Exploring Management, 3rd Edition By Schermerhorn
Schermerhorn Exploring Management 3rd edition
Chapter 1 The Management Process Everyone becomes a manager someday Chapter Objectives Each Chapter contains several inset features designed to assist the student reader in applying the concepts to relevant examples. Management Live illustrates how popular movies demonstrate management concepts in the chapter. Role Models features a management professional that illustrates key chapter concepts in a novel, visionary or inspirational way. Explore Yourself refers students to self assessment activities relevant to concepts in the chapter. Ethics Check profiles examples of ethical issues in management. Manager's Library features books that illustrate current events or trends relevant to chapter concepts. Facts to Consider introduces research or trends that may be used for class discussion in the classroom or online for distance learning. Chapter 1 begins to explore the fundamental notions of what a manager actually does, the requirements for a manager, and the expectations. Both the benefits and challenges are discussed. It may be worthwhile to have the class reflect at the outset on a person for whom they may have already worked or played sports with that they believe was a good manager. Then perhaps ask students to describe some of this person’s traits for further reinforcement and discussion as you present Chapter 1. Suggested learning activities for Management Live, Explore Yourself, Role Models, Ethics Check, Facts to Consider and Manager's Library are included at the end of each Chapter in this Instructor’s Resource Guide. The objectives of Chapter 1 may be summarized as: 1. 2. 3. 4. 5. 6. 7. 8.
To describe the varying types and levels of managers To convey how managers are measured for effectiveness To define accountability, especially in the face of changing and multiple expectations To describe the intensity and stress of managing To explain the four key functions of managers: Plan, Organize, Lead, and Control To describe managers in terms of skills as well as roles enacted To define ethics and corporate governance To explain globalization, job migration and other trends; and how students can begin to prepare for the contemporary organization in light of these trends, issues and concerns 9. To define diversity and discrimination 10. To review how talent and intellectual capital drive high-performance organizations
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Chapter Outline 1.1 What Does it Mean to Be a Manager? •
Managers are persons who directly supervise, support, and help activate work efforts to achieve the performance goals of individuals, teams, or even an organization as a whole.
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Organizations have different types and levels of managers ✓ Figure 1.1 depicts an organization as a series of “layers,” each of which represents different levels of work and managerial responsibilities. ✓ First-line manager is someone who leads a group of people who perform nonmanagerial duties. ➢ Common titles are department head, team leader, supervisor ✓ Middle Managers are persons in charge of relatively large departments or divisions consisting of several smaller work units or teams. ➢ Usually supervise several first-line managers ➢ Examples are clinic directors in hospitals, plant managers, and regional sales managers in businesses ✓ Top managers are responsible for the performance of the organization as a whole. ➢ Chief Executive Officer (CEO), President, Vice Presidents ➢ Expected to be alert to trends in the external environment, recognize problems and opportunities, and to lead the organization to long-term success ➢ Best are strategic thinkers, can communicate well, and keep organization members focused on important objectives ✓ Boards of Directors ➢ Responsible for Corporate Governance and the active oversight of the affairs of the organization and the performance of its top management ➢ The CEO or President typically reports to the Board of Directors who are responsible for the hiring, firing and compensation of senior executives ➢ In non-profit organizations, may be called the Board of Trustees •
Accountability is a cornerstone of managerial performance ✓ Describes the requirement of one person to answer to a higher authority for performance achieved in his or her area of work responsibility ➢ Accountability flows upward in organizations ➢ Managers are also dependent on others to do the required work
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Effective managers strive for both performance and satisfaction ✓ Quality of work life (QWL) is integral to managers being a success ✓ QWL includes respect and valued employees, fair pay, safe working conditions, learning and growth opportunities, and pride in the workplace
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Managers must meet multiple and changing expectations ✓ Managers today often referred to as “coaches” or “coordinators”
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✓ See Figure 1.2–an upside-down pyramid depicting a new mindset for managers acting as coaches; the organization exists to serve its customers 1.1 Questions for discussion suggested answers 1) Each of us will be “managers” in several ways beyond work lives: managing our career; volunteer organizations; households; sports teams; daily priorities, etc. 2) Quality of work life connects directly to employee satisfaction and productivity and customer satisfaction. If employee morale is poor and/or if employees are not viewed as individuals with unique goals and concerns, this will impact current sales and profitability; it will also impact retention, and the costs associated with replacing experienced employees are quite high. 3) The upside down view emphasizes the importance of customers and employees who serve those customers. That pyramid view of an organization mirrors reality better than the notion that CEOs alone drive success. 1.2 What Do Managers Do and What Skills Do They Use? •
Managerial work is often intense and demanding. ✓ Henry Mintzberg describes daily managerial work in this manner in The Nature of Managerial Work ➢ In addition to the long hours, Mintzberg described a day spent at an intense pace at fragmented and varied tasks, using many types of communication media, working largely through relationships.
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Managers plan, organize, lead and control. ✓ Four functions in the management process-see Figure 1.3 ✓ The Management Process - planning, organizing, leading and controlling ✓ All managers in any organization are responsible for doing each of these functions well ✓ Planning is the process of setting performance objectives and determining what actions should be taken to accomplish them ✓ Organizing is the process of assigning tasks, allocating resources, and coordinating the activities of individuals and groups ✓ Leading is the process of arousing people’s enthusiasm to work hard and inspiring their efforts to fulfill plans and accomplish objectives ✓ Controlling is the process of measuring work performance, comparing results to objectives, and taking corrective action as needed
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Managers enact informational, interpersonal, and decisional roles. ✓ The four management functions are not performed step-by-step ➢ Mintzberg identified three sets of roles that he believed all good managers enact successfully Through these roles, the manager fulfills the four management functions ✓ Informational roles focus on the giving, receiving, and analyzing of information
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✓ Interpersonal roles reflect interaction with people inside and outside the work unit ✓ Decisional roles involve using information to make decisions to solve problems or address opportunities •
Managers pursue action agendas and engage in networking. ✓ Agenda setting is used by managers to develop action priorities; these agendas may be incomplete and loosely connected in the beginning ✓ Networking is the building, maintenance, and use of positive relationships with other people, ideally those who may be useful someday ➢ Networks create the opportunity through which many agenda items can be fulfilled ➢ Most managers maintain extensive networks not only with their own organization, but also with customers, suppliers, and community representatives
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Managers use a variety of technical, human, and conceptual skills. ✓ Technical skill is the ability to use a special proficiency or expertise to perform particular tasks ➢ Examples are accountants, engineers, and systems analysts ➢ Technical skills are very important at career entry levels ✓ Human skill is the ability to work well with others ➢ High self awareness, capacity for empathy, trusting, and enthusiasm with others ➢ Emotional Intelligence (EI) (described by Daniel Goleman) is the ability to manage ourselves and our relationships effectively ➢ See the inset summarizing the five facets of EI ✓ Conceptual skill is the ability to think critically and analytically; the capacity to break down problems into smaller parts, see the relations between the parts and recognize the implications of any one problem for others ➢ Conceptual skills actually grow in importance as one moves up to higher management responsibilities
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Managers can and should learn from experience. ✓ Lifelong learning - the process of continuously learning from our daily experiences and opportunities ✓ Table 1.1 presents six "Must Have" managerial skills. ➢ Teamwork ➢ Self-Management ➢ Leadership ➢ Critical Thinking ➢ Professionalism ➢ Communication ✓ Learning Activity: Have students rank these skills in order of importance individually or in small groups. Compile the lists in a large group, asking students to justify their choices.
1.2 Questions for discussion suggested answers
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1) The world is becoming more complex and more technologically connected globally. In order to compete, organizations and individuals can no longer partition their lives into 40 hour work weeks from “8-5.” The paradox of improving the speed of communications is that it makes our lives less separable from our “jobs.” Having a smartphone and laptop means 24/7/365 availability. Students may consider the types of communication they used 5 to 10 years ago (land lines, cell-phones, instant messaging) and the ones they use now (texting, Facebook, Twitter) and the increased amount of time spent communicating. Are they ready for their personal and professional lives to merge as the communication needs of both increase? Even though such a world may entail more stress and long hours, it also provides more flexibility, freedom, and mobility. Moreover, in order to compete, one must accept such consequences or another person somewhere in the world that is more willing to do so, may take your position. 2) The Katz model indicates that in order to obtain a good entry-level position, it is imperative that my interpersonal skills and technical skills be outstanding. Human or interpersonal skills will remain high throughout my career, but it is important to acquire a strategic or “big picture” view of the organization, competitors, and customers early to distinguish myself and ascend to the “top.” 3) We all know someone who has or had “great potential” but who has somehow not been able to translate that potential into actuality because of personal issues, including poor discipline, bad time management, losing one’s temper, and many other reasons. Developing emotional intelligence and self-awareness enables us to eliminate obstacles and create opportunities. 1.3 What Are Some Important Career Issues the New Workplace? •
Globalization and job migration are changing the world of work. ✓ “Borderless world” (Kenichi Ohmae) – disappearance of national boundaries ✓ Trend for companies to operate and have employees in multiple countries ✓ Globalization is the worldwide interdependence of resource flows, product markets, and business competition ➢ Global outsourcing is hiring workers and contracting for supplies and services in other countries. ➢ Global outsourcing can create savings and efficiency gains through manufacturing or providing service with lower labor costs in some countries ✓ Job Migration is the shifting of jobs from one country to another. ➢ The U.S. is a net loser at present ➢ Countries such as China, India and the Philippines are net gainers ➢ Not limited to unskilled labor; engineers, accountants, health professionals and scientists are as low as one-fifth the cost of an equivalent U.S. worker ✓ Politicians and policymakers debate solutions to the high costs of job migrationprotection or patience and time for eventual strengthening of the national economy
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Failures of ethics and corporate governance are troublesome. ✓ Recent sensational ethical failures ➢ Bernard Madoff convicted of $65 billion dollar fraudulent Ponzi scheme ➢ Wide and huge impact on personal savings, investments ➢ How would you recover from a major loss? ✓ Ethics ➢ Ethics is a Code of moral principles that sets standards of conduct for what is “good” and “right” as opposed to “bad” and “wrong” ➢ World of work still includes a lot of good o High value on personal integrity and ethical leadership o Concerns for natural environment, safety, protection of human rights o Many organizations declare their values ➢ Ethics Check feature on page 21 introduces a hypothetical ethical dilemma that is inspired by an actual situation between Coca-Cola and PepsiCo. ✓ Corporate Governance ➢ Corporate Governance is the active oversight of management decisions, corporate strategy, and financial reporting by Boards of Directors ➢ Typical Board of Directors responsible for hiring, firing and compensation of senior executives ➢ Individual Board members are accountable, including consequences for failures of responsibility such as fines •
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Diversity and discrimination are continuing social priorities. ✓ Workplace diversity describes the composition of a workforce in terms of differences among the members, such as gender, age, race ethnicity, religion, sexual orientation, and able-bodiness. ➢ U.S. Census predicts that by 2050 whites will be in the minority and the combined populations of African Americans, Native Americans, Asians and Hispanics will be in the majority. By 2030, more than 20% of the U.S. population will be over 65 years old. ✓ U.S. laws strictly prohibit the use of demographic characteristics in human resource management decisions, such as hiring, promotion, and firing. ➢ Actions not always in compliance with laws ➢ One study showed that names affect selection of resumes by employers ➢ Glass ceiling effect occurs when an invisible barrier or “ceiling” prevents members of diverse populations from advancing to high levels of responsibility in organizations ✓ Diversity bias still exists ➢ Prejudice is the holding of negative irrational attitudes regarding people who are different from us ➢ Discrimination is when prejudice becomes active; when organizations unfairly treat minority members and deny them full membership benefits ✓ Scholar Judith Rosener says discrimination comes at high cost in “undervalued and underutilized” human capital Intellectual capital and self-management skills are essential for career success
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✓ Career success requires continuous learning and capacity for self management. ✓ The future will be more of a free agent economy; many people will be changing jobs more often and working on flexible contracts with a shifting mix of employers over time (like professional athletes) ✓ Shamrock Organization is an analogy used by British scholar and consultant Charles to describe three types of workers, each depicted by a leaf: ➢ Core - full-time workers with critical skills and standard career paths ➢ Independent Contractors - workers with short- and long term-contracts; specialized skills and talents supporting the core workers ➢ Part-time temporary - workers hired as the needs of the business grows and let go when business fails ✓ Intellectual capital is the collective brainpower or shared workforce of an organization’s workforce. Competency represents our talents or job-relevant capabilities; commitment represents our willingness to work hard in applying them to important tasks. Both are essential. ➢ Can be viewed as formula with two components: Intellectual Capital = Competency x Commitment ✓ Knowledge workers are persons whose minds, not just their physical capabilities, are critical assets ➢ Futurist Daniel Pink describes a conceptual age we are moving into where intellectual capital will rest with people who are both “high concept”- creative and good with ideas, and “high touch”- joyful and good with relationships. The future will belong to those of us with “whole mind” competencies - combining left-brain analytical and right-brain intuitive thinking. ✓ Self Management involves showing emotional intelligence, initiative and accepting responsibility for one's own actions and consequences. ➢ Today’s college graduates must be prepared to work as all three types of worker a portfolio of skills will be required that is both current and attractive to ✓ Personal “brand” - a unique and timely package of skills and capabilities of real value to a potential employer ➢ Management consultant Tom Peters advises your brad should be “remarkable, measurable, distinguished and distinctive” relative to the competition 1.3 Questions for discussion suggested answers 1) Most textbooks and courses in Introduction to Business, Management, and Accounting include a separate chapter on Ethics, and the instructors spend considerable time on this topic. Additionally, Ethics may be an entire required course in the graduation track curriculum to obtain a business degree. Globalization is covered in most texts and courses as examples that apply to the chapter concepts. Changing careers may be the least effectively covered of the three concerns. Is that true in your curriculum? How do students feel about their preparation to meet challenges of the future? 2) Avoiding the “hurt” may involve two aspects: 1) the personal feelings that are normal from a reaction to the glass ceiling effect; and 2) protecting oneself against being discriminated against in a culture that allows “glass ceilings.”As the name implies, it is
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never easy-if at all possible – to discern if a glass ceiling exists in a particular culture. The best evidence, though, is to objectively examine and investigate how many minorities are in senior management. If an organization is quite large and is devoid of minority senior executives, that organization’s culture deserves further scrutiny before you accept a position. It is also a reasonable area to explore during the interview process. If one is a victim of glass ceiling discrimination, the matter should be brought to the attention of appropriate agencies and within the company itself. But if the discrimination is subtle and hard to “pin down” it is better to recognize that and not to invest valuable years in such an organization. 3) Self management is perhaps the most valuable area/trait for personal growth for one’s career. Change is occurring at an increasing rate and the “life” of many companies and organizations may be shorter due to fierce competition. Each individual can build their resume through “Chapters” or chunks of skills with what is likely to be many employers for most people today. Self-discipline and self-awareness are essential in such a climate. Globalization and technology advances mean that each person may be more of a “free agent” than was the case in prior generations.
Teaching Notes In this section, ideas, exercises, and assignments are provided to assist you in integrating the concepts in Exploring Management for your students, especially the special features of the text. Management Live Slumdog Millionaire profiles the discipline, confidence, determination and self-management skills of an orphan growing up in the slums of Mumbai, India. His determination to rise above his beginnings are an inspirational example for management students to discuss, particularly as it applies to the concepts in "Takeaway 1.3 What are some important career issue in the new workplace." Learning Activity: Ask students to come up with other examples of movies that involve a determined character who finds success. Role Models Ursula Burns, CEO of Xerox, started as an intern and worked her way up to the top position through “hard work and high performance”. She assumed the CEO position at a difficult time for the document management company. Sales and profits declined as businesses are becoming “paperless” and buying less equipment (see Role Models box on page 11). Questions for class discussion (or an assignment): • Burns is the second woman to head Xerox at a time when women CEOs of Fortune 500 firms are rare. What might Xerox do differently in developing management talent than other large firms? • Which of the issues and concerns complicating the new workplace as listed in Chapter 1 seem to be most relevant to the challenges facing Xerox? How might Xerox face these challenges in the future?
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Ethics Check Coke's secret formula making its way to Pepsi? Unthinkable, but it nearly happened. This situation is drawn from a similar situation a few years ago. The "You Decide" questions ask students to guess what the executive would do and how the student would respond. In real life, the Pepsi executive called Coke who called the FBI. Facts to Consider Figures indicate that although progress has been made, women and minorities still lag behind Caucasian men in earnings and management positions. How can these data be explained? Ask students to brainstorm reasons that the data indicate discriminatory practices. Remind them that the number of Hispanics in the workforce may be underrepresented in the study if undocumented workers were not included. What are the implications of these data for you and your career aspirations? Some students will see an advantage over other groups. Minority members of your class may feel discouraged. This may be an opportunity to have students discuss their feelings in smaller diverse groups. What other contradictions in diversity can you spot and how can they be justified? Ask students to come up with at least one or two and compare examples in a large group. Manager's Library Delivering Happiness: A Path to Profits, Passion and Purpose Tony Hsieh (pronounced "Shay") has an interesting story to tell. At age 24, he sold a company he founded to Microsoft for $265 million. He went on to start Zappos, an online apparel retailer that he sold to Amazon for $1.2 billion. Still actively involved in Zappos as CEO, his management style is to create a culture where employees and customers are treated like friends. Reflect and React questions probe students' views of work and play, friends and coworkers and discovery. Explore Yourself The assessment suggested is Personal Career Readiness in the Skill-Building Portfolio. Students may be required to complete it prior to class so their results can be discussed as an introduction to chapter 1, or as a short break in your class presentation. Interpretation is in the Skill-Building Portfolio. Case Snapshot The case for this Chapter describes “Trader Joe’s – Managing With a Cool Edge.” Instructors may consider suggesting students visit the Trader Joe’s website at www.traderjoes.com for further preparation as they prepare case answers. Case discussion questions and suggested answers: 1. In what ways does Trader Joe’s demonstrate the importance of each responsibility in the management process – planning, organizing, leading and controlling?
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Planning is the process of setting performance objectives and actions taken to accomplish them. References to their commitment to thrift, cost savings and “relentless pursuit of value” (“Every penny we save is a penny you save”) and ways they demonstrate that commitment are numerous in the case. Their simple four-part philosophy and approach to stocking guides purchasing plans. Organizing involves arranging resources to accomplish organizational goals efficiently. Compensation at Trader Joe’s is high for the industry. This usually allows employers to hire better qualified employees even in a tight labor market, reducing training and turnover expenses. Their training programs (Trader Joe’s University) help develop employee potential to support their promote from within policy. Leading inspires people to work hard to achieve high performance. One responsibility of leadership that Trader Joe’s takes seriously is establishing a strong culture. Employees and customers alike are drawn to the chain’s “charming blend of low prices, tasty treats and laid-back but enthusiastic customer service”. Not only is the attitude casual, employee dress and store décor are a nautical and tropical theme. The company hires employees to fit the culture with desired soft skills such as “ambitious, adventurous, enjoy smiling and have a strong sense of values”. Controlling measures performance to ensure the desired results. Control, hand in hand with planning, measures the success of the plan by measuring results. Store size, inventory control and aggressive cost cutting are measured and adjusted as necessary. 2. This is a German company operating in America and sourcing products from around the world. What are the biggest risks that international ownership and global events pose for Trader Joe’s performance effectiveness and performance efficiency? The risks would include economic risks like recession, currency valuation risk and problems with global sourcing such as the issues with Chinese food imports. Globalization also presents opportunities like the ability to work with providers world wide to find low cost products. 3. In a casual and nontraditional work environment like the one at Trader Joe’s, what are the keys to a team leader or supervisor becoming an effective manager? Several management practices enable Trader Joe’s to develop managerial talent: • Strong culture • Hiring with job descriptions that describe desirable personality traits and attitudes • Training • Promote-from-within policy 4. Further Research – Students are directed to research Trader Joe’s and make comparisons with competitors. Caution students to conduct their online research with objective media sources. The college library may offer free searches such as EBSCO Host that access a large number of periodicals including industry publications that may provide thorough and accurate comparisons as well as current industry trends.
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Suggested Team Exercise for Chapter 1 Emotional Intelligence Exercise Chapter 1 includes an inset listing five facets of EI on page 16. Break the class into teams of three or four and ask each group to collectively discuss these five facets. Ask them to list well known managers or celebrities who seem to possess some or all of the facets, and provide examples to share with the class. Also ask them to provide examples of the failure of well known managers or celebrities who lack one or more of the five facets. Upon completion of all teams, have each team (a volunteer from the team) discuss their examples. This will allow the class to learn collaboratively and recognize the values of EI. Conceptual Skill Exercise Chapter 1 includes a review of conceptual skills. This exercise is designed to have teams use conceptual skills to create ideas for a new business in the community Organize the class into teams of three or four students each. Ask each team to “create” a concept for a new business in the local community that serves a need or want they have observed (they should be prepared to support/explain this perceived need or want). They should be told that they can assume that they have the needed financing for a local business. It is useful to share with them an example such as the Geek Squad or a Starbucks, both of which first started as local companies in one community. Allow teams about 45 minutes for this exercise. The teams should report to the class their “concept” as well as a “name” for the business that is communicative and “catchy” (again, Geek Squad is an example, or perhaps Stub Hub, the on-line ticket broker.) The Instructor should summarize the concepts and names. Then the Instructor may want to pick “winners” of the “best concept” and “best name” based on his or her discretion and share the reasons with the class. Students enjoy this exercise and it allows them to see how valuable conceptual skills are. It adds interest and excitement to assign “bonus points” to teams that win, either as extra credit toward their grade or added points (example 3-5 points) on their upcoming test/exam.
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CHAPTER 2 Management Learning Great things grow from strong foundations Chapter Objectives Chapter Two provides the theoretical and historical underpinnings of management principles. Classical, behavioral, and modern management approaches are reviewed
The objectives of Chapter 2 may be summarized as: 1. To explain scientific management, bureaucratic organizations, and administrative principles. 2. To explain behavioral management approaches 3. To describe management as complex networks of systems and sub-systems 4. To explain contingency thinking in management 5. To describe knowledge management and organizational learning 6. To describe the application of evidence-based management
Chapter Outline 2.1 What Are the Lessons of the Classical Management Approaches? •
Taylor’s scientific management sought efficiency in job performance ✓ Major branches in the classical approaches to management are illustrated ✓ 1911 book by Frederick Taylor ThePrinciples of Scientific Management ➢ Identify basic steps and motions of jobs and determine the most efficient ways of doing them ➢ Four principles of scientific management: o Develop a science for each job o Hire workers with the right abilities o Train and motivate workers o Support workers by planning and assisting their work according to science ➢ Still in use today (example is UPS calibrated productivity standards). See “Tips to Remember”. •
Weber’s bureaucratic organization is supposed to be efficient and fair ✓ Late-19th century German intellectual insights have made a significant impact on management and sociology of organizations ➢ Bureaucracy type of organization could be highly efficient and very fair ➢ Relies on logic, order, and legitimate authority ➢ Government agencies or large colleges may be examples
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➢ Table 2.1 lists characteristics of an ideal bureaucracy •
Fayol’s Administrative principles describe managerial duties and practices ✓ Henri Fayol published Administration Industrielle et Générale, outlining his views on proper management of organizations. ✓ Fayol’s five “rules” or “duties” closely resemble the four functions used in management today: Foresight, Organization, Command, Coordination and Control. ✓ Scalar chain principle: the chain of command and communication is clear and unbroken from the bottom (line workers) to the top (top managers) of the organization. ✓ Unity of command principle: workers should only have one boss.
2.1 Questions for discussion suggested answers 1) Taylor focused on individual tasks and efficiency, assigning very narrow and repetitive jobs for speed. Weber, meanwhile, focused more on the overall organizational approach, rewards and rules. 2) Weber’s concepts still have value but perhaps not in isolation as a sole management philosophy. Every one of his tenets is used today by most companies, with the exception of such a clear division of labor-as companies have learned that flexibility and job enrichment are more satisfying and can improve performance. 3) The risk is that executives may have a narrow or short-sighted view that is out of touch with employee’s behaviors and motivations. 2.2 What Are the Contributions of the Behavioral Management Approaches? • Note: See Figure 2.1 “Foundations of the Behavioral or Human Resource Approaches” •
Follett viewed organizations as communities of cooperative action ✓ Mary Parker Follett believed that a groups or a sense of community were important aspects of organizations. ➢ Managers should foster cooperation with workers without domination ➢ Follett suggested that employee ownership would create feelings of collective responsibility ➢ Emphasis was placed on making profits while considering the public good, a predecessor of corporate social responsibility.
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The Hawthorne studies focused attention on the human side of organizations ✓ Elton Mayo of Harvard University commenced a study in 1924 at the Western Electric Company to determine how economic incentives and physical conditions of the workplace affected the output of workers ➢ No direct relationship was found ➢ Instead, workers responded to increased attention by their managers ➢ Hawthorne effect – the tendency to live up to expectations; a person’s performance will be affected by the way they are treated by their managers
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➢ Groups can have a strong negative, as well as positive, influence on the behavior of their members •
Maslow described a hierarchy of human needs with self-actualization at the top ✓ Human need is a physical or psychological deficiency that a person feels compelled to satisfy ✓ Maslow described five levels of human needs that affect behavior (see Figure 2.2) ✓ Progression principle - a need at any level becomes activated only after the next-lowerlevel need is satisfied ✓ Deficit principle – a satisfied need doesn’t motivate behavior; people act to satisfy needs for which a satisfaction “deficit” exists ✓ Only at the highest level, self actualization, do both the deficit and progression principles cease to exist
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Mc Gregor believed managerial assumptions create self-fulfilling prophesies ✓ Douglas McGregor wrote the classic book The Human Side of Enterprise ✓ Theory X – set of negative assumptions about workers; they dislike work, lack ambition, resist change, and prefer to follow rather than lead ✓ Theory Y – set of positive assumptions about workers; they like work, are capable of self direction and control, responsible and creative ✓ Theory X managers likely to be “command and control” managers ✓ Theory Y managers likely to be “participative” managers ✓ Self fulfilling prophecy –workers respond to the way they are treated
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Argyris suggests that workers treated as adults will be more productive ✓ Chris Argyris wrote the book Personality and Organization ✓ Many organizations treat workers like children, which is counterproductive ✓ Networks create the opportunity through which many agenda items an be fulfilled ✓ Most managers maintain extensive networks not only with their own organization, but also with customers, suppliers, and community representatives
2.2 Questions for Discussion suggested answers 1) Hawthorne’s work shifted the focus from a scientific perspective to a more humanistic view. Employees were no longer viewed simply as “machines” or a part of the assembly line, but as humans whom could be affected by motivation, reward systems, and attention. 2) An effective manager needs to understand that each employee has unique needs and that one blanket approach will not suffice for all employees. Knowing each employee’s needs enables managers to tailor their development, rewards, and management to each person for higher performance. 3) Fundamentally, Argyris’ theory says to treat people like adults-with respect, trust and genuine caring. This is also what Theory Y in McGregor’s theory effectively would suggest.
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2.3 What are the foundations of the modern management thinking? •
Managers use quantitative analysis and tools to solve complex problems ✓ Analytics is the analysis of data to solve problems and make sound decisions ✓ Management science and operations research are used interchangeably to describe mathematical techniques used for management problem solving and planning. ✓ Gantt charts illustrate the interrelationships between complex tasks on a large project such as developing a shopping center or new building on a college campus. The margin feature on page 46 illustrates a Gantt chart for a building project such as a home. ✓ Operations management is the study of how to improve operations to deliver goods and services with the most efficient and effective use of resources.
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Organizations are open systems that interact with their environments ✓ Open systems obtain resources from the external environment; perform work activities to transform resources into goods or services for the external environment (Figure 2.3). ✓ Customer-driven organizations focus goals and energy on satisfying needs of customers and clients. ✓ Subsystems or smaller components include activities that individually and collectively support the work of the larger system. Figure 2.4 illustrates the relationship. ✓ Examples of subsystems are purchasing, accounting, sales, etc.
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Contingency thinking recognizes there is no one best way to manage ✓ Contingency thinking - belief that the way one manages depends on organizational complexities and demands of situations
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Quality management focuses attention on continuous improvement ✓ W. Edwards Deming assisted Japanese industry in the 1950s with quality control techniques that included: tally defects, analyze and trace them to the source, make corrections and keep a record of what happened afterward, using statistics. ✓ Total Quality Management or TQM grew out of Deming’s work. TQM links strategic objectives and applies them to all aspects of an organization’s activities. ✓ Continuous Improvement is the goal of always looking for new ways to improve performance.
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Evidence-based management seeks hard facts about what really works ✓ Evidence-based management is the process of using data from a large number of organizations to determine facts about effective management practices that can be validated by research. ✓ Decision makers are encouraged to challenge conventional wisdom regarding “what works” (example: merit pay encourages better performance) and encourage others to do the same. Decisions should be made with clear evidence that the solution or practice will achieve the desired result. ✓ High-performance organization achieves excellence in a work environment that provides a high "quality of work life."
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✓ Evidence-based management makes good decisions by examining what works and making sure data used is relevant and sound. 2.3 Questions for discussion suggested answers 1) Municipal governments and colleges are often organized and also function as Open Systems and Subsystems. For example, the zoning department and tax assessment departments are separate departments (or divisions in larger cities) yet both are somewhat related to property matters as the larger “system” and both are subsystems of the entire city structure. Colleges, similarly, have departments such as Financial Aid, Cashier’s Office, and Registrar, all which have some role in handling Finances in most colleges. In that case, each is a “subsystem” while Finance would be a “system.” The Department of Business or English would be another example of separate “subsystems” within the educational/teaching “system” of the college or university. 2) An effective manager should have a contingency plan for such areas as weather-related or crisis-related matters such as plant closings to ensure timely resumption (and security and access for such areas as Information Systems) continuity of operations with minor or no interruptions of customer service. Tornado drills and/or fire drills are routine drills performed in “normal” times but are also examples of necessary and important employee safety contingency plans. Finally, having a sound risk management and insurance program is an integral part of any company’s management today. 3) Managers who use their own experience need to make sure their perspective on the previous experience is accurate before using it to make decisions regarding future events. For example, "fundamental attribution error" is the tendency to over emphasize internal controllable factors and under emphasize external and uncontrollable factors when reviewing the mistakes of others, yet doing just the opposite when reviewing our own mistakes. Good two-way communication with colleagues and others would help make sure the perspective is accurate.
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Teaching Notes In this section, ideas, exercises, and assignments are provided to assist you in integrating the concepts in Exploring Management for your students, especially the special features of the text. Management Live Mr. Holland's Opus profiles a gifted music teacher that learns to adapt the way he teaches music to the unique learning styles of his students. The lessons of the movie make good examples of several concepts in chapter 2 including contingency thinking in Takeaway 2.3 and learning style as students review the Explore Yourself feature and take the Managerial Assumptions selfassessment in the Skill-Building Portfolio. Role Models Carol Barz is described as a "fair but tough" manager. This feature can be used to launch discussions on contingency management and how different management styles may be necessary in a technology firm as opposed to another management environment such as a retail or manufacturing organization. To further probe the issue of contingency management, the effectiveness of a woman's management style as she takes over from a male manager would be a relevant application of the feature too. Ethics Check The ethical issues involved in the use of "no-compete" agreements is explored in this feature. No-compete agreements are common in the largest of organizations or a business as small as your local hair salon. Students may have personal experience to share about how they have seen no-compete agreements used in the workplace. Facts to Consider Statistics on how Baby Boomers, GenX and Millenials rate their managers seem to indicate the older generations don't rate the performance of their managers as highly as younger workers. Thought questions probe possible reasons that younger workers seem to view their managers more positively. This makes a good illustration for understanding contingency management concepts in the chapter. Manager's Library Author Malcolm Gladwell's books (The Tipping Point, Blink, Outliers) all provide interesting reading and provocative thinking that are very applicable to the way we manage people and resources. This Manager's Library feature introduces concepts from Outliers that try to explain factors that lead some to greatness such as IQ, practice, positive attitude, assertiveness and social savvy. Gladwell concludes that success is something that most of us can achieve under the right circumstances. Reflect and React discussion questions probe students' thoughts on their views of success in life and education. Explore Yourself Learning style goes beyond how we prefer to learn, receive, process and recall new information, although students will explore their personal preferences as they complete the Managerial
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Assumptions in the Skill-Building Portfolio as suggested in the Explore Yourself feature. As students determine and reveal their preferences, an interesting class discussion on how this influences the results of their management style, contingency management and which of the management philosophies in chapter two they most closely resemble. The assessment tool is intended to help students reflect on their own management style or current orientation. Ask students to maintain their scores and reflections throughout the course and write a summary of the areas they want to strengthen, or change, as they develop as managers or employees. This may be a comprehensive special project near the end of the quarter/semester. Case The case for this Chapter is “Zara International – Fashion at the Speed of Light.” DISCUSSION QUESTIONS 1. In what ways are elements of the classical management approaches evident at Zara International? Classical management finds the best way to produce a product or service so both workers and employers benefit from increased efficiencies. Zara seems to have embraced the efficiencies found in Weber's bureaucratic form of organizations. The rapid response to fashion trends require efficient design, production, distribution and inventory management. All departments must clearly know their purpose with a clear division of labor, levels of authority are clearly defined, rules and procedures facilitate the fast turnaround necessary to get fresh fashions in the store within days of design. Fayol's administrative principles are in evidence in Zara's clear foresight or plan of action, organization allows fast mobilization of resources, command is evident in the vision and leadership of founder and Chairman, Amancio Ortega Gaona, over the 80,000 workers, coordination requires close communication and efficient operations, and control is seen in their ambitious goals for growth. 2. How do you see operations management in practice at Zara? Operations management involves production of goods and services and how they can be improved. Zara seems to have perfected the process of spotting fashion trends and bringing them to their retail stores in record time. They accomplish this by utilizing justin-time inventory management and production practices along with distribution centers that processes orders within 24 hours.. 3. How can systems concepts and the notion of contingency thinking explain the success of some Zara’s distinctive practices? Systems interact with their environments to obtain resources that are transformed into outputs for consumers. Zara uses fabrics, labor and the latest fashion trends from other designers to create high fashion at an affordable price. The subsystems at Zara include purchasing and inventory, distribution, information and technology, operations management and accounting and financial systems to transform the ideas and raw materials into fashionable garments. Zara chooses to keep most of these subsystems within the company rather than outsource them to outside contractors. Zara's organizational network of subsystems is designed to be responsive to new fashion trends and consumer buying patterns. They seem to be specifically designed to respond quickly to change. Contingency thinking is the process of adapting management to the
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unique circumstances of the organization. Management at Zara seems to have responded to the necessity for fast response to fashion trends and need for cost efficiencies to achieve their goals of low cost high fashion. In fact, their ability to respond quickly seems to be a strong competitive advantage. 4. FURTHER RESEARCH—Gather the latest information on competitive trends in the apparel industry, and the latest actions and innovations of Zara. Is the firm continuing to do well? Is it adapting in ways needed to stay abreast of both its major competition and the pressures of a changing global economy? Is Inditex still providing worthy management benchmarks for other firms to follow? Students should be encouraged to research Inditex as well as Zara. Caution students to conduct their online research with objective media sources. The college library may offer free searches such as EBSCO Host that access a large number of periodicals including industry publications that may provide thorough and accurate comparisons as well as current industry trends. Suggested Team Exercise for Chapter 2 Bureaucracy Exercise Chapter 2 describes Max Weber’s characteristics of an ideal bureaucracy. Break the class into teams of three or four and ask each group to collectively discuss these five characteristics. Ask them to list organizations that, in their view, have many (or all) of these characteristics. What organizations, if any, seem to be best suited for such a style/type of organization? Students then should discuss the benefits and disadvantages of the organizations they have discussed. Some examples would be state or federal governmental agencies (license tags, passports, etc.), state colleges, large banks, the military etc. Allow teams about 45 minutes for this exercise. The teams will then report to the class the summaries of their conclusions.
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CHAPTER 3 Ethics and Ethical Behavior Character doesn’t stay at home when we go to work Chapter Objectives Chapter Three provides a thorough review of ethics in contemporary organizations. This includes a definition of ethics; how ethics can be perceived differently in varying cultures; guidelines when one is confronted with an ethical dilemma; and the role of managers. The objectives of Chapter 3 may be summarized as: 1. 2. 3. 4. 5. 6. 7. 8.
To define ethics and ethical behavior. To explain how ethics varies across cultures and among moral reasoning approaches. To define ethical dilemmas and how personal and contextual factors affect ethical conduct. To explain the role of training and whistleblowers in organizations. To review the that role managers and codes of ethics have in organizations. To explain the concept of social responsibility by providing examples. To contrast the classical and socioeconomic views of corporate social responsibility. To define corporate governance.
Chapter Outline 3.1 How Do Ethics and Ethical Behavior Play Out in the Workplace? •
Ethical behavior can always be described as what is “good” or “right.” ✓ Ethics is a code of moral principles or behavior that sets standards of what is right and wrong regardless of whether the behavior is legal. ✓ Ethical Behavior describes the actions we accept as good and right.
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Ethical behavior is values driven. ✓ Values are the underlying beliefs and judgments regarding what is right or desirable and that influence individual attitudes and behaviors ➢ Terminal values focus on desired ends ➢ Instrumental values concern the means for accomplishing these ends ➢ These values tend to be enduring for an individual but may vary considerably from one person to the next
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What is considered ethical varies among moral reasoning approaches. ✓ Figure 3.1 summarizes the four alternative views ✓ Utilitarian view is that ethical behavior should deliver the greatest good to the greatest number of people
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➢ An example in the recent recession is the companies that cut jobs and closed divisions in order to help the organization survive for remaining employees and their communities. GM, Ford and Chrysler are good examples. ✓ Individualism view is that ethical behavior should focus on the long-term advancement of self-interests ➢ Unethical behavior may pay off in the short-term, but in the long-term it catches up and the consequences can be devastating. When Toyota's decision to move slowly on acceleration issues came to light, the company's sales and reputation were damaged. ✓ Justice view is that ethical behavior is when people are treated impartially and fairly, according to legal rules and standards ➢ Procedural justice involves the fair administration of policies and rules ➢ Distributive justice involves the allocation of outcomes without regard to individual characteristics such as gender, race, ethnicity or age ➢ Interactional justice focuses on the treatment of others with dignity and respect ➢ Commutative justice involves all parties to a transaction entering it freely with all relevant and available information. Nothing held back. ✓ Moral-rights view is that ethical behavior should respect and protect the fundamental rights of people ➢ The Universal Declaration of Human Rights of the United Nations is excerpted in the margin. ➢ Students may have examples of people who are deprived of basic human rights such as child labor, repression of free speech or practice of religion in China or Myanmar. •
What is considered ethical can vary across cultures. ✓ Cultural relativism is the belief that cultural context alone determines ethical behavior ✓ Figure 3.2 illustrates the concept of Cultural Relativism ➢ Based on work of scholar and ethicist Thomas Donaldson ✓ Moral absolutism is the belief that certain values and practices are universally good and bad ➢ Ethical imperialism is externally imposing one’s own ethical standards on others
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Ethical dilemmas arise as tests of personal ethics and values. ✓ Ethical dilemma is a situation requiring a decision about a course of action that, although offering potential benefits, may be considered unethical ➢ May be no clear consensus on what is “right” or “wrong” ➢ See Table 3.1 inset ➢ Harvard Business Review survey said many dilemmas arise out of conflicts with superiors, customers, and subordinates ➢ Unrealistically high performance goals high on the list of factors
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People have tendencies to rationalize unethical behaviors. ✓ It’s not really illegal
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✓ It’s in everyone’s best interests ✓ No one will ever know about it ✓ The organization will stand behind me 3.1 Questions for discussion suggested answers 1) Students may debate the merits of all approaches. Ask them to give examples of where each may be appropriate such as “the justice view is the view that seems most fitting for a CEO with a diverse workforce”. The instructor may also consider assigning different approaches to small groups of students and ask them to come up with an example that would advocate one approach as the best for the situation. 2) Cultural relativism in all likelihood will cause problems, since, as the name implies, there is no “clear” boundary of what is right and wrong. Given a profit motivation, the temptation would be great to make decisions that err on the wrong side of ethics. 3) Ethical dilemmas can be opportunities. This is particularly true if it is a learning opportunity for the organization. An example might be when one company learns of a competitor’s “secret” through a supplier etc. By choosing not to exploit such a secret and use it, the manager or decision maker is sending a very strong message and setting a tone for the entire organization. 3.2 How Can We Maintain High Standards of Ethical Conduct? •
Personal character and moral development influence ethical decision making. ✓ Ethical frameworks are well-thought-out personal rules and strategies for ethical decision-making ✓ Organization and action contexts influence workplace ethics ✓ Conditions in the external environment also influence organizations and their members (includes laws and regulations, and social norms and values) ✓ Lawrence Kohlberg describes three levels of moral development that individuals progress through (see Figure 3.3). ➢ Preconventional or Self-Centered Behavior ➢ Conventional or Social-Centered Behavior ➢ Postconventional or Principle-Centered Behavior
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Training in ethical decision making may improve ethical conduct. ✓ Ethics training helps employees understand and best deal with ethical aspects of decision making ✓ See Tips to Remember in inset box ✓ “Spotlight questions” ➢ How would I feel if my family found out about my decision? ➢ How would I feel if my decision is reported in the local newspaper or posted on the internet ➢ What would the person I know who has the strongest character and best ethical judgment say about my decision?
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Protection of whistleblowers can encourage ethical conduct. ✓ Whistleblowers are people who expose organizational misdeeds in order to preserve ethical standards and protect against wasteful, harmful, or illegal acts ✓ The very nature of organizations as power structures creates potential barriers to whistleblowing ➢ Strict chain of command ➢ Strong work group identities ➢ Ambiguous priorities
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Managers as positive role models may inspire ethical conduct. ✓ The way top mangers approach ethics issues can have a powerful effect on what happens in their organizations ➢ Policies that set high ethics standards ➢ Set a personal example of the behavior you expect, “Walk the talk”. ➢ Margin graphic illustrates three ways managers may choose to behave: • Immoral manager • Amoral manager • Moral manager
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Formal codes of ethics set standards for ethical conduct. ✓ Codes of ethics formally state the values and ethical principles that members are expected to display ➢ Some require employees to read and agree as a condition of employment ➢ Can be very specific guidelines on how to behave in situations ➢ Increasingly common
3.2 Questions for discussion suggested answers 1) It is not only right for a company to require ethics training; it is the responsible action that every company should take. It also reduces a company’s exposure even if an employee does commit an ethics violation. For instance, it increases the defense that the company is not a climate for sexual harassment if training can be demonstrated to have occurred. Most importantly, it explicitly sets out the ethics rules, and lets employees know that they are important enough to pay workers to attend. 2) Whistleblowers are entitled to complete protection and are protected by law and policies. They are taking a high risk for actions that may jeopardize their careers or may even threaten their personal safety. The benefits to society for avoidance of situations such as Enron far outweigh any undesired or unintended costs of added federal or state protective laws and regulations. 3) Yes - there is perhaps no better way to reinforce the importance of ethics than rewarding (or penalizing) managers for their ethical conduct. 3.3 What Should We Know About the Social Responsibilities of Organizations?
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Social responsibility is an organization’s obligation to best serve society. ✓ Corporate Social Responsibility (CSR) advocates organizational behavior that serves its own mission and interests by acting in a way that serves the best interests of all stakeholders, including society as a whole. ✓ Triple bottom line is a concept that evaluates organizational performance on financial, social and environmental criteria rather than just financial. ✓ Three Ps of Organizational Performance ➢ Profit ➢ People ➢ Planet
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Scholars argue cases for and against social responsibility. ✓ Classical view of CSR – “The business of business is business” meaning that the goal of business is to produce profits for the owners or stockholders. Milton Friedman advocated, along with many others, that society’s best interests are served by managers who strive for profits without expanding the business mission to include social causes. ✓ Socioeconomic view of CSR – Business must focus on all stakeholders including society at large. This may lead to improved financial performance as a positive perception of the business leads to a “virtuous circle”. Sustainability is an important social responsibility goal ✓ Sustainability concerns doing business in such a way that respects future generations and their right to the world's natural resources. ✓ Sustainable business means that organizations operate so that they meet the needs of the consumers while protecting the natural environment. ✓ Sustainable development uses natural resources in such a way that today's needs are met, yet they are preserved for future generations. ✓ Environmental Capital, Natural Capital is the available natural resources ➢ Land, water, air, minerals ✓ ISO 14001 Global quality standard for organizations that have objectives for sustainable business practices. ✓ Human Sustainability socially responsible organizations must consider the effect of management practices on employees.
✓ Social business and social entrepreneurship point the way in social responsibility. ✓ Social business has as its foundation the goal of addressing a social problem, yet may still return a profit. The chapter-opening example of the Grameen Bank founded by Nobel Prize winner Mohammad Yunus is a good example. ✓ Social entrepreneurship seeks to solve social problems through entrepreneurship 3.3 Questions for discussion suggested answers 1. The social audit would include criteria to assess the organization’s performance in terms of the impact a wide range of stakeholder groups. Criteria would include Economic Responsibility, Legal Responsibility, Ethical Responsibility and Discretionary
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Responsibility. This would be an interesting small group activity, requiring all groups to audit different organizations. 2. Responses will differ along the same arguments as the classical view of CSR and socioeconomic view of CSR. Students may have read research that supports the view that socially responsible companies are more profitable over time than those that hold a more classical view. Others may have research that supports the classical view. Ask them to compare with examples. 3. Recent corporate governance failures of AIG and other financial institutions may tip student opinion to favor more government involvement. The reporting requirements and regulations added by the Sarbanes – Oxley Act do not appear to have prevented behavior students perceive to be unethical. The question needs to be asked: “can any amount of regulation prevent unethical behavior of amoral or immoral behavior of managers such as Bernard Madoff?”
Teaching Notes In this section, ideas, exercises, and assignments are provided to assist you in integrating the concepts in Exploring Management for your students, especially the special features of the text. Management Live The Blind Side contains a number of examples where the characters learned about ethical behavior and doing the right thing. Many situations in the movie include characters taking big risks and even facing danger as they try to act with integrity. Students who have seen the movie may be able to cite scenes that show that ethical behavior isn't easy. The Spotlight questions in this chapter are particularly relevant to the movie when one realizes that it is a true story. Additional discussion questions: How far would you go to act ethically? How about your students? Do they have examples where they or others have acted ethically when it was difficult and the stakes were high? Role Models Gary Hirshberg has built a company that is the largest maker of organic yoghurt in the world. Like many other companies that hold corporate social responsibility as a core value, his company focuses on the Triple Bottom Line as a measure of success rather than a purely financial bottom line. What's the Lesson Here? Questions probe students' thoughts on how focusing on people and planet in addition to profit can lead to success. Ethics Check The Ethics Check feature explores "cradle to grave" manufacturing, a sustainability concept that involves for planning on how a manufactured product will be disposed of or recycled at the end of its useful life without creating unnecessary waste or pollution. In addition to the You Decide questions that examines sustainable manufacturing and product disposal, considering asking students if sustainability and "cradle to grave" concepts can be
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applied to higher education. How can they re-imagine college and the goods used in education so that there is minimal waste in the process. Selling used textbooks and recycling waste paper is a start. Food service and out-of-date electronics may push their creativity a little harder. Facts to Consider The statistics in this Facts to Consider feature shed light on factors that influence whether employees choose to act ethically or not. Manager behavior, work-life balance, job satisfaction, and a lack of personal integrity are some of the factors examined. Manager's Library Muhammad Yunus is the Nobel Prize winning founder of Grameen Bank, a lender that makes micro-loans that helps people work their way out of poverty. In his 2007 book Creating a World Without Poverty, Yunus advocates a business model that benefits those who suffer from hunger and poverty. He contends that current business models may actually perpetuate those societal problems rather than reduce them. Reflect and React questions probe students' views on the responsibility of business to "give back" to society. Explore Yourself This feature offers students a chance to determine their personal values system by taking the Terminal Values Assessment in the Skill-Building Portfolio. The assessment tool is intended to help students reflect on their values. Ask students to maintain their scores and reflections throughout the course and write a summary of the areas they want to strengthen, or change, as they develop as managers or employees. This may be a comprehensive special project near the end of the quarter/semester. Case The case for this chapter is Patagonia: Leading a Green Revolution. Instructors may consider suggesting students visit Patagonia's website at www.patagonia.com for further preparation as they prepare case answers. 1. While Patagonia has a history of putting sustainability ahead of profits, it cannot do so at the expense of operating capital. Based on what you learned about Patagonia’s ideals, how do you think the company determines what possible ventures will be both practical and environmentally friendly. Choinard has said that when they make decisions that are good for the environment, it turns out profitable every time. For example, the decision to use only organic cotton in their products wasn’t profitable at first, but when other manufacturers and retailers followed their lead, more growers went organic, supply increased and prices went down to the point where it is now used in garments made for Walmart. It seems that choices are made with the environment in mind first with the assumption that profitability will follow. It’s conceivable that if their practices were to ever face criticism for not being environmentally sound, there could be a consumer backlash. 2. What could Patagonia do today to confirm that Yvon Chouinard’s ideals become a permanent part of the company’s culture after he leaves the company?
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Choinard is clearly the heart of the culture, much as Herb Kelleher is at Southwest Airlines and Steve Jobs is at Apple. None will live forever, so they need to establish core values that everyone believes in and build a culture around them that is reinforced and taught to new employees. Elements of culture is covered more thoroughly in chapter 9. 3. Imagine you were asked by Yvon Chouinard to propose a new sustainability initiative for Patagonia. What would you choose, and why? Students can let their imaginations run wild on this one. Suggestions may include sponsoring sustainable food products, sustainable eco-friendly travel and adventure tours that include a stop to help underprivileged people along the way, extending their clothing recycling to include other fibers and consulting services that help other businesses or even communities mimic their sustainable practices 4. FURTHER RESEARCH Business decisions can often be a compromise between ethics and profitability, even for a company with the idealism of Patagonia. Research Patagonia’s and see if you can find a business decision that appeared to put profits ahead of the company’s publicly stated environmental goals. Explain why you think that company made this decision and the competing factors you believe were involved. Caution students to conduct their online research with objective media sources. The college library may offer free searches such as EBSCO Host that access a large number of periodicals including industry publications that may provide thorough and accurate comparisons as well as current industry trends. Suggested Team Exercises for Chapter 3 Ethics Exercise Break the class into teams of three or four and ask each group to take a survey within their group, summarize their findings and discuss the implications. Note: The questions listed below should be phrased if they know “anyone” who has ever done the behavior described, and not to disclose whether they themselves have. This will allow for more open discussion while providing personal privacy. Here are ten questions (you may write these on the board, post on a message board, or use handout surveys) to discuss and summarize results (ask them to provide a specific tally count for each question) within each group: “Have you ever known anyone (this may include yourself) who … • • • • • • •
Worked in a restaurant or bar and did not report all tips earned to the IRS? Paid money to a babysitter for child care but did not report it to the IRS? Painted, built decks, or did other types of contracting work, and did not report all income to the IRS? Cheated on an exam? Took supplies such as copy paper, pens, etc. from work? Used the telephone at work for long-distance personal calls? Called in sick when not sick for a “free” day off?
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• • •
Lied on an expense report (exaggerated actual meal cost etc.)? Stole from a warehouse that they worked in? Has witnessed an ethical issue by another at work or school and did not report it to the teacher, authorities or the manager etc.?
Students then should discuss these questions and discuss how “serious “each is perceived to be. Are some very accepted in our society? If so, why is that? Is it a big “leap” from these behaviors to CEO “scandals “such as the Enron fraud case? As individuals get promoted, does ethical behavior improve, stay the same, or worsen? Allow teams about 20-30 minutes for this exercise. The teams will then report to the class the summaries of their conclusions. Take the students tally and summarize the total tally by questions. The results will provoke further questions and discussion.
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CHAPTER 4 Managers as Decision Makers There Is No Substitute for a Good Decision Chapter Objectives Chapter Four provides a review of problem solving and decision-making. It includes a review of decision making and problem solving styles, methods, and conditions. The decision-making process steps are outlined. Finally, decision making by groups, using heuristics, and integrating ethics are reviewed. The objectives of Chapter 4 may be summarized as: 1. 2. 3. 4. 5. 6. 7. 8.
To review how managers deal with problems and their varying styles To explore the conditions under which decisions are made To classify types of decisions as programmed or non-programmed To identify the five steps in the decision-making process To explain heuristics and other biases in decision making To explore group decision-making To explain and examine the impact of making decisions within a crisis context To review the ethical dimensions of decisions
Chapter Outline 4.1 How do Managers Use Information to Solve Problems? •
Managers deal with problems posing threats and offering opportunities ✓ Problem-solving - the process of identifying a discrepancy between an actual and desired state of affairs and then taking action to resolve it ✓ Knowledge workers - definition of "persons whose value to organizations rests with their intellectual, not physical, capabilities" is very appropriate for managers ✓ Information competency - the ability to locate, retrieve, evaluate, organize, and analyze information to make decisions that solve problems ✓ Performance threat - an actual or potential performance deficiency ➢ Examples include Hurricane Katrina, sub-prime mortgage crisis, General Motors and Chrysler bankruptcies ✓ Performance opportunity - a situation that offers the possibility of a better future
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Managers can be problem avoiders, problem solvers, or problem seekers ✓ Problem avoiders - persons who ignore information that would signal the presence of a performance threat or opportunity ✓ Problem solvers - person who make decisions and try to solve problems when required; reactive
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✓ Problem seekers - persons who are always looking for problems to solve or opportunities to explore; information gatherers; proactive •
Managers make programmed and non-programmed decisions when solving problems ✓ Decision - a choice among possible alternative course of action ✓ Programmed decisions - can use preplanned solutions based on the lessons of past experience; best for structured problems, frequently are the subject of policies and procedures that promote continuity and uniformity in management decisions ✓ Non-programmed decisions - for unusual situations full of ambiguities and information deficiencies; novel solutions crafted to meet the unique demands ✓ Learning Activity - Students may be asked to determine whether Capt. Sullenberger's emergency landing in the Hudson River provides an example of a programmed or non-programmed decision
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Managers display systematic and intuitive thinking in problem-solving ✓ Systematic thinking - a person who approaches problems in a rational, step-by-step, and analytical fashion ✓ Intuitive thinking - a person who is more flexible and spontaneous than the systematic thinker; the person may also be quite creative
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Managers use different cognitive styles to process information for decision making ✓ Sensation Thinkers - impersonal and realistic in problem solving, prefer facts, certainty and control ✓ Intuitive Thinkers - idealistic and intellectual, comfortable with abstract and unstructured situations, impersonal manner and low attention to details ✓ Intuitive Feelers - take a broad and global view of issues, insightful, short on details, flexible with a high priority on relationships ✓ Sensation Feelers - analytical but place relationships as a high priority, realistic and factual, good communicators and sensitive to feelings and values of others ✓ Learning Activity - Students may take a few minutes to classify a manager or professor with whom they have worked into one of the categories. Students may discuss their reasoning in small or large groups.
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Managers make decisions under conditions of certainty, risk, and uncertainty ✓ Certain environment - an ideal situation where factual information exists for the possible alternative courses of action and their consequences (a student loan cost is an example; you know the interest rate, the time periods etc.) ✓ Risk environment - information and facts are incomplete ➢ Alternative courses of action can be assigned probabilities (chances of occurring) ✓ Uncertain environment - the most difficult condition; facts are few and information is poor ✓ See Figure 4.2.
4.1 Questions for discussion suggested answers
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1) A manager needs to be able to prioritize, including whether a problem is worth involvement or attention. For example, an employee who is having personal issues that may be affecting work may not merit attention unless such behavior continues for some time and is affecting performance. 2) Neither is innately “better” than the other; both systematic and intuitive workers have important roles in organizations. It is important, however, to match employee thinking patterns with job requirements. Intuitive workers may not perform well in such welldefined and structured jobs as, say, tax accounting. Systematic workers may perform poorly in jobs that require creativity. Customer Service positions would probably be best handled by a Sensation Feeler decision making style. 3) Yes, pilots in high-risk or critical situations such as Capt. Sullenberger have extensive training that allows them to face unique situations with a background of similar procedures for programmed situations. Fire, tornado and earthquake drills for schools are examples. 4.2
What Are The Steps in the Decision-Making Process?
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Step 1 is to identify and define the problem ✓ Common mistakes in identifying problems ➢ Identifying the problem too broadly ➢ Dealing with symptoms rather than problems ➢ Choosing the wrong problem ✓ Stage of information gathering, processing and deliberation ✓ Stage where goals are clarified to specify exactly what a decision should accomplish
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Step 2 is to generate and evaluate alternative courses of action ✓ Criteria for evaluating alternatives ➢ Cost benefit analysis - compares what an alternative will cost with its expected ➢ Timeliness - how long until we see results? ➢ Acceptability - will stakeholders accept the alternative? ➢ Ethical soundness - does it fit our ethical requirements
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Step 3 is to decide on a preferred course of action ✓ Classical and behavioral models of decision-making - see Figure 4.4 for a comparison. ✓ Classical decision model - views the manager as acting rationally and in a fully informed manner; he or she makes an optimizing decision (that gives the absolute best solution to the problem) ✓ Behavioral decision model - assumes that people act only in terms of their perceptions, which are frequently imperfect; he or she makes a satisficing decision by choosing the first solution that appears satisfactory to them
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Step 4 is to implement the decision ✓ Lack of participation error-when managers don’t include in the decision-making process those persons whose support is necessary for implementation
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Step 5 is to evaluate results ✓ This is a form of control ✓ Gathering data to measure performance results against initial goals; examining both positive and negative outcomes; may involve redoing steps in the decision-making process
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Ethical reasoning is important at all steps in decision making ✓ Conduct an "ethics double check" ✓ Ethical criteria ➢ utility - does the decision satisfy all stakeholders? ➢ rights - does the decision respect rights and duties of all? ➢ justice - does the decision administer justice? ➢ caring - is the decision consistent with responsibility to care? ✓ Spotlight questions ➢ How would I feel if my family found out about this decision? ➢ How would I feel if this decision was published in the local newspaper or posted on the Internet? ➢ What would the person I know who has the strongest character and best ethical judgment say about my decision?
4.2 Questions for discussion suggested answers 1) Yes, the steps are intended to be sequential, but if evaluation of results (step 5) is unsatisfactory, the process begins again with re-defining the problem (step 1). 2) Absolutely. Perceptions are frequently imperfect. Mangers may be certain that they understand the problem or stakeholders, but not have correct information. Some managers may “shoot from the hip” and make decisions too fast based on poor information or “instinct.” The consequences may be costly. Involving additional stakeholder groups may prevent a "lack of participation error" that would correct the faulty perception. 3) The ethics double-check depend upon the decision maker to have several basic concepts. A clear understanding of all relevant stakeholders, applicable rights and duties, justice and the ability to care are all necessary for the decision maker to make correct answers to the four ethical questions. The spotlight questions require the decision maker to feel a responsibility to a family or community that would make value judgments on the morality of the decision and its consequences. If a decision maker lacked the ability to understand these criteria or lacked a value system that would cause guilt or embarrassment, he or she could answer the questions incorrectly and make an unethical decision. This might particularly be true if the decision maker
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were in an unfamiliar country or culture and did not adequately understand the relevant rights or duties or did not have any expectation that family or a home community would find out about or understand the decision. The spotlight questions might also present a problem if the organization was large enough that the decision maker was confident that the decision would be attributed to the organization and no one would find out who was responsible.
4.3
What Are Some Current Issues in Managerial Decision Making?
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Personal factors help drive creativity in decision making ✓ Creativity -generation of a novel idea or unique approach that solves a problem ✓ Personal Creativity Drivers build creativity in the workplace ➢ task expertise - creativity is an expansion of an existing skill ➢ task motivation - drive to work hard to resolve a problem ➢ creativity skills - "right brain" thinking such as imagination, intuition, holistic processing and the ability to make random associations. ✓ Learning Activity: Students may do extended research by taking one of many online quizzes that assess tendencies to right or left brain thinking. Author Dan Pink explores the impact of right brain thinking and careers in the future in the book "A Whole New Mind". Students may read the book and report on Pink's findings or present one of the many online videos of Pink discussing the subject.
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Group decision-making has both advantages and disadvantages ✓ Advantages (Table 4.1) ➢ more information ➢ more alternatives ➢ increased understanding ➢ greater commitment ✓ Disadvantages ➢ conformity with social pressures ➢ domination by a few members ➢ time delays ✓ Learning Activity- Lost at Sea, an Online Interactive Learning Resource. After the activity, students may discuss how the advantages and disadvantages of group decision making influences their group choices.
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Judgmental heuristics and other biases may cause decision-making errors ✓ Availability heuristic - using easily available information to assess the situation without further research, although it may be incomplete, irrelevant or wrong ✓ Representativeness heuristic - assessing a situation based on a stereotype without regard for unique circumstances ✓ Anchoring and adjustment heuristic - adjusting a previous decision or action without regard for the correctness of the previous decision. ✓ Framing error - when mangers evaluate and resolve a problem in the context in which they perceive it
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✓ Confirmation error - decision maker only notices or accepts information that confirms the decision recently made ✓ Escalating commitment - tendency to increase effort and perhaps apply more resources to pursue a course of action that signals indicate is not working; an inability to call it quits ➢ how to avoid wasting resources on an escalating commitment to a bad decision: - set advance limits on resources - make up your own mind rather than follow others - ask why you are continuing the course of action - consider saving the resources or costs for another purpose •
Managers must be prepared for crisis decision-making ✓ Crisis - an unexpected problem that can lead to disaster if not handled quickly and appropriately ✓ Manager mistakes - a common error in a crisis is for managers to become isolated and limit the sources of information when in fact they should do exactly the opposite. This is a time when heuristics are attractive and can lead to poor judgment. Seek many sources of information before taking action. ✓ Crisis Management Programs train managers in how to handle crisis situations ✓ Tips to Remember list rules for managing a crisis
4.3 Questions for discussion answers 1) If the company for which you work uses an “anchor and adjustment” system, there are a couple ways to mitigate the possible negative consequences: • Perform at a high level and the “adjustment” portion should, in most organizations, grow at a very steep rate. Over time, you may outperform the market. • Gather convincing evidence that the compensation which you receive is below that which you could earn at comparable positions in other companies. This method requires god interpersonal skills, but managers do not want to lose great employees. If your performance is at a high level, you will have a concerned listener in your manager. Arm him or her with “ammunition” regarding competitive compensation. 2) Here are several real-world examples of escalating commitment: • You win several hundred dollars gambling in Las Vegas, a total of $800 “net.” Then you begin to lose and eventually are down by $200 below the initial sum you brought with you, say $500. Rather than walk out the door with the $300 you have left, you continue to play to “get back to” the initial $500. • One world leader presents objective evidence that indicates that a war is not being waged successfully. In discussing this, the other party notes that “we have already invested many lives and millions of dollars already” and we cannot exit because of those factors. • You invest $1000 in the stock market by buying one company’s shares. After the stock price increases in value several months in a row, it drops substantially and the news is bad (liability issues, ethics, losses etc.) You decide to “sell” but want to wait until you get back to what you initially invested, $1000 rather than “cut your losses.”
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3) A crisis can be turned into an opportunity in a number of ways. • The way a manager handles a crisis can be an opportunity to demonstrate the integrity of the company. For example, Johnson & Johnson handled a crisis extremely well when they were a victim of product tampering in 1982. Extra Strength Tylenol was contaminated with cyanide, killing seven people in the Chicago area. Johnson & Johnson acted swiftly to remove the product from the market and took effective steps to warn consumers about the danger. Their swift response was seen as responsible and ethical. Within a year, Tylenol had regained much of its pre-crisis market share and Johnson & Johnson was seen as an example of corporate responsibility. • US Airways saw a similar effect following the 2009 ditching of a disabled aircraft in the Hudson River. The actions of Captain Sullenberger and his crew were seen as heroic, and US Airways received praise. • Another way a crisis can be turned into an opportunity is to evaluate all actions after the crisis has passed to turn it into a learning experience for future experience. US Airways and other airlines have used the lessons learned from the experience to determine ways to reduce the bird strikes that were responsible for damaging the aircraft and make water landings safer and survivable.
Teaching Notes In this section, ideas, exercises, and assignments are provided to assist you in integrating the concepts in Exploring Management for your students, especially the special features of the text. Management Live Just when you think you have everything covered and it's safe to leave the office, you get that phone call from your frantic assistant about everything that's going wrong and they need your help RIGHT NOW! You and a few of your students will be able to identify with this common scenario which is similar to the one described in the movie Red Eye in the Management Live feature for chapter 4. This situation is a good springboard for a lively student discussion of all of the things that have gone wrong in their work experience. A list of these experiences can be classified as Programmed, Non-Programmed and Crisis situations as discussion of decision principles in chapter 4 continues. Role Models In the Role Models feature “Indra Nooyi Brings Style and a Strategic Vision to Pepsi.” Pepsico CEO Indra Nooyi is profiled as having a unique business sense, strong work ethic along with "heart and a sense of humor". • Nooyi is only the 12th woman to head a Fortune 500 firm. Ask students to discuss whether men and women have different approaches to decision making. • Assign students a research project investigate the decisions by Pepsico to sell Taco Bell, Pizza Hut and KFC; the merger with Quaker Oats and purchase of Tropicana. Do these decisions seem to have been examples of management as a problem avoider, problem solver or problem seeker?
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Which situation would best describe the environment under which the decisions were made, certainty, risk or uncertainty? Evaluate Nooyi's comment about assuming others have positive intent, ending with "Maybe they are saying something to me that I am not hearing?" What can students learn about her decision-making style from that comment?
Ethics Check This true story of life and death on Mt. Everest poses some interesting ethical questions. The questions in the "You Decide" section probe student thoughts about their views of ethics that may not be of life-or-death proportions, but still define their character. Facts to Consider The Facts to Consider inset in Chapter 4 provides information on green-house gas emissions as a concern of business. The carbon footprint of several common items are listed. These questions may be used in class or online for discussion in addition to the questions listed in the "Your Thoughts" section: • How would the different views of moral reasoning approaches (utilitarian, individualism, justice and moral rights) in Chapter 3 view the responsibility of business to control greenhouse gasses? • Using the steps in the decision-making process listed in Chapter 4, how would students define the problem? What are some problems in defining the problem? Extended discussion may continue through all 5 steps. • Track your personal carbon footprint for a week. Do you view the problem any differently? Manager's Library Has the internet changed our brains? It's certainly changed the way we teach. Asking students if the internet has changed brains might be a problem since few may remember a world without the internet that has brought the world to their fingertips with the click of a hyperlink. The question for mangers is how does the availability of the internet on our desks and on our phones or other wireless devices change the way we work, gather information, manage others and get distracted. Explore Yourself Students are encouraged to take the Cognitive Style self assessment in the Skill Building Portfolio to gain insight into the way they gather and process and information, a key competency in developing decision-making skills. Case The case for this Chapter is “Amazon.com - One e-store Rules Them All.” Students have probably visited Amazon.com as a customer. Encourage them to visit the website again from the perspective of evaluating the decision making process of the company. 1. In what ways does Bezos's decision to develop and deliver the Kindle show systematic and intuitive thinking?
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Systematic thinking approaches problems in a rational, step-by-step, analytical way. Problems are broken down into smaller components. Students may suggest that Amazon breaks down potential markets in the same way. Music and video have been digital download products for some time, digital books are a logical extension of the technology. Intuitive thinking is flexible, spontaneous and creative. Bezos is quoted in the text as saying “you have to rely on experienced executives who’ve honed their instincts and are able to make good judgments". This seems to indicate his preference for creative thinking. 2. Would you describe Amazon's position in the digital entertainment market as certain, risky or uncertain? Why? Students will have a wide variety of views, depending on how they view the digital entertainment market in general. Once upon a time, competitors in the digital entertainment market would have been described as uncertain when it was in its infancy, but the technology is becoming familiar and the competitors are maturing, so it would probably be described as a risk environment because the outcomes of decision choices can be predicted with probabilities and percentages. This can be tied into discussion of Chapter 4 concepts by discussing whether their views are examples of Amazon as a problem avoider, problem solver or problem seeker. Problem seeker seems the most appropriate because Amazon seems to be forward thinking and looks for problems to solve or opportunities to explore. Another way to tie in concepts from. 3. Which decision errors and traps are the greatest threats to the success of Bezos's decision making as Amazon's CEO and why? The possibilities are endless. Amazon has always been a trailblazer in delivering products, but the Kindle is a step into producing product too. Concepts from Chapter 4 to apply include: • Defining the problem too broadly or narrowly • Dealing with symptoms, not causes • Focusing on the wrong problem • Costs outweigh benefits • Timing • Acceptability to stakeholders • Ethical soundness • Lack of participation error 4. FURTHER RESEARCH - What are the latest initiatives coming out of Amazon? How do they stack up in relation to actual or potential competition? Is Bezos making the right decisions as he guides the firm through today's environmental challenges? Research is a great way to stimulate class discussion. Online or face-to-face students can discuss their findings in pairs or small groups and each student may write a twosentence summary of the research of the other students in the class. Students may be asked to select one article from the group to present to the class. This may or may not be the student who originally researched the article. This is easily adapted to online classes through threaded discussions or chat.
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Suggested Team Exercise for Chapter 4 Assign teams to develop a decision-making process for buying a used car for, say, $7,000. This should include a consensus ranking of the top 5 criteria they would use and evaluate in their selection. Where would they look for the cars? How many cars or models would they examine before they would feel comfortable making their decision? What are the benefits of looking at more cars? What are the disadvantages, if any? Were they able to optimize or satisfice?
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CHAPTER 5 Plans and Planning Techniques Goals and objectives get you there faster Chapter Objectives Chapter Five provides a review of planning and planning techniques and tools. The Chapter includes a definition of planning and a review of its benefits and the varying types of plans, used by most organizations. The distinction between policies and procedures is explained. A variety of specific types of planning support tools or specific types of planning are reviewed including forecasting, contingency, budgets, project and scenario planning. Benchmarking and its definition are provided. Finally, the merits and disadvantages of staff planners and participatory planning are discussed. The objectives of Chapter 5 may be summarized as: 1. 2. 3. 4. 5.
To define planning and its benefits To classify types of planning by time horizon, and their level of detail and use To explain policies and procedures To define specific planning used for budgets and project management To provide various planning tools and techniques, such as forecasting, contingency and scenario planning, and benchmarking 6. To review the use and benefits of staff planners and participatory planning
Chapter Outline 5.1 How and Why Do Managers Use the Planning Process? •
Planning is one of the four functions of management ✓ Planning – is a process of setting goals and objectives, and determining how to best accomplish them ✓ Planning comes first among the four functions; it sets the stage for every other function (figure 5.1 illustrates the four functions).
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Planning is the process of setting objectives and identifying how to achieve them ✓ See Table 5.1 which explains the 5 steps in the planning process ✓ Step 1 - Define objectives - the specific results or desired goals one hopes to achieve ➢ Stretch goals - performance targets that require extra hard work and stretch to reach ✓ Step 2 - Determine current status compared to objectives - where are you now, and how far do you need to go to accomplish the objectives ✓ Step 3 - Develop premises regarding future conditions - what could possibly happen? ✓ Step 4 - Make a plan.
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➢ Plan - a list of actions that must be taken in order to pursue the alternative and accomplish the objectives ✓ Step 5 - Implement the plan and evaluate results - take action and decide if it was the correct one to take. •
Planning improves focus and action orientation ✓ See the inset graphic for the benefits of good planning ➢ Action oriented ➢ Priority oriented ➢ Advantage oriented ➢ Change oriented ➢ Complacency trap is becoming inactive or stuck due to current successes or failures.
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Planning improves coordination and control ✓ Planning provides a link with control, setting a goal with which to measure success. ✓ Hierarchy of objectives - lower level objectives help to accomplish higher ones ✓ Figure 5.2 illustrates the hierarchy with examples
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Planning improves time management ➢ Helps make choices that allocate time among competing demands ➢ See Tips to Remember - Do's and Don'ts for Managing Your Time
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Learning Activity - Challenge students to describe the planning steps as they would follow them to achieve a personal goal such as earning an “A” on the next management exam, graduating on time or getting a job.
5.1 Questions for discussion suggested answers 1) All employees need to plan effectively. This skill will enable higher job performance and illustrates to supervisors that an employee is ready for promotion to positions where planning will become increasingly important. 2) Deciding where to go (or objectives) is the most difficult. Once those are determined, the other steps are much easier to perform. Deciding on objectives is perhaps the most unstructured area in planning. 3) Individuals should prepare a strategic plan for themselves and their career. What objectives do I want to accomplish? When do I want to achieve each objective? What resources will I need? What tactics such as training or degrees will I need? Which types of experiences will I need to gain to advance and how will I gain that experience? 5.2 What types of plans do managers use? •
Managers use short-range and long-range plans ✓ Short-range plans - usually cover a year or less ✓ Long-range plans - look ahead three or more years into the future
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✓
Elliot Jacques, researcher, found that very few people have the capacity to think long-term; most of us work comfortably with only three month time spans
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Managers use strategic and operational plans ✓ Strategic plans - set broad, comprehensive, and longer-term action directions ✓ Vision - organization's purpose and hopes for the future ✓ Tactical or Operational plans - define what each functional work unit needs to do to implement strategic plans in specific terms. Examples of functional plans include: ➢ Production plans - methods and technology needed by people in their work ➢ Financial plans - deal with money required to support various operations ➢ Facilities plans - deal with facilities and work layouts ➢ Marketing plans - deal with the requirements of selling and distributing goods or services ➢ Human resource plans - deal with the recruitment, selection, and placement of people into various jobs
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Organizational policies and procedures are plans ✓ A policy communicates broad guidelines for taking action and making decisions in specific circumstances ✓ Procedures or rules describe exactly what actions to take in specific situations
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Budgets are plans that commit resources to activities ✓ A budget is a plan that commits resources to activities, programs, or projects ➢ A fixed budget allocates a set amount of resources for a specific purpose ➢ A flexible budget allocates resources that vary in proportion with various levels of activity ➢ A zero-based budget allocates resources as if each budget was brand new
5.2 Questions for Discussion Suggested Answers 1) Yes, long-range planning is very important, especially in complex industries, such as the automotive, defense, aerospace, and pharmaceutical industries, where product development cycles are lengthy. 2) Companies need to have policies for human resources, safety and health, environmental compliance, ethics, and perhaps company intellectual property. 3) Yes, zero-based budgeting has the disadvantage of requiring more time in preparation and justification of expenses and programs. Using existing budgets as a “base-line” allows for easier incremental changes.
5.3 What are some useful planning tools and techniques? •
Forecasting tries to predict the future ✓ Forecasting is the process of predicting what will happen in the future
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➢ Qualitative forecasting relies on expert opinions ➢ Quantitative forecasting relies on mathematical models and/or statistical analysis •
Contingency planning creates back-up plans for when things go wrong ✓ Contingency planning identifies alternative courses of action to take when things go wrong. The recession, tsunami in Japan and resulting Fukshima nuclear plant disaster, BP Deepwater Horizon oil spill, Joplin Missouri tornado and recent devastating floods have caused many organizations to realize the importance of contingency plans.
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Scenario planning crafts plans for alternative future conditions ✓ Scenario planning identifies alternative future scenarios and makes plans to deal with each
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Benchmarking identifies best practices used by others ✓ Benchmarking uses external comparisons to gain insights for planning ✓ Best practices are methods that lead to superior performance
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Participatory planning improves implementation capacities ✓ Participatory planning includes the people whose ideas and inputs can benefit the plans and whose support will be needed for implementation ✓ Figure 5.3 depicts how participation helps build commitment to plans
✓ Goal setting helps align plans and activities throughout an organization ✓ Goal setting can make a difference in how well plans are implemented ✓ Suggestions for creating "great goals" that result in successful plans are illustrated ➢ Specific ➢ Timely ➢ Measurable ➢ Challenging ➢ Attainable
5.3 Questions for Discussion Suggested Answers 1) Forecasting, even if imperfect, still provides directional guidance in most cases and is better than “randomness” or the lack of total direction. 2) Some plans involve decisions that are so inconsequential or low in cost or importance that a contingency plan is not worth the effort in time it would require. For instance, it would not make sense to have a contingency plan for grocery shopping if your favorite tissue brand is out-of-stock. 3) Stretch goals are performance targets that require extra hard work and stretch to reach. Given the uncertain state of the economy and job market, stretch goals might be not only a good fit
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but mandatory for career success. Stretch goals also seem to fit well with the characteristics of millenials.
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Teaching Notes In this section, ideas, exercises, and assignments are provided to assist you in integrating the concepts in Exploring Management for your students, especially the special features of the text. Management Live The heroine in 27 Dresses certainly seems to be a compulsive planner who thrives on organization, planning and time management. Students probably have many examples of friends or colleagues who are on either extreme of the planning continuum. This can lead to a good opening discussion on how effective the results of either fastidious planning or total lack of planning have been in those personal and work situations. Role Models In the Role Models feature, “Don Thompson Keeps McDonald's on Focus,” McDonald's USA President Don Thompson is profiled as a young executive with an unusual career path that lead him from an engineering career at Northrop Grumman to McDonald's. This is a good case study illustrating how important it is to keep flexible in pursuing career goals. Suggested questions for further discussion: • Thompson became discouraged when he failed to win a coveted award. Is this a good reason for changing career plans? • Why do you think his move to operations provided the attention necessary for advancement? • What evidence do you see that Thompson puts a high priority on participatory planning? Ethics Check Who doesn't have an out-dated piece of electronic equipment sitting around? This feature explores the issue of responsibility for making sure harmful toxins don't become part of our environment due to improper disposal of e-waste. In addition to the You Decide discussion questions in the feature, students may want to explore how your college disposes of e-waste and evaluate the ethical considerations. Facts to Consider The Facts to Consider feature provides information on romance between co-workers as a concern of business. Statistics on the types of policies that organizations have about office romance are included. These questions may be used in class or online for discussion in addition to the questions listed in the "Your Thoughts" section: • What would be the benefit of developing a policy on employees becoming romantically involved? • Could there be any disadvantages of having such a policy? • Should the policy apply at all levels of the organization? Why or why not? Manager's Library It's hard to argue the premise of Analytics at Work: organizations can improve strategic decisions by making better use of available information when following decision making procedures. That sounds like good advice in our personal lives too, but many of us find that we do the same thing that large organizations do, fail to adequately use the large amounts of information available to
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us. Reflect and React questions in the feature probe how organizations and students can better analyze information. Explore Yourself Time Management is the focus of the self assessment suggested in this Explore Yourself feature. Following the self-assessment, encourage students to make a plan for managing their time better. This is probably good advice for busy professors too. Case Snapshot The case for this chapter is Nordstrom: planning a better inventory. Instructors may consider directing students to take a look at Nordstrom's website at www.nordstom.com as they prepare to answer case questions. 1. How does Nordstrom use demand forecasting to minimize leftover inventory? Buying is tied tightly to recent sales, and demand is tracked closely. Sales are carefully planned and leftover inventory is shipped to Nordstrom Rack Stores. As a result, inventory turnover is twice that of competitors. 2. What benchmarks could Nordstrom use to assess the success of its web-based inventory integration? Other online retailers with high customer satisfaction ratings such as Zappos or Lands’ End could be benchmarks for customer satisfaction. Benchmarks for profitability would probably be more relevant with Macy’s. 3. How might Nordstrom apply the concept of participatory planning to product purchasing? What groups should be involved? Participatory planning includes people in all steps of a process such as purchasing who have ideas that can benefit the plan. At Nordstrom, anyone in the purchasing process, from the consumer through buyers should be involved. Customers have comments on products they buy, sales people can provide even more information about customer preferences, IT people and data from the inventory management system can provide important information about sales, markdowns and transfers. Nordstrom Rack employees can provide information about the items they receive that do and do not sell even at reduced prices. 4. FURTHER RESEARCH Imagine you have been asked to develop a long-range plan to extend Nordstrom’s inventory management overhaul into the future. What changes, revisions, or updates would you plan for the company? What stretch goals come to mind? Students may consider researching inventory management software and inventory practices at competitors, domestic and foreign as they look at overhauling Nordstrom's inventory management. Caution students to conduct their online research with objective media sources. The college library may offer free searches such as EBSCO Host that access a large number of periodicals including industry publications that may provide thorough and accurate comparisons as well as current industry trends. Suggested Team Exercise for Chapter 5
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Assign teams to develop a strategic plan and an operational plan for a residential interior painting service that they are planning to launch in the local market, or an improved food service for your college. When their plans are complete, they may be required to contact local painting contractors or food service distributors and determine how feasible their plans really are.
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CHAPTER 6 Controls and Control Systems What gets measured happens Chapter Objectives Chapter Six provides a comprehensive discussion of Controls and Control Systems including the use of objectives and standards, the importance of measurement and correction, and the focus on work inputs, throughputs, and outputs. Additionally the control process is examined in the context of organizations including management by objectives performance systems, employee discipline, and purchasing and quality control processes. The use, computation and benefits of breakeven analysis are also explored. The objectives of Chapter 6 may be summarized as: 1. 2. 3. 4. 5. 6. 7.
To define and explain controlling and its benefits To explain management by objectives To review employee discipline as a control method To explore purchasing, inventory and quality control systems To review the computation, use and benefits of breakeven analysis To identify types of control systems used by organizations To explain the purpose of financial ratios and balanced scorecards
Chapter Outline 6.1 How and Why do Managers Use the Control Process? •
Controlling is one of the four functions of management ✓ An after-action review identifies lessons learned in a completed project, task force, or special operation ✓ Controlling is the process of measuring performance and taking action to ensure desired results
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Control begins with objectives and standards ✓ An output standard measures performance results (outcomes or work) in terms of quantity, quality, cost, or time ✓ An input standard to measure work efforts that go into a performance task ✓ Figure 6.2 illustrates the role of control in the management functions
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Control measures actual performance ✓ Accurate and timely measurement is essential ✓ Learning Activity - To help students understand the role of control as measurement, ask them to identify how they use control in their personal lives by setting objectives
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and measuring performance. Examples may include using a scale to calculate weight lost, keeping track of their grades to keep a certain grade point, keeping to a personal budget or looking for a car with a minimum gas mileage rating. •
Control compares results with objectives and standards ✓ Need for action = Desired performance-Actual performance ✓ Engineering comparisons - carefully calculated and predetermined standards ✓ Historical comparisons - past experiences as a basis to measure
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Control takes corrective action as needed ✓ Management by exception - the practice of giving attention to situations that show the greatest need for action
6.1 Questions for Discussion Suggested Answers 1) Standards for an emergency room might include: time from admission to procedure; mortality rates; patients successfully treated per evening; litigation expense; national or community ratings. Standards for a fire department might include response time to leave station from dispatch call; saved buildings; lives lost; fireman injuries and/or deaths. 2) Yes, and example would be conformance standards-does the item meet customer requirements. This would be true for both incoming raw materials and outgoing finished goods. 3) Management by exception presumes that the “norm” or the “baseline” is satisfactory, and therefore may lessen opportunities for all units or departments to continuously improve. Managers must also be observant of problem situations on items of any level of priority so they may be corrected, and opportunity situations on any level should provide lessons to improve future performance. 6.2 How Do Managers Exercise Control? •
Managers use feedforward, concurrent and feedback controls ✓ Organizations are open systems that interact with their environment with a cycle of input, throughput and output that is controlled by management. ✓ Figure 6.3 depicts three types of managerial controls ➢ Feed-forward controls - (preliminary controls) take place before work begins/prevent problems before they occur; proactive ➢ Concurrent controls - (steering controls) focus on what happens during the work process ➢ Feedback controls - (post action controls) take place after completing an action ✓ Learning Activity - Students may be asked to consider the areas they identified earlier for control in their personal lives and determine how they use feedforward, concurrent and feedback controls to accomplish their objectives.
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Managers use both internal and external controls ✓ Internal control - managers encourage workers to use self discipline to keep focused in achieving goals at work. ✓ External control - systems established by management to directly control work processes ➢ Bureaucratic control - policies, procedures, job descriptions, budgets and supervision all keep behavior in line with organizational objectives ➢ Clan control - organizational culture influences employee behavior ➢ Market control - market competition forces organizations to adjust products, pricing and other practices to maintain a competitive advantage
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Management by objectives integrates planning and controlling ✓ Management by objectives (MBO) is a process of joint objective setting between a superior and subordinate ➢ Important to state as specifically and quantitatively as possible ➢ Measurable end product ➢ Verifiable work activities ➢ Figure 6.4 depicts the MBO process ✓ Improvement objectives - specific performance improvement is stated so it can be measured ✓ Personal development objectives are for employee development or personal growth ✓ Learning Activity - After reviewing "Tips to Remember - How to write a good performance objective", directs students to write a Personal Development Objective. This may be implemented as a group activity in face to face or online classes as students get into small groups and share goals and do peer review to determine if they fulfill the steps in "Tips to Remember".
6.2 Questions for Discussion Suggested Answers 1) Bureaucratic control is a formal system of policies, procedures and supervision established by management to directly control employees. Clan control is an informal control of employee behavior that is reinforced by employees to maintain organizational culture. New employees are taught the culture or "the way we do things around here" and reinforce appropriate behavior and discourage inappropriate behavior. 2) McGregor's Theory Y type manager would feel that people are willing to use internal controls or self discipline in their work, but they are more likely to do this when they have some participation in setting performance objectives. 3) MBO probably would fail if there is a relationship problem between a team leader and a team member. Mutual support and trust is a key aspect of success in a team as well as for MBO to work well. If MBO is administered well, it may improve team leader and team member relations. 6.3 What Are Some Useful Organizational Control Tools and Techniques?
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Quality control is a foundation of modern management - the work of W. Edwards Deming is the foundation of the quality movement so important to modern management. ✓ Total quality management - process of emphasizing quality as an objective and striving for zero defects in products or services. ✓ Continuous improvement - constantly looking for ways to improve performance ✓ Control charts - graphical representation of performance that indicate trends. These trends can be used to identify whether performance is "in control". Students who have taken statistics courses will recognize the control limits in control charts. ✓ Six Sigma - quality standard that tolerates no more than 3.4 defects per million units produced. ✓ Learning Activity - students may apply the concepts of total quality management, continuous improvement and control charts to academic performance in a management class. How are academic performance indicators and student effort similar to quality control in industry?
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Gantt charts and CPM/PERT are used in project management and control. ✓ Project management - area of management that is responsible for planning and control of a project such as an event, product development or building project. Project managers are responsible for completing an activity on time and on budget. ✓ Gantt chart - graphic depiction of the scheduling necessary to complete tasks on time for project completion. ✓ CPM/PERT - charts depict a critical path in a project. A critical path is a sequence of events that can slow down completion of a project if delayed.
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Inventory controls help save costs - and make sure that inventory is adequate for current demand but not so large that there is expensive surplus inventory. ✓ Economic order quantity - automatic order of a pre-determined amount of inventory when inventory falls to a certain level. Examples include college bookstores and supermarkets. ✓ Just-in-time scheduling (JIT) - inventory arrives exactly when it is needed for production or sale.
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Breakeven analysis shows where revenues will equal costs ✓ Breakeven point - revenue equals costs. When revenue exceeds this point a product or service will earn a profit. ➢ Breakeven Point = Fixed Costs ÷ (Price - Variable Costs) ➢ Figure 6.5 illustrates the concept graphically ✓ Breakeven analysis - determines breakeven point when costs change.
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Financial ratios measure key areas of financial performance ✓ Financial ratios - calculations that track financial success of the organization. ➢ Liquidity - ability to meet short term financial obligations (pay bills) ➢ Leverage - measures use of debt ➢ Asset management - measures how well inventory is managed ➢ Profitability - determines if the firm is producing a return on the owner's investment
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Balanced scorecard – help top managers exercise strategic control ✓ Financial Performance ✓ Customer Satisfaction ✓ Internal Process Improvement ✓ Innovation and Learning
Questions for Discussion Suggested Answers 1. If control results in shortages of inventory, demand might drop as customers determine that the organization rarely has the items that are advertised or are in high demand. Good inventory management manages inventory costs so they are held to a minimum but do not result in shortages. 2. Students will likely agree that it is not out of date, particularly if they have used a defective product or had a vehicle recalled. This would be an opportunity to ask them why total quality management is still so important. Why after 50 years of understanding the importance of quality production do we still have defective products? 3. Balanced scorecards build on financial analysis to measure organizational performance in other financial measures, customer satisfaction, internal process improvement and innovation and learning.
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Teaching Notes In this section, ideas, exercises, and assignments are provided to assist you in integrating the concepts in Exploring Management for your students, especially the special features of the text. Management Live Forrest Gump is one of the most loved and certainly most quoted movies in recent memory. It's full of management analogies too. The Management Live feature illustrates Forrest's resiliency in the face of adversity and asks students how well they bounce back in difficult situations. A fun discussion could evolve by asking students to list the quotable lines they remember in the movie and how well they apply to management situations. Role Models Dancing Deer Bakery founder Patricia Karter is profiled as an entrepreneur balancing growth with a strong commitment to her values and social responsibility. This short case is a good study in keeping true to your mission while changing your business plan. Suggested questions for further discussion: • What influence might Market Control have on Dancing Deer Bakery's successes? • What role did control have in Karter's decision to decline a large order from Williams Sonoma? • Apply the elements of the balanced scorecard to the performance of Dancing Deer Bakery. How would the mission and vision of the company influence the elements you choose to measure? Ethics Check Technology and globalization have created many new ethical dilemmas individually. When they combine, issues like the censorship issues that Skype and Google have faced in order to do business in China. Students are challenged to examine their views of cultural values, government regulation and human rights as they apply to global communication. Facts to Consider The Facts to consider feature provides information on employee theft. Statistics on theft are included. These questions may be used in class or online for discussion in addition to the questions listed in the "Your Thoughts?' section: • How might Management by Objectives be used as a tool to reduce employee theft? • How could other types of control prevent or reduce employee theft? • Is theft a bigger problem with the "lower level" employee as described in the feature, or is it a bigger problem with upper level employees that steal larger amounts of money? Explain your thoughts Manager's Library Yet another ethical issue raised by the increased use of technology is examined in the book The Facebook Effect by David Kirkpatrick. Students may already be aware of the warnings against posting information that may be used by a potential or current employer, but how do they feel about being on the employer side? How much do they want to know about their employees? What controls would they use as an employee or manager?
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Explore Yourself The tendency toward internal or external control can be very enlightening. After taking the Internal/External Control self-assessment in the Skill-Building Portfolio, consider asking students how their view of the influence of internal control or external control will impact their behavior as a manager or as a student. Case Snapshot The case for this Module is “Electronic Arts: Inside Fantasy Sports. Students may be surprised to learn that some of their favorite games are EA products. 1. How can feedforward, concurrent and feedback controls each help Electronic Arts achieve its quality goals for video games? Feedforward, Concurrent and Feedback controls three types of managerial controls that illustrate how an organizations react with their environments as they control internal processes. For EA, these types of control would help achieve quality goals for video games by: • Feedforward or preliminary controls ensure that EA is producing the correct products to achieve their mission and excite their target market. To do this they must keep track of their own product sales, track the sales of competing products and keep on top of the popularity of the celebrity players depicted in the sports games they develop. Students may have many other suggestions such as new gaming technology or economic trends. It is also important to use the right resource inputs. This might include talented programmers, licensing of the NFL, rights to use player likeness. • Concurrent Controls ensure that the right things are being done in the workflow process to make sure that a quality product is being produced. For EA, this would include accurate development and programming of the game to prevent glitches. • Feedback Controls ensure that the final results are up to desired standards. Product testing and customer feedback would be two ways to effectively test games. Students with a strong background in testing prototype games are very likely to have much greater insight into this process than all but the most game-savvy instructor or professor! 2. What output standards and input standards would be appropriate for the control process as applied to video game production? • Output standards measure outcomes or work results. Applying output standards to the control process of video game production would require determining measureable factors that indicate that the games have found success with consumers. Market share, sales, consumer and critical reviews, programming errors and costs of production would be possible output standards. • Input standards also measure work efforts and are used when outputs are difficult to measure. EA may choose to measure the use of resources such as time spent in game development or costs incurred in securing or licensing players' images.
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3. Can you see the principle of management by exception at play in any of EA's recent business decisions? Why or Why not? Management by exception is the practice of giving attention to the differences between expected performance and actual performance. Priority is given to the situations that need the most correction and have the highest stakes. EA has lost market share as new technology and competition have pushed it to third place for market share. Management by exception is evidenced by spending $300 million to buy a developer of games for social media and the decision to put popular Madden football games on Facebook. 4. Further Research - What is the latest in Electronic Arts' quest to regain its former glory as the top gaming publisher? How well is EA positioned for future competitive advantage? Overall, is EA's executive team still on "top of its game?" Consolidation in the gaming industry continues and speculation on possible mergers and takeovers provide ample opportunity for students to research Electronic Arts, and other gaming companies.
Suggested Team Exercise for Chapter 6 Break the class into pairs and be sure that at least one student has a calculator in each pair. Calculate the breakeven costs for this hamburger restaurant: The selling price for each hamburger is $ 2.00 each The average cost per burger is Meat Paper Condiments Bread Labor
.60 .10 .15 .20 .20
In addition, the cost per year for rent, insurance, property taxes, and utilities which are on all the time is $75,000. A) How many hamburgers does the restaurant need to sell to break-even? B) How many do they need to sell to make a profit of $150,000 a year? Calculations: a) Unit costs are $1.25 per burger obtained by adding the costs above. Therefore, BEP = Fixed Costs/Price per Unit -Variable Cost per Unit = $75,000/ ($2.00-$1.25) = 100,000 burgers
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b) The goal is to make a profit of $150,000 after covering all costs. Since we already know the BEP is 100,000 burgers and we know that we make $.75 per burger, then the restaurant needs to “cover” the goal of the $ 150,000 by selling an added 200,000 burgers. So the total is the 200,000 needed to break-even PLUS the added 150,000 burgers needed to make a profit of $ 150,000 annually. OR 350,000 TOTAL burgers will generate a profit of $150,000. Proof: 200,000 burgers X a profit of $.75 each per burger = $150,000 annually
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CHAPTER 7 Strategy and Strategic Management Insights and hard work deliver results Chapter Objectives Chapter Seven provides a definition of strategy and a review of its importance to organizational success. Additionally the various types of strategies employed by organizations are examined as well as their applicability. Porter’s models and SWOT analysis are outlined and explored as valuable tools in developing and analyzing both company and industry strategy and competitiveness. The objectives of Chapter 7 may be summarized as: 1. 2. 3. 4.
To define and explain strategy To categorize and explain the main strategies utilized by organizations To review a framework used by organizations in developing strategies To review Porter’s models as useful tools in understanding competitive position of a company and the challenges of an industry 5. To define and explore how SWOT analysis is used as a basis for developing strategies
Chapter Outline 7.1 What types of strategies are used by organizations? •
Strategy is a comprehensive plan for achieving competitive advantage ✓ A strategy is a comprehensive action plan that identifies long-term direction for an organization and guides resource utilization to accomplish its goals ✓ “Best guess” about what to do to be successful in the face of rivalry and changing conditions ✓ Strategic intent is a unifying target or goal ✓ Competitive advantage is an “edge” or method of operations that allows an organization to outperform rivals ➢ Sustainable Competitive Advantage is a way of operating that is difficult to imitate
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Organizations use corporate, business and functional strategies ✓ Corporate strategy provides direction and guides resource allocations as a whole ✓ Business strategy provides direction and guides resource allocations for an individual unit or division within a larger enterprise ✓ Functional strategy guides activities to implement strategies at a detail or specific operations level ➢ Such as Marketing, Finance, Manufacturing, Marketing, and Human Resources
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Growth strategies focus on expansion ✓ Growth strategies are those designed to increase the size of current operations ➢ Concentration strategies focus on an existing business area ➢ Diversification strategies focus on entering new business areas o Related – similar or complementary business areas o Unrelated – entirely new business areas o Vertical integration - acquire suppliers (backward) or customers (forward)
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Restructuring and divestiture strategies focus on consolidation ✓ A retrenchment strategy seeks to correct weaknesses by making radical changes to current ways of operating ➢ Liquidation – when a business closes and sells is assets to pay creditors ✓ A restructuring strategy seeks to correct weaknesses by reducing the scale or mix of operations ➢ Chapter 11 bankruptcy - protects an organization from creditors as it reorganizes in an attempt to restore solvency. ✓ Downsizing seeks to decrease the size of operations ✓ Divestiture sells off parts of the organization to refocus attention on core business areas
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Global strategies focus on international business initiatives ✓ Globalization strategy adopts standardized products and advertising for worldwide use ➢ Gillette razors ✓ Multidomestic strategy customizes products and advertising to meet local cultural needs ➢ Proctor & Gamble consumer products ✓ Transnational strategy seeks efficiencies of global operations with attention to local markets ➢ Ford, Sony
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Cooperative Strategies find opportunities in alliances and partnerships ➢ Strategic alliances - two or more organizations create a partnership to pursue an area of mutual interest or strengthen competitive advantage. ➢ Airlines often create strategic alliances with foreign airlines to facilitate easier foreign travel ticketing for travelers and create a competitive advantage for the airlines. ➢ Supplier alliances - suppliers have preferred relationships with others in the supply chain to facilitate smooth flow of supplies. ➢ Distribution alliances - firms cooperate for product/service sales and distribution. ➢ Co-opetition - competitors share information or technology with the intent of creating a larger market for both ➢ IBM and Red Hat cooperate on some aspects of Linux development
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•
E-business strategies focus on using the Internet for business success ✓ Table 7.1 summarizes the types of web-based business models ✓ E-business strategy uses the internet to gain competitive advantage ➢ B2B – business to business; uses web portals and IT to link organizations vertically in supply chains ➢ B2C – business to customers; uses web portals and IT to link organizations with customers ➢ Social media strategy -social media is used to engage customers and other external groups ➢ Crowdsourcing - social media strategy that becomes an interactive idea exchange with customers.
7.1 Questions for discussion Suggested Answers 1) It is much more difficult to sustain an advantage today, with the speed of change and technology. However, companies can create a sustainable culture than allows a sustainable advantage through ongoing commitments to innovation and continuous improvement. Examples are Apple, 3M, Proctor and Gamble, Toyota, and many other companies. 2) Growth is popular because so many owners and investors desire growth in their returns on capital. Additionally, American culture in particular is growth-oriented compared to other cultures. 3) Usually restructuring plans are treated as “good news” for investors. The reason for this is that such plans are usually developed when a company is experiencing financial difficulties or sales are slowing, etc. The restructuring plan sends a signal to the market and investors that management is addressing issues and has a plan in place for improving results. 7.2 How do managers formulate and implement strategies? •
The strategic management process formulates and implements strategies ✓ Strategic management is the process of formulating and implementing strategies to accomplish long-term goals and sustain competitive advantage ✓ See Figure 7.1 for a depiction of the steps in the strategic management process ✓ Strategy formulation is the process of creating strategies ✓ Strategy implementation is the process of putting strategies into action
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Strategy formulation begins with the organization's mission and objectives ✓ Mission is the organization’s reason for existence or purpose ✓ Operating objectives are specific short-term results that organizations try to achieve
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SWOT analysis identifies strengths, weaknesses, opportunities, and threats ✓ SWOT analysis is a tool used in strategic planning to determine the current status of the organization
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➢ Internal assessment of the organizational strengths and weaknesses ➢ External assessment of environmental opportunities and threats ✓ See Figure 7.2 for a depiction of SWOT analysis ✓ Core competency is a special strength that gives and organization a competitive advantage •
Porter’s five forces model examines industry attractiveness ✓ Figure 7.3 illustrates the five forces model which include competitors, new entrants, suppliers, customers and substitutes ✓ Unattractive industry – intense rivalry, easy entry, substitute products, powerful suppliers and customers ✓ Attractive industry – low rivalry, barriers to entry, few or no substitute products, weak supplier and customer power
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Porter’s competitive strategies model examines business or product strategies ✓ A differentiation strategy seeks competitive advantage seeks competitive advantage through uniqueness ✓ A cost leadership strategy seeks competitive advantage through operating with lower costs than competitors ✓ A focused differentiation strategy seeks competitive advantage through concentration on one special market segment and offering a unique product to that segment’s customers ✓ A focused cost leadership strategy seeks competitive advantage through concentration on one special market segment and being the low cost provider to that market segment’s customers ✓ See Figure 7.4 for a depiction of these in the soft drink industry
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Portfolio planning examines strategies across multiple businesses or products ✓ Useful for companies that operates a variety of businesses (portfolio) ✓ BCG matrix analysis is a planning tool for such companies ✓ See Figure 7.5 for a depiction of the BCG matrix approach ➢ Stars - high market share in high growth markets ➢ Cash cows - high market share in low growth markets ➢ Question marks - low market share in high growth markets ➢ Dogs - low market share in low growth markets
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Strategic leadership ensures strategy implementation and control ✓ Requires good organization structures and cultures, and the right staffing ✓ Strategic leadership - the capability to inspire people to successfully engage in a process of continuous change, performance enhancement, and implementation of organizational strategies ✓ Strategic control - responsibility of top managers to keep in touch with strategy, how well it is being implemented and if it needs to be changed to be more effective in accomplishing the mission ✓ A strategic leader has to: ➢ Be a guardian of trade-offs
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➢ ➢ ➢ ➢
Create a sense of urgency Make sure that everyone understands the strategy Be a teacher Be a great communicator
7.2 Questions for discussion Suggested Answers 1) Yes, a strategy answers the question “how” we will succeed; the mission says “what” the purpose of the organization is. If a company has a poorly written mission statement that allows for a “jack of all trades” business definition, the company may attempt to become a conglomerate and fail, or perform with mediocrity, even though the strategies in each separate business/ market may be sound. On the other hand, a company may see its mission as very narrowly defined and miss out on opportunities for growth or adaptation. 2) Monopolies would be very close and may receive a perfect score. The only area where this may be less than perfect is the power of suppliers. Even a monopoly must rely on suppliers. Unless the monopoly happens to also be the sole customer for the supplier’s products (unlikely for most resources), then that aspect would make the “score” less than perfect. 3) Yes, the BCG matrix oversimplifies strategic positions and strategic planning. It offers a “formula” approach and may lead to abandoning a business that may yield very high returns if management attention is focused on the business in question. Very few companies use the BCG matrix; it was popular in the 1970’s when conglomerates were in vogue.
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Teaching Notes In this section, ideas, exercises, and assignments are provided to assist you in integrating the concepts in Exploring Management for your students, especially the special features of the text. Management Live Tron: Legacy creates a virtual world within a video game with few instructions. You don't have to wander very far off that premise to draw a strong parallel between a lawless cyberworld and the global environment managers operate in today. Managers need strong strategic skills to compete in a confusing global economy with the goal of survival. Critical thinking is mentioned as the most important skill, allowing us to accumulate relevant information, prioritize goals, and develop strategies for success. Students can gain critical thinking skills through case studies provided in the book, but only if they go beyond finding the right vocabulary. They need to thoroughly apply the concepts and develop a winning strategy. Role Models In the Role Models feature, "Roger W. Ferguson Jr. Provides Strategic Leadership at TIAACREF," Ferguson is profiled as a CEO with a strong background in finance and economics who also has the ear of President Obama. TIAA-CREF is a financial services organization that does retirement planning for employees in education and medicine among other career fields. Suggested questions for further discussion: • If you were to prepare a SWOT analysis of TIAA- CREF, how would the background of CEO Ferguson fit and why? • How does promoting diversity apply to the mission statement of a financial services company? Ethics Check The sight of netting outside the dormitories of Foxcom factories is sobering when you learn that it was installed to prevent suicides of workers who lose hope and jump off the dormitory roof. What responsibility do employers have to make sure workers not only have safe working conditions, but work that has meaning with a sense of accomplishment and hope of a better future? What responsibility do U.S companies such as Apple, Dell and HP have to make sure Foxcom remedies conditions that lead workers to suicide? How about us as consumers? Do we have a responsibility? Would you alter your consumption habits? Facts to Consider CEO pay seems to defy logic. The millions that top managers earn seem radically out of line w by their special skill set, education or resume. They seem more in line with professional athletes or rock stars. Can these salaries be justified by their responsibilities? Do organizations have responsibilities to keep salaries in line with worker's salaries? The Your Thoughts questions direct students to probe these issues and will stimulate interesting class discussion. Manager's Library Mark Benioff's perspective on strategy and corporate philanthropy make a nice contrast to the ethical pay issues in the previous Facts to Consider feature. Students may be surprised to find out his role in developing SaaS (Software as a Service), cloud computing, Salesforce.com an unique
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business strategies that encourage having a dream and donating time, products and money to charity. His business philosophy as explained in Behind the Cloud will provoke discussion as students answer the Reflect and React questions in this feature. Explore Yourself The assessment for this Chapter is entitled “Facts and inferences”. The assessment tool is intended to help students assess their ability to distinguish facts from inferences, an important trait for a manager participating in the planning process. For extended learning, students may discuss how perception of facts and inferences influence strategic management. For example, what role does personal perception of facts influence the establishment of mission or a SWOT analysis? Case The case for this Chapter is "Dunkin Donuts: Betting Dollars on Donuts." 1. What does a Porter’s Five Forces analysis reveal about the industry in which Dunkin’ Donuts and Starbuck’s compete, and what are its strategic implications for Dunkin’ Donuts? Porter's Five Forces model analyzes factors that influence a specific industry to help managers understand the industry in which they compete. An analysis of the factors would seem to indicate that the industry is very competitive and competitive advantages can be very quickly copied. The Five Factors as they apply to Dunkin’ Donuts and Starbucks would include: • New entrants - Dunkin’ and Starbucks sell breakfast beverages and pastries and are branching out to other breakfast foods. Competition would include expansion of similar regional companies like Caribou Coffee or companies like McDonald’s who extend their beverage offerings to include premium coffees. • Customers - the bargaining power of buyers is very influential to the industry. The current recession has resulted in the closing of hundreds of Starbucks locations, while relatively few of the franchised Dunkin’ Donuts have closed. • Substitute products - the large number of substitute beverages and breakfast alternatives makes this a huge factor in the industry. • Suppliers - occasionally the supply of coffee beans is limited, driving up the cost of the beverage. This often makes the substitute products such as home-brewed coffee and more attractively priced fast food coffee and pastries a strong competitive force. • Industry competition - Starbucks and other regional coffee shops; convenience stores like 7-Eleven and Circle K; and fast food restaurants like McDonald’s and Burger King. 2. In what ways is Dunkin’ Donuts presently using strategic alliances, and how could cooperative strategies further assist with its master plan for growth? Strategic alliances exist when two or more companies join forces to pursue an area of mutual interest or to gain competitive advantage. Examples in the case include Dunkin’ pairing with Wal-Mart, Stop & Shop and Great Wolf Lodge plus a variety of other cooperative alternatives such as convention registration areas, gift shops and general stores. Can college student centers be far behind?
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These cooperative strategies increase brand recognition as they increase sales. Families that enjoy Dunkin’ Donuts products while on a vacation stay at Great Wolf Lodge will be very receptive to expansion of the brand to their hometown. Co-opetition describes an alliance of competitors for mutual benefit. If Starbucks or McDonald's were to join forces with Dunkin to research lower fat and healthier ingredient alternatives, there would likely be a larger market for all to share. 3. Do you see any evidence of strategic leadership in Dunkin's U.S. expansion plans? If so, how? Strategic leadership is the capability to inspire people to successfully implement and control organizational strategies. While Dunkin' maintains its strategy of providing simple morning snacks, it has also expanded its breakfast food options to compete with Starbucks. They have chosen to execute the strategy by growing and expanding in retailers such as Walmart and Stop & Shop that fit their strategy and relationship with customers. 4. FURTHER RESEARCH—Gather information on industry trends, as well as current developments with Dunkin’ Donuts and its competitors. Use this information to build an upto-date SWOT analysis for Dunkin’ Donuts. If you were the CEO of the firm, what would you consider to be the strategic management implications of this analysis, and why? Caution students to conduct their online research with objective media sources. The college library may offer free searches such as EBSCO Host that access a large number of periodicals including industry publications that may provide thorough and accurate comparisons as well as current industry trends.
Suggested Team Exercise for Chapter 7 Break the class into pairs or small (no more than four students) teams. Assign each team an industry (pick industries that students can relate to such as chocolate candy; automobiles; clothing; shoes; fast food; beer; cell phones; computers, etc.) Have each pair or team identify (and explain if needed): The company or product using a cost leadership strategy (example Chery from China) The company or product using a differentiation strategy (example Scion) The company or product using a focused cost leadership strategy (example Focus) The company or product using a focused differentiation strategy (example Porsche)
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CHAPTER 8 Organization Structures It’s all about working together Chapter Objectives Chapter Eight defines organizations and their importance in effective management of any organization or company. The Chapter reviews both informal and formal structures. Functional, divisional, matrix, team and network structures are explained and applied. Current trends in organizational design such as flatter organizations with more decentralization and delegation are introduced. The objectives of Chapter 8 may be summarized as: 1. To define and explain organizational structure 2. To distinguish between formal and informal structures 3. To identify functional, divisional, matrix, team and network structures and explain when each is most appropriate to an organization. 4. To identify trends in organizational design and explain their influence on the organization.
Chapter Outline 8.1 What is organizing as a managerial responsibility? •
Organizing is one of the management functions ✓ Organizing arranges people and resources to work toward a goal
•
Organization charts describe the formal structures of organizations ✓ Organization structure is a formal arrangement that links the various parts of an organization to another ✓ Organization chart is a diagram of positions and reporting relationships within an organization ➢ Division of labor - people and groups performing different jobs, ideally ones for which they are skilled ➢ Formal structure - the “official” structure, the way things are supposed to operate ➢ See Table 8.1 for a full listing of what can be learned from an organization chart
•
Organizations also operate with important informal structures ✓ Informal structure - a “shadow” organization made up of unofficial but often critical working relationships between members.
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✓ Social network analysis identifies the informal structure by discovering who employees communicate with and ask for help. •
Informal structures have good points and bad points ✓ Good points include employees assisting each other, providing emotional and social support, building friendships and helping the organization adapt to change. ✓ Bad points include eavesdropping, gossip, rumors, breeding resistance to change and providing distractions.
8.1 Questions for discussion suggested answers 1) Organization is important because typically it enhances the opportunity for both efficiency and effectiveness in organizations. Organizing usually results in the most efficient use of financial and human resources. 2) Even imperfect organization charts provide some sense of direction, responsibilities, and accountabilities. An analogy can be made to taking a trip without a map or a compass. 3) It’s difficult to tell, since as a practical matter, every organization is going to have informal structure. Informal structures can provide enhanced communication and ideas and working relationships between sub-groups in organizations.
8.2 What are the most common types of organization structures? •
Functional structures group together people using similar skills ✓ Departmentalization – division of labor whose parts are well coordinated ✓ See Figure 8.2 for a depiction of typical functional structures ✓ A functional structure groups people together into formal work units based on their similar skills and performing similar tasks. Example: Marketing, Finance, Production and Human Resources. ✓ Work well in smaller organizations and stable organizations ✓ Sharing of expertise within departments ✓ Functional chimneys (or functional silos) – when performance suffers due to a lack of communication, coordination, and problem solving across functions ✓ See inset for the advantages of functional structures
•
Divisional structures group together people by products, customers, or locations ✓ See inset for advantages of divisional structures ✓ A divisional structure groups people together into formal work units based on their working on the same product, in the same area, or with similar customers. Figure 8.3 illustrates the concept. ➢ Product - groups jobs and activities devoted to a single product or service ➢ Geographical - groups jobs and activities in the same location or region ➢ Customer - groups jobs and activities that serve the same customers or clients
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•
Matrix structures combine the functional and divisional structures ✓ Sets up permanent teams that operate across functions to support specific products, projects, or programs ✓ Workers belong to at least two formal groups (a functional and a project group) and have two bosses ✓ See Figure 8.4 for a depiction of a matrix structure ✓ Cross functional teams are teams whose members come together from different functional departments, to work on a common task. ✓ See inset for advantages of Matrix structures
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Team structures use many permanent and temporary teams ✓ Team structures use permanent and temporary cross-functional teams to improve lateral relations and solve problems, projects, and for day-to-day tasks ✓ See Figure 8.5 for a depiction of a team structure ✓ See inset for advantages of team structures
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Network structures extensively use strategic alliances and outsourcing ✓ A network structure links a central core with “networks” of relationships with outside contractors and partners that supply essential services ✓ May lower costs, increase speed, and offers flexibility ✓ A strategic alliance – cooperation with other firms to pursue business activities of mutual interest ➢ Outsourcing alliances – contract to purchase important services from another organization ➢ Supplier alliances – link businesses in preferred supplier-customer relationships that guarantee a smooth and timely flow of quality supplies among the partners ✓ See Figure 8.6 for a depiction of a network structure ✓ A virtual organization – uses information technologies to operate a constantly shifting network of alliances
8.2 Questions for discussion suggested answers 1) Despite their disadvantages, most companies use functional organizations because they offer opportunities for career development; mentoring; resource leveraging within the function; and improved communication within the function. 2) Matrix organizations are ideal for law firms, consulting firms, accounting firms, landscaping and construction companies, or other project-based organizations where skills can be leveraged over multiple projects. 3) Group decision making can hurt teams if : 1) the dominant members are incompetent, uncooperative or simply unwilling to work hard; 2) the team lacks technical expertise required to perform the tasks; the expert or competent team members are passive and do not fully participate or offer suggestions. Teams often suffer from “the lowest common denominator” syndrome, where the “weakest link” becomes the norm.
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8.3 What are the trends in organizational design? •
Organizations are becoming flatter with fewer levels of management ✓ Organizational design is the process of aligning the structure of the organization to best accomplish the organizational mission and respond to the challenges of the external environment. ✓ Span of control is the number of people reporting to an individual manager. ➢ Narrow - managers supervise a small number of people ➢ Wide - managers supervise a larger number of people ➢ Flatter organizational structures mean span of control is wider ➢ Inset illustrates the concept
•
Organizations are increasing decentralization ✓ Centralization - top management keeps strong control over decision-making ✓ Decentralization - top management allows decision-making responsibility to be distributed throughout the organization to those who are best qualified. ✓ Technology makes it easier for top management to decentralize much decisionmaking responsibility yet stay informed about day-to-day performance results.
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Organization are increasing delegation and empowerment ✓ Delegation is the process of entrusting work to others by giving them the right to make decisions and take action; involves deciding what work you should do yourself and what work you should allow others to accomplish ✓ Steps in delegation ➢ Assign responsibility ➢ Grant authority ➢ Create accountability ✓ Empowerment is the process of giving people the freedom to contribute ideas, make decisions, show initiative, and to do their jobs in the best possible ways
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Organizations are becoming more horizontal and adaptive ✓ A bureaucracy emphasizes formal authority, rules, order, fairness, and efficiency ✓ Mechanistic designs are bureaucratic, using a centralized and vertical structure ✓ Organic designs are adaptable using a decentralized and horizontal structure ✓ Based on work of Burns and Stalker ✓ Figure 8.7 depicts these two approaches ✓ Learning activity - students may list 3-4 organizations with which they are familiar, including their employer, employers of friends and family or your college. Evaluate the organizations on the aspects of mechanistic or organic designs. They may do this individually, then in teams or a large group discussion.
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Organizations are using more alternative work schedules ✓ Compressed workweek - full time work is completed in less than five days. For example, a 4-10 work week means that employees work four 10 hours days and have an extra day off each week. Other compressed schedules are spread over two weeks.
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✓ Flexible working hours or flextime offer employees a choice of starting and ending times each day, while still working an entire work day. ✓ Job sharing - splits a job between two or more people who divide the responsibilities and schedule ✓ Telecommuting - using technology like the internet and videoconferencing to work outside the office 8.3 Questions for discussion suggested answers 1) Organizations are increasing delegation and empowerment. The reductions in staff and levels of management have been enormous. Much of the “shifting” of decisions and responsibilities that had previously been performed by upper levels of management has already been redistributed. The opportunities for added delegation and empowerment are significant. 2) This answer will vary by student. Probe their responses to make them identify aspects of their personality that makes their choice of organizational design a good fit. The self assessment "Organizational Design Preference" may be used before the activity or after the discussion. Students should report if their scores differed from their expressed preference. 3) Alternative work schedules lead to greater job satisfaction and often increase productivity. Employees are able to achieve work-life balance. Turnover is reduced and recruiting top talent is easier.
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Teaching Notes In this section, ideas, exercises, and assignments are provided to assist you in integrating the concepts in Exploring Management for your students, especially the special features of the text. Management Live Fighting bureaucracy probably isn't the first thing that comes to mind when you think of the classic movie Patch Adams starring Robin Williams. He certainly didn't fit the traditional stereotype of a doctor, did he? Thinking past his entertaining bedside manner, his struggles with established medical bureaucracy certainly creates a lot of drama in the story. Many of us find that it's hard to pursue excellence in the face of an entrenched bureaucracy. Faculty and students may find this true in the education system and students will probably have many examples of organizational structure that doesn't seem to support empowerment or excellence. These examples will provide many teachable moments in discussion of chapter 8. Role Models The Role Models feature for Chapter 8 explains how Alan Mulally went from being an executive at Boeing to the CEO at Ford Motor Company. Mulally is credited with re-structuring Ford prior to the recession and putting it in a position to weather the economy better than most other automakers. Suggested questions for further discussion: • Explain the changes Mulally made at Ford that seem to be most responsible for Ford's movement from a bureaucratic organization with mechanistic design to one with a more adaptive organization with organic design. • Which type of organizational structure seems to be most appropriate for a car manufacturer? • Why do you think Ford choose to adopt a more centralized approach to decision-making for global operations when the current trend is toward more decentralized decisionmaking? Ethics Check Many issues in this hypothetical situation are far too familiar in corporate life as organizations trim staff and create leaner structures. Doing more with less, being evaluated on "face time" rather than productivity, difficulty balancing family and work life all take a toll on workers as it has on "Overworked in Cincinnati." The You Decide questions probe the ethical issues that arise as management practices in flatter structures and out-of-touch upper management. Ask students to complete the questions as a takehome assignment or discussion for online classes. Facts to Consider It seems like the managers surveyed in this study have pretty good opinions of themselves and their abilities to manage and lead. The manager in the preceding Ethics Check was probably one of the respondents. The discussion questions in the Your Thoughts? section can be used in small group/large group discussion or in an online class discussion. Manager's Library
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Author Paul Osterman paint a bleak picture of middle managers in The Truth About Middle Managers as he explains how their role has changed as organizations restructure to meet the challenges of the economy and competition. Fewer employees, less autonomy and empowerment, less job security and greedy, self-serving top management are just a few of the challenges Osterman found in his research. Yet he also found that middle managers really enjoy their work and tend to be highly committed to jobs that involve decision-making and employee interaction. In addition to the Reflect and React questions, students may want to discuss their thoughts on their own view of a management career. Explore Yourself Empowerment is a proven way to motivate and develop employees, yet most students would say that in their work experience, empowerment is lacking. Will they choose to empower employees as they move into their own management careers? The Empowering Others self-assessment in the Skill-Building Portfolio helps them determine their views on empowerment. Following the assessment, discussion may center on how they can improve their empowerment skills. Case The case for this Chapter is Nike: Spreading out to stay together 1. When Nike CEO Phil Knight stepped down and handed his job to Bill Perez, he stayed on as chairman of the board. In what ways could Knight’s continued presence on the board have created an informal structure that prevented Perez from achieving full and complete leadership of Nike? Informal structures are the shadow organization that represents the actual working and communication relationships that may not resemble the formal organizational chart. When Knight remained on the board, old communication relationships may have survived his departure from the CEO position, cutting Perez off from valuable information. Knight's access to the informal communication network may have worked to spread rumors to Knight and back down the communication chain. These rumors may have contained inaccurate information, caused resistance to change and distract members from their work . This may have reinforced Perez's position as an outsider. 2. How can Nike utilize both traditional and newer organization structures to support the firm’s heavy strategic commitment to outsourcing? The case doesn't give any concrete indication of Nike's current structure, but students will probably surmise that some aspects of a network structure exists due to the heavy dependence on outsourcing. 3. In what ways does Nike's in-house collaboration with ad agency Wieden + Kennedy qualify as a strategic alliance? Network structures like Nike's seems to be are heavily dependent on strategic alliances and outsourcing alliances. Weiden+Kennedy seems to be a contractor for Nike. Strategic alliances form between firms that have similar interests. The example in the text is a catalog that is published with the cooperation of several home furnishing companies. An example for Nike might be pairing with another fitness equipment provider to sponsor an
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event. The relationship with Weiden+Kennedy is an outsourcing alliance according the text in chapter 8. Nike contracts with Weiden+Kennedy to provide important services. 4. FURTHER RESEARCH—Gather information on Nike’s recent moves and accomplishments, and those of its rival, Adidas. Are both firms following the same strategies and using the same structures to support them? Or, is one doing something quite different from the other? Based on what you learn, what do you predict for the future? Will Nike stay on top, or is Adidas the next industry leader? Remind students that the research should center on the companies and not the specific products. Sources like Runner's World will contain product information, and even comparisons, but that isn't going to provide the insight they will need to assess company strategy. Caution students to conduct their online research with objective media sources. The college library may offer free searches such as EBSCO Host that access a large number of periodicals including industry publications that may provide thorough and accurate comparisons as well as current industry trends. Suggested Team Exercise for Chapter 8 This exercise will only work in classrooms in the same physical setting (not distance learning). Break the class into teams of five. Supply each team with • one stapler (with ample supply of staples) • one small “post it” type note pad • a red pen • a supply of paper clips. Tell the class that each team is a “company.” Their product is a “FoleyO.” The “FoleyO” manufacturing process is as follows: Note: The instructor or Professor should have one example or “prototype” to show each team as an example of the completed “product”. This will also be provided to a class “inspector” (one for the entire class who will not be on any team but will get equal credit, if any given, for this exercise) as a template for “quality control.” Products that match the “prototype” will count as “good” production or “finished products.” All other will count as “rejects” or “scrap” production. 1) Pull one sheet off the “post it” pad 2) Fold the sheet exactly in half 3) Staple the folded sides together by putting a staple at the very middle and top of the folded page-the staple must be horizontal or parallel to the paper 4) One student per team is the “signer” who looks at the product which has gone through steps 1-3 above and must sign his or her initials legibly as a type of “logo.” 5) Paper clips should be used for each set of 10 pages that have gone through steps 1-4 above.
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The instructor should tell the teams to meet and decide how they will organize their production. They may shuffle chairs etc. or face each other as they wish. (Note: students may decide to “combine” steps-one student may do two tasks, but do not offer this suggestion unless someone asks the question. This is effectively comparable to downsizing for efficiencies, etc.) Allow 15 minutes from the “start” time and call off the last minute by 15 second increments. When time has expired, each team should take their finished production to the inspector. The instructor should count each piece of abandoned paper by each team as a scrap product. These should be added to those rejected by the inspector as not meeting quality standards. a) Count the accepted (approved by the inspector) products b) Count the rejected products from above c) Multiply the Number of rejected products by 2 as a penalty for low quality production d) Subtract the total in “c’ from the total in “a” This is the net “good” production e) Rank the teams You may wish to make this game more realistic by adding incentives (similar to piecework) for the top or winning team (maybe an added 5 points each on a future test or exam). This creates a high level of class energy and interest. Then, the teams should assess what went “right” and “wrong” on their teams. Did they match skills to jobs? Did they combine jobs? Did they change physical arrangements? Was speed (efficiency) more important than quality (effectiveness)? Finally, a combined class discussion will reinforce the values of organization (as well as planning).
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CHAPTER 9 Organizational Culture, Innovation, and Change Adaptability and Values Set the Tone Chapter Objectives Chapter Nine reviews culture, innovation and change in organizations, and how managers can lead change processes. This Chapter also explores the characteristics of creative organizations, and the ways in which change can occur. The stages of the change process are outlined. Finally the role of mangers and organization development in establishing the climate and leading change processes is investigated. The objectives of Chapter 9 may be summarized as: 1. 2. 3. 4. 5. 6. 7. 8. 9.
To define and explain organizational culture To review the importance of customer-driven and performance-oriented culture To differentiate and to explore observable and core cultures To review creativity and innovation as sources of competitive advantage To explore the types of change and the change processes in organizations To review what characteristics creative organizations have in common To examine common pitfalls of negotiation To review management strategies for change and the role of change leaders To outline organization development as a way of building capacities for change
Chapter Outline 9.1 What is the nature of organizational culture? •
Organizational culture is the personality of the organization ✓ Organizational culture is the system of shared beliefs and values that develops within an organization and guides the behavior of its members
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Organizational culture shapes behavior and influences performance ✓ Strong cultures - cultures which are clear, well-defined, and widely shared among members ✓ Socialization - new members learn how what is expected by the culture: how to act, dress, common terminology, work ethic, customer service orientation etc.
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The observable culture is what you see and hear as an employee or customer ✓ Includes how people dress at work, arrange their offices, speak to and behave toward one another, and talk about and treat their customers ✓ Found in stories, heroes, rituals, and symbols ✓ See Figure 9.1 for a depiction of the main components of organizational culture
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Learning Activity - ask students to individually indentify the elements of observable culture (stories, heroes, rituals, and symbols) of an organization they are familiar with such as an employer or your college. Ask them to share their thoughts in a small group and have the small groups report to the class.
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The core culture is the underlying values of the organization ✓ Core culture is the second and deeper level of organizational culture ✓ Core values - underlying assumptions and beliefs that shape and guide people’s behaviors
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Core culture is found in the underlying values of the organization ✓ Core Values are beliefs and values shared by members of the organization ➢ Examples include performance excellence, innovation, social responsibility worker involvement, customer service and teamwork. ➢ Frequently included in mission statements
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Value-based management supports a strong organizational culture ✓ Workplace spirituality are practices that create meaning and community. It does not necessarily include religion ✓ Common elements are meaningful work, respect for diversity, work-life balance, ethical behavior ✓ Symbolic leaders communicate culture and values through symbolic language and behavior. Common examples are Mary Kay Ash and Herb Kelleher.
9.1 Questions for discussion suggested answers 1) Companies with strong cultures are much more likely to outperform companies without that advantage, whether organizational design is strong or weak. Culture affects processes, motivation and execution in a direct fashion. A weak culture will adversely impact performance. 2) Bank employees dress somewhat formally - often wearing suits or blazers, have shorter and no facial hair, less stylish or trendy dress, behave more rigidly, and are unlikely to make decisions that are not “their job.” 3) I would select the following core values: customer above all; employee freedom to fail, but with accountability for results; an ethical culture; number one or two in market share; pride in developing future managers; and continuous process improvement; strong work ethic combined with a strong play ethic; sense of humor and a positive attitude. 9.2 How do organizations support and achieve innovation? •
Organizations pursue process, product and business model innovations ✓ Innovation is the process of taking a new idea and putting it into practice ✓ Process innovations result in an improved process such as faster processing of online product purchases or banking transactions
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✓ Product innovations result in new or improved goods or services such as the Amazon Kindle or Barnes and Noble Nook readers, or textbook rentals. ✓ Business model innovations result in new ways to expand existing businesses such as the University of Phoenix developing a completely online college, or your college developing an online degree program. •
Green innovations pursue and support the goals of sustainability ✓ Green or sustainable innovation is the process of turning ideas into innovations or business models that are earth-friendly or reduce the organization's carbon footprint. ✓ Examples include wind and solar farms, recycling, carbon offsets, developing products that use little or no energy from fossil fuels.
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Social innovations seek solutions to important societal problems ✓ Social entrepreneurship seeks new and unique ways to solve the world's social problems. ✓ Examples include the Grameen Bank making micro loans in Bangladesh; One Acre Fund lending money for helping farmers in Kenya; One Laptop Per Child distributing computers where little or no education is available; or Heifer International providing livestock to families around the world.
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Learning Activity - Challenge students to develop projects that would benefit a social entrepreneurship organization of their choice such as raising money to purchase a $100 laptop for One Laptop Per Child, making a micro loan or purchasing livestock through Heifer International.
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Commercializing innovation turns new ideas into stable products ✓ Figure 9.2 illustrates the steps in the commercializing innovation process. ✓ Commercializing innovation turns ideas into products, services or processes that the organization can use to produce profits. ▪ Idea creation ▪ Initial experimentation ▪ Feasibility determination ▪ Final application ✓ Reverse innovation or trickle-up innovation takes products created for small or emerging markets and moves them into larger distribution.
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Innovative organizations share many common characteristics ✓ Innovative organizations incorporate innovation into the core values and culture of the organization. Common characteristics include: ▪ Strategy supports innovation ▪ Culture values innovation ▪ Structure supports innovation ▪ Management supports innovation ▪ Staffing supports innovation
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✓ Skunkworks is a term for special units whose goal is innovation and operate outside the normal structure. 9.2 Questions for discussion suggested answers 1) A traditional view of business social responsibility is that the organization's mission is to create a return for the owners or investors. If social responsibility is not one of the core values of the organization or part of its mission, investors might become upset. Many organizations have social responsibility as a core value and would value green innovation as an important way to create sustainability and competitive advantage. 2) Many factors might reduce support for innovation. Management may not support new ideas; management may slow the process allowing competitors to reach the market faster; there may be a lack of focus on customer needs; a culture that does not value innovation; a structure that makes innovation difficult; or a lack of visionary staff. 3) Organizational leaders play a huge role. Leaders set the culture and core values that would support innovation. Top managers must tolerate criticism and differences in opinion, eliminate barriers to innovation and willingness to fail. 9.3 How do managers lead the processes of organizational change? •
Organizations pursue both transformational and incremental changes ✓ Change leaders take leadership responsibility for changing the existing pattern of behavior. ✓ Inset illustration shows the differences between change leaders and status quo leaders. ✓ Transformational change results in a major and comprehensive redirection of the organization ✓ Incremental change tweaks and nudges existing systems and practices to better align them
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Three phases of planned change are unfreezing, changing, and refreezing ✓ Kurt Lewin described planned change as a process with three phases ▪ Unfreezing - preparing a system for change ▪ Changing - making actual changes in the system ▪ Refreezing - stabilizing the system after change ✓ See Figure 9.3 which depicts the change leader’s responsibility in the three phases
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Managers use force-coercion, rational persuasion, and power change strategies ✓ See Figure 9.6 for a depiction of three common change strategies ▪ Force-Coercion uses the primary power bases of legitimacy, rewards, and punishments as the primary inducements to change; most useful as a unfreezing strategy o Direct forcing - direct and unilateral command that change takes place o Political maneuvering - works indirectly to gain special advantage over other person in making the change
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▪ ▪
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Rational persuasion - bring about change through persuasion backed by special knowledge, information, facts, and rational argument Shared power - encourages people in a collaborative process of identifying values, assumptions, and goals from which support for change will naturally emerge
Change leaders identify and deal positively with resistance to change ✓ See Table 9.1 for a summary of why people may resist change ✓ Positive resistance tactics: ▪ Education and communication ▪ Participation and involvement ▪ Facilitation and support ▪ Negotiation and agreement ✓ Negative resistance tactics: ▪ Manipulation and cooptation ▪ Explicit and implicit coercion
9.3 Questions for discussion suggested answers 1) Not all changes are radical enough to be considered transformational. Incremental change faces mangers on a daily basis as changes are required in existing practices, procedures and policies. 2) It may not be possible to “refreeze” change in a rapidly-changing environment. Lewin's three phase change process assumes a stable external environment. Few organizations enjoy the luxury of a predictable environment, particularly in challenging economic times such as a recession. Change in many organizations is indeed an ongoing daily part of the culture. Examples would be companies such as GE, Apple, Google, E-Bay, etc. 3) No, force-coercion may be needed in situations where the very survival of the company is at stake (GM) or if all other efforts have failed to convince a firmly entrenched opposition to a new process or policy.
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Teaching Notes In this section, ideas, exercises, and assignments are provided to assist you in integrating the concepts in Exploring Management for your students, especially the special features of the text. Management Live Viktor Navorski (Tom Hanks) shows an amazing ability to adapt and tolerate ambiguity in the movie The Terminal as an airline passenger who is stuck in a terminal after his home country government is overthrown while he is on an international flight. The Explore Yourself feature probes this issue further as students take a self assessment on their Tolerance for Ambiguity. Role Models In the Role Models feature, entrepreneur Tom Szaky explains the process he went through to establish his firm "TerraCycle". His experience is a good starter for discussions on innovation and culture. Suggested questions for further discussion: • How would the elements of observable culture apply to TerraCycle? • How would the core culture and values of TerraCycle be explained? • What is the most important characteristic of TerraCycle as an innovative organization? Ethics Check Again, Facebook provides a teachable moment for managers. Several examples show employees getting caught making Facebook updates that aren't very career-smart. The You Decide questions probe the ethical issues of personal freedom of speech and the employer's right to use public information in personnel decisions. As you discuss the issues, remind students to look at the issue as an employer as well as employee and see if their position changes. Facts to Consider You can tell a lot about an organization's culture by the way they handle employee work-life conflict. What responsibility do employers have for supporting the quality of life that employees want? What benefits are there to the employer of providing that flexibility? Consider taking a look at organizations such as SAS, Scott's Miracle Gro and Best Buy to see how they incorporate work-life balance into their culture. Manager's Library Change By Design examines innovation, design, creativity and change. His view of design is that it should be human centered and focus on needs. Innovation isn't just from the minds of geniuses, it comes from an examination of our needs. Reflect and React questions ask students to take a look at how they view designs that evoke an emotional response and how everyday observations can yield innovation. Explore Yourself The assessment for this Chapter is entitled "Tolerance for Ambiguity. The assessment tool is intended to help students assess their ability to accept ambiguity or uncertainty. After determining their scores, you may ask students how innovative they are likely to be as a manager and what type of organizational culture would be a good fit for them.
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Case The case for this Chapter is "Apple Inc. - People and Design Create the Future". 1. What examples can you find that illustrate Apple's core culture and observable culture elements: stories, heroes, symbols, rites and rituals. Steve Jobs and Apple are masters of creating culture that includes the users, not just the producers. The core culture of Apple is that of a passion for innovation and powerful technology that is fun and easy to use. Observable elements of culture include: Stories: the story of how Apple was started in a garage and how it was built are well known. Heroes: Steve Jobs and co-founder Steve Wozniak Symbols: The Apple logo and the naming system of products that all begin with a lower case i. Rites and Rituals: Apple product introductions all begin with Jobs appearing in a black shirt, jeans and running shoes as he demonstrates the product. 2. Should Apple’s board of directors be expecting the CEO to push transformational change or incremental change, or both, at this point in time? Why? Both have their place. Apple has transformational change as a core value and is a good example of an organization that welcomes change and views it as an opportunity. Incremental change may be used in areas such as software where improvements to existing products must be made, but when customers are familiar and happy with a type of software product such as productivity software or an operating system, incremental change would keep it cutting edge, yet familiar. 3. How could organization development be used to help the teams involved with iPhone development make sure that they are always working together in the best ways as they pursue the next generations of iPhones and innovative product extensions? Although Apple is already known for innovation, organizational development that works with teams to further improve communication, and creative thinking couldn't hurt. Managers could also use some OD to remind them how to foster a culture of creativity and innovation. 4. FURTHER RESEARCH—Review what the analysts are presently saying about Apple. Make a list of all the praises and criticisms, organize them by themes, and then put them in the priority order you would tackle if taking over from Steve Jobs as Apple’s new CEO. In what ways can the praises and criticisms be used to create a leadership agenda for positive change? Like the Nike case, remind students that they aren't looking for product reviews, but reviews of the company's strategy and performance. Suggested Team Exercise for Chapter 9 Break the class into teams and have the teams perform the following discussion task. Identify a sports team at the college or professional level that exemplifies strong culture. Identify the key elements (symbols, heroes, stories, and rituals) of the observable culture of the team that you select.
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CHAPTER 10 Human Resource Management Nurturing turns potential into performance Chapter Objectives Chapter Ten reviews Human Resource Management and its importance within the context of an organization. The primary responsibilities of the human resource function are detailed including recruiting, selection, socialization, training and career planning and development. The objectives of Chapter 10 may be summarized as: 1. To define human resource management 2. To review the impact of the legal environment on the employment and human resource management process 3. To review recruitment and selection, and socialization and orientation 4. To define performance appraisal and explain varying methods 5. To define training 6. To review performance management techniques 7. To review career development strategies 8. Identify current issues and concerns in human resource management 9. Differentiate between different types of compensation plans 10. Explain the legal environment of employee relations and collective bargaining
Chapter Outline 10.1 What are the purpose and legal context of human resource management? •
Human resource management attracts, develops, and maintains a talented workforce ✓ Human Resource Management (HRM) ensures that an organization is always staffed with the best people available so that it gets important jobs done in the best possible ways. Three major responsibilities of HRM include: 1. Attracting a quality workforce 2. Developing a quality workforce 3. Maintaining a quality workforce
1. Strategic human resource management aligns human capital with organizational strategies. ✓ Human capital is the value of workers that have skills, knowledge, innovation, creativity, energy and commitment to offer to the organization. ✓ Strategic human resource management aligns people and their jobs in the most effective way to achieve the organization's strategic plan, purpose and mission.
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2. Government legislation is supposed to protect workers against employment discrimination ✓ Job discrimination - occurs when an organization denies employment or a job assignment or an advancement opportunity for reasons that are not performance relevant. ✓ See Table 10.1 for a summary of laws designed to protect workers from job discrimination ✓ Equal employment opportunity (EEO) – the right to employment without regard to sex, race, color, national origin, or ➢ Title VII of the Civil Rights Act of 1964, amended by the Equal Employment opportunity Act of 1972 and the Civil Rights Act (EEOA) of 1991 protect these rights ➢ Intent is that employment should be based only on ability and job performance ➢ Generally applies to organizations that employ 15 or more people ✓ Affirmative action – is an effort to give employment preference to women and minority group members ➢ Affirmative action plans - designed to ensure that an organization’s workforce represents women and minorities in proportion to their labor market availability ➢ Reverse discrimination - claims of discrimination by majority populations ➢ Bona fide occupational qualifications - criteria for employment that an organization can clearly demonstrate as relating to a person’s capacity to perform a job 3. Laws can't guarantee that employment discrimination will never happen ✓ Workplace privacy- the right to privacy while at work. ✓ Pay discrimination - women earn approximately 77% of men in the U.S. The struggle for equal pay continues. ➢ Lilly Ledbetter Fair Pay Act became law in 2009 allowing workers to file discrimination claims longer than previously allowed. ✓ Pregnancy discrimination - complaints seem to be on the increase ✓ Age Discrimination - Workers 40 and over are protected from employers making any employment decision based on age. Claims are on the increase as the recession has left older workers unemployed longer than younger workers. 10.1 Questions for discussion suggested answers 1) Globalization will likely require that Human Resources: • Be at least bi-lingual with departmental language skills mirroring those of the countries of employment • Put a higher reliance on local interviewing and internet testing and screening • Develop a higher need for technology skills among human resource professionals • Maintain awareness and understanding of cultural differences between countries • Be able to understand employment laws and employee protections in other countries
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2) Discriminatory practices still exist in spite of current laws, so new laws are frequently needed to protect against the discriminatory practices that slip past current laws. The Lilly Ledbetter Fair Pay Act modified the length of time workers have to file claims for pay discrimination in light of pay secrecy practices. The Genetic Information Nondiscrimination Act (GINA) was passed to respond to new technology that led to employers discriminating against workers with a genetic predisposition to illnesses such as carpal tunnel, heart disease, breast cancer, Alzheimer's Disease and many others. 3) Hiring of illegal workers is a major concern; many jobs are being lost to individuals who have broken the law and come into the U.S. across borders. It is clear and well-known that many employers are “winking” at the laws. Students and Americans who would be able to work in those jobs do not have the opportunity because enforcement is so low, and employers continue the practice because such workers will work for much lower wages and with no or few benefits. Virtually every poll shows that a significant majority of Americans want the laws enforced that already exist, including large penalties and even imprisonment for those who flaunt the law. Some estimates are that as many as 30 million workers are in the United States illegally. 10.2 What are the essential human resource management practices? •
Person-job fit is the match between an individual's skills, interests and abilities to the requirements of the position ✓ Person Organization fit is the match between the person and the culture of the organization.
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Recruitment attracts qualified job applicants ✓ Recruitment - what organizations do to attract a qualified pool of applicants to an organization ✓ Realistic job preview - gives a candidate both the good points and bad points of the job and the organization
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Selection makes decisions to hire qualified job applicants ✓ Selection - involves choosing to hire from the pool the persons who offer the greatest performance potential ✓ Reliability - means that a selection device or test provides a consistent measurement, returning the same results over time ✓ Validity - means that the test or selection device score is a good predictor of future job performance ✓ Assessment centers - evaluates a person’s job potential by observing his or her performance in experiential activities designed to simulate daily work ✓ Work sampling - working on the actual job while observers grade your performance
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Socialization and orientation integrate new employees into the organization ✓ Socialization - the process of influencing the expectations, behavior, and attitudes of a new employee in a desirable way
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✓ Orientation - a set of activities designed to familiarize new employees with their jobs, co-workers, and key values, policies, and other aspects of the organization as a whole •
Training continually improves employee skills and capabilities ✓ Coaching - an experienced person provides performance advice to someone else ✓ Mentoring - a new or early career employee is assigned as a protégé to someone senior in their area of expertise, perhaps a high level manager ✓ Reverse mentoring - younger employees serve as a mentor to senior executives, frequently providing expertise on technology and social media
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Performance management appraises and rewards accomplishments ✓ Performance appraisal -a process of formally assessing and providing feedback on someone’s work accomplishments ✓ Graphic rating scale - a checklist or scorecard for rating an employee on preselected personal traits or performance characteristic such as work quality, attendance, and punctuality ✓ Behaviorally anchored rating scale (BARS) - describes actual behaviors that exemplify various levels of performance achievement in a job ✓ See Figure 10.1 for a depiction of a Behaviorally anchored rating scale ✓ Critical incident technique – keeps an actual log of a person’s effective and ineffective job behaviors ✓ 360 degree feedback - gathers inputs from the many people that work and depend on the person being appraised (boss, subordinates, peer, and others) ✓ Multi-person comparison - rate people relative to each other
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Retention and career development provide career paths and options ✓ Career development - the process of managing how a person grows and progresses in responsibility from one point in a career to the next ✓ Career planning - the process of systematically matching career goals and individual capabilities with opportunities for their fulfillment
10.2 Questions for discussion suggested answers 1) The more successful the company, the more likely that job previews will be realistic. Successful companies recognize that they are attractive to recruits and need not portray the job opportunity unrealistically. For less successful companies and small companies, human nature combined with competition from more attractive employers makes realistic job interviews less likely. 2) Most companies do not assign a coach or mentor; this typically occurs through networking or spontaneous contacts in the course of working. A new employee should take the time to understand the organization and its culture then identify persons who would seem to be possible coaches. Often, coaches or mentors are not even aware they are doing “coaching” or “mentoring” yet the benefits still can occur.
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3) The biggest “downside” to 360 feedback is the danger that a disgruntled subordinate or peer who is competing for promotion will “sabotage” the rating by deliberately underrating or rating poorly the employee. The manager to whom the person reports needs to be cognizant of such possibilities and look at the holistic results of the ratings. 10.3 What are current issues in human resource management? • •
Today's lifestyles increase demands for flexibility and work-life balance ✓ Work-life balance involves balancing career demands with personal and family needs Organizations are relying more on independent contractors and part-time workers ✓ Independent contractors are not employees. They are hired on temporary contracts. ✓ Contingency workers are sometimes called permatemps. They work regular or parttime hours on a long term basis without the guarantee of a permanent job.
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Compensation plans influence employee recruitment and retention ✓ Merit pay - ties compensation to performance. High performing employees receive larger pay increases. ✓ Bonus pay - provides one-time payments to employees in recognition of contribution or performance ✓ Profit sharing - distributes a portion of profits to employees as a reward and incentive ✓ Gain sharing - distributes a portion of savings when costs are reduced ✓ Stock options - the right to purchase shares of company stock at a fixed price in the future. They're a good deal if the stock price goes up.
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Fringe benefits are an important part of employee compensation packages ✓ Fringe benefits - non monetary compensation such as health insurance and retirement plans ✓ Family friendly benefits - help employees achieve better work-life balance. Examples include childcare and flextime ✓ Flexible benefits - allow employees to personalize benefits within a set allowance ✓ Employee assistance programs - help employees cope with personal stresses and problems
4. Labor relations and collective bargaining are closely governed by law ✓ Labor unions - organizations to which employees belong and that deal with employers on the workers’ behalf; a collective “voice” for their members for added power ✓ Labor contracts – a formal agreement between a union and an employer which typically specify the rights and obligations of employees and management with respect to wages, work hours, work rules, seniority, hiring, grievances, and other conditions of work ✓ Collective bargaining - the process that brings management and union representatives together in negotiating, administering and interpreting labor contracts
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✓ Two-tier wage systems- pay new hires less than workers already doing the same jobs with more seniority ✓ See Figure 10.2 for a depiction of what happens when labor-management relations become adversarial 10.3 Questions for discussion suggested answers 1. No. The issue of work-life balance becomes a real concern as employees increasingly feel that there is little "down time" when they are connected to work nearly 24/7 via smart phones and the Internet. Globalization has increased business dependence on 24/7 availability for many businesses. Separation of personal and work life becomes a real concern when employees find it difficult to "unplug". 2. Many things must go right for merit pay to work. Systems can become quite complicated, so it must be clearly explained to and understood by employees. The system of performance appraisal must be seen as valid and fair by employees. The amount of money offered must provide an incentive. Employees must see the pay as a valid incentive with clear criteria that fairly rewards those who deserve it. Failure of any of these will reduce its effectiveness. 3. Unions are gaining popularity, but not in traditional occupations. The unions seeing increasing membership are those in the service industries such as public service and the hospitality industry.
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Teaching Notes In this section, ideas, exercises, and assignments are provided to assist you in integrating the concepts in Exploring Management for your students, especially the special features of the text. Management Live Professionalism is certainly a prerequisite for success in many careers, especially management, yet pop culture abounds with examples of the counterculture slob that prevails in spite of unprofessional and even rude behavior. Iron Man 2 hero Tony Stark (Robert Downey Jr.) is another example of a wildly unprofessional millionaire industrialist who is called to task by his assistant when she takes over as CEO. It's her influence that has kept the company together, after all. Students will probably be happy to provide examples of unprofessionalism among the ranks of management they have worked for. Younger workers often seem to have the most poorly trained managers. What have they learned from these examples of rude or unprofessional managers? How can students learn professionalism that will assist them in their management careers? Student organizations such as your local student SHRM Chapter, Management Club or other business student organization. Role Models SAS founder and CEO Jim Goodnight has created a strong culture that values employees, treats them extremely well and provides benefits that allow them a high quality-of-work life and work/life balance. This is a great way to retain and motivate workers, and Goodnight seems to understand that. Additional questions for class discussion: 5. Why do these extravagant benefits help with retaining employees? Does it go beyond the conveniences and pampering? 6. Goodnight claims that people work hard because they care about the company. That seems to disagree with Herzberg's theory that pay and benefits are not motivators. Would you be motivated by the benefits? Ethics Check Automotive sales is still pretty much a male dominated career field. This Ethic Check feature probes the ethics of those hiring practices and efforts to recruit women specifically. You Decide questions ask students to consider those ethical issues. Facts to Consider Performance appraisal can be a valuable employee development tool if used effectively, but a recent Wall Street Journal survey indicates that most HR executives aren't happy with the way managers use them. This is a great opportunity to discuss students' experience with performance appraisals, good and bad and how they can be improved. Manager's Library Author Ron Alsop seems to think that the millennial generation is in for a rude awakening when they enter the workforce. In The Trophy Kids Grow Up. This can lead to an interesting discussion on how students would like to be treated in the workplace.
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One of the characteristics mentioned in the book is that millenials seem to prefer more direction and feedback. How can HR managers use this to improve the performance appraisal process? Explore Yourself This Explore Yourself returns to the issue of professionalism in the Management Live feature on Iron Man 2. Can learning HR skills through student organizations build professionalism? Much of the benefit comes through the interaction with HR professionals that comes with membership. Students are also encouraged to take the Performance Appraisal Assumptions self-assessment in the Skill-Building Portfolio. The assessment tool is intended to help students determine whether students, as managers or potential future managers, are more prone to regard appraisals as evaluation or development tools.
Case The case for this Chapter is “Netflix - Making Movie Magic". 1. What performance appraisal method would you recommend to make sure that only the “best” are kept on the Netflix team? Multi-person comparisons that require managers to rate people relative to one another would be the best choice. The options include rank-ordering people from best to last, paired comparisons that rank everyone in comparison to everyone else, or forced distribution that categorize everyone into percentile rankings, sometimes leading to a "rank and yank" policy forcing mangers to fire employees falling into the lowest groups. 2. What are the limitations and risks of Hastings’ human resource management practices? Appraisal systems that require managers to fire low performers require extensive training of mangers involved in the appraisal process to make the system effective and fair. These systems are also very time-consuming for managers and HRM. Compensation systems that pay salaries above the market may end up with inflated compensation expense, especially if the high starting salaries are increased annually with larger raises. Evidence does suggest that companies that pay higher than average starting salaries recruit better qualified employees and incur lower recruiting and training costs. 3. How do Netflix' compensation policies encourage high performance? Netflix doesn't specifically link pay to merit, but several policies do encourage high performance. Pay is higher than average and low performing employees lose their jobs. Employees get to decide how much of their compensation will be paid in salary and how much to receive in stock options, which are considered to be motivating. Employees are allowed as much vacation as they wish, which would be a motivation to keep the job. 4. FURTHER RESEARCH—Check up on Hastings and Netflix. How is the firm doing right now? How has it changed since the case information was prepared? Are the human resource management practices described here still active at the firm? What else is Netflix doing to create human capital for sustained competitive advantage? Caution students to conduct their online research with objective media sources. The college library may offer free searches such as EBSCO Host that access a large number of periodicals including industry publications that may provide thorough and accurate comparisons as well as current industry trends.
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Suggested Team Exercise for Chapter 10 Break the class into teams and have the teams perform the following discussion tasks: • “Identify five questions that you might ask during an interview process to help obtain a realistic view of what the company is ‘really like’? “ • As a group, reflect and discuss how your present or past employers (including part-time work) have provided performance appraisal information to you. Summarize your discussion to include the typical frequency, honesty, and value of the process. Also share any very poor or outstanding examples of how a “boss” helped you improve as an employee.
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CHAPTER 11 Leadership A leader lives in each of us Chapter Objectives Chapter Eleven reviews Leadership and its importance to the successful performance of any organization. The Chapter also looks at traits and styles of effective leadership, as well as varying theories regarding contingency leadership. The Learning Outline of Chapter 11: 1. Understand the foundations for effective leadership. 2. Identify insights of the contingency leadership theories. 3. Discuss current issues and directions in leadership development.
Chapter Outline 11.1 What are the foundations for effective leadership? •
Leadership is one of the four functions of management ✓ Leading builds the commitments and enthusiasm for people to apply their talents to turn plans into action
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Leaders use position power to achieve influence ✓ Power is the ability to get someone else to do something that you want done; the ability to make things happen the way you want them to. ✓ Position power - the power of a position, and includes coercion. Rewards, and legitimacy ➢ Reward power - the capability to offer something of value as a means of influencing the behavior of other people ➢ Coercive power - the capability to punish or withhold positive outcomes as a means of influencing the behavior of other people ➢ Legitimate power - the capability to influence through authority; the right by virtue of one’s status as a manager, or the person in charge, to exercise control over persons in subordinate positions
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Leaders use personal power to achieve influence ✓ Personal power - who you are and what your presence means in a situation ➢ Expert power - the capability to influence the behavior of other people because of special knowledge and skills ➢ Referent power - the capability to influence the behavior of other people because they admire and want to identify positively with you.
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Leaders bring vision to leadership situations ✓ Vision is a clear sense of the future ✓ Visionary leadership - is the ability to communicate a clear sense of the future and how to accomplish the vision
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Leaders display different traits in the quest for leadership effectiveness ✓ Research shows that physical characteristics make no difference ✓ Research has shown that people want leaders who are honest, competent, forwardlooking, inspiring, and credible ✓ Table 11.1 explains more traits shared by effective leaders ✓ Learning Activity - ask students to individually list the three most important characteristics they want in a leader. Next, put them in groups of three and have them compile their lists and come to a consensus on the top three. Ask them if they displayed any of the highly rated characteristics in their group interaction.
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Leaders display different styles in the quest for leadership effectiveness ✓ Leadership style is the pattern of behaviors a leader exhibits ✓ Autocratic leaders hold on to authority and act in a unilateral "command and control" fashion ✓ Human relations leaders emphasize a high concern for people over task completion ✓ Democratic leaders encourage participation with a strong emphasis on both task and people ✓ Laissez-faire leaders show little concern for people or tasks and do just enough to not get fired ✓ Figure 11.2 illustrates the concept
11.1 Questions for discussion suggested answers 1) Coercive power may be needed in situations where there is a threat of danger to the manager, the employee themselves, or other employees. It may also be needed when an employee has lost emotional control or an open confrontation develops in the workplace. Finally, a crisis situation may require coercion if someone is reticent or unable to function because of fear. 2) Personal power is acquired as people understand the leader as a person and what he or she has to offer. Likeable personal characteristics are a good way to start to acquire referent power which is the ability to influence others because they admire or want to positively emulate the leader. Another type of personal power is acquiring influence because of special knowledge or skills. Special computer, technical or other related skills that help a new employee gain recognition would be an example of expert power. Reverse mentoring mentioned in the previous chapter would be an example. 3) Human relations leaders may have problems if the workers were not well trained, the job was not clearly defined, they didn't value high performance or were a little too immature
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to understand how important their task was. A good example might be managing young workers in a fast food restaurant. 11.2 What can we learn from the contingency leadership theories? •
Contingency leadership perspective suggests that successful leadership varies by the circumstances, task, the leader and the people.
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Fiedler’s contingency model matches leadership styles with situational differences ✓ Least Preferred Co-Worker Scale (LPC) - instrument used to classify leadership styles as either task or relationship motivated ✓ The Least Preferred Co-worker Scale is the Self Assessment for this chapter on in the Skill-Building Portfolio ✓ See Figure 11.3 for a depiction of Fiedler’s contingency model
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The Hersey-Blanchard situational leadership model matches leadership styles with the maturity of the followers ✓ Hersey-Blanchard situational leadership model suggests that successful leaders adjust their styles based on the maturity of followers and their readiness to perform the task at hand ✓ Leadership styles can be adjusted based on the amount of "Task Behavior" or guidance required and "Relationship Behavior" or support required ➢ Delegating - low task, low relationship ➢ Participating - low task, high relationship ➢ Selling - high task, high relationship ➢ Telling - high task, low relationship ✓ Figure 11.4 illustrates the concept
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House’s path-goal theory matches leadership styles with task and follower characteristics ✓ Path-goal theory suggests that leaders are effective when they help followers move along paths to achieve both work and personal goals ✓ Four leadership styles ➢ Directive leader ➢ Supportive leader ➢ Achievement oriented leader ➢ Participative leader ✓ See inset box for an explanation of the 4 path-goal leadership styles
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Leader-member exchange theory describes how leaders treat in-group and outgroup followers ✓ Leader-member exchange (LMX) recognizes that in most leadership situations, the leader does not treat everyone the same ✓ In-groups are considered the best performers and receive special high-exchange relationships with the leader
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✓ Out-groups have low-exchange relationships with the leader and are often excluded from some information and privileges •
The Vroom-Jago model describes a leader's choice of alternative decision-making methods ✓ Authority decision - is made by the leader and communicated to the group ✓ Consultative decision - is made by a leader after receiving input from the group ✓ Group decision - is made by the group themselves ✓ Figure 11.5 illustrates the criteria involved in determining which of these is the best match for the situation ➢ Decision quality ➢ Decision acceptance ➢ Decision time
11.2 Questions for discussion suggested answers 1) Fiedler's contingency leadership model indicates that leadership success depends on a match between the leadership style of the leader, task structure, and the amount of position power the leader has. For career development, managers should understand their personal leadership style tendencies (take Self-Assessment 11: Least Preferred CoWorker Scale in the Skill-Building Portfolio) and understand how they must adjust to accommodate the workers, amount of task structure and how much control the manger has in the situation. Figure 11.3 illustrates the adjustments that must be made to be effective. 2) The Hersey-Blanchard situational leadership model suggests that successful leaders must know the maturity level or "readiness" of those they lead and adjust leadership style. There are four basic types of leadership to choose from based on the maturity or readiness of the employees. Delegating style works well with employees with a high degree of readiness, Selling works well with moderate to high readiness, Participative works with low to moderate readiness and telling works best with a low degree of follower readiness. 3) It would be better to put everyone in the in-group, allowing everyone equal access to information, assignments and privileges. Equity theory suggests that those in the outgroup would be less motivated and productive if they feel that their efforts do not receive the same rewards as the in-group. 11.3 What are current issues and directions in leadership development? •
Transformational leadership inspires enthusiasm and extraordinary performance ✓ Charismatic leadership - the ability to inspire others in exceptional ways ✓ Transactional leadership - somewhat “mechanical” in style; directs through tasks, rewards, and structures ✓ Transformational leadership - the ability by leaders to use their personalities to inspire followers, to strive for extraordinary performance accomplishments
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Emotionally intelligent leadership handles emotions and relationships well ✓ Emotional intelligence (EI) - an ability to understand emotions in oneself and others, and use this understanding to handle one’s relationships effectively ➢ Self awareness - the ability to understand our own moods and emotions ➢ Social awareness - the ability to empathize, to understand the emotions of others, and to use this understanding to better deal with them ➢ Self-management is the ability to think before acting and to be in control of otherwise disruptive impulses ➢ Relationship management is the ability to establish rapport with other in ways that build good relationships and influence their emotions in positive ways
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Interactive leadership emphasizes communication, listening, and participation ✓ Gender similarities hypothesis holds that males and females are very similar to one another in terms of psychological properties ✓ Interactive leadership style - democratic, participative, and inclusive, often approaching problems and decisions through teamwork ➢ - often associated with female leadership
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Moral leadership builds trust from a foundation of personal integrity ✓ Ethical leadership - leaders who practice high ethical standards, build ethical cultures, and who both help and require others to behave ethically in their work ✓ Integrity - honest, credible, and consistent behavior that puts sound values into action and earns the trust of followers
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Servant leadership is follower centered and empowering ✓ Servant leadership - based firmly on a commitment to serving others, to helping people use their talents to full potential while working together for organizations that benefit society ✓ Other-centered rather than self-centered; followers more important than the leader ✓ Empowerment - the process through which leaders give people job freedom and help them gain power to achieve influence within the organization
11.3 Questions for discussion suggested answers 1) No, most managers will not be able to excel at transformational leadership. This style requires a high degree of personal charisma and an ability to communicate vision which not all individuals possess. Additionally, it requires a high ability to make important and often difficult decisions with high consequences. This is also a rare trait. 2) The gender similarities hypothesis suggests that they have similar psychological properties and both are capable of effective leadership. That being said, our perceptions of men and women as leaders have been the focus of several studies. Some results include these facts: women tend to be less directive; more participative; strong on
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motivating others, emotional intelligence, persuasion, communication, mentoring others; and supportive of high quality work. 3) Moral leadership involves integrity and ethical leadership, and putting values into action. Servant leadership means that leaders view leadership as a responsibility and value followers highly. Servant leadership seems to be a way one would demonstrate moral leadership.
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Teaching Notes Special feature in the text provide opportunities to explore concepts with students and discuss how they apply to students' personal experience. Manager's Library The Manager's Library feature for this chapter looks at the book Power by Jeffrey Pfeffer with student questions that probe their thoughts their personal experience and perceptions of leaders. Role Models Dr. Lorraine Monroe is featured as an example of a visionary leader with questions that focus on how students can use Dr. Monroe's example to develop leadership skills.. Facts to Consider Statistics on how workers view the integrity of organizations and their leaders. Questions probe students' views of the morality of leaders. Explore Yourself Integrity in leadership is explored and Peter Drucker's concept of "Old Fashioned Leadership" is introduced. Students are directed to take the "Least Preferred Co-workers Scale" in the Skill Building Portfolio. Ethics Check How far will you go outside your understanding of your job responsibilities to make the boss happy? The concept of the "Zone of Indifference" is explored. Questions direct students to determine where to draw the line. Additional questions to explore are how far the Zone of Indifference extends in a classroom setting. How far will they go at the professor's request? Pass out papers? Run an errand? Help with research? Wash your car? Case For Critical Thinking The case for this Chapter is "SAS: Business Decisions at the Speed of Information 1. Explain why House's path-goal theory might affect an organization's decision to adopt a business analytics tool like SAS. Path-goal theory suggests that leaders are more effective when they help followers achieve work and personal goals along an appropriate path. The leader's job is to remove barriers to performance and reward progress toward the goal. Leaders can use one of four leadership styles and they can move between them depending on which is more effective under the circumstances. These include directive leaders, supportive leaders, achievement oriented leaders and participative leaders. Analytical tools provided by SAS may be appropriate when it's necessary to motivate employees to change or show progress toward a goal. Achievement oriented leaders may have more use for analytics.
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2. How could access to SAS data affect an employee's high or low LMX relationship with their leader? Information is power. Employees who are empowered by having access to data have more opportunities to grow in their abilities and would be perceived as having a high LMX relationship with the leader. Employees who are denied access to data would feel that they have a low LMX relationship. 3. A leader with which leadership style would be most likely to seek out analytical results from SAS? Of the classic leadership styles in chapter 11, the leadership styles that would be more attracted to the data analysis tools that SAS provides would probably be higher in task orientation, so the choices seem to be team leaders, middle of the road leaders or authority-obedience leaders. 4. FURTHER RESEARCH the success of a leader can be influenced as much by her access to correct pertinent information as her leadership style. Describe a situation in which a leader would serve her organization best by utilizing analytical information provided by SAS, even if he choice to do so goes against her personal leadership style. Then describe a situation in which an organization would benefit more from a leader's personal style than her interpretation of analytical data. Contingency leadership is matching the manager's leadership style with the requirements of the workers and the task. Students will probably find that the situations that need a leader to put aside her preferred leadership style and move to a more data oriented and probably task oriented style might include crisis management, non-programmed decisions, transformational change or just dealing with a subgroup that craves data like financial or research associates. Situations that would benefit from a leader's presumably more people oriented style would include working with people or teams that are self-directed and motivated or dealing with change that requires rational persuasion rather than force-coercion. Suggested Team Exercise for Chapter 11 Break the class into teams and have the teams perform the following discussion tasks: •
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Ask students to individually list the three most important characteristics they want in a leader. Next, put them in groups of three and have them compile their lists and come to a consensus on the top three. Ask them if they displayed any of the highly rated characteristics in their group interaction. Could an outstanding leader in one organization move into an entirely different organization and still be an outstanding leader? For example, could a great football coach with evident leadership abilities be hired as a CEO of a large company such as General Motors and be equally successful? How important I expertise? Can you provide any “real-life” examples of the “transferability” or “portability” of leadership?
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CHAPTER 12 Individual Behavior There’s beauty in individual differences Chapter Objectives Chapter Twelve reviews individual behavior and the impact it has on organizations and performance. The Chapter defines personalities and categorizes different traits which may compose one’s personalities. The Chapter also reviews stress and its impact on the individual. Additionally, perception is defined and the various ways in which perceptions can be distorted are examined. Finally attitudes and job satisfaction are explored. The objectives of Chapter 12 may be summarized as: 1. 2. 3. 4. 5. 6.
To define personality To review the various types of traits that distinguish individuals To describe stress and its positive and negative consequences To explore perceptions and how they may distort behavior To review attitudes and how they may affect behavior To review job satisfaction and its impact on performance
Chapter Outline 12.1 How do perceptions influence individual behavior? •
Perceptual distortions can obscure individual differences ✓ Perception is the process through which people receive and interpret information from the environment ✓ See Figure 12.1 for a depiction of the effects of perception on communication ✓ Stereotypes occur when a person identifies someone with a group or category, and then use the attributes associated with the group or category to describe the individual ✓ Halo effect occurs when we use one characteristic of a person or situation to form an overall impression ✓ Selective perception is the tendency to single out for attention those aspects of a situation or person that reinforce or appear consistent with one’s existing beliefs, values, or needs ✓ Projection occurs when we assign our personal attributes to other individuals
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Perception can cause attribution errors as we explain events and problems ✓ Attribution is developing explanations or assigning causes for events ✓ Fundamental attribution error tendency when something goes wrong for another person, we assume that internal forces were primarily to blame and lessen the role of external forces. In short, "it was their own fault."
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✓ Self-serving bias is the tendency for people to blame their personal failures or problems on external causes and underestimate the role of personal responsibility. In short "it wasn't MY fault!" •
Impression management is a way of influencing how others perceive us ✓ Impression management – the systematic attempt to influence how others perceive us
12.1 Questions for discussion suggested answers 1) Advertising uses stereotypes to help promote the appeal or products or services. Stereotypes help target products to the appropriate market such as men or women. 2) There are not many situations where having self-serving bias is constructive; it can lead to poor decisions and deflect needed improvement in personal skills. The exception to this may be in entry level positions at a very early stage when it may instill confidence until one arms himself or herself with stronger skills. 3) There is no conflict between trying to look your best or promote or market yourself with personal integrity. A conflict could occur if you did so at the expense of another person to gain an “edge.” 12.2 How do personalities influence individual behavior? •
The Big Five personality traits describe work-related individual differences ✓ Personality is the combination of characteristics that makes us unique. ✓ See table 12.1 for “How to Identify the Big Five Personality Traits”: Extroversion, extraversion, agreeableness, conscientiousness, emotional stability, and openness
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The Myers-Briggs type indicator is a popular approach to personality assessment ✓ Myers-Briggs type indicator - based on work of psychologist Carl Jung ✓ Three main dimensions of personality ➢ Extraversion/Introversion - how we relate to others ➢ Sensation/Intuition - how we gather information ➢ Thinking/Feeling - how we evaluate information ➢ Added fourth dimension: Judging/Perceiving how we react to the outside world
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Self-monitoring and other personality traits influence work behavior ✓ Locus of control - belief in the amount of control a person has over personal destiny ➢ Internal- belief in personal control over success or failure, self confident ➢ External - belief that what happens is beyond personal control. Fate, luck and chance are strong influence. Less self confident. ✓ Authoritarianism - degree to which a person respects authority and accepts status differences.
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✓ Machiavellianism -emotionally detached and uses power and political behavior to manipulate others ➢ Hi-Mach - exploitative, believes the ends justify the means even if questionable ethical behavior is necessary ➢ Low-Mach - allows other to exert power over them ✓ Self-monitoring - open to feedback and able to adjust as circumstances change •
People with Type A personalities tend to stress themselves ✓ Stress is a state of tension experienced by individuals facing extraordinary demands, constraints or opportunities ✓ Type A personality describes someone that is high in achievement orientation, impatience, and perfectionism ✓ Stressors - sources of stress
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Stress has consequences for work performance and personal health ✓ Constructive stress is a positive influence on effort, creativity and diligence in work ✓ Destructive stress is dysfunctional when it is or seems to be so intense or long lasting that it overloads and breaks down a person’s physical and mental systems ✓ Job burnout is a sense of physical and mental exhaustion that can be incapacitating both personally and professionally ✓ Workplace rage - overly aggressive behavior toward co-workers, bosses, or customers ✓ Personal wellness - the pursuit of a personal health-promotion program
12.2 Questions for discussion suggested answers 1) I would add “effort.” Individuals vary significantly in their individual effort and energy expended at work. This may range from “driven” and “committed” to “lazy” at the opposite extreme. 2) Diversity brings creativity to problem solving. Organizations need creative, outgoing, reflective, thoughtful, detail oriented and intuitive people to avoid "group think" and represent many points of view. 3) Yes. Although many entrepreneurs and managers share type A characteristics there is a strong need for managers with strong people skills that do not necessarily need to be as driven and focused as a type A manager. 12.3 How do attitudes, emotions, and moods influence individual behavior? •
Attitudes predispose people to act in certain ways ✓ An attitude is a predisposition to act in a certain way toward people and environmental factors ✓ Cognitive dissonance is the discomfort we feel in situations where our attitude is inconsistent with our behavior
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✓ See the margin figure for the three components of individual attitudes: cognition, affect, and behavior •
Job satisfaction is a positive attitude toward one’s job and work experiences ✓ Job satisfaction is the degree to which an individual feels positive or negative about various aspects of his job and work experiences ✓ Components of job satisfaction are the job itself, quality of supervision, co-workers, pay, work conditions, and security ✓ Facts to Consider profiles a survey about how American workers feel about their jobs with discussion questions for students.
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Job satisfaction influences work behavior ✓ Withdrawal behaviors - such as absenteeism and turnover indicate employees are not satisfied with jobs ✓ Organizational citizenship behaviors - such as going the extra mile and willingness to do more than required ✓ Employee engagement - sense of belonging and connection with work and employer.
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Job satisfaction has a complex relationship with job performance ✓ Modest link between job satisfaction and performance and vice versa ✓ The margin graphic illustrates the relationship between job satisfaction and performance
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Emotions and moods are positive and negative states of mind that influence behavior ✓ Emotional Intelligence (EI) - ability to understand and manage emotions ✓ Emotions - strong feelings directed toward someone or something ✓ Moods - generalized positive and negative feelings or state of mind ✓ Mood contagion - influence of one's positive or negative moods onto others.
12.3 Questions for discussion suggested answers 1) Cognitive dissonance can be both a good or negative influence on us. It may be easier to display a positive attitude even though our internal feelings are not satisfactory or happy. In that case, communications may lack candor. In other cases, most of us encounter aspects of our jobs or responsibilities that we disdain on occasion. Displaying a “different” positive attitude ay be incongruent, but may be more effective if we conclude that it is simply not “a big deal.” 2) If a worker is satisfied but is performing at a low level, the best way to deal with such an employee is to discuss the performance with that employee. Then challenges and specific goals and deadlines for improved performance should be detailed and communicated clearly.
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3) It's an old saying that attitudes are contagious. Mood contagion certainly backs that up. A new supervisor should demonstrate the moods or attitudes that he or she would like to see mirrored back by employees.
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Teaching Notes In this section, ideas, exercises, and assignments are provided to assist you in integrating the concepts in Exploring Management for your students, especially the special features of the text. Management Live The Social Network is a wildly successful but mostly fictional account of Mark Zuckerberg and how Facebook came to be. Zuckerberg is certainly an interesting personality and serves as a great example as your discussion of chapter 12 progresses. Role Models It's hard to discuss Sir Richard Branson without using words like flamboyant, creative, ambitious and unique. This feature profiles his road to success and his big personality. In addition to the questions in What's the Lesson Here? Consider asking students to evaluate Branson's personality according to the Big Five Personality Traits and the Myers-Briggs Type Indicator. Ethics Check The Ethics Check feature begins with a sample letter inviting a student/applicant for a second interview that includes a round of personality tests. You Decide questions probe students opinions about whether they would consider this to be an invasion of privacy and if the results could be discriminatory if they don't specifically apply to the job. Further discussion topics for students could involve what personality traits they consider relevant to a management position, using Myers-Briggs Type Indicator. Facts to Consider This Facts to Consider feature profiles a survey about how American workers feel about their jobs. The results show that a total of 84% of workers were somewhat or completely satisfied with their work. The Your Thoughts questions probe student opinions about whether the economic crisis has an effect on those ratings. Manager's Library Seventy percent of women with children work and forty percent of them are the primary wage earner for their families. In Women Count, author Susan Bulkeley Butler asserts that women have behavioral advantages over men for management careers including being more compassionate, less ego-driven, better listeners, take fewer risks and a tendency to be consensus builders. In spite of these attributes, women are only 3% of Fortune 500 CEOs. Reflect and React questions focus on the challenges of being a woman in management and ways to increase representation in upper management. Explore Yourself In our earlier discussion of Sir Richard Branson, he was described as ambitious. Do your students see themselves as ambitious? Do they have the drive to be as successful as Sir Richard? Ambitious individuals have a high tolerance for stress. Students can evaluate their own stress tolerance by taking the Stress Test in the Skill-Building Portfolio. Following the assessment, ask students how they can increase their stress tolerance. Another interesting question may be whether it's even a good idea to increase their stress tolerance.
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Case The Case for this Chapter is Facebook: Social Networking is Big Business 1. Can effective communication be achieved via social networking sites such as Facebook? It might depend on the way the user utilizes the features of Facebook. In Chapter 12, communication is described as effective if the receiver accurately understands the sender's message. Channel richness, and communication richness could be interpreted as adding meaning to communication. If a Facebook user only posts updates, the channel richness would be low and the possibility of misinterpretation would be relatively high. This would make Facebook ineffective. Facebook allows posting longer messages than Twitter, and also allows posting photos. Actually, it allows posting lots of photos. This would allow for higher channel richness, therefore more effective communication. This leaves an opening for a lively discussion with students. If their Facebook page has a large number of "social" photos, would that give an accurate view of the student to a viewer such as a professor of prospective employer? Something to think about! 2. Do your believe that Facebook has had problems managing users' privacy or is this an instance of the selective perception of a few upset users? What influenced your answer? Every few months there seems to be controversy about a new Facebook policy regarding ownership of posted pictures, sharing of user data and the usage data collected by partners such as the games. Student's views will likely be dictated by recent events. 3. Sheryl Sandberg is certainly under a lot of pressure to bring a mature edge to Facebook. What are the most significant challenges that she most likely faces when communicating with her younger peers, and how would you advise her to best deal with them? Since she is new and quite a bit older than the founder and many employees, she's going to need to gain access to their thoughts and earn their trust in order to avoid "filtering" of information she needs from employees. She will seem more approachable if she adopts a "Management by Wandering/Walking Around" style. FURTHER RESEARCH—Find as much information as you can about Mark Zuckerberg. Does he have what it takes to lead Facebook at this stage in its life? Is he making the right choices in terms of “communicating” himself and his firm to the world? What kind of constructive feedback would you give him? There is no lack of information about Zuckerberg these days. The Social Network movie, settling the lawsuit and Facebook's imminent IPO all have created enormous interest. Suggested Team Exercise for Chapter 12 Break the class into teams and have the teams discuss various techniques or methods that individuals in the team have found to be successful in dealing with stress. Each team should develop a list of “tactics to deal with stress” based on their team discussions. After the teams have had sufficient time to develop their lists, have each team report and share their ideas with the rest of the class. Additional team exercise: Break the class into teams and ask the teams to consider each of the flowing communication scenarios and to discuss and summarize their answers to each scenario:
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1. You are the CEO of a company and, because of very poor sales due to the recent recession, have determined that you need to terminate 10% of your workforce as a cost control measure. How would you communicate this message to all employees in a large company with multiple locations? 2. You need to advise an employee who works in customer service that he or she is too abrasive with customers based on surveys that you have received. Where and how would you communicate this issue? 3. You are the Manager of Employee Benefits and want to communicate a change in the car mileage reimbursement rate from $.55 a mile to $.50 a mile for use of employees’ personal automobiles for company business. How would you do this? 4. You are the CEO of a pharmaceutical company and have just learned that the Food and Drug Administration has approved one of your drugs for use in cancer treatment. You need to advise your immediate executive staff. However this is very sensitive information. How would you do this?
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CHAPTER 13 Motivation Respect Unlocks Human Potential Chapter Objectives Chapter Thirteen reviews motivation and the various theories that researchers have developed regarding this topic. Each theory is explored, including potential benefits and limitations or challenges. The theories are organized into human needs, thought processes and decisions, and reinforcement and their impact on motivation. The objectives of Chapter 13 may be summarized as: 1. 2. 3. 4. 5.
To define motivation To distinguish between theories of motivation To review how human needs influence motivation to work To review how thought processes influence motivation to work To review how reinforcement influences motivation to work
Chapter Outline 13.1 How do human needs influence motivation to work? •
Motivation accounts for the level, direction and persistence of effort at work.
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Maslow described a hierarchy of needs topped by self-actualization ✓ Abraham Maslow’s developed the theory of hierarchy of needs. ✓ See Figure 13.1 for a depiction of the management opportunities found in Maslow’s hierarchy of needs. ✓ Lower order needs are physiological, safety, and social concerns ✓ Higher order needs are esteem and self-actualization ✓ Deficit principle states that a satisfied need is not a motivator of behavior ✓ Progression principle states that people try to satisfy lower level needs first, then move step-by-step up the hierarchy
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Alderfer’s ERG theory focuses on existence, relatedness, and growth needs ✓ Clayton Alderfer developed the ERG theory which collapses Maslow’s five needs into three: ➢ Existence (desires for physiological and material well-being) ➢ Relatedness (desires for satisfying interpersonal relationships) ➢ Growth (desires for continued psychological growth and development) ✓ Frustration-regression principle says that an already satisfied lower level need can be reactivated when a higher level need cannot be satisfied
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McClelland identified acquired needs for achievement, power, and affiliation ✓ David McClelland and colleagues identified three basic acquired needs that are central to understanding motivation: ➢ Need for achievement is the desire to do something better or more efficiently ➢ Need for power is the desire to control other people ➢ Need for affiliation is the desire to establish and maintain friendly and warm relations with other people ✓ There are also two forms of power need: ✓ The need for personal power is exploitative and involves manipulation for the pure sake of personal gratification ✓ The need for social power involves the use of power in a socially responsible way, one that is directed toward group or organizational objectives rather than personal ones
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Herzberg’s two-factor theory focuses on higher-order need satisfaction ✓ The Explore Yourself feature directs students to take the Two Factor Assessment in the Skill-building Portfolio. After the assessment, consider these discussion questions: ➢ How well does your current or a recent job provide for satisfier or hygiene factors as described by Herzberg? If students do not have jobs they can relate to, have them consider their educational experience in your class or college. ➢ How does this affect your motivation? ➢ How can these factors be modified to increase motivation and commitment? ✓ Frederick Herzberg developed the two-factor theory. Figure 13.2 illustrates the concept. ➢ Satisfier factors (motivator factors) are part of job content; sense of achievement, feelings of recognition, a sense of responsibility, the opportunity for advancement, and feelings of personal growth ➢ Hygiene factors (“turn off workers”; dissatisfier factors) are part of job context; working conditions, interpersonal conditions, interpersonal relations, organizational policies and administration, technical quality of supervision, and base wage or salary ✓ Job satisfaction cannot be increased by improving the hygiene factors; you will only get less dissatisfaction. You can only improve job satisfaction by improving the satisfier factors ✓ Job enrichment involves building into a job more opportunities for people to manage themselves and exercise self-control over their work. Job enrichment increases job satisfaction according to Herzberg
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The core characteristics model integrates motivation and job design ✓ Job design is the allocation of specific work tasks to individuals and groups ✓ Job enrichment increases the content of a job by adding opportunities for satisfying higher order needs (Maslow) by adding opportunities for planning and controlling work. Figure 13.3 illustrates the concept ✓ Five "core" job characteristics include" ➢ Skill variety
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➢ ➢ ➢ ➢
Task identity Task significance Autonomy Feedback from the job itself
13.1 Questions for discussion suggested answers 1) Yes, most humans want to be fulfilled doing whatever it is they are most skilled at and that makes them most happy. Very few are able to ever reach that pinnacle-but it is nevertheless a goal for most of us. 2) The need for achievement is a mostly positive force and can result in a healthy drive for meaningful accomplishment as well as contributions to society. Taken to extremes or used unethically, it can result in undesirable, even dangerous behavior. Ruthless dictators or dishonest CEOs or corrupt politicians are examples of drive combined with a lack of ethics that has negative consequences. For most individuals with ethics, excessive drive can lead to an unhealthy balance between career and personal life/family happiness. 3) Not everyone approaches work with the maturity or intellect necessary to desire more responsibility or self control in work. Young part-time workers and temporary workers among others may desire job simplification rather than job enrichment.
13.2 How do thought processes and decisions affect motivation to work? •
Equity theory explains how social comparisons can motivate individual behavior ✓ J. Stacy Adams developed this theory. The inset figure illustrates the concept ✓ Equity Theory says that employees continually compare their situations to others; any perceived inequities in those comparisons will motivate them to engage in behaviors which correct the inequities ✓ Perceived negative inequity creates a sense of anger; and causes employees to try and restore perceived equity to the situation, such as by reducing current work efforts to compensate for the missing rewards or by even quitting the job ✓ Perceived positive inequity is associated with a sense of guilt; and the individual restores perceived equity by increasing the quantity or quality of work, taking on more difficult assignments or working overtime
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Expectancy theory considers motivation = expectancy x instrumentality x valence ✓ Developed by Victor Vroom. The inset figure illustrates the concept. ✓ Motivation = Expectancy x Instrumentality x Valence ✓ Expectancy is a persons’ belief that working hard will result in achieving a desired level of task performance ✓ Instrumentality is a persons’ belief that successful performance will lead to rewards ✓ Valence is the value a person assigns to the possible rewards and other work-related outcomes
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✓ See Figure 13.4 which summarizes the management implications of expectancy theory •
Goal-setting theory says that well chosen and well set goals can be motivating ✓ Developed by Edwin Locke ✓ Goal-setting theory says that task goals can be highly motivating, but only if they are the right goals and if they are set in the proper way ✓ MBO can be a good example
13.2 Questions for discussion suggested answers 1) People are as different as snowflakes and their motives are equally complex. Some may see positive inequity figure that they deserve it and choose not to work any harder. Others will feel real guilt and work harder because they want to appear to earn the rewards of the positive inequity. Ask students what they would do if they felt a grade on a paper or case was overly generous. Would they work harder next time or not? Does it make a difference if others know the grade. 2) Expectancy is the belief that hard work will result in achieving a desired level of task performance. Low expectancy would indicate that a worker wouldn't believe that working hard would achieve the expected level of performance. This would likely create a worker that put forth a half-hearted effort because he or she didn't believe that working any harder would help. This may be pretty common for new employees learning a complex task, or someone learning to play an instrument or learning a new sport like snowboarding. In most of these cases, it takes a manager, teacher or coach to help develop expectancy in the discouraged newcomer. 3) It's very common to have goals established without input from workers. Deciding how to best accomplish the goals may be empowering and motivational. 13.3 How does reinforcement influence motivation to work? •
Operant conditioning influences behavior by controlling its consequences ✓ Law of effect says that people generally repeat behavior that results in a pleasant outcome and avoid behavior that results in an unpleasant outcome ✓ Operant conditioning is the process of is the process of applying the law of effect to influence behavior by manipulating its consequences ✓ Positive reinforcement strengthens or increases the frequency of desirable behavior by making a pleasant consequence contingent on its occurrence ✓ Negative reinforcement strengthens or increases the frequency of desirable behavior by making the avoidance of an unpleasant consequence contingent on its occurrence ✓ Punishment decreases the frequency of or eliminates undesirable behavior by making an unpleasant consequence contingent on its occurrence ✓ Extinction decreases the frequency of or eliminates undesirable behavior by making the removal of a pleasant consequence contingent on its occurrence ✓ See Figure 13.5 for a depiction of how to apply reinforcements strategies to influence work behavior.
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Positive reinforcement connects desirable behavior with pleasant consequences ✓ Law of contingent reinforcement states: for a reward to have maximum reinforcing value, it must be delivered only if the desired behavior is exhibited ✓ Law of immediate reinforcement states: the more immediate a reward after the desired behavior is exhibited, the greater the reinforcing value of the reward. Table 13.1 list guidelines for using these laws in the workplace. ✓ Shaping is the creation of a new behavior by the positive reinforcement of successive approximations to it ✓ Continuous reinforcement schedule administers a reward each time a desired behavior occurs ✓ Intermittent reinforcement schedule rewards behavior only periodically ✓ Generally, continuous reinforcement will elicit a desired behavior more quickly than intermittent reinforcement ➢ Behavior acquired under an intermittent schedule will be more permanent than will behavior acquired under a continuous schedule
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Punishment connects undesirable behavior with unpleasant consequences
13.3 Questions for discussion suggested answers 1) One of the concerns that many people have regarding operant conditioning is that it is, in fact, a manipulative methodology. Nevertheless, in certain situations, especially shortterm in nature, it is an effective technique. 2) Punishment is appropriate when an employee has performed poorly, endangered others, committed a crime, or other serious offenses or incidents. Progressive discipline policies apply punishment for unacceptable behavior in the workplace. 3) It is not likely that a manager or parent will only be able to use positive reinforcement. Humans will make mistakes and not always operate at perfectly or even at a high level.
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Teaching Notes In this section, ideas, exercises, and assignments are provided to assist you in integrating the concepts in Exploring Management for your students, especially the special features of the text. Management Live Many of us see ourselves as Mr. Incredible. Capable of greatness if our superpowers were only recognized and utilized. The big difference is that Mr. Incredible actually does have superpowers. The rest of us need to work with our mortal abilities and hopefully find a manager who knows how to motivate us to great feats. Turning back to our roles as managers, how will we find ways to motivate our own employees and keep them engaged? Their superpowers and attitudes are all different. How will we know what motivates them? You've come to the right place. Chapter 13 has some great theories that should bring out the superhero in most of our employees. Role Models Charlie Butcher is profiled as an extremely generous employer who shared his riches with employees after selling his family business. In addition to the questions in What's the lesson here, quiz students about whether Herzberg would consider the money distributed by Charlie as a satisfier or a motivator? Ethics Check In this Ethics Check feature, a worker opens a huge can of perceived inequity worms when she finds a list of confidential co-worker salaries in a photocopier. The You Decide questions focus on the ethics of sharing the information, but the application to chapter 13 don't stop there. Consider discussing: How does Equity Theory explain the worker's anger and depression upon finding out she earned less that workers she perceived as not working as hard as she does? If she enjoyed her job before she learned of the pay inequity, why did she lose motivation over the salary discrepancy. Does this disprove Herzberg's two-factor theory? Facts to Consider In the US and Europe, women lag behind men in upper level management positions and on corporate boards. In fact, Thailand leads the world with 45% of senior management positions being held by women as compared with only 15% in the U.S. The feature takes a look at how the problem is being faced in Great Britain and France. Your Thoughts questions probe reasons for the discrepancy. Manager's Library Author Daniel Pink makes some very interesting points about how we are motivated as workers in Drive. His findings that managers will find more success in motivating workers by appealing to intrinsic motivation by making work more interesting and creative and appealing to supervise their own work. This is a great application of Herzberg's two-factor theory of motivation. Several good videos of Pink discussing his findings are online including a humorous and relevant talk on www.ted.com http://www.ted.com/talks/lang/eng/dan_pink_on_motivation.html
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Explore Yourself The assessment for this Chapter is entitled “Two Factor Profile” The assessment tool is intended to help students determine the relative importance students place on motivation (satisfier) factors or hygiene (dissatisfier) factors in the workplace. Once students have completed the assessment, refer them back to Herzberg's two-factor theory and have them list the factors in the appropriate category in order of importance. Group or class discussion of results will follow. Case The case for this module is "Panera Bread - Positive Attitude Is a Recipe for Success". 1. How might consumers' perception of Panera's menu and atmosphere affect their dining experience? The menu and atmosphere support a perception of fast food or a bistro setting because of the counter service, serving food on trays and self-bussing of the tables. 2. Describe how fast food industry stereotypes might positively and negatively impact Panera. Perceptual distortions may interfere with our ability to observe individual differences. Customers that view Panera as fast food may limit their visits to the restaurant to lunch, breakfast and times when a quick meal is necessary. 3. What are Panera's competitive advantages? Can any of them be deemed "sustainable"? Competitive advantages include high quality food with fresh ingredients, a varied menu, casual atmosphere and wi-fi among others. Many find Panera to be an ideal place for business lunches and meetings because of the availability of these factors. They are certainly sustainable, but are also easy to imitate. FURTHER RESEARCH - See if you can find data reporting on how Panera's sales were affected by the recent economic downturn in the U.S. economy and if the effects were different in various regions of the country. Does this company have special strengths that help it deal better than others with challenges such as those posed by a declining economy? If location and class size allow, consider either having your class visit a Panera location or invite a Panera manager to speak to your class. Suggested Team Exercise for Chapter 13 Break the class into teams and have the teams to consider and develop responses to each of the following questions: 1. Can ‘fear’ motivate? Have you ever played a sport or been in a class where fear improved your performance? 2. You are a manager of a local fast food operation (such as Domino’s Pizza). You recognize that most of your employees are working to earn money for college or working only until they can find another job. (Turnover is very high in the fast food industry). Your boss, a regional manager, has given you authority to design programs to reduce turnover and help lengthen employee stays. What ideas would you submit and why? 3. You have just been hired as manager of a department in a new company. After watching employee performance after your first six months, you are surprised that one of your best supervisors, a female, is making $40,000 for the same position that a male counterpart (who is also performing his job well) with similar experience and skills, is making $50,000. Neither presumably knows what the other makes since pay is confidential (but
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you aren’t certain that employees don’t share such information). How would you handle this issue?
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CHAPTER 14 Teams and Teamwork Two heads really can be better than one Chapter Objectives Chapter Fourteen covers the topic of teams and their importance within organizations. They various types of teams are explored. The benefits as well as the potential pitfalls of teams are reviewed. Finally, ways to improve team effectiveness are examined, along with the variables that impact team performance. The objectives of Chapter 14 may be summarized as: 1. 2. 3. 4. 5. 6.
To differentiate the various types of teams in organizations To explain the advantages and disadvantages of teams To review how people and processes impact team effectiveness To examine what factors affect team performance To explain how to improve team performance To discuss how teams can improve job satisfaction
Chapter Outline 14.1 Why is it important to understand teams and teamwork? •
Teams offer synergy and other benefits to organizations and their numbers ✓ A team is a collection of people with complementary skills who work together to accomplish shared goals while holding each other mutually accountable for performance results ✓ Teamwork is people working together to accomplish a shared goal ✓ Synergy is the creation of a whole that exceeds the sum of its parts
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Teams often suffer from common performance problems ✓ Social loafing is the presence of “free-riders” who slack off and allow other team members to do the work ✓ To prevent social loafing: ➢ Make task assignments more interesting ➢ Keep group size small ✓ Other problems can be personality conflicts, differences in work styles, ambiguous agendas, or members who can’t or won’t do group work
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Organizations are networks of formal teams and informal groups ✓ A formal team is officially designated for a specific organizational purpose ➢ Department
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➢ Work units ➢ Teams ➢ Divisions ✓ An informal group comes from natural or spontaneous relationships among people ➢ Interest groups ➢ Friendship groups ➢ Support groups ✓ Organizations use committees, task forces, and cross-functional teams ✓ A committee brings together people outside of their daily job assignments to work in a small team for a specific purpose; the task agenda is specific and ongoing ✓ Project teams or task forces bring together people from various parts of the organization to work on common problems ✓ Cross-functional team has members from different functional units ✓ Employee-involvement team has members who meet on a regular basis to apply their expertise to continuous improvement ✓ Quality circle is a group of workers that meets regularly to discuss and plan specific ways to improve work quality •
Virtual teams are increasingly common in organizations ✓ The virtual team is a group of people who work together and solve problems through computer-mediated rather than face to face interactions
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Self-managing teams are a form of job enrichment for groups ✓ Self-managing teams - have authority to make decisions about how they share and complete their work. ✓ Figure 14.1 illustrates the concept
14.1 Questions for discussion suggested answers 1) Teams can perform well under shorter deadlines, as long as the deadlines are realistic. Most teams seem to plan and organize better under some targeted deadline that produces modest pressure to get things done and goals accomplished. Exceptions would be for complex projects such as systems integration, construction or surgery where rushing may contribute to mental judgment errors; or creative teams that need for freedom. 2) Interviews and important customer sales or service visits are examples of situations that are more effective when done face-to-face. This allows for improved personal interaction, as well as reading body language. Face to face allows for more "channel richness". 3) Most people do not want to confront others-it is not a comfortable feeling for many people. This is particularly true if the parties are likely to have ongoing contact at work or other daily interactions. 14.2 What are the building blocks of successful teamwork?
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Teams need the right members and other inputs to be effective ✓ See Figure 14.2 for a depiction of the foundations of team effectiveness ✓ An effective team should be accomplishing three output goals – task performance, member satisfaction, and viability for future action ✓ Membership composition is the mix of abilities, skills, backgrounds, and experiences of the members ✓ Inputs that affect team performance ➢ Team size - teams larger than 6-7 members can be difficult to manage ➢ Nature of the task - complex tasks require more information exchange and interaction than simple ones ➢ Organizational setting - the key issue is support in information, resources, technology, rewards, and even physical space
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Teams need the right processes to be effective ✓ Team process is the way the members actually work together as they transform inputs into outputs
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Teams move through different stages of development ✓ Forming stage-initial task orientation and interpersonal testing ✓ Storming stage-period of high emotionality and conflict ✓ Norming stage-members begin to coordinate their efforts as a working unit and tend to operate with shared rules of conduct ✓ Performing stage-team is more focused, organized, and well functioning ✓ Adjourning stage-members prepare to achieve closure and disband, ideally with a sense that they have accomplished important goals ✓ Figure 14.3 illustrates criteria for assessing the maturity of a team.
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Teams performance is affected by norms and cohesiveness ✓ Norms are behaviors expected of team members; rules or standards that guide behaviors ✓ Performance Norm is the amount of effort expected by team members. ✓ Cohesiveness is the degree to which members are attracted to and motivated to remain on a team ✓ Figure 14.4 depicts how norms and cohesiveness impact team performance
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Team performance is affected by task and maintenance roles ✓ Task activities contribute directly to the team’s purpose ✓ Maintenance activities support the emotional side of teams as an ongoing social system ✓ Distributed leadership makes every member continually responsible for recognizing and taking actions when task or maintenance activities are needed ✓ Disruptive behaviors such as aggressiveness, excessive joking and non-participation cause problems and limit effectiveness
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Team performance is affected by use of communication networks
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✓ Decentralized communication networks - all members communicate directly with each other ✓ Centralized communication networks - when members divide up the work and then simply coordinate the final results ✓ Restricted communication networks exist when subgroups fail to adequately communicate with one another, become antagonistic and restrict communication. ✓ See Figure 14.5 for a depiction of the communication networks
14.2 Questions for discussion suggested answers 1) Teams that cannot get past the storming stage usually complete the work quickly and poorly to get “it over with.” Some teams may dissolve altogether. 2) • Act as a positive role model. • Reinforce the desired behaviors with rewards. • Control results by performance reviews and regular feedback. • Train and orient new members to adopt desired behaviors. • Recruit and select new members who exhibit the desired behaviors. • Hold regular meetings to discuss progress and ways of improving. • Use team decision-making methods to reach agreement. 3) Sometimes, employees can be so cohesive they “protect” each other and resist change that may seem to adversely affect another member of the group. They may also, intentionally or unintentionally, shield the manager from “bad news” and by so doing, lose opportunities for improvement. Groupthink is more likely to occur in cohesive teams. 14.3 How can managers create and lead high-performance teams? •
Team building helps team members learn to better work together ✓ Team building is a set of collaborative activities to analyze how well a team functions and make constructive changes to increase team effectiveness ✓ Decision making is a process of selecting a course of action from alternatives ✓ Consensus means that after thorough discussion, most team members encourage one decision alternative and the other members agree to support it
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Teams performance suffers when groupthink leads to bad decisions ✓ Groupthink is the tendency for members of highly cohesive groups to lose their critical evaluative capabilities ✓ Table 14.1 lists symptoms of groupthink
✓ Team performance benefits from good conflict management ✓ Conflicts can occur over substantive or emotional issues ✓ A conflict is a disagreement among people
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✓ Substantive conflict - involves disagreements over such things as goals and tasks, the allocation of resources, rewards, policies and procedures, and job assignments ✓ Emotional conflict - involves disagreements from feelings of anger, distrust, dislike, fear, and resentment, as well as relationship problems ✓ Figure 14.6 illustrates the five common styles of conflict management and how they relate to cooperation and assertiveness ✓ Avoidance is when everyone withdraws and pretends that conflict doesn’t really exist, hoping that it will go away ✓ Accommodation plays down differences and highlights similarities and areas of agreement ➢ Both accommodation and avoidance create lose-lose conflict, where no one achieves his or her true desires ✓ Competition is when one party wins through superior skill or outright domination ✓ Compromise occurs through trade-offs ✓ Both compromise and competition are forms of win-lose conflict, where each party strives to gain something at the other party’s expense ✓ Collaboration tries to find and address the problem and reconcile the real differences underlying a conflict ➢ Collaboration is the most effective conflict resolution style and is a form of winwin conflict, that tries to resolve things to the mutual benefit of all conflicting parties ✓ Conflict Resolution removes the reasons for the conflict 14.3 Questions for discussion suggested answers 1) Unanimity involves everyone agreeing to a course of action. Consensus means that everyone has participated in the discussion, but not all agree on a first choice of action. The minority agrees to support the choice of the majority. 2) Groupthink exists in highly cohesive teams out of a desire for unanimity. Pre-cohesive teams may arrive at a unanimous solution because some group members are not committed enough to honestly contribute (social loafing). 3) When a problem is minor with few or no consequences, it is likely “not worth it.” This is particularly true when it involves a person who may be experiencing personal issues such as divorce, a death in the family, or serious illness. Another reason to avoid a conflict may be if more information will be available at a future point that may resolve the issue.
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Teaching Notes In this section, ideas, exercises, and assignments are provided to assist you in integrating the concepts in Exploring Management for your students, especially the special features of the text. Management Live In the television show Lost, a group of strangers survive a plane crash on a seemingly deserted island and learn the benefits of working as a team. Fans of the show will probably agree that the cast never really completed the stages of team development, in fact, it could probably be argued that they never made it past the storming or norming stage in the interest of good TV drama. Students are directed to examine a recent team experience and assess the existence of teamwork. These examples will provide many discussion topics as you progress through the chapter. Role Models Jeff Bezos, founder of Amazon.com has the philosophy that teams should be small enough that they can be fed by two pizzas. If two pizzas aren't enough, the team is too big. Bezos has many other thoughts on corporate culture and teamwork, and many of them are captured on videos that students can find online. Consider encouraging students to come up with a relevant video to share with the class as part of your discussion of teamwork. Ethics Check Three scenarios with common themes of individual behavior in teams are presented that will provide fertile ground for student comments and discussion about their personal experience in teams. You Decide questions probe students' views of social loafing in a team environment. Facts to Consider Statistics from a worldwide survey of workers' views on meetings, productivity and communication and their answers don't speak very well for managers who hold lots of meetings. Your Thoughts questions ask students to examine their personal experience with meetings and their personal behavior. Manager's Library Author Jeff Howe examines the power of the internet to create virtual teams of thousands to influence everything from top news stories, creating Wikipedia to micro loans to entrepreneurs in his book, Crowdsourcing. Reflect and React questions probe students' thoughts on the uses, ethics and leadership of crowdsourcing Explore Yourself The assessment for this Chapter is entitled “Team Leader Skills”. The assessment tool is intended to help students identify and understand their strengths and weakness on seven dimensions of team leadership. After taking the assessment, ask students to list their highest two scores and lowest two scores. In teams of 3-4, ask them to discuss how they might improve their scores.
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Case The case for this Module is "Pixar - Animated Geniuses" 1. How do you think the changes that John Lasseter and Edwin Catmull made to Disney's animation department affected that team's effectiveness? Effective teams achieve high levels of task performance, membership satisfaction and future viability. Lasseter and Catmull likely brought changes to Disney from Pixar that helped productivity and task performance. Whether all team members were initially satisfied by the changes isn't mentioned and is doubtful, considering most people's views of change. The ultimate outcome was successful. 2. #2 Pixar relies heavily on creative people who are motivated to do their best under production schedules that can sometimes be highly stressful. How does this create challenges in maintaining effective team performance? Creativity as personality trait isn't necessarily a challenge to teamwork, in fact it may be an asset, but some of the challenges it may present would include communication, difficult decision-making and personality conflicts, and possibly even a lack of diversity. Stressful schedules may compress the time frame necessary to go through the stages of team development, possibly delaying the time it takes the team to arrive at the Performing stage. Team leadership may also be difficult to establish. 3. #3 Pixar struggled in its early days. Steve Jobs was tempted to sell it when it was necessary to invest more and more money to keep it afloat until it finally achieved success. How did his actions and the events that contributed to Pixar's success increase team cohesiveness? Team cohesiveness is influenced by team size, agreement on goals, interaction between team members, rewarding team outcomes, competition with other teams and similar characteristics of team members. All seem to be present in Pixar's journey to success. 4. Further research—Some predict that Pixar’s best days are over and that it will be hard for it to stay creative as a Disney business. Find out how Pixar is now doing. In what ways is its current performance consistent with or different from the predictions, and why? Pixar has had some recent box office successes. Challenge students to try to find out what is in the works for their next big movie. Suggested Team Exercise for Chapter 14 Break the class into teams and have the teams to consider and develop responses to each of the following questions: 1. Today online learning is growing at a very fast rate. What type of courses do you think are best suited for online learning? Which courses are least suited for online learning? Explain your reasoning for each answer. 2. What are the limitations of online learning as contrasted with traditional “classroom learning”? What are the advantages of it?
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CHAPTER 15 Communication Listening can be the key to understanding Chapter Objectives Chapter Twelve reviews communications as a process together with its various elements of sender, message, receiver, channels, and filtering. Additionally, various ways to improve communication in terms of physical conditions, technology or listening are summarized. Finally, cross cultural communications are explored. The objectives of Chapter 15 may be summarized as: 1. 2. 3. 4. 5. 6. 7.
To define communications To review the various parts of the communication process To describe the importance of communications to effective management To explore filtering and how it can impact communications To review the effects of alternative office design upon communication To evaluate the influence of technology in communication To review cross cultural communication and how sensitivity and etiquette can enhance this particular type of communication
Chapter Outline 15.1 What is communication and when is it effective? •
Communication is a process of sending and receiving messages with meanings attached ✓ Communication is the interpersonal process of sending and receiving symbols with messages attached to them ✓ Involves a sender encoding an intended message into meaningful symbols, both verbal and nonverbal; he or she sends the message through a communication channel to a receiver; the receiver then decodes or interprets the meaning; when present, feedback reverses the process and conveys the receiver’s response back to the sender ✓ See Figure 15.1 for a depiction of the communication process
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Communication is effective when the receiver understands the sender’s message ✓ Messages aren't always interpreted by the receiver in the way the sender intended. ✓ Effective communication takes place when the receiver fully understands the message in the way the sender intended.
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Communication is efficient when it is delivered at low cost to the sender
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Efficient communication is when communication occurs at minimum cost in terms of resources expended ✓ Cost includes time, expense and convenience
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Communication is persuasive when the receiver acts as the sender intends ✓ Persuasive communication is getting someone else to accept, support, and act consistent with the sender’s message ✓ Credible communication-trust, respect, and integrity in the eyes of others
15.1 Questions for discussion suggested answers 1) It would be hard to find a job that does not include "effective communication skills among the requirements. The ability to communicate information and ideas is essential to success in the workplace. This may be particularly true in situations where distance is a factor and face-to-face communication is minimal such as telecommuters or online communication 2) Twitter would be a good example of a communication that isn't very effective because it limits the number of characters allowed, but is very efficient because it can be sent quickly and can be accessed immediately. If more information is necessary, a more effective medium can be used such as calling the sender on the phone, speaking in person or sending an e-mail. 3) Credibility takes place when a sender has the trust and respect of the receiver. Students will have many ideas about how to earn trust and respect. At the foundation of most responses will be the fact that a track record of honest and sincere communication builds trust and respect and eventually, credibility. 15.2 What are the major barriers to effective communication? •
Poor use of channels makes it hard to communicate effectively. ✓ Noise is anything that interferes with the communication process ✓ Figure 15.2 illustrates the concept with a list of several distractions that are considered "noise". ✓ Learning activity - Ask students to make a list of "noise" that interferes with the communication process in your classroom. Their list will may include: environmental noise, texting, Facebook on laptops, neighbors talking, hunger, listening in a second language, faculty speaking in a boring, monotone way . . . . ✓ Communication channel is the medium used to carry a message ✓ Channel richness is the capacity of a communication channel to effectively carry information ✓ Inset illustration on illustrates the concept with a continuum of low richness media to high richness media.
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Poor written or oral expression makes it hard to communicate effectively
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✓ Communication needs to be clear to be understood. Most managers need to practice written communication and presentation skills •
Failure to spot nonverbal signals makes it hard to communicate effectively ✓ Nonverbal communication takes place through gestures, expressions, posture and use of interpersonal space. ✓ Mixed messages result when words communicate one message and actions, body language
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Status differences make it hard to communicate effectively ✓ Filtering is intentional distortion of information to make it more favorable to the recipient ✓ Unpleasant information is minimized or eliminated
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Physical distraction make it hard to communicate effectively ✓ Physical distractions can be avoided or minimized by planning the message to minimize interruptions. Most of us don't multi-task effectively when communicating.
15.2 Questions for discussion suggested answers 1) Text is a low context medium, but it is very inexpensive. That means that it is not very effective, but very efficient. Messages that require high effectiveness would not be a good choice for text. An example might be anything that might need clarification with two way communication, or a complex message about a sensitive subject, like a firing, discipline or even compliment. This might be a tough sell to students that feel that texting can convey about anything. 2) A great idea would be to take a college writing or speech class. If that isn't an option, reading articles, going to workshops, joining an organization like Toastmasters, taking a Dale Carnegie class or even reading this chapter would be a good start. 3) A manager that is approachable and displays emotional intelligence will find that direct reports are much more comfortable in presenting information of any kind. A policy of "Management by Wandering/Walking Around (MBWA)" will help employees feel that the manger is accessible and approachable. 15.3 How can we improve communication with people at work? •
Active listening helps people say what they really mean ✓ Active listening is the process of taking action to help someone else say what he or she really means ✓ Rules for better listening 1) Listen for message content 2) Listen for feelings 3) Respond to feelings 4) Note all cues
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5) Paraphrase and restate •
Constructive feedback is specific, timely, and relevant ✓ Feedback is the process of telling other people how you feel about something they did or said, or about the situation in general ✓ Tips to Remember box includes ideas for communicating feedback effectively
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Office spaces can be designed to encourage interaction and communication ✓ Proxemics is the study of the way we use space ✓ Physical distance between people conveys varying intentions in terms of intimacy, openness, and status as they communicate with one another
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Transparency and openness ensure that accurate and timely information is shared ✓ Communication transparency involves being honest and openly sharing accurate and complete information. ✓ Open book management provides employees with accurate information about the employer's financial status
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Appropriate use of technology can facilitate more and better communication ✓ E-mail, text, and social networking communication may or may not be appropriate in the organization or circumstance. Know your audience and plan the best medium for the message ✓ Electronic grapevine uses technology to transmit information around informal networks inside and outside organizations ➢ Some organizations monitor employee communication
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Sensitivity and etiquette can improve cross-cultural communication ✓ Ethnocentrism is a major source of intercultural difficulties ✓ Ethnocentrism is the tendency to consider one’s culture superior to any and all others ✓ Cultural etiquette is the use of appropriate manners and behaviors when communicating with people from other cultures
15.3 Reflect/React Suggested Answers 1) Most people do not listen to message content. This can occur because they are formulating a response or are distracted. 2) MBWA cannot be the sole source of information for a manager. It may contain employee bias or error. But MBWA is a very effective tool for building trust and communication and credibility with employees. 3) The desk should face visitors as they enter through the open door; the environment should be at least comfortable, if not inviting-a side chair would be helpful in this regard. A small conference table either round or oval in design would enable open communication.
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Teaching Notes In this section, ideas, exercises, and assignments are provided to assist you in integrating the concepts in Exploring Management for your students, especially the special features of the text. Management Live In the Devil Wears Prada, Andy (Anne Hathaway) learns how to survive in the seemingly cutthroat worlds of high fashion and publishing with possibly the worst boss in either world, Miranda Priestly (Meryl Streep). The communication and networking skills she learns not only help her survive, but she learns to excel at them. Students may find that making their way into a management career will require learning new communication and networking skills. A few may have already experienced the pressure of learning communicate in a world in which they do not feel comfortable. Discussion questions for students: Is it necessary to change the way you communicate to find success? How will you find out what changes are necessary? Role Models Although they both work in fashion, the fictional Miranda in the Devil Wears Prada and the very real Linda Heasley, CEO of The Limited couldn't be more different. In addition to the questions listed in What's the Lesson Here? Consider asking students: How does Heasley encourage effective and efficient communication? How does Heasley seem to reduce "noise" that enters the communication process? Ethics Check Catherine Sanderson is one of the growing number of employees that have lost their jobs because they discussed work in their blogs. The questions in You Decide ask readers to compare blogs to other situations that question the ethics of sharing work experiences with the general public. How does the situation differ when viewed from the perspective of employer versus the employee perspective? To add a little educational controversy: What if it was a student blogging about what goes on in class or posting comments about a professor on ratemyprofessor.com? Would it be any different if professors shared their experience about students on a blog? Facts to Consider Do employers have the right to track employee internet use on the job? Yes and they frequently do. This feature shares some statistics on employer monitoring of employees and the disciplinary actions taken. This is a great opportunity to discuss the policies of student's employers or of the college. Manager's Library Teamwork is criticized as not living up to our managerial expectations in Collaboration by Morton Hansen. Rather than give up on teamwork, Hansen suggests that the problem lies in our
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reluctance or inability to communicate effectively in a team and suggests that managers appreciate these problems and work to overcome them. Reflect and React questions ask students to relate the communication barriers described by Hansen to their own experience in teams. Explore Yourself Communication and networking skills are valuable tools for career success as we've discussed. This Explore Yourself feature suggests that students take the Feedback and Assertiveness assessment in the Skill-Building Portfolio. Discussion may follow on the value of these abilities to communication and networking. Case Twitter: Redefining Communication Discussion Questions 1. Do you think Twitter’s 140-character limit for tweets is a barrier to effective communication? Why or why not? Yes, the short nature of a tweet limits its effectiveness. It's certainly a very efficient medium due to the low amount of time or energy it takes to send or read a 140 character tweet, but it is low in effectiveness due to the low channel richness and ample opportunity for "noise" to interfere in the form of getting lost in other messages or distracted readers not getting or misunderstanding the message. Also, the tendency to shorten words in a tweet may be misunderstood. 2. For what kinds of messages would Twitter be an appropriate communication channel? Messages requiring efficient communication that isn't very effective, such as notices that are easily understandable and require little feedback. 3. How could Twitter improve communication within an organization? It could be used as reminders about things like available training or to refer employees to the company website for more detailed information. 4. FURTHER RESEARCH Imagine you have been tasked with analyzing the “official” tweets of a competing company in order to discern their social media strategy. Choose a company with a Twitter presence and select fifty consecutive tweets to analyze. What is the company attempting to communicate with its tweets? Do they tend to be public or intended for individuals? What proportion of their tweets are retweets? Do they tweet Twitter-only deals or specials? Based on this analysis, how would you define this company’s social media strategy? Does your college use Twitter? Consider analyzing the effectiveness of the college's social media policy. Suggested Team Exercise for Chapter 15 Break the class into teams and ask the teams to consider each of the flowing communication scenarios and to discuss and summarize their answers to each scenario: 1. You are the CEO of a company and, because of very poor sales due to the recent recession, have determined that you need to terminate 10% of your workforce as a cost
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control measure. How would you communicate this message to all employees in a large company with multiple locations? 2. You need to advise an employee who works in customer service that he or she is too abrasive with customers based on surveys that you have received. Where and how would you communicate this issue? 3. You are the Manager of Employee Benefits and want to communicate a change in the car mileage reimbursement rate from $.55 a mile to $.50 a mile for use of employees’ personal automobiles for company business. How would you do this? 4. You are the CEO of a pharmaceutical company and have just learned that the Food and Drug Administration has approved one of your drugs for use in cancer treatment. You need to advise your immediate executive staff. However this is very sensitive information. How would you do this?
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CHAPTER 16 Diversity and Global Cultures There are new faces in the neighborhood Chapter Objectives Chapter Sixteen provides a definition and review of the concepts of diversity and global and organizational cultures. This Chapter also examines culture “shock,” bias, and ways in which cultures vary. The objectives of Chapter 16 may be summarized as: 1. 2. 3. 4. 5.
To define diversity To explain culture, both organizationally and globally To explore bias To explain and evaluate varying cultures To define cultural shock and cultural intelligence
Chapter Outline 16.1 What should we know about diversity in the workplace? •
There is a business case for diversity ✓ Diversity is good for businesses-a potential source of competitive advantage ✓ IBM attributes growth in sales to minority-owned businesses and women-owned smaller businesses to an increased presence of women and minorities in its management ranks ✓ Research company Catalyst says that companies with a greater percentage of women on their boards outperform those whose boards have the lowest female representation
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Inclusive organizational cultures value and support diversity ✓ Inclusivity-the degree to which an organization is open to anyone who can perform a job, regardless of race, sexual preference, gender, or other diversity attribute ✓ A truly diverse culture or climate is one that is rich in beliefs, values and expectations ✓ Multicultural organization - based on pluralism and operates with inclusivity and respect for diversity ✓ See Table 16.1 for “Characteristics of a Multicultural Organization”
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Organizational subcultures can create diversity challenges ✓ Organizational subcultures are informal groupings of person with shared identity ➢ Can form around such things as: • Occupations • Ethnicity • Religion
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• Gender • Generations ➢ Can create diversity challenges ➢ May be students at school who group around their majors ✓ Ethnocentrism is the belief that one’s membership group or subculture is superior to all •
Minorities and women suffer diversity bias in many situations ✓ Glass Ceiling is a real barrier to career advancement-not publicized barrier that acts as a limit to women and minority members advancing into higher positions ✓ Figure 16.1 illustrates the concept ✓ Biculturalism is the display of majority culture characteristics that seem necessary to succeed in the work environment
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Managing diversity should be top leadership priority ✓ Margin figure illustrates continuum of leadership approaches to diversity described by R. Roosevelt Thomas ✓ Affirmative action commits the organization to hiring and advancing minorities and women ✓ Valuing diversity commits the organization to education and training programs designed to help people better understand and respect individual differences ✓ Managing diversity is always seeking ways to make an organization truly multi cultural and inclusive
16.1 Questions for discussion suggested answers 1) Possible subculture groups students may observe include ethnic groups, religious groups, men, women, non-traditional students and foreign students. Interest groups such as students with different majors, fans of anime, theater, video games, athletes... 2) Leaders of organizations need to proactively support and articulate the very real benefits of diversity – its benefits to new products and services, stronger global sensitivity resulting in more markets and customers, and a learning opportunity for employees. The message needs to be, much like attention to new products or processes, diversity is integral to the company’s strategic success. 3) Existence of an affirmative action policy alone may not be evidence that an organization has truly committed to a proactive diversity policy. In some situations, such policies follow years of poor practices resulting in problems necessitating such policies. The Los Angeles Police force is such an example. One of the key issues in the Rodney King beating “fallout” was an under-representation of minorities on the force relative to the Los Angeles population proportions. Affirmative action may initially have been instilled as a compliance strategy to correct long-term issues. True integration and acceptance of diverse cultures and employees within a workforce may take a much longer time for effectiveness. 16.2 What should we know about diversity among global cultures?
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•
Culture shock comes from discomfort in cross-cultural situations ✓ Culture shock is feelings of confusion and discomfort when in or dealing with an unfamiliar culture ✓ Stages of adjustment to a new culture include ➢ Confusion ➢ Small victories ➢ Honeymoon ➢ Irritation and anger ➢ Reality
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Cultural intelligence is the capacity to adapt and adjust to foreign cultures ➢ High cultural self-awareness and flexibility ➢ Willingness to learn from what is unfamiliar; modification of behaviors to act with sensitivity to another culture’s ways
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The “silent” languages of cultures include context, time, and space ✓ High-context cultures - what is said or written may convey only part of the real message • Body language, physical setting, and non verbal signals important ✓ Low-context cultures - most communication tales place via the written or spoken word (U.S., Canada, and Germany) ✓ Monochronic cultures - one in which people do things one at a time ✓ Polychronic cultures - one in which people try to work on many different things at once, perhaps not in any particular order (Egypt) ✓ Proxemics—the varying ways people use personal space to communicate
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Hofstede mentions five value differences among national cultures ✓ See Figure 16.2 for a depiction of these ✓ Power distance is the degree to which a society accepts or rejects the unequal distribution of power among people in organizations and the institutions of society ✓ Uncertainty avoidance the degree to which a society tolerates risk and uncertainty ✓ Individualism-collectivism is the degree to which a society emphasizes individuals and their self-interests ✓ Masculinity-femininity is the degree to which a society values assertiveness and materialism rather than feelings, relationships and quality of life ✓ Time orientation is the degree to which a society emphasizes short-term or longterm goals ✓ Ecological fallacy is acting with the mistaken assumption that a generalized cultural value applies equally and always to all members of the culture
16.2 Questions for discussion suggested answers 1) Religion could be considered a silent language. An example would be Muslims washing their feet which may not be understood by non-Muslims. Religions also involve many rituals and gestures which may be misinterpreted.
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2) Cultures in the United States and the Middle Eastern cultures differ greatly on the dimension of in-group collectivism. The Middle East is high on this measure, meaning that people there tend to be much more loyal and cohesive toward families and organizational memberships. The United States culture ranks low on this measure. Another key difference would be the role and dress of females in each country. The Middle East scores low on gender egalitarianism. 3) With advances in the speed and quality of technology and communications, people globally are becoming increasingly exposed to other countries’ cultures and practices. An example in the United States is the homogenization of shopping malls and the seeming disappearance of regional accents.
Teaching Notes In this section, ideas, exercises, and assignments are provided to assist you in integrating the concepts in Exploring Management for your students, especially the special features of the text. Management Live Finding Forrester explores the nature of racism and perceptions. Since the movie is about a minority college student and the perceptions others have of him because of his race and fact that he is a star basketball player. Students are challenged to examine their level of diversity maturity, the ability to respect and work with others who are of a different ethnicity or culture. This is an opportunity for a discussion of how your students view themselves and others they perceive as different. This works well with Questions for Discussion #1, which asks students to determine which subcultures exist at your school and how they affect relationships. Role Models David Segura is an American success story of immigrant parents. He's the founder of VisionIT, a technology consulting company. He feels that the Hispanic population is underrepresented in the technology industry. Students are asked if there are examples in your local community of people who value diversity as a business advantage. Questions for class discussion (or an assignment): • Christine Rice, Segura's sister and partner in VisionIT is quoted as saying "It's been a tremendous journey. Being an entrepreneur takes tremendous effort. Nothing is easy." Understanding that fact, would you consider becoming an entrepreneur? What would you consider to be the most difficult part? • Rice goes on to say "VisionIT is a firm of much diversity and we are showing that a company is at its best when it fully utilizes the talents of all backgrounds and ethnicities." What would you consider to be the strongest advantages of diversity in a growing company? Ethics Check
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Buying Fair Trade products is a noble goal of many, but it isn't always convenient. This feature profiles Fair Indigo, fashion company that guarantees that the products are made by people who are paid a fair wage. Students may complain about retailers who use overseas manufacturers with abusive labor practices, but are they willing to pay more for a fair-trade product? Does convenience outweigh fairness? Facts to Consider This feature provides information on employee morale in countries around the world. These questions may be used in class or online for discussion in addition to the questions listed in the "Your Thoughts?" section. • Is it possible that a country with a high employee morale ranking might have a lower standard of living and per capita income than a country with a higher morale ranking? How might this happen? • What do you believe would need to happen for the United States to climb in the rankings? Manager's Library Half the Sky is taken from an ancient proverb that credits women with holding up half the sky. The trouble is, in China and many other countries, women are exploited in the workplace and in society. The book explores the plight of poor and uneducated women and the circumstances they live in which can be considered nothing but tragic. The authors of Half the Sky encourage us to recognize the injustice these women face and work to eliminate it. Consider showing your students the website at www.halftheskymovement.org and challenge them to find ways to get involved. Reflect and React questions probe students' view on the role of business in helping eliminate global "gendercide." Explore Yourself The assessment for this Chapter is entitled “Diversity Awareness.” The assessment tool is intended to help students reflect on their own sensitivity to diverse people. The questions lend themselves to an interesting class discussion after students have completed the assessment. Case Snapshot The Case for this Chapter is "Toyota - Looking Far into the Future." 1. How might a cell phone manufacturer, an elementary school and the local post office each benefit from Toyota’s concept of kaizen? "Kaizen" or continuous improvement has been adopted by many organizations, so the phone manufacturer, post office and elementary school examples aren't too farfetched. All would benefit from higher customer satisfaction and dependability rankings. 2. Do you believe that a U.S. automaker would keep auto assembly employees on the payroll when the line is stopped? Use Hofstede's five dimensions of value differences to explain your answer. It's quite possible. Ford and GM have changed their ways to adapt to competition.
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Chrysler is actually owned by Fiat, the UAW, the US and Canada and is working hard to adapt as well. Hofstede's five dimensions include Power distance ,Uncertainty avoidance, Individualism-collectivism, Masculinity-femininity, and Time orientation 3. Does Toyota appear to value its human resources more than its U.S. rivals? Is this a result of Toyota’s business philosophy or its cultural values? Yes and both. Toyota has made a bold statement of values when they refuse to lay off employees. This is an extension of how they treat employees in Japan. This would be an interesting concept for students to research. The decision not to lay off employees is a result of their cultural values (earlier comments) and a business philosophy that allows them to stay union free. 4. FURTHER RESEARCH—Toyota isn’t alone as a major Asian competitor to the U.S. automakers. Do some investigation; who else is in the picture and what countries are they from? Are the other Asian automakers using operations techniques and values similar to those found at Toyota, or are they bringing new ones into play? Encourage students to investigate the companies and their strategies, not just the new car models that foreign companies produce. Suggested Team Exercises for Chapter 16 Community Involvement Exercise Break the class into teams of three or four and ask each group to identify how many “cultures” and/or “subcultures” are in their group? These may be related to ethnic, religious, age, gender, etc. differences. Have them develop a list and then share it with the entire class. Ask them to discuss how may in their group can speak and read more than one language? Another question would be to ask students how many learned English as a second language. Compare the number of languages spoken by native English speakers versus the number spoken by those who learned another language first. Ask them to summarize the implications of their findings as they apply to a manager's role.
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CHAPTER 17 Globalization and International Management Going global isn’t just for travelers Chapter Objectives Chapter Seventeen provides a review of the varying ways in which business is conducted internationally. This Chapter also reviews the impact of varying laws and politics and their effect on business risks. Also included is the definition and review of the multinational corporation and the potential controversies such multinational corporations generate. Finally, the various areas of planning, organizing, leading and controlling are reviewed. The objectives of Chapter 17 may be summarized as: 1. 2. 3. 4. 5.
To explain the relationship of Globalization and the global economy To review and explain methods of doing business globally To explore the impact of different legal and political systems on international business To explain and examine the facets of multinational corporations To review the various management functions as they are performed within the context of a multinational corporation
Chapter Outline 17.1 How does globalization affect international business? •
Globalization involves the growing interdependence of the world's economies ✓ Global economy - an economy that is worldwide; one in which resource supplies, product markets , and business competition are worldwide ✓ Globalization - process of growing interdependence among elements of the global economy ✓ Insourcing - creation of domestic jobs by foreign employers • 1 of 20 persons in Ohio is working for a foreign firm • Outsourcing - shifts local jobs to foreign locations to take advantage of lower wages, infrastructure, educated workforce or government support • Figure 17.1 illustrates the path that a t-shirt takes from the point the cotton is grown in Texas to its purchase in Florida by author Pietra Rivoli in The Travels of a T-Shirt in the Global Economy. The t-shirt eventually ends up as used clothing in a market in Tanzinia. The people, countries and economies it touches make for interesting reading.
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Globalization creates a variety of international business opportunities ✓ International business - conducts for-profit transactions of goods and services across national boundaries. ✓ Reasons a business may "go international"
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➢ ➢ ➢ ➢ ➢ ➢ ➢
Profits Customers Suppliers Capital Labor Risk Economic development
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International business is done by global sourcing, import/export, licensing and franchising ✓ Global sourcing is when a business purchases materials, manufacturing components, or services from around the world ✓ Exporting is selling locally made products in foreign markets ✓ Importing is buying foreign-made products and selling them in domestic markets ✓ Licensing agreements occur when a foreign firm pays for the rights to make or sell another company’s products in a specified region ✓ Franchising is when a foreign firm buys the rights to use another’s name and operating method in its home country ➢ Often used in the fast food restaurant business
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International business is done by joint ventures and wholly owned subsidiaries ✓ A joint venture is a co-ownership arrangement in which the foreign and local business agree to pool resources, share risks, and jointly operate the new business ✓ A global strategic alliance is an arrangement in which each partner hopes to achieve through cooperation things they couldn’t do or would have a hard time doing alone ➢ Method used in China by many automakers ✓ A foreign subsidiary is a local operation completely owned and controlled by a foreign firm ➢ Often very expensive and therefore entails more risk ✓ Greenfield venture - foreign subsidiary is established after firm has experience in joint ventures
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International business is complicated by different legal and political systems ✓ Laws may cover occupational health and safety, equal employment opportunity, sexual harassment and other matters ✓ Laws of incorporation and ownership, foreign exchange matters, intellectual property and many others vary ➢ Intellectual property matters an area of controversy in China ✓ World Trade Organization (WTO) is a global institution that was established to promote free trade and open markets around the world ➢ Member nations now number 153 ➢ Members are given the most favored nation status ➢ For extended learning, consider accessing the WTO "for students" site and encourage them to try some of the interactive learning Chapters. The URL is http://www.wto.org/english/forums_e/students_e/students_e.htm
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✓
Nontarrif barriers are nontax policies that governments enact to discourage imports, such as quotas and import restrictions ✓ Tariffs are taxes placed on imports in order raise their price in comparison to similar domestic products, protecting the domestic producer ✓ Protectionism is a call for tariffs and other favorable treatment such as subsidies for domestic producers, giving them an advantage over foreign producers 17.1 Questions for discussion suggested answers 1) Ownership of more than 49% constitutes at least an equal control of voting and ownership, and may mean majority control if over 50% legal majority. Majority control (voting and legal control) is power in any organization. In some ventures, such as sensitive defense or shipping industries, such control may be perceived as a national security risk. 2) Many laws such as the Foreign Corrupt Practices Act may, in fact, put U.S. companies at a disadvantage compared to other countries. Many American executives, owners, investors, and employees complain that there is not a “level playing field” in laws that protect the environment, worker safety, child labor exploitation, bribery etc. and that these laws results in an unfair competitive advantage that unfairly tilts toward other countries. 3) The Russian company will need to become familiar with anti-trust laws, occupational health and safety, equal opportunity, and sexual harassment laws and regulations. Other laws may include incorporation and business ownership, intellectual property, contracts and foreign currency exchange. Tariffs may also be placed on imports of materials from Russia. 17.2 What are global corporations and how do they work? •
Global corporations or MNCs do substantial business in many countries ✓ A global corporation, also known as a multinational corporation (MNC) has extensive operations in several foreign countries and derives a substantial portion of its sales and profits from international sources ✓ Transnational corporations operate worldwide without being identified with one national home ➢ Nestlé a good example ➢ Total integration of global operations, make decisions from a global perspective, and employ senior executives from many different countries ➢ For extended learning, consider showing students the Nestlé international website at www.nestle.com. The section on their global brands is an interesting view of their global reach.
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The actions of global corporations can be controversial at home and abroad ✓ Globalization Gap involves large global firms growing larger and more quickly than smaller firms and even countries are able to grow.
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✓ Global corporations hold one third of the world's productive assets and control 70% of world trade ✓ 90% based in Northern Hemisphere ✓ Figure 17.2 depicts what can go right and wrong in relationships between a MNC and its host country •
Managers of global corporations face a variety of ethical challenges ✓ Corruption - illegal practices to further business ✓ The Foreign Corrupt Practices Act makes it illegal for U.S. companies to engage in corrupt practices overseas ➢ May put U.S. firms at a competitive disadvantage, particularly in countries that consider commissions or bribes to be a cost of doing business ✓ Sweatshops - places were employees work long hours for low wages and often in unsafe conditions ✓ Child labor - the full-time employment of children for work otherwise done by adults
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Planning and controlling are complicated in global corporations ✓ Currency risk - fluctuations in foreign exchange rates ➢ Weak dollar - more dollars are necessary to buy one Euro. This is bad for U.S. tourists, but may be good for U.S. companies that have strong sales in Europe, because U.S. products become more affordable to European buyers ✓ Political risk - the potential loss in value of an investment in or managerial control over a foreign asset because of instability and political changes in the host country ✓ Political risk analysis - tries to forecast the probability of disruptive events that can threaten the security of a foreign investment
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Organizing can be difficult in global corporations ✓ Global area structure - arranges production and sales functions into separate geographical units and assigns a top manager to oversee them ✓ Global product structure - gives worldwide responsibilities to product group mangers who are assisted by area specialists on the corporate staff ✓ See Figure 17.3 for a depiction of both of the above organization structures
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Leading is challenging in multinational corporations ✓ Global managers - managers aware of international developments and competent in working across cultures ✓ The margin feature "Universal Facilitators of Leadership Success" lists traits of successful and unsuccessful global manager.
17.2 Questions for discussion suggested answers 1) Yes, becoming transnational is in the interests of all companies that seek growth in sales and profits and new product and process ideas. Examples would include Coca-Cola, Ikea, McDonald’s, Accenture, and many other companies.
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2) The best deterrent to conflict between a host country and a MNC is the proactive involvement of the MNC in supporting and respecting the culture and people of the host country. This also calls for greater social responsibility in being involved within local communities. 3) They certainly present challenges. Chapter Three explains that what is considered ethical can vary across cultures. The Foreign Corrupt Practices Act seems to take a stand that looks like Ethical Imperialism or the view that one's own ethical standard must be imposed on others. Cultural Relativism, or the belief that context alone determines ethical behavior would dictate "when in Rome, do as the Romans do". This would respect the local culture or laws, possible creating an ethical dilemma for the global manager from the U.S. If global managers from other countries operate with a cultural relativism view, while U.S. managers are held to an Ethical Imperialism view because of the Foreign Corrupt Practices Act, the U.S. company many view the act as unfairly restricting the ability to compete.
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Teaching Notes In this section, ideas, exercises, and assignments are provided to assist you in integrating the concepts in Exploring Management for your students, especially the special features of the text. Management Live The popular television show The Amazing Race highlights the cultural differences between countries as teams from the U.S. travel around the world. Sometimes their lack of awareness of the countries they visit is a little embarrassing, but it's always entertaining to watch. How much do you and your students know about the companies that you do business with? Are you aware of where your clothing, car, shoes or even your textbook were made? Challenge your students to do a little research into the origins of the products they buy as you study chapter 17. Role Models A vast network of suppliers, manufacturers and subcontractors work to support the retail stores that make up Limited Brands. Students have probably shopped at these stores including Victoria's Secret, The Limited, Bath and Body Works and others. The founder, Les Wexner has been a pioneer in global sourcing, yet a policy that requires all subcontractor to an ethical code that prohibits child labor and unsafe working conditions. After reading this Role Models feature, students are asked what a leader can do to ensure ethical practices with global business partners. Ethics Check When discussing what can go wrong in an MNC- Host Country relationship, nationalization isn't specifically mentioned in figure 17.2, but it's among the worst things that can go wrong. Suddenly, the government just takes ownership of the MNC located in the country. This Ethics Check feature explains what happened when Bolivia took over oil and gas fields regardless of who owned them with the argument that the natural resources belong to Bolivia. Sounds good, but what rights do global firms have that paid for the right to use those resources? You Decide questions probe students' thoughts on exploitation of resources by foreigners and the ethics of nationalization. Facts to Consider The Facts to Consider feature lists the best and worst countries for corruption and bribery. Use these additional questions for class discussion: • What criteria would you use to evaluate the level of corruption in a country? • What criteria would you use to evaluate the level of bribery? • Visit the website of Transparency International at http://www.transparency.org/. Have the rankings changed? How have the rankings of the United States changed in recent years? • How does corruption impact you as a consumer or employee? Manager's Library In Hot, Flat and Crowded 2.0, author Thomas Friedman presents a bold scenario for the 21st century where the U.S. leads the way in creating a sustainable lifestyle less dependent on fossil fuels.
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Reflect and React questions explore students' thoughts on how this can be accomplished. Explore Yourself The assessment for this chapter is entitled Global Intelligence The assessment tool is intended to help students reflect on their readiness to participate in the global work environment. Ask students to list the factors that influence their personal readiness to participate in a global work environment. Ask them to compare their results to those of their classmates. This may lead to a few controversial topics. Case The case for this Chapter is "Harley-Davidson - Style and Strategy Have Global Reach" 1. If you were CEO of Harley-Davidson, how would you compare the advantages and disadvantages of using exports, joint ventures, and wholly-owned subsidiaries as ways of expanding international sales? The advantages of exports and joint ventures and subsidiaries are the same to Harley as to other organizations, including increased profits, new customers, access to suppliers, access to capital for expansion and lower labor costs. Harley-Davidson is far from being a global company, and the disadvantages of several of the global market entry strategies are a little unique. Harley's image is a competitive advantage, and overseas production may hurt that image to customers both overseas and in the U.S. 2. Given Harley’s legacy of quality and craftsmanship, what complications might the Chinese business environment pose for the firm to manufacture there? If the Chinese government were to restrict Harley-Davidson to purchasing Chinese made parts, Harley-Davidson may need to spend time and money on finding and training a production partner in China. 3. Now that more Harley bikes are being built outside the US than ever before, what qualities of global managers should the company seek for its assembly plant management? Mangers need to understand the Harley legacy and culture with a strong commitment to quality. 4. FURTHER RESEARCH—Is it accurate to say that Harley is “still on top” of its game? How is the company doing today in both domestic and global markets? Who are its top competitors in other parts of the world, and how is Harley faring against them?
Suggested Team Exercises for Chapter 17 International Business Research Organize the class into teams of three or four. Assign each team a country to research in depth. I recommend that you select major emerging economies such as India or China, as well as countries that may be somewhat obscure to increase interest. Each team should have a different country. (You could assign this as an individual assignment, as well). Each team should prepare a presentation to the class on their assigned country.
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Two excellent websites that you may refer the teams to use, among other resources, are: The CIA World Factbook: https://www.cia.gov/cia/publications/factbook/index.html and also NationMaster.com: http://www.nationmaster.com/index.php Each team should provide a thorough report to the rest of the class based on their research including some of the following (much more could be added if you wish to make this an in-depth project): • • • • • • • • • • • • • • • •
Using a globe, show the country’s location How big is the country? Compare it to another country or state What are the country’s primary natural resources? What is the population size? Provide the birth and death rates. What is the life expectancy at birth and how does this compare to the United States? How many internet users are there? What is (are) the primary religion(s)? What is the primary language? What is the literacy rate (%) of the entire population? What type of government? What is the name of the capitol? What currency is used in the country. Provide an overview of the economy. What are the main industries, exports, imports? What is the GDP per capita? (This is a good relative indicator of a country’s wealth or poverty that takes into consideration population size). Compare this to the Unites States. Crime or other issues or risks identified.
Assign each student (this may be an individual assignment, or you may prefer to use pairs or small teams) a global corporation for a research assignment. Some companies may be duplicated based on class size, but this will not detract from the value of the exercise. They should obtain the following information (you may select all or parts of these questions for a large or small assignment): ✓ In how many countries does the company have operations or facilities? Provide a summary with sources to support this finding. ✓ Does the company have any subsidiaries or joint ventures or other forms of operating? ✓ Where is the corporate headquarters located? ✓ How many employees does the company have in total? ✓ Provide an analysis of the percentage of sales by country or region for the company for a recent fiscal (financial) year. ✓ How is the company organized structurally (organization chart)
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CHAPTER 18 Entrepreneurship and Small Business Taking risks can make dreams come true Chapter Objectives Chapter Eighteen provides a review of entrepreneurs, small businesses, and family owned businesses. Included in this Chapter is a discussion of the growth in the number of women and minority-owned businesses. Small businesses are thoroughly reviewed, including the definition of small business, family-owned businesses, the reasons small businesses succeed and fail, and the varying ways of owning and financing small businesses. The objectives of Chapter 18 may be summarized as: 1. 2. 3. 4. 5. 6. 7. 8.
To define entrepreneurs To explore the characteristics of entrepreneurs To review the growth in women and minority entrepreneurs To define social entrepreneurs To review small and family owned business, their impact and challenges To explore the importance of a sound business plan to small businesses To explain and examine the forms of ownership of a business To review the various ways of financing a small business
Chapter Outline 18.1 What is entrepreneurship and who are entrepreneurs? •
Entrepreneurs are risk takers that spot and pursue opportunities ✓ Entrepreneurship - dynamic, risk-taking, creative, growth-oriented behavior ✓ Entrepreneur - person willing to pursue opportunities that others fail to recognize or view as problems ✓ First-mover advantage - moving faster than competitors to stop, exploit, and enter a new market or an unrecognized niche in an existing one ✓ See Table 18.1 for myths about entrepreneurs ✓ Examples of successful entrepreneurs include: ➢ Anita Roddick, founder of The Body Shop, PLC ➢ Earl Graves, founder of Earl G. Graves Ltd, a multimedia company including Black Enterprise.com ➢ David Thomas, founder of Wendy's ➢ Caterina Fake and Stewart Butterfield founders of Flickr
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Entrepreneurs often share similar backgrounds and experiences ✓ Experiences may include:
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➢ Childhood experiences ➢ Career and work history ➢ Windows of opportunity ✓ Intrapreneurs - are employees of a larger firm that display entrepreneurial behavior such as developing a new product or process •
Entrepreneurs often share similar personal characteristics ✓ Personality traits common among entrepreneurs ➢ Internal locus of control ➢ High energy level ➢ Self-confidence ➢ Tolerance for ambiguity ➢ Self-reliance ➢ Need for achievement ➢ Flexibility ➢ Passion and action orientation
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Women and minority entrepreneurs are growing in numbers ✓ Necessity-based entrepreneurship - start of new business because of no other employment options or other closed doors such as hitting glass ceilings ✓ See Facts to Consider feature for statistics on minority entrepreneurs
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Social entrepreneurs seek novel solutions to social problems ✓ Social entrepreneurs are similar to other entrepreneurs except a social mission drives them
18.1 Questions for discussion suggested answers 1) While first-mover advantage provides a strong base for success, there are many examples of entrepreneurs who have improved products or services and gained market share and success. Toyota and Honda are two examples of companies that have taken significant market share from “first-mover” Ford. Netflix has done very well in the movie rental business, even though it was years behind Blockbuster. Donato’s and Papa John’s pizza also have performed well, although Domino’s clearly had the first mover advantage in the delivered pizza industry. 2) Every one of the traits that is important for entrepreneurs are also important for career success. 3) Necessity-driven entrepreneurship often is the result of a lack of opportunities for minorities who, therefore, need to form their own business for economic needs. The shifting of many jobs to other countries has also resulted in downsizings and terminations in many cases, again forcing many to start their own businesses for economic survival. Necessity-driven entrepreneurship has existed since the very founding of our country
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18.2 What should we know about small business, and how to start one? •
Small businesses are mainstays of the economy ✓ A small business has fewer than 500 employees according to the Small Business Administration (SBA) ➢ Employ 52% of workers, provide 51% of private sector output, provide 7 of every 10 new jobs in the economy, and receive 35% of federal government contract dollars ✓ The Internet has had a huge impact; 85% of small firms are already conducting business over the Internet
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Small businesses must master three life-cycle stages ✓ See Figure 18.1 for a depiction of the typical progression of a small business ➢ Birth stage - where the entrepreneur struggles to get the new venture established and survive long enough to really test the marketplace ➢ Breakthrough stage - where the business model begins to work well, growth takes place, and the complexity of the business expands significantly ➢ Maturity stage - where the entrepreneur experiences market success and financial stability, but also has to face competitive challenges in a dynamic environment
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Family-owned businesses can face unique challenges ✓ Family-owned businesses - those owned and financially controlled by family members. They represent the largest percentage of businesses operating worldwide ✓ Family business feud - when family members disagree over how the business is run ✓ Succession problem - the issue of who will run the business when the current head leaves ✓ A succession plan - clearly spells out how leadership transition and related matters, including financial ones, are to be handled when the time for changeover occurs
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Most small businesses fail within five years ✓ Small Business Administration reports that as many as 60 to 80% of new businesses fail within the first five years of operation. ✓ Eight reasons small businesses fail ➢ Lack of expertise ➢ Lack of commitment ➢ Lack of strategy ➢ Ethical failure ➢ Lack of expertise ➢ Growing too fast ➢ Lack of strategic leadership ➢ Poor financial control
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Assistance is available to help small business get started ✓ Business incubators offer services to help new businesses get started ✓ Help includes offices, and access to expertise and financing.
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✓ Small Business Development Centers offer help to entrepreneurs and small business owners •
A small business should start with a sound business plan ✓ Business plan - describes the goals for a new business, its operating plans, and the required financing ✓ Banks and senior managers want to see a well-developed and justified business plan before committing funds ✓ See Tips to Remember inset box for key items to include in a business plan
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There are different forms of small business ownership ✓ Sole Proprietorship - an individual that pursues business for a profit ➢ this is the most common form of ownership ➢ owner has personal liability for all business debts and claims ✓ Partnership - when two or more people agree to contribute resources to start and operate a business together ➢ Limited - a general partner and one or more limited partners whose losses are limited to their investment ➢ General - simplest and most common form; owners share management and liability ➢ Limited liability partnerships - usually professionals such as accountants, lawyers and doctors; limits the liability of the partners ✓ Corporation - usually “Inc.” is a legal entity that exists separately from its owners ➢ Grants the right to engage in contracts ➢ The corporation is responsible for its own liabilities ➢ Life of its own ➢ Major disadvantage is the cost to incorporate ➢ Limited liability corporation (LLC) - combines the advantages of sole proprietorship, partnership, and corporations
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There are different ways of financing a small business ✓ Debt financing - borrowing money that must be repaid with interest over time ➢ Requires collateral that pledges personal or business assets ✓ Equity financing - exchanging ownership shares for outside investment monies; this money does not need to be paid back ✓ Venture financing - capital investments made by individuals or companies that pool capital to invest in new ventures; hope is that initial stake will can become profitable when the company becomes successful ✓ Initial Public Offering (IPO) is when the shares in the business are sold to the public at large, usually beginning to be traded on one of the major stock exchanges ✓ Angel investor - a wealthy investor willing to invest in return for equity in a new venture
18.2 Questions for discussion suggested answers
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1) Economic incentives such as abatements, subsidized labor force training, and tax credits all make sense to support and attract small businesses. 2) I would look at several areas: 1) the financial strength; 2) the strategic competitive differential if any; 3) the quality and leadership of the owner(s); and success to date. 3) Venture capitalists can adversely affect a business through micro-management and overinvolvement. If the company does not perform according to plan, most agreements allow venture capitalists to gain majority or total voting and operating control; it is entirely possible the initial owners and key executives may be terminated in such instances. Also, many venture capital deals or agreements contain onerous terms for the founders.
Teaching Notes In this section, ideas, exercises, and assignments are provided to assist you in integrating the concepts in Exploring Management for your students, especially the special features of the text. Management Live The Bourne Ultimatum is an action packed movie involving the CIA and highly trained assassins and it has a lot in common with entrepreneurs. Not the murder and international intrigue, it's the risk taking! Put yourself and your students in the position of Jason Bourne without the weapons and life-ordeath consequences. What risks are you willing to take for a successful career or to start the business of your dreams? Time? Money? Energy? Failure? Take your time. There's a lot at stake. Role Models Michelle Greenfield and her husband are founders of Third Sun Solar Wind and Power, Ltd., a company that provides solar energy systems. They have seen amazing growth and have used the services of Ohio University Innovation Center, a business incubator. Ethics Check Students are probably familiar with Tom's Shoes. The popular and fashionable shoes are also an example of caring capitalism, if not social entrepreneurship. For every pair of shoes sold, Tom's donates a pair to needy children worldwide and over a million pair have already been donated. You Decide questions probe students' views of the business model and the ethics of linking philanthropy with the sale of products. In addition, consider asking students if they feel that the fact that Tom's donates shoes is a reason for their success? Could other businesses copy this model? Which ones? Facts to Consider This feature provides statistics on the minority-owned businesses in the U.S. This activity can be used in class or online for discussion in addition to the question in the "What are your thoughts?" section. • Assign each student (this may be an individual assignment, or you may prefer to use pairs or small teams) the task to identify two successful businesses started by minorities.
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Teams will provide a brief background on the entrepreneur and the concept of the business. Manager's Library Competitive advantage is a key to success and the In-N-Out Burger feels that they have an "uncopyable" advantage. Read the feature that explains the advantages outlined in the book In-NOut Burger and discuss with your class whether you think there is such a thing as an "uncopyable" advantage in the fast food industry. Explore Yourself The assessment suggested for this chapter is entitled “Entrepreneurship Orientation”. The assessment tool is intended to help students compare their characteristics to those of a typical entrepreneurial profile. Case The case for this chapter In-N-Out Burger: Building a Better Burger 1. Rich Snyder was twenty-four years old when he assumed leadership of In-N-Out after his father passed away. Do you think his young age was an asset or a liability for his leadership? Or did it matter in the first place? A company with a strong culture won't be as quickly affected by an immature leader, however Snyder seems to have all of the qualifications mentioned in the chapter including a family background in entrepreneurship, so his young age may have been an energizing factor. 2. In an era of jalapeno poppers and extreme fajitas, do you view In-N-Out’s long-term strategy of offering only four, simple food items as risky? Why or why not? Absolutely it's risky. Customers are fickle in their tastes and preferences and a small menu is more liable to sudden changes in demand due to news, or cultural factors such as the backlash against McDonalds after the movie Supersize Me was released. 3. Do you think an entrepreneur could walk into a bank today and expect to receive financing for a business plan based on In-N-Out’s extremely simple menu? Why or why not? In our current economic climate, any entrepreneur is having difficulty finding financing. Students could research the availability of financing for start-up businesses. Has it become easier? 4. FURTHER RESEARCH Imagine you were asked by In-N-Out Burger to modernize its advertising mix while maintaining the modesty and simplicity that’s characterized its brand for over sixty years. With a partner, craft an advertising concept that speaks to In-N-Out’s core values: quality, consistency, friendliness, and cleanliness. How would you illustrate this concept to consumers? Explain why you would choose to include or exclude TV, print, radio, or online advertising based on your premise. How would you pitch this concept to In-NOut’s marketing department in a way that would emphasize In-N-Out’s core values? Suggested Team Exercise for Chapter 18 Assign teams the task of developing a small business that you delegate. They should
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1) Visit the SBA website http://www.sba.gov/ and see firsthand the many resources and information provided. You may want the team to provide a brief summary of the benefits of the website as a preliminary assignment before 2) below, or as an integral part of that presentation. 2) The SBA site has very useful link to sample real business plans provided by the SBA as a free service /reference. Each team should select a different business plan to review and present that plan to the class as if they were presenting it to a bank. Every member should be required to participate. They should use Power Point slides and, of course, cite the SBA website as their source.
Additional Team Activity An additional assignment for the class is to have teams of students provide their concept for a business that they think would be a success using the Internet. As part of this concept, they should name the target “audience” or likely customer base; the rationale for its success; a clever name for the business; and how the company would generate sales or revenues. To make this more interesting, the instructor may make it more “real-world” and have teams present their concept in a “pitch” to a panel of “venture capitalists” (this should include the teacher and perhaps a volunteer fellow faculty member or a neutral student who will get some form of extra credit for participating); the panel in turn will challenge the “entrepreneurs” ideas and select a 1st, 2nd and 3rd place winner, who may receive extra credit points or added points on the next exam.
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