2, Describe the constraints and challenges facing managers in today’s external environment, AACSB: Analytical thinking)

• Choose an organization you are familiar with or would like to know more about.

Create a table identifying potential stakeholders of this organization. Then indicate what particular interests or concerns these stakeholders might have.

(LO: 2, Describe the constraints and challenges facing managers in today’s external environment, AACSB: Analytical thinking)

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• Activist investors and special interest groups try to pressure top management at companies to make significant changes to their policies. How have executives at companies like Coca-Cola, Disney, Exxon, and Meta made changes in response to investors’ or special interest groups’ demands? Give some examples and indicate if you agree or disagree with the changes. Was there any evidence of greenwashing at the company(ies) you researched?

• If you belong to a student organization, evaluate its culture. How would you describe the culture? How do new members learn the culture? How is the culture maintained? If you don’t belong to a student organization, talk to another student who does and evaluate it using the same questions.

(LO: 3, Discuss the characteristics and importance of organizational culture, AACSB: Analytical thinking) Research remote work and work nomads. In a short paper, discuss the positive and negative impacts these ways of working have on an organization with a strong culture. Would the effects be the same for an organization with a weak culture? Explain whether maintaining an organization’s culture should be different if remote workers and work nomads are used.

ANSWERS TO CASE APPLICATION 1 QUESTIONS Student answers to these questions will vary.

Environmental Uncertainty at HBO 4-11. Which of the cells in Exhibit 4-2 applies most clearly to the environmental uncertainty faced by HBO? While answers may vary somewhat, the correct answer will always be in Cell 2 or Cell 4 since the environment is very dynamic. However, Cell 4 is a better fit since there are numerous components that are continually changing that require sophisticated knowledge to understand how they fit together. (LO: 2, Describe the constraints and challenges facing managers in today’s external environment, AACSB: Analytical thinking) 4-12. Using Exhibit 4-4, what components of HBO’s external environment and specific environment are having an impact on the company? Why? HBO’s customer base is changing and becoming more receptive to other content delivery modes. In addition, competition is increasing as Netflix, Apple, and other firms enter the market. (LO: 2, Describe the constraints and challenges facing managers in today’s external environment, AACSB: Analytical thinking) 4-13. What, if anything, can HBO do to manage its environment and reduce its uncertainty exposure?

Responses to this question will vary. However, HBO needs to adjust to the decline in cable subscribers and evaluate different pricing models for streaming content.

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(LO: 2, Describe the constraints and challenges facing managers in today’s external environment, AACSB: Analytical thinking) 4-14. How might HBO’s organizational culture change as a result of the changes described in this case?

An organization’s culture is a reflection of its leadership and the values that leadership promotes. The primary driver of change is the merger with AT&T-Time Warner. HBO will need to adjust to a different corporate culture and focus more on quantity of shows produced at a lower cost. This change in strategic focus will also affect the company’s culture. (LO: 3, Discuss the characteristics and importance of organizational culture, AACSB: Analytical thinking)

ANSWERS TO CASE APPLICATION 2 QUESTIONS Student answers to these questions will vary.

Organizational Culture at Vice Media 4-15. Which of the six organizational culture dimensions apply most clearly to Vice Media’s culture?

Adaptability and outcome orientation both apply. Vice Media valued both creativity and innovation but also wanted results regardless of how they were obtained. As a result, people orientation is absent from this culture. (LO: 3, Discuss the characteristics and importance of organizational culture, AACSB: Analytical thinking) 4-16. Do you think that a new CEO could have turned around the culture at Vice Media?

Answers will vary. Because hiring in organization is often designed to hire those who match its existing culture it could be difficult to hire a new CEO that would institute substantially different practices. However, if the new CEO was hired based on their experience with different dimensions of organization culture like adaptability with a people or team, it is possible the culture could be turned around. The new CEO needs to implement a formal socialization and training program so all employees understand the firm’s culture and what behaviors are acceptable or unacceptable. Clear communication of the changes and expectations is critical. (LO: 3, Discuss the characteristics and importance of organizational culture, AACSB: Analytical thinking) 4-17. If you were the new CEO at Vice Media, what actions would you take to improve the culture?

Student opinions will vary. Possibilities include changing the office space layout to a more team or people oriented work environment. Compensation and benefit where greater equity is ensured are common answers. Idea of ensuring equal and fair pay can also include the need to recruit new and people-oriented managers. (LO: 3, Discuss the characteristics and importance of organizational culture, AACSB: Analytical thinking)

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Chapter 5 Diversity, Equity, and Inclusion Employing and properly managing a diverse workforce is a challenge for most organizations. In the United States, managers are faced with an increasingly diverse population, which has necessitated changes in how they manage employees. With the push in the 1960s toward civil rights, and the women’s movement, managers are now more aware of the needs of special groups. However, diversity is not always black or white, male or female. In this chapter, students will explore diversity, equity, and inclusion, why these concepts are essential for a successful business, and strategies companies can use in their DEI work.

LEARNING OBJECTIVES 1.

2.

3.

4.

5.

Define workplace diversity, equity, and inclusion explain why managing it is so important.

Describe the changing makeup of workplaces in the United States and around the world.

Explain the different types of diversity found in workplaces.

Discuss the challenges managers face in managing diversity, equity, and inclusion.

Describe various workplace diversity, equity, and inclusion initiatives.

CHAPTER OUTLINE 5.1

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DIVERSITY, EQUITY, AND INCLUSION IN THE WORKPLACE Diversity has many meanings. What does diversity mean in the context of the workplace? Does diversity refer only to people, or does it refer to other aspects such as language, past experiences, and abilities? In this section, the authors address this question and explore why diversity is important for organizations.

A. What Is Workplace Diversity, Equity, and Inclusion in the Workplace?

1.

Exhibit 5-1 illustrates a historical overview of how the concept and meaning of workforce diversity has evolved.

2.

Diversity has traditionally been considered a term used by human resources departments to describe fair hiring practices, discrimination, and inequality.

3.

Dictionary definitions of diversity refer to variety, differences, multiformity (instead of uniformity), or dissimilarities (instead of similarities).

4.

The Society for Human Resource Management says that diversity is often used to refer to differences based on ethnicity, gender, age, religion, disability, national origin, and sexual orientation, but it also encompasses an infinite range of unique characteristics and experiences, including communication styles, physical characteristics such as height and weight, and speed of learning and comprehension.

5.

The authors have chosen to define workplace diversity as the ways in which people in an organization are different from and similar to one another.

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6.

B.

5.2

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Surface-level diversity refers to easily perceived differences that may trigger certain stereotypes, but that do not necessarily reflect the ways people think or feel.

7.

Deep-level diversity refers to differences in values, personality, and work preferences that can affect the way people view organizational work rewards, communicate, react to leaders, negotiate, and generally behave at work.

8.

Equity—Equity means adjusting treatment by considering each person’s unique circumstances so that the outcomes or opportunities are equal without giving anyone an unfair advantage.

9.

Inclusion—Inclusion is about creating a welcoming, affirming, and respectful workplace.

Benefits of a Diverse, Equitable, and Inclusive Workplace Many companies view diversity as a positive benefit for organizations. The benefits fall into three main categories: people management, organizational performance, and strategic advantage (see Exhibit 5-2).

1.

People Management a.

Positive and explicit workforce diversity efforts can help organizations attract and keep talented, diverse people and make the best of the talents those individuals bring to the workplace. b.

Workforce diversity efforts help organizations draw from a larger applicant pool and utilize the best of the talents those individuals can bring to the workplace. Work teams with diverse backgrounds subsequently bring unique perspectives to discussions, which result in more creative ideas and solutions.

2.

Organizational Performance a.

The performance benefits organizations get from workforce diversity include cost savings and improvements in organizational functioning. b.

Cost savings occur when organizations that cultivate a diverse workforce reduce employee turnover, absenteeism, and the chance of lawsuits. c.

Enhanced organizational performance is achieved through workforce diversity because of improved problem-solving abilities and system flexibility.

3.

Strategic Advantage a.

Organizations also benefit strategically from a diverse workforce when they extract the best talent, performance, market share, and suppliers from a diverse country and world. b.

Organizations can better anticipate and respond to changing consumer needs with a diverse workforce. c.

From an ethical perspective, a commitment to workforce diversity is the right thing to do. Businesses have an ethical imperative to build relationships that value and enable all employees to be successful.

THE CHANGING WORKPLACE In this section, we look at the demographic trends of the US population and then at global diversity trends. These trends will be reflected in a changing workplace, thus making this information important for managers to recognize and understand.

A. Characteristics of the US Population.

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1.

Total Population: a.

The total population of the United States was 336 million in 2023.

It is projected to increase to 373 million by the year 2050. b.

Representation of different Racial/ethnic groups will change meaningfully by 2050. Exhibit 5-3 provides a breakdown of these changes.

Nearly one in five Americans will be age 65 or older in 2050.B. What About Global Workforce Changes?

1.

Total World Population a.

The world population in 2022 is estimated at over 8 billion and is forecasted to hit 9.7 billion by 2050, but there are signs that population growth is slowing.

2.

An Aging Population a.

The world’s population is now aging at an unprecedented rate. b.

By 2050, life expectancy will increase to 77.2 years compared to 72.8 years in 2019. c.

An aging world population will bring about a lot of changes. Young workers will be in short supply, and advanced nations will rely on immigrants from developing countries to fill job openings.

5.3

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TYPES OF WORKPLACE DIVERSITY Workplace diversity comes in several forms. All of these forms have potential ramifications for management. (See Exhibit 5-4.)

A. Age. 1.

The negative stereotypes of older workers—poor mental functioning, lower job performance, resistance to change—have undoubtedly discouraged many employers from hiring and retaining people over 50.

2.

Title VII of the Civil Rights Act of 1964 and the Age Discrimination in Employment Act of 1967 prohibit age discrimination. The Age Discrimination Act also restricts mandatory retirement at specific ages.

3.

Perceptions of older workers are often inaccurate. Older workers bring many good qualities to the job, including experience, judgment, a strong work ethic, and a commitment to doing quality work.

4.

Gen Z (born between 1997 and 2012) workers want more control over their schedules but worry about financial security and are willing to put in the effort to get ahead.

B. Gender.

1.

While women now make up almost half of the workforce (47 percent), gender diversity issues are still quite prevalent in organizations.

2.

Women now hold more than half of professional or management jobs..

3.

Although there continue to be gender inequities in the workplace, thanks to the exposure that was created by “me-too,” workers today are more confident that people who commit workplace harassment or assault will be held accountable. Managers can expect organizational cultures that continue to be hostile, especially toward women, to attract unfavorable media attention and face serious legal consequences.

C. Race and Ethnicity.

1.

The issue of race and diversity has been an emotionally charged topic in the United States.

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2.

Race is defined as the biological heritage (including physical characteristics such as one’s skin color and associated traits) that people use to identify themselves.

3.

Ethnicity is related to race, but it refers to social traits—such as one’s cultural background or allegiance—that are shared by a human population.

4.

A diverse workforce does not equate to an inclusive and equitable workforce. More than 40 percent of the discrimination complaints filed with the EEOC in 2022 were related to race and ethnicity.

D. Disabilities.

1.

The Americans with Disabilities Act (ADA) passed in 1990 prohibits discrimination against persons with disabilities and requires employers to make reasonable accommodations so their workplaces are accessible to people with physical or mental disabilities and enable them to effectively perform their jobs.

2.

The US Equal Employment Opportunity Commission classifies a person with a disability when they have any physical or mental impairment that substantially limits one or more major life activities.

3.

Disabilities include some conditions not commonly associated with disabled people, such as deafness, chronic back pain, AIDS, missing limbs, seizure disorder, schizophrenia, diabetes, and alcoholism.

4.

A recent report indicated that only 4 percent of companies prioritize disability as part of their company’s DEI initiative.

5.

Exhibit 5-5 describes some of the fears that employers may have about the disabled as well as the reality.

6.

Overall, people with disabilities are highly rated by employers for traits such as dependability and conscientiousness.

E. Religion.

1.

Title VII of the Civil Rights Act prohibits discrimination on the basis of religion (as well as race/ethnicity, country of origin, and sex).

2.

Research suggests that honoring religious diversity in the workplace can improve employee engagement. By viewing religious diversity as an asset, organizations can create a more inclusive workplace.

F. LGBTQ+: Sexual Orientation and Gender Identity.

1.

The acronym LGBTQ+ stands for lesbian, gay, bisexual, transgender, and queer, with a “+” to recognize the limitless sexual orientations and gender identities that exist.

2.

Laws have been in place in Europe for several years to prohibit discrimination based on sexual orientation.

3.

The US Supreme Court ruled that transgender, lesbian, bisexual, and gay individuals were protected under Title VII of the Civil Rights Act’s prohibition against sexual discrimination.

4.

Companies can support their LGBTQ+ employees by creating a supportive work climate and encouraging inclusive behavior by coworkers.

G. Socioeconomic Status 1.

A combination of social and economic factors such as the amount and kind of education attained, type and prestige of occupation, income level, and place of residency determine one’s position on a society’s socioeconomic scale.

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2.

5.4

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Research suggests that workers from lower-class social origins are 32 percent less likely to make it to the manager level in a company. a.

Management must add goals to their DEI strategy to address supporting employees from diverse socioeconomic backgrounds. b.

Hiring managers should make sure they do not require advanced education if it is not needed. c.

Companies should create opportunities for promotion to management from the hourly worker ranks.

CHALLENGES IN MANAGING DIVERSITY While most managers understand the value of a diverse workforce, they still face challenges in implementing equitable workplace policies and differing employee perceptions.

A. Personal Bias.

1.

Employees bring many preconceived ideas about others into the workplace.

2.

Bias is a term that describes a tendency or preference toward a particular perspective or ideology. a. Unconscious bias refers to deeply engrained beliefs about others that individuals are unaware of but influence their attitudes and behaviors.

3.

One outcome of our personal biases can be prejudice, a preconceived belief, opinion, or judgment toward a person or a group of people.

4.

A major factor in prejudice is stereotyping, which is judging a person based on one’s perception of the group to which they belong.

5.

Both prejudice and stereotyping can lead to someone treating others who are members of a particular group unequally. That’s what we call discrimination, which is when someone acts out their prejudicial attitudes toward people who are the targets of their prejudice.

6.

Exhibit 5-6 shows the definitions and examples of different types of discrimination.

7.

Discrimination has potential financial consequences for organizations and managers, as well as loss in employee productivity, negative and disruptive interpersonal conflicts, increased employee turnover, and an overall negative climate.

B. Glass Ceiling.

1.

The term glass ceiling refers to the invisible barrier that separates women and minorities from top management positions. A “ceiling” means that something is blocking upward movement, and the idea of “glass” is that whatever’s blocking the way isn’t immediately apparent.

2.

Potential causes for the glass ceiling have ranged from lack of mentoring, sex stereotyping, views that associate masculine traits with leader effectiveness, and bosses’ perceptions of family-work conflict.

C. Pay Inequities.

1.

The Equal Pay Act of 1963 made having different pay scales for men and women doing the same job illegal.

2.

By 2022, women made 82 percent of what men earned, just slightly up from 80 percent 20 years earlier in 2002. For young women, the gap has narrowed more over time. In 1980, women ages 25 to 34 earned 33 cents less than their male counterparts, compared with 9 cents in 2022.

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3.

Pay disparities exist between races as well. For example, Black employees are paid 76 cents for every dollar paid to Whites, and Hispanic employees are paid 73 cents a.

Evidence suggests that pay transparency does help to close the pay gap.

5.5 WORKPLACE DIVERSITY, EQUITY, AND INCLUSION INITIATIVES While the challenges to create and maintain a diverse workforce are daunting, organizations have taken steps to foster and promote workplace diversity. Some of these initiatives are listed below.

A. Top Management Commitment to DEI. 1.

Top management must ensure that diversity and inclusion are part of the organization’s purpose, goals, and strategies. Policies and procedures must be in place to ensure that grievances and concerns are addressed immediately.

2.

The organizational culture needs to be one where diversity and inclusion are valued, even to the point where individual performance is measured and rewarded on diversity accomplishments. a. Exhibit 5-7 outlines five stages of DEI strategy. Understanding what stage a company is in, helps management focus its DEI initiatives effectively.

B. Mentoring.

1.

Mentoring is a process whereby an experienced organizational member (a mentor) provides advice and guidance to a less-experienced member (a protégé). Mentors usually provide two unique forms of mentoring functions—career development and social support.

2.

A good mentoring program should help diverse employees with high potential move up the organization’s career ladder.

3.

Exhibit 5-8 highlights what a good mentor does.

C. DEI Training.

1.

Diversity training is specialized training to educate employees about the importance of diversity and teach them skills for working in a diverse workplace.

2.

Diversity training should focus on knowledge, attitudes, and behavior. a. Many emerging training programs also emphasize the importance of individual actions to support inclusiveness in the workplace.

3.

For the training to be more successful, it must be reinforced by other diversity initiatives. These include top-management commitment, diverse task forces, and a formal mentoring program.

D. Employee Resource Groups.

1.

Employee resource groups (also frequently called affinity groups) are made up of employees connected by some common dimension of diversity.

2.

These groups are usually formed by the employees themselves, not the organizations; however, it is important for organizations to recognize and support these groups.

3.

Approximately 90 percent of Fortune 500 companies now have ERGs, and they’ve become an important structural device for supporting diversity. A recent study found that almost half of workers under the age of 34 were interested in ERGs, but less than 20 percent of workers in the 55–64 age bracket showed similar interest.

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4.

E.

Employee resource groups are useful in that diverse groups see that their existence is acknowledged and that they have the support of people within and outside the group.

Measuring and Reporting on DEI Initiatives.

Many companies include DEI reporting as part of their social metrics of their environmental, social, and governance reporting because DEI initiatives should positively impact the well-being of employees as well as other company stakeholders.

1.

Artificial Intelligence (AI)—AI can help companies analyze data to uncover and diagnose problems such as pay inequities or promotion barriers. a. Although it is easy to quantify diversity representation, such as the ratio of women to men in management, understanding inclusion and how people are treated in an organization is challenging to quantify or track. b. AI can be helpful to look for patterns in the data. The AI can identify why some co-workers engage with others and why other employees may be disconnected. AI can prompt managers to use the data to take informed action and help disconnected employees become more included.

ANSWERS TO REVIEW AND DISCUSSION QUESTIONS Student answers to these questions will vary.

5-1. Using workplace examples, contrast diversity, equity, and inclusion.

Student answers will vary. Workforce diversity has been defined as the ways people in an organization are different from and similar to one another. Deep-level diversity represents the more difficultly observed ways employees of an organization hold different values, personalities, and workplace preferences. In a diverse organization, employees might differ in their preferences for face-to-face, hybrid, and remote work options. Equity in an organization would be represented in the ways each person receives fair treatment. For instance, a company’s management training program would allow self-nominations to minimize barriers. Selfnominations allow all people access to the available management training. Inclusion is about creating a welcoming, affirming, and respectful workplace. An inclusive company offers employee onboarding for all new hires and many communication paths for all employees to voice their concerns. (LO: 1, Define workplace diversity, equity, and inclusion and explain why managing it is so important, AACSB: Diverse and multicultural work environments) 5-2. Distinguish between surface-level diversity and deep-level diversity. Why is it important to understand the difference between the two?

Surface-level diversity is the easily perceived differences that may trigger certain stereotypes.

Deep-level diversity is more difficult to observe and is the differences in values, personality, and work preferences that can affect the way people view organizational work rewards, communicate, react to leaders, negotiate, and generally behave at work. By focusing on deeplevel diversity, organizations can go beyond the divisive issues of race and other differences that can cause stereotypes and seek to understand how people think or feel. (LO: 3, Explain the

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different types of diversity found in workplaces, AACSB: Diverse and multicultural work environments) 5-3. What are the major trends in the changing populations of the United States and the world?

Refer to Exhibit 5-3 for information on the changing population makeup of the United States. By 2060, the white population will drop from 58.9 percent to 44.3 percent, while other racial/ethnic groups will increase, including the percentage of foreign-born people and two or more races.

The overall population of the United States will be substantially larger, more racially and ethnically diverse, and older. To address a shortage of workers in all industries created by an aging workforce, a larger healthcare industry will be needed to care for aging citizens. The United States will need to agree on immigration policies allowing younger immigrants to enter the country so companies can fill vacant jobs. Companies will likely also need to focus more on being more flexible in meeting employees’ needs. (LO: 2, Describe the changing makeup of workplaces in the United States and around the world, AACSB: Diverse and multicultural work environments) 5-4. Which two types of diversity found in the workplace are most relevant in careers associated with your major?

Student answers will vary. Each student’s perceptions of diversity related to age, gender, race and ethnicity, disabilities, religion, sexual orientation and gender identity, and socioeconomic status will differ in relevance to their careers. Generally, students will feel the most relevant types in organizations are those with the most significant need for improved practices related to increasing equity and inclusivity. (LO: 3, Explain the different types of diversity found in workplaces, AACSB: Diverse and multicultural work environments) 5-5. Which of the five stages of diversity, equity, and inclusion is most difficult for managers to accomplish in most companies? Which should be the easiest?

Student answers will vary. The stages of awareness, compliance, tactical, integrated, and sustainable are presented in Exhibit 5-7. Students’ perception of which stage most companies are currently determines the stage chosen as being the most difficult. Awareness of DEI’s importance among top managers is likely the most important and difficult stage. The sustainable stage, where leaders have a continuous improvement mindset, is often identified as the most straightforward stage. (LO: 5, Describe various workplace diversity, equity, and inclusion initiatives, AACSB: Diverse and multicultural work environments) 5-6. Explain how the glass ceiling and pay inequity are outcomes of discriminatory behavior in the workplace. Why are exclusion and incivility on the list of discriminatory behaviors?

These topics can be seen as linked together like a chain. Bias is a tendency or preference toward a particular perspective or ideology. Unchecked, a bias can lead to prejudice, a preconceived belief, opinion, or judgment toward a person or a group of people. Prejudice can lead to stereotyping, which is judging a person on the basis of one’s perception of a group to which he or she belongs. Both prejudice and stereotyping can lead to someone treating others who are members of a particular group unequally, which means less advancement and pay for specific groups. A glass ceiling is a metaphor used to describe an invisible barrier that limits the level to which a woman or a member of another demographic group can advance within the different levels of management within an organization. The idea of a ceiling means something is blocking upward movement, and the idea of glass is that whatever is blocking the way is not

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immediately apparent. Studies show a disparity in pay between men and women doing the same job, which suggests pay along with advancement are outcomes of biases in the organization. Pay inequities often focus on the gender pay gap, but pay disparities between races within organizations usually exist as well.

Exclusion and incivility are on the list of discriminatory behaviors because many overt forms of discrimination have faded. However, an increase in more covert forms of discrimination in organizations, like incivility or exclusion, has been found.

(LO: 4, Discuss the challenges managers face in managing diversity, equity, and inclusion, AACSB: Diverse and multicultural work environments) 5-7. How do mentoring and diversity training support a company’s diversity, equity, and inclusion efforts?

The commitment of top management can be demonstrated through their support for and involvement in mentoring and diversity training. Training is a common compliment to organizations committed to creating diverse, equitable, and inclusive workplaces. However, mentorship is essential as experienced managers have the opportunity to provide advice and guidance to a less-experienced member. Support for DEI efforts is most effective when mentors include women or people of color. These mentors are often best equipped to offer advice to others like themselves. Protégés are also more likely to relate to someone they see as similar to themselves. (LO: 5, Describe various workplace diversity, equity, and inclusion initiatives, AACSB: Diverse and multicultural work environments) 5-8. Describe an employee resource group and why it is helpful to organizations and employees.

An employee resource group (ERG) is an organization's voluntary, employee-led subgroup that shares distinctive qualities, interests, or goals. An ERG is often initiated by employees and sponsored by a senior executive who is connected to the group’s focus. The sponsor helps ensure the ERG’s goals and concerns are forwarded to senior-level decision-makers. ERGs serve as a sounding board for worries among group members, and they also help attract diverse talent to the organization, increase employee engagement, and work well with mentorship programs. (LO: 5, Describe various workplace diversity, equity, and inclusion initiatives, AACSB: Diverse and multicultural work environments)

ETHICS DILEMMA Student answers to these questions will vary.

This dilemma challenges students to think about the ethics of possible discrimination based on employee attributes other than gender, race, ethnic background, and sexual orientation. In this exercise, students are asked to consider the potential discrimination against disabled workers.

Challenge students to put themselves in the management position and consider the ethics of discriminating against a small number of qualified individuals simply because of their disabilities.

Accommodating some disabilities can be seen as rarely needed and overly expensive. The case gives an example of adding a wheelchair lift to a shuttle bus used to transport employees around a large company’s campus.

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5-11. Do large companies have an ethical responsibility to refit shuttle buses or purchase new buses to accommodate workers with physical disabilities? Explain. Do schools and universities where future workers are trained have the same or different ethical responsibilities?

Student answers will vary. One in four adults in the United States has some form of disability, suggesting the need for accommodation is large. The Americans with Disabilities Act prohibits discrimination against an individual with a disability and requires employers to make reasonable accommodations. Hence, their workplaces are accessible to people with physical or mental disabilities and enable them to perform their jobs effectively. Students who feel the purchase is reasonable will feel companies are responsible for accommodating them. With the law’s enactment, individuals with disabilities became a more representative and integral to the US workforce. Because employers highly rate people with disabilities for traits such as dependability and conscientiousness, students report it is in the company’s best interest to make this purchase. See Exhibit 5-5, which shows that disabled persons often perform better in some capacities, and it would create loyalty. Schools and universities are more responsible for offering accommodations as training/education is crucial to attaining employment. Their failure to accommodate would serve as a barrier to the employment of disabled people. Without the necessary education, these individuals would not have the qualifications to apply for jobs at organizations, and by default, organizations would not find a need to make accommodations.

(LO: 3, Explain the different types of diversity found in workplaces, AACSB: Diverse and multicultural work environments) 5-12. What ethical issues might arise in a workplace accommodating jobs for workers with deafness, blindness, or other physical disabilities but not accommodating workers with chronic illnesses like diabetes, Crohn’s disease, and long COVID? As a manager, how might you handle such issues?

Student answers will vary. Managers have a legal responsibility to offer reasonable accommodations according to the Americans with Disabilities Act. Understanding DEI means making equitable and inclusive workplaces for these types of diversity. Managers are and will experience increasing responsibility in this area. First, managers need to recognize that DEI is a continually evolving process, and they may not always be aware of the best ways to accommodate workers. Managers should rely upon employee resource groups (ERGs) to become aware of steps that could be taken to accommodate workers with physical disabilities and chronic illnesses. Clear policies on how to request an accommodation can also be helpful.

In most cases, managers must also lead by example on these issues. (LO: 4, Discuss the challenges managers face in managing diversity, equity, and inclusion, AACSB: Diverse and multicultural work environments)

SKILLS EXERCISE: DEVELOPING YOUR VALUING DIVERSITY SKILL In this exercise, students are asked to work on skills to help them better see the challenges of valuing diversity. The skills are developed by understanding the eight actions managers may take to create a diverse workforce and communicate the importance of diversity to their employees. This exercise highlights the obstacles to motivating and managing employees. To practice this skill, students are given a scenario and asked to manage a restaurant's cooking staff. As the manager, they list issues they might face and suggest how to help the staff work together effectively. Students should be encouraged to review the types of workplace diversity

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shown in Exhibit 5-4 and consider the stages of DEI listed in Exhibit 5-7. Some students may emphasize diversity awareness to resolve problems described in each scenario. While this is a positive step, instructors should ask students to take additional steps. Resolutions where actual behaviors can be taken and observed by others are best. For example, working with the staff and using their feedback to select and eventually complete diversity skill training is a common choice. (LO: 5, Describe various workplace diversity, equity, and inclusion initiatives, AACSB: Diverse and multicultural work environments)

WORKING TOGETHER: TEAM EXERCISE In groups of three to four individuals, students are encouraged to reflect on and then draft a few sentences about the challenges an individual might face in the workforce if they were also in a role reversal situation and a person of color or LGBTQ+. Students should consider the different types of diversity.

After the groups have done their research, they should share their ideas with the rest of the class. After sharing, brainstorm ways managers could improve each situation. LO: 4, Discuss the challenges managers face in managing diversity, equity, and inclusion, AACSB: Diverse and multicultural work environments)

MY TURN TO BE A MANAGER •

Describe your experiences working, learning, or playing sports or music with people from backgrounds different from your own. What challenges have you faced? What have you learned that will help you understand a diverse workplace’s unique set of needs and challenges? (LO: 4, Discuss the challenges managers face in managing diversity, equity, and inclusion, AACSB: Diverse and multicultural work environments)

•

Go to Fair360 (www.fair360.com) and find the latest list of Top 50 Companies for Diversity or its Hall of Fame List. Select three companies from this list. Describe and evaluate what the selected companies are doing right as far as workplace diversity, equity, and inclusion is concerned. (LO: 5, Describe various workplace diversity, equity, and inclusion initiatives, AACSB: Diverse and multicultural work environments)

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Think of times when you may have been treated unfairly because of stereotypical thinking.

What stereotypes were being used? How did you respond to the treatment? (LO: 4, Discuss the challenges managers face in managing diversity, equity, and inclusion, AACSB: Diverse and multicultural work environments)

•

The Job Accommodation Network is a free resource for employers to identify ways to provide work accommodations to allow disabled workers to be productive and hold a wider variety of jobs. Visit www.askjan.org and search the accommodation database to find examples of accommodations for specific disabilities. (LO: 3, Explain the different types of diversity found in workplaces, AACSB: Diverse and multicultural work environments)

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Assume you are designing a mentoring program for an organization. Conduct some research on mentoring programs that currently exist in different organizations and identify

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characteristics of an effective mentoring program. (LO: 5, Describe various workplace diversity, equity, and inclusion initiatives, AACSB: Diverse and multicultural work environments) •

What can you do as a manager to clarify that there is no conflict between promoting diversity and rewarding merit? (LO: 4, Discuss the challenges managers face in managing diversity, equity, and inclusion, AACSB: Diverse and multicultural work environments)

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Take pictures that tell a story or convey a message of inclusion and community. Create a presentation explaining the photos selected. Bring your computer or device to class and share your presentation in small groups during class. Questions to guide the group discussion might include: (1) What inspired you to take this picture? (2) What is being communicated in this picture? (3) How does the photo connect to expectations for feelings of inclusion and community? (4) How does the picture demonstrate the possibility and acceptance of expressions of inclusion at work? (LO: 1, Define workplace diversity, equity, and inclusion and explain why managing it is so important, AACSB: Diverse and multicultural work environments)

•

How would you define the socioeconomic status of the average student in your class 10 years from now? Will the average person be in the middle class and saving for retirement?

How much will they have in a savings account? Will they rely on walking or public transportation to go places? Will they have to miss an important holiday, birthday, or family event because they are working? Will they hire someone to do the tasks they do not want to do (housework, yardwork, car maintenance, etc.) on a regular basis? If they have children, will they wear clothes handed down from a sibling or other family member? Write down your answers and thoughts. Discuss them in a group during class. Be prepared to share your answer in class and discuss what this might mean regarding the diversity within the average student’s community or workplace 10 years in the future. (LO: 3, Explain the different types of diversity found in workplaces, AACSB: Diverse and multicultural work environments)

•

Being a new parent can be a difficult adjustment for anyone to make. However, managing a new parent and welcoming them back to work presents interesting challenges in the workplace. Research how employers and managers can provide a supportive environment to welcome new moms and dads back into the work world. Specifically, suggest how this can be done in an equitable way for other workers who are single, experienced parents, or empty nesters. Summarize your findings and thoughts in a short paper. (LO: 1, Define workplace diversity, equity, and inclusion and explain why managing it is so important, AACSB: Diverse and multicultural work environments)

•

Headlines in the news about business failures related to diversity, equity, and inclusion report poor management as the most frequent culprit. Some consider managers’ power and influence and their biases and distance from the work being done to be a recipe for disaster.

So, should companies just fire all the managers? Will a self-managed and empowered workforce create more diverse, inclusive, and equitable workplaces? Write your thoughts in a short paper and present them in small groups during class. (LO: 4, Discuss the challenges managers face in managing diversity, equity, and inclusion, AACSB: Diverse and multicultural work environments)

•

The Society for Human Resource Managers (SHRM) has podcasts about diversity, equity, and inclusion in the workplace. Some feature interviews, tips for human resource managers,

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or insights valuable to anyone in the workplace. Go to SHRM Podcasts (https://www.shrm.org/hr-today/news/pages/podcasts.aspx) and listen to two or three podcasts. Write a summary of what you heard and present it to the class. (LO: 5, Describe various workplace diversity, equity, and inclusion initiatives, AACSB: Diverse and multicultural work environments)

ANSWERS TO CASE APPLICATION 1 QUESTIONS Student answers to these questions will vary.

Gusto: Making a Difference in Gender Diversity 5-11. What DEI stage does Gusto seem to be in? What is happening, and what should leaders do next?

Gusto appears to be in the awareness stage of the DEI strategy. Julie Lee’s meeting with the co-founder Edward Kim triggers a commitment to DEI concerning hiring more women engineers. Consequently, Gusto changed the wording of job postings and allowed candidates to meet with Julie Lee as a way to be more welcoming to female applicants. Leaders at Gusto still need to gain a broader understanding of DEI. The next step is for top management to take steps to understand Gusto's internal environment better and set future DEI goals. Overall, Julie and Edward have made gender diversity a more significant priority at Gusto. (LO: 5, Describe various workplace diversity initiatives, AACSB: Diverse and multicultural work environments) 5-12. Even though Julie Lee was helpful to Gusto’s gender diversity efforts, what demands does this case illustrate are involved in being the only woman?

Feeling isolated made Julie Lee uncomfortable and could have led to her leaving Gusto. Firms must know how a lack of diversity could create a vicious cycle. The impact of little diversity is a feeling of isolation and turnover among diverse workers, thereby keeping the workforce’s diversity low. The departure of diverse workers ensures that subsequent new hires with diverse backgrounds would feel isolated and willing to leave the organization. (LO: 2, Describe the changing makeup of workplaces in the United States and around the world, AACSB: Diverse and multicultural work environments) 5-13. Now that Gusto has hired more women engineers, what should it do to ensure that they do not leave the company?

One of the best programs that organizations use to help retain minority employees is mentoring.

Top managers at Gusto should encourage mentors to diversify their pool of protégés. Another program Gusto could utilize is Employee Resource Groups. These groups are comprised of employees connected by some common dimension of diversity. (LO: 5, Describe various workplace diversity initiatives, AACSB: Diverse and multicultural work environments) 5-14. Is Gusto on the right path to improve its workforce’s diversity? Explain.

Gusto is on the right path in terms of increasing its female engineering applicants. Yet, Gusto seems to lack an interest in expanding its workforce diversity on a broad scale. Top managers

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will need more training on the types of diversity found in the workplace. Using only the information from this case, Gusto appears to be just beginning the steps necessary to improve and manage a diverse workforce. At this time, training programs, mentoring, and employee resource groups seem to be absent from Gusto. (LO: 5, Describe various workplace diversity initiatives, AACSB: Diverse and multicultural work environments)

ANSWERS TO CASE APPLICATION 2 QUESTIONS Student answers to these questions will vary.

Bring in Diversity….and Then What?

5-17. The benefits of diversity do not happen automatically just because employers hire diverse employees. Companies need to do so much more after they attract diverse talent to come to work for them. What actions has Accenture taken to be more inclusive?

Accenture ensures that employees can openly talk about diversity. Accenture implemented an inclusion initiative framed for all employees and does not focus on just a certain group of employees. Their “Inclusion Starts with I” and “Next Generation Leaders” are part of a leadership development program highlighting that each person is needed to create an inclusive workplace. (LO: 5, Describe various workplace diversity initiatives, AACSB: Diverse and multicultural work environments) 5-16. What are some of the ways that companies can increase the chances that employees from diverse backgrounds want to keep working for them?

Responses to this question will vary. Accenture is an example of how DEI efforts start and are reinforced by the highest levels of management. Openly showing a commitment to DEI and creating an environment where all employees feel welcome are other ways of increasing the chances employees remain loyal. Mentoring and employee resource groups have also been effective employee retention tools at some firms. (LO: 5, Describe various workplace diversity initiatives, AACSB: Diverse and multicultural work environments) 5-19. Why is it important for top leadership to be representative of the rest of the organization from a diversity perspective?

Responses to this question will vary. For many employees, there is little difference between the leaders at the top of an organization and the organization itself. When leaders are committed to diversity, they show it, and employees see their commitment as the organization’s commitment to diversity. Top management has the opportunity to make sure that diversity and inclusion are part of the organization’s purpose, goals, and strategies. They can also ensure diversity is integrated into policies and procedures and that individual performance is measured and rewarded on DEI accomplishments. (LO: 5, Describe various workplace diversity initiatives, AACSB: Diverse and multicultural work environments)

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Chapter 6 Managing in a Global Environment Every organization is affected in some way by the global environment. In this chapter, students will learn what managers need to know about ethnocentric, polycentric, and geocentric attitudes. The history and arguments for and against globalization, types of international organizations, and structures and techniques organizations use as they go international will be presented.

LEARNING OBJECTIVES 1. Define globalization, nationalism, and parochialism; and contrast ethnocentric, polycentric, and geocentric attitudes.

2. Describe the history of globalization.

3. Summarize the case for and against globalization.

4. Explain the different types of international organizations.

5. Describe the structures and techniques organizations use as they go international.

6. Explain the relevance of the political/legal, economic, and cultural environments to global business.

CHAPTER OUTLINE

6.1

CLARIFYING TERMINOLOGY A common vocabulary related to the globalization movement is presented in this section.

A. Globalization refers to a process by which organizations develop influence or operations across international borders.

B. Nationalism refers to patriotic ideals and policies that glorify a country’s values.

C. Parochialism is viewing the world solely through your own perspectives, leading to an inability to recognize differences between people.

Parochialism is an obstacle for many US managers and stems from monolingualism.

Managers might have one of three perspectives or attitudes toward international business: 1.

An ethnocentric attitude is the parochialistic belief that the best work approaches and practices are those of the home country (the country in which the company’s headquarters are located).

2.

A polycentric attitude is the view that the managers in the host country (the foreign country where the organization is doing business) know the best work approaches and practices for running their business.

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A geocentric attitude is a world-oriented view that focuses on using the best approaches and people from around the globe.

To be a successful global manager, an individual needs to be sensitive to differences in national customs and practices.

A BRIEF HISTORY OF GLOBALIZATION Globalization moves in and out of favor. In recent history, globalization began to grow following World War II. The Bretton Woods Conference in 1944 established rules for commercial and financial relations between the United States, Canada, Western Europe, Australia, and Japan. Since that time, a number of agreements and events transpired, including: • The International Monetary Fund (IMF) is an organization of 190 countries that promotes international monetary cooperation and provides member countries with policy advice, temporary loans, and technical assistance to establish and maintain financial stability and strengthen economies.

• The World Bank (1945) is an international financial institution that provides vital financial and technical assistance to countries around the world with the goal of promoting sustainable economic growth, reducing poverty, and improving living standards.

• General Agreement on Tariffs and Trade (GATT) (1948) GATT is an agreement between countries to reduce or eliminate tariffs.

• Organisation for Economic Co-operation and Development (OECD) was formed in 1961. The 38 member nations from developed countries work to stimulate economic growth and world trade through coordinating domestic and international economic policies.

• Association of Southeast Asian Nations (ASEAN) is a trading alliance of Southeast 10 Asian nations with a common goal of accelerating growth.

• World Economic Forum (1974) This organization is a Swiss non-profit foundation that brings world leaders together to discuss issues and find solutions to economic and social issues that are common problems.

• The Fall of the Soviet Union (1991) The Soviet Union officially dissolved in December 1991 and now comprises nine different nations that are now known as the Commonwealth of Independent States. These include Russia, Armenia, Tajikistan, and others.

• Mercosur Trade Agreement (1991) is a trade bloc that includes the member countries Argentina, Brazil, Paraguay, and Uruguay. Bolivia, Chile, Colombia, Ecuador, Guyana, Peru, and Suriname are associate members, receiving tariff reductions when trading with the full members. Associate members do not receive full voting rights or free access to members’ markets.

• The European Union (EU) is a union of 27 European nations created as a unified economic and trade entity. The primary motivation for creating the EU in February 1992 was to allow member nations to better compete with the United States and Japan.

• The North American Free Trade Agreement (NAFTA) (1994) is an agreement among the Mexican, Canadian, and US governments to work toward eliminating trade barriers.

• The World Trade Organization (WTO) was formed in 1995 and evolved from the GATT. The WTO is the only global organization dealing with the rules of trade among nations. The membership consists of 164 countries.

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6.3

Shanghai Cooperation Organization (2003) is an eight-nation cooperative representing half of the world’s population and members have pledged to cooperate on free trade. Members include China, Russia, India, and Pakistan.

Made in China 2025 (2015) was a Chinese government initiative to make China the dominant global player in high-tech manufacturing by using subsidies and other government roles to achieve this goal.

Trans-Pacific Partnership (2016), or the TPP, was a trade agreement involving the US and other Pacific Rim nations, including Japan, Australia, Peru, and Vietnam. The US withdrew support after Trump’s election, so it was not fully implemented.

NAFTA 2.0 or USMCA (2020) is the United States–Mexico–Canada Agreement (USMCA). Its provisions include giving the United States increased access to Canada’s dairy markets, establishing new labor requirements for Mexico, increasing environmental regulations, and updating intellectual property and data trade protections.

COVID-19 PANDEMIC (2020) was a worldwide pandemic highlighting several vulnerabilities of globalization. The public health crisis disrupted supply chains and trade. It also led to travel restrictions and temporary border closures, significantly impacting international trade and mobility.

TRADE AND COOPERATION AGREEMENT (2021) was formed when citizens of the United Kingdom voted in June 2016 to remove themselves from the European Union (EU). Referred to as “Brexit,” The Trade and Cooperation Agreement (TCA) governs the trade relationship between the United Kingdom and EU and covers a wide range of issues including eliminating tariffs on trade.

AFRICAN CONTINENTAL FREE TRADE AREA (AfCFTA) (2021) is the largest free trade area in the world, AfCFTA includes 54 countries and allows tariff-free trade across the African continent.

THE CASE FOR AND AGAINST GLOBALIZATION Throughout the mid-1940s through the early 2000s, most economists supported free trade because it was believed that free trade benefits all countries. Over the last decade, some of the downsides of globalization became apparent.

A. The Win-Win Argument.

The “every country wins” argument is largely based on the law of comparative advantage that maintains countries should focus production on the goods or services they can produce at the lowest opportunity cost and then engage in trade to obtain other nations’ output.

This was the dominant view from the mid-1940s to about 2015.

B. The Downside of Globalization.

The middle class in both North America and Europe, suffering from wage stagnation, began to question globalization. They charged global firms with shipping production to cheaper labor countries in Asia and keeping wages suppressed in the developed nations.

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Considerable evidence supports the position that some sectors, groups, and countries are harmed by free markets and open 55

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6.4

borders. the COVID-19 pandemic highlighted the risks of relying on production and supplies from other countries.

2.

Many Americans feel that they’re at a disadvantage due to open border policies. They feel that they’re losing jobs and are facing security threats Critics of open borders claim that immigrants are taking jobs, holding down wages, are a threat to security, and resist fitting in.

Globalization Today.

Opposition to globalization and the movement toward nationalism and protectionism is louder today than it has been in 80 years.

1.

Globalization is far from dead, but it is changing. Many multinational companies have shifted strategies regarding suppliers to reduce risk and prioritize reliability and diversification.

2.

The evidence is overwhelming that free trade is not the cause of unemployment. Automation was the cause of over 80 percent of the manufacturing job loss in the United States between 2000 and 2010.

3.

Most people believe the benefits of globalization outweigh the costs.

What Does This Mean for Managers?

Globalization is here to stay managers and those that want to be managers must develop the skills needed for global management.

1.

Managers need to develop a geocentric attitude, be flexible, and be willing to work with people from other cultures.

2.

Managers need to gaining international experience and it is very beneficial and speaking another language, such as Spanish or Mandarin, would open doors for your entire career.

3.

Managers that have entrepreneurial interests need to gain an understanding of global markets and the various ways to enter those markets.

DIFFERENT TYPES OF INTERNATIONAL ORGANIZATIONS A. Business has been conducted internationally for many years (e.g., DuPont conducted business in China in 1863, H. J. Heinz has been manufacturing their brands in the United Kingdom since 1905, and Ford established its first overseas sales branch in France in 1908).

Multinational corporations did not become popular until the mid-1960s.

Global organizations can be classified in the following categories: 1.

The term multinational corporation (MNC) is a broad term that refers to any and all types of international companies that maintain operations in multiple countries.

2.

One type of MNC is a multidomestic corporation, which decentralizes management and other decisions to the local country.

3.

Another type of MNC is a global company, which centralizes its management and other decisions in the home country.

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A transnational corporation (TNC), sometimes called a borderless organization, is a type of international company in which artificial geographical barriers are eliminated. As remote 56

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work grows in popularity many companies have found benefits in tapping into a remote and geographically dispersed workforce.

6.5

HOW ORGANIZATIONS GO INTERNATIONAL Organizations often use different approaches when they go international.

There are essentially three stages, illustrated in Exhibit 6-1, that an organization typically progresses through.

1.

Companies that go international may begin by using global sourcing (also called global outsourcing). In this stage of going international, companies purchase materials or labor from around the world, wherever the materials or labor are least expensive.

Beyond the stage of global sourcing, each successive stage to become more international involves more investment and risk.

2.

In the next stage, companies may go international by exporting (making products domestically and selling them abroad) or importing (acquiring products made abroad and selling the products domestically). Both exporting and importing require minimal investment and risk.

3.

In the early stages of going international, managers may also use licensing (giving another organization the right to make or sell its products using its technology or product specifications) or franchising (giving another organization the right to use its name and operating methods).

4.

After an organization has done international business for a period of time, managers may decide to make more of a direct investment in international markets by forming a strategic alliance, which is a partnership between an organization and a foreign company partner(s). In a strategic alliance, partners share resources and knowledge in developing new products or building production facilities.

5.

A joint venture (a specific type of strategic alliance) may be undertaken to allow partners to form a separate, independent organization for some business purpose.

6.

Managers may decide to make a direct investment in a foreign country by establishing a foreign subsidiary, in which a company sets up a separate and independent production facility or office.

Establishing a foreign subsidiary involves the greatest commitment of resources and the most significant risk of all of the stages of going international.

6.6

MANAGING IN A GLOBAL ENVIRONMENT Managing in a global environment entails challenges.

A. The Political/Legal Environment.

The legal-political environment does not have to be unstable or revolutionary to be a challenge to managers. The fact that a country’s political system differs from that of the United States is important to recognize.

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A growing number of countries are passing “Right to Disconnect” laws that protect workers’ right to turn off electronics to help 57

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support work/life balance, which has implications for global companies seeking remote workers.

2.

Labor disputes in other nations can also affect business operations.

3.

According to the Corruption Perceptions Index, a tool that measures public perception of public sector corruption, Denmark, closely followed by Finland and New Zealand, are countries with the least amount of corruption; in contrast, South Sudan, Syria, Somalia, and Venezuela were ranked as having the most corruption.

The Economic Environment.

The economic environment also presents many challenges to foreignbased managers, including fluctuations in currency exchange rates, inflation, and diverse tax policies.

1.

In a free market economy, resources are primarily owned by the private sector.

2.

In a planned economy, all economic decisions are planned by a central government.

The Cultural Environment.

Countries have different cultures, just as organizations do. National culture is the values and attitudes shared by individuals from a specific country that shape their behavior and their beliefs about what is important. See Exhibit 6-2 for a synopsis of Hofstede’s five dimensions of National Culture.

1.

The Global Leadership and Organizational Behavior Effectiveness (GLOBE) research program studies cross-cultural leadership behavior and is an updates of Hofstede’s studies. a.

GLOBE began in 1993 and identified nine dimensions on which national cultures differ: • Power distance: The extent to which a society accepts that power in institutions and organizations is distributed unequally.

• Uncertainty avoidance: A society’s reliance on social norms and procedures to alleviate the unpredictability of future events.

• Assertiveness: The extent to which a society encourages people to be tough, confrontational, assertive, and competitive rather than modest and tender.

• Humane orientation: The degree to which a society encourages and rewards individuals for being fair, altruistic, generous, caring, and kind to others.

• Future orientation: The extent to which a society encourages and rewards future-oriented behaviors such as planning, investing in the future, and delaying gratification.

• Institutional collectivism: The degree to which individuals are encouraged by societal institutions to be integrated into groups within organizations and society.

• Gender differentiation: The extent to which a society maximizes gender role differences as measured by how much status and decision-making responsibilities women have.

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In-group collectivism: The extent to which members of a society take pride in membership in small groups, such as their family and circle of close friends, and the organizations in which they’re employed.

• Performance orientation: The degree to which a society encourages and rewards group members for performance improvement and excellence.

GLOBE confirms Hofstede’s dimensions are still valid.

Applying Cultural Guidelines—Managers need to understand these dimensions and use them to understand the cultures they deal with when working abroad or managing people from other cultures.

ANSWERS TO REVIEW AND DISCUSSION QUESTIONS wer these questions will vary.

6-1. Contrast ethnocentric, polycentric, and geocentric attitudes toward global business.

The ethnocentric, polycentric, and geocentric views vary by the degree to which the holder adheres to the belief that their culture is the best and their willingness to accept best approaches from other cultures. An ethnocentric attitude is the parochialistic belief that the best work approaches and practices are those of the home country (the country in which the company’s headquarters are located). A polycentric attitude is the view that employees in the host country (the foreign country in which the organization is doing business) know the best work approaches and practices for running their business. A geocentric attitude is a world-oriented view that focuses on using the best approaches and people from around the globe. Managers with this type of attitude have a global view and look for the best approaches and people regardless of origin. (LO: 1 Define globalization, nationalism, and parochialism; and contrast ethnocentric, polycentric, and geocentric attitudes, AACSB: Diverse and multicultural work environments) 6-2. How have the political and economic agreements between countries impacted the way companies moved products, offered services, or exchanged money since World War I? Goods and capital were moving unfettered across borders. Improvements in communications and shipping technology made global outsourcing more feasible. And as countries with emerging economies prospered and millions of people moved into the middle class, and new markets opened for richer countries. Hundreds of millions of people worldwide can now enjoy a significant increase in their standards of living.

Meanwhile, consumers benefited from lower prices. The partners of economic agreements experienced tariff-free trade, which boosted trade among the partners and allowed local business growth. Job creation followed as well as more opportunities for foreign investment and international trade. (LO: 2 Describe the history of globalization, AACSB: Diverse and multicultural work environments) 6-3. What arguments are there for placing limits on globalization?

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Critics argue that globalization was the major reason that the middle class in North America and Europe was suffering from wage stagnation. In their argument global companies were believed to be shipping production (and jobs) from countries with high labor costs to developing countries where low wages prevailed. Many Americans, for example, feel that they are at a disadvantage due to open border policies. They feel that they are losing their jobs and are facing security threats. By placing limits on globalization, they also feel open borders resulting from globalization allows immigrants are taking jobs, hold down wages, and are a threat to security. The COVID-19 pandemic strengthened these arguments as it highlighted the additional risk of relying on production and supplies from other countries. (LO: 3 Summarize the case for and against globalization, AACSB: Diverse and multicultural work environments) 6-4. Contrast multinational, multidomestic, global, and transnational organizations.

A multinational corporation (MNC) refers to a broad group of organizations and any type of international company that maintains operations in multiple countries. The types of MNC vary with respect to the degree to which they decentralize decision making across countries in which they operate. A multidomestic corporation is a type of multinational corporation, which decentralizes management and other decisions to the local country.

Another multinational corporation is the global company, which centralizes its management and other decisions in the home country. This type of company takes a worldview of operations, seeking to maximize efficiency by producing goods that have a global appeal. A transnational company eliminates artificial geographical barriers and seeks the best possible arrangement without regard to the country to maximize efficiencies and competitive advantage. (LO: 4 Explain the different types of international organizations., AACSB: Diverse and multicultural work environments) 6-5. What are the managerial implications of a borderless organization?

In a borderless organization, artificial geographic borders do not separate functions, divisions, or activities. The managerial implications of such an organization are that it is infinitely more flexible in its ability to respond to changing marketplace conditions.

However, this type of organization is much more difficult to control. (LO: 5 Describe the structures and techniques organizations use as they go international, AACSB: Diverse and multicultural work environments) 6-6. Describe the different ways organizations can go international.

Management makes its first attempt to go international by using global sourcing, in which companies take advantage of lower costs and minimal risk. Next, managers may go international by exporting products to other countries and/or importing products from other countries. Exporting and importing involve minimal risk and provide more control over the company’s product(s). In licensing (primarily used by manufacturers) and franchising (mainly used by service organizations), management continues to look at ways to enter the global market, and at the same time, avoid investing a lot of capital.

Strategic alliances and joint ventures allow partners to share both the risks and the rewards incurred in business conducted by the partners through the alliance.

Establishing a foreign subsidiary involves the greatest commitment of resources and the greatest amount of risk of all the stages of going international. Companies setting up a foreign subsidiary do not have to share profits with a partner but, at the same time, do 60

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not have a partner who will share the loss if a business enterprise fails. (LO: 5 Describe the structures and techniques organizations use as they go international, AACSB: Diverse and multicultural work environments) 6-7. How might the cultural differences in the GLOBE dimensions affect how managers (a) use work groups, (b) develop goals/plans, (c) reward outstanding employee performance, and (d) deal with employee conflict?

There are multiple ways to address this question. First, students may address each item by referring to one of the nine dimensions presented in the GLOBE model. For example, the use of work groups would be considered more or less favorable by employees if they are high, moderate, or low in institutional collectivism, in-group collectivism, and performance orientation. Answers will vary in explanations related to developing goals/plans, rewarding outstanding employee performance, and dealing with employee conflict. The dimensions of national culture give managers guidance in determining what workers in different countries might prefer or not prefer. These dimensions can show areas where potential problems might surface. Students will see the complexity managers may face as they attempt to use multiple dimensions to address managing in different countries. (LO: 6 Explain the relevance of the political/legal, economic, and cultural environments to global business, AACSB: Diverse and multicultural work environments)

PREPARING FOR: My Career ETHICS DILEMMA Student answers to these questions will vary.

Facial-recognition technology is on the rise as firms and Amazon sold facial recognition technology to law enforcement. Ultimately Amazon chose to stop the sale until state or federal laws were passed to guide managers on how much access to give law enforcement. While many in the US express concerns about the technology, the Chinese government is investing heavily in the technology and uses facial recognition in financial services, real estate, and ride-sharing industries.

6-8. In what situations do you think using facial recognition technology violates people’s privacy?

Answers will vary a lot. Students can find many instances where facial-recognition technology makes life easier, but they struggle to determine what is acceptable and not acceptable in terms of law enforcement. Financial institutions in the private sector may opt to use it for another layer of security if the employee consents. Troubles with this question expand as students consider international companies use of their data or when their data is owned by foreign governments instead of foreign businesses. Many think that when foreign governments use or own their data it violates privacy. (LO: 6 Explain the relevance of the political/legal, economic, and cultural environments to global business, AACSB: Diverse and multicultural work environments)

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6-9. Is it ethical to use facial-recognition technology if you are doing business in a culture where privacy concerns are not raised as much (like China)? Why or why not?

Answers will vary, but many students prefer to apply the same standard as applied to them in countries they are doing business in regardless of that country’s privacy concerns. For example, students in the United States would extent privacy standards to other countries or cultures. (LO: 6 Explain the relevance of the political/legal, economic, and cultural environments to global business, AACSB: Diverse and multicultural work environments) 6-10. Is an international organization like the World Trade Organization in the best position to create rules governing facial recognition technology companies can use?

Answers will vary depending as many students are not that familiar with the World Trade Organization. Depending on their trust in international organizations students will agree or disagree that the World Trade Organization is suited to create these rules. Ultimately, students will agree that eventually rules will need some be put in place, but they may migrate from the national level into regional alliances between nations before universal international agreements can be reached. (LO: 2 Describe the history of globalization, AACSB: Diverse and multicultural work environments) SKILLS EXERCISE: Developing Your Collaboration Skill An important skill for any employee and new manager is collaboration. In this exercise students interview individuals with nationalities different from their own to learn about challenges of collaboration with individuals from different cultures. Learn how they recommend dealing with these challenges and hear advice on how being bilingual and traveling to other countries will improve the students ability to collaborate. (LO: 1 Define globalization, nationalism, and parochialism; and contrast ethnocentric, polycentric, and geocentric attitudes, AACSB: Written and oral communication)

WORKING TOGETHER: TEAM EXERCISE In groups of three to four individuals, students are asked to identify examples of GLOBE dimensions where their home country differs from another country they know about.

Students are encouraged to think about how their previous interactions with individuals from other countries could be interpreted differently on GLOBE dimensions. They should then discuss ways in which everyone could have been made more comfortable in that interaction. After the groups develop their consensus, they should share with the rest of the class. (LO: 6 Explain the relevance of the political/legal, economic, and cultural environments to global business, AACSB: Diverse and multicultural work environments)

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MY TURN TO BE A MANAGER •

Find two current examples of each of the ways that organizations go international. Write a short paper describing what these companies are doing.

(LO: 5 Describe the structures and techniques organizations use as they go international, AACSB: Diverse and multicultural work environments)

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The U.K.-based company Commisceo Global has several cultural awareness “quizzes” on its website, www.commisceo-global.com/resources/quizzes. Go to the website and try two or three of them. Were you surprised at your score?

What does your score tell you about your cultural awareness? (LO: 1 Define globalization, nationalism, and parochialism; and contrast ethnocentric, polycentric, and geocentric attitudes, AACSB: Diverse and multicultural work environments)

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Interview two or three professors or students at your school who are from other countries. Ask them to describe the business environment is like in their home country. Write a short paper describing what you found out. (LO: 1 Define globalization, nationalism, and parochialism; and contrast ethnocentric, polycentric, and geocentric attitudes, AACSB: Diverse and multicultural work environments)

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Sign up for a foreign language course. (LO: 1 Define globalization, nationalism, and parochialism; and contrast ethnocentric, polycentric, and geocentric attitudes, AACSB: Diverse and multicultural work environments)

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Look at the opportunities available to you to travel to other countries, either on personal trips or on school-sponsored trips. Choose one opportunity and research that country’s economic, political/legal, and cultural environments. Write a report summarizing your findings. (LO: 6 Explain the relevance of the political/legal, economic, and cultural environments to global business, AACSB: Diverse and multicultural work environments)

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It is important to understand basic etiquette when traveling internationally for business (e.g., how does one greet someone new, and is a handshake appropriate?). Identify three countries that you would like to travel to and conduct research to learn about business etiquette for those countries. Summarize your findings. (LO: 6 Explain the relevance of the political/legal, economic, and cultural environments to global business , AACSB: Diverse and multicultural work environments)

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Identify a company that operates internationally and has locations in more than two different countries. Explore the “Career” page of the company’s website.

Write a brief report about the career opportunities available at the company and the required qualifications of applicants. (LO: 5 Describe the structures and techniques organizations use as they go international. , AACSB: Diverse and multicultural work environments)

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How could consultants use the GLOBE framework to prepare professionals sent to work in different countries, like Canadian hospital administrators with Doctors Without Borders traveling to Guatemala or Australian project managers with UNICEF sent to work in Egypt? Explain. Will these countries’ political/legal and economic environments affect the advice the consultants give these professionals? (LO: 6 Explain the relevance of the political/legal, economic, and cultural environments to global business, AACSB: Diverse and multicultural work environments)

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What challenges might confront a Mexican manager transferred to the United States to manage a manufacturing plant in Tucson, Arizona? Will these issues be the same for a US manager transferred to Guadalajara? Explain. (LO: 6 Explain the relevance of the political/legal, economic, and cultural environments to global business, polycentric, and geocentric attitudes, AACSB: Diverse and multicultural work environments)

CASE APPLICATION 1 QUESTIONS Student answers to these questions will vary.

Glencore: Conducting Business in Countries Where Others Might Not 6-11. How can Glencore be subject to a new US law when it is based in Switzerland?

Was the United States justified in launching this investigation?

While it is possible that students may have a variety of reactions to this question, it is probable that the common reaction is that Glencore crossed the line and committed a serious infraction by violating provisions of the FCPA by making payments to Gertler to gain mine access in the Congo. While the practice is legal and acceptable in some cultures, it is not acceptable in the United States and, because of the FCPA, it is illegal to engage in outside of the country. Since Glencore sells cobalt to the US, the US is justified in launching the investigation according to the FCPA. Bribery stifles competition and should be prohibited. (LO: 6 Explain the relevance of the political/legal, economic, and cultural environments to global business, AACSB: Diverse and multicultural work environments) 6-12. Some think that Glencore should change its business practices because of this corruption investigation. What if there is no other way to get access to resources without brushing up against corruption?

Many will believe Glencore will want to continue selling cobalt to the US, so it will find other ways to obtain the mineral. If there is no other way to get access to the resources Glencore may call upon the United States and other nations to apply sanction on the Congolese government until the country eliminates bribes and other forms of corruption in the mining industry. Again, there is no one correct answer to this question. (LO: 6 Explain the relevance of the political/legal, economic, and cultural environments to global business, AACSB: Diverse and multicultural work environments) 64

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6-13. Can the ends (providing a much-needed mineral like cobalt) ever justify the means (corrupt practices)? If so, when?

Answers will vary. In cases where bribery and price manipulation are part of what it means to do business in an international market, businesses will ultimately seek substitutes or different partners that are easier to do business with. (LO: 6 Explain the relevance of the political/legal, economic, and cultural environments to global business, AACSB: Diverse and multicultural work environments) 6-14. What are other examples of international companies that have been linked to corruption? What defense did they use to justify their practices?

Have the students conduct an Internet search to get current examples. The following website has a list of some recent cases: https://www.sec.gov/spotlight/fcpa/fcpacases.shtml. (LO: 6 Explain the relevance of the political/legal, economic, and cultural environments to global business, AACSB: Diverse and multicultural work environments)

CASE APPLICATON 2 QUESTIONS Student answers to these questions will vary.

Lululemon Power of Three × 2 Growth Strategy 6-15. Is Lululemon a multinational, multidomestic, global, and transnational organization?

Lululemon is a global company because it has a foothold in multiple countries, but the offerings and processes are consistent in each country. For example, Lululemon sets up shops in different countries and the offerings are the same in each market. The company uses the same fabrics and manufacturing processes, regardless of local culture.

Lululemon does not adapt to local norms, but rather, uses a standardized business model in each country. While their product offering remains consistent the messaging may be adapted to work within the cultural norms. (LO: 4 Explain the different types of international organizations, AACSB: Diverse and multicultural work environments) 6-16. What are the strengths and weaknesses of how Lululemon does business globally?

Lululemon does not have manufacturing facilities of its own and intends to continue sourcing fabrics for its apparel from dozens of suppliers from several countries around the world. Problems with suppliers, designing products internally, and using third-party inspectors to ensure manufacturers meet rigorous quality standards. However, it does not make long-term contracts with suppliers or manufacturers of its products. (LO: 5 Describe the structures and techniques organizations use as they go international, AACSB: Diverse and multicultural work environments) 6-17. What external environmental forces are affecting Lululemon’s sourcing and manufacturing? What forces affect the first store opening in a new market or country?

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Lululemon’s sourcing and manufacturing are subject to political/legal and economic forces to the largest degree. Because both the sourcing and manufacturing occur in multiple locations managers at Lululemon will need a familiarity with processes and economics in different countries. The cultural environment is relevant in terms of doing business with the suppliers and manufacturers, but at this time the cultural differences related to selling products in these same locations is not an issue. Lululemon likely benefits from a long history of other clothing retailers using similar suppliers and manufacturers. As a result, managers with experience doing this type of business at Lululemon and at the suppliers and manufactures are common and available. Economic issues managers need to understand include currency exchange rates, inflation rates, and tax policies. Profits can vary dramatically, depending on the strength of Lululemon’s home currency and the currencies of the countries in which it operates. For instance, a rise in the value of the yen against the Canadian dollar reduces the profits of Lululemon when it converts yen into Canadian dollars.

The political/legal, economic, and cultural environment will affect the fist store opening in a new market. These are particularly challenging when the new market is also in a new country. Legal, political, and economic differences among countries are fairly obvious.

For example, the Japanese manager who works in the United States or their US counterpart who works in Japan can get information about laws or tax policies without too much effort. Information about cultural differences can be more difficult as it can be difficult for natives to explain their country’s unique cultural characteristics to someone else. (LO: 6 Explain the relevance of the political/legal, economic, and cultural environments to global business, AACSB: Diverse and multicultural work environments) 6-28. What do you think Lululemon might need to do better to expand rapidly in the global marketplace?

Global sourcing may be the first step in going international. To expand rapidly requires more investment. Lululemon might consider using licensing or franchising. This will allow another organization to quickly get products to the market in return for a lump-sum payment or a fee usually based on sales. Franchising is another option, but it is primarily used by service organizations. If Lululemon invests a large sum in international markets, managers may decide to make a direct foreign investment by forming strategic alliances or joint ventures. The partnership between Lululemon and foreign-company partners would allow them to both share resources and knowledge to more quickly develop new products, get products to new markets, or building production facilities. These partners can speed up the process adjusting to the political/legal, economic, and cultural environmental challenges associated with doing business in a new market. (LO: 5 Describe the structures and techniques organizations use as they go international, AACSB: Diverse and multicultural work environments)

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Chapter 7 Managing Social Responsibility and Ethics How important is it for organizations and managers to be socially responsible and ethical? In this chapter, students learn what it means to be socially responsible and ethical and what role managers play in both. Focus on the following learning objectives as you read and study this chapter.

LEARNING OBJECTIVES 1. Discuss what it means to be socially responsible and what factors influence that decision.

2. Explain green management and how organizations can go green.

3. Describe approaches companies can take to evaluate and report on social responsibility and sustainability efforts.

4. Discuss the factors that lead to ethical and unethical behavior.

5. Describe management’s role in encouraging ethical behavior.

CHAPTER OUTLINE INTRODUCTION This chapter discusses social responsibility and managerial ethics and their effect on managerial decision making. Both social responsibility and ethics are responses to a changing environment and are influenced by organizational culture.

7.1

WHAT IS SOCIAL RESPONSIBILITY? Managers regularly face decisions that have dimensions of social responsibility.

Examples include employee relations, philanthropy, pricing, resource conservation, product quality and safety, and doing business in countries that violate human rights.

A. Two Opposing Views. There are two opposing views of social responsibility.

1.

The classical View is that management’s only social responsibility is to maximizing profits. Economist and Nobel laureate Milton Friedman is the most outspoken advocate of this view. Friedman argues that managers’ primary responsibility is to operate the business in the stockholders' best interests—the organization's true owners.

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The socioeconomic View is the view that management’s social responsibility goes beyond the making of profits, to include protecting and improving society’s welfare. This view purports that corporations are not independent entities responsible only to stockholders.

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Stakeholder Capitalism is the growing movement among corporate leaders to shift focus from shareholders to stakeholders. Corporate leaders and others advocating for stakeholder capitalism suggest that companies should focus on all stakeholders, which engages more of the 79

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B.

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7.2

socioeconomic view of social responsibility. Stakeholders include employees, vendors, community members, and the environment. See Exhibit 7-1 summarizing the major arguments for and against businesses assuming social responsibilities.

From Obligations to Responsiveness to Responsibility. Social obligation occurs when a firm engages in social actions because of its obligation to meet certain economic and legal responsibilities. Social responsiveness is seen when a firm engages in social actions in response to some popular social need.

Social responsibility is a business’s intention, beyond its legal and economic obligations, to do the right things and act in ways that are good for society.

Exhibit 7-2 shows the differences between social responsibility and social responsiveness.

Social Responsibility and Economic Performance. How do socially responsible activities affect a company’s economic performance? Exhibit 7-1 details the arguments for and against social responsibility. A majority of studies have found a positive relationship between social involvement and economic performance, but some caution in this regard is necessary because of methodological questions associated with the measurement of social responsibility and economic performance. A recent meta-analysis of 53 studies encompassing 16,000 firms found overwhelming support for the argument that social responsibility and financial performance are linked. There is little evidence that social responsibility can hurt performance.

Corporate Philanthropy. Corporate philanthropy can be an effective way for companies to demonstrate a commitment to society. There is evidence that philanthropy is good for employee morale. It can be a source of pride and increase a company’s ability to attract and recruit qualified staff.

GREEN MANAGEMENT AND ENVIRONMENTAL SUSTAINABILITY Many managers are considering the impact of their organization on the natural environment. Nike Inc. has launched an app called Making, which allows its design engineers to see the environmental effects of their material choices on water, energy and waste, and chemistry. Fairmont Hotel’s use of rooftop beehives to help dwindling honeybee populations is also generating a lot of buzz. These companies are practicing green management, which considers the company’s impact on the natural environment.

A. How Organizations Go Green. Approaches include the legal (or light green) approach, the market approach, the stakeholder approach, and the activist approach. See Exhibit 7-3 for a continuum of green approaches.

7.3 REPORTING SOCIAL RESPONSIBILITY AND SUSTAINABILITY A. ESG Reporting. Environmental, social, and governance (ESG) is a reporting tool for investors to evaluate companies. In 2020 the World Economic Forum proposed universal ESG reporting focusing on four pillars. The pillar of “people” reflects the treatment of employees, the “planet” pillar focuses on environmental impacts, “prosperity” addresses the impact on the financial well-being of the community, and “principles of governance” reflects purpose, strategy, and accountability.

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Global Reporting Initiative suggests that as organizations become “greener,” they report their commitment to being green in several ways, including fulfilling guidelines issued by the Global Reporting Initiative (GRI).

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ISO 9000 is another way organizations show their green commitment by meeting ISO 14000 standards.

United Nations Sustainable Development Goals (SDGs) established by the United Nations (UN) in 2015, set forth a plan of action for countries worldwide to address societal and environmental concerns by 2030. The UN noted that the private sector can also have an impact, and many businesses look to the SDGs to prioritize sustainability efforts.

Global 100 is a list of the 100 most sustainable corporations in the world.

A company must display a superior ability to effectively manage environmental and social factors to be on the list.

MANAGERS AND ETHICAL BEHAVIOR The term ethics refers to principles, values, and beliefs that define what is right and wrong behavior. This section examines the ethical dimensions of managerial decision making. Exhibit 7-4 contains some tests a manager can use to help make a decision when facing an ethical dilemma. And Exhibit 7-5 shows some of the factors that determine ethical and unethical behavior.

A. Factors That Determine Ethical and Unethical Behavior.

1.

Stage of Moral Development. Research confirms three levels of moral development (see Exhibit 6-6). Each level has two stages. a.

The first level is called preconventional. At this level, the individual’s choice between right and wrong is based on the personal consequences involved. b.

At the second stage, which is labeled conventional, moral values reside in maintaining expected standards and living up to the expectations of others. c.

At the third level—the principled level—the individual makes a clear effort to define moral principles apart from the authority of the groups to which the person belongs. d.

Research on the stages of moral development indicates that people proceed sequentially through the six stages of these three levels, with no guarantee of continued development at any stage.

The majority of adults are at Stage 4. The higher the stage an employee reaches, the more likely that he or she will behave ethically.

2.

Individual Characteristics. A person joins an organization with a relatively entrenched set of values. a.

Values are basic convictions about what is right and wrong.

Values are broad and cover a wide variety of issues. b.

Ego strength is a personality measure of the strength of a person’s convictions. Individuals who score high on ego strength are likely to resist impulses to act unethically and will likely do what they themselves think is right. c.

Locus of control is a personality attribute that measures the degree to which people believe they control their own fate.

Individuals with an internal locus of control think that they control their destiny, while persons with an external locus of control are less likely to take personal responsibility for the consequences of their behavior and are more likely to rely on external forces.

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Externals believe that what happens to them is due to luck or chance.

Structural Variables. A third factor influencing managerial ethics is structural variables. The existence of structural variables such as formal rules and regulations, job descriptions, written codes of ethics, performance appraisal systems, and reward systems can strongly influence ethical behavior.

Organization’s Culture. The content and strength of an organization’s culture influences ethical behavior. a.

An organizational culture most likely to encourage high ethical standards is one that is high in risk tolerance, control, and conflict tolerance. b.

A strong culture exerts more influence on managers than a weak one does. c.

However, in organizations with weak cultures, work groups and departmental standards strongly influence ethical behavior.

Issue Intensity. Finally, issue intensity influences ethical behavior. Not all issues are strongly held by everyone. Exhibit 7-7 shows six characteristics that determine issue intensity. When an ethical issue is important, employees are more likely to behave ethically.

Ethics in an International Context. Are ethical standards universal? Hardly!

Social and cultural differences between countries are environmental factors that play an influential role in determining ethical and unethical behavior.

1.

The Foreign Corrupt Practices Act (FCPA) makes some actions, such as bribing foreign officials, illegal. However, many issues are not black and white. In 2017, the US Department of Justice brought 13 FCPA enforcement actions and collected $1.13 billion in fines.

2.

Exhibit 7-8 lists the ten principles of the Global Compact. At the 1999 World Economic Forum, the United Nations Secretary-General challenged world business leaders to “embrace and enact” this particular document that gives guidelines for doing business globally in the areas of human rights, labor, and anti-corruption.

Artificial Intelligence and Ethics. Bias can find its way into AI machine-learning models regardless of the company's intent, and if not controlled, AI can amplify biases. If the historical data on past successful applicants include more men than women, the AI could develop a bias against women. Although some experts suggest programming ethics into the AI algorithms, the reality is that ethics is nuanced and often requires human insights.

ENCOURAGING ETHICAL BEHAVIOR Organizations can take a number of actions to cultivate ethical behavior among members. In this section of the text, eight suggestions are explored: A. Employee Selection. The selection process for bringing new employees into organizations should be viewed as an opportunity to learn about an individual’s level of moral development, personal values, ego strength, and locus of control.

B. Codes of Ethics. A code of ethics is a formal statement of an organization’s primary values and the ethical rules it expects employees to follow. In addition, decision rules can be developed to guide managers in handling ethical dilemmas in decision making.

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Leadership at the Top. Top management’s leadership and commitment to ethical behavior are extremely important since the cultural tone of an organization is established by its top managers.

Job Goals and Performance Appraisal. Employees’ job goals should be tangible and realistic because clear and realistic goals reduce ambiguity and motivate rather than punish. Job goals are usually a key issue in the performance appraisal process. If an organization wants employees to uphold high ethical standards, this dimension must be included in the appraisal process.

Performance appraisals should include this dimension, rather than focusing solely on economic outcomes.

Ethics Training. Ethics training teaches ethical problem solving and presents simulations of ethical situations that could arise. At the least, ethics training should increase awareness of ethical issues.

Ethics Officer of Committee. Many organizations hire an ethics officer to lead ethics programs and also address ethical issues as they arise. An ethics officer can create programs or initiatives that address the ethical challenges specific to a company. In an organization with more complex challenges, an ethics committee with a variety of expertise might be more useful.

Protecting Whistle-Blowers. Whistle-blowing is defined as an act of an individual within an organization who discloses information to report and correct corruption.

1.

Management commitment. Above all, managers must set an ethical example by demonstrating a commitment to addressing employee concerns about potential violations of the law.

2.

Compliance concern response system. Managers need to establish procedures to enable employees to confidentially report concerns and ensure a fair and effective resolution.

3.

Anti-retaliation response system. Firms should designate clear reporting channels for concerns and guarantee timely responses.

4.

Anti-retaliation training. All employees, including management, need training to understand the law and their rights and responsibilities with regard to whistle-blowers.

5.

Program oversight. Firms need to develop and implement rigorous monitoring programs and conduct independent audits to ensure compliance.

ANSWERS TO REVIEW AND DISCUSSION QUESTIONS Student answers to these questions will vary.

6-1. Differentiate the business practices related to social responsiveness, social responsibility, and social obligation.

These terms differ by the degree to which the organization is willing to go past what is legally required, engage in more altruistic behavior, and serve the public good. Social obligation occurs when a firm engages in social actions because of its obligation to meet certain economic and legal responsibilities. Social responsiveness is seen when a firm engages in social actions in response to some popular social need. Social responsibility is a business’s 83

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intention, beyond its legal and economic obligations, to do the right things and act in ways that are good for society. Business practices like promoting volunteering at not-for-profit organizations in the community, making changes to processes and packaging that benefit the environment, engaging in ethical labor practices, and engaging in charitable giving indicate social responsibility efforts. Engaging in these practices due to pressure from customers is representative of a social responsiveness orientation. For example, stopping animal testing after a PETA protest at a company’s headquarters would be a business practice that is social responsiveness. Businesses that change business practices only after changes in legislation or government rules or regulations require them to do so practice social obligation. (LO: 1, Discuss what it means to be socially responsible and what factors influence that decision, AACSB: Ethical understanding and reasoning) 6-2. Does social responsibility mean something different to your employee behavior than your behavior as a manager? Do you think a business can be socially responsible when its employees and managers are not? Explain.

Students’ answers to this question will vary. Their responses should indicate an understanding that the view and obligation felt by the organization direct the behaviors of employees and managers within the organization. When an organization pursues a social obligation, its employees and managers will engage in behaviors associated with social goals that only meet basic economic and legal standards. Employees and managers in an organization with a responsiveness or responsibility obligation will engage in a wider variety of behaviors as their goals are to exceed those required by basic economic and legal standards. Employees and managers in socially responsible organizations will go beyond customers' demands. They will be more innovative where in terms of ethics and sustainability. They also gauge success by using a long-term view. Corporate philanthropy and environmental, social, and governance reporting will be the responsibility of managers in organizations. (LO: 3, Describe approaches companies can take to evaluate and report on social responsibility and sustainability efforts., AACSB: Ethical understanding and reasoning) 6-3. Compare the market, stakeholder, and activist approaches to green management. Why would a company choose one approach instead of the other?

In the market approach, managers and the organization respond to customers' environmental preferences. Whatever customers demand in terms of environmentally friendly products will be what the organization provides. In the stakeholder approach, an organization works to meet the environmental demands of multiple stakeholders, such as employees, suppliers, or the community. If an organization pursues an activist (or dark green) approach, it seeks ways to protect the earth’s natural resources. The activist approach reflects the highest environmental sensitivity and illustrates social responsibility. (LO: 2, Explain green management and how organizations can go green, AACSB: Ethical understanding and reasoning) 6-4. Describe an approach companies should use to evaluate and report on their social responsibility and sustainability efforts.

Companies can utilize environmental, social, and governance reporting to evaluate and share their sustainability efforts. The Global Reporting Initiative, ISO 14000, posting progress toward the United Nations Sustainable Development Goals, and making the Global 100 list are other ways companies can evaluate and report their social responsibility and sustainability efforts.

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(LO: 3, Describe approaches companies can take to evaluate and report on social responsibility and sustainability efforts, AACSB: Ethical understanding and reasoning) 6-5. What factors influence whether an employee behaves ethically or unethically? Explain the relevant factors.

This issue is addressed in Section 7.3 and Exhibit 7-4. Complex interactions influence whether a person acts ethically or unethically when faced with an ethical dilemma. Students may focus on all eight factors or choose those that they see as more pertinent. For example, the Foreign Corrupt Practices Act (FCPA) makes it illegal for a company to knowingly corrupt a foreign official. People who lack a strong moral sense are much less likely to do the wrong things if they are constrained by rules, policies, job descriptions, or strong cultural norms that frown on such behaviors. Conversely, very moral people can be corrupted by an organizational structure and culture that permits or encourages unethical practices. (LO: 3, Discuss the factors that lead to ethical and unethical behavior, AACSB: Ethical understanding and reasoning) 6-6. Review the United Nations principles for doing business globally (see Exhibit 7-8). Identify and describe the two most important principles in your opinion.

The 10 principles of the United Nations Global Compact are organized into the categories of human rights, labor standards, environment, and anti-corruption. Because students are often more familiar with human rights and the environment, they describe principles from these categories as most important. (LO: 3, Describe approaches companies can take to evaluate and report on social responsibility and sustainability efforts., AACSB: Ethical understanding and reasoning) 6-7. How can managers encourage ethical behavior in the workplace?

Managers can do several things to encourage ethical behaviors in the workplace. For instance, hire employees with high ethical standards, establish codes of ethics, and lead by example.

Employee performance appraisals emphasizing the end and the means by which work is accomplished are more likely to encourage ethical behaviors. The overall evidence is positive toward the benefits of ethics training. Behavior tends to improve when training is combined with a code of ethics, top-management role models, accountability policies, and regular ethics audits.

Ethical individuals are likely to have a strong values system that they use to distinguish right from wrong. Ethical persons will probably be in Stages 4, 5, or 6 of moral development. These individuals will likely have strong convictions; that is, their ego strength will be high. This person will probably have an internal locus of control. Ethical managers make decisions and engage in work activities that support their values. These managers probably challenge and teach their employees to challenge what they perceive as ethically questionable decisions or actions. If an organization wants its managers to uphold high ethical standards, ethics must be included in its employee performance appraisal process. (LO: 4, Discuss the factors that lead to ethical and unethical behavior, AACSB: Ethical understanding and reasoning) 6-8. Do you think promoting social responsibility through social media shows that a company is mostly concerned with enhancing its reputation rather than being ethical? Why or why not?

Student answers will vary. Some might believe that altruistic motives represent an organization with social responsibility goals. Those with a more cynical perspective tend to report these posts to represent an organization with a social responsiveness orientation. Those with a social 85

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responsibility orientation may feel that social media posting is part of the ethical obligation to encourage others to follow suit. (LO: 4, Describe management’s role in encouraging ethical behavior, AACSB: Ethical understanding and reasoning) 7-9. Do you think businesses have a responsibility to help employees balance their work demands with their family and personal commitments? Why or Why not?

Student answers will vary. Some might believe that managers answering questions from Exhibit 7-4 would help managers see it is their ethical responsibility to help employees balance their work demands with family and personal commitments. Some report the family and front page/social media tests as relevant. Because ethical decision making is impacted to a large degree by individual and situational characteristics, those students with an affinity for the social responsiveness obligation and activist approach to going green will be more likely to see helping employees in this way as a business responsibility. Leading at the top and balancing job goals for employees would be ways to fulfill this responsibility. (LO: 5, Describe management’s role in encouraging ethical behavior, AACSB: Ethical understanding and reasoning)

ETHICS DILEMMA Student answers to these questions will vary.

Nearly everyone has experienced a situation when a co-worker or colleague has taken credit for work they didn’t do or ideas they didn’t create. Are these actions innocent or deliberate? When, if ever, is it okay to take credit for work you didn’t do?

7-10. What are two possible reasons others take credit for your work? Are either of these reasons justifiable? Why or why not?

Possible answer: Exhibit 7-6 lists factors determining unethical and ethical behavior. Generally, someone steals credit because it has happened to them, they perceive there is no penalty for stealing credit, or they are incentivized in some way to do so. (LO: 4, Discuss the factors that lead to ethical and unethical behavior., AACSB: Ethical understanding and reasoning) 7-11. Do you think those who take credit for your work know how to so is wrong?

If the thief were to refer to Exhibit 7-4 and apply one of those decision tests, they would have the same result—taking undeserved credit is wrong. Most students will believe the thief knows it is wrong and have justified taking undeserved credit as okay in their minds in some way. These individuals are probably in the preconventional stage of moral development shown in Exhibit 77. It is also possible they know it is wrong, and they are emulating the behaviors of other leaders in the organization. As a result, the thief does as others demonstrated should be done. (LO: 4, Discuss the factors that lead to ethical and unethical behavior, AACSB: Ethical understanding and reasoning) 7-12. How would you respond to your coworker or boss taking all the credit for your work?

Explain.

Most students would refer to their organization's code of ethics or leaders at the top for guidance on dealing with the situation. Few would approach the thief and request a meeting 86

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where they could present evidence that the work was theirs. A small but non-trivial number of respondents will suggest doing nothing at the moment and avoid working with the individual in the future or looking for another job assignment/organization to work for. (LO: 4, Discuss the factors that lead to ethical and unethical behavior, AACSB: Ethical understanding and reasoning)

SKILLS EXERCISE: Developing Your Trust Building Skill In this exercise, students are asked to work on their trust skills related to ethical employee behavior. Students are given eight steps in practicing trust while working on a team project.

Students will list behaviors for the beginning, middle, and end of the project that they are willing to commit to during the team project to build or maintain trust with the different team members.

(LO: 5, Describe management’s role in encouraging ethical behavior, AACSB: Ethical understanding and reasoning)

WORKING TOGETHER: TEAM EXERCISE Students are asked to identify a company they are familiar with and reflect on the socially responsible behavior of the company.

Then, after dividing into groups of three or four, students are asked to share their reflections with each other and compare and discuss the socially responsible actions of their companies.

Students are asked to address how the actions benefit the company and whether there are steps each company could take to become more socially responsible. (LO: 1, Discuss what it means to be socially responsible and what factors influence that decision, AACSB: Ethical understanding and reasoning)

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MY TURN TO BE A MANAGER •

Go to the Global Reporting Initiative Website, www.globalreporting.org, and choose three businesses from the list of organizations that have filed reports. Look at those reports and describe/evaluate what’s in them. In addition, identify the stakeholders that might be affected and how they might be affected by the company’s actions. (LO: 5, Describe management’s role in encouraging ethical behavior, AACSB: Ethical understanding and reasoning)

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Identify three companies that are known for being socially responsible. List and compare the types of socially responsible behavior that each company engages in. (LO: 2, Explain green management and how organizations can go green., AACSB: Ethical understanding and reasoning)

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Find a list of companies with the lowest environmental, social, and governance (ESG) scores. Do you recognize any of the companies with the lowest scores? Are you surprised by any of the company names on the list? Are there some simple steps the companies can take to raise their scores quickly? (LO: 3, Describe approaches companies can take to evaluate and report on social responsibility and sustainability efforts, AACSB: Ethical understanding and reasoning)

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Research careers in sustainability. Visit the Occupational Information Network (O*Net) at www.onetcenter.org and search for careers using the terms “sustainability” or “green management.” Create a list of the types of jobs or careers you can pursue. Identify the skills and abilities that are required for a career in sustainability. (LO: 2, Explain green management and how organizations can go green., AACSB: Ethical understanding and reasoning)

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Find three different examples of organizational codes of ethics. Compare and contrast the examples. Using the examples of codes of ethics you found, create what you feel would be an appropriate and effective organizational code of ethics. With this information as inspiration, create your own personal code of ethics to use as a guide to ethical dilemmas. (LO: 5, Describe management’s role in encouraging ethical behavior, AACSB: Ethical understanding and reasoning)

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Over the course of two weeks, see what ethical “dilemmas” you observe. These could be ones you face personally, or they could be ones that others (friends, colleagues, other students talking in the hallway or before class, and so forth) face. Write these dilemmas down and think about what you might do if faced with each dilemma. (LO: 3, Discuss the factors that lead to ethical and unethical behavior., AACSB: Ethical understanding and reasoning)

•

Interview a manager and professor about how employees should be encouraged to be ethical. Now, ask an artificial intelligence (AI) chatbot the same question. Write down the similarities and differences between all of the comments. Discuss how these ideas might help you be a better manager. (LO: 5, Describe management’s role in encouraging ethical behavior, AACSB: Ethical understanding and reasoning) 88

.

ANSWERS TO CASE APPLICATION 1 QUESTIONS Student answers to these questions will vary.

Chobani: A Different Kind of Yogurt Company 6-13. Is Chobani a better example of social responsibility or social responsiveness? Provide reasons why.

It is a better example of social responsibility since Chobani instituted socially responsible practices without pressure or criticism from stakeholders. The changes were not made in response to societal changes. (LO: 1, Discuss what it means to be socially responsible and what factors influence that decision, AACSB: Ethical understanding and reasoning) 6-13. What actions has Chobani taken that illustrate the socioeconomic view of social responsibility? What ways (if any) could Chobani expand its efforts logically into corporate philanthropy?

Answers will vary, but persuading suppliers to hire refugees, giving six-week parental leave for both mothers and fathers, paying workers double the federal minimum wage, and granting employees ownership in Chobani make their goals consistent with the view of social responsibility. Corporate philanthropy could create its own foundation to give grants to suppliers and other stakeholders willing to support social causes related to Chobani’s values. (LO: 1, Discuss what it means to be socially responsible and what factors influence that decision, AACSB: Ethical understanding and reasoning) 6-14. Which of the arguments for and against social responsibility apply to Chobani (see Exhibit 7-1)?

Answers will vary, but Chobani is a socially responsible firm since it hires workers from groups with traditionally high unemployment rates. The firm has an excellent public image and makes contributions to charities. While it is difficult to tell, these actions may cost the firm money and dilute its purpose. (LO: 1, Discuss what it means to be socially responsible and what factors influence that decision, AACSB: Ethical understanding and reasoning) 6-15. Do you think Chobani’s approaches to business would attract customers? Why or why not?

Answers will vary, but most will hope the consumer will cast their dollar votes for firms that engage in socially responsible behavior over firms that do not. (LO: 1, Discuss what it means to be socially responsible and what factors influence that decision, AACSB: Ethical understanding and reasoning)

ANSWERS TO CASE APPLICATION 2 QUESTIONS

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.

Student answers to these questions will vary.

Every Kid Fed: Addressing Childhood Hunger Through Social Entrepreneurship 7-17. What barriers did Shanay confront in creating Every Kid Fed? How did she overcome them?

Shanay found many were supportive of the idea of creating a food pantry. The lack of time, money, and staff were the main obstacles. (LO: 1, Discuss what it means to be socially responsible and what factors influence that decision.)

7-18. You read about one graduate student making a difference by being socially responsible.

With Every Kid Fed as an example, how important is a partnership with companies for to individuals being socially responsible?

Answers will vary. Shanay confronted a lack of resources and the time needed to acquire them. She used creative problem solving to circumvent the traditional grant writing process and gain access to funds. Many will see the partnership with companies as a way to expand the student effort, but individuals can still be socially responsible on a small scale without a corporate partner. (LO: 2, Explain green management and how organizations can go green., AACSB: Ethical understanding and reasoning) 6-18. Building on the example of Shanay Thompson, what personal qualities and behaviors does it take to be socially responsible?

Answers will vary. Passion, energy, creativity, and hard work are all needed. (LO: 4, Discuss the factors that lead to ethical and unethical behavior., AACSB: Ethical understanding and reasoning) 6-19. Provide examples of individuals leading socially responsible activities in your community.

Have these individuals partnered with corporations? Why or why not?

Tacos for Life, EarthEnable, Grameen Bank, and Seventh Generation are a few examples. (LO: 1, Discuss what it means to be socially responsible and what factors influence that decision., AACSB: Ethical understanding and reasoning)

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Chapter 8 Foundations of Planning In this chapter, students study the first of the management functions: planning. Planning is important because it establishes what an organization is doing. All managers need to understand the importance and the process of planning so they can help accomplish their organization's goals. Managers set goals as well as how they establish plans.

LEARNING OBJECTIVES 1.

2.

3.

4.

5.

Define the nature and purposes of planning.

Classify the types of plans organizations might use.

Identify the key contingency factors in planning.

Compare and contrast approaches to objective setting.

Discuss contemporary issues in planning.

CHAPTER OUTLINE INTRODUCTION Planning is one of the four functions of management. Fundamental information about managerial planning is presented in this chapter; the text discusses the nature and purposes of planning, strategies for effective planning, and contemporary planning issues.

8.1

THE WHAT AND WHY OF PLANNING A. What Is Planning? Planning involves defining the organization’s goals, establishing an overall strategy for achieving these goals and developing plans for organizational work activities. As used in this chapter, the term planning refers to formal planning.

B. Why Do Managers Plan? Planning serves several significant purposes.

1.

Planning gives direction to managers and nonmanagers of an organization.

2.

Planning reduces uncertainty.

3.

Planning minimizes waste and redundancy.

4.

Planning establishes the goals or standards used in controlling.

C. Planning and Performance. Although organizations that use formal planning do not always outperform those that do not plan, most studies show positive relationships between planning and performance.

1.

Effective planning and implementation play a greater part in high performance than does the amount of planning done.

2.

Studies have shown that when formal planning has not led to higher performance, the external environment is often the reason.

8.2

TYPES OF PLANS

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Planning is often called the primary management function because it establishes the basis for all other functions. Planning involves two important elements: goals and plans. Plans are documents that outline how goals are going to be met. They can be described by their breadth, time frame, specificity, and frequency of use (see Exhibit 8-1).

A. Strategic Versus Operational Plans. Breadth: Strategic versus operational plans. Strategic plans (long-term plans) are plans that apply to the entire organization, establish the organization’s overall goals, and seek to position the organization in terms of its environment. Operational plans (short-term plans) are plans that specify the details of how the overall goals are to be achieved.

B. Short-Term Versus Long-Term Plans. Time frame: Short-term versus long-term plans. Short-term plans are plans that cover one year or less.

Intermediate-term plans cover from one to five years, and long-term plans are plans with a time frame beyond five years.

C. Specific Versus Directional Plans. Specificity: Specific versus directional plans. Specific plans are plans that are clearly defined and leave no room for interpretation. Directional plans are flexible plans that set out general guidelines. Exhibit 8-2 shows an example of specific versus directional plans.

D. Single-Use Versus Standing Plans. Frequency of use: Single-use versus standing plans. A single-use plan is a one-time plan specifically designed to meet the needs of a unique situation. Standing plans are ongoing plans that provide guidance for activities performed repeatedly.

E. Static Versus Scenario Plans. Most business plans are made under the assumption that the business environment and internal conditions will remain mostly unchanged over the given planning period. These static plans provide leaders with stable direction but are not responsive to the dynamic environment in which most businesses operate. Scenario plans involve making assumptions about what might happen and determining how your organization will respond. This type of planning is useful in anticipating events that can be anticipated.

8.3

CONTINGENCY FACTORS IN PLANNING Different situations call for different types of plans. This section identifies three contingency factors in planning.

A. Level in the Organization.

Exhibit 8-3 illustrates the relationship between managerial level in an organization and the type of planning conducted. As managers rise through the ranks, their planning role shifts to strategic planning.

B. Degree of Environmental Uncertainty.

The greater the degree of environmental uncertainty, the more plans should focus on directional planning and a short-term time horizon. The planning process in uncertain environments should include scenario planning.

C. Length of Future Commitments.

The final contingency factor is the commitment concept. The more that current plans affect future commitments the longer the time frame for which management should plan.

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8.4

OBJECTIVES: THE FOUNDATION OF PLANNING Objectives are goals. We use the term interchangeably. They refer to desired outcomes for individuals, groups, or the entire organization.

A. Stated Versus Real Objectives.

Stated objectives are official statements of what the organization says and what it wants the public to believe. Real objectives are what an organization pursues, as defined by the actions of its members. Stated and real objectives can differ, so managers need to keep that in mind.

B. Traditional Objective-Setting.

Traditional objective-setting is an approach to setting objectives in which objectives are set at the top level of the organization and then broken into subgoals for each level of the organization.

1.

Traditional goal-setting assumes that top managers know what is best because of their ability to see the “big picture.” Employees are to work to meet the goals for their particular area of responsibility.

2.

This traditional approach requires that goals must be made more specific as they flow down to lower levels in the organization. In striving to achieve specificity, however, objectives sometimes lose clarity and unity with goals set at a higher level in the organization (see Exhibit 8-4).

3.

When the hierarchy of organizational goals is clearly defined, it forms an integrated means-end chain—an integrated network of goals in which the accomplishment of goals at one level serves as the means for achieving the goals, or ends, at the next level.

C. Management by objectives (MBO). MBO is a process of setting mutually agreed-upon goals and using those goals to evaluate employee performance.

1.

Cascading Objectives—Exhibit 8-5 presents the cascading objectives found in a typical MBO program. The objectives are the organization’s overall objectives translated into specific objectives for each succeeding level within the organization.

2.

SMART Objectives—MBO programs benefit from well-written goals. Objectives should be concise statements of expected accomplishments. SMART is an acronym for specific, measurable, achievable, relevant, and time-bound goals. Ideally, these are accompanied by managers who give ongoing feedback to individuals, supplemented by periodic formal appraisal meetings.

3.

Does MBO Work?—If factors such as a person’s ability and acceptance of goals are constant, evidence demonstrates that more difficult goals lead to higher performance. MBO is most effective if the goals are difficult enough to require the person to do some stretching and is allowed to set goals participatively.

8.5

CONTEMPORARY ISSUES IN PLANNING The concluding section of Chapter 8 examines how managers can plan effectively in dynamic environments and addresses the concept of environmental scanning.

A. Environmental Scanning

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A manager’s analysis of the external environment may be improved by environmental scanning, which involves screening information to detect emerging trends. Competitive intelligence is the process of gathering information about competitors that allows managers to anticipate competitors’ actions.

2.

Competitive intelligence is not corporate espionage – much competitor-related information is publicly available. Purchasing access to databases as well as searches on the Internet can provide key information.

3.

Global information can be garnered through subscriptions to news services. Exhibit 8-6 lists various environmental elements and examples of where you might locate information about these elements.

4.

Social media is becoming an important source of competitive intelligence. LinkedIn, Facebook, and Twitter provide a wealth of information about consumer opinions and patterns.

Using Artificial Intelligence to Support Planning. A recent survey of 1500 CEOs found that 75 percent believe they risk going out of business if they don’t figure out how to integrate AI into their management practices. AI consumes and learns from data, creating opportunities to support managers planning. AI can study trends, understand customer behavior, predict the supply and demand of materials, and support workforce planning.

1.

B.

ANSWERS TO REVIEW AND DISCUSSION QUESTIONS Student answers to these questions will vary.

8-1. Explain what studies have shown about the relationship between planning and performance.

One cannot say that organizations that formally plan always outperform those that don’t plan. However, studies have indicated that formal planning is often associated with positive financial results. Generally, performance is also higher in those organizations where planning is present. And, when higher performance is not the result of formal planning, often the reason is due to something in the external environment. Finally, studies indicate that at least four years of formal planning are necessary before performance is affected. (LO: 1, Define the nature and purposes of planning, AACSB: Analytical thinking) 8-2. Discuss the contingency factors that affect planning.

The first contingency factor is the manager’s level in the organization. Typically, lowerlevel managers are operational planners, while upper-level managers are strategic planners. Second, with environmental uncertainty, plans should be specific, but flexible.

And third, the length of future commitments can greatly affect planning. (LO: 3, Identify the key contingency factors in planning, AACSB: Analytical thinking) 8-3. Will planning become more or less important to managers in the future? Why?

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Planning will become more important to managers in the future because of the uncertainty in an increasingly dynamic environment. Changes constantly occur in both the general and specific environments of organizations, and many of these changes occur rapidly. Planning helps managers cope with uncertainty by forcing managers to look ahead, anticipate change, consider the impact of the change, and develop appropriate responses. (LO: 5, Discuss contemporary issues in planning, AACSB: Analytical thinking) 8-4. If planning is so crucial, why do some managers choose not to do it? What would you tell these managers?

Managers may choose not to devote time to planning because they do not know how to plan or feel they do not have the necessary time. Others may say that planning is a waste of time and that the future will happen whether or not they plan. However, these reasons do not discount the importance of planning. Every manager should engage in planning. (LO: 1, Define the nature and purposes of planning, AACSB: Analytical thinking) 8-5. Explain how planning involves decisions today that will have an impact later.

As managers plan, they make decisions that influence how activities are organized, how employees are managed, and what control mechanisms are implemented. As managers look to the future by planning, the decisions they make as they plan will have an impact on their other managerial activities. (LO: 2, Classify the types of plans organizations might use, AACSB: Analytical thinking) 8-6. How might planning in a not-for-profit organization such as the World Wildlife Fund differ from planning in a for-profit organization such as Airbnb?

The planning process is similar, but the content of the plans will differ. The types of objectives established and the plans formulated will be influenced by the fact that a notfor-profit organization does not have profit as its major objective. However, a not-forprofit organization must devote efforts and resources to planning how to raise funds and recruit volunteers to achieve its mission. Airbnb is a technology-focused business and must devote efforts and resources to planning how to innovate and incorporate new technologies into its business to achieve its mission. (LO: 3, Identify the key contingency factors in planning, AACSB: Application of knowledge) 8-7. What types of planning do you do in your personal life? Describe these plans in terms of being (a) strategic or operational plans, (b) short-term or long-term plans, and (c) specific or directional plans.

Students’ responses to this question will, of course, vary. Students may mention their plans to meet educational and career goals. Please encourage students to think about their everyday lives and the types of daily, weekly, monthly, and yearly planning they do.

(LO: 2, Classify the types of plans organizations might use, AACSB: Application of knowledge)

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8-8. Provide examples of the sources of data a residential solar panel company might gather when engaging in environmental scanning. Exhibit 8-6 may be helpful when answering this question.

General data from environmental scanning could be sourced from pending Federal, State, and local government legislation, tax incentives, business news, environmental or climate change data, and other government or NGO reports. Specific environment sources might come from industry associations, vendors, surveys, and focus groups.

Other sources of information are also likely. (LO: 5, Discuss contemporary issues in planning, AACSB: Application of knowledge) ETHICS DILEMMA Student answers to these questions will vary.

Students are asked to assess an event that happened at a pharmacy. The case revolves around an individual who is a leading developer of virtual reality products for a company about to go through an initial public offering. He has just been diagnosed with a serious vision issue that would ultimately result in blindness if it wasn’t treated. His insurance will cover 90 percent of an experimental medical treatment projected to cost one million dollars. A negative of this treatment is that it dramatically increases cancer rates later in the life of the patients completing the treatment. Executives at his company are concerned they will lose millions of dollars if he were to lose his sight and have offered to cover all of his out-of-pocket costs for the experimental treatment needed to save his vision. This exercise could be a short written assignment or serve as a group activity in class.

8-9. What potential ethical issues do you see here? What are the strategic issues?

Issues students might address range from the lack of universal healthcare, an insurance company failing to pay 100 percent of medical costs, and an executive pressuring someone to pursue medical treatment to ensure their financial well-being. Some students may comment on the similarity of this case to the ethical issues professional athletes and sports teams deal with when athletes are injured or are tempted to take performance-enhancing drugs. An ethical issue to address is the limitation on Bob Abernathy to make personal healthcare choices without outside influences. The strategic problems include Bob Abernathy’s plan for his career and quality of life and the company’s dependency on a specific employee for long-term success. Should the firm hire a third party to advise Abernathy with his medical decisions to remove the executives' conflict of interest? Does the company have an ethical obligation to encourage Abernathy to undergo the treatment to protect the company’s viability? And should Abernathy have kept his medical diagnosis a secret, or was he obligated to share his diagnosis with his employer? (LO: 5, Discuss contemporary issues in planning, AACSB: Ethical understanding and reasoning) 8-10. If you were an employee or executive with stock options, would you press Mr. Abernathy to take the medication? Why or why not?

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Students may have their opinion on the matter but should be able to provide support for their stance on the issue. (LO: 5, Discuss contemporary issues in planning, AACSB: Ethical understanding and reasoning)

SKILLS EXERCISE: Making a To-Do List That Works and Using It Students are provided with suggestions for effectively creating to-do lists. Using the suggestions, they are then asked to create a to-do list for an upcoming project. (LO: 4, Compare and contrast approaches to objective setting, AACSB: Reflective thinking)

WORKING TOGETHER: TEAM EXERCISE In groups of three to four individuals, students tackle planning and goal-setting for a local bakery, club, restaurant, or sandwich shop with which members of their group are familiar. Next, students are tasked with looking through a list of strategic objectives found at this link that they believe are important for this business: www.clearpointstrategy.com/56-strategic-objective-examples-for-your-company-to-copy.

Conversations among group members should include why the selected strategic objective are important to this business and what plans this business could implement in the next six months to begin accomplishing the chosen strategic objectives. Students are asked to be prepared to discuss their objectives and plans in class. (LO: 4, Compare and contrast approaches to objective setting, AACSB: Application of Knowledge)

MY TURN TO BE A MANAGER •

Practice setting goals for various aspects of your personal life, such as academics, career preparation, family, hobbies, and so forth. Set at least two short-term goals and at least two long-term goals for each area. (LO: 4, Compare and contrast approaches to objective setting, AACSB: Reflective thinking)

•

For the goals that you have set, write out plans for achieving those goals. Think in terms of what you will have to do to accomplish each one. For instance, if one of your academic goals is to improve your grade-point average, what plan can you create to reach this academic goal? (LO: 4, Compare and contrast approaches to objective setting, AACSB: Reflective thinking)

•

Write a personal mission statement. Although this may sound simple to do, it’s not going to be simple or easy. Our hope is that it will be something that you’ll want to keep, use, and revise when necessary...that it will be something that helps you be the “you” you’d like to be and helps you live the life you’d like to live. Start by doing some research on personal mission statements. There are some wonderful Web resources that can guide you. Good luck! (LO: 4, Compare and contrast approaches to objective setting, AACSB: Reflective thinking)

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•

Interview three managers about the types of strategic and operational planning they do. Ask them for suggestions on how to be a better planner. Write a report that describes and compares your findings. (LO: 2, Classify the types of plans organizations might use, AACSB: Analytical thinking)

•

Find a podcast about strategy, strategy skills, or strategic thinking. Listen to leading experts, senior management, or board directors to learn what happens during strategy meetings. As they share their insights on tips, tricks, and tools, try to understand the skills needed to be good at strategy in business. (LO: 2, Classify the types of plans organizations might use, AACSB: Analytical thinking)

•

Choose two companies, preferably in different industries. Research the companies’ websites and find examples of goals that they have stated. (Hint: A company’s annual report is often a good place to start.) Evaluate these goals. Are they wellwritten? Rewrite those that don’t exhibit the characteristics of well-written goals so that they do. (LO: 5, Discuss contemporary issues in planning, AACSB: Analytical thinking)

•

Effective managers are always screening information to look for emerging trends that might affect their industries. Start looking for trends in an industry you are interested in by subscribing to a variety of social media sources that are related to the industry.

(LO: 5, Discuss contemporary issues in planning, AACSB: Analytical thinking)

ANSWERS TO CASE APPLICATION 1 QUESTIONS Student answers to these questions will vary.

Johnson Controls Using OpenBlue to Reach Net Zero 8-11. Is Johnson Controls helping customers meet their strategic or operational goals?

Explain.

The goal to reach net zero evolves from the organization’s mission and provides an overall guide to what organizational members think is important. While Johnson Control’s technology does reduce customers' CO2 emissions right away, the purpose of cutting global emissions is for a time frame beyond five years, and top executives make the goals and plans to use the technology. Because the goals are part of a long-term plan that applies to the entire customer’s organization, accomplishes one of the customer’s overall objectives, and positions the customer positively in terms of its environment, these are strategic goals connected to a strategic plan. (LO: 2, Classify the types of plans organizations might use, AACSB: Analytical thinking, AACSB: Analytical thinking) 8-12. What advantages and disadvantages does Johnson Controls’ OpenBlue platform have over companies looking to develop solutions on their own?

The advantage of Johnson Controls’ AI technology is its ability to optimize indoor air, lighting, and energy usage on a continual basis. The AI can learn and continue to make

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changes with or without the input of employees. AI can aid ESG reporting, keeping a constant watch over a company's operations, analyzing sustainability data, evaluating equipment efficiency at its age, warning managers when they are in danger of not meeting sustainability goals, and quantifying the advantages of sustainable systems or products. Disadvantages of using AI include the loss of jobs due to AI automation, more significant concerns about data privacy, and e-waste created in the building and replacement of AI technology. Johnson Controls has an opportunity to optimize sustainability as it gains more data across industries and companies. However, as more companies rely on Johnson Controls, they risk becoming less distinctive from competitors relying on the same technology. Also, as companies stop looking to develop solutions on their own, they lose emotion-informed and creative decisions, and the flawed or incorrect decisions by AI. Johnson Controls also offers the potential to improve. Still, its solutions may be more expensive compared to an employee and may not be better. (LO: 5, Discuss contemporary issues in planning, AACSB: Analytical thinking) 8-13. What contingency planning might Johnson Controls need to complete regarding its approach to helping companies reach their net zero goals?

Responses to this question will vary. Most business plans working to achieve net zero will be under the assumption that the business environment and internal conditions will change substantially over the next 5, 10, and 15 years. Contingency planning through scenario planning will help employees and Johnson Controls make assumptions about what might happen in the future and determine how they will alter the ways they benefit customers. A scenario is a consistent view of what the future is likely to be. Scenario planning requires managers to map out multiple scenarios that include positive and negative outcomes for Johnson Controls. By engaging in scenario planning, managers at Johnson Controls can be proactive and decisive. Because reaching net zero is such a challenging and important goal, managers must think broadly about the possible scope of scenarios that might affect a company or industry. (LO: 3, Identify the key contingency factors in planning, AACSB: Analytical thinking) 8-14. How could additional collaborations help Johnson Controls and Accenture expand?

Responses to this question will vary. Both organizations will benefit from economies of scale, the pooling of resources to drive innovation, and a shared competitive advantage to scale quickly, build innovation solutions for their customers, enter new markets, and pool valuable knowledge about emerging technology and business practices. s. (LO: 5, Discuss contemporary issues in planning, AACSB: Application of knowledge)

ANSWERS TO CASE APPLICATION 2 QUESTIONS Student answers to these questions will vary.

Living Up to Goals at Tesla

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8-15. What factors will make it difficult for Tesla to meet its stated objective of 5,000 Model 3 sedans per week? Explain why you think its stated objective should (or should not) have been different than it was.

Student answers will vary, but Tesla is known for setting aggressive production goals and meeting them. If they produced autos on this scale, there is a chance anticipated optimizations will not be as big as projected, new technology will have glitches that will take some time to repair, or the critics may be correct that more factories will be required than can be built. Many recommend that the stated goal be more realistic to prevent a public relations issue if the objective is unmet. Many students struggle to believe that difficulty goals increase productivity more than comfortable self-set goals. (LO: 4, Compare and contrast approaches to objective setting, AACSB: Analytical thinking) 8-16. What is the downside of setting an ambitious production objective as Tesla has for 2030?

Student answers will vary, but setting an objective that is too ambitious sets the firm up for failure and gives the public a negative opinion of the firm when it fails to achieve the objective. (LO: 4, Compare and contrast approaches to objective setting, AACSB: Analytical thinking) 8-17. How supportive do you think Tesla’s production staff is of the objective to produce 20 million electric vehicles in 2030? Would it have a positive or negative impact on morale? Explain.

Student answers will vary, but some will hold a negative opinion of management since management has set objectives without a step-by-step plan for accomplishing them.

Students only sometimes recommended relying on technological advances or leveraging state-of-the-art technology. Some students will anticipate low employee morale due to the hard work required to meet this objective and the anxiety associated with the possibility of missing deadlines. (LO: 4, Compare and contrast approaches to objective setting, AACSB: Analytical thinking)

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Chapter 9 Managing Strategy In this chapter, students learn an important part of managers' planning: developing organizational strategies. Every organization has a strategy for doing what it’s in business to do. And managers must manage those strategies effectively by creating competitive advantages.

LEARNING OBJECTIVES 1.

2.

3.

4.

Define strategic management and explain why it’s important.

Explain what managers do during the five steps of the strategic management process.

Describe the three types of corporate strategies.

Describe competitive advantage and the strategies organizations use to get it.

CHAPTER OUTLINE INTRODUCTION Effective managers recognize strategic management's role in their organization’s performance. Throughout this chapter, students discover that good strategies can lead to high organizational performance.

9.1

.

WHAT IS STRATEGIC MANAGEMENT, AND WHY IS IT IMPORTANT? Managers must carefully consider their organization’s internal and external environments as they develop strategic plans. They should systematically analyze the environment, assess their organization’s strengths and weaknesses, identify opportunities that would give the organization a competitive advantage, and incorporate these findings into their planning. The value of thinking strategically has an important impact on organizational performance.

A. Defining Strategic Management 1.

Strategic management is what managers do to develop the organization’s strategies.

2.

Strategies are the plans for how the organization will do whatever it’s in business to do, how it will compete successfully, and how it will attract and satisfy its customers to achieve its goals.

3.

A business model is how a company uses resources to create value for customers and generate profits. It focuses on three things: (1) whether customers will value what the company is providing, (2) whether the company has or can acquire the resources needed to execute its strategy, and (3) whether the company can make money.

B. Why Is Strategic Management Important? There are three reasons.

1.

The most significant is that it can make a difference in how well an organization performs.

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2.

C.

9.2

.

Managers of all types and sizes face continually changing situations.

They cope with this uncertainty by using the strategic management process to examine relevant factors and decide what actions to take.

3.

Because organizations are complex and diverse, strategic management helps each part work together toward achieving the organization’s goals.

Supporting the Strategic Management Process. Research on the strategic management process provides evidence that strategic planning is more likely to positively influence organizational performance when there is crossorganizational involvement in the strategic management process and when the company invests resources in doing a thorough analysis of the internal and external environment.

1.

Involving employees benefits strategic management in several ways. a.

Broader involvement helps support the development of an effective strategy as employees from different parts bring a perspective that top management does not hold. b.

It can enhance overall employee engagement in the organization as those involved feel valued. c.

Those responsible for implementing the plan will be more committed, increasing the likelihood of success.

2.

Artificial Intelligence—As companies conduct internal and external analyses to understand the current state of the organization, artificial intelligence (AI) can be a tool used to inform executives during the formulation of a strategy. AI can support quicker analysis and insights from the data.

THE STRATEGIC MANAGEMENT PROCESS The strategic management process is a five-step process that encompasses strategic planning, implementation, and evaluation. (See Exhibit 9-1.)

A. Step 1: Identifying the Organization’s Current Mission, Goals, and Strategies.

1.

Every organization needs a mission, which is a statement of the purpose of an organization. The mission statement addresses the question: What is the organization’s reason for being in business?

2.

The organization must also identify its current goals and strategies. See Exhibit 9-2 for a list of components of a mission statement.

B. Step 2: SWOT Analysis. The combined internal and external analyses are called the SWOT analysis, an analysis of the organization’s Strengths, Weaknesses, Opportunities, and Threats. After completing the SWOT analysis, managers are ready to formulate appropriate strategies that (1) exploit an organization’s strengths and external opportunities, (2) buffer or protect the organization from external threats, or (3) correct critical weaknesses.

1.

Internal Analysis—The internal analysis provides important information about an organization’s specific resources and capabilities. a.

An organization’s resources are its assets—financial, physical, human, and intangible—that it uses to develop, manufacture, and deliver products to its customers. b.

An organization’s capabilities are its skills and abilities in doing the work activities needed in its business

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The organization’s major value-creating skills and capabilities that determine its competitive weapons are the organization’s core competencies. d.

Any activities the organization does well or any unique resources that it has are called strengths. e.

Weaknesses are activities the organization does not do well or resources it needs but does not possess.

2.

External Analysis—Managers do an external analysis. Hence, they know what the competition is doing, what pending legislation might affect the organization, or what the labor supply is like in locations where it operates. In an external analysis, managers should examine the economic, demographic, political/legal, sociocultural, technological, and global components to see the trends and changes. a.

Opportunities are positive trends in the external environment; threats are negative trends.

Step 3: Formulating Strategies. After the SWOT, managers develop and evaluate strategic alternatives and select strategies that are appropriate.

1.

The three main strategies managers will formulate are corporate, competitive, and functional.

Step 4: Implementing Strategies. A strategy is only as good as its implementation. Successful implementation requires managers to have the right capabilities and take the correct actions in strategy implementation.

1.

Research suggests that successful strategy implementation requires competence, commitment, and coordination.

Step 5: Evaluating Results.

1.

The final step in the strategic management process is evaluating results.

How effective have the strategies been at helping the organization reach its goals? c.

D.

E.

F.

9.3

CORPORATE STRATEGIES Strategic planning takes place on three different and distinct levels: corporate, business, and functional. (See Exhibit 9-3.)

A. What Is Corporate Strategy? Corporate strategy is an organizational strategy that determines what businesses a company is in, should be in, or wants to be in and what it wants to do with those businesses.

B.

C.

.

What Are the Types of Corporate Strategy? There are three main types of corporate strategies: a. A growth strategy is a corporate strategy used when an organization wants to grow by expanding the number of products offered or markets served, either through its current business(es) or through new business(es). b. A stability strategy is a corporate strategy characterized by an absence of significant change in what the organization is currently doing. c. A renewal strategy is a corporate strategy designed to address organizational weaknesses that are leading to performance declines.

Two such strategies are retrenchment and turnaround strategies.

How Are Corporate Strategies Managed? Corporate portfolio analysis is used when an organization’s corporate strategy involves several businesses.

Managers can manage this portfolio of businesses using a corporate portfolio

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matrix, such as the BCG matrix. The BCG matrix is a strategy tool that guides resource allocation decisions on the basis of market share and growth rate of SBUs. 1. A business unit is evaluated using a SWOT analysis and placed in one of the four categories, which are as follows: a. Stars: High market share/High anticipated growth rate b. Cash Cows: High market share/Low anticipated growth rate c. Question Marks: Low market share/High anticipated growth rate d. Dogs: Low market share/Low anticipated growth rate 9.4

.

COMPETITIVE STRATEGY A competitive strategy is focused on how the organization will compete in each of its businesses. When an organization is in several different businesses, those single businesses that are independent and have their own competitive strategies are referred to as strategic business units (SBUs).

A. The Role of Competitive Advantage. A competitive advantage is what sets an organization apart; that is, its distinctive edge. An organization’s competitive advantage can come from its core competencies.

1. Quality as a Competitive Advantage. If implemented properly, quality can be one way for an organization to create a sustainable competitive advantage.

2. Design Thinking as a Competitive Advantage. A company’s ability to use design thinking in the way its employees and managers strategically manage can be a powerful competitive tool. Using design thinking means thinking in unusual ways about what the business is and how it’s doing what it’s in business to do.

3. Social Media as a Competitive Advantage. Investments in social media can lead to a competitive advantage. In addition to providing social connections, social media can also help boost an organization’s productivity.

B. Sustaining Competitive Advantage. An organization must be able to sustain its competitive advantage; it must keep its edge despite competitors’ actions and regardless of evolutionary changes in the organization’s industry. Warren Buffett uses the term “economic moat” to visualize the concept of maintaining a competitive advantage. Firms build economic moats in the same manner moats were used to protect medieval castles. One way to build an economic moat, or create a competitive advantage, is by doing an industry analysis using Porter’s five forces model.

1.

Five Forces Model—Michael Porter’s work explains how managers can create and sustain a competitive advantage that will give a company above-average profitability. He says there are five competitive forces at work in an industry; together, these five forces determine industry attractiveness and profitability. Porter proposes that the following five factors can be used to assess an industry’s attractiveness: a.

Threat of new entrants. How likely is it that new competitors will come into the industry? b.

Threat of substitutes. How likely is it that products of other industries could be substituted for a company’s products? c.

Bargaining power of buyers. How much bargaining power do buyers (customers) have?

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d.

D.

Bargaining power of suppliers. How much bargaining power do a company’s suppliers have? e.

Current rivalry. How intense is the competition among current industry competitors?

2.

Choosing a Competitive Strategy—According to Porter, managers must choose a strategy that will give their organization a competitive advantage. Porter identifies three generic competitive strategies. Which strategy managers select depends on the organization’s strengths and core competencies and its competitor(s) weaknesses. a.

A cost leadership strategy is a business or competitive strategy in which the organization competes on the basis of having the lowest costs in its industry. b.

A differentiation strategy is a business or competitive strategy in which a company offers unique products that are widely valued by customers. c.

A focus strategy is a business or competitive strategy in which a company pursues a cost or differentiation advantage in a narrow industry segment. d.

An organization that has not been able to develop either a cost or differentiation advantage is said to be “stuck in the middle.” e.

Subsequent research indicates that it is possible, though very difficult, for organizations that are stuck in the middle to achieve high performance. f.

Functional strategy is the strategies used by an organization’s various functional departments to support the business or competitive strategy.

Examples of Differentiation Strategies. Firms like Walmart, Apple, and 3M have successfully differentiated themselves from the competition. Five differentiation strategies are used to create a competitive advantage.

1.

Quality As A Competitive Advantage—Using quality as a basis for differentiation or focus has been successfully accomplished by numerous. If a firm can continue to improve quality, it will likely be able to sustain a competitive advantage.

2.

Innovation as a Competitive Advantage—These strategies focus on breakthrough products and can include the application of existing technology to new uses. An organization that is the first to bring a product innovation to the market or to use a new process innovation is called a first mover. Exhibit 9-4 lists the advantages and disadvantages associated with being a first mover.

3.

Customer Focus as a Competitive Advantage—These strategies give customers what they want, communicate effectively with them, and provide employees with customer service training.

4.

Mass Customization as a Competitive Advantage—Consumers increasingly seek products and services customized to their needs. As a result of improvements in production methods, information technology, and supply-chain management, businesses now have the capability to provide customized offerings at mass-production prices.

ANSWERS TO REVIEW AND DISCUSSION QUESTIONS

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Student answers to these questions will vary.

9-1. Why is strategic management important for organizations?

Strategic management, which involves all basic management functions, is what managers do to develop the organization’s strategies. Strategic management is important for three key reasons. First, it can make a real difference in how an organization performs. Organizations that use strategic management generally perform better. Second, it helps managers make sense of continually changing situations. Finally, strategic management helps coordinate and focus employee efforts on what’s important, which is helpful because organizations are complex and diverse. (LO: 1, Define strategic management and explain why it’s important, AACSB: Analytical thinking) 9-2. Describe the five steps in the strategic management process.

The five steps in the strategic management process encompass strategy planning, implementation, and evaluation. These steps include the following: (1) identify the current mission, goals, and strategies; (2) do a SWOT analysis of the organization’s strengths, weaknesses, opportunities, and threats; (3) formulate strategies; (4) implement strategies; and (5) evaluate strategies. Strengths are any activities the organization does well or unique resources that it has. Weaknesses are activities the organization doesn’t do well or resources it needs but doesn’t have. Opportunities are positive trends in the external environment. Threats are negative trends. (LO: 2, Explain what managers do during the five steps of the strategic management process, AACSB: Analytical thinking) 9-3. Should executives complete the strategic plan without input from other employees and managers? Why or why not?

Yes, executives should seek input from employees and managers throughout the organization.

Involving employees from all levels of the organization benefits strategic management because employees from different parts and levels bring a perspective that top management does not hold. Seeking input also leads to more creative ideas for consideration as executives formulate the company’s strategy. Involvement enhances employee engagement in the organization, and by obtaining their feedback, they are more likely to commit to the strategy once it is implemented. Early buy-in on the strategic plan as it was developed increases the likelihood of obtaining success. (LO: 2, Explain what managers do during the five steps of the strategic management process, AACSB: Application of knowledge) 9-4. Should (a) large, (b) small, and (c) not-for-profit organizations analyze their organization’s internal and external environments differently? Why or why not?

As a firm’s strategy is the basis for its plans, the organization will likely be unprepared for changing markets and trends when the internal or external environment is not considered.

Large or small companies, profit or not-for-profit, domestic or global, benefit from analyzing their internal and external environments. The critical difference between the different types of companies and the process they go through centers around their mission and goals. For example, the owners of a small business might not want to pursue the goal of growth and instead focus on stability. For not-for-profit organizations, the goal is not to make money for owners or stockholders but to find a way to effectively and efficiently maximize their resources

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to benefit others. The SWOT would be more involved in a large global organization due to the number of potential elements involved. Large organizations with multiple departments, jobs, and products are more complex, making an internal analysis more difficult. Fortunately, large organizations have more resources and are likely to employ professionals who can use the latest methodologies to evaluate the internal and external environment. The external analysis would also include a broader focus, including global economic trends and political/legal factors across multiple locations. Smaller organizations might be more vulnerable to significant changes in the external environment and may tend to focus more energy on this type of analysis. The smaller organizations do not have the benefit of resources found in larger organizations, but they have the advantage of being more flexible. The internal analysis would be more straightforward and might focus on a few critical variables like the capabilities of employees and capital available for process improvements or new equipment. Not-for-profit organizations are more likely to consider engagement with the community, donors, volunteers, and foundations during their external analysis. The internal analysis focuses on how well the resources are utilized to accomplish its mission. (LO: 2, Explain what managers do during the six steps of the strategic management process, AACSB: Diverse and multicultural work environments) (LO: 2, Explain what managers do during the five steps of the strategic management process, AACSB: Ethical understanding and reasoning) 9-5. Describe the three major types of corporate strategies and how the BCG matrix is used to manage the different businesses using those corporate strategies.

A growth strategy is when an organization expands the number of markets served or products offered, either through current or new businesses. The types of growth strategies include concentration, vertical integration (backward and forward), horizontal integration, and diversification (related and unrelated). A stability strategy is when an organization makes no significant changes in what it’s doing. Both renewal strategies— retrenchment and turnaround—address organizational weaknesses that are leading to performance declines. The BCG matrix is a way to analyze a company’s portfolio of businesses by looking at a business’s market share and its industry’s anticipated growth rate. The four categories of the BCG matrix are cash cows, stars, question marks, and dogs. (LO: 3, Describe the three types of corporate strategies. AACSB: Application of knowledge) 9-6. Describe the differences between corporate and competitive strategies.

A competitive strategy is focused on how the organization will compete in each of its businesses. When an organization is in several different businesses, those single businesses that are independent and have their own competitive strategies are referred to as strategic business units (SBUs). A corporate strategy determines what businesses a company is in (or wants to be in) and what it wants to do with those businesses. An organization’s competitive advantage is what sets it apart—its distinctive edge. Corporate strategies are different because they guide an entire organization, often including multiple businesses. A company’s competitive strategy operates at a lower level within the corporation. Individual businesses within a corporation choose a competitive strategy to determine who it will compete with within its industry or market. The competitive strategy outlines how the business unit will seek to gain an advantage over its competitors. Additionally, the corporate strategy aims to attain success for an entire organization, while a competitive strategy aims to help a business unit outperform competitors. (LO: 4, Describe competitive advantage and the competitive strategies organizations use to get it, AACSB: Analytical thinking)

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9-7. “The concept of competitive advantage is as important for not-for-profit organizations as it is for profit organizations.” Do you agree or disagree with this statement? Explain, using examples from the five forces model to make your case.

Not-for-profit and for-profit companies compete for customers. In the case of not-for-profit companies, those customers are donors and, like any market, are limited in size. To be effective, not-for-profit companies need something that will attract donors like for-profit companies attract customers. For example, United Way has an established network of businesses that regularly donate money as part of their yearly pledge drives. Another example is Susan G. Komen, known for their work with breast cancer awareness, which has established a series of runs and walks across the United States and has even succeeded in publicizing their cause with the NFL. With the five forces model an organization’s competitive advantage is what sets it apart, its distinctive edge. A company’s and not-for-profit organization's competitive advantage becomes the basis for choosing an appropriate competitive strategy. However, a not-for-profit may alter the five forces model to one offering collaboration with other organizations to better accomplish both organization’s missions instead of competition with other organizations. In other words, a win-win relationship with other organizations versus a win-lose relationship. Other differences might include modifying the bargaining power of suppliers to include philanthropists, grand providers, or government partners. (LO: 4, Describe competitive advantage and the competitive strategies organizations use to get it, AACSB: Application of knowledge) 9-8. Describe quality, innovation, customer focus, and mass customization differentiation strategies.

Quality strategies focus on continuous product improvement and quality to differentiate themselves from competitors. Rolex employs this strategy. Some firms, known as first movers, use product innovation strategies and become the first organization to bring a product to the market or to use a new process. Innovation strategies focus on breakthrough products and can include the application of existing technology to new uses. Customer focus strategies give customers what they want, communicate effectively with them, and provide employees with customer service training. Mass customization involves giving customers a vast array of options and allowing them to create their own unique version of a product. (LO: 4, Describe competitive advantage and the competitive strategies organizations use to get it, AACSB: Analytical thinking)

ETHICS DILEMMA Student answers to these questions will vary.

This ethical dilemma involves an executive sharing information about a former employer with a new employer’s executives. While employees sometimes sign non-compete agreements, these sorts of agreements are not standard policy. In the absence of a policy, new employees must decide on their own about what information is appropriate to share with a new employer.

9-9. What do you think? Should you share your We-Sell-It-All inside and show the CEO they made the right decision?

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Many will view it as unethical for an executive to share inside information about a former employer. Still, most will believe this type of information sharing is a common practice. In many cases, students believe it will be necessary to have high-level managers sign a nondisclosure agreement when they leave the firm to prevent them from sharing inside information. (LO: 4, Describe competitive advantage and the competitive strategies organizations use to get it, AACSB: Ethical understanding and reasoning) 9-10. What ethical dilemmas are involved with sharing information about We-Sell-It-All? Students will mention they are violating an implied contract with their former employer, where loyalty was an expectation with compensation and employment. Some will notice that the experiences offered by WE-Sell-It-All made it possible to become the Vice President of Marketing at BuyIt. This development is an obligation to keep information confidential, and you should maintain that confidence even after separating from the firm. Others will be concerned about reputational damage if sharing inside information creates hurt feelings or causes lost friendships with former colleagues. Students may have other opinions. (LO: 4, Describe competitive advantage and the competitive strategies organizations use to get it, AACSB: Ethical understanding and reasoning) 9-11. What responsibilities, if any, do you have to your former employer?

It can be helpful to ask students to think of all the stakeholders who might be affected by this decision. Those with a more cynical perspective will consider that there are no responsibilities once their employment has ended. For these students, it is unnecessary to remain loyal to their former employer unless they signed an agreement not to do so or if there is reason to fear retaliation from their former employer. (LO: 4, Describe competitive advantage and the competitive strategies organizations use to get it, AACSB: Ethical understanding and reasoning)

SKILLS EXERCISE: DEVELOPING YOUR BUSINESS PLANNING SKILL This section describes the process of putting together a business plan. An important part of the plan is to determine the strategic direction of the business. A business plan aids in thinking about strategic issues and provides a sound basis to ask for funding for a new business. Here are the steps in the process: • Describe your company’s background and purpose.

• Identify your short- and long-term goals.

• Do a thorough market analysis.

• Describe your development and production emphasis.

• Describe how you’ll market your product or service.

• Put together your financial statements.

• Provide an overview of the organization and its management.

• Describe the legal form of the business.

• Identify the critical risks and contingencies facing the organization.

• Put the business plan together.

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Students are asked to create a business plan for a bank by choosing from the alternatives listed below: 1. Pet grooming at the customer’s home (you make house calls) 2. Vending machines offering only organic and locally sourced products (convenient farmto-table snacks) 3. Rent a pet (the joys of pet ownership without all the responsibility) 4. Zoom with a chef (cook gourmet meals with the help of a master chef who is right there with you on your tablet or phone) (LO: 1, Define strategic management and explain why it’s important, AACSB: Application of knowledge)

WORKING TOGETHER: TEAM EXERCISE This exercise asks students to work in small groups of three to four and identify a company in one of these industries: virtual reality, green or solar energy, or commercial and professional drones. Identify the company’s competitive advantage and then apply the five forces model to the company’s industry. Brainstorm ways the firm can minimize threats or increase their bargaining power in their industry. This exercise could be used as an out-of-class assignment.

Be prepared to share your analysis with the class.

(LO: 4, Describe competitive advantage and the competitive strategies organizations use to get it, AACSB: Application of knowledge)

My Turn to be a Manager

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•

Using current business periodicals, find two examples of each of the corporate and competitive strategies. Write a description of what these businesses are doing and how each represents a particular strategy. (LO: 3, Describe the three types of corporate strategies, AACSB: Analytical thinking)

•

Pick three companies from the latest version of Fortune’s “Most Admired Companies” list. Research these companies and identify, for each, its (a) mission statement, (b) strategic goals, and (c) strategies being used for each. (LO: 2, Explain what managers do during the five steps of the strategic management process, AACSB: Analytical thinking)

•

Consider several businesses from which you purchase products or services on a regular basis. Identify the business model for each business. (LO: 4, Describe competitive advantage and the competitive strategies organizations use to get it, AACSB: Application of knowledge)

•

Write a short paper on how the process of strategy formulation, implementation, and evaluation might differ for (a) large businesses, (b) small businesses, (c) not-for-profit organizations, and (d) global businesses. (LO: 2, Explain what managers do during the five steps of the strategic management process, AACSB: Application of knowledge)

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•

Customer focus and innovation strategies are particularly important to managers today.

Digital creators, professional gamers, and influencers are no different. Find one example and describe how that person has chosen customer focus in an innovative way to differentiate from their competitors. This could include finding new ways to give customers what they want, communicate effectively with them, or interact with customers. Provide examples and write a report describing your examples. (LO: 4, Describe competitive advantage and the competitive strategies organizations use to get it, AACSB: Analytical thinking)

•

Listen to a podcast about strategies used by one of the seven US companies that have reached the $1 trillion market cap (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, or Saudi Aramco). Write what you learned about the company’s strategy and what the founders did to make the business successful. (LO: 4, Describe competitive advantage and the competitive strategies organizations use to get it, AACSB: Integration of realworld business experiences)

•

Search on YouTube to find information about big data and strategic decisions. Write a summary of the recommendations you discovered about how executives use or can use big data to make strategic decisions. (LO: 1, Define strategic management and explain why it’s important, AACSB: Analytical thinking)

ANSWERS TO CASE APPLICATION 1 QUESTIONS Student answers to these questions will vary.

NVIDIA’s Gaming and AI Strategy 9-12. In what specific ways did Nvidia gain a competitive advantage? Will it be difficult for Nvidia to expand while sustaining its competitive advantage?

Student answers will vary. Students often identify the differentiation of technology as a critical competitive advantage. Nvidia focused initially on the gaming segment of the market, which turned out to be a sizable segment of the computer market. Expansion seems likely as the threat of new entrants, the threat of substitutes, the bargaining power of buyers, and current rivalry are low. Supply chain issues within the computer chip market and eventual Chinese competitors may be the only competitive weaknesses. Nvidia gained an advantage over competitors when it was selected to provide chips for Microsoft’s Xbox. This demonstrated an ability to work collaboratively with large businesses, leading to other relationships with companies like Mercedes-Benz. Working collaboratively with developers also proved to be an advantage. Seeking opportunities to expand into other technologies continues to increase profits. (LO: 4, Describe competitive advantage and the competitive strategies organizations use to get it, AACSB: Analytical thinking) 9-13. Use the BCG matrix to evaluate Nvidia and recommend how to manage it going forward.

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Student answers will vary. Given Nvidia's high market share and high anticipated growth rate, it is classified as a star according to the BCG matrix. (LO: 4, Describe the three types of corporate strategies, AACSB: Application of knowledge) 9-14. How important is it for Nvidia to pay attention to the external and internal analysis steps in the strategic management process? What, if any, new challenges has the company faced?

It is important not to be too enamored with past success. Nvidia needs to analyze its external environment continually. Understanding opportunities and threats is a critical step in the strategic management process. When managers do an external analysis, they know more about what the competition is doing, what pending legislation might affect the organization, or what the labor supply is like in locations where it operates. In an external analysis, managers at Nvidia will need to pay attention to the economic, demographic, political/legal, technological, and global components as spending habits, technology-related legislation, and innovation will continue to go dramatic changes. Other new challenges include competition from Chinese companies or a reduced interest in AI, dramatically impacting areas where Nvidia intends to expand its operations. (LO: 2, Explain what managers do during the five steps of the strategic management process, AACSB: Analytical thinking) 9-15. Do Nvidia’s executives have an obligation to create a strategy ensuring its technology is used in responsible and trustworthy applications? Justify your answer.

Student answers will vary. Yes, executives have an obligation to ensure their products are safe, safe to use, and do not harm society or the environment in avoidable ways. The social impact of excessive gaming and an overreliance on AI will likely have profound positive and, at times, negative social implications that Nvidia’s executives will have to address. Failure to ensure technology is used responsibly or trustworthy will tarnish Nvidia’s reputation and lead governments to create strict laws and protection guidelines. (LO: 1, Define strategic management and explain why it’s important, AACSB: Ethical understanding and reasoning)

ANSWERS TO CASE APPLICATION 2 QUESTIONS Student answers to these questions will vary.

Saving Lives Through Strategy at RapidSOS 9-16. How does RapidSOS exemplify the advantages and disadvantages of being a first mover?

Student answers will vary, but RapidSOS was very innovative with the product and had the advantage of no competitors. However, the disadvantages were that they had to overcome numerous technological challenges to make their idea function properly and then determine how to market it effectively. (LO: 4, Describe competitive advantage and the competitive strategies organizations use to get it, AACSB: Application of knowledge) 9-17. What growth strategy did RapidSOS implement (concentration, vertical integration, horizontal integration, or diversification)? Justify your answer.

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Responses to this question will vary. However, RapidSOS fits the diversification growth strategy since it partnered with other firms to make the product function properly and gain marketing clout. (LO: 3, Describe the three types of corporate strategies, AACSB: Application of knowledge) 9-18. What new populations can RapidSOS help next?

Student answers will vary. Some basic research on how 911 systems work might have helped them construct a different product that fits existing systems better. Based on experience, students may suggest offering similar safety features to children in school or a similar service that connects through satellites to help locate soldiers, aid workers, or other first responders working in remote and dangerous conditions. Other possibilities include utilizing arcuate location technology for amusement park operators to facilitate interactive entertainment experiences or advertisers to launch age and demographic-focused advertisements for realtime content that incorporates the user’s location. (LO: 4, Describe competitive advantage and the competitive strategies organizations use to get it, AACSB: Analytical thinking) 9-19. How can RapidSOS’s actions decrease the threat of new entrants and the threat of substitutes?

Student answers will vary. The switching costs of 911 systems moving to a competitor are high, and most decision-makers will be reluctant to change vendors. Partnering with both Apple and Google will also make it difficult for new providers to enter this market successfully. (LO: 4, Describe competitive advantage and the competitive strategies organizations use to get it, AACSB: Analytical thinking)

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Chapter 10 Designing Organizational Structure This chapter covers managers' decisions involved in designing their organization’s structure.

The key organizing concepts and their components are defined in relation to how managers use these basics of organizing to create a variety of structures are presented.

LEARNING OBJECTIVES 1. Describe six key elements in organizational design.

2. Contrast mechanistic and organic structures.

3. Discuss the contingency factors that favor either the mechanistic model or the organic model of organizational design.

4. Describe traditional organizational design options.

5. Discuss organizing for flexibility in the twenty-first century.

6. Explain flexible work approaches for workers.

CHAPTER OUTLINE 10.1

SIX ELEMENTS OF ORGANIZATIONAL DESIGN Managers need to establish structural designs that best support and allow employees to do their work effectively and efficiently. Terms defined to understand the elements

of organizational structure and design: 1.

A.

B.

.

Organizing is arranging and structuring work to accomplish the organization’s goals. This process has several purposes, as shown in Exhibit 10-1.

2.

Organizational structure is the formal arrangement of jobs within an organization.

3.

Organizational design is developing or changing an organization’s structure. This process involves decisions about six key elements: work specialization, departmentalization, chain of command, span of control, centralization-decentralization, and formalization.

Work Specialization. Work specialization is dividing work activities into separate job tasks. Most of today’s managers regard work specialization as a critical organizing mechanism but not as a source of ever-increasing productivity. Exhibit 10-2 illustrates the human diseconomies from the division of labor—boredom, fatigue, stress, low productivity, poor quality, increased absenteeism, and high turnover—that eventually exceed the economic advantages created by work specialization.

1.

Today’s View—Most managers today continue to see work specialization as important because it helps employees be more efficient.

Departmentalization. When work tasks have been defined, they must be arranged in order to accomplish organizational goals. This process, known as

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C.

D.

.

departmentalization, is the basis by which jobs are grouped. There are five major ways to departmentalize (see Exhibit 10-3): 1.

Functional departmentalization groups jobs by functions performed.

2.

Product departmentalization groups jobs by product line.

3.

Geographical departmentalization groups jobs on the basis of geographical region.

4.

Process departmentalization groups jobs on the basis of product or customer flow.

5.

Customer departmentalization groups jobs on the basis of specific and unique customers who have common needs.

6.

Today’s View—Popular trends in departmentalization include the following: a.

Customer departmentalization continues to be a highly popular approach because it allows better monitoring of customers’ needs and responds to changes in the needs of customers.

Chain of Command. The chain of command is the line of authority extending from upper organizational levels to the lowest levels, which clarifies who reports to whom. Three concepts related to the chain of command are authority, responsibility, and unity of command.

1.

Authority is the rights inherent in a managerial position to tell people what to do and to expect them to do it. a.

The acceptance theory of authority proposed by Chester Barnard says that authority comes from the willingness of subordinates to accept it. Barnard contended that subordinates will accept orders only if the following conditions are satisfied: 1.

They understand the order.

2.

They feel the order is consistent with the organization’s purpose.

3.

The order does not conflict with their personal beliefs.

4.

They can perform the task as directed. b.

Line authority entitles a manager to direct the work of an employee. It is the employer–employee authority relationship that extends from the top of the organization to the lowest echelon, according to the chain of command. c.

Staff authority functions to support, assist, advise, and generally reduce some of their informational burdens.

2.

Responsibility is the obligation to perform any assigned duties.

3.

Unity of command is the management principle that each person should report to only one manager.

4.

Today’s View—Although early management theorists believed that chain of command, authority (line and staff), responsibility, and unity of command were essential, times have changed. Information systems allow employees to communicate with anyone else in the organization without going through the chain of command. Employees in organizations where work revolves around projects report to more than one boss, thus violating the unity of command principle.

Span of Control. The number of employees a manager can efficiently and effectively manage is the span of control.

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1.

E.

F.

10.2

.

The span of control concept is important because it determines how many levels and managers an organization will have (see Exhibit 10-4 for an example).

2.

Today’s View—Many factors, such as the skills and abilities of the manager and the employees, the characteristics of the work being done, and the similarity and complexity of employee tasks. a.

The trend in recent years has been toward wider (larger) spans of control.

Centralization and Decentralization. The concepts of centralization and decentralization address who, where, and how organizations make decisions.

1.

Centralization is the degree to which decision making is concentrated at upper levels of the organization.

2.

Decentralization is the degree to which lower-level employees provide input or actually make decisions.

3.

The current trend is toward decentralizing decision making in order to make organizations more flexible and responsive.

4.

Several factors influence an organization's degree of centralization or decentralization (see Exhibit 10-5).

5.

Today’s View—Employee empowerment is giving employees more authority (power) to make decisions.

Formalization refers to the degree to which jobs within an organization are standardized and the extent to which employee behavior is guided by rules and procedures.

1.

In a highly formalized organization, employees have little discretion, and a high level of consistent and uniform output exists. Formalized organizations have explicit job descriptions, many organizational rules, and clearly defined procedures.

2.

In a less formalized organization, employees have much freedom and can exercise discretion in the way they do their work.

3.

Formalization fosters relatively unstructured job behaviors and eliminates the need for employees to consider alternatives.

4.

Today’s View—The degree of formalization can vary widely between and even within organizations.

MECHANISTIC AND ORGANIC STRUCTURES Organizations do not have identical structures. Even companies of comparable size do not necessarily have similar structures.

A. Two Models of Organizational Design. (See Exhibit 10-6.)

1.

A mechanistic organization is an organizational design that is rigid and tightly controlled. It is characterized by high specialization, rigid departmentalization, narrow spans of control, high formalization, a limited information network, and little participation in decision making by lower-level employees.

2.

An organic organization is a highly adaptive and flexible organizational design. It is characterized by little work specialization, minimal formalization, and little direct supervision of employees. a.

Many employees in organic organizations are knowledge workers, who are trained professionals who use high-level knowledge to develop products or services, with a significant use

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b.

c.

10.3

.

of technology. Knowledge workers can operate without structured supervision.

The organic organization is low in centralization so that the professional can respond quickly to problems and because toplevel managers cannot be expected to possess the expertise to make necessary decisions.

No organization is purely mechanistic or organic, and although many organizations today lean toward organic, some bureaucracy is needed, particularly as a company grows.

CONTINGENCY FACTORS AFFECTING STRUCTURAL CHOICE Appropriate organizational structure depends upon four contingency variables: A. Strategy and Structure. The organization’s strategy is a contingency variable influencing organizational design.

1.

Alfred Chandler originated the strategy-structure relationship. His finding that structure follows strategy indicates that as organizations change their strategies, they must change their structure to support that strategy.

2.

Most current strategy/structure frameworks focus on three strategy dimensions: a.

Innovation needs the flexibility and free flow of information present in the organic organization. b.

Cost minimization needs the efficiency, stability, and tight controls of the mechanistic organization. c.

Imitation uses some of the characteristics of both mechanistic and organic organizations.

B. Size and Structure. Considerable historical evidence indicates that an organization’s size significantly affects its structure. Larger organizations tend to have more specialization, departmentalization, centralization, and formalization, although the size-structure relationship is not linear.

C. Technology and Structure. Technology has been shown to affect an organization’s choice of structure.

1.

Every organization uses technology to transform inputs into outputs.

2.

Joan Woodward’s study of structure and technology shows that organizations adapt to their technology. She found that three distinct technologies have increasing levels of complexity and sophistication. a.

Unit production is the production of items in units or small batches. b.

Mass production is the production of items in large batches. c.

Process production is the production of items in continuous processes.

3.

Woodward found in her study of these three groups that distinct relationships exist among these technologies, the subsequent structure of the organization, and the effectiveness of the organization. Exhibit 11-7 provides a summary of these findings.

4.

Artificial Intelligence—AI will impact various organizational tasks and operations and leads to changing organizational structures. AI can automate non-routine tasks, allowing companies that traditionally were mechanistic to engage more organic structures and shift the need for human labor.

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D.

Environmental Uncertainty and Structure. Environmental uncertainty is the final contingency factor that has been shown to affect organizational structure.

Environmental uncertainty may be managed by making adjustments to the organization’s structure. The more uncertain the environment, the more flexible and responsive the organization needs to be.

10.4

TRADITIONAL ORGANIZATIONAL DESIGN OPTIONS A number of different organizational designs can be found in today’s organizations.

Exhibit 10-8 summarizes the strengths and weaknesses of each of these designs.

A. Simple Structure. A simple structure is an organizational design with low departmentalization, wide spans of control, authority centralized in a single person, and little formalization.

1.

Strengths of the simple structure are its flexibility, speed, clear accountability, and low maintenance costs.

2.

The major limitation of a simple structure is that it is most effective when used in small organizations.

B. As an organization grows, its structure becomes more specialized and formalized. When contingency factors favor a bureaucratic or mechanistic design, one of the following two options is likely to be used: functional structure or divisional structure.

C. Functional Structure. A functional structure is an organizational design that groups similar or related occupational specialties together.

D. Divisional Structure. A divisional structure is an organizational structure made up of separate, semiautonomous units or divisions.

10.5

ORGANIZING FOR FLEXIBILITY IN THE TWENTY-FIRST CENTURY Today’s increasingly dynamic and complex environment demands greater flexibility and innovation in organizational structure. Many organizations are abandoning traditional organizational designs in favor of more organic approaches.

A. Team Structures. One of the newer concepts in organizational design is team structure, an organizational structure in which the entire organization is made up of work groups or teams.

B. Matrix and Project Structures. Other variations in organizational arrangements are based on the fact that many of today’s organizations deal with work activities of different time requirements and magnitude.

1.

One of these arrangements is the matrix structure, an organizational structure that assigns specialists from different functional departments to work on one or more projects (see Exhibit 10-9).

2.

Another of these designs is the project structure, an organizational structure in which employees continuously work on projects.

C. The Virtual Organization. Another approach to organizational design is the virtual organization, sometimes called the network or modular organization.

1.

The Virtual Organization. A virtual organization operates with a small core of full-time employees, hiring outside specialists to work on projects temporarily, as needed.

2.

The prototype of the virtual structure is today’s filmmaking organization.

Movies are made by a collection of individuals and small firms that come together to make the film project by project. This structural form allows the studio the flexibility to contract the best talent for the specific project.

Flexibility is the major advantage of this structural form.

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10.6

.

OFFERING FLEXIBILITY FOR TODAY’S WORKFORCE Mandated quarantines during the COVID-19 pandemic led many organizations to pivot to remote work or other flexible working arrangements quickly. Many organizations are looking for new ways to maximize organizational productivity and efficiency postpandemic through alternate staffing uses, such as a reduced workweek or contingent workers.

A. Remote Work. Telecommuting, an early version of remote work, allowed employees to work at home and are linked to the workplace by computer.

1.

Telecommuting work is typically asynchronous and the employee works independently.

2.

Today, companies are offering broader remote work options. In some cases, employees can work from anywhere. Still, there is often an expectation for them to engage synchronously through virtual meetings and using a variety of technical platforms to interact.

3.

Hybrid Work—Although many companies allowed remote work to continue post-pandemic, some companies sought to return workers fully to the office. Many companies embraced a hybrid work option as a compromise to workers who wanted to continue working remotely, requiring remote workers to come into the office a few days each week or month. a.

Many managers report that hybrid work arrangements are difficult to manage.

E. Flexible Work Schedule. A wide range of non-standard work schedules exist beyond the Monday through Friday, 9-to-5 workweek. Many aspects of the nonstandard workweek have been studied, including different work schedules and their effects on productivity, employee turnover, job satisfaction, and other factors.

1.

Compressed (or Reduced) Workweek—A compressed workweek is when employees work longer hours per day but fewer days per week. a.

Advocates maintain that it gives workers extra time to pursue family time, leisure activities, and handle personal responsibilities. b.

This benefit results in higher worker satisfaction, fewer absences, and less turnover.

2.

Flextime—Flextime (also known as flexible work hours), is a scheduling system in which employees are required to work a specific number of hours a week but are free to vary those hours within certain limits. a.

Flextime arrangements vary but typically give employees some flexibility to work around a common core work time where everyone is working to ensure employees are able to interact regularly and schedule meetings. b.

During the COVID-19 pandemic, many companies encouraged flextime to help reduce stress levels for remote employees, and employees started to appreciate the option. c.

A 2022 survey of knowledge workers found that 95 percent wanted schedule flexibility.

3.

Job sharing—Job sharing is the practice of having two or more people split a full-time job.

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a.

H.

G.

In 2020, US job sharing arrangements reached an all-time high at nearly 1.7 million. b.

The appeal of offering job sharing is that it provides the opportunity to get two-for-the-price-of-one, gaining broader skills and experience than might be available in a single person.

The Contingent Workforce. Contingent Workers are freelancers, independent contractors, consultants, or other outsourced and non-permanent workers who are hired on a temporary basis. This contingent-based organization has been described as the dominant form of the future’s workforce.

1.

As organizations eliminate full-time jobs through downsizing and other organizational restructurings, they often rely on a contingent workforce to fill in as needed.

2.

One of the main issues businesses face with their contingent workers, especially independent contractors or freelancers, is classifying who qualifies as one. a.

As of 2023, the courts have sided with companies like Uber and Lyft, allowing workers to remain independent contractors and keeping them from receiving company benefits.

Implications for Managers. Managers must explore and consider alternate working structures, locations, and schedules. Leaders need to identify desirable and feasible options for their business and their employees.

1.

Managers need to learn how to manage these flexible work arrangements and consider how to offer flexibility to hourly workers. a.

Early research on managing remote workers suggests that many managers struggle with the task; the virtual work environment, in particular, exposes many managers’ weaknesses in tracking and encouraging performance.

2.

61 percent of US workers cannot work remotely due to the nature of their job.

ANSWERS TO REVIEW AND DISCUSSION QUESTIONS Student answers to these questions will vary.

10-1. Describe a nurse’s working experience in terms of the six elements of organizational design at a hospital adhering to the traditional view. How would work be different for a nurse at a hospital managed according to the contemporary view of organizational design?

The six elements of organizational design include work specialization, departmentalization, a chain of command, a span of control, centralization and decentralization, and formalization.

The traditional hospital environment would be more representative of the mechanistic organization (or bureaucracy), where adhering to the chain-of-command principle ensures the existence of a formal hierarchy of authority, with each person controlled and supervised by one superior. Keeping the span of control small at increasingly higher levels in the organization created tall, impersonal structures. As the distance between the organization's top and bottom expanded, top management would increasingly impose rules and regulations. Because top managers couldn’t control lower-level activities through direct observation and ensure the use

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of standard practices, they substituted rules and regulations. The high degree of work specialization would ensure the nurse’s jobs were simple, routine, and standardized.

Further specialization through departmentalization increases impersonality and the need for multiple layers of management to coordinate the specialized departments. Under the more contemporary or organic design, the chain of command and its companion concepts— authority, responsibility, and unity of command—are less relevant. The modern view is that the span of control depends on the skills and abilities of the manager and the employees and the characteristics of the situation. Cross-functional teams, free information flow, wider control spans, decentralization, and less formalization would require contemporary nurses to make more decisions on their own. Their jobs would be less standardized, and the hospital would rely more on nurses working as knowledge workers. (LO: 2, Contrast mechanistic and organic structures, AACSB: Application of knowledge) 10-2. Would you rather be a first-line supervisor in a mechanistic or an organic organization?

Why? Student answers will vary but should include justifications for their preferences. A mechanistic organization is a rigid and tightly controlled structure. An organic organization is highly adaptive and flexible. Higher standardization and formalization are perceived by students selecting mechanistic organizations as more manageable for the first-line supervisor job. Others prefer the flexibility the organic organization’s low centralization offers because they want the opportunity to respond quickly to problems and do not believe top-level managers can possess the expertise to make necessary decisions at the lowest levels of the organization. (LO: 2, Contrast mechanistic and organic structures, AACSB: Analytical thinking) 10-3. Contrast the three traditional organizational designs.

Students’ answers to this question will vary. Many students prefer the simple structure and have an affinity for smaller entrepreneurial ventures. Others like the structure provided by a functional and divisional structure of larger organizations, whereas others feel they would be less productive in an organization with structural rigidity. Exhibit 10-8 offer a comparison between the traditional organizational designs. Functional structures have the advantage of cost savings, while the divisional structure focuses more on results. Weakness of the functional structure can lead managers to lose sight of the organization’s larger goals, while divisional structures often have duplication of activities that reduce their efficiency. (LO: 4, Contrast mechanistic and organic structures, AACSB: Reflective thinking) 10-4. With the availability of analytics, smartphones, email, and other advanced technology that allows an organization’s work to be done anywhere at any time, is a clear chain of command and unity of authority still needed? Why or why not?

Although an organization’s work may be done anywhere at any time, organizing remains a vital managerial function because work still must be accomplished, divided, grouped, and coordinated. As these technologies become more prevalent, organizations will offer more flexible work arrangements, but managing remote workers is difficult. Many managers struggle to track and encourage employee performance remotely. Even though companies have successfully continued to operate remotely, employees want to use the technology to create more flexible work arrangements. However, leaders continue to believe in-person interactions are essential to support innovation, problem-solving, and other collaborative work.(LO: 5, Discuss organizing for flexibility in the twenty-first century, AACSB: Reflective thinking)

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10-5. How is managing in a matrix structure different from doing so in a project structure?

Unlike the matrix structure, a project structure has no formal departments where employees return at the completion of a project. Instead, employees take their specific skills, abilities, and experiences to other projects. Also, all work-in-project structures are performed by teams of employees. (LO: 5, Discuss organizing for flexibility in the twenty-first century, AACSB: Analytical thinking) 10-6. What organizational design issues might arise in managing employees’ remote work arrangements? Think about what you have learned about organizational design. How might a narrow span of control, high formalization, and centralization help or hinder a manager attempting to address those issues?

Although an organization’s work may be done anywhere at any time, organizing remains a vital managerial function because the work that must be accomplished must still be divided, grouped, and coordinated. When organizations become more flexible, control and authority become important issues. Without direct supervision (in the case of remote and hybrid work), lines of authority are weak, and managers may feel a loss of control. On the other hand, in the case of flexible work arrangements, employees may feel left out of critical organizational decisions or like they are not considered for important assignments. (LO: 5, Discuss organizing for flexibility in the twenty-first century, AACSB: Analytical thinking) 10-7. How could flexible work schedules be made to increase employee effectiveness? What would a job sharer need to do to make the arrangement work?

Student answers will vary. Managers have to pair people who are compatible and willing to work together at various times. Each person needs the discipline to know when, how, and where they work best, plus the flexibility and willingness to communicate effectively with coworkers for these arrangements to work. Job sharing increases the requirement for collaboration and agreement between two employees performing the same job as one person.

(LO: 5, Discuss organizing for flexibility in the twenty-first century, AACSB: Analytical thinking) 10-8. Why are more companies today relying on contingent workers?

The contingent workforce refers to temporary, freelance, or contract workers whose employment is contingent on demand for their services. Organizations looking for new ways to maximize organizational productivity and efficiency see contingent workers as a cost-effective option. Demand for contingent workers is expected to grow as full-time jobs are eliminated through automation, AI, downsizing, and restructuring. (LO: 6, Explain flexible work approaches for workers, AACSB: Analytical thinking)

ETHICS DILEMMA Student answers to these questions will vary.

In this dilemma, a pediatric nurse is fired from their job because they left their workstation to provide medical assistance to a man having a heart attack at a bus stop near the doctor’s office where they work. The employer fired Thomas Lopez because he opened the company to possible legal action and malpractice claims. From the company’s perspective, the employee

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put the company in jeopardy and, as a result, deserved to be terminated. However, this brings a fascinating view of how work is arranged and the degree of formalization and work specialization a company employs. Because unexpected events occur, this specialized design of pediatrics made a poor match between the medical needs of a nearby adult and the ability of the nurse’s qualifications to adjust their behavior to meet demands of the medical situation.

After this story hit the media, Medical Hills Pediatrics offered the nurse his job back, but he declined.

10-9. What do you think? What ethical concerns do you see in this situation?

Student answers will vary, but many believe the nurse handled the situation ethically. While the nurse made their employer unhappy, these actions were justified since they were needed to save a life. While the employer said the nurse exposed them to liability, most believe saving a life is more important than the danger of later liability issues. (LO: 4, Describe traditional organizational design options, AACSB: Ethical understanding and reasoning) 10-10. What lessons can be applied to organizational design from this story?

The firm should have some flexibility built into its policies that enable nurses and doctors to use their judgment when someone’s life is in danger. Adjusting insurance coverage can also grant medical professionals more freedom and discretion. Many believe they learned one rule cannot apply to every situation. (LO: 5, Discuss organizing for flexibility in the twenty-first century, AACSB: Ethical understanding and reasoning)

SKILLS EXERCISE: DEVELOPING YOUR ACQUIRING POWER SKILL Managers need to know how to acquire and use power to perform well in their jobs. When managers have power, they are less dependent on others for critical resources. And if the resources a manager controls are important, scarce, and nonsubstitutable, their power will increase because others will be more dependent on her for those resources. In this exercise, students are given eight behaviors for effectively acquiring and using power. Students are then asked to keep a journal and identify their use of power and the use of power by a business executive. Students also reflect on ways power is gained and if it is acquired differently in a mechanistic or organic organization structure. (LO: 1, Describe six key elements in organizational design, AACSB: Communication abilities)

WORKING TOGETHER: TEAM EXERCISE Remote work has become a common practice for many organizations and employees.

However, managing virtual remote workers can be challenging. Organizations can create guidelines to help address issues that can come up. Students are asked to assume the role of a manager of a five-person team that has been given the chance to work remotely three days a week and draft guidelines for how the team will be expected to complete their newly created hybrid jobs.

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Then, students are asked to work in groups of three or four to draft guidelines for their office.

Students should be prepared to share their guidelines with the class. (LO: 6, Explain flexible work approaches for workers, AACSB: Analytical thinking)

MY TURN TO BE A MANAGER •

Find examples of organizational chart for a company with a traditional view and another with a contemporary view of organizational design. In a report, describe each of them.

Try to decipher each organization’s use of organizational design elements, especially departmentalization, chain of command, centralization, decentralization, and formalization. (LO: 1, Describe six key elements in organizational design, AACSB: Analytical thinking)

•

Survey at least five different managers as to how many employees they supervise.

Also, ask them the most employees they would feel comfortable supervising and the fewest they would be allowed. Graph your survey results and write a report describing what you found. Draw some deeper conclusions about the span of control by calculating the headcount of supervisors, managers, and executives in an organization with 500 hourly employees. Use the smallest and largest spans of control reported by the managers surveyed to complete your calculations. (LO: 1, Describe six key elements in organizational design, AACSB: Analytical thinking)

•

Using current business periodicals, research open innovation efforts by companies.

Choose three examples of businesses using this and describe and evaluate what each is doing. (LO 5, Discuss organizing for flexibility in the twenty-first century, AACSB: Analytical thinking)

•

Visit the When Work Works website at www. whenworkworks.org. This organization works to bring research on workplace flexibility into practice. Visit the “Find Solutions” page of the website and review the guidance provided for employers. What resources are available for managers looking to create more flexible work arrangements? (LO: 5, Discuss organizing for flexibility in the twenty-first century, AACSB: Analytical thinking)

•

Research the term “digital nomad” and how to become one. Also, visit the Working Nomads at https://www.workingnomads.com/jobs/. Report the feasibility of starting your career as a digital nomad and if your thoughts on the growing contingent workforce or viability of virtual organizations has changed. (LO: 6, Explain flexible work approaches for workers, AACSB: Application of knowledge)

•

Search online for infographics on vocabulary like remote and hybrid work, flexible work arrangements or flex time, span of control, contingent workers, or virtual organizations.

Select an infographic relevant to managers, professionals, or one you find interesting and bring it to class for discussion. (LO: 6, Explain flexible work approaches for workers, AACSB: Application of knowledge)

ANSWERS TO CASE APPLICATION 1 QUESTIONS

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Student answers to these questions will vary.

Making a Flat Organization Work at Punchkick 10-11. How would you describe Punchkick Interactive in terms of the elements of organizational design?

Punchkick did not have specialized work or distinct jobs, jobs were not grouped per se, and there was no real chain of command and limited span of control. The firm is very decentralized and informal. (LO: 1, Describe six key elements in organizational design, AACSB: Analytical thinking) 10-12. What are the strengths and potential areas of concern at Punchkick?

The firm can respond rapidly to client needs, and everyone feels a duty to perform at the highest level. However, if Punchkick were to hire a poor performer, it might be challenging to get that person to leave the firm. This structure ultimately limits the firm’s size. (LO: 1, Describe six key elements in organizational design, AACSB: Analytical thinking) 10-13. What makes a flat, “no boss” structure like Punchkick’s work effectively? In what situations (e.g., industries, organizational sizes, employee characteristics) would this structure not work well?

This works well in intellectual property firms that need creative people. It would not work well in manufacturing, large organizations, and firms where employees need structure and welldefined roles. (LO: 4, Describe traditional organizational design options, AACSB: Analytical thinking) 10-14. What advice would you give to Punchkick to ensure it doesn’t experience the problems that Valve has had?

Pay close attention to performance metrics and staffing. At some point, the firm may grow large enough, and this system may not scale well. Punchkick needs to ensure power groups do not emerge over time. (LO: 4, Describe traditional organizational design options, AACSB: Analytical thinking)

ANSWERS TO CASE APPLICATION 2 QUESTIONS Student answers to these questions will vary.

Life as a Digital Nomad in Foreign Cities 10-15. What are the advantages of digital nomad workers for (a) companies, (b) the workers themselves, and (c) the locations they choose to work?

Contractor workers give companies a flexible workforce and access to some specialties at a much lower long-term cost since it is on a project-by-project basis. The workers can choose

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how to work, hours to work, ways of working, and where they work. The locations can attract highly skilled and more diverse workers while gaining more income for their local economy.

(LO: 5, Discuss organizing for flexibility in the twenty-first century, AACSB: Analytical thinking) 10-16. What are the most important problems you see with being a digital nomad?

Paying your taxes and providing your benefits is problematic. Knowing employment can be terminated without notice and not having workplace recourses like mentorship are problematic.

Pay can be lower in some job roles. (LO: 6, Explain flexible work approaches for workers, AACSB: Analytical thinking) 10-17 Do you think digital nomads make the reality of virtual organizations being widely available more or less likely in the future? Describe how the possibility of working for a virtual organization or as a digital nomad matches your career aspirations.

Student answers will vary. Generally, students have experienced an increase in their virtual education experiences, which informs their perception that virtual organizations will be more widely available. Many have considered working virtually, but for most, the possibility of working as a digital nomad will be unique. As a result, this limits their affinity for working from anywhere. (LO: 5, Discuss organizing for flexibility in the twenty-first century, AACSB: Reflective thinking) 10-18. Do you think the experiences of contingent workers and regular employees would have a better chance of being more similar to one another in a mechanistic or an organic organizational structure? Explain the reasons for your answer.

Student answers will vary. However, most believe that the experiences of these two categories of employees would be more similar in a mechanistic structure. Roles and responsibilities are more clearly defined and standardized, which would make it more challenging to justify differential treatment. (LO: 2, Contrast mechanistic and organic structures, AACSB: Application of knowledge)

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Chapter 11 Managing Human Resources Once an organization’s structure is in place, it’s time to find the people to fill the jobs that have been created. That is where human resource management comes in. It is an important task that involves getting the right number of the right people in the right place at the right time.

LEARNING OBJECTIVES 1. Explain the importance and process of managing human resources.

2. Describe the external influences that affect the human resource management process.

3. Discuss the tasks associated with identifying and selecting competent employees.

4. Explain how companies develop talent.

5. Describe strategies for retaining competent, high-performing employees.

CHAPTER OUTLINE INTRODUCTION The quality of an organization is, to a large degree, dependent upon the quality of the people it hires and retains. Chapter 11 examines the concepts of human resource management.

11.1

WHY MANAGING HUMAN RESOURCE MANAGEMENT IS IMPORTANT Various studies have concluded that an organization’s human resources can be an important strategic tool and can help establish a firm’s sustainable competitive advantage. Human resource management (HRM) is important for several

reasons: 1.

2.

3.

4.

11.2

.

Various studies have shown employees can be a significant source of competitive advantage.

HRM is an important part of organizational strategies.

The way organizations treat their people has been found to significantly impact organizational performance.

The human resource management process consists of eight activities for staffing the organization and sustaining high employee performance. See Exhibit 11-1 for a flowchart of the process and how certain activities affect the retention of competent and high-performing employees.

EXTERNAL FACTORS THAT AFFECT THE HUMAN RESOURCE MANAGEMENT PROCESS.

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Several environmental forces constrain human resource management activities.

The factors most directly influencing the HRM process are economic conditions, employee labor unions, laws and regulations, and demographic trends.

A. The Economy. The economy's ebb and flow—with business cycle changes—directly affect an organization’s human resources. In downturns, management is often forced to reduce staff, cut pay, and reorganize work activities. In strong economies and tight labor markets, management has to raise wages, improve benefits, and explore long-term strategies such as offering flexible work options to attract and keep qualified people.

B. Laws and Rulings. Federal laws and regulations have greatly

expanded the federal government’s influence over HRM (see Exhibit 11-2).

2.

C.

D.

E.

.

Sexual and Other Forms of Harassment—The EEOC defines sexual harassment this way: “Unwelcome sexual advances, requests for sexual favors, and other verbal or physical conduct of a sexual nature constitute sexual harassment when this conduct explicitly or implicitly affects an individual’s employment, unreasonably interferes with an individual’s work performance, or creates an intimidating, hostile or offensive work environment.”

Organizations make programs that have: a.

(1) a clear antiharassment policy, (2) an explicit statement of prohibited behaviors that can be considered harassment, (3) a complaint procedure that encourages employees to come forward, (4) protections for complainants and witnesses against retaliation, (5) an investigative strategy that protects the privacy interests of both the alleged victim and the accused offender, (6) ongoing management training and employee awareness programs, and (7) measures and processes to ensure prompt corrective action to stop ongoing harassment and appropriate disciplinary actions for offenders.

Demography. Demographic trends will continue to play an important role in the human resource function as the pool of workers changes, i.e., there will be an increase in older workers ready for retirement and greater ethnic diversity in the United States. Workforce trends are: a.

A growing population of older workers delaying retirement. b.

Women now account for more than half of the collegeeducated workforce, but they are not represented at top levels in companies Social and Cultural Factors. Companies operate within a society, and societal trends can impact a company’s human resource management practices. Current factors include flexible work arrangements and a growth in a wide variety of wellness-related programs in workplaces.

Labor Unions. A labor union is an organization that represents workers and seeks to protect their interests through collective bargaining. In unionized organizations, many HRM decisions are dictated by collective bargaining agreements, which usually define things such as recruitment sources; criteria for hiring, promotions, and layoffs; training eligibility; and disciplinary practices.

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1.

11.3

.

A minority of workers are in unions now. Unions continue to hold dominant positions in certain businesses—for instance, utilities, transportation, and warehousing—and represent a third of all workers in the public sector (including teachers, police officers, firefighters, and government workers).

IDENTIFYING AND SELECTING COMPETENT EMPLOYEES The HRM process's first phase involves human resource planning, recruitment and decruitment, and selection.

A. Human Resource Planning. Human resource planning. This is the process by which managers ensure they have the right number and kinds of capable people in the right places and at the right time. Through planning, organizations avoid sudden people shortages and surpluses.

HR planning entails (1) assessing current human resources and (2) meeting future HR needs.

1.

Current Assessment—Managers begin HR planning by conducting a current assessment of the organization’s human resource status. a.

This assessment is typically accomplished through a human resource inventory. b.

An important part of a current assessment is the job analysis, which is an assessment that defines jobs and the behaviors necessary to perform them. c.

From this information, management can draw up a job description (or position description), which is a written statement that describes a job. d.

In addition, management must develop a job specification, which is a statement of the minimum qualifications that a person must possess in order to perform a given job successfully.

2.

Meeting Future HR Needs—Future HR needs are determined by looking at the organization’s mission, goals, and strategies.

Developing a future program requires estimates determining if and where the organization will be understaffed or overstaffed.

B. Recruitment and Decruitment.

1.

Recruitment—Recruitment is the process of locating, identifying, and attracting capable applicants. Job candidates can be found using a number of different sources (see Exhibit 11-3). a.

Referrals are effective, and social media is increasing in importance.

2.

Decruitment—Decruitment is reducing an organization’s workforce. Decruitment options include firing, layoffs, attrition, transfers, reduced workweeks, early retirements, and job sharing (see Exhibit 12-4).

C. Selection. Selection is screening job applicants to ensure the most appropriate candidates are hired.

1.

What is Selection?—Selection is an exercise in prediction.

Prediction is important because any selection decision can result in four possible outcomes (see Exhibit 11-5). The major aim of any selection activity should be to reduce the probability of making

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D.

12.4

.

reject errors or accept errors, while increasing the probability of making correct decisions.

2.

Validity and Reliability—A valid selection device is characterized by a proven relationship between a selection device and some relevant job criterion. A reliable selection device measures the same thing consistently.

3.

Types of Selection Tools—Managers can select employees using numerous and varied selection devices. Exhibit 11-6 lists the strengths and weaknesses of each of these devices. a.

Job interviews continue to be one of the most popular selection tools. A work sample test is one of the most reliable and valid tests for predicting an applicant’s future job performance. Work sample tests are hands-on simulations of part or all of the work someone must perform. More elaborate simulation tests may be performed in assessment centers.

5.

Realistic Job Previews—A realistic job preview is a preview of a job that provides both positive and negative information about the job and the company. Including an RJP can increase job satisfaction among employees and reduce turnover.

Technology in the Hiring Process.

1.

Artificial Intelligence—AI is significantly impacting the hiring process. For example, artificial intelligence (AI) is often used to screen a large volume of résumés or to search for niche skill sets. a.

AI can amplify biases in data. Businesses should ensure that the development of AI selection tools includes steps to mitigate bias.

2.

Social Media—Many businesses today hire digital marketing experts to utilize social media in the recruitment process. a.

Caution is advised, as there are problems with potential discrimination by using social media inappropriately in the selection process.

TRAINING AND DEVELOPING EMPLOYEES A. Orientation and Socialization. Orientation is introducing a new employee to their job and the organization.

1.

Work unit orientation familiarizes the employee with the work unit's goals, clarifies how their job contributes to the unit’s goals, and includes an introduction to their coworkers.

2.

Organization orientation informs the new employee about the organization’s objectives, history, philosophy, procedures, and rules.

3.

Major objectives of orientation include the following: a.

To reduce initial anxiety. b.

To familiarize new employees with the job, the work unit, and the organization. c.

To facilitate the outsider-insider transition.

4.

Besides orientation, management should consider helping new employees adapt to the organization’s culture. This practice is called socialization and there are several different options an

159

B.

C.

12.5

.

organization can use to socialize new employees (see Exhibit 117). These options include: a. formal vs. informal b. individual vs. collective c. fixed vs. variable d. serial vs. random e. investiture vs. divestiture Employee Training. Employee training is a critical component of the human resource management program. Managers are responsible for deciding what type of training employees need, when they need it, and what form that training should take.

1.

Types of Training—Types of training include general and specific.

See Exhibit 11-8.

2.

Training Methods—Exhibit 11-9 describes the major types of training that organizations provide. a.

Traditional Training methods. On-the-job training is very common, and it may involve job rotation. Job rotation is onthe-job training that involves lateral transfers to enable employees who work on the same level of the organization to work in different jobs. On-the-job training can also involve mentoring, coaching, experiential exercises, and classroom training. b.

Technology-driven training methods. Today’s organizations increasingly rely on technology-based training, including elearning applications, to communicate important information and train employees.

Developing Employees. Employee development activities are focused on preparing you for your future roles within the company. Employee development activities could include formal education, assessments of skills, mentoring programs, or networking opportunities.

1.

Microsoft provides a range of development activities, as Exhibit 11-10 outlines.

RETAINING COMPETENT, HIGH-PERFORMING EMPLOYEES Providing employees feedback on their work leads to improved performance and helps companies retain workers. Further, companies can design compensation, including pay and benefits, as a way to build a loyal and committed workforce.

A. Performance Feedback. Managers need to know whether their employees are performing their jobs efficiently and effectively or whether improvement is needed. Various performance evaluation tools help managers perform this task.

1.

Traditional performance evaluation methods along with the advantages and disadvantages of each of these methods, are shown in Exhibit 11-11. a.

A written essay appraises performance through a written description of an employee’s strengths and weaknesses, past performance, and potential. b.

Critical incidents are used to appraise performance by focusing on the critical job behaviors. In this technique, the appraiser writes anecdotes to describe what the employee

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B.

.

did that was especially effective or ineffective. Only specific behaviors, rather than vaguely defined personality traits, are cited. c.

The use of graphic rating scales is one of the oldest and most popular performance appraisal methods. This method appraises performance using a rating scale on a set of performance factors. Graphic rating scales list a set of performance factors; the evaluator goes down the list and rates the employee on each factor, using an incremental scale. d.

Using behaviorally anchored rating scales (BARS) is an appraisal approach that appraises performance using a rating scale on examples of actual job behavior. BARS combines major elements from the critical incident and graphic rating scale approaches. The appraiser rates an employee according to items along a scale, but the items are examples of actual behavior on the job rather than general descriptions or traits. e.

Multiperson comparison appraises performance by comparing it with others’ performance. f.

Management by objectives (MBO) is another mechanism for appraising performance. It is often used to assess the performance of managers and professional employees. g.

360-degree feedback appraises performance by using feedback from supervisors, employees, and coworkers.

2.

In some jobs, especially those working with computers, supervisor observation is being replaced by electronic performance monitoring. For example, call centers use this technology to continually collect performance data that can be used to evaluate employees at any time.

Compensation and Benefits. An effective reward system aims to attract and retain competent and talented individuals who can help the organization achieve its mission and goals. A compensation system can include base wages and salaries, wage and salary add-ons, incentive payments, and benefits and services. Factors influencing compensation and benefits packages for employees receive are presented in Exhibit 12-12).

1.

Skill-Based Vs. Variable Pay: Under a skill-based pay system, employees are compensated for the job skills they can demonstrate. Research shows that skill-based pay systems tend to be more successful in manufacturing organizations than in service organizations. Under a variable pay system, an individual’s compensation is contingent on performance.

2.

Bonuses Vs. Annual Pay Increases—Some pay experts recommend replacing annual pay raises with bonuses for high performance. This practice keeps the motivating potential in place.

Motivation is often lost when top and mediocre performers get the same raise.

3.

Pay Secrecy Vs. Transparency—Under the National Labor Relations Act, it is illegal to forbid employees from talking about

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4.

their pay. Laws are shifting in several states to require companies to publish salary ranges to address pay inequity concerns.

Benefit Options—Total compensation also includes benefits, and 57 percent of employees indicated organizational benefits were a top consideration when they decided whether to take the job.

Almost 90 percent stated the right benefit package would make them less likely to leave their jobs. The most important benefits in preference order are: a.

Health insurance b.

Flexible work options c.

Retirement plans d.

Paid time off

ANSWERS TO REVIEW AND DISCUSSION QUESTIONS Student answers to these questions will vary.

11-1. Describe how human resource management practices can be a source of competitive advantage for a company.

The Human Capital Index found that people-oriented HR gives organizations a competitive advantage by creating superior shareholder value. Other research shows CEOs who believe human capital is key can attain a competitive advantage. (LO: 1, Explain the importance and process of managing human resources, AACSB: Analytical thinking) 11-2. Describe the external environmental factors that most directly affect the HRM process.

The external environmental factors that affect HR include economic conditions, unionization, the legal environment, and demographic trends. (LO: 2, Describe the external influences that affect the human resource management process, AACSB: Analytical thinking) 11-3. Why should HR complete a job analysis and update the job description before they screen and interview job candidates? Which selection devices work best for professional jobs?

A job analysis defines a job and the behaviors necessary to perform it. It also determines the knowledge, skills, and abilities required to perform this job adequately. Because this information is gathered by directly observing individuals on the job, interviewing employees individually or in a group, , or having job “experts” (usually managers) identify a job’s specific characteristics, which gives HR and managers the information needed to match applicant qualifications to the needs of the job. The different selection devices include application forms (best used for gathering employee information), written tests (must be job-related), work sampling (appropriate for complex nonmanagerial and routine work), assessment centers (most appropriate for top-level managers), interviews

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(widely used, but most appropriate for managerial positions, especially top-level managers), background investigations (useful for verifying application data, but reference checks are essentially worthless), and physical exams (useful for work that involves certain physical requirements and for insurance purposes). (LO: 3, Discuss the tasks associated with identifying and selecting competent employees, AACSB: Analytical thinking) 11-4. What are the benefits and drawbacks of realistic job previews? (Consider this question from the perspective of both the organization and the employee.)

This question would be a good springboard for debate as well, with half of the class looking at RJPs from the organization’s viewpoint and the other half of the class looking at RJPs from the employee’s viewpoint. In addition, students should be encouraged to describe occasions when they have received an RJP in an interview setting. Students could also be encouraged to share aspects or characteristics of jobs they currently hold that should be communicated by an interviewer to prospective employees as part of an RJP in an employment interview. (LO: 3, Discuss the tasks associated with identifying and selecting competent employees, AACSB: Analytical thinking) 11-5. Describe the different types of orientation and training and if each can be effectively provided virtually.

Orientation is important because it results in an outsider-insider transition that makes the new employee feel comfortable and fairly well-adjusted, lowers the likelihood of poor work performance, and reduces the probability of an early surprise resignation. The two types of training are general (includes communication skills, computer skills, customer service, and personal growth) and specific (includes basic life/work skills, customer education, diversity/cultural awareness, and managing change). This training can be provided using traditional training methods (on-the-job, job rotation, mentoring and coaching, experiential exercises, workbooks/manuals, and classroom lectures) or by technology-based methods (CD/DVD/videotapes/audiotapes, videoconferencing or teleconferencing, or e-learning). (LO: 4, Explain how companies develop workplace talent , AACSB: Analytical thinking) 11-6. List the factors that influence employee compensation and benefits.

The factors are: employee’s tenure and performance, kind of job performed, kind of business, unionization, labor or capital intensive business, management philosophy, geographic location, company profitability, and company size. (LO: 5, Describe strategies for retaining competent, high-performing employees, AACSB: Analytical thinking) 11-7. Describe the different performance appraisal methods.

A written essay appraises performance through a written description of an employee’s strengths and weaknesses, past performance, and potential. Critical incidents are used to appraise performance by focusing on the critical job behaviors. In this technique, the appraiser writes anecdotes to describe what the employee did that was especially effective or ineffective. The use of graphic rating scales is one of the oldest and most popular performance appraisal methods. This method appraises performance using a

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rating scale on a set of performance factors. The graphic rating scales list a set of performance factors; the evaluator goes down the list and rates the employee on each factor, using an incremental scale. Using behaviorally anchored rating scales (BARS) is an appraisal approach that appraises performance using a rating scale on examples of actual job behavior. BARS combines major elements from the critical incident and graphic rating scale approaches. The appraiser rates an employee according to items along a scale, but the items are examples of actual behavior on the job rather than general descriptions or traits. Multiperson comparison appraises performance by comparing it with others’ performance. Management by objectives (MBO) is another mechanism for appraising performance. It is often used to assess the performance of managers and professional employees. 360-degree feedback appraises performance by using feedback from supervisors, employees, and coworkers. (LO: 5, Describe strategies for retaining competent, high-performing employees, AACSB: Analytical thinking)

ETHICS DILEMMA Student answers to these questions will vary.

As the use of technology increases, it becomes easier to monitor employees in a number of ways. And, there are essentially no laws that prohibit organizations from even telling employees they are under video surveillance or other types of electronic monitoring. Students are asked how they feel about this issue and how others will be impacted by this growing concern.

11-8. What are the positives and negatives of monitoring employees electronically?

Student answers will vary. However, electronic monitoring can help prevent employees from slacking off too much and allow the organization to improve efficiency. The downside is that it could affect employee morale and increase turnover. (LO: 5, Describe strategies for retaining competent, high-performing employees, AACSB: Analytical thinking) 11-9. How might employee electronic monitoring affect employee retention, engagement, and productivity?

Student answers will vary, but electronic monitoring signals that the organization does not trust employees. Many believe monitoring could increase turnover and limit engagement. It can be unclear for many if monitoring will help or hurt productivity. Most perceive that others need to be monitored, and few perceive they need to be monitored.

(LO: 5, Describe strategies for retaining competent, high-performing employees, AACSB: Ethical understanding and reasoning) 11-10. If employers want to monitor employees electronically, how should they do it ethically? How should they decide whether a specific monitoring practice is appropriate or is going too far?

While there is no right or wrong answer to this dilemma, students should be aware that firms can legally engage in electronic monitoring. (LO: 5, Describe strategies for

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retaining competent, high-performing employees, AACSB: Ethical understanding and reasoning) SKILLS EXERCISE: DEVELOPING YOUR INTERVIEWING SKILLS This exercise should help students develop their interviewing skills. After giving seven tips for administering an interview, students go through these steps by imagining they are the president of a successful student organization and need to interview three students for the treasurer role in their organization. To prepare for the interview, they will research the typical responsibilities of a student organization treasure, write three questions, create examples of poor, average, and excellent answers for each question, and vet these questions and answers by reviewing them with another student. (LO: 3, Discuss the tasks associated with identifying and selecting competent employees, AACSB: Application of knowledge)

WORKING TOGETHER: TEAM EXERCISE Students are asked to reflect on their experiences with employee onboarding and organizational socialization. After writing down notes about the employee socialization process at their last job, students are asked to think about what they might need to learn during the socialization that could be helpful to them for a job. Then, working in groups of three or four, students are asked to create a list of onboarding “dos and don’ts” for companies.

(LO: 4, Explain how companies develop workplace talent., AACSB: Reflective thinking)

MY TURN TO BE A MANAGER

.

•

Studies show that women’s salaries still lag behind men’s, and even with equal opportunity laws and regulations, women are paid about 82 percent of what men are paid. Minority women earned even less of a percentage of what men are paid, at 58 percent for Hispanic or Latina women and 63 percent for Black women. However, women ages 25 to 34 earned 92 percent of what men in the same age group were paid. Do some research on designing a compensation system that would address this issue. Write up your findings in a bulleted list format. (LO: 5, Describe strategies for retaining competent, high-performing employees , AACSB: Analytical thinking)

•

The American Federation of Labor and Congress of Industrial Organizations (AFL/CIO) is a national trade union center and the largest federation of unions in the United States. Visit the organization’s website at www.aflcio.org. Explore the website and identify issues that are of current concern for today’s labor unions.

(LO: 2, Describe the external influences that affect the human resource management process, AACSB: Reflective thinking)

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•

The US approval of labor unions is at its highest level since 1965. Approval is particularly high among younger workers. Collect some information to uncover why opinions of unions have been changing, and write up your findings so you can present them to your class. (LO: 2, Describe the external influences that affect the human resource management process, AACSB: Analytical thinking)

•

Go to the Society for Human Resource Management website (www.shrm.org) and look for the “HR News” page. Pick one of the news stories to read. (Note: Some may be available only to SHRM members, but others should be generally available.) Write a summary of the information. At the end of your summary, discuss the topic’s implications for managers. (LO: 5, Describe strategies for retaining competent, high-performing employees , AACSB: Reflective thinking)

•

Find Fortune’s “Best Companies to Work For” list online. Read the profiles of the top companies. Identify the types of benefits and other company characteristics that are common among these companies. Collect this information in a formal report you can present to your class. (LO: 5, Describe strategies for retaining competent, high-performing employees, AACSB: Analytical thinking)

•

Visit an online job board and learn about how a company posts a job. Pick any online job board, such as www.monster.com, www.careerboard.com, www.indeed.com, the career services site at your school, or a local job board.

Click on the “Employers” tab and read about the process employers are asked to go through to post a job. (LO: 3, Discuss the tasks associated with identifying and selecting competent employees, AACSB: Multicultural and diversity understanding)

•

Work on your résumé. If you don’t have one, research what a good résumé should include. If you have one already, make sure it provides specific information that explicitly describes your work skills and experience rather than meaningless phrases such as “results-oriented.” (LO: 3, Discuss the tasks associated with identifying and selecting competent employees, AACSB: Application of knowledge)

•

Set up a profile on LinkedIn. Make sure you use a professional photo and provide a complete profile. Go on YouTube and watch a video or two on how to use LinkedIn for Business to get a perspective on how companies can use LinkedIn in the hiring process. (LO: 3, Discuss the tasks associated with identifying and selecting competent employees, AACSB: Application of knowledge)

•

Search for human resources analytics videos, training, certification, or degree programs online. How could an organization use one or some of the ideas presented to make a difference in the workplace? (LO: 5, Describe strategies for retaining competent, high-performing employees, AACSB: Reflective thinking)

ANSWERS TO CASE APPLICATION 1 QUESTIONS

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Student answers to these questions will vary.

Employees with Side Hustles: It’s No Secret ***The case in the textbook may need to be revised from- Everyone knew the daytime IT employee worked a night hustle on nights and weekends to launch their own line of barbeque sauces—to—Everyone knew the daytime IT employee worked a side hustle on nights and weekends to launch their own line of barbeque sauces.*** 11-11. Do you agree with how the HR manager addressed the employee complaints?

Are there any challenges that this approach fails to address?

Responses to this question will vary by student. Most students will agree that HR addressed the complaint appropriately. HR met with the employee in private and communicated to all involved clearly and transparently. HR also pointed out a policy was already in place, described the justification behind the policy, and set a process for continuing to review employee performance. (LO: 5, Describe strategies for retaining competent, high-performing employees, AACSB: Analytical thinking) 11-12. What are the advantages and disadvantages of in-person, hybrid, and virtual employees also working side hustles and second jobs?

The company points out the advantages of side hustles, including encouraging entrepreneurial thinking and the chance for employees to seek, find, and follow a fulfilling life; the side hustles often energize employees and give them opportunities to develop new skills. Those in hybrid and virtual work arrangements can create more flexible work hours, work-from-home options, and the chance to select their projects and follow their passions. Disadvantages include employees who burn out from the need to work multiple jobs to make ends meet, or if work quality and absences become problematic. (LO: 5, Describe strategies for retaining competent, high-performing employees, AACSB: Analytical thinking) 11-13. Is it a good practice to hire an employee with a side business? What evidence would be needed to justify your position?

Student opinions will vary. Many will see the benefits of employees running a side business because the business mindset and networking can carry from the side business to the other job. These opportunities allow employees with a side business to share the responsibility for career development. Knowledge workers with side businesses will likely demonstrate creativity and other valuable characteristics employers find essential. (LO: 3, Discuss the tasks associated with identifying and selecting competent employees, AACSB: Analytical thinking) 11-14. Should HR take additional steps to ensure the salaries of the director of sales, social media, and marketing and the IT employee are high enough? Justify your response.

Yes, proactively reviewing salaries is a good practice to ensure appropriate compensation. There is no penalty for being proactive, even if no changes are needed.

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(LO: 5, Describe strategies for retaining competent, high-performing employees, AACSB: Analytical thinking)

ANSWERS TO CASE APPLICATION 2 QUESTIONS Student answers to these questions will vary.

Keeping Dealership Sales Staff from Leaving at Nissan 11-15. What HRM process should owners of car dealerships address to continue to minimize the impact of salespeople turnover?

Students will often select human resource planning because it is the process by which managers ensure that they have the right number and kinds of capable people in the right places and at the right times. Through planning, organizations avoid employee shortages. HR planning entails (1) assessing current human resources and (2) meeting future HR needs. However, the dealership is already aware of the need for more salespeople. The owners need to find ways of recruiting and selecting the right people or better ways to compensate employees to retain current salespeople, or both. (LO: 3, Discuss the tasks associated with identifying and selecting competent employees, AACSB: Analytical thinking) 11-16. Several of the compensation issues described in this chapter could be applied to this case. Which are they, and how do they apply?

Fixed pay versus variable pay affects this industry as most of the compensation is driven by sales metrics and can vary quite a bit from month to month. Also, inconsistent pay is problematic as younger workers emerging from college desire consistency to pay back student loans. (LO: 5, Describe strategies for retaining competent, high-performing employees, AACSB: Analytical thinking) 11-17. Which of the dealerships’ attempts at reducing turnover seems most promising?

What other jobs might the dealership focus on to ensure turnover there will not become a problem, too?

The “no negotiation” dealers eliminate some of the unpleasant aspects of the job. Online training is likely helpful as well. Dealers could offer to make student loan payments up to a certain amount for students with degrees and student loan debt. This option doesn’t appear much different from tuition reimbursement. The owners could also target older employees with a fixed income who want to work part-time. Dealerships might focus on online car sales, IT, and online marketing jobs. (LO: 5, Describe strategies for retaining competent, high-performing employees, AACSB: Analytical thinking) 11-18. Would converting the dealership to online sales and selling to customers through a digital kiosk at the dealership be an effective way to resolve staffing issues?

Current trends suggest online car sales will grow. Younger generations are familiar with making purchases online, by app, and from a kiosk, and it would seem to be an idea

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worth pursuing. The suggestion that younger salespeople are uncomfortable making face-to-face sales suggests that customers of the same generation would feel the same way about face-to-face car purchases. (LO: 5, Describe strategies for retaining competent, high-performing employees, AACSB: Analytical thinking)

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Chapter 12 Managing Change and Innovation Change is a constant for organizations and managers. Because change cannot be eliminated, managers must learn how to manage it successfully. Because innovation is often closely tied to an organization's change efforts, managers must also know how to handle it. The ability to innovate and evolve requires a company with the capacity to change. In this chapter, students will learn about the change process, why people resist it, and what managers can do to overcome that resistance. Then, students learn about driving innovation in organizations.

LEARNING OBJECTIVES 1.

2.

3.

4.

5.

6.

Describe making the case for change.

Compare and contrast views on the change process.

Classify areas of organizational change.

Explain how to manage change.

Compare different types of innovation.

Describe how managers can simulate innovation.

CHAPTER OUTLINE 12.1

.

THE CASE FOR CHANGE Organizational change is defined as any alteration of people, structure, or technology in an organization. Instead of trying to eliminate change, managers must realize that change is always present and that they should seek ways to manage change successfully. Change requires a catalyst. The manager may act as a change agent— someone who acts as a catalyst and assumes the responsibility for managing the change process.

A. Living with VUCA. Today's business environment is becoming increasingly complex and unpredictable. Military planners call this VUCA—an environment of nonstop volatility, uncertainty, complexity, and ambiguity. Exhibit 12-1 shows that both external and internal forces create the need for change.

B. External Forces for Change. External forces creating the need for change come from various sources: 1.

Consumer Needs and Wants—Sometimes, a company may make changes that fail to meet customer preferences. Such reversals often require companies to change their workflows, processes, and even staffing structures.

2.

New Government Laws—Five broad categories of governmental laws directing managers' behavior include truth in advertising, employment, and labor fair practices, environmental protection, privacy, and safety and health.

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3.

C.

Technology—Emerging technologies require businesses to make many changes, from workflows and processes to product offerings.

4.

The Economy—Managers must respond to changes in economic forces.

Internal Forces for Change. Internal forces for change come from decisions or influences within the company. These internal forces include: 1.

New Organizational Strategy—When top management changes its organization's strategy, it can affect all segments of the business.

2.

Composition of the Workforce—Inclusively managing a diverse workforce based on surface-level variables, including age and race, as well as deep-level variables, including differences in values, personality, and work preferences.

3.

New Equipment—Technological changes like 3-D printers and genomics, biotechnology, robotics, connected care, and artificial intelligence dramatically impact business processes.

4.

Employee Attitudes—Changing attitudes challenge managers to adopt methods to support employees through organizational changes.

12.2

THE CHANGE PROCESS Two very different metaphors can be used to describe the change process.

A. The Calm Waters Metaphor. The calm waters metaphor characterizes the process of change as being like a ship crossing a calm sea. The calm waters metaphor can be illustrated by Lewin's three-step chance process (see Exhibit 12-2).

1.

Unfreezing the equilibrium is the first step. Unfreezing the equilibrium can be accomplished in one of three ways: a.

Increasing driving forces are forces that direct behavior away from the status quo. b.

Decreasing restraining forces, which are forces that hinder movement from the existing equilibrium. c.

Combining the two approaches.

2.

The next step is to implement the change itself.

3.

The final step is to refreeze the situation.

B. The White-Water Rapids Metaphor. The white-water rapids metaphor describes change that takes place in uncertain and dynamic environments. To put the two views into perspective, it is helpful to note that not every manager constantly faces chaotic change. However, the number of managers who do not face this type of environment is rapidly dwindling!

12.3

AREAS OF CHANGE The need for change in organizations has accelerated over the last several years. From the shift to remote work and the need for digital transformation, to responding to labor shortages and supply chain challenges, businesses managed on average ten planned changes in 2022, compared to only two in 2016. See Exhibit 12-3 for the five areas of change managers focus on (strategy, structure, culture, technology, and people).

A. Strategy. Companies that fail to change their strategy when

circumstances dictate it run the risk of failing. Changing strategy involves modifying the approach to ensure the organization's success.

B.

.

Structure. Changes in the external environment or organizational strategies often lead to changes in the organizational structure. Managers can alter one or more structural components of the organization, such as work specialization,

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C.

D.

E.

departmentalization, chain of command, span of control, centralization and decentralization, and formalization.

Culture. An organization's culture is difficult to change. Successfully changing an organization's culture can take years; certain cultures are easier to change than others. Favorable conditions for culture change include: 1.

A dramatic crisis occurs.

2.

When leadership changes hands.

3.

The organization is young and small.

4.

The organization has a weak culture.

5.

A strategy for managing cultural change is described in Exhibit 12-4. a.

There is no guarantee that the cultural change efforts will succeed. Organizational members don't quickly let go of values that they understand and have worked well for them.

Technology. Today, technological changes usually involve the introduction of new equipment, tools, or methods; automation; or computerization.

1.

The Internet of Things (IoT) is a network of physical objects embedded with sensors and software that allows connections and data sharing across systems and other devices over the Internet.

People. Organizational development (OD) is a technique or program to change people and the nature and quality of interpersonal work relationships.

1.

Exhibit 12-5 provides descriptions of the most popular OD approaches.

12.4

MANAGING CHANGE Managers are motivated to initiate change when they are committed to improving organizational performance.

A. Why Do People Resist Change? Resistance to change is a natural event in organizations and occurs for the following reasons: uncertainty, habit, concern about personal loss, and the belief that the change is not in the organization's best interest.

B. Techniques for Reducing Resistance to Change. Organizations can build up inertia that actually motivates employees to resist change. The techniques for reducing resistance are listed in Exhibit 12-6. They are: 1. Education and communication 2. Participation 3. Facilitation and support 4. Negotiation 5. Manipulation and co-optation 6. Coercion

12.5

EXPLORING INNOVATION Innovation is essential to organizational success in a dynamic marketplace.

A. Creativity Versus Innovation.

1.

Creativity is the ability to combine ideas in a unique way or to make unusual associations between ideas.

2.

Innovation is taking creative ideas and turning them into useful products or work methods.

B. Disruptive Innovation. Disruptive innovation describes innovations in products, services, or processes that radically change an industry's rules of the game. As Exhibit 12-7 illustrates, no shortage of businesses has suffered at the expense of disruptive innovation.

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1.

C.

D.

12. 6

.

Disruptive innovations, especially at the beginning, typically apply to emerging or small markets and project lower profits than a firm's mainline products.

2.

Large and successful companies are motivated to repeat what has succeeded in the past and invest in ideas that offer the highest probability of generating maximum profits—and those aren't disruptive innovations.

Breakthrough Innovation. New products, industries, jobs, and profit growth can come from innovation without making another product or industry obsolete.

A breakthrough innovation creates a market where one did not exist before.

Sustaining Innovation. Sustaining innovation represents small and incremental changes in established products rather than dramatic breakthroughs. Most innovation in business is sustaining innovation.

DRIVING INNOVATION An intentional approach is necessary to drive innovation. Intentional approaches to innovation require companies to first invest in ideation, where new ideas are discovered and developed. They then can turn to incubation, where new ideas are tested and validated.

A. Creating an Environment to Stimulate Innovation. Three sets of variables have been found to stimulate innovation (see Exhibit 7-8).

1.

Structural Variables—Research into the effect of structural variables on innovation shows five things. a.

Organic structure b.

Resources c.

Communication d.

Time e.

Support creativity 2.

Cultural Variables—An innovative culture is likely to have the following characteristics: a.

Acceptance of ambiguity b.

Tolerance of the impractical c.

Minimize external controls d.

Tolerance of risk e.

Tolerance of conflict f.

Focus on ends rather than means h.

Provide positive feedback 3.

Human Resource Variables—People play an important role in innovative organizations. a.

Innovative organizations actively promote the training and development of their employees so that their knowledge will be current. b.

Innovative organizations offer employees high job security. c.

Innovative organizations encourage individuals to become idea champions—that is, individuals who actively and enthusiastically support new ideas, build support, overcome resistance, and ensure that the innovations are implemented.

B. Ideation. As the competitive business environment has challenged companies to move beyond just being product manufacturers, business leaders have

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C.

embraced a wide range of approaches to finding or creating new ideas to become innovative.

1.

Design Thinking—Design thinking is an approach that asks managers to approach management problems as designers approach design problems. This is a human-centered innovation strategy, summarized in four steps: a.

Clarify for inspiration b.

Ideate c.

Develop d.

Implement and iterate 2.

Crowdsourcing—Another approach to ideation, which can be difficult to manage, is called crowdsourcing. The term refers to relying on a network of people outside the organization's traditional set of decision-makers to solicit ideas via the Internet.

3.

Artificial Intelligence—Besides using artificial intelligence (AI) to innovate processes such as chatbots to improve customer service, AI tools can support creative ideation. Exhibit 12-9 provides sample AI prompts for ideation.

Incubation. The incubation process helps the company validate whether it makes sense to invest in an idea. The business model canvas is useful for determining if an idea should be pursued.

1.

Business Model Canvas—The business model canvas (BMC) helps businesses validate new ideas. The nine building blocks explore an idea's feasibility, desirability, and viability. a.

The viability of an idea is determined by examining costs and potential revenue—that is should we do this? Finally, the value proposition is a statement that explains how the innovation satisfies a customer's need.

2.

Skunk Works—Many companies have learned that disruptive innovation must be carried out by a separate group that is physically and structurally disconnected from the business's main operations. These separate groups are frequently referred to as skunk works—defined as a small group within a large organization, given a high degree of autonomy and unhampered by corporate bureaucracy, whose mission is to develop a project primarily for the sake of radical innovation.

ANSWERS TO REVIEW AND DISCUSSION QUESTIONS Student answers to these questions will vary.

12-1. Why is a change agent needed for organizational change? Is a low-level employee better positioned to be a change agent addressing internal or external forces for change? Explain your answer.

A change agent acts as a catalyst and assumes the responsibility for managing the change process. Change agents can come from inside or outside the organization, and from different levels within the organization. If the low-level employee is a low-level manager, it is possible

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that he or she could act as a change catalyst, just as any manager can be a change agent.

However, it is essential to note that change should begin at the top and work its way down.

Change is most successful when it is supported by top management. Also, it is important to remember that as organizations empower employees, they may empower them as change agents. Organizations often hire outside consultants to provide advice and assistance for major changes. As outsiders, they can provide an objective perspective that insiders may lack. But outside consultants typically have a limited understanding of the organization's history, culture, operating procedures, and people. They are also more likely to initiate drastic changes because they don't have to deal with the repercussions after the changes are implemented. In contrast, internal change agents may be more thoughtful but possibly overly cautious because they must live with the consequences of their decisions. (LO: 1, Describe making the case for change, AACSB: Analytical thinking) 12-2. Contrast the calm waters and white-water rapids metaphors of change.

According to the calm waters scenario, an occasional disruption (a “storm”) means changing to deal with the disruption. On the other hand, the white-water rapids metaphor implies a dynamic environment with constantly changing paradigms and high levels of competition. (LO: 2, Compare and contrast views on the change process, AACSB: Analytical thinking) 12-3. What is organizational development, and which of the five types of change does it relate to? How do organizational development techniques support organizational change?

Managers primarily focus on five areas of change, including strategy, structure, culture, technology, and people. Changing people is organizational development led by internal human resource specialists or outside consultants. Organizational development describes the change methods that focus on people and the nature and quality of interpersonal work relationships.

Organizational development techniques, including sensitivity training, team building, intergroup development, process consultation, and survey feedback, help bring about changes in an organization's employees and improve the ability to work together. (LO: 3, Classify areas of organizational change, AACSB: Analytical thinking) 12-4. Why do managers need to be prepared for employees who will resist change? Provide examples of ways managers can reduce employees' resistance to change.

Change is often a threat to people in organizations, because change replaces the known with uncertainty. People in organizations resist change for many reasons, including uncertainty, habit, concern over personal loss, and the belief that the change is not in the organization's best interest. Managers can use the following techniques (Exhibit 12-6) to reduce resistance to change: education and communication; participation; facilitation and support; negotiation; manipulation and co-option. (LO: 4, Explain how to manage change, AACSB: Analytical thinking) 12-5. Compare and contrast disruptive and breakthrough innovation. What are the steps a manager can take to sustain innovation?

Disruptive innovation describes innovations in products, services, or processes that radically change an industry's rules of the game. Often, a smaller company with fewer resources successfully challenges established companies. Those smaller companies prove themselves to be disruptive by serving overlooked segments of possible consumers with products or services

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at relatively low prices. Economist Joseph Schumpeter used “creative destruction” to describe how capitalism builds on processes that destroy old technologies but replace them with new and better ones. That, in essence, is disruptive innovation. However, innovations do not have to be disruptive to create a new market. New products, industries, jobs, and profit growth can come from innovation without making another product or industry obsolete. A breakthrough innovation creates a market where one did not exist before. This opportunity to create new markets where none existed before is an innovation strategy for companies that also benefits society because it does not require the destruction of other companies. Three sets of variables have been found to stimulate innovation. They pertain to the organization’s structure, culture, and human resource practices (Exhibit 12-8). Managers committed to human resource variables or supporting key cultural variables are best positioned to sustain innovation. Most innovation in business is sustaining innovation because businesses ask managers to find ways for the business to get better at what they do. When managers focus on sustaining innovations, they can help a company stay on top of changing markets. By working on sustaining innovations, managers can also build a company’s overall capability to innovate. However, sustaining innovation is not always enough to stay ahead. (LO: 5, Compare different types of innovation, AACSB: Analytical thinking) 12-6. Why should organizational managers be concerned about reducing employee stress levels? 6.1 7.5 Stress in the workplace is at an all-time high. According to Gallup's most recent State of the Global Workplace Report, 44 percent of workers worldwide experience daily stress. There are many causes of stress at work, including workload, relationships with others, and work–life conflicts. At the root of many of these stressors is organizational change. During times of change, workload often increases and workers feel uncertainty, which leads to feelings of stress. (see Workplace Confidential Coping with Stress). (LO: 4, Explain how to manage change, AACSB: Analytical thinking) 12-7. Innovation requires allowing people to make mistakes. However, being wrong too many times can be disastrous to your career. Do you agree? Why or why not? What are the implications for nurturing innovation?

This question offers an opportunity to set up a debate in class. Ask half of the students in the class to argue that being wrong can be fatal, and have the remaining half argue that being wrong does not have to be fatal. Students must, however, understand and be able to incorporate the relationship between nurturing innovation and “punishing” failure. If an organization punishes employees for failing, employees will cease to “take a chance” on innovation, and innovative activity will decline. (LO: 6, Describe how managers can stimulate innovation, AACSB: Analytical thinking) 12-8. Provide an example of a disruptive innovation. What impact did this innovation have on the industry?

Student responses to this question will vary depending on the disruptive innovation chosen.

Students should demonstrate an understanding of the significance of disruptive innovation in industries and organizations. (LO: 5, Compare different types of innovation, AACSB: Analytical thinking)

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ETHICS DILEMMA Stress management and counseling can be an important aid for employees. In this dilemma, students are asked to address why employees would not take advantage of these benefits.

The authors mention a paradox; employees are experiencing stress but feel that they don't want to admit to being stressed (which may make the stress even worse). Students are encouraged to think of ways to change the perception of stress management programs and to get employees to participate.

12-9. What can be done to resolve the paradox of employees needing stress management assistance but being reluctant to take advantage of assistance programs offered to deal with stress?

Student answers will vary, but some companies use employee assistance programs (EAPs) that keep employees' names confidential. Another way to remove the stigma of stress management programs may be to take the opposite approach and have employees write testimonials of their benefits. These could be published in a company newsletter (again, with the names confidential). Managers also need to respect employees' autonomy, and employees can, with informed consent, decide to and not to take advantage of assistance programs. (LO: 4, Explain how to manage change, AACSB: Ethical understanding and reasoning abilities) 12-10. Does offering wellness programs, whether employees participate in the programs or not, absolve an organization of the ethical responsibility to address employees' work-related stress?

Justify your response.

Student answers will vary, but the simple answer to this question is yes. For many employees, the stressful nature of the job causes employees' poor behavior at work, which can spill over into their home life. Helping them deal with stress should also result in better job performance and lower turnover. Additionally, knowing about the problem and consequences of stress does require those with the power and resources to take action to solve or minimize its effects. A standard morality norm is to help reduce suffering when we can. Managers often have the ability and responsibility to act in ways that remove employees from harm. (LO: 4, Explain how to manage change, AACSB: Ethical understanding and reasoning abilities)

SKILLS EXERCISE: DEVELOPING YOUR CHANGE-MANAGEMENT SKILL In this exercise, students are asked to assume the role of hospital administrator overseeing teams of emergency room and floor nurses after the hospital president has requested a change in the training nurses receive. Completing the exercise allows students to work on personal skills that will help make them better change agents. Change management is necessary for two reasons: first, managers are constantly making changes, and second, employees almost always resist change. (LO: 4, Explain how to manage change, AACSB: Reflective thinking)

WORKING TOGETHER: TEAM EXERCISE

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Students are asked to first individually search for pictures of the most spectacular corporate headquarters on the Internet, select one that would be able to spark their innovation, and identify amenities that create an environment where they would be innovative. In groups of three to four, students should discuss the work environments each was able to find. Students should be prepared to share their ideas on the structure, culture, and human resource practices they would choose for their organization. (LO: 6, Describe how managers can stimulate innovation, AACSB: Analytical thinking)

MY TURN TO BE A MANAGER

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•

Choose two organizations you are familiar with that have 500 or more employees and assess whether these organizations face a calm waters or white-water rapids environment. Write a short report describing these organizations and your assessment of the change environment each faces. Be sure to explain your choice of change environment. (LO: 2, Compare and contrast views on the change process, AACSB: Analytical thinking)

•

Reflect on a significant change you have experienced in your life (for example, moving to a new school, going to college, or a family problem such as a divorce). Did you resist the change? Why? Did you use any strategies to adjust to the change? What could you have done differently? Write your reflection and note of how you could effectively manage future changes in your life. (LO: 2, Compare and contrast views on the change process, AACSB: Reflective thinking)

•

Choose an organization, and go to its website and review the “about” portion of the website. Describe the culture (shared values and beliefs) the company is presenting.

Select two of those values/beliefs and describe how they could help or hinder organizational change. Put this information in a report. (LO: 6, Describe how managers can stimulate innovation, AACSB: Analytical thinking)

•

When you find stress prevents you from performing at your best, write down what is causing the stress, what stress symptoms you are exhibiting, and how you are dealing with the stress. Keep this information in a journal and evaluate how well your stress reducers are working and how you could handle stress better in the future. (LO: 4, Explain how to manage change, AACSB: Analytical thinking)

•

Visit www.testmycreativity.com to take an assessment to measure your creativity. What is your level of creativity in comparison with others? What are your strengths? Your weaknesses? Do you agree with the assessment? (LO: 5, Compare different types of innovation, AACSB: Reflective thinking)

•

Research information on how to be a more innovative professional. Write down suggestions in a bulleted-list format and be prepared to present your information in class. (LO: 1, Describe making the case for change, AACSB: Reflective thinking)

•

What businesses and jobs would be disrupted if 50 percent of vehicles purchased each year were electric or if 50 percent of people used car-sharing services (like Uber and

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Lift) to travel to and from professional sporting events and concerts? (LO: 5, Compare different types of innovation, AACSB: Analytical thinking) •

Research managing organizational change or the rate of change in business on the Society of Human Resource Management website. Select the information you find interesting and surprising. Put this information in a report and present it to your class.

(LO: 6, Describe how managers can stimulate innovation, AACSB: Analytical thinking)

ANSWERS TO CASE APPLICATION 1 QUESTIONS Student answers to these questions will vary.

Change from Within at Google 12-11. Who were the change agents at Google, and what did they do that made them change agents?

Claire Stapleton and other employees were the primary catalysts for change. They publicized cases of sexual harassment and then solicited ideas from other employees. This tactic resulted in a document with five demands sent to top management. One pseudo-external change agent who helped organize the employees was Claire Stapleton, a marketing manager at YouTube, a Google subsidiary. (LO: 1, Describe making the case for change, AACSB: Analytical thinking)

12-12. What were the internal and/or external forces for change in this case?

The primary forces for change were internal and related to both employee attitudes and top management's hypocritical behavior toward an executive accused of sexual assault. And the subsequent failure to address the employees' five demands to reduce sexual harassment, discrimination, and pay and opportunity inequities for both full-time employees and contractors.

(LO: 1, Describe making the case for change, AACSB: Analytical thinking) 12-13. What areas of organizational change mattered most to employees in this case?

Employees had five demands; to reduce sexual harassment, discrimination, and pay and opportunity inequities for both full-time employees and contractors. Google executives appeared in the employees' view to be supportive and deal with the human resource variables they were concerned about. As a result, employee attitudes were negative and were not supportive of top management. As change agents, the employees publicized the behaviors and attitudes they wanted to change. They also solicited additional input and used Claire Stapleton's help to organize their efforts. (LO: 2, Compare and contrast views on the change process, AACSB: Analytical thinking) 12-14. What techniques for reducing the leaders' resistance to change at Google could employees use to help make further progress toward these changes?

Managers seem fearful about changing the status quo in this case (i.e., restraining force).

Education and communication were the primary techniques used to reduce the leaders'

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resistance to change. However, it wasn't until the information became public that the driving forces for change were strong enough to unfreeze management. Management at Google became receptive to making the issue disappear, which some view as negotiation or coercion.

However, management and employees struggled to change enough to prevent management from reverting back to the old equilibrium state (i.e., the old ways of doing things). (LO: 4, Explain how to manage change, AACSB: Analytical thinking)

ANSWERS TO CASE APPLICATION 2 QUESTIONS Student answers to these questions will vary.

Microsoft Innovative Again 12-15. Why is "innovation" a more accurate word to describe Microsoft's latest efforts than "creativity"?

Creativity refers to the ability to combine ideas in a unique way. Innovation turns creative ideas into useful outcomes. Microsoft focuses on creating useful outcomes by choosing to partner with and purchasing small firms. As a result, it launched ChatGPT. Partnerships generated this new product from Microsoft's decision to implement new processes and procedures a characteristic of innovation. The innovative organization is characterized by its ability to generate new ideas that are implemented in new products, processes, and procedures designed to be useful—that is, to channel creativity into useful outcomes. (LO: 6, Describe techniques for stimulating innovation, AACSB: Analytical thinking) 12-16. What structural, cultural, and/or human resource variables have helped encourage innovation success at Microsoft since 2014?

Microsoft's structural variables include recourse, communication, time, and support for creativity. Cultural characteristics seem to be an acceptance of ambiguity, tolerance for risk, and a focus on ends rather than means. On the human resources side, they have a CEO who is an idea champion, creative people, persistence, and a high commitment toward risk taking.

(LO: 6, Describe how managers can stimulate innovation, AACSB: Application of knowledge) 12-17. Has Microsoft achieved disruptive innovation with its AI products? Why or why not?

Responses to this question will vary by student. Some believe they have achieved disruptive innovation since AI is expected to change an industry's rules of the game radically. Because the impact of AI and ChatGPT has not fully materialized, some suggest that innovation at this time only has the potential to be disruptive or breakthrough innovations. (LO: 6, Describe how managers can stimulate innovation, AACSB: Analytical thinking) 12-18. Is there an example of "sustaining innovation" in this case? Explain.

Responses to this question will vary by student. Microsoft's initial decision to purchase a small company or partnership with another company can be viewed as innovative, but subsequent purchases and partnerships can be viewed as examples of sustaining innovation. The repeated choice represents small and incremental changes in newly established practices

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rather than dramatic breakthroughs. (LO: 5, Compare different types of innovation, AACSB: Analytical thinking)

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Chapter 13 Understanding and Managing Individual Behavior This chapter presents content about employee behavior—specifically, attitudes, personality, perception, and learning. People differ in their behaviors, and even the same person can behave one way one day and a completely different way another day. Managers need to understand employee behavior for the insights it provides in hiring decisions, motivating staff, choosing leadership behaviors, and retaining high-performing employees.

LEARNING OBJECTIVES 1.

2.

3.

4.

5.

Identify the focus and goals of individual behavior within organizations.

Explain the role that attitudes play in job performance.

Describe different personality theories.

Describe perception and factors that influence it.

Discuss learning theories and their relevance in shaping behavior.

CHAPTER OUTLINE INTRODUCTION This chapter examines numerous factors that influence employee behavior and their implications for managers.

13.1

.

FOCUS AND GOALS OF ORGANIZATIONAL BEHAVIOR Organizational behavior is the study of how people act at work. The visible organization can be described as the tip of an iceberg; many of the important issues involved in understanding OB are not easily observed. (See Exhibit 13-1.)

A. Focus of Organizational Behavior. Organizational behavior focuses on two major areas: 1.

Individual behavior 2.

Group behavior B. Goals of Organizational Behavior. The goals of OB are to explain, predict, and influence behavior. Six important behaviors have been identified from the study of OB: 1.

Employee productivity is a performance measure of both efficiency and effectiveness.

2.

Absenteeism is the failure to show up for work.

3.

Turnover is the voluntary and involuntary permanent withdrawal from an organization.

4.

Organizational citizenship behavior (OCB) is discretionary behavior that's not part of an employee's formal job requirements but promotes the effective functioning of the organization.

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5.

6.

13.2

.

Job satisfaction is an employee's general attitude toward their job.

Counterproductive workplace misbehavior is any intentional employee behavior that is potentially harmful to the organization or individuals within the organization.

ATTITUDES AND JOB PERFORMANCE Attitudes are defined as evaluative statements—favorable or unfavorable—concerning objects, people, or events. Attitudes have three components: cognitive, affective, and behavioral.

1.

The cognitive component of an attitude is the part of an attitude that is made up of the beliefs, opinions, knowledge, or information held by a person.

2.

The affective component of an attitude is that part of an attitude that is the emotional, or feeling, part.

3.

The behavioral component of an attitude is that part of an attitude that refers to an intention to behave in a certain way.

Managers are particularly interested in the job-related attitudes of employees.

Job-related attitudes include job satisfaction, job involvement, organizational commitment, and organizational citizenship behavior.

A. Job Satisfaction. Job satisfaction is defined as an employee's general attitude toward their job.

1.

How Satisfied Are Employees?—In general, about 60 percent of US workers reported that they were satisfied with their jobs between 1972 and 2006. However, this number dropped to the low 40s in 2010 (the Great Recession). By 2022, 62.3 percent of workers reported they were satisfied with their job.

2.

Satisfaction and Performance—Following the Hawthorne Studies, many managers believed that if they kept their employees happy, the employees would be productive. Current studies show a fairly strong relationship between satisfaction and performance.

3.

Satisfaction and Absenteeism—Research on job attitudes shows a strong negative relationship between job satisfaction and absenteeism.

4.

Satisfaction and Turnover—The strongest variable related to job satisfaction is turnover. Lower job satisfaction is a good predictor of turnover.

5.

Job Satisfaction and Customer Satisfaction—Job satisfaction has been linked to customer satisfaction, but a converse relationship has also been found to be true; customer dissatisfaction has been related to an employee’s job satisfaction.

6.

Job Satisfaction and OCB—Organizational citizenship behavior is the discretionary behavior that is not part of an employee’s formal job requirements, but promotes the effective functioning of the organization.

While it is obvious that job satisfaction is related to organizational citizenship behavior, other variables such as fairness and the type of citizenship behavior, play a role in the relationship.

7.

Job Satisfaction and Counterproductive Behavior—While predicting how employees will respond is difficult, managers need to be aware that dissatisfied employees may engage in misbehavior or violence at work.

B. Job Involvement and Organizational Commitment. Job involvement is the degree to which an employee identifies with their job, actively participates in it,

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C.

D.

E.

F.

G.

.

and considers their job performance important to their self-worth. Organizational commitment is an employee’s orientation toward the organization in terms of their loyalty to, identification with, and involvement in the organization.

1.

Research about perceived organizational support—employees’ general belief that their organization values their contribution and cares about their well-being—shows that the commitment of the organization to the employee can be beneficial.

2.

High levels of perceived organizational support increase job satisfaction and lower turnover.

Employee Engagement. Employee engagement is when employees are connected to, satisfied with, and enthusiastic about their jobs.

1.

Highly engaged employees have higher retention rates, which helps keep recruiting and training costs low.

Cognitive Dissonance Theory. Research has generally shown that people seek consistency among their attitudes and between their attitudes and their behavior.

Cognitive dissonance refers to any inconsistency that an individual might perceive between attitudes or between behavior and attitudes.

1.

Dissonance or inconsistency leads to an uncomfortable state for the individual, who will try to reduce the inconsistency.

2.

The desire to reduce dissonance is determined by (a) the importance of the factors creating the dissonance, (b) the degree of influence the individual believes they have over those factors, and (c) the rewards that may be involved in dissonance.

3.

Individuals reduce dissonance either by changing their behavior, concluding that the dissonant behavior is not so important after all, by changing the attitude, or by identifying compatible factors that outweigh the dissonant ones.

Assessing Attitude Surveys. Companies often use surveys to ask employees how they feel about their jobs, work groups, supervisors, or the organization.

Exhibit 13-2 provides some sample employee statements from an attitude survey.

Can Artificial Intelligence Help Improve Employee Attitudes? AI tools can support a more accurate assessment of employee attitudes and engagement at work. Using AI provides an opportunity to improve employee attitudes by changing work processes and automating tasks.

1.

AI might fill out forms, schedule, or manage expenses, freeing an employee to spend time on more exciting work.

2.

AI tools might make it easier for an employee to gather and organize information for a report.

Implications for Managers. Managers should focus on factors that are conducive to a high degree of employee satisfaction. Such factors include mentally challenging work, equitable rewards, supportive working conditions, and supportive colleagues.

1.

The implication for managers from understanding attitudes is that there is relatively strong evidence that committed and satisfied employees have lower rates of turnover and absenteeism.

2.

Employees will try to reduce dissonance when they are required to do things that are at odds with their attitudes, but studies show that this feeling is reduced if the rewards are high enough or there is a belief that the dissonance is externally imposed and, therefore, uncontrollable.

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13.3

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PERSONALITY Personality is defined as the unique combination of emotional, thought, and behavioral patterns that affect how a person reacts and interacts with others.

A. MBTI®. The Myers-Briggs Type Indicator (MBTI®) is a general personality assessment. The MBTI® measures four dimensions: 1.

Social interaction: extrovert (E) or introvert (I) 2.

Preference for gathering data: sensing (S) or intuitive (N) 3.

Preference for decision making: feeling (F) or thinking (T) 4.

Style of making decisions: perceptive (P) or judgmental (J) Combining these preferences provides descriptions for about 16 different personality types. Examples of MBTI® personality types are shown in Exhibit 13-3.

B. The Big Five Model. The Big Five Model is a five-factor model of personality.

1.

Research has shown that important relationships exist between these personality dimensions and job performance.

2.

The personality traits in the Big Five Model are listed below: a.

Extraversion b.

Agreeableness c.

Conscientiousness d.

Emotional Stability e.

Openness to Experience 3.

Extraverts perform better in jobs where high social interaction is necessary—like managerial and sales positions.

4.

Conscientiousness is the best predictor of job performance.

5.

Emotional stability is most strongly related to life satisfaction, job satisfaction, and reduced burnout and intentions to quit.

6.

Open people are more likely to be effective leaders and more comfortable with ambiguity.

C. The Dark Triad. Some people have toxic or undesirable personality traits. Three such traits have been dubbed the Dark Triad. They are: 1.

Machiavellianism is the degree to which people are pragmatic, maintain emotional distance, and believe that ends justify means.

2.

Narcissism describes someone with a grandiose sense of selfimportance, who requires excessive admiration, and is arrogant.

3.

Psychopathy refers to someone who lacks concern for others and lacks guilt or remorse when their actions cause harm.

D. Additional Personality Insights. Personality researchers have identified five additional personality traits that have proved to be the most powerful in explaining individual behavior in organizations: locus of control, Machiavellianism, self-esteem, self-monitoring, and risk-taking.

1.

Locus of Control—Locus of Control is the degree to which people believe they control their own fate. Locus of control can be either external or internal.

2.

Self-Esteem—Self-esteem is an individual’s degree of like or dislike for themself.

3.

Self-Monitoring—Self-monitoring is an individual’s ability to adjust his or her behavior to external situational factors.

4.

Risk-Taking—Risk-taking refers to an individual’s willingness to take risks.

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5.

E.

F.

G.

15.4

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Proactive Personality—A proactive personality refers to someone who identifies opportunities, shows initiative, takes action, and perseveres until change occurs.

Personality Types in Different Cultures. Do these personality types transfer across cultures? Although no common personality types are found in a given national culture, a country’s culture can influence the dominant personality characteristics of its people. This is particularly true for the personality trait, locus of control.

Emotions and Emotional Intelligence. Emotional intelligence (EI) is the ability to notice and manage emotional cues and information.

1.

Emotional intelligence is composed of five dimensions: a.

Self-awareness b.

Self-management c.

Self-motivation d.

Empathy e.

Social skills 2.

Research has shown that emotional intelligence is positively related to job performance and leadership skills.

Implications for Managers. Managers are likely to have higher-performing and more satisfied employees if consideration is given to matching personalities with jobs.

1.

John Holland has developed the best-documented personality-job fit theory (see Exhibit 13-4). a.

The key points of his model: Intrinsic differences in personality probably do exist among individuals; there are different types of jobs; and people who work in job environments congruent with their personality types should be more satisfied.

2. Four suggestions related to personality and hiring: a.

Assess vocational interests in the hiring process. b.

Individuals who score high in conscientiousness are dependable, reliable, careful, thorough, organized, hard-working, and persistent. c.

Hire people with high emotional intelligence. d.

Carefully screen job candidates and reject individuals who hold the set of Dark Triad traits.

PERCEPTION Perception is the process of organizing and interpreting sensory impressions in order to give meaning to the environment.

A. Factors that Influence Perception. A number of factors operate to shape and sometimes distort perception: 1.

The perceiver 2.

The target (see Exhibit 13-5) 3.

The situation B. Attribution Theory is a theory that explains how we judge people differently depending on the meaning we attribute to a given behavior. The determination of the cause of the behavior depends on three factors: distinctiveness, consensus, and consistency.

1.

Distinctiveness refers to whether an individual displays different behavior in different situations.

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2.

C.

D.

15.5

.

Consensus refers to whether an individual who is faced with a similar situation responds in the same way with the same behavior.

3.

Consistency refers to the congruency in a person’s actions, whether the person engages in the behaviors regularly and consistently.

4.

Exhibit 13-6 summarizes the key elements of attribution theory.

5.

One of the most interesting findings of attribution theory is that there are errors or biases that distort attributions. a.

The fundamental attribution error refers to the tendency to underestimate the influence of external factors and overestimate the influence of internal factors when making judgments about the behavior of others. b.

Self-serving bias is the tendency for individuals to attribute their own successes to internal factors while putting the blame for failures on external factors.

Shortcuts Used in Judging Others 1.

Selective perception is the fact that we are more likely to perceive something if similarities exist between the person or object and our own interests, background, experience, and attitudes.

2.

Assumed Similarity—Assumed similarity is the belief that others are like oneself.

3.

Stereotyping—Stereotyping refers to judging a person on the basis of one’s perception of a group to which they belong.

4.

Halo effect—The halo effect refers to a general impression of an individual based on a single characteristic.

5.

Contrast Effect—The contrast effect refers to the fact that we don’t evaluate someone in isolation. Our perception is influenced by recent encounters with other people.

Implications for Managers. Managers need to recognize that their employees react to perceptions, not reality. Management is also not immune to biases and can negatively impact employees’ perception of fairness with inaccurate appraisals or setting discriminatory wage levels.

LEARNING Managers need to understand how people learn if they want to explain, predict, and influence behavior. Learning is any relatively permanent change in behavior that occurs as a result of experience.

A. Social Learning is a learning theory that says people learn through observation and direct experience. Four processes determine the amount of influence that these models will have on an individual: attentional processes, retention processes, motor reproduction processes, and reinforcement processes.

1.

Attentional processes. People learn from a model only when they recognize and pay attention to its critical features.

2.

Retention processes. A model’s influence depends upon how well an individual remembers the model’s action.

3.

Motor reproduction processes. After a person has observed a new behavior by watching a model, he/she must demonstrate an ability to do the modeled activities.

4.

Reinforcement processes. Individuals will be motivated to exhibit modeled behavior if positive rewards are provided.

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B.

C.

Shaping: A Managerial Tool. In shaping, a manager systematically reinforces each successive step that moves an individual closer to a desired response.

Shaping is a behavior modification approach based on operant conditioning, a theory of learning that suggests behavior is a function of its consequences.

Behavior can be shaped in four ways: 1.

Positive reinforcement is reinforcing a desired behavior by providing something pleasant after that behavior.

2.

Negative reinforcement is reinforcing a desired behavior with the termination or withdrawal of something unpleasant.

3.

Punishment penalizes undesirable behavior.

4.

Extinction involves eliminating any reinforcement that is maintaining a behavior.

Implications for Managers. From learning theory, managers should recognize that employees will learn while doing a job. A key question: Will managers manage employees’ learning through the rewards they allocate and the examples they set, or will they allow learning to occur haphazardly?

ANSWERS TO REVIEW AND DISCUSSION QUESTIONS Student answers to these questions will vary.

13-1. Do managers at different levels of the organization use their knowledge of organizational behavior (OB) differently? If so, how? If not, why not? Be specific.

Knowledge of OB is important for all managers since executives at all levels of the organization deal with people. Low-level managers are likely to supervise employees directly, so they need to have knowledge of attitudes, perceptions, and learning. If they have responsibilities for hiring employees, they also need to have knowledge about personality. Middle-level managers will likely need knowledge of attitudes and personality as they supervise lower-level managers.

Upper-level managers need knowledge of attitudes to deal with organizational design decisions and human resource management issues. (LO: 1, Identify the focus and goals of individual behavior within organizations, AACSB: Analytical thinking) 13-2. Explain the organization as an iceberg concept as it relates to managers' difficulty in explaining, predicting, and influencing employee behavior.

Like the iceberg that sunk the Titanic, the real danger of icebergs is not what lies on top, but the hidden portion underneath. In the attempt to understand employee behavior, the hidden organizational elements (attitudes, perceptions, norms, etc.) make understanding individual behavior so challenging. (LO: 1, Identify the focus and goals of individual behavior within organizations, AACSB: Analytical thinking) 13-3. Define the six important employee behaviors. Which behavior is most important to organizations? Explain.

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Employee productivity is a performance measure of both efficiency and effectiveness.

Absenteeism is the failure to report to work. Turnover is the voluntary and involuntary permanent withdrawal from an organization. Organizational citizenship behavior (OCB) is discretionary behavior that’s not part of an employee’s formal job requirements but it promotes the effective functioning of an organization. Job satisfaction is an individual’s general attitude toward his or her job. Workplace misbehavior is any intentional employee behavior that is potentially harmful to the organization or individuals within the organization. Some students will notice that the six behaviors are not listed alphabetically, suggesting that employee productivity is the most important. Without the ability to perform work efficiently and effectively, the other five behaviors are less important considerations. (LO: 1, Identify the focus and goals of individual behavior within organizations, AACSB: Analytical thinking) 13-4. Describe how employees with low and high job satisfaction, organizational commitment, and engagement think, feel, and behave.

Employees with high job satisfaction are more committed and engaged. They attend work consistently and perform work tasks better. Those with low job satisfaction, commitment, and engagement do not perceive their job as important and as rather a means to an end (a paycheck). They feel less loyal and attached to the organization and are willing to engage in counterproductive behaviors at work. Low ratings equal thoughts of boredom or disconnectedness from the work or organization, while high ratings lead to thoughts of work as contributing to their personal growth and a desire to develop innovative ideas to improve outcomes for their organization. (LO: 2, Explain the role that attitudes play in job performance, AACSB: Analytical thinking) 13-5. Contrast the Big Five model and the Dark Triad. Describe how these personality traits help explain individual behavior in organizations.

Managers are likely to have higher-performing and more satisfied employees if consideration is given to matching personalities with jobs. The Big Five Model is an attempt to classify personality along various important behaviors and consists of five personality traits: extraversion, agreeableness, conscientiousness, emotional stability, and openness to experience. Three specific traits that form the Dark Triad together have been identified. They are Machiavellianism, narcissism, and psychopathy. Because each tends to be a negative trait, they’ve been called a triad, but they don’t always occur together. Higher ratings of extraversion, agreeableness, conscientiousness, emotional stability, and openness to experience are correlated with positive organizational outcomes. Although individuals with Dark Triad traits typically come with some positive qualities, the toxic side of their personalities is likely to pollute their work environments. It is best to reject individuals high in all three Dark Triad traits. (LO: 3, Describe different personality theories, AACSB: Analytical thinking) DING 13-6. Explain how an understanding of perception can help managers better understand individual behavior. Name three shortcuts used in judging others and the shortcuts’ limitations.

Perception is how we give meaning to our environment by organizing and interpreting sensory impressions. Because people behave according to their perceptions, managers need to understand it. Three shortcuts used in judging others are assumed similarity, stereotyping, and

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the halo effect. Managers need to recognize that their perceptions of employees are based on perceptions, not reality. Shortcuts are a quick way to organize and interpret what they see, so when managers rely on shortcuts, there is also the potential for perceptual distortion. The message is clear: managers must pay close attention to how they perceive their jobs and employee actions. (LO: 4, Describe perception and the factors that influence it, AACSB: Analytical thinking) 13-7. Describe the key elements of attribution theory. Provide examples of the fundamental attribution error and self-serving bias occurring in the workplace.

Attribution theory depends on three factors. Distinctiveness is whether an individual displays different behaviors in different situations (that is, is the behavior unusual?). Consensus is whether others facing a similar situation respond in the same way. Consistency is when a person engages in behaviors regularly and consistently. Whether these three factors are high or low helps managers determine whether employee behavior is attributed to external or internal causes. The fundamental attribution error is the tendency to underestimate external factors' influence and overestimate internal factors' influence. The self-serving bias is the tendency to attribute our successes to internal factors and blame personal failure on external factors. As an example, fundamental attribution error can explain why a sales manager may attribute the poor performance of their sales representative to laziness rather than to the innovative product line recently introduced by a new competitor. Self-serving bias is the tendency to attribute our successes to internal factors, such as ability or effort, while blaming personal failure on external factors, such as luck. A team member might attribute the team’s success to their hard work, intelligence, or contributions. For example, they might say, “I played a crucial role in the project's success because of my exceptional skills and dedication.” And “The project didn’t go well because some team members didn’t pull their weight, and the timeline was too ambitious.” (LO: 4, Describe perception and the factors that influence it, AACSB: Application of knowledge) 13-8. Give an example of how managers could use each type of reinforcement to shape employee behavior in a retail setting.

Operant conditioning argues that behavior is a function of its consequences. Managers can use it to explain, predict, and influence behavior. Managers can shape behavior by using positive reinforcement (reinforcing a desired behavior by giving something pleasant), negative reinforcement (reinforcing a desired response by withdrawing something unpleasant), punishment (eliminating undesirable behavior by applying penalties), or extinction (not reinforcing a behavior to eliminate it). Positive Reinforcement: The manager could implement a recognition program where employees who receive positive customer feedback or achieve high sales targets are publicly praised during team meetings. Additionally, the manager might offer small rewards such as gift cards, certificates of achievement, or other incentives to those who consistently demonstrate outstanding customer service. Negative Reinforcement: The manager might implement a system where employees who always arrive on time are excused from participating in early morning inventory checks. Removing the undesirable task serves as negative reinforcement for arriving on time, increasing the likelihood that employees will

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continue to arrive on time. (LO: 5, Discuss learning theories and their relevance in shaping behavior, AACSB: Analytical thinking)

ETHICS DILEMMA Student answers to these questions will vary.

This chapter’s ethical dilemma explores a situation where two managers, Jared and Amanda, are in charge of hiring a new business analyst. Two of the three finalists have connections with either Jared or Amanda, and they each prefer the candidate they have a connection to in some way. However, the third candidate appears to be the most qualified for the job.

15-9. What ethical issues might arise if Stephanie is not hired? In what ways are the possible ethical issues involved in hiring Sheri different (or the same) as hiring Scott?

Possible answer: Failing to hire the most qualified candidate is considered unfair. Ethics require hiring decisions to be based on factors related to the job requirements. Hiring less qualified applicants negatively impacts the organization's reputation and makes it difficult to attract top candidates in the future. If Sheri or Scott is hired, it is likely to create a rift between Jared and Amanda. It could also result in challenges for Amanda if Sheri does not live up to expectations.

Similar problems emerge if Scott is hired. Jared, Amanda, and the new hire will also perceive it is standard within the organization to focus more on who you know than what you know. (LO: 4, Describe perception and the factors that influence it, AACSB: Ethical understanding and reasoning) 13-10. What steps should managers like Jared and Amanda take to minimize the chance of making perceptual errors in this situation?

Possible answer: Management could have multiple levels of interviews with different managers conducting the interviews. This should remove the bias since a single candidate is unlikely to have a connection with all the interviewers. (LO: 4, Describe perception and the factors that influence it, AACSB: Ethical understanding and reasoning) SKILLS EXERCISE: DEVELOPING YOUR SHAPING BEHAVIOR SKILL Managers are responsible for teaching employees the most critical behaviors to their, and the organization’s, success. This involves ‘shaping’ the behavior of employees, beginning with teaching skills and having them reinforced. This exercise gives students seven steps to practice their shaping skills. Students are then asked to imagine that their assistant is ideal in all respects but one—they continually message on their cell phone during work hours. During a recent training session, the intern was observed continually being on their phone instead of engaging in the training. Students are asked to devise a plan to address this behavior along with how they will present this to the intern during a one-on-one meeting. (LO: 5, Discuss learning theories and their relevance in shaping behavior, AACSB: Application of knowledge)

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WORKING TOGETHER: TEAM EXERCISE

In this exercise, students are asked to understand how individual preferences might affect work assignments and tasks if the preferences are known in advance. Working in groups of three or four, students should brainstorm how different personality attributes match tasks requiring precision, brainstorming, collaboration, or public speaking. Students should be prepared to discuss their thoughts with the class. (LO: 2, Explain the role that attitudes play in job performance, AACSB: Analytical thinking) MY TURN TO BE A MANAGER

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Write down three attitudes you have. Identify the cognitive, affective, and behavioral components of those attitudes. (LO: 2, Explain the role that attitudes play in job performance, AACSB: Reflective thinking)

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Survey 15 employees (at your place of work or some campus office). Be sure to obtain permission before doing this anonymous survey. Ask them what behaviors new employees could do or have done to make a good impression during the first couple of weeks on the job. Also, ask why employees who are open to experience, optimistic, and emotionally intelligent are more successful. Compile your findings in a report and be prepared to discuss this in class. If you were the manager in this workplace, how would you handle this behavior? (LO: 2, Explain the role that attitudes play in job performance, AACSB: Analytical thinking)

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If you have never taken a personality or career compatibility test, contact your school’s testing center to see if you can take one or complete the O*Net Interest Profiler at https://www.mynextmove.org/explore/ip. Once you get your results, evaluate what they mean for your career choice. Does your intended major fit with your results? Research the jobs/occupations matching your results. Does your current major prepare you for these options? Do the results indicate if you have chosen a career that “fits” your personality? What are the implications? Describe the wages/salaries associated with these prospects. Summarize your results in up to 500 words. (LO: 3, Describe different personality theories, AACSB: Written and oral communication )

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Have you ever heard of the “waiter rule”? The rule references the belief that a person’s true character can be observed by watching how they treat staff or service workers, such as a waiter. Many business people use lunch and dinner meetings to observe how someone treats service workers as a way to assess their companion’s true character and attitudes. Do you think this rule holds for people who are high self-monitors or emotionally intelligent? Do you agree with taking applicants to lunch or dinner to observe their character this way? Why or why not? Would you mind being evaluated via the “waiter rule”? (LO: 2, Explain the role that attitudes play in job performance, AACSB: Reflective thinking)

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Like it or not, each of us continually shapes the behavior of those around us. For one week, keep track of how many times you use positive reinforcement, negative reinforcement, punishment, or extinction to shape behaviors. At the end of the week, which one did you tend to use most? What were you trying to do; that is, what behaviors

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were you trying to shape? Were your attempts successful? Evaluate. What could you have done differently if you were trying to change someone’s behavior? (LO: 5, Discuss learning theories and their relevance in shaping behavior, AACSB: Reflective thinking) •

Find two companies that have been recognized for having highly engaged employees.

Compare the different strategies each company uses to build and engage its workforce.

Are any the same? Different? Why do you think each company has been successful with employee engagement? (LO: 2, Explain the role that attitudes play in job performance, AACSB: Analytical thinking)

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What is your level of emotional intelligence? Google “emotional intelligence test.” Select and complete a quiz. What did the results show? Are they compatible with your personal assessment of your EI? (LO: 3, Describe different personality theories, AACSB: Application of knowledge)

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Select a recent movie or television show. Evaluate the personality characteristics of three or four key characters using the Big Five, Dark Triad, and the five additional singular personality traits. Note if these characters are prone to particular perceptual errors or emotions. Present your results to the class. Be creative! (LO: 3, Describe different personality theories, AACSB: Application of knowledge)

•

Research behavioral analytics. Determine the value managers could create for employees and organizations by gathering and analyzing workplace data related to their organization’s processes. Are organizations striving to develop data-driven initiatives and practices for understanding and improving employee engagement and productivity?

Will managers need a background in analytics to prepare for a business career? Is analyzing workplace data something artificial intelligence (AI) can help a manager do?

(LO: 2, Explain the role that attitudes play in job performance, AACSB: Analytical thinking)

ANSWERS TO CASE APPLICATION 1 QUESTIONS Student answers to these questions will vary.

Heat Waves Cause Employees to Walk Off the Job 13-11. Do you agree with the employees walking off the job and striking during the summer heat wave? Will top-level managers agree as well? Why or why not?

Student opinions will vary, but most will find it acceptable for employees to walk off the job and strike during the summer heat wave. Because top-level managers may be out of touch with the working conditions of these employees, most students believe managers will agree once they become aware of the severity of the working conditions. (LO: 2, Explain the role that attitudes play in job performance, AACSB: Analytical thinking)

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13-12. How do uncomfortable or even dangerous working conditions affect how employees behave in the workplace?

The employees are likely to experience negative affect. Job satisfaction decreased, and employee productivity declines as absenteeism, turnover, and customer satisfaction will soon also follow. Counterproductive workplace behaviors are also likely to increase. (LO: 2, Explain the role that attitudes play in job performance, AACSB: Analytical thinking) 13-13. What are the benefits of “listening for emotions” when asking employees what needs to be done to improve their work schedules and working conditions?

Emotions can be one way to communicate nonverbally. Listening for emotions tells managers what is most important to the employees. Hearing and responding to these issues increased employees' commitment, engagement, and perception of the level of support they receive from the organization. (LO: 2, Explain the role that attitudes play in job performance, AACSB: Reflective thinking) 13-14. What impacts on employee recruitment, productivity, absenteeism, turnover, and attitudes (organizational commitment, perceived organizational support) can the organizations expect as a result of the heat waves?

The publicity and descriptions of the difficult working conditions will negatively impact future employee recruitment efforts. As current employees see more news about the hazards of their working conditions, their attitudes become validated and translate into behaviors. Lower job performance and more absenteeism and turnover are likely. (LO: 2, Explain the role that attitudes play in job performance, AACSB: Reflective thinking)

ANSWERS TO CASE APPLICATION 2 QUESTIONS Student answers to these questions will vary.

Getting Your Company’s Logo as a Tattoo 13-15. Once an employee gets a company logo tattoo, how might their job satisfaction, job involvement, organizational commitment, absenteeism, and turnover be different from nontattooed employees? What are the reasons for any differences?

A tattoo is a permanent indicator of employee commitment to the organization. That probably indicates higher job satisfaction, organizational commitment, and lower absenteeism and turnover relative to nontattooed employees. The tattoo is simply an indicator of the employee’s attitudes and feelings and does not cause the differences. (LO: 2, Explain the role that attitudes play in job performance, AACSB: Reflective thinking) 13-16. Employees might get a company logo tattoo when their attitude toward their company is positive. How does cognitive dissonance apply if their attitude towards the company changes to a negative attitude?

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Cognitive dissonance occurs when there is incompatibility between attitudes and behavior. The individual’s attitude no longer matches the tattoo’s intent. (LO: 2 Explain the role that attitudes play in job performance, AACSB: Reflective thinking) 13-17. How could the shortcuts used in judging others (selective perception, assumed similarity, stereotyping, etc.) apply to an employee with a company logo tattoo?

Student answers will vary. We are likely to stereotype someone with a company logo tattoo as a sycophant or “brown noser.” We might also form our entire opinion about this person based solely on the tattoo (halo effect). (LO: 4, Describe perception and the factors that influence it, AACSB: Analytical thinking) 13-18. Sometimes family members of employees who get company logo tattoos do not think it was smart to get that tattoo. How does attribution theory apply to the perceptions family members make about their relative with a company logo tattoo?

Student answers will vary. Attribution theory suggests that the relatives may attribute the tattoo to internal causes, meaning it is within the person’s control. If the tattoo lines up, or is consistent, with the person’s job loyalty, then we may still question the longevity of their attitudes. (LO: 4, Describe perception and the factors that influence it, AACSB: Reflective thinking)

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Chapter 14 Motivating Employees Managers need to understand and apply motivational concepts and practices to encourage their employees to devote maximum effort to their jobs. This chapter explores essential information on the concepts of motivation.

LEARNING OBJECTIVES 1.

2.

3.

4.

Define motivation.

Compare and contrast early theories of motivation.

Compare and contrast contemporary theories of motivation.

Discuss current issues in motivation.

CHAPTER OUTLINE 14.1

WHAT IS MOTIVATION? Motivation is the process by which a person’s efforts are energized, directed, and sustained towards attaining a goal. Effort is a measure of intensity or drive. High levels of effort are unlikely to lead to favorable job performance unless the effort is channeled in a direction that benefits the organization.

14.2

EARLY THEORIES OF MOTIVATION Three early theories of motivation provide the best-known explanations for employee motivation, even though their validity has been questioned.

A. Maslow’s Hierarchy of Needs Theory. Maslow’s hierarchy of needs theory states that there is a hierarchy of five human needs: physiological, safety, social, esteem, and self-actualization (see Exhibit 14-1).

1.

As each need is substantially satisfied, the next need becomes dominant.

2.

The text describes these five needs as physiological (basic food, drink, water, shelter, and sexual needs); safety (security and protection from physical and emotional harm); social (affection, belongingness, acceptance, and friendship); esteem (internal factors such as selfrespect, autonomy, and achievement, and external factors such as status, recognition, and attention); and self-actualization (a person’s drive to become what they are capable of becoming).

3.

Maslow separated the needs into lower-level needs (including the physiological and safety needs) and higher-level needs (including social, esteem, and self-actualization).

B. McGregor’s Theory X and Theory Y. McGregor’s Theory X and Theory Y were developed by Douglas McGregor and describe two distinct views of human nature.

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1.

C.

D.

14.3

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Theory X is the assumption that employees dislike work, are lazy, avoid responsibility, and must be coerced to perform.

2.

Theory Y is the assumption that employees are creative, enjoy work, seek responsibility, and can exercise self-direction.

3.

Theory X assumes that Maslow’s lower-order needs dominate individuals, while Theory Y assumes that higher-order needs are dominant.

4.

No empirical evidence exists to confirm that either set of assumptions is valid or that altering behavior based on Theory Y assumptions is the only way to motivate employees.

Herzberg’s Two-Factor Theory. The Two-factor theory (also called motivation-hygiene theory), developed by Frederick Herzberg, is the motivation theory that intrinsic factors are related to job satisfaction and motivation. In contrast, extrinsic factors are associated with job dissatisfaction (see Exhibit 142).

1.

Herzberg believed that the opposite of satisfaction was not dissatisfaction. (See Exhibit 14-3.) According to Herzberg, simply removing dissatisfying characteristics from a job would not necessarily make the job satisfying.

2.

Hygiene factors are factors that eliminate dissatisfaction. They include factors such as supervision, company policy, salary, working conditions, and security—i.e., extrinsic factors associated with job context, or those things surrounding a job.

3.

Motivators are factors that increase job satisfaction and motivation. They include factors such as achievement, recognition, responsibility, and advancement—i.e., intrinsic factors associated with job content, or those things within the job itself.

4.

Herzberg’s theory has been criticized for his study's statistical procedures and methodology. Despite these criticisms, Herzberg’s theory has strongly influenced how we currently design jobs.

Three-Needs Theory. The three-needs theory, developed by David McClelland, is the motivation theory that says three acquired (not innate) needs—achievement, power, and affiliation—are major motives in work.

1.

The need for achievement (nAch) is the drive to excel, to achieve in relation to a set of standards, and to strive to succeed. a.

McClelland found that high achievers differentiate themselves from others by their desire to do things better. b.

High achievers like moderately challenging goals. c.

They avoid what they perceive to be very easy or very difficult tasks.

2.

The need for power (nPow) is the need to make others behave in a way that they would not have behaved otherwise.

3.

The need for affiliation (nAff) is the desire for friendly and close interpersonal relationships.

4.

A person’s levels of these three needs are typically measured by reacting to a set of pictures included in the Thematic Apperception Test, or TAT. Exhibit 14-4 shows an example of a TAT.

CONTEMPORARY THEORIES OF MOTIVATION

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A number of contemporary theories represent current explanations of employee motivation. These contemporary theories have a reasonably strong degree of validity through supporting documentation.

A. Goal-Setting Theory. Goal-setting theory is the proposition that specific goals increase performance, and difficult goals, when accepted, result in higher performance than easy goals. What is known about goals as motivators?

1.

Intention to work toward a goal is a major source of job motivation.

Specific and challenging goals are superior motivating forces. Specific hard goals produce a higher level of output than do generalized goals.

2.

Is there a contradiction between achievement motivation and goal setting? No, as the following points explain: a.

Goal-setting theory deals with people in general; achievement theory is based only on people who have a high need for achievement. Difficult goals are still recommended for the majority of employees. b.

The conclusions of goal-setting theory apply to those who accept and are committed to the goals. Difficult goals will lead to higher performance only if they are accepted.

3.

Will employees try harder if they participate in the planning and formulation of goals? a.

It cannot be said that participation is always desirable. b.

However, participation is probably preferable to assigning goals whenever a manager expects resistance.

4.

Will people do better when they get feedback on how well they are progressing toward their goals? a.

Feedback acts to guide behavior. b.

Self-generated feedback is a more powerful motivator than externally generated feedback.

5.

What four contingencies exist in goal-setting theory? a.

Feedback influences the goal-performance relationship. b.

Goal commitment is most likely to occur when goals are made public, when the individual has an internal locus of control, and when the goals are set by the individual rather than assigned. c.

Self-efficacy is an individual’s belief that they are capable of performing a task. d.

National culture is a contingency that also affects goal-setting theory.

6.

One may conclude that intentions, as defined by hard and specific goals, are a powerful motivating force in goal-setting efforts. a.

In the proper conditions, intentions can lead to higher performance. b.

However, no evidence exists that such goals are associated with increased job satisfaction. c.

Exhibit 14-5 summarizes the relationships among goals, motivation, and performance.

B. Reinforcement Theory. Reinforcement theory is counter to goal-setting theory.

It proposes that behavior is a function of its consequences.

1.

Reinforcement theory argues that behavior is externally caused.

2.

Reinforcers are consequences immediately following a response that increases the probability that the behavior will be repeated.

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3.

C.

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Reinforcement theory ignores factors such as goals, expectations, and needs; it focuses on what happens when a person takes an action.

4.

How can the concept of reinforcement be used to explain motivation? a.

People will most likely engage in a desired behavior if they are rewarded for doing so. b.

These rewards are most effective if they immediately follow a desired response. c.

Behavior that isn’t rewarded or is punished is less likely to be repeated.

5.

Managers can influence employees’ behavior by reinforcing the work behaviors they desire.

Designing Motivating Jobs. Job design theory can be used to influence employee motivation. Job design is the way tasks are combined to form complete jobs. Managers should design jobs to reflect the demands of the changing environment, the organization’s technology, and its employees’ skills, abilities, and preferences.

1.

Job Enlargement—An early effort at overcoming the drawbacks of job specialization involved horizontally expanding a job through increasing job scope, the number of different tasks required in a job and the frequency with which those tasks are repeated. a.

This type of job design is called job enlargement—the horizontal expansion of a job or an increase in job scope. b.

Job design programs that focused solely on task enlargement have had little success. c.

When knowledge enlargement activities were implemented, however, workers were more satisfied and made fewer errors.

2.

Job Enrichment—Job enrichment, another approach to designing jobs, is the vertical expansion of a job by adding planning and evaluating responsibilities. a.

In job enrichment, job depth, the degree of control employees have over their work, is increased. b.

Research evidence has been inconclusive about the benefits of job enrichment activities.

3.

Job Characteristics Model—The job characteristics model (JCM) is a framework for analyzing and designing jobs. It identifies five primary job characteristics, their interrelationships, and their impact on employee productivity, motivation, and satisfaction. These five job dimensions are described below (see Exhibit 14-6): a.

Skill variety is the degree to which a job requires a variety of activities so that an employee can use a number of different skills and talents. b.

Task identity is the degree to which a job requires the completion of a whole and identifiable piece of work. c.

Task significance is the degree to which a job has a substantial impact on the lives or work of other people. d.

Autonomy is the degree to which a job provides substantial freedom, independence, and discretion to the individual in scheduling the work and determining the procedures to be used in carrying it out.

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e.

D.

.

Feedback is the degree to which carrying out the work activities required by a job results in the individual’s obtaining direct and clear information about the effectiveness of his or her performance. f.

Skill variety, task identity, and task significance combine to create meaningful work. Autonomy leads to an increased sense of responsibility for outcomes of the work. Feedback leads to knowledge of the actual results of the work activities. g.

The JCM suggests that intrinsic (internal) rewards are gained when an employee learns (knowledge of results through feedback) that they personally (responsibility through autonomy of work) has performed well on a task that they care about (experiences meaningfulness of work through skill variety, task identity, and/or task significance). h.

The more these three conditions characterize a job, the greater the employee’s work motivation, performance, and satisfaction and the lower their absenteeism and likelihood of resigning. i.

The JCM also provides specific guidelines to managers for job design.

1.

Combine tasks.

2.

Create natural work units.

3.

Establish client (external or internal) relationships.

4.

Expand jobs vertically.

5.

Open feedback channels. j.

Research suggests that sources of meaning in work include service to others, realization of full potential, unity with others, and self-integrity.

4.

Emerging Perspectives on Job Design—Two new approaches to job design are prompting a rethinking on the JCM and other standard approaches. a.

The relational perspective of work design focuses on how people’s tasks and jobs are increasingly based on social relationships. Managers may need to consider access to and the level of social support in the organization, types of interactions outside an organization, amount of task interdependence, and interpersonal feedback. b.

The proactive perspective of work design suggests that employees are taking the initiative to change how their work is performed.

1.

One stream of research that’s relevant to proactive work design is high-involvement work practices, which are designed to elicit greater input or involvement from workers.

Equity Theory. Equity theory, developed by J. Stacey Adams, is the theory that an employee compares his/her job’s input-outcomes ratio with that of relevant others and then corrects any inequity (see Exhibit 14-7).

1.

Referents are the persons, systems, or selves against which individuals compare themselves to assess equity.

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2.

E.

F.

14.4

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Equity theory recognizes that individuals are concerned with their absolute rewards as well as the relationship of those rewards to what others receive.

3.

What will employees do when they perceive an inequity? a.

Distort either their own or others’ inputs or outcomes. b.

Behave in some way to induce others to change their inputs or outcomes. c.

Behave in some way to change their own inputs or outcomes. d.

Choose a different comparison person. e.

Quit their job.

4.

Historically, equity theory focused on distributive justice. Recent equity research has focused on issues of procedural justice.

Expectancy Theory. Expectancy theory is the theory that an individual tends to act in a certain way based on the expectation that the act will be followed by a given outcome and on the attractiveness of that outcome to the individual. Three relationships are important to this theory (see Exhibit 14-8).

1.

Effort-performance linkage (expectancy) is the probability perceived by the individual that exerting a given amount of effort will lead to a certain level of performance.

2.

Performance-reward linkage (instrumentality) is the degree to which an individual believes that performing at a particular level is instrumental in, or will lead to, the attainment of a desired outcome.

3.

Attractiveness is the importance an individual places on the potential outcome or reward that can be achieved on the job. This considers both the goals and needs of the individual.

4.

Four features are inherent in expectancy theory: a.

What perceived outcomes does the job offer the employee? b.

How attractive do employees consider these outcomes to be? c.

What kind of behavior must the employee exhibit to achieve these outcomes? d.

How does the employee view their chance of doing what is asked?

5.

The key to understanding expectancy theory is understanding an individual’s goal and the linkage between effort and performance, performance and rewards, and rewards and individual goal satisfaction.

Integrating Contemporary Theories of Motivation. Exhibit 14-9 presents a model that integrates much of what is known about motivation.

1.

The basic foundation is the simplified expectancy model.

2.

The model also considers the achievement-need, reinforcement, equity, and JCM theories.

3.

Rewards also play an important role in the model.

CURRENT ISSUES IN MOTIVATION Understanding and predicting employee motivation is one of the most popular areas in management research. Several significant workplace issues are important to examine in understanding motivation.

A. Technology and Motivation. Constantly advancing technology is impacting how, where, and when we work, influencing motivation in several ways.

1.

The effective integration of technology in work, companies could increase motivation by providing opportunities to provide meaningful work.

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2.

B.

C.

D.

.

The flexibility offered by remote work could also positively impact worker motivation as they are able to better manage their lives.

Managing Cross-Cultural Motivational Challenges.

In today’s global environment, motivational programs that work in one location may not be effective in another.

1.

An American bias exists in some of the motivational theories. For example, in Japan, Greece, and Mexico, security needs would appear at the top of Maslow’s pyramid.

2.

There are some cross-cultural consistencies, though. Recent research showed that being treated with respect, having a good work-life balance, and having interesting work motivated people in a number of countries.

Motivating Unique Groups of Workers. Managers need to understand the motivational requirements of unique groups of workers, including diverse employees, professionals, and contingent workers, and remote workers.

1.

Motivating a Diverse Workforce—Motivating a diverse workforce requires managers to think in terms of flexibility. Lifestyle (e.g., single parenthood) is an important factor. a.

Studies tell us that men place more importance on having autonomy in their jobs than women. In contrast, the opportunity to learn, convenient and flexible work hours, and good interpersonal relations are more important to women. b.

A diverse array of rewards is needed to motivate employees with such diverse needs. For instance, many organizations have developed flexible work arrangements—such as compressed workweeks, flextime, and job sharing.

2.

Motivating Professionals—This group of employees values challenging work, problem solving, and support. Professionals tend to be focused on their work as their central life interest, whereas nonprofessionals typically have other interests outside of work that can compensate for needs not met on the job.

3.

Motivating Contingent Workers—Contingent workers can include those who choose to be contingent such as consultants and independent contractors, but also may be temporary workers who are unable to find full-time employment. a.

Managers might use the opportunity for permanent status, opportunity for training, and equitable treatment to motivate contingent workers.

4.

Motivating Remote Workers—Despite the dramatic increase of remote and hybrid working following the COVID-19 pandemic, there is some uncertainty around strategies to motivate remote workers. a.

Remote work gives employees control over their schedule and autonomy, allowing for intrinsic motivation. b.

One of the challenges for companies is establishing a remote or hybrid work policy.

Designing Appropriate Rewards Programs.

1.

Open-Book Management—Open-book management is a motivational approach in which an organization’s financial statements (the “books”) are shared with all employees.

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a.

2.

3.

The goal of open-book management is to motivate employees to think as an owner would think as a result of being able to see the impact their decisions and actions have on financial results. b.

For open-book management to be effective, employees must be taught the fundamentals of financial statement analysis.

Employee Recognition Programs—Employee recognition programs consist of personal attention and expressions of interest, approval, and appreciation for a job well done.

Pay-for-Performanc—Pay-for-performance programs are variable compensation plans that pay employees on the basis of some performance measure. a.

Performance-based compensation is probably most compatible with expectancy theory. b.

The increasing popularity of pay-for-performance programs can be explained in terms of both motivation and cost control. c.

Do pay-for-performance programs work? Studies seem to indicate that they do.

ANSWERS TO REVIEW AND DISCUSSION QUESTIONS Student answers to these questions will vary.

14-1. Do high levels of effort always lead to better job performance? Explain why or why not using the three elements of motivation.

Motivation is the process by which a person’s efforts are energized, directed, and sustained toward attaining a goal. The energy element is a measure of intensity, drive, or vigor. The high level of effort needs to be directed in ways that help the organization achieve its goals.

Employees must persist in putting forth effort to achieve those goals. Instances where employees lack ability do not lead to better performance; if effort is not correctly directed, effort will not lead to better performance. (LO: 1, Define motivation, AACSB: Analytical thinking) 14-2. How do the needs theories of motivation differ from Hertzberg’s and McGregor’s early theories of motivation?

In Maslow’s hierarchy, individuals move up the hierarchy of five needs (physiological, safety, social, esteem, and self-actualization) as needs are substantially satisfied. A need that’s substantially satisfied no longer motivates. A Theory X manager believes that people don’t like to work or won’t seek out responsibility so they have to be threatened and coerced to work. A Theory Y manager assumes that people like to work and seek out responsibility, so they will exercise self-motivation and self-direction. Herzberg’s theory proposed that intrinsic factors associated with job satisfaction were what motivated people. Extrinsic factors associated with job dissatisfaction simply kept people from being dissatisfied. The three-needs theory proposes these three needs that are major motives in work: need for achievement, affiliation, and power.

Needs theories emphasize the fulfillment of needs as the primary motivator. In contrast, Herzberg’s theory distinguishes between factors that prevent and enhance motivation, and McGregor’s Theories relates to how managers’ assumptions about employees impact motivation. Needs theories and Herzberg are related to the work environment, while McGregor’s

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theories focus on how the manager’s beliefs shape the work environment. (LO: 2, Compare and contrast early theories of motivation, AACSB: Analytical thinking) 14-3. How can managers motivate employees using goal-setting, reinforcement, and equity theories together?

By integrating goal-setting, reinforcement, and equity theories, managers create a motivational framework that addresses what work will be completed and how much work will be completed.

Managers will know to recognize achievements in a way that fosters a sense of fairness within the workplace. This approach would increase employee engagement, job satisfaction, and overall performance. Goal-setting theory says that specific goals increase performance, and difficult goals, when accepted, result in higher performance than do easy goals. Important points in goal setting theory include intention to work toward a goal as a major source of job motivation; specific hard goals that produce higher levels of output than generalized goals; participation in setting goals as preferable to assigning goals, but not always; feedback that guides and motivates behavior, especially self-generated feedback; and contingencies that affect goal setting—goal commitment, self-efficacy, and national culture. Reinforcement theory says that behavior is a function of its consequences. To motivate, use positive reinforcers to reinforce desirable behaviors. Ignore undesirable behavior rather than punishing it. Equity theory focuses on how employees compare their inputs–outcomes ratios to relevant others’ ratios. A perception of inequity will cause an employee to do something about it. Procedural justice has a greater influence on employee satisfaction than does distributive justice. (LO: 3, Compare and contrast contemporary theories of motivation, AACSB: Analytical thinking) 14-4. What are the different job design approaches to motivation?

Job enlargement involves horizontally expanding job scope by adding more tasks or increasing how many times the tasks are done. Job enrichment vertically expands job depth by giving employees more control over their work. The job characteristics model says five core job dimensions (skill variety, task identity, task significance, autonomy, and feedback) are used to design motivating jobs. Another job design approach proposed looks at the relational and proactive aspects of jobs. (LO: 3, Compare and contrast contemporary theories of motivation, AACSB: Analytical thinking) 14-5. Explain the three critical linkages in expectancy theory and their role in employee motivation.

Expectancy theory says that an individual tends to act in a certain way based on the expectation that the act will be followed by a desired outcome. Expectancy is the effort-performance linkage (how much effort do I need to exert to achieve a certain level of performance); instrumentality is the performance–reward linkage (achieving at a certain level of performance will get me a specific reward); and valence is the attractiveness of the reward (is it the reward that I want?).

The linkages are summarized in Exhibit 14-8. (LO: 3, Compare and contrast contemporary theories of motivation, AACSB: Analytical thinking) 14-6. What issues do managers face in motivating today’s workforce?

Managers face challenges in motivating unique groups of workers. A diverse workforce is looking for flexibility. Professionals want job challenge and support, and are motivated by the work itself. Contingent workers want the opportunity to become permanent or to receive skills

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training. Recognition programs and sincere appreciation for work done can be used to motivate low-skilled, minimum-wage workers, and meet the needs of remote workers. (LO: 4, Discuss current issues in motivation, AACSB: Analytical thinking) 14-7. Describe open-book management, employee recognition, and pay-for-performance programs.

Open-book management is when financial statements (the books) are shared with employees who have been taught what they mean. Employee recognition programs consist of personal attention, approval, and appreciation for a job well done. Pay-for-performance programs are variable compensation plans that pay employees on the basis of some performance measure.

(LO: 4, Discuss current issues in motivation, AACSB: Analytical thinking) 14-8. Can employee recognition and pay-for-performance programs work too well? Discuss.

This question can serve as an excellent springboard for small group discussion. Students may express strong opinions in their answers to this question, depending upon their employment experiences and the types of managers and employees they have already worked with. Their answers to this question will likely introduce ethical considerations in relation to motivation and the willingness of some individuals to lose sight of ethical standards in pursuit of more and more pay. (LO: 4, Discuss current issues in motivation, AACSB: Analytical thinking) ETHICS DILEMMA Student answers to these questions will vary.

Advocates of open-book management point to the advantages of getting employees to think like owners and being motivated to make better decisions about how they do their work once they see how their choices impact financial results. However, is there such a thing as “too much openness”? At some companies, employees have access to company financial details, staff performance reviews, and individual pay information. Some cities have pay transparency laws requiring employers to post minimum and maximum salaries on all job postings.

14-9. What are the pros and cons of the open-book management approach at a government agency versus a privately owned business?

Possible answer: Students generally feel that taxpayers are part owners/investors of a government agency and have a vested interest in the financial details of how the agency does its business. Private businesses have a limited number of investors who expect to earn a return on their investment. For this reason, students feel it would be a disadvantage to open books in a way that would take away competitive advantages and limit the ability to earn a profit. Still, closed books for government agencies (i.e., the Central Intelligence Agency) and privately owned businesses leave concerns for unethical and corrupt business practices. Open-book management also has worries about confidentiality risks, but open-book management may reduce employee anxiety and resistance to change. The success of open-book management depends on the agency's or business's culture and leaders. However, the goal of aligning employees with organizational objectives through a shared understanding of financial implications is generally a good idea. (LO: 4, Discuss current issues in motivation, AACSB: Ethical understanding and reasoning)

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14-10. What potential ethical issues do you see here? How might managers address these ethical issues?

Possible answers include employees learning private information about their colleagues.

Managers are often privy to information that should not be shared with others. It could create a toxic environment at work. Managers can limit the amount of personal information that is shared in an open-book policy. (LO: 4, Discuss current issues in motivation, AACSB: Ethical understanding and reasoning) 14-11. Does transparency mean managers will be prepared to answer questions from employees on what they need to do to earn more? Or if there are age, race, or gender pay disparities?

Managers living under an expectation of transparency would be expected to do the due diligence and be prepared to answer questions. The process of doing due diligence for transparency should allow managers to proactively uncover and correct any pay disparities, thereby significantly minimizing the chance that they would exist. Should an employee discover a disparity, transparency also means working with the employee to make the necessary corrections. Transparency implies a commitment to open communication, providing information, and addressing questions and concerns from employees. Managers in any organization should be prepared to engage in these discussions. It is a manager's job to ensure that employees clearly understand compensation practices, and managers must promote a fair and equitable work environment.

SKILLS EXERCISE: DEVELOPING YOUR MOTIVATING EMPLOYEES SKILL Several suggestions for motivating employees are provided, based on what is currently known about motivation. Students practice the skill by creating a motivational plan for each of the groups of employees with different job titles. This is followed by a review of job postings on LinkedIn or Indeed or brainstorming to get ideas on the rewards or incentives appropriate for each group. (LO: 2, Compare and contrast early theories of motivation, AACSB: Communication abilities) (LO: 3, Compare and contrast contemporary theories of motivation, AACSB: Written and oral communication)

WORKING TOGETHER: TEAM EXERCISE Students are asked to reflect on past jobs and think about what motivates them at work. Then, working in groups of three or four, students are asked to share their thoughts and discuss what management or organizational leaders could have done differently according to expectancy theory. Students should be prepared to share their group’s ideas with the class. (LO: 1, Define motivation, AACSB: Reflective thinking) (LO: 2, Compare and contrast early theories of motivation, AACSB: Written and oral communication) (LO: 3, Compare and contrast contemporary theories of motivation, AACSB: Written and oral communication)

MY TURN TO BE A MANAGER

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Goal setting is a good habit to get into. Set specific and challenging goals for ways to make your résumé stand out more within the next two months. Put these goals in an email and send them to two people who know you well. Ask for feedback on the goals you have set for yourself to determine if your goals are challenging enough. Use their input to adjust your goals before you begin working on accomplishing these goals. Track your progress toward achieving the goals. Reflect on the benefits of goal setting and use this knowledge to revise your process before you begin again. (LO: 3, Compare and contrast contemporary theories of motivation, AACSB: Reflective thinking)

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Describe a task you recently completed well while also exerting a high level of effort.

Explain your behavior using one of the contemporary motivation approaches described in this chapter. (LO: 3, Compare and contrast contemporary theories of motivation, AACSB: Reflective thinking)

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Pay attention to times when you are highly motivated and times when you are not. Write down a description of these. What internal and external factors account for the difference in your level of motivation? (LO: 1, Define motivation, AACSB: Reflective thinking)

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Interview three managers about how they motivate their employees. What have they found that works the best? Write up your findings in a report and be prepared to present them in class. (LO: 1, Define motivation, AACSB: Analytical thinking)

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Using the job characteristics model, redesign two of the following jobs in a way that makes them more motivating: retail store sales associate, Uber driver, computer programmer, accountant, financial planner, and server at a restaurant. In a written report, describe a specific action you would take for each of the five core job dimensions for each job to make it more intrinsically motivating.. (LO: 3, Compare and contrast contemporary theories of motivation, AACSB: Reflective thinking)

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Think seriously about what you want from your job after graduation. Using the list of job factors in the “What Motivates You?” It’s Your Career feature near the beginning of the chapter, list what is important to you. Think about how and where you will discover a job to help you get those things. (LO: 3, Compare and contrast contemporary theories of motivation, AACSB: Reflective thinking)

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Find three different examples of employee recognition programs from organizations with which you’re familiar. Write a report describing your examples and evaluating what you think about the various approaches. (LO: 4, Discuss current issues in motivation, AACSB: Analytical thinking)

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Research pay-for-performance programs. Do these programs seem to be effective at motivating employees? Evaluate if you would want to receive your compensation from such a program. Do you think any of your friends would be interested in these programs? Why or why not? Is there a type of person motivated by pay-for-performance programs? (LO: 4, Discuss current issues in motivation, AACSB: Analytical thinking)

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Research “best practices in motivating and retaining employees in the workplace” online.

Post some thoughts describing what you feel are the best recommendations to social media. Present your findings and feedback from your post to a small group of friends or

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the class. (LO: 3, COMPARE and contrast contemporary theories of motivation, AACSB: Analytical thinking) •

In contrast to a generation ago, the typical employee today is more likely to be a professional with a college degree or a service worker than a blue-collar factory worker.

What unique concerns should managers be aware of when trying to motivate a team of professionals or service workers that might not apply to factory workers? Specifically, discuss with a group of students how the current issues in motivation apply to these workers. (LO: 4, Discuss current issues in motivation, AACSB: Analytical thinking)

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Go to Statista at https://www.statista.com. Research motivation, student motivation, and employee motivation. What data is interesting, surprising, and informative? (LO: 4, Discuss current issues in motivation, AACSB: Analytical thinking)

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One incentive commonly offered to key employees and top-tier executives in publicly traded companies is an incentive stock option. Essentially these employees can buy company stock at a discounted price and sell their stock after a two-year vesting period.

Incentive stock options are a form of compensation offered on top of the employees’ salaries or as a reward instead of a traditional salary raise. Many companies believe these stock options, like other benefits, attract and retain highly skilled workers when the company cannot currently afford to pay competitive base salaries. Do some research and evaluate the advantages and disadvantages of this incentive. (LO: 4, Discuss current issues in motivation, AACSB: Analytical thinking)

ANSWERS TO CASE APPLICATION 1 QUESTIONS Student answers to these questions will vary.

Motivating Employees Who Love the Outdoors at REI 14-12. In what ways does the work environment at REI help satisfy one of the needs in the three-needs theory?

The three-needs theory says that motivations in work are the need for achievement, power, and affiliation. REI’s culture is such that the company affirms a commitment to the outdoors or environment by giving Yay Days, and REI also has personal incentive plans. These two factors would fulfill the need for achievement since this need focuses on personal achievements. The need for power is likely fulfilled by the environmental volunteering focus and the need for affiliation is fulfilled by the close bonds employees appear to make with coworkers. (LO: 2, Compare and contrast early theories of motivation, AACSB: Reflective thinking) 14-13. How could expectancy theory explain the motivation employees draw from the outdoororiented benefits offered at REI? Expectancy theory says an individual tends to act in a certain way based on the expectation that a desired outcome will follow the act. Expectancy is the effort–performance linkage (will exerting

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a given amount of effort lead to a certain level of performance?); instrumentality is the performance–reward linkage (achieving at a certain level of performance will get me a specific reward); and valence is the attractiveness of the reward (is it the reward that I want?). Applying expectancy theory, students may discuss how employees perceive their effort will lead to a desired level of performance and that performance will get them a specific reward. The critical linkage for REI is the opportunity for employees interested in outdoor activities to work in an outdoor enthusiast retail store, and the other benefits offered by REI will be particularly motivating. Those who desire the award appear to be the perceived attractiveness of the rewards (benefit package) relative to the effort needed to earn that benefit. Maintaining high levels of performance enables employees to keep working at a place they love and earning a unique set of perks. (LO: 3, Compare and contrast contemporary theories of motivation, AACSB: Reflective thinking) 14-14. What else could REI do to improve how it motivates its employees?

Answers will vary. The firm could use flextime and various employee recognition bonuses for top performers. This system would allow everyone to see the benefits of high performance are recognized and rewarded. (LO: 4, Discuss current issues in motivation, AACSB: Analytical thinking) 14-15. When hiring employees not working in REI’s stores, like human resource managers, computer programmers, warehouse workers, and the like, should a preference be given to more outdoor-oriented candidates?

Yes, outdoor-oriented candidates should have an advantage because motivators are built to cater to these individuals. However, in some instances, hiring someone without an outdoor focus may bring a different perspective to work and thus add diversity of thought. However, they might not fit in as well with the culture or truly understand what drives sales if they do not have the same mindset. (LO: 4, Discuss current issues in motivation, AACSB: Analytical thinking)

ANSWERS TO CASE APPLICATION 2 QUESTIONS Student answers to these questions will vary.

Motivating Under Constraints at Televerde 14-16. Using examples, describe the assumptions about human nature, Theory X or Theory Y, that best apply to managers at Televerde.

A Theory X manager believes people don’t like to work or won’t seek out responsibility, so they have to be threatened and coerced to work. A Theory Y manager assumes people like to work and seek out responsibility, so they will exercise self-motivation and self-direction. These workers (inmates) are more oriented toward Theory Y because they are rewarded by a sense of personal achievement or accomplishment since they cannot be given traditional merit pay raises and bonuses. Managers anticipate this desire, offer one-on-one feedback, and have recognition programs in place for when employees excel in their work. They receive positive reinforcement when they do well and are treated with respect by the firm. (LO: 3, Compare and contrast contemporary theories of motivation, AACSB: Analytical thinking) 14-17. Analyze this case using the integrative model in Exhibit 14-9.

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Expectancy theory explains why inmates will exert a high level of effort for Televerde. Inmates perceive a strong relationship between effort and performance, performance and rewards, and rewards and satisfaction of personal goals. Training and feedback are provided to ensure employees have the efficacy to put forth the effort to lead to good performance. The performance evaluation system seems to be perceived as being fair and objective. Good performance is rewarded, and with the chance to work at Televerde’s corporate office is available upon release. As a result, inmates see the rewards–goal relationship. Need theories increase motivation because the rewards received for their high performance satisfy dominant needs consistent with individual goals. The high achiever would be particularly motivated by Televerde’s success. The high achievers are internally driven as long as their jobs provide them with personal responsibility, feedback, and moderate risks. Reinforcement theory in the integrated model is also connected to rewards because Televerde’s rewards reinforce the individual’s performance. Since the rewards are perceived as fair, they play a key part in equity theory. Inmates will compare the rewards (outcomes) they have received from the inputs or efforts they made with the inputs–outcomes ratio of relevant others. If inequities exist, the effort expended may be negatively influenced. Finally, the JCM relates as the task characteristics do influence job motivation. Specifically, jobs are designed to increase an employee’s control over key elements in their work. Therefore, motivation is higher because the jobs offer autonomy, feedback, which help to satisfy the individual goals of employees who desire greater control over their work. (LO: 3, Compare and contrast contemporary theories of motivation, AACSB: Analytical thinking) 14-18. How might self-efficacy increase for inmates who work at Televerde?

Self-efficacy refers to an individual’s belief that they are capable of performing a task. After working at Televerde, these inmates leave prison knowing they can do a good job and be compensated for that work. This program should increase employee self-efficacy significantly, particularly given their starting point. Any time an employee (inmate) secures a sales lead, she rings a bell signaling both employees and managers to applaud. Employees earn award certificates for excellent performance, and the winners tend to display these certificates in their workspaces. As one employee put it, it’s is through these expressions of earned respect “that we gain confidence. And the more confident you become inside, the more confident you sound on the phone. .So of course that brings more success and then more confidence, and it feeds on itself in a positive snowball effect.” This increases self-efficacy or an individual’s belief that they can perform a task. As the bell rings, they increase their self-efficacy and gain additional confidence in their ability to succeed in a task. So, as they gain more self-efficacy, they will try harder to master the challenge. (LO: 3, Compare and contrast contemporary theories of motivation, AACSB: Analytical thinking) 14-19. In what ways could the relational perspective of work design be applied to Televerde’s approach? Are there other aspects of this perspective that Televerde might consider adding to what it already does?

The employees all work in a common room and share a common bond (prison inmates). They rely on the successes of everyone in the room to motivate them to perform and managers treat them as equals. Televerde could add weekly meetings after the inmates are released to ensure they are transitioning well to society. (LO: 3, Compare and contrast contemporary theories of motivation, AACSB: Analytical thinking)

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14-20. What would be an example of how Televerde might implement a high-involvement work practice to complement what it currently does?

The workday could start with managers soliciting ideas for improvement. Has any employee discovered a tactic that seems to increase productivity? This solicitation of input might get them more involved. (LO: 3, Compare and contrast contemporary theories of motivation, AACSB: Reflective thinking)

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Chapter 15 Managing Groups and Teams Few trends have influenced how work gets done in organizations as much as the use of work teams. Organizations are increasingly structuring work around teams rather than individuals. Managers need to understand what influences team performance and satisfaction.

LEARNING OBJECTIVES 1. Define groups and the stages of group development.

2. Describe the major components that determine group performance and satisfaction.

3. Define teams and best practices influencing team performance.

CHAPTER OUTLINE INTRODUCTION Work groups are a common arrangement within today’s business organizations.

Work is being restructured around groups of all kinds and in all sizes of organizations. Managers need an understanding of group behavior and the concept of teams in order to appreciate what groups can and cannot do within organizations and how groups function.

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GROUPS AND GROUP DEVELOPMENT Groups exhibit different behavior—more than just the sum total of each group member’s individual behavior. In this section, we’re going to look at various aspects of group behavior.

A. What Is a Group?

A group is defined as two or more interacting and interdependent individuals who come together to achieve particular objectives.

1.

Formal groups are work groups established by the organization and who have designated work assignments and specific tasks (see Exhibit 15-1).

2.

Informal groups are natural social formations that appear in the work environment.

B. Stages of Group Development.

Evidence suggests that groups pass through five stages as they develop (see Exhibit 15-2).

1.

Forming is the first stage in group development during which people join the group and then define the group’s purpose, structure, and leadership. Forming is a stage characterized by much uncertainty. This stage is complete when members begin to think of themselves as part of a group.

2.

Storming is the second stage of group development characterized by intragroup conflict. Members will agree upon the

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5.

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leadership hierarchy and group direction when this stage is complete.

Norming is the third stage of group development, characterized by close relationships and cohesiveness.

Performing is the fourth stage in group development when the group is fully functional.

Adjourning is the final stage in group development for temporary groups. It’s characterized by concern with wrapping up activities rather than with task performance.

WORK GROUP PERFORMANCE AND SATISFACTION We need to look at how groups work. The answer to why some groups are more successful than others is quite complex. There are five factors that can affect this relationship (see Exhibit 15-3).

A. External Conditions Imposed on the Group. These factors include an organization’s strategy, authority relationships, formal rules and regulations, the availability of resources, employee selection criteria, the performance management system and culture, and the general physical layout of the group’s workspace or the virtual resources for remote teams.

B. Group Member Resources. These factors include member abilities and personality characteristics. Interpersonal skills are especially important for high performance by work groups. The Dark Triad is negatively related to group productivity and morale.

C. Group Structure. There are seven aspects of the internal structure. Six are covered here and leadership is covered in Chapter 16.

1.

Roles—A role is a set of behavior patterns expected of someone occupying a given position in a social unit. Role conflict can occur when an individual is confronted with different role expectations.

2.

Norms—Norms are acceptable standards or expectations shared by a group’s members. Although each group has its own unique set of norms, there are common classes of norms that appear in organizations.

3.

Conformity—Norms focus on effort and performance, dress, and loyalty. Also, because individuals desire acceptance by the groups to which they belong, they are susceptible to conformity pressure. When an individual’s opinion of objective data differs significantly from that of others in the group, they feel extensive pressure to align their opinion to conform to others’ opinions. This is known as groupthink.

4.

Status Systems—Status systems are an important factor in understanding group behavior. Status is a prestige grading, position, or rank within a group.

5.

Group Size—Group size can also affect the group’s overall behavior. The effect depends on which outcomes are focused on.

An important finding related to group size is social loafing—the tendency for individuals to expend less effort when working collectively than when working individually.

6.

Group Cohesiveness—Group cohesiveness is the degree to which members are attracted to a group and share the group’s goals. Research has shown that highly cohesive groups are more

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effective than less cohesive groups. However, it’s important to look at the degree to which the group’s attitude aligns with the goals (see Exhibit 15-5).

Group Processes. Group processes include the communication patterns used by members to exchange information, group decision processes, leader behavior, power dynamics, conflict interactions, and other actions.

1.

Group Decision Making— (See Exhibit 15-6.) Groups make many organizational decisions. Advantages of group decision making include the following benefits: a.

Generate more complete information and knowledge b.

Generate more diverse alternatives c.

Increase acceptance of a solution d.

Increase legitimacy 2.

Disadvantages of group decision making include: a.

Time consuming b.

Minority domination c.

Pressures to conform d.

Ambiguous responsibility 3.

Conflict Management—Conflict management is another group concept that must be understood. Conflict is perceived when incompatible differences result in interference or opposition. a.

The traditional view of conflict is the view that all conflict is bad and must be avoided. b.

The human relations view of conflict is the view that conflict is a natural and inevitable outcome in any group. c.

The interactionist view of conflict is the view that some conflict is necessary for a group to perform effectively. d.

Functional conflicts are conflicts that support a group’s goals and improve its performance.

Dysfunctional conflicts are conflicts that prevent a group from achieving its goals. See Exhibit 15-7 for Conflict and Performance relationship.

4.

Three types of conflict have been identified: a.

Task conflict is conflict over the content and goals of the work. b.

Relationship conflict is conflict based on interpersonal relationships. c.

Process conflict is conflict over how work gets done.

Group Tasks. The complexity and interdependence of tasks influence the group’s effectiveness. Evidence indicates that the more complex the task, the more a group benefits from group discussion about alternative work methods.

1.

Effective communication and controlled conflict are most relevant to group performance when tasks are complex and interdependent.

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TURNING GROUPS INTO EFFECTIVE TEAMS Teamwork is a core feature of today’s organizations. Studies show that teams usually outperform individuals when the tasks to be completed require multiple skills, judgment, and experience.

A. The Difference Between Groups and Teams.

1.

Work teams are groups whose members work intensely on a specific, common goal using their positive synergy, individual and mutual accountability, and complementary skills.

2.

Although most students are familiar with the concept of a “team,” many may be less familiar with the concept of a “work team.” All work teams are groups, but only formal groups can be work teams. Exhibit 15-8 highlights the differences between groups and teams.

B. Types of Work Teams.

Certain characteristics distinguish different types of teams: 1.

A problem-solving team is a type of work team that is composed of a manager and his or her subordinates from a particular functional area.

2.

A self-managed team is a type of work team that operates without a manager and is responsible for a complete work process or segment.

3.

A cross-functional team is a work team composed of individuals from various specialties.

4.

A virtual team is a type of work team that uses technology to link physically dispersed members in order to achieve a common goal.

C. Creating Effective Work Teams.

The establishment of teams in the workplace will not automatically enhance productivity. Nine characteristics are associated with

effective teams (see Exhibit 15-9): 1.

2.

3.

4.

5.

6.

7.

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Clear Goals—High-performance teams have a clear understanding of the goal to be achieved.

Relevant Skills—Effective teams are composed of competent individuals who have the necessary technical and interpersonal skills to achieve the desired goals while working well together.

Unified commitment—Effective teams are characterized by high mutual trust among members Good communication—effective teams are characterized by good communication.

Negotiating skills—Effective teams are continually making adjustments as to who does what, which requires team members to possess negotiating skills.

Appropriate leadership—Leaders clarify goals, demonstrate that change is possible by overcoming inertia, increasing the selfconfidence of team members, and helping members to more fully realize their potential.

Internal and External Support—the team should have a sound infrastructure, which means proper training, a clear and reasonable measurement system that team members can use to evaluate their overall performance, an incentive program that

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recognizes and rewards team activities, and a supportive human resource system. Externally, managers should provide the team with the resources needed to get the job done.

D. Technology and Teams. Virtual Collaboration platforms and the impact of artificial intelligence impact team interactions.

1.

Virtual Collaboration Platforms—Most companies use some version of a virtual collaboration platform such as Microsoft Teams or Slack to support team collaboration. Evidence suggests that using these platforms facilitates virtual teams and enhances productivity for all teams.

2.

Artificial Intelligence—Artificial intelligence (AI) is advancing the capabilities of machines to allow them to collaborate with humans.

AI tools can use recordings of team discussions to diagnose problems with collaborative problem solving and advise team members on how to improve.

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ANSWERS TO REVIEW AND DISCUSSION QUESTIONS Student answers to these questions will vary.

15-1. Describe the different types of groups and the five stages of group development.

A group is two or more interacting and interdependent individuals who come together to achieve specific goals. Formal groups are work groups that are defined by the organization’s structure and have designated work assignments and specific tasks directed at accomplishing organizational goals. Informal groups are social groups.

The forming stage consists of two phases: joining the group and defining the group’s purpose, structure, and leadership. The storming stage is one of intragroup conflict over who will control the group and what the group will be doing. The norming stage is when close relationships and cohesiveness develop as norms are determined. The performing stage is when group members begin to work on the group’s task. The adjourning stage is when the group prepares to disband. (LO: 1, Define groups and the stages of group development, AACSB: Analytical thinking) 15-2. Explain how external conditions and group member resources affect group performance and satisfaction.

External conditions, such as the availability of resources, organizational goals, and other factors, affect work groups. Group member resources (knowledge, skills, abilities, personality traits) can influence what members can do and how effectively they will perform in a group. (LO: 2, Describe the major components that determine group performance and satisfaction, AACSB: Analytical thinking) 15-3. Separately discuss how group structure, processes, and tasks influence group performance and satisfaction. How might remote work improve group performance and satisfaction?

Group roles generally involve getting the work done or keeping group members happy.

Group norms are powerful influences on a person’s performance and dictate things such as work output levels, absenteeism, and promptness. Pressures to conform can heavily influence a person’s judgment and attitudes. If carried to extremes, groupthink can be a problem. Status systems can be a significant motivator with individual behavioral consequences, especially if incongruence is a factor. What size group that is most effective and efficient depends on the task the group is supposed to accomplish.

Cohesiveness is related to a group’s productivity.

Group decision making and conflict management are important group processes that play a role in performance and satisfaction. If accuracy, creativity, and degree of acceptance are important, a group decision may work best. Relationship conflicts are almost always dysfunctional. Low levels of process conflicts and low-to-moderate levels of task conflicts are functional. Effective communication and controlled conflict are most relevant to group performance when tasks are complex and interdependent.

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Technology has advanced enough for groups to be structured in effective ways.

Employees are familiar with technology and can engage in group processes in ways resulting in higher performance and satisfaction. Tasks can be characterized as either simple or complex. Evidence indicates that the more complex the task, the more a group benefits. Should remote teams work on complex tasks, the team will need to interact more. Thus, effective communication and controlled conflict may be more complicated to manage when tasks are complex, and in these remote work situations, satisfaction and performance may be lower than in face-to-face groups. Although virtual teams have existed for many years, advancing technology is becoming a key resource for team effectiveness. Virtual collaboration platforms include shared workspaces or dashboards, messaging options such as chat features or discussion boards, shared document storage, videoconferencing, and project management tools. There is evidence that using these platforms facilitates virtual teams and can enhance productivity for all teams. (LO: 2, Describe the major components that determine group performance and satisfaction, AACSB: Analytical thinking) 15-4. Compare groups and teams.

Characteristics of work groups include a strong, clearly focused leader; individual accountability; purpose that’s the same as the broader organizational mission; individual work product; efficient meetings; effectiveness measured by influence on others; and a group that discusses, decides, and delegates together. Characteristics of teams include shared leadership roles; individual and mutual accountability; specific team purpose; collective work products; meetings with open-ended discussion and active problem solving; performance measured directly on collective work products; and a team that discusses, decides, and does real work. (LO: 3, Define teams and best practices influencing team performance, AACSB: Analytical thinking) 15-5. Describe the most common types of work teams.

A problem-solving team is one that’s focused on improving work activities or solving specific problems. A self-managed work team is responsible for a complete work process or segment and manages itself. A cross-functional team is composed of individuals from various specialties. A virtual team uses technology to link physically dispersed members in order to achieve a common goal. (LO: 3, Define teams and best practices influencing team performance, AACSB: Analytical thinking) 15-6. Rank the characteristics of an effective team in terms of the most important characteristic of an effective team to the least important characteristic. Justify your rankings.

Students' ranking will vary. Clear goals often rank at the top of the list. The characteristics of an effective team include clear goals, relevant skills, mutual trust, unified commitment, good communication, negotiating skills, appropriate leadership, and internal and external support. (LO: 3, Define teams and best practices influencing team performance, AACSB: Analytical thinking) 15-7. Explain the types of difficult people and how to handle them when managing teams.

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Have students review the workplace confidential titled Handling Difficult Coworkers. The types of difficult people are the aggressive types, the complainers, the silent or nonresponsive types, and the know-it-all experts. Other types include psychopathy is a personality disorder. A lack of remorse and empathy characterizes it. Psychopaths are emotionally cold and disconnected. Machiavellian types are master manipulators.

They’re cunning and duplicitous. Not surprisingly, they are often your boss or upper-level manager. The third component of toxicity is narcissism. Narcissists are highly selfcentered people who are egotistical and think the world revolves around them. Studies have found that Machiavellian and narcissistic types use “soft” tactics like compliments and reason to get their way; psychopathic individuals use “hard” tactics such as assertiveness and direct manipulations. Research on social networks has shown that when people need help getting a job done, they’ll choose a friendly colleague over someone who may be more capable. So, allowing employees to select their team or who is on their team can be helpful. (LO: 3, Define teams and best practices influencing team performance, AACSB: Analytical thinking)

ETHICS DILEMMA Student answers to these questions will vary.

What do you do when a coworker shares on social media that he has shaved his entire body to reduce aerodynamic drag or that they are involved in an office romance In this ethical dilemma, students are asked what they think when colleagues share too much online. An obvious issue to address here is whether it crosses the line. Should a coworker be able to tell another coworker that they do not want to read information they are uncomfortable with?

15-8. What do you think? Why do some coworkers share so much personal information on social media?

Student answers will vary, but most know or have experienced situations where people have different comfort levels and motivations for sharing personal information on social media. Sometimes, when people spend a lot of time together, they can become too comfortable with one another and begin to share too much personal information in person and on social media. Sometimes, people are unsure if they are making the correct choices, and they post information in hopes of getting feedback that their choices are acceptable when they get positive feedback or encouragement they need from peers. (LO: 3, Define teams and best practices influencing team performance, AACSB: Ethical understanding and reasoning) 15-9. A recent survey revealed that 51 percent of employees said they have had an office romance. Another survey found that workers in their 20s and 30s view workplace romances more positively than older generations do. Should colleagues refrain from posting about relationships with coworkers on social media? Explain your reasoning.

Student answers will vary. Some believe the managers should eventually be made aware of the situation. Most agree that some types of relationship posts are acceptable while others are not (LO: 3, Define teams and best practices influencing team performance, AACSB: Ethical understanding and reasoning)

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15-10. What are the ethical implications of managing oversharing coworkers? Is sharing too much information about their hobbies, tattoos, religion, food interests, relationships, and children just normal human behavior?

Student answers will vary. While managers want to create an environment of open communication and inclusivity, they also need to create a culture where everyone understands the boundaries of what should and should not be shared. But both the receiver and sender of the information need to be understanding. Sharing personal information about hobbies, tattoos, religion, food interests, relationships, and children can be normal human behavior. Sharing personal information can be a sign of mutual trust, which is important for managers striving to create a workplace where collaboration happens. This case highlights sharing should balance openness with professionalism and respect for individual boundaries. Clear communication about expectations and creating an environment where employees feel comfortable expressing concerns can contribute to a healthier workplace dynamic. (LO: 3, Define teams and best practices influencing team performance, AACSB: Ethical understanding and reasoning)

SKILLS EXERCISE: DEVELOPING YOUR COACHING SKILLS Managers are expected to add coaching to the growing list of expected skills. In this exercise, students are to find a friend they can coach on a project or challenging assignment. Students are asked to analyze ways to improve performance and abilities, create a supportive climate, and influence the friend to change their behavior to improve performance. (LO: 3, Define teams and best practices influencing team performance, AACSB: Written and oral communication)

WORKING TOGETHER: TEAM EXERCISE In this exercise, students are to imagine that they have been put in charge of a team of five to create new products for a software company. Issues for students to think about are that the employees assigned to your work team have been with the company for less than a year and have not worked together before. Students may want to refer to the relationship between group cohesiveness and productivity in Exhibit 15-5 and Exhibit 15-9 for the characteristics of effective teams. (LO: 2, Describe the major components that determine group performance and satisfaction, AACSB: Written and oral communication)

MY TURN TO BE A MANAGER •

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Think of a group to which you belong (or have belonged). Trace its development through the stages of group development as shown in Exhibit 15-2. How closely did its development parallel the group development model? How might the group development model be used to improve this group’s effectiveness? (LO: 1, Define groups and the stages of group development, AACSB: Analytical thinking)

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Using this same group, write a report describing the following things about this group: types of roles played by each member, group norms, group conformity issues, status system, size of the group and how effective/efficient it is, and group cohesiveness. (LO: 1, Define groups and the stages of group development, AACSB: Reflective thinking)

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Using the same group, describe how decisions are made. Is the process effective? Efficient? Describe what types of conflicts often arise (relationship, process, or task) and how those conflicts are handled. Add this information to your report on the group’s development and structure. (LO: 2, Describe the major components that determine group performance and satisfaction, AACSB: Reflective thinking)

•

Select two of the characteristics of effective teams listed in Exhibit 15-9 and develop a team-building exercise for each characteristic that will help a group improve that characteristic. Be creative. Write a report describing your exercises and be sure to explain how your exercise will help a group improve or develop that characteristic. (LO: 3, Define teams and best practices influencing team performance, AACSB: Reflective thinking)

•

Often, new teams that must become productive quickly start off by writing ground rules or a team working agreement. Conduct some research on team working agreements and create a summary of what such an agreement might include.

When assigned your next team project, try writing a team working agreement to kick off your project. (LO: 3, Define teams and best practices influencing team performance, AACSB: Reflective thinking)

ANSWERS TO CASE APPLICATION 1 QUESTIONS Student answers to these questions will vary.

Making Delivery Drones a Reality at Alphabet 15-11. What are the norms for the US Women’s National Soccer team?

Being a player on the US team means living up to high expectations, winning, and dominating at the highest level. The US women’s team’s norms include players committed to hard work and willing to push themselves to their physical limits. (LO: 2, Describe the major components that determine group performance and satisfaction, AACSB: Analytical thinking) 13-12. How might different group development stages apply to this team? In your answer, note how making changes to cohesiveness might impact the stages of group development and the team’s performance in the World Cup.

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The 2023 US Women’s National Soccer team was a team in transition. Because many players are new, the team is likely to go through all the stages of team development, from forming to performing, to attain the chemistry needed to win. The team was a mixture of experienced veteran stars and players with little international soccer experience who have not played together. Of the 23 team members, only 9 of the 2023 US players were on the 2019 World Cup championship team. Their reliance on new team members meant fewer game experiences as a national team and less team chemistry. The 2023 team’s short training camp made it difficult for the team to get to know each other and likely slowed the team's ability to reach the performing stage of group development. To build chemistry during the tournament, veterans offered encouragement behind closed hotel-room doors, in training sessions, at team meals, and during halftime at matches. Their struggle to become cohesive was observed when the women played like freelancers struggling to unite as a high-performing team. This team has probably gone through the first four stages; forming, storming, norming and performing. Struggling to play well in some games could have generated some intergroup conflict. This stage is the storming stage. (LO: 1, Define groups and the stages of group development, AACSB: Analytical thinking) 15-13. What kinds of conflict do you think might impact the US team at different points, from training camp through competing in the World Cup? Which types of conflict will hinder and enhance the effectiveness of the team in the future?

The storming stage is appropriately named because of the intragroup conflict. Because the team was in transition, there was likely conflict over who would control the group and what the group needed to be doing. During this stage, a relatively clear hierarchy of leadership and agreement on the group’s direction emerge. Teams may have serious interpersonal conflicts. But conflict can be a positive process factor leading to the synergy within the team. However, if the conflict is dysfunctional, the team may have negative process factors such as social loafing, high levels of conflict, or poor communication. Functional conflicts—are constructive and support the goals of the work group and improve its performance. Other conflicts—dysfunctional conflicts—are destructive and prevent a group from achieving its goals. Exhibit 15-7 illustrates the challenges managers face at different levels of conflict. Task conflict relates to the content and goals of the work. Relationship conflict focuses on interpersonal relationships. Process conflict refers to how the work gets done. Research shows that relationship conflicts are almost always dysfunctional because interpersonal hostilities increase personality clashes and decrease mutual understanding, and the tasks don’t get done. On the other hand, low levels of process conflict and low to moderate levels of task conflict are functional. For process conflict to be productive, it must be minimal.

Otherwise, intense arguments over who should do what may become dysfunctional and can lead to uncertainty about task assignments, increase the time to complete tasks, and result in members working at cross-purposes. However, a low -to- moderate level of task conflict has a positive effect on group performance because it stimulates discussion of ideas that help groups be more innovative. Conflict that initiates from one person or a dyad is more likely to be functional conflict. The important learning for managers is that conflict may have a different effect depending on the source, and managers may need to take a different approach to help teams move through conflict. (LO: 2, Describe the major components that determine group performance and satisfaction, AACSB: Analytical thinking)

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15-14. Which characteristics of an effective team does the US team have? Which are missing? Could technology be used to support building the team’s cohesiveness leading up to the World Cup? Explain.

The characteristics of an effective team include clear goals, relevant skills, mutual trust, unified commitment, good communication, negotiating skills, appropriate leadership, and internal and external support. The group has clear goals, talented players, and access to abundant resources, which was helpful. However, good communication and mutual trust may be missing. (LO: 3, Define teams and best practices influencing team performance, AACSB: Analytical thinking) ANSWERS TO CASE APPLICATION 2 QUESTIONS Student answers to these questions will vary.

Taylor Swift’s Bonuses Cause Their Own “Swift Quake” 15-15. Is Taylor Swift’s Eras Tour really a team effort? Why or why not?

Of course, Taylor Swift’s seemingly one-woman show required a significant team effort.

The costumes Swift work during the concerts required the work of several designers, and she needed help changing costumes several times each show. The stage show is technically ambitious as well; the stage show was a collaboration of technicians, designers, and a variety of workers. Other team members included the 50-plus truckers transporting sets and equipment from one stadium to the next, caterers to feed everyone, to workers handing out LED wristbands that sync up to songs in unison when Swift is singing, and many more. (LO: 3, Define teams and best practices influencing team performance, AACSB: Analytical thinking) 15-16. Why were crew members such as dancers, musicians, lighting and sound technicians, caterers, and even truck drivers on tour motivated to perform well on tour?

Explain.

Everyone knew expectations were high for Swift's sold-out concerts. Swift and even these team members know many fans spent a lot of money to see and attend the concert, and the team members felt an obligation to ensure fans got what they paid for.

Swift’s management team also provided the support, resources, and encouragement to ensure they were able do their job well. The team effort did not go unnoticed; during a meeting with these behind-the-scenes workers, Scott Swift, Taylor’s father, made a surprise visit to a truck driver meeting to announce that Taylor felt everybody should receive a bonus. While a $5,000 to $10,000 bonus is often given to truck drivers at the end of large stadium tours, Taylor offered a handwritten note to each driver with a wax seal on the envelope with her monogram that included a $1000,000 bonus for each truck driver. A significant amount to workers with an average salary in the United States of around $84,000. Swift also gave bonuses totaling over $55 million to other crew members on the tour, such as dancers, musicians, lighting and sound technicians, and caterers. (LO: 2, Describe the major components that determine group performance and satisfaction, AACSB: Analytical thinking)

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15-17. How important is it for a leader like Taylor Swift to recognize and reward her team? What challenged do Swift’s generous rewards pose for future tours and other artists?

A supportive leader is necessary for a team to be effective. Swift’s recognition and rewards showed she knew what was needed to do the job. Swift’s generous rewards set expectations for what financial support looks like and will pressure future artists to be equally generous. Higher reward expectations will impact the budget for future tours, but the challenge for future artists will be navigating expectations to maintain positive team dynamics. (LO: 3, Define teams and best practices influencing team performance, AACSB: Analytical thinking) 15-18. What characteristics of effective work teams must be in place to make this tour so successful?

This team, just like other teams, it needs clear goals and strong leadership to keep the tour and concerts on track and enjoyable for fans. Members must have the relevant skills, mutual trust of team members, commitment to the team’s goals, and good communication skills. The teams also need internal and external support to accomplish their assigned task. (LO: 3, Define teams and best practices influencing team performance, AACSB: Analytical thinking)

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Chapter 16 Being an Effective Leader Leaders in organizations make things happen. But what makes leaders different from nonleaders? What's the most appropriate style of leadership? What can managers do to be seen as a leader? These are just a few of the questions addressed in this chapter.

LEARNING OBJECTIVES 1.

2.

3.

4.

5.

6.

Define leader and leadership.

Compare and contrast early theories of leadership.

Describe the three major contingency theories of leadership.

Describe contemporary views of leadership.

Compare the various theories of leadership for their validity.

Discuss twenty-first-century issues affecting leadership.

CHAPTER OUTLINE INTRODUCTION The quality of leadership is an important element in an organization's success, since leaders influence employees to work together toward fulfilling a company's mission and achieving its goals.

16.1

WHO ARE LEADERS AND WHAT IS LEADERSHIP? Certain distinctions can be made between managers and leaders.

A. While managers are appointed and have legitimate power within the organization, a leader is someone who can influence others and who has managerial authority.

B. Leadership is the process of influencing a group to achieve goals.

16.2

EARLY LEADERSHIP THEORIES Researchers began to study leadership in the early twentieth century and developed behavioral theories that focused on the leader (trait theories) and how the leader interacts with their group members.

A. Leadership Traits.

1.

Research in the 1920s and 1930s focused on the traits of the leader, with the intent to isolate characteristics that might be used to differentiate leaders from nonleaders.

2.

Identifying a set of traits consistently associated with the process of leadership proved to be more successful than one set of traits that would always differentiate leaders from nonleaders.

3.

Ten traits associated with effective leadership are described in Exhibit 16-1.

B. Leadership Behaviors.

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1.

2.

3.

4.

5.

6.

16.3

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Researchers began to hope that a behavioral theories' approach would provide more definitive information about the nature of leadership than did trait theories. Four main leader behavior studies are summarized in Exhibit 16-2.

University of Iowa Studies—Kurt Lewin and his associates explored three leadership styles: autocratic, democratic, and laissez-faire.

The Ohio State Studies—identified two important dimensions of leader behavior: initiating structure and consideration. High-high leaders (leaders high in both behaviors) sometimes achieved high group task performance and high group member satisfaction.

University of Michigan Studies—identified two dimensions of leader behavior: leaders who were employee-oriented and leaders who were production-oriented.

The Managerial Grid—The Managerial Grid is a two-dimensional grid used to appraise leadership styles using “concern for people” and “concern for production” as dimensions.

Predicting leadership success involved more than isolating a few leader traits or behavior. The lack of success in attaining consistent results led to a focus on situational influences.

CONTINGENCY THEORIES OF LEADERSHIP A. The Fiedler Model. The Fiedler contingency model, developed by Fred Fiedler, is a contingency theory proposing that effective group performance depended upon the proper match between a leader's style of interacting with their followers and the degree to which the situation allowed the leader to control and influence.

1.

Fiedler developed the least-preferred coworker (LPC) questionnaire, which measures whether a person is task or relationship-oriented. This questionnaire contained 18 pairs of contrasting adjectives. Respondents were asked to think of all the coworkers they had ever had and to describe the person they least preferred to work with, using the 18 sets of adjectives. Fiedler believed that a person's basic leadership style could be determined on the basis of their answers.

2.

Fiedler also isolated three situational criteria that he believed could be manipulated to create the proper match with the behavioral orientation of the leader: a.

Leader-member relations describe the degree of confidence, trust, and respect subordinates have in their leader. b.

Task structure described the degree to which job assignments were formalized and procedurized. c.

Position power describes the degree of influence a leader had over power-based activities such as hiring, firing, discipline, promotions, and salary increases.

3.

Next, Fiedler used the above variables to evaluate the situation. He defined eight different situations in which a leader could find themself (see Exhibit 16-3).

4.

The Fiedler model proposes matching an individual's LPC and an assessment of the three contingency variables to achieve maximum leadership effectiveness.

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B.

C.

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Fiedler concluded that task-oriented leaders tend to perform better in situations that are either very favorable or very unfavorable to them.

6.

He concluded that relationship-oriented leaders perform better in moderately favorable situations.

7.

Fiedler believed that an individual's leadership style was fixed; he concluded that leader effectiveness could be improved in only two ways: a.

Bring in a new leader whose style fits the situation better. b.

Change the situation to fit the leader.

8.

Research has generally supported the validity of Fiedler's model.

However, some drawbacks are associated with the model.

Hersey and Blanchard's Situational Leadership Theory. Situational leadership theory (SLT) is a leadership contingency theory developed by Paul Hersey and Ken Blanchard that focuses on followers' readiness.

1.

Hersey and Blanchard propose that successful leadership is achieved by selecting the right leadership style that matches the level of the followers' readiness.

2.

Readiness is the extent to which people have the ability and willingness to accomplish a specific task.

3.

SLT uses the same leadership dimensions identified by Fiedler: task and relationship behaviors.

4.

Each of the two leadership dimensions is considered either high or low and then combined into four specific leadership styles.

5.

Research efforts to test and support this theory generally have been disappointing, possibly because of internal ambiguities or inconsistencies in the model itself.

Path-Goal Model. Path-goal theory, developed by Robert House, is a leadership theory that purports that it is the leader's job to assist his or her followers in attaining their goals and to provide the direction or support needed to ensure that their goals are compatible with the overall objectives of the organization (see Exhibit 16-4).

1.

Four leadership behaviors were identified by House: a.

The directive leader lets subordinates know what is expected of them, schedules work to be done, and gives specific guidance on how to accomplish tasks. b.

The supportive leader is friendly and shows concern for subordinates' needs. c.

The participative leader consults with subordinates and uses their suggestions before making a decision. d.

The achievement-oriented leader sets challenging goals and expects subordinates to perform at their highest level.

2.

The path-goal theory proposes two classes of situational or contingency variables that moderate the leadership behavior-outcome relationship: a.

Variables in the environment that are outside of the control of the follower. b.

Variables that are part of the personal characteristics of the follower.

3.

The following hypotheses have evolved from path-goal theory:

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a.

4.

16.4

CONTEMPORARY VIEWS ON LEADERSHIP The most current approaches to looking at leadership are discussed in this section of the text.

A. Leader-Member Exchange (LMX) Theory. Leader-member exchange (LMX) theory states that leaders create in-groups and out-groups and those in the in-group will have higher performance, less turnover, and greater job satisfaction.

1.

The leader will categorize a follower as an “in” or an “out.” Both leader and follower must “invest” in the relationship.

2.

The leader does the choosing, but the follower’s characteristics drive the decision.

3.

Research supports the LMX theory.

B.

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Directive leadership leads to greater satisfaction when tasks are ambiguous or stressful, than when they are highly structured and well laid out. b.

Supportive leadership results in high employee performance and satisfaction when subordinates are performing structured tasks. c.

Directive leadership leads to higher employee satisfaction when there is substantive conflict within a work group. d.

Achievement-oriented leadership increases subordinates' expectancies that effort will lead to high performance when tasks are ambiguously structured. e.

Subordinates with an external locus of control will be more satisfied with a directive style. f.

Achievement-oriented leadership will increase subordinates' expectations that effort will lead to high performance when tasks are ambiguously structured.

Although not every research finding has been positive, the majority of the evidence supports the following logic underlying path-goal theory: a.

Employee performance and satisfaction are likely to be positively influenced when the leader compensates for shortcomings in either the employee or the work setting. b.

However, if the leader spends time explaining tasks when those tasks are already clear or when the employee has the ability and experience to handle them, the employee is likely to see such behavior as redundant or even insulting.

Charismatic Leadership.

1.

A charismatic leader is an enthusiastic, self-confident leader whose personality and actions influence people to behave in certain ways. a. Five personal characteristics of charismatic leaders have been identified. Charismatic leaders have a vision, are able to articulate that vision, are willing to take risks to achieve that vision, are sensitive to both environmental constraints and follower needs, and exhibit behaviors that are out of the ordinary. b. An increasing amount of research shows impressive correlations between charismatic leadership and high

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C.

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F.

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H.

16.5

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performance and satisfaction among followers. Most experts think that individuals can be trained to exhibit charismatic behaviors. c. Charismatic leadership may not always be needed to achieve high levels of employee performance. This type of leadership may be most appropriate when an employee's job has a significant amount of ideological content.

Transformational-Transactional Leadership.

What is the difference between transactional and transformational leaders?

1.

Transactional leaders are leaders who lead primarily by using social exchanges (or transactions).

2.

Transformational leaders are leaders who stimulate and inspire (transform) followers to achieve extraordinary outcomes. Evidence supporting the superiority of transformational leadership over transactional leadership is overwhelmingly impressive.

Authentic Leadership. Authentic leadership focuses on the moral aspects of being a leader. Authentic leaders know who they are, know what they believe in, and act on those values and beliefs openly and candidly.

Ethical Leadership. Ethical top leadership not only influences direct followers, but also spreads all the way down the command structure, because top leaders set expectations and expect lower-level leaders to behave consistent with ethical guidelines.

1.

Leaders rated as highly ethical tend to be evaluated very positively by their subordinates, who are also more satisfied and committed to their jobs and experience less strain and turnover intentions.

Servant Leadership. Servant leaders go beyond their self-interest and focus on opportunities to help their followers grow. Its specific characteristics include caring about followers' personal problems and well-being, empowering followers with responsibility and decision-making influence, helping subordinates grow and succeed, and serving as a model of integrity.

1.

Servant leaders put the needs of followers ahead of their own needs.

2.

Servant leadership may be more prevalent in certain Asian cultures.

Emergent Leadership. Emergent leadership occurs when the leader of a group or team naturally arises instead of being appointed. Emergent leaders are those who are perceived by their peers as being leaderlike and accepted as the informal leader.

Followership. Leaders need good followers. Good followers have several qualities, including: 1.

They can manage themselves.

7.

They are strongly committed to a purpose outside themselves.

8.

They are enthusiastic.

9.

They build their competence and focus their efforts for maximum impact.

10.

They are courageous, honest, and credible.

INTEGRATING THEORIES OF LEADERSHIP Some commonalities and overlaps exist in the various leadership theories discussed so far. In this section, the ways they overlap or complement each other are presented.

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1.

2.

3.

16.6

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Traits: No single trait is unique to all leaders, but 10 traits that regularly appear in research studies are listed in Exhibit 17-1. Intelligence, emotional intelligence, and conscientiousness appear to be the most powerful.

Behaviors: Three metacategories of behaviors encompass most leadership behaviors. These are: a.

Task-oriented behavior b.

Relations-oriented behavior c.

Change-oriented behavior Contingency Factors: Follower's experience and follower's ability help explain effective leadership. Organizational and national cultures are also highly relevant contingency factors in leadership.

LEADERSHIP ISSUES IN THE TWENTY-FIRST CENTURY The concept of leadership is continually being refined. This section of the text examines several contemporary issues in leadership.

A. Managing Power.

Power is the capacity of a leader to influence work actions or decisions.

Because leaders must influence others, we need to look at how leaders acquire power. French and Raven identified five sources or bases of power.

1.

Legitimate power is the power a leader has as a result of his or her position in the organization.

2.

Coercive power is the power a leader has because of his or her ability to punish or control.

3.

Reward power is the power a leader has because of his or her ability to give positive benefits or rewards.

4.

Expert power is influence that is based on expertise, special skills, or knowledge.

5.

Referent power is the power that arises because of a person's desirable resources or personal traits.

6.

Most effective leaders rely on several different bases of power.

B. Developing Credibility and Trust.

1.

Credibility is the degree to which followers perceive someone as honest, competent, and able to inspire.

2.

Trust is the belief in the integrity, character, and ability of a leader.

3.

Research has identified five dimensions that make up the concept of trust: a.

Integrity (honesty and truthfulness) b.

Competence (technical and interpersonal knowledge and skills) c.

Consistency (reliability, predictability, and good judgment in handling situations) d.

Loyalty (willingness to protect a person, physically and emotionally) e.

Openness (willingness to share ideas and information freely) 4.

Integrity seems to be the most critical component when assessing another's trustworthiness.

5.

Given the fact that many organizations have moved to self-managed work teams, establishing trust in the leadership is critical.

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C.

D.

E.

Leading Virtual Teams. Leading virtual teams requires work establishing norms and expectations, building collaborative relationships, and establishing trust.

1.

Without physical presence, virtual leaders must shift from managing time and activity to focusing on outcomes and results.

Leadership Training.

1.

Leadership training takes many different forms; however, not everyone has what it takes to be a great leader. Depending on the type of training, leaders may learn skills such as vision creation, trust building, and mentoring.

2.

However, not everyone has the ability to be a leader. Leadership training is not effective on this group.

3.

Training on Artificial Intelligence—Leaders need to become AI literate to integrate AI into an organization’s strategy effectively. Three paths to prepare leaders to engage with AI a.

Individual learning and self-study. b.

Third-party resources for leader training programs, such as a company’s IT provider. c.

Larger organizations are considering developing internal training programs.

When Leadership May Not Be Important.

Substitutes for Leadership. Certain individual, job, and organizational variables can act as “substitutes for leadership,” negating the importance of having an individual leader. Possible variables of this type include characteristics of followers (e.g., experience, training, professional orientation, or the need to be independent).

1.

Routine, unambiguous, or intrinsically satisfying jobs may require little leadership.

2.

Cohesive work groups, explicit formal goals, and/or rigid rules and procedures may serve as substitutes for leadership.

ANSWERS TO REVIEW AND DISCUSSION QUESTIONS Student answers to these questions will vary.

16-1. What conclusions from the four theories on leadership behavior are most important?

Are supervisors born able to initiate structure, set goals, involve subordinates, delegate authority, encourage participation, or show consideration? Explain.

The University of Iowa Studies explored three styles of leadership: autocratic, democratic, and laissez-faire. Initial results found that a democratic style leader was more effective.

However, later studies had mixed results. When group member satisfaction was examined, it was found that a democratic style was more effective than an autocratic one. The Ohio State Studies found that a leader who was high in both initiating structure and consideration sometimes achieved high group task performance and high group member satisfaction, but not always. The University of Michigan Studies presented two dimensions of leadership: employee orientation and production orientation. Researchers concluded that leaders who were employee oriented could get high group productivity and high group member

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satisfaction. Finally, the Managerial Grid attempted to categorize various leadership behaviors. Ultimately, the grid offered no answers to the question of what made a manager an effective leader; it only provided a framework for conceptualizing leadership style. It is a myth that leaders are born, not made. Leadership is a skill that managers can build with awareness and effort. Behavior theories of leadership determine leaders can be trained to initiate structure, set goals, involve subordinates, delegate authority, encourage participation, or show consideration. Behavior theories focus on behaviors and inform which leadership skills should be developed through training, practice, and experience. Situational leadership theories were an extension of this research. (LO: 2, Compare and contrast early theories of leadership, AACSB: Reflective thinking) 16-2. According to Fiedler’s contingency model of leadership, how do leaders use the least-preferred coworker (LPC) questionnaire to find the best leadership style for their situation?

Fiedler’s model proposed that group performance was based upon the leader’s style and the amount of control in a given situation. After a leader’s style is assessed through the leastpreferred coworker questionnaire, three contingency dimensions are examined: leadermember relations, task structure, and position power. Ultimately, the model suggests that effectiveness is achieved when a leader is matched to a particular situation or if the situation is changed. If the leader described the least-preferred coworker in relatively positive terms (in other words, a “high” LPC score), then the respondent was primarily interested in good personal relations with coworkers, and the style would be described as relationship-oriented.

In contrast, if you saw the least-preferred coworker in relatively unfavorable terms (a low LPC score), you were primarily interested in productivity and getting the job done; thus, your style would be labeled as task-oriented. After an individual’s leadership style has been assessed through the LPC, it is necessary to evaluate the situation to match the leader with the situation. Once you have described the leader and situational variables, you have everything you need to define the specific contingencies for leadership effectiveness (see Exhibit 16-3). (LO: 3, Describe the three major contingency theories of leadership, AACSB: Analytical thinking) 16-3. If employees vary in their ability and willingness to perform tasks at work, how do leaders determine the amount of direction and support to provide each employee? Hint: consider the situational leadership and path-goal theories.

Situational leadership theory focuses on the readiness of followers. It treats the leader and follower relationship like that of a parent and child. As the child (follower) matures, the parent (leader) relinquishes more control. The SLT says if followers are at R1 (unable and unwilling to do a task), the leader needs to use the telling style and give clear and specific directions; if followers are at R2 (unable and willing), the leader needs to use the selling style and display high task orientation to compensate for the followers’ lack of ability and high relationship orientation to get followers to “buy into” the leader’s desires; if followers are at R3 (able and unwilling), the leader needs to use the participating style to gain their support; and if employees are at R4 (both able and willing), the leader doesn’t need to do much and should use the delegating style. Path-goal theory puts the focus on the leader and their ability to guide followers and remove obstacles. Environmental and subordinate contingency factors determine if the leader engages in directive, supportive, participative, or achievement oriented behavior. (LO: 3, Describe the three major contingency theories of leadership, AACSB: Analytical thinking)

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16-4. Why are the relationships between the leader and their subordinates important to the leader–member exchange theory? Are these relationships different in the presence of a charismatic leader?

Leader-member exchange theory states that leaders establish “in-groups” and “out-groups.”

Those in the in-group will have higher performance, lower turnover, and greater job satisfaction. This is due to the leader and follower investing in the relationship. The in-group relationship with the charismatic leader is much stronger, and the size of the in-group is much larger when the leader is charismatic. In groups with a person “trained” to be charismatic leaders, members had higher task performance, higher task adjustment, and better adjustment to the leader and the group than groups whose members worked in a group led by non-charismatic leaders. (LO: 4, Describe contemporary views of leadership, AACSB: Reflective thinking) 16-5. Differentiate between transactional and transformational leaders and between ethical and servant leaders.

A transactional leader guides and influences followers by exchanging rewards for the followers’ productivity. A transformational leader stimulates and inspires followers to achieve extraordinary outcomes. An ethical leader creates a culture where all employees think they could and should do a better job. A servant leader is one who goes beyond their own selfinterest and focuses on opportunities to help their followers grow and develop. (LO: 4, Describe contemporary views of leadership, AACSB: Analytical thinking) 16-6. Which source of a leader’s power is most effective and why? Rank the five sources from most to least effective.

The five sources of a leader’s power are legitimate, coercive, reward, expert, and referent.

Rankings will differ, but coercive is the least effective long-term. Legitimate, coercive, and reward power are most prevalent among managers, while expert and referent power might be the most influential for leadership. (LO: 6, Discuss twenty-first-century issues affecting leadership, AACSB: Analytical thinking) 16-7. Micromanaging can make a well-intentioned leader less effective. How can the leader’s followers gain more autonomy and empowerment when needed?

The leader-follower interaction is two-way. Followers and leaders need to work together to accomplish a collective goal. A leader is more willing to empower followers eager to collaborate, manage themselves, show commitment to the product/work team/process/organization, are enthusiastic, hold high-performance standards for their work, and establish themselves as critical thinkers whose knowledge and judgment can be trusted. (LO: 4, Describe contemporary views of leadership, AACSB: Reflective thinking) 16-8. Why is trust between leaders and employees important? Give an example of how a leader can demonstrate credibility to employees in a face-to-face, hybrid, and remote work environment.

Trust refers to a belief in a leader's integrity, character, and ability. When employees trust their leader, they are willing to be vulnerable to the leader’s actions, confident in their belief that the leader will not compromise their rights and interests. Building trust requires leaders

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to be fair and open, speak their feelings, be truthful, show competence and consistency, and maintain confidence. Research shows that trust between leaders and followers is significantly related to positive job outcomes. Building trust in hybrid and remote work environments means going beyond ensuring the right technology is in place to support communication. Leading virtual teams requires them to do the work to establish norms and expectations, build collaborative relationships, and establish trust. Trust is built through virtual relationships where the leader finds ways to stay connected, which can include checking in on workers to ensure they have what they need. Leaders need to learn how to lead with empathy with the tools provided by technology. This can be more difficult in remote work because, without physical presence, virtual leaders must shift from managing time and activity to focusing on outcomes and results (LO: 6, Discuss twenty-first-century issues affecting leadership, AACSB: Analytical thinking) ETHICS DILEMMA Student answers to these questions will vary.

This ethics dilemma explores the potential problems exposed in the show Undercover Boss.

According to their Web site, the show follows a different executive as they leave the comfort of their corner office for an undercover mission to examine the inner workings of their companies. While working alongside their employees, they see the effects of their decisions on others, where the problems lie within their organizations, and they get an up-close look at both the good and the bad while discovering the unsung heroes who make their companies run.

While potentially entertaining, is this candid camera approach fair to employees? Should the workplace be a subject of public scrutiny where CEOs get to play “gotcha” on their employees? Have students discuss privacy issues and how this behavior by CEOs potentially violates employees’ trust in their leaders.

16-9. Do you think a credible leader would need to go undercover? Is it ethical for a leader to go undercover in their organization? Why or why not?

Answers will vary. This question could go either way. Going undercover is deceiving your employees and being disingenuous, which most believe is unethical behavior. However, if the motives are to find ways to improve the organization and better identify and reward highperforming employees, then it might be justifiable. Obviously, the leaders on the show lack some credibility as the purpose of the show is to demonstrate that the CEOs are often unaware of how work is done at lower levels of the organization. (LO: 6, Discuss twenty-firstcentury issues affecting leadership, AACSB: Ethical understanding and reasoning) 17-10. What ethical issues could arise? How could managers deal with those issues?

Possible answer: It is difficult to believe a CEO who is willing to trick employees is an ethical leader. Ethical leaders and organizations prioritize honesty and transparency in their interactions with employees. Open communication doesn’t require deceptive techniques to uncover the reality of a situation. Other issues include instances when colleagues may make unflattering statements about the firm or the boss that the undercover boss finds offensive.

The boss might need to sign a contract before going undercover that states they will not

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retaliate against anyone for unfavorable comments. These comments might result in changes that decrease performance. (LO: 5, Compare the various theories of leadership for their validity, AACSB: Ethical understanding and reasoning) SKILLS EXERCISE: CHOOSING AN EFFECTIVE GROUP LEADERSHIP STYLE SKILL Students are provided with six suggestions for choosing an effective group leadership style.

They are then asked to consider two different situations from their past experiences. First, they are to think of a group or team they have been a part of and evaluate the leader's leadership style. In the second, they are asked to observe a successful sports team and assess the leadership styles. Students should be able to use terms from the text while sharing their experiences and observations of leadership behaviors that lead to group and team success. (LO: 4, Describe contemporary views of leadership, AACSB: Written and oral communication) WORKING TOGETHER: TEAM EXERCISE In groups of three to four individuals, students brainstorm a list of characteristics associated with good leadership. In addition, they will develop a list of steps to take to develop their transactional and transformational leadership abilities. Next, students, in groups of three or four, will brainstorm strategies to develop their skills while still in college. Each student is asked to write a brief personal leadership development plan at the end of their group discussion. (LO: 5, Compare the various theories of leadership for their validity, AACSB: Written and oral communication)

MY TURN TO BE A MANAGER •

Think of the different organizations to which you belong. Make a table with the name of the organizations across the top and the style of leadership presented in this chapter in a column below. In rows, make a check for the style of leading (no names, please) observed in each organization. Write a short paper summarizing your results and evaluate if the styles being used match those you hoped would be used. (LO: 4, Describe contemporary views of leadership, AACSB: Reflective thinking)

•

Write down three prominent leaders from your hometown, county, state, or province.

Make a bulleted list of these individuals’ sources of power and the characteristics they exhibit that make you think of them as leaders. (LO: 4, Describe contemporary views of leadership, AACSB: Reflective thinking)

•

Think about the times you have had to lead. Describe your leadership style in one paragraph. What could you do to make your leadership skill more obvious to others?

Come up with an action plan with three steps you can take in the next 3 months to ensure others can better see your leadership skill. Make sure these steps are true to yourself. Put all this information into a brief paper. (LO: 4, Describe contemporary views of leadership, AACSB: Reflective thinking)

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•

Managers use influence to get things done. Do some research on the importance of credibility and authenticity in the art of persuasion. Make a bulleted list of how to improve your skills at influencing others. (LO: 4, Describe contemporary views of leadership, AACSB: Reflective thinking)

•

Here’s a list of leadership skills. Choose two and develop a training exercise that will help develop or improve that skill: building employee communities, building teams, coaching and motivating others, communicating with impact, confidence and energy, leading by example, leading change, making decisions, providing direction and focus, and valuing diversity. (LO: 6, Discuss twenty-first-century issues affecting leadership, AACSB: Analytical thinking)

•

Select followership or leadership Issues important in your career in the next five years. Research on the topic and put your findings in a bulleted list. Be prepared to share this in class. Cite your sources using APA format. (LO: 6, Discuss twenty-firstcentury issues affecting leadership, AACSB: Analytical thinking)

•

Interview three managers about what they think it takes for a recent graduate and new professional to be a good follower in their first fob after graduation. Write up your findings in a report and be prepared to present it in class. (LO: 6, Discuss twenty-first-century issues affecting leadership, AACSB: Analytical thinking)

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•

Try out your leadership skills! Volunteer for a leadership position in an organization you are involved in. (LO: 1, Define leader and leadership, AACSB: Ethical understanding and reasoning)

•

Research imposter syndrome. Briefly summarize how it could hinder a person’s advancement into a leadership role in their career. (LO: 1, Define leader and leadership, AACSB: Ethical understanding and reasoning)

•

Search for the ten best leadership podcasts. Select and listen to a few podcasts focused on making you a better leader. Briefly present to the class the lessons you learned and the degree to which these lessons connect with this chapter. (LO: 6, Discuss twenty-first-century issues affecting leadership, AACSB: Analytical thinking)

•

The Collegiate Leadership Competition, LeaderShape Institute, Toastmasters, and other organizations provide students a chance to practice leadership. Research these opportunities or other case competitions, conferences, or workshops designed to help students develop their leadership ability. Find one matching you and your goals. Sign up, attend, and participate. (LO: 6, Discuss twenty-first-century issues affecting leadership, AACSB: Analytical thinking)

•

Review your digital footprint. Search yourself on the Internet and social media platforms to get a sense of your publicly available information and persona. What can you say about your digital footprint? Reflect on the results to determine how others might understand you regarding your potential to be a leader in a professional environment. Now assume some employers will do some online digging before scheduling interviews or extending job offers. Finally, take the additional step to

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understand how leaders craft their digital footprint differently than followers. Write four ways you could craft your image as a leader online more intentionally (i.e., showing enthusiasm or excitement for getting the job done with a team) and present them to students in small groups during class. (LO: 1, Define leader and leadership, AACSB: Application of knowledge) •

Universities and businesses believe emerging leaders need to embrace technology.

Technologies like artificial intelligence are powerfully reshaping society. With the right leaders, these technologies offer economic growth, innovation, and human wellbeing. Research the competencies emerging leaders need to have to embrace technology successfully in their careers. For example, must they be intimately familiar with coding, robotics, and advanced analytics? Briefly present your thoughts to the class and converse with a group of students on further developing the group’s competencies in the next six months. (LO: 4, Describe contemporary views of leadership, AACSB: Application of knowledge)

ANSWERS TO CASE APPLICATION 1 QUESTIONS Student answers to these questions will vary.

Transforming the Fashion Industry at Stitch Fix 16-11. What examples are provided in this case for how Katrina Lake exhibited authentic leadership?

Student responses will vary. However, Katrina Lake appears to be very humble and comfortable with who she is as a person and a leader. She is also very transparent, knows what she believes in, and appears guided by strong moral standards. (LO: 4, Describe contemporary views of leadership, AACSB: Analytical thinking) 16-12. What has Katrina Lake done that likely allowed her to develop credibility and trust as a leader?

She is very transparent and honest. She also takes time to understand her clients and employees by personally working with clients each week. (LO: 4, Describe contemporary views of leadership, AACSB: Analytical thinking) 16-13. In what ways has Katrina Lake demonstrated behaviors that indicate servant leadership? What could she do to exemplify servant leadership even more?

Student responses will vary, but Katrina Lake’s recognition of the need to mentor the next generation of company founders is a great example of servant leadership. She could augment that image by investing in her own employees to help them achieve their potential.

Lake may do this already, but it is not indicated in the case. (LO: 4, Describe contemporary views of leadership, AACSB: Analytical thinking) 16-14. Lake’s Stitch Fix transformed how people shop by making personal shopping more affordable and less time-consuming. If Lake hopes to continue being viewed as a

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transformational leader in the eyes of her followers, what kinds of behaviors should she continue to exhibit?

Student answers will vary. However, some of the qualities Lake would exhibit include focusing more on developing and encouraging her employees to reach their full potential.

The case does not indicate how she will continue to innovate or communicate her vision to employees, customers, and investors. She will need to keep employees excited and inspired about the company’s mission and strategy for doing business. (LO: 4, Describe contemporary views of leadership, AACSB: Analytical thinking)

ANSWERS TO CASE APPLICATION 2 QUESTIONS Student answers to these questions will vary.

New Endorsements Give Power to College Athletes 16-15. How has NIL changed the power dynamic in college sports?

Student answers will vary. The court rulings gave athletes legitimate power to earn money and make their own deals and money. As a result, the athletes capitalized on their expert and referent power to earn money. (LO: 6, Discuss twenty-first-century issues affecting leadership, AACSB: Analytical thinking) 16-16. Why did the critics believe only a few basketball and football stars would benefit from NIL deals? What type of power do they have?

Critics felt a small minority of athletes held enough expert and referent power to earn money from NIL deals. Their concern about the move to NIL was that the power dynamic would still include the university administrators and coaches and only add a minority of high-earning NIL players, leaving most college athletes in a weaker position than before the NIL deals were allowed. As a result, they worried most athletes would have less visibility and bargaining power than before. Essentially, critics felt that even though the environment before NIL was flawed, the old rules at least gave similar protection to all college athletes.

Critics have expert power based on their knowledge of college athletics and athlete sponsorships. ((LO: 6, Discuss twenty-first-century issues affecting leadership, AACSB: Analytical thinking) 16-17. Haley Jones and Olivia Dunne have used a combination of expert and referent power to earn big money through NIL deals. What does this case suggest about followership (and about how leaders might relate to followers)?

Leaders need to motivate and engage their followers to achieve end goals. The leader must respect the followers’ abilities and trust them to manage themselves. Jones and Dunne have gained deals through personal branding and likability. These leaders show the viability of different NIL strategies; by working with others, they can achieve success on a larger scale.

While they can succeed on their own, by collectively working with teammates, they will be able to increase the amount of money available for NIL deals. Athletes competing against each other for deals is likely to weaken both athlete’s bargaining power. Still, by teaching

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others how to earn money, athletes can increase the amount of money earned through NIL deals and increase all athletes' ability to make money (have power) through NIL deals.

Working together builds all athletes' competence and allows them to focus their efforts for maximum impact. Athletes who effectively use expert and referent power could experience increased engagement and support from their fan base. As teams of athletes work together and pool their power, they are likely to attain more financial opportunities through NIL deals (LO: 6, Discuss twenty-first-century issues affecting leadership, AACSB: Analytical thinking) 16-18. Olivia Dunne has decided to use her NIL expertise to help other women athletes find success as well. Does Dunne’s NIL success help or hurt her ability to lead these women?

Explain.

Gaining popularity does not hurt her ability to lead other women athletes. In fact, it increases her legitimate and expert power. Should Dunne demonstrate an interest in using her power to maximize her deals at the expense of other athletes, this would hurt her ability to lead them. Dunne’s, authenticity, openness, and willingness to work with others, combined with her knowledge of how to succeed in NIL (expert power), helps her ability to lead other athletes at this time. (LO: 6, Discuss twenty-first-century issues affecting leadership, AACSB: Analytical thinking)

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Chapter 17 Managing Communication Without communication, nothing would ever get done in organizations. Managers are concerned with two types of communication: interpersonal and organizational. This chapter highlights the role communication plays in a manager’s ability to be efficient and effective.

LEARNING OBJECTIVES 1.

2.

3.

4.

5.

Define the nature and function of communication.

Describe the communication process.

Explain how communication can flow most effectively in organizations.

Describe how technology affects managerial communication and organizations.

Discuss how to become a better communicator.

CHAPTER OUTLINE INTRODUCTION Communication between managers and employees provides the information necessary to get work done effectively and efficiently in organizations. Basic managerial communication concepts including the interpersonal communication process, methods of communicating, barriers to effective communications, and ways to overcome these barriers are presented. Organizational communication issues such as communication flow and communication networks, as well as contemporary issues and challenges associated with electronic communications and information technology, are covered.

17.1

.

UNDERSTANDING COMMUNICATION The importance of effective communication cannot be overemphasized because everything a manager does involves communicating.

A. What Is Communication?

Communication is the transfer and understanding of meaning.

1.

If no information or ideas have been conveyed or transferred, communication has not taken place.

2.

For communication to be successful, the meaning must be imparted and understood.

3.

Good communication does not require agreement with the message—only a clear understanding of the message.

4.

Communication encompasses both interpersonal communication (between two or more people) and organizational communication (all the patterns, networks, and systems of communication within an organization).

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B.

17.2

.

Functions of Communication.

Effective communication serves four major functions: control, motivation, emotional expression, and information.

THE COMMUNICATION PROCESS Exhibit 17-1 illustrates the seven elements of the communication process: the communication source (the sender), the message, encoding, the channel, decoding, the receiver, and feedback. Note that the entire process is susceptible to noise—any disturbances that interfere with the transmission, receipt, or feedback of a message.

A. Modes of Communicating.

People rely on three primary ways to transmit meaning among themselves. These are oral, written, and nonverbal communication.

1.

Oral Communication includes speeches, one-on-one discussion, and any other form of verbal communication. It has the advantage of speed and rapid feedback. However, if the message passes through several people, it has the potential for distortion.

2.

Written Communication includes text messages, social media posts, chats, letters, emails, and any other method with written words or symbols. It is commonly used in business communication.

3.

Nonverbal Communication is communication transmitted without words. The best-known types of nonverbal communication are body language and verbal intonation. a.

Body language refers to gestures, facial expressions, and other movements of the body that convey meaning. b.

Verbal intonation is an emphasis given to words or phrases that conveys meaning.

B. Barriers to Effective Communication.

1.

Cognitive—Information overload occurs when the information we have to work with exceeds our processing capacity. a.

Receivers tend to select out, ignore, pass over, or forget information when they have information overload. b.

Alternatively, receivers may put off further processing until the overload situation is over, which also results in lost information and less effective communication.

2.

Filtering—Filtering is the deliberate manipulation of information to make it appear more favorable to the receiver. a.

As information is communicated upward through the organizational levels, senders condense and synthesize it so that top managers will not experience information overload. These senders filter communication through their personal interests and perceptions of what is important. b.

The more vertical layers present in the structure of an organization, the more opportunities there are for filtering. c.

The more that organizational rewards emphasize style and appearance, the more managers will be motivated to filter communications in their favor.

3.

Emotions—Emotions influence how a receiver interprets a message when it is received. It is best for receivers to avoid

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C.

17.3

.

reacting to a message when they are upset because they are not likely to be thinking clearly.

4.

Language—With a diverse workforce, different words mean different things to different people, even when they speak the same language. a.

Age, education, and cultural background can influence language use and the definitions given to words. b.

Jargon is specialized terminology or technical language that members of a group use to communicate among themselves.

5.

Silence—Silence is sometimes defined as the absence of information, but this is far from true. Silence can indicate disinterest, disagreement, and information overload among other things.

6.

National Culture—National culture can affect the way a manager chooses to communicate.

Overcoming the Barriers 1.

Use Feedback—The feedback might be verbal or nonverbal, or both.

2.

Simplify Language—The manager should consider characteristics of the intended audience, tailoring the message to the receiver.

The sender should remember that understanding is improved when he or she uses language that is familiar to the receiver.

3.

Listen Actively—In listening, two people are engaged in thinking: the receiver as well as the sender. Listening is an active search for meaning. b.

Active listening is listening for full meaning without making premature judgments or interpretations. c.

Active listening is enhanced by developing empathy with the sender—placing oneself in the sender’s position. d.

“It’s Your Career” on page 366 lists additional behaviors demonstrated by active listeners.

4.

Constrain Emotions—A manager should strive to refrain from communicating until he or she has regained composure.

5.

Watch Nonverbal Cues—Actions speak louder than words, so the sender should ensure that his or her actions are in alignment with and reinforce the verbal message.

EFFECTIVE ORGANIZATIONAL COMMUNICATION A. Formal Versus Informal.

1.

Formal communication is communication that follows the official chain of command or is required to do one’s job.

2.

Informal communication is communication that is not defined by the organization’s structural hierarchy. a.

Informal communication systems permit employees to satisfy their need for social interaction. b.

Informal communication systems can improve an organization’s performance by creating alternative—and frequently faster and more efficient—channels of communication.

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B.

C.

Direction of Flow.

1.

Downward Communication—Downward communication is communication that flows downward from a manager to employees. It is used to inform, direct, coordinate, and evaluate employees. a.

Town hall meetings are informal public meetings where top executives relay information, discuss issues, or bring employees together to celebrate accomplishments.

2.

Upward Communication—Upward communication is communication that flows upward from employees to managers. a.

Upward communication can be used to keep managers aware of how employees feel about their jobs, their coworkers, and the organization in general. b.

The organizational culture influences the extent of upward communication. A climate of trust, respect, and participative decision making encourages a significant amount of upward communication. A highly mechanistic and authoritarian environment severely limits upward communication in terms of both style and content.

3.

Lateral Communication—Lateral communication is communication that takes place among any employees on the same organizational level.

4.

Diagonal Communication—Diagonal communication is communication that cuts across work areas and organizational levels. a.

The increased use of email facilitates diagonal communication in an organization. b.

Diagonal communication has the potential to create problems if employees do not keep their managers informed about decisions they have made or action they have taken.

Networks.

1.

Exhibit 17-2 illustrates three common types of communication networks. a.

2.

.

The chain network represents communication flowing according to the formal chain of command, both downward and upward. b.

The wheel network represents communication flowing between a clearly identifiable and strong leader and others in a work group or team. The leader serves as the hub through which all communication passes. c.

The all-channel network represents communication flowing freely among all members of a work team.

The Grapevine—The grapevine is the informal organizational communication network. a.

The grapevine is active in almost every organization. One survey reported that 63 percent of employees hear about matters first through rumors on the grapevine.

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b.

The grapevine can act as both a filter and a feedback mechanism.

17.4

COMMUNICATION AND TECHNOLOGY Technology is changing the way we work and communicate. Information technology (IT) now touches every aspect of almost every company’s business.

The implications for how, where, and when managers communicate are profound.

A. The 24/7 Work Environment. Thanks to advances in IT, employees are now connected 24/7, regardless of where they are located.

1.

Many countries are passing “right to disconnect” laws to protect workers from around-the-clock texting and communication, but many employers are considering ways to reduce unnecessary offhour communication.

2.

Experts suggest that managers act as role models, scheduling messages to be sent during regular work hours and also noting expectations for responses.

B. Social Media. Social media can be a useful tool to disseminate information and help employees build relationships, companies should proceed with caution.

1.

One in five said they checked social media 10 times or more during the workday.

2.

Technology is significantly affecting the way organizations communicate and share work.

C. Artificial Intelligence. The authors prompted OpenAI’s ChatGPT tool with the question: How can managers use ChatGPT to improve organizational communication? See Exhibit 17-3 for the response.

D. Virtual Meetings. With an increase in remote work comes an increase in remote or virtual meetings. Experts suggest to avoid the mental drain of virtual meetings, managers should put their phones away to limit distractions and make sure to take a break at least every 50 minutes.

17.5

BECOMING A BETTER COMMUNICATOR Managers should always take the opportunity to improve their communication skills. In addition to listening skills, successful managers also need persuasion, speaking, writing, and reading skills.

A. Sharpening Your Persuasion Skills.

1.

Persuasion skills enable a person to influence others to change their minds or behavior.

B. Sharpening Your Speaking Skills.

1.

Speaking skills refer to the ability to communicate information and ideas by talking so others will understand. One survey revealed that 70 percent of employees who make presentations say that good presentation skills are important to career success.

2.

Effective speakers speak with authenticity, humility, brevity, and a clear understanding of the audience.

C. Sharpening Your Writing Skills.

1.

Writing skills entail communicating effectively in text that is most appropriate for its audience. The abbreviations and jargon that

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D.

a

are standard in texting among friends and family are not always appreciated in a business setting.

2.

Some tips: a.

Don’t be in a rush to press the send button or drop the memo in the mail. b.

Express information and ideas logically and don’t switch back and forth between topics. c.

Check the accuracy of the content. d.

Read the message carefully to ensure that an inaccurate word for the context doesn’t slip in.

Sharpening Your Reading Skills.

1.

Reading skills entail an understanding of written sentences and paragraphs in work-related documents. a.

If your reading skills aren’t up to par—either in comprehension or in speed—don’t be afraid to sign up for reading-improvement class.

ANSWERS TO REVIEW AND DISCUSSION QUESTIONS Student answers to these questions will vary.

17-1. Define communication, interpersonal communication, and organizational communication. Why isn’t effective communication synonymous with agreement?

Communication is the transfer and understanding of meaning. Interpersonal communication is communication between two or more people. Organizational communication includes all the patterns, networks, and systems of communication within an organization. Effective communication is not the same as agreement because if someone disagrees with us, we assume that the person just didn’t fully understand our position. In other words, many of us define good communication as having someone accept our views. But I can clearly understand what you mean and just not agree with what you say. (LO: 1, Define the nature and function of communication, AACSB: Analytical thinking) 17-2. How is being an active listener related to a manager’s ability to communicate effectively?

When someone talks, managers often hear but don’t listen. Listening is an active search for meaning, whereas hearing is passive. In listening, the receiver is also putting effort into the communication. Managers need to be active listeners, but it can be difficult as most managers would instead do the talking. Unlike hearing, active listening occurs without premature judgments or interpretations and demands total concentration. When managers are active listeners, they can better understand employee concerns.

Understanding the key issues allows them to resolve conflict and coach employees better. (LO: 2, Describe the communication process, AACSB: Analytical thinking) 17-3. Explain the components in the communication process.

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Before communication can take place, a purpose, expressed as a message to be conveyed, must exist. It passes between a source (the sender) and a receiver. The message is converted to a symbolic form (called encoding) and passed by way of some medium (channel) to the receiver, who retranslates the sender’s message (called decoding). The result is the transfer of meaning from one person to another. The entire process is susceptible to noise—disturbances that interfere with the transmission, receipt, or feedback of a message. (LO: 1, Define the nature and function of communication, AACSB: Analytical thinking) 17-4. What are the various communication methods managers can use? What criteria can managers use to evaluate those communication methods?

The communication methods include face-to-face, telephone, group meetings, formal presentations, memos, traditional mail, fax, employee publications, bulletin boards, other company publications, audio- and videotapes, hotlines, email, computer conferencing, voice mail, teleconferences, and videoconferences. Managers can evaluate the various communication methods according to their feedback, complexity capacity, breadth potential, confidentiality, encoding ease, decoding ease, time-space constraint, cost, interpersonal warmth, formality, scanability, and time of consumption. (LO: 2, Describe the communication process, AACSB: Written and oral communication) 17-5. Contrast formal and informal communication.

Formal communication is communication that takes place within prescribed organizational work arrangements. Informal communication is not defined by the organization’s structural hierarchy. (LO: 2, Describe the communication process, AACSB: Written and oral communication) 17-6. Explain communication flow, the three common communication networks, and how managers should handle the grapevine.

Communication in an organization can flow downward, upward, laterally, and diagonally.

The three communication networks include the chain, in which communication flows according to the formal chain of command; the wheel, in which communication flows between an identifiable leader and others in a work team; and the all-channel, in which communication flows freely among all work team members. Managers should manage the grapevine as an important information network. The negative consequences of rumors can be minimized by communicating openly, fully, and honestly with employees.

(LO: 3, Explain how communication can flow most effectively in organizations, AACSB: Analytical thinking) 14-7. What is organizational communication with employees like in the 24/7 work environment? How has technology changed the ways managers communicate with employees and vice versa?

Technology is transforming the workplace beyond a physical destination and a place where employees are present at designated times. Today’s managers communicate with email, online messaging systems, and smartphones that make communication available 24/7. Managers and employees can communicate about work almost anywhere and anytime. Both managers and employees can stay connected around the clock, 7 days

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per week. As a result, employees and managers don’t have to be at their desk with their computers to communicate with others in the organization. Both also feel the expectation to check email outside of typical working hours and both know doing so has a negative impact on work–life balance. Because constant connections are possible, managers are expected to be role models for communicating electronically during regular work hours and noting response expectations. As role models they determine if communication outside of normal work hours is required, voluntary, or unnecessary, the pressure off the receiver to respond during off hours. (LO: 4, Describe how technology affects technology managerial communication and organizations, AACSB: Analytical thinking) 14-8. What are some specific steps managers can take to become a better communicator?

Because of status and power differences, managers need to recognize they often have to initiate and take follow-up actions after communicating with peers and employees.

Managers also need to develop emotional intelligence to understand the cues about how someone feels, even when employees do not share the information directly or effectively. Good communicators have strong listening, persuasion, speaking, writing, and reading skills. (LO: 5, Discuss how to become a better communicator, AACSB: Reflective thinking)

ETHICS DILEMMA Student answers to these questions will vary.

In this dilemma, students are to consider what happens when digital natives, like Gen Z employees, have technology skills, but lack the skills or desire to communicate face-toface. Because their managers are most comfortable with face-to-face communication, these employees may be working for a manager who is apprehensive about communicating with them digitally. These differences in experiences and comfort with communication methods can be problematic, and management demands for a specific approach could negatively impact the work environment.

17-9. Do different communication preferences impact the work environment? Can managers demand employees use a certain approach to communicating?

Student answers may vary. However, differences in communication preference can initially be problematic, but functional conflict related to improving this process would often lead to improvements over time. Expectations that one type of communication is the only type of communication are problematic when both parties don’t agree on which mode of communication is appropriate. Yes, managers can demand employees use a certain approach to communicating. Often, these demands are related to process or organizational requirements. However, ordering would not be the most effective way to persuade an employee to adopt a particular communication approach. (LO: 4, Describe how technology affects managerial communication and organizations, AACSB: Ethical understanding and reasoning) 17-10. What ethical responsibility do employers have to train workers of different generations to communicate effectively in the workplace?

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Student answers may vary. Once an employee is hired, it is presumed they have the necessary qualifications and ability to perform a job at a minimally acceptable level.

Managers and organizations have the ethical responsibility to work in good faith with employees to train them to meet the expectations of effective workplace communication.

Effective managers and workplaces also have a reasonable expectation of adjusting work practices as technology makes innovations possible. However, current trends have placed most of the responsibility for an employee’s development on the employee. For example, different types of training may be offered with the expectation that employees needing that training would voluntarily sight up for it. (LO: 4, Describe how technology affects managerial communication and organizations, AACSB: Ethical understanding and reasoning)

SKILLS EXERCISE: DEVELOPING YOUR PRESENTATION SKILLS Making presentations is a common task for many managers. The skills of presenting can be significantly enhanced through practice. Students are asked to look for opportunities to make presentations using the guidelines given in the exercise. (LO: 5, Discuss how to become a better communicator, AACSB: Written and oral communication)

WORKING TOGETHER: TEAM EXERCISE In this exercise, students are asked to discuss possible communication challenges, possible barriers that might occur, and ways of overcoming the barriers for three different scenarios. The scenarios are: 1.

You are about to hold your first meeting as the leader of a cross-functional team (a team composed of one person from IT, one from marketing, one from accounting, and one from the legal department).

2.

You are working virtually with two other people on a project, the project has a quick turnaround time, and the project deadline is approaching fast.

3.

Your company has announced layoffs due to a decline in the demand for your company’s products. The sales of a project line your team supports have dropped dramatically, and you need to lay off a team member to reduce costs.

You are responsible for telling the employee with the least seniority, in person, that they are being laid off for at least six weeks. (LO: 2, Describe the communication process, AACSB: Written and oral communication)

MY TURN TO BE A MANAGER •

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For one day, keep track of the types of communication you use (face-to-face, text, phone, email, Microsoft Teams, Zoom, etc.). Which do you use most?

Least? Were your choices of communication methods effective? Why or why not? Could they have been improved? How? (LO: 2, Describe the communication process, AACSB: Written and oral communication)

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For one day, track nonverbal communication that you notice in others. Did you observe more nonverbal communication in happy than unhappy people? What types of nonverbal communication did you observe most often? Was the nonverbal communication always consistent with the verbal communication taking place? Did you notice any other trends? Describe them. (LO: 2, Describe the communication process, AACSB: Written and oral communication)

•

Interview two entrepreneurs and managers. Get their advice on what it takes to be being a good communicator. Put this information in a bulleted list format and be prepared to present it in class. (LO: 5, Discuss how to become a better communicator, AACSB: Written and oral communication)

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Improve your oral speaking skills by joining a Toastmasters Club (www.toastmasters.org). Toastmasters technology is a nonprofit organization that teaches public speaking through a network of clubs where you can practice giving speeches to an audience that provides feedback to help you improve your skills. (LO: 5, Discuss how to become a better communicator, AACSB: Written and oral communication)

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Identify at least one company that effectively uses social media to communicate with customers and/or employees. What social media applications does the company use? Subscribe to the company’s social media feeds and take notes regarding its social media communications for at least one week. What patterns do you see? What social media messages that are effective based analytics like the on the number of comments, likes, and shares? (LO: 4, Describe how technology affects managerial communication and organizations, AACSB: Written and oral communication)

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Given that email is still a primary method of communication within most organizations, it is important to practice using it effectively. Research email etiquette and create a list of “do’s” and “don’ts” for using email. (LO: 4, Describe how technology affects managerial communication and organizations, AACSB: Written and oral communication)

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Does posting videos to social media platforms like TikTok build communication skills? Find out by posting an engaging video to TikTok about important management issues learned in this class. In the video, model the effective communication practices presented in this chapter. Share the video with a small group of students in class. Meet with the group to discuss the challenges you faced while making the video and get their feedback on how to make the video more engaging. Reflect on what you learned about communicating in a way that is accurate, accessible, and engaging to an audience.

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Communicating effectively during a meeting can be difficult. Research how to communicate effectively during meetings. Write a one-page paper summarizing the results of your research.

Sit back-to-back with another student in the class. Make sure you both have a piece of paper and a pencil. Now draw a picture of a simple object like a flower, bike, house, car or truck, or the like. Using clear instructions, describe to the

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other student how they should draw an exact replica of your picture. Based on your instructions and without looking at your picture, the listener (i.e., your partner) must try to draw the same object. It should be the same size, on the same part of the paper, and so forth. Clearly, this takes good communication.

After the first round, brainstorm ways to improve communication for this task.

Switch roles and repeat the process to see if you were able to improve your communication and listening skills.

ANSWERS TO CASE APPLICATION 1 QUESTIONS Student answers to these questions will vary.

Communicating as the Company Grows at Hootsuite 17-11. In what ways does Hootsuite’s concern about improving communication illustrate the topics of communication discussed in this chapter? Are there other aspects of communication not addressed by these types of programs?

Students should be able to identify several functions of communication in this case.

Specifically, it is easy to see how the various communications used at Hootsuite function as information exchange and sharing ideas that might lead to collaborations. These programs have not taken the steps to improve team member communications or employee manager communications. Additional programs may be needed to ensure communication in these locations is as effective as possible. (LO: 1, Define the nature and function of communication, AACSB: Written and oral communication) 1417-12.

What barriers to effective communication between colleagues are caused by the increased size of the company and additional its growth worldwide?

Student answers to these questions will vary. However, the growth could have lead to an increase in impersonal emails and messages sent thought the organization leading employees to experience information overload. Similarly, without a planned communication process management may have filtered information to a degree that employees lacked critical information about the organization or their jobs. The growth of the organization may have created a more interpersonal environment, where employees working in the same location or on the same process did not get to know one and another. Essentially colleagues are silent and do not speak to one and another, or the jargon of their jobs make it difficult for them to communicate with other employees in the same location with different job functions. (LO: 2, Describe the communication process, AACSB: Reflective thinking) 17-13. Which direction of communication and networks is Hootsuite’s addressing with the #RandomCoffee program? Which should be addressed further?

Student answers to these questions will vary. The organic way in which connections are created the flow of communication could be downward, upward, lateral, or diagonal.

Some students perceive this program to be part of the organizations grapevine network.

Others see the culmination of all communications creating a type of all channel network.

Students will argue that a planned wheel network or diagonal communication could help

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facilitate innovations or process improvements in a particular part of the organization.

(LO: 3, Explain how communication can flow most effectively in organizations, AACSB: Reflective thinking) 17-14. Describe your interest in participating as a student and separately as an employee in programs like #RandomCoffee, Innovate Brew, and Ten Thousand Coffees.

Responses to this question will vary. It appears that Hootsuite’s techniques address all communication flows. Their approach is very comprehensive and transparent. The lack of certainty about knowing the content of the conversations or the type of person they will meet is problematic for some students. (LO: 3, Explain how communication can flow most effectively in organizations, AACSB: Reflective thinking)

ANSWERS TO CASE APPLICATION 2 QUESTIONS Student answers to these questions will vary.

No Meetings?

17-15. Which of the communication networks (chain, wheel, or all-channel) should Shopify rely on now that meetings are less of an option? Why? In the chain network, communication flows according to the formal chain of command, both downward and upward. Shopify should make it clear that on important maters information can flow both upward and downward. Managers should rely on the wheel network because communication flowing the manager and others in a work group or team makes it easier to get the work done. This is important for typical work activities because the manager will serve as the hub through whom all communication passes.

Experienced managers with skillful employees should implement an in the all-channel network, communication flows freely among all members of a work team. Generally, professionals would be interested in the all-channel network. Exhibit 17-2 also summarizes each network’s effectiveness according to four criteria: speed, accuracy, the probability that a leader will emerge, and the importance of member satisfaction. (LO: 3, Explain how communication can flow most effectively in organizations, AACSB: Reflective thinking) 17-16. If some managers become uncommunicative, what steps should Shopify’s employees take to improve communication?

Middle managers should utilize both formal and informal communication to gage how effective their supervisors are in communicating with their peers and subordinates. In instances where communication is less effective they should offer coaching, mentorship, and at times formal training to improve communication effectiveness and frequency.

Generally the middle manager should embody the type of communication lower-level supervisors should emulate. (LO: 2, Describe the communication process, AACSB: Analytical thinking)

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17-17. How would the grapevine play a role in the ways communication happens after Shopify adopted its less frequent meeting culture?

The grapevine likely spread and informal communication would increase. At times the grapevine reflects the fears and concerns of employees and hence should become more important to management. It could reveal instances where communication is not happening frequently enough or where communication breakdowns are hurting productivity and employee satisfaction. The grapevine’s value would grow in its ability to identifying issues that employees consider important. It would act as both a filter and a feedback mechanism, picking up issues that employees consider relevant and planting messages that employees want passed on to upper management. (LO: 3, Explain how communication can flow most effectively in organizations, AACSB: Analytical thinking) 17-18. Should other organizations adopt a no- or low-meeting culture? Why or why not?

Student opinions will vary. Many student are unfamiliar with meetings are unable to gauge the right number of meetings they would need at work. However, many do believe meetings have rarely been productive when they have used them to complete work with a team on project for a course. (LO: 3, Explain how communication can flow most effectively in organizations, AACSB: Analytical thinking)

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Chapter 18 Management and Controlling Managers must monitor whether goals that were established as part of the planning process are being accomplished efficiently and effectively. That is what they do when they control.

Appropriate controls can help managers look for specific performance gaps and areas for improvement. Therefore, monitoring employees can help managers find more effective and efficient operational practices.

LEARNING OBJECTIVES 1.

2.

3.

4.

5.

Explain the nature and importance of control.

Describe the three steps in the control process.

Explain how organizational and employee performance are measured.

Describe tools used to measure organizational performance.

Discuss contemporary issues in control.

CHAPTER OUTLINE 18.1

WHAT IS CONTROLLING, AND WHY IS IT IMPORTANT? Control is important for three main reasons: A. What Is Controlling? Controlling is the process of monitoring, comparing, and correcting work performance.

B. Why Is Controlling Important? Controlling ensures that everything is going as planned and goals are being met. Exhibit 18-1 shows the link between planning and controlling.

1.

Controlling serves as the final link in the functional chain of management.

2.

Controlling is also important to employee empowerment. The development of an effective control system may minimize potential problems.

3.

Finally, controls serve to protect the company and its assets.

18.2

THE CONTROL PROCESS The control process is a three-step process including measuring actual performance, comparing actual performance against a standard, and taking managerial action (see Exhibit 18-2). Once strategic goals are established, the organization identifies Key Performance Indicators (KPIs) to measure progress toward those goals. A KPI is a measurable target that indicates how the company is performing. Exhibit 18-3 provides examples of KPIs an organization might track A. Step 1: Measuring Actual Performance. Measuring is the first step in the control process.

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1.

B.

C.

D.

18.3

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What We Measure—KPIs provide guidance in establishing what we measure. What we measure is probably more critical than how we measure. a.

Keeping costs within budget is also a fairly common control measure. Other control metrics should recognize the different activities that managers supervise. b.

When a performance indicator can't be stated in quantifiable terms, managers should look for and use subjective or qualitative measures.

2.

How We Measure—Measurement is frequently achieved through four common sources of information such as: a.

Personal observation b.

Statistical reports c.

Self-monitoring computers d.

Oral reports e.

Written reports 3.

Managers increasingly rely on quantitative measures such as statistical reports for measuring actual performance.

Step 2: Comparing Actual Performance Against the Standard. Comparing is the next step in the control process.

1.

Comparing determines the degree of variation between actual performance and the standard.

2.

Of critical importance to the control process is determining the range of variation. The range of variation is the acceptable parameters of variance between actual performance and the standard. (See Exhibit 184.)

3.

An example of comparing actual performance to standards is presented in Exhibit 18-5.

Step 3: Taking Managerial Action.

Although the manager might decide to “do nothing,” two additional alternatives may be taken.

1.

Correct Actual Performance—Once the manager has decided to correct actual performance, they must make another decision: a.

To take immediate corrective action, which is corrective action that corrects problems at once to get performance back on track, or b.

To take basic corrective action, which is corrective action that looks at how and why performance deviated and then proceeds to correct the source of deviation. c.

After analyzing deviations, effective managers identify and correct causes of variance when the benefits of doing so justify the cost involved.

2.

Revise the Standard—If the standard was set too high or too low, a manager may decide to revise the standard.

Summary. The control process is a continuous flow between measuring, comparing, and managerial action. Exhibit 18-6 summarizes the manager's decisions in the control process.

CONTROLLING FOR ORGANIZATIONAL PERFORMANCE A. What Is Organizational Performance?

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B.

C.

18.4

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Performance is the end result of an activity. Managers are concerned with organizational performance—the accumulated end results of all the organization's work activities.

Measures of Organizational Performance. Three frequently used organizational performance measures include productivity, effectiveness, and industry rankings.

1.

Organizational Productivity—Productivity is the overall output of goods or services produced divided by the inputs needed to generate that output. The management of an organization seeks to increase this ratio.

2.

Organizational Effectiveness—Organizational effectiveness is a measure of how appropriate organizational goals are and how well an organization is achieving those goals.

3.

Industry and Company Rankings—Industry and company rankings are often used as a measure to describe organizational effectiveness. Exhibit 18-7 lists some of the more popular industry rankings used to measure organizational performance.

Controlling for Employee Performance.

1.

Delivering Effective Performance Feedback—Managers need to provide their employees with feedback so they know where they stand regarding job performance.

2.

Using Disciplinary Actions—Managers are responsible for making sure employees’ work efforts are of the quantity and quality needed to accomplish organizational goals. Managers can use disciplinary actions to enforce the organization’s work standards and regulations. Exhibit 188 lists some common types of work discipline problems and examples of each. Managers can use progressive disciplinary action to ensure that the minimum penalty appropriate to the offense is imposed. Progressive disciplinary actions typically involve five steps: a.

Oral warning b.

Initial written warning c.

Final written warning d.

Termination review or suspension e.

A dismissal letter stating the reason for dismissal

TOOLS FOR CONTROLLING ORGANIZATIONAL PERFORMANCE Three basic types of controls are used to control organizational performance: feedforward controls, concurrent controls, and feedback controls. (See Exhibit 18-9.)

A. Feedforward/Concurrent/Feedback Controls.

1.

Feedforward Control—Feedforward control is a type of control that takes place before a work activity is done.

2.

Concurrent Control—Concurrent control is a type of control that takes place while a work activity is in progress.

3.

Feedback Control—Feedback control is a type of control that takes place after a work activity is done.

B. Financial Controls. Every business wants to earn a profit. Exhibit 18-10 summarizes some of the most popular ratios used for financial control.

1.

Budgets are discussed in the Planning and Control Techniques module.

Budgets also function as control tools; budgets provide managers with quantitative standards against which to measure and compare actual performance and resource consumption.

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C.

D.

E.

18.5

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Information Controls. Managers need to address IT controls to prevent security breaches.

1.

How Is Information Used in Controlling?—Managers need the right amount of information at the right time. A management information system (MIS) is a system used to provide managers with needed information on a regular basis. In theory, this system can be manual or computer based, although most organizations have moved to computersupported applications.

2.

Controlling Information: Cybersecurity—Almost everything an organization does is transacted digitally and cybersecurity is a critical issue. a.

Controlling information includes using secure passwords; being suspicious of external downloads and emails; backing up data; securing Wi-Fi; and installing and renewing a complete antivirus, antispyware, and firewall package on every computer. b.

Many companies invest in threat intelligence platforms that collect, analyze, and disseminate information about potential information security threats.

Balanced Scorecard. The balanced scorecard is a performance measurement tool that looks at four areas—financial, customer, internal processes, and people/innovation/growth assets—that contribute to a company’s performance.

Benchmarking of Best Practices.

1.

Benchmarking is the search for the best practices among competitors or noncompetitors that lead to their superior performance.

2.

The benchmark is the standard of excellence against which to measure and compare. a.

Benchmarking can be used to monitor and measure organizational performance. b.

This practice can be used to identify specific performance gaps and potential areas of improvement. c.

Exhibit 18-11 provides a summary to guide managers in implementing internal benchmarking programs.

CONTEMPORARY ISSUES IN CONTROL Global Differences in Control. Should global organizations use particular control systems? What should global managers know about adjusting controls for national differences?

1.

Methods of controlling people vary in different countries.

2.

Technology has an impact on control, depending on the level of sophistication of technology in a particular country.

3.

Managers must consider the legal constraints in different countries.

4.

Managers face challenges in making comparisons of goods and services among countries, even when comparing similar products and services.

5.

Organizations need to have controls in place to protect their workers and other assets during times of global turmoil and disasters.

C. Workplace Privacy. Many employers monitor employees at work. Employers can (and many do), among other things, read employee email (even those marked “personal” or “confidential”), monitor an employee’s work by computer, and track an employee’s whereabouts in a company vehicle.

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E.

Employee Theft. Employee theft is any unauthorized taking of company property by employees for their personal use. Exhibit 18-12 presents actions taken by managers to deal with employee theft.

Corporate Governance. Corporate governance is the system used to govern a corporation so that the interests of corporate owners are protected.

1.

The Role of the Board of Directors—The role of boards of directors is to have a group, independent of management, looking out for the interest of stockholders.

2.

Financial Reporting and the Audit Committee—Senior managers are now required by law (Sarbanes-Oxley Act) to certify their companies’ financial results.

3.

Compliance Offices and Positions—Corporate compliance is the process of making sure your company and employees follow the laws, regulations, standards, and ethical practices that apply to the organization. Compliance policies are overseen by a compliance officer.

4.

Artificial Intelligence—The use of AI to analyze data about employee behavior may help alleviate concerns about workplace privacy because managers can look at data at the group or organizational level without compromising employee identities. a.

There is support for organizations to use AI when there are clear public benefits, such as monitoring driving for safety purposes, but opposition to uses such as monitoring when employees are at their computers.

ANSWERS TO REVIEW AND DISCUSSION QUESTIONS 18-1. What are the three steps in the control process? Describe in detail.

The three steps in the control process are measuring, comparing, and taking action. Measuring involves deciding how to measure actual performance and what to measure. Comparing involves looking at the variation between actual performance and the standard (goal).

Deviations outside an acceptable range of variation need attention. (LO: 2, Describe the three steps in the control process, AACSB: Analytical thinking) 18-2. Describe key performance indicators’ (KPIs) role in measuring organizational operations.

What is the role of KPIs’ in assessing organizational performance?

Organizational performance is the accumulated results of all the organization’s work activities.

Three frequently used organizational performance measures include (1) productivity, which is the output of goods or services produced divided by the inputs needed to generate that output; (2) effectiveness, which is a measure of how appropriate organizational goals are and how well those goals are being met; and (3) industry and company rankings compiled by various business publications. Qualitative and quantitative tools can measure actual performance.

Measuring involves deciding what to measure and how to measure actual performance.

Managers identify key performance indicators (KPIs) based on organizational goals. KPIs can be applied to different levels of an organization, from overall performance to specific departments or individuals. Comparing involves looking at the variation between actual performance and the standard (goal). Then when deviations outside an acceptable range of

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variation occur, managers know an issue needs their attention. KPIs work best when they provide a quantitative measure of performance, enabling managers to track progress, make informed decisions, and continuously improve. The selection of KPIs, as a result, impacts which operations are considered most important and related to an organization's priorities. (LO: 3, Explain how organizational and employee performance are measured, AACSB: Analytical thinking) 18-3. Contrast feedforward, concurrent, and feedback controls.

Feedforward controls take place before a work activity is done. Concurrent controls take place while a work activity is being done. Feedback controls take place after a work activity is done.

(LO: 2, Describe the three steps in the control process, AACSB: Analytical thinking) 18-4. Discuss the various types of tools used to monitor and measure organizational performance.

Financial controls that managers can use include financial ratios (liquidity, leverage, activity, and profitability) and budgets. One information control managers can use is an MIS, which provides managers with needed information on a regular basis. Others include comprehensive and secure controls such as data encryption, system firewalls, data backups, and so forth that protect the organization’s information. Balanced scorecards provide a way to evaluate an organization’s performance in four different areas rather than just from the financial perspective.

Benchmarking provides control by finding the best practices among competitors or noncompetitors and from inside the organization itself. (LO: 3, Explain how organizational and employee performance are measured, AACSB: Analytical thinking) 18-5. Explain the balanced scorecard approach to evaluating organizational performance. How could the success of an organization’s cybersecurity program be monitored with the balanced scorecard approach?

The balanced scorecard allows organizations to measure organizational performance using more than just a financial perspective. This approach includes establishing goals and then assessing financial, customer, internal processes, and people/innovation/growth assets.

Cybersecurity is a growing risk and concern for organization executives. Adding cybersecurity to the balanced scorecard means it becomes an area reported on and monitored by the organization’s executives. Regularly measuring and analyzing cybersecurity with key performance indicators will provide insights into the security program's strengths, weaknesses, and areas for improvement. The Balanced Scorecard is a holistic approach to understanding how cybersecurity efforts contribute to the organization's overall strategic goals and objectives.

Its presence on the balanced scorecard ensures that cybersecurity is not only seen as a technical concern but as a critical component of the organization's overall success.

Cybersecurity controls include comprehensive and secure controls such as data encryption, system firewalls, and data backups that protect the organization’s information. (LO: 4, Describe tools used to measure organizational performance, AACSB: Application of knowledge) 18-6. Why is control important to customer interactions with an organization’s website, social media platforms, employees, and the like?

Websites and social media platforms offer another source of data on customer interactions.

Using these sources can increase the amount, type, and speed at which management collects,

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analyzes, and acts upon data. Control is important to customer interactions because employee service productivity and service quality influence customer perceptions of service value.

Organizations want long-term and mutually beneficial relationships among their employees and customers. (LO: 5, Discuss contemporary issues in control, AACSB: Analytical thinking) 18-7 Do workers have a right to privacy at their jobs? Do you think it is possible to establish and maintain effective standards for employee privacy while instituting a controlled environment to prevent employee theft? Discuss.

Student answers will vary. Employers can (and many do), among other things, read employee email (even those marked “personal” or “confidential”), monitor employee’s work by computer, and track employee whereabouts in a company vehicle. As a general rule, it is legal for an employer to monitor if they have provided the employee with the computer. And if they’ve provided notice, they can even monitor employees using their own devices. Most jobs use technology, and most organizations have workplace monitoring policies. Such policies should control employee behavior in a nondemeaning way, and employees should be informed about those policies. Straightforward, realistic, and collaboratively written standards can be created to establish and maintain practical standards for employee privacy and theft. Hiring an outside consultant could help human resource managers, compliance and legal officers, and IT and security teams develop effective standards. Including employees in the process will make policies more transparent and inclusive. (LO: 5, Discuss contemporary issues in control, AACSB: Ethical understanding and reasoning) 18-8. Why do organizations have a compliance office? Compare and contrast corporate governance, compliance officers, and the board of directors.

Corporate governance is the system of rules and practices used to govern a corporation so that the interests of corporate owners are protected. These efforts can be large and difficult to manage. In an effort to improve corporate behavior and better protect their firms, senior management has assigned a person within the organization to ensure it conducts its business in full compliance. Most large organizations have created a compliance office, appointed a senior executive as a compliance officer, and established corporate compliance policies. A compliance officer oversees compliance policies. This person’s role is to ensure that your company conducts its business in full compliance with all national and internal laws and regulations pertaining to specific industry, professional standards, accepted business practices, and internal standards.

Corporate governance is a process in which the compliance officers and the board of directors work within the organization to implement and monitor the organization's corporate governance.

The role of the Board of Directors includes being a group, independent from management, looking out for the interests of shareholders who were not involved in the organization's day-today management. The Sarbanes-Oxley Act of 2002 increased their role to include a focus is governance practices that increase integrity, accountability, and effective engagement between public companies, boards of directors, and investors. The compliance officer is an employee of an organization. Their role covers both internal policies and rules and federal and state laws.

This person’s role is to ensure that their company conducts its business in full compliance with all national and internal laws and regulations pertaining to their specific industry, professional standards, accepted business practices, and internal standards. (LO: 5, Discuss contemporary issues in control, AACSB: Analytical thinking)

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ETHICS DILEMMA Student answers to these questions will vary.

Organizations are vulnerable to employees unintentionally helping the organization get hacked.

This scenario reveals younger tech-savvy workers and the most active social media users to be the most reckless employees when it comes to cybersecurity. As a result, organizations do more than just tell and show employees how to avoid phishing, smishing, and vishing, or requiring them to create stronger passwords. Machine learning tools and AI monitor employees and organizational processes. These tools do not focus on hackers but instead measure, detect, and stop employees’ undesirable behavior.

18-9. Should organizations spend more resources monitoring their least experienced and youngest workers if they are the biggest cybersecurity risk?

Possible answer: Yes, as part of an overall strategy, organizations need cybersecurity measures that address potential risks from all employees, regardless of their experience or age.

Obviously, less experienced and younger workers need additional training, and due to their lack of experience, they are often targeted by hackers. For effective cybersecurity strategies, organizations must focus on educating all employees. Monitoring should be applied uniformly, considering the principle of fairness and avoiding discrimination based on age or experience.

(LO: 4, Describe tools used to measure organizational performance, AACSB: Ethical understanding and reasoning) 18-10. How would you prioritize employee trust and privacy with the need for security? How could organizations make sure they are ethically controlling employees' behavior?

Possible answer: Security is important to securing a company’s long-term success. Yet, the inability to protect employee’s privacy would suggest an inability for IT to maintain appropriate cybersecurity. Protecting employee privacy and cybersecurity are often two sides of the same issue. Performing well on one would likely mean performing well on the other. Ethical processes implement security while offering transparent policies and training to educate employees on how to be effective cybersecurity partners. Obtaining employee consent and ensuring only the minimum amount of data is collected would be another aspect of ethically controlling employees. Policies that identify management’s response will also ensure everyone is treated the same. (LO: 4, Describe tools used to measure organizational performance, AACSB: Ethical understanding and reasoning) SKILLS EXERCISE: MANAGING CHALLENGING EMPLOYEES Almost all managers will, at one time or another, have to deal with people who are difficult.

Some examples include people being short-tempered, demanding, abusive, angry, defensive, complaining, intimidating, aggressive, narcissistic, arrogant, and rigid. Successful managers have learned how to cope with difficult people. In this exercise, students are given the following suggestions for dealing with difficult people: •

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Don’t let your emotions rule

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• • •

Attempt to limit contact Try polite confrontation Practice positive reinforcement

Students reflect on a past situation where they dealt with a difficult person. Students are asked to write how they would handle the situation if they could return as the problematic person's manager. Students are assigned to write down the amount of time (minutes, hours, days, weeks, etc.) they would spend on each step to effectively manage this person before they would expect to see a change in this person’s behavior and impact on other employees. (LO: 3, Explain how organizational and employee performance are measured, AACSB: Analytical thinking)

WORKING TOGETHER: TEAM EXERCISE

Working in groups of three or four, students are asked to provide feedback to another group member as if they were the manager using one of four scenarios. The student in the employee role can play the character of an accommodating, collaborative, difficult, or passive-aggressive employee as they respond to the feedback provided. The group is asked to discuss how effective the manager was at providing feedback. (LO: 3, Explain how organizational and employee performance are measured, AACSB: Analytical thinking)

MY TURN TO BE A MANAGER

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•

You have a major class project due in a month. Identify some performance measures that you could use to help determine whether the project is going as planned and will be completed efficiently (on time) and effectively (high quality). (LO: 3, Explain how organizational and employee performance are measured, AACSB: Reflective thinking)

•

How could you use the concept of control in your personal life? Be specific. (Think in terms of feedforward, concurrent, and feedback controls as well as specific controls for the different aspects of your life—school, work, family relationships, friends, hobbies, etc.) (LO: 5, Discuss contemporary issues in control, AACSB: Analytical thinking)

•

Pretend you are the manager of a customer call center for student housing. What types of control measures would you use to see how efficient and effective an employee is?

Are different measures needed to evaluate the entire call center? Explain. (LO: 4, Describe tools used to measure organizational performance, AACSB: Analytical thinking)

•

Disciplining employees is one of the least favorite tasks of managers, but it is something that all managers have to do. Survey three managers about their experiences with employee discipline. What types of employee actions have caused the need for disciplinary action? What corrective actions have these managers used? What do they think is the most difficult thing to do when disciplining employees? What suggestions do they have for disciplining employees? (LO: 4, Describe tools used to measure organizational performance, AACSB: Analytical thinking)

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•

Figure 18-7 lists several industry and company ranking lists. Go to the Website for three of these company rankings sites. For each of these lists ,identify the performance measures that are used to determine how the companies are assigned a ranking on the list. Are there any similar measures? Any unique measures? Summarize your findings in a brief report. (LO: 3, Explain how organizational and employee performance are measured, AACSB: Analytical thinking)

•

Do you agree with this statement: “Every employee in an organization plays a role in controlling work activities.” Explain. (LO: 3, Explain how organizational and employee performance are measured, AACSB: Analytical thinking)

•

Research the concepts of retail and warehouse shrinkage. Make a list of common examples and causes for both. Also, determine steps an organization can take to control retail and warehouse shrinkage. Write a short paper summarizing your findings. (LO: 3, Explain how organizational and employee performance are measured, AACSB: Analytical thinking)

ANSWERS TO CASE APPLICATION 1 QUESTIONS

Student answers to these questions will vary.

Feeding Chocolate to Cows 18-11. Identify the benefits and potential challenges of the Candy Meal Project for Hershey and Cargill.

Benefits include diverting waste from landfills, providing an additive to animal feed, and offering a cheaper source of sugar calories than the sugar Cargill purchased from other suppliers.

Challenges include capturing, storing, and transporting the rejected product from Hersey’s to the Cargill facility. Additionally, Hersey’s waste must be shredded and correctly combined with Cargill’s existing product mix. (LO: 5, Discuss contemporary issues in control, AACSB: Analytical thinking) 18-12. What new key performance indicators will managers need to measure to run the Candy Meal Project effectively? What are the reasons for your answer?

Answers will vary. Examples of KPIs are provided in Exhibit 18-3 they might be modified for this case to include the cost of transporting waste to Cargill, pounds of waste diverted from landfill, cost of grinding and mixing the candy into animal feed, cost savings from using candy instead of purchasing raw sugar, etc. (LO: 2, Describe the three steps in the control process, AACSB: Analytical thinking) 18-13. What are the dangers to Hershey if management promotes the success of the food waste conversion too much? Is the Cany Meal Project likely to improve organizational performance at Hershey? At Cargill?

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Employees could become less precise in candy manufacturing, and more waste could be produced, which would increase Hershey’s production costs. Creating more sustainable processes and implementing innovations lead to improved organizational performance. (LO: 5, Discuss contemporary issues in control, AACSB: Analytical thinking)

ANSWERS TO CASE APPLICATION 2 QUESTIONS

Student answers to these questions will vary.

Posting for Just Other Employees to See 18-14. How did Starbucks use social media as a control tool?

Responses to this question will vary. Starbucks received instant feedback on a product that was selling well in several stores and immediately provided a company recipe for the product to all stores. Managers need the correct information at the right time and in the right amount to monitor and measure organizational activities and performance. They also rely on information to help them determine if deviations are acceptable. By using benchmarks, managers could see that the new drink was a practice that would benefit the entire organization if shared. See Exhibit 18-11. (LO: 4, Describe tools used to measure organizational performance, AACSB: Application of knowledge) 18-15. In what ways does employees’ use of workplace allow Walmart to monitor employees’ activities at work in both positive and potentially negative ways?

Workplace lets employees share ideas about displays, products, and store features that are successful. However, it could also lead to oversharing of personal and company information that might not be positive. (LO: 5, Discuss contemporary issues in control, AACSB: Ethical understanding and reasoning) 18-16. How could Workplace have an impact on organizational performance?

Workplace could improve employee morale and promote employee engagement. It can also be used as a quick way to share successful marketing techniques or promotional ideas. (LO: 5, Discuss contemporary issues in control, AACSB: Analytical thinking) 18-17. Some employees might not feel drawn to using Workplace for the wrong reasons. What do you think managers might need to do to encourage employees to use Workplace appropriately?

More data is generally considered better than less or no data. Any information posted by employees represents their attitudes, emotions, and perceptions. As a result, any posts made may not be related to the original managers’ intentions or the tool/app. Still, the posts likely provide insight into employees' experiences and thoughts. Further, technology is known for providing managers with large amounts of raw data and unanalyzed facts. A library, for example, contains millions of volumes. A library doesn’t do you any good if you can’t find what you want quickly. That’s why librarians spend a great deal of time cataloging a library’s

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collections and ensuring that materials are returned to their proper locations. Managers would be better suited to consider data on sites like Workplace as well-stocked libraries. The issue is not a lack of data; instead, it is whether an organization can process that data so that the right information is available to the right person when needed. AI is a technology that offers a chance to turn collected data into relevant information for managers to use. Managers could offer incentives for good ideas or simply just check in daily. Prizes, time off, cash awards, and other perks could be offered to the best idea every week. Firms could enter employees in a lottery for logging in every day. (LO: 5, Discuss contemporary issues in control, AACSB: Analytical thinking)

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Chapter 17 Managing Communication Without communication, nothing would ever get done in organizations. Managers are concerned with two types of communication: interpersonal and organizational. This chapter highlights the role communication plays in a manager’s ability to be efficient and effective.

LEARNING OBJECTIVES 1.

2.

3.

4.

5.

Define the nature and function of communication.

Describe the communication process.

Explain how communication can flow most effectively in organizations.

Describe how technology affects managerial communication and organizations.

Discuss how to become a better communicator.

CHAPTER OUTLINE INTRODUCTION Communication between managers and employees provides the information necessary to get work done effectively and efficiently in organizations. Basic managerial communication concepts including the interpersonal communication process, methods of communicating, barriers to effective communications, and ways to overcome these barriers are presented. Organizational communication issues such as communication flow and communication networks, as well as contemporary issues and challenges associated with electronic communications and information technology, are covered.

17.1

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UNDERSTANDING COMMUNICATION The importance of effective communication cannot be overemphasized because everything a manager does involves communicating.

A. What Is Communication?

Communication is the transfer and understanding of meaning.

1.

If no information or ideas have been conveyed or transferred, communication has not taken place.

2.

For communication to be successful, the meaning must be imparted and understood.

3.

Good communication does not require agreement with the message—only a clear understanding of the message.

4.

Communication encompasses both interpersonal communication (between two or more people) and organizational communication (all the patterns, networks, and systems of communication within an organization).

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B.

17.2

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Functions of Communication.

Effective communication serves four major functions: control, motivation, emotional expression, and information.

THE COMMUNICATION PROCESS Exhibit 17-1 illustrates the seven elements of the communication process: the communication source (the sender), the message, encoding, the channel, decoding, the receiver, and feedback. Note that the entire process is susceptible to noise—any disturbances that interfere with the transmission, receipt, or feedback of a message.

A. Modes of Communicating.

People rely on three primary ways to transmit meaning among themselves. These are oral, written, and nonverbal communication.

1.

Oral Communication includes speeches, one-on-one discussion, and any other form of verbal communication. It has the advantage of speed and rapid feedback. However, if the message passes through several people, it has the potential for distortion.

2.

Written Communication includes text messages, social media posts, chats, letters, emails, and any other method with written words or symbols. It is commonly used in business communication.

3.

Nonverbal Communication is communication transmitted without words. The best-known types of nonverbal communication are body language and verbal intonation. a.

Body language refers to gestures, facial expressions, and other movements of the body that convey meaning. b.

Verbal intonation is an emphasis given to words or phrases that conveys meaning.

B. Barriers to Effective Communication.

1.

Cognitive—Information overload occurs when the information we have to work with exceeds our processing capacity. a.

Receivers tend to select out, ignore, pass over, or forget information when they have information overload. b.

Alternatively, receivers may put off further processing until the overload situation is over, which also results in lost information and less effective communication.

2.

Filtering—Filtering is the deliberate manipulation of information to make it appear more favorable to the receiver. a.

As information is communicated upward through the organizational levels, senders condense and synthesize it so that top managers will not experience information overload. These senders filter communication through their personal interests and perceptions of what is important. b.

The more vertical layers present in the structure of an organization, the more opportunities there are for filtering. c.

The more that organizational rewards emphasize style and appearance, the more managers will be motivated to filter communications in their favor.

3.

Emotions—Emotions influence how a receiver interprets a message when it is received. It is best for receivers to avoid

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C.

17.3

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reacting to a message when they are upset because they are not likely to be thinking clearly.

4.

Language—With a diverse workforce, different words mean different things to different people, even when they speak the same language. a.

Age, education, and cultural background can influence language use and the definitions given to words. b.

Jargon is specialized terminology or technical language that members of a group use to communicate among themselves.

5.

Silence—Silence is sometimes defined as the absence of information, but this is far from true. Silence can indicate disinterest, disagreement, and information overload among other things.

6.

National Culture—National culture can affect the way a manager chooses to communicate.

Overcoming the Barriers 1.

Use Feedback—The feedback might be verbal or nonverbal, or both.

2.

Simplify Language—The manager should consider characteristics of the intended audience, tailoring the message to the receiver.

The sender should remember that understanding is improved when he or she uses language that is familiar to the receiver.

3.

Listen Actively—In listening, two people are engaged in thinking: the receiver as well as the sender. Listening is an active search for meaning. b.

Active listening is listening for full meaning without making premature judgments or interpretations. c.

Active listening is enhanced by developing empathy with the sender—placing oneself in the sender’s position. d.

“It’s Your Career” on page 366 lists additional behaviors demonstrated by active listeners.

4.

Constrain Emotions—A manager should strive to refrain from communicating until he or she has regained composure.

5.

Watch Nonverbal Cues—Actions speak louder than words, so the sender should ensure that his or her actions are in alignment with and reinforce the verbal message.

EFFECTIVE ORGANIZATIONAL COMMUNICATION A. Formal Versus Informal.

1.

Formal communication is communication that follows the official chain of command or is required to do one’s job.

2.

Informal communication is communication that is not defined by the organization’s structural hierarchy. a.

Informal communication systems permit employees to satisfy their need for social interaction. b.

Informal communication systems can improve an organization’s performance by creating alternative—and frequently faster and more efficient—channels of communication.

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B.

C.

Direction of Flow.

1.

Downward Communication—Downward communication is communication that flows downward from a manager to employees. It is used to inform, direct, coordinate, and evaluate employees. a.

Town hall meetings are informal public meetings where top executives relay information, discuss issues, or bring employees together to celebrate accomplishments.

2.

Upward Communication—Upward communication is communication that flows upward from employees to managers. a.

Upward communication can be used to keep managers aware of how employees feel about their jobs, their coworkers, and the organization in general. b.

The organizational culture influences the extent of upward communication. A climate of trust, respect, and participative decision making encourages a significant amount of upward communication. A highly mechanistic and authoritarian environment severely limits upward communication in terms of both style and content.

3.

Lateral Communication—Lateral communication is communication that takes place among any employees on the same organizational level.

4.

Diagonal Communication—Diagonal communication is communication that cuts across work areas and organizational levels. a.

The increased use of email facilitates diagonal communication in an organization. b.

Diagonal communication has the potential to create problems if employees do not keep their managers informed about decisions they have made or action they have taken.

Networks.

1.

Exhibit 17-2 illustrates three common types of communication networks. a.

2.

.

The chain network represents communication flowing according to the formal chain of command, both downward and upward. b.

The wheel network represents communication flowing between a clearly identifiable and strong leader and others in a work group or team. The leader serves as the hub through which all communication passes. c.

The all-channel network represents communication flowing freely among all members of a work team.

The Grapevine—The grapevine is the informal organizational communication network. a.

The grapevine is active in almost every organization. One survey reported that 63 percent of employees hear about matters first through rumors on the grapevine.

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b.

The grapevine can act as both a filter and a feedback mechanism.

17.4

COMMUNICATION AND TECHNOLOGY Technology is changing the way we work and communicate. Information technology (IT) now touches every aspect of almost every company’s business.

The implications for how, where, and when managers communicate are profound.

A. The 24/7 Work Environment. Thanks to advances in IT, employees are now connected 24/7, regardless of where they are located.

1.

Many countries are passing “right to disconnect” laws to protect workers from around-the-clock texting and communication, but many employers are considering ways to reduce unnecessary offhour communication.

2.

Experts suggest that managers act as role models, scheduling messages to be sent during regular work hours and also noting expectations for responses.

B. Social Media. Social media can be a useful tool to disseminate information and help employees build relationships, companies should proceed with caution.

1.

One in five said they checked social media 10 times or more during the workday.

2.

Technology is significantly affecting the way organizations communicate and share work.

C. Artificial Intelligence. The authors prompted OpenAI’s ChatGPT tool with the question: How can managers use ChatGPT to improve organizational communication? See Exhibit 17-3 for the response.

D. Virtual Meetings. With an increase in remote work comes an increase in remote or virtual meetings. Experts suggest to avoid the mental drain of virtual meetings, managers should put their phones away to limit distractions and make sure to take a break at least every 50 minutes.

17.5

BECOMING A BETTER COMMUNICATOR Managers should always take the opportunity to improve their communication skills. In addition to listening skills, successful managers also need persuasion, speaking, writing, and reading skills.

A. Sharpening Your Persuasion Skills.

1.

Persuasion skills enable a person to influence others to change their minds or behavior.

B. Sharpening Your Speaking Skills.

1.

Speaking skills refer to the ability to communicate information and ideas by talking so others will understand. One survey revealed that 70 percent of employees who make presentations say that good presentation skills are important to career success.

2.

Effective speakers speak with authenticity, humility, brevity, and a clear understanding of the audience.

C. Sharpening Your Writing Skills.

1.

Writing skills entail communicating effectively in text that is most appropriate for its audience. The abbreviations and jargon that

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D.

a

are standard in texting among friends and family are not always appreciated in a business setting.

2.

Some tips: a.

Don’t be in a rush to press the send button or drop the memo in the mail. b.

Express information and ideas logically and don’t switch back and forth between topics. c.

Check the accuracy of the content. d.

Read the message carefully to ensure that an inaccurate word for the context doesn’t slip in.

Sharpening Your Reading Skills.

1.

Reading skills entail an understanding of written sentences and paragraphs in work-related documents. a.

If your reading skills aren’t up to par—either in comprehension or in speed—don’t be afraid to sign up for reading-improvement class.

ANSWERS TO REVIEW AND DISCUSSION QUESTIONS Student answers to these questions will vary.

17-1. Define communication, interpersonal communication, and organizational communication. Why isn’t effective communication synonymous with agreement?

Communication is the transfer and understanding of meaning. Interpersonal communication is communication between two or more people. Organizational communication includes all the patterns, networks, and systems of communication within an organization. Effective communication is not the same as agreement because if someone disagrees with us, we assume that the person just didn’t fully understand our position. In other words, many of us define good communication as having someone accept our views. But I can clearly understand what you mean and just not agree with what you say. (LO: 1, Define the nature and function of communication, AACSB: Analytical thinking) 17-2. How is being an active listener related to a manager’s ability to communicate effectively?

When someone talks, managers often hear but don’t listen. Listening is an active search for meaning, whereas hearing is passive. In listening, the receiver is also putting effort into the communication. Managers need to be active listeners, but it can be difficult as most managers would instead do the talking. Unlike hearing, active listening occurs without premature judgments or interpretations and demands total concentration. When managers are active listeners, they can better understand employee concerns.

Understanding the key issues allows them to resolve conflict and coach employees better. (LO: 2, Describe the communication process, AACSB: Analytical thinking) 17-3. Explain the components in the communication process.

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Before communication can take place, a purpose, expressed as a message to be conveyed, must exist. It passes between a source (the sender) and a receiver. The message is converted to a symbolic form (called encoding) and passed by way of some medium (channel) to the receiver, who retranslates the sender’s message (called decoding). The result is the transfer of meaning from one person to another. The entire process is susceptible to noise—disturbances that interfere with the transmission, receipt, or feedback of a message. (LO: 1, Define the nature and function of communication, AACSB: Analytical thinking) 17-4. What are the various communication methods managers can use? What criteria can managers use to evaluate those communication methods?

The communication methods include face-to-face, telephone, group meetings, formal presentations, memos, traditional mail, fax, employee publications, bulletin boards, other company publications, audio- and videotapes, hotlines, email, computer conferencing, voice mail, teleconferences, and videoconferences. Managers can evaluate the various communication methods according to their feedback, complexity capacity, breadth potential, confidentiality, encoding ease, decoding ease, time-space constraint, cost, interpersonal warmth, formality, scanability, and time of consumption. (LO: 2, Describe the communication process, AACSB: Written and oral communication) 17-5. Contrast formal and informal communication.

Formal communication is communication that takes place within prescribed organizational work arrangements. Informal communication is not defined by the organization’s structural hierarchy. (LO: 2, Describe the communication process, AACSB: Written and oral communication) 17-6. Explain communication flow, the three common communication networks, and how managers should handle the grapevine.

Communication in an organization can flow downward, upward, laterally, and diagonally.

The three communication networks include the chain, in which communication flows according to the formal chain of command; the wheel, in which communication flows between an identifiable leader and others in a work team; and the all-channel, in which communication flows freely among all work team members. Managers should manage the grapevine as an important information network. The negative consequences of rumors can be minimized by communicating openly, fully, and honestly with employees.

(LO: 3, Explain how communication can flow most effectively in organizations, AACSB: Analytical thinking) 14-7. What is organizational communication with employees like in the 24/7 work environment? How has technology changed the ways managers communicate with employees and vice versa?

Technology is transforming the workplace beyond a physical destination and a place where employees are present at designated times. Today’s managers communicate with email, online messaging systems, and smartphones that make communication available 24/7. Managers and employees can communicate about work almost anywhere and anytime. Both managers and employees can stay connected around the clock, 7 days

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per week. As a result, employees and managers don’t have to be at their desk with their computers to communicate with others in the organization. Both also feel the expectation to check email outside of typical working hours and both know doing so has a negative impact on work–life balance. Because constant connections are possible, managers are expected to be role models for communicating electronically during regular work hours and noting response expectations. As role models they determine if communication outside of normal work hours is required, voluntary, or unnecessary, the pressure off the receiver to respond during off hours. (LO: 4, Describe how technology affects technology managerial communication and organizations, AACSB: Analytical thinking) 14-8. What are some specific steps managers can take to become a better communicator?

Because of status and power differences, managers need to recognize they often have to initiate and take follow-up actions after communicating with peers and employees.

Managers also need to develop emotional intelligence to understand the cues about how someone feels, even when employees do not share the information directly or effectively. Good communicators have strong listening, persuasion, speaking, writing, and reading skills. (LO: 5, Discuss how to become a better communicator, AACSB: Reflective thinking)

ETHICS DILEMMA Student answers to these questions will vary.

In this dilemma, students are to consider what happens when digital natives, like Gen Z employees, have technology skills, but lack the skills or desire to communicate face-toface. Because their managers are most comfortable with face-to-face communication, these employees may be working for a manager who is apprehensive about communicating with them digitally. These differences in experiences and comfort with communication methods can be problematic, and management demands for a specific approach could negatively impact the work environment.

17-9. Do different communication preferences impact the work environment? Can managers demand employees use a certain approach to communicating?

Student answers may vary. However, differences in communication preference can initially be problematic, but functional conflict related to improving this process would often lead to improvements over time. Expectations that one type of communication is the only type of communication are problematic when both parties don’t agree on which mode of communication is appropriate. Yes, managers can demand employees use a certain approach to communicating. Often, these demands are related to process or organizational requirements. However, ordering would not be the most effective way to persuade an employee to adopt a particular communication approach. (LO: 4, Describe how technology affects managerial communication and organizations, AACSB: Ethical understanding and reasoning) 17-10. What ethical responsibility do employers have to train workers of different generations to communicate effectively in the workplace?

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Student answers may vary. Once an employee is hired, it is presumed they have the necessary qualifications and ability to perform a job at a minimally acceptable level.

Managers and organizations have the ethical responsibility to work in good faith with employees to train them to meet the expectations of effective workplace communication.

Effective managers and workplaces also have a reasonable expectation of adjusting work practices as technology makes innovations possible. However, current trends have placed most of the responsibility for an employee’s development on the employee. For example, different types of training may be offered with the expectation that employees needing that training would voluntarily sight up for it. (LO: 4, Describe how technology affects managerial communication and organizations, AACSB: Ethical understanding and reasoning)

SKILLS EXERCISE: DEVELOPING YOUR PRESENTATION SKILLS Making presentations is a common task for many managers. The skills of presenting can be significantly enhanced through practice. Students are asked to look for opportunities to make presentations using the guidelines given in the exercise. (LO: 5, Discuss how to become a better communicator, AACSB: Written and oral communication)

WORKING TOGETHER: TEAM EXERCISE In this exercise, students are asked to discuss possible communication challenges, possible barriers that might occur, and ways of overcoming the barriers for three different scenarios. The scenarios are: 1.

You are about to hold your first meeting as the leader of a cross-functional team (a team composed of one person from IT, one from marketing, one from accounting, and one from the legal department).

2.

You are working virtually with two other people on a project, the project has a quick turnaround time, and the project deadline is approaching fast.

3.

Your company has announced layoffs due to a decline in the demand for your company’s products. The sales of a project line your team supports have dropped dramatically, and you need to lay off a team member to reduce costs.

You are responsible for telling the employee with the least seniority, in person, that they are being laid off for at least six weeks. (LO: 2, Describe the communication process, AACSB: Written and oral communication)

MY TURN TO BE A MANAGER •

.

For one day, keep track of the types of communication you use (face-to-face, text, phone, email, Microsoft Teams, Zoom, etc.). Which do you use most?

Least? Were your choices of communication methods effective? Why or why not? Could they have been improved? How? (LO: 2, Describe the communication process, AACSB: Written and oral communication)

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•

For one day, track nonverbal communication that you notice in others. Did you observe more nonverbal communication in happy than unhappy people? What types of nonverbal communication did you observe most often? Was the nonverbal communication always consistent with the verbal communication taking place? Did you notice any other trends? Describe them. (LO: 2, Describe the communication process, AACSB: Written and oral communication)

•

Interview two entrepreneurs and managers. Get their advice on what it takes to be being a good communicator. Put this information in a bulleted list format and be prepared to present it in class. (LO: 5, Discuss how to become a better communicator, AACSB: Written and oral communication)

•

Improve your oral speaking skills by joining a Toastmasters Club (www.toastmasters.org). Toastmasters technology is a nonprofit organization that teaches public speaking through a network of clubs where you can practice giving speeches to an audience that provides feedback to help you improve your skills. (LO: 5, Discuss how to become a better communicator, AACSB: Written and oral communication)

•

Identify at least one company that effectively uses social media to communicate with customers and/or employees. What social media applications does the company use? Subscribe to the company’s social media feeds and take notes regarding its social media communications for at least one week. What patterns do you see? What social media messages that are effective based analytics like the on the number of comments, likes, and shares? (LO: 4, Describe how technology affects managerial communication and organizations, AACSB: Written and oral communication)

•

Given that email is still a primary method of communication within most organizations, it is important to practice using it effectively. Research email etiquette and create a list of “do’s” and “don’ts” for using email. (LO: 4, Describe how technology affects managerial communication and organizations, AACSB: Written and oral communication)

•

Does posting videos to social media platforms like TikTok build communication skills? Find out by posting an engaging video to TikTok about important management issues learned in this class. In the video, model the effective communication practices presented in this chapter. Share the video with a small group of students in class. Meet with the group to discuss the challenges you faced while making the video and get their feedback on how to make the video more engaging. Reflect on what you learned about communicating in a way that is accurate, accessible, and engaging to an audience.

•

Communicating effectively during a meeting can be difficult. Research how to communicate effectively during meetings. Write a one-page paper summarizing the results of your research.

Sit back-to-back with another student in the class. Make sure you both have a piece of paper and a pencil. Now draw a picture of a simple object like a flower, bike, house, car or truck, or the like. Using clear instructions, describe to the

•

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other student how they should draw an exact replica of your picture. Based on your instructions and without looking at your picture, the listener (i.e., your partner) must try to draw the same object. It should be the same size, on the same part of the paper, and so forth. Clearly, this takes good communication.

After the first round, brainstorm ways to improve communication for this task.

Switch roles and repeat the process to see if you were able to improve your communication and listening skills.

ANSWERS TO CASE APPLICATION 1 QUESTIONS Student answers to these questions will vary.

Communicating as the Company Grows at Hootsuite 17-11. In what ways does Hootsuite’s concern about improving communication illustrate the topics of communication discussed in this chapter? Are there other aspects of communication not addressed by these types of programs?

Students should be able to identify several functions of communication in this case.

Specifically, it is easy to see how the various communications used at Hootsuite function as information exchange and sharing ideas that might lead to collaborations. These programs have not taken the steps to improve team member communications or employee manager communications. Additional programs may be needed to ensure communication in these locations is as effective as possible. (LO: 1, Define the nature and function of communication, AACSB: Written and oral communication) 1417-12.

What barriers to effective communication between colleagues are caused by the increased size of the company and additional its growth worldwide?

Student answers to these questions will vary. However, the growth could have lead to an increase in impersonal emails and messages sent thought the organization leading employees to experience information overload. Similarly, without a planned communication process management may have filtered information to a degree that employees lacked critical information about the organization or their jobs. The growth of the organization may have created a more interpersonal environment, where employees working in the same location or on the same process did not get to know one and another. Essentially colleagues are silent and do not speak to one and another, or the jargon of their jobs make it difficult for them to communicate with other employees in the same location with different job functions. (LO: 2, Describe the communication process, AACSB: Reflective thinking) 17-13. Which direction of communication and networks is Hootsuite’s addressing with the #RandomCoffee program? Which should be addressed further?

Student answers to these questions will vary. The organic way in which connections are created the flow of communication could be downward, upward, lateral, or diagonal.

Some students perceive this program to be part of the organizations grapevine network.

Others see the culmination of all communications creating a type of all channel network.

Students will argue that a planned wheel network or diagonal communication could help

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facilitate innovations or process improvements in a particular part of the organization.

(LO: 3, Explain how communication can flow most effectively in organizations, AACSB: Reflective thinking) 17-14. Describe your interest in participating as a student and separately as an employee in programs like #RandomCoffee, Innovate Brew, and Ten Thousand Coffees.

Responses to this question will vary. It appears that Hootsuite’s techniques address all communication flows. Their approach is very comprehensive and transparent. The lack of certainty about knowing the content of the conversations or the type of person they will meet is problematic for some students. (LO: 3, Explain how communication can flow most effectively in organizations, AACSB: Reflective thinking)

ANSWERS TO CASE APPLICATION 2 QUESTIONS Student answers to these questions will vary.

No Meetings?

17-15. Which of the communication networks (chain, wheel, or all-channel) should Shopify rely on now that meetings are less of an option? Why? In the chain network, communication flows according to the formal chain of command, both downward and upward. Shopify should make it clear that on important maters information can flow both upward and downward. Managers should rely on the wheel network because communication flowing the manager and others in a work group or team makes it easier to get the work done. This is important for typical work activities because the manager will serve as the hub through whom all communication passes.

Experienced managers with skillful employees should implement an in the all-channel network, communication flows freely among all members of a work team. Generally, professionals would be interested in the all-channel network. Exhibit 17-2 also summarizes each network’s effectiveness according to four criteria: speed, accuracy, the probability that a leader will emerge, and the importance of member satisfaction. (LO: 3, Explain how communication can flow most effectively in organizations, AACSB: Reflective thinking) 17-16. If some managers become uncommunicative, what steps should Shopify’s employees take to improve communication?

Middle managers should utilize both formal and informal communication to gage how effective their supervisors are in communicating with their peers and subordinates. In instances where communication is less effective they should offer coaching, mentorship, and at times formal training to improve communication effectiveness and frequency.

Generally the middle manager should embody the type of communication lower-level supervisors should emulate. (LO: 2, Describe the communication process, AACSB: Analytical thinking)

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17-17. How would the grapevine play a role in the ways communication happens after Shopify adopted its less frequent meeting culture?

The grapevine likely spread and informal communication would increase. At times the grapevine reflects the fears and concerns of employees and hence should become more important to management. It could reveal instances where communication is not happening frequently enough or where communication breakdowns are hurting productivity and employee satisfaction. The grapevine’s value would grow in its ability to identifying issues that employees consider important. It would act as both a filter and a feedback mechanism, picking up issues that employees consider relevant and planting messages that employees want passed on to upper management. (LO: 3, Explain how communication can flow most effectively in organizations, AACSB: Analytical thinking) 17-18. Should other organizations adopt a no- or low-meeting culture? Why or why not?

Student opinions will vary. Many student are unfamiliar with meetings are unable to gauge the right number of meetings they would need at work. However, many do believe meetings have rarely been productive when they have used them to complete work with a team on project for a course. (LO: 3, Explain how communication can flow most effectively in organizations, AACSB: Analytical thinking)

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Part 1: Starbucks—Introduction Discussion Questions with Answers; Teaching Suggestions P1-1. What management skills do you think would be most important for Laxman Narasimhan to have? Why? What skills do you think would be most important for a Starbucks store manager to have? Why? As chairman and chief global strategist of Starbucks Corporation, Laxman Narasimhan needs to have strong skills in each of the areas identified by Robert L. Katz: technical skills, interpersonal skills, and conceptual skills. Conceptual skills are essential for Narasimhan to lead his company effectively. These skills enable him to make strategic plans that guide the global growth of Starbucks, predict future product trends, incorporate new technologies into the operations, and take advantage of opportunities in the external environment. Additionally, reliance on conceptual skills allows him to understand how previous CEOs have led the company and determine the practices he needs to follow, improve upon, and change. Interpersonal skills aid Narasimhan as he communicates, motivates, leads, and inspires enthusiasm and trust throughout the organization.

To successfully manage an individual Starbucks location, each Starbucks store manager (i.e., first-line manager) needs to place a different emphasis on the skills identified by Katz. Students should recognize that the most important skills at this management level are related to technical skills. This particular skill category important as they manage the employees to proficiently use the equipment and provide the service to Starbucks’s customers. Interpersonal skills also equips a store manager to effectively work with the employees, or “partners”—to achieve the goals and objectives of the individual store.

P1-2. How might the following management theories/approaches be useful to Starbucks: scientific management, organizational behavior, quantitative approach, and systems approach?

Throughout the history of management, experts have learned ways to improve the efficiency and effectiveness of work. What was learned in each of the periods of management development still holds some truth and usefulness for managers today.

Companies like Starbucks would benefit from the use of scientific management and the quantitative approach in the production side of their business. Scientific management could be used to make their retail establishments more efficient and quantitative management can help improve the company's logistics. Examining how organizational behavior can be used, the company already applies some techniques to help employees feel like they are contributing and to help increase employee satisfaction. Managers should understand the use of several of Fayol's fourteen management principles, including division of work, esprit de corps, and unity of command along with quality management’s intense focus on the customer and concern for accurate measurement. For instance, when managers make budgeting, queuing, scheduling, quality control, and similar decisions, they typically rely on quantitative techniques. Using quantitative approaches, managers will use software and other technology to complete these tasks. Finally, the systems approach helps management understand that decisions and actions in one area of the company will affect other areas of the company. For example, if the supplychain group fails to acquire the correct quantity and quality of coffee beans, the baristas won’t be able to do their job. Familiarity with the systems approach also helps managers recognize they need to work with government regulators, suppliers, and the varied constituencies in each community where Starbucks does business.

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P1-3. Choose three of the current trends and issues facing managers and explain how Starbucks might be impacted. What might be the implications for first-line managers? Middle managers? Top managers?

The first way that managers' jobs are changing is in terms of how important customers are to the manager's job. Because Starbucks' success is a direct result of how it interacts with its customers, this is critical. In fact, “customers” is one of the company's six key corporate principles. There are critical implications for first-line managers in how customer connections are created and maintained as front-line partners serve and interact with each and every customer. The emphasis would be on delivering top-notch, quality service in each and every customer encounter. For middle managers, the implications would lie more in ensuring that the resources and support are available for first-line managers in creating exceptional customer experiences. And for top managers, the implications would be on reinforcing the corporate principles and establishing a reward system that recognizes and celebrates those partners who exemplify outstanding customer engagement.

The second way that a manager's job is changing is in the increasing importance of innovation. Like many companies, Starbucks Corporation faces critical challenges with technology, Artificial Intelligence, and computerization. However, Starbucks executives have faced challenges in the past. They responded with a full-fledged change effort that encompassed innovation within the company from top to bottom. “Doing things differently” was a key driver of those change efforts. Technological innovations are likely to impact all levels of management, the implications were profound...ranging from being more analytical, automated, and efficient in the operations side of the business requiring executives to continue to focusing on integrating these innovations in ways that improve the long-term future of the company.

The third way that a manager’s job is changing is in how important sustainable practices are to how a company does business. Sustainability is in the DNA of Starbucks. The company has been about doing business ethically and responsibly since the beginning. This commitment can be seen in the way the company sources its all-important coffee beans to the way it wants to be a “good neighbor” in the communities it serves. Managers at all levels of the company must understand the obligations associated with doing business sustainably and recognize that they are accountable for how sustainability is practiced and lived. Environmental, social, and governance reporting to communities where Starbucks does business will also remain important.

P1-4. Give examples of how Laxman Narasimhan might perform the interpersonal roles, the informational roles, and the decisional roles.

Laxman Narasimhan wears many managerial hats during the course of each day. Acting as a coach and mentor for his executive team, he plays an interpersonal role. Johnson must be able to work with individuals from diverse backgrounds and cultures in his global company. He plays interpersonal roles as he networks within and outside of the organization as a liaison, using his strengths in interpersonal roles to promote cooperation and commitment among partners of Starbucks. Narasimhan plays a figurehead role as he represents the company at promotional events. He performs the interpersonal role of leader as he influences members of the work teams who contribute to the continuing development and success of the company.

Narasimhan continuously monitors and disseminates information, internally and externally, in his information roles. In making strategic decisions concerning the future directions of the company, the introduction of new products, and how to respond to external issues, Johnson plays the role of decision maker. He must be, at times, a negotiator with suppliers and a savvy disturbance handler in challenging leadership situations. Narasimhan must be constantly alert in developing innovations for products in his decisional role as entrepreneur.

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P1-5. Look up Laxman Narasimhan and notice what is mentioned about him. How might his experiences and background affect the way the company is managed?

Narasimhan, like Johnson, the CEO before him, had decades of experience managing along with many years of experience as an executive. Narasimhan’s profile lists him as a trusted leader with nearly 30 years of experience leading and advising global consumer goods businesses. He served as CEO of Reckitt, a multinational consumer health, hygiene, and nutrition company, prior to becoming CEO of Starbucks. At Reckitt, he led the company’s return to sustainable growth. Known for his considerable operational and transformational expertise, he has a proven track record in developing and growing purpose-led brands on a global scale.

Throughout his career, he maintained a commitment to servant leadership. Before this role he served as PepsiCo’s global chief commercial officer and CEO of PepsiCo’s Latin America, Europe, and sub-Saharan Africa operations where he was responsible for operations in over 100 countries. He is well positioned to lead a global business like Starbucks, and he speaks six languages. His preferred Starbucks beverage is a Doppio espresso macchiato with hot skim milk on the side. This mindset is “With every cup, with every conversation, with every community – we nurture the limitless possibilities of human connection.”

P1-6. Go to the company’s website www.starbucks.com and find the list of senior officers. Pick one of those positions and describe what you think that job might involve. Try to envision what types of planning, organizing, leading, and controlling this person would have to do.

Students can select from a variety of senior positions within Starbucks when answering this question. For example, there are several Executive Vice Presidents. For example, the Executive Vice President and Chief Communications Officer, Public Affairs, oversees Starbucks’ global communications, internal communications, partner, communications, Starbucks Stories, entertainment and more. This particular top manager must plan, organize, and lead programs that will inform individuals and communities in the varied neighborhoods and countries served

by Starbucks. The design and implementation of control mechanisms for obtaining feedback and responding appropriately would also be part of this executive's job.

P1-7. Look up the company’s mission statement and guiding principles on the company’s website. What do you think of the mission and guiding principles?

Student opinions will vary. However, before answering this question, have the students review the core values of Starbucks. You might want to ask them to address these principles/core values during a class discussion, examining how each of the principles relates to and supports the company's mission statement.

P1-8. Describe how the mission and guiding principles would influence how a barista at a local Starbucks store does their job. Describe how these would influence how one of the company’s top executives does their job.

Emphasize to your students that Starbucks’s mission and guiding principles serve as the driving force behind everything done by the company, including job performance by every “partner” at Starbucks, from the barista at a local store to a top executive of the company. For instance, in their day-to-day operations, baristas will use Starbucks’s core values/principles to guide their decisions in dealing with customers, preparing customer orders, and performing other tasks they’re assigned. In making decisions to direct the growth and development of the company, a top executive is guided by Starbucks’ principles to encourage the highest standards of

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excellence in contributing to the simultaneous financial profitability of the company and the benefit of the communities served by the organization around the globe.

P1-9. Was Starbucks’s response to the Philadelphia crisis a programmed or non-programmed decision? Explain your answer.

Non-programmed decisions are those that address new and unusual situations that have incomplete or ambiguous information. The situation exploded on social media and quickly became a public relations nightmare for Starbucks. This crisis represented an unstructured problem.

This situation was an unstructured problem because it was not straightforward, familiar, or easily defined. Because this was an unusual occurrence, there was no standardized routine for handling it. As a result, there was not a programmed decision available to handle it. Kevin Johnson became directly involved. To address the crisis he likely developed a set of alternatives, a stage of the decision-making process, to determine how to handle the Philadelphia crisis. Unstructured problems like this one involve upper levels of management, are unusual, have ambiguous or incomplete information, can require a long time frame for reaching a solution, and need a creative solution. Nonprogrammed decisions are unique and nonrecurring and involve custom-made solutions. Starbucks decided on various custom-made solutions to address the crisis, ranging from a personal apology to the men involved and requiring company-wide training through its stores in the United States. However, Starbucks needs to develop procedures and rules that guide store managers to prevent similar situations from occurring in the future.

P1-10. How might biases and errors affect the decision making done by Starbucks executives?

By Starbucks store managers? By Starbucks partners?

When managers make decisions, they may use shortcuts, or heuristics, to simplify or speed up their decision-making. Decision biases and errors will be different due to the different skills managers rely upon at different levels of the organization. Top-level managers must use conceptual skills more often than middle and lower-level managers, while lower-level managers rely more heavily on technical skills. As a result, top managers will experience more biases and errors more often in decisions related to the conceptual skills they use, and lower-level managers will experience more biases and errors more often with decisions related to their use of technical skills. Examples of the common decision-making biases in Exhibit 3-8, but at the lowest level of the organization partners and store managers biases and errors will relate to dealing with customers, fellow employees, and other aspects of a single store’s operations.

Examples pertaining to executives will relate to dealing with other executives, middle managers, and Starbucks’s operations extending across multiple stores, regions, and countries. Errors made at the executive level broadly impact the organization, its stakeholders, and its long-term success.

Have students divide into three groups, each representing the three different employee groups: executives, managers, and partners. Have each group go through the list below and give several potential biases that could occur for their employee group.

•Overconfidence •Immediate Gratification •Anchoring •Selective Perception

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•Confirmation •Framing •Availability •Representation •Randomness •Sunk Costs •Self-Serving Bias •Hindsight Practice Your Data Analysis Skills This case presents a situation faced by three friends who started a coffee business. The friends are experimenting with adding the sale of coffee drinks, instead of giving them away as free samples, to their store that previously only sold wholesale coffee beans directly to restaurants, caterers, and individuals who ground the beans at home.

1. After sales start on Monday, how much total revenue and profit will the store make from the first 100 customers? Assume each customer will buy 1 pound of coffee beans and a coffee drink. Thirty percent of sales will be wholesale specialty coffee beans and cold Frappuccinotype drinks. On average, 1 pound of coffee makes 35 $3 coffees or 60 $5 cold Frappuccinotype drinks (which use half of a cup of coffee with other ingredients costing $0.25 per cup).

Is the profit margin on the drinks appropriate for this business? (Hint: the markup formula is the selling price minus cost divided by cost.)

Students may need guidance on how to begin this problem, and there are several approaches to analyzing this data. One approach is determining the revenue and profit per 100 customers for both the 70 pounds of traditional and 30 pounds of specialty coffee beans. Next, students can calculate the revenue and profit from selling coffee and cold Frappuccino-type drinks per 100 customers. The data suggests that revenue for the coffee beans sales per 100 customers is $2,300 ($1,400 + $900), while the revenue for the coffee drink sales per 100 customers is $360 ($210 + 150). The profit is $1,000 for coffee beans and $327.5 for coffee drinks per 100 customers. Student opinions on the appropriateness of the profit margin for the coffee drinks will vary. Students will notice that the markup is substantially higher on coffee drinks than on the coffee business, which suggests a possible inconsistency in how the owners set prices for their products. Some students will present the 100 percent markup as more appropriate even if customers are willing to pay a higher price.

Markup 100 percent: Traditional Coffee Beans 1 pound ($20) & Specialty Coffee Beans 1 pound ($30) 100 customers: total revenue = 70 pounds of traditional coffee (70 * $20) = $1,400 Profit = $700 Total revenue = 30 pounds of specialty coffee (30 * $30) = $900 Profit = $300 Total revenue = 70 cups of coffee ($10 of 1 pound of coffee = 35 cups) Revenue = 70 * $3 = $210 Profit = $210 – 20 = $190 Total revenue = 30 cups of cold Frappuccino-type ($10 of 1 pound coffee = 60 cups; additional costs $0.25 per cup)

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Revenue = 30 * $5= 150 Profit = $150 – $5 – ($0.25*30) = $137.50 Markup on Cup of coffee = ($3 – (10/35))/(10/35) = 934.5% Markup on Cup of Cold Frappuccino-type drink = ($5 – (10/60 + $0.25))/(10/60 + $0.25) = 1,090.48% See https://www.omnicalculator.com/finance/markup 2. How successful was the three friends’ decision to sell coffee drinks? Would you advise them to work to expand the decision to sell coffee drinks or to maintain a focus on selling wholesale coffee beans?

The profitability of the coffee drink business justifies the decision to sell coffee drinks for most students and enhances their willingness to recommend expanding this option. Student answers will vary. Many will see the complexity of adding coffee drink sales to the business. Some perceive a higher possibility of increasing the number of customers willing to buy a drink instead of coffee beans because this relates to their buying experiences.

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Part 2: Starbucks—Basics of Managing in Today’s Workplace Discussion Questions with Answers P2-1. Do you think Howard Schultz, Kevin Johnson, and Laxman Narasimhan have viewed their roles more from the omnipotent or the symbolic perspective? Explain.

By providing leadership for this company, Howard Schultz, Kevin Johnson, and Laxman Narasimhan believe in empowering employees throughout the organization, where they participate as partners in the company's success. To some extent, Schultz portrayed both the omnipotent and symbolic perspectives. From the omnipotent perspective, he was the heart and soul of this company. As one former board member said, Schultz is consumed with his vision for Starbucks and feels strongly about his role in creating the company's culture. His successors, Kevin Johnson, and Laxman Narasimhan, show similar omnipotent attitudes in their belief that success is defined by how they guide the firm to enhance the human experience. However, from the symbolic perspective, Schultz's ability to affect performance outcomes was dramatically influenced and constrained by external factors. Competition with Luckin Coffee in China and the COVID-19 pandemic are examples. Schultz's leadership role might be most accurately described as more omnipotent than symbolic. Schultz acted within the constraints of both the internal and external environments. Laxman Narasimhan still operates within those same constraints, so his leadership role reflects a similar strong leaning toward the omnipotent perspectives.

P2-2. Who made Starbucks’ culture what it is? How has that culture been maintained over time?

Students should revisit the description in the Part I case concerning the business philosophy of the three original founders. Ask students to explain how the unwritten business philosophy of these three Starbucks founders served as a basis for the subsequent composition of the mission for the company, as developed by Howard Schultz. Students should recognize that the original passionate commitment to quality, “world-class” coffee, and individual education of Starbucks' customers inspired Schultz to envision the possibilities for maintaining, developing, and expanding the company's emphasis on a caring, respectful, and diversified culture.

The company's culture is maintained through the company's mission, the six guiding principles, selecting and socializing executives, managers, and partners that match Starbucks’s culture, and the daily decisions and actions of the partners from top to bottom. Schultz, Kevin Johnson, and now Laxman Narasimhan also recognize how powerful and important it is to maintain the relationship Schultz developed with his partners.

P2-3. What culture does Starbucks have? Is its strong culture a competitive advantage?

Explain.

Students should be able to find examples of Starbucks' strong culture because values are widely shared, employees receive consistent messages about what is important, employees strongly identify with the culture, and there is a strong connection between shared values and behaviors. Starbucks appears to have an organizational culture that is highly adaptable, outcome-oriented, people-oriented, and emphasizes integrity. The culture leads employees to be responsive to their customers. Although there is no specific reference to Starbucks’ innovation efforts, an innovative culture can be assumed when you look at the list of Starbucks' products. It is quite impressive; many of these products are offered for purchase by app and to

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go. Starbucks encourages an ethical culture through ethical product sourcing, environmental stewardship, and community involvement.

P2-4. Describe some of the specific and general environmental components that are likely to impact Starbucks.

Some ways that the external environments affect Starbucks are the environment’s impact on the availability of quality workers to fill jobs in stores, intense competition in China from Luckin Coffee and others (its 2nd largest market), and increasing customer interest in order-by-app.

Stakeholder interest in environmental stewardship, corporate responsibility, diversity, and inclusive environments will also impact Starbucks. One of the most visible areas is where the external environment affects managers. The environment affects the number and types of jobs available and how those jobs are created and managed. When the global economy is weak, Starbucks' executive team may have to make difficult decisions to realign the company's businesses, affecting jobs and employment. During a robust global economy, the company faces competition for quality workers, and when quality workers are unavailable, the impact can be poorer quality, higher labor costs, or both. Starbucks has a major focus on the Chinese market and must navigate its cultural differences. Finally, managers at Starbucks recognize and understand the importance of managing the relationships the company has with its stakeholders. From partners and customers to suppliers and communities, Starbucks has focused on nurturing those connections because it feels it's the right thing to do and because doing so has led to desirable organizational outcomes.

P2-5. How would you classify the uncertainty of the environment in which Starbucks operates?

Explain. Would you classify Starbucks’s environment as more calm waters or white-water rapids? Explain. How does the company manage change in this type of environment?

As with most global companies, Starbucks faces significant environmental uncertainty, which is the degree of change and complexity in an organization's environment. With the rapid changes in technology, unpredictable global economic and political environments, uncertainty concerning competitors, and changing tastes of consumers, Starbucks operates in a dynamic environment.

White-water rapids is part of a metaphor to describe the pace of change in the economy, technology, and customer preferences. Some students will perceive Starbucks as operating in white-water rapids instead of calm waters. Change is typical and expected in the “white-water rapids” metaphor, and managing it is a continual process. The stability and predictability of the calm waters probably will not exist for Starbucks. Disruptions in the status quo will frequently challenge management at Starbucks. Like most managers today, executives and the partners at Starbucks are navigating a white-water rapids situation. Students will give various reasons to support the choice of this metaphor in describing the environment facing Starbucks, such as the challenge of inventing products that will appeal to a diverse customer base, increasing competition from domestic companies, and numerous economic and cultural obstacles, both domestically and globally.

P2-6. What two stakeholders do you think Starbucks might be most concerned with? Why? What issue(s) might each want Starbucks to address?

Students may identify several important stakeholders of Starbucks, including customers, suppliers, and employees. Regarding its employees, Starbucks is devoted to the happiness and welfare of all persons employed by the company. This concern for its employees is epitomized by the term “partners,” which is used within the company to identify all its employees. Starbucks also supports many employee resource groups (ERGs) called “partner networks.”

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Starbucks recognizes that the best way to ensure that its customers are treated well is to treat its partners well. Motivated content partners will, in turn, provide the highest quality products and service to customers. Howard Schultz, Kevin Johnson, and now Laxman Narasimhan “walk the talk” by enacting and espousing dedication to the company's partners. Narasimhan knows how to create positive relationships with all partners and provides them with the highest quality ingredients, which is critical to the company’s success.

P2-7. What global economic and legal-political issues might Starbucks face as it expands its operations in South America or Africa that it does not face in China?

Doing business in China means working within one political, legal, and economic system. While this is a complicated endeavor, China’s government has implemented a plan ensuring a good infrastructure and environment for conducting business. Africa and South America are more complex because they are not single countries. Africa is comprised of 54 different countries with different religions, races and ethnicities, and legal and political systems. South America is comprised of 12 countries, and Spanish is not the only language spoken there. The environment for business and infrastructure can also be substantially different across the African and South American continents. Moving products, employees, and raw materials from one African country to another African country is also more complicated than the same practice within China. Similar challenges are present in South America, which include different currencies, extreme inflation, and political uncertainty. This implies that managers need more skill as they plan, organize, lead, and control. Managers must pay close attention to the global challenges associated with the different country’s political/legal environment, economic environment, and cultural environments in Africa and South America. As education and work practices vary from country to country, staffing an organization that demands a coordinated work effort becomes more difficult. This is further complicated by language and cultural barriers. As Starbucks expands, getting employees with the skills to work in a global organization will be difficult. Finding baristas who can service the retail stores may not be easy. Still, the most challenging task will be finding key support personnel who provide the organization's financial, logistical, and operational functions.

P2-8. Pick one African country to be an important target for Starbucks’s expansion. Make a bulleted list of this country's economic, political-legal, and cultural characteristics and how they might affect Starbuck’s operations.

Divide your class into small groups of four to five students to address this question. Then, have each group take a country and do some research on that country’s economic, political-legal, and cultural characteristics. After each group has written a report, have each group present their findings. Useful websites to find information to address the three factors include: • Department of Commerce, and the International Trade Administration (http://trade.gov/) • The US State Department (http://travel.state.gov/) • Geert Hofstede’s findings on both national cultures at http://www.geerthofstede.com/index.shtml P2-9. What workforce challenges might Starbucks face in the United States with its partners?

Demographic changes in the United States will continue to change managers' relationships with partners and partners' relationships with customers. Communication issues, discrimination, stereotypes, prejudice, and building trust will continue to be challenges. Training baristas to inclusively service the retail stores will likely be required. Still, the most challenging task will be

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finding key support personnel who can adapt stores to meet the increasing preferences for to-go and drive-thru ordering.

P2-11. With more than 330,000 partners worldwide, what challenges might Starbucks face in ensuring its inclusivity and diversity values are practiced and adhered to?

Student answers will vary. Communication issues, discrimination, stereotypes, prejudice, and building trust will be constant challenges. The company's definition of inclusion encompasses human connection and engagement. Equity involves fairness and justice. Accessibility is shown through ease of use and being barrier-free. The company also states that its diversity strategy focuses on important stakeholders, including partners, customers, suppliers, and communities.

Your students will likely agree that this is a good description of how an organization should address and manage diversity, citing that it encompasses important aspects. However, you might want to point out that although the words and intentions are good, actually doing and practicing these things may not be as easily achieved. That's always been the challenge for managers in managing diversity. Starbucks' Partner Networks are examples of employee resource groups. Such networks (or groups) can be beneficial for partners who are connected by some common dimension of diversity because their existence is acknowledged, and they have a source of support both within and outside the group. Individuals in a minority group often feel as if they're invisible and not important in the overall organizational scheme of things. These networks provide an opportunity for those individuals to have a voice. Starbucks will also need structured training programs to ensure all employees understand the firm’s commitment to diversity.

P2-12. Laxman Narasimhan is quoted on the Starbucks website as saying, “We have a critical role to play in bringing human connection to a world that’s quite disconnected.… In order to exceed the customer expectations, we must first exceed partner expectations.” Explain what you think this means. How is this related to how Starbucks shares its culture with its employees?

Narasimhan makes it clear that he remembers that people are essential to Starbucks. Both the people who work at Starbucks and the people who are customers at Starbucks are shown to be important in his message. The company's definition of inclusion encompasses human connection and engagement. Its diversity strategy focuses on important stakeholders, including partners, customers, suppliers, and communities. Students agree that statements from Narasimhan are part of the stories, rituals, and martial artifacts and symbols of the culture at Starbucks and a way culture is shared with employees.

P2-13. Starbucks has a Black woman as the board chair and a CEO born in India. Does Starbucks need to say and do more to show its commitment to diversity? In what ways could Starbucks become even stronger in the area of diversity?

Yes, Starbucks does commit to diversity, but a continual commitment is required. Obviously, one or two hires are not a strong commitment to diversity. Starbucks' strong commitment is demonstrated by its employment of minorities and women throughout the company and at all management levels. The company also encourages employee resource groups (ERGs) that actively support partners with disabilities, armed forces veterans, black partners, and other groups. The firm also has firm targets in place to ensure top management has representation from diverse groups, and the firm makes sure facilities are located in underserved communities.

The firm does numerous activities that indicate a commitment to diversity. Students will offer their suggestions on how to become stronger in the area of diversity.

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P2-14. Go to the company’s website, www.starbucks.com, and find the latest corporate social responsibility report. Find the goals for one of its competitors (e.g., Dunkin, Luckin Coffee, McDonald’s), and describe and evaluate whether there are any meaningful differences in corporate social responsibility between the two companies. If possible, note some significant accomplishments for each.

By accessing the company's website and clicking on the “About Us” link, your students can find other links with all kinds of information about the company’s global responsibility efforts. They may have to do a little searching for the report, but if they’re having trouble, tell them to look for the “Starbucks Shared Planet” information. Have students study this document independently to describe and evaluate Starbucks’ latest actions in the area of global responsibility. Starbucks tries very hard to be a responsible company, and it might be interesting to have your students do brief presentations on the area they are looking at.

P2-15. What do you think of Starbucks’s goal to stop using plastic straws worldwide? What challenges might it face in meeting that goal? Is this merely a “public relations” promotion?

As the case states, environmental stewardship is one area that Starbucks has struggled with.

No one can argue that Starbucks' intentions are good—it wants to be a responsible and ethical company. However, dealing with plastic straws is challenging for the firm’s cold beverages.

What do you replace them with? However, the firm has some experience with moving away from using foam cups and disposable containers. Many will believe Starbucks is truly intent on helping make the world greener. Students will differ on the belief that this goal is merely a public relations promotion or a genuine commitment to sustainability.

P2-16. Which of the approaches to “going green” does Starbucks utilize? Explain your choice.

Most will believe that Starbucks has a dark green, or activist approach, to the environment. The firm appears to be a leader in sustainability issues and does not wait for stakeholders or public opinion to drive the change. Others may have a different opinion.

P2-17. What do you think the company’s use of the term partners instead of employees implies?

What is your reaction to this? Do you think it matters what companies call their employees? (For instance, Walmart calls its employees associates.) Why or why not?

Terms like partners and associates are meant to create a feeling of empowerment and belonging to the organization. As employees move from a “hired hand” to a “partner,” they start to feel more important in the organization's decision-making processes. Employees may also feel a greater buy-in and commitment to organizational policy and plans and become involved in setting future rules and goals. The term partner also helps employees adapt to the culture. This is a socialization, a process that helps new employees learn the organization’s way of doing things. However, the term associate may not have the same power as a partner. While Walmart uses the term associate, many do not feel they follow through on decentralizing power and allow associates to make decisions. As a result, the term at Walmart is not as effective. Students often see Walmart’s actions as less authentic and trustworthy.

P2-18. Is Starbucks a case for or against globalization?

Student answers will vary. The positive aspect of its global expansion is that it helps engage employees in the global market. Employees get experience working with an internationally

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respected organization known for its people-oriented human resource policies and organizational cultural variables important to innovation. Several innovation variables will impact motivation, resulting in job security and a work environment where employees are encouraged to try something new without fear of failure. Starbucks’ employees are called “partners,” which shows appreciation for their efforts. The benefit package is also considered generous. In the United States, this includes free college tuition and stock options. Negatives of the global expansion of Starbucks include its movement away from local sourcing of goods, increasing a global culture of consumerization, the westernization of other cultures, and the diminishment of local businesses.

P2-19. Do Starbucks’s benefits live up to the promises? For example, a barista can earn shares of Starbucks stock as part of its Bean Stock program, which they can sell after two years. In its Stock Investment Plan, partners can use up to 10 percent of their base pay to buy Starbucks stock at a 5 percent discount. Using today’s date two years ago, how happy do you think a partner would be if they sold 10 shares in each program today? Complete the necessary calculations to explain your answer.

On January 2, 2022 SBUX: Starbucks stock closed at $116.24.

On January 2, 2024 SBUX: Starbucks stock closed at $93.23.

Shares purchased on January 2, 2022, at a 5% discount would cost $110.43. Stock 10 stocks sold on January 2, 2024, would come at a loss of $17.20 per share or a loss of $172 on the total 10 shares traded. The partner would receive $932.30 from their original $1,104.30 investment.

This is an unfavorable outcome for the barista, but it may be beneficial at other times. Some students may mention that owning a stock is a unique opportunity offered to a barista, unmatched by similar employers. As a result, the chance to participate in stock ownership while taking risks is a benefit worth taking.

Practice Your Data Analysis Skills A coffee business started by three friends caught on, and currently has 10 locations, the environmentally conscious founders of this business have started to consider if the garbage generated by each store is problematic. Last month, the average waste sent to landfills amounted to 1,500 pounds per store. Stores are open seven days a week, and about 500 customers visit each store daily. It turns out that single-use coffee cups, approximately 500 per day per store, can be replaced by compostable paper cups at a cost of $0.15 per cup. By implementing recycling, 600 pounds of garbage per store can be diverted from going to a landfill.

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What is the waste diversion rate per store if recycling and compostable cups are used?

Assume 50 single-use cups equal 1 pound of garbage, and the waste diversion rate is calculated by dividing the amount of waste diverted by the total amount of waste, then multiply the total by 100. The waste diversion rate is presented as a percentage.

Possible Answer: Cup waste reduction = 500 cups per day/(50 cups per 1 pound of garbage) = 10 pounds per day x 30 days = 300 pounds of garbage per month per store.

Recycling subtracts 600 additional pounds from the previous monthly total of 1,200 lbs per store per month.

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Waste Diversion Rate = ((300 + 600)/1500) x 100 = 60% (i.e., 60% of waste that is diverted away from landfills; 20% of waste diverted away from landfills is connected to compostable cups) https://www.ecosystemevents.com/how-to-calculate-the-waste-diversion-rate-of-anevent/#:~:text=Divide%20the%20amount%20of%20waste,diversion%20rate%20of%2092.3%25 !

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The founders have also decided to donate $100,000 yearly to an environmental organization dedicated to saving the earth through food security, ecosystem survival, and reducing carbon footprints. Calculate the total cost of the company’s new sustainability initiatives (donations and compostable cups). Do you feel the impact on the organization's bottom line is too high? Explain. Are there other or better sustainability steps this coffee business should take?

Possible answer: Total cost of sustainability initiatives = $100,000 + (0.15 per cup) x (500 cups per day) x (10 stores) x (365 days in a year) = $100,000 + $273,750 = $373,750.00 It can be helpful to suggest the average cup of coffee sells for $3.00. In this instance, the total revenue per store for coffee is $3.00 x 500 cups per day x 10 stores x 365 days a year = $5,465,000. The total cost of sustainability initiatives is estimated at 6.8% of their revenue from coffee sales. Students will generally feel the coffee business has spent enough on sustainability and is not obligated to spend more. Ideas for other or better sustainability include requiring suppliers to reduce the size of their packaging or make their packaging compostable, finding other uses for coffee grinds after the coffee has been made, utilizing solar panels or making stores more energy efficient, offering reusable cups, etc.

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