Management, 15th edition by Stephen P Robbins Solution Manual by Ace Test Banks

Instructor’s Manual Revised by Michael Casey

Management Fifteenth Edition

Stephen P. Robbins Mary Coulter With contributions by Amy Randel

MANAGEMENT, 15TH EDITION BY STEPHEN P. ROBBINS & MARY COULTER

INSTRUCTOR’S RESOURCE MANUAL PREFACE As instructors, we know that teaching tomorrow’s managers can be a daunting task. With all of the information available from authors, publishers, the Internet, and our own studies, it can be difficult to sort through everything to deliver a good product to our students. To help, we have provided instructors with a clear and concise manual for teaching with the fifteenth edition of Management, by Stephen P. Robbins and Mary Coulter. The instructor manual provides chapter-specific resources that address the learning objectives, chapter outline, discussion questions, ethics dilemma, skill development exercise, team exercise, and case answers for all of the chapters in the text. Each chapter follows a consistent outline. KEY CHANGES TO THE 15TH EDITION Here are some of the main changes made in the 15th edition: •

Each chapter has an Employability Skills Matrix at the beginning of the chapter that identifies the chapter components that build on one or more of the five skills employers look for in job candidates.

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Chapter 4 provides a history of globalization and then highlights the recent shift in thought that challenge the belief that globalization is a win-win proposition for all countries. This growth in nationalism is covered in depth.

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Chapter 5 expands on gender inequality and covers organizational cultures that are hostile to women as revealed by the recent “me-too” movement.

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Throughout the book we provide insights into how social media is reshaping management practices.

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Big data, analytics, and AI are also affecting the way decisions are made and organizations are designed. This material is covered in several chapters.

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Dozens of current examples illustrating management practices and challenges in start-up and established organizations, small and large organizations, and manufacturing, service, and technology organizations have been added. There are also boxed sections on “Learning from Failure” that provide unique insights into management issues.

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The “It’s Your Career” segment has been replaced at the beginning of each chapter with the Employability Skills Matrix. However, in many chapters the “It’s Your Career” advice has been moved to a text box in the body of the chapter.

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Both cases included at the end of each chapter are new cases developed for this edition.

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MYLAB MANAGEMENT SUGGESTED ACTIVITIES For the 15th edition, Pearson’s MyLab Management remains fully integrated into the text. These new features are outlined below. Making assessment activities available online for students to complete before coming to class will allow you, the professor, more discussion time during the class to review areas that students are having difficulty comprehending. Watch It Recommends a video clip that can be assigned to students for outside classroom viewing or that can be watched in the classroom. The video corresponds to the chapter material and is accompanied by multiple-choice questions that reinforce students’ comprehension of the chapter content. Try It Recommends a mini simulation that can be assigned to students as an outside classroom activity or be done in the classroom. As the students watch the simulation, they will be asked to make choices based on the scenario presented in the simulation. At the end of the simulation, the student will receive immediate feedback based on the answers he/she gave. These simulations reinforce the concepts of the chapter and the students’ comprehension of those concepts. Talk About It These are discussion-type questions that can be assigned as an activity within the classroom. Assisted-Graded Writing Questions These are short essay questions that the students can complete as an assignment and submit to you, the professor, for grading.

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SAMPLE COURSE SYLLABUS COURSE TITLE: PRINCIPLES OF MANAGEMENT ———————————————————————————————————— Class Times & Location: Course Web Site: Instructor Information: Office & Office Hours: ————————————————————————————————————

COURSE DESCRIPTION: This course serves as an introduction to the discipline of management. It is designed to integrate the accepted theories in the area with real-world applications to provide students with the basic knowledge and skills needed for managing others. This course begins with a discussion of the current issues in management and then proceeds to cover the traditional functions of management: planning, organizing, leading, and controlling. Lecture and class assignments given in the course are intended to help students understand the needs of modern public and private organizations, including emerging national and international trends.

COURSE OBJECTIVES By the end of the course, students should be able to identify the principals of managing formal organizations, recognize the various challenges faced by today’s managers, and give examples of organizations engaging in the management functions of planning, organizing, leading, and controlling.

RESOURCES TEXTBOOK: Management, 15th Edition by S. Robbins and M. Coulter, published by Pearson Education. SOFTWARE: MyLab Management. See www.pearson.com/mylab/management for

more information. LIBRARY & INTERNET RESOURCES: Students are encouraged to use the university library and the Internet for research and to complete assignments when necessary.

COURSE COMPONENTS EXAMS: A designated number of exams and a final exam will test students’ understanding of the materials discussed in class and in the assigned readings. ONLINE ASSIGNMENTS: These assignments consist of assisted writing problems and personal inventory assessments through MyLab Management. CASE ASSIGNMENTS: Students will answer discussion questions from case applications assigned in the text. The goal is for students to apply the information discussed to these real-world situations to the concepts and principles presented in the course.

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IN-CLASS EXERCISES: Throughout the semester, students are expected to be prepared to discuss issues relevant to the course and to participate in team exercises. For these exercises, students will be required to be actively involved to receive credit – i.e. making substantive comments, answering questions, and preparing short presentations. Points will be awarded by the instructor based on individual and group participation. Students should bring their textbook to class as part of their participation grade. Material for in-class assignments can be found at the conclusion of each chapter – see Ethical Dilemmas and Team Exercises. GRADING Online Assignments (10 at 10 points each) Case Assignments (4 at 25 points each) Exam(s) In-Class Exercises/Participation Final Exam TOTAL POINTS

Percentage 20% 20% 20% 20% 20%

Points 100 100 100 100 100 500

NOTE: • Class attendance and participation in class discussion is expected and absences will affect your final grade. • The due dates for assignments are non-negotiable and late work will be penalized. • All assignments are to be professional in appearance and typed to receive full credit.

COURSE POLICIES CLASSROOM BEHAVIOR: Classroom behavior that interferes with either the instructor’s ability to conduct the class or the ability of students to benefit from the instruction is not acceptable. Students engaging in improper classroom behavior may have points deducted from their total points in the course, or, if the situation warrants, be reprimanded to the university’s committee on student discipline. ACADEMIC HONESTY AND APPEALS: Students are expected to maintain the highest standards of academic integrity. Behavior that violates these standards is not acceptable. Examples are the use of unauthorized material, communication with fellow students during an examination, attempting to benefit from the work of another student, and any other similar behavior that defeats the intent of an examination or other class work. Cheating on exams, plagiarism, improper acknowledgement of sources in essays, and the use of a single essay or paper in more than one course without permission are considered very serious offenses and shall be grounds for disciplinary action as outlined in the current General Catalogue.

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COURSE OUTLINE

15-WEEK COURSE: SEMESTER

Week Assigned Reading Chapter 1 Managers and You in the 1 Workplace Module Management History Chapter 2 Making Decisions 2 3

5 6 7 8 9 10 11 12 13

14 15

Chapter 3 Influence of the External Environment and the Organization’s Culture Chapter 4 Managing in a Global Environment Chapter 5 Managing Diversity Chapter 6 Managing Social Responsibility and Ethics Chapter 7 Managing Change and Disruptive Innovation Chapter 8 Foundations of Planning Chapter 9 Managing Strategy Chapter 10 Entrepreneurial Ventures Chapter 11 Designing Organizational Structure Chapter 12 Managing Human Resources Chapter 13 Managing Groups and Teams Chapter 14 Managing Communication Chapter 15 Understanding and Managing Individual Behavior Chapter 16 Motivating Employees Chapter 17 Being an Effective Leader Chapter 18 Monitoring and Controlling Final Exam

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Deliverable In-class discussion: Ethics Dilemma (Chapter 1) In-class exercise: Team Building (Chapter 2) Case #1 (Chapter 3) In-class discussion: Ethics Dilemma (Chapter 4) In-class exercise: Team Building (Chapter 5) Exam 1 Case #2 (Chapter 7) In-class exercise: Team Building (Chapter 8) In-class discussion: Ethics Dilemma (Chapter 9) Case #1 (Chapter 10) Exam 2

In-class exercise: Team Building (Chapter 13) In-class discussion: Ethics Dilemma (Chapter 14) Case #1 (Chapter 15) In-class exercise: Team Building (Chapter 16) In-class discussion: Ethics Dilemma (Chapter 17) Case #2 (Chapter 18)

COURSE OUTLINE

12-WEEK COURSE: SEMESTER

Week Assigned Reading Chapter 1 Managers and You in the 1 Workplace Module Management History Chapter 2 Making Decisions 2 Chapter 3 Influence of the External Environment and the Organization’s Culture Chapter 4 Managing in a Global Environment 3 Chapter 5 Managing Diversity 4 5 6 7 8 9

11 12

Chapter 6 Managing Social Responsibility and Ethics Chapter 7 Managing Change and Disruptive Innovation Chapter 8 Foundations of Planning Chapter 9 Managing Strategy Chapter 10 Entrepreneurial Ventures Chapter 11 Designing Organizational Structure Chapter 12 Managing Human Resources Chapter 13 Managing Groups and Teams Chapter 14 Managing Communication Chapter 15 Understanding and Managing Individual Behavior Chapter 16 Motivating Employees Chapter 17 Being an Effective Leader Chapter 18 Monitoring and Controlling Final Exam

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Deliverable In-class discussion: Ethics Dilemma (Chapter 1) In-class exercise: Team Building (Chapter 2) Case #1 (Chapter 13) In-class discussion: Ethics Dilemma (Chapter 4) In-class exercise: Team Building (Chapter 5) Exam 1 Case #2 (Chapter 7) In-class exercise: Team Building (Chapter 8) In-class discussion: Ethics Dilemma (Chapter 9) In-class exercise: Team Building (Chapter 12) Exam 2 In-class discussion: Ethics Dilemma (Chapter 14) Case #1 (Chapter 15) In-class exercise: Team Building (Chapter 16) In-class discussion: Ethics Dilemma (Chapter 17) Case #2 (Chapter 18)

OTHER MATERIALS AVAILABLE WITH MANAGEMENT, 15TH EDITION At the Instructor Resource Center (IRC), https://www.pearson.com/us/highereducation/subject-catalog/download-instructor-resources.html, instructors can access a variety of print, digital, and presentation resources available with this text in downloadable format. Registration is simple and gives you immediate access to new titles and new editions. As a registered faculty member, you can download resource files and receive immediate access to, and instructions for, installing course management content on your campus server. In case you ever need assistance, our dedicated technical support team is ready to help with the media supplements that accompany this text. Visit https://www.pearson.com/us/support.html for answers to frequently asked questions and toll-free user support phone numbers. The following supplements are available for download to adopting instructors: • Instructor’s Manual • Test Item File • TestGen (test-generating program) • PowerPoint Slides TEST ITEM FILE Each chapter of the text has an extensive test bank of multiple-choice, true/false, and short answer questions to test understanding. The Test Item File is specifically for the 15th edition with page references, learning objective references, and AACSB references where appropriate. The Test Item File is available in MS Word so that instructors can easily incorporate select questions into their own tests. TESTGEN The test bank is also available on TestGen, a test-generating program that allows instructors to efficiently add, edit, or delete questions from the test bank; analyze test results; and organize a database of exams and student results. Our TestGens are converted for use in BlackBoard, WebCT, Canvas, D2L, Sakai, and Moodle. All conversions are available on the IRC. POWERPOINT PRESENTATIONS A set of PowerPoint slides is available for each chapter and module in the text.

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Chapter 1 Managers and You in the Workplace In this introductory chapter, your students will explore the concepts of management, manager skills, and organizations in today’s dynamic business environment. LEARNING OBJECTIVES 1. 2. 3. 4. 5. 6.

Tell who managers are and where they work. Explain why managers are important to organizations. Describe the functions, roles, and skills of managers. Describe the factors that are reshaping and redefining the manager’s job. Explain the value of studying management. Describe the benefits of the Employability Skills Matrix (ESM).

CHAPTER OUTLINE 1.1

TELL WHO MANAGERS ARE AND WHERE THEY WORK Managers may not always be what we expect. Today’s managers range from 18 to 80, they‘re found in a variety of different types of organizations, and they perform a variety of jobs from the top to the bottom of the organization. Statistics show an increasing number of women in management; however, while their number is increasing, it is mostly in the area of lower and middle management, not top management. Similarly, only 20 (4%) were minorities. Who Is a Manager? A. The changing nature of organizations and work often requires employees in formerly nonmanagerial jobs to perform managerial activities. Students who are preparing for careers on any organizational level can benefit from acquiring management skills. Today’s employees need to be crosstrained and multi-skilled. B. How do we define a manager? A manager is someone who coordinates and oversees the work of other people so that organizational goals can be accomplished. However, keep in mind that managers may have additional work duties not related to coordinating the work of others. C. Managers can be classified by their level in the organization, particularly in traditionally structured organizations—those shaped like a pyramid (see Exhibit 1-1). 1. First-line (or front-line) managers (often called supervisors) are typically involved with producing the organization’s products or servicing the organization’s customers. These managers are located on the lowest level of management. 2. Middle managers include all levels of management between the first level and the top level of the organization. They may have titles such as regional manager, project leader, store manager, or division manager.

Top managers include managers at or near the top of the organization who are responsible for making organization-wide decisions and establishing plans and goals that affect the entire organization. Where Do Managers Work? A. An organization is a deliberate arrangement of people to accomplish some specific purpose. Organizations share three common characteristics (See Exhibit 1-2): (1) each has a distinct purpose; (2) each is composed of people; and (3) each develops some deliberate structure so members can do their work. B. Although these three characteristics are important in defining what an organization is, the concept of an organization is changing. These changes include: flexible work arrangements, employee work teams, open communication systems, and supplier alliances. Organizations are becoming more open, flexible, and responsive to changes. Future Vision: Is It Still Managing When What You’re Managing Are Robots? While the text presents a fairly accurate description of today’s workplace, the future is not certain. Work life in the future may be very different than today and will likely include workers who are robots. How will a manager’s job be different? How will working with robots affect human coworkers? The following discussion questions are posed: Talk About It 1: What’s your response to the title of this box: Is it still managing when what you’re managing are robots? Discuss. Talk About It 2: If you had to “manage” people and robots, how do you think your job as manager might be different than what the chapter describes? Student answers to these questions will vary.

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WHY ARE MANAGERS IMPORTANT? Managers have an important impact on both employees and the organizations in which they work. The following three reasons address their importance: A. Organizations need their managerial skills and abilities more than ever in these uncertain, complex, and chaotic times. B. Managers are critical to getting things done. C. Managers do matter to organizations! According to a Gallup poll of tens of thousands of managers and employees, the relationship of manager to their employees and supervisors is the single most important variable in employee productivity and loyalty.

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MANAGEMENT VS. MANAGERS What is Management? A. Management involves coordinating and overseeing the work activities of others so that their activities are completed efficiently and effectively.

Coordinating and overseeing the work of others is what distinguishes a managerial position from a nonmanagerial one. 2. Efficiency is getting the most output from the least amount of inputs in order to minimize resource costs. Efficiency is often referred to as “doing things right” (see Exhibit 1-3). 3. Effectiveness is completing activities so that organizational goals are attained and is often described as “doing the right things” (see Exhibit 1-3). What Do Managers Do? B. Management Functions. Henri Fayol, a French industrialist in the early 1900s, proposed that managers perform five management functions: POCCC (planning, organizing, commanding, coordinating, and controlling). 1. Over time, Fayol’s five management functions have been reorganized into four functions, which provide a foundation for the organization of many current management textbooks (see Exhibit 1-4). a. Planning involves defining goals, establishing strategies for achieving those goals, and developing plans to integrate and coordinate activities. b. Organizing involves arranging and structuring work to accomplish the organization’s goals. c. Leading involves working with and through people to accomplish organizational goals. d. Controlling involves monitoring, comparing, and correcting work performance. 2. In practice, managing is not always performed in a sequence as outlined above. Since these four management functions are integrated into the activities of managers throughout the workday, they should be viewed as an ongoing process. C. Management Roles Henry Mintzberg, a management researcher, conducted a precise study of managers at work. He concluded that managers perform 10 different roles, which are highly interrelated. 1. Managerial roles refer to specific categories of managerial behavior (see Exhibit 1-5). a. Interpersonal roles include figurehead, leadership, and liaison activities. b. Informational roles include monitor, disseminator, and spokesperson. c. Decisional roles include entrepreneur, disturbance handler, resource allocator, and negotiator. 2. Follow-up studies of Mintzberg’s role categories in different types of organizations and at different managerial levels within organizations generally support the idea that managers perform similar roles. 3. Although the functions approach represents the most useful way to describe the manager’s job, Mintzberg’s roles give additional insight into managers’ work. D. Management Skills. 3

Managers need certain skills to perform the challenging duties and activities associated with being a manager. 1. Robert L. Katz found through his research that managers need three essential skills (see Exhibit 1-6). a. Technical skills are job-specific knowledge and techniques needed to proficiently perform specific tasks. b. Human skills involve the ability to work well with other people individually and in a group. c. Conceptual skills involve the ability to think and to conceptualize about abstract and complex situations. d. Other skills are listed in Exhibit 1-7. These skills will be highlighted in a feature at the end of each chapter. 2. Developing management skills is important for aspiring managers. To help aid students in this respect, the authors have put together several skill-building modules in mymanagementlab. These skills reflect a broad cross-section of the important managerial activities that are elements of the four management functions. 1.4

MANAGERIAL CHALLENGES TODAY AND INTO THE FUTURE Security threats, corporate ethics scandals, global economic and political uncertainties, and technological advancements should be discussed. While all managers will not have to manage under tragically demanding circumstances, how managers manage in today’s workplace is changing. These issues are summarized in Exhibit 1-8. A. Focus on Technology. Cloud computing, social media, and robotics are all changing how things get done in the workplace. Managers need to get employees on board with new technology and ensure that they are comfortable with it, can use it, and understand how it improves their lives.

It’s Your Career The ABC’s of Managing Your Time Do you feel constantly busy? Do you always seem to have a lot to do and never enough time to do it? If you’re like most people, the answer to these questions is YES! Well, maybe in a management textbook we need to do something about that by focusing on one aspect of management that can be tremendously useful to you….TIME MANAGEMENT! Time is a unique resource. If it’s wasted, it can never be replaced. People talk about saving time, but time can never actually be saved. And unlike resources such as money or talent, which are distributed unequally in the world, time is an equal-opportunity resource. Each one of us gets exactly the same amount: twenty-four hours per day and 168 hours each week. Some people are just a lot more efficient in using their allotment. Here are some suggestions to help you better use your time: 1. List your current and upcoming goals. Know what needs to be done daily, weekly, and monthly. 2. Rank your goals according to importance. Not all goals are of equal importance. Make sure you give highest priority to the most important goals.

3. List the activities/tasks necessary to achieve your goals. What specific actions do you need to take to achieve your goals? 4. Divide these activities/tasks into categories using an A, B, and C classification. The As are important and urgent. Bs are either important or urgent, but not both. Cs are routine—not important nor urgent, but still need to be done. 5. Schedule your activities/tasks according to the priorities you’ve set. Prepare a daily plan. Every morning, or at the end of the previous workday, make a list of the five or so most important things you want to do for the day. Then set priorities for the activities listed on the basis of importance and urgency. 6. Recognize that technology can be a time waster. Think for a moment how many phone calls, emails, texts, and postings on social media you receive on a typical day. Some are essential, while others are distractions that don’t require immediate attention. Prioritize the importance of this information. 7. Realize that priorities may change as your day or week proceeds. New information may change a task’s importance or urgency. As you get new information, reassess your list of priorities.

B. Focus on Disruptive Innovation. Innovation is critical to today’s organizations and managers. All organizations innovate; however, a problem for organizations is working to get all employees involved in the innovation process. Managers can respond to this need by creating a “team close,” a time when all employees are scheduled to close the store and leave together. This helps create an attitude of working together and commitment. C. Focus on Social Media. The new frontier in communication is social media. Platforms such as Facebook and Twitter have moved beyond personal uses to work, and managers need to understand their power and dangers. In some cases, social media can enhance customer relationships, help better manage customers, and tap into talent. But, managers need to remember that social media is a tool that needs to be managed to be beneficial. D. Focus on Ethics. The long-term success of an organization depends on building trust with customers, clients, suppliers, and employees. Leaders need to take responsibility for setting high ethical standards and creating ethical workplaces. Each chapter will have an ethical dilemma to help focus students on the importance of ethical behavior. E. Focus on Political Uncertainty. Today’s political environment is rife with uncertainty, even in democratic societies that have a long history of relatively stable and predictable political environments. This new uncertainty poses challenges for managers that must learn to adapt to different regimes and significant changes. Examples include Brexit, renegotiation of NAFTA, and state and city laws increasing the minimum wage. F. Focus on the Customer. With all of the technology available to managers, it is possible now more than ever to lose touch with customers. Face-to-face contact is being replaced by e-mails and text messages. In a service-oriented economy, like the United States, the need to deliver high quality customer service is the basis for competitiveness. As a result, many managers are re5

discovering the importance of a customer-responsive organization where employees are friendly, courteous, accessible, and responsive to customer needs. 1.5

WHY STUDY MANAGEMENT? The importance of studying management in today’s dynamic global environment can be explained by looking at the universality of management, the reality of work, and the rewards and challenges of being a manager. A. The Universality of Management. Without a doubt, management is needed in all types and sizes of organizations, at all organizational levels, and in all organizational work areas throughout the world (see Exhibit 1-9). 1. We interact with organizations every day of our lives. Every product we use, every action we take, is provided by or affected by organizations. Well-managed organizations develop a loyal customer base, grow, and prosper. 2. Students who study management gain the ability to recognize and encourage good management practices; just as important, they learn to recognize poor management and how to correct it. B. The Reality of Work. After graduation, students will either manage or be managed. A course in management provides insight and understanding about behaviors of supervisors and the internal operations of organizations. An individual does not have to aspire to be a manager in order to benefit from taking a course in management. C. Rewards and Challenges of Being a Manager (See Exhibit 1-10). 1. Challenges a. Being a manager is hard work and often involves more clerical duties than managerial responsibilities. Managers often must deal with a range of personalities, make do with limited resources, and work in chaotic and uncertain situations. b. Managers may have difficulty in effectively blending the knowledge, skills, ambitions, and experiences of a diverse group of employees. c. A manager’s success typically is dependent on others’ work performance. 2. Rewards a. Managers have an opportunity to create a work environment in which organizational members can do their work to the best of their ability and help the organization achieve its goals. b. Managers often receive recognition and status in the organization and in the larger community; influence organizational outcomes; and receive appropriate compensation. c. Knowing that their efforts, skills, and abilities are needed by the organization gives many managers great satisfaction. D. Gaining Insights into Life at Work. 6

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Understanding management concepts and how managers think is important even for those students who are not planning a career in management. Doing so will helps students get better results at work and enhance their careers. DESCRIBE THE BENEFITS OF THE EMPLOYABILITY SKILLS MATRIX (ESM). The ESM identifies chapter content that relates to five important employee skills which are critical thinking, communication, collaboration, knowledge application, and social responsibility. These skills are transferrable and applicable to any organizational setting. Students should make an effort to develop these skills as they progress through the course. All of the chapters in this text will begin with the ESM and link different features to a specific skill. Look at Exhibit 1-10 for an example of how the ESM will be presented.

WORKPLACE CONFIDENTIAL: DEALING WITH ORGANIZATIONAL POLITICS Organizations are made up of individuals and groups with different values, goals, and interests. And, given that resources are limited, you cannot escape politics as different interest groups compete for those resources. For this reason, you need to develop some political skills. The following suggestions will help you improve your political skills and navigate the organizational politics: *Frame arguments in term of organizational goals *Develop the right image *Gain control of organizational resources *Make yourself appear indispensable *Be visible *Develop powerful allies *Avoid “tainted” members *Support your boss For more details on each one of these suggestions read the text box on page 14.

ANSWERS TO REVIEW AND DISCUSSION QUESTIONS Student answers to these questions will vary. 1-1. What is a manager? How do managers differ from nonmanagerial employees? The answer to this question used to be straightforward, but the line between managerial and nonmanagerial employees has blurred as more employees take on tasks once reserved for managers. To keep the answer from becoming too complicated, the best way to address this question is to focus on the fact that a manager’s job is about helping others do their work. (LO: 1, Tell who managers are and where they work, AACSB: Analytical thinking) 1-2. Why are managers important to organizations? There are three key reasons why managers are important to organizations. First, organizations need the managerial skills and abilities that managers provide. Second,

managers are essential to getting things done. Third, research shows that the single most important variable in employee productivity and loyalty is the quality of the relationship between employees and their direct supervisors. (LO: 2, Explain why managers are important to organizations, AACSB: Analytical thinking)

1-3. What is the difference between efficiency and effectiveness? Both are integral to effective management. Efficiency is getting the most output from the least amount of inputs, the goal of which is to minimize resource costs (see Exhibit 1-3). Effectiveness is completing activities so that organizational goals are attained; often described as “doing the right things” (see Exhibit 1-3). (LO: 3, Describe the functions, roles, and skills of managers, AACSB: Analytical thinking) 1-4. Is your course instructor a manager? Discuss in terms of managerial functions, managerial roles, and skills. Course instructors (in contrast to individuals who hold positions such as department head) are not usually classified as managers. In most situations, a course instructor does not fall within the definition of a manager when utilizing managerial functions, mainly because students are clients rather than employees. In some cases, an instructor has little input about course content or how it should be taught. In these instances, the instructor makes few managerial decisions. In terms of managerial roles, course instructors may be involved in some ways in the interpersonal, informational, and decisional roles. For example, a course instructor could be seen as a liaison (interpersonal role), a monitor and disseminator (both informational roles), and a disturbance handler and negotiator (both decisional roles). Regarding managerial skills, course instructors certainly need technical skills— knowledge about the latest research and conceptual developments in a particular discipline. They also need significant human skills as they interact with their students. To a limited extent, the instructor utilizes conceptual skills as courses are planned or as departmental curriculums are debated. (LO: 3, Describe the functions, roles, and skills of managers, AACSB: Reflective thinking) 1-5. What is an example of a disruptive innovation that managers might have to cope with in the future? There are numerous technologies in development that have the potential to radically alter the way some organizations function. Self-driving vehicles and alternative energy automobiles are already affecting the auto industry in terms of resource allocation and investment, and these technologies may soon disrupt the trucking industry and others that deliver products. Nanotechnology and smart metals have the potential to change many sectors of the economy. And, artificial intelligence (AI) is already reshaping production and has the potential to change almost any organization and job. (LO: 4, Describe the factors that are reshaping and redefining the manager’s job, AACSB: Reflective thinking) 1-6. Why is it important for managers to focus on the customer? Delivering consistent, high-quality customer service is essential to the success of companies. Studies show that 92 percent of customers whose issues are resolved during their first contact with the company are likely to continue to use that company. In contrast, just 51 percent of customers whose issue is not resolved during first contact continue to use the company. Customer-responsive organizations where employees are 8

friendly and courteous, accessible and knowledgeable, prompt in responding to needs, and willing to do what’s necessary to please the customer are likely to be more successful in today’s competitive market. (LO: 4, Describe the factors that are reshaping and redefining the manager’s job, AACSB: Reflective thinking) 1-7. Explain why the universality of management concept still holds true or doesn’t hold true in today’s world. Management principles are needed for the efficient and effective operation of organizations, regardless of the level of the manager or the industry in which they operate. This is true for today’s organizations now more than ever. The global environment of today ensures that organizations will face staunch competition. Failure and weakness on the part of management ultimately leads to loss of market share and organizational closure. Also, gone are the days when managers could ‘bluff’ their way through their dealings with employees who have become more demanding and aware of their legal rights. (LO: 5, Explain the value of studying management, AACSB: Reflective thinking) 1-8. Which of the reasons for studying management are most important to you and why? While most people do not see ‘management’ as an invention, it is safe to say that without the principles of management and the guidance of managers in organizations, we as a society would not have reached the level of development that we enjoy today. The goal of management centers on the art of getting things done. Without organizations and their managers, it would be impossible to accomplish what has been done in history so far. It is has always been up to managers to coordinate and oversee work activities in the art of getting things done in the areas of agriculture, medicine, science, and manufacturing. (LO: 5, Explain the value of studying management, AACSB: Reflective thinking) 1-9. Is there one best “style” of management? Why or why not? This answer requires students to form an opinion, so answers will vary. A possible answer is there is no one best style of management. Organizations have different structures, and managers are tasked with achieving different goals and work with different personalities. Managerial styles can differ from organization to organization, task to task, and person to person. Managers need to cultivate the ability to recognize when they need to use a different approach and be flexible. (LO: 5, Explain the value of studying management, AACSB: Reflective thinking) 1-10. Researchers at Harvard Business School found that the most important managerial behaviors involve two fundamental things: enabling people to move forward in their work and treating them decently as human beings. What do you think of these two managerial behaviors? What are the implications for someone, like yourself, who is studying management? This answer requires students to form an opinion, so answers will vary. A possible answer is that you will be a better manager if you enable the people you manage to excel in their tasks. You will soon become known as someone people want to work for since you treat your team with respect and help them improve. This reputation will in turn create opportunities for you to advance. (LO: 5, Explain the value of studying management, AACSB: Reflective thinking) ETHICS DILEMMA 9

Student answers to these questions will vary. • • • •

The gap between career development opportunities managers intend to provide and what they actually deliver to employees has grown to 12 percent. Millennials place more importance on career development opportunities and job training than older generations. Forty percent of managers never talk with employees about career goals and how to meet them. Thirty-seven percent of employees would like to have career-related discussions with their managers more frequently. Moving to a management position isn’t easy.

1-11. Does an organization have an ethical responsibility to provide career development advice to employees? Explain your position. Organizations of today should help employees develop to their fullest potential. This practice will benefit the employee and the organization, and it is the first bullet point listed in Exhibit 1-9. Employees will be more likely to stay with the organization and advance through the ranks, and it will create loyalty to the organization and contribute to a positive work environment. (LO: 3, Describe the functions, roles, and skills of managers, AACSB: Ethical understanding and reasoning) 1-12. If career opportunities in an organization are limited, do managers have a responsibility to convey this information to employees? Explain your position. Managers should be forthright and this practice also falls under the category of “support, coach, and nurture others,” listed in Exhibit 1-9. Employees appreciate honesty and explaining their options may make some work harder to promote and others will self-select to move to other organizations. (LO: 3, Describe the functions, roles, and skills of managers, AACSB: Ethical understanding and reasoning)

SKILLS EXERCISE: DEVELOPING YOUR SKILLS AS A MANAGER As referenced in Exhibit 1-7, there are many skills important to managers. The importance of each skill changes depending on the level of the manager. However, all managers need to develop conceptual skills, interpersonal skills, and technical skills. Nine managerial skills are listed in this exercise. Students are encouraged to select two skills and spend one week practicing the skills. As they rotate through the skills, encourage them to take notes to track their progress and then to evaluate their own level of skill development. (LO: 3, Describe the functions, roles, and skills of managers, AACSB: Analytical thinking)

WORKING TOGETHER: TEAM EXERCISE In groups of three to four individuals, students are asked to discuss their experience with both good and bad managers. Students should make a list of both good and bad management behaviors and relate these to the functions of management and which 10

management skills they think it falls under. As a group, determine which skills could have been improved and whether commonalities exist. Using Mintzberg’s roles show where these individuals were deficient and brainstorm ways that these individuals might improve their skills. After the groups develop their list, they should share with the rest of the class. (LO: 3, Describe the functions, roles, and skills of managers, AACSB: Written and oral communication)

MY TURN TO BE A MANAGER •

Use the most current Occupational Outlook Handbook (U.S. Department of Labor, Bureau of Labor Statistics) to research three different categories of managers. For each, prepare a bulleted list that describes the following: the nature of the work, training and other qualifications needed, earnings, and job outlook and projections data.

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Get in the habit of reading at least one current business periodical (Wall Street Journal, BusinessWeek, Fortune, Fast Company, Forbes, etc.). Keep a file of interesting information you find about managers or managing.

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

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Interview two different managers and ask them the following questions: What are the best and worst parts about being a manager? What’s the best management advice you ever received? Type up the questions and their answers to turn in to your professor.

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

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If you have work experience, consider managers who you have encountered. Did you work with any good managers? Did you work with any bad managers? Based on your experience, create a list of traits or skills that good managers possess.

ANSWERS TO CASE APPLICATION 1 QUESTIONS Student answers to these questions will vary. Working with Artificial Intelligence

1-13. In what ways do machines add to the work of managers and other employees (instead of replacing them)? Machines add a level of technical complexity that managers will need to understand. Machines also lack the ability to make some reasoned decisions and could generate errors that create numerous management problems. As an example, a few years ago Wells Fargo foreclosed on a few hundred homes due to a computer glitch. After this mistake was uncovered it was up to the managers to clean up the mess and make it right with those customers. (LO: 4, Describe the factors that are reshaping and redefining the manager’s job, AACSB: Analytical thinking) 1-14. How might AI change a manager’s job in 2030? Responses to this question will vary. However, managers will need to know the limitations of AI and pair the appropriate technology with the correct human skills. While AI may make rote decisions easier, the more complex decisions will still require a human touch. (LO: 4, Describe the factors that are reshaping and redefining the manager’s job, AACSB: Analytical thinking) 1-15. What kind of skills or tasks do you think are least likely to be done by machines or computers in the future? Responses to this question will vary. However, AI does not make complex decisions as well as humans. One example given in the case related to the ability to feel a fabric and see how a garment fits. This task is not easily automated. (LO: 4, Describe the factors that are reshaping and redefining the manager’s job, AACSB: Analytical thinking) 1-16. What can you do to make yourself more valuable to companies so that they need you (and not a machine) to get work done? Responses to this question will vary. Students should begin developing the technical skills needed to understand and potentially program AI. However, perhaps most important is to develop critical thinking skills that cannot be easily replicated by a machine. Ethical reasoning skills are also not likely to be easily replicated and require human interaction. (LO: 4, Describe the factors that are reshaping and redefining the manager’s job, AACSB: Analytical thinking)

CASE APPLICATION 2 QUESTIONS Student answers to these questions will vary. Nike: Taking a Customer Focus to a New Level 1-17. What makes Nike’s focus on the customer different from most companies? Answers will vary, but Nike takes the customer focus to an entirely new level. Nike uses focused data collection to determine customer wants and customizes products based on that data. (LO: 1, Tell who managers are and where they work, AACSB: Analytical thinking) 1-18. If you were in charge of taking Nike’s focus on the customer to the next level, what would you do? Answers will vary, but the next level might involve the customer using a portal to design their own unique shoe. Of course, manufacturing capabilities will need to be 12

developed that enable these shoes to be made at a reasonable cost. Stores could hold design contests that are unique to a geographic region and roll out the winning shoe. (LO: 4, Describe the factors that are reshaping and redefining the manager’s job, AACSB: Analytical thinking) 1-19. What advantages of online shopping and in-person shopping do Nike Live stores try to combine? Why (or why not) do you think they will be successful? Answers will vary, but Nike wants customers to be able to order shoes online and have them pick up the shoes in the store. They are attempting to combine the convenience of online shopping with a customer-focused in-store experience that makes the customer feel special. (LO: 4, Describe the factors that are reshaping and redefining the manager’s job, AACSB: Analytical thinking) 1-20. What do you think a focus on the customer will look like for companies in 2025? Answers will vary, but the ability to extract customer likes and dislikes from big data will only improve a firm’s ability to customize products to existing demand. Firms that fail to compete based on consumer preferences may find they will not survive long. (LO: 5, Explain the value of studying management, AACSB: Analytical thinking)

Management History Module In this chapter, we’re going to take a trip back in time to see how the field of study called management has evolved. What you’re going to find out is that today’s managers still use many elements of the historical approaches to management. Focus on the following learning objectives as you read and study this chapter.

LEARNING OBJECTIVES 1. 2. 3. 4. 5.

Describe some early management examples. Explain the various theories in the classical approach. Discuss the development and uses of the behavioral approach. Describe the quantitative approach. Explain the various theories in the contemporary approach.

Since the birth of modern management theory in the early 1900s, management experts have developed theories to help organizations and their managers coordinate and oversee work activities as effectively and efficiently as possible. In presenting the history of modern management, this supplement explores the evolution of management thought and practice during the twentieth century. Students discover how knowledge of management history can help us better understand current management practices while avoiding some mistakes of the past.

CHAPTER OUTLINE MH.1 EARLY MANAGEMENT Many fascinating examples from history illustrate how management has been practiced for thousands of years. A. Organizations and managers have existed for thousands of years. The Egyptian pyramids and the Great Wall of China were projects of tremendous scope and magnitude, requiring the efforts of tens of thousands of people. How was it possible for these projects to be completed successfully? The answer is management. Regardless of the titles given to managers throughout history, someone has always had to plan what needs to be accomplished, organize people and materials, lead and direct workers, and impose controls to ensure that goals were attained as planned. B. Adam Smith, author of the classical economics doctrine The Wealth of Nations, argued brilliantly for the economic advantages that he believed division of labor or job specialization (the breakdown of jobs into narrow, repetitive tasks) would bring to organizations and society. C. The Industrial Revolution is possibly the most important pre-twentiethcentury influence on management. The introduction of machine powers

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combined with the division of labor made large, efficient factories possible. Planning, organizing, leading, and controlling became necessary activities. Exhibit MH-1 illustrates the development of management theories.

MH.2 CLASSICAL APPROACH A. Scientific management is defined as the use of the scientific method to determine the “one best way” for a job to be done. 1. Frederick W. Taylor is known as the “father” of scientific management. Taylor’s work at the Midvale and Bethlehem Steel companies stimulated his interest in improving efficiency. a. Taylor sought to create a mental revolution among both workers and managers by defining clear guidelines for improving production efficiency. He defined four principles of management (Exhibit MH-2). b. His pig iron experiment is probably the most widely cited example of his scientific management efforts. c. Using his principles of scientific management, Taylor was able to define the “one best way” for doing each job. d. Frederick W. Taylor achieved consistent improvements in productivity in the range of 200 percent. He affirmed the role of managers to plan and control and the role of workers to perform as they were instructed. 2. Frank and Lillian Gilbreth were inspired by Taylor’s work and proceeded to study and develop their own methods of scientific management. a. Frank Gilbreth is probably best known for his experiments in reducing the number of motions in bricklaying. b. The Gilbreths were among the first to use motion picture films to study hand-and-body motions in order to eliminate wasteful motions. c. They also devised a classification scheme to label 17 basic hand motions called therbligs (Gilbreth spelled backward, with the th transposed). 3. How Today’s Managers Use Scientific Management. Guidelines devised by Taylor and others to improve production efficiency are still used in today’s organizations. However, current management practice is not restricted to scientific management practices alone. Elements of scientific management still used include: a. Using time and motion studies b. Hiring best qualified workers c. Designing incentive systems based on output B.

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

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Henri Fayol, who was a contemporary of Frederick W. Taylor, was the managing director of a large French coal-mining firm. a. Fayol focused on activities common to all managers. b. He described the practice of management as distinct from other typical business functions. c. He stated 14 principles of management (fundamental or universal truths of management that can be taught in schools; see Exhibit MH-3). Max Weber (pronounced VAY-ber) was a German sociologist who wrote in the early twentieth century. a. Weber developed a theory of authority structures and described organizational activity based on authority relations. b. He described the ideal form of organization as a bureaucracy marked by a division of labor, a clearly defined hierarchy, detailed rules and regulations, and impersonal relationships (see Exhibit MH-4). How Today’s Managers Use General Administrative Theories. Some current management concepts and theories can be traced to the work of the general administrative theorists. a. The functional view of a manager’s job relates to Henri Fayol’s concept of management. b. Weber’s bureaucratic characteristics are evident in many of today’s large organizations—even in highly flexible organizations that employ talented professionals. Some bureaucratic mechanisms are necessary in highly innovative organizations to ensure that resources are used efficiently and effectively.

MH.3 BEHAVIORAL APPROACH The field of study concerned with the actions (behaviors) of people at work is organizational behavior. Organizational behavior (OB) research has contributed much of what we know about human resources management and contemporary views of motivation, leadership, trust, teamwork, and conflict management. A. Early Advocates of Organizational Behavior. Four individuals—Robert Owen, Hugo Munsterberg, Mary Parker Follett, and Chester Barnard—were early advocates of the OB approach. Their ideas served as the foundation for employee selection procedures, motivation programs, work teams, and organization environment management techniques. (See Exhibit MH-5 for a summary of the most important ideas of these early advocates.) B. The Hawthorne Studies were the most important contribution to the development of organizational behavior. 1. This series of experiments conducted from 1924 to the early 1930s at the Western Electric Company Works in Cicero, Illinois, were initially devised as a scientific management experiment to

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assess the impact of changes in various physical environment variables on employee productivity. 2. After Harvard professor Elton Mayo and his associates joined the study as consultants, other experiments were included to look at redesigning jobs, make changes in workday and workweek length, introduce rest periods, and introduce individual versus group wage plans. 3. The researchers concluded that social norms or group standards were key determinants of individual work behavior. 4. Although not without criticism (concerning procedures, analyses of findings, and the conclusions), the Hawthorne Studies stimulated interest in human behavior in organizational settings. How Today’s Managers Use the Behavioral Approach. 1. The behavioral approach assists managers in designing jobs that motivate workers, in working with employee teams, and in facilitating the flow of communication within organizations. 2. The behavioral approach provides the foundation for current theories of motivation, leadership, and group behavior and development.

MH.4 QUANTITATIVE APPROACH The quantitative approach to management, sometimes known as management science, uses quantitative techniques to improve decision making. This approach includes applications of statistics, optimization models, information models, and computer simulations. A. The quantitative approach originated during World War II as mathematical and statistical solutions to military problems and was developed for wartime use. 1. As often happens after wartime, methods that were developed during World War II to conduct military affairs were applied to private industry following the war. For instance, a group of military officers—the Whiz Kids—used quantitative methods to improve decision making at Ford Motor Company in the mid-1940s. 2. In the 1950s, the ideas and techniques of W. Edwards Deming and Joseph M. Juran were embraced by Japanese organizations. Later Western managers also incorporated their ideas. 3. The management philosophy devoted to continual improvement and responding to customer needs and expectations is total quality management or TQM. (See Exhibit MH-6.) 4. TQM represents a counterpoint to earlier management theorists who believed that low costs were the only road to increased productivity. 5. The objective of quality management is to create an organization committed to continuous improvement in work processes. B. How Today’s Managers Use the Quantitative Approach. 1. The quantitative approach has contributed most directly to managerial decision making, particularly in planning and controlling.

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

MH.5 CONTEMPORARY APPROACHES A. Systems Theory. Exhibit MH-7 identifies major events that affected American business. Many of these events pre-date systems theory but all had a major impact on efficiency, operations, and management. During the 1960s, researchers began to analyze organizations from a systems perspective based on the physical sciences. A system is a set of interrelated and interdependent parts arranged in a manner that produces a unified whole. The two basic types of systems are closed and open. A closed system is not influenced by and does not interact with its environment. An open system interacts with its environment (see Exhibit MH-8). 1. Using the systems approach, managers envision an organization as a body with many interdependent parts, each of which is important to the well being of the organization as a whole. 2. Managers coordinate the work activities of the various parts of the organization, realizing that decisions and actions taken in one organizational area will affect other areas. 3. The systems approach recognizes that organizations are not selfcontained; they rely on and are affected by factors in their external environment. B. The Contingency Approach. The contingency approach recognizes that different organizations require different ways of managing. 1. The contingency approach to management is a view that the organization recognizes and responds to situational variables as they arise. 2. Some popular contingency variables are shown in Exhibit MH-9.

ANSWERS TO REVIEW AND DISCUSSION QUESTIONS MH-1. Explain why studying management history is important. While the study of management history reviews the work of experts in the past, from a practical side, it shows the techniques and implementations that companies are using today. For example, the principles learned from Scientific Management are still used today in manufacturing. Assembly line layouts, work processes, and compensation plans in modern organizations are modifications of the foundation laid by men and women like Taylor. The same is true for the work of Weber, Fayol, and more recently Deming. The organizations we work in today are the result of an evolution of management concepts, not something completely new. (LO: 5, Explain the various theories in the contemporary approach, AACSB: Analytical thinking) MH-2. What is the significance of the industrial revolution?

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The industrial revolution heralded the shift from manufacturing goods in the home to the more economical process of producing goods in factories. This created demand for the manager, the individual responsible for forecasting demand, ensuring that raw materials were on hand, assigning tasks, and generally directing daily activities. (LO: 1, Describe some early management examples, AACSB: Analytical thinking) MH-3. What is a bureaucracy? Do bureaucracies still exist today? Max Weber described the bureaucracy as a form of organization characterized by division of labor, a clearly deﬁned hierarchy, detailed rules and regulations, and impersonal relationships. While Weber recognized that the “ideal bureaucracy” didn’t exist in reality, it provided a basis for understanding how work could be done in large groups. Weber’s “ideal type” still describes many contemporary organizations. (LO: 2, Explain the various theories in the classical approach, AACSB: Analytical thinking) MH-4. What did the early advocates of OB contribute to our understanding of management? The early advocates of OB gave managers a greater understanding of the human element present in all organizations. What was learned from Scientific Management and the Quantitative Studies allowed for better use of people’s effort, but the underlying causes of why people put forth effort still needed to be explored. The early advocates also brought in a variety of new variables that affect organizational performance, i.e. group dynamics, employee attitudes, conflict, etc. (LO: 3, Discuss the development and uses of the behavioral approach, AACSB: Analytical thinking) MH-5. Why were the Hawthorne Studies so critical to management history? While Taylor and Weber sought to make work more efficient, they did not focus on the human element of work. Whether through chance or intentional design, the Hawthorne studies brought up the point that people are more complex than tools and machines. Because an employee is put in a job that has been designed to maximize efficiency, does not mean that the employee will make the choice to do so. (LO: 2, Explain the various theories in the classical approach, AACSB: Analytical thinking) MH-6. Explain what the quantitative approach has contributed to the field of management. Although “people” problems can rarely be resolved using quantitative techniques exclusively, mathematical techniques can help a manager solve these types of problems. Statistical methods, information models, computer simulations, and other quantitative techniques are designed to help managers make better decisions. Accordingly, they could help a manager address people problems encountered in the workplace. (LO: 4, Describe the quantitative approach, AACSB: Analytical thinking) MH-7. Describe total quality management. As proposed by Edward Deming, TQM is a management philosophy devoted to continual improvement and responding to customer needs and expectations. (See Exhibit MH-6.) Customers include anyone who interacts with the organization’s products or services internally or externally. It encompasses employees and suppliers as well as the people who purchase the organization’s goods or services. TQM also advocates continual improvement, which requires statistical techniques that measure every critical

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variable in the organization’s work processes. These measurements are compared against standards to identify and correct problems. (LO: 5, Explain the various theories in the contemporary approach, AACSB: Analytical thinking) MH-8. How has technology impacted how managers use the quantitative approach in today’s workplace? Today’s technology has allowed for the development of specialized software to facilitate budgeting, queuing, scheduling, quality control, and so on. This has enabled companies like Whole Foods to improve customer service. Whole Foods uses the quantitative approach for queue management, or to keep lines moving in their stores. (LO: 4, Describe the quantitative approach, AACSB: Analytical thinking) MH-9. How do systems theory and the contingency approach make managers better at what they do? Going back to the view of Scientific Management, Taylor sought for the one best way to organize work. What we know today from the systems and contingency view is that there is no one best way to do anything in an organization. There are too many internal and external factors that affect employee and organizational performance to design a job or task and then sit back and be comfortable. Managers must understand that the workplace is both complex and dynamic. But this should not be an excuse for managers who attempt to use accepted theory and practices. Managers should embrace the differences in people and organizations and do their best to apply theory to the context of their organization. (LO: 5, Explain the various theories in the contemporary approach, AACSB: Analytical thinking) MH-10. How do societal trends influence the practice of management? What are the implications for someone studying management? Societal trends have a major impact on the practice of management. For example, the change in society’s emphasis on the value of diversity has profound implications for the recruiting, hiring, training, development, and motivation programs in the human resources functions of an organization. Work-related processes must be aligned with the needs of a diverse and pluralistic workforce. The impact of these changes is a global issue; business organizations throughout the world—including Canada, Australia, South Africa, Japan, and Europe—are experiencing similar trends. (LO: 5, Explain the various theories in the contemporary approach, AACSB: Analytical thinking)

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MY TURN TO BE A MANAGER • Conduct research and identify a new or emerging management theory. Do you think the new theory will have an impact on future management practices? • Can scientific management principles help you be more efficient? Choose a task that you do regularly (such as laundry, fixing dinner, grocery shopping, studying for exams, etc.). Analyze it by writing down the steps involved in completing that task. See if there are activities that could be combined or eliminated. Find the “one best way” to do this task. And the next time you have to do the task, try the scientifically managed way and see if you become more efficient (keeping in mind that changing habits isn’t easy to do). • How do business organizations survive for 100+ years? Obviously, they’ve seen a lot of historical events come and go! Choose one such company (for example, CocaCola, Procter & Gamble, Avon, General Electric) and research its history. How has the company changed over the years? From your research on this company, what did you learn that could help you be a better manager? • Pick one historical event from this century and do some research on it. Write a paper describing the impact that this event might be having or has had on how workplaces are managed. • Come on, admit it. You multitask, don’t you? And if not, you probably know people who do. Multitasking is common in the workplace. But does it make employees more efficient and effective? Pretend you’re the manager in charge of a loan-processing department. Describe how you would research this issue, using each of the following management approaches or theories: scientific management, general administrative theory, quantitative approach, behavioral approach, systems theory, and contingency theory.

ADDITIONAL CHAPTER INFORMATION You may want to use the following information to generate class discussion. If so, be prepared to defend why students nonetheless need to know how management thought has evolved. Real Time: Preparing for the Age of the Never Satisfied Customer, a book by Regis McKenna, argues that companies will have to reorganize in order to conduct their business in real-time because “the competitive environment will no longer tolerate slow response or delayed decision-making.” The assumption from decades of scientific management theories and from control proponents like Frederick W. Taylor has led managers to believe that the future can be predicted and controlled. Managers must realize that “continuous discontinuous change” is now necessary for success and that planning beyond the next quarter will be futile. Studying the major theories and theorists can be challenging to some students. One approach to learning this material that has been used in a classroom is to play a trivia game for points. The instructor develops questions in the format used in Jeopardy about

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management history, early theories, and early theorists. The class is divided into teams for competition. One team selects a category, and the instructor reads the appropriate question. If the team successfully answers the question, the team is awarded 10 points; if the team answers incorrectly, 10 points are deducted from the team’s score, and the next team in rotation is given the opportunity to answer the question. If this team successfully answers the question, it receives the 10 points. Teams select and attempt to answer questions in a rotating manner, with all teams having the same number of “turns.” At the end of the class period, the team with the most points is declared the winner, and each member of the winning team is awarded a bonus of 10 points as an inclass participation score. Negative team scores are simply recorded as a 10-point participation grade. Students who have played this game have found it to be fun and helpful in studying the history, theories, and theorists of management, yesterday and today.

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Chapter 2 Making Decisions In this chapter, students will explore the importance of decision making to managers and learn how to make effective decisions. LEARNING OBJECTIVES 1. 2. 3. 4. 5.

Describe the eight steps in the decision-making process. Explain the five approaches managers can use when making decisions. Classify decisions and decision-making styles. Describe how biases affect decision making. Identify cutting-edge approaches for improving decision making.

CHAPTER OUTLINE 2.1

THE DECISION-MAKING PROCESS A decision is a choice made from two or more alternatives. The decisionmaking process is a set of eight steps that include identifying a problem, selecting an alternative, and evaluating the decision’s effectiveness. (See Exhibit 2-1 for an illustration of the decision-making process.) A. Step 1: Identify a Problem. A problem is a discrepancy between an existing and a desired condition. In order to identify a problem, you, as a manager, should recognize and understand the three characteristics of problems: 1. You must be aware of the problem. Be sure to identify the actual problem rather than a symptom of the problem. 2. You must be under pressure to act. A true problem puts pressure on the manager to take action; a problem without pressure to act is a problem that can be postponed. 3. You must have the authority or resources to act. When managers recognize a problem and are under pressure to take action but do not have the necessary resources, they usually feel that unrealistic demands are being put upon them. B. Step 2: Identify Decision Criteria. Decision criteria are criteria that define what is relevant in a decision. C. Step 3: Allocate Weights to the Criteria. The criteria identified in Step 2 of the decision-making process do not have equal importance, so the decision maker must assign a weight to each of the items in order to give each item accurate priority in the decision. Exhibit 2-2 lists the criteria and weights for Amanda’s purchase decision for new computers. D. Step 4: Develop Alternatives. The decision maker must now identify viable alternatives that could resolve the problem. E. Step 5: Analyze Alternatives. Each of the alternatives must now be critically analyzed by evaluating it against the criteria established in Steps 2 and 3. Exhibit 2-3 shows the values that Amanda assigned to each of

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2.2

her alternatives for a new computer. Exhibit 2-4 reflects the weighting for each alternative, as illustrated in Exhibits 2-2 and 2-3. Step 6: Select an Alternative. This step to select the best alternative from among those identified and assessed is critical. If criteria weights have been used, the decision maker simply selects the alternative that received the highest score in Step 5. Step 7: Implement the Alternative. The selected alternative must be implemented by effectively communicating the decision to the individuals who will be affected by it and winning their commitment to the decision. Step 8: Evaluate Decision Effectiveness. This last step in the decisionmaking process assesses the result of the decision to determine whether or not the problem has been resolved.

APPROACHES TO DECISION MAKING At this point in the study of Chapter 2, students will learn about the manager as a decision maker and how decisions are actually made in organizations. Exhibit 25 shows how decision making fits into the four functions of management. In this section, students examine how decisions are made, the types of problems and decisions faced by real-life managers, the conditions under which managers make decisions, and decision-making styles. A. Rationality. Managerial decision making is assumed to be rational—that is, making choices that are consistent and value-maximizing within specified constraints. If a manager could be perfectly rational, he or she would be completely logical and objective. 1. Rational decision making assumes that the manager is making decisions in the best interests of the organization, not in his or her own interests. 2. The assumptions of rationality can be met if the manager is faced with a simple problem in which (1) goals are clear and alternatives limited, (2) time pressures are minimal and the cost of finding and evaluating alternatives is low, (3) the organizational culture supports innovation and risk taking, and (4) outcomes are concrete and measurable. B. Bounded Rationality. In spite of these limits to perfect rationality, managers are expected to be rational as they make decisions. Because the perfectly rational model of decision making isn’t realistic, managers tend to operate under assumptions of bounded rationality, which is decision-making behavior that is rational, but limited (bounded) by an individual’s ability to process information. 1. Under bounded rationality, managers make satisficing decisions, in which they accept solutions that are “good enough.” 2. We may satisfice due to time constraints that inhibit our ability to fully search out all possible alternatives. C. Intuition. Managers also regularly use their intuition. Intuitive decision making is a subconscious process of making decisions on the basis of experience and accumulated judgment. Exhibit 2-6 describes the five different aspects of intuition. 1. Making decisions on the basis of gut feeling doesn’t necessarily happen independently of rational analysis; the two complement each other.

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2.3

Although intuitive decision making will not replace the rational decision-making process, it does play an important role in managerial decision making. Evidence-Based Management. The premise behind evidence-based management (EBMgt) is that any decision-making process is likely to be enhanced through the use of relevant and reliable evidence. EBMgt promotes the use of the best available evidence to improve management practice. 1. The four essential elements of EBMgt are the decision maker’s expertise and judgment; external evidence that’s been evaluated by the decision maker; opinions, preferences, and values of those who have a stake in the decision; and relevant organizational (internal) factors such as context, circumstances, and organizational members. 2. The strength or influence of each of these elements on a decision will vary with each decision. 3. The key for managers is to recognize and understand the mindful, conscious choice as to which element(s) are most important and should be emphasized in making a decision. Crowdsourcing. Crowdsourcing involves relying on a network of people outside the organization’s traditional set of decision makers. Managers solicit input and ideas via the Internet. 1. One example of crowdsourcing is Hershey’s use of a competition to find a solution to keep their chocolates cool when shipping during the summer months. 2. Crowdsourcing can be used to solicit input from customers, suppliers, any stakeholder group, or other external parties. 3. Managers can get a diverse set of opinions to help them make better-informed decisions.

TYPES OF DECISIONS AND DECISION-MAKING STYLES A. Types of Decisions. Managers encounter different types of problems and use different types of decisions to resolve them. 1. Structured problems are straightforward, familiar, and easily defined. In dealing with structured problems, a manager may use a programmed decision, which is a repetitive decision that can be handled by a routine approach. Managers rely on three types of programmed decisions: a. A procedure is a series of interrelated sequential steps that can be used to respond to a structured problem. b. A rule is an explicit statement that tells managers what they can or cannot do. c. A policy is a guideline for making decisions. 2. Unstructured problems are problems that are new or unusual and for which information is ambiguous or incomplete. These problems are best handled by a nonprogrammed decision that is a unique decision that requires a custom-made solution. 3. Exhibit 2-7 describes differences between programmed versus nonprogrammed decisions.

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At higher levels in the organizational hierarchy, managers deal more often with difficult, unstructured problems and make nonprogrammed decisions in attempting to resolve these problems and challenges. b. Lower-level managers handle routine decisions themselves, using programmed decisions. They let upperlevel managers handle unusual or difficult decisions. Decision-Making Styles. 1. Each person has an individual decision-making style. 2. Research shows there are four different individual approaches to making decisions. People differ along two dimensions: way of thinking and tolerance for ambiguity. Exhibit 2-8 shows this Decision-Style Model. 3. The matrix generates four types of decision makers which are: a. Directive – people with a directive style have low tolerance for ambiguity and seek rationality. They are efficient and logical but may be prone to making decisions too fast with limited information. b. Analytic – analytic decision makers are more comfortable with ambiguity relative to directive styles. They are more willing to adapt to change or new situations. c. Conceptual – conceptual decision makers have a broad scope and consider many alternatives. They are good at finding creative solutions to problems. d. Behavioral – behavioral decision makers work well with others. They tend to avoid conflict and seek acceptance from others. This tendency makes them receptive to suggestions from others. While each of the four categories is distinct, people typically display characteristics from more than one style. Most business students score high on the analytic style.

DECISION-MAKING BIASES AND ERRORS Managers use different styles and “rules of thumb” (heuristics) to simplify their decision making. A. See Exhibit 2-9 for the common decision-making biases. 1. Overconfidence bias occurs when decision makers tend to think that they know more than they do or hold unrealistically positive views of themselves and their performance. 2. Immediate gratification bias describes decision makers who tend to want immediate rewards and avoid immediate costs. 3. The anchoring effect describes when decision makers fixate on initial information as a starting point and then, once set, fail to adequately adjust for subsequent information. 4. Selective perception bias occurs when decision makers selectively organize and interpret events based on their biased perceptions. 5. Confirmation bias occurs when decision makers seek out information that reaffirms their past choices and discount information that contradicts their past judgments.

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6. 7. 8.

9. 10.

11.

12.

Framing bias occurs when decision makers select and highlight certain aspects of a situation while excluding others. Availability bias is seen when decision makers tend to remember events that are the most recent and vivid in their memory. Decision makers who show representation bias assess the likelihood of an event based on how closely it resembles other events or sets of events. Randomness bias describes the effect when decision makers try to create meaning out of random events. The sunk costs error is when a decision maker forgets that current choices cannot correct the past. Instead of ignoring sunk costs, the decision maker cannot forget them. In assessing choices, the individual fixates on past expenditures rather than on future consequences. Self-serving bias is exhibited by decision makers who are quick to take credit for their successes and blame failure on outside factors. Hindsight bias is the tendency for decision makers to falsely believe, once the outcome is known, that they would have accurately predicted the outcome.

Managers need to be aware of these decision-making biases so they can avoid them. Research shows that training can help managers learn to recognize situations where these biases occur. 2.5

CUTTING-EDGE APPROACHES FOR IMPROVING DECISION MAKING Today’s business world revolves around making decisions when faced with rapid technological change. However, some of the advances in technology can help managers make better decisions. In this section we will review some of those cutting-edge approaches to decision making that are attributed to changes in technology.

WORKPLACE CONFIDENTIAL: Making Good Decisions Decisions are an essential part of our lives, personally and professionally. Each and every day is a series of decisions, from minor to significant, and everything in between. Good decision making is a skill, and like any skill, it can be learned and improved. So, how can you improve your decision-making skills? Here are a few suggestions you can use to improve your decision-making skills: 1. Know, understand, and use the decision-making process. Yes, there is a “method” to making decisions that takes you from identifying problems to evaluating the effectiveness of your decision. It works. Know it. Understand it. Use it. 2. Know when and how to use rational or intuitive decision making or both. Different types of problems and different conditions will influence how you approach making a decision. 3. Know your decision-making style. Not everyone approaches decision making the same way. But you do need to recognize how you’re most comfortable when making a decision—and how others around you make decisions. 4. Know, recognize, and understand the biases and errors that may influence your decision making. Biases and errors can creep into your decision making. You may think you’re making good decisions and may not even recognize you are being affected by biases.

Student answers to these questions will vary.

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Design Thinking and Decision Making. Design thinking has been described as “approaching management problems as designers approach design problems.” It can be useful when identifying problems and when identifying and evaluating alternatives. Design thinking involves asking the “what if” questions and using observation and inquiry skills instead of relying solely on rational analysis. Big Data and Artificial Intelligence. Big data is the vast amount of quantifiable information that can be analyzed by highly sophisticated data processing. One IT expert described big data with “3V’s: high volume, high velocity, and/or high variety information assets.” With this type of data at hand, decision makers have very powerful tools to help them make decisions. Big data has opened the door to the widespread use of artificial intelligence and other powerful decision-making tools. Artificial Intelligence (AI) harnesses computing power to replicate the decision-making functions of humans. AI now has the ability to learn and solve complex problems such as the technology used in self-driving autos. Machine learning is a method of data analysis facilitated by AI. Machine learning involves pattern identification, learning from those patterns, and then using that information to make decisions with little or no human assistance. Deep learning is a subset of machine learning. Deep learning simulates functions of the human brain by using algorithms to create a hierarchical level of artificial neural networks. This network of connected nodes processes information in a nonlinear fashion and has been used to improve the identification of skin cancers. Analytics is the use of mathematics, statistics, predictive modeling, and machine learning to find meaningful patterns in data sets. Analytics are now being used in professional sports to help make decisions about whether to kick a field goal or go for it on fourth down. There are numerous other applications.

ANSWERS TO REVIEW AND DISCUSSION QUESTIONS Student answers to these questions will vary. 2-1. Why is decision making often described as the essence of the manager’s job? Decisions are made throughout the performance of all four functions of management. Almost anything a manager does in terms of planning, organizing, leading, and controlling involves decision making. The pervasiveness of decision making in management explains why managers are often called decision makers. (LO: 1, Describe the eight steps in the decision-making process, AACSB: Analytical thinking) 2-2. Describe the eight steps in the decision-making process.

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The decision-making process consists of eight steps: (1) identify problem; (2) identify decision criteria; (3) weight the criteria; (4) develop alternatives; (5) analyze alternatives; (6) select alternative; (7) implement alternative; and (8) evaluate decision effectiveness. (LO: 1, Describe the eight steps in the decision-making process, AACSB: Analytical thinking) 2-3. Compare and contrast the five ways managers make decisions. The assumptions of rationality are as follows: the problem is clear and unambiguous; a single, well-defined goal is to be achieved; all alternatives and consequences are known; and the final choice will maximize the payoff. Bounded rationality says that managers make rational decisions but are bounded (limited) by their ability to process information. Satisficing happens when decision makers accept solutions that are good enough. With escalation of commitment, managers increase commitment to a decision even when they have evidence it may have been a wrong decision. Intuitive decision making means making decisions on the basis of experience, feelings, and accumulated judgment. Using evidence-based management, a manager makes decisions based on the best available evidence. Crowdsourcing involves soliciting input from a network of people outside of the organization and using that information to make better decisions and find innovative solutions. (LO: 2, Explain the five approaches managers use when making decisions, AACSB: Analytical thinking) 2-4. Explain the two types of problems and decisions. Contrast the four decision-making styles. Programmed decisions are repetitive decisions that can be handled by a routine approach and are used when the problem being resolved is straightforward, familiar, and easily defined (structured). Nonprogrammed decisions are unique decisions that require a custom-made solution and are used when the problems are new or unusual (unstructured) and for which information is ambiguous or incomplete. The four decisionmaking styles are directive, analytic, conceptual, and behavioral. People with a directive style have low tolerance for ambiguity and seek rationality. They are efficient and logical but may be prone to making decisions too fast with limited information. Analytic decision makers are more comfortable with ambiguity relative to directive styles. They are more willing to adapt to change or new situations. Conceptual decision makers have a broad scope and consider many alternatives. They are good at finding creative solutions to problems. Behavioral decision makers work well with others. They tend to avoid conflict and seek acceptance from others. This tendency makes them receptive to suggestions from others. (LO: 3, Classify decisions and decision-making styles, AACSB: Analytical thinking) 2-5. How can managers blend the guidelines for making effective decisions in today’s world with the rationality and bounded rationality models of decision making, or can they? Explain. A balance is required. Under today’s business conditions (such as intense time pressure and higher degrees of risk and uncertainty), managers must practice sound decisionmaking approaches. Knowing when it’s time to quit, for example, is not inconsistent with rationality and bounded rationality. Changes in technology also provide managers with the data and tools to make better decisions. Some decisions can now be made with AI or machine learning tools that require little managerial effort. (LO: 5, Identify cutting-edge approaches for improving decision making, AACSB: Analytical thinking)

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2-6. Is there a difference between wrong decisions and bad decisions? Why do good managers sometimes make wrong decisions? Bad decisions? A bad decision is making an incorrect choice even when faced with the information needed to make a better decision. A wrong decision is one made with incomplete data that ends up being a poor choice in hindsight. Time pressures, incomplete information, and higher levels of uncertainty in today’s business environment may lead to ineffective decision making. Bad decisions are typically due to one of the biases listed in Exhibit 29. Managers can improve their decision-making skills by focusing on six characteristics of effective decision making, including focusing on important criteria, logic, and consistency; blending subjective and objective thinking with analysis; requiring the information necessary to resolve a particular dilemma; gathering relevant and informed opinions; and remaining flexible. (LO: 4, Describe how biases affect decision making, AACSB: Analytical thinking) 2-7. All of us bring biases to the decisions we make. What are the drawbacks of having biases? Could there be any advantages to having biases? Explain. What are the implications for managerial decision making? Not all biases are negative. Sometimes they lead to heuristics, or short-cuts, that speed up decision making. However, in many cases they do have negative effects resulting in poor decisions and should be avoided. Managers need to be aware of common biases that have negative effects and learn to recognize them and change behavior accordingly. (LO: 4, Describe how biases affect decision making, AACSB: Analytical thinking)

ETHICS DILEMMA Student answers to these questions will vary. This dilemma describes a situation where IKEA designed a belt-driven bike, called Sladda, to market to consumers that wanted to drive less and reduce their carbon footprint. However, the belt drives snapped on some bikes and resulted in injuries to riders. IKEA determined it was too expensive to replace all the belts with traditional chains so the firm recalled the Sladda bikes and halted new sales. Some skeptics felt the decision was driven more by slow sales and that IKEA abandoned the sustainability solution offered by the Sladda. Ask the students: 2-8. Was the decision by Ikea to recall and stop production of the Sladda appropriate? Explain both “why” and “why not.” Possible answers: IKEA is a for-profit firm and cannot exist in the long run without making money. If the “fix” was too expensive to undertake, then it’s a rational decision to recall the bikes and cease production. However, the entire fiasco could tarnish IKEA’s reputation and highlight a lack of commitment to sustainability. The firm could have redesigned the bike with a chain drive and launched again. (LO: 2, Explain the five approaches managers can use when making decisions, AACSB: Ethical understanding and reasoning)

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2-9. If you were a manager, how would you use this incident to “teach” employees about ethics and decision making? Possible answer: IKEA needs to consider factors other than profit when making a decision. Sometimes it is costly to “do the right thing.” Employees need to understand the firm’s commitment to ethical decision making, even if the consequences for making an ethical decision reduce the firm’s profitability. (LO: 2, Explain the five approaches managers can use when making decisions, AACSB: Ethical understanding and reasoning)

SKILLS EXERCISE: DEVELOPING YOUR CREATIVITY SKILL Creativity is an important skill for all managers—not just those in marketing and R&D. In this exercise, students work on developing their creativity skills using eight steps suggested by the authors. To practice their new creativity skills, students can engage in a brainstorming exercise where they see how many words can be made from the letters in the word “brainstorm.” To illustrate the usefulness of brainstorming, this could be done as an entire class with someone assigned to write down the created words. There are 95 possible words that can be generated. (LO: 5, Identify cutting-edge approaches for improving decision making, AACSB: Analytical thinking)

WORKING TOGETHER: TEAM EXERCISE In this team-based activity, small groups of students are to list possible problems on campus. Are there limited food options, parking issues, or other problems? The groups should go through the first six steps of the decision-making process to identify a solution to the specific problem. Teams should be prepared to share the best solution with campus administrators. This class activity should help students to become more comfortable and skillful in using the decision-making process. (LO: 1, Describe the eight steps in the decision-making process, AACSB: Analytical thinking)

MY TURN TO BE A MANAGER •

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

•

Write a procedure, a rule, and a policy for your instructor to use in your class. Be sure that each one is clear and understandable. And be sure to explain how it fits the characteristics of a procedure, a rule, or a policy. (LO: 1, Describe the eight steps in the decision-making process, AACSB: Analytical thinking)

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Find three examples of managerial decisions described in any of the popular business periodicals (Wall Street Journal, BusinessWeek, Fortune, etc.). Write a paper describing each decision and any related information, such as what led to

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the decision, what happened as a result of the decision, etc. What did you learn about decision making from these examples? (LO: 3, Classify decisions and decision-making styles, AACSB: Analytical thinking) •

Interview two managers and ask them for suggestions on what it takes to be a good decision maker. Write down their suggestions and be prepared to present them in class. (LO: 5, Identify cutting-edge approaches for improving decision making, AACSB: Analytical thinking)

•

Do a web search on the phrase “101 dumbest moments in business.” Get the most current version of this end-of-year list. Choose three of the examples and describe what happened. What’s your reaction to each example? How could the managers have made better decisions? (LO: 4, Describe how biases affect decision making, AACSB: Analytical thinking)

•

Visit the Mindtools website (www.mindtools.com) and find the decision-making toolkit. Explore the decision-making tools suggested and select one tool to use the next time you need to make a decision. (LO: 5, Identify cutting-edge approaches for improving decision making, AACSB: Analytical thinking)

CASE APPLICATION 1 QUESTIONS Student answers to these questions will vary. Making Decisions with Bad Data 2-10. What should managers and companies do to minimize their use of bad data? Managers need to be able to verify the accuracy of the data in some way to prevent the use of fake data in decision making. Firms and managers also need to make sure the data is current and transferrable between departments or divisions if applicable. (LO: 1, Describe the eight steps in the decision-making process, AACSB: Analytical thinking) 2-11. How might intuition, the analytical decision style, and the conceptual decision style help to work against problems arising from using bad data? These managerial styles have a greater tolerance for ambiguity and have the ability to consider numerous alternatives or use their gut feel to interpret data. For this reason these managers will be less likely to accept bad data as accurate if it goes against their intuition or judgement. (LO: 3, Classify decisions and decision-making styles, AACSB: Analytical thinking) 2-12. What does this case illustrate about big data and analytics? Making good decisions still requires managers to use judgement. Just because you have reams of data it may not always lead to good decisions. Use good judgement to interpret the results, and if it doesn’t make sense reevaluate it. (LO: 5, Identify cutting-edge approaches for improving decision making, AACSB: Analytical thinking)

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ANSWERS TO CASE APPLICATION 2 QUESTIONS Student answers to these questions will vary. Bringing Sports Analytics into the Thick of Things 2-13. What do you think the analyst and head coach need to do to make this approach of adding analysts to the bench as effective as possible? Having both groups interact in social settings to create trust will help players and coaches be more receptive to the analyst’s advice. Having the analysts travel with the team and be involved during the games will also help them better understand the goal of their analysis. (LO: 2, Explain the five approaches managers can use when making decisions, AACSB: Analytical thinking) 2-14. How might rational and intuitive decision making both be involved when analysts join the coaching staff? Rational decision makers will be more receptive to the data-driven recommendations. However, intuition combines collective experiences and gut feeling, which can often result in faster decisions that are very accurate. These two styles combined should result in better decisions. (LO: 3, Classify decisions and decision-making styles, AACSB: Analytical thinking) 2-15. What decision-making errors might analysts help coaches minimize by being close by? Several errors could be eliminated by the close proximity of analysts. These include selective perception bias, framing bias, availability bias, and sunk costs errors. An unbiased third party analyst could quickly discuss major decisions with a coach if they perceive a bias will result in a poor decision. (LO: 4, Describe how biases affect decision making, AACSB: Analytical thinking)

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Part 1: Management Practice A Manager’s Dilemma Suppose you’re a recruiter for a large retail chain and want to get college graduates to consider store management as a career option. Using what you learned in Part 1, how would you do that? One way to do this is through organizational culture. Culture plays an important role in attracting and socializing applicants. Today’s college students want more than just a job and a paycheck; they want an experience and to feel that they are doing something important. Companies should create a culture that emphasizes the values of the importance of people and innovation. Global Sense What issues might Deutsche Telekom face in recruiting women for new trainee positions? How could it address those issues? Get students to think about how Deutsche Telekom would attract only female applicants. In US markets, advertisements for jobs cannot specify a gender. Such an ad would be seen as a violation of other applicants’ civil rights. Deutsche Telekom could send recruiters to female-only universities or advertise in media oriented toward females. They can also use media outlets that are tailored to female college graduates, such as magazines and websites that relate to women. What issues might Chevron face with their approach to addressing the gender gap in leadership, and how could it address these issues? Chevron might face accusations of favoring gender over merit when it promotes someone. The firm needs to be transparent in its promotion decisions so all employees feel they have a chance at being promoted. What are other possible advantages of a company’s diversity and inclusion efforts besides increased innovation? Studies show diversity ultimately has a positive impact on profitability. In addition, for the United States and other countries, gender diversity is a requirement for those companies doing business with the federal government according to Affirmative Action guidelines. Diversity also enhances the understanding of the marketplace and can help a firm improve sales and market share. Multiple other benefits also flow from a diverse workforce. What could other organizations around the globe learn from Chevron? Companies should realize that minorities and women make up a growing percentage of the global workforce and consumer market, so managerial talent must be drawn from an increasingly diverse pool. Chevron’s program also shows that increasing female representation in management is possible and some firms may need to implement similar programs that help men understand their unconscious biases. CONTINUING CASE: STARBUCKS Foreword "I hear, and I forget. I see, and I remember. I do, and I understand." Sharing this Chinese proverb with your students early in the semester will serve as an introduction to the value of learning through the case study method. Case studies give students vicarious opportunities to "learn by doing." This method of study facilitates the application of knowledge learned in the

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classroom to the real world of business for students who have not yet experienced challenging business situations firsthand and for students who may have workplace experience but no firsthand managerial experiences. An exciting feature of the fifteenth edition of this text is the inclusion of a continuing comprehensive case examining the management of the world's number-one specialty coffee retailer, Starbucks Corporation. Each part of the continuing case looks at Starbucks from the perspective of the managerial concepts, theories, and skills presented in that part of the textbook. Following your students' study of information presented in Part I (Chapters 1-2 and Management History Module) of the text, introduce the Part I continuing case entitled, "Starbucks—Introduction." By using selected study questions and teaching activities suggested on the following pages, you will enrich your students' understanding of management theory and practice in the real world of global business today. Part 1: Starbucks—Introduction Discussion Questions with Answers; Teaching Suggestions P1-1. What management skills do you think would be most important for Kevin Johnson to have? Why? What skills do you think would be most important for a Starbucks store manager to have? Why? As chairman and chief global strategist of Starbucks Corporation, Kevin Johnson needs to have strong skills in each of the areas identified by Robert L. Katz: technical skills, human skills, and conceptual skills. Conceptual skills are especially important for Schultz to effectively lead his company. These skills enable him to make strategic plans that guide the global growth of Starbucks, predict future product trends, and take advantage of opportunities in the external environment. To manage an individual Starbucks location successfully, each Starbucks store manager, as well as the top manager of Starbucks Corporation, needs to possess the skills identified by Katz. Your students should recognize that the most important skills in this level of management would likely be related to human skills. This particular skill category equips a store manager to effectively utilize his/her most valuable resource—the employees, or "partners"—to achieve the goals and objectives of the individual store as well as the corporation as a whole.

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P1-2. How might the following management theories/approaches be useful to Starbucks: scientific management, organizational behavior, quantitative approach, systems approach? Throughout the history of management, experts have learned ways to improve the efficiency and effectiveness of work. What was learned in each of the periods of management development still holds some truth and usefulness for managers today. Companies like Starbucks would benefit from the use of scientific management and the quantitative approaches in the production side of their business. Scientific management could be used to make their retail establishments more efficient and quantitative management can help to improve the logistics of the company. Examining how organizational behavior can be used, the company already applies some techniques to help employees feel like they are contributing and to help increase employee satisfaction. Managers should understand the use of a number of Fayol's fourteen management principles, including division of work, esprit de corps, and unity of command. Starbucks managers and top executives alike must view the company as a complete system, realizing that the successful management and operation of each part of the company affects the well being of the entire corporation. P1-3. Choose three of the current trends and issues facing managers and explain how Starbucks might be impacted. What might be the implications for first-line managers? Middle managers? Top managers? The first way that managers' jobs are changing is in terms of how important customers are to the manager's job. Because Starbucks' success is a direct result of how it interacts with its customers, this is critical. In fact, "customers" is one of the company's six key corporate principles. There are critical implications for first-line managers in how customer connections are created and maintained as front-line partners serve and interact with each and every customer. The emphasis would be on delivering top-notch, quality service in each and every customer encounter. For middle managers, the implications would lie more in ensuring that the resources and support are available for first-line managers in creating exceptional customer experiences. And for top managers, the implications would be on reinforcing the corporate principles and establishing a reward system that recognizes and celebrates those partners who exemplify outstanding customer engagement. The second way that a manager's job is changing is in the increasing importance of innovation. Starbucks Corporation, like many companies, faced critical challenges during the extended economic downturn. However, the executive team responded with a full-fledged change effort that encompassed the company from top to bottom. "Doing things differently" was a key driver of those change efforts. For all levels of management, the implications were profound...ranging from being more disciplined and efficient in the operations side of the business to re-focusing on the long-term future of the company. The third way that a manager's job is changing is in how important sustainable practices are to how a company does business. Sustainability is in the DNA of Starbucks. From the beginning, the company has been about doing business ethically and responsibly. This commitment can be seen in the way the company sources its all-important coffee beans to the way it wants to be a "good neighbor" in the communities it serves. Managers at all levels of the company need to understand the obligations associated with doing business sustainably and recognize that they are accountable for how sustainability is practiced and lived. P1-4. Give examples of how Kevin Johnson might perform the interpersonal roles, the informational roles, and the decisional roles. Kevin Johnson wears many managerial hats during the course of each day. Acting as coach and mentor for his executive team, he plays an interpersonal role. Johnson must be able to work with individuals from diverse backgrounds and cultures in his global company. He plays

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interpersonal roles as he networks within and outside of the organization as a liaison, using his strengths in interpersonal roles to promote cooperation and commitment among partners of Starbucks. As he represents the company at promotional events, Johnson plays a figurehead role. He performs the interpersonal role of leader as he influences members of the work teams who contribute to the continuing development and success of the company. Johnson continuously monitors and disseminates information, internally and externally, in his information roles. In making strategic decisions concerning the future directions of the company, the introduction of new products, and how to respond to external issues, Johnson plays the role of decision maker. He must be, at times, a negotiator with suppliers and a savvy disturbance handler in challenging leadership situations. Johnson must be constantly alert in developing innovations for products in his decisional role as entrepreneur. P1-5. Look up Kevin Johnson and notice what is mentioned about him. How might his experiences and background affect the way the company is managed? Johnson’s profile lists him as a “passionate servant-leader” and his experience helping nonprofit organizations backs up his commitment to others. This mindset fits nicely into Starbucks’ mission of “To inspire and nurture the human spirit—one person, one cup and one neighborhood at a time.” Given this information, Johnson will manage the firm as a steward of the environment and humanity, but with the knowledge the firm can only do this if it makes a profit and keeps customers happy. P1-6.Go to the company’s website (stories.starbucks.com/leadership) and find the list of senior officers. Pick one of those positions and describe what you think that job might involve. Try to envision what types of planning, organizing, leading, and controlling this person would have to do. Your students can select from a variety of senior positions within Starbucks when answering this question. For example, the position of Executive Vice President, Public Affairs, oversees Starbucks’ global functions in areas of public relations, government affairs, and social responsibility and presents both a responsibility and an opportunity for this executive to lead Starbucks in its dedication to act as a socially responsible corporate citizen of the world community. This particular top manager must plan, organize, and lead programs that will benefit individuals and communities in the varied neighborhoods and countries served by Starbucks. The design and implementation of control mechanisms for obtaining feedback on these programs and responding appropriately would also be part of this executive's job. P1-7. Look up the company’s mission statement and guiding principles at the company’s website. What do you think of the mission and guiding principles? Student opinions will vary. However, before answering this question, have the students review the core values of Starbucks. You might want to ask them to address these principles/core values during a class discussion, examining how each of the principles relates to and supports the company's mission statement. P1-8. Describe how these would influence how a barista at a local Starbucks store does his or her job. Describe how these would influence how one of the company’s top executives does his or her job. Emphasize to your students that the mission and the guiding principles of Starbucks serve as the driving force behind everything done by the company, including job performance by every "partner" at Starbucks, from the barista at a local store to a top executive of the company. For instance, in their day-to-day operations, baristas will use the core values/principles of Starbucks to guide their decisions in dealing with customers, preparing customer orders, and performing other tasks they're assigned to do. In making decisions to direct the growth and development of

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the company, a top executive is guided by Starbucks' principles to encourage the highest standards of excellence in contributing to the simultaneous financial profitability of the company and benefit of the communities served by the organization around the globe. Managing Your Career

If You Were a Barista, What Would You Do?

If your classroom has Internet capabilities, visit “Hot Jobs” on the Starbucks website at [http://starbucks.com/careers]. (If you are unable to access the Internet in your classroom, you may give students the address of the website and encourage them to visit the site individually outside of class.) Under “Search jobs” ask students to pick a category (retail, retail leadership, corporate, manufacturing and distribution) and review a few positions listed on on that screen. By examining the jobs on the retail link, students will discover additional information describing the responsibilities of a Starbucks barista. After your students have explored these links, have them compose a list of skills and traits needed by a successful barista. In addition, ask them to respond to the following questions: • • • • • •

What types of positions with Starbucks are available at the present time? How do the responsibilities of a Starbucks store manager differ from those of an assistant manager? How do the responsibilities of a Starbucks retail manager differ from those of a store manager? What types of positions are listed in the area of human resource management? In what areas of the United States are positions currently available? Are job openings available at international locations? What types of international employment opportunities are offered at the present time?

P1-9. What makes Starbucks’ response to the Philadelphia crisis a non-programmed decision? To ensure that store managers across the company use programmed decisions in order to respond in a consistent way to non-buying customers, what would need to be done? Non-programmed decisions are those that address new and unusual situations that have incomplete or ambiguous information. The situation exploded on social media and quickly became a public relations nightmare for Starbucks. However, it was rapidly addressed by Starbucks and now the firm needs to develop procedures and rules that guide store managers when similar situations occur.

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P1-10. Which decision style best describes Kevin Johnson’s approach to decision making? Which decision style best summarizes Howard Schultz’s decision-making approach? Explain your answer. Kevin Johnson appears to be similar to Howard Schultz in that he appears to use bounded rationality but also combines intuition. However, Johnson may also utilize crowdsourcing or information gleaned from social media to help him make the right decisions. Johnson is also listed as a servant-leader so his moral code drives many of his decisions. Students may view some of Schultz’s decisions as non-linear. Clearly Schultz is not afraid of risk and might be considered an aggressive risk taker. Students may also note Schultz’s compassion for those in the company when he makes decisions and feel that he is an ethical decision maker. Starbucks' CEO Howard Schultz likely makes many decisions using a combination of bounded rationality and intuition. In a dynamic business environment, Schultz—as well as other top managers— must satisfice at times when quick action is required on an issue or problem. To help your students better understand the concept of satisficing, have them write a brief account recalling a time when they were content to satisfice in making a decision. They should include a description of the impact of using this technique in the particular circumstance they write about. You might ask for volunteers to share their recollections with the entire class. P1-11. How might biases and errors affect the decision making done by Starbucks’ executives? By Starbucks’ store managers? By Starbucks’ partners? Have students divide into three groups, each representing the three different employee groups: executives, managers, and partners. Have each group go through the list below and give several potential biases that could occur for their employee group. • • • • • • • • • • • •

Overconfidence Immediate Gratification Anchoring Selective Perception Confirmation Framing Availability Representation Randomness Sunk Costs Self-Serving Bias Hindsight

P1-12. How might design thinking be important to a company like Starbucks? Do you see any indication that Starbucks uses design thinking? Explain. Design thinking is “approaching management problems as designers approach design problems.” It can be useful when identifying problems and when identifying and evaluating alternatives. You can see evidence of design thinking in how Starbucks designs their products and retail stores. Great care is put into naming the products, i.e. Skinny Peppermint Mocha & Refreshers, and the layout of the coffee bars and sitting areas.

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Chapter 3 Influence of the External Environment and the Organization’s Culture The components of an organization’s culture are as complex as the different aspects of an individual’s personality. Today’s managers must understand how the force of an organization’s internal and external environments may influence, and sometimes constrain, its productivity.

LEARNING OBJECTIVES 1. Contrast the actions of managers according to the omnipotent and symbolic views. 2. Describe the constraints and challenges facing managers in today’s external environment. 3. Discuss the characteristics and importance of organizational culture. CHAPTER OUTLINE INTRODUCTION Managers must realize that organizational culture and organizational environment have important implications for the way an organization is managed. Both organizational culture and external forces that can shape an organization are explored in order to gain a better understanding of the complexities presented by internal and external environments. 3.1

THE MANAGER: OMNIPOTENT OR SYMBOLIC? Two perspectives concerning the role that managers play in an organization’s success or failure have been proposed. A. The Omnipotent View. This maintains that managers are directly responsible for the success or failure of an organization. 1. This view of managers as being omnipotent is consistent with the stereotypical picture of the “take-charge” executive who can overcome any obstacle in carrying out the organization’s objectives. 2. When organizations perform poorly, someone must be held accountable. According to the omnipotent view, that “someone” is the manager. B. The Symbolic View. This view of management upholds the view that much of an organization’s success or failure is due to external forces outside managers’ control. 1. The influence that managers do have is seen mainly as a symbolic outcome.

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Organizational results are influenced by factors outside of the control of managers, including the economy, customers, governmental policies, competitors’ actions, the state of the particular industry, the control of proprietary technology, and decisions made by previous managers in the organization. 3. The manager’s role is to create meaning out of randomness, confusion, and ambiguity. 4. According to the symbolic view, the actual part that management plays in the success or failure of an organization is minimal. Reality suggests a synthesis. Managers are neither helpless nor all powerful. Instead, the more logical approach is to see the manager as operating within constraints imposed by the organization’s culture and environment (see Exhibit 3-1).

THE EXTERNAL ENVIRONMENT The impact of the external environment on a manager’s actions and behaviors cannot be overemphasized. Forces in the external environment play a major role in shaping managers’ endeavors. A. Defining the Environment and Environmental Uncertainty. The environment consists of those factors and forces outside the organization’s control that have the potential to affect the organization’s performance. Not all firms operate in the same environment. Environments differ based on their degree of environmental uncertainty. Environmental uncertainty refers to the degree of change and complexity in an organization’s environment. The Environmental Uncertainty Matrix in Exhibit 3-2 shows these two aspects. 1. Degree of change is characterized as being dynamic or stable. 2. In a dynamic environment, components of the environment change frequently. If change is minimal, the environment is called a stable environment. 3. The degree of environmental complexity is the number of components in an organization’s environment and the extent of an organization’s knowledge about those components. 4. If the number of components and the need for sophisticated knowledge is minimal, the environment is classified as simple. If a number of dissimilar components and a high need for sophisticated knowledge exist, the environment is complex. 5. Because uncertainty is a threat to organizational effectiveness, managers try to minimize environmental uncertainty.

Monitoring the General Environment. The general environment includes everything outside the organization. The general environment can be divided into several components as shown in Exhibit 3-3. These components include economic, political/legal, sociocultural, demographic, technological, and global conditions. 1. Economic conditions include factors such as interest rates, inflation, changes in disposable income, and others. 2. Political/legal conditions include the general political stability of countries in which an organization does business and the specific attitudes that elected officials have toward business. Federal,

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state, and local governments can influence what organizations can and cannot do. 3. Sociocultural conditions include the changing expectations of society. Societal values, customs, and tastes can change, and managers must be aware of these changes. 4. Demographic conditions include the physical characteristics of a population (e.g., gender, age, level of education, geographic location, income, composition of family) which can change over time and managers must adapt to these changes. 5. Technological conditions include any scientific or industrial innovation. This component has changed more rapidly than any other element of the general environment. 6. Global factors include global competitors and global consumer markets. The Specific Environment. Most of management’s attention will focus on the organization’s specific environment. The specific environment consists of constituencies or stakeholders that can positively or negatively influence the organization’s effectiveness. It can include suppliers, customers, competitors, government agencies, and special interest groups. 1. Suppliers – Suppliers include any entity that provides the organization with labor, components, raw materials, or equipment. Managers need to ensure a steady flow of these resources at the lowest price possible. 2. Customers – All organizations exist to satisfy customers. However, customers can be fickle and managers need to be attuned to changing needs and preferences. 3. Competitors – Every organization faces competition; even nonprofits compete for donor dollars. Managers need to pay attention to any changes the competition introduces to gain customers or market share. 4. Government – Federal, state, and local governments influence what organizations can and cannot do. Legislation can change organizational demands or requirements overnight so managers need to be aware of these changes and be ready to respond. 5. Pressure Groups – Special interest groups often influence organizations. Protestors often disrupt business operations or force firms to make changes. Managers must be prepared to respond to these actions. Managing the Environment. Organizations do not operate in a vacuum and must be prepared to respond to the overall environment summarized in Exhibit 3-4. A manager’s job is to operate within these environmental constraints and gain as much control as possible over the organization’s environment.

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

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What is Organizational Culture? Organizational culture is the shared values, principles, traditions, and ways of doing things that influence the way organizational members act. This definition implies: 1. Individuals perceive organizational culture based on what they see, hear, or experience within the organization. 2. Organizational culture is shared by individuals within the organization. 3. Organizational culture is a descriptive term. It describes how members perceive the culture, rather than evaluates. 4. Six dimensions of an organization’s culture have been proposed. a. Adaptability (the degree to which employees are encouraged to be innovative and take risks) b. Attention to detail (the degree to which employees are expected to exhibit precision, analysis, and attention to detail) c. Outcome orientation (the degree to which managers focus on results or outcomes rather than on the techniques and processes used to achieve those outcomes) d. People orientation (the degree to which management decisions take into consideration the effect on people within the organization) e. Team orientation (the degree to which work activities are organized around teams rather than individuals) f. Integrity (the degree to which people exhibit honesty and high ethical principles in their work) 5. Exhibit 3-5 describes how the cultural dimensions can be combined to create organizations that are significantly different. Strong Cultures. 1. Strong cultures are found in organizations where key values are intensely held and widely shared. 2. Whether a company’s culture is strong, weak, or somewhere in between depends on organizational factors such as size, age, employee turnover rate, and intensity of original culture. 3. A culture has increasing impact on what managers do as the culture becomes stronger. 4. Most organizations have moderate-to-strong cultures. In these organizations, high agreement exists about what is important and what defines “good” employee behavior, for example. 5. Studies of organizational culture have yielded various results. One study found that employees in firms with strong cultures were more committed to their firm than were employees in firms with weak cultures. Organizations with strong cultures also used their recruitment efforts and socialization practices to build employee commitment. An increasing body of research suggests that strong cultures are associated with high organizational performance. 6. Exhibit 3-6 contrasts strong cultures vs. weak cultures. Where Culture Comes From and How it Continues. 1. The original source of an organization’s culture is usually a reflection of the vision or mission of the organization’s founders. The culture is a result of the interaction between the founders’

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biases and assumptions and what the first employees subsequently learned from their own experiences. 2. An organization’s culture continues when: a. Once a culture is in place, practices help to maintain it. b. Hiring practices reflect the culture in terms of “fit.” c. Actions of top executives help to maintain the culture. d. New employees learn the organization’s way of doing things through socialization—the process that helps employees adapt to the organization’s culture. 3. Exhibit 3-7 shows how organizations establish and maintain culture. How Employees Learn Culture. 1. Culture is transmitted principally through stories, rituals, material symbols, and language. 2. Stories are one way that employees learn the culture. These stories typically involve a narrative of significant events or people. 3. Rituals are repetitive sequences of activities that express and reinforce the key values of the organization, which goals are most important, and which people are important or expendable. 4. The use of material artifacts and symbols is another way in which employees learn the culture, learn the degree of equality desired by top management, discover which employees are most important, and learn the kinds of behavior that are expected and appropriate. 5. Language is often used to identify members of a culture. Learning this language indicates members’ willingness to accept and preserve the culture. This special lingo acts as a common denominator to unite members of a particular culture.

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IT’S YOUR CAREER: Reading an Organization’s Culture: Find One That is a Right Fit for You Wouldn’t it be nice to one day find a job you enjoy in an organization you’re excited to go to every day (or at least most days!)? Organizational cultures vary and finding one that’s a good fit with you is important for your satisfaction at work. Here’s a list of things you can do to “read” a culture: 1. Do background check. Are the company’s values and mission statement listed? What do current news items tell you about the company? You might also talk with members of trade organizations to which the organization’s employees belong. 2. Observe the physical surroundings and corporate symbols. What do logos, posters, pictures, style of dress, length of hair, and other factors tell you about the company? Could you see yourself working there and enjoying it? 3. How would you characterize the people you meet? Are they formal? Casual? Serious? Jovial? Open? What do these things say about the organization’s values? 4. Look at the organization’s HR manual (if you can). Are there formal rules and regulations? Could you see yourself working within these parameters? 5. Ask questions of the people you meet. How is job success defined/determined? What rituals are important, and what events get commemorated? What do these things say about what the organization values? When you apply for a job, much about the organization’s culture is right there for you to see. Know the clues to look for and decide if it’s for you!

How Culture Affects Managers. An organization’s culture is important because it establishes constraints on what managers can do. 1. The link between corporate values and managerial behavior is fairly straightforward. 2. The culture conveys to managers what is appropriate behavior. 3. An organization’s culture, particularly a strong one, constrains a manager’s decision-making options in all managerial functions (see Exhibit 3-8).

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WORKPLACE CONFIDENTIAL: Adjusting to a New Job or Work Team The typical individual will change jobs more than 10 times over a 20-year period. So, how do you make a successful adjustment when confronted with the change? Every organization has a socialization process that helps employees adjust to the organizational culture. Here are some options: 1. Formal vs. Informal. Some organizations have a formal orientation while others put new employees directly into the job. 2. Individual vs. Collective. Some organizations have group orientation and socialization experiences but most socialize new members individually. 3. Fixed vs. Variable. Some organizations have fixed transition schedules with time targets and others will promote you when you are “ready.” 4. Serial vs. Random. Some organizations use serial socialization processes such as an apprenticeship and others let you figure it out on your own. 5. Investiture vs. Divestiture. Some organizations will affirm and support your qualities and qualifications and leave you alone. This process is called investiture. Other will strip away certain characteristics through rituals that shape new members into the proper role. This process is called divestiture. Research shows that people have more job satisfaction if they go through the socialization process. Focus on what you can control and always remember that first impressions are very powerful!

ANSWERS TO REVIEW AND DISCUSSION QUESTIONS Student answers to these questions will vary. 3-1. Describe the two perspectives on how much impact managers have on an organization’s success or failure. In Section 3.1 of Chapter 3, the omnipotent and symbolic views of management are presented. The omnipotent view supports the idea that a manager is directly responsible for the success and failure of the organization. Top CEO’s (and head football coaches) would be more likely to be held accountable for the entire organization’s outcomes, while lower level managers would be held responsible for the outcomes in their respective departments. This view adopts the premise that managers set the priorities/goals of the organization and are responsible for making major success oriented decisions. If the goals and decisions managers choose are correct, then the organization should thrive. The symbolic view is a counterpart to the omnipotent view and asserts that much of an organization’s success or failure can be attributed to factors in the external environment,

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such as competition, economic conditions, or governmental influences. According to this view, management decisions are often flawed and poorly implemented due to factors beyond their direct control. Considering the random and ambiguous situations manager’s face, they should not be held responsible for organizational performance. (LO: 1, Contrast the actions of managers according to the omnipotent and symbolic views, AACSB: Analytical thinking) 3-2. “Businesses are built on relationships.” What do you think this statement means? What are implications for managing the external environment? Organizations depend on their environment and their stakeholders as a source of inputs and a recipient of outputs. Good relationships can lead to organizational outcomes such as improved predictability of environmental changes, more successful innovations, greater degrees of trust among stakeholders, and greater flexibility in acting to reduce the impact of change. In addition, relationship management and maintaining good relationships have been proven by many researchers to have an effect on organizational performance. High-performing companies tend to consider the interests of all major stakeholder groups as they make decisions. (LO: 2, Describe the constraints and challenges facing managers in today’s external environment, AACSB: Reflective thinking) 3-3. Refer to Exhibit 3-5. How would a first-line manager’s job differ in these two organizations? How about a top-level manager’s job? In Organization A, strong attention would be given to detail, with little innovation and risk taking. Teamwork would not be encouraged, and employees would be viewed as a means to an end. Strict controls would be placed on workers, and task achievement would be most important. The supervisor would have little latitude and would do things “by the book.” In Organization B, innovation and risk taking would be highly encouraged. The supervisor would have more autonomy in how to achieve goals. Employees would be given the opportunity to provide input, and a team approach would be used. People would be viewed as important contributors. The supervisor’s job would be more like that of a coach, encourager, and facilitator. (LO: 3, Discuss the characteristics and importance of organizational culture, AACSB: Reflective thinking) 3-4. Classrooms have cultures. Describe your class culture using the seven dimensions of organizational culture. Does the culture constrain your instructor? How? Answers to this question will vary. Have students look at the seven dimensions of organizational culture described in the text and rate them from high to low for the class. One point you might want to explore: What role does the instructor play in establishing the culture of the classroom? Ask students to relate this information to the role a manager might play in establishing the culture of a business organization. (LO: 3, Discuss the characteristics and importance of organizational culture, AACSB: Analytical thinking) 3-5. Can culture be a liability to an organization? Explain. In some cases, organizational culture could be a liability. In the global environment, a society that discriminates on the basis of ethnicity or gender or in the exploitation of workers could experience a backlash from the reactions of consumers in other nations. (See, for example, Reebok’s and Nike’s problems regarding manufacturing in emerging nations. (LO: 3, Discuss the characteristics and importance of organizational culture, AACSB: Analytical thinking)

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3-6. Discuss the impact of a strong culture on organizations and managers. At one time, researchers supported a direct connection between the strength of an organization’s culture and its performance. Today, we know that the strength of an organization’s culture is more closely tied to acceptance of an organization’s values. Exhibit 3-6 gives five employee related outcomes of strong vs. weak cultures. In the end, strong cultures aid a manager in fulfilling their functions: planning, organizing, leading, and controlling. (LO: 3, Discuss the characteristics and importance of organizational culture, AACSB: Analytical thinking) 3-7. What are the four common ways an organization communicates its culture to employees? An organization communicates its culture through stories, rituals, material artifacts and symbols, and language. (LO: 3, Discuss the characteristics and importance of organizational culture, AACSB: Analytical thinking)

ETHICS DILEMMA Student answers to these questions will vary. In many ways, technology has made all of us more productive. However, ethical issues do arise in how and when technology is used. Take the sports arena. All kinds of technologically advanced sports equipment (swimsuits, golf clubs, ski suits, etc.) have been developed that can sometimes give competitors/players an edge over their opponents. We saw it in swim meets at the Summer Olympics and on the ski slopes and ice rinks at the Winter Olympics. 3-8. What do you think? Is this an ethical use of technology? Possible answer: As long as all athletes competing in the sport have the ability to take advantage of the technology, then it is ethical. No one will be able to generate an unfair advantage if this is the case. (LO: 2, Describe the constraints and challenges facing managers in today’s external environment, AACSB: Ethical understanding and reasoning) 3-9. What if your school (or country) was competing for a championship and couldn’t afford to outfit athletes in such equipment and it affected your ability to compete? Would that make a difference? Possible answer: Yes, if the technology is not available to everyone, then the victory is not due solely to ability. (LO: 2, Describe the constraints and challenges facing managers in today’s external environment, AACSB: Ethical understanding and reasoning) 3-10. What ethical guidelines might you suggest for such situations? Possible answer: All athletes and teams should have equal access to the technology or it should be banned. (LO: 2, Describe the constraints and challenges facing managers in today’s external environment, AACSB: Ethical understanding and reasoning)

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SKILLS EXERCISE: DEVELOPING YOUR ENVIRONMENTAL SCANNING SKILL Environmental scanning is an important managerial skill. In this exercise, students are asked to practice this skill using five suggestions: • Decide which type of environmental information is important to your work. • Regularly read and monitor pertinent information. • Incorporate the information that you get from your environmental scanning into your decisions and actions. • Regularly review your environmental scanning activities. • Encourage your subordinates to be alert to information that is important. Students are then given two ways to begin developing these skills. (LO: 2, Describe the constraints and challenges facing managers in today’s external environment, AACSB: Analytical thinking)

WORKING TOGETHER: TEAM EXERCISE Have students work in teams of three or four. Student responses will vary. The most common ways to learn organizational culture is through stories, rituals, material artifacts and symbols, and language. Some questions that students might ask include: • Physical design (buildings, furnishings, parking lot, office or store design)— Where are they located and why? Where do customers and employees park? What does the office/store layout look like? What activities are encouraged or discouraged by the physical layout? What do these things say about what the organization values? • Symbols (logos, dress codes, slogans, philosophy statements)—What values are highlighted? Where are logos displayed? Whose needs are emphasized? What concepts are emphasized? What actions are prohibited? What actions are encouraged? Are any artifacts prominently displayed? What do those artifacts symbolize? What do these things say about what the organization values? • Words (stories, language, job titles)—What stories are repeated? How are employees addressed? What do job titles say about the organization? Are jokes/anecdotes used in conversation? What do these things say about what the organization values? • Policies and activities (rituals, ceremonies, financial rewards, policies for how customers or employees are treated)—(Note: You may be able to assess this one only if you’re an employee or know the organization well.) What activities are rewarded? Ignored? What kinds of people succeed? Fail? What rituals are important? Why? What events get commemorated? Why? What do these things say about what the organization values? (LO: 3, Discuss the characteristics and importance of organizational culture, AACSB: Analytical thinking)

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

Consider a business that you frequent (for example, a restaurant or coffee shop) and review the six aspects of the external environment discussed in the text. Create a list of factors in the external environment that could affect the management of the business you selected. (LO: 2, Describe the constraints and challenges facing managers in today’s external environment, AACSB: Analytical thinking)

• Choose an organization you’re familiar with or one that you would like to know more about. Create a table identifying potential stakeholders of this organization. Then indicate what particular interests or concerns these stakeholders might have. (LO: 2, Describe the constraints and challenges facing managers in today’s external environment, AACSB: Analytical thinking) • If you belong to a student organization, evaluate its culture. How would you describe the culture? How do new members learn the culture? How is the culture maintained? If you don’t belong to a student organization, talk to another student who does and evaluate it using the same questions. (LO: 3, Discuss the characteristics and importance of organizational culture, AACSB: Analytical thinking)

ANSWERS TO CASE APPLICATION 1 QUESTIONS Student answers to these questions will vary. Environmental Uncertainty at HBO 3-11. Which of the cells in Exhibit 3-2 applies most clearly to the environmental uncertainty faced by HBO? While answers may vary somewhat, the correct answer will always be in Cell 2 or Cell 4 since the environment is very dynamic. However, Cell 4 is a better fit since there are numerous components that are continually changing that require sophisticated knowledge to understand how they fit together. (LO: 2, Describe the constraints and challenges facing managers in today’s external environment, AACSB: Analytical thinking) 3-12. Using Exhibit 3-4, what components of HBO’s external environment and specific environment are having an impact on the company? Why?

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HBO’s customer base is changing and becoming more receptive to other content delivery modes. In addition, competition is increasing as Netflix, Apple, and other firms enter the market. (LO: 2, Describe the constraints and challenges facing managers in today’s external environment, AACSB: Analytical thinking) 3-13. What, if anything, can HBO do to manage its environment and reduce its uncertainty exposure? Responses to this question will vary. However, HBO needs to adjust to the decline in cable subscribers and evaluate different pricing models for streaming content. (LO: 2, Describe the constraints and challenges facing managers in today’s external environment, AACSB: Analytical thinking) 3-14. How might HBO’s organizational culture change as a result of the changes described in this case? An organization’s culture is a reflection of its leadership and the values that leadership promotes. The primary driver of change is the merger with AT&T-Time Warner. HBO will need to adjust to a different corporate culture and focus more on quantity of shows produced at a lower cost. This change in strategic focus will also affect the company’s culture. (LO: 3, Discuss the characteristics and importance of organizational culture, AACSB: Analytical thinking)

ANSWERS TO CASE APPLICATION 2 QUESTIONS Student answers to these questions will vary. Organizational Culture at Vice Media 3-15. Which of the six organizational culture dimensions apply most clearly to Vice Media’s culture? Adaptability and outcome orientation both apply. Vice Media valued both creativity and innovation but also wanted results regardless of how they were obtained. (LO: 3, Discuss the characteristics and importance of organizational culture, AACSB: Analytical thinking) 3-16. How do you think the new Vice Media CEO needs to help employees learn about changes she decides to make in the organization’s culture? Answers will vary. However, the firm needs to be more structured and focused. She needs to implement a formal orientation and training program so all employees understand the firm’s culture and what behaviors and acceptable or unacceptable. Clear communication of the changes and expectations is critical. (LO: 3, Discuss the characteristics and importance of organizational culture, AACSB: Analytical thinking) 3-17. If you were the new CEO at Vice Media, what actions would you take to improve the culture? Student opinions will vary. Possibilities include changing the office space layout to a more structured work environment with innovation labs where teams can brainstorm ideas, adding a formal orientation, and ensuring equal and fair pay. (LO: 3, Discuss the characteristics and importance of organizational culture, AACSB: Analytical thinking)

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3-18. Other high-tech firms have been accused of creating “college dorm” cultures. These type of cultures were unheard of in start-ups thirty years ago. What might have changed? How do you make cultures like this more professional? Answers will vary, but the driver of change is probably a demographic shift. Different generations have different cultures. Encouraging people to be creative may also spawn a “college dorm” culture attractive to younger workers. Managers will likely need to introduce more structure and have formal orientation and training. And, some employees may need to be terminated. (LO: 3, Discuss the characteristics and importance of organizational culture, AACSB: Analytical thinking)

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Chapter 4 Managing in a Global Environment Every organization is affected in some way by the global environment. In this chapter, you will learn what managers need to know about managing globally, including regional trading alliances, how organizations go international, and cross-cultural differences. Focus on the following learning objectives as you read and study this chapter. LEARNING OBJECTIVES 1. Define globalization, nationalism, and parochialism; and contrast ethnocentric, polycentric, and geocentric attitudes. 2. Describe the history of globalization. 3. Summarize the case for and against globalization. 4. Explain the different types of international organizations. 5. Describe the structures and techniques organizations use as they go international. 6. Explain the relevance of the political/legal, economic, and cultural environments to global business.

CHAPTER OUTLINE WHO OWNS WHAT? Students may be astonished to discover the country of ownership origin for many products they use. In taking this quiz and discussing their scores, students may also be surprised to learn that a significant number of well-known companies derive more than half of their revenues from global operations. 4.1

CLARIFYING TERMINOLOGY We need to begin our discussion of the global environment by defining a few terms. A. Globalization refers to a process by which organizations develop influence or operations across international borders. B. Nationalism refers to patriotic ideals and policies that glorify a country’s values. C. Parochialism is viewing the world solely through your own perspectives, leading to an inability to recognize differences between people. Parochialism is an obstacle for many U.S. managers and stems from monolingualism. Managers might have one of three perspectives or attitudes toward international business: 1. An ethnocentric attitude is the parochialistic belief that the best work approaches and practices are those of the home country (the country in which the company’s headquarters are located). 53

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A polycentric attitude is the view that the managers in the host country (the foreign country where the organization is doing business) know the best work approaches and practices for running their business. A geocentric attitude is a world-oriented view that focuses on using the best approaches and people from around the globe. To be a successful global manager, an individual needs to be sensitive to differences in national customs and practices.

A BRIEF HISTORY OF GLOBALIZATION Globalization moves in and out of favor. In recent history, globalization began to grow following World War II. The Bretton Woods conference in 1944 established a set of rules for commercial and financial relations between the US, Canada, Western Europe, Australia, and Japan. Since that time a number of agreements and events transpired including: • The International Monetary Fund (IMF) is an organization of 189 countries that promotes international monetary cooperation and provides member countries with policy advice, temporary loans, and technical assistance to establish and maintain financial stability and to strengthen economies. • The World Bank is an international financial institution that provides vital financial and technical assistance to developing countries around the world. • General Agreement on Tariffs and Trade (GATT) (1948) Gatt is an agreement between countries to reduce or eliminate tariffs. • The Organization for Economic Cooperation and Development was formed in 1961. The 37 member nations from developed countries work to stimulate economic growth and world trade through coordinating domestic and international economic policies. • The Association of Southeast Asian Nations (ASEAN) is a trading alliance of Southeast 10 Asian nations with a common goal of accelerating growth. • World Economic Forum (1974) This organization is a Swiss non-profit foundation that brings world leaders together to discuss issues and find solutions to economic and social issues that are common problems. • Margaret Thatcher Elected PM in Great Britain (1979) Margaret Thatcher was the Prime Minister of the UK from 1878 to 1990 and a big proponent of free trade. • Ronald Reagan Elected US President (1980) President Reagan introduced numerous policies to deregulate industry and promoted global trade. His policies are credited with the collapse of the Soviet Union and the reunification of Germany. • The Fall of the Soviet Union (1991) The Soviet Union officially dissolved in December 1991 and is now comprised of nine different nations that are now known as the Commonwealth of Independent States. These include Russia, Armenia, Tajikistan, and others. • The European Union (EU) is a union of 28 European nations created as a unified economic and trade entity (see Exhibit 4-1). The primary motivation for the creation of the EU in February 1992 was to allow member nations to reassert their position against the industrial strength of the United States and Japan. 54

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The North American Free Trade Agreement (NAFTA) (1994) is an agreement among the Mexican, Canadian, and U.S. governments to work toward eliminating trade barriers. • The World Trade Organization (WTO) Formed in 1995 and evolving from GATT, the WTO is the only global organization dealing with the rules of trade among nations. Membership consists of 164 countries. • Shanghai Cooperation Organization (2003) This eight-nation cooperative represents half of the world’s population and members have pledged to cooperate on free trade. Members include China, Russia, India, and Pakistan. • “We are the 99%” Protest Movement (2011) A protest movement that attacked income and wealth inequality in the US. Their belief was that the top 1% of the US population controlled too much power and wealth. • Made in China 2025 (2015) A Chinese government initiative to make China the dominant global player in high-tech manufacturing by using subsidies and other government roles to achieve this goal. • British Vote to Exit the EU (2016) The June 2016 UK vote to leave the European Union. Brexit is viewed as a return to nationalism. • Donald Trump Elected President (2016) President Trump’s goals include reducing regulation, renegotiating US trade deals, and fostering “America First” policies. • Trans-Pacific Partnership (2016) The TPP was a trade agreement involving the US and other Pacific Rim nations including Japan, Australia, Peru, and Vietnam. The US withdrew support after Trump’s election, so it was not fully implemented. • NAFTA 2.0 or USMCA (2018) The United States-Mexico-Canada Agreement, or USMCA, was a result of President Trump’s renegotiation of NAFTA. It established new labor and environmental regulations for Mexico, updated intellectual property and data trade protections, and gave the US increased access to Canada’s dairy markets. Overall, the more recent developments highlight the growing movement away from globalization. Exhibit 4-2 shows the global pendulum swing that is currently underway. 4.3

THE CASE FOR AND AGAINST GLOBALIZATION Most economists are proponents of free trade since it is believed that free trade benefits all countries. The following sections highlight the arguments for and against free globalization and the managerial implications. A. The Win-Win Argument. The “every country wins” argument is largely based on the law of comparative advantage that maintains countries should focus production on the goods or services they can produce at the lowest opportunity cost and then engage in trade to obtain other nations’ output. This was the dominant view from the mid-1940s to about 2015. B. The Downside of Globalization. The middle class in both North America and Europe, suffering from wage stagnation, began to question globalization. They charged global firms with shipping production to cheaper labor countries in Asia and keeping wages suppressed in the developed nations. Considerable evidence supports the position that some sectors, groups, and countries are 55

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harmed by free markets and open borders. The “America First” and “Brexit” movements were spawned by the harmful effects of globalization. Globalization Today. Opposition to globalization and the movement toward nationalism and protectionism is louder today than it has been in 80 years. However, globalization will not disappear due to these factors: 1. Global firms employ tens of millions of workers worldwide and have billions invested in infrastructure and the supply chains that support globalization. There is little political will to undo this level of investment. 2. The evidence is overwhelming that free trade is not the cause of unemployment. Research shows that workers have been displaced due to technology. Automation was the cause of over 80% of the manufacturing job loss in the US between 2000 and 2010. 3. Most people still believe the benefits of globalization outweigh the costs. Consumers like lower prices and investors like higher profits. And, high-skilled workers in developed nations end up with higher wages, as do workers in developing nations, all due to globalization. What Does This Mean for Managers? Since globalization is here to stay managers and those that want to be managers must develop the skills needed for global management. Managers need to be flexible and willing to work with people from other cultures. Gaining international experience is very beneficial and speaking another language, such as Spanish or Mandarin, would open doors for your entire career. Managers that have entrepreneurial interests need to gain an understanding of global markets and the various ways to enter those markets.

DIFFERENT TYPES OF INTERNATIONAL ORGANIZATIONS A. Different Types of International Organizations. Business has been conducted internationally for many years (e.g., DuPont conducted business in China in 1863, H. J. Heinz has been manufacturing their brands in the United Kingdom since 1905, and Ford established its first overseas sales branch in France in 1908). Multinational corporations did not become popular until the mid-1960s. Global organizations can be classified in the following categories: 1. The term multinational corporation (MNC) is a broad term that refers to any and all types of international companies that maintain operations in multiple countries. 2. One type of MNC is a multidomestic corporation, which decentralizes management and other decisions to the local country. 3. Another type of MNC is a global company, which centralizes its management and other decisions in the home country. 4. A transnational corporation (TNC), sometimes called a borderless organization, is a type of international company in which artificial geographical barriers are eliminated. 56

Your students should keep in mind that neither the national origin of a company nor the national origin of its employees is any longer a good measure of where that company conducts business. 4.5

HOW ORGANIZATIONS GO INTERNATIONAL Organizations often use different approaches when they go international. There are essentially three stages, illustrated in Exhibit 4-3, that an organization typically progresses through. 1. Companies that go international may begin by using global sourcing (also called global outsourcing). In this stage of going international, companies purchase materials or labor from around the world, wherever the materials or labor are least expensive. Beyond the stage of global sourcing, each successive stage to become more international involves more investment and risk. 2. In the next stage, companies may go international by exporting (making products domestically and selling them abroad) or importing (acquiring products made abroad and selling the products domestically). Both exporting and importing require minimal investment and risk. 3. In the early stages of going international, managers may also use licensing (giving another organization the right to make or sell its products using its technology or product specifications) or franchising (giving another organization the right to use its name and operating methods). 4. After an organization has done international business for a period of time, managers may decide to make more of a direct investment in international markets by forming a strategic alliance, which is a partnership between an organization and a foreign company partner(s). In a strategic alliance, partners share resources and knowledge in developing new products or building production facilities. 5. A joint venture (a specific type of strategic alliance) may be undertaken to allow partners to form a separate, independent organization for some business purpose. 6. Managers may decide to make a direct investment in a foreign country by establishing a foreign subsidiary, in which a company sets up a separate and independent production facility or office. Establishing a foreign subsidiary involves the greatest commitment of resources and the greatest risk of all of the stages in going international.

4.6

MANAGING IN A GLOBAL ENVIRONMENT Managing in a global environment entails challenges. A. The Political/Legal Environment. The legal-political environment does not have to be unstable or revolutionary to be a challenge to managers. The fact that a country’s political system differs from that of the United States is important to recognize. B. The Economic Environment. 57

The economic environment also presents many challenges to foreignbased managers, including fluctuations in currency exchange rates, inflation, and diverse tax policies. 1. In a free market economy, resources are primarily owned by the private sector. 2. In a planned economy, all economic decisions are planned by a central government. The Cultural Environment. Countries have different cultures, just as organizations do. National culture is the values and attitudes shared by individuals from a specific country that shape their behavior and their beliefs about what is important. See Exhibit 4-4 for a synopsis of American national culture. An approach developed by Geert Hofstede serves as a valuable framework for understanding differences between national cultures. Exhibit 4-5 illustrates Hofstede’s five dimensions of national culture. 1. Hofstede studied individualism versus collectivism. Individualism is the degree to which people in a country prefer to act as individuals rather than as members of groups. Collectivism is characterized by a social framework in which people prefer to act as members of groups and expect others in groups of which they are a part (such as a family or an organization) to look after them and to protect them. 2. Another cultural dimension is power distance, which measures the extent to which a society accepts the fact that power in institutions and organizations is distributed unequally. 3. Uncertainty avoidance describes the degree to which people tolerate risk and prefer structure over unstructured situations. 4. Hofstede identified the dimension of achievement versus nurturing. Achievement is the degree to which values such as assertiveness, the acquisition of money and material goods, and competition prevail. Nurturing emphasizes sensitivity in relationships and concern for the welfare of others. 5. Long-term and short-term orientation. People in countries having long-term orientation cultures look to the future and value thrift and persistence. Short-term orientation values the past and present and emphasizes a respect for tradition and fulfilling social obligations. The Global Leadership and Organizational Behavior Effectiveness (GLOBE) research program is an assessment that updates Hofstede’s studies. a. GLOBE began in 1993 and identified nine dimensions on which national cultures differ: Assertiveness, future orientation, gender differentiation, uncertainty avoidance, power distance, individualism/collectivism, in-group collectivism, performance orientation, and humane orientation. b. GLOBE confirms Hofstede’s dimensions are still valid. Managers need to understand these dimensions and use them to understand the cultures they deal with when working abroad or managing people from other cultures. 58

It’s Your Career Developing Your Global Perspective—Working with People from Other Cultures In this chapter, students will learn how to develop their global perspective. Human resource managers say that there is a great need for cross-cultural understanding and savvy in business settings. Most executives, across the world, say that cross-cultural leadership is their top management challenge. During their career, students will work with individuals who were born in a different country and don’t speak English as their first language. Their habits and customs will be different and students may have a hard time understanding their behavior. This chapter suggests that students should increase their ability to work with people from different cultures in the following ways: 1. Become aware of your own level of openness to and confidence in crosscultural experiences. Work on expanding your comfort zone. 2. Assume differences until similarity is proven. To avoid embarrassing misinterpretations, assume that individuals from different cultures will interpret communication or behaviors differently until some similarities are proven. 3. Emphasize description rather than interpretation or evaluation. Description emphasizes observation. Some customs may be different from what you’re used to, but different doesn’t make them wrong or inferior. 4. Show empathy. Interpret the words, motives, and actions of a person from another culture from the perspective of that culture rather than your own. 5. Treat your initial interpretations as working hypotheses. Pay careful attention to feedback in order to avoid serious miscommunications and resulting problems. 6. Educate yourself on cross-cultural issues and approaches. Develop international experience through traveling. Consider study abroad and get to know the international students at your school and learn about their countries and cultures.

ANSWERS TO REVIEW AND DISCUSSION QUESTIONS wer these questions will vary. 4-1. Contrast ethnocentric, polycentric, and geocentric attitudes toward global business. The ethnocentric, polycentric, and geocentric views vary by their degree to which the holder adheres to the belief that their culture is the best and their willingness to accept best approaches from other cultures. An ethnocentric attitude is the parochialistic belief that the best work approaches and practices are those of the home country (the country in which the company’s headquarters are located). A polycentric attitude is the view that employees in the host country (the foreign country in which the organization is doing business) know the best work approaches and practices for running their business. A geocentric attitude is a world-oriented view that focuses on using the best approaches and people from around the globe. Managers with this type of attitude have a global view and look for the best approaches and people regardless of origin. (LO: 1 Define 59

globalization, nationalism, and parochialism; and contrast ethnocentric, polycentric, and geocentric attitudes, AACSB: Diverse and multicultural work environments) 4-2. How have attitudes toward globalization changed over the last century? After decades of movement toward globalization, attitudes have shifted away from free trade and globalization and moved back toward nationalism and protectionism. This pendulum swing became apparent in 2015 with “America First” and “Brexit” highlighting the change. (LO: 2 Describe the history of globalization, AACSB: Diverse and multicultural work environments) 4-3. Contrast multinational, multidomestic, global, and transnational organizations. A multinational corporation (MNC) refers to a broad group of organizations and refers to any type of international company that maintains operations in multiple countries. The types of MNC vary with respect to the degree to which they decentralize decision making across countries in which they operate. One type of MNC is a multidomestic corporation, which decentralizes management and other decisions to the local country. A global company is a MCN that centralizes its management and other decisions in the home country. This type of company takes a worldview of operations, seeking to maximize efficiency by producing goods that have a global appeal. Finally, the transnational company eliminates artificial geographical barriers and seeks the best possible arrangement without regard to the country to maximize efficiencies and competitive advantage. (LO: 5 Describe the structures and techniques organizations use as they go international, AACSB: Diverse and multicultural work environments) 4-4. What are the managerial implications of a borderless organization? In a borderless organization, artificial geographic borders do not separate functions, divisions, or activities. The managerial implications of such an organization are that it is infinitely more flexible in its ability to respond to changing marketplace conditions. However, this type of organization is much more difficult to control. (LO: 5 Describe the structures and techniques organizations use as they go international, AACSB: Diverse and multicultural work environments) 4-5. Describe the different ways organizations can go international. Management makes its first attempt to go international by using global sourcing, in which companies take advantage of lower costs and minimal risk. Next, managers may go international by exporting products to other countries and/or importing products from other countries. Exporting and importing involve minimal risk and provide more control over the company’s product(s). In licensing (primarily used by manufacturers) and franchising (mainly used by service organizations), management continues to look at ways to enter the global market, and at the same time, avoid investing a lot of capital. Strategic alliances and joint ventures allow partners to share both the risks and the rewards incurred in business conducted by the partners through the alliance. Establishing a foreign subsidiary involves the greatest commitment of resources and the greatest amount of risk of all of the stages of going international. Companies setting up a foreign subsidiary do not have to share profits with a partner but, at the same time, do not have a partner who will share the loss if a business enterprise fails. (LO: 5 Describe the structures and techniques organizations use as they go international, AACSB: Diverse and multicultural work environments) 60

4-6. Can the GLOBE framework presented in this chapter be used to guide managers in a Russian hospital or a government agency in Egypt? Explain. Yes, the GLOBE framework discussed in Chapter 4 is applicable to both situations. Managers must first understand the unique cultural characteristics of each country in order to modify management decisions and practices. (LO: 6 Explain the relevance of the political/legal, economic, and cultural environments to global business, AACSB: Diverse and multicultural work environments) 4-7. What challenges might confront a Mexican manager transferred to the United States to manage a manufacturing plant in Tucson, Arizona? Will these issues be the same for a U.S. manager transferred to Guadalajara? Explain. The Mexican manager would have to become familiar with the legal, political, economic, and cultural environments of the United States. The cultural environment would be particularly challenging, since the national culture of Mexico varies greatly from the national culture of the United States in three out of five of Hofstede’s dimensions. On the individualism-collectivism dimension, Mexico is a more collective society, whereas the United States is more individualistic. In the power distance dimension, Mexico rates high, while the United States rates low. In the uncertainty avoidance dimension, Mexico again rates high, while the United States rates low. (LO: 6 Explain the relevance of the political/legal, economic, and cultural environments to global business, AACSB: Diverse and multicultural work environments) 4-8. How might the cultural differences in the GLOBE dimensions affect how managers (a) use work groups, (b) develop goals/plans, (c) reward outstanding employee performance, and (d) deal with employee conflict? There are multiple ways to address this question. First, students may address each item by referring to one of the nine dimensions presented in the GLOBE model. For example, a) institutional collectivism, b) future orientation, c) performance orientation, or d) assertiveness. Or, students may attempt to use multiple dimensions to address each item. On reflection, it is possible to see many combinations of how the dimensions would impact the items presented in the question. (LO: 6 Explain the relevance of the political/legal, economic, and cultural environments to global business, AACSB: Diverse and multicultural work environments)

PREPARING FOR: My Career ETHICS DILEMMA Student answers to these questions will vary. Face-recognition technology is on the rise as firms and law enforcement embrace the AIenabled technology as a way to prevent identity theft and help catch criminals. However, the US Supreme Court ruled that tracking people using cell phones was unconstitutional, so many people believe face-recognition technology should have similar prohibitions. While many in the US express concerns about the technology, the Chinese government is investing heavily in the technology and uses facial recognition in financial services, real estate, and ride-sharing industries.

4-11. In what industries or situations do you think using face-recognition technology is acceptable? When does it violate people’s privacy? Answers will vary a lot. I am not sure where I stand on the issue, but it smacks of Big Brother so I lean towards prohibition in almost every sector. However, financial institutions in the private sector may opt to use it for another layer of security if the employee consents. I think it violates privacy when done without consent. (LO: 6 Explain the relevance of the political/legal, economic, and cultural environments to global business, AACSB: Diverse and multicultural work environments) 4-12. Is it ethical to use face-recognition technology if you are doing business in a culture where privacy concerns are not raised as much (like China)? Why or why not? Answers will vary, but I would apply the same standard as applied in the US due to basic human privacy rights. (LO: 6 Explain the relevance of the political/legal, economic, and cultural environments to global business, AACSB: Diverse and multicultural work environments)

SKILLS EXERCISE: Developing Your Collaboration Skill An important skill for any employee and new manager is collaboration. In this exercise students work on building their own political skills based on the following steps: looking for common points of interest, listening to others, checking for understanding, accepting diversity, seeking additional information, and not becoming defensive. Students are encouraged to take notes to track their progress and then to evaluate their own level of collaboration skill development. (LO: 1 Define globalization, nationalism, and parochialism; and contrast ethnocentric, polycentric, and geocentric attitudes, AACSB: Written and oral communication)

WORKING TOGETHER: TEAM EXERCISE In groups of three to four individuals, students are asked to identify examples of GLOBE dimensions where their home country differs from another country they know about. Students are encouraged to think about how their previous interactions with individuals from other countries could be interpreted differently on GLOBE dimensions. They should then discuss ways where everyone could have been made more comfortable in that interaction. After the groups develop their consensus, they should share with the rest of the class. (LO: 6 Explain the relevance of the political/legal, economic, and cultural environments to global business, AACSB: Diverse and multicultural work environments)

MY TURN TO BE A MANAGER •

Find two current examples of each of the ways that organizations go international. Write a short paper describing what these companies are doing. (LO: 5 Describe the structures and techniques organizations use as they go international, AACSB: Diverse and multicultural work environments)

•

The U.K.-based company Commisceo Global has several cultural awareness “quizzes” on its website, www.commisceo-global.com/resources/quizzes. Go to the website and try two or three of them. Were you surprised at your score? What does your score tell you about your cultural awareness? (LO: 1 Define globalization, nationalism, and parochialism; and contrast ethnocentric, polycentric, and geocentric attitudes, AACSB: Diverse and multicultural work environments)

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On another website, you’ll also find Intercultural Management Guides (www.kwintessential.co.uk/resources-types/guides). Pick two countries to study (from different regions) and compare them. How are they the same? Different? How would this information help a manager? (LO: 1 Define globalization, nationalism, and parochialism; and contrast ethnocentric, polycentric, and geocentric attitudes, AACSB: Diverse and multicultural work environments)

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

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Take advantage of opportunities that you might have to travel to other countries, either on personal trips or on school-sponsored trips. (LO: 6 Explain the relevance of the political/legal, economic, and cultural environments to global business, AACSB: Diverse and multicultural work environments)

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

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Suppose that you were being sent on an overseas assignment to another country (you decide which one). Research that country’s economic, political/legal, and cultural environments. Write a report summarizing your findings. (LO: 6 Explain the relevance of the political/legal, economic, and cultural environments to global business, AACSB: Diverse and multicultural work environments)

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If you don’t have your passport yet, go through the process to get one. (The current fee in the USA is $145.) (LO: 6 Explain the relevance of the political/legal, economic, and cultural environments to global business, AACSB: Diverse and multicultural work environments) 63

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It is important to understand basic etiquette when traveling internationally for business (e.g., how does one greet someone new, and is a handshake appropriate?). Identify three countries that you would like to travel to and conduct research to learn about business etiquette for those countries. Summarize your findings. (LO: 1 Define globalization, nationalism, and parochialism; and contrast ethnocentric, polycentric, and geocentric attitudes, AACSB: Diverse and multicultural work environments)

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Identify a company that operates internationally and has locations in more than two different countries. Explore the “Career” page of the company’s website. Write a brief report about the career opportunities available at the company and the required qualifications of applicants. (LO: 1 Define globalization, nationalism, and parochialism; and contrast ethnocentric, polycentric, and geocentric attitudes, AACSB: Diverse and multicultural work environments)

CASE APPLICATION 1 QUESTIONS Student answers to these questions will vary. Glencore: Conducting Business in Countries Where Others Might Not 4-13. How can Glencore be subject to a new US law when it is based in Switzerland? Is the US justified in launching this investigation? While it is possible that students may have a variety of reactions to this question, it is probable that the common reaction is that Glencore crossed the line and committed a serious infraction by violating provisions of the FCPA by making payments to Gertler in order to gain mine access in the Congo. While the practice is legal and acceptable in some cultures, it is not acceptable in the United States and, because of the FCPA, it is illegal to engage in outside of the country. Since Glencore sells cobalt to the US, the US is justified in launching the investigation according to the FCPA. Bribery stifles competition and should be prohibited. (LO: 6 Explain the relevance of the political/legal, economic, and cultural environments to global business, AACSB: Diverse and multicultural work environments) 4-14. Some people think that Glencore should change its business practices because of this corruption investigation. What if there is no other way to get access to resources without brushing up against corruption? I believe Glencore will want to continue selling cobalt to the US, so it will find other ways to obtain the mineral. Again, there is no one correct answer to this question. (LO: 6 Explain the relevance of the political/legal, economic, and cultural environments to global business, AACSB: Diverse and multicultural work environments) 4-15. Can the ends (providing a much-needed mineral like cobalt) ever justify the means (corrupt practices)? If so, when? Answers will vary. In cases where human life is at stake, it might be justifiable. (LO: 6 Explain the relevance of the political/legal, economic, and cultural environments to global business, AACSB: Diverse and multicultural work environments)

4-16. What are other examples of international companies that have been linked to corruption? What defense did they use to justify their practices? Have the students conduct an Internet search to get current examples. The following website has a list of some recent cases: https://www.sec.gov/spotlight/fcpa/fcpacases.shtml. (LO: 6 Explain the relevance of the political/legal, economic, and cultural environments to global business, AACSB: Diverse and multicultural work environments)

CASE APPLICATON 2 QUESTIONS Student answers to these questions will vary. Tariffs: Helping or Hurting General Motors? 4-17. What are the pros and cons of tariffs as a part of global trade? Tariffs can help protect domestic firms and save jobs. They also generate revenue for the government. One disadvantage is they typically result in higher prices for consumers. Nations will often retaliate, which affects jobs in other industries. (LO: 3 Summarize the case for and against globalization, AACSB: Diverse and multicultural work environments) 4-18. What roles do regional trading alliances and global trade mechanisms play in the events affecting General Motors highlighted in this case? GM sells products to other nations and buys raw materials and inputs from other nations. Trade alliances typically make both buying and selling easier and cheaper. (LO: 2 Describe the history of globalization, AACSB: Diverse and multicultural work environments) 4-19. With so many external environmental forces affecting General Motors, what could executives at General Motors do to manage this uncertainty? GM executives currently lobby lawmakers to reduce trade barriers. On the supply chain input side they could look for other sources of steel and aluminum inside the US. Expanding their brand presence could also make foreign buyers less affected by higher prices if nations impose retaliatory tariffs. (LO: 6 Explain the relevance of the political/legal, economic, and cultural environments to global business, AACSB: Diverse and multicultural work environments) 4-20. What do you think General Motors might need to do better to navigate the changes happening in the global marketplace (including the pendulum swinging away from globalism toward nationalism)? There are several possible answers, but if they cannot influence the change they need to adapt. Source material elsewhere or build manufacturing capacity in the countries where GM products are sold in large enough quantities to justify the investment. (LO: 6 Explain the relevance of the political/legal, economic, and cultural environments to global business, AACSB: Diverse and multicultural work environments)

Chapter 5 Managing Diversity Employing and properly managing a diverse workforce is a challenge for most organizations. In the United States, we are faced with a growingly diverse population, which has necessitated changes in how we look at employees. With the push in the 1960’s toward civil rights, and the women’s movement, managers are now more aware of the needs of special groups. However, diversity isn’t always black or white, male or female. There are many aspects of diversity that a manager must consider. These topics, along with the management initiatives to better manage diversity, are presented in this chapter.

LEARNING OBJECTIVES 1. 2. 3. 4. 5.

Define workplace diversity and explain why managing it is so important. Describe the changing makeup of workplaces in the United States and around the world. Explain the different types of diversity found in workplaces. Discuss the challenges managers face in managing diversity. Describe various workplace diversity initiatives.

CHAPTER OUTLINE 5.1

DIVERSITY 101 Diversity has many meanings. What does diversity mean in the context of the workplace? Does diversity refer only to people or does it refer to other aspects such as language, past experiences, and abilities? In this section, the authors address this question and explore why diversity is an important consideration for organizations. A. What Is Workplace Diversity? 1. Exhibit 5-1 illustrates an historical overview of how the concept and meaning of workforce diversity has evolved. 2. Diversity has traditionally been considered a term used by human resources departments, associated with fair hiring practices, discrimination, and inequality. 3. Dictionary definitions of diversity refer to variety, differences, multiformity (instead of uniformity), or dissimilarities (instead of similarities). 4. The Society for Human Resource Management says that diversity is often used to refer to differences based on ethnicity, gender, age, religion, disability, national origin, and sexual orientation, but it also encompasses an infinite range of unique characteristics and experiences, including communication styles, physical characteristics such as height and weight, and speed of learning and comprehension. 5. The authors have chosen to define workplace diversity as the ways in which people in an organization are different from and similar to one another.

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Surface-level diversity are easily perceived differences that may trigger certain stereotypes, but that do not necessarily reflect the ways people think or feel. 7. Deep-level diversity are differences in values, personality, and work preferences that can affect the way people view organizational work rewards, communicate, react to leaders, negotiate, and generally behave at work. Benefits of Workforce Diversity Many companies view diversity as a positive benefit for organizations. The benefits fall into three main categories: people management, organizational performance, and strategic (see Exhibit 5-2). 1. People Management a. Positive and explicit workforce diversity efforts can help organizations attract and keep talented diverse people and make the best of the talents those individuals bring to the workplace. b. As companies rely more on employee teams in the workplace, work teams with diverse backgrounds often have more creative ideas and solutions. c. There is a negative aspect of diversity. Research has indicated that diversity in teams does not always result in higher long-term performance, and diversity in teams creates higher levels of conflict. 2. Organizational Performance a. The performance benefits that organizations get from workforce diversity include cost savings and improvements in organizational functioning. b. Cost savings occur when organizations that cultivate a diverse workforce reduce employee turnover, absenteeism, and the chance of lawsuits. c. Organizational performance can be enhanced through workforce diversity because of improved problem-solving abilities and system flexibility. 3. Strategic a. Diverse employees bring a variety of viewpoints and approaches to opportunities, which can improve how the organization markets to diverse consumers. b. Diverse teams can be a powerful source of competitive advantage, primarily because innovation thrives in such an environment. c. From an ethical perspective, workforce diversity and effectively managing diversity is the right thing to do. This stems from the belief that diverse people should have access to equal opportunities and be treated fairly and justly.

THE CHANGING WORKPLACE In this section, we look at the demographic trends of the U.S. population and then at global diversity trends. These trends will be reflected in a changing workplace, thus making this information important for managers to recognize and understand. A. Characteristics of the U.S. Population. 1. Total Population:

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a. b. c.

The total population of the United States was 327 million in 2018. It is projected to increase to 438 million by the year 2050. This increase will be due to immigrants and their U.S.-born descendants. Nearly one in five Americans will be an immigrant in 2050, compared with one in eight in 2018.

WORKPLACE CONFIDENTIAL: Dealing With Diversity Diversity benefits the organization in many ways, such as making work groups more effective and helping generate broader perspectives that help us enter diverse markets and gain competitive advantages. So, what can managers do to create a workplace that welcomes and appreciates differences? A few suggestions include: 1. Recognize your biases and try to remove them from your thinking. Be as objective as possible. 2. Get to know others regardless of differences, or perceived differences. 3. Look beyond surface diversity and try to find common interests. 4. As a team leader, be cognizant of diversity and don’t allow “faultlines” to develop that threaten group cohesiveness and the ability to achieve the objective.

Racial/Ethnic Groups a. By 2050, the percentage of white Americans will decrease by over 20%. b. The percentage of Hispanic and Asian Americans is expected to double (see Exhibit 5-3). Aging Population a. Baby Boomers are close to outnumbering children as the US birth rate continues to decline. b. By 2050, one in every five persons will be aged 65 or over. c. The largest age group in the US will be persons over age 80. d. An aging workforce will be an important defining characteristic of the U.S. population. Impact of these Trends a. Population trends are likely to have a major impact on U.S. workplaces. These trends include the increasing number of foreign-born U.S. workers and an aging workforce. b. According to a recent analysis released by the U.S. Census Bureau, nearly one in seven American workers is foreign-born. While some of these jobs will be low paying, others will be whitecollar jobs. c. Other developing trends concerning immigrant workers are that they are younger and more likely to be women and people of color. d. By the year 2024, 47% of the labor force will be women and 23% will be black. e. With such a diverse population, organizations can’t expect employees to assimilate into the organization by adopting similar

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attitudes and values. Instead, they should value the differences that people bring to the workplace. What About Global Workforce Changes? 1. Total World Population a. The total world population in 2018 is estimated at over 7.6 billion and is forecasted to hit 9.8 billion by 2050, at which point the United Nations predicts the total population will either stabilize or peak after growing for centuries at an ever-accelerating rate. 2. An Aging Population a. The world’s population is now aging at an unprecedented rate. b. By the year 2050, people over the age of 65 will represent 17% of the world’s population. c. People aged 65 and older will soon outnumber children under age 5 for the first time in history. Also, the world’s population aged 80 and over is projected to increase 233 percent by 2040.

TYPES OF WORKPLACE DIVERSITY Workplace diversity comes in several forms. All of these forms have potential ramifications for management. (See Exhibit 5-4) A. Age. 1. With many of the nearly 85 million baby boomers still employed and active in the workforce, managers must ensure that those employees are not discriminated against because of age. 2. Both Title VII of the Civil Rights Act of 1964 and the Age Discrimination in Employment Act of 1967 prohibit age discrimination. The Age Discrimination Act also restricts mandatory retirement at specific ages. 3. Perceptions of older workers are often inaccurate. On the positive side, many believe that older workers bring a number of good qualities to the job including experience, judgment, a strong work ethic, and a commitment to doing quality work. However, there is also the view of older workers as not being flexible or adaptable and being more resistant to new technology. 4. As baby boomers do retire, experts point out that some industries will face severe shortages of qualified employees. 5. Millennials will comprise 75% of the global workforce by 2025. They bring strengths in technology, communications, and curiosity, and they make great team players. B. Gender. 1. While women now make up almost half of the workforce (47%), gender diversity issues are still quite prevalent in organizations. 2. The latest information shows that women are an increasing proportion of professionals such as doctors, lawyers, college professionals, and corporate executives, yet they don’t move up the career ladder as fast as men. 3. While women make up more than half of today’s college students, research shows that men start their careers at a higher level than women. 4. One recent study shows that men get more challenging assignments, promotions, and access to top leaders. 5. Women also indicated that they often do not get credit for their contributions and gender was a factor in missed raises and promotions.

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The recent “me-too” movement highlights organizational cultures that are often toxic and even dangerous to women. Examples of abuse include sexual harassment, assault, and even rape accusations against Harvey Weinstein, Matt Lauer, and many others. 7. The “me-too” movement also uncovered “boys’ club” organizational cultures at firms such as Tesla, Uber, and other Silicon Valley tech firms. Race and Ethnicity. 1. The issue of race and diversity has been an emotionally charged topic in the United States. 2. Race is defined as the biological heritage (including physical characteristics such as one’s skin color and associated traits) that people use to identify themselves. 3. Ethnicity is related to race, but it refers to social traits—such as one’s cultural background or allegiance—that are shared by a human population. 4. Research shows that individuals in workplaces tend to favor colleagues of their own race in performance evaluations, promotion decisions, and pay raises. 5. African Americans tend to favor affirmative action programs to a greater degree than whites. 6. Other research shows that African Americans generally do worse than whites in decisions related to the workplace. However, there is little difference between the races on absenteeism, applied work skills, or accident rates. Disabilities. 1. The Americans with Disabilities Act (ADA) passed in 1990 prohibits discrimination against persons with disabilities and also requires employers to make reasonable accommodations so their workplaces are accessible to people with physical or mental disabilities and enables them to effectively perform their jobs. 2. The U.S. Equal Employment Opportunity Commission classifies a person as disabled if he or she has any physical or mental impairment that substantially limits one or more major life activities. 3. Disabilities include some conditions not normally associated with the disabled such as deafness, chronic back pain, AIDS, missing limbs, seizure disorder, schizophrenia, diabetes, and alcoholism. 4. Not every job can be made to accommodate an individual with a disability. According to the ADA, an employer must make reasonable accommodations. 5. Over 60% of HR professionals now include disabilities in their diversity and inclusion plans, yet only 47% actively recruit disabled persons. 6. Exhibit 5-5 describes some of the fears that employers may have about the disabled as well as the reality. 7. Some disabilities improve performance. One Chase executive stated that autistic employees turned out 48% to 140% more work when compared to their non-autistic colleagues since they were more focused and less prone to social interaction. Religion. 1. Title VII of the Civil Rights Act prohibits discrimination on the basis of religion (as well as race/ethnicity, country of origin, and sex). 6.

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5.4

Today, it seems that the greatest religious diversity issue in the United States revolves around Islam, one of the world’s most popular religions. 3. There are about 3 million Muslims in the US but that number will double by 2030. 4. Since 2002, Muslims have made up a disproportionate amount of the EEOC’s religious-based discrimination charges. 5. Religious beliefs can prohibit or encourage some work behaviors. For example, religious holidays may preclude an employee from work on a certain day but may also be a strong reinforcer for maintaining ethical behavior. LGBT: Sexual Orientation and Gender Identity. 1. Until 2015, U.S. federal law did not prohibit discrimination against employees on the basis of sexual orientation, although many states and municipalities do. 2. Laws have been in place in Europe for several years to prohibit discrimination based on sexual orientation. 3. The US Supreme Court ruled that transgender, lesbian, bisexual, and gay individuals were protected under Title VII of the Civil Rights Act’s prohibition against sexual discrimination. 4. Many large companies are taking a stand and creating policies that protect the rights of LGBT employees. 5. Despite the actions of many firms, research shows that over 40% of gay and lesbian employees felt they had been treated unfairly, denied a promotion, or forced to quit due to their sexual orientation.

CHALLENGES IN MANAGING DIVERSITY While the majority of managers understand the value of a diverse workforce, there are still challenges they face in the implementation of equitable workplace policies and differing employee perceptions. A. Personal Bias. 1. Employees bring many preconceived ideas about others into the workplace. 2. Bias is a term that describes a tendency or preference toward a particular perspective or ideology. 3. One outcome of our personal biases can be prejudice, a preconceived belief, opinion, or judgment toward a person or a group of people. 4. A major factor in prejudice is stereotyping, which is judging a person on the basis of one’s perception of a group to which he or she belongs. 5. Both prejudice and stereotyping can lead to someone treating others who are members of a particular group unequally. That’s what we call discrimination, which is when someone acts out their prejudicial attitudes toward people who are the targets of their prejudice. 6. Exhibit 5-6 shows the definitions and examples of different types of discrimination. 7. Discrimination has potential financial consequences for organizations and managers as well as loss in employee productivity, negative and disruptive interpersonal conflicts, increased employee turnover, and overall negative climate. B. Glass Ceiling. 1. The term glass ceiling, first used in a Wall Street Journal article, refers to the invisible barrier that separates women and minorities from top

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management positions. The idea of a “ceiling” means that there is something blocking upward movement, and the idea of “glass” is that whatever’s blocking the way isn’t immediately apparent. 2. Potential causes for the glass ceiling have ranged from lack of mentoring, sex stereotyping, views that associate masculine traits with leader effectiveness, and bosses’ perceptions of family-work conflict. Pay Inequities. 1. The Equal Pay Act of 1963 made it illegal to have different pay scales for men and women doing the same job. 2. Despite this law, as of 2017 women earned only 82% as much as their male counterparts. 3. Research indicates that two factors, job type and preference for flexibility, explained this gap in pay. 4. Women prefer more flexible work arrangements to help them accommodate family responsibilities. 5. Even after factoring these explanations into the pay equation, there is still a 3 to 5 percent gap between the pay of men and women. However, gender pay equality is improving over time.

5.5 WORKPLACE DIVERSITY INITIATIVES While the challenges to create and maintain a diverse workforce are daunting, organizations have taken steps to foster and promote workplace diversity. Some of these initiatives are listed below. A. Top Management Commitment to Diversity. 1. Diversity and inclusion should be part of the organization’s purpose, goals, and strategies as well as every other aspect of business. 2. Policies and procedures must be in place to ensure that grievances and concerns are addressed immediately. 3. The organizational culture needs to be one where diversity and inclusion are valued, even to the point where individual performance is measured and rewarded on diversity accomplishments. B. Mentoring. 1. Mentoring is a process whereby an experienced organizational member (a mentor) provides advice and guidance to a less-experienced member (a protégé). Mentors usually provide two unique forms of mentoring functions—career development and social support. 2. A good mentoring program should help diverse employees with high potential move up the organization’s career ladder. 3. Exhibit 5-7 looks at what a good mentor does. C. Diversity Training. 1. Diversity training is specialized training to educate employees about the importance of diversity and teach them skills for working in a diverse workplace. 2. Diversity training should focus on knowledge, attitudes, and behavior. 3. Millions of dollars are spent on this effort annually, much of it on training. 4. For the training to be more successful, it must be reinforced by other diversity initiatives. These include top-management commitment, diverse hiring goals, and a formal mentoring program. D. Employee Resource Groups.

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Employee resource groups (also frequently called affinity groups) are made up of employees connected by some common dimension of diversity. 2. These groups are usually formed by the employees themselves, not the organizations; however, it’s important for organizations to recognize and support these groups. 3. One example is the 12,000-member African American ERG at AT&T. This group is credited with the firm’s 85.6% black employee retention rate. 4. Employee resource groups are useful in that diverse groups have the opportunity to see that their existence is acknowledged and that they have the support of people within and outside the group. Some Final Thoughts and Questions. 1. Some critics question whether our focus on promoting our differences is sacrificing the ability to create a strong organizational culture built around common values. Is diversity coming at the expense of organizational unification? 2. Do certain long-established practices undermine diversity? For example, employee referrals often result in hiring people similar to us, and teambuilding exercises celebrate common goals and values rather than our differences. 3. Does supporting diversity conflict with rewarding merit? Some critics point out that using diversity criteria for hiring, promotion, and compensation decisions is at odds with using merit for these decisions.

ANSWERS TO REVIEW AND DISCUSSION QUESTIONS Student answers to these questions will vary. 5-1. Why is it important for an organization to have a clear definition of diversity? Diversity has been defined in many ways and because of the emotionally charged history of civil rights and the push for greater diversity in the U.S., it is important that everyone work from the same point of view to clear potential misunderstandings. Some see diversity as simply race or gender. This view limits a deeper understanding of how people differ from one another and the advantages that can be gained by a more diverse workforce. (LO: 1, Define workplace diversity and explain why managing it is so important, AACSB: Diverse and multicultural work environments) 5-2. Distinguish between surface-level diversity and deep level diversity. Why is it important to understand the difference between the two? Surface-level diversity is the easily perceived differences that may trigger certain stereotypes. Deep-level diversity are the differences in values, personality, and work preferences that can affect the way people view organizational work rewards, communicate, react to leaders, negotiate, and generally behave at work. By focusing on deep-level diversity, organizations are able to go beyond the divisive issues of race and other differences that can cause stereotypes and seek to understand the ways people think or feel. (LO: 3, Explain the different types of diversity found in workplaces, AACSB: Diverse and multicultural work environments) 5-3. What are the major trends in the changing populations of the United States and the world?

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Over the last twenty years, organizations have focused on the obvious trends in the workforce, mainly race (i.e. black and white) and gender. Recently, there has been more emphasis on age and the increasing number of immigrants. (LO: 2, Describe the changing makeup of workplaces in the United States and around the world, AACSB: Diverse and multicultural work environments) 5-4. Distinguish between race and ethnicity. In the text, race is defined as the biological heritage (including physical characteristics such as one’s skin color and associated traits) that people use to identify themselves. Ethnicity is related to race, but it refers to social traits—such as one’s cultural background or allegiance—that are shared by a human population. (LO: 3, Explain the different types of diversity found in workplaces, AACSB: Diverse and multicultural work environments) 5-5. What legal protection do employees have against discrimination based on sexual orientation? The US Supreme Court ruled that transgender, lesbian, bisexual, and gay individuals were protected under Title VII of the Civil Rights Act’s prohibition against sexual discrimination. Still, it seems that change is underway. In addition, many organizations are supportive of employee resource groups to help provide a voice to LGBT workers. A report from the Human Rights Campaign Foundation showed that 91% of the largest US corporations now prohibit discrimination based on sexual orientation. (LO: 4, Discuss the challenges managers face in managing diversity, AACSB: Diverse and multicultural work environments) 5-6. Explain the relationship among bias, prejudice, stereotyping, and discrimination. These topics can be seen as linked together like a chain. Bias is a tendency or preference toward a particular perspective or ideology. Unchecked, a bias can lead to prejudice, a preconceived belief, opinion, or judgment toward a person or a group of people. Prejudice can lead to stereotyping, which is judging a person on the basis of one’s perception of a group to which he or she belongs. Both prejudice and stereotyping can lead to someone treating others who are members of a particular group unequally, which is discrimination. (LO: 4, Discuss the challenges managers face in managing diversity, AACSB: Diverse and multicultural work environments) 5-7. What other practices (besides employee referrals and corporate team building) might hurt a company’s diversity efforts? A lack of top-management commitment, using only a diversity criterion for promoting and awarding compensation, and a lack of training and support all might harm a company’s diversity efforts. (LO: 5, Describe various workplace diversity initiatives, AACSB: Diverse and multicultural work environments) 5-8. Why do you think the glass ceiling has proven to be a barrier to women and minorities? The text cites several potential causes for the glass ceiling including: lack of mentoring, sex stereotyping, views that associate masculine traits with leader effectiveness, and bosses’ perceptions of family-work conflict. Another cause could be the time and experience required for women to move into upper management. Only in the recent past have women been given more opportunity to work in management positions. It will take time for experienced female managers to replace the aging male-dominated ranks of top management. (LO: 4, Discuss the challenges managers face in managing diversity, AACSB: Diverse and multicultural work environments)

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ETHICS DILEMMA Student answers to these questions will vary. This dilemma challenges students to think about the ethics of possible discrimination based on employee attributes other than gender, race, ethnic background, and sexual orientation. In this exercise, students are asked to consider the possible discrimination against disabled workers. Challenge students to put themselves in the position of management and to consider the ethics of discriminating against qualified individuals simply because of their disabilities. Accommodating some disabilities can be costly. The case gives an example of the $15,000 cost to refit a bus to allow a wheelchair-bound person to be a driver. 5-11. Do school districts have an ethical responsibility to refit buses for disabled applicants? Explain. Possible answer: I believe they do if the refit will allow the disabled person to accomplish the task safely. As you can see in Exhibit 5-5, disabled persons often perform better in some capacities and it would create loyalty. (LO: 3, Explain the different types of diversity found in workplaces, AACSB: Diverse and multicultural work environments) 5-12. What ethical issues might arise in workplaces with disabled workers? As a manager, how might you handle such issues? Managers have to be aware of how other employees react to the disabled workers and take steps to prevent other employees from excluding the disabled workers. Clear policies on how to recognize and react to workplace issues such as harassment and mockery will help prevent this from occurring. Managers must also lead by example. (LO: 4, Discuss the challenges managers face in managing diversity, AACSB: Diverse and multicultural work environments)

SKILLS EXERCISE: DEVELOPING YOUR VALUING DIVERSITY SKILL In this exercise, students are asked to work on skills that will help them better value diversity. The skills are based on eight actions that managers may take to aid them in creating a diverse workforce and communicating the value of diversity to its employees. The skills in this exercise are on valuing diversity. To practice this skill, students are given a scenario and asked how they would handle the situation. Students should be encouraged to review Section 5.5, organizational initiatives for dealing with diversity. Some students may emphasize diversity awareness as a way to resolve problems described in each scenario. While this is a positive step, get students to take the next step toward diversity skill training. (LO: 5, Describe various workplace diversity initiatives, AACSB: Diverse and multicultural work environments)

WORKING TOGETHER: TEAM EXERCISE In groups of three to four individuals, students are encourage to reflect on and then draft a few sentences about the challenges a racial minority of LGBT individual might face in the workforce. Students should consider the different types of diversity. After the groups have done their research, they should share their ideas with the rest of the class. After sharing, brainstorm ways managers could improve each situation. LO: 5, Describe various workplace diversity initiatives, AACSB: Diverse and multicultural work environments)

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MY TURN TO BE A MANAGER •

Describe your experiences with people from other backgrounds. What challenges have you faced? What have you learned that will help you in understanding the unique needs and challenges of a diverse workplace? (LO: 4, Discuss the challenges managers face in managing diversity, AACSB: Diverse and multicultural work environments)

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Go to DiversityInc.com [www.diversityinc.com] and find the latest list of Top 50 Companies for Diversity. Select three companies from this list. Describe and evaluate what they’re doing as far as workplace diversity. (LO: 5, Describe various workplace diversity initiatives, AACSB: Diverse and multicultural work environments)

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Think of times when you may have been treated unfairly because of stereotypical thinking. What stereotypes were being used? How did you respond to the treatment? (LO: 3, Explain the different types of diversity found in workplaces, AACSB: Diverse and multicultural work environments)

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The Job Accommodation Network is a free resource for employers to identify ways to provide work accommodations to allow disabled workers to be productive and hold a wider variety of jobs. Visit www.askjan.org and search the accommodation database to find examples of accommodations for specific disabilities. (LO: 4, Discuss the challenges managers face in managing diversity, AACSB: Diverse and multicultural work environments)

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Assume you are designing a mentoring program for an organization. Conduct some research on mentoring programs that currently exist in different organizations and identify characteristics of an effective mentoring program. (LO: 5, Describe various workplace diversity initiatives, AACSB: Diverse and multicultural work environments)

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Pick one of the laws listed in Exhibit 5-8. Research that law looking for these elements: Whom does the law cover? What does the law prohibit? What are the consequences for violating the law? (LO: 4, Discuss the challenges managers face in managing diversity, AACSB: Diverse and multicultural work environments)

ANSWERS TO CASE APPLICATION 1 QUESTIONS Student answers to these questions will vary. Gusto: Making a Difference in Gender Diversity 5-13. What were the most important steps that Gusto took to increase gender diversity? Gusto actively recruited more women and changed job ad wording to less masculine descriptions, allowed Julie Lee to email female applicants and invite them to speak with her about the firm, and overall made gender diversity a priority at Gusto. (LO: 5, Describe various workplace diversity initiatives, AACSB: Diverse and multicultural work environments)

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5-14. Even though Julie Lee was so helpful to Gusto’s gender diversity efforts, what demands does this case illustrate are involved in being the only woman? Feeling isolated made Julie Lee uncomfortable and could have led to her leaving Gusto. Firms need to be cognizant of how a lack of diversity could impact the occasional diverse employee. (LO: 2, Describe the changing makeup of workplaces in the United States and around the world, AACSB: Diverse and multicultural work environments) 5-15. Now that Gusto has hired more women engineers, what should they do to ensure that they don’t leave the company? One of the best programs that organizations use to help retain minority employees is mentoring. Top managers at Gusto should encourage mentors to diversify their pool of protégés. Another program that Gusto could utilize is Employee Resource Groups, groups made up of employees connected by some common dimension of diversity. (LO: 5, Describe various workplace diversity initiatives, AACSB: Diverse and multicultural work environments) 5-16. What can Gusto do to improve racial diversity? Gusto can adopt similar tactics that it used to attract female applicants. Seek out candidates and actively recruit them and make racial diversity a priority within the firm. (LO: 5, Describe various workplace diversity initiatives, AACSB: Diverse and multicultural work environments)

ANSWERS TO CASE APPLICATION 2 QUESTIONS Student answers to these questions will vary. Bring in Diversity….and Then What? 5-17. What can colleges do so that students spend more of their time interacting with students who are different from themselves? Responses to this question will vary. Colleges can purposely house diverse students in the same dorm instead of allowing them to self-select roommates. Professors can form class teams or groups based on diversity. (LO: 5, Describe various workplace diversity initiatives, AACSB: Diverse and multicultural work environments) 5-18. What are some of the ways that companies can increase the chances that diverse employees want to keep working for them? Responses to this question will vary. Firms need to have diversity training and show commitment to diversity at the top level. Mentoring and employee resource groups have also been effective retention tools at some firms. (LO: 5, Describe various workplace diversity initiatives, AACSB: Diverse and multicultural work environments) 5-19. Companies offer “diversity and inclusion” programs and hire “chief diversity and inclusion officers.” Does it make sense to include “diversity” and “inclusion” in the same phrase? Is inclusion an approach to diversity or is it something different? Responses to this question will vary. I believe inclusion indicates receptiveness to others that are different so inclusion and diversity can be used together. It merely indicates an effort to understand and welcome diverse persons to the organization and to ensure they feel a sense of

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belonging. (LO: 5, Describe various workplace diversity initiatives, AACSB: Diverse and multicultural work environments) 5-20. Does framing inclusion efforts as “involving everyone” make a diverse workplace better? Or does including everyone dilute efforts to attract and retain diverse employees? Support your position. Responses to this question will vary. Firms need to ensure their existing employees don’t feel like they are being overlooked in favor of diversity. Diversity can drive a wedge between groups if firms do not frame the efforts as benefiting all employees. (LO: 5, Describe various workplace diversity initiatives, AACSB: Diverse and multicultural work environments)

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Chapter 6 Managing Social Responsibility and Ethics How important is it for organizations and managers to be socially responsible and ethical? In this chapter, we’re going to look at what it means to be socially responsible and ethical and what role managers play in both. Focus on the following learning objectives as you read and study this chapter.

LEARNING OBJECTIVES 1. Discuss what it means to be socially responsible and what factors influence that decision. 2. Explain green management and how organizations can go green. 3. Discuss the factors that lead to ethical and unethical behavior. 4. Describe management’s role in encouraging ethical behavior. 5. Discuss current social responsibility and ethics issues.

CHAPTER OUTLINE INTRODUCTION This chapter discusses issues involving social responsibility and managerial ethics and their effect on managerial decision making. Both social responsibility and ethics are responses to a changing environment and are influenced by organizational culture. 6.1

WHAT IS SOCIAL RESPONSIBILITY? Managers regularly face decisions that have dimensions of social responsibility. Examples include employee relations, philanthropy, pricing, resource conservation, product quality and safety, and doing business in countries that violate human rights. A. Two Opposing Views. There are two opposing views of social responsibility. 1. The classical view is the view that management’s only social responsibility is to maximize profits. Economist and Nobel laureate Milton Friedman is the most outspoken advocate of this view. Friedman argues that managers’ primary responsibility is to operate the business in the best interests of the stockholders—the true owners of the organization. 2. The socioeconomic view is the view that management’s social responsibility goes beyond the making of profits, to include protecting and improving society’s welfare. This view purports that

corporations are not independent entities responsible only to stockholders. From Obligations to Responsiveness to Responsibility. Social obligation occurs when a firm engages in social actions because of its obligation to meet certain economic and legal responsibilities. Social responsiveness is seen when a firm engages in social actions in response to some popular social need. Social responsibility is a business’s intention, beyond its legal and economic obligations, to do the right things and act in ways that are good for society. Exhibit 6-2 shows the differences between social responsibility and social responsiveness. Social Responsibility and Economic Performance. How do socially responsible activities affect a company’s economic performance? Exhibit 6-1 details the arguments for and against social responsibility. A majority of studies have found a positive relationship between social involvement and economic performance, but some caution in this regard is necessary because of methodological questions associated with the measurement of social responsibility and economic performance. A recent metaanalysis of 53 studies encompassing 16,000 firms found overwhelming support for the argument that social responsibility and financial performance are linked. There is little evidence that social responsibility can hurt performance.

6.2

GREEN MANAGEMENT AND SUSTAINABILITY Many managers are considering the impact of their organization on the natural environment. Nike Inc. has launched an app called Making, which allows its design engineers to see the environmental effects of their material choices on water, energy and waste, and chemistry. Fairmont Hotel’s use of rooftop beehives to help dwindling honeybee populations is also generating a lot of buzz. These companies are practicing green management, which considers the company’s impact on the natural environment. A. How Organizations Go Green. Approaches include the legal (or light green) approach, the market approach, the stakeholder approach, and the activist approach. See Exhibit 6-3 for a continuum of green approaches. B. Evaluating Green Management Actions. As organizations become “greener,” they are reporting their commitment to being green in several ways, including fulfilling of guidelines issued by the Global Reporting Initiative (GRI); meeting ISO 14000 standards; and appearing on the list of the 100 Most Sustainable Corporations in the World.

6.3

MANAGERS AND ETHICAL BEHAVIOR The term ethics refers to principles, values, and beliefs that define what is right and wrong behavior. This section examines the ethical dimensions of managerial decision making. Exhibit 6-4 contains some tests a manager can use to help make a decision when facing an ethical dilemma. And Exhibit 6-5 shows some of the factors that determine ethical and unethical behavior. A. Factors That Determine Ethical and Unethical Behavior. 1. Stage of Moral Development. Research confirms three levels of moral development (see Exhibit 6-6). Each level has two stages. 80

The first level is called preconventional. At this level, the individual’s choice between right and wrong is based on the personal consequences involved. b. At the second stage, which is labeled conventional, moral values reside in maintaining expected standards and living up to the expectations of others. c. At the third level—the principled level—the individual makes a clear effort to define moral principles apart from the authority of the groups to which the person belongs. d. Research on the stages of moral development indicates that people proceed sequentially through the six stages of these three levels, with no guarantee of continued development at any stage. The majority of adults are at Stage 4. The higher the stage an employee reaches, the more likely that he or she will behave ethically. Individual Characteristics. A person joins an organization with a relatively entrenched set of values. a. Values are basic convictions about what is right and wrong. Values are broad and cover a wide variety of issues. b. Ego strength is a personality measure of the strength of a person’s convictions. Individuals who score high on ego strength are likely to resist impulses to act unethically and will likely do what they themselves think is right. c. Locus of control is a personality attribute that measures the degree to which people believe they control their own fate. Individuals with an internal locus of control think that they control their destiny, while persons with an external locus of control are less likely to take personal responsibility for the consequences of their behavior and are more likely to rely on external forces. Externals believe that what happens to them is due to luck or chance. Structural Variables. A third factor influencing managerial ethics is structural variables. The existence of structural variables such as formal rules and regulations, job descriptions, written codes of ethics, performance appraisal systems, and reward systems can strongly influence ethical behavior. Organization’s Culture. The content and strength of an organization’s culture influences ethical behavior. a. An organizational culture most likely to encourage high ethical standards is one that is high in risk tolerance, control, and conflict tolerance. b. A strong culture exerts more influence on managers than a weak one does. c. However, in organizations with weak cultures, work groups and departmental standards strongly influence ethical behavior. Issue Intensity. Finally, issue intensity influences ethical behavior. Not all issues are strongly held by everyone. Exhibit 6-7 shows 81

six characteristics that determine issue intensity. When an ethical issue is important, employees are more likely to behave ethically. B.

Ethics in an International Context. Are ethical standards universal? Hardly! Social and cultural differences between countries are environmental factors that play an influential role in determining ethical and unethical behavior. The Foreign Corrupt Practices Act (FCPA) makes some actions, such as bribing foreign officials, illegal. However, many issues are not black and white. In 2017, the US Department of Justice brought 13 FCPA enforcement actions and collected $1.13 billion in fines. Exhibit 6-8 lists the ten principles of The Global Compact. At the 1999 World Economic Forum, the United Nations Secretary-General challenged world business leaders to “embrace and enact” this particular document that gives guidelines for doing business globally in the areas of human rights, labor, and anti-corruption.

6.4

ENCOURAGING ETHICAL BEHAVIOR Organizations can take a number of actions to cultivate ethical behavior among members. In this section of the text, eight suggestions are explored: A. Employee Selection. The selection process for bringing new employees into organizations should be viewed as an opportunity to learn about an individual’s level of moral development, personal values, ego strength, and locus of control. B. Codes of Ethics. A code of ethics is a formal statement of an organization’s primary values and the ethical rules it expects employees to follow. In addition, decision rules can be developed to guide managers in handling ethical dilemmas in decision making. C. Leadership at the Top. Top management’s leadership and commitment to ethical behavior is extremely important since the cultural tone for an organization is established by its top managers. D. Job Goals and Performance Appraisal. Employees’ job goals should be tangible and realistic because clear and realistic goals reduce ambiguity and motivate rather than punish. Job goals are usually a key issue in the performance appraisal process. If an organization wants employees to uphold high ethical standards, this dimension must be included in the appraisal process. Performance appraisals should include this dimension, rather than focusing solely on economic outcomes. E. Ethics Training. Ethics training should be used to help teach ethical problem solving and to present simulations of ethical situations that could arise. At the least, ethics training should increase awareness of ethical issues. F. Independent Social Audits. Independent social audits evaluate decisions and management practices in terms of the organization’s code of ethics and can be used to deter unethical behavior.

6.5

CURRENT ISSUES IN SOCIAL RESPONSIBILITY AND ETHICS 82

This section discusses four current issues in management; protecting whistleblowers, promoting social entrepreneurship, social media and social responsibility, and corporate philanthropy. A. Protecting Whistle-Blowers. Whistle-blowing is defined as an act of an individual within an organization who discloses information to report and correct corruption. 1. Management commitment. Above all, managers must set an ethical example by demonstrating a commitment to addressing employee concerns about potential violations of the law. 2. Compliance concern response system. Managers need to establish procedures to enable employees to confidentially report concerns and ensure a fair and effective resolution. 3. Anti-retaliation response system. Firms should designate clear reporting channels for concerns and guarantee timely responses. 4. Anti-retaliation training. All employees, including management, need training to understand the law and their rights and responsibilities with regard to whistle-blowers. 5. Program oversight. Firms need to develop and implement rigorous monitoring programs and conduct independent audits to ensure compliance. B. Promoting Social Entrepreneurship. A social entrepreneur is an individual or organization who seeks out opportunities to improve society by using practical, innovative, and sustainable approaches. C. Social Media and Social Responsibility. Social media has been shown to enhance a company’s reputation when evidence of social initiatives are posted online. It has also been a vehicle to bring attention to corporate wrongdoing. Management can shape the organization’s image using social media. D. Corporate Philanthropy. Giving to charitable foundations and causes is not limited to individuals. Organizations, through their ability to coordinate large projects and their access to capital, have made great strides in improving community and social efforts. Workplace Confidential Balancing Work and Personal Life Some critics have proposed that firms have a social responsibility to help their employees achieve a better work-life balance. Some companies have responded by making work-life balance a corporate goal. However, most of us will need to take steps to accomplish this goal on our own. Here are some suggestions that will help you do just that: 1. Set specific time targets for leaving work. Make it a habit to leave at the same time every day. Your colleagues will recognize this pattern and interact with you during your work hours. 2. Separate work and personal cell phones. Using two separate cell phones will allow you to leave your work at work. Turn off the business phone when you are not at work. 83

3. Working for others always requires giving up some degree of control. You still have a job and this requires giving up some freedom in exchange for compensation. ANSWERS TO REVIEW AND DISCUSSION QUESTIONS Student answers to these questions will vary. 6-1. Differentiate between social responsiveness, social responsibility, and social obligation. These terms differ by the degree to which the organization is willing to go past what is legally required and engage in behavior that is more altruistic and serving of the public good. Social obligation occurs when a firm engages in social actions because of its obligation to meet certain economic and legal responsibilities. Social responsiveness is seen when a firm engages in social actions in response to some popular social need. Social responsibility is a business’s intention, beyond its legal and economic obligations, to do the right things and act in ways that are good for society. (LO: 1, Discuss what it means to be socially responsible and what factors influence that decision, AACSB: Ethical understanding and reasoning) 6-2. What does social responsibility mean to you personally? Do you think business organizations should be socially responsible? Explain. Students’ answers to this question will vary. Their responses should indicate an understanding that social responsibility means going “beyond the minimum required by law.” Students should pinpoint and discuss why they feel business firms should or should not be socially responsible. (LO: 1, Discuss what it means to be socially responsible and what factors influence that decision, AACSB: Ethical understanding and reasoning) 6-3. Compare the stakeholder and the activist approach to green management. Why would a company choose one approach instead of the other? In the stakeholder approach, an organization works to meet the environmental demands of multiple stakeholders such as employees, suppliers, or community. If an organization pursues an activist (or dark green) approach, it looks for ways to protect the earth’s natural resources. The activist approach reflects the highest degree of environmental sensitivity and illustrates social responsibility. (LO: 2, Explain green management and how organizations can go green, AACSB: Ethical understanding and reasoning) 6-4. What factors influence whether a person behaves ethically or unethically? Explain all relevant factors. This issue is addressed in Section 6.3 and Exhibit 6-3 shows the complex interactions that influence whether a person acts ethically or unethically when faced with an ethical dilemma. Students may focus on all eight factors or choose those that they see as more pertinent. (LO: 3, Discuss the factors that lead to ethical and unethical behavior, AACSB: Ethical understanding and reasoning) 6-5. What is the Foreign Corrupt Practices Act? 84

The Foreign Corrupt Practices Act (FCPA) makes it illegal for a company to knowingly corrupt a foreign official. (LO: 3, Discuss the factors that lead to ethical and unethical behavior, AACSB: Ethical understanding and reasoning) 6-6. What are some problems that could be associated with employee whistle-blowing for (a) the whistle-blower and (b) the organization? The whistleblower might find that peers, managers, and other company employees ostracize him or her. For example, the whistleblower may encounter difficulty in accomplishing tasks and/or obtaining needed resources while remaining employed at the organization. The organization itself may struggle with a tarnished reputation if the whistleblowing incident becomes public. Other employees may watch to see what happens and how the organization treats whistleblowers. A pattern for future ethical or unethical behavior can be set by the organization’s response to a whistleblower. (LO: 5, Discuss current social responsibility and ethics issues, AACSB: Ethical understanding and reasoning) 6-7. Describe the characteristics and behaviors of someone you consider to be an ethical person. How could the types of decisions and actions this person engages in be encouraged in a workplace? Ethical individuals are likely to have a strong values system that they use to distinguish right from wrong. Ethical persons will probably be in Stage 4, 5, or 6 of moral development. These individuals will likely have strong convictions; that is, their ego strength will be high. This person will probably have an internal locus of control. Ethical managers make decisions and engage in work activities that support their values. These managers probably challenge what they perceive as ethically questionable decisions or actions. If an organization wants its managers to uphold high ethical standards, ethics must be included in the organization’s performance appraisal process. (LO: 3, Discuss the factors that lead to ethical and unethical behavior, AACSB: Ethical understanding and reasoning) 6-8. Do you think promoting social responsibility through social media shows that a company is mostly concerned with enhancing its reputation rather than being ethical? Why or why not? Student answers will vary. Some might believe that altruistic motives would preclude a social media posting while others believe that disseminating the actions can encourage others to follow suit. (LO: 5, Discuss current social responsibility and ethics issues, AACSB: Ethical understanding and reasoning)

ETHICS DILEMMA Student answers to these questions will vary. Nearly everyone has experienced a situation when a co-worker or colleague has taken credit for work they didn’t do or ideas they didn’t create. Are these actions innocent or deliberate? When, if ever, is it okay to take credit for work you didn’t do? 6-9. What are some of the possible reasons for others taking credit for your work? Are any of the reasons justifiable? Why or why not? Possible answer: Exhibit 6-5 contains a 85

list of factors that determine unethical and ethical behavior. I do not believe taking credit for others work is ever justified. Refer to Exhibit 6-4 and apply one of those decision tests and they will all have the same result…..don’t do it. (LO: 3, Discuss the factors that lead to ethical and unethical behavior, AACSB: Ethical understanding and reasoning) 6-10. Do you think that those who take credit for your work know that what they’re doing is wrong? I believe they know it’s wrong and have justified it in their minds in some way. These individuals are probably in the preconventional stage of moral development shown in Exhibit 6-6. (LO: 3, Discuss the factors that lead to ethical and unethical behavior, AACSB: Ethical understanding and reasoning) 6-11. How would you respond to your coworker or boss? Explain. I would approach both of them and request a meeting where I could present evidence that the work was mine. However, you should never lose your temper or lose control of your emotions in this situation. (LO: 3, Discuss the factors that lead to ethical and unethical behavior, AACSB: Ethical understanding and reasoning)

SKILLS EXERCISE: Developing Your Trust Building Skill In this exercise, students are asked to work on their trust skills as it relates to ethical employee behavior. Students are given eight steps in practicing trust and then presented with a scenario and asked to write a paper on how they would handle the situation. Students should be encouraged to review section 6.3 on the factors that lead to ethical behaviors and section 6.4 on how organizations can encourage ethical behavior. In the case, students should focus on what the organization can do to promote a more positive culture in light of the change. (LO: 4, Describe management’s role in encouraging ethical behavior, AACSB: Ethical understanding and reasoning)

WORKING TOGETHER: TEAM EXERCISE Students are asked to identify a company they are familiar with and reflect on the socially responsible behavior of the company. Then, after dividing into groups of three or four, students are asked to share their reflections with each other and compare and discuss the socially responsible actions of their companies. Students are asked to address how the actions benefit the company and whether there are steps each company could take to become more socially responsible. (LO: 1, Discuss what it means to be socially responsible and what factors inﬂuence that decision, AACSB: Ethical understanding and reasoning)

MY TURN TO BE A MANAGER •

Go to the Global Reporting Initiative Website, www.globalreporting.org, and choose three businesses from the list of organizations that have filed reports. Look at those reports and describe/evaluate what’s in them. In addition, identify the stakeholders that might be affected and how they might be affected by the company’s actions. (LO: 4, Describe management’s role in encouraging ethical behavior, AACSB: Ethical understanding and reasoning)

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Identify three companies that are known for being socially responsible. List and compare the types of socially responsible behavior that each company engages in. (LO: 5, Discuss current social responsibility and ethics issues, AACSB: Ethical understanding and reasoning)

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Research careers in sustainability. Visit the Occupational Information Network (O*Net) at www.onetcenter.org and search for careers using the terms “sustainability” or “green management.” Create a list of the types of jobs or careers you can pursue. Identify the skills and abilities that are required for a career in sustainability. (LO: 5, Discuss current social responsibility and ethics issues, AACSB: Ethical understanding and reasoning)

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Find five different examples of organizational codes of ethics. Using Exhibit 6-7, describe what each contains. Compare and contrast the examples. (LO: 4, Describe management’s role in encouraging ethical behavior, AACSB: Ethical understanding and reasoning)

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Using the examples of codes of ethics you found, create what you feel would be an appropriate and effective organizational code of ethics. In addition, create your own personal code of ethics that you can use as a guide to ethical dilemmas found in each chapter. Write a response to each of the dilemmas and include these responses in your portfolio. (LO: 4, Describe management’s role in encouraging ethical behavior, AACSB: Ethical understanding and reasoning)

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Over the course of two weeks, see what ethical “dilemmas” you observe. These could be ones you face personally, or they could be ones that others (friends, colleagues, other students talking in the hallway or before class, and so forth) face. Write these dilemmas down and think about what you might do if faced with that dilemma. (LO: 4, Describe management’s role in encouraging ethical behavior, AACSB: Ethical understanding and reasoning)

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Interview two different managers about how they encourage their employees to be ethical. Write down their comments and discuss how these ideas might help you be a better manager. (LO: 4, Describe management’s role in encouraging ethical behavior, AACSB: Ethical understanding and reasoning)

ANSWERS TO CASE APPLICATION 1 QUESTIONS Student answers to these questions will vary. Chobani: A Different Kind of Yogurt Company 6-12. Is Chobani a better example of social responsibility or social responsiveness? Provide reasons why. It is a better example of social responsibility since Chobani instituted the socially responsible practices without pressure or criticism from stakeholders. The changes were not made in response to societal changes. (LO: 1, Discuss what it means to be socially responsible and what factors influence that decision, AACSB: Ethical understanding and reasoning) 6-13. What actions has Chobani taken that illustrate the socioeconomic view of social responsibility? What ways (if any) could Chobani be considered an example of the classical view of social responsibility? Answers will vary but granting employees ownership in Chobani makes their goals consistent with maximizing shareholder wealth since they are now part owners. Maximizing long-term value is a classical view. (LO: 1, Discuss what it means to be socially responsible and what factors influence that decision, AACSB: Ethical understanding and reasoning) 6-14. Which of the arguments for and against social responsibility apply to Chobani (see Exhibit 6-1)? Answers will vary but Chobani is a socially responsible firm since the firm hires workers from a group with traditionally high unemployment rates. The firm has a great public image and makes contributions to charities. While it is difficult to tell, these actions may be costing the firm money and diluting the firm’s purpose. (LO: 1, Discuss what it means to be socially responsible and what factors influence that decision, AACSB: Ethical understanding and reasoning) 6-15. Do you think Chobani’s approaches to business would attract customers? Why or why not? Answers will vary but I think today’s consumer will cast their dollar votes for firms that engage in socially responsible behavior over firms that do not. (LO: 1, Discuss what it means to be socially responsible and what factors influence that decision, AACSB: Ethical understanding and reasoning)

ANSWERS TO CASE APPLICATION 2 QUESTIONS Student answers to these questions will vary. Every Kid Fed: Addressing Childhood Hunger Through Social Entrepreneurship 6-16. You read about TOMS Shoes as an example of social entrepreneurship. How is Every Kid Fed a different kind of example of social entrepreneurship than TOMS Shoes? Answers will vary. TOMS Shoes is also a profit-driven business where Every Kid Fed does not have a profit component or a product that it sells. (LO: 5, Discuss current social responsibility and ethics issues, AACSB: Ethical understanding and reasoning) 6-17. What barriers did Shanay confront in creating Every Kid Fed? How did she overcome them? Answers will vary. Shanay confronted a lack of resources and time needed to acquire the resources. She used creative problem solving to circumvent the traditional grant writing process and gain access to funds. (LO: 5, Discuss current social responsibility and ethics issues, AACSB: Ethical understanding and reasoning) 6-18. Building on the example of Shanay Thompson, what personal qualities and behaviors does it take to be a social entrepreneur? Answers will vary. Passion, energy, creativity and hard work are all needed. (LO: 5, Discuss current social responsibility and ethics issues, AACSB: Ethical understanding and reasoning) 6-19. What are other examples of social entrepreneurship? Look up some examples. Tacos for Life, EarthEnable, Grameen Bank, and Seventh Generation are a few examples. (LO: 5, Discuss current social responsibility and ethics issues, AACSB: Ethical understanding and reasoning)

Chapter 7 Managing Change and Disruptive Innovation Change is a constant for organizations and thus for managers. Because change can’t be eliminated, managers must learn how to manage it successfully. Because innovation is often closely tied to an organization’s change efforts, managers must know how to manage it as well. Focus on the following learning objectives as you read and study this chapter. LEARNING OBJECTIVES 1. 2. 3. 4. 5. 6. 7.

Describe making the case for change. Compare and contrast views on the change process. Classify areas of organizational change. Explain how to manage change. Discuss contemporary issues in managing change. Describe techniques for stimulating innovation. Explain why managing disruptive innovation is important.

CHAPTER OUTLINE INTRODUCTION Change and change management are important aspects of the manager’s job. Chapter 7 focuses on ways to manage change effectively and to promote innovation in an organization. 7.1

THE CASE FOR CHANGE Organizational change is defined as any alteration of people, structure, or technology in an organization. Instead of trying to eliminate change, managers must realize that change is always present and that they should seek ways to manage change successfully. Change requires a catalyst. The manager may act as a change agent— someone who acts as a catalyst and assumes the responsibility for managing the change process. A. Living with VUCA. Today’s business environment is becoming increasingly complex and unpredictable. Military planners call this VUCA – an environment of nonstop volatility, uncertainty, complexity, and ambiguity. Exhibit 7-1 shows that both external and internal forces create the need for change. B. External Forces for Change. External forces creating the need for change come from various sources: 1. Consumer needs and wants 2. New government laws 3. Technology

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4. The Economy Internal Forces for Change. Internal forces creating change usually originate from the internal operations of the organization or from the impact of external changes. These internal forces include: 1. New organizational strategy 2. Composition of the workforce 3. New equipment 4. Employee attitudes

7.2

THE CHANGE PROCESS Two very different metaphors can be used to describe the change process. A. The Calm Waters Metaphor. 1. The calm waters metaphor characterizes the process of change as being like a ship crossing a calm sea. The calm waters metaphor can be illustrated by Lewin’s 3-step process for change (see Exhibit 7-2). a. Unfreezing the equilibrium is the first step. Unfreezing the equilibrium can be accomplished in one of three ways: 1. Increasing driving forces, which are forces that direct behavior away from the status quo. 2. Decreasing restraining forces, which are forces that hinder movement from the existing equilibrium. 3. Combining the two approaches. b. The next step is to implement the change itself. c. The final step is to refreeze the situation. B. The White-Water Rapids Metaphor. 1. The white-water rapids metaphor describes change that takes place in uncertain and dynamic environments. To put the two views into perspective, it is helpful to note that not every manager constantly faces a world of chaotic change. However, the number of managers who do not face this type of environment is rapidly dwindling!

7.3

AREAS OF CHANGE A. Types of Change. What can a manager change? A manager may make changes in four categories: strategy, structure, technology, and people. (See Exhibit 7-3) 1. Strategy a. Companies that fail to change strategy when circumstances dictate it run the risk of failing. b. Changing strategy involves modifying the approach to ensuring the organization’s success. 2. Structure a. Managers can alter one or more structural components of the organization, such as work specialization, departmentalization, chain of command, span of control, centralization and decentralization, and formalization. b. Frequently, the design of the organization’s structure is changed in order to meet new demands.

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Technology a. Competitive factors or new innovations often require introduction of new equipment, tools, or operating methods. b. Automation is a technological change that replaces certain tasks done by people with machines. c. Computerization has probably been the most visible technological change in recent years. People a. Organizational development (OD) is techniques or programs to change people and the nature and quality of interpersonal work relationships. b. Exhibit 7-4 provides descriptions of the most popular OD approaches.

7.4

MANAGING CHANGE Managers are motivated to initiate change when they are committed to improving organizational performance. A. Why do People Resist Change? Resistance to change is a natural event in organizations and occurs for the main reasons including: uncertainty, habit, concern about personal loss, and the belief that the change is not in the organization’s best interest. B. Techniques for Reducing Resistance to Change. Organizations can build up inertia that actually motivates employees to resist change. The techniques for Reducing Resistance are listed in Exhibit 7-5. They are: 1. Education and communication 2. Participation 3. Facilitation and support 4. Negotiation 5. Manipulation and co-optation 6. Coercion

7.5

CONTEMPORARY ISSUES IN MANAGING CHANGE Contemporary issues related to managing change include organizational culture, employee stress, and successful change action. Culture is resistant to change because it consists of relatively stable and permanent characteristics. The fact that culture is formed over a long period of time and that strong cultures have highly committed people also make it difficult to change an organization’s culture. A. Changing an Organization’s Culture. 1. Understanding the Situational Factors Some situations can facilitate culture change, including: a. A dramatic crisis b. A change in leadership c. A young organization that is small in size d. A culture that is weak 2. Making Changes in Culture Exhibit 7-6 demonstrates the need for a comprehensive, coordinated strategy for managing cultural change. B. Employee Stress.

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What is Stress? Stress is the adverse reaction people have to excessive pressure placed on them from extraordinary demands, constraints, or opportunities. What Causes Stress? Research shows that stress may be related to the organization or to personal factors. Important variables that have been known to cause employee stress include: a. Task demands b. Role demands 1. Role Conflict: Work expectations that are hard to satisfy. 2. Role Overload: Having more work to accomplish than time permits. 3. Role Ambiguity: When role expectations are not clearly understood. c. Interpersonal demands d. Organizational structure e. Organizational leadership f. Personality 1. Type A personality: People who have a chronic sense of urgency and an excessive competitive drive. 2. Type B personality: People who are relaxed and easygoing and accept change easily. What are the Symptoms of Stress? Stress may be exhibited in a number of ways. For example, an employee who is experiencing a high degree of stress may become depressed, accident prone, or argumentative and may be easily distracted. Exhibit 7-7 groups stress symptoms into three categories: physical, psychological, and behavioral. How Can Stress Be Reduced? Employee selection, realistic job previews, MBO, and job redesign are methods of reducing stress in an organization.

WORKPLACE CONFIDENTIAL: Coping with Job Stress Job stress is the biggest source of stress for American workers. A recent survey showed that 83% of American workers said they were stressed at work. The following suggestions will help you cope with, or even reduce, job-related stress: 1. Learn to manage your time. Becoming more efficient and organized will help you keep up with the job demands. 2. Take work breaks at routine intervals. Research shows this practice can reduce stress. 3. Take walk breaks at routine intervals. This practice also improves your overall health. 4. Utilize deep-relaxation techniques such as deep breathing. This practice helps relieve stress. 5. Meditation has been shown to help reduce stress, so develop the habit of meditating. It focuses your attention on a more blissful state. 6. Yoga exercises also help you develop relaxation techniques that lower stress. 7. The use of imagery can put you in a peaceful state when you feel overwhelmed. 8. Any type of physical exercise helps reduce stress. 9. Develop a social support network of friends, family, or colleagues that can listen to you and offer a different perspective on a stressful situation.

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7.6

STIMULATING INNOVATION Innovation is essential to organizational success in a dynamic marketplace. Whether it’s Google, Facebook, or Apple, all companies rely on innovation to deliver the products and services necessary for the marketplace. A. Creativity Versus Innovation. 1. Creativity is the ability to combine ideas in a unique way or to make unusual associations between ideas. 2. Innovation is taking creative ideas and turning them into useful products or work methods. B. Stimulating and Nurturing Innovation. How can managers foster innovation? The systems model shows how to foster innovation. (See Exhibit 7-8) Three sets of variables have been found to stimulate innovation. 1. Structural variables can be summarized as follows: a. Organic structures positively influence innovation. b. The easy availability of organizational resources provides a critical building block for innovation. c. Frequent communication among work units helps to break down barriers to innovation. d. Minimize time pressures on creative activities. e. Provide explicit support for creating work and nonwork sources. 2. Cultural variables show that an innovative culture is likely to have the following characteristics: a. Acceptance of ambiguity b. Tolerance of the impractical c. Minimize external controls d. Tolerance of risk e. Tolerance of conflict f. Focus on ends rather than means h. Provide positive feedback 3. Human resource variables indicate the important role that people play in innovative organizations. a. Innovative organizations actively promote the training and development of their employees so that their knowledge will be current. b. Innovative organizations offer employees high job security. c. Innovative organizations encourage individuals to become idea champions—that is, individuals who actively and enthusiastically support new ideas, build support, overcome resistance, and ensure that the innovations are implemented.

7.7

DISRUPTIVE INNOVATION A. Definition. 1. Disruptive innovation describes innovations in products, services, or processes that radically change an industry’s rules of the game. Sustaining innovation refers to small and incremental

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changes in established products rather than dramatic breakthroughs. 2. Disruptive innovation has been around for centuries (see Exhibit 7-9). Why Disruptive Innovation is Important. 1. Disruptive innovations are a threat to many established businesses. Companies that attempt to respond only through sustaining innovation will find it difficult to be successful. 2. However, new ideas for products or services that differ significantly from the status quo are a threat to the established power structure within large companies. Who’s Vulnerable? 1. Large, established, and highly profitable companies are the most vulnerable to disruptive innovations. These companies are already vested in their current market and technologies and so have the most to lose from change. Implications. 1. For Entrepreneurs. Disruptive innovations mean opportunity. Entrepreneurs thrive on change and innovation. Major disruptions open the door for new products and services to replace established and mature businesses. 2. For Corporate Managers. The challenge for corporate managers is to identify an appropriate response to disruptive change. a. Small groups within a large organization that are given a high degree of autonomy and are unhampered by corporate bureaucracy, whose mission is to develop a project primarily for the sake of radical innovation, are called skunk works. 3. For Career Planning. How should you approach your career in a disruptive world? a. Never get comfortable with a single employer. b. Keep your skills current. c. Be responsible for your own future. d. Take risks when you are young.

ANSWERS TO REVIEW AND DISCUSSION QUESTIONS Student answers to these questions will vary. 7-1. Why is a change agent needed for organizational change? Can a low-level employee be a change agent? Explain your answer. A change agent acts as a catalyst and assumes the responsibility for managing the change process. Change agents can come from inside or outside the organization, and from different levels within the organization. If the low-level employee is a low-level manager, it is possible that he or she could act as a change catalyst, just as any manager can be a change agent. However, it is important to note that change should begin at the top and work its way down. Change is most successful when it is supported by top management. Also, it is important to remember that as organizations empower

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employees, they may empower them as change agents. (LO: 1, Describe making the case for change, AACSB: Analytical thinking) 7-2. Contrast the calm waters and white-water rapids metaphors of change. According to the calm waters scenario, an occasional disruption (a “storm”) means changing to deal with the disruption. On the other hand, the white-water rapids metaphor implies a dynamic environment with constantly changing paradigms and high levels of competition. (LO: 2, Compare and contrast views on the change process, AACSB: Analytical thinking) 7-3. What is organizational development? How do organizational development techniques support organizational change? Organizational development describes the change methods that focus on people and the nature and quality of interpersonal work relationships. Organizational development techniques including sensitivity training, team building, intergroup development, process consultation, and survey feedback (Exhibit 7-4) help to bring about changes in an organization’s employees and make the work together better. (LO: 3, Classify areas of organizational change, AACSB: Analytical thinking) 7-4. Why do people in organizations resist change? Provide examples an organization can take to reduce resistance to change. People in organizations resist change for a number of reasons including uncertainty, habit, concern over personal loss, and the belief that the change is not in the organization’s best interest. Companies can use the following techniques (Exhibit 7-5) to reduce resistance to change: education and communication; participation; facilitation and support; negotiation; manipulation and co-option. (LO: 4, Explain how to manage change, AACSB: Analytical thinking) 7-5. Discuss the role of organizational culture in the change process. What are steps an organization can take to create a culture that supports change? Organizational culture is made up of relatively stable and permanent characteristics that make it resistant to change. Strong cultures are especially problematic because employees are committed to them. Change in these cultures can take years. Organizations seeking to create a culture that supports change should take the following steps (Exhibit 7-7): set the tone through management behavior; create new stories, symbols, and rituals to replace those currently in use; select, promote, and support employees who adopt the new values; redesign socialization processes to align with the new values; change the reward system; set clearly speciﬁed expectations; shake up current subcultures; and work to get consensus through employee participation and creating a climate with a high level of trust. (LO: 5, Discuss contemporary issues in managing change, AACSB: Analytical thinking) 7-6. Why should organizational managers be concerned about reducing employee stress levels? 6.1 7.5 Surveys show that between 40 to 80 percent of U.S. workers experience workplace stress. Employee stress is also a problem in other countries. Understanding and working to reduce stress is important for organizations because it can lead to psychological, physical, and behavioral problems (Exhibit 7-8). Psychological symptoms of stress include job-related dissatisfaction, tension, anxiety, irritability, boredom, and procrastination. Behavioral symptoms of stress include changes in productivity,

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absenteeism, job turnover, changes in eating habits, increased smoking or consumption of alcohol, rapid speech, fidgeting, and sleep disorders. Physical symptoms of stress include changes in metabolism, increased heart and breathing rates, raised blood pressure, headaches, and potential of heart attacks. (LO: 5, Discuss contemporary issues in managing change, AACSB: Analytical thinking) 7-7. Innovation requires allowing people to make mistakes. However, being wrong too many times can be disastrous to your career. Do you agree? Why or why not? What are the implications for nurturing innovation? This question offers an opportunity to set up a debate in class. Ask half of the students in the class to argue that being wrong can be fatal, and have the remaining half of the class argue that being wrong does not have to be fatal. Students must, however, understand and be able to incorporate the relationship between nurturing innovation and “punishing” failure. If an organization punishes employees for failing, employees will cease to “take a chance” on a new innovation, and innovative activity will decline. (LO: 6, Describe techniques for stimulating innovation, AACSB: Analytical thinking) 7-8. Provide an example of a disruptive innovation. What impact did this innovation have on the industry? Student responses to this question will vary depending on the disruptive innovation chosen. Students should demonstrate an understanding of the significance of disruptive innovation on industries and organizations. (LO: 7, Explain why managing disruptive innovation is important, AACSB: Analytical thinking)

ETHICS DILEMMA Stress management and counseling can be an important aid for employees. In this dilemma, students are asked to address why employees would not take advantage of these benefits. The authors mention a paradox that exists; employees are experiencing stress but they feel that they don’t want to admit to being stressed (which may make the stress even worse). Students are encouraged to think of ways to change the perception of stress management programs and to get employees to participate. 7-9. What can be done about this paradox of needing stress management assistance but being reluctant to admit it? Student answers will vary, but some companies use EAP programs that keep employees’ names confidential. Another way to take away the stigma of stress management programs may take the opposite approach and have employees write testimonials of their benefits. These could be published in a company newsletter (again, with the names confidential). (LO: 4, Explain how to manage change, AACSB: Ethical understanding and reasoning abilities) 7-10. Do organizations have an ethical responsibility to help employees deal with stress? Discuss. Student answers will vary, but the simple answer to this question is yes. For many employees it is the stressful nature of the job that causes employees’ poor behavior at work, which can spill over into their home life. Helping them deal with stress should also result in better job performance and lower turnover. (LO: 4, Explain how to manage change, AACSB: Ethical understanding and reasoning abilities)

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SKILLS EXERCISE: DEVELOPING YOUR CHANGE-MANAGEMENT SKILL In this exercise, students are asked to work on personal skills that will help make them better change agents. Change management is a necessary skill for two reasons: first, managers are always making changes, and second, employees almost always resist change. (LO: 4, Explain how to manage change, AACSB: Reflective thinking)

WORKING TOGETHER: TEAM EXERCISE In groups of three to four, students are asked to assume the role of the founders of a new technology start-up company. Students are asked to identify the steps the organization should take to establish a work environment that supports the stimulation of innovation.

Students should be prepared to share their ideas on the structure, culture, and human resource practices they would choose for their organization. (LO: 6, Describe techniques for stimulating innovation, AACSB: Analytical thinking)

MY TURN TO BE A MANAGER •

Choose two organizations you’re familiar with and assess whether these organizations face a calm waters or white-water rapids environment. Write a short report describing these organizations and your assessment of the change environment each faces. Be sure to explain your choice of change environment. (LO: 2, Compare and contrast views on the change process, AACSB: Analytical thinking)

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Reflect on a significant change you’ve experienced in your life (for example, moving to a new school, going to college, or a family problem such as a divorce). Did you resist the change? Why? Did you use any strategies to adjust to the change? What could you have done differently? Write your reflection and make note of how you could effectively manage future changes in your life. (LO: 2, Compare and contrast views on the change process, AACSB: Analytical thinking)

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Choose an organization with which you’re familiar (employer, student organization, family business, etc.). Describe its culture (shared values and beliefs). Select two of those values/beliefs and describe how you would go about changing them. Put this information in a report. (LO: 5, Discuss contemporary issues in managing change, AACSB: Analytical thinking)

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When you find yourself experiencing dysfunctional stress, write down what’s causing the stress, what stress symptoms you’re exhibiting, and how you’re dealing with the stress. Keep this information in a journal and evaluate how well your stress reducers are working and how you could handle stress better. Your

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goal is to get to a point where you recognize that you’re stressed and can take positive actions to deal with the stress. (LO: 5, Discuss contemporary issues in managing change, AACSB: Analytical thinking) •

Visit www.testmycreativity.com to take an assessment to measure your creativity. What is your level of creativity in comparison with others? What are your strengths? Your weaknesses? Do you agree with the assessment? (LO: 6, Describe techniques for stimulating innovation, AACSB: Analytical thinking)

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Research information on how to be a more creative person. Write down suggestions in a bulleted list format and be prepared to present your information in class. (LO: 6, Describe techniques for stimulating innovation, AACSB: Analytical thinking)

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Is innovation more about (1) stopping something old or (2) starting something new? Prepare arguments supporting or challenging each view. (LO: 6, Describe techniques for stimulating innovation, AACSB: Analytical thinking)

ANSWERS TO CASE APPLICATION 1 QUESTIONS Student answers to these questions will vary. Change from Within at Google 7-11. Who were the change agents at Google, and what did they do that made them change agents? Employees were the primary catalyst for change. They publicized cases of sexual harassment and then solicited ideas from other employees. This tactic resulted in a document with five demands sent to top management. One pseudo-external change agent that helped organize the employees was Claire Stapleton, a marketing manager at YouTube, which is a Google subsidiary. (LO: 1, Describe making the case for change, AACSB: Analytical thinking) 7-12. What were the internal and/or external forces for change in this case? The primary forces for change were internal and related to both employee attitudes and the composition of the workforce. (LO: 1, Describe making the case for change, AACSB: Analytical thinking) 7-13. How did employees increase driving forces in this case? The employees publicized the behaviors and attitudes they wanted to change. They also solicited additional input and used the help of Claire Stapleton to help them organize their efforts. (LO: 2, Compare and contrast views on the change process, AACSB: Analytical thinking) 7-14. What techniques for reducing resistance to change could employees use to help make further progress toward change?

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The primary technique used was education and communication. As soon as the information became public, management at Google was very receptive to making the issue go away. However, the education aspect was geared more toward informing outsiders, so Google would feel societal pressure to make the necessary changes. (LO: 4, Explain how to manage change, AACSB: Analytical thinking)

ANSWERS TO CASE APPLICATION 2 QUESTIONS Student answers to these questions will vary. Creating an Innovation Lab at Neiman Marcus 7-15. Why is “innovation” a more accurate word to describe Neiman Marcus’s lab than “creativity”? Creativity refers to the ability to combine ideas in a unique way. Innovation turns creative ideas into useful outcomes. The iLab has generated several outcomes that help Neiman Marcus better serve its customers so innovation is a more accurate descriptor. (LO: 6, Describe techniques for stimulating innovation, AACSB: Analytical thinking) 7-16. What structural, cultural, and/or human resource variables helped encourage innovation success at Neiman Marcus? Neiman Marcus appears to have an organic structure that makes it easy to share ideas, abundant resources, and work and network support. On the human resources side, they have creative people and a high commitment to training and development. On the cultural side, the firm is willing to accept ambiguity, tolerate risk, and focus on the outcomes. (LO: 6, Describe techniques for stimulating innovation, AACSB: Analytical thinking) 7-17. Has Neiman Marcus achieved disruptive innovation with their iLab’s work? Why or why not? Responses to this question will vary by student. I believe they have achieved disruptive innovation since the changes alter the rules of the game by providing consumers with virtual reality type options such as digital memory mirrors to help them make fashion decisions by asking for a friend’s opinion and making side-by-side comparisons. (LO: 7, Explain why managing disruptive innovation is important, AACSB: Analytical thinking) 7-18. What is an example of “sustaining innovation” in this case? Responses to this question will vary by student. I think using the memory makeover mirrors is a sustaining innovation since it merely extends the makeup application feature and also the “Snap Find Shop” phone app that helps locate similar fashions. (LO: 7, Explain why managing disruptive innovation is important, AACSB: Analytical thinking)

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Part 2: Management Practice A Manager’s Dilemma Using what you learned in Part 2, especially Chapter 6, what would you do in this situation? Jim has a difficult decision to make, and his actions should be guided by both legal and moral requirements in this instance. Because of the potential exposure, Jim should immediately contact the local health department and notify them of any potential exposure danger. As part of this process, the local health department may have a plan in place to notify the public, in which case the issue of public notification is not a decision to be made by the manager. If after testing of the potentially affected employee there is a case of exposure, the health department is likely to require the company to follow procedures regarding public notification, employee testing, building decontamination, and a mandatory shutdown. At this point, Jim could notify the public of his company’s concern for customers’ well-being and assistance in how to react to any potential exposure. Events like this point to the need for companies to develop a policy on potential exposure to infectious diseases and hazardous materials. Information on what companies should do in these cases can be found at both state and local levels, i.e. http://www.health.ny.gov/diseases/communicable/hepatitis/hepatitis_a/food_service_workers_fa ct_sheet.htm Global Sense What global attitude do you think would most encourage, support, and promote cultural awareness? Explain. The ethnocentric, polycentric, and geocentric views vary by their degree to which the holder adheres to the belief that their culture is the best and their willingness to accept best approaches from other cultures. An ethnocentric attitude is the parochialistic belief that the best work approaches and practices are those of the home country (the country in which the company’s headquarters are located). A polycentric attitude is the view that employees in the host country (the foreign country in which the organization is doing business) know the best work approaches and practices for running their business. A geocentric attitude is a worldoriented view that focuses on using the best approaches and people from around the globe. Managers with this type of attitude have a global view and look for the best approaches and people regardless of origin. How might legal-political and economic differences play a role as companies design appropriate cultural awareness training for employees? Explain. Companies should include these elements in their cultural awareness training as a country’s national culture plays a large role in their legal and economic systems. It is difficult in many cases to divorce a country’s culture from its political system; it’s almost an argument of ‘which came first, the chicken or the egg?’ The answer in this case is that the culture of the country is the lower part of the iceberg that develops the systems that people see, such as the political and economic systems. Is diversity management related to cultural awareness? Discuss. The answer to this question is that from the company’s perspective, cultural diversity is a form of diversity, similar to gender and age diversity. Title VII of the Civil Rights Act of 1964, for example, made it unlawful to discriminate on the basis of race, color, national origin, or religion. Equal opportunity for employment allows for the entry into the American workforce of increasing numbers of individuals from cultural groups historically discriminated against.

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Read more: http://www.referenceforbusiness.com/encyclopedia/Dev-Eco/DiversityCulture.html#b#ixzz2COITwr9b Pick one of the countries mentioned above and do some cultural research on it. What did you find out about the culture of that country? How might this information affect the way a manager in that country plans, organizes, leads, and controls? Students can find information on cultural differences from several sources including the Department of Commerce, and the International Trade Administration (http://trade.gov/). For individuals traveling to another country, there is information available at the U.S. State Department (http://travel.state.gov/). Students can also compare Geert Hofstede’s findings on both national cultures at http://www.geert-hofstede.com/index.shtml. This website shows graphically how the cultures compare on the five dimensions. For example, in comparing the United States with Japan, the United States is more individualistic than Japan, while Japan is higher on the dimensions of masculinity, uncertainty avoidance, and long-term orientation. What advice might you give to a manager who has little experience globally? There are a variety of training programs put out by organizations that can help managers increase their cultural awareness. These programs can educate managers on theories such as Hofstede’s dimensions of national culture or GLOBE. Managers can also contact resource groups that work with cultural minorities, such as Hispanics and Asians, to get more information on how these cultures impact work-related behavior. Another recommendation is that managers can expose themselves to other cultures by interacting more with individuals from other cultures or by traveling internationally.

Continuing Case Starbucks—Basics of Managing in Today’s Workplace Discussion Questions with Answers; Teaching Suggestions P2-1. Do you think Howard Schultz and Kevin Johnson have viewed their roles more from the omnipotent or from the symbolic perspective? Explain. By providing leadership for this company, Howard Schultz and now Kevin Johnson believe in empowering employees throughout the organization to participate as partners in the success of the company. To some extent, Schultz portrayed both the omnipotent and symbolic perspectives. From the omnipotent perspective, he was the heart and soul of this company. As one former board member said, Schultz is "consumed with his vision for Starbucks" and feels strongly about his role in creating the company's culture. His successor, Kevin Johnson, shows similar omnipotent attitudes in his belief that success is defined by how the firm enhances the human experience. However, from the symbolic perspective, Schultz's ability to affect performance outcomes was dramatically influenced and constrained by external factors, especially over the last couple of years. Schultz's leadership role might be most accurately described as a synthesis. Schultz acted within the constraints of both the internal and external environments. Kevin Johnson still operates within those same constraints, so his leadership role reflects a similar synthesis of the two perspectives. P2-2. What has made Starbucks’ culture what it is? How is that culture maintained? Students should revisit the description in the Part I case concerning the business philosophy of the three original founders. Ask your students to explain how the unwritten business philosophy

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of these three Starbucks founders served as a basis for the subsequent composition of the mission for the company, as developed by Howard Schultz. Students should recognize that the original passionate commitment to quality, "world-class" coffee, and individual education of Starbucks' customers inspired Schultz to envision the possibilities for maintaining, developing, and expanding the company's emphasis on a caring, respectful, and diversified culture. The company's culture is maintained through the company's mission, the six guiding principles, and the daily decisions and actions of the partners from top to bottom. Schultz, and now Kevin Johnson, also recognize how powerful and how important it is to maintain the relationship Schultz developed with his partners. P2-3. Does Starbucks encourage a customer responsive culture? An ethical culture? Explain. In Part I of the case, students should be able to find examples of the responsiveness of Starbucks to its customers. Although there's no specific reference in Part I to Starbucks’ innovation efforts, an innovative culture can be assumed when you look at the list of the products that Starbucks offers. It is quite impressive and many of these products have been added only recently. Starbucks encourages an ethical culture through ethical product sourcing, environmental stewardship, and community involvement. The company has been issuing an annual Social Responsibility Report since 2001. P2-4. Describe some of the specific and general environmental components that are likely to impact Starbucks. The three ways that the external environments affect managers are its impact on jobs and employment, amount of environmental uncertainty, and nature of stakeholder relationships. One of the most visible areas where we've seen how the external environment affects managers is in the constraints it places on jobs and employment, both in poor conditions and in good conditions. Changes in the external environment affect the number and types of jobs available and also affect how those jobs are created and managed. When the global economy eroded during the past decade, Starbucks' executive team had to make some difficult decisions to realign the company's businesses, affecting jobs and employment. These decisions impacted the company from top to bottom and around the globe. As the global economy improves and the company continues its global push, the impact on jobs and employment will continue to be felt. The amount of environmental uncertainty in the external environment also has affected how Starbucks' managers manage. The amount of change and the complexity of those changes— challenges that were of a "breadth and magnitude unlike anything Schultz had ever seen"— influenced the decision to undergo a full-fledged transformation to help the company return to profitable growth. More recently Starbucks decided to enter the Chinese market and it must navigate the cultural differences in that market. Finally, managers at Starbucks recognize and understand the importance of managing the relationships the company has with its stakeholders. From partners and customers to suppliers and communities, Starbucks has focused on nurturing those connections both because it feels it's the right thing to do and because doing so has led to desirable organizational outcomes. P2-5. How would you classify the uncertainty of the environment in which Starbucks operates? Explain. As with most global companies, Starbucks faces a significant amount of environmental uncertainty, which is the degree of change and complexity in an organization's environment. With the rapid changes in technology, unpredictable global economic and political environments, uncertainty concerning competitors, and changing tastes of consumers, Starbucks operates in a dynamic environment.

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P2-6. What stakeholders do you think Starbucks might be most concerned with? Why? What issue(s) might each of these stakeholders want Starbucks to address? Your students may identify a number of important stakeholders of Starbucks, including customers, suppliers, and employees. Regarding its employees, Starbucks is devoted to the happiness and welfare of all persons employed by the company. This concern for its employees is epitomized by the term "partners," which is used within the company to identify all its employees. Starbucks also supports a number of employee resource groups (ERGs) which it calls “partner networks.” Starbucks recognizes that the best way to ensure that its customers are treated well is to treat its partners well. Motivated content partners will, in turn, provide the highest quality products and service to customers. Howard Schultz, and now Kevin Johnson, "walk the talk" by enacting as well as espousing dedication to the company's partners. Johnson treasures positive relationships with all partners, providing them with the highest quality ingredients. Starbucks also constantly works to solidify the relationships with the company's suppliers. P2-7. If Starbucks wanted to increase the adaptability of its organizational culture due to the tough competition it is facing, what are some examples of how Starbucks could encourage more innovation and experimentation among its employees? Ask your students to brainstorm ideas. They could create an innovation lab similar to the one created at Neiman Marcus. Other possibilities include holding employee contests for innovative ideas with substantial prizes to the top ideas. They could set creativity goals and celebrate successes and failures so the people aren’t afraid to try something new. Starbucks is already a very innovative company that has several programs designed to encourage innovation. P2-8. What types of global economic and legal-political issues might Starbucks face as it does business globally? Kevin Johnson probably believes that the company's global business is one of its core strengths because of the popularity of Starbucks' brands overseas. With more than 12,000 stores in over 70 countries outside the United States, Starbucks is well on its way to being a strong global competitor. Much of the company's future growth prospects can be found in global markets, with most of its efforts being aimed at China, India, and Vietnam. What this implies for managers as they plan, organize, lead, and control is paying close attention to the global challenges associated with the different country's political/legal environment, economic environment, and cultural environment. P2-9. Pick one of the countries mentioned as an important target for Starbucks. Make a bulleted list of economic, political-legal, and cultural characteristics of this country. Divide your class into small groups of four to five students to address this question. Then, have each group take a country and do some research on that country’s economic, political-legal, and cultural characteristics. After each group has written a report, have each group present their findings. Useful websites to find information to address the three factors include: • Department of Commerce, and the International Trade Administration (http://trade.gov/) • The U.S. State Department (http://travel.state.gov/) • Geert Hofstede’s findings on both national cultures at http://www.geerthofstede.com/index.shtml P2-10. What workforce challenges might Starbucks face in China in regard to its partners? As education and work practices vary from country to country, staffing an organization that demands a coordinated work effort becomes more difficult. This is further complicated by language and cultural barriers. As Starbucks expands, it will be difficult to get employees who

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have the skills to work in a global organization. Finding baristas who can service the retail stores may not be easy, but the most challenging task will be finding key support personnel who provide the financial, logistical, and operational functions for the organization. Since Chinese consumers like coffee delivered, Starbucks will also need to find a fleet of delivery drivers to make sure it competes with the Chinese firm Luckin. P2-11. With more than 330,000 partners worldwide, what challenges might Starbucks face in making sure its diversity values are practiced and adhered to? Starbucks' Partner Networks are examples of employee resource groups. Such networks (or groups) can be beneficial for partners who are connected by some common dimension of diversity because their existence is acknowledged and they have a source of support both within and outside the group. Individuals in a minority group often feel as if they're invisible and not important in the overall organizational scheme of things. These networks provide an opportunity for those individuals to have a voice. Starbucks will also need structured training programs to ensure all employees understand the firm’s commitment to diversity. P2-12. Kevin Johnson is quoted on the Starbucks website as saying, “We aspire to be a place of inclusion, diversity, equity and accessibility.” Explain what you think this means. How are these four concepts different from one another? The company's definition of inclusion encompasses human connection and engagement. Equity involves fairness and justice. Accessibility is shown through ease of use and being barrier-free. The company also states that its diversity strategy focuses on important stakeholders including partners, customers, suppliers, and communities. Your students are likely to agree that this is a good description of how an organization should address and manage diversity, citing that it encompasses important aspects. However, you might want to point out that although the words and intentions are good, actually doing and practicing these things may not be as easily achieved. That's always been the challenge for managers in managing diversity. P2-13. What are specific ways in which Starbucks has shown top-management commitment to diversity? In what ways could Starbucks become even stronger in the area of diversity? Approximately 45% of Starbucks employees are minorities and 67% are women. The company also encourages employee resource groups (ERGs) that actively support partners with disabilities, armed forces veterans, black partners, and other groups. The firm also has firm targets in place to ensure top management has representation from diverse groups and the firm makes sure facilities get located in underserved communities. The firm does numerous activities that indicate a commitment to diversity. P2-14. Go to the company’s website [www.starbucks.com] and find the latest corporate social responsibility report. Choose one of the key areas in the report (or your professor may assign one of these areas). Describe and evaluate what the company has done in this key area. By accessing the company's website and clicking on the "About Us" link, your students can find other links that will have all kinds of information about the company's global responsibility efforts. They may have to do a little searching for the report, but if they're having trouble, tell them to look for the "Starbucks Shared Planet" information. Have your students study this document independently to describe and evaluate Starbucks' latest actions in the area of global responsibility. Starbucks tries very hard to be a responsible company and it might be interesting to have your students do brief presentations on the area they looked at. P2-15. What do you think of Starbucks’ goal to stop using plastic straws by 2020? What challenges might it face in meeting that goal? Is this merely a “public relations” promotion?

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As the case states, environmental stewardship is one area that Starbucks has struggled with. No one can argue that Starbucks' intentions are good — it wants to be a responsible and ethical company. However, dealing with the plastic straws is a challenge for the firm’s cold beverages. What do you replace them with? However, the firm has some experience with moving away from using foam cups and disposable containers. I believe Starbucks is truly intent of helping make the world a greener place. P2-16. Which of the approaches to “going green” (see Exhibit 6-3) does Starbucks utilize? Explain your choice. My opinion is that Starbucks has a dark green, or activist approach, to the environment. The firm appears to be a leader in sustainability issues and does not wait for stakeholders or public opinion to drive the change. Others may have a different opinion. P2-17. What do you think the company’s use of the term partners instead of employees implies? What’s your reaction to this? Do you think it matters what companies call their employees? (For instance, Walmart calls its employees associates.) Why or why not? Terms like partners and associates are meant to create a feeling of empowerment and belonging to the organization. As employees move from a “hired hand” to a “partner,” they start to feel more important in the decision-making processes of the organization. Employees may also feel a greater buy-in and commitment to organizational policy and plans and they become involved in setting rules and goals. However, as more organizations begin to use these terms and do not follow through on decentralizing power and decision making, the terms lose their effectiveness. Employees may then see the organizations’ actions as less authentic and trustworthy. P2-18. Would you classify Starbucks’ environment as more calm waters or white-water rapids? Explain. How does the company manage change in this type of environment? Like most managers today, Kevin Johnson and the partners at Starbucks are navigating in a white-water rapids situation. Students will give a variety of reasons to support the choice of this metaphor in describing the environment facing Starbucks such as: the challenge to invent products that will appeal to a diverse customer base; increasing competition from domestic companies; and numerous economic and cultural obstacles, both domestically and globally. P2-19. Using Exhibit 7-8, describe which innovation variables are already a part of Starbucks. To stimulate more innovation, which motivation variables could they consider adding more of? Exhibit 7-8 describes the structural, human resource, and cultural variables that are important to innovation. In looking at each of these, Starbucks has tried to create an environment in which innovation and innovative efforts are encouraged. This is particularly important since innovation is critical to Starbucks' continued success. Starbucks has a number of innovation initiatives including its STAR program and its Starbucks Reserve Roasteries that are designed to foster innovation. Several of the innovation variables will impact motivation. For example, job security will result in higher levels of creativity as employees are encouraged to try something new without fear of failure. Starbucks’ employees are called “partners,” which shows appreciation for their efforts. The benefit package includes free college tuition and stock options, which are both good motivators. Starbucks could offer bonuses given to partners that develop successful new products and other creativity and innovation awards.

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Chapter 8 Foundations of Planning In this chapter, we begin our study of the first of the management functions: planning. Planning is important because it establishes what an organization is doing. We’ll look at how managers set goals as well as how they establish plans. Focus on the following learning objectives as you read and study this chapter.

LEARNING OBJECTIVES 1. 2. 3. 4. 5.

Define the nature and purposes of planning. Classify the types of plans organizations might use. Identify the key contingency factors in planning. Compare and contrast approaches to objective setting. Discuss contemporary issues in planning.

CHAPTER OUTLINE INTRODUCTION Planning is one of the four functions of management. Fundamental information about managerial planning is presented in this chapter; the text discusses the nature and purposes of planning, strategies for effective planning, and contemporary planning issues. 8.1

THE WHAT AND WHY OF PLANNING A. What is Planning? Planning involves defining the organization’s goals, establishing an overall strategy for achieving these goals, and developing plans for organizational work activities. The term planning as used in this chapter refers to formal planning. B. Why Do Managers Plan? Planning serves a number of significant purposes. 1. Planning gives direction to managers and nonmanagers of an organization. 2. Planning reduces uncertainty. 3. Planning minimizes waste and redundancy. 4. Planning establishes goals or standards used in controlling. C. Planning and Performance. Although organizations that use formal planning do not always outperform those that do not plan, most studies show positive relationships between planning and performance. 1. Effective planning and implementation play a greater part in high performance than does the amount of planning done. 2. Studies have shown that when formal planning has not led to higher performance, the external environment is often the reason.

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TYPES OF PLANS Planning is often called the primary management function because it establishes the basis for all other functions. Planning involves two important elements: goals and plans. Plans are documents that outline how goals are going to be met. They can be described by their breadth, time frame, specificity, and frequency of use (see Exhibit 8-1). A. Strategic Versus Operational Plans. Breadth: Strategic versus operational plans. Strategic plans (long-term plans) are plans that apply to the entire organization, establish the organization’s overall goals, and seek to position the organization in terms of its environment. Operational plans (short-term plans) are plans that specify the details of how the overall goals are to be achieved. B. Short-Term Versus Long-Term Plans. Time frame: Short-term versus long-term plans. Short-term plans are plans that cover one year or less. Intermediate-term plans cover from one to five years and long-term plans are plans with a time frame beyond five years. C. Specific Versus Directional Plans. Specificity: Specific versus directional plans. Specific plans are plans that are clearly defined and leave no room for interpretation. Directional plans are flexible plans that set out general guidelines. Exhibit 8-2 shows an example of specific versus directional plans. D. Single-Use Versus Standing Plans. Frequency of use: Single-use versus standing plans. A single-use plan is a one-time plan specifically designed to meet the needs of a unique situation. Standing plans are ongoing plans that provide guidance for activities performed repeatedly.

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CONTINGENCY FACTORS IN PLANNING Different situations call for different types of plans. Therefore, in this section we identify three contingency factors in planning. A. Level in the Organization. Exhibit 8-3 illustrates the relationship between managerial level in an organization and the type of planning that is conducted. As managers rise up through the ranks, their planning role shifts to strategic planning. B. Degree of Environmental Uncertainty. The greater the degree of environmental uncertainty, the more plans should focus on directional planning and a short-term time horizon. C. Length of Future Commitments. The final contingency factor is the commitment concept. The more that current plans affect future commitments, the longer the time frame for which management should plan.

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OBJECTIVES: THE FOUNDATION OF PLANNING Objectives are goals. We use the term interchangeably. They refer to desired outcomes for individuals, groups, or the entire organization. A. Stated Versus Real Objectives. Stated objectives are official statements of what the organization says and what it wants the public to believe. Real objectives are what an organization actually pursues, as defined by the actions of its members.

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Stated and real objectives can differ, so managers need to keep that in mind. Traditional Objective-Setting. Traditional objective-setting is an approach to setting objectives in which objectives are set at the top level of the organization and then broken into subgoals for each level of the organization. 1. Traditional goal-setting assumes that top managers know what is best because of their ability to see the “big picture.” Employees are to work to meet the goals for their particular area of responsibility. 2. This traditional approach requires that goals must be made more specific as they flow down to lower levels in the organization. In striving to achieve specificity, however, objectives sometimes lose clarity and unity with goals set at a higher level in the organization (see Exhibit 8-4). 3. When the hierarchy of organizational goals is clearly defined, it forms an integrated means-end chain—an integrated network of goals in which the accomplishment of goals at one level serves as the means for achieving the goals, or ends, at the next level. Management by objectives (MBO). MBO is a process of setting mutually agreed-upon goals and using those goals to evaluate employee performance. Exhibit 8-5 lists the steps in a typical MBO program. 1. Studies of actual MBO programs confirm that MBO can increase employee performance and organizational productivity. However, top management commitment and involvement are important contributions to the success of an MBO program.

WORKPLACE CONFIDENTIAL: When you Face a Lack of Clear Directions The workplace of today exhibits rapid change. While some people thrive on ambiguity, others find it frustrating and stressful. So, how do you handle it when your boss gives you ambiguous guidelines or a lack of clear directions? Here are three suggestions to help you handle those situations: 1. Suppress your urge to control things. Learn to accept the fact that you can’t control everything related to your job. 2. Learn to act without the complete picture. In the real world we don’t always know everything but have to act anyway. 3. You can make decisions based on the information you have, even if the information is not complete. Sometimes a wrong decision is better than none. Don’t be afraid to move ahead and make a decision.

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CONTEMPORARY ISSUES IN PLANNING The concluding section of Chapter 8 examines how managers can plan effectively in dynamic environments as well as addressing the concept of environmental scanning. A. Environmental Scanning 1. A manager’s analysis of the external environment may be improved by environmental scanning, which involves screening information to detect emerging trends. Competitive intelligence

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is the process of gathering information about competitors that allows managers to anticipate competitors’ actions. 2. Competitive intelligence is not corporate espionage – much competitor-related information is publicly available. Purchasing access to databases as well as searches on the Internet can provide key information. 3. Global information can be garnered through subscriptions to news services. Exhibit 8-6 lists various environmental elements and examples of where you might locate information about these elements. 4. Social media is becoming an important source of competitive intelligence. LinkedIn, Facebook, and Twitter provide a wealth of information about consumer opinions and patterns. Virtual Reality. 1. Virtual reality (VR) refers to a three-dimensional, interactive, computer-generated experience that takes place in a simulated environment. 2. VR tools can help with facility design, product design, and a host of other planning issues that require modelling. VR has also been utilized in financial planning and other collaborative projects.

ANSWERS TO REVIEW AND DISCUSSION QUESTIONS Student answers to these questions will vary. 8-1. Explain what studies have shown about the relationship between planning and performance. It should be noted that one cannot say that organizations that formally plan always outperform those that don’t plan. However, studies have indicated that formal planning is often associated with positive financial results. Generally, performance is also higher in those organizations where planning is present. And, when higher performance is not the result of formal planning, often the reason is due to something in the external environment. Finally, studies indicate that at least four years of formal planning are necessary before performance is affected. (LO: 1, Define the nature and purposes of planning, AACSB: Analytical thinking) 8-2. Discuss the contingency factors that affect planning. The first contingency factor is a manager’s level in the organization. Typically, lowerlevel managers are operational planners, while upper-level managers are strategic planners. Second, with environmental uncertainty, plans should be specific, but flexible. And third, the length of future commitments can greatly affect planning. (LO: 1, Define the nature and purposes of planning, AACSB: Analytical thinking) 8-3. Will planning become more or less important to managers in the future? Why? Planning will become more important to managers in the future because of the uncertainty in an increasingly dynamic environment. Changes constantly occur in both the general and specific environments of organizations, and many of these changes take place rapidly. Planning helps managers cope with the uncertainty by forcing managers to

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look ahead, anticipate change, consider the impact of the change, and develop appropriate responses. (LO: 5, Discuss contemporary issues in planning, AACSB: Analytical thinking) 8-4. If planning is so crucial, why do some managers choose not to do it? What would you tell these managers? Managers may choose not to devote time to planning because they do not know how to plan or feel that they do not have the necessary time. Others may say that planning is a waste of time that the future is going to happen whether or not they plan. However, these reasons do not discount the importance of planning. Every manager should engage in planning. (LO: 1, Define the nature and purposes of planning, AACSB: Analytical thinking) 8-5. Explain how planning involves decisions today that will have an impact later. As managers plan, they make decisions that influence how activities are organized, how employees are managed, and what control mechanisms are implemented. As managers look to the future by planning, the decisions they make as they plan will have an impact on their other managerial activities. (LO: 1, Define the nature and purposes of planning, AACSB: Analytical thinking) 8-6. How might planning in a not-for-profit organization such as the American Cancer Society differ from planning in a for-profit organization such as Coca-Cola? The process of planning is similar, but the content of the plans will differ. The types of objectives that are established and the plans that are formulated will be influenced by the fact that a not-for-profit organization does not have profit as its major objective. However, a not-for-profit organization must devote efforts and resources to planning how to raise funds and to recruit volunteers to achieve its mission. (LO: 3, Identify the key contingency factors in planning, AACSB: Analytical thinking) 8-7. What types of planning do you do in your personal life? Describe these plans in terms of being (a) strategic or operational plans, (b) short- or long-term plans, and (c) specific or directional plans. Students’ responses to this question will, of course, vary. Students may mention their planning to meet educational and career goals. Encourage your students to think about their everyday lives and the types of daily, weekly, monthly, and yearly planning they do. (LO: 2, Classify the types of plans organizations might use, AACSB: Reflective thinking) 8-8. Provide examples of the sources of data a fruit juice drink company might gather when engaging in environmental scanning. Exhibit 8-6 may be helpful when answering this question. General environment data sources on the economy might include Fed minutes, business news, and other government reports. Specific environment sources might come from industry associations, vendors, surveys, and focus groups. Other sources of information are also likely. (LO: 5, Discuss contemporary issues in planning, AACSB: Analytical thinking)

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ETHICS DILEMMA Student answers to these questions will vary. Students are asked to assess an event that happened at a pharmacy. The case revolves around an individual who had been diagnosed with a serious vision issue that would ultimately result in blindness if it wasn’t treated. The drugs required to treat the illness cost $10,000 and were not covered by insurance. The patient involved contacted several pharmacies hoping to get a discount, but none of the pharmacies was willing to help. The patient was unemployed and had little savings and eventually made the decision to break into a pharmacy to steal the medication. This exercise could be a short written assignment or serve as a group activity in class. 8-9. What potential ethical issues do you see here? Denying someone a medication that has such dire consequences is unethical in my view. However, it is also likely that the business owner could not afford to sell the drug at a lower cost and absorb the loss. The primary ethical issue to address is the cost of the drug. Should the pharmaceutical firm charge that much money? Does the insurance company have an ethical obligation to provide the drug? And, lastly, was the individual with the vision issue justified in breaking into the store? I think there were other options. (LO: 5, Discuss contemporary issues in planning, AACSB: Ethical understanding and reasoning) 8-10. If you were the store manager, what would you have done in this situation? Obviously, students may have their opinion on the matter, but should be able to provide support for their stance on the issue. One option is to engage social media and solicit contributions or attempt to push the insurance company or the drug maker to change their position. (LO: 5, Discuss contemporary issues in planning, AACSB: Ethical understanding and reasoning)

SKILLS EXERCISE: Making a To-Do List That Works and Using It Students are provided with eight suggestions for effectively creating to-do lists. They are then asked to create a to-do list for an upcoming project using the suggestions. (LO: 4, Compare and contrast approaches to objective setting, AACSB: Reflective thinking)

WORKING TOGETHER: TEAM EXERCISE In groups of three to four individuals, students tackle planning and goal-setting for a local bakery, sandwich shop, or restaurant with which members of your group are familiar. Next, students are tasked with looking through a list of strategic objectives found at this link that they believe are important for this business: www.clearpointstrategy.com/56strategic-objective-examples-for-your-company-to-copy. Why are the strategic objective you selected important to this business? Discuss operational plans that this business could put into place to achieve the objectives you picked. Be prepared to discuss your

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thoughts in class. (LO: 4, Compare and contrast approaches to objective setting, AACSB: Analytical thinking)

MY TURN TO BE A MANAGER •

Practice setting goals for various aspects of your personal life, such as academics, career preparation, family, hobbies, and so forth. Set at least two short-term goals and at least two long-term goals for each area. (LO: 4, Compare and contrast approaches to objective setting, AACSB: Reflective thinking)

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For the goals that you have set, write out plans for achieving those goals. Think in terms of what you will have to do to accomplish each one. For instance, if one of your academic goals is to improve your grade-point average, what will you have to do to reach it? (LO: 4, Compare and contrast approaches to objective setting, AACSB: Reflective thinking)

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Write a personal mission statement. Although this may sound simple to do, it’s not going to be simple or easy. Our hope is that it will be something that you’ll want to keep, use, and revise when necessary...that it will be something that helps you be the “you” you’d like to be and helps you live the life you’d like to live. Start by doing some research on personal mission statements. There are some wonderful Web resources that can guide you. Good luck! (LO: 4, Compare and contrast approaches to objective setting, AACSB: Reflective thinking)

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Interview three managers about the types of planning they do. Ask them for suggestions on how to be a better planner. Write a report that describes and compares your findings. (LO: 5, Discuss contemporary issues in planning, AACSB: Analytical thinking)

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Choose two companies, preferably in different industries. Research the companies’ websites and find examples of goals that they have stated. (Hint: A company’s annual report is often a good place to start.) Evaluate these goals. Are they well-written? Rewrite those that don’t exhibit the characteristics of wellwritten goals so that they do. (LO: 5, Discuss contemporary issues in planning, AACSB: Analytical thinking)

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Effective managers are always screening information to look for emerging trends that might affect their industries. Start looking for trends in an industry you are interested in by subscribing to a variety of social media sources that are related to the industry. (LO: 5, Discuss contemporary issues in planning, AACSB: Analytical thinking)

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ANSWERS TO CASE APPLICATION 1 QUESTIONS Student answers to these questions will vary. Capturing Anti-Trends at New Balance 8-11. How is New Balance’s approach to environmental scanning different from how companies usually gather information about customers? New Balance uses technology to identify outliers or trend setters. Using this technology to monitor and identify patterns is a cutting-edge way to gather data. (LO: 5, Discuss contemporary issues in planning, AACSB: Analytical thinking) 8-12. What advantages and disadvantages does New Balance’s approach have compared with using traditional competitive intelligence as a source of information about fashion trends? The approach uses real people to capture emerging trends which might give them a competitive advantage. However, the disadvantage is that designing the shoes might be delayed and the products come out after the competition launches new products. (LO: 5, Discuss contemporary issues in planning, AACSB: Analytical thinking) 8-13. What legal or ethical concerns might New Balance need to think about regarding their approach to monitoring trends? Responses to this question will vary. Spying on people without their consent seems unethical and maybe even illegal if done by the private sector. (LO: 5, Discuss contemporary issues in planning, AACSB: Analytical thinking) 8-14. How could New Balance apply virtual reality to the data they collect in New York, Toronto, Stockholm, and Madrid? Responses to this question will vary. I suspect many fashion trends vary by location so they could use the same VR techniques and also incorporate virtual design elements. (LO: 5, Discuss contemporary issues in planning, AACSB: Analytical thinking)

ANSWERS TO CASE APPLICATION 2 QUESTIONS Student answers to these questions will vary. Living Up to Goals at Tesla 8-15. What factors made it difficult for Tesla to initially meet their stated objective of 5,000 Model 3 sedans per week? Explain why you think their stated objective should (or should not) have been different than what it was. Student answers will vary, but Tesla had never produced autos on that scale before and needed some time to work the bugs out. They also had delays in robotics installation that cost the firm time. The stated goal should have been more realistic since it was a

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public relations issue when they did not meet their objective. (LO: 4, Compare and contrast approaches to objective setting, AACSB: Analytical thinking) 8-16. What’s the downside for setting an ambitious production objective like Tesla did for the Model 3? Student answers will vary, but setting an objective that is too ambitious sets the firm up for failure and gives the public a negative opinion of the firm when they fail to achieve the objective. (LO: 4, Compare and contrast approaches to objective setting, AACSB: Analytical thinking) 8-17. What do you think Tesla’s production staff felt about the 5,000-unit objective? Would it have a positive or negative impact on morale? Explain. Student answers will vary, but I think it would give the production staff a negative opinion of management since they clearly did not understand what is involved in manufacturing. I suspect employee morale was really bad following the missed deadlines. (LO: 4, Compare and contrast approaches to objective setting, AACSB: Analytical thinking)

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Chapter 9 Managing Strategy In this chapter, we look at an important part of the planning that managers do: developing organizational strategies. Every organization has strategies for doing what it’s in business to do. And managers must manage those strategies effectively. Focus on the following learning objectives as you read and study this chapter. LEARNING OBJECTIVES 1. Define strategic management and explain why it’s important. 2. Explain what managers do during the six steps of the strategic management process. 3. Describe the three types of corporate strategies. 4. Describe competitive advantage and the strategies organizations use to get it. CHAPTER OUTLINE INTRODUCTION Effective managers recognize the role that strategic management plays in their organization’s performance. Throughout this chapter, students discover that good strategies can lead to high organizational performance. 9.1

WHAT IS STRATEGIC MANAGEMENT AND WHY IS IT IMPORTANT? Managers must carefully consider their organization’s internal and external environments as they develop strategic plans. They should have a systematic means of analyzing the environment, assessing their organization’s strengths and weaknesses, identifying opportunities that would give the organization a competitive advantage, and incorporating these findings into their planning. The value of thinking strategically has an important impact on organization performance. A. Defining Strategic Management 1. Strategic management is what managers do to develop the organization’s strategies. 2. Strategies are the plans for how the organization will do whatever it’s in business to do, how it will compete successfully, and how it will attract and satisfy its customers in order to achieve its goals. 3. A business model is simply how a company is going to make money. It focuses on two things: (1) whether customers will value what the company is providing and (2) whether the company can make any money doing that. B. Why Is Strategic Management Important? 1. Strategic management has a significant impact on how well an organization performs.

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2. 3.

9.2

In today’s business world, organizations of all types and sizes must manage constantly changing situations. Today’s companies are composed of diverse divisions, departments, functions, and work activities that must be coordinated. Strategic management is involved in many of the decisions that managers make.

THE STRATEGIC MANAGEMENT PROCESS The strategic management process is a six-step process that encompasses strategic planning, implementation, and evaluation. (See Exhibit 9-1) A. Step 1: Identifying the Organization’s Current Mission, Goals, and Strategies. 1. Every organization needs a mission, which is a statement of the purpose of an organization. The mission statement addresses the question: What is the organization’s reason for being in business? 2. The organization must also identify its current goals and strategies. See Exhibit 9-2 for a list of components of a mission statement. B. Step 2: Doing an External Analysis. 1. Managers in every organization need to conduct an external analysis. Influential factors such as competition, pending legislation, and labor supply are included in the external environment. 2. After analyzing the external environment, managers must assess what they have learned in terms of opportunities and threats. Opportunities are positive trends in external environmental factors; threats are negative trends in environmental factors. 3. Because of different resources and capabilities, the same external environment can present opportunities to one organization and pose threats to another. C. Step 3: Doing an Internal Analysis. 1. Internal analysis should lead to a clear assessment of the organization’s resources and capabilities. 2. The organization’s major value-creating skills and capabilities that determine its competitive weapons are the organization’s core competencies. 3. Any activities the organization does well or any unique resources that it has are called strengths. 4. Weaknesses are activities the organization does not do well or resources it needs but does not possess. 5. Organizational culture is important in internal analysis; the company’s culture can promote or hinder its strategic actions. 6. SWOT analysis is an analysis of the organization’s strengths, weaknesses, opportunities, and threats. D. Step 4: Formulating Strategies. 1. After the SWOT, managers develop and evaluate strategic alternatives and select strategies that are appropriate. 2. Strategies need to be established for corporate, business, and functional levels.

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E. F.

Step 5: Implementing Strategies. 1. A strategy is only as good as its implementation. Step 6: Evaluating Results. 1. The final step in the strategic management process is evaluating results. How effective have the strategies been at helping the organization reach its goals?

It’s Your Career Learning Your Strengths and Weaknesses Interviewers often ask important questions; like “Do you know your individual personal strengths and weaknesses?” Interviewers commonly ask what you consider your strengths and weaknesses and you want to be prepared to answer those questions and demonstrate your level of self-knowledge and self-awareness. Here are some suggestions to help you learn your strengths and weaknesses so you can accentuate your positive attributes and minimize or compensate for your weaknesses: 1. Identify your strengths. Your strengths are your individual personal positive attributes and characteristics. 2. Take a look at your weaknesses. Your weaknesses are your individual personal negative attributes and characteristics, and it’s never easy to look for those. 3. Develop a strategy to do something about your strengths and weaknesses. You want to leverage, emphasize, and capitalize on your strengths. 4. Update your list of strengths and weaknesses periodically. As you gain new experiences and as your life circumstances change, you’ll want to revise your list of strengths and weaknesses. 9.3

CORPORATE STRATEGIES Strategic planning takes place on three different and distinct levels: corporate, business, and functional. (See Exhibit 9-3) A. What Is Corporate Strategy? Corporate strategy is an organizational strategy that determines what businesses a company is in, should be in, or wants to be in, and what it wants to do with those businesses.

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WORKPLACE CONFIDENTIAL: Developing a Career Strategy Strategy is not limited to managers and organizations. You can use it to “think strategically” about your career. Here are some steps you can take to begin this process and develop this mindset. *Conduct you own SWOT analysis. What are your strengths, weaknesses, opportunities, and threats? *Now identify a match between you and specific organizational cultures. Where would you fit best? *Don’t delegate your future to someone else. Take charge of your career progression and destiny.

9.4

What Are the Types of Corporate Strategy? 1. There are three main types of corporate strategies: a. A growth strategy is a corporate strategy that is used when an organization wants to grow and does so by expanding the number of products offered or markets served, either through its current business(es) or through new business(es). b. A stability strategy is a corporate strategy characterized by an absence of significant change in what the organization is currently doing. c. A renewal strategy is a corporate strategy designed to address organizational weaknesses that are leading to performance declines. Two such strategies are retrenchment strategy and turnaround strategy. How Are Corporate Strategies Managed? 1. Corporate portfolio analysis is used when an organization’s corporate strategy involves a number of businesses. Managers can manage this portfolio of businesses using a corporate portfolio matrix, such as the BCG matrix. The BCG matrix is a strategy tool that guides resource allocation decisions on the basis of market share and growth rate of SBUs. 2. A business unit is evaluated using a SWOT analysis and placed in one of the four categories, which are as follows: a. Stars: High market share/High anticipated growth rate b. Cash Cows: High market share/Low anticipated growth rate c. Question Marks: Low market share/High anticipated growth rate d. Dogs: Low market share/Low anticipated growth rate

COMPETITIVE STRATEGY A competitive strategy is focused on how the organization will compete in each of its businesses. When an organization is in several different businesses, those single businesses that are independent and that have their own competitive strategies are referred to as strategic business units (SBUs).

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The Role of Competitive Advantage. A competitive advantage is what sets an organization apart; that is, its distinctive edge. An organization’s competitive advantage can come from its core competencies. 1. Quality as a Competitive Advantage. If implemented properly, quality can be one way for an organization to create a sustainable competitive advantage. 2. Design Thinking as a Competitive Advantage. A company’s ability to use design thinking in the way its employees and managers strategically manage can be a powerful competitive tool. Using design thinking means thinking in unusual ways about what the business is and how it’s doing what it’s in business to do. 3. Social Media as a Competitive Advantage. Investments in social media can lead to a competitive advantage. In addition to providing social connections, social media can also help boost an organization’s productivity. Sustaining Competitive Advantage. An organization must be able to sustain its competitive advantage; it must keep its edge despite competitors’ actions and regardless of evolutionary changes in the organization’s industry. Warren Buffett uses the term “economic moat” to visualize the concept of maintaining a competitive advantage. Firms build economic moats in the same manner moats were used to protect medieval castles. One way to build an economic moat, or create a competitive advantage, is by doing an industry analysis using Porter’s five forces model. 1. Five Forces Model. Michael Porter’s work explains how managers can create and sustain a competitive advantage that will give a company above-average profitability. He says there are five competitive forces at work in an industry; together, these five forces determine industry attractiveness and profitability. Porter proposes that the following five factors can be used to assess an industry’s attractiveness: a. Threat of new entrants. How likely is it that new competitors will come into the industry? b. Threat of substitutes. How likely is it that products of other industries could be substituted for a company’s products? c. Bargaining power of buyers. How much bargaining power do buyers (customers) have? d. Bargaining power of suppliers. How much bargaining power do a company’s suppliers have? e. Current rivalry. How intense is the competition among current industry competitors? Choosing a Competitive Strategy. According to Porter, managers must choose a strategy that will give their organization a competitive advantage. Porter identifies three generic competitive strategies. Which strategy managers select depends on the organization’s strengths and core competencies and the particular weaknesses of its competitor(s). 1. A cost leadership strategy is a business or competitive strategy in which the organization competes on the basis of having the lowest costs in its industry.

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A differentiation strategy is a business or competitive strategy in which a company offers unique products that are widely valued by customers. 3. A focus strategy is a business or competitive strategy in which a company pursues a cost or differentiation advantage in a narrow industry segment. 4. An organization that has not been able to develop either a cost or differentiation advantage is said to be “stuck in the middle.” 5. Subsequent research indicates that it is possible, though very difficult, for organizations that are stuck in the middle to achieve high performance. 6. Functional strategy is the strategies used by an organization’s various functional departments to support the business or competitive strategy. Examples of Differentiation Strategies. We’ve seen how firms like Walmart, Apple, and 3M have successfully differentiated themselves from the competition. Now let’s look at five differentiation strategies and discuss how they’ve been used for competitive advantage. 1. Quality as a competitive advantage. Using quality as a basis for differentiation or focus has been successfully accomplished by numerous firms such as Lexus, Rolex, and Harley-Davidson bikes. If a firm can continue to improve quality, it will likely be able to sustain a competitive advantage. 2. Innovation as a competitive advantage. These strategies focus on breakthrough products and can include the application of existing technology to new uses. An organization that is first to bring a product innovation to the market or to use a new process innovation is called a first mover. Exhibit 9-4 lists the advantages and disadvantages associated with being a first mover. Firms successful using this strategy include Procter & Gamble and Yum! Brands (owner of KFC). 3. Customer service as a competitive advantage. These strategies give customers what they want, communicate effectively with them, and provide employees with customer service training. New Balance shoes and Singapore Airlines are both known for customer service. 4. Mass customization as a competitive advantage. These strategies have been successfully employed by Dell in computers, M&M’s in candy options, and automaker BMW claims that no two of its vehicles are alike. 5. Social media as a competitive advantage. Using the Internet, companies have created knowledge bases that employees can tap into anytime, anywhere. Turner Broadcasting has taken advantage of social media to gather information that it uses to develop a sustainable competitive advantage for the Bleacher Report. This strategy can also be used to establish a basis for differentiation or focus.

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ANSWERS TO REVIEW AND DISCUSSION QUESTIONS Student answers to these questions will vary. 9-1. Why is strategic management important for organizations? Can an organization be successful without a strategic plan? Why or why not? Strategic management, which involves all basic management functions, is what managers do to develop the organization’s strategies. Strategic management is important for three key reasons. First, it can make a real difference in how an organization performs. Organizations that use strategic management generally perform better. Second, it helps managers make sense of continually changing situations. Finally, it is important because organizations are complex and diverse. (LO: 1, Define strategic management and explain why it’s important, AACSB: Analytical thinking) 9-2. Describe the six steps in the strategic management process. The six steps in the strategic management process encompass strategy planning, implementation, and evaluation. These steps include the following: (1) identify the current mission, goals, and strategies; (2) do an external analysis; (3) do an internal analysis (Steps 2 and 3 collectively are known as SWOT analysis); (4) formulate strategies; (5) implement strategies; and (6) evaluate strategies. Strengths are any activities the organization does well or unique resources that it has. Weaknesses are activities the organization doesn’t do well or resources it needs but doesn’t have. Opportunities are positive trends in the external environment. Threats are negative trends. (LO: 2, Explain what managers do during the six steps of the strategic management process, AACSB: Analytical thinking) 9-3. How might the process of strategy formulation, implementation, and evaluation differ for (a) large businesses, (b) small businesses, (c) not-for-profit organizations, and (d) global businesses? All companies, large or small, profit or not-for-profit, domestic or global, benefit from the process of strategy formulation. The major difference that exists between the different types of companies and the process they go through centers around the development of their mission and goals. For example, the owners of a small business might not want to pursue the goal of growth and instead focus on stability. For not-for-profit organizations, the goal is not about making money for owners or stockholders but about how to find a way to effectively and efficiently maximize their resources to benefit others. In a global organization, while the SWOT would be more involved due to the number of potential elements involved, it remains the same except that the goals extend beyond serving one country or market. (LO: 2, Explain what managers do during the six steps of the strategic management process, AACSB: Diverse and multicultural work environments) 9-4. Should ethical considerations be included in analyses of an organization’s internal and external environments? Why or why not? Ethical considerations should permeate every activity of an organization. As a firm’s strategy is the basis for their plans, when ethics are not considered, then the organization is likely to ignore potential ethical problems. (LO: 2, Explain what managers do during the six steps of the strategic management process, AACSB: Ethical understanding and reasoning)

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9-5. Describe the three major types of corporate strategies and how the BCG matrix is used to manage those corporate strategies. A growth strategy is when an organization expands the number of markets served or products offered, either through current or new businesses. The types of growth strategies include concentration, vertical integration (backward and forward), horizontal integration, and diversification (related and unrelated). A stability strategy is when an organization makes no significant changes in what it’s doing. Both renewal strategies— retrenchment and turnaround—address organizational weaknesses that are leading to performance declines. The BCG matrix is a way to analyze a company’s portfolio of businesses by looking at a business’s market share and its industry’s anticipated growth rate. The four categories of the BCG matrix are cash cows, stars, question marks, and dogs. (LO: 4, Describe competitive advantage and the competitive strategies organizations use to get it, AACSB: Analytical thinking) 9-6. Describe the role of competitive advantage and how Porter’s competitive strategies help an organization develop competitive advantage. An organization’s competitive advantage is what sets it apart, its distinctive edge. A company’s competitive advantage becomes the basis for choosing an appropriate competitive strategy. Porter’s five forces model assesses the five competitive forces that dictate the rules of competition in an industry: threat of new entrants, threat of substitutes, bargaining power of buyers, bargaining power of suppliers, and current rivalry. Porter’s three competitive strategies are as follows: cost leadership (competing on the basis of having the lowest costs in the industry), differentiation (competing on the basis of having unique products that are widely valued by customers), and focus (competing in a narrow segment with either a cost advantage or a differentiation advantage). (LO: 4, Describe competitive advantage and the competitive strategies organizations use to get it, AACSB: Analytical thinking) 9-7. “The concept of competitive advantage is as important for not-for-profit organizations as it is for profit organizations.” Do you agree or disagree with this statement? Explain, using examples to make your case. Not-for-profit and for-profit companies compete for customers. In the case of not-forprofit companies, those customers are donors and, like any market, are limited in size. To be effective, non-for-profit companies need something that will attract donors like forprofit companies attract customers. For example, United Way has an established network of businesses that regularly donate money as part of their yearly pledge drives. Another example is Susan G. Komen’s, known for their work with breast cancer awareness, that has established a series of runs and walks across the United States and has even had success in publicizing their cause with the NFL. (LO: 4, Describe competitive advantage and the competitive strategies organizations use to get it, AACSB: Analytical thinking) 9-8. Describe quality, innovation, customer service, mass customization, and social media differentiation strategies. Quality strategies focus on continuous product improvement and quality to differentiate themselves from competitors. Rolex employs this strategy. Some firms, known as first movers, use product innovation strategies and become the first organization to bring a product to the market or to use a new process. Innovation strategies focus on breakthrough products and can include the application of existing technology to new uses. Customer service strategies give customers what they want, communicate

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effectively with them, and provide employees with customer service training. Mass customization involves giving customers a vast array of options and allowing them to create their own unique version of a product. Social media differentiation strategies involve using the Internet and social media platforms like Facebook and Twitter to gather useful information or target market their products. (LO: 4, Describe competitive advantage and the competitive strategies organizations use to get it, AACSB: Analytical thinking)

ETHICS DILEMMA Student answers to these questions will vary. This ethical dilemma brings up the issue of sharing information about a former employer with a new employer. While employees sometimes sign non-compete agreements, these sort of agreements are not standard policy, leaving new employees open to potentially troubling situations. Do you have an ethical responsibility to your former employer to keep your knowledge of that organization to yourself? Is it possible to completely avoid sharing details of your past company with your current employer? 9-9. What do you think? Should you follow the CEO’s instructions? No, it is unethical to use inside information from your former employer. In many cases, high-level managers must sign a nondisclosure agreement when they leave the firm to prevent them from sharing inside information. (LO: 4, Describe competitive advantage and the competitive strategies organizations use to get it, AACSB: Ethical understanding and reasoning) 9-10. What ethical dilemmas are involved with sharing competitive intelligence? You are violating a trust with your former employer. They trusted you to keep information confidential and you should maintain that confidence even after separating from the firm. Students may have other opinions. (LO: 4, Describe competitive advantage and the competitive strategies organizations use to get it, AACSB: Ethical understanding and reasoning) 9-11. What responsibilities, if any, do you have to inform your former employer about what you’ve been asked? (Think in terms of the various stakeholders who might be affected by this decision. There may be legal considerations you need to factor into your answers.) If you do not disclose the information, it is not necessary to inform your former employer unless you signed an agreement upon termination requiring that you do so. (LO: 4, Describe competitive advantage and the competitive strategies organizations use to get it, AACSB: Ethical understanding and reasoning)

SKILLS EXERCISE: DEVELOPING YOUR BUSINESS PLANNING SKILL This section describes the process for putting together a business plan. An important part of the plan is to determine the strategic direction of the business. A business plan aids in thinking about strategic issues and provides a sound basis to ask for funding for a new business. Here are the steps in the process:

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• • • • • • • • • •

Describe your company’s background and purpose. Identify your short- and long-term goals. Do a thorough market analysis. Describe your development and production emphasis. Describe how you’ll market your product or service. Put together your financial statements. Provide an overview of the organization and its management. Describe the legal form of the business. Identify the critical risks and contingencies facing the organization. Put the business plan together.

Students are asked to create a business plan for a bank by choosing from the alternatives listed below: 1. Haircuts at home (you make house calls) 2. Olympic snowboarding computer game for consoles and mobile devices 3. Online apartment rental listing 4. Voice-activated house alarm (LO: 1, Define strategic management and explain why it’s important, AACSB: Analytical thinking)

WORKING TOGETHER: TEAM EXERCISE This exercise asks students to work in small groups of three to four and identify a company in one of these industries: virtual reality, green or solar energy, or drones. Identify the company’s competitive advantage and then apply the five forces model to the company’s industry. Brainstorm ways the firm can minimize threats or increase their bargaining power in their industry. This exercise could be used as an out-of-class assignment. Be prepared to share your analysis with the class. (LO: 4, Describe competitive advantage and the competitive strategies organizations use to get it, AACSB: Analytical thinking)

My Turn to be a Manager •

Using current business periodicals, find two examples of each of the corporate and competitive strategies. Write a description of what these businesses are doing and how each represents a particular strategy. (LO: 3, Describe the three types of corporate strategies, AACSB: Analytical thinking)

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Pick five companies from the latest version of Fortune’s “Most Admired Companies” list. Research these companies and identify, for each, its (a) mission statement, (b) strategic goals, and (c) strategies being used. (LO: 2, Explain what managers do during the six steps of the strategic management process, AACSB: Analytical thinking)

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Consider several businesses from which you purchase products or services on a regular basis. Identify the business model for each business. (LO: 4, Describe competitive advantage and the competitive strategies organizations use to get it, AACSB: Analytical thinking)

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Customer service, social media, and innovation strategies are particularly important to managers today. We described specific ways companies can pursue these strategies. Your task is to pick customer service, e-business, or innovation and find one example for each of the specific approaches in that category. For instance, if you choose customer service, find an example of (a) giving customers what they want, (b) communicating effectively with them, and (c) providing employees with customer service training. Write a report describing your examples. (LO: 4, Describe competitive advantage and the competitive strategies organizations use to get it, AACSB: Analytical thinking)

ANSWERS TO CASE APPLICATION 1 QUESTIONS Student answers to these questions will vary. Turnaround at Chipotle 9-12. In what specific ways did Chipotle follow (or not follow) the two components of renewal strategies? Student answers will vary. Chipotle appears to have followed a shorter-term retrenchment strategy since the firm did not fully address food safety issues. A turnaround strategy with a longer time horizon might have been more appropriate. Address the food safety first, and then implement new ideas to increase profits. (LO: 3, Describe the three types of corporate strategies, AACSB: Analytical thinking) 9-13. If Chipotle only needed a retrenchment strategy (instead of a turnaround strategy), what might they have done? Student answers will vary. The firm’s primary focus should have been on food safety. Additional outbreaks of E. Coli can undo years of branding and positive press in a short period of time. (LO: 3, Describe the three types of corporate strategies, AACSB: Analytical thinking) 9-14. How does Chipotle’s turnaround strategy show that they paid attention (or didn’t) to the external and internal analyses steps in the strategy management process? Student answers will vary. Given that the food safety issue was not fixed, Chipotle does not appear to have formulated and implemented strategies designed to address the internal issues. Externally, the firm had to overcome bad PR and the new health issue set that objective back quite a bit. (LO: 2, Explain what managers do during the six steps of the strategic management process, AACSB: Analytical thinking) 9-15. Has Chipotle made additional progress toward their turnaround strategy since October 2018? What, if any, new challenges has the company faced?

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Student answers will vary. Have them do an Internet search and see what might have changed since October 2018. (LO: 3, Describe the three types of corporate strategies, AACSB: Analytical thinking)

ANSWERS TO CASE APPLICATION 2 QUESTIONS Student answers to these questions will vary. Saving Lives Through Strategy at RapidSOS 9-16. How does RapidSOS exemplify advantages and disadvantages of being a first mover? Student answers will vary, but RapidSOS was very innovative with the product and had the advantage of no competitors. However, the disadvantages were that they had to overcome numerous technology challenges to make their idea function properly and then determine how to market it effectively. (LO: 4, Describe competitive advantage and the competitive strategies organizations use to get it, AACSB: Analytical thinking) 9-17. What type of growth strategy did RapidSOS implement (concentration, vertical integration, horizontal integration, or diversification)? Justify your answer. Responses to this question will vary. However, it appears that RapidSOS fits the diversification growth strategy since it partnered with other firms to make the product function properly and the gain marketing clout. (LO: 4, Describe competitive advantage and the competitive strategies organizations use to get it, AACSB: Analytical thinking) 9-18. What could RapidSOS have done differently to have avoided the problems related to using an app to reach 911 operators? Student answers will vary. Some basic research on how 911 systems work might have helped them construct a different product that fit existing systems better. (LO: 4, Describe competitive advantage and the competitive strategies organizations use to get it, AACSB: Analytical thinking) 9-19. How has RapidSOS’s actions decreased the threat of new entrants and threat of substitutes? Student answers will vary. The switching costs of 911 systems moving to a competitor are high and most decision makers will be reluctant to change vendors. Partnering with both Apple and Google will also make it very difficult for new providers to successfully enter this market. (LO: 4, Describe competitive advantage and the competitive strategies organizations use to get it, AACSB: Analytical thinking)

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Chapter 10 Entrepreneurial Ventures How many of your students dream of starting a new business someday? When you ask this question in class, you may be surprised and impressed by the number of your students who are interested in the possibility of becoming an entrepreneur. This chapter presents information to provide students with a foundational knowledge of major entrepreneurial issues in today’s dynamic business environment.

LEARNING OBJECTIVES 1. Define entrepreneurship and explain why it’s important. 2. Explain what entrepreneurs do in the planning process for new ventures. 3. Describe the six legal forms of organization and the choice of appropriate organizational structure. 4. Describe how entrepreneurs lead organizations. 5. Explain how managers control organizations and exit the venture.

CHAPTER OUTLINE 10.1

THE CONTEXT OF ENTREPRENEURSHIP Entrepreneurs engage in a variety of activities through their performance of the four managerial functions of planning, organizing, leading, and controlling. A. What is Entrepreneurship? Entrepreneurship is important to every industry sector in the United States and in most advanced countries throughout the world. 1. There are key differences between entrepreneurial ventures and small businesses. 2. Organizations that pursue opportunities, are characterized by innovative practices, and have growth and profitability as their main goals are entrepreneurial ventures, while a small business is one that is independently owned, operated, and financed; has fewer than 100 employees; doesn’t necessarily engage in any new or innovative practices; and has relatively little impact on its industry. B. Why is Entrepreneurship Important? The importance of entrepreneurship can be found in three areas: 1. Innovation. Entrepreneurial firms act as “agents of change.” Entrepreneurs play a disproportionate role in commercializing new product ideas. 2. Economic growth. Entrepreneurship contributes to increased economic efficiency and therefore higher

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standards of living for the citizens of a nation. They also keep markets competitive, which is beneficial for consumers. These contributions are particularly critical to developing nations. 3. Job creation. Job creation is important to overall long-term economic health. Almost half of the U.S. workforce is employed by small business. In 2017, 1.9 million of the 2.1 million net new jobs created in the US were created by small businesses. New and young businesses are the most prolific job creators. The Entrepreneurial Process. Entrepreneurs must address four key steps as they begin and manage their entrepreneurial ventures: 1. Explore the entrepreneurial context. 2. Identify opportunities and possible competitive advantages. 3. Start the venture. 4. Manage the venture. What Do Entrepreneurs Do? Entrepreneurs create something, search for a change, respond to it, and exploit it for financial gain or societal change. Once the venture is up and running, the entrepreneur must perform all of the management functions associated with running a business. A Hybrid Path to Entrepreneurship. 1. Slightly over 50% of new-venture start-ups fail in the first four years. A hybrid approach improves the odds of success. 2. A hybrid approach involves starting a business while keeping your day job. This approach has several advantages including retaining paid employment and benefits while starting the new venture. 3. Since you are not solely dependent on the new venture for an income, it lowers the risk. 4. This approach also allows entrepreneurs to test their ideas in a less-pressured environment. 5. Entrepreneurs can use income from their day job to initially fund the venture. 6. Studies show that a hybrid approach results in much higher venture survival rates.

WORKPLACE CONFIDENTIAL: Dealing with Risks Hockey great Wayne Gretzky once said, “You miss 100 percent of the shots you never take.” In other words, you must take risks to achieve success. Risk has both positive and negative outcomes, so you need to understand when to take risks, how to avoid them, and how to turn risk taking to your advantage. There are four elements of risk to consider: uncertainty, gains, losses, and your risk profile. People differ in their willingness to take risks but most entrepreneurs will take a big risk at some point in their life. In most cases, you are willing to accept more risk when you are younger since you will have longer to recover from a loss. Remember that failure is not fatal. Many very successful people failed

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several times before they succeeded. However, don’t proceed with unrestrained risk taking. Undertake risk thoughtfully, intelligently, selectively, and with a careful consideration of the possible outcomes. If the idea has a minimal chance of success, it may not be worth the risk.

10.2

START-UP AND PLANNING ISSUES Entrepreneurs must first identify opportunities and possible competitive advantages. Next, they should research the feasibility of the venture and carefully plan for its launch. A. Identifying Environmental Opportunities and Competitive Advantage. Entrepreneurs must see opportunities quickly, before those opportunities disappear or are exploited by other individuals. 1. Peter Drucker identified the following seven potential sources of opportunity that entrepreneurs might seek to identify in the external context: a. The unexpected b. The incongruous c. The process need d. Industry and market structures e. Demographics f. Changes in perception g. New knowledge B. Researching the Venture’s Feasibility—Ideas. Where do ideas come from? 1. Generating Ideas. Sources for an entrepreneurial venture include working in the same industry, personal interests or hobbies, examining existing products and services, and opportunities in external environmental sectors. Design thinking could be a technique used to generate ideas. 2. Evaluating Ideas. Some questions entrepreneurs might ask when they evaluate potential ideas are described in Exhibit 10-1. 3. A more structured evaluation approach that an entrepreneur might want to use is a feasibility study—an analysis of the various aspects of a proposed entrepreneurial venture designed to determine its feasibility. C. Researching the Venture’s Feasibility—Competitors. Possible questions entrepreneurs might consider in researching their potential competitors include the following items: 1. What types of products or services are competitors offering? 2. What are the major characteristics of these products or services? 3. What are their products’ strengths and weaknesses? 4. How do they handle marketing, pricing, and distributing? 5. What do they attempt to do differently from other competitors? 6. Do they appear to be successful at it? Why or why not?

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10.3

7. What are they good at? 8. What competitive advantage(s) do they appear to have? 9. What are they not so good at? 10. What competitive disadvantage(s) do they appear to have? 11. How large and profitable are these competitors? Researching the Venture’s Feasibility—Financing. Possible financing options available to entrepreneurs include personal funds, home equity loans, credit cards, and loans from friends and family. Today there are numerous venture capitalists competing to fund good ideas. The entrepreneur must devote time and effort to carefully researching a number of varied financing options. Developing a Business Plan. A written document that summarizes a business opportunity and defines and articulates how the identified opportunity is to be seized and exploited is a business plan. 1. A good business plan covers six major areas: a. Executive summary b. Analysis of opportunity c. Analysis of the context d. Description of the business e. Financial data and projections f. Supporting documentation

ORGANIZING ISSUES When the start-up and planning issues for the entrepreneurial venture have been addressed, the entrepreneur begins to consider the organization of the proposed business. A. Legal Forms of Organization. 1. In organizing a new business, the entrepreneur must first determine the form of legal ownership for the venture. The two primary considerations in this decision are taxes and legal liability. 2. An entrepreneurial venture may be organized in one of three basic ways: sole proprietorship, partnership, and corporation. 3. These three basic ways, together with variations of these alternatives, offer the six possible choices listed below (see Exhibit 10-2): a. Sole proprietorship: the form of legal organization in which the owner maintains sole and complete control over the business and is personally liable for business debts. b. General partnership: a form of legal organization in which two or more business owners share the management and risk of the business. c. Limited liability partnership (LLP): a legal organization formed by general partner(s) and limited partner(s). The general partners actually operate and manage the business.

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10.4

C corporation: a legal business entity that is separate from its owners and managers. e. S corporation: a specialized type of corporation that has the regular characteristics of a corporation but is unique in that the owners are taxed as a partnership as long as certain criteria are met. f. Limited liability company (LLC): a relatively new form of business organization that’s a hybrid between a partnership and a corporation. The LLC offers the liability protection of a corporation, the tax benefits of a partnership, and fewer restrictions than an S corporation. Organizational Design and Structure. 1. As the business grows, the entrepreneur must hire employees to help in the business. At this point, the entrepreneur must decide on the most appropriate structural arrangement to effectively and efficiently carry out the organization’s activities. 2. Organizational design choices are based on the key elements of organizational structure presented in Chapter 11. Human Resource Management Issues. 1. As an entrepreneurial venture grows, additional employees will need to be hired to perform the increased workload. 2. Employee recruitment. An entrepreneur wants to ensure that the venture has the people to do the required work. Recruiting new employees is one of the biggest challenges that entrepreneurs face. 3. Employee retention. Getting competent and qualified people into the venture is just the first step in effectively managing the human resources. An entrepreneur wants to keep the people he or she has hired and trained.

LEADING ISSUES In an entrepreneurial venture, the management function of leading plays an important role in the success of the business. A. Personality Characteristics of Entrepreneurs. 1. It has been difficult to identify specific personality traits that all entrepreneurs share. However, Exhibit 10-3 identifies ten strengths that a Gallup survey of almost 200 highly successful entrepreneurs showed they all had in some quantity. 2. Evidence suggests an entrepreneur is likely to have a proactive personality: a personality trait that describes individuals who are more prone to take actions to influence their environments. 3. Studies have shown that entrepreneurs have greater risk propensity than managers do. However, this propensity is moderated by the entrepreneur’s primary goal. B. The Entrepreneur as Leader.

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Leading the Venture: leadership combines the unpredictability of the future with the gifts of individuals. The way an entrepreneur leads the venture should be much like the jazz leader—drawing the best out of other individuals, even given the unpredictability of the situation. One of the most common causes of new venture failure is the inability of the entrepreneur to provide the required leadership. New businesses progress through three different stages and each requires a different set of leadership skills to successfully navigate. The three stages are: a. Start-up stage. The business is being defined and the entrepreneur is the heart and soul of the business. The organization is informal, flexible and ambiguous. b. Transition stage. The business is becoming more structured so it can adapt to rapid expansion. This stage moves from a “one person does it all” to one where the entrepreneur must give up some control. c. Scaling stage. Much of the venture’s uniqueness has disappeared and the concepts of management become fairly generalizable.

10.5

CONTROL ISSUES Entrepreneurs must consider a number of issues relating to the control of their venture’s operations in order to survive and prosper. These control issues include the following: A. Potential Control Problems and Actions. 1. Keep a close eye on the numbers: Maintaining good financial records and financial controls over cash flow, inventory, customer data, sales orders, receivables, payables, and costs should be a priority of every entrepreneur. Make sure someone is monitoring this activity. 2. Monitor the competition and potential competition: Keep collecting competitive intelligence so you can respond rapidly to changes or threats. 3. Maintain regular contact with customers: Keep tabs on your customers. Are they satisfied with the product or service? Do they have any concerns? 4. Monitor employee performance: Make sure your employees are performing as expected. Do they need additional training? Do they have any complaints or concerns? 5. Monitor employee workloads: Are key tasks being ignored or poorly done? Is the founder, or other key personnel, trying to do too much? B. Exiting the Venture. At some point, an entrepreneur may decide to capitalize financially on the investment in the venture (harvesting) or simply wants to get out for other reasons. The issues involved with exiting the

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venture include choosing the right exit option and the correct business valuation method. 1. There are basically five exit options. a. Merger or acquisition b. Selling to a friendly buyer c. Initiate an IPO d. Treat it as a cash cow e. Liquidation 2. Business Valuation Models help determine how much the entrepreneur will receive from the business. The three categories of valuation techniques are: a. Asset valuation b. Earnings valuation c. Cash flow valuations

ANSWERS TO REVIEW AND DISCUSSION QUESTIONS Student answers to these questions will vary. 10-1. What do you think would be the hardest thing about being an entrepreneur? What do you think would be the most fun? One of the interesting things about the advantages and disadvantages of being an entrepreneur is that often what’s seen as an advantage for some can be a disadvantage for others. Some individuals may find that the most difficult aspect of starting a business will be coming up with an innovative product or service. For others, it will be accepting the risk of creating a new venture, possibly making a loan or getting funding from other investors. For some, it will be the handling of the day-to-day operations of running an organization. Turning this around, some students will be excited about the prospect of creating something from nothing, digging into the financials of a company, or being the boss. (LO: 2, Explain what entrepreneurs do in the planning process for new ventures, AACSB: Analytical thinking) 10-2. Why are entrepreneurs important to society? Social entrepreneurship is a form of entrepreneurship. When most people think of entrepreneurship, they think of starting a business to make money. The goal of social entrepreneurship is still business creation; however, the business goal is not necessarily to make a profit but to resolve some social or environmental problem. (LO: 1, Define entrepreneurship and explain why it’s important, AACSB: Analytical thinking) 10-3. Would a good manager be a good entrepreneur? Discuss. A good entrepreneur needs good management skills. Also, to be a good manager, they should have some of the qualities of a good entrepreneur (i.e. the ability to solve problems with innovative solutions). Some students may try to argue that the two skills sets are exclusive, but whether the business is large or small, an existing venture or a start-up, the skills are the same. (LO: 4, Describe how entrepreneurs lead organizations, AACSB: Analytical thinking)

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10-4. Why do you think many entrepreneurs find it hard to step aside and let others manage their business? Most entrepreneurs develop a strong attachment to the organization that they have created. This can lead to the belief that only they know what’s best for the company. As a result, they may be reluctant to empower others to take control because they fear the loss of the investment in time and energy they have put in. (LO: 5, Explain how managers control organizations and exit the venture, AACSB: Analytical thinking) 10-5. Do you think a person can be taught to be an entrepreneur? Why or why not? Some people have the ‘right stuff’ when it comes to starting their own business. They have a proactive personality, they are comfortable with risk, they have a good support group, and they have been put in the right situation at the right time to seize an opportunity. Does this mean that if an aspiring entrepreneur doesn’t have the right personality, or friends and family, that you won’t succeed? Absolutely not. There are some things that can’t be taught, but the majority of what makes a good entrepreneur is the skills that they have picked up in their life and the effort they put into accomplishing their goals. (LO: 4, Describe how entrepreneurs lead organizations, AACSB: Analytical thinking)

ETHICS DILEMMA Student answers to these questions will vary. In this dilemma, students are asked to consider a situation in which a business grows so quickly it has trouble maintaining some of its practices that it uses as selling points. In this particular case, the business is operating without completing the background checks on service providers it has promised customers have been conducted. Students should recognize the potential problems that could arise given the nature of the business. What ethical issues do they see in the case? And what are the implications for various stakeholders in this situation? 10-6. What ethical dilemmas are involved with choosing not to conduct background checks? Customers could be placed in danger if someone with a criminal background and propensity to commit additional crimes is used to provide service. Subjecting customers to this potential without disclosing this information is highly unethical. The firm is being dishonest with the public. (LO: 1, Define entrepreneurship and explain why it’s important, AACSB: Ethical understanding and reasoning abilities) 10-7. Should you focus on providing timely placements or taking the extra time to complete background checks? Explain your answer. Complete background checks are more important since they ensure customer safety and keep the firm’s integrity intact. (LO: 1, Define entrepreneurship and explain why it’s important, AACSB: Ethical understanding and reasoning abilities)

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SKILLS EXERCISE: DEVELOPING GRIT One characteristic shared across successful entrepreneurs is grit. Grit helps entrepreneurs because they often face challenges and setbacks in the process of launching a venture. An entrepreneur with grit will continue working hard, even in the face of seemingly endless obstacles. In this exercise, students are given steps to help them develop grit including practicing resilience, pursuing a passion, practicing positive self-talk, building in practice time, and putting together a support team. Students are then asked to identify a challenge and use the steps to work toward the attainment of the goal. (LO: 4, Describe how entrepreneurs lead organizations, AACSB: Analytical thinking)

WORKING TOGETHER: TEAM EXERCISE In this exercise, students are asked to brainstorm business ideas that could be started on their campus. Working in groups of three or four students, share your ideas with the group and pick one idea to explore further. What would be your competitive advantage? Who are your competitors? Will you need financing to get started? Write an executive summary for this business plan and be prepared to share your idea with the class. (LO: 2, Explain what entrepreneurs do in the planning process for new ventures, AACSB: Analytical thinking)

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To be an entrepreneur, you must first have an idea. Entrepreneurs get their ideas from many sources; however, an idea often hits when the entrepreneur steps out of his or her own comfort zone. Start by exposing yourself to new ideas and information. Subscribe to social media feeds for websites or journals in a wide variety of disciplines such as science, technology, sports, and the arts. Take as many classes outside of your own major that you can. Attend diverse events and network with people from a wide variety of backgrounds. Keep an idea journal with interesting ideas or information that you come across on a daily basis. (LO: 2, Explain what entrepreneurs do in the planning process for new ventures, AACSB: Analytical thinking)

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Explore the innovations or business ideas of others. Visit www.springwise.com, a website that discovers and shares innovative ideas from around the world and www.socialbusiness.org, a website that shares ideas and businesses that are creating positive social change. Add your thoughts and reflections on what you learn to your idea journal. (LO: 2, Explain what entrepreneurs do in the planning process for new ventures, AACSB: Analytical thinking)

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Interview an entrepreneur. Ask how he or she discovered his or her business idea. What challenges did he or she face in starting the business? What do you think made the business succeed? (LO: 2,

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Explain what entrepreneurs do in the planning process for new ventures, AACSB: Analytical thinking) •

Look online to find local resources or organizations that support entrepreneurs. Make a list of the resources that are available to entrepreneurs in your area. (LO: 2, Explain what entrepreneurs do in the planning process for new ventures, AACSB: Analytical thinking)

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One of the biggest challenges start-ups face is obtaining funding. While only a very few businesses are able to obtain funding through the popular television show Shark Tank, you can learn a lot by watching how the “sharks” or venture capitalists on the show’s panel make decisions on which ideas to invest in. Go online and watch an episode of the show. Take note of why the sharks decide to invest in a particular business and why they let some contestants leave empty handed. (LO: 2, Explain what entrepreneurs do in the planning process for new ventures, AACSB: Analytical thinking)

ANSWERS TO CASE APPLICATION 1 QUESTIONS Student answers to these questions will vary. Becoming an Entrepreneur While in College with Brainz Power 10-8. What did Andrew Kozlovski do well during the steps involved in the entrepreneurial process? Responses to this question will vary. Andrew did a good job recognizing a need and identifying an opportunity with a possible competitive advantage. He also selected a relatively risk free startup path to take since he did not need current income. (LO: 1, Define entrepreneurship and explain why it’s important, AACSB: Analytical thinking) 10-9. In what ways is Andrew an example of a hybrid path to entrepreneurship? Also, in what ways is he different from a typical person who takes the hybrid path to entrepreneurship? Responses will vary. Andrew started the firm while he was a full-time student so he had other time commitments. However, he did not need the income from the venture and he focused on getting the product right before moving it to market. (LO: 1, Define entrepreneurship and explain why it’s important, AACSB: Analytical thinking) 10-10 What personality characteristics of entrepreneurs do you think Andrew has? Which of these characteristics were likely most important to his success? Student answers will vary, but Andrew is willing to take risks, independent, confident, clearly sets goals, and has a strong work ethic. (LO: 4, Describe how entrepreneurs lead organizations, AACSB: Analytical thinking)

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10-11. What potential control problems should Andrew be aware of? What should he do to minimize these problems? Responses will vary. Andrew might find it difficult to deal with employee issues since he has been the entire staff for so long. Monitoring the financial side might also be difficult as the firm grows. He will need to hire key personnel to help him shore up any weaknesses he may have as a leader. (LO: 5, Explain how managers control organizations and exit the venture, AACSB: Analytical thinking)

ANSWERS TO CASE APPLICATION 2 QUESTIONS Student answers to these questions will vary. Qordoba: How Sweet It Is to Find a Solution to a Problem 10-12. Explain how Qordoba has an impact on the areas that show the importance of entrepreneurship (innovation, economic growth, and job creation). Qordoba’s idea was strong enough to make it easy to attract funding. The product is now used by dozens of organizations, including the NBA and Marriot, to ensure their message and content is consistent across hundreds of web platforms. Their innovative product creates jobs within their firm but also helps other firms grow and create jobs. (LO: 1, Define entrepreneurship and explain why it’s important, AACSB: Analytical thinking) 10-13. Qordoba’s founders identified an opportunity in the external environment when they founded the company. Which of the seven potential sources of opportunity that entrepreneurs might look for in the external context apply to the example of Qordoba? Responses to this question will vary. However, part of the idea focuses on process need and the idea was also unexpected. They originally intended to focus on language translation but discovered this problem instead. (LO: 2, Explain what entrepreneurs do in the planning process for new ventures, AACSB: Analytical thinking) 10-14. Describe the role that financing (venture capital funding) played in Qordoba’s rising success. Student answers will vary, but Qordoba was able to easily attract financing to their idea. That easy access made expansion and scaling much easier and faster since they weren’t scrambling to find money. (LO: 2, Explain what entrepreneurs do in the planning process for new ventures, AACSB: Analytical thinking) 10-15. What leadership requirements and challenges do you think Qordoba might be dealing with now? How might those leadership requirements and challenges change for Qordoba in the future? Answers will vary, but Qordoba is likely facing the scaling issues any firm faces. How do they scale the operation without losing focus, how do they staff their HR needs, and how do they maintain contact with their customers? Those are just a few of the challenges Qordoba will face. (LO: 4, Describe how entrepreneurs lead organizations, AACSB: Analytical thinking)

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Part 3: Management Practice A Manager’s Dilemma Pretend you’re part of that management team. Using what you’ve learned in the chapters on planning and strategic management in Part 3, what five things would you suggest the team focus on? Think carefully about your suggestions to the team. Planning involves defining the organization’s goals, establishing an overall strategy for achieving those goals, and developing a comprehensive set of plans to integrate and coordinate organizational work. Determining how and where the remainder of a $2.5 million gift should be allocated requires careful planning – in both the long term and short term. Have students think of short-term plans involved for the initial allocation of some of the gift, and then long-term plans to not only evaluate what has been allocated, but how the remaining funds should be used. In addressing the importance of these plans, have students think of the possible outcomes for the plan if they decided to invest a percentage of the gift (and the investment results in a significant return; or the investment results in a substantial loss). Global Sense You see the challenges associated with a global supply chain; what are some of the benefits of it? What can managers do to minimize the impact of such disruptions? Students should recognize that the global supply chain allows for the maximization of competitive advantages from around the world. Products can be outsourced to different companies across the globe, allowing for reduction in costs and higher quality. The drawback as seen in this case is the potential for disruption. When a supply chain is broken, then other suppliers and manufacturers down the line will eventually slow and stop. Keeping enough components in inventory will allow firms to run even when the supply chain is disrupted. However, this solution is also costly since firms must invest in inventory and storage. Sourcing components from multiple suppliers in different locations could also limit the damage if one supply source is out of commission. What types of plans would be best in these unplanned events? A sudden, unexpected event such as a volcanic eruption would create a need for several different kinds of plans. Though long-term plans would be in place, some flexibility in those plans would probably be necessary. Students should be able to identify the importance of shortterm plans in handling the situation. Again, flexibility would be key. Additionally, students may point to operational plans to provide specifics in certain areas of an organization and directional plans that ensure flexibility during the crisis. How can managers plan effectively in dynamic environments? This situation epitomizes the importance of understanding environmental uncertainty. A company may not be able to plan specifically for a volcano eruption that interrupts air traffic; however, a company’s plans should remain flexible in the event of sudden, unexpected obstacles. Students should be able to explain how a firm develops specific plans, but builds in a degree of flexibility to those plans. Students should grasp the importance of flexibility with the planning process. Environmental uncertainty is the expectation and not the exception; therefore, rigid adherence to any plan could create challenges for managers. The ability to quickly adapt to a crisis is also critical as it enables managers to assess a situation and work with his or her team to overcome the obstacles.

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Could SWOT analysis be useful in these instances? Explain. Yes, after completing the SWOT analysis, managers are ready to formulate appropriate strategies—that is, strategies that (1) exploit an organization’s strengths and external opportunities, (2) buffer or protect the organization from external threats, or (3) correct critical weaknesses. Strategies in this case could address the decision to outsource production overseas or whether the threat of a disruption is not worth the potential harm it could have on the organization. How might managers use environmental scanning and virtual reality in preparing for such disasters? Managers need to stay up with current trends, issues, and environmental changes that might impact the firm. They can use this information to perform some “what if” analysis and forecast the potential impact on the firm. If the impact is significant, then managers can determine the steps necessary to mitigate the damage. Virtual reality is one tool that can help them simulate the impact on the firm and also visualize the impact of the mitigation activities. Students will also come up with other ideas.

Continuing Case Starbucks—Planning Discussion Questions with Answers; Teaching Suggestions P3-1. Make a list of Starbucks’ goals. Describe what type of goal each is. Then, describe how that stated goal might affect how the following employees do their job: (a) a part-time store employee—a barista—in Omaha; (b) a quality assurance technician at the company’s roasting plant in Amsterdam; (c) a regional sales manager; (d) the executive vice president of global supply chain operations; and (e) the CEO. To enable your students to benefit from the synergy generated by team efforts (and because this question is quite complex), divide your class into groups of five students for this exercise. Students should review the case study material in Parts I and II as they compile a list of Starbucks' goals. Each student in a group can be responsible for examining how the job of one of the five employees mentioned above (a through e) would be affected by each of the stated goals listed by their group. Group members should present their findings to other members of their team in small group discussions. P3-2. Discuss the types of growth strategies that Starbucks has used. Be specific. After the presentation and discussion of different types of growth strategies as presented in Chapter 9 in the text, ask your students to identify which of these strategies has been used by Starbucks in its past successes. Be sure that students provide specific examples of how the growth strategies they identify have been used by Starbucks, such as the company’s expansion of the number of products offered (for example, custom CDs, films, new coffees and teas) through its existing and newly established locations. P3-3. In what specific ways do stability and/or renewal strategies apply to Starbucks in recent years? Starbucks is not sitting on its laurels and accepting the lower sales and profit growth. The firm is pushing expansion in China and is marketing Starbucks’ products outside of the café venue. For

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this reason, I don’t believe Starbucks is using a stability strategy. However, Johnson is trying to address minor performance issues with strategic changes so it fits a retrenchment strategy. The problems do not approach the level of a turnaround strategy. Both renewal strategies utilize similar tactics, but you would see more aggressive changes in a turnaround strategy. P3-4. What is Starbucks doing to sustain its competitive advantage over competitors? What else might they do to continue to be competitive relative to their industry? First, ask your students to answer the following questions: • What is a competitive advantage? • What is a sustainable competitive advantage? • Why is the possession of one or more competitive advantages essential to the success of every organization? Next, ask the students to name competitive advantages of Starbucks. As students identify these competitive advantages, list them on the board, where the entire class can see them. Then, ask students to select the competitive advantages they think are sustainable and tell what should be done by Starbucks to maintain them over time in a highly competitive global market. Ask your students if Starbucks could do anything else to remain competitive. Answers will vary. P3-5. Starbucks charges more for coffee than its Chinese competitor Luckin. Starbucks also has followed Luckin by offering coffee delivery. What kind of differentiation strategy is Starbucks currently using relative to its competitors like Luckin and McDonald’s in China? What other differentiation strategies might Starbucks consider using in the future? Starbucks appears to be using several differentiation strategies in China including differentiating based on quality, customer service, and mass customization. Innovation and social media might be avenues Starbucks can use in the future to differentiate its brand. P3-6. How is the way that Kevin Johnson is leading Starbucks different from the way that Howard Schultz led the company as an entrepreneur-founder? Student answers will vary. However, Howard Schultz initially grew Starbucks by taking higher levels of risk, but he also defined the company’s moral compass. Kevin Johnson maintains the social responsibility aspect of Schultz’s leadership style, but he is more measured in his approach to growing the firm. He is also focusing on improvements in customer service as a growth strategy instead of simply opening more outlets.

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Chapter 11 Designing Organizational Structure Once managers are done planning, then what? This is when managers need to begin to “work the plan.” And the first step in doing that involves designing an appropriate organizational structure. This chapter covers the decisions involved with designing this structure. We also address the issue of structure with an emphasis on the new designs that companies are implementing to deal with an increasingly competitive environment that focuses on efficiency. Focus on the following learning objectives as you read and study this chapter.

LEARNING OBJECTIVES 1. Describe six key elements in organizational design. 2. Contrast mechanistic and organic structures. 3. Discuss the contingency factors that favor either the mechanistic model or the organic model of organizational design. 4. Describe traditional organizational design options. 5. Discuss organizing for flexibility in the twenty-first century.

CHAPTER OUTLINE INTRODUCTION Designing organizational structure involves the process of organizing (the second management function) and plays an important role in the success of a company. 11.1

SIX ELEMENTS OF ORGANIZATIONAL DESIGN Managers need to establish structural designs that will best support and allow employees to do their work effectively and efficiently. Several important terms must be defined in order to understand the elements of organizational structure and design: 1. Organizing is arranging and structuring work to accomplish the organization’s goals. This process has several purposes, as shown in Exhibit 11-1. 2. Organizational structure is the formal arrangement of jobs within an organization. 3. Organizational design is developing or changing an organization’s structure. This process involves decisions about six key elements: work specialization, departmentalization, chain of command, span of control, centralization-decentralization, and formalization. A. Work Specialization. Work specialization is dividing work activities into separate job tasks. Most of today’s managers regard work specialization

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as an important organizing mechanism, but not as a source of everincreasing productivity. Exhibit 11-2 illustrates the human diseconomies from division of labor—boredom, fatigue, stress, low productivity, poor quality, increased absenteeism, and high turnover—that eventually exceed the economic advantages created by work specialization. Departmentalization. When work tasks have been defined, they must be arranged in order to accomplish organizational goals. This process, known as departmentalization, is the basis by which jobs are grouped. There are five major ways to departmentalize (see Exhibit 11-3): 1. Functional departmentalization groups jobs by functions performed. 2. Product departmentalization groups jobs by product line. 3. Geographical departmentalization groups jobs on the basis of geographical region. 4. Process departmentalization groups jobs on the basis of product or customer flow. 5. Customer departmentalization groups jobs on the basis of specific and unique customers who have common needs. 6. Today’s View. Popular trends in departmentalization include the following: a. Customer departmentalization continues to be a highly popular approach because it allows better monitoring of customers’ needs and responds to changes in the needs of customers. b. Cross-functional teams, which are work teams composed of individuals from various functional specialties, are being used along with traditional departmental arrangements. Chain of Command. The chain of command is the line of authority extending from upper organizational levels to the lowest levels, which clarifies who reports to whom. Three concepts related to chain of command are authority, responsibility, and unity of command. 1. Authority is the rights inherent in a managerial position to tell people what to do and to expect them to do it. a. The acceptance theory of authority proposed by Chester Barnard says that authority comes from the willingness of subordinates to accept it. Barnard contended that subordinates will accept orders only if the following conditions are satisfied: 1. They understand the order. 2. They feel the order is consistent with the organization’s purpose. 3. The order does not conflict with their personal beliefs. 4. They are able to perform the task as directed. b. Line authority entitles a manager to direct the work of an employee. It is the employer–employee authority relationship that extends from the top of the organization to the lowest echelon, according to the chain of command.

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Staff authority functions to support, assist, advise, and generally reduce some of their informational burdens. 2. Responsibility is the obligation to perform any assigned duties. 3. Unity of command is the management principle that each person should report to only one manager. 4. Today’s View. Information technology has made some of the early theories of management less relevant. While in the past elements like chain of command, authority, responsibility, and unity of command were essential, in today’s organization information that used to be only available to managers is easily accessible and employees can communicate with each other without going through a traditional chain of command. Span of Control. Span of control is the number of employees a manager can efficiently and effectively manage. 1. The span of control concept is important because it determines how many levels and managers an organization will have (see Exhibit 11-4 for an example). 2. What determines the “ideal” span of control? Contingency factors such as the skills and abilities of the manager and the employees, the characteristics of the work being done, similarity and complexity of employee tasks, the physical proximity of subordinates, the degree to which standardized procedures are in place, the sophistication of the organization’s information system, the strength of the organization’s culture, and the preferred style of the manager influence the ideal number of subordinates. 3. The trend in recent years has been toward wider (larger) spans of control.

WORKPLACE CONFIDENTIAL: Coping with Multiple Bosses It’s not uncommon to find yourself in a work situation where two different individuals think they are your boss. Sometimes the issue is due to poor organizational design without clearly defined lines of authority. Sometimes lines blur due to overlapping roles. Here are a few things you can do if you find yourself in this situation: 1. Prioritize your bosses. Determine where your first loyalty should be and make sure that person is satisfied with your work. This is most likely the person who completes your reviews. 2. Be proactive about your workload. Make sure the multiple bosses know your total workload. 3. Prioritize your workload and list. Make a list of all ongoing tasks and then prioritize them. Update the list regularly and communicate this list with your bosses. 4. Set boundaries. Set limits on your time. You can’t do everything. 5. Get your bosses to communicate with each other. If they communicate with each other, they are less likely to overload you. 6. Look at the bright side. You are in high demand and you might end up with more autonomy and influence.

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Centralization and Decentralization. The concepts of centralization and decentralization address who, where, and how decisions are made in organizations. 1. Centralization is the degree to which decision making is concentrated at upper levels of the organization. 2. Decentralization is the degree to which lower-level employees provide input or actually make decisions. 3. The current trend is toward decentralizing decision making in order to make organizations more flexible and responsive. 4. A number of factors influence the degree of centralization or decentralization in an organization (see Exhibit 11-5). 5. Today’s View. Employee empowerment is giving employees more authority (power) to make decisions. Formalization refers to the degree to which jobs within an organization are standardized and the extent to which employee behavior is guided by rules and procedures. 1. In a highly formalized organization, employees have little discretion, and a high level of consistent and uniform output exists. Formalized organizations have explicit job descriptions, many organizational rules, and clearly defined procedures. 2. In a less-formalized organization, employees have much freedom and can exercise discretion in the way they do their work. 3. Formalization not only fosters relatively unstructured job behaviors but also eliminates the need for employees to consider alternatives. 4. Today’s View. The degree of formalization can vary widely between organizations and even within organizations.

11.2

MECHANISTIC AND ORGANIC STRUCTURES Organizations do not have identical structures. Even companies of comparable size do not necessarily have similar structures. A. Two Models of Organizational Design. (See Exhibit 11-6.) 1. A mechanistic organization is an organizational design that is rigid and tightly controlled. It is characterized by high specialization, rigid departmentalization, narrow spans of control, high formalization, a limited information network, and little participation in decision making by lower-level employees. 2. An organic organization is an organizational design that is highly adaptive and flexible. It is characterized by little work specialization, minimal formalization, and little direct supervision of employees. 3. Under what circumstances is each design favored? It “depends” on contingency variables.

11.3

CONTINGENCY FACTORS AFFECTING STRUCTURAL CHOICE Appropriate organizational structure depends upon four contingency variables: A. Strategy and Structure. The organization’s strategy is one of the contingency variables that influences organizational design. 1. Alfred Chandler originated the strategy-structure relationship. His finding that structure follows strategy indicates that as

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11.4

organizations change their strategies, they must change their structure to support that strategy. 2. Most current strategy/structure frameworks focus on three strategy dimensions: a. Innovation needs the flexibility and free flow of information present in the organic organization. b. Cost minimization needs the efficiency, stability, and tight controls of the mechanistic organization. c. Imitation uses some of the characteristics of both mechanistic and organic organizations. Size and Structure. Considerable historical evidence indicates that an organization’s size significantly affects its structure. Larger organizations tend to have more specialization, departmentalization, centralization, and formalization, although the size-structure relationship is not linear. Technology and Structure. Technology has been shown to affect an organization’s choice of structure. 1. Every organization uses some form of technology to transform inputs into outputs. 2. Joan Woodward’s study of structure and technology shows that organizations adapt to their technology. She found that three distinct technologies have increasing levels of complexity and sophistication. a. Unit production is the production of items in units or small batches. b. Mass production is the production of items in large batches. c. Process production is the production of items in continuous processes. 3. Woodward found in her study of these three groups that distinct relationships exist among these technologies, the subsequent structure of the organization, and the effectiveness of the organization. Exhibit 11-7 provides a summary of these findings. Environmental Uncertainty and Structure. Environmental uncertainty is the final contingency factor that has been shown to affect organizational structure. Environmental uncertainty may be managed by making adjustments in the organization’s structure. The more uncertain the environment, the more flexible and responsive the organization needs to be.

TRADITIONAL ORGANIZATIONAL DESIGN OPTIONS A number of different organizational designs can be found in today’s organizations. Exhibit 11-8 summarizes the strengths and weaknesses of each of these designs. A. Simple Structure. A simple structure is an organizational design with low departmentalization, wide spans of control, authority centralized in a single person, and little formalization. 1. Strengths of the simple structure are its flexibility, speed, clear accountability, and low maintenance costs. 2. The major limitation of a simple structure is that it is most effective when used in small organizations.

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C. D.

11.5

As an organization grows, its structure tends to become more specialized and formalized. When contingency factors favor a bureaucratic or mechanistic design, one of the following two options is likely to be used: functional structure or divisional structure. Functional Structure. A functional structure is an organizational design that groups similar or related occupational specialties together. Divisional Structure. A divisional structure is an organizational structure made up of separate, semiautonomous units or divisions.

ORGANIZING FOR FLEXIBILITY IN THE TWENTY-FIRST CENTURY Today’s increasingly dynamic and complex environment demands greater flexibility and innovation in organizational structure. Many organizations are abandoning traditional organizational designs in favor of more organic approaches. A. Team Structures. One of the newer concepts in organizational design is team structure, an organizational structure in which the entire organization is made up of work groups or teams. B. Matrix and Project Structures. Other variations in organizational arrangements are based on the fact that many of today’s organizations deal with work activities of different time requirements and magnitude. 1. One of these arrangements is the matrix structure, an organizational structure that assigns specialists from different functional departments to work on one or more projects (see Exhibit 11-9). 2. Another of these designs is the project structure, an organizational structure in which employees continuously work on projects. C. The Virtual Organization. Another approach to organizational design is the virtual organization, sometimes called the network or modular organization. 1. The Virtual Organization. A virtual organization operates with a small core of full-time employees, while hiring outside specialists to work on projects temporarily, as needed. 2. The prototype of the virtual structure is today’s filmmaking organization. Movies are made by a collection of individuals and small firms that come together to make the film project by project. This structural form allows the studio the flexibility to contract the best talent for the specific project. Flexibility is the major advantage of this structural form. D. Telecommuting. Telecommuting is a work arrangement in which employees work at home and are linked to the workplace by computer. 1. Telecommuting provides the company a way to grow without having to incur any additional fixed costs such as office buildings, equipment, or parking lots. In addition, some companies view the arrangement as a way to combat high gas prices and to attract talented employees who want more freedom and control. 2. Some managers are reluctant to have their employees become “laptop hobos.” They argue that employees will waste time surfing the Internet or playing online games instead of working, that they’ll ignore clients and work responsibilities.

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Employees often express the same concerns about working remotely, especially when it comes to the isolation of not being “at work.” 4. Managing telecommuters then becomes a matter of keeping employees feeling like they’re connected and engaged, a topic we delve into at the end of the chapter as we look at today’s organizational design challenges. Compressed Work Weeks. A compressed work week is a work week where employees work longer hours per day but fewer days per week. 1. Advocates maintain that it gives workers extra time to pursue family time, leisure activities, and handle personal responsibilities. 2. This benefit results in higher worker satisfaction, fewer absences, and less turnover. Flextime. Flextime (also known as flexible work hours), is a scheduling system in which employees are required to work a specific number of hours a week but are free to vary those hours within certain limits. 1. Flextime arrangements vary but typically give employees some flexibility to work around a common core work time. An example of a common core is 9 a.m. to 3 p.m. Employees on flextime could come in at 7 a.m. and work until 3 p.m., or come in at 9 a.m. and work until 5 p.m., or some other 8-hour period as long as they were at work during the common core time. 2. This work scheduling option is extremely popular and over half of US organizations offer some form of flextime. Job sharing. Job sharing is the practice of having two or more people split a full-time job. 1. This practice isn’t widely popular but can appeal to retirees with a lot of expertise that only want to work part time. 2. Only 18% of US organizations offer job sharing opportunities. The Contingent Workforce. Contingent Workers are temporary, freelance, or contract workers whose employment is contingent upon demand for their services. 1. As organizations eliminate full-time jobs through downsizing and other organizational restructurings, they often rely on a contingent workforce to fill in as needed. 2. One of the main issues businesses face with their contingent workers, especially those who are independent contractors or freelancers, is classifying who actually qualifies as one. a. Companies don’t have to pay Social Security, Medicare, or unemployment insurance taxes on workers classified as independent contractors. And those individuals also aren’t covered by most workplace laws.

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

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11-1. Discuss the traditional and contemporary views of each of the six key elements of organizational design. Traditionally, work specialization was viewed as a way to divide work activities into separate job tasks. Today’s view is that it is an important organizing mechanism but it can lead to problems. The chain of command and its companion concepts—authority, responsibility, and unity of command—were viewed as important ways of maintaining control in organizations. The contemporary view is that they are less relevant in today’s organizations. The traditional view of span of control was that managers should directly supervise no more than five to six individuals. The contemporary view is that the span of control depends on the skills and abilities of the manager and the employees and on the characteristics of the situation. (LO: 1, Describe six key elements in organizational design, AACSB: Analytical thinking) 11-2. Would you rather work in a mechanistic or an organic organization? Why? A mechanistic organization is a rigid and tightly controlled structure. An organic organization is highly adaptive and flexible. (LO: 2, Contrast mechanistic and organic structures, AACSB: Analytical thinking) 11-3. Contrast the three traditional organizational designs. Students’ answers to this question will vary. Many students prefer the structure provided by a mechanistic organization, whereas others would be less productive in an organization with structural rigidity. Note that SAL #III.A.1, “What Type of Organization Structure Do I Prefer?” addresses whether each of your students would like to work in a bureaucracy (a mechanistic organization). Students might want to revisit this assessment in answering this question. (LO: 2, Contrast mechanistic and organic structures, AACSB: Reflective thinking) 11-4. With the availability of advanced information technology that allows an organization’s work to be done anywhere at any time, is organizing still an important managerial function? Why or why not? Although an organization’s work may be done anywhere at any time, organizing remains a vital managerial function because the work that must be accomplished still must be divided, grouped, and coordinated. (LO: 4, Describe traditional organizational design options, AACSB: Reflective thinking) 11-5. Differentiate between matrix and project structures. A project structure, unlike the matrix structure, has no formal departments where employees return at the completion of a project. Instead, employees take their specific skills, abilities, and experiences to other projects. Also, all work-in-project structures are performed by teams of employees. (LO: 5, Discuss organizing for flexibility in the twentyfirst century, AACSB: Analytical thinking) 11-6. What structural issues might arise in managing employees’ flexible work arrangements? Think about what you’ve learned about organizational design. How might that information help a manager address those issues? Although an organization’s work may be done anywhere at any time, organizing remains a vital managerial function because the work that must be accomplished still must be divided, grouped, and coordinated. When organizations become more flexible, control and authority become important issues. Without direct supervision (in the case of telecommuting), lines of authority are weak and managers may feel a loss of control. On

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the other hand, in the case of telecommuting, employees may feel left out of important organizational decisions or like they are not considered for important assignments. (LO: 5, Discuss organizing for flexibility in the twenty-first century, AACSB: Analytical thinking) 11-7. How could a job-sharing arrangement be made effective? What would a job sharer need to do to make the arrangement work? You have to pair two people who are compatible and willing to work together. Each person needs to have some flexibility and communicate decisions to their work partner in order for this arrangement to work. (LO: 5, Discuss organizing for flexibility in the twentyfirst century, AACSB: Analytical thinking) 11-8. Why are more companies today relying on contingent workers? The contingent workforce refers to temporary, freelance, or contract workers whose employment is contingent on demand for their services. Demand for contingent workers is expected to grow as full-time jobs are eliminated through downsizing and restructuring. (LO: 5, Discuss organizing for flexibility in the twenty-first century, AACSB: Analytical thinking)

ETHICS DILEMMA Student answers to these questions will vary. In this dilemma, a lifeguard is fired from his job because he left his patrol area to save a drowning man. When the employer eventually offered the lifeguard their job back (after the story hit the media), the lifeguard declined. Students are asked what they think, their possible concerns, and how the lessons of organizational design apply to this story. From the company’s perspective, there is a case to be made that the employee did violate company policy and as a result, deserved to be terminated. However, this brings in an interesting view of how work is arranged and the degree of formalization a company employs. The company in question could have implemented a design that allows for more delegation and less formalization in the lifeguard position. Because unexpected events occur, this design would have allowed for a better match between an uncertain environment and the ability of the lifeguard to adjust their behavior to meet demands. 11-9. What do you think? What ethical concerns do you see in this situation? Student answers will vary but I believe the situation was handled ethically by the lifeguard. While he ignored company policy his actions were justified since it was to save a life. While the firm said he exposed them to liability I believe a good lawyer could make a strong case for liability if a lifeguard knowingly watched someone drown instead of leaving their post. (LO: 4, Describe traditional organizational design options, AACSB: Ethical understanding and reasoning) 11-10. What lessons can be applied to organizational design from this story? The firm should have some flexibility built into their policies that enable lifeguards to use their judgment when someone’s life is in danger. You can’t simply apply one rule to every situation. (LO: 5, Discuss organizing for flexibility in the twenty-first century, AACSB: Ethical understanding and reasoning)

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SKILLS EXERCISE: DEVELOPING YOUR ACQUIRING POWER SKILL Managers need to know how to acquire and use power if they are to perform well in their job. When a manager has power, he or she is not as dependent on others for critical resources. And if the resources a manager controls are important, scarce, and nonsubstitutable, her power will increase because others will be more dependent on her for those resources. In this exercise, students are given eight behaviors for the effective acquisition and use of power. Students are then asked to keep a journal and identify their own use of power and to identify the use of power by a business executive. (LO: 1, Describe six key elements in organizational design, AACSB: Communication abilities)

WORKING TOGETHER: TEAM EXERCISE Telecommuting has become a common practice for many organizations and employees. However, managing remote workers can be challenging. Organizations can create telecommuting guidelines to help address issues that can come up. Students are asked to assume the role of a manager of a small technology firm and consider some telecommuting issues that could arise. Then, students are asked to work in groups of three or four to draft guidelines for their office. Students should be prepared to share their guidelines with the class. (LO: 5, Discuss organizing for flexibility in the twenty-first century, AACSB: Analytical thinking)

MY TURN TO BE A MANAGER •

Find three different examples of organizational charts. In a report, describe each of them. Try to decipher the organization’s use of organizational design elements, especially departmentalization, chain of command, centralization, decentralization, and formalization. (LO: 1, Describe six key elements in organizational design, AACSB: Analytical thinking)

•

Survey at least 10 different managers about how many employees they supervise. Also ask them whether they feel they could supervise more employees or whether they feel the number they supervise is too many. Graph your survey results and write a report describing what you found. Draw some conclusions about span of control. (LO: 1, Describe six key elements in organizational design, AACSB: Analytical thinking)

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Using current business periodicals, research open innovation efforts by companies. Choose three examples of businesses using this and describe and evaluate what each is doing. (LO 5, Discuss organizing for flexibility in the twenty-first century, AACSB: Analytical Thinking)

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Visit the When Work Works website at www. whenworkworks.org. This organization works to bring research on workplace flexibility into practice. Visit the “Find Solutions” page of the website and review the guidance provided for employers. What resources are available for managers looking to create more flexible work arrangements? (LO: 5, Discuss organizing for flexibility in the twenty-first century, AACSB: Analytical Thinking)

ANSWERS TO CASE APPLICATION 1 QUESTIONS Student answers to these questions will vary. Making a Flat Organization Work at Punchkick 11-11. How would you describe Punchkick Interactive in terms of the elements of organizational design? Punchkick did not have specialized work or distinct jobs, jobs were not grouped per se, no real chain of command, and limited span of control. The firm is very decentralized and informal. (LO: 1, Describe six key elements in organizational design, AACSB: Analytical thinking) 11-12. What are the strengths and potential areas of concern illustrated by the example of Punchkick? The firm can respond rapidly to client needs and everyone feels a duty to perform at the highest level. However, if Punchkick were to hire a poor performer, it might be challenging to get that person to leave the firm. This structure ultimately limits the firm’s size. (LO: 1, Describe six key elements in organizational design, AACSB: Analytical thinking) 11-13. What do you think makes a flat, “no boss” structure like Punchkick’s work effectively? In what situations (e.g., industries, organizational sizes, employee characteristics) would this structure not work well? This works well in intellectual property firms that need creative people. It would not work well in manufacturing, large organizations, and firms where employees need structure and well-defined roles. (LO: 4, Describe traditional organizational design options, AACSB: Analytical thinking) 11-14. What advice would you give to Punchkick to ensure that they don’t experience the problems that Valve has had? Pay close attention to performance metrics and staffing. At some point the firm may grow large enough and this system may not scale very well. Punchkick needs to ensure power groups do not emerge over time. (LO: 4, Describe traditional organizational design options, AACSB: Analytical thinking)

ANSWERS TO CASE APPLICATION 2 QUESTIONS

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Student answers to these questions will vary. The Invisible Workforce at Google 11-15. What are the advantages of contractor workers for a) Google and b) the workers themselves? Contractor workers give Google a flexible workforce and also access to some specialties at a much lower long-term cost since it is on a project by project basis. For the contractors, affiliation with Google can open doors and give them immediate legitimacy. (LO: 5, Discuss organizing for flexibility in the twenty-first century, AACSB: Analytical thinking) 11-16. What are the most important problems that you see with being a contractor? Paying your own taxes and providing your own benefits is problematic. And, your employment can be terminated without notice and you may not have recourse if you have a workplace grievance. Pay can be lower in some job roles. (LO: 5, Discuss organizing for flexibility in the twenty-first century, AACSB: Analytical thinking) 11-17 How do you think the contractor hiring arrangement could be improved to realize effective outcomes for both contractors and Google? Google could hire contractors in house and not sub that task out to employment agencies. This practice could generate more loyalty and give the workers a greater sense of fitting in to Google’s culture. (LO: 5, Discuss organizing for flexibility in the twenty-first century, AACSB: Analytical thinking) 11-18. Do you think the experiences of contractors and regular employees would have a better chance of being more similar to one another in a mechanistic or organic organizational structure? Explain the reasons for your answer. Student answers will vary. However, I believe that the experiences of these two categories of employees would be more similar in a mechanistic structure. Roles and responsibilities are more clearly defined and standardized which would make it more difficult to justify differential treatment. (LO: 2, Contrast mechanistic and organic structures, AACSB: Analytical thinking)

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Chapter 12 Managing Human Resources Once an organization’s structure is in place, it’s time to find the people to fill the jobs that have been created. That’s where human resource management comes in. It’s an important task that involves getting the right number of the right people in the right place at the right time. Focus on the following learning objectives as you read and study this chapter.

LEARNING OBJECTIVES 1. Explain the importance of the human resource management and the human resource management process. 2. Describe the external influences that affect the human resource management process. 3. Discuss the tasks associated with identifying and selecting competent employees. 4. Explain how companies provide employees with skills and knowledge. 5. Describe strategies for retaining competent, high-performing employees. 6. Identify two important trends in organizational career development. 7. Discuss contemporary issues in managing human resources.

CHAPTER OUTLINE INTRODUCTION The quality of an organization is, to a large degree, dependent upon the quality of the people it hires and retains. Chapter 12 examines the concepts of human resource management. 12.1

WHY HUMAN RESOURCE MANAGEMENT IS IMPORTANT Various studies have concluded that an organization’s human resources can be an important strategic tool and can help establish a firm’s sustainable competitive advantage. A. Human resource management (HRM) is important for several reasons: 1. Various studies have shown HRM can be a significant source of competitive advantage. 2. HRM is an important part of organizational strategies. 3. Studies that have explored the link between HRM policies and practices and organizational performance have found that certain HRM policies and practices have a significant impact on performance. 4. The human resource management process consists of eight activities necessary for staffing the organization and sustaining high employee performance. See Exhibit 12-1 for a flowchart of

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the process and how certain activities affect the retention of competent and high-performing employees. 12.2

EXTERNAL FACTORS THAT AFFECT THE HUMAN RESOURCE MANAGEMENT PROCESS. A number of environmental forces constrain human resource management activities. The factors most directly influencing the HRM process are economic conditions, employee labor unions, governmental laws and regulations, and demographic trends. A. The Economy. 1. The Great Recession of 2008 forced many employers to cut their workforce. However, in 2018 unemployment is at an 18-year low of below 4%. As you can see, the health of the economy has an effect on employment, attitudes toward work, careers, and retirement. 2. Employers often lay off workers, cut pay, and reorganize work activities during downturns. When the economy is strong employers must pay higher wages, improve benefits, or make other accommodations to attract and retain employees. B. Labor Unions. 1. Unionization can affect a company’s human resource management activities. a. A labor union is an organization that represents workers and seeks to protect their interests through collective bargaining. b. Good labor-management relations, the formal interactions between unions and an organization’s management, are important. c. Less than 11 percent of the workforce in the United States is unionized; that percentage is higher in some other countries such as Germany and Canada. C. Laws and Rulings. 1. Federal laws and regulations have greatly expanded the federal government’s influence over HRM (see Exhibit 12-2). a. Balance of the “should and should-not’s” of many of these laws often fall within the realm of affirmative action— programs that enhance the organizational status of members of protected groups. b. Managers that operate in an international context must also be aware of specific laws that apply to the countries in which they do business. Canadian laws most closely mirror those in the United States. In Mexico, employees are more likely to be unionized. In Australia, discrimination laws are fairly new and generally apply to affirmative action for women. In Germany, companies are required to have a high degree of worker participation in management through the use of work councils and board representatives. D. Demography.

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Demographic trends will continue to play an important role in the Human Resource function as the pool of workers change, i.e., increase in older workers ready for retirement and greater ethnic diversity due to an increasing number of Hispanics residing in the United States. Workforce trends in the early twenty-first century are notable for four reasons: a. Changes in racial and ethnic composition. b. An aging baby boomers (those born between 1946 and 1964) generation. c. An expanding cohort of Gen Y workers (those born between 1978 and 1994). d. Skill imbalances due to rapidly changing technology.

IDENTIFIYING AND SELECTING COMPETENT EMPLOYEES The first phase of the HRM process involves three tasks: human resource planning, recruitment and decruitment, and selection. A. Human Resource Planning. Human resource planning is ensuring that the organization has the right number and kinds of capable people in the right places at the right times. 1. Current Assessment. Managers begin HR planning by conducting a current assessment of the organization’s human resource status. a. This assessment is typically accomplished through a human resource inventory. b. Another part of the current assessment process is the job analysis, which is an assessment that defines jobs and the behaviors necessary to perform them. c. From this information, management can draw up a job description (or position description), which is a written statement that describes a job. d. In addition, management must develop a job specification, which is a statement of the minimum qualifications that a person must possess in order to perform a given job successfully. 2. Meeting Future HR Needs. Future HR needs are determined by looking at the organization’s mission, goals, and strategies. Developing a future program requires estimates in which the organization will be understaffed or overstaffed. B. Recruitment and Decruitment. 1. Recruitment is the process of locating, identifying, and attracting capable applicants. Job candidates can be found using a number of different sources (see Exhibit 12-3).

WORKPLACE CONFIDENTIAL: Job Search Finding the right job is a complex task. Here are a few search options and suggestions to help you land the job that’s right for you: 1. Referrals. Referrals from a current employee reduce unrealistic expectations since you can quiz them about the employer and job. 2. College placement services. Many colleges will actively help you find a good job.

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3. Job fairs. Organizational job fairs are often a good way to meet existing employees and let them connect a face to a resume. 4. Professional organizations. Many occupations have professional organizations that post openings and have networking opportunities. 5. Online searches. Job boards, social media sites such as LinkedIn, and websites like Monster.com all help with job searches. 6. Look for a good fit. Develop a list of questions to ask prospective employers and research the organization online. Decruitment is reducing an organization’s workforce. Decruitment options include firing, layoffs, attrition, transfers, reduced workweeks, early retirements, and job sharing (see Exhibit 12-4). Selection. Selection is screening job applicants to ensure that the most appropriate candidates are hired. 1. What is Selection? Selection is an exercise in prediction. Prediction is important because any selection decision can result in four possible outcomes (see Exhibit 12-5). The major aim of any selection activity should be to reduce the probability of making reject errors or accept errors, while increasing the probability of making correct decisions. 2. Validity and Reliability. A valid selection device is characterized by a proven relationship that exists between a selection device and some relevant job criterion. A reliable selection device measures the same thing consistently. 3. Types of Selection Tools. Managers can select employees using numerous and varied selection devices. Exhibit 12-6 lists the strengths and weaknesses of each of these devices. 4. One of the most reliable and valid tests for predicting an applicant’s future job performance is a work sample test. Work sample tests are hands-on simulations of part or all of the work someone must perform. More elaborate simulation tests may be performed in assessment centers. 5. Realistic Job Previews. A realistic job preview is a preview of a job that provides both positive and negative information about the job and the company. Including an RJP can increase job satisfaction among employees and reduce turnover. 2.

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PROVIDING EMPLOYEES WITH THE NEEDED SKILLS AND KNOWLEDGE A. Orientation. Orientation is introducing a new employee to his or her job and the organization. 1. Work unit orientation familiarizes the employee with the goals of the work unit, clarifies how his/her job contributes to the unit’s goals, and includes an introduction to his or her coworkers. 2. Organization orientation informs the new employee about the organization’s objectives, history, philosophy, procedures, and rules. 3. Major objectives of orientation include the following: a. To reduce initial anxiety.

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To familiarize new employees with the job, the work unit, and the organization. c. To facilitate the outsider-insider transition. 4. In addition to orientation, management should consider helping new employees adapt to the organization’s culture. This practice is called socialization and there are several different options an organization can use to socialize new employees (see Exhibit 127). These options include: a. formal vs. informal b. individual vs. collective c. fixed vs. variable d. serial vs. random e. investiture vs. divestiture Employee Training. Employee training is a critical component of the human resource management program. 1. Types of Training. Types of training include general and specific. See Exhibit 12-8. 2. Training Methods. Exhibit 12-9 describes the major types of training that organizations provide. a. Traditional Training methods. On-the-job training is very common, and it may involve job rotation. Job rotation is onthe-job training that involves lateral transfers to enable employees who work on the same level of the organization to work in different jobs. On-the-job training can also involve mentoring, coaching, experiential exercises, and classroom training. b. Technology-driven training methods. Today’s organizations are increasingly relying on technology-based training, including e-learning applications, to communicate important information and to train employees.

RETAINING COMPETENT, HIGH-PERFORMING EMPLOYEES The employee’s annual review traditionally provided management with feedback on how well employees were doing their jobs and identified areas where additional training might be needed. Today, new technologies often provide constant performance feedback. A. Performance Evaluation. Managers need to know whether their employees are performing their jobs efficiently and effectively or whether improvement is needed. Various performance evaluation tools help managers perform this task. 1. Performance Evaluation Methods. (Exhibit 12-10 summarizes the advantages and disadvantages of each of these methods.) a. A written essay appraises performance through a written description of an employee’s strengths and weaknesses, past performance, and potential. b. Critical incidents are used to appraise performance by focusing on the critical job behaviors. In this technique, the appraiser writes anecdotes to describe what the employee did that was especially effective or ineffective. Only specific

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behaviors, rather than vaguely defined personality traits, are cited. c. The use of graphic rating scales is one of the oldest and most popular performance appraisal methods. This method appraises performance using a rating scale on a set of performance factors. Graphic rating scales list a set of performance factors; the evaluator goes down the list and rates the employee on each factor, using an incremental scale. d. Using behaviorally anchored rating scales (BARS) is an appraisal approach that appraises performance using a rating scale on examples of actual job behavior. BARS combines major elements from the critical incident and graphic rating scale approaches. The appraiser rates an employee according to items along a scale, but the items are examples of actual behavior on the job rather than general descriptions or traits. e. Multiperson comparison appraises performance by comparing it with others’ performance. f. Management by objectives (MBO) is another mechanism for appraising performance. It is often used to assess the performance of managers and professional employees. g. 360-degree feedback appraises performance by using feedback from supervisors, employees, and coworkers. In some jobs, especially those working with computers, supervisor observation is being replaced by electronic performance monitoring. For example, call centers use this technology to continually collect performance data that can be used to evaluate employees at any time. Compensation and Benefits. How do organizations determine the compensation levels and benefits that employees will receive? 1. The purpose of having an effective reward system is to attract and retain competent and talented individuals who can help the organization achieve its mission and goals. 2. A compensation system can include base wages and salaries, wage and salary add-ons, incentive payments, and benefits and services. 3. What factors determine the compensation and benefits packages for different employees? A number of factors influence these differences (see Exhibit 12-11). Let’s look at three contemporary compensation issues: a. Skill-based vs. variable pay: Under a skill-based pay system, employees are compensated for the job skills they can demonstrate. Research shows that skill-based pay systems tend to be more successful in manufacturing organizations than in service organizations. Under a variable pay system, an individual’s compensation is contingent on performance. b. Bonuses vs. annual pay increases: Some pay experts recommend replacing annual pay raises with bonuses for

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high performance. This practice keeps the motivating potential in place. Motivation is often lost when top performers and mediocre performers get essentially the same raise. Pay secrecy vs. transparency: Historically, employees were told not to share compensation information. However, in 2016 an executive order prohibited firms from retaliating against employees if they disclosed this information. Now many large companies are becoming more transparent in their compensation packages. Benefit options: Total compensation also includes benefits and 57% of employees indicated organizational benefits were a top consideration when they decided whether to take the job. Almost 90% stated the right benefit package would make them less likely to leave their jobs. The most important benefits in preference order are: 1. Health insurance 2. Vacations and paid time off 3. Retirement plans

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CAREER DEVELOPMENT Career development is also important in the HRM process. In the past 30 years most organizations left career development up to the individual. Employees were responsible to create their own “brand.” However, two trends are emerging: 1. Lifetime learning – many firms now offer tuition reimbursement as a benefit. 2. Internships – firms are expanding internship programs as a way to assess a potential employee’s abilities and motivation.

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CONTEMPORARY ISSUES IN MANAGING HUMAN RESOURCES A. Sexual Harassment. Sexual harassment is any unwanted action or activity of a sexual nature that explicitly or implicitly affects an individual’s employment, performance, or work environment. 1. Sexual harassment isn’t a problem just in the United States. It’s a global issue. Studies show that 35 percent of female employees globally have experienced some form of sexual harassment. Sexual harassment costs to the firm can easily reach millions of dollars. 2. What can an organization do to protect itself against sexual harassment claims? The courts want to know two things: First, did the organization know about, or should it have known about, the alleged behavior? And secondly, what did managers do to stop it? A program consisting of seven elements has been suggested to help firms protect themselves from sexual harassment. They are: a. Adopt a clear anti-harassment policy. b. It should contain an explicit statement of prohibited behaviors. c. A complaint procedure process that encourages employees to come forward.

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Protections for complainants and witnesses against retaliation. e. An investigative strategy that protects everyone involved. f. Ongoing management training and employee awareness programs. g. Measures and processes to ensure prompt corrective actions are taken. Bullying in the Workplace. 1. Workplace bullying occurs when an individual experiences a number of negative behaviors over time that result in physical or mental harm. It can include verbal abuse, derogatory remarks, humiliation and other behaviors. 2. Workplace bullying is widespread and growing. Almost 30% of the workforce admits to being bullied on the job. 3. Bullying can lead to anxiety and panic attacks and other issues. It can also lead to lower employee productivity, increased absences and higher turnover.

ANSWERS TO REVIEW AND DISCUSSION QUESTIONS Student answers to these questions will vary. 12-1. Discuss how human resource management practices can be a source of competitive advantage for a company. The Human Capital Index found that people-oriented HR gives organization a competitive advantage by creating superior shareholder value. Other research shows that CEOs believe that human capital is a key source of sustained economic value. (LO: 1, Explain the importance of human resource management and the human resource management process, AACSB: Analytical thinking) 12-2. Discuss the external environmental factors that most directly affect the HRM process. The external environmental factors that affect HR include economic conditions, unionization, the legal environment, and demographic trends. (LO: 2, Describe the external influences that affect the human resource management process, AACSB: Analytical thinking) 12-3. Describe the different selection devices and which work best for different jobs. The different selection devices include application forms (best used for gathering employee information), written tests (must be job-related), work sampling (appropriate for complex nonmanagerial and routine work), assessment centers (most appropriate for top-level managers), interviews (widely used, but most appropriate for managerial positions, especially top-level managers), background investigations (useful for verifying application data, but reference checks are essentially worthless), and physical exams (useful for work that involves certain physical requirements and for insurance purposes). (LO: 3, Discuss the tasks associated with identifying and selecting competent employees, AACSB: Analytical thinking)

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12-4. What are the benefits and drawbacks of realistic job previews? (Consider this question from the perspective of both the organization and the employee.) This question would be a good springboard for debate as well, with half of the class looking at RJPs from the organization’s viewpoint and the other half of the class looking at RJPs from the employee’s viewpoint. In addition, students should be encouraged to describe occasions when they have received an RJP in an interview setting. Students could also be encouraged to share aspects or characteristics of jobs they currently hold that should be communicated by an interviewer to prospective employees as part of an RJP in an employment interview. (LO: 3, Discuss the tasks associated with identifying and selecting competent employees, AACSB: Analytical thinking) 12-5. Describe the different types of orientation and training and how each of the types of training might be provided. Orientation is important because it results in an outsider-insider transition that makes the new employee feel comfortable and fairly well adjusted, lowers the likelihood of poor work performance, and reduces the probability of an early surprise resignation. The two types of training are general (includes communication skills, computer skills, customer service, personal growth, etc.) and specific (includes basic life/work skills, customer education, diversity/cultural awareness, managing change, etc.). This training can be provided using traditional training methods (on-the-job, job rotation, mentoring and coaching, experiential exercises, workbooks/manuals, and classroom lectures) or by technology-based methods (CD/DVD/videotapes/audiotapes, videoconferencing or teleconferencing, or e-learning). (LO: 4, Explain how companies provide employees with skills and knowledge, AACSB: Analytical thinking) 12-6. List the factors that influence employee compensation and benefits. The factors are: employee’s tenure and performance, kind of job performed, kind of business, unionization, labor or capital intensive business, management philosophy, geographic location, company profitability, and size of company. (LO: 5, Describe strategies for retaining competent, high-performing employees, AACSB: Analytical thinking) 12-7. Describe the different performance appraisal methods. A written essay appraises performance through a written description of an employee’s strengths and weaknesses, past performance, and potential. Critical incidents are used to appraise performance by focusing on the critical job behaviors. In this technique, the appraiser writes anecdotes to describe what the employee did that was especially effective or ineffective. The use of graphic rating scales is one of the oldest and most popular performance appraisal methods. This method appraises performance using a rating scale on a set of performance factors. The graphic rating scales list a set of performance factors; the evaluator goes down the list and rates the employee on each factor, using an incremental scale. Using behaviorally anchored rating scales (BARS) is an appraisal approach that appraises performance using a rating scale on examples of actual job behavior. BARS combines major elements from the critical incident and graphic rating scale approaches. The appraiser rates an employee according to items along a scale, but the items are examples of actual behavior on the job rather than general descriptions or traits. Multiperson comparison appraises performance by comparing it with others’ performance. Management by objectives (MBO) is another mechanism for appraising performance. It is often used to assess the performance of managers and professional employees. 360-degree feedback appraises performance

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by using feedback from supervisors, employees, and coworkers. (LO: 5, Describe strategies for retaining competent, high-performing employees, AACSB: Analytical thinking) 12-8. What, in your view, constitutes sexual harassment? Describe how companies can minimize sexual harassment in the workplace. You might provide an opportunity for small group discussion of this question and encourage students to research (perhaps on the Web outside of class) strategies currently used by large and small companies to minimize sexual harassment in the workplace. In the class session immediately following the small group discussions, ask students to share their answers and opinions regarding issues raised by this question. (LO: 7, Discuss contemporary issues in managing human resources, AACSB: Analytical thinking)

ETHICS DILEMMA Student answers to these questions will vary. As the use of technology increases, it becomes easier to monitor employees in a number of ways. And, there are essentially no laws that prohibit organizations from even telling employees they are under video surveillance or other types of electronic monitoring. Students are asked how they feel about this issue and how others will be impacted by this growing concern. 12-9. What are the pros and cons of monitoring employees electronically? Student answers will vary. However, electronic monitoring will help prevent employees from slacking off too much and allow the organization to improve efficiency. The downside is that it could affect employee morale and increase turnover. (LO: 7, Discuss contemporary issues in managing human resources, AACSB: Analytical thinking) 12-10. How might employee electronic monitoring affect employee retention, engagement, and productivity? Student answers will vary but electronic monitoring sends the signal that the organization does not trust employees. I believe it could increase turnover and limit engagement. I can see where it could help or hurt productivity. (LO: 5, Describe strategies for retaining competent, high-performing employees, AACSB: Ethical understanding and reasoning) 12-11. If employers want to electronically monitor employees, how should they do it ethically? How should they decide whether a specific monitoring practice is OK or is going too far? While there is no right or wrong answer to this dilemma, students should be aware that firms can and do legally engage in electronic monitoring. Does that feel like an invasion of your privacy? (LO: 5, Describe strategies for retaining competent, high-performing employees, AACSB: Ethical understanding and reasoning)

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SKILLS EXERCISE: DEVELOPING YOUR INTERVIEWING SKILLS This exercise should help students develop their interviewing skills. After giving seven tips for interviewing, students are asked to review and update their résumé. It would be helpful if students were to have several friends who have experience in management critique it. Next, students are asked to create an inventory of their interpersonal and technical skills and any practical experiences that do not show up in their résumé. Finally, students should draft a set of leading questions they would like to be asked in an interview that would give them a chance to discuss the unique qualities and attributes they could bring to the job. (LO: 3, Discuss the tasks associated with identifying and selecting competent employees, AACSB: Written and oral communication)

WORKING TOGETHER: TEAM EXERCISE Students are asked to reflect on their experiences with employee orientation. After writing down notes about the employee orientation process at their last job, students are asked to think about what the orientation taught them about the organization and what information was not provided that could have been helpful to them in the job. Then, working in groups of three or four, students are asked to create a list of orientation “dos and don’ts” for companies. (LO: 4, Explain how companies provide employees with skills and knowledge, AACSB: Analytical thinking)

MY TURN TO BE A MANAGER •

Studies show that women’s salaries still lag behind men’s, and even with equal opportunity laws and regulations, women are paid about 82 percent of what men are paid. Do some research on designing a compensation system that would address this issue. Write up your findings in a bulleted list format. (LO: 7, Discuss contemporary issues in managing human resources, AACSB: Analytical thinking)

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The American Federation of Labor and Congress of Industrial Organizations is a national trade union center and the largest federation of unions in the United States. Visit the organization’s website at www.aflcio.org. Explore the website and identify issues that are of current concern for today’s labor unions. (LO: 7, Discuss contemporary issues in managing human resources, AACSB: Reflective thinking)

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Go to the Society for Human Resource Management website (www.shrm.org) and look for the HR News. Pick one of the news stories to read. (Note: Some of these may be available only to SHRM members, but others should be generally available.) Write a summary of the information. At the end of your summary, discuss the implications of the topic for managers. (LO: 7, Discuss contemporary issues in managing human resources, AACSB: Reflective thinking)

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Find Fortune’s “Best Companies to Work For” list online. Read the profiles of the top companies. Identify the types of benefits and other company characteristics that are common among these companies. Collect this information in a formal report you can present to your class. (LO: 5, Describe strategies for retaining competent, high-performing employees, AACSB: Analytical thinking)

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Visit an online job board and learn about how a company posts a job. Pick any online job board such as www.monster.com, www.careerboard.com, or a local job board in your area. Click on the “Employers” tab and read about the process to post a job. (LO: 3, Discuss the tasks associated with identifying and selecting competent employees, AACSB: Multicultural and diversity understanding)

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Work on your résumé. If you don’t have one, research what a good résumé should include. If you have one already, make sure it provides specific information that explicitly describes your work skills and experience rather than meaningless phrases such as “results-oriented.” (LO: 3, Discuss the tasks associated with identifying and selecting competent employees, AACSB: Analytical thinking)

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Set up a profile on LinkedIn. Make sure you use a professional photo and provide a complete profile. Click on the “Business Services” link to learn how companies can use LinkedIn in the hiring process. (LO: 3, Discuss the tasks associated with identifying and selecting competent employees, AACSB: Analytical thinking)

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Search online for a sample sexual harassment training program. How could an organization use this training program to help prevent harassment in the workplace? (LO: 7, Discuss contemporary issues in managing human resources, AACSB: Reflective thinking)

ANSWERS TO CASE APPLICATION 1 QUESTIONS Student answers to these questions will vary. “Moneyball for HR” at Unilever 12-12. Which activities in the HRM process (see Exhibit 12-1) does this Moneyball approach to HR relate to? What challenges involved in these activities does their approach seek to address? Responses to this question will vary by student. The Moneyball approach is related to recruitment and selection and it is attempting to improve employee fit with the job and firm. This type of approach is relatively new and untested so it remains to be seen whether it really works. (LO: 1, Explain the importance of the human resource management and the human resource management process, AACSB: Analytical thinking) 12-13. What are the advantages and disadvantages of Unilever’s approach to hiring?

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The advantages include faster hiring process and more applicants. The disadvantages are primarily related to whether the approach will be successful. It will take some time to determine whether these new employees work out and stay with the firm. (LO: 3, Discuss the tasks associated with identifying and selecting competent employees, AACSB: Analytical thinking) 12-14. What evidence will be necessary to prove that Unilever is using a valid selection device to hire employees? What evidence would make it clear that they are using a reliable selection device? The method will be valid if they can prove a link between the Moneyball tests and performance of the employees selected using this method. The method will be reliable if successive hiring classes all perform in a consistent manner. (LO: 3, Discuss the tasks associated with identifying and selecting competent employees, AACSB: Analytical thinking) 12-15. What suggestions would you provide to a company that is considering implementing an approach similar to Unilever’s? Don’t rely solely on this tool. Use it in conjunction with other tools and then evaluate its effectiveness over time. (LO: 3, Discuss the tasks associated with identifying and selecting competent employees, AACSB: Analytical thinking)

ANSWERS TO CASE APPLICATION 2 QUESTIONS Student answers to these questions will vary. Keeping Dealership Sales Staff from Leaving at Nissan 12-16. How have external forces affecting the HRM process impacted car dealerships’ recent experience with employee turnover? Changing demographics, advances in technology, and increased competition all impact employee performance and compensation in this industry. (LO: 5, Describe strategies for retaining competent, high-performing employees, AACSB: Analytical thinking) 12-17. Several of the compensation issues described in this chapter could be applied to this case. Which issues are they, and how do they apply? Fixed pay versus variable pay affect this industry as most of the compensation is driven by sales metrics and can vary quite a bit from month to month. Also, benefits are important to younger workers emerging from college with high debt loads. (LO: 5, Describe strategies for retaining competent, high-performing employees, AACSB: Analytical thinking) 12-18. Which of the dealerships’ attempts at reducing turnover do you think seems most promising? What else might they do to reduce turnover? The “no negotiation” dealers eliminate some of the unpleasant aspects of the job. Online training is likely helpful as well. I think the dealers could offer to make student loan payments up to a certain amount for students with degrees and high debt. This option doesn’t appear much different from tuition reimbursement. They could also target older

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employees with a fixed income that want to work part time. (LO: 5, Describe strategies for retaining competent, high-performing employees, AACSB: Analytical thinking) 12-19. How, if at all, could realistic job previews for potential sales staff at car dealerships help reduce turnover? Realistic job previews would help screen out people on the front end that determined the job was not suited to their personality and skill sets. Improving the hiring process should result in a greater fit and lower turnover. (LO: 5, Describe strategies for retaining competent, high-performing employees, AACSB: Analytical thinking)

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Chapter 13 Managing Groups and Teams Few trends have influenced how work gets done in organizations as much as the use of work teams. Organizations are increasingly structuring work around teams rather than individuals. Managers need to understand what influences team performance and satisfaction. Focus on the following learning objectives as you read and study this chapter.

LEARNING OBJECTIVES 1. Define groups and the stages of group development. 2. Describe the major components that determine group performance and satisfaction. 3. Define teams and best practices influencing team performance.

CHAPTER OUTLINE INTRODUCTION Work groups are a common arrangement within today’s business organizations. Work is being restructured around groups of all kinds and in all sizes of organizations. Managers need an understanding of group behavior and the concept of teams in order to appreciate what groups can and cannot do within organizations and how groups function. 13.1

GROUPS AND GROUP DEVELOPMENT Groups exhibit different behavior—more than just the sum total of each group member’s individual behavior. In this section, we’re going to look at various aspects of group behavior. A. What Is a Group? A group is defined as two or more interacting and interdependent individuals who come together to achieve particular objectives. 1. Formal groups are work groups established by the organization and who have designated work assignments and specific tasks (see Exhibit 13-1). 2. Informal groups are natural social formations that appear in the work environment. B. Stages of Group Development. Evidence suggests that groups pass through five stages as they develop (see Exhibit 13-2). 1. Forming is the first stage in group development during which people join the group and then define the group’s purpose, structure, and leadership. Forming is a stage characterized by

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3. 4. 5.

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much uncertainty. This stage is complete when members begin to think of themselves as part of a group. Storming is the second stage of group development characterized by intragroup conflict. When this stage is complete, members will agree upon the leadership hierarchy and group direction. Norming is the third stage of group development, characterized by close relationships and cohesiveness. Performing is the fourth stage in group development when the group is fully functional. Adjourning is the final stage in group development for temporary groups. It’s characterized by concern with wrapping up activities rather than with task performance.

WORK GROUP PERFORMANCE AND SATISFACTION We need to look at how groups work. The answer to why some groups are more successful than others is quite complex. There are five factors that can affect this relationship (see Exhibit 13-3). A. External Conditions Imposed on the Group. These factors include an organization’s strategy, authority relationships, formal rules and regulations, the availability of resources, employee selection criteria, the performance management system and culture, and the general physical layout of the group’s workspace. B. Group Member Resources. These factors include member abilities and personality characteristics. Interpersonal skills have been shown to be especially important for high performance by work groups. C. Group Structure. There are seven aspects of the internal structure. Six are covered here and leadership is covered in Chapter 17. 1. Roles. A role is a set of behavior patterns expected of someone occupying a given position in a social unit. Role conflict can occur when an individual is confronted with different role expectations. 2. Norms. Norms are acceptable standards or expectations shared by a group’s members. Although each group has its own unique set of norms, there are common classes of norms that appear in organizations. 3. Conformity. Norms focus on effort and performance, dress, and loyalty. Also, because individuals desire acceptance by the groups to which they belong, they are susceptible to conformity pressure. When an individual’s opinion of objective data differs significantly from that of others in the group, he or she feels extensive pressure to align his or her opinion to conform to others’ opinions. This is known as groupthink. 4. Status Systems. Status systems are an important factor in understanding group behavior. Status is a prestige grading, position, or rank within a group. 5. Group Size. Group size can also affect the group’s overall behavior. The effect depends on which outcomes are focused on. An important finding related to group size is social loafing—the tendency for individuals to expend less effort when working collectively than when working individually.

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Group Cohesiveness. Group cohesiveness is the degree to which members are attracted to a group and share the group’s goals. Research has shown that highly cohesive groups are more effective than those that are less cohesive. However, it’s important to look at the degree to which the group’s attitude aligns with the goals (see Exhibit 13-5.) Group Processes. Group processes include the communication patterns used by members to exchange information, group decision processes, leader behavior, power dynamics, conflict interactions, and other actions. 1. Group decision making (See Exhibit 13-6) Groups make many organizational decisions. Advantages of group decision making include the following benefits: a. Generate more complete information and knowledge b. Generate more diverse alternatives c. Increase acceptance of a solution d. Increase legitimacy 2. Disadvantages of group decision making include: a. Time consuming b. Minority domination c. Pressures to conform d. Ambiguous responsibility 3. Conflict Management. Conflict management is another group concept that must be understood. Conflict is perceived when incompatible differences result in interference or opposition. a. The traditional view of conflict is the view that all conflict is bad and must be avoided. b. The human relations view of conflict is the view that conflict is a natural and inevitable outcome in any group. c. The interactionist view of conflict is the view that some conflict is necessary for a group to perform effectively. d. Functional conflicts are conflicts that support a group’s goals and improve its performance. Dysfunctional conflicts are conflicts that prevent a group from achieving its goals. See Exhibit 13-7 for Conflict and Performance relationship. 4. Three types of conflict have been identified: a. Task conflict is conflict over the content and goals of the work. b. Relationship conflict is conflict based on interpersonal relationships. c. Process conflict is conflict over how work gets done. Group Tasks. The complexity and interdependence of tasks influence the group’s effectiveness.

TURNING GROUPS INTO EFFECTIVE TEAMS

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Team work is a core feature of today’s organizations. Studies show that teams usually outperform individuals when the tasks to be completed require multiple skills, judgment, and experience. A. The Difference Between Groups and Teams. 1. Work teams are groups whose members work intensely on a specific, common goal using their positive synergy, individual and mutual accountability, and complementary skills. 2. Although most students are familiar with the concept of a “team,” many may be less familiar with the concept of a “work team.” All work teams are groups, but only formal groups can be work teams. Exhibit 13-8 highlights the differences between groups and teams. B. Types of Work Teams. Certain characteristics distinguish different types of teams: 1. A problem-solving team is a type of work team that is composed of a manager and his or her subordinates from a particular functional area. 2. A self-managed team is a type of work team that operates without a manager and is responsible for a complete work process or segment. 3. A cross-functional team is a work team composed of individuals from various specialties. 4. A virtual team is a type of work team that uses technology to link physically dispersed members in order to achieve a common goal.

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IT’S YOUR CAREER: Maximizing Outcomes Through Negotiation Everything is negotiable!” Managers negotiate with employees, bosses, colleagues, suppliers, and sometimes even customers. And each of us, in our daily lives, will find ourselves having to negotiate with parents, spouses, children, friends, neighbors, and car salespersons—just to name the obvious. Here are some brief suggestions to hone your skills at negotiating: 1. Do your homework. Gather as much pertinent information as possible before your negotiation. 2. Assess goals. Take the time to assess your own goals and the other party’s goals and interests. 3. Begin with a positive proposal. Concessions tend to be reciprocated. So start with something positive. 4. Address problems, not personalities. Concentrate on the negotiation issues, not on the personal characteristics of your opponent. 5. Pay attention to the interpersonal aspects of the negotiation process. Negotiating is communicating. Trust is an important part of that communication. 6. Pay little attention to initial offers. Initial offers tend to be extreme and idealistic. 7. Emphasize win-win solutions. Look for solutions that can allow both you and the person you’re negotiating with to declare a victory.

Creating Effective Work Teams. The establishment of teams in the workplace will not automatically enhance productivity. Managers must look closely at how they can successfully develop and manage effective teams. 1. Research has been conducted on the characteristics associated with effective teams. The research on this subject indicates that effective teams have a number of characteristics. 2. Nine characteristics are associated with effective teams (see Exhibit 13-9): a. Clear goals b. Relevant skills c. Unified commitment d. Good communication e. Negotiating skills f. Appropriate leadership g. Internal support h. External support i. Mutual trust

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WORKPLACE CONFIDENTIAL: Handling Difficult Coworkers Some people are easy to get along with and some aren’t. So, how do you handle that second group at work? Start by recognizing the behavior that annoys you and then try not to make it personal. Try to view things from their perspective. The following lists several styles, or behavioral types, and how to deal with them: 1. The aggressive types. Stand up for yourself but avoid a head-on fight. Be friendly but don’t worry about being polite. 2. The complainers. Listen and acknowledge their concerns but don’t agree with them. Try to switch them to problem solving. 3. The silent or nonresponsive types. Ask open-ended questions and don’t fill in the silent spots in the conversation. 4. The know-it-all experts. Be on top of things and question them firmly without confrontation. Channel their energy into positive things. 5. The toxic coworker. This person is destructive, abusive, and may have traits of psychopathy, narcissism, or Machiavellianism. Try to physically distance yourself from this person. Set boundaries and be prepared to take your complaints to your supervisor.

ANSWERS TO REVIEW AND DISCUSSION QUESTIONS Student answers to these questions will vary. 13-1. Describe the different types of groups and the five stages of group development. A group is two or more interacting and interdependent individuals who come together to achieve specific goals. Formal groups are work groups that are defined by the organization’s structure and have designated work assignments and specific tasks directed at accomplishing organizational goals. Informal groups are social groups. The forming stage consists of two phases: joining the group and defining the group’s purpose, structure, and leadership. The storming stage is one of intragroup conflict over who will control the group and what the group will be doing. The norming stage is when close relationships and cohesiveness develop, as norms are determined. The performing stage is when group members began to work on the group’s task. The adjourning stage is when the group prepares to disband. (LO: 1, Define groups and the stages of group development, AACSB: Analytical thinking) 13-2. Explain how external conditions and group member resources affect group performance and satisfaction. External conditions, such as availability of resources, organizational goals, and other factors, affect work groups. Group member resources (knowledge, skills, abilities, personality traits) can influence what members can do and how effectively they will perform in a group. (LO: 2, Describe the major components that determine group performance and satisfaction, AACSB: Analytical thinking) 13-3. Discuss how group structure, group processes, and group tasks influence group performance and satisfaction.

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Group roles generally involve getting the work done or keeping group members happy. Group norms are powerful influences on a person’s performance and dictate things such as work output levels, absenteeism, and promptness. Pressures to conform can heavily influence a person’s judgment and attitudes. If carried to extremes, groupthink can be a problem. Status systems can be a significant motivator with individual behavioral consequences, especially if incongruence is a factor. What size group that is most effective and efficient depends on the task the group is supposed to accomplish. Cohesiveness is related to a group’s productivity. Group decision making and conflict management are important group processes that play a role in performance and satisfaction. If accuracy, creativity, and degree of acceptance are important, a group decision may work best. Relationship conflicts are almost always dysfunctional. Low levels of process conflicts and low-to-moderate levels of task conflicts are functional. Effective communication and controlled conflict are most relevant to group performance when tasks are complex and interdependent. (LO: 2, Describe the major components that determine group performance and satisfaction, AACSB: Analytical thinking) 13-4. Compare groups and teams. Characteristics of work groups include a strong, clearly focused leader; individual accountability; purpose that’s the same as the broader organizational mission; individual work product; efficient meetings; effectiveness measured by influence on others; and a group that discusses, decides, and delegates together. Characteristics of teams include shared leadership roles; individual and mutual accountability; specific team purpose; collective work products; meetings with open-ended discussion and active problem solving; performance measured directly on collective work products; and a team that discusses, decides, and does real work. (LO: 3, Define teams and best practices influencing team performance, AACSB: Analytical thinking) 13-5. Describe the four most common types of teams. A problem-solving team is one that’s focused on improving work activities or solving specific problems. A self-managed work team is responsible for a complete work process or segment and manages itself. A cross-functional team is composed of individuals from various specialties. A virtual team uses technology to link physically dispersed members in order to achieve a common goal. (LO: 3, Define teams and best practices influencing team performance, AACSB: Analytical thinking) 13-6. List the characteristics of effective teams. The characteristics of an effective team include clear goals, relevant skills, mutual trust, unified commitment, good communication, negotiating skills, appropriate leadership, and internal and external support. (LO: 3, Define teams and best practices influencing team performance, AACSB: Analytical thinking) 13-7. Explain the role of informal (social) networks in managing teams. Research on social networks has shown that when people need help getting a job done, they’ll choose a friendly colleague over someone who may be more capable. Another recent review of team studies showed that teams with high levels of interpersonal interconnectedness actually attained their goals better and were more committed to staying together. (LO: 3, Define teams and best practices influencing team performance, AACSB: Analytical thinking)

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ETHICS DILEMMA Student answers to these questions will vary. What do you do when a coworker shares that he has shaved his entire body to reduce aerodynamic drag? Have you ever been involved in an office romance? In this ethical dilemma, students are asked what they think when colleagues share personal information or become involved in workplace romances. An obvious issue to address here is does it cross the line and become sexual harassment. Sharing information that is too personal may create a hostile work environment. Employees should know their rights and be able to tell a coworker that they do not want to hear information they are uncomfortable with. 13-8. What do you think? Why do many work colleagues become romantically involved? Why do some coworkers choose to share personal information? Student answers will vary but when people spend a lot of time together they can grow too comfortable with one another and begin to share personal information or may even become involved with one another. Proximity and familiarity can trigger both of these issues. (LO: 3, Define teams and best practices influencing team performance, AACSB: Ethical understanding and reasoning) 13-9. Should employees inform their managers about such relationships? Explain your reasoning. Student answers will vary. I believe the managers should be aware of the situation since it could create issues if one employee reported to the other at work. It can rapidly make someone uncomfortable if the two show physical displays of affection at work. (LO: 3, Define teams and best practices influencing team performance, AACSB: Ethical understanding and reasoning) 13-10. What are the ethical implications of coworkers’ becoming romantically involved? Sharing too much information? Student answers will vary. Power relationships can emerge where one person uses another and/or becomes emotionally and physically attached. This can affect performance and your other coworkers. It becomes even more problematic if one or the other has a significant other at home. (LO: 3, Define teams and best practices influencing team performance, AACSB: Ethical understanding and reasoning)

SKILLS EXERCISE: DEVELOPING YOUR COACHING SKILLS Managers are expected to add coaching to the growing list of expected skills. In this exercise, students are to find a friend they can coach on a project or assignment. Students are asked to analyze ways to improve performance and abilities, create a supportive climate, and influence the friend to change his or her behavior to improve performance. (LO: 3, Define teams and best practices influencing team performance, AACSB: Written and oral communication)

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WORKING TOGETHER: TEAM EXERCISE In this exercise, students are to imagine that they have been put in charge of a team to create new products for a software company. Issues for students to think about include diverse group membership, rules of team behavior that would stimulate creativity, rewards for team members, and evaluation of members. Students may want to refer to Exhibit 13-9 for the characteristics of effective teams. (LO: 2, Describe the major components that determine group performance and satisfaction, AACSB: Written and oral communication)

MY TURN TO BE A MANAGER •

Think of a group to which you belong (or have belonged). Trace its development through the stages of group development as shown in Exhibit 13-2. How closely did its development parallel the group development model? How might the group development model be used to improve this group’s effectiveness? (LO: 1, Define groups and the stages of group development, AACSB: Analytical thinking)

•

Using this same group, write a report describing the following things about this group: types of roles played by whom, group norms, group conformity issues, status system, size of group and how effective/efficient it is, and group cohesiveness. (LO: 1, Define groups and the stages of group development, AACSB: Reflective thinking)

•

Using the same group, describe how decisions are made. Is the process effective? Efficient? Describe what types of conflicts seem to arise most often (relationship, process, or task) and how those conflicts are handled. Add this information to your report on the group’s development and structure. (LO: 2, Describe the major components that determine group performance and satisfaction, AACSB: Reflective thinking)

•

Select two of the characteristics of effective teams listed in Exhibit 13–9 and develop a team-building exercise for each characteristic that will help a group improve that characteristic. Be creative. Write a report describing your exercises and be sure to explain how your exercise will help a group improve or develop that characteristic. (LO: 3, Define teams and best practices influencing team performance, AACSB: Reflective thinking)

•

Often new teams that must become productive quickly start off by writing ground rules or a team working agreement. Conduct some research on team working agreements and create a summary of what such an agreement might include. When assigned your next team project, try writing a team working agreement to kick off your project. (LO: 3, Define teams and best practices influencing team performance, AACSB: Reflective thinking)

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ANSWERS TO CASE APPLICATION 1 QUESTIONS Student answers to these questions will vary. Making Delivery Drones a Reality at Alphabet 13-11. Which of the team types apply to Project Wing team? The response to this question will depend on individual student opinions. However, this team appears to have a lot of the characteristics of several different types of teams. It was a problem-solving team, a self-managed work team and a cross-functional team. (LO: 3, Define teams and best practices influencing team performance, AACSB: Analytical thinking) 13-12. How might different group development stages apply to this team? In your answer, note how making changes to the drone design might have impacted the stages of group development. This team has probably gone through the first four stages; forming, storming, norming and performing. Change in drone design could have generated some intergroup conflict over possible solutions. This stage is the storming stage. The team still appears to be together so it has not reached the adjourning stage, although one could argue a spinoff into a distinct unit disbanded the team element. (LO: 1, Define groups and the stages of group development, AACSB: Analytical thinking) 13-13. What kinds of conflict do you think might have occurred at different points described in this case? Why or why not were these kinds of conflict effective for the team? Strong-willed individuals will often disagree on the best solutions and the resulting conflict can result in a stronger, more cohesive team. The end result should be a better product as ideas are shared and the best solutions adopted. (LO: 1, Define groups and the stages of group development, AACSB: Analytical thinking) 13-14. How did the “external conditions imposed on the group” (see Exhibit 13-3) help or hinder Project Wing? The group has access to abundant resources, which was helpful. However, government regulations on flight paths and air traffic control hindered the ability to complete the task. Other external resources could have a positive or negative impact. (LO: 2, Describe the major components that determine group performance and satisfaction, AACSB: Analytical thinking)

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ANSWERS TO CASE APPLICATION 2 QUESTIONS Student answers to these questions will vary. “Remote Week” at HubSpot 13-15. What type of team(s) were exemplified by the team participating in “Remote Week” at HubSpot? The response to this question will depend on individual student opinions. However, HubSpot appears to have all types of teams participating, including problem-solving teams, self-managed work teams, cross-functional teams, and virtual teams. All members were required to hold meetings online. (LO: 3, Define teams and best practices influencing team performance, AACSB: Analytical thinking) 13-16. Explain how norms and roles were a part of making HubSpot’s marketing team function well during “Remote Week.” Managers were expected to have everyone participate and share their feedback with the rest of the organization. The group determined that someone needed to fill the role of facilitator to ensure everyone had input. (LO: 2, Describe the major components that determine group performance and satisfaction, AACSB: Analytical thinking) 13-17 What challenges did “Remote Week” try to address that virtual teams often have? Group participation, cohesiveness, and effective collaboration were all potential issues they were attempting to address. They also found out that unplanned conversations can generate good ideas or outcomes and they needed to find ways to encourage that behavior. (LO: 3, Define teams and best practices influencing team performance, AACSB: Analytical thinking) 13-18. How is each of the characteristics of creating effective work teams relevant to virtual teams? Virtual teams, just like other teams, need clear goals and strong leadership to keep the meeting on track and focused. Members all need to have the relevant skills, mutual trust of team members, commitment to the team’s goals, and good communication skills. The teams also need internal and external support to accomplish their assigned task. In short, the same skills and attributes that make non-virtual teams effective are still important to a virtual team. (LO: 3, Define teams and best practices influencing team performance, AACSB: Analytical thinking)

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Part 4: Management Practice A Manager’s Dilemma Suppose you’re a manager at Google’s Hyderabad facility. How would you gauge a potential hire’s ability to work as a team member, and how would you maintain your team’s innovation when new engineers and designers join the group? There are a variety of answers for this, but management must be very creative and the motivation can't just be extrinsic. Managers would need to be in continuous dialogue with the employees to keep them engaged and to understand their desires and future plans. Another factor to consider is generational differences. Ask students from a Generation-Y perspective what Google could do to continue to develop this culture of success. Money and perks may not be as motivating to the new generation of employees. It may be that the most desirable benefits are flexibility and more time off. Global Sense How might workforce productivity be affected by organizational design? Look at the six key elements of organizational design. There is a strong connection between organizational design and productivity, similar to the connection between organizational strategy and the environment. Some forms of design are aimed at increasing efficiency while others are aimed at effectiveness, but the best choice of design depends on customer demand and the environment. Choosing the best design will make a company more productive in the long run. The key elements in organizational design are work specialization, chain of command, span of control, departmentalization, centralizationdecentralization, and formalization. Ask students to think about how changing one of these factors could affect either efficiency or effectiveness for Starbucks. What types of adaptive organizational design might be conducive to increasing worker productivity? Which might be detrimental to worker productivity? Chapter 11 addresses a variety of flexible organizational designs. These designs capitalize on decentralization of decision making, the use of teams, and the use of technology to create a more productive organization. The types of flexible design that could be used include: • Team Structure • Matrix Structure • Project Structure • Virtual Organizations • Learning Organizations While each type has certain advantages, there are also disadvantages. For example, the matrix structure increases efficiency by using both a functional and product/service structure together. But the matrix structure also violates the principle of the unity of command. The team structure can also be advantageous in that it incorporates employee empowerment and a more responsive means of making decisions. On the other hand, teams require a lot of training and are not suited for all types of employees or positions. How might an organization’s human resource management approach affect worker productivity? How could managers use their HR processes to improve worker productivity?

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Most managers now realize that employees represent an important competitive advantage for an organization. And the way employees are treated has a direct impact on how they perform. Human resource policy affects employees in a variety of important ways, including staffing, training, compensation, and appraisals. Break students into groups and assign each one function of HRM. Ask students to brainstorm ways that the proper management of that function can improve an organization’s bottom line. Are teams more productive than individuals? Discuss and explain. There is no “yes” or “no” answer to this question. First, which is more productive depends on the task being performed. Teams are better on tasks that require innovation, employee buy-in, and are so complex that one individual cannot perform the complete task alone. On the other hand, teams require more time to form and have potential drawbacks for individual performance such as social loafing and groupthink. Second, some teams are better than others because of training, the level of cohesion, buy-in to team goals, trust, and appropriate leadership. What could managers do to reduce the stress that employees feel due to pressure from managers to increase productivity growth? While the numbers presented in the case show that employee productivity has stifled or actually decreased for some countries, most students would be surprised to find that for the U.S., productivity per employee is something that has been growing steadily since it was first measured. Factors within management’s control that have been shown to reduce or control employee stress include making sure the employee’s skills match the job, improving communication to reduce ambiguity, and provide clear performance goals. Firms could also offer time management courses and a period of time where employees could exercise.

Continuing Case Starbucks—Organizing Discussion Questions with Answers; Teaching Suggestions P4-1. What types of departmentalization are being used? Explain your choices. (Hint: In addition to information in the case, you might want to look at the complete list and description of corporate executives on the company’s website.) If your classroom has internet capabilities, access some company information for Starbucks with your students at the following address: https://stories.starbucks.com/leadership/ (You may want to suggest to students that they can access this information outside of class and print copies to use as a reference in studying the remainder of the part-ending comprehensive cases on Starbucks.) If internet access is not available in your classroom, your students should examine these company websites outside of class. Reading this material and the information in the Part IV ending case material, students will likely be impressed by the number of senior positions in the Starbucks organizational structure. After studying material in the text on departmentalization (see page 277) and referring to Exhibit 11-3 on page 278, students should be able to recognize and give examples of a variety of forms of departmentalization, including functional (e.g., Supply Chain Operations, Partner Resources, Finance), geographical (e.g., Western Division, Eastern Division); and product (e.g., Global Consumer Products).

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P4-2. What possible problems could Starbucks encounter with their matrix structure? What could they do to try to minimize these problems? Students’ answers to this question may vary. However, the matrix structure creates a dual chain of command, so reporting issues could arise. This violates the unity of command principle but it could be minimized by regular communication between all parties so everyone is on the same page. P4-3. If Starbucks wanted to offer compressed workweeks, flextime, or job sharing, what would they need to consider? What are the advantages and disadvantages of offering these employment options at Starbucks? These benefits can improve morale and help Starbucks attract additional talent. The primary consideration is scheduling for all of these benefit options and additional compatibility issues if job sharing was an option offered. Evaluating some employees might become more challenging as well. P4-4. Starbucks has said its goal is to expand delivery to one-quarter of its US stores and increase earnings per share by 10 percent. How will the organizing function contribute to the accomplishment of these goals? Students’ answers to this question should reflect their understanding of ways in which the six elements of organizational design enhance Starbucks’ ability to grow while maintaining the company’s uncompromising principles. Before class begins, you may want to write each of Starbucks’ long-term goals at the top of a portion of the board in your classroom, as follows: • •

Expand delivery to one-quarter of its US stores Increase earnings per share by 10 percent

To initiate a class discussion, ask three students in your class to help in answering this question, each standing beside a different long-term goal you have written on the board. Ask students in the class to give suggestions, to be recorded on the board by the three standing students, concerning ways in which the six elements of organizational structural might contribute to the accomplishment of each of these long-term goals of Starbucks. P4-5. Starbucks has said that it wants people who have the ability to create “genuine moments of connection” with customers, a willingness to learn, and an openness to getting the job done while helping fellow team members. How does the company ensure that its hiring and selection process identifies those kinds of people? In order to identify the type of job candidates the company is seeking, Starbucks utilizes a variety of recruiting sources, including: • An interactive and user-friendly online Career Center, located at https://www.starbucks.com/careers • Recruiting events in various locations throughout the year, where potential partners can talk to recruiters and employees of Starbucks • The acceptance of an employment application at any Starbucks store location • Internships for students during the summer months • Employment practices providing equal employment opportunities and the strict prohibition of discrimination P4-6. Evaluate Starbucks’ training efforts. What other type(s) of training might be necessary? Your students will want to access the following site for additional information before answering this question: https://www.starbucks.com/careers.

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Students’ responses to Question P4-6 should include information describing diversity training; the “green apron book”; and the different number of hours of training provided for baristas, shift supervisors, assistant store managers, store managers, and district managers. They should also note the class on coffee education taken by every partner; the variety of classes offered at the corporate support center; and the career counseling, executive coaching, job rotation, mentoring, and leadership development opportunities provided by Starbucks. P4-7. Pretend that you’re a local Starbucks’ store manager. You have three new hourly partners (baristas) joining your team. Describe the orientation you would provide these new hires. This question can serve as a springboard for discussion of students’ recommendations for effective orientation programs. Have students participate in the activity entitled “How Did Your Job Begin?” in “Managing Your Most Important Resource: The People” below. Managing Your Most Resource: The People

Important

How Did Your Job Begin?

In small groups of four or five students, ask each student to describe the orientation he or she received for a job held in the past or present. You might ask students to address these questions by sharing their experiences with their team members: • Describe the orientation you received for this position. • In your opinion, how effective was the orientation you received? • What changes do you think could have been made to improve the quality of this orientation? • What effect, if any, did the quality of this orientation have on your subsequent job performance and degree of job satisfaction?

P4-8. If Starbucks wanted to implement multiperson comparisons or 360-degree appraisals as methods of evaluating employee performance, what possible issues (both positive and negative) might arise? How might those employee performance management methods affect how store managers manage their teams? Multiperson comparisons pit one employee against another and are difficult to accomplish with a large number of employees. It could create negative competition issues or it could push people to perform better. The 360-degree appraisal method is very time consuming since it utilizes feedback from supervisors, employees, and coworkers. If the assessments do not remain confidential it could create a toxic working environment. Store managers might opt to simply give all team members the same rating to avoid conflict. P4-9. Which of the company’s values affect the organizing function of management? Explain how the one(s) you chose would affect how Starbucks’ managers deal with (a) structural issues; (b) HRM issues; and (c) issues in managing teams. (Hint: Starbucks’ values can be found on the company’s website.) Students’ answers to this question will require critical thinking skills and an understanding of the importance of effective use of concepts and methods presented in Part 2 of the textbook. Any of the core values could serve as a viable basis for an analysis of how its core values affect the organizing function of management at Starbucks.

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Chapter 14 Managing Communication Without communication, nothing would ever get done in organizations. Managers are concerned with two types of communication: interpersonal and organizational. We look at both in this chapter and the role they play in a manager’s ability to be efficient and effective. Focus on the following learning objectives as you read and study this chapter.

LEARNING OBJECTIVES 1. 2. 3. 4.

Define the nature and function of communication. Describe the communication process. Explain how communication can flow most effectively in organizations. Describe how the internet and social media affect managerial communication and organizations. 5. Discuss how to become a better communicator.

CHAPTER OUTLINE INTRODUCTION Communication between managers and employees provides the information necessary to get work done effectively and efficiently in organizations. Chapter 14 presents basic managerial communication concepts including the interpersonal communication process, methods of communicating, barriers to effective communications, and ways to overcome these barriers. Organizational communication issues such as communication flow and communication networks, and contemporary issues and challenges associated with electronic communications and information technology are covered as well. 14.1

UNDERSTANDING COMMUNICATION The importance of effective communication cannot be overemphasized because everything a manager does involves communicating. A. What Is Communication? Communication is the transfer and understanding of meaning. 1. If no information or ideas have been conveyed or transferred, communication has not taken place. 2. For communication to be successful, the meaning must be imparted and understood. 3. Good communication does not require agreement with the message—only a clear understanding of the message. 4. Communication encompasses both interpersonal communication (between two or more people) and

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organizational communication (all the patterns, networks, and system of communication within an organization). Functions of Communication. Effective communication serves four major functions: control, motivation, emotional expression, and information.

THE COMMUNICATION PROCESS Exhibit 14-1 illustrates the seven elements of the communication process: the communication source (the sender), the message, encoding, the channel, decoding, the receiver, and feedback. Note that the entire process is susceptible to noise—any disturbances that interfere with the transmission, receipt, or feedback of a message. A. Modes of Communicating. People rely on three primary ways to transmit meaning among themselves. These are oral, written, and nonverbal communication. 1. Oral Communication includes speeches, one-on-one discussion, and any other form of verbal communication. It has the advantage of speed and rapid feedback. However, if the message passes through several people, it has the potential for distortion. 2. Written Communication includes letters, emails, and any other method with written words or symbols. It is commonly used in business communication. 3. Nonverbal Communication is communication transmitted without words. The best-known types of nonverbal communication are body language and verbal intonation. a. Body language refers to gestures, facial expressions, and other movements of the body that convey meaning. b. Verbal intonation is an emphasis given to words or phrases that conveys meaning. B. Barriers to Effective Communication. 1. Cognitive. Information overload occurs when the information we have to work with exceeds our processing capacity. a. Receivers tend to select out, ignore, pass over, or forget information when they have information overload. b. Alternatively, receivers may put off further processing until the overload situation is over, which also results in lost information and less effective communication. 2. Filtering is the deliberate manipulation of information to make it appear more favorable to the receiver. a. As information is communicated upward through the organizational levels, senders condense and synthesize it so that top managers will not experience information overload. These senders filter communication through their personal interests and perceptions of what is important. b. The more vertical layers present in the structure of an organization, the more opportunities there are for filtering. c. The more that organizational rewards emphasize style and appearance, the more managers will be motivated to filter communications in their favor.

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Emotions. Emotions influence how a receiver interprets a message when it is received. It is best for receivers to avoid reacting to a message when they are upset because they are not likely to be thinking clearly. 4. Language. With a diverse workforce, different words mean different things to different people, even when they speak the same language. a. Age, education, and cultural background can influence language use and the definitions given to words. b. Jargon is specialized terminology or technical language that members of a group use to communicate among themselves. 5. Silence. Silence is sometimes defined as the absence of information, but this is far from true. Silence can indicate disinterest, disagreement, and information overload among other things. 6. National Culture. National culture can affect the way a manager chooses to communicate. Overcoming the Barriers 1. Use Feedback. The feedback might be verbal or nonverbal, or both. 2. Simplify Language. a. The manager should consider characteristics of the intended audience, tailoring the message to the receiver. b. The sender should remember that understanding is improved when he or she uses language that is familiar to the receiver. 3. Listen Actively. a. In listening, two people are engaged in thinking: the receiver as well as the sender. Listening is an active search for meaning. b. Active listening is listening for full meaning without making premature judgments or interpretations. c. Active listening is enhanced by developing empathy with the sender—placing oneself in the sender’s position. d. “It’s Your Career” on page 366 lists additional behaviors demonstrated by active listeners. 4. Constrain Emotions. A manager should strive to refrain from communicating until he or she has regained composure. 5. Watch Nonverbal Cues. Actions speak louder than words, so the sender should ensure that his or her actions are in alignment with and reinforce the verbal message.

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WORKPLACE CONFIDENTIAL: An Uncommunicative Boss Many of us may find ourselves in a situation where we have a boss who is never around, always seems too busy to talk, or doesn’t respond to messages. The following suggestions can help you deal with this situation. 1. Ask yourself if you are being singled out: Does the boss treat everyone this way? If not, you may be part of the problem. 2. Does the organization’s culture encourage your boss’s behavior? Look around you. If most of the other managers behave in the same manner, the situation is unlikely to change. 3. Are there good reasons for your boss to be uncommunicative? Your boss may have too much responsibility or too many employees to manage effectively. 4. Be proactive: Support your boss: Be positive around your boss and make them feel good about what they do. 5. Share your needs with your boss. Your boss may not realize there’s a problem if you don’t let them know your concerns. 6. Act, but keep your boss informed: Move forward on your own and create a paper trail to support you were keeping the boss informed. 7. Look for a boss-substitute: Find someone else to mentor and support you. 8. Protect yourself. Get to know your boss’s boss: Develop a relationship with your boss’s superior. It can help in several ways. 9. Turn this situation to your favor: Look at the positive side. This is a chance to step and possibly open the door to promotion when someone notices you are filling a leadership void.

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EFFECTIVE ORGANIZATIONAL COMMUNICATION A. Formal Versus Informal. 1. Formal communication is communication that follows the official chain of command or is required to do one’s job. 2. Informal communication is communication that is not defined by the organization’s structural hierarchy. a. Informal communication systems permit employees to satisfy their need for social interaction. b. Informal communication systems can improve an organization’s performance by creating alternative—and frequently faster and more efficient—channels of communication. B. Direction of Flow. 1. Downward. Downward communication is communication that flows downward from a manager to employees. It is used to inform, direct, coordinate, and evaluate employees. a. Town hall meetings are informal public meetings where top executives relay information, discuss issues, or bring employees together to celebrate accomplishments. 2. Upward Communication. Upward communication is communication that flows upward from employees to managers.

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Upward communication can be used to keep managers aware of how employees feel about their jobs, their coworkers, and the organization in general. b. The organizational culture influences the extent of upward communication. A climate of trust, respect, and participative decision making encourages a significant amount of upward communication. A highly mechanistic and authoritarian environment severely limits upward communication in terms of both style and content. 3. Lateral Communication. Lateral communication is communication that takes place among any employees on the same organizational level. 4. Diagonal Communication. Diagonal communication is communication that cuts across work areas and organizational levels. a. The increased use of email facilitates diagonal communication in an organization. b. Diagonal communication has the potential to create problems if employees do not keep their managers informed about decisions they have made or action they have taken. Networks. 1. Exhibit 14-2 illustrates three common types of communication networks. 2. Types of Communication Networks. a. The chain network represents communication flowing according to the formal chain of command, both downward and upward. b. The wheel network represents communication flowing between a clearly identifiable and strong leader and others in a work group or team. The leader serves as the hub through which all communication passes. c. The all-channel network represents communication flowing freely among all members of a work team. 3. The grapevine is the informal organizational communication network. a. The grapevine is active in almost every organization. One survey reported that 63 percent of employees hear about matters first through rumors on the grapevine. b. The grapevine can act as both a filter and a feedback mechanism.

COMMUNICATION IN THE INTERNET AND SOCIAL MEDIA AGE Technology is changing the way we work and communicate. Information technology (IT) now touches every aspect of almost every company’s business. The implications for how, where, and when managers communicate are profound. A. The 24/7 Work Environment. 1. Thanks to advances in IT, employees are now connected 24/7 regardless of where they are located.

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Social Media. 1. Various social media platforms like YouTube and Twitter have become popular means for communication between employees and between top level managers and their employees. 2. Technology is significantly affecting the way organizations communication and share work. Cybersecurity. 1. Hackers constantly target firms to obtain sensitive information about employees, confidential communications, and other private information. Target, Home Depot, and many other large firms have been successfully hacked in the past few years. 2. Today almost everything an organization does is digitally tracked and recorded. This fact makes cybersecurity extremely important. 3. Firms can reduce the threat by using secure passwords, backing up data, using secure Wi-Fi, and other security steps.

BECOMING A BETTER COMMUNICATOR You should always take the opportunity to improve your communication skills. In addition to listening skills, successful managers also need skills in persuasion, speaking, writing, and reading. A. Sharpening Your Persuasion Skills. 1. Persuasion skills enable a person to influence others to change their minds or behavior. B. Sharpening Your Speaking Skills. 1. Speaking skills refer to the ability to communicate information and ideas by talking so others will understand. One survey revealed that 70 percent of employees who make presentations say that good presentation skills are important to career success. 2. Effective speakers speak with authenticity, humility, brevity, and a clear understanding of the audience. C. Sharpening Your Writing Skills. 1. Writing skills entail communicating effectively in text that is most appropriate for its audience. The abbreviations and jargon that are standard in texting among friends and family are not always appreciated in a business setting. 2. Some tips: a. Don’t be in a rush to press the send button or drop the memo in the mail. b. Express information and ideas logically and don’t switch back and forth between topics. c. Check the accuracy of the content. d. Read the message carefully to ensure that an inaccurate word for the context doesn’t slip in. D. Sharpening Your Reading Skills. 1. Reading skills entail an understanding of written sentences and paragraphs in work-related documents. a. If your reading skills aren’t up to par—either in comprehension or speed—don’t be afraid to sign up for a reading-improvement class.

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ANSWERS TO REVIEW AND DISCUSSION QUESTIONS Student answers to these questions will vary. 14-1. Define communication, interpersonal communication, and organizational communication. Why isn’t effective communication synonymous with agreement? Communication is the transfer and understanding of meaning. Interpersonal communication is communication between two or more people. Organizational communication includes all the patterns, networks, and systems of communication within an organization. Effective communication is not the same as agreement because if someone disagrees with us, we assume that the person just didn’t fully understand our position. In other words, many of us define good communication as having someone accept our views. But I can clearly understand what you mean and just not agree with what you say. (LO: 1, Define the nature and function of communication, AACSB: Analytical thinking) 14-2. What are the functions of communication? The functions of communication include controlling employee behavior, motivating employees, providing a release for emotional expression of feelings and fulfillment of social needs, and providing information. (LO: 1, Define the nature and function of communication, AACSB: Analytical thinking) 14-3. Explain the components in the communication process. Before communication can take place, a purpose, expressed as a message to be conveyed, must exist. It passes between a source (the sender) and a receiver. The message is converted to symbolic form (called encoding) and passed by way of some medium (channel) to the receiver, who retranslates the sender’s message (called decoding). The result is the transfer of meaning from one person to another. The entire process is susceptible to noise—disturbances that interfere with the transmission, receipt, or feedback of a message. (LO: 1, Define the nature and function of communication, AACSB: Analytical thinking) 14-4. What are the various communication methods managers can use? What criteria can managers use to evaluate those communication methods? The communication methods include face-to-face, telephone, group meetings, formal presentations, memos, traditional mail, fax, employee publications, bulletin boards, other company publications, audio- and videotapes, hotlines, email, computer conferencing, voice mail, teleconferences, and videoconferences. Managers can evaluate the various communication methods according to their feedback, complexity capacity, breadth potential, confidentiality, encoding ease, decoding ease, time-space constraint, cost, interpersonal warmth, formality, scanability, and time of consumption. (LO: 2, Describe the communication process, AACSB: Written and oral communication) 14-5. Contrast formal and informal communication. Formal communication is communication that takes place within prescribed organizational work arrangements. Informal communication is not defined by the organization’s structural hierarchy. (LO: 2, Describe the communication process, AACSB: Written and oral communication)

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14-6. Explain communication flow, the three common communication networks, and how managers should handle the grapevine. Communication in an organization can flow downward, upward, laterally, and diagonally. The three communication networks include the chain, in which communication flows according to the formal chain of command; the wheel, in which communication flows between a clearly identifiable and strong leader and others in a work team; and the allchannel, in which communication flows freely among all members of a work team. Managers should manage the grapevine as an important information network. The negative consequences of rumors can be minimized by communicating openly, fully, and honestly with employees. (LO: 3, Explain how communication can flow most effectively in organizations, AACSB: Analytical thinking) 14-7. How have the internet and social media changed organizational communication? The internet is transforming the work place. Today’s manager spends more than a quarter of his or her workweek dealing with email, is available essentially 24/7, and can work from anywhere. Using social media like YouTube, managers can communicate information to help the company achieve goals. (LO: 4, Describe how the internet and social media affect managerial communication and organizations, AACSB: Analytical thinking) 14-8. What are some specific steps you can take to become a better communicator? Good communicators have strong skills in listening, persuasion, speaking, writing, and reading. Students should explore the Skills Exercise on page 375 to see how to develop these skills. (LO: 5, Discuss how to become a better communicator, AACSB: Reflective thinking)

ETHICS DILEMMA Student answers to these questions will vary. In this chapter’s ethical dilemma, students are to consider what happens when colleagues or even your boss wants to “friend” you on a social network site. Is it okay to provide people you know in a professional sense a “window into your personal life”? What ethical issues might arise in such a situation? In this chapter, the distinction is made between formal communication and informal communication. Most people would see Facebook as informal communication (even though we have already discussed the use of Facebook as a recruiting tool for Ernst & Young). Employees have the right to decline others access to their personal information on a social networking site, unless the site is dedicated for company use. Students should also be aware that prospective employers might also want access to their social networking information to learn more about an applicant. 14-9. What do you think? Is it okay to provide people you know in a professional sense a “window into your personal life”? Student answers may vary. However, it can be problematic given the amount of personal information some people share on social media. The work persona and the real-life persona can be completely different. (LO: 4, Describe how the internet and social media affect managerial communication and organizations, AACSB: Ethical understanding and reasoning)

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14-10. What ethical issues might arise in such a situation? Student answers may vary. One possible answer is that political and social differences in opinion could cause your boss to treat you differently based on your true beliefs. You could get unfavorable or more favorable treatment and treating someone differently based on their personal beliefs you discovered on social media is unethical. (LO: 4, Describe how the internet and social media affect managerial communication and organizations, AACSB: Ethical understanding and reasoning)

SKILLS EXERCISE: DEVELOPING YOUR PRESENTATION SKILLS Making presentations is a common task for many managers. The success of those presentations can be greatly enhanced if the manager develops strong presentation skills. Students are asked to look for opportunities to make presentations using the guidelines presented in the exercise. (LO: 5, Discuss how to become a better communicator, AACSB: Written and oral communication)

WORKING TOGETHER: TEAM EXERCISE In this exercise, students are asked to discuss possible communication challenges, possible barriers that might occur, and ways of overcoming the barriers for three different scenarios. The scenarios are: 1. You are about to go into your first meeting as the leader of a crossfunctional team. 2. You are working on a team project with a tight deadline approaching. 3. You need to lay off an employee due to declining sales and you must tell the employee they will be terminated in six weeks. (LO: 2, Describe the communication process, AACSB: Written and oral communication)

MY TURN TO BE A MANAGER •

For one day, keep track of the types of communication you use (e.g., face-toface, text, phone, email, Skype/FaceTime). Which do you use most? Least? Were your choices of communication methods effective? Why or why not? Could they have been improved? How? (LO: 2, Describe the communication process, AACSB: Written and oral communication)

•

For one day, track nonverbal communication that you notice in others. What types did you observe? Was the nonverbal communication always consistent with the verbal communication taking place? Describe. (LO: 2, Describe the communication process, AACSB: Written and oral communication)

•

Survey five different managers for their advice on being a good communicator. Put this information in a bulleted list format and be prepared to present it in class.

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(LO: 5, Discuss how to become a better communicator, AACSB: Written and oral communication) •

Improve your oral speaking skills by joining a Toastmasters Club (www.toastmasters.org). Toastmasters technology is a nonprofit organization that teaches public speaking through a network of clubs where you can practice giving speeches to an audience that provides feedback to help you improve your skills. (LO: 5, Discuss how to become a better communicator, AACSB: Written and oral communication)

•

Identify at least one company that effectively uses social media to communicate with customers and/or employees. What social media applications does the company use? Subscribe to the company’s social media feeds and take notes regarding their social media communications for at least one week. What patterns do you see? What are social media messages that are effective based on the number of “likes” or “shares”? (LO: 4, Describe how the internet and social media affect managerial communication and organizations, AACSB: Written and oral communication)

•

Given that email is still a primary method of communication within most organizations, it is important to practice using it effectively. Research email etiquette and create a list of “do’s” and “don’ts” for using email. (LO: 4, Describe how the internet and social media affect managerial communication and organizations, AACSB: Written and oral communication)

ANSWERS TO CASE APPLICATION 1 QUESTIONS Student answers to these questions will vary. Communicating as the Company Grows at Hootsuite 14-11. In what ways do Hootsuite’s communication techniques illustrate the functions of communication discussed in this chapter? Students should be able to identify several functions of communication in this case. Specifically, it is easy to see how the various communications used at Hootsuite function as information exchange (CEO videos and RandomCoffee matches), motivation (CEO videos), and emotional sharing in socialization times (RandomCoffee matches and company kitchen mixers). (LO: 1, Define the nature and function of communication, AACSB: Written and oral communication) 14-12. What barriers to effective communication could apply when Hootsuite employees experience the communication techniques described in this case? Student answers to these questions will vary. However, they could experience information overload and filtering as employees post feedback on videos. (LO: 2, Describe the communication process, AACSB: Reflective thinking)

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14-13. Which of the five ways of overcoming barriers do Hootsuite’s techniques do a good job of addressing? Which ways of overcoming barriers might need to be addressed further? Student answers to these questions will vary. Hootsuite’s techniques make good use of feedback. Everyone should have the same information and be on the same page. The social interactions should improve listening skills and the CEO’s involvement is a good nonverbal cue. It is difficult to tell the emotions in this situation and whether the language is appropriately tailored to the audience. (LO: 2, Describe the communication process, AACSB: Reflective thinking) 14-14. Which directions of communication flow (downward, upward, lateral, diagonal) are addressed in Hootsuite’s techniques? Is there anything else they could do to be more comprehensive in addressing directions of communication flow? Responses to this question will vary. It appears that Hootsuite’s techniques address all communication flows. Their approach is very comprehensive and transparent. (LO: 3, Explain how communication can flow most effectively in organizations, AACSB: Reflective thinking)

ANSWERS TO CASE APPLICATION 2 QUESTIONS Student answers to these questions will vary. Communication Challenge at Facebook 14-15. Which of the communication networks (chain, wheel, or all-channel) was involved when workers posted concerns on Facebook’s internal message boards? It appears to be an all-channel network given the posting flowed from every level of the firm between all employees. (LO: 3, Explain how communication can flow most effectively in organizations, AACSB: Reflective thinking) 14-16. In what ways was Kaplan’s appearance at the congressional hearing a form of nonverbal communication? Kaplan’s presence signaled support for Kavanaugh and could even be interpreted as a lack of support for his accuser. Given Kaplan’s position it could also be interpreted as Facebook support for Kavanaugh. (LO: 2, Describe the communication process, AACSB: Analytical thinking) 14-17. How do you think the grapevine might have played a role in employees’ reactions to Kaplan’s appearance at the congressional hearing? How could the grapevine have been involved in employees’ response to Bosworth’s post on Facebook’s internal message board? The grapevine likely spread the word rapidly about Kaplan’s appearance. In addition, the grapevine could have rallied opposition to Bosworth’s post regarding Kaplan’s appearance. (LO: 3, Explain how communication can flow most effectively in organizations, AACSB: Analytical thinking) 14-18. How could Bosworth have responded more effectively to employees’ concerns about Kaplan’s appearance?

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Bosworth could have voiced support for individuals having their own opinions and freedom of thought without telling everyone to hit the road if they disagreed with Kaplan’s appearance. (LO: 3, Explain how communication can flow most effectively in organizations, AACSB: Analytical thinking)

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Chapter 15 Understanding and Managing Individual Behavior Have you ever wondered why the people around you are behaving the way they are? People differ in their behaviors, and even the same person can behave one way one day and a completely different way another day. Managers need to understand individual behavior. Focus on the following learning objectives as you read and study this chapter.

LEARNING OBJECTIVES 1. 2. 3. 4. 5.

Identify the focus and goals of individual behavior within organizations. Explain the role that attitudes play in job performance. Describe different personality theories. Describe perception and factors that influence it. Discuss learning theories and their relevance in shaping behavior.

CHAPTER OUTLINE INTRODUCTION This chapter examines numerous factors that influence employee behavior and their implications for managers. 15.1

FOCUS AND GOALS OF ORGANIZATIONAL BEHAVIOR Organizational behavior is the study of how people act at work. The visible organization can be described as the tip of an iceberg; many of the important issues involved in understanding OB are not easily observed. (See Exhibit 15-1) A. Focus of Organizational Behavior. Organizational behavior focuses on two major areas: 1. Individual behavior 2. Group behavior B. Goals of Organizational Behavior. The goals of OB are to explain, predict, and influence behavior. Six important behaviors have been identified from the study of OB: 1. Employee productivity: a performance measure of both efficiency and effectiveness. 2. Absenteeism: the failure to show up for work. 3. Turnover: the voluntary and involuntary permanent withdrawal from an organization. 4. Organizational citizenship behavior (OCB): discretionary behavior that’s not part of an employee’s formal job requirements but promotes the effective functioning of the organization.

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5. 6.

15.2

Job satisfaction: an employee’s general attitude toward his or her job. Counterproductive workplace misbehavior: any intentional employee behavior that is potentially harmful to the organization or individuals within the organization.

ATTITUDES AND JOB PERFORMANCE Attitudes are defined as evaluative statements—favorable or unfavorable— concerning objects, people, or events. Attitudes have three components: cognitive, affective, and behavioral. 1. The cognitive component of an attitude is the part of an attitude that is made up of the beliefs, opinions, knowledge, or information held by a person. 2. The affective component of an attitude is that part of an attitude that is the emotional, or feeling, part. 3. The behavioral component of an attitude is that part of an attitude that refers to an intention to behave in a certain way. Managers are particularly interested in the job-related attitudes of employees. Job-related attitudes include job satisfaction, job involvement, organizational commitment, and organizational citizenship behavior. A. Job Satisfaction. Job satisfaction is defined as an employee’s general attitude toward his or her job. 1. How satisfied are Employees? In general, about 60% of U.S. workers reported that they were satisfied with their job between 1972 and 2006. However, this number dropped to the low 40s in 2010 which was attributed to the Great Recession. By 2017, the number of employees satisfied with their job was back up to 51%. The degree of job satisfaction has been linked to income but is probably influenced more by the type of job an employee performs. 2. Satisfaction and Performance. Following the Hawthorne Studies, many managers believed that if they kept their employees happy, the employees would be productive. Current studies show a fairly strong relationship between satisfaction and performance. 3. Satisfaction and Absenteeism. Research on job attitudes shows a strong negative relationship between job satisfaction and absenteeism. 4. Satisfaction and Turnover. The strongest variable related to job satisfaction is turnover. Lower job satisfaction is a good predictor of turnover. 5. Job Satisfaction and Customer Satisfaction. Job satisfaction has been linked to customer satisfaction, but a converse relationship has also been found to be true; customer dissatisfaction has been related to an employee’s job satisfaction. 6. Job Satisfaction and OCB. Organizational citizenship behavior is the discretionary behavior that is not part of an employee’s formal job requirements, but promotes the effective functioning of the organization. While it is obvious that job satisfaction is related to organizational citizenship behavior, other variables such as

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fairness and the type of citizenship behavior play a role in the relationship. 7. Job Satisfaction and Counterproductive Behavior. While it is difficult to predict how employees will respond, managers need to be aware that dissatisfied employees may engage in misbehavior or violence at work. Job Involvement and Organizational Commitment. Job involvement is the degree to which an employee identifies with his or her job, actively participates in it, and considers his or her job performance important to his or her self-worth. Organizational commitment is an employee’s orientation toward the organization in terms of his or her loyalty to, identification with, and involvement in the organization. 1. Research about perceived organizational support—employees’ general belief that their organization values their contribution and cares about their well-being—shows that the commitment of the organization to the employee can be beneficial. 2. High levels of perceived organizational support lead to increased job satisfaction and lower turnover. Employee Engagement. Employee engagement refers to a situation where employees are connected to, satisfied with, and enthusiastic about their jobs. 1. Highly engaged employees are passionate about and deeply connected to their work. Disengaged employees have essentially “checked out” and don’t care. Attitudes and Consistency. Research has generally shown that people seek consistency among their attitudes and between their attitudes and their behavior. Cognitive Dissonance Theory. Cognitive dissonance refers to any inconsistency that an individual might perceive between attitudes or between behavior and attitudes. 1. Dissonance or inconsistency leads to an uncomfortable state for the individual, who will try to reduce the inconsistency. 2. The desire to reduce dissonance is determined by (a) the importance of the factors creating the dissonance, (b) the degree of influence the individual believes he/she has over those factors, and (c) the rewards that may be involved in dissonance. 3. Individuals reduce dissonance either by changing their behavior, concluding that the dissonant behavior is not so important after all, by changing the attitude or by identifying compatible factors that outweigh the dissonant ones. Attitude Surveys. Companies often use surveys to ask employees how they feel about their jobs, work groups, supervisors, or the organization. Exhibit 15-2 provides some sample employee statements from an attitude survey. Implications for Managers. Managers should focus on factors that are conducive to a high degree of employee satisfaction. Such factors include mentally challenging work, equitable rewards, supportive working conditions, and supportive colleagues.

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15.3

The implication for managers from understanding attitudes is that there is relatively strong evidence that committed and satisfied employees have lower rates of turnover and absenteeism. Employees will try to reduce dissonance when they are required to do things that are at odds with their attitudes, but studies show that this feeling is reduced if the rewards are high enough or there is a belief that the dissonance is externally imposed and therefore uncontrollable.

PERSONALITY Personality is defined as the unique combination of emotional, thought, and behavioral patterns that affect how a person reacts and interacts with others. A. MBTI®. The Myers-Briggs Type Indicator (MBTI®) is a general personality assessment. The MBTI® measures four dimensions: 1. Social interaction: extrovert (E) or introvert (I) 2. Preference for gathering data: sensing (S) or intuitive (N) 3. Preference for decision making: feeling (F) or thinking (T) 4. Style of making decisions: perceptive (P) or judgmental (J) Combining these preferences provides descriptions for about 16 different personality types. Examples of MBTI® personality types are shown in Exhibit 15-3. B. The Big Five Model. The Big Five Model is a five-factor model of personality. 1. Research has shown that important relationships exist between these personality dimensions and job performance. 2. The personality traits in the Big Five Model are listed below: a. Extraversion b. Agreeableness c. Conscientiousness d. Emotional Stability e. Openness to Experience C. The Dark Triad. Some people have toxic or undesirable personality traits. Three such traits have been dubbed the Dark Triad. They are: 1. Machiavellianism is the degree to which people are pragmatic, maintain emotional distance, and believe that ends justify means. 2. Narcissism describes someone with a grandiose sense of selfimportance, who requires excessive admiration, and is arrogant. 3. Psychopathy refers to someone who lacks concern for others and lacks guilt or remorse when their actions cause harm. D.

Additional Personality Insights. Personality researchers have identified five additional personality traits that have proved to be the most powerful in explaining individual behavior in organizations: locus of control, Machiavellianism, self-esteem, self-monitoring, and risk-taking. 1. Locus of control is the degree to which people believe they control their own fate. Locus of control can be either external or internal. 2. Self-esteem is an individual’s degree of like or dislike for himself or herself.

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Self-monitoring is an individual’s ability to adjust his or her behavior to external situational factors. 4. Risk-taking refers to an individual’s willingness to take risks. 5. Proactive personality refers to someone who identifies opportunities, shows initiative, takes action, and perseveres until change occurs. Personality Types in Different Cultures. Do these personality types transfer across cultures? Although no common personality types are found in a given national culture, a country’s culture can influence dominant personality characteristics of its people. This is particularly true for the personality trait, locus of control. Emotions and Emotional Intelligence. Emotional intelligence (EI) is the ability to notice and to manage emotional cues and information. 1. Emotional intelligence is composed of five dimensions: a. Self-awareness b. Self-management c. Self-motivation d. Empathy e. Social skills 2. Research has shown that emotional intelligence is positively related to job performance at all organizational levels. 3.

WORKPLACE CONFIDENTIAL: An Abusive Boss No one wants an abusive boss. We define an abusive boss as one you perceive to be engaging in sustained displays of hostile verbal or nonverbal behaviors. So, how do you deal with that person? Here are some options that may help you handle an abusive boss: 1. Confrontation: Discuss the problem directly with your boss. 2. Passive-aggressiveness: Indirectly express your displeasure through procrastination, moodiness, or other negative behaviors. 3. Ingratiation: Try to win over your boss with flattery or positive actions. 4. Seek Support from Others: Assume there is power in numbers so a group may be able to effect change. 5. Avoidance: Stay away from your boss as much as possible. 6. Reframing: Try to view your boss’s actions in a way that make them no longer seem abusive. 7. Complain to Higher-ups: Take your complaints above your boss and they may encourage the boss to change their behavior. Which of these works best? Standing up to your boss (confrontation) results in the most satisfaction and generates good results. Oddly enough, being passive-aggressive also seems to change the boss’s perception of you and the boss’s behavior. G.

Implications for Managers. The benefit of a manager’s understanding personality differences is clearly seen in the area of employee selection. Just as individual personalities differ, so do jobs. Efforts have been made to match the proper personalities with the proper jobs.

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1. 2.

15.4

John Holland has developed the best-documented personality-job fit theory (see Exhibit 15-4). The key points of his model: Intrinsic differences in personality probably do exist among individuals; there are different types of jobs; and people who work in job environments congruent with their personality types should be more satisfied.

PERCEPTION Perception is the process of organizing and interpreting sensory impressions in order to give meaning to the environment. A. Factors that Influence Perception. A number of factors operate to shape and sometimes distort perception: 1. The perceiver 2. The target (See Exhibit 15-5) 3. The situation B. Attribution Theory is a theory that explains how we judge people differently depending on the meaning we attribute to a given behavior. The determination of the cause of the behavior depends on three factors: distinctiveness, consensus, and consistency. 1. Distinctiveness refers to whether an individual displays different behavior in different situations. 2. Consensus refers to whether an individual who is faced with a similar situation responds in the same way with the same behavior. 3. Consistency refers to the congruency in a person’s actions, that is, whether the person engages in the behaviors regularly and consistently. 4. Exhibit 15-6 summarizes the key elements of attribution theory. 5. One of the most interesting findings of attribution theory is that there are errors or biases that distort attributions. a. The fundamental attribution error refers to the tendency to underestimate the influence of external factors and overestimate the influence of internal factors when making judgments about the behavior of others. b. Self-serving bias is the tendency for individuals to attribute their own successes to internal factors while putting the blame for failures on external factors. C. Shortcuts Used in Judging Others 1. Selective perception is the fact that we are more likely to perceive something if similarities exist between the person or object and our own interests, background, experience, and attitudes. 2. Assumed similarity is the belief that others are like oneself. 3. Stereotyping refers to judging a person on the basis of one’s perception of a group to which he or she belongs. 4. Halo effect refers to a general impression of an individual based on a single characteristic. 5. Contrast effect refers to the fact that we don’t evaluate someone in isolation. Our perception is influenced by recent encounters with other people.

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15.5

Implications for Managers. Managers need to recognize that their employees react to perceptions, not reality. Management is also not immune to biases and can negatively impact employees’ perception of fairness with inaccurate appraisals or setting discriminatory wage levels.

LEARNING Learning is any relatively permanent change in behavior that occurs as a result of experience. A. Operant Conditioning is a type of learning in which desired voluntary behavior leads to a reward or prevents a punishment. 1. B. F. Skinner is the psychologist most often associated with operant conditioning theory. 2. Operant conditioning theory proposes that behavior is determined from without (that is, learned) rather than from within (reflexive, or unlearned). 3. Skinner argued that creating pleasing and desirable consequences to follow some specific behavior would increase the frequency of that behavior. 4. People will most likely engage in desired behaviors if they receive positive reinforcement for doing so. B. Social Learning is a learning theory that says people learn through observation and direct experience. Four processes determine the amount of influence that these models will have on an individual: attentional processes, retention processes, motor reproduction processes, and reinforcement processes. 1. Attentional processes. People learn from a model only when they recognize and pay attention to its critical features. 2. Retention processes. A model’s influence depends upon how well an individual remembers the model’s action. 3. Motor reproduction processes. After a person has observed a new behavior by watching a model, he/she must demonstrate an ability to do the modeled activities. 4. Reinforcement processes. Individuals will be motivated to exhibit modeled behavior if positive rewards are provided. C. Shaping: A Managerial Tool. In shaping, a manager systematically reinforces each successive step that moves an individual closer to a desired response. Behavior can be shaped in four ways: 1. Positive reinforcement is reinforcing a desired behavior by providing something pleasant after that behavior. 2. Negative reinforcement is reinforcing a desired behavior with the termination or withdrawal of something unpleasant. 3. Punishment penalizes undesirable behavior. 4. Extinction involves eliminating any reinforcement that is maintaining a behavior. D. Implications for Managers. From learning theory, managers should recognize that employees will learn while doing a job. A key question: Will managers manage employees’ learning through the rewards the managers allocate and the examples they set, or will managers allow learning to occur haphazardly?

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ANSWERS TO REVIEW AND DISCUSSION QUESTIONS Student answers to these questions will vary. 15-1. Does the importance of knowledge of OB differ based on a manager’s level in the organization? If so, how? If not, why not? Be specific. Knowledge of OB is important for all managers since executives at all levels of the organization deal with people. Low-level managers are likely to supervise employees directly, so they need to have knowledge of attitudes, perception, and learning. If they have responsibilities pertaining to the hiring of employees, they need to have knowledge about personality. Middle-level managers are likely to need knowledge of attitudes and personality, as they supervise lower-level managers. Upper-level managers need knowledge of attitudes as they deal with organizational design decisions and human resource management issues. (LO: 1, Identify the focus and goals of individual behavior within organizations, AACSB: Analytical thinking) 15-2. Explain why the concept of an organization as an iceberg is important. Like the iceberg that sunk the Titanic, the real danger of icebergs is not what lies on top, but the hidden portion underneath. In the attempt to understand employee behavior, it’s the hidden organizational elements (attitudes, perceptions, norms, etc.) that make understanding individual behavior so challenging. (LO: 1, Identify the focus and goals of individual behavior within organizations, AACSB: Analytical thinking) 15-3. Define the six important employee behaviors. Employee productivity is a performance measure of both efficiency and effectiveness. Absenteeism is the failure to report to work. Turnover is the voluntary and involuntary permanent withdrawal from an organization. Organizational citizenship behavior (OCB) is discretionary behavior that’s not part of an employee’s formal job requirements but it promotes the effective functioning of an organization. Job satisfaction is an individual’s general attitude toward his or her job. Workplace misbehavior is any intentional employee behavior that is potentially harmful to the organization or individuals within the organization. (LO: 1, Identify the focus and goals of individual behavior within organizations, AACSB: Analytical thinking) 15-4. Describe the three components of an attitude and explain the four job-related attitudes. The cognitive component refers to the beliefs, opinions, knowledge, or information held by a person. The affective component is the emotional or feeling part of an attitude. The behavioral component refers to an intention to behave in a certain way toward someone or something. (LO: 2, Explain the role that attitudes play in job performance, AACSB: Analytical thinking) 15-5. Contrast the MBTI and the Big Five model. Describe five other personality traits that help explain individual behavior in organizations.

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The MBTI focuses on learning styles and measures four dimensions: social interaction, preference for gathering data, preference for decision making, and style of making decisions. The Big Five Model is an attempt to classify personality along a variety of important behaviors and consists of five personality traits: extraversion, agreeableness, conscientiousness, emotional stability, and openness to experience. The five personality traits that help explain individual behavior in organizations are locus of control, Machiavellianism, self-esteem, self-monitoring, and risk-taking. Other personality traits include Type A/Type B personalities, proactive personality, and resilience. (LO: 3, Describe different personality theories, AACSB: Analytical thinking) DING 15-6. Explain how an understanding of perception can help managers better understand individual behavior. Name three shortcuts used in judging others. Perception is how we give meaning to our environment by organizing and interpreting sensory impressions. Because people behave according to their perceptions, managers need to understand it. Three shortcuts used in judging others are assumed similarity, stereotyping, and the halo effect. (LO: 4, Describe perception and the factors that influence it, AACSB: Analytical thinking) 15-7. Describe the key elements of attribution theory. Discuss the fundamental attribution error and self-serving bias. Attribution theory depends on three factors. Distinctiveness is whether an individual displays different behaviors in different situations (that is, is the behavior unusual?). Consensus is whether others facing a similar situation respond in the same way. Consistency is when a person engages in behaviors regularly and consistently. Whether these three factors are high or low helps managers determine whether employee behavior is attributed to external or internal causes. The fundamental attribution error is the tendency to underestimate the influence of external factors and overestimate the influence of internal factors. The self-serving bias is the tendency to attribute our own successes to internal factors and to put the blame for personal failure on external factors. (LO: 4, Describe perception and the factors that influence it, AACSB: Analytical thinking) 15-8. Describe operant conditioning and how managers can shape behavior. Operant conditioning argues that behavior is a function of its consequences. Managers can use it to explain, predict, and influence behavior. Managers can shape behavior by using positive reinforcement (reinforcing a desired behavior by giving something pleasant), negative reinforcement (reinforcing a desired response by withdrawing something unpleasant), punishment (eliminating undesirable behavior by applying penalties), or extinction (not reinforcing a behavior to eliminate it). (LO: 5, Discuss learning theories and their relevance in shaping behavior, AACSB: Analytical thinking)

ETHICS DILEMMA Student answers to these questions will vary.

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This chapter’s ethical dilemma explores a situation where two managers, Jared and Amanda, are in charge of hiring a new business analyst. Two of the three finalists have connections with either Jared or Amanda and they each prefer the candidate they have a connection to in some way. However, the third candidate appears to be the most qualified for the job. 15-9. What ethical issues might arise if Scott is hired? In what ways are the possible ethical issues involved in hiring Sheri different (or the same) as hiring Scott? Possible answer; If Scott is hired it could create a rift between Jared and Amanda. It could also result in challenges for Jared if Scott does not live up to expectations. Similar problems emerge if Sheri is hired. And, is it ethical to pass up the candidate who appears to be the most qualified? (LO: 4, Describe perception and the factors that influence it, AACSB: Ethical understanding and reasoning) 15-10. What steps could senior management take to minimize ethical issues in this situation? Possible answer; Management could have multiple levels of interviews with different managers conducting the interviews. This should remove the bias since it is unlikely a single candidate could have a connection with all of the interviewers. (LO: 4, Describe perception and the factors that influence it, AACSB: Ethical understanding and reasoning) SKILLS EXERCISE: DEVELOPING YOUR SHAPING BEHAVIOR SKILL Managers are responsible for teaching employees the behaviors that are most critical to their, and the organization’s, success. This involves ‘shaping’ the behavior of employees, beginning with teaching skills and having them reinforced. In this exercise, students are given seven steps to practice their shaping skills. Students are then asked to imagine that their assistant is ideal in all respects but one—he or she is hopeless at taking phone messages for you when you’re not in the office. Students are asked to think about the factors contributing to this behavior and develop a shaping strategy by determining what can change—the available technology, the task itself, the structure of the job, or some other element of performance. (LO: 5, Discuss learning theories and their relevance in shaping behavior, AACSB: Written and oral communication)

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WORKING TOGETHER: TEAM EXERCISE

In this exercise students are asked to understand how individual preferences might affect work assignments and tasks if the preferences are known in advance. Working in groups of three or four, students should brainstorm how different personality attributes might impact task preferences. What kinds of tasks should be assigned to each group member with which personality attributes? Does it matter when the work happens? Now or later? Be prepared to discuss your thoughts with the class. (LO: 2, Explain the role that attitudes play in job performance, AACSB: Analytical thinking)

MY TURN TO BE A MANAGER •

Write down three attitudes you have. Identify the cognitive, affective, and behavioral components of those attitudes. (LO: 2, Explain the role that attitudes play in job performance, AACSB: Reflective thinking)

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Survey 15 employees (at your place of work or at some campus office). Be sure to obtain permission before doing this survey. Ask the employees what rude or negative behaviors they’ve seen at work. Compile your findings in a report and be prepared to discuss this in class. If you were the manager in this workplace, how would you handle this behavior? (LO: 2, Explain the role that attitudes play in job performance, AACSB: Analytical thinking)

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If you’ve never taken a personality or career compatibility test, contact your school’s testing center to see if you can take one. When you get your results, evaluate what they mean for your career choice. Have you chosen a career that “fits” your personality? What are the implications? (LO: 3, Describe different personality theories, AACSB: Reflective thinking)

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Have you ever heard of the “waiter rule”? A lot of businesspeople think that how you treat service workers says a lot about your character and attitudes. What do you think this means? Do you agree with this idea? Why or why not? How would you be evaluated on the “waiter rule”? (LO: 2, Explain the role that attitudes play in job performance, AACSB: Reflective thinking)

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Like it or not, each of us is continually shaping the behavior of those around us. For one week, keep track of how many times you use positive reinforcement, negative reinforcement, punishment, or extinction to shape behaviors. At the end of the week, look at your results. Which one did you tend to use most? What were you trying to do; that is, what behaviors were you trying to shape? Were your attempts successful? Evaluate. What could you have done differently if you were trying to change someone’s behavior? (LO: 5, Discuss learning theories and their relevance in shaping behavior, AACSB: Reflective thinking)

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Find two companies that have been recognized for their employee engagement efforts. Compare the different strategies each company uses to build and engage their workforce. Are any the same? Different? Why do you think each company has been successful with employee engagement? (LO: 2, Explain the role that attitudes play in job performance, AACSB: Analytical thinking)

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What is your level of emotional intelligence? Visit www.mindtools.com, search for “emotional intelligence,” and select “How Emotionally Intelligent Are You?” to take a brief self-assessment. (LO: 2, Explain the role that attitudes play in job performance, AACSB: Analytical thinking)

ANSWERS TO CASE APPLICATION 1 QUESTIONS Student answers to these questions will vary. Employee Experience at IBM 15-11. Why do employees with high employee engagement scores provide better customer service? Becoming more engaged likely increases an employee’s satisfaction with their job and studies show a positive relationship between performance and job satisfaction. (LO: 2, Explain the role that attitudes play in job performance, AACSB: Analytical thinking) 15-12. Why might a company’s investments in their employees’ experience result in benefits to behaviors (e.g., productivity, absenteeism, turnover) and attitudes (organizational commitment, perceived organizational support)? The employee experience gives the employees input on aspects of their job and allows them to make suggestion for improvement. This in turn should increase job satisfaction and have a positive impact on employee behaviors and attitudes. (LO: 2, Explain the role that attitudes play in job performance, AACSB: Analytical thinking) 15-13. What are the benefits of “listening for emotions” when asking employees what matters to them? Emotions can be one way to communicate nonverbally. Listening for emotions tells an organization what is most important to the employee. (LO: 2, Explain the role that attitudes play in job performance, AACSB: Reflective thinking) 15-14. What do think it would take to make an Employee Experience approach effective? What could make an Employee Experience approach ineffective? Employees could be rewarded for suggestions that the firm adopts or recognizes in some manner. The approach will become ineffective if management ignores the output or delays implementation of the suggestions. (LO: 2, Explain the role that attitudes play in job performance, AACSB: Reflective thinking)

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ANSWERS TO CASE APPLICATION 2 QUESTIONS Student answers to these questions will vary. Getting Your Company’s Logo as a Tattoo 15-15. Once an employee gets a company logo tattoo, how might his or her job satisfaction, job involvement, organizational commitment, absenteeism, and turnover be different from nontattooed employees? What are the reasons for any differences? A tattoo is a permanent indicator of employee commitment to the organization. That probably indicates higher job satisfaction, organizational commitment, and lower absenteeism and turnover relative to nontattooed employees. The tattoo is simply an indicator of the employee’s attitudes and feelings and does not cause the differences. (LO: 2, Explain the role that attitudes play in job performance, AACSB: Reflective thinking) 15-16. Employees might get a company logo tattoo when their attitude toward their company is positive. How does cognitive dissonance apply if their attitude towards the company changes to a negative attitude? Cognitive dissonance occurs when there is incompatibility between attitudes and behavior. The individual’s attitude no longer matches the tattoo’s intent. (LO: 2 Explain the role that attitudes play in job performance, AACSB: Reflective thinking) 15-17. How could the shortcuts used in judging others (e.g., selective perception, assumed similarity, stereotyping, etc.) apply to an employee with a company logo tattoo? Student answers will vary. We are likely to stereotype someone with a company logo tattoo as a sycophant or “brown noser.” We might also form our entire opinion about this person based solely on the tattoo (halo effect). (LO: 4, Describe perception and the factors that influence it, AACSB: Analytical thinking) 15-18. Sometimes family members of employees who get company logo tattoos don’t think it was smart to make a sudden decision to get their tattoo. How does attribution theory apply to how a family member might try to interpret an employee’s decision to get a company logo tattoo? Student answers will vary. Attribution theory suggests that the relatives may attribute the tattoo to internal causes, meaning it is within the person’s control. If the tattoo lines up, or is consistent, with the person’s job loyalty then we may still question the longevity of their attitudes. (LO: 4, Describe perception and the factors that influence it, AACSB: Reflective thinking)

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Chapter 16 Motivating Employees Motivating and rewarding employees is one of the most important and challenging activities that managers do. To get employees to put forth maximum work effort, managers need to know how and why they’re motivated. That’s what we discuss in this chapter. Focus on the following learning objectives as you read and study this chapter.

LEARNING OBJECTIVES 1. 2. 3. 4.

Define motivation. Compare and contrast early theories of motivation. Compare and contrast contemporary theories of motivation. Discuss current issues in motivation.

CHAPTER OUTLINE INTRODUCTION Managers need to understand and apply motivational concepts and practices to encourage their employees to devote maximum effort to their jobs. This chapter explores essential information on the concepts of motivation. 16.1

WHAT IS MOTIVATION? Motivation is the process by which a person’s efforts are energized, directed, and sustained towards attaining a goal. Effort is a measure of intensity or drive. High levels of effort are unlikely to lead to favorable job performance unless the effort is channeled in a direction that benefits the organization.

IT’S YOUR CAREER What Motivates You? What’s important to you or excites you in a job? Some say “money.” Others might say “challenging work” or “fun coworkers.” If you have a solid grounding in and understanding of what motivates you, it can help you make smart career and job choices. The following is a list of 12 factors that might enter into your decision in selecting a job. Read over the list. Then rank order the items in terms of importance, with 1 being highest in importance and 12 being lowest in importance. ________ High pay ________ Good working conditions ________ Friendly and supportive colleagues

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________ Flexible working hours ________ Opportunities for growth and new challenges ________ Considerate boss ________ Inclusion in decisions that affect you ________ Fair and equitable treatment ________ Job security ________ Promotion potential ________ Excellent benefits (vacation time, retirement contributions, etc.) ________ Freedom and independence Now, compare your list with others in your class. How similar were your preferences? It’s rare for lists to be exactly the same. This tells us that people differ in terms of what they value. Second, use these results to better understand what you’re looking for in a job. -------------------------------------------------------------------------------------------------------------------16.2

EARLY THEORIES OF MOTIVATION Three early theories of motivation provide the best-known explanations for employee motivation, even though their validity has been questioned. A. Maslow’s Hierarchy of Needs Theory. Maslow’s hierarchy of needs theory was developed by psychologist Abraham Maslow. This theory states that there is a hierarchy of five human needs: physiological, safety, social, esteem, and self-actualization (see Exhibit 16-1). 1. As each need is substantially satisfied, the next need becomes dominant. 2. The text describes these five needs as physiological (basic food, drink, water, shelter, and sexual needs); safety (security and protection from physical and emotional harm); social (affection, belongingness, acceptance, and friendship); esteem (internal factors such as self-respect, autonomy, and achievement, and external factors such as status, recognition, and attention); and self-actualization (a person’s drive to become what he or she is capable of becoming). 3. Maslow separated the needs into lower-level needs (including the physiological and safety needs) and higher-level needs (including social, esteem, and self-actualization). B. McGregor’s Theory X and Theory Y. McGregor’s Theory X and Theory Y were developed by Douglas McGregor and describe two distinct views of human nature. 1. Theory X is the assumption that employees dislike work, are lazy, avoid responsibility, and must be coerced to perform. 2. Theory Y is the assumption that employees are creative, enjoy work, seek responsibility, and can exercise self-direction. 3. Theory X assumes that Maslow’s lower-order needs dominate individuals, while Theory Y assumes that higher-order needs are dominant. 4. No empirical evidence exists to confirm that either set of assumptions is valid or that altering behavior based on Theory Y assumptions will increase employees’ motivation.

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Herzberg’s Two-Factor Theory. Two-factor theory (also called motivation-hygiene theory), developed by Frederick Herzberg, is the motivation theory that intrinsic factors are related to job satisfaction and motivation, whereas extrinsic factors are associated with job dissatisfaction (see Exhibit 16-2). 1. Herzberg believed that the opposite of satisfaction was not dissatisfaction. (See Exhibit 16-3) According to Herzberg, simply removing dissatisfying characteristics from a job would not necessarily make the job satisfying. 2. Hygiene factors are factors that eliminate dissatisfaction. They include factors such as supervision, company policy, salary, working conditions, and security—i.e., extrinsic factors associated with job context, or those things surrounding a job. 3. Motivators are factors that increase job satisfaction and motivation. They include factors such as achievement, recognition, responsibility, and advancement—i.e., intrinsic factors associated with job content, or those things within the job itself. 4. Herzberg’s theory has been criticized for the statistical procedures and methodology used in his study. In spite of these criticisms, Herzberg’s theory has had a strong influence on how we currently design jobs. Three-Needs Theory. The three-needs theory, developed by David McClelland, is the motivation theory that says three acquired (not innate) needs—achievement, power, and affiliation—are major motives in work. 1. The need for achievement (nAch) is the drive to excel, to achieve in relation to a set of standards, and to strive to succeed. a. McClelland found that high achievers differentiate themselves from others by their desire to do things better. b. High achievers like moderately challenging goals. c. They avoid what they perceive to be very easy or very difficult tasks. 2. The need for power (nPow) is the need to make others behave in a way that they would not have behaved otherwise. 3. The need for affiliation (nAff) is the desire for friendly and close interpersonal relationships. 4. A person’s levels of these three needs are typically measured by reacting to a set of pictures included in the Thematic Apperception Test, or TAT. Exhibit 16-4 shows an example of a TAT.

CONTEMPORARY THEORIES OF MOTIVATION A number of contemporary theories represent state-of-the-art explanations of employee motivation. These contemporary theories have a reasonably strong degree of validity through supporting documentation. A. Goal-Setting Theory. Goal-setting theory is the proposition that specific goals increase performance, and difficult goals, when accepted, result in higher performance than easy goals. What is known about goals as motivators? 1. Intention to work toward a goal is a major source of job motivation. Specific and challenging goals are superior motivating forces.

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Specific hard goals produce a higher level of output than do generalized goals. 2. Is there a contradiction between achievement motivation and goal setting? No, as the following points explain: a. Goal-setting theory deals with people in general; achievement theory is based only on people who have a high need for achievement. Difficult goals are still recommended for the majority of employees. b. The conclusions of goal-setting theory apply to those who accept and are committed to the goals. Difficult goals will lead to higher performance only if they are accepted. 3. Will employees try harder if they participate in the planning and formulation of goals? a. It cannot be said that participation is always desirable. b. However, participation is probably preferable to assigning goals whenever a manager expects resistance. 4. Will people do better when they get feedback on how well they are progressing toward their goals? a. Feedback acts to guide behavior. b. Self-generated feedback has been shown to be a more powerful motivator than externally generated feedback. 5. What four contingencies exist in goal-setting theory? a. Feedback influences the goal-performance relationship. b. Goal commitment is most likely to occur when goals are made public, when the individual has an internal locus of control, and when the goals are set by the individual rather than assigned. c. Self-efficacy is an individual’s belief that he or she is capable of performing a task. d. National culture is a contingency that also affects goalsetting theory. 6. One may conclude that intentions, as defined by hard and specific goals, are a powerful motivating force in goal-setting efforts. a. In the proper conditions, intentions can lead to higher performance. b. However, no evidence exists that such goals are associated with increased job satisfaction. c. Exhibit 16-5 summarizes the relationships among goals, motivation, and performance. Reinforcement Theory. Reinforcement theory is counter to goal-setting theory. It proposes that behavior is a function of its consequences. 1. Reinforcement theory argues that behavior is externally caused. 2. Reinforcers are consequences immediately following a response that increase the probability that the behavior will be repeated. 3. Reinforcement theory ignores factors such as goals, expectations, and needs; it focuses on what happens when a person takes an action. 4. How can the concept of reinforcement be used to explain motivation?

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People will most likely engage in a desired behavior if they are rewarded for doing so. b. These rewards are most effective if they immediately follow a desired response. c. Behavior that isn’t rewarded or is punished is less likely to be repeated. 5. Managers can influence employees’ behavior by reinforcing the work behaviors they desire. Designing Motivating Jobs. Job design theory can be used to influence employee motivation. Job design is the way tasks are combined to form complete jobs. Managers should design jobs to reflect the demands of the changing environment as well as the organization’s technology, and its employees’ skills, abilities, and preferences of its employees. 1. Job Enlargement. One of the earliest efforts at overcoming the drawbacks of job specialization was through increasing job scope, the number of different tasks required in a job and the frequency with which those tasks are repeated. a. This type of job design is called job enlargement—the horizontal expansion of a job or an increase in job scope. b. Job design programs that focused solely on task enlargement have had little success. c. When knowledge enlargement activities were implemented, however, workers were more satisfied and made fewer errors. 2. Job Enrichment. Job enrichment, another approach to designing jobs, is the vertical expansion of a job by adding planning and evaluating responsibilities. a. In job enrichment, job depth, the degree of control employees have over their work, is increased. b. Research evidence has been inconclusive about the benefits of job enrichment activities. 3. Job Characteristics Model. The job characteristics model (JCM) is a framework for analyzing and designing jobs that identifies five primary job characteristics, their interrelationships, and their impact on employee productivity, motivation, and satisfaction. These five job dimensions are described below (see Exhibit 166): a. Skill variety is the degree to which a job requires a variety of activities so that an employee can use a number of different skills and talents. b. Task identity is the degree to which a job requires completion of a whole and identifiable piece of work. c. Task significance is the degree to which a job has a substantial impact on the lives or work of other people. d. Autonomy is the degree to which a job provides substantial freedom, independence, and discretion to the individual in scheduling the work and determining the procedures to be used in carrying it out.

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Feedback is the degree to which carrying out the work activities required by a job results in the individual’s obtaining direct and clear information about the effectiveness of his or her performance. f. Skill variety, task identity, and task significance combine to create meaningful work. Autonomy leads to an increased sense of responsibility for outcomes of the work. Feedback leads to knowledge of the actual results of the work activities. g. The JCM suggests that intrinsic (internal) rewards are gained when an employee learns (knowledge of results through feedback) that he/she personally (responsibility through autonomy of work) has performed well on a task that he/she cares about (experiences meaningfulness of work through skill variety, task identity, and/or task significance). h. The more these three conditions characterize a job, the greater the employee’s work motivation, performance, and satisfaction and the lower his or her absenteeism and likelihood of resigning. i. The JCM also provides specific guidelines to managers for job design. 1. Combine tasks. 2. Create natural work units. 3. Establish client (external or internal) relationships. 4. Expand jobs vertically. 5. Open feedback channels. 4. Job Design Updated. Two new approaches to job design are prompting a rethinking on the JCM and other standard approaches. a. The relational perspective of work design focuses on how people’s tasks and jobs are increasingly based on social relationships. Managers may need to consider access to and the level of social support in the organization, types of interactions outside an organization, amount of task interdependence, and interpersonal feedback. b. The proactive perspective of work design suggests that employees are taking the initiative to change how their work is performed. 1. One stream of research that’s relevant to proactive work design is high-involvement work practices, which are designed to elicit greater input or involvement from workers. Equity Theory. Equity theory, developed by J. Stacey Adams, is the theory that an employee compares his/her job’s input-outcomes ratio with that of relevant others and then corrects any inequity (see Exhibit 16-7). 1. Referents are the persons, systems, or selves against which individuals compare themselves to assess equity.

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Equity theory recognizes that individuals are concerned with their absolute rewards as well as the relationship of those rewards to what others receive. 3. What will employees do when they perceive an inequity? a. Distort either their own or others’ inputs or outcomes. b. Behave in some way to induce others to change their inputs or outcomes. c. Behave in some way to change their own inputs or outcomes. d. Choose a different comparison person. e. Quit their job. 4. Historically, equity theory focused on distributive justice. Recent equity research has focused on issues of procedural justice. Expectancy Theory. Expectancy theory is the theory that an individual tends to act in a certain way based on the expectation that the act will be followed by a given outcome and on the attractiveness of that outcome to the individual. Three relationships are important to this theory (see Exhibit 16-8). 1. Effort-performance linkage (expectancy) is the probability perceived by the individual that exerting a given amount of effort will lead to a certain level of performance. 2. Performance-reward linkage (instrumentality) is the degree to which an individual believes that performing at a particular level is instrumental in, or will lead to, the attainment of a desired outcome.

WORKPLACE CONFIDENTIAL: Feelings of Unfair Pay Someday you may find out that someone is making more money than you for essentially the same job. While not all of us have the same equity sensitivity (ES), some of us have personality traits that may cause us to focus on situations where we feel we are underrewarded relative to others. The following suggestions may help you deal with this situation. 1. Do you have any evidence that you are underpaid? Do some research first so that you have data to back up your claim. 2. Is there a logical reason you make less than someone else in a similar job? Do you have the same level of education, skills, length of time with the firm, or live in a different geographic region? Those factors might be the reason for a pay differential. 3. If you still believe you are underpaid, are you willing to risk pushing the issue? In some firms, management may be unwilling to renegotiate your pay if it opens the doors for renegotiating everyone’s pay. 4. Develop a strategy if you decide to pursue the issue. Decide who you need to persuade. It might not be your immediate supervisor but the human resources department instead. 5. Timing counts! Some times are better than others for making your case. Your annual performance evaluation is a natural time to make this request. Highlight your contributions and present your evidence. 6. Do NOT go over your boss’s head without first getting your boss’s approval. 7. Don’t discuss compensation with your coworkers. 8, Don’t make comparisons to specific people in the organization.

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9. Don’t go negative and complain or make threats.

16.4

Attractiveness of the reward (valence) is the importance that the individual places on the potential outcome or reward that can be achieved on the job. 4. Four features are inherent in expectancy theory: a. What perceived outcomes does the job offer the employee? b. How attractive do employees consider these outcomes to be? c. What kind of behavior must the employee exhibit to achieve these outcomes? d. How does the employee view his or her chance of doing what is asked? 5. The key to understanding expectancy theory is understanding an individual’s goal and the linkage between effort and performance, between performance and rewards, and between rewards and individual goal satisfaction. Integrating Contemporary Theories of Motivation. Exhibit 16-9 presents a model that integrates much of what is known about motivation. 1. The basic foundation is the simplified expectancy model. 2. The model also considers the achievement-need, reinforcement, equity, and JCM theories. 3. Rewards also play an important role in the model.

CURRENT ISSUES IN MOTIVATION Understanding and predicting employee motivation continues to be one of the most popular areas in management research. Several significant workplace issues are important to examine in understanding motivation. A. Managing Cross-Cultural Motivational Challenges. In today’s global environment, motivational programs that work in one location may not be effective in another. 1. An American bias exists in some of the motivational theories. For example, in Japan, Greece, and Mexico, security needs would appear at the top of Maslow’s pyramid. 2. There are some cross-cultural consistencies, though. Recent research showed that being treated with respect, having a good work-life balance, and having interesting work motivated people in a number of countries. B. Motivating Unique Groups of Workers. 1. Motivating a Diverse Workforce. Motivating a diverse workforce requires managers to think in terms of flexibility. Lifestyle (e.g., single parenthood) is an important factor. a. A compressed workweek is a workweek where employees work longer hours per day but fewer days per week.

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Flexible work hours (flextime) is a scheduling system in which employees are required to work a number of hours a week but are free, within limits, to vary the hours of work. c. Job sharing is the practice of having two or more people split a full-time job. d. Telecommuting is a job approach where employees work at home and are linked to the workplace by computer and modem. e. The advantages of telecommuting include a decrease in the time and stress of commuting and an increase in flexibility to cope with family demands. f. Drawbacks of telecommuting center on the lack of social contact, the reward system used, and the separation of organization work and homework. 2. Motivating Professionals. This group of employees values challenging work, problem solving, and support. 3. Motivating Contingent Workers. Contingent workers do not have the security or stability that permanent employees do. a. Managers might use the opportunity for permanent status, opportunity for training, and equitable treatment to motivate contingent workers. Designing Appropriate Rewards Programs. 1. Open-Book Management. Open-book management is a motivational approach in which an organization’s financial statements (the “books”) are shared with all employees. a. The goal of open-book management is to motivate employees to think as an owner would think as a result of being able to see the impact their decisions and actions have on financial results. b. In order for open-book management to be effective, employees must be taught the fundamentals of financial statement analysis. 2. Employee Recognition Programs. Employee recognition programs consist of personal attention and expressions of interest, approval, and appreciation for a job well done. 3. Pay-for-Performance. Pay-for-performance programs are variable compensation plans that pay employees on the basis of some performance measure. a. Performance-based compensation is probably most compatible with expectancy theory. b. The increasing popularity of pay-for-performance programs can be explained in terms of both motivation and cost control. c. Do pay-for-performance programs work? Studies seem to indicate that they do.

ANSWERS TO REVIEW AND DISCUSSION QUESTIONS

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Student answers to these questions will vary. 16-1. What is motivation? Explain the three key elements of motivation. Motivation is the process by which a person’s efforts are energized, directed, and sustained toward attaining a goal. The energy element is a measure of intensity, drive, or vigor. The high level of effort needs to be directed in ways that help the organization achieve its goals. Employees must persist in putting forth effort to achieve those goals. (LO: 1, Define motivation, AACSB: Analytical thinking) 16-2. Describe each of the four early theories of motivation. In Maslow’s hierarchy, individuals move up the hierarchy of five needs (physiological, safety, social, esteem, and self-actualization) as needs are substantially satisfied. A need that’s substantially satisfied no longer motivates. A Theory X manager believes that people don’t like to work or won’t seek out responsibility so they have to be threatened and coerced to work. A Theory Y manager assumes that people like to work and seek out responsibility, so they will exercise self-motivation and self-direction. Herzberg’s theory proposed that intrinsic factors associated with job satisfaction were what motivated people. Extrinsic factors associated with job dissatisfaction simply kept people from being dissatisfied. Three-needs theory proposed three acquired needs that are major motives in work: need for achievement, need for affiliation, and need for power. (LO: 2, Compare and contrast early theories of motivation, AACSB: Analytical thinking) 16-3. How do goal-setting, reinforcement, and equity theories explain employee motivation? Goal-setting theory says that specific goals increase performance, and difficult goals, when accepted, result in higher performance than do easy goals. Important points in goal setting theory include intention to work toward a goal as a major source of job motivation; specific hard goals that produce higher levels of output than generalized goals; participation in setting goals as preferable to assigning goals, but not always; feedback that guides and motivates behavior, especially self-generated feedback; and contingencies that affect goal setting—goal commitment, self-efficacy, and national culture. Reinforcement theory says that behavior is a function of its consequences. To motivate, use positive reinforcers to reinforce desirable behaviors. Ignore undesirable behavior rather than punishing it. Equity theory focuses on how employees compare their inputs–outcomes ratios to relevant others’ ratios. A perception of inequity will cause an employee to do something about it. Procedural justice has a greater influence on employee satisfaction than does distributive justice. (LO: 3, Compare and contrast contemporary theories of motivation, AACSB: Analytical thinking) 16-4. What are the different job design approaches to motivation? Job enlargement involves horizontally expanding job scope by adding more tasks or increasing how many times the tasks are done. Job enrichment vertically expands job depth by giving employees more control over their work. The job characteristics model says five core job dimensions (skill variety, task identity, task significance, autonomy, and feedback) are used to design motivating jobs. Another job design approach proposed looking at relational aspects and proactive aspects of jobs. (LO: 3, Compare and contrast contemporary theories of motivation, AACSB: Analytical thinking)

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16-5. Explain the three key linkages in expectancy theory and their role in motivation. Expectancy theory says that an individual tends to act in a certain way based on the expectation that the act will be followed by a desired outcome. Expectancy is the effortperformance linkage (how much effort do I need to exert to achieve a certain level of performance); instrumentality is the performance-reward linkage (achieving at a certain level of performance will get me a specific reward); and valence is the attractiveness of the reward (is it the reward that I want?). (LO: 3, Compare and contrast contemporary theories of motivation, AACSB: Analytical thinking) 16-6. What challenges do managers face in motivating today’s workforce? Managers face challenges in motivating unique groups of workers. A diverse workforce is looking for flexibility. Professionals want job challenge and support, and are motivated by the work itself. Contingent workers want the opportunity to become permanent or to receive skills training. Recognition programs and sincere appreciation for work done can be used to motivate low-skilled, minimum-wage workers. (LO: 4, Discuss current issues in motivation, AACSB: Analytical thinking) 16-7. Describe open-book management, employee recognition, and pay-for-performance programs. Open-book management is when financial statements (the books) are shared with employees who have been taught what they mean. Employee recognition programs consist of personal attention, approval, and appreciation for a job well done. Pay-forperformance programs are variable compensation plans that pay employees on the basis of some performance measure. (LO: 4, Discuss current issues in motivation, AACSB: Analytical thinking) 16-8. Can an individual be too motivated? Discuss. This question can serve as an excellent springboard for small group discussion. Students may express strong opinions in their answers to this question, depending upon their employment experiences and the types of managers and employees with whom they have already worked. Their answers to this question will likely introduce ethical considerations in relation to motivation and the willingness of some individuals to lose sight of ethical standards in pursuit of a goal. (LO: 4, Discuss current issues in motivation, AACSB: Analytical thinking)

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ETHICS DILEMMA Student answers to these questions will vary. Advocates of open-book management point to the advantages of getting employees to think like owners and being motivated to make better decisions about how they do their work once they see how their decisions impact financial results. However, is there such a thing as “too much openness”? At some companies, employees not only have access to company financial details but also to staff performance reviews and individual pay information. 16-9 What do you think? What are the pros and cons of such an approach? Possible answer: Employees would not think the firm was keeping secrets from them or using excuses when justifying a management response. This should build trust in the organization. However, it could also result in an unhealthy competitiveness among employees if they can see everyone’s performance reviews and have a negative impact on employee morale. (LO: 4, Discuss current issues in motivation, AACSB: Ethical understanding and reasoning) 16-10. What potential ethical issues do you see here? How might managers address these ethical issues? Possible answers include employees learning private information about their colleagues. Managers are often privy to information that should not be shared with others. It could create a toxic environment at work. Managers can limit the amount of personal information that is shared in an open-book policy. (LO: 4, Discuss current issues in motivation, AACSB: Ethical understanding and reasoning)

SKILLS EXERCISE: DEVELOPING YOUR MOTIVATING EMPLOYEES SKILL Several suggestions for motivating employees are provided, based on what is currently known about motivation. A. Recognize individual differences in terms of needs, attitudes, personality, and other important individual factors. B. Match people to jobs by identifying what needs are important to individuals and trying to provide jobs that allow them to fulfill those needs. C. Use goals because the literature on goal setting suggests that managers should ensure that employees have hard, specific goals and feedback on how well they are performing in pursuit of those goals. D. Ensure that goals are perceived as attainable. Employees who see goals as unattainable will reduce their levels of effort. E. Individualize rewards. Because employees have different needs, what is a reward and reinforcer to one may not work for another. F. Link rewards to performance by making rewards contingent on desired levels of performance. G. Check the system for equity. Employees should perceive that the rewards or outcomes are equal to the inputs given.

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Don’t ignore money. The allocation of performance-based increases, piecework bonuses, and other pay incentives is important in determining employee motivation. (LO: 2, Compare and contrast early theories of motivation, AACSB: Communication abilities) (LO: 3, Compare and contrast contemporary theories of motivation, AACSB: Written and oral communication) H.

WORKING TOGETHER: TEAM EXERCISE Students are asked to reflect on past jobs and think about what motivates them at work. Then, working in groups of three or four, students are asked to share their thoughts and discuss what management or organizational leaders could have done differently. (LO: 1, Define motivation, AACSB: Reflective thinking) (LO: 2, Compare and contrast early theories of motivation, AACSB: Written and oral communication) (LO: 3, Compare and contrast contemporary theories of motivation, AACSB: Written and oral communication)

MY TURN TO BE A MANAGER •

A good habit to get into if you don’t already do it is goal-setting. Set goals for yourself using the suggestions from goal-setting theory. Write them down and keep them in a notebook. Track your progress toward achieving these goals. (LO: 3, Compare and contrast contemporary theories of motivation, AACSB: Reflective thinking)

•

Describe a task you’ve done recently for which you exerted a high level of effort. Explain your behavior, using any three of the motivation approaches described in this chapter. (LO: 3, Compare and contrast contemporary theories of motivation, AACSB: Reflective thinking)

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Pay attention to times when you’re highly motivated and times when you’re not as motivated. Write down a description of these times. What accounts for the difference in your level of motivation? (LO: 1, Define motivation, AACSB: Reflective thinking)

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Interview three managers about how they motivate their employees. What have they found that works best? Write up your findings in a report and be prepared to present it in class. (LO: 1, Define motivation, AACSB: Analytical thinking)

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Using the job characteristics model, redesign the following jobs to be more motivating: retail store sales associate, utility company meter reader, and checkout cashier at a discount store. In a written report, describe for each job at least two specific actions you would take for each of the five core job dimensions. (LO: 3, Compare and contrast contemporary theories of motivation, AACSB: Reflective thinking)

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Do some serious thinking about what you want from the job you get after graduation. Make a list of what’s important to you. Are you looking for a pleasant work environment, challenging work, flexible work hours, fun coworkers, or something else? Discuss how you will discover whether a particular job will help you get those things. (LO: 3, Compare and contrast contemporary theories of motivation, AACSB: Reflective thinking)

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Find three different examples of employee recognition programs from organizations with which you’re familiar. Write a report describing your examples and evaluating what you think about the various approaches. (LO: 4, Discuss current issues in motivation, AACSB: Analytical thinking)

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Have you ever participated in a pay-for-performance program? If not, ask your friends and find someone who has participated in such a program. Consider your or your friend’s program. Was it effective in motivating employees? Why or why not? How could the program be improved? (LO: 4, Discuss current issues in motivation, AACSB: Analytical thinking)

ANSWERS TO CASE APPLICATION 1 QUESTIONS Student answers to these questions will vary. Motivating Employees Who Love the Outdoors at REI 16-11. In what ways could the work environment at REI help satisfy one of the needs in Three-Needs theory? Three-needs theory says that motivations in work are the need for achievement, power, and affiliation. REI’s culture is such that the company affirms a commitment to the outdoors or environment by giving Yay Days and REI also has personal incentive plans. These two factors would fulfil the need for achievement since this need focuses on personal achievements. The need for power is likely fulfilled by the environmental volunteering focus and the need for affiliation is fulfilled by the close bonds employees appear to make with coworkers. (LO: 2, Compare and contrast early theories of motivation, AACSB: Reflective thinking) 16-12. How could the outdoor-oriented benefits offered at REI apply to expectancy theory? Applying expectancy theory, students may discuss the perceived attractiveness of the rewards (benefit package) relative to the effort needed to earn that benefit. Maintaining high levels of performance enables employees to keep working at a place they love and earning a unique set of perks. (LO: 3, Compare and contrast contemporary theories of motivation, AACSB: Reflective thinking) 16-13. What else could REI do to improve how they motivate their employees? Answers will vary. The firm could use flextime and various employee recognition bonuses for top performers. This system would allow everyone to see the benefits of

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high performance are recognized and rewarded. (LO: 4, Discuss current issues in motivation, AACSB: Analytical thinking) 16-14. What are advantages and disadvantages of hiring employees at REI who might not be as outdoor-oriented as other employees? The advantage of hiring someone without an outdoor focus is that they bring a different perspective to work and thus add diversity of thought. However, they might not fit in as well with the culture or truly understand what drives sales if they do not have the same mindset. (LO: 4, Discuss current issues in motivation, AACSB: Analytical thinking)

ANSWERS TO CASE APPLICATION 2 QUESTIONS Student answers to these questions will vary. Motivating Under Constraints at Televerde 16-15. Analyze this case using the integrative model in Exhibit 16-9. These workers (inmates) are rewarded by a sense of personal achievement or accomplishment since they cannot be given traditional merit pay raises and bonuses. Their dominant need(s) differ from the traditional workforce since many of them need to learn that they can focus on a goal and achieve that goal. They receive positive reinforcement when they do well and are also treated with respect by the firm. (LO: 3, Compare and contrast contemporary theories of motivation, AACSB: Analytical thinking) 16-16. How might self-efficacy increase for inmates who work at Televerde? Self-efficacy refers to an individual’s belief that they are capable of performing a task. After working at Televerde, these inmates leave prison with the knowledge that they can do a good job and be compensated for that work. This program should increase employee self-efficacy significantly, particularly given their starting point. (LO: 3, Compare and contrast contemporary theories of motivation, AACSB: Analytical thinking) 16-17. In what ways could the relational perspective of work design be applied to Televerde’s approach? Are there other aspects of this perspective that Televerde might consider adding to what they already do? The employees all work in a common room and share a common bond (prison inmates). They rely on the successes of everyone in the room to motivate them to perform and managers treat them as equals. Televerde could add weekly meetings after the inmates are released to make sure they are transitioning well to life in society. (LO: 3, Compare and contrast contemporary theories of motivation, AACSB: Analytical thinking) 16-18. What would be an example of how Televerde might implement a highinvolvement work practice to complement what they currently do? The workday could start with managers soliciting ideas for improvement. Has any employee discovered a tactic that seems to increase productivity? This solicitation of input might get them more involved. (LO: 3, Compare and contrast contemporary theories of motivation, AACSB: Reflective thinking)

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Chapter 17 Being an Effective Leader Leaders in organizations make things happen. But what makes leaders different from nonleaders? What’s the most appropriate style of leadership? What can you do to be seen as a leader? Those are just a few of the questions we’ll try to answer in this chapter. Focus on the following learning objectives as you read and study this chapter.

LEARNING OBJECTIVES 1. 2. 3. 4. 5. 6.

Define leader and leadership. Compare and contrast early theories of leadership. Describe the three major contingency theories of leadership. Describe contemporary views of leadership. Compare the various theories of leadership for their validity. Discuss twenty-first century issues affecting leadership.

CHAPTER OUTLINE INTRODUCTION The quality of leadership is an important element in an organization’s success, since leaders influence employees to work together toward the fulfillment of a company’s mission and the achievement of its goals. 17.1

WHO ARE LEADERS AND WHAT IS LEADERSHIP? Certain distinctions can be made between managers and leaders. A. While managers are appointed and have legitimate power within the organization, a leader is someone who can influence others and who has managerial authority. B. Leadership is the process of influencing a group to achieve goals.

17.2

EARLY LEADERSHIP THEORIES Researchers began to study leadership in the early twentieth century and developed behavioral theories that focused on the leader (trait theories) and how the leader interacts with his or her group members. A. Leadership Traits. 1. Research in the 1920s and 1930s focused on the traits of the leader, with the intent to isolate characteristics that might by used to differentiate leaders from nonleaders. 2. Identifying a set of traits consistently associated with the process of leadership proved to be more successful than one set of traits that would always differentiate leaders from nonleaders.

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3. B.

17.3

Ten traits associated with effective leadership are described in Exhibit 17-1. Leadership Behaviors. 1. Researchers began to hope that a behavioral theories’ approach would provide more definitive information about the nature of leadership than did trait theories. 2. Four main leader behavior studies are summarized in Exhibit 17-2. a. University of Iowa Studies. Kurt Lewin and his associates explored three leadership styles: autocratic, democratic, and laissez-faire. b. The Ohio State Studies identified two important dimensions of leader behavior: initiating structure and consideration. High-high leaders (leaders high in both behaviors) sometimes achieved high group task performance and high group member satisfaction. c. University of Michigan Studies identified two dimensions of leader behavior: leaders who were employee-oriented and leaders who were production-oriented. d. The Managerial Grid is a two-dimensional grid used to appraise leadership styles using “concern for people” and “concern for production” as dimensions. 3. Predicting leadership success involved more than isolating a few leader traits or behavior. The lack of success in attaining consistent results led to a focus on situational influences.

CONTINGENCY THEORIES OF LEADERSHIP A. The Fiedler Model. The Fiedler contingency model, developed by Fred Fiedler, is a contingency theory proposing that effective group performance depended upon the proper match between a leader’s style of interacting with his/her followers and the degree to which the situation allowed the leader to control and influence. 1. Fiedler developed the least-preferred coworker (LPC) questionnaire, which measures whether a person is task or relationship oriented. This questionnaire contained 18 pairs of contrasting adjectives. Respondents were asked to think of all the coworkers they had ever had and to describe the person they least preferred to work with, using the 18 sets of adjectives. Fiedler believed that a person’s basic leadership style could be determined on the basis of their answers. 2. Fiedler also isolated three situational criteria that he believed could be manipulated to create the proper match with the behavioral orientation of the leader:

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Leader-member relations described the degree of confidence, trust, and respect subordinates have in their leader. b. Task structure described the degree to which job assignments were formalized and procedurized. c. Position power described the degree of influence a leader had over power-based activities such as hiring, firing, discipline, promotions, and salary increases. 3. Next, Fiedler used the above variables to evaluate the situation. He defined eight different situations in which a leader could find himself/herself (see Exhibit 17-3). 4. The Fiedler model proposes matching an individual’s LPC and an assessment of the three contingency variables to achieve maximum leadership effectiveness. 5. Fiedler concluded that task-oriented leaders tend to perform better in situations that are either very favorable or very unfavorable to them. 6. He concluded that relationship-oriented leaders perform better in moderately favorable situations. 7. Fiedler believed that an individual’s leadership style was fixed; he concluded that leader effectiveness could be improved in only two ways: a. Bring in a new leader whose style fits better to the situation. b. Change the situation to fit the leader. 8. Research has generally supported the validity of Fiedler’s model. However, some drawbacks are associated with the model. Hersey and Blanchard’s Situational Leadership Theory. Situational leadership theory (SLT) is a leadership contingency theory developed by Paul Hersey and Ken Blanchard that focuses on followers’ readiness. 1. Hersey and Blanchard propose that successful leadership is achieved by selecting the right leadership style that matches the level of the followers’ readiness. 2. Readiness is the extent to which people have the ability and willingness to accomplish a specific task. 3. SLT uses the same leadership dimensions identified by Fiedler: task and relationship behaviors. 4. Each of the two leadership dimensions is considered either high or low and then combined into four specific leadership styles. 5. Research efforts to test and support this theory generally have been disappointing, possibly because of internal ambiguities or inconsistencies in the model itself. Path-Goal Model. Path-goal theory, developed by Robert House, is a leadership theory that purports that it is the leader’s job to assist his or her followers in attaining their goals and to provide the direction or support needed to ensure that their goals

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are compatible with the overall objectives of the organization (see Exhibit 17-4). 1. Four leadership behaviors were identified by House: a. The directive leader lets subordinates know what is expected of them, schedules work to be done, and gives specific guidance on how to accomplish tasks. b. The supportive leader is friendly and shows concern for subordinates’ needs. c. The participative leader consults with subordinates and uses their suggestions before making a decision. d. The achievement-oriented leader sets challenging goals and expects subordinates to perform at their highest level. 2. The path-goal theory proposes two classes of situational or contingency variables that moderate the leadership behavior-outcome relationship: a. Variables in the environment that are outside of the control of the follower. b. Variables that are part of the personal characteristics of the follower. 3. The following hypotheses have evolved from path-goal theory: a. Directive leadership leads to greater satisfaction when tasks are ambiguous or stressful, than when they are highly structured and well laid out. b. Supportive leadership results in high employee performance and satisfaction when subordinates are performing structured tasks. c. Directive leadership leads to higher employee satisfaction when there is substantive conflict within a work group. d. Achievement-oriented leadership increases subordinates’ expectancies that effort will lead to high performance when tasks are ambiguously structured. e. Subordinates with an external locus of control will be more satisfied with a directive style. f. Achievement-oriented leadership will increase subordinates’ expectations that effort will lead to high performance when tasks are ambiguously structured. 4. Although not every research finding has been positive, the majority of the evidence supports the following logic underlying path-goal theory: a. Employee performance and satisfaction are likely to be positively influenced when the leader compensates for shortcomings in either the employee or the work setting.

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17.4

However, if the leader spends time explaining tasks when those tasks are already clear or when the employee has the ability and experience to handle them, the employee is likely to see such behavior as redundant or even insulting.

CONTEMPORARY VIEWS ON LEADERSHIP The most current approaches to looking at leadership are discussed in this section of the text. A. Leader-Member Exchange (LMX) Theory. Leader-member exchange (LMX) theory states that leaders create in-groups and out-groups and those in the in-group will have higher performance, less turnover, and greater job satisfaction. 1. The leader will categorize a follower as an “in” or an “out.” Both leader and follower must “invest” in the relationship. 2. The leader does the choosing, but the follower’s characteristics drive the decision. 3. Research is supportive of the LMX theory. B.

Charismatic Leadership. 1. A charismatic leader is an enthusiastic, self-confident leader whose personality and actions influence people to behave in certain ways. a. Five personal characteristics of charismatic leaders have been identified. Charismatic leaders have a vision, are able to articulate that vision, are willing to take risks to achieve that vision, are sensitive to both environmental constraints and follower needs, and exhibit behaviors that are out of the ordinary. b. An increasing amount of research shows impressive correlations between charismatic leadership and high performance and satisfaction among followers. Most experts think that individuals can be trained to exhibit charismatic behaviors. c. Charismatic leadership may not always be needed to achieve high levels of employee performance. This type of leadership may be most appropriate when an employee’s job has a significant amount of ideological content. Transformational-Transactional Leadership. What is the difference between transactional and transformational leaders? 1. Transactional leaders are leaders who lead primarily by using social exchanges (or transactions). 2. Transformational leaders are leaders who stimulate and inspire (transform) followers to achieve extraordinary outcomes. Evidence supporting the superiority of transformational leadership over transactional leadership is overwhelmingly impressive.

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Authentic Leadership. Authentic leadership focuses on the moral aspects of being a leader. Authentic leaders know who they are, know what they believe in, and act on those values and beliefs openly and candidly. Ethical Leadership. Ethical leaders put public safety ahead of profits. 1. Ethical leaders hold employees accountable. 2. Create a culture where people feel they could and should do a better job. Servant Leadership. An extension of ethical leadership is a concept called servant leadership where the leader goes above and beyond their own self-interest and focuses on opportunities to help their followers grow. Examples include Dr. Martin Luther King Jr. and Mother Teresa. 1. Servant leaders put the needs of followers ahead of their own needs. 2. Servant leadership may be more prevalent in certain Asian cultures. Followership. Leaders need good followers. Today’s standard of a good follower differs from the expected obedience of years past. Good followers have several qualities including: 1. They can manage themselves. 2. They are strongly committed to a purpose outside themselves. 3. They are enthusiastic. 4. They build their competence and focus their efforts for maximum impact. 5. They are courageous, honest, and credible.

17.5

INTEGRATING THEORIES OF LEADERSHP Some commonalities and overlap exist in the various leadership theories discussed so far. In the following section, we will cover some ways they overlap or complement each other. 1. Traits: No single trait is unique to all leaders but 10 traits that regularly appear in research studies are listed in Exhibit 17-1. Intelligence, emotional intelligence, and conscientiousness appear to be the most powerful. 2. Behaviors: Three metacategories of behaviors encompass most leadership behaviors. These are: a. task-oriented behavior b. relations-oriented behavior c. change-oriented behavior 3. Contingency Factors: Follower’s experience and follower’s ability help explain effective leadership. Both organizational culture and national culture are also highly relevant contingency factors in leadership.

17.6

LEADERSHIP ISSUES IN THE TWENTY-FIRST CENTURY The concept of leadership is continually being refined. This section of the text examines several contemporary issues in leadership.

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Managing Power. Power is the capacity of a leader to influence work actions or decisions. Because leaders must influence others, we need to look at how leaders acquire power. French and Raven identified five sources or bases of power. 1. Legitimate power is the power a leader has as a result of his or her position in the organization. 2. Coercive power is the power a leader has because of his or her ability to punish or control. 3. Reward power is the power a leader has because of his or her ability to give positive benefits or rewards. 4. Expert power is influence that is based on expertise, special skills, or knowledge. 5. Referent power is power that arises because of a person’s desirable resources or personal traits. 6. Most effective leaders rely on several different bases of power. Developing Credibility and Trust. 1. Credibility is the degree to which followers perceive someone as honest, competent, and able to inspire. 2. Trust is the belief in the integrity, character, and ability of a leader.

WORKPLACE CONFIDENTIAL: A Micromanaging Boss Micromanaging is probably the most common complaint employees have about their boss. Micromanagers want to control every aspect of your work. So, how do you deal with a micromanager? Here are some suggestions: 1. Self-assessment. Is there a reason your boss is a micromanager? Take a realistic assessment of your work behavior. Maybe you need to be micromanaged and should adjust your behavior to eliminate that need. 2. New to the job. Are you, or your boss, new to the job? If so, give it some time before trying to correct their behavior. 3. Changing conditions. Is something different that might cause your boss to micromanage? Examples include major organizational changes or new project deadlines. The micromanagement might be temporary if this is true. 4. Talk to your boss. If the behavior is not temporary, your boss may not be aware that their micromanagement is a problem. Ensure them you are capable of doing your job. 5. Keep your boss updated. Proactively contact your boss with updates before they are requested. This practice might alleviate their concerns. 6. Reinforce your boss’s positive behaviors. When they leave you alone, tell them you appreciate the hands-off approach and trust. Over time, these suggestions should correct the problem.

Research has identified five dimensions that make up the concept of trust: a. Integrity (honesty and truthfulness)

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Competence (technical and interpersonal knowledge and skills) c. Consistency (reliability, predictability, and good judgment in handling situations) d. Loyalty (willingness to protect a person, physically and emotionally) e. Openness (willingness to share ideas and information freely) Integrity seems to be the most critical component when assessing another’s trustworthiness. Given the fact that many organizations have moved to selfmanaged work teams, establishing trust in the leadership is critical.

4. 5.

IT’S YOUR CAREER: How to Be Seen as Trustworthy Being known as trustworthy is an asset. As a leader, how can you build trust? Here are some suggestions to help you become known as trustworthy: 1. Be open. Be candid about problems and fully disclose relevant information. 2. Be fair. Before making decisions, consider how they will be perceived. Give credit where credit is due. 3. Speak your feelings. Sharing your feelings makes you seem more real and human. 4. Tell the truth. Truth is an inherent part of integrity. If someone finds out you’ve lied to them, it will be impossible for them to trust you. 5. Show consistency. Be predictable in your decisions and let your values and beliefs guide your actions. 6. Fulfill your promises. People must believe your word to trust you. 7. Maintain confidences. If you betray someone’s confidence, you will be seen as untrustworthy.

Leading Virtual Teams. Virtual teams pose some leadership problems. Specifically, how do you lead people who are physically separated and might be in different time zones, geographic regions, or reside in a different culture? 1. 43% of employed Americans indicated they have worked remotely at some point. 2. Group cohesion is difficult to achieve in virtual teams. 3. In face-to-face conversations, you can soften bad news with nonverbal cues. This is not possible online or on the phone. 4. Interpersonal skills are hard to develop in a virtual environment but may be necessary for a good leader. 5. Successful virtual leaders are adept at using social media to interact with team members and build trust and for bonding.

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6. D.

For virtual leaders, good writing skills are rapidly becoming an extension of interpersonal skills. Leadership Training. 1. Leadership training takes many different forms; however, not everyone has what it takes to be a great leader. Depending on the type of training, leaders may learn skills such as vision creation, trust building, and mentoring. 2. However, not everyone has the ability to be a leader. Leadership training is not effective on this group. When Leadership May Not Be Important. Substitutes for Leadership. Certain individual, job, and organizational variables can act as “substitutes for leadership,” negating the importance of having an individual leader. Possible variables of this type include characteristics of followers (e.g., experience, training, professional orientation, or the need to be independent). 1. Routine, unambiguous, or intrinsically satisfying jobs may require little leadership. 2. Cohesive work groups, explicit formal goals, and/or rigid rules and procedures may serve as substitutes for leadership.

ANSWERS TO REVIEW AND DISCUSSION QUESTIONS Student answers to these questions will vary. 17-1. What does each of the four theories on leadership behavior say about leadership? The University of Iowa Studies explored three styles of leadership: autocratic, democratic, and laissez-faire. Initial results found that a democratic style leader was more effective. However, later studies had mixed results. When group member satisfaction was examined, it was found that a democratic style was more effective than an autocratic one. The Ohio State Studies found that a leader who was high in both initiating structure and consideration sometimes achieved high group task performance and high group member satisfaction, but not always. The University of Michigan Studies presented two dimensions of leadership: employee orientation and production orientation. Researchers concluded that leaders who were employee oriented were able to get high group productivity and high group member satisfaction. Finally, the Managerial Grid attempted to categorize various leadership behaviors. Ultimately, the grid offered no answers to the question of what made a manager an effective leader; it only provided a framework for conceptualizing leadership style. (LO: 2, Compare and contrast early theories of leadership, AACSB: Reflective thinking) (LO: 3, Describe the three major contingency theories of leadership, AACSB: Reflective thinking) 17-2. Explain Fiedler’s contingency model of leadership.

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Fiedler’s model proposed that group performance was based upon the leader’s style and the amount of control in a given situation. After a leader’s style is assessed through the least-preferred coworker questionnaire, three contingency dimensions are examined: leader-member relations, task structure, and position power. Ultimately, the model suggests that effectiveness is achieved when a leader is matched to a particular situation or if the situation is changed. (LO: 3, Describe the three major contingency theories of leadership, AACSB: Analytical thinking) 17-3. How do situational leadership theory and path-goal theory each explain leadership? Situational leadership theory focuses upon the readiness of followers. It treats the leader and follower relationship like that of a parent and child. As the child (follower) matures, the parent (leader) relinquishes more control. Path-goal theory puts the focus on the leader and his or her ability to guide followers and remove obstacles. (LO: 3, Describe the three major contingency theories of leadership, AACSB: Analytical thinking) 17-4. What is leader-member exchange theory and what does it say about leadership? Leader-member exchange theory states that leaders establish “in-groups” and “out-groups.” Those in the in-group will have higher performance, lower turnover, and greater job satisfaction. This is due to the leader and follower investing in the relationship. (LO: 4, Describe contemporary views of leadership, AACSB: Reflective thinking) 17-5. Differentiate between transactional and transformational leaders and between ethical and servant leaders. A transactional leader guides and influences followers by exchanging rewards for the followers’ productivity. A transformational leader stimulates and inspires followers to achieve extraordinary outcomes. An ethical leader creates a culture where all employees think they could and should do a better job. A servant leader is one who goes beyond their own self-interest and focuses on opportunities to help their followers grow and develop. (LO: 4, Describe contemporary views of leadership, AACSB: Analytical thinking) 17-6. What are the five sources of a leader’s power? The five sources of a leader’s power are legitimate, coercive, reward, expert, and referent. (LO: 6, Discuss twenty-first century issues affecting leadership, AACSB: Analytical thinking) 17-7. Do you think that most managers in real life use a contingency approach to increase their leadership effectiveness? Explain. As managers participate in mentoring, development training, networking, and onthe-job experience, they should become more comfortable and adept in their use of a contingency approach to increase their leadership effectiveness. Organizations that offer leadership training often include contingency approaches. Ask your students to give examples to illustrate how their managers in the workplace use a contingency approach for successful leadership. (LO: 3,

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Describe the three major contingency theories of leadership, AACSB: Reflective thinking) 17-8. Why is trust between leaders and employees important? How can a leader build trust? Trust refers to a belief in the integrity, character, and ability of a leader. When an employee trusts his or her leader, he or she is willing to be vulnerable to the leader’s actions confident in their belief that the leader will not compromise their rights and interests. Building trust requires the leader to be fair and open, speak their feelings, be truthful, show competence and consistency, and maintain confidences. Research shows that trust between leaders and followers is significantly related to positive job outcomes. (LO: 6, Discuss twenty-first century issues affecting leadership, AACSB: Analytical thinking) ETHICS DILEMMA Student answers to these questions will vary. This ethics dilemma explores the potential problems exposed in the show Undercover Boss. According to their Web site, the show follows a different executive as they leave the comfort of their corner office for an undercover mission to examine the inner workings of their companies. While working alongside their employees, they see the effects that their decisions have on others, where the problems lie within their organizations, and they get an upclose look at both the good and the bad while discovering the unsung heroes who make their companies run. While potentially entertaining, is this candid camera approach fair to employees? Should the workplace be a subject for public scrutiny where CEOs get to play ‘gotcha’ on their employees? Have students discuss the issues of privacy and how this behavior by CEOs potentially violates employees’ trust in their leaders. 17-9. What do you think? Is it ethical for a leader to go undercover in his or her organization? Why or why not? Answers will vary. This question could go either way. Going undercover is deceiving your employees and begin disingenuous which I believe is unethical. However, if the motives are to find ways to improve the organization and better identify and reward high-performing employees then it might be justifiable. (LO: 1, Define leader and leadership, AACSB: Ethical understanding and reasoning) 17-10. What ethical issues could arise? How could managers deal with those issues? Possible answer: Colleagues may make unflattering statements about the firm or the boss that the undercover boss finds offensive. The boss might need to sign a contract before going undercover that states they will not retaliate against anyone for unfavorable comments. These comments might actually result in changes that improve performance. (LO: 1, Define leader and leadership, AACSB: Ethical understanding and reasoning)

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SKILLS EXERCISE: CHOOSING AN EFFECTIVE GROUP LEADERSHIP STYLE SKILL Students are provided with six suggestions for choosing an effective leadership style. They are then asked to consider two different situations from their past experiences. In one, they are to think of a group or team which they have been a part of and evaluate the leadership style of the leader. In the second, they are asked to observe a successful sports team and evaluate the leadership styles. Students should be able to use terms from the text while sharing their experiences and observations. (LO: 4, Describe contemporary views of leadership, AACSB: Written and oral communication) WORKING TOGETHER: TEAM EXERCISE In groups of three to four individuals, students brainstorm a list of characteristics associated with good leadership. In addition, they will develop a list of steps to take to develop their leadership abilities. Though students’ responses will vary, try to encourage them to discuss the sources of power and issues related to trust. (LO: 6, Discuss twenty-first century issues affecting leadership, AACSB: Written and oral communication)

MY TURN TO BE A MANAGER •

Think of the different organizations to which you belong. Note the different styles of leadership used by the leaders in those organizations. Write a paper describing these individuals’ styles of leading (no names, please) and evaluate the styles being used. (LO: 4, Describe contemporary views of leadership, AACSB: Reflective thinking)

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Write the names of three people you consider to be effective leaders. Make a bulleted list of the characteristics these individuals exhibit that you think make them effective leaders. (LO: 4, Describe contemporary views of leadership, AACSB: Reflective thinking)

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Think about the times that you have had to lead. Describe what you think your own personal leadership style is. What could you do to improve your leadership style? Come up with an action plan of steps that you can take. Put all this information into a brief paper. (LO: 4, Describe contemporary views of leadership, AACSB: Reflective thinking)

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Managers say that increasingly they must use influence to get things done. Do some research on the art of persuasion. Make a bulleted list of suggestions that you find on how to improve your skills at influencing others. (LO: 4, Describe contemporary views of leadership, AACSB: Reflective thinking)

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Here’s a list of leadership skills. Choose two and develop a training exercise that will help develop or improve that skill: building employee communities, building teams, coaching and motivating others, communicating with impact, confidence and energy, leading by example, leading change, making decisions, providing direction and focus, and valuing diversity. (LO: 6, Discuss twenty-first century issues affecting leadership, AACSB: Analytical thinking)

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Select one of the topics from the section on leadership Issues in the twenty-first century. Do some additional research on the topic and put your findings in a bulleted list. Be prepared to share this in class. Be sure to cite your sources. (LO: 6, Discuss twenty-first century issues affecting leadership, AACSB: Analytical thinking)

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Interview three managers about what they think it takes to be a good leader. Write up your findings in a report and be prepared to present it in class. (LO: 6, Discuss twenty-first century issues affecting leadership, AACSB: Analytical thinking) •

Try out your leadership skills! Volunteer for a leadership position in an organization you are involved in. (LO: 1, Define leader and leadership, AACSB: Ethical understanding and reasoning)

ANSWERS TO CASE APPLICATION 1 QUESTIONS Student answers to these questions will vary. Transforming the Fashion Industry at Stitch Fix 17-11. What examples are provided in this case for how Katrina Lake exhibited authentic leadership? Student responses will vary. However, Katrina Lake appears to be very humble and comfortable with who she is as a person and a leader. She is also very transparent, knows what she believes in, and appears to be guided by strong moral standards. (LO: 4, Describe contemporary views of leadership, AACSB: Analytical thinking) 17-12. What has Katrina Lake done that likely allowed her to develop credibility and trust as a leader? She is very transparent and honest. She also takes time to understand her clients and employees by personally working with clients each week. (LO: 4, Describe contemporary views of leadership, AACSB: Analytical thinking) 17-13. In what ways has Katrina Lake demonstrated behaviors that indicate servant leadership? What could she do to exemplify servant leadership even more?

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Student responses will vary, but Katrina Lake’s recognition of the need to mentor the next generation of company founders is a great example of servant leadership. She could augment that image by investing in her own employees to help them achieve their potential. Lake may do this already, but it is not indicated in the case. (LO: 4, Describe contemporary views of leadership, AACSB: Analytical thinking) 17-14. Lake’s Stitch Fix is thought to have transformed the fashion industry by making personal shopping more affordable and less time-consuming. If Lake has been a transformational leader with her followers, what kinds of behaviors would she have exhibited? Student answers will vary. However, some of the qualities Lake would exhibit include focusing more on developing and encouraging her employees to reach their full potential. The case does not indicate she motivates, encourages, and inspires her followers to accomplish extraordinary things. (LO: 4, Describe contemporary views of leadership, AACSB: Analytical thinking)

ANSWERS TO CASE APPLICATION 2 QUESTIONS Student answers to these questions will vary. Recognizing What Leadership is Needed at the Golden State Warriors 17-15. What leadership models, theories, or concepts do you see in this case? List and describe. Student answers will vary. The Fiedler contingency model fits well since Kerr’s leadership style changed depending on the situation. Situational leadership theory also fits since Kerr adapted his style based on the players’ readiness. Path-goal theory is also evident since Kerr viewed his role as providing direction and support to achieve wins. Kerr also appears to be an authentic leader with strong moral convictions. Other models, theories, and concepts can also be applied. (LO: 3, Define the three major contingency theories of leadership, AACSB: Analytical thinking), (LO: 4, Describe contemporary views of leadership, AACSB: Analytical thinking) 17-16. What situational conditions or leadership actions do you think are necessary for it to be effective to let players coach themselves? Players need to respect the coach’s abilities in order to buy into his vision for the team. Kerr then needs to show he trusts the players to make good decisions that will help them achieve their collective goal. (LO: 3, Define the three major contingency theories of leadership, AACSB: Analytical thinking) 17-17. What does this case suggest about followership (and about how leaders might relate to followers)? Leaders need to motivate and engage their followers to achieve end goals. The leader must respect the followers’ abilities and trust them to manage themselves. (LO: 4, Describe contemporary views of leadership, AACSB: Analytical thinking)

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17-18. What are the advantages and disadvantages involved in speaking up on current events? In what ways does this approach help and/or hurt Kerr’s strengths as a leader? Speaking up on current events can create problems for the team and management if the opinion is controversial or unpopular. However, it also speaks to Kerr’s authenticity and moral character. His followers likely trust him more even if they don’t agree with all of his positions. (LO: 4, Describe contemporary views of leadership, AACSB: Analytical thinking)

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Part 5: Management Practice A Manager’s Dilemma Put yourself in Glen’s shoes. Using what you’ve learned in Part 5 about individual behavior, communication, employee motivation, and leadership, how would you handle this situation? There are no right answers about how to address Glen’s situation. Traditionally, management experts would have recommended that Glen move out as managers’ benefit when they separate their personal lives from the lives of their employees. Today’s view is that managers can have personal and social interactions with their employees, but the relationship can be strained when difficult decisions need to be made. Students can break into groups, with each group addressing one of these areas: individual behavior, communication, motivation, and leadership. This discussion could be aided by asking if being in a management position changes how a person looks at friends outside of work. Global Sense What role do you think external factors, such as the economy or a country’s culture, play in levels of employee engagement? Discuss. As world economies become more closely tied together, employees recognize that what happens “over there” will soon impact what happens in the United States (and vice versa). Also, there are many employees who work for companies that are closely connected (or owned) by firms outside of the United States. So it is natural to assume that for these companies, the global economy has a very real impact on their company’s ability to give raises or retain employees. With regard to culture, we can see how a country’s national culture also relates to global economic issues. Several countries in Europe with paternalistic views of worker benefits have created an economic time bomb not only from themselves but for their partners in the EU. Have students look at the effects of the Greek and Italian economies near collapses on other member countries. What role does an organization’s motivational programs play in whether an employee is engaged or not? Discuss. There is a strong connection between what a company does to motivate employees and their level of engagement (one being the intended purpose of the other). To create discussion on this question, it might be useful to discuss the opposite, ‘why do motivational programs fail at improving employee engagement?’ Students may more closely see the link between a bad program and its effect on employee engagement. They can use this scenario or experience to make suggestions for how these programs should work and can be improved. How might a manager’s leadership style affect an employee’s level of engagement? Discuss. Leadership is important for energizing employees and providing direction through goals and missions. As students will see, some styles of leadership are potentially very motivational, i.e. charismatic leadership and transformational leadership. These styles rely on referent power and expert power to influence employees. On the other hand, transactional leadership focuses mainly on external rewards and the ability of this type of leader decreases as the attractiveness of the rewards decrease or the leaders’ ability to distribute rewards. What could a manager do in the way he or she communicates to affect an employee’s level of engagement? Looking at the first part of Chapter 14, students can pick out a variety of ways that communication between managers can be improved; for example, eliminating the barriers to

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communication, such as filtering, information overload, and defensiveness. Managers can also increase an employee’s level of engagement by using the technique of active listening to empathize with employees. Another example of how communication can affect engagement is the type of communication network used in the organization. The traditional chain and the wheel networks result in low levels of employee satisfaction, while the all-channel network reports the highest level of employee satisfaction. You’re a manager of a workplace that has different “generations.” How will you approach engaging your employees? Do you think Gen Y employees (born between 1980 and 1994) and Gen Z (born between 1995 and 2015) will tend to be more difficult to “engage”? Discuss. Ask most managers and they will tell you that Generation Y employees are not like other employees when it comes to motivation. This generation of employees is not likely to be committed to one company for long periods of time, and is not easily influenced by organizational programs that do not provide quick employee returns. This generation has also been heavily influenced by social networks, and relational work benefits (those emphasizing relationships) are important. Generation Y employees are also more likely to be motivated by time-related benefits than those involving money. Ultimately, flexibility will be one of the key aspects of programs that motivates this group of new workers. Gen Z employees may also be difficult to engage given they are sometimes called the “touch screen” generation. They grew up with technology and may use it instead of personal interaction. Different techniques may be needed to engage this group.

Continuing Case Starbucks—Leading Discussion Questions with Answers; Teaching Suggestions P5-1. Which of the functions of communication do you think Kevin Johnson uses when he is involved in a Partner Connection Tour? Are the communication functions any different when he uses the internal social media tool Workplace? Discuss. As your students discuss their perspectives on these issues, have them think about how communication functions differ depending on the situation. The communication in the Partner Connection Tours is used to motivate partners, have some time for emotional sharing, and also pass along relevant information. Students may come up with other ideas. P5-2. What potential barriers to effective communication might apply to employees working in a busy Starbucks café? What could a store manager do to minimize those barriers? The primary barriers will be noise, or any disturbance that interferes with communicating the message. Actual physical noise of people talking and the machines used to make the products would be the biggest impediment. They can use computer monitors so the customer can view the order before it’s made to make sure it’s accurate. Other screens can let someone know their order is ready. P5-3. Besides asking employees for their opinions through attitude surveys, what else could managers at Starbucks do to ensure that employees have as positive attitudes as possible? Factors that might ensure positive attitudes include close attention to scheduling preferences, attitude awards, praise for someone with a positive attitude, and numerous other actions. And, if someone has a toxic attitude, it may be time to terminate the relationship before it spreads to others.

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P5-4. Look at the description of the types of people Starbucks seeks. What individual behavior issues might arise in managing these types of people? (Think in terms of attitudes, personality, etc.) What work team issues might arise? (Think in terms of what makes teams successful. Hint: Can a person be self-motivated and passionate and be a good team player?) In studying the textbook chapters associated with leading and the chapter on Managing Teams, and in the Part 5-ending comprehensive case material, your students are learning to appreciate the complex skills and knowledge needed to lead a diverse workforce and to promote effective group processes. This question can serve as a stimulus for small group study and discussion of possible challenges faced by Starbucks managers directing individuals and work groups in today’s teamoriented business environment. Divide your class into groups of five or six students for this activity. As you walk around your classroom, you can facilitate group discussion by carefully listening and asking questions when appropriate, to encourage students to consider work team issues from their own experiences at school or in their workplace. Many of your students who have participated in major group projects during course work will understand and have opinions about this issue; they have had firsthand experience relating to the challenges of team work and group management as a team member. P5-5. Discuss the “ideal” Starbucks employee in terms of the various personality trait theories. Your students will have varied responses to this question, depending upon the qualities they determine to be characteristics of an “ideal” Starbucks partner. Be sure they relate their answers to the different personality trait theories described in Chapter 14, “Understanding Individual Behavior,” including the four dimensions of the MBTI, the five personality traits in the Big Five Model, and the additional personality insights. P5-6. Describe the workplace environment Starbucks has tried to create. What impact might such an environment have on motivating employees? In fostering a workplace environment to promote the success of the company’s mission and goals, Starbucks managers seek to lead by encouraging employees to give their best effort to all aspects of their work. CEO Howard Schultz knows that the workplace environment plays a key role in creating the motivation his partners must possess. This environment at Starbucks is espoused and enacted by Schultz himself as he speaks about the importance of understanding how people behave and why they do the things they do: “We all want the same thing as people—to be respected and valued as employees and appreciated as customers.” Ask your students to work together as an entire class to offer their ideas about the elements of the Starbucks' work environment that contribute to the company’s success. You can record these elements on the board, where all students can see, and discuss their impact on the motivation of Starbucks’ partners. Students’ answers should include specific examples such as the company’s use of a partner survey to give partners a voice in shaping their partner experience, its adherence to the “Total Pay” philosophy through provision of the Total Pay package; Starbucks’ formal recognition programs, such as its on-the-spot recognition card that celebrates both individual and team successes; and the company’s Caring Unites Partners (CUP) fund. P5-7. Using the Job Characteristics Model in Exhibit 16-6, re-design a part-time hourly worker’s job to be more motivating. Do the same with a store manager’s job. Students can work on this question in a small group setting either during class or outside of the classroom. You can initiate this assignment by asking students to recall a time when they lacked

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motivation in an employment situation. In what possible ways could their job have been redesigned to increase their motivation? Point out to your students that providing jobs with a variety of activities enables employees to use and develop their skills and talents, and can be a key ingredient in motivating a part-time hourly worker. Also, note that different job characteristics often have varying degrees of importance to different individuals. P5-8. Describe Kevin Johnson’s leadership style. Would his approach be appropriate in other types of organizations? Why or why not? You may want to initiate a class discussion of this question by proposing these questions to your students: • Do you believe that great leaders share some of the same characteristics in their style of leadership? • If so, what characteristics would you identify as being held in common by outstanding leaders? • When a leader develops a style that is effective in leading employees in a particular organization, can he/she assume that this style will be effective in a similar position with another company later in his/her career? Why or why not? • What are some implications for a manager’s leadership style that are presented by employee perception? Do you think that the process of becoming an effective leader involves lifelong learning? Justify your answer. P5-9. What is Starbucks doing “right” with respect to the leading function? Are they doing anything “wrong”? Explain. When answering this question, students will likely respond quickly to the first part of this question, providing examples from their study of this case. Answering the second part of this question may present a greater challenge to your students. Encourage them to use their critical thinking skills and their observations and experiences as a consumer, and perhaps as an employee, as they analyze information about the leading function at Starbucks. P5-10. Which of the company’s mission and values (see website) influence the leading function of management? Explain how the one(s) you chose would affect how Starbucks’ managers deal with (a) communication issues; (b) individual behavior issues; (c) motivational techniques; and (d) leadership styles or approaches. This question challenges your students to apply the knowledge they have gained about leadership theory and practice to the Starbucks case in areas of key responsibility to Starbucks managers at every level of the organization. You might assign this question as a written exercise to culminate the study of the Part 5-ending comprehensive case on an individual basis outside of class. If you choose to present this question in this manner, ask your students to choose at least two of the Guiding Principles in completing this activity. After their study of leadership and the Starbucks case material, students should have little difficulty describing how each one of the company’s Guiding Principles could influence the leading function of management. Their responses could serve as a springboard for class discussion and should give you insight into their understanding of varied aspects of the leading function.

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Chapter 18 Monitoring and Controlling Managers must monitor whether goals that were established as part of the planning process are being accomplished efficiently and effectively. That’s what they do when they control. Appropriate controls can help managers look for specific performance gaps and areas for improvement. Focus on the following learning objectives as you read and study this chapter.

LEARNING OBJECTIVES 1. 2. 3. 4. 5.

Explain the nature and importance of control. Describe the three steps in the control process. Explain how organizational and employee performance are measured. Describe tools used to measure organizational performance. Discuss contemporary issues in control.

CHAPTER OUTLINE INTRODUCTION Even when managers carefully and thoroughly plan, a program or decision may be poorly or improperly implemented if an effective control system has not been established. 18.1

WHAT IS CONTROLLING, AND WHY IS IT IMPORTANT? Control is important for three main reasons: A. What is Controlling? Controlling is the process of monitoring, comparing, and correcting work performance. B. Why is Controlling Important? Controlling ensures that everything is going as planned and goals are being met. Exhibit 18-1 shows the link between planning and controlling. 1. Controlling serves as the final link in the functional chain of management. 2. Controlling is also important to employee empowerment. The development of an effective control system may minimize potential problems. 3. Finally, controls serve to protect the company and its assets.

18.2

THE CONTROL PROCESS The control process is a three-step process, including measuring actual performance, comparing actual performance against a standard, and taking managerial action (see Exhibit 18-2).

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18.3

Step 1: Measuring Actual Performance. Measuring is the first step in the control process. 1. How We Measure. Measurement is frequently achieved through four common sources of information such as: a. Personal observation b. Statistical reports c. Self-monitoring computers d. Oral reports e. Written reports 2. What We Measure. What we measure is probably more critical than how we measure. What is measured often determines the area(s) in which employees will attempt to excel. Step 2: Comparing Actual Performance Against the Standard. Comparing is the next step in the control process. 1. Comparing determines the degree of variation between actual performance and the standard. 2. Of critical importance to the control process is determining the range of variation. The range of variation is the acceptable parameters of variance between actual performance and the standard. (See Exhibit 18-3.) 3. An example of comparing actual performance to standards is presented in Exhibit 18-4. Taking Managerial Action. Although the manager might decide to “do nothing,” two additional alternatives may be taken. 1. Correct Actual Performance. Once the manager has decided to correct actual performance, he/she must make another decision: a. To take immediate corrective action, which is corrective action that corrects problems at once to get performance back on track, or b. To take basic corrective action, which is corrective action that looks at how and why performance deviated and then proceeds to correct the source of deviation. c. After analyzing deviations, effective managers identify and correct causes of variance when the benefits of doing so justify the cost involved. 2. Revise the Standard. If the standard was set too high or too low, a manager may decide to revise the standard. Summary. The control process is a continuous flow among measuring, comparing, and managerial action. Exhibit 18-5 summarizes the manager’s decisions in the control process.

CONTROLLING FOR ORGANIZATIONAL PERFORMANCE A. What Is Organizational Performance? Performance is the end result of an activity. Managers are concerned with organizational performance—the accumulated end results of all the organization’s work activities. B. Measures of Organizational Performance.

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Employees need to recognize the connection between what they do and the outcomes. The most frequently used organizational performance measures include organizational productivity, organizational effectiveness, and industry rankings. 1. Organizational Productivity. Productivity is the overall output of goods or services produced divided by the inputs needed to generate that output. The management of an organization seeks to increase this ratio. 2. Organizational Effectiveness. Organizational effectiveness is a measure of how appropriate organizational goals are and how well an organization is achieving those goals. 3. Industry and Company Rankings. Industry and company rankings are often used as a measure to describe organizational effectiveness. Exhibit 18-6 lists some of the more popular industry rankings used to measure organizational performance. IT’S YOUR CAREER How to Be a Pro at Giving Feedback Everyone needs feedback! If you want people to do their best, they need to know what they’re doing well and what they can do better. That’s why providing feedback is such an important skill to have. But being effective at giving feedback is tricky! That’s why we often see managers either (a) not wanting to give feedback, or (b) giving feedback in such a way that it doesn’t result in anything positive. You can feel more comfortable with and be more effective at providing feedback if you use the following specific suggestions: 1. Be straightforward by focusing on specific behaviors. Feedback should be specific rather than general. 2. Be realistic. Focus your feedback on what can be changed. 3. Keep feedback impersonal. Feedback, particularly the negative kind, should be descriptive rather than judgmental or evaluative. 4. Keep your feedback goal oriented. Don’t just blow off steam. If the feedback will not help another person, then hold the comments. 5. Know when to give feedback—make it well timed. Feedback is most meaningful to a recipient when there’s a very short interval between his or her behavior and the receipt of feedback about that behavior. 6. Ensure understanding. Make sure your feedback is concise and complete so that the recipient clearly and fully understands the communication meaning you intended. 7. Watch your body language, tone of voice, and facial expressions. Think about what you want to communicate and make sure your body language supports that message.

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Controlling for Employee Performance. 1. Delivering Effective Performance Feedback. Managers need to provide their employees with feedback so the employees know where they stand in job performance. 2. Using Disciplinary Actions. Managers are responsible for making sure employees’ work efforts are of the quantity and quality needed to accomplish organizational goals. Managers can use disciplinary actions to enforce the organization’s work standards and regulations. Exhibit 18-7 lists some common types of work discipline problems and examples of each. To ensure that the minimum penalty appropriate to the offense is imposed, managers can use progressive disciplinary action. Progressive disciplinary actions typically involve five steps: a. Oral warning b. Initial written warning c. Final written warning d. Termination review or suspension e. A dismissal letter stating the reason for dismissal

WORKPLACE CONFIDENTIAL: Responding to an Unfair Performance Review A recent survey indicated that 62% of full-time employees felt “blindsided” by their performance reviews. What do you do when you feel your review isn’t a fair assessment of your work? Here are a few suggestions; 1. Listen closely to what your boss is saying. Allow your boss to complete the review and be prepared to accept that some of the negative comments may be true. 2. Stay calm and cool, and avoid being defensive. Control your emotions and don’t blame others or get into a debate with your boss. 3. Ask what you can do to improve. This indicates you can receive criticism and are willing to change if needed. 4. Request more feedback between reviews. Increased regularity of feedback may help eliminate surprises in the annual review and give you time to correct performance issues. 5. Do you want to push back? Decide whether the criticisms are truly unfair before challenging the review. 6. Challenging your performance appraisal. A) request a copy of the review, B) determine which aspects you disagree with, C) schedule a meeting to present your evidence to support your position, D) take your case to the Human Resources Department if your meeting fails. 7. Writing a rebuttal. If you decide to challenge the review, you need a formal rebuttal letter. 8. The worst-case scenario. If you expect to be fired, turn it into an opportunity.

18.4

TOOLS FOR CONTROLLING ORGANIZATIONAL PERFORMANCE Three basic types of controls are used to control organizational performance: feedforward controls, concurrent controls, and feedback controls. (See Exhibit 18-8.) A. Feedforward, Concurrent, and Feedback Controls.

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Feedforward Control. Feedforward control is a type of control that takes place before a work activity is done. 2. Concurrent Control. Concurrent control is a type of control that takes place while a work activity is in progress. a. The best-known form of concurrent control is direct supervision. Another term for it is management by walking around, which is when a manager is in the work area interacting directly with employees. 3. Feedback Control. Feedback control is a type of control that takes place after a work activity is done. Financial Controls. 1. Traditional Financial Control Measures (See Exhibit 18-9) a. Financial ratios are calculated by taking numbers from the organization’s primary financial statements—the income statement and the balance sheet. Financial ratios can be organized into four categories: 1. Liquidity ratios measure an organization’s ability to meet its current debt obligations. 2. Leverage ratios examine the organization’s use of debt to finance its assets and whether the organization is able to meet the interest payments on the debt. 3. Activity ratios assess how efficiently the firm is using its assets. 4. Profitability ratios measure how efficiently and effectively the firm is using its assets to generate profits. b. Budgets are discussed in the Planning and Control Techniques module. Budgets also function as control tools; budgets provide managers with quantitative standards against which to measure and compare actual performance and resource consumption. Information Controls. 1. Managers deal with information controls in two ways: (1) as a tool to help them control other organizational activities and (2) as an organizational area they need to control. a. How Is Information Used in Controlling? Managers need the right amount of information at the right time. A management information system (MIS) is a system used to provide managers with needed information on a regular basis. In theory, this system can be manual or computer based, although most organizations have moved to computer-supported applications. b. Controlling Information. Information controls need to be monitored regularly to ensure that all possible precautions are being taken to protect important information. Balanced Scorecard.

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18.5

The balanced scorecard is a performance measurement tool that looks at four areas—financial, customer, internal processes, and people/innovation/growth assets—that contribute to a company’s performance. Benchmarking of Best Practices. 1. Benchmarking is the search for the best practices among competitors or noncompetitors that lead to their superior performance. 2. The benchmark is the standard of excellence against which to measure and compare. a. Benchmarking can be used to monitor and measure organizational performance. b. This practice can be used to identify specific performance gaps and potential areas of improvement. c. Exhibit 18-10 provides a summary to guide managers in implementing benchmarking programs.

CONTEMPORARY ISSUES IN CONTROL A. Social Media as a Control Tool. Social media can provide current data on issues where instant feedback is needed to make adjustments. Public officials dealing with natural disasters, such as floods and wildfires, have used social media to get updates on escape routes, disaster progress, and stranded people. They then used this information to direct resources. Social media can also be monitored for candid customer feedback on products or services. B. Global Differences in Control. Should global organizations use particular control systems? What should global managers know about adjusting controls for national differences? 1. Methods of controlling people vary in different countries. 2. Technology has an impact on control, depending on the level of sophistication of technology in a particular country. 3. Managers must consider the legal constraints in different countries. 4. Managers face challenges in making comparisons of goods and services among countries, even when comparing similar products and services. 5. Organizations need to have controls in place for protecting their workers and other assets during times of global turmoil and disasters. C. Workplace Privacy. Many employers monitor employees at work. 1. Employers monitor workers for a number of reasons. a. Web surfing while at work is thought to cost billions of dollars in lost work productivity each year. Employers do not want to risk being sued for creating a hostile workplace environment because of offensive messages or material displayed on an employee’s computer screen. b. Managers want to ensure that the company’s secrets are not being leaked by employees.

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Employee Theft. Employee theft is any unauthorized taking of company property by employees for their personal use. Exhibit 18-11 presents actions taken by managers to deal with employee theft. Corporate Governance. 1. Corporate governance is the system used to govern a corporation so that the interests of corporate owners are protected. a. The Role of the Board of Directors. The role of boards of directors is to have a group, independent of management, looking out for the interest of stockholders. b. Financial Reporting and the Audit Committee. Senior managers are now required by law (Sarbanes Oxley Act) to certify their companies’ financial results. c. Compliance Offices and Positions. Corporate compliance is the process of making sure your company and employees follow the laws, regulations, standards, and ethical practices that apply to the organization. Compliance policies are overseen by a compliance officer.

ANSWERS TO REVIEW AND DISCUSSION QUESTIONS 18-1. What are the three steps in the control process? Describe in detail. The three steps in the control process are measuring, comparing, and taking action. Measuring involves deciding how to measure actual performance and what to measure. Comparing involves looking at the variation between actual performance and the standard (goal). Deviations outside an acceptable range of variation need attention. (LO: 2, Describe the three steps in the control process, AACSB: Analytical thinking) 18-2. What is organizational performance? Organizational performance is the accumulated results of all the organization’s work activities. Three frequently used organizational performance measures include (1) productivity, which is the output of goods or services produced divided by the inputs needed to generate that output; (2) effectiveness, which is a measure of how appropriate organizational goals are and how well those goals are being met; and (3) industry and company rankings compiled by various business publications. (LO: 3, Explain how organizational and employee performance are measured, AACSB: Analytical thinking) 18-3. Contrast feedforward, concurrent, and feedback controls. Feedforward controls take place before a work activity is done. Concurrent controls take place while a work activity is being done. Feedback controls take place after a work activity is done. (LO: 2, Describe the three steps in the control process, AACSB: Analytical thinking) 18-4. Discuss the various types of tools used to monitor and measure organizational performance. Financial controls that managers can use include financial ratios (liquidity, leverage, activity, and profitability) and budgets. One information control managers can use is an

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MIS, which provides managers with needed information on a regular basis. Others include comprehensive and secure controls such as data encryption, system firewalls, data backups, and so forth that protect the organization’s information. Balanced scorecards provide a way to evaluate an organization’s performance in four different areas rather than just from the financial perspective. Benchmarking provides control by finding the best practices among competitors or noncompetitors and from inside the organization itself. (LO: 3, Explain how organizational and employee performance are measured, AACSB: Analytical thinking) 18-5. Explain the balanced scorecard approach to evaluating organizational performance. The balanced scorecard allows organizations to measure organizational performance using more than just a financial perspective. This approach includes establishing goals and then making assessments of financial, customer, internal processes, and people/innovation/growth assets. (LO: 4, Describe tools used to measure organizational performance, AACSB: Analytical thinking) 18-6. Why is control important to customer interactions? Control is important to customer interactions because employee service productivity and service quality influence customer perceptions of service value. Organizations want long-term and mutually beneficial relationships among their employees and customers. (LO: 5, Discuss contemporary issues in control, AACSB: Analytical thinking) 18-7. In Chapter 7 we discussed the white-water rapids view of change, which refers to situations in which unpredictable change is normal and expected, and managing it is a continual process. Do you think it’s possible to establish and maintain effective standards and controls in this type of environment? Discuss. An organizational environment that is characterized by the white-water rapids view of change must establish and maintain effective standards and controls in order to provide the stability necessary for effective production of goods and services in the midst of continuous hyperchange. The white-water rapids atmosphere requires the establishment and implementation of a control system that is flexible and clearly focused on the performance measures of significant importance to the success of the company. (LO: 1, Explain the nature and importance of control, AACSB: Analytical thinking) 18-8. “Every individual employee in an organization plays a role in controlling work activities.” Do you agree with this statement, or do you think control is something that only managers are responsible for? Explain. Every individual employee plays a role in controlling the quality of goods and services produced by their company, particularly in organizations where employees have been empowered by management. Even in organizations where employees have not been extensively empowered, employees play a role in measuring, comparing, and correcting performance. In any case, managers remain responsible for establishing and maintaining standards, approaches, and guidelines for measuring, comparing, and correcting the work of the organization. (LO: 5, Discuss contemporary issues in control, AACSB: Analytical thinking)

ETHICS DILEMMA

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Student answers to these questions will vary. It’s Cyber Monday. What are you going to do? If you’re like many other Americans, you’re going to shop on the Internet, even if you’re at work. A recent survey found that of those workers who are caught shopping instead of working only a few are reprimanded. 18-9. Other than the obvious, what problems do you see here, especially as it relates to control? Possible answer; Not reprimanding someone for shirking could create morale issues with their colleagues who are doing their jobs. It can also shift work to those colleagues if a project does not get completed on time. (LO: 5, Discuss contemporary issues in control, AACSB: Ethical understanding and reasoning) 18-10. How would you handle this? How could organizations make sure they’re addressing work controls ethically? Possible answer: I would document the event or “write up” the employee and put it in their HR file. This practice sends a signal that the practice is not tolerated during work hours. Policies that clearly identify management’s response will ensure everyone is treated the same. (LO: 5, Discuss contemporary issues in control, AACSB: Ethical understanding and reasoning) SKILLS EXERCISE: MANAGING CHALLENGING EMPLOYEES Almost all managers will, at one time or another, have to deal with people who are difficult. Some examples include people being short-tempered, demanding, abusive, angry, defensive, complaining, intimidating, aggressive, narcissistic, arrogant, and rigid. Successful managers have learned how to cope with difficult people. In this exercise, students are given the following suggestions for dealing with difficult people: • • • •

Don’t let your emotions rule Attempt to limit contact Try polite confrontation Practice positive reinforcement

Students are presented with a scenario whereby they must interact with difficult managers and are asked how they might improve their ability to work with these individuals. (LO: 3, Explain how organizational and employee performance are measured, AACSB: Analytical thinking)

WORKING TOGETHER: TEAM EXERCISE

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Working in groups of three or four, students are asked to provide feedback to another group member based on four different scenarios. After each person provides feedback, discuss as a group how effective it was and brainstorm ways it could be improved. (LO: 3, Explain how organizational and employee performance are measured, AACSB: Analytical thinking)

MY TURN TO BE A MANAGER •

You have a major class project due in a month. Identify some performance measures that you could use to help determine whether the project is going as planned and will be completed efficiently (on time) and effectively (high quality). (LO: 3, Explain how organizational and employee performance are measured, AACSB: Reflective thinking)

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How could you use the concept of control in your personal life? Be specific. (Think in terms of feedforward, concurrent, and feedback controls as well as specific controls for the different aspects of your life—school, work, family relationships, friends, hobbies, etc.) (LO: 5, Discuss contemporary issues in control, AACSB: Analytical thinking)

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Survey 30 people about whether they have experienced office rage. Ask them specifically whether they have experienced any of the following: yelling or other verbal abuse from a coworker, yelling at coworkers themselves, crying over work-related issues, seeing someone purposely damaging machines or furniture, seeing physical violence in the workplace, or striking a coworker. Compile your findings in a table. Are you surprised at the results? Be prepared to present these in class. (LO: 5, Discuss contemporary issues in control, AACSB: Analytical thinking)

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Pretend you’re the manager of a customer call center for timeshare vacations. What types of control measures would you use to see how efficient and effective an employee is? How about measures for evaluating the entire call center? (LO: 4, Describe tools used to measure organizational performance, AACSB: Analytical thinking)

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Disciplining employees is one of the least favorite tasks of managers, but it is something that all managers have to do. Survey three managers about their experiences with employee discipline. What types of employee actions have caused the need for disciplinary action? What disciplinary actions have these managers used? What do they think is the most difficult thing to do when disciplining employees? What suggestions do they have for disciplining employees? (LO: 4, Describe tools used to measure organizational performance, AACSB: Analytical thinking)

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Figure 18-6 lists several industry and company ranking lists. Find the Web site for 3 lists and identify the performance measures that are used to determine the rankings on each. Are there any similar measures? Any unique measures?

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Summarize your findings in a brief report. (LO: 3, Explain how organizational and employee performance are measured, AACSB: Analytical thinking)

ANSWERS TO CASE APPLICATION 1 QUESTIONS

Student answers to these questions will vary. Bug Bounty Hackers at General Motors 18-11. Bug bounty programs and hiring of white hat hackers are forms of information controls. What are other forms of information controls mentioned in the chapter? Social media, date encryption, system firewalls, and data backups are all listed. (LO: 5, Discuss contemporary issues in control, AACSB: Analytical thinking) 18-12. When a bug is found through a bug bounty program, do you think managers are more likely to take immediate corrective action or basic corrective action? What are the reasons for your answer? Answers will vary. Depending on the severity of the bug, it may require immediate corrective action, but it should be followed with basic corrective action to ensure other similar bugs do not emerge. (LO: 2, Describe the three steps in the control process, AACSB: Analytical thinking) 18-13. What are the dangers and benefits of hiring hackers? Why have companies decided that there are more benefits than dangers in accomplishing the process of controlling via hiring hackers? Hackers can be the source of a data breach and cost overruns could occur. However, the danger and cost of a significant data breach outweighs the cost of hiring hackers to identify weaknesses that will enable the company to fix them before a data breach occurs. (LO: 5, Discuss contemporary issues in control, AACSB: Analytical thinking)

ANSWERS TO CASE APPLICATION 2 QUESTIONS

Student answers to these questions will vary. Posting for Just Other Employees to See 18-14. How did Starbucks use social media as a control tool? Responses to this question will vary. Starbucks received instant feedback on a product that was selling well in several stores and immediately provided a company recipe for the product to all stores. (LO: 5, Discuss contemporary issues in control, AACSB: Ethical understanding and reasoning) 18-15. In what ways does employees’ use of Workplace allow employers to monitor employees’ activities at work in both positive and potentially negative ways?

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Workplace lets employees share ideas about displays, products, and store features that are successful. However, it could also lead to oversharing personal and company information that might not be positive. (LO: 5, Discuss contemporary issues in control, AACSB: Ethical understanding and reasoning) 18-16. How could Workplace have an impact on organizational performance? Workplace could improve employee morale and promote employee engagement. It can also be used as a quick way to share successful marketing techniques or promotional ideas. (LO: 5, Discuss contemporary issues in control, AACSB: Analytical thinking) 18-17. Some employees might not feel drawn to using Workplace. What do you think managers might need to do to increase the chances that employees would choose to use Workplace? Managers could offer incentives for good ideas or simply just checking in daily. Prizes, time off, cash awards, and other perks could be offered to the best idea every week. Firms could enter employees in a lottery for logging in every day. (LO: 5, Discuss contemporary issues in control, AACSB: Analytical thinking)

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Planning and Control Techniques Module In the study of this module, students will have an opportunity to learn essential knowledge about the planning tools and techniques that can help any business reach the objectives driven by its organizational mission.

CHAPTER OUTLINE INTRODUCTION This section introduces some of the basic planning tools and techniques that can be used by managers in helping organizations to achieve their goals. 1.

TECHNIQUES FOR ASSESSING THE ENVIRONMENT The following techniques have been developed to assist managers in assessing the organization’s environment: A. Environmental Scanning. Environmental scanning is the screening of large amounts of information to anticipate and interpret changes in the environment. Research has shown that both large and small companies with advanced environmental scanning systems have increased their profits and revenue growth. 1. Competitor intelligence is an environmental scanning activity by which organizations gather information about competitors. In using this fastest-growing environmental scanning activity, companies seek to identify their competitors, learn what their competitors are doing, and gain information about the possible effect of competitors’ actions on their organization. 2. Global scanning is an especially important type of environmental scanning used by managers to assess changes and trends in the global environment through the gathering of vital global information. B. Forecasting. Environmental scanning provides the foundation for developing forecasts, which are predictions of outcomes. 1. Forecasting techniques can be grouped into two main categories: a. Quantitative forecasting applies a set of mathematical rules to a series of past data to predict outcomes. b. Qualitative forecasting uses the judgment and opinions of knowledgeable individuals to predict outcomes. c. Exhibit PC-1 describes some popular forecasting techniques. 2. Forecasting Effectiveness. Managers must consider effectiveness when deciding which forecasting techniques to use. a. Forecasting techniques are most accurate when the environment is not rapidly changing and when it is used to predict nonseasonal events.

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The following suggestions may improve forecasting effectiveness: 1. Use simple forecasting techniques. 2. Involve more people in the process. 3. Compare every forecast with “no change.” 4. Do not rely on a single forecasting method. 5. Do not assume that you can accurately identify turning points in a trend. 6. Forecasting is a managerial skill and can be practiced and improved.

TECHNIQUES FOR ALLOCATING RESOURCES Resources are the assets of the organization, including financial, physical, human, intangible, and structural/cultural. A. Budgeting. A budget is a numerical plan for allocating resources to specific activities. Budgets are widely used because they can be applied to a wide variety of organizations and units within an organization. Exhibit PC-2 describes the different types of budgets that managers might use. Exhibit PC-3 provides 7 examples for improving the budget process. 1. Incremental budgeting starts with the current budget from which managers decide whether additional resources are needed and the justification for requesting them. This approach is appropriate for adjusting budgets that contain all of the necessary expenditures. 2. Zero-based budgeting (ZBB) starts with an established point of zero rather than using the current budget as the basis for adding, modifying, or subtracting resources. B. Scheduling. Scheduling is detailing what activities have to be done, the order in which they are to be completed, who is to do each, and when they are to be completed. Some useful scheduling tools include the following: 1. Gantt Charts. The Gantt chart, developed by Henry Gantt, who was an associate of Frederick W. Taylor, is a scheduling chart that shows actual and planned output over a period of time. (See Exhibit PC-4.) 2. Load Charts. A load chart is a modified Gantt chart that schedules capacity by entire departments or specific resources. (See Exhibit PC-5.) 3. PERT Network Analysis. The Program Evaluation and Review Technique (PERT) is a technique for scheduling complicated projects comprising many activities, some of which are interdependent. a. A PERT network is a flowchart diagram showing the sequence of activities needed to complete a project and the time or cost associated with each. b. The steps in developing a PERT network are outlined in Exhibit PC-6 and involve the following key terms: 1. Events are end points that represent the completion of major activities in a PERT network.

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See Exhibit PC-7 for an example of the events and activities used in constructing an office building. 2. Activities are the time or resources needed to progress from one event to another in a PERT network. 3. Slack time is the amount of time an individual activity can be delayed without delaying the whole project. 4. The critical path is the longest sequence of activities in a PERT network. c. Refer to Exhibit PC-8 to see an example of a PERT network. Breakeven Analysis. Breakeven analysis is a technique for identifying the point at which total revenue is just sufficient to cover total costs. (See Exhibit PC-9.) Linear Programming. Linear programming is a mathematical technique that solves resource allocation problems. (See Exhibit PC-10.) Refer to Exhibit PC-11 for a graphical solution to a linear programming problem.

CONTEMPORARY PLANNING TECHNIQUES Project management and scenario planning are two planning techniques that are appropriate for planning in an environment that is both dynamic and complex. A. Project Management. A project is a one-time-only set of activities that has a definite beginning and ending point in time. Project management is the task of getting a project’s activities done on time, within budget, and according to specifications. 1. Project Management Process In a typical project, work is done by a project team whose members are assigned from their respective work areas to the project and who report to a project manager. Exhibit PC-12 outlines the project planning process. 2. Role of the Project Manager a. The only real influence project managers have is their communication skills and their power of persuasion. b. Team members seldom work on just one project; they’re usually assigned to two or three at any given time. B. Scenario Planning. A scenario is a consistent view of what the future is likely to be. 1. Developing scenarios is also known as contingency planning. 2. The intent of scenario planning is not to try to predict the future, but to reduce uncertainty by playing out potential situations under different specified conditions. 3. Scenario planning is difficult to use when forecasting random events.

ANSWERS TO REVIEW AND DISCUSSION QUESTIONS

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Student answers to these questions will vary. PC-1. Describe the different approaches to assessing the environment. Environmental scanning is the screening of large amounts of information to anticipate and interpret changes in the environment. Environmental scanning establishes the basis for forecasts, which are predictions of outcomes. Forecasting techniques fall into two categories: quantitative and qualitative. Quantitative forecasting applies a set of mathematical rules to a series of past data to predict outcomes. These techniques are preferred when managers have sufficient hard data that can be used. Qualitative forecasting, in contrast, uses the judgment and opinions of knowledgeable individuals to predict outcomes. Benchmarking is the search for the best practices among competitors or noncompetitors that lead to their superior performance. PC-2. Describe the four techniques for allocating resources. The four techniques are budgeting, scheduling, breakeven analysis, and linear programming. A budget is a numerical plan for allocating resources to specific activities. Scheduling is detailing what activities have to be done, the order in which they are to be completed, who is to do each, and when they are to be completed. Breakeven analysis is a technique for identifying the point at which total revenue is just sufficient to cover total costs. Linear programming is a mathematical technique that solves resource allocation problems. PC-3. How does PERT network analysis work? A PERT network is a flowchart diagram that shows the sequence of activities needed to complete a project and the time or costs associated with each activity. With a PERT network, a manager must think through what has to be done, determine which events depend on one another, and identify potential trouble spots. To construct a PERT network, four terms are needed. Events are end points that represent the completion of major activities. Activities represent the time or resources required to progress from one event to another. Slack time is the amount of time an individual activity can be delayed without delaying the whole project. The critical path is the longest or most timeconsuming sequence of events and activities in a PERT network. PC-4. Why is flexibility so important to today’s planning techniques? Project schedules should always have some degree of flexibility built in, or even a slight delay would throw off the completion of the entire project. Slack time allows for some aspects of the project to continue if there is a delay or accident occurring in another part of the project. If there is no slack time, or flexibility, multiple parts of the project would fail to begin on time, resulting in increased costs from vendors, penalties, or increased opportunity costs. PC-5. What is project management, and what are the steps managers use in planning projects? Project management is the task of getting a project’s activities done on time, within budget, and according to specifications. The essential features of the project planning process are shown in Exhibit PC-12 and include, in order: defining objectives, identifying activities, establishing sequences, estimating time for activities, determining a project completion date, comparing with objectives, and determining additional resource requirements.

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PC-6. It’s a waste of time and other resources to develop a set of sophisticated scenarios for situations that may never occur. Do you agree or disagree? Support your position. Although the situations depicted in scenarios may never actually occur, the process of developing a scenario can prove to be worthwhile. In developing a scenario (whether it is simple or sophisticated), a manager exercises creativity and critical thinking skills that can help him/her respond quickly and effectively in unrelated situations. Practicing the development of scenarios can increase confidence in one’s leadership ability, and it provides opportunities for growing in the ability to be decisive under pressure. PC-7. Do intuition and creativity have any relevance in quantitative planning tools and techniques? Explain. Yes, intuition and creativity may have relevance in determining the factors to be analyzed or the scenarios to be developed. The planning tools and techniques provide a way for the manager to quantitatively assess a situation, but the manager still needs to be creative in setting up the components to be studied. PC-8. The Wall Street Journal and other business periodicals often carry reports of companies that have not met their sales or profit forecasts. What are some reasons a company might not meet its forecasts? What suggestions could you make for improving the effectiveness of forecasting? A company could fail to meet its forecasts for a number of reasons. For instance, the internal or external economic situation might experience a decline. A technological advancement may render a company’s product useless, or a new competitor might enter the marketplace. However, the possibility of these types of developments does not justify eliminating forecasting. Rather, doing forecasts for different scenarios can increase the effectiveness of an organization’s ability to forecast in general. Even the use of fairly simple forecasting techniques can improve the effectiveness of forecasting. Moreover, shortening the length of the time forecast can help improve the effectiveness of an organization’s forecasting efforts. PC-9. In what ways is managing a project different from managing a department or other structured work area? In what ways are they the same? A project manager is concerned with a one-time-only set of activities that has a definite beginning and ending point in time, whereas a manager of a department or other structured work area supervises an ongoing set of activities with no single, specific ending date. However, both types of management must complete activities on time, within budget, and according to specifications. In addition, both types of management involve the four management functions of planning, organizing, leading, and controlling. PC-10. What might be some early warning signs of (a) a new competitor coming into your market, (b) an employee work stoppage, or (c) a new technology that could change demand for your product? Remaining alert to the external and internal environments of the organization is a key responsibility of every manager. The activities named in the answer to Question PC-6 above are important ways to discover news about competitors and technological trends. One of the vital qualities of excellent managers is their approachability and the trust they have established between their employees and themselves. When employees trust their

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manager and do not fear repercussions if they report knowledge about impending negative events, a manager may learn about potential problems in time to avert disaster.

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Managing Operations Module Every organization “produces” something, whether it’s a good or a service. This module focuses on how organizations do that through a process called operations management. We also look at the important role that managers play in managing those operations. As your students have learned throughout this course, organizational success in today’s highly competitive marketplace is based on effective and efficient management of all available resources. The opening case describes the innovative manufacturing plans of Divergent 3D. The firm’s founder, Kevin Czinger, plans to build automotive factories that are no bigger than a large grocery store. The production will rely on large-scale 3-D metal printers, laser cutters, and assembly robots. Czinger claims he will be able to deliver low-carbon vehicles, in small and highly customizable batches, at a cost that is $6,700 below the typical cost in today’s automotive plants. Divergent 3D has two working plants and this firm is just one example of the rapid change that is occurring in manufacturing around the world. This module examines the topics of operations management including productivity, value chain management, e-manufacturing, and quality. The concepts in this module could be applied to almost every company, from the high-tech operations of Divergent 3D, to your local McDonald’s.

CHAPTER OUTLINE 1.

THE ROLE OF OPERATIONS MANAGEMENT Operations management is the design, operation, and control of the transformation process that converts resources into finished goods or services. Exhibit MO-1 illustrates a simplified operations system. Operations management is important for three key reasons: A. Services and Manufacturing. Operations management encompasses both manufacturing and services. a. Manufacturing organizations are organizations that produce physical goods. b. Service organizations are organizations that produce nonphysical outputs in the form of services. B. Managing Productivity. a. Productivity is the overall output of goods or services produced divided by the inputs needed to generate that output. b. W. Edwards Deming believed that managers, rather than workers, were the primary source of increased productivity. Deming presented 14 points for improving management’s productivity. C. Strategic Role of Operations Management. Through mistakes learned in the 1970s when the United States lost its position as the dominant

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force in manufacturing, organizations today realize the importance of operations management to the overall strategy of the organization. 2.

VALUE CHAIN MANAGEMENT This section of the module examines several aspects of value chain management, including its definition, goals, benefits, and potential obstacles to successful implementation. A. What is value chain management? In order to understand the term value chain management, students must first grasp the meaning of several individual terms. 1. Value is the performance characteristics, features and attributes, and other aspects of goods and services for which customers are willing to give up resources. 2. The value chain is the entire series of organizational work activities that adds value at each step from raw materials to finished product. 3. Value chain management, then, is the process of managing the sequence of activities and information along the entire product chain. B. Goal of Value Chain Management. Ultimately, customers possess the power in the value chain. The goal of value chain management, therefore, is to create a value chain strategy that meets and exceeds customers’ needs and desires, allowing full and seamless integration among all members of the chain. C. Benefits of Value Chain Management. Value chain management offers several benefits, including: 1. Improved procurement 2. Improved logistics 3. Improved product development 4. Enhanced customer order management D. Value Chain Strategy. See Exhibit MO-2 for a summary of the six main requirements for effective value chain management. 1. Coordination and Collaboration. Coordination and collaboration among all members of the value chain 2. Technology Investment. Investment in information technology 3. Organizational Processes. Organizational processes, which are the ways that organizational work is done. Changes must be made, as illustrated below: a. Improved demand forecasting is necessary and is enabled through closer ties between customers and suppliers. b. Selected functions may need to be accomplished collaboratively with other partners in the value chain. c. New measures are needed for evaluating performance of various activities along the value chain. 4. Leadership. Strong leadership is essential for successful value chain management. 5. Employees/Human Resources. An organization’s employees play an important role as well. a. Traditional, functional job roles are inadequate in a value chain environment.

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Flexibility is the key to job design in a value chain management organization, and the hiring of employees who have the ability to learn and adapt to changing situations is a prerequisite for successful value chain management in an organization. Organizational Culture and Attitudes. Supportive organizational culture and attitudes are important as well.

CURRENT ISSUES IN MANAGING OPERATIONS Six issues currently top managers’ lists for improving operations management: technology in general, robotics, quality management, quality goals, mass customization, and creating a lean organization. A. Technology’s Role in Operations Management. Savvy companies are exploring ways to harness technology to improve operations management. Technology helps synchronize all aspects of the supply chain. B. The Robots Are Coming! Robots will soon displace millions of workers. Robots are sorting grapes in Napa Valley and fulfilling orders in Amazon fulfillment centers. They will be used extensively to replace tedious jobs in the near future. C. Quality Management. According to many experts, organizations that do not produce high-quality products will be unable to compete successfully in the global marketplace. 1. Quality is the ability of a product or service to reliably do what it’s supposed to do and to satisfy customer expectations. 2. Planning for Quality. Managers must have quality improvement goals and strategies and plans to achieve those goals. 3. Organizing and Leading for Quality. Managers need to provide the right information to the right people to have a successful quality improvement program. 4. Controlling for Quality. Quality improvement initiatives will not succeed if you don’t monitor and evaluate their progress. An effective control system provides feedback that can be used to improve quality. D. Quality Goals. Numerous organizations worldwide have pursued challenging quality goals. Two of the most widely recognized quality goals are ISO 9000 and Six Sigma. 1. ISO 9001:2015. ISO 9001 is a series of international quality management standards that set uniform guidelines for processes to ensure that products conform to customer requirements. 2. Six Sigma. Six Sigma is a quality standard that establishes a goal of no more than 3.4 defects per million parts or procedures. 3. In summary, the key benefit of implementing value chain management comes from the quality improvement journey itself, rather than the achievement of a particular quality certification. E. Mass Customization. Mass customization provides consumers with a product when, where, and how they want it. Mass customization requires flexible manufacturing techniques and continual dialogue with customers. Technology plays an important role in both of these efforts.

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Creating a Lean Organization. An intense focus on customers is also important in order to be a lean organization, which is an organization that understands what customers want, identifies customer value by analyzing all activities required to produce products, and then optimizes the entire process from the customer’s perspective.

ANSWERS TO REVIEW AND DISCUSSION QUESTIONS MO-1. What is operations management? Operations management is the transformation process that converts resources into finished goods and services. MO-2. Do you think that manufacturing or service organizations have the greater need for operations management? Explain. Both manufacturing and service organizations have a great need for operations management. Productivity is a key concern for both manufacturing and service organizations. Many of the concepts and techniques that have proven to be successful in manufacturing industries are now being implemented in service organizations. Because a service is often produced by a company and received by its customer almost simultaneously, the effective and efficient management is a particular challenge for service organizations. MO-3. What is a value chain and what is value chain management? What is the goal of value chain management? What are the benefits of value chain management? The value chain is the sequence of organizational work activities that add value at each step from raw materials to finished product. Value chain management is the process of managing the sequence of activities and information along the entire product chain. The goal of value chain management is to create a value chain strategy that meets and exceeds customers’ needs and desires and allows for full and seamless integration among all members of the chain. Value chain management provides four main benefits: improved procurement, improved logistics, improved product development, and enhanced customer order management. MO-4. What is required for successful value chain management? What obstacles exist to successful value chain management? The six main requirements for successful value chain management include coordination and collaboration, investment in technology, organizational processes, leadership, employees or human resources, and organizational culture and attitudes. The obstacles to value chain management include organizational barriers (refusal to share information, reluctance to shake up the status quo, or security issues), unsupportive cultural attitudes, lack of required capabilities, and employees unwilling or unable to do it. MO-5. How could you use value chain management in your everyday life? Students’ responses to this question will naturally vary. You may begin discussion of this question, which relates theory to practical application in the lives of your students, by pointing out the “value chain” involved in the students’ preparing and submitting work for this course and in the instructor’s evaluation of that work.

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MO-6. How does technology play a role in manufacturing? Companies are looking at ways to harness technology to improve their operations management by extensive collaboration and cost control. MO-7. What are ISO 9001 and Six Sigma? ISO 9001 is a series of international quality management standards that set uniform guidelines for processes to ensure that products conform to customer requirements. Six Sigma is a quality standard that establishes a goal of no more than 3.4 defects per million units or procedures. MO-8. Describe lean management and explain why it’s important. Mass customization provides customers with a product when, where, and how they want it. It requires flexible manufacturing techniques and continual customer dialogue. A lean organization is one that understands what customers want, identifies customer value by analyzing all activities required to produce products, and then optimizes the entire process from the customer’s perspective. MO-9. How might operations management apply to other managerial functions besides control? Successful operations management is essential in the planning, organizing, and leading functions of management, as well as in control. To establish realistic strategic and operational plans that maximize available resources, managers on each level of the organization should have an understanding of operations management gained through study and experience. In the organizing function, managers must develop appropriate organizational structures for the management of their operations. In leading, managers must consider the diversity of backgrounds, cultures, abilities, and skills of their most important resource, the people who perform the operations in the organization.

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Part 6: Management Practice A Manager’s Dilemma Pretend you’re part of the management team. Using what you’ve learned in this Part on monitoring and controlling, what five things would you suggest the team focus on? Think carefully about your suggestions to the team. This situation is a good way to apply the concepts of controlling for organizational and employee performance. Using this approach, managers at Lululemon might implement the following controls: 1. Organizational productivity—Managers must control for organizational productivity, increasing the ration of sales revenue to inputs and thus increasing efficiencies. Raising prices in this time for the company would be very risky so the only option for Lululemon is to decrease costs. 2. Organizational effectiveness—Managers must evaluate the appropriateness of current goals and devise strategies for accomplishing these goals. Goals directed towards quality manufacturing and sourcing would seem most appropriate at this point. 3. Industry and company rankings—Managers should increase performance, working towards improving their ranking within their industry and generally. 4. Deliver effective performance feedback—Managers must develop standards for employees, and monitor and evaluate employees against those standards. Regular goalsetting and performance appraisal will support that effort. 5. Using disciplinary actions—Quality problems like those reported in the case cannot continue. Employees whose performance falls short of standards must face disciplinary actions, including off-boarding. Global Sense Discuss the following questions in light of what you learned in Part 6. How are offshoring and outsourcing similar? How are they different? Offshoring and outsourcing are similar in that they both employ moving parts of the production process apart from the company’s normal operations. Outsourcing is always done by an outside vendor. Often these vendors may be in another part of the world from the host company. Companies may use offshoring as part of a direct investment strategy. What arguments do critics use to say offshoring and outsourcing are bad? Some of the criticisms of both outsourcing and offshoring are that they eliminate jobs within an organization. Offshoring often eliminates jobs locally, replacing their work with lower paying jobs overseas. These practices can have negative impacts on local communities through plant closings and layoffs. Others criticize that such practices remove vital production standards from company control and may lead to quality problems. What arguments do proponents use to say offshoring and outsourcing are not bad? Outsourcing and offshoring are critical considerations if an organization is to remain competitive in a global environment. Moving lower-skilled jobs overseas has the potential to create higher paying jobs at home. Outsourcing and offshoring allow companies to focus on their core competencies and focus on design, engineering, marketing, and other functions. How does the decision to offshore and outsource affect monitoring and controlling activities?

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As key processes move outside the organization to be performed by partners, monitoring and controlling become more challenging. This is especially true in the case of offshoring. In either case, managers must travel to meet with their partners and develop methods to control production and collaborate remotely. Is it just manufacturers that deal with these decisions/issues? Discuss. These problems and issues are not only found in the manufacturing sector but also in the service sector. Companies must make key decisions to outsource part of their value proposition in order to focus on core competencies, while maintaining control of their operations.

Continuing Case Starbucks—Controlling Discussion Questions with Answers: Teaching Suggestions P6-1. What might need to be different in Starbucks’ control process as a result of their shift to including more drive-through windows in their stores? What specific measures of performance might be needed with drive-through service that are not as relevant to inside-store sales? What are control issues that Starbucks may need to address related to its out-of-store delivery offerings? Students should see that the company’s expansion of drive-through service requires a different set of control metrics. Drive-through customers are more concerned with speed and quality of the product. Starbucks could electronically monitor the time it takes to enter the drive-through line until the customer gets their coffee. They could also use social media surveys with coupons to incentivize participation as a way to measure quality, speed, and overall customer satisfaction. The out-of-store deliveries need to be monitored for both time and the temperature of the product. Students will come up with other issues as well. P6-2. How could Starbucks use social media to practice effective levels of feedforward control, concurrent control, and feedback control? If you think that your students would benefit from a review of feedforward, concurrent, and feedback controls before addressing Question P6-2, have them look at the pages on the steps of control in the textbook. Ask them to explain the use of these controls, providing examples from their own observations and work experience. Then, have students reexamine the Part 6ending comprehensive case material and write a list of the controls they find, organizing these mechanisms into columns for feedforward, concurrent, and feedback controls. Ask students to identify how Starbucks can use social media to practice these controls. Answers will vary, but Starbucks could use crowdsourcing to get feedforward comments on new products or services they intended to introduce. Both concurrent control and feedback control should be easy to collect via Google ads, Twitter posts, and numerous other social media outlets. P6-3. What companies might be good benchmarks for Starbucks? Why? What companies might want to benchmark Starbucks? Why? To prepare your students for responding to these questions, review with them the concept of benchmarking from the text. As your students answer these questions, you might suggest that they consider the competitive advantages of Starbucks as identified by the class. Ask them to think about what companies might need to establish some of these competitive advantages and

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how these companies could benchmark in order to learn from the success of Starbucks in each of these areas. P6-4. What “red flags” might indicate significant deviations from standard for (a) an hourly partner; (b) a store manager; (c) a district manager; (d) the executive vice president of finance; and (e) the CEO? Are there any similarities? Why or why not? Your students should recall that only after careful analysis of deviations should managers on each of these levels of the organization make judgments to determine the acceptable range of variation before taking corrective action. Students can work in teams of five or six team members, with each group addressing one of the Starbucks positions listed in Question P6-3. Following work in small groups, have a representative from each group report the “red flags” identified by his/her group to the class as a whole. Encourage class members to add “red flags” to the list presented by each group. P6-5. Using the company’s most current financial statements, calculate the following financial ratios: current, debt to assets, inventory turnover, total asset turnover, profit margin on sales, and return on investment. What do these ratios tell managers? Your students’ calculations will vary, depending upon the date of the company’s most current financial statements that are available to your students in Starbucks' Annual Report. You may prefer that your students bring their calculators to class and calculate these ratios in groups of two or three students. Refer your students to “Popular Financial Ratios” in the textbook. Be sure that students accompany their answers with a brief explanation of the purpose of each ratio and what Starbucks can learn about the company’s financial standing from each of these particular calculations. P6-6. Can Starbucks manage the uncertainties in its value chain? If so, how? If not, why not? In responding to this question, students may want to consider material on value chain management in the text. Since value chain management is externally oriented—in contrast to supply chain management, which is internally oriented—managers must concentrate on both incoming materials and outgoing products and services. Many uncertainties and factors outside of Starbucks’ control are encountered externally as the company strives to achieve effectiveness and create the highest possible value for its customers. Starbucks’ dedication to meeting and exceeding customer expectations requires a proactive stance in conducting research on customer needs and desires. In today’s dynamic, competitive business environment, Starbucks is continuously looking for new ways to manage the uncertainties in its value chain. Ask your students to discuss how Starbucks can use better demand forecasting, collaborate with other partners in the value chain, and implement new measures to evaluate how well value is being created and delivered to the company’s customers.

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Management Fifteenth Edition

Chapter 1 Managers and You in the Workplace

Learning Objectives 1.1 Tell who managers are and where they work.

1.2 Explain why managers are important to organizations. 1.3 Describe the functions, roles, and skills of managers. 1.4 Describe the factors that are reshaping and redefining the manager’s job. 1.5 Explain the value of studying management. 1.6 Describe the benefits of the Employability Skills Matrix (ESM).

Who Is a Manager? Manager: someone who coordinates and oversees the work of other people so that organizational goals can be accomplished

Exhibit 1.1 Levels of Management

Classifying Managers • First-Line Managers: manage the work of non-managerial employees • Middle Managers: manage the work of first-line managers • Top Managers: responsible for making organization-wide decisions and establishing plans and goals that affect the entire organization

Where Do Managers Work? • Organization: a deliberate arrangement of people to accomplish some specific purpose

Exhibit 1.2 Characteristics of Organizations

Why Are Managers Important? • Organizations need their managerial skills and abilities now more than ever • Managers are critical to getting things done • Managers do matter to organizations

Exhibit 1.3 Managers Make a Difference

Exhibit 1.3 shows data on why managers are important. Managers that are not engaged cost organizations billions of dollars through employee turnover. Copyright © 2021, 2018, 2016 Pearson Education, Inc. All Rights Reserved

What Do Managers Do? • Management involves coordinating and overseeing the work activities of others so that their activities are completed efficiently and effectively.

Efficiency and Effectiveness • Efficiency: doing things right – getting the most output from the least amount of input • Effectiveness: doing the right things – attaining organizational goals

Exhibit 1.4 Efficiency and Effectiveness in Management

Exhibit 1.4 shows that whereas efficiency is concerned with the means of getting things done, effectiveness is concerned with the ends, or attainment of organizational goals. Copyright © 2021, 2018, 2016 Pearson Education, Inc. All Rights Reserved

Management Functions • Planning: Defining goals, establishing strategies to achieve goals, and developing plans to integrate and coordinate activities • Organizing: Arranging and structuring work to accomplish organizational goals

• Leading: Working with and through people to accomplish goals • Controlling: Monitoring, comparing, and correcting work

Exhibit 1.5 Four Functions of Management

Mintzberg’s Managerial Roles and a Contemporary Model of Managing • Roles: specific actions or behaviors expected of and exhibited by a manager • Mintzberg identified 10 roles grouped around interpersonal relationships, the transfer of information, and decision making

Types of Roles • Interpersonal – Figurehead, leader, liaison • Informational – Monitor, disseminator, spokesperson • Decisional – Entrepreneur, disturbance handler, resource allocator, negotiator

Exhibit 1.6 Mintzberg’s Managerial Roles

Management Skills • Technical skills – Knowledge and proficiency in a specific field • Human skills – The ability to work well with other people • Conceptual skills – The ability to think and conceptualize about abstract and complex situations concerning the organization

Exhibit 1.7 Skills Needed at Different Managerial Levels

Challenges Facing Managers Today and into the Future • Focus on technology • Focus on disruptive innovation • Focus on social media

• Focus on ethics • Focus on political uncertainty • Focus on the customer

Focus on Technology • Managers must get employees on board with new technology • Managers must oversee the social interactions and challenges involved in using collaborative technologies

Focus on Disruptive Innovation • One of the most critical challenges facing managers today is dealing with disruptive innovation • Disruptive innovation involves new products, processes, or services that radically change the rules of the game • One example is how the automobile destroyed the horsedrawn buggy industry

Focus on Social Media • Social media: forms of electronic communication through which users create online communities to share ideas, information, personal messages, and other content

Focus on Ethics • We commonly see unethical business practices in the news • Examples include pharmaceutical firms raising drug prices by 500% or someone turning in fake receipts for expenses • Organizational survival depends on building trust with customers, clients, suppliers, employees, and other stakeholders

Focus on Political Uncertainty • In the past, major democratic nations like the US, Canada, and the UK have been relatively stable politically • In the last 10 years these countries have shifted to greater political uncertainty • Brexit and the USMCA are examples of that shift • Some states, such as California, have placed additional regulations on business

Focus on the Customer • Without customers, most organizations would cease to exist • Managing customer relationships is the responsibility of all managers and employees • Consistent, high-quality customer service is essential

The Universality of Management • The reality that management is needed in all types and sizes of organizations, at all organizational levels, in all organizational areas, and in organizations no matter where located

Exhibit 1.8 Universal Need for Management

The Reality of Work • When you begin your career, you will either manage or be managed

Rewards of Being a Manager • Responsible for creating a productive work environment • Recognition and status in your organization and in the community • Attractive compensation in the form of salaries, bonuses, and stock options

Exhibit 1.9 Rewards From Being a Manager • Create a work environment in which organizational members can work to the best of their ability • Have opportunities to think creatively and use imagination • Help others find meaning and fulfillment in work • Support, coach, and nurture others • Work with a variety of people • Receive recognition and status in organization and community • Play a role in influencing organizational outcomes • Receive appropriate compensation in the form of salaries, bonuses, and stock options Copyright © 2021, 2018, 2016 Pearson Education, Inc. All Rights Reserved

Gaining Insights into Life at Work • Students need to understand management principles regardless of career choice • Workplace Confidential boxes located in each chapter will introduce students to various workplace challenges and give advice on how to handle those challenges

Employability Skills Matrix (ESM) • The ESM will be presented at the beginning of each chapter and focus on key skills covered in that chapter. These include:

• Critical thinking • Communication • Collaboration

• Knowledge application and analysis • Social responsibility skills

Exhibit 1.10 Employability Skills Matrix (ESM)

Review Learning Objective 1.1 • Tell who managers are and where they work. – Managers coordinate and oversee the work of other people so that organizational goals can be accomplished. – Managers work in an organization, which is a deliberate arrangement of people to accomplish some specific purpose.

Review Learning Objective 1.2 • Explain why managers are important to organizations. – Organizations need their managerial skills and abilities in uncertain, complex, and chaotic times. – Managers are critical to getting things done in organizations. – Managers contribute to employee productivity and loyalty.

Review Learning Objective 1.3 (1 of 3) • Describe the functions, roles, and skills of managers. – Management involves coordinating and overseeing the efficient and effective completion of others’ work activities. – The four functions of management include planning, organizing, leading, and controlling.

Review Learning Objective 1.3 (2 of 3) • Mintzberg’s managerial roles include: – Interpersonal, involve people and other ceremonial/symbolic duties (figurehead, leader, and liaison) – Informational, collecting, receiving, and disseminating information (monitor, disseminator, and spokesperson) – Decisional, making choices (entrepreneur, disturbance handler, resource allocator, and negotiator)

Review Learning Objective 1.3 (3 of 3) • Katz’s managerial skills include: – Technical (job-specific knowledge and techniques) – Human (ability to work well with people) – Conceptual (ability to think and express ideas)

Review Learning Objective 1.4 • Describe the factors that are reshaping and redefining the manager’s job. – Managers must be concerned with: ▪ Customer service because employee attitudes and behaviors play a big role in customer satisfaction ▪ Technology as it impacts how things get done in organizations ▪ Social media because these forms of communication are becoming important and valuable tools in managing ▪ Innovation because it is important for organizations to be competitive ▪ Sustainability as business goals are developed ▪ Employees in order for them to be more productive Copyright © 2021, 2018, 2016 Pearson Education, Inc. All Rights Reserved

Review Learning Objective 1.5 • Explain the value of studying management. – The universality of management—managers are needed in all types and sizes of organizations – The reality of work—you will manage or be managed – Significant rewards and challenges

Review Learning Objective 1.6 • Describe the benefits of the Employability Skills Matrix (ESM) • Helps students develops five critical skills – Critical thinking – Communication – Collaboration – Knowledge application – Social responsibility

Copyright This work is protected by United States copyright laws and is provided solely for the use of instructors in teaching their courses and assessing student learning. Dissemination or sale of any part of this work (including on the World Wide Web) will destroy the integrity of the work and is not permitted. The work and materials from it should never be made available to students except by instructors using the accompanying text in their classes. All recipients of this work are expected to abide by these restrictions and to honor the intended pedagogical purposes and the needs of other instructors who rely on these materials.

Management Fifteenth Edition

Chapter M H-1 Management History Module

Learning Objectives MH1.1 Describe some early management examples. MH1.2 Explain the various theories in the classical approach. MH1.3 Discuss the development and uses of the behavioral approach. MH1.4 Describe the quantitative approach.

MH1.5 Explain various theories in the contemporary approach.

Early Management • The Egyptian pyramids and the Great Wall of China are proof that projects of tremendous scope, employing tens of thousands of people, were completed in ancient times.

Job Specialization • In 1776 Adam Smith published “The Wealth of Nations” – division of labor (job specialization): the breakdown of jobs into narrow and repetitive tasks

Industrial Revolution • Industrial revolution: a period during the late eighteenth century when machine power was substituted for human power, making it more economical to manufacture goods in factories than at home

Exhibit M H.1 Major Approaches to Management

Classical Approach • Classical approach: first studies of management, which emphasized rationality and making organizations and workers as efficient as possible

Scientific Management • Scientific management: an approach that involves using the scientific method to find the “one best way” for a job to be done

Exhibit MH.2 Taylor’s Scientific Management Principles Principles

1. Develop a science for each element of an individual’s work to replace the old rule-of-thumb method. 2. Scientifically select and then train, teach, and develop the worker. 3. Heartily cooperate with the workers to ensure that all work is done in accordance with the principles of the science that has been developed. 4. Divide work and responsibility almost equally between management and workers. Management does all work for which it is better suited than the workers. Copyright © 2021, 2018, 2016 Pearson Education, Inc. All Rights Reserved

Frank and Lillian Gilbreth • Therbligs: a classification scheme for labeling basic hand motions

General Administrative Theory • General administrative theory: an approach to management that focuses on describing what managers do and what constitutes good management practice

Henri Fayol • Principles of management: fundamental rules of management that could be applied in all organizational situations and taught in schools

Exhibit MH.3 Fayol’s 14 Principles of Management (1 of 2) Principles

1. Division of work. Specialization increases output by making employees more efficient. 2. Authority. Managers must be able to give orders, and authority gives them this right. 3. Discipline. Employees must obey and respect the rules that govern the organization. 4. Unity of command. Every employee should receive orders from only one superior. 5. Unity of direction. The organization should have a single plan of action to guide managers and workers.

6. Subordination of individual interests to the general interest. The interests of any one employee or group of employees should not take precedence over the interests of the organization as a whole. 7. Remuneration. Workers must be paid a fair wage for their services. Copyright © 2021, 2018, 2016 Pearson Education, Inc. All Rights Reserved

Exhibit MH.3 Fayol’s 14 Principles of Management (2 of 2) Principles 8. Centralization. This term refers to the degree to which subordinates are involved in decision making. 9. Scalar chain. The line of authority from top management to the lowest ranks is the scalar chain.

10. Order. People and materials should be in the right place at the right time. 11. Equity. Managers should be kind and fair to their subordinates. 12. Stability of tenure of personnel. Management should provide orderly personnel planning and ensure that replacements are available to fill vacancies.

13. Initiative. Employees allowed to originate and carry out plans will exert high levels of effort. 14. Esprit de corps. Promoting team spirit will build harmony and unity within the organization. Copyright © 2021, 2018, 2016 Pearson Education, Inc. All Rights Reserved

Max Weber • Bureaucracy: a form of organization characterized by division of labor, a clearly defined hierarchy, detailed rules and regulations, and impersonal relationships

Exhibit MH.4 Characteristics of Weber’s Bureaucracy

Behavioral Approach • Organizational behavior (OB): the study of the actions of people at work

Exhibit MH.5 Early OB Advocates

Hawthorne Studies • Hawthorne studies: a series of studies during the 1920s and 1930s that provided new insights into individual and group behavior

Quantitative Approach • Quantitative approach: the use of quantitative techniques to improve decision making

Total Quality Management • Total quality management (TQM): a philosophy of management that is driven by continuous improvement and responsiveness to customer needs and expectations

Exhibit MH.6 What is Quality Management? Characteristic 1. Intense focus on the customer. The customer includes outsiders who buy the organization’s products or services and internal customers who interact with and serve others in the organization. 2. Concern for continual improvement. Quality management is a commitment to never being satisfied. “Very good” is not good enough. Quality can always be improved.

3. Process focused. Quality management focuses on work processes as the quality of goods and services is continually improved. 4. Improvement in the quality of everything the organization does. This relates to the final product, how the organization handles deliveries, how rapidly it responds to complaints, how politely the phones are answered, and the like. 5. Accurate measurement. Quality management uses statistical techniques to measure every critical variable in the organization’s operations. These are compared against standards to identify problems, trace them to their roots, and eliminate their causes. 6. Empowerment of employees. Quality management involves the people on the line in the improvement process. Teams are widely used in quality management programs as empowerment vehicles for finding and solving problems.

Contemporary Approaches • System: a set of interrelated and interdependent parts arranged in a manner that produces a unified whole • Closed systems: systems that are not influenced by and do not interact with their environment • Open systems: systems that interact with their environment

Exhibit M H.7 Great Moments in American Business The $5 Workday (1914). Ford doubles its employees’ pay and helps create the middle class. Comprehensive Employee Benefits (1928). Kodak grants benefits that were lavish for the time—such as life insurance, tuition assistance, and a retirement annuity. The Innovation Lab (1944). 3M set up the Products Fabrication Laboratory for lab technicians to dream big without constraints. ENIAC (1946). The first digital computer begins operation. The Personal Computer (1977). The Apple II is introduced, starting the era of the personal computer. Flexible Workplaces (1993). Ad agency Chiat/Day builds new offices designed to boost creativity by eliminating assigned desks and replacing them with mobile workstations. Domestic-Partner Benefits (1996). IBM extends healthcare benefits to its employees’ gay and lesbian partners. Going Green (2005). GE introduces Ecomagination, a suite of environmentally friendly products. Copyright © 2021, 2018, 2016 Pearson Education, Inc. All Rights Reserved

Exhibit MH.8 Organization as an Open System

Contingency Approach • Contingency approach: a management approach that recognizes organizations as different, which means they face different situations (contingencies) and require different ways of managing

Exhibit MH.9 Popular Contingency Variables Variable Organization Size. As size increases, so do the problems of coordination. For instance, the type of organization structure appropriate for an organization of 50,000 employees is likely to be inefficient for an organization of 50 employees. Routineness of Task Technology. To achieve its purpose, an organization uses technology. Routine technologies require organizational structures, leadership styles, and control systems that differ from those required by customized or nonroutine technologies. Environmental Uncertainty. The degree of uncertainty caused by environmental changes influences the management process. What works best in a stable and predictable environment may be totally inappropriate in a rapidly changing and unpredictable environment. Individual Differences. Individuals differ in terms of their desire for growth, autonomy, tolerance of ambiguity, and expectations. These and other individual differences are particularly important when managers select motivation techniques, leadership styles, and job designs.

Review Learning Objective MH1.1 • Describe some early management examples. – Early examples of management practice include the construction of the Egyptian pyramids and the Great Wall of China. – One important historical event was the publication of Adam Smith’s “Wealth of Nations,” in which he argued the benefits of division of labor (job specialization). – Another was the industrial revolution, where it became more economical to manufacture in factories than at home.

Review Learning Objective MH1.2 • Explain the various theories in the classical approach. – Frederick W. Taylor – The Gilbreths – Henri Fayol – Max Weber

Review Learning Objective MH1.3 • Discuss the development and uses of the behavioral approach. – Early advocates of OB – The Hawthorne Studies

Review Learning Objective MH1.4 • Describe the quantitative approach. – The quantitative approach – Total quality management (TQM)

Review Learning Objective MH1.5 • Explain various theories in the contemporary approach. – Systems approach – Contingency approach

This work is protected by United States copyright laws and is provided solely for the use of instructors in teaching their courses and assessing student learning. Dissemination or sale of any part of this work (including on the World Wide Web) will destroy the integrity of the work and is not permitted. The work and materials from it should never be made available to students except by instructors using the accompanying text in their classes. All recipients of this work are expected to abide by these restrictions and to honor the intended pedagogical purposes and the needs of other instructors who rely on these materials.

Management Fifteenth Edition

Chapter 2 Making Decisions

Learning Objectives 2.1 Describe the eight steps in the decision-making process. 2.2 Explain the five approaches managers can use when making decisions.

2.3 Classify decisions and decision-making styles. 2.4 Describe how biases affect decision making. 2.5 Identify cutting-edge approaches for improving decision making.

Be A Better Decision Maker A key to success in management and in your career is knowing how to be an effective decision maker.

What is a Decision? Decision—a choice among two or more alternatives

Exhibit 2.1 Decision-Making Process

Exhibit 2.1 shows the eight steps in the decision-making process. This process is as relevant to personal decisions as it is to corporate decisions. Copyright © 2021, 2018, 2016 Pearson Education, Inc. All Rights Reserved

Decision-Making Process Step 1: Identify a Problem • Problem: an obstacle that makes it difficult to achieve a desired goal or purpose.

• Every decision starts with a problem, a discrepancy between an existing and a desired condition. • Example: Amanda is a sales manager whose reps need new laptops.

Decision-Making Process Step 2: Identify the Decision Criteria • Decision criteria are factors that are important to resolving the problem.

• Example: Amanda decides that memory and storage capabilities, display quality, battery life, warranty, and carrying weight are the relevant criteria in her decision

Decision-Making Process Step 3: Allocate Weights to the Criteria • If the relevant criteria aren’t equally important, the decision maker must weight the items in order to give them the correct priority in the decision. • Example: The weighted criteria for Amanda’s computer purchase are shown in Exhibit 2.2.

Exhibit 2.2 Important Decision Criteria Criterion

Weight

Memory and storage

Battery life

Carrying weight

Warranty

Display quality

Decision-Making Process Step 4: Develop Alternatives • List viable alternatives that could solve the problem. • Example: Amanda identifies eight laptops as possible choices (shown in Exhibit 2.3).

Exhibit 2.3 Possible Alternatives Laptop

Memory and Storage

Battery Life

Carrying Weight

Warranty

Display Quality

Acer Aspire E

Apple MacBook Pro

Dell XPS 13

Lenovo ThinkPad

Lenovo Yoga

Microsoft Surface Book

Razer Blade Stealth

Decision-Making Process Step 5: Analyze Alternatives Step 6: Select an Alternative • STEP 5: Once you identify the alternatives you need to analyze them using the criteria established in Step 2. • STEP 6: Choose the alternative that generates the highest total in Step 5.

Exhibit 2.4 Evaluation of Alternatives Laptop

Memory and Storage

Battery Life

Carrying Weight

Warranty

Display Quality

Total

Acer Aspire E

100

231

Apple MacBook Pro

232

Dell XPS 13

231

Lenovo ThinkPad

229

Lenovo Yoga

204

Microsoft Surface Book

100

249

Razer Blade Stealth

206

Decision-Making Process Step 7: Implement the Alternative • Put the chosen alternative into action. • Convey the decision to those affected and get their commitment to it.

Decision-Making Process Step 8: Evaluate Decision Effectiveness • Evaluate the result or outcome of the decision to see if the problem was resolved.

• If it wasn’t resolved, what went wrong?

Exhibit 2.5 Decisions Managers May Make: Planning and Organizing

Exhibit 2.5 Decisions Managers May Make: Leading and Controlling

Rationality • Rational Decision Making: choices that are logical and consistent and maximize value

• Assumptions of rationality: – Rational decision maker is logical and objective – Problem faced is clear and unambiguous – Decision maker would have clear, specific goal and be aware of all alternatives and consequences – The alternative that maximizes achieving this goal will be selected – Decisions are made in the best interest of the organization

Bounded Rationality • Bounded rationality: decision making that’s rational, but limited by an individual’s ability to process information • Satisfice: accepting solutions that are “good enough”

Intuition • Intuitive Decision Making: making decisions on the basis of experience, feelings, and accumulated judgment

Exhibit 2.6 What is Intuition?

Exhibit 2.6 shows the five different aspects of intuition identified by researchers studying managers’ use of intuitive decision making. Copyright © 2021, 2018, 2016 Pearson Education, Inc. All Rights Reserved

Evidence-Based Management • Evidence-based management (EBMgt): the systematic use of the best available evidence to improve management practice.

Crowdsourcing • Crowdsourcing: a decision-making approach where you solicit ideas and input from a network of people outside of the traditional set of decision makers.

Types of Decisions: Structured Problems and Programmed Decisions • Structured problems: straightforward, familiar, and easily defined problems

• Programmed decisions: repetitive decisions that can be handled by a routine approach

Types of Programmed Decisions • Procedure: a series of sequential steps used to respond to a well-structured problem • Rule: an explicit statement that tells managers what can or cannot be done • Policy: a guideline for making decisions

Types of Decisions: Unstructured Problems and Nonprogrammed Decisions • Unstructured problems: problems that are new or unusual and for which information is ambiguous or incomplete • Nonprogrammed decisions: unique and nonrecurring and involve custom-made solutions

Exhibit 2.7 Programmed vs. Nonprogrammed Decisions Characteristic

Programmed Decisions

Nonprogrammed Decisions

Type of problem

Structured

Unstructured

Managerial level

Lower levels

Upper levels

Frequency

Repetitive, routine

New, unusual

Information

Readily available

Ambiguous or incomplete

Goals

Clear, specific

Vague

Time frame for solution

Short

Relatively long

Solution relies on…

Procedures, rules, policies

Judgment and creativity

Decision-Making Styles • Research has identified four different individual decisionmaking styles based on two dimensions:

1. An individual’s way of thinking 2. An individual’s tolerance for ambiguity • The four styles are directive, analytic, conceptual and behavioral.

Four Decision-Making Styles • Directive style: low tolerance for ambiguity and seek rationality • Analytic style: seek rationality but have a higher tolerance for ambiguity • Conceptual style: intuitive decision makers with a high tolerance for ambiguity • Behavioral style: intuitive decision makers with a low tolerance for ambiguity

Exhibit 2.8 Decision-Style Model

Exhibit 2.8 shows the decision-style model from A. J. Rowe and J. D. Boulgarides, Managerial Decision Making (Upper Saddler River, N J: Prentice Hall, 1992), p. 29. Copyright © 2021, 2018, 2016 Pearson Education, Inc. All Rights Reserved

Heuristics • Heuristics or “rules of thumb” can help make sense of complex, uncertain, or ambiguous information. • However, they can also lead to errors and biases in processing and evaluating information.

Exhibit 2.9 Common Decision-Making Biases

Decision-Making Biases and Errors (1 of 4) • Overconfidence Bias: holding unrealistically positive views of oneself and one’s performance • Immediate Gratification Bias: choosing alternatives that offer immediate rewards and avoid immediate costs

• Anchoring Effect: fixating on initial information and ignoring subsequent information

Decision-Making Biases and Errors (2 of 4) • Selective Perception Bias: selecting, organizing and interpreting events based on the decision maker’s biased perceptions • Confirmation Bias: seeking out information that reaffirms past choices while discounting contradictory information • Framing Bias: selecting and highlighting certain aspects of a situation while ignoring other aspects

Decision-Making Biases and Errors (3 of 4) • Availability Bias: losing decision-making objectivity by focusing on the most recent events

• Representation Bias: drawing analogies and seeing identical situations when none exist • Randomness Bias: creating unfounded meaning out of random events

Decision-Making Biases and Errors (4 of 4) • Sunk Costs Errors: forgetting that current actions cannot influence past events and relate only to future consequences • Self-serving Bias: taking quick credit for successes and blaming outside factors for failures • Hindsight Bias: mistakenly believing that an event could have been predicted once the actual outcome is known (after-the-fact)

Cutting-Edge Decision Making • Technology has changed the ability of managers to access information. Two technology driven cutting-edge aides to decision making are: – Design thinking: approaching management problems as designers approach design problems – Big data and Artificial Intelligence: big data refers to huge and complex data sets now available. Big data has opened the door to widespread use of artificial intelligence (AI)

Big Data and Artificial Intelligence • Big data: the vast amount of quantifiable data that can be analyzed by highly sophisticated data processing • Can be a powerful tool in decision making, but collecting and analyzing data for data’s sake is wasted effort

Artificial Intelligence and Machine Learning Tools • Artificial Intelligence (AI) – uses computing power to solve complex problems – AI systems have the ability to learn and have facilitated the use of new tools such as: ▪ Machine learning ▪ Deep learning ▪ Analytics

Machine Learning, Deep Learning, and Analytics • Machine Learning: A method of data analysis that automates analytical model building.

• Deep Learning: A subset of machine learning that use algorithms to create a hierarchical level of artificial neural networks that simulate the function of the human brain. • Analytics: The use of mathematics, statistics, predictive modeling, and machine learning to find meaningful patterns in a data set.

Review Learning Objective 2.1 • Describe the eight steps in the decision-making process. 1. Identify problem 2. Identify decision criteria 3. Weight the criteria 4. Develop alternatives 5. Analyze alternatives 6. Select alternative 7. Implement alternative 8. Evaluate decision effectiveness

Review Learning Objective 2.2 (1 of 2) • Explain the five approaches managers use when making decisions. – Assumptions of rationality ▪ The problem is clear and unambiguous ▪ A single, well-defined goal is to be achieved ▪ All alternatives and consequences are known ▪ The final choice will maximize goal achievement

Review Learning Objective 2.2 (2 of 2) • Rationality: making decisions when the goal is welldefined and everything is clear and unambiguous • Satisficing: when decision makers accept solutions that are good enough

• Intuitive decision making: making decisions on the basis of experience, feelings, and accumulated judgment • Evidence-based management: a manager makes decisions based on the best available evidence • Crowdsourcing: a manager solicits ideas via the internet from people outside of the organization

Review Learning Objective 2.3 (1 of 2) • Classify decisions and decision-making styles. – Programmed decisions are repetitive decisions that can be handled by a routine approach and are used when the problem being resolved is straightforward, familiar, and easily defined (structured). – Nonprogrammed decisions are unique decisions that require a custom-made solution and are used when the problems are new or unusual (unstructured) and for which information is ambiguous or incomplete.

Review Learning Objective 2.3 (2 of 2) • Classify decisions and decision-making styles. – Individual decision-making styles differ on two dimensions; way of thinking and tolerance for ambiguity. – These dimensions result in four different decisionmaking styles which are: ▪ Directive ▪ Analytical ▪ Conceptual ▪ Behavioral

Review Learning Objective 2.4 • Describe how biases affect decision making. – The 12 common decision-making errors and biases: ▪ Overconfidence ▪ Immediate gratification ▪ Anchoring effect ▪ Selective perception ▪ Confirmation ▪ Framing ▪ Availability ▪ Representation ▪ Randomness ▪ Sunk costs ▪ Self-serving ▪ Hindsight Copyright © 2021, 2018, 2016 Pearson Education, Inc. All Rights Reserved

Review Learning Objective 2.5 (1 of 2) • Identify cutting-edge approaches for improving decision making. – Design thinking, big data, artificial intelligence, machine learning, deep learning, and analytics are all relatively new tools that harness the power of technology to help managers make better decisions.

Review Learning Objective 2.5 (2 of 2) • Design thinking: approaching management problems as designers approach design problems

• Big Data: when tempered with good judgment, it can be a powerful tool in decision making • Artificial Intelligence: AI and the tools that use AI are now possible due to big data and computing power. Machine learning, deep learning, and analytics can all help managers make better decisions.

Management Fifteenth Edition

Chapter 3 Influence of the External Environment and the Organization’s Culture

Learning Objectives 3.1 Contrast the actions of managers according to the omnipotent and symbolic views. 3.2 Describe the constraints and challenges facing managers in today’s external environment. 3.3 Discuss the characteristics and importance of organizational culture.

The Manager: Omnipotent or Symbolic? • Omnipotent view: managers are directly responsible for an organization’s success or failure • Symbolic view: much of an organization’s success or failure is due to external forces outside managers’ control

Managerial Constraints • In reality, managers are neither all-powerful nor helpless. But their decisions and actions are constrained. • External constraints come from the organization’s environment and internal constraints come from the organization’s culture

Exhibit 3.1 Constraints on Managerial Discretion

Exhibit 3.1 shows that external constraints come from the organization’s environment and internal constraints come from the organization’s culture. Copyright © 2021, 2018, 2016 Pearson Education, Inc. All Rights Reserved

The Environment and Environmental Uncertainty • Environment: institutions or forces outside of the organization that could potentially affect performance. – Environments differ on degree of environmental uncertainty – Environmental uncertainty has two dimensions ▪ Degree of change ▪ Degree of complexity

Exhibit 3.2 Environmental Uncertainty Matrix

Degree of Change • Environments can be either dynamic or stable – In a dynamic environment the components in an organization’s environment change frequently – In a stable environment the components in an organization’s environment change very little

Degree of Environmental Complexity • Environmental complexity looks at the number of components in an organization’s environment and the extent of the knowledge the organization has about those components. • Depending on the organizational environment, managers may need to know a lot about the components, or very little.

The External Environment • Those factors and forces outside the organization that affect its performance – Economic – Demographic – Political/Legal – Sociocultural – Technological – Global

Exhibit 3.3 Components of External Environment

The Specific Environment (1 of 2) • Specific Environment: the part of the environment directly relevant to the achievement of organizational goals • Most of management’s attention typically focuses on the specific environment

The Specific Environment (2 of 2) • The specific environment includes one or more of the following: – Suppliers – Customers – Competitors – Government agencies – Special interest groups

Specific Environment Components (1 of 2) • Suppliers: Managers need to ensure a steady flow of inputs • Customers: Organizations exist to meet customer needs

• Competitors: All organizations have competitors that they need to monitor

Specific Environment Components (2 of 2) • Government: Federal, state, and local governments influence what the organization can and cannot do. • Pressure Groups: Special interest groups can have a significant impact on the organization. Lobbyists, protestors, various action groups all effect change.

Exhibit 3.6 Strong vs. Weak Cultures

Organizational Culture • Just as each individual has a unique personality, an organization, too, has a personality.

What is Organizational Culture? • Organizational culture: the shared values, principles, traditions, and ways of doing things that influence the way organizational members act and that distinguish the organization from other organizations

Six Dimensions of Organizational Culture • Research shows there are six dimensions that appear to capture an organization’s culture: 1. Adaptability 2. Attention to detail 3. Outcome orientation 4. People orientation 5. Team orientation 6. Integrity

Exhibit 3.5 Contrasting Organizational Culture • Risk taking and change discouraged • Creativity discouraged • Close managerial supervision • Work designed around individual employees • Risk taking and change rewarded • Creativity and innovation rewarded • Management trusts employees • Work designed around teams

Strong Cultures • Strong cultures: organizational cultures in which the key values are intensely held and widely shared

Exhibit 3.6 Strong Versus Weak Cultures Strong Cultures

Weak Cultures

Values widely shared

Values limited to a few people – usually top management

Culture conveys consistent messages Culture sends contradictory about what’s important messages about what’s important Most employees can tell stories about Employees have little knowledge of company history or heroes company history or heroes Employees strongly identify with culture

Employees have little identification with culture

Strong connection between shared values and behaviors

Little connection between shared values and behaviors

Where Culture Comes From and How it Continues • The original source of the culture usually reflects the vision of the founders.

• Once the culture is in place, certain organizational practices help maintain it. • The actions of top managers also have a major impact on the organization’s culture.

Exhibit 3.7 Establishing and Maintaining Culture

How Employees Learn Culture • Stories • Rituals • Material Artifacts and Symbols

• Language

How Culture Affects Managers • Because an organization’s culture constrains what they can and cannot do and how they manage, it’s particularly relevant to managers.

Exhibit 3.8 Types of Managerial Decisions Affected by Culture

Review Learning Objective 3.1 • Contrast the actions of managers according to the omnipotent and symbolic views. – Omnipotent view: Managers are directly responsible for the organization’s success or failure. – Symbolic view: Much of the organization’s success or failure is due to external forces outside of the manager’s control. – The two constraints on managers' discretion are organizational culture (internal) and the environment (external).

Review Learning Objective 3.2 • Describe the constraints and challenges facing managers in today’s external environment. – The external environment includes those factors and forces outside the organization that affect its performance. – The main components of the external environment are economic, demographic, political/legal, sociocultural, technological, and global. – These components can constrain and challenge managers because they have an impact on jobs, environmental uncertainty, and stakeholder relationships.

Review Learning Objective 3.3 • Discuss the characteristics and importance of organizational culture. – The seven dimensions of culture are: attention to detail, outcome orientation, people orientation, team orientation, aggressiveness, stability, innovation, and risk taking. – The stronger the culture, the greater the impact on the way managers plan, organize, lead, and control. – The original source of the organizational culture reflects the founder’s vision. – Culture is transmitted through stories, rituals, material symbols, and language. Copyright © 2021, 2018, 2016 Pearson Education, Inc. All Rights Reserved

Management Fifteenth Edition

Chapter 4 Managing in a Global Environment

Learning Objectives 4.1 Define globalization, nationalism, and parochialism; and contrast ethnocentric, polycentric, and geocentric attitudes. 4.2 Describe the history of globalization. 4.3 Summarize the case for and against globalization. 4.4 Explain the different types of international organizations. 4.5 Describe the structures and techniques organizations use as they go international. 4.6 Explain the relevance of the political/legal, economic, and cultural environments to global business.

What’s Your Global Perspective? Globalization: the process of developing influence or operations in other countries Nationalism: patriotic ideals and policies that glorify a country’s values Parochialism: viewing the world solely through your own perspectives, leading to an inability to recognize differences between people

Three Possible Global Attitudes • Ethnocentric: view that home country has best work practices

• Polycentric: view that managers in the host country know the best approaches • Geocentric: world-oriented view; wants to use best practices from around the globe

Globalization Highlights • After WWI nations became more protectionist • After WWII the trend toward globalization started • Numerous agreements, institutions, and events pushed for globalization

Global Trade Mechanisms • World Trade Organization (WTO) • International Monetary Fund (IMF) • World Bank Group

• General Agreement on Tariffs and Trade (GATT) • Organization for Economic Cooperation and Development (OECD)

World Trade Organization • World Trade Organization (WTO): global organization of 161 countries that deals with the rules of trade among nations – Essentially replaced GATT

International Monetary Fund and World Bank Group • International Monetary Fund (IMF): An organization of 188 countries that promotes international monetary cooperation and provides advice, loans, and technical assistance • World Bank Group: a group of very closely associated institutions that provides financial and technical assistance to developing countries

GATT and Organization for Economic Cooperation and Development • GATT: a 1948 agreement between countries to reduce or eliminate trade barriers • Organization for Economic Cooperation and Development (OECD): an international economic organization that helps its 34 member countries achieve sustainable economic growth and employment

Association of Southeast Asian Nations (ASEAN) • Association of Southeast Asian Nations (ASEAN): a trading alliance of 10 Southeast Asian nations

Other Globalization Milestones • World Economic Forum (1974) is a Swiss non-profit foundation that brings world leaders together each year to discuss factors of common interest • Margaret Thatcher elected Prime Minister of UK (1979). She was very pro free trade. • Ronald Reagan elected US President (1980). Joined Thatcher as a pro free trade advocate

• Fall of the Soviet Union (1991). Created 9 member states

Regional Trading Alliances • Global competition and the global economy are shaped by regional trading agreements, including: – European Union (EU) – North American Free Trade Agreement (NAFTA)

The European Union • European Union (EU): a union of 28 democratic European nations created as a unified economic and trade entity with the euro as a single common currency

Exhibit 4.1 European Union Map

North American Free Trade Agreement (NAFTA) • North American Free Trade Agreement (NAFTA): an agreement among the Mexican, Canadian, and U.S. governments in which barriers to trade have been eliminated

Other Major Events Shaping Globalization • Shanghai Cooperation Organization (2003) – an eightnation group pledges to promote free trade among other goals. • We are the 99% Protest Movement (2011) – a group protesting income and wealth inequality in the US. • Made in China 2025 (2015) – a Chinese government-led initiative to make China dominant in high-tech manufacturing by 2025

Other Globalization Events • British vote to Exit EU (2016) – also known as Brexit. The vote was in response to nationalist feelings in the UK

• Donald Trump elected US president (2016) – elected on an America First campaign due to distrust of career politicians • Trans-Pacific Partnership (2016) – TPP was a trade agreement among Pacific rim countries that fell apart for lack of support • USMCA (2018) – President Trump’s renegotiated version of NAFTA

Exhibit 4.2 Nationalism vs. Globalism Pendulum

The Case for Globalization • The Win-Win Argument: The “every country wins” argument is based on the law of comparative advantage. • Essentially says a ‘rising tide floats all boats.’ • Globalization benefits all trading partners.

The Case Against Globalization • The Downside of Globalization: Critics of globalization maintain that jobs were leaving developed high labor cost nations and flowing to cheap labor nations. • Cheap goods worldwide created wage stagnation for the middle class. • Globalization and capitalism together have increased wealth inequality.

• Some groups are harmed by globalization.

Globalization Today and Managerial Implications • Globalization will continue despite its critics because: – The infrastructure is already in place for global trade. – The evidence shows globalization is NOT the cause of unemployment—technology is the culprit. – Managers need to develop requisite skills to be a global manager.

Different Types of International Organizations • Multinational corporation (MNC) • Multidomestic corporation • Global company

• Transnational or borderless organization

How Organizations Go International • Global sourcing: purchasing materials or labor from around the world wherever it is cheapest

Exhibit 4.3 How Organizations Go Global

Going Global: Exporting and Importing • Exporting: making products domestically and selling them abroad

• Importing: acquiring products made abroad and selling them domestically

Going Global: Licensing and Franchising • Licensing: an organization gives another organization the right to make or sell its products using its technology or product specifications • Franchising: an organization gives another organization the right to use its name and operating methods

Going Global: Strategic Alliances and Joint Ventures • Strategic Alliance: partnership between an organization and foreign company partner(s) in which both share resources and knowledge in developing new products or building production facilities • Joint Venture: A specific type of strategic alliance in which the partners agree to form a separate, independent organization for some business purpose

Going Global: Foreign Subsidiary • Foreign Subsidiary: directly investing in a foreign country by setting up a separate and independent production facility or office

Managing in a Global Environment • What challenges will a manager face in a new country?

Political/Legal Environment – U.S. managers are accustomed to a stable legal and political system – Managers must stay informed of the specific laws in countries where they do business – Some countries have risky political climates

Economic Environment • Free Market Economy: an economic system in which resources are primarily owned and controlled by the private sector • Planned Economy: an economic system in which economic decisions are planned by a central government

Cultural Environment • National Culture—the values and attitudes shared by individuals from a specific country that shape their behavior and beliefs about what is important.

Exhibit 4.4 What Are Americans Like? Characteristic Americans are very informal. They tend to treat people alike even when great differences in age or social standing are evident. Americans are direct. They don’t talk around things. To some foreigners, this may appear as abrupt or even rude behavior. Americans are competitive. Some foreigners may find Americans assertive or overbearing. Americans are achievers. They like to keep score, whether at work or at play. They emphasize accomplishments. Americans are independent and individualistic. They place a high value on freedom and believe that individuals can shape and control their own destiny. Americans value personal space. They keep a distance when speaking and are uncomfortable when people are too close. Americans dislike silence. They would rather talk about the weather than deal with silence in a conversation. Americans value punctuality. They keep appointment calendars and live according to schedules and clocks. Americans value cleanliness. They often seem obsessed with bathing, eliminating body odors, and wearing clean clothes. Copyright © 2021, 2018, 2016 Pearson Education, Inc. All Rights Reserved

Exhibit 4.5 Hofstede’s Five Dimensions of National Culture

Global Leadership and Organizational Behavior Effectiveness (GLOBE) • Power distance • Uncertainty avoidance • Assertiveness • Humane orientation • Future orientation • Institutional collectivism • Gender differentiation • In-group collectivism • Performance orientation Copyright © 2021, 2018, 2016 Pearson Education, Inc. All Rights Reserved

Applying Cultural Guidelines • How do we apply this information? • At a simplistic level it means, “When in Rome, do as the Romans do” • However, Hofstede and the GLOBE studies will help you alert managers to potential problems that might emerge due to cultural differences

Review Learning Objective 4.1 (1 of 2) • Define globalization, nationalism, and parochialism; and contrast ethnocentric, polycentric, and geocentric attitudes. – Globalization—a process by which organizations develop influence or operations in other countries. – Nationalism—patriotic ideals and policies that glorify a country’s values. – Parochialism—viewing the world solely through your own eyes and perspectives.

Review Learning Objective 4.1 (2 of 2) – Ethnocentric attitude—a parochial belief that the best work approaches and practices are those of the home country. – Polycentric attitude—managers in the host country know the best work approaches and practices for running their business. – Geocentric attitude—a world-oriented view that focuses on using the best approaches and people from around the globe.

Review Learning Objective 4.2 (1 of 2) • Describe the history of globalization. – The European Union consists of 28 democratic countries. – NAFTA helps Canada, Mexico, and the United States strengthen their global economic power. Appears it will be replaced by USMCA. – ASEAN is a trading alliance of 10 Southeast Asian nations. – World Trade Organization (WTO) monitors and promotes trade relationships.

Review Learning Objective 4.2 (2 of 2) – The International Monetary Fund (IMF) and the World Bank Group provide monetary support. – The Organization for Economic Cooperation and Development assists its member countries with financial support. – Pendulum is swinging back toward nationalism. – Trump’s election on “America First” platform highlights the change. – Britain votes to exit the EU (Brexit). – TPP abandoned. – NAFTA renegotiated.

Review Learning Objective 4.3 • Summarize the case for and against globalization. • FOR Globalization: Based on the law of comparative advantage that states nations are better off focusing production on goods they can produce with the lowest opportunity cost and then engage in trade to get other goods. All nations benefit when this happens. • AGAINST Globalization: Globalization is responsible for wage stagnation in developed nations since low-wage countries now produce most labor-intensive goods. It also increases income and wealth inequality.

Review Learning Objective 4.4 • Explain the different types of international organizations. – A multinational corporation—an international company that maintains operations in multiple countries. – A multidomestic organization—an MNC that decentralizes management and other decisions to the local country. – A global organization—an MNC that centralizes management and other decisions in the home country. – A transnational organization—an MNC that has eliminated artificial geographical barriers.

Review Learning Objective 4.5 (1 of 2) Describe the structures and techniques organizations use as they go international. – Global sourcing: purchasing materials or labor from around the world wherever it is cheapest. – Exporting: making products domestically and selling them abroad. – Importing: acquiring products made abroad and selling them domestically. – Licensing: gives that organization the right to use the company’s brand name, technology, or product specifications.

Review Learning Objective 4.5 (2 of 2) – Franchising: use another company’s name and operating methods. – Global strategic alliance: partnership between an organization and foreign company partners – Joint venture: a strategic alliance in which the partners agree to form a separate, independent organization for some business purpose – Foreign subsidiary: direct investment in a foreign country that a company creates by establishing a separate and independent facility or office

Review Learning Objective 4.6 (1 of 2) • Explain the relevance of the political/legal, economic, and cultural environments to global business. – The laws and political stability of a country are issues in the global political/legal environment with which managers must be familiar – Managers must be aware of a country’s economic issues such as currency exchange rates, inflation rates, and tax policies.

Review Learning Objective 4.6 (2 of 2) – Geert Hofstede identified five dimensions for assessing a country’s culture: individualism-collectivism, power distance, uncertainty avoidance, achievementnurturing, and long-term/short-term orientation. – The GLOBE studies identified nine dimensions for assessing country cultures.

Management Fifteenth Edition

Chapter 5 Managing Diversity

Learning Objectives 5.1 Define workplace diversity and explain why managing it is so important. 5.2 Describe the changing makeup of workplaces in the United States and around the world. 5.3 Explain the different types of diversity found in workplaces. 5.4 Discuss the challenges managers face in managing diversity. 5.5 Describe various workplace diversity initiatives.

What is Workplace Diversity? Workforce diversity: the ways in which people in an organization are different from and similar to one another

Exhibit 5.1 Timeline of the Evolution of Workforce Diversity Timeframe

Events

1960s to 1970s

Focus on complying with laws and regulations: Title VII of Civil Rights Act; Equal Employment Opportunity Commission; affirmative action policies and programs

Early 1980s

Focus on assimilating minorities and women into corporate setting: Corporate programs developed to help improve self-confidence and qualifications of diverse individuals so they can “fit in”

Late 1980s

Concept of workforce diversity expanded from compliance to an issue of business survival: Publication of Workforce 2000 opened business leaders’ eyes about the future composition of workforce—that is, more diverse; first use of term workforce diversity

Late 1980s to Late 1990s

Focus on fostering sensitivity: Shift from compliance and focusing only on women and minorities to include everyone; making employees more aware and sensitive to the needs and differences of others

New Millennium

Focus on diversity and inclusion for business success: Workforce diversity seen as core business issue; important to achieve business success, profitability, and growth

Types of Diversity • Surface-level diversity: Easily perceived differences that may trigger certain stereotypes, but that do not necessarily reflect the ways people think or feel • Deep-level diversity: Differences in values, personality, and work preferences

Why is Managing Workplace Diversity So Important? • People management • Organizational performance • Strategic

Exhibit 5.2 Benefits of Workforce Diversity Exhibit 5.2 shows the three main categories of workforce diversity benefits: people management, organizational performance, and strategic. People Management • Better use of employee talent • Increased creativity in team problem-solving • Ability to attract and retain employees of diverse backgrounds Organizational Performance • Reduced costs associated with high turnover,

• absenteeism, and lawsuits • Enhanced problem-solving ability Improved system flexibility Strategic • Increased understanding of the marketplace, which improves ability to better market to diverse consumers

• Potential to improve sales growth and increase market share • Potential source of competitive advantage because of improved innovation efforts • Viewed as moral and ethical; the “right” thing to do Copyright © 2021, 2018, 2016 Pearson Education, Inc. All Rights Reserved

The Changing Workplace: Characteristics of the U.S. Population • Total population of the United States • Racial/ethnic groups • Aging population

Exhibit 5.3 Changing Population Makeup of the United States Group

2018

2050

Foreign-born

14%

19%

Racial/ethnic groups

blank

White*

72%

47%

Hispanic

12%

29%

Black*

12%

13%

Asian*

* = Non-Hispanic

blank

American Indian/Alaska Native not included.

blank

What About Global Workforce Changes? • Total world population

• Aging population

Exhibit 5.4 Types of Diversity Found in Workplaces

Workforce Diversity: Age and Gender • Age: Both Title VII of the Civil Rights Act of 1964 and the Age Discrimination in Employment Act of 1967 prohibit age discrimination • Gender: Women (47%) and men (53%) now each make up almost half of the workforce

Workforce Diversity: Race and Ethnicity • Race: the biological heritage (including skin color and associated traits) that people use to identify themselves • Ethnicity: social traits (such as cultural background or allegiance) that are shared by a human population

Workforce Diversity: Disability/Abilities and Religion • Disability/abilities: the Americans With Disabilities Act of 1990 prohibits discrimination against persons with disabilities. • Religion: Title VII of the Civil Rights Act prohibits discrimination on the basis of religion

Exhibit 5.5 Employers’ Fears About Disabled Workers

Workforce Diversity: LGBT and Other Types of Diversity • LGBT: in two separate U.S. Supreme Court cases, the justices held that transgendered (gender identity) and lesbian, bisexual, and gay (sexual orientation) individuals were protected under Title VII’s prohibition against sexual discrimination • Other types of diversity: diversity refers to any dissimilarities or differences that might be present in a workplace

Challenges in Managing Diversity: Personal Bias • Bias: a tendency or preference toward a particular perspective or ideology • Prejudice: a preconceived belief, opinion, or judgment toward a person or a group of people

Challenges in Managing Diversity: Stereotyping and Discrimination • Stereotyping: judging a person based on a perception of a group to which that person belongs • Discrimination: when someone acts out their prejudicial attitudes toward people who are the targets of their prejudice

Exhibit 5.6 Forms of Discrimination (1 of 2) Types of Discrimination

Definition

Examples from Organizations

Discriminatory policies or practices

Actions taken by representatives of the organization that deny equal opportunity to perform or unequal rewards for performance

Older workers may be targeted for layoffs because they are highly paid and have lucrative benefits.

Sexual harassment

Unwanted sexual advances and other verbal or physical conduct of a sexual nature that create a hostile or offensive work environment

Salespeople at one company went on company-paid visits to strip clubs, brought strippers into the office to celebrate promotions, and fostered pervasive sexual rumors.

Intimidation

Overt threats or bullying directed at members of specific groups of employees

African American employees at some companies have found nooses hanging over their workstations.

Exhibit 5.6 Forms of Discrimination (2 of 2) Types of Discrimination

Definition

Examples from Organizations

Mockery and insults

Jokes or negative stereotypes; sometimes the result of jokes taken too far

Arab Americans have been asked at work whether they were carrying bombs or were members of terrorist organizations.

Exclusion

Exclusion of certain people from job opportunities, social events, discussions, or informal mentoring; can occur unintentionally

Many women in finance claim they are assigned to marginal job roles or are given light workloads that don’t lead to promotion.

Incivility

Disrespectful treatment, including behaving in an aggressive manner, interrupting the person, or ignoring his or her opinions

Female team members are frequently cut off in meetings.

Glass Ceiling • Glass ceiling: the invisible barrier that separates women and minorities from top management positions • Decision makers in organizations need to actively take steps to eliminate this

The Legal Aspect of Workplace Diversity • Workplace diversity needs to be more than understanding and complying with federal laws

Pay Inequities • The Equal Pay Act of 1963 made it illegal to pay different amounts to men and women doing the same work • However, as of 2017 women make only 82% of what a man makes in a comparable job • For younger women the gap is smaller but younger women still make less than their male counterparts

Workplace Diversity Initiatives • Some businesses do effectively manage diversity • Some organizations mandate diversity training every month • There are numerous diversity initiatives that firms can use to increase the diversity of their workforce including: – Top management commitment to diversity – Mentoring – Diversity training – Employee resource groups (ERG)

Top Management Commitment to Diversity • Top management commitment is probably the most important factor in achieving a diverse workforce • Management needs to integrate diversity into all aspects of the firm’s business, including all stakeholders and the supply chain

• Policies and procedures should be in place to address issues immediately

Mentoring • Mentoring: a process whereby an experienced organizational member (a mentor) provides advice and guidance to a less experienced member (a protégé)

Diversity Skills Training • Diversity skills training: specialized training to educate employees about the importance of diversity and to teach them skills for working in a diverse workplace

Employee Resource Groups • Employee resource groups: groups made up of employees connected by some common dimension of diversity

Some Final Thoughts on Diversity • Has identity politics led to an obsession with celebrating differences? – Does this hinder unifying employees around a common goal? • Do long established practices undermine diversity? – Do employee referrals and team building reduce diversity? • Does supporting diversity conflict with rewarding merit? – If you promote a diversity platform, what happens to promoting based solely on merit?

Review Learning Objective 5.1 • Define workplace diversity and explain why managing it is so important. – Workplace diversity is the ways in which people in an organization are different from and similar to one another – Why it’s important: ▪ People management benefits ▪ Organizational performance benefits ▪ Strategic benefits

Review Learning Objective 5.2 • Describe the changing makeup of workplaces in the United States and around the world. – United States ▪ Total increase in population ▪ Changing components of racial/ethnic groups ▪ An aging population – The world: ▪ Total world population ▪ Aging of that population

Review Learning Objective 5.3 • Explain the different types of diversity found in workplaces. – Age (older workers and younger workers) – Gender (male and female) – Race and ethnicity (racial and ethnic classifications) – Disability/abilities (people with a disability that limits major life activities) – Religion (religious beliefs and religious practices) – Sexual orientation and gender identity (gay, lesbian, bisexual, and transgender) – Other (e.g., socioeconomic background, physical attractiveness, obesity, job seniority, etc.)

Review Learning Objective 5.4 • Discuss the challenges managers face in managing diversity. – Bias is a tendency or preference toward a particular perspective or ideology – Prejudice, which is a preconceived belief, opinion, or judgment toward a person or a group of people – Glass ceiling refers to the invisible barrier that separates women and minorities from top management positions

Review Learning Objective 5.5 • Describe various workplace diversity initiatives. – Some of the federal laws on diversity include: ▪ Title VII of the Civil Rights Act ▪ The Americans with Disabilities Act ▪ Age Discrimination in Employment Act – Workplace diversity initiatives to diversity include top management commitment, mentoring, diversity skills training, and employee resource groups

Management Fifteenth Edition

Chapter 6 Managing Social Responsibility and Ethics

Learning Objectives 6.1 Discuss what it means to be socially responsible and what factors influence that decision. 6.2 Explain green management and how organizations can go green. 6.3 Discuss the factors that lead to ethical and unethical behavior. 6.4 Describe management’s role in encouraging ethical behavior. 6.5 Discuss current social responsibility and ethics issues.

From Obligations to Responsiveness to Responsibility • Social obligation: when a firm engages in social actions because of its obligation to meet certain economic and legal responsibilities • Classical view: the view that management’s only social responsibility is to maximize profits

The Socioeconomic View • Socioeconomic view: the view that managers’ social responsibilities go beyond making profits to include protecting and improving society’s welfare • Social responsiveness: when a company engages in social actions in response to some popular social need

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

Exhibit 6.1 Arguments For and Against Social Responsibility

Social Responsibility Versus Social Responsiveness Exhibit 6.2 Social Responsibility Versus Social Responsiveness

Blank

Social Responsibility

Social Responsiveness

Major consideration Focus Emphasis Decision framework

Ethical Ends Obligation Long-term

Pragmatic Means Responses Medium- and short-term

Source: Adapted from Steven L. Wartick and Philip L. Cochran, “The Evolution of the Corporate Social Performance Model,” Academy of Management Review (October 1985): p. 766. Copyright © 2021, 2018, 2016 Pearson Education, Inc. All Rights Reserved

Green Management and Sustainability • Green management: managers consider the impact of their organization on the natural environment

How Organizations Go Green • Legal (light green) approach • Market approach • Stakeholder approach • Activist approach

Exhibit 6.3 Green Approaches

Evaluating Green Management Actions • Company-issued reports on environmental performance • ISO 9000 (quality management) and ISO 14000 (environmental management) standards • Global 100 list of the most sustainable corporations in the world

Managers and Ethical Behavior • Ethics: principles, values, and beliefs that define right and wrong behavior • In the next slide of Exhibit 6-4 you will find several tests a manager can use when faced with an ethical dilemma • Posing one of the questions listed in Exhibit 6-4 can help you make an ethical choice

Exhibit 6.4 Helping You Make Ethical Decisions When faced with an ethical dilemma, consider using one or more of these tests: • The Golden Rule Test: Would I want people to do this to me? • The What-If-Everybody-Did-This Test: Would I want everyone to do this? Would I want to live in that kind of world? • The Family Test: How would my parents/spouse/significant other/children feel if they found out I did this? • The Conscience Test: Does this action go against my conscience? Will I feel guilty afterwards? • The Front Page/Social Media Test: How would I feel if this action was reported on the front page of my hometown newspaper or splashed across social media outlets for all to see? Source: Based on T. Lickona, Character Matters: How to Help Our Children Develop Good Judgment Integrity, and Other Essential Virtues (New York: Touchstone Publishing, 2004); A. Goodman, “The Dilemma: Addicted and Conflicted About Laughing at the Afflicted,” Institute for Global Ethics, June 3, 2013, globalethics.org; and G. Enck, “Six-Step Framework for Ethical Decision Making,” Journal of Health Services Research and Policy (January 2014): pp. 62–64.

Exhibit 6.5 Factors that Determine Ethical and Unethical Behavior

Stage of Moral Development • Preconventional level • Conventional level • Principled level

Exhibit 6.6 Stages of Moral Development

Individual Characteristics • Values • Ego strength • Locus of control

Structural Variables • Ethical behavior can be influenced by: – An organization’s structural design – Goals – Performance appraisal system – Reward allocation

Exhibit 6.7 Issue Intensity

As Exhibit 6.7 shows, six characteristics determine issue intensity or how important an ethical issue is to an individual: greatness of harm, consensus of wrong, probability of harm, immediacy of consequences, proximity to victim(s), and concentration of effect. Copyright © 2021, 2018, 2016 Pearson Education, Inc. All Rights Reserved

Issue Intensity • The six factors suggest that: – the larger the number of people harmed – the more agreement that the action is wrong – the greater the likelihood that the action will cause harm – the more immediately the consequences of the action will be felt – the closer the person feels to the victim – The more concentrated the effect of the action on the victim(s)… • The greater the issue intensity or importance

Ethics in an International Context • Ethical standards are not universal • Foreign Corrupt Practices Act • United Nations Global Contract

Exhibit 6.8 The Ten Principles of the UN Global Compact (1 of 2) Principle Number

Principle Text

Human Rights

blank

Principle 1

Business should support and respect the protection of internationally proclaimed human rights within their sphere of influence; and

Principle 2

Make sure they are not complicit in human rights abuses.

Labor Standards

blank

Principle 3

Business should uphold the freedom of association and the effective recognition of the right to collective bargaining;

Principle 4

The elimination of all forms of forced and compulsory labor;

Principle 5

The effective abolition of child labor; and

Principle 6

The elimination of discrimination in respect to employment and occupation.

Exhibit 6.8 shows the UN Global Compact, which asks companies to embrace, support, and enact, within their sphere of infuence, a set of core values in the areas of human rights, labor standards, the environment, and anti-corruption. Copyright © 2021, 2018, 2016 Pearson Education, Inc. All Rights Reserved

Exhibit 6.8 The Ten Principles of the U N Global Compact (2 of 2) Principle Number

Principle Text

Environment

Blank

Principle 7

Business should support a precautionary approach to environmental challenges;

Principle 8

Undertake initiatives to promote greater environmental responsibility; and

Principle 9

Encourage the development and diffusion of environmentally friendly technologies.

Anti-Corruption

blank

Principle 10

Business should work against corruption in all its forms, including extortion and bribery.

Employee Selection • Some firms do pre-employment integrity testing to weed out applicants that are likely to be dishonest or engage in other undesirable workplace behaviors • Firms need to state that background checks will be conducted and references contacted

• Use the interview to pose ethical questions to determine the applicant’s integrity

Codes of Ethics and Decision Rules • Code of ethics: a formal statement of an organization’s primary values and the ethical rules it expects its employees to follow • The effectiveness of a code of ethics depends heavily on whether management supports them and how employees that violate the codes are treated

Developing Codes of Ethics • Organizational leaders should model appropriate behavior and reward those who act ethically. • Managers should reaffirm the importance of the ethics code and discipline those who break it • Stakeholders should be considered as an ethics code is developed or improved • Managers should communicate and reinforce the ethics code regularly • Managers should use the five-step process to guide employees when faced with ethical dilemmas

Leadership at the Top • Doing business ethically requires a commitment from managers at all levels, but especially the top level because: – they uphold the shared values and set the cultural tone – they’re role models in both words and actions

Job Goals and Performance Appraisal • Under the stress of unrealistic goals, otherwise ethical employees may feel they have no choice but to do whatever is necessary to meet those goals.

Ethics Training • More organizations are setting up seminars, workshops, and similar ethics training programs to encourage ethical behavior.

Independent Social Audits • Independent social audits: evaluate decisions and management practices in terms of the organization’s code of ethics

Protection of Employees Who Raise Ethical Issues • Whistle-blower: individual who raises ethical concerns or issues to others – Currently 22 federal statutes protecting whistle-blowers – Managers retaliating against whistle-blowers could face a ten-year prison sentence – OSHA has proposed that anti-retaliation programs have the 5 key elements discussed next

OSHA Anti-Retaliation Program Elements 1. Management Commitment: Management needs to demonstrate it is committed to addressing concerns 2. Compliance Concern Response System: Need to have established procedures for confidential reporting 3. Anti-Retaliation Response System: Need clearly designated channels that bypass managers accused of retaliation 4. Anti-Retaliation Training: All employees need to be trained about the law 5. Program Oversight: The program needs rigorous oversight in the form of monitoring processes Copyright © 2021, 2018, 2016 Pearson Education, Inc. All Rights Reserved

Social Entrepreneurship • Social entrepreneur: an individual or organization that seeks out opportunities to improve society by using practical, innovative, and sustainable approaches

Social Media and Social Responsibility • Social media has a growing impact on everyone • It has been recognized as a tool managers can use to communicate and promote socially responsible actions • Some research shows it can enhance a company’s reputation

• Currently one of the best ways for an organization to promote transparency • Provides a means to shape an organization’s image or reputation

Corporate Philanthropy • Corporate philanthropy: can be an effective way for companies to address societal problems – Walmart, Google, and ExxonMobil are in the top 10 most charitable companies – Philanthropy is good for employee morale and increases the firm’s ability to attract top talent – 55% of online consumers indicated they would pay more for a product to support philanthropy

Review Learning Objective 6.1 • Discuss what it means to be socially responsible and what factors influence that decision. – Social obligation: a firm engages in social actions because of its obligation to meet certain economic and legal responsibilities – Social responsiveness—when a firm engages in social actions in response to some popular social need

Review Learning Objective 6.2 • Explain green management and how organizations can go green. – Different approaches ▪ Legal or light green approach ▪ Market approach ▪ Stakeholder approach ▪ Activist or dark green approach

Review Learning Objective 6.3 • Discuss the factors that lead to ethical and unethical behavior. – Factors that affect ethical and unethical behavior include: ▪ An individual’s level of moral development ▪ Individual characteristics ▪ Structural variables ▪ Organizational culture ▪ Issue intensity

Review Learning Objective 6.4 • Describe management’s role in encouraging ethical behavior. – The behavior of managers is the single most important influence on an individual’s decision to act ethically or unethically. – Nonprogrammed decisions are unique decisions that require a custom-made solution and are used when the problems are new or unusual (unstructured) and for which information is ambiguous or incomplete.

Review Learning Objective 6.5 • Discuss current social responsibility and ethics issues. – Firms should adopt policies to protect whistle-blowers. – Social entrepreneurship has the potential to solve numerous global problems. – Social media is a good way to communicate socially responsible actions. – Corporate philanthropy has benefits to society and the firm.

Management Fifteenth Edition

Chapter 7 Managing Change and Disruptive Innovation

Learning Objectives 7.1 Describe making the case for change. 7.2 Compare and contrast views on the change process. 7.3 Classify areas of organizational change. 7.4 Explain how to manage change.

7.5 Discuss contemporary issues in managing change. 7.6 Describe techniques for stimulating innovation. 7.7 Explain why managing disruptive innovation is important.

The Case for Change • Organizational change: any alteration of people, structure, or technology in an organization • Change agent: someone who acts as a catalyst and assumes the responsibility for managing the change process

• VUCA: volatility, uncertainty, complexity, and ambiguity – In today’s world, change is the only constant – Managers must deal with that reality

Exhibit 7.1 External and Internal Forces for Change External

Internal

Consumer needs and wants

New organizational strategy

New governmental laws

Composition of the workforce

Technology

New equipment

The economy

Employee attitudes

External Forces for Change • Consumer needs and wants • New governmental laws • Technology • The economy

Internal Forces for Change • New organizational strategy • Composition of workforce • New equipment • Employee attitudes

Calm Waters Versus White-Water Rapids Metaphors • Calm waters metaphor: – Unfreezing the status quo – Changing to a new state – Refreezing to make the change permanent

Exhibit 7.2 The Three-Step Change Process

White-Water Rapids Metaphor • White-water rapids metaphor: the lack of environmental stability and predictability requires that managers and organizations continually adapt and manage change actively to survive

Areas of Change Managers focus on four main areas of change 1. Strategy: Modifying the approach to success 2. Structure: Modifying structure or design 3. Technology: Modifying processes or equipment

4. People: Modifying attitudes, expectations, and other individual or group beliefs or behavior

Exhibit 7.3 Four Types of Change

Types of Change: Strategy • Failure to change strategy when circumstances dictate could undermine a company’s success. • Competition can dictate a change in strategy. • Organizations that don’t recognize a need to change strategy may not survive in the long run.

Types of Change: Structure • Changing structural components

• Changing structural design

Types of Change: Technology • New equipment, tools, or methods • Automation • Computerization

Types of Change: People • Organizational development: change methods that focus on people and the nature and quality of interpersonal work relationships

Exhibit 7.4 Popular OD Techniques

Why Do People Resist Change? • Uncertainty • Habit • Fear of loss • Belief change is inconsistent with goals of organization

Techniques for Reducing Resistance to Change • Education and communication • Participation • Facilitation and support • Negotiation

• Manipulation and co-optation • Coercion

Exhibit 7.5 Techniques for Reducing Resistance to Change Technique

When Used

Advantage

Disadvantage

Education and communication

When resistance is due to misinformation

Clear up misunderstandings

May not work when mutual trust and credibility are lacking

Participation

When resisters have the expertise to make a contribution

Increase involvement and acceptance

Time-consuming; has potential for a poor solution

Facilitation and support

When resisters are fearful and anxiety ridden

Can facilitate needed adjustments

Expensive; no guarantee of success

Negotiation

When resistance comes from a powerful group

Can “buy” commitment

Potentially high cost; opens doors for others to apply pressure too

Manipulation and co-optation

When a powerful group’s endorsement is needed

Inexpensive, easy way to gain support

Can backfire, causing change agent to lose credibility

Coercion

When a powerful group’s endorsement is needed

Inexpensive, easy way to gain support

May be illegal; may undermine change agent’s credibility

Changing an Organization’s Culture • The fact that an organization’s culture is made up of relatively stable and permanent characteristics tends to make it very resistant to change. • However, cultures can be changed even if the process is difficult.

Understanding the Situational Factors • Conditions that facilitate change: – dramatic crisis occurs – leadership changes hands – organization is young and small – culture is weak

Exhibit 7.6 Changing Culture Set the tone through management behavior; top managers, particularly, need to be positive role models. Create new stories, symbols, and rituals to replace those currently in use. Select, promote, and support employees who adopt the new values. Redesign socialization processes to align with the new values. To encourage acceptance of the new values, change the reward system. Replace unwritten norms with clearly specified expectations. Shake up current subcultures through job transfers, job rotation, and/or terminations. Work to get consensus through employee participation and creating a climate with a high level of trust.

Employee Stress • Stress: the adverse reaction people have to excessive pressure placed on them from extraordinary demands, constraints, or opportunities • Stressors: factors that cause stress

What Causes Stress? • Task demands • Role demands – Role conflicts – Role overload – Role ambiguity

• Interpersonal demands • Organization structure • Organizational leadership

Personal Factors • Type A personality: people who have a chronic sense of urgency and an excessive competitive drive • Type B personality: people who are relaxed and easygoing and accept change easily

Exhibit 7.7 Symptoms of Stress

How Can Stress Be Reduced? • Realistic job preview during selection process • Performance planning program, e.g. MBO • Job redesign • Addressing personal stress – counseling – time management programs – wellness programs

Creativity Versus Innovation • Creativity: the ability to combine ideas in a unique way or to make unusual associations between ideas • Innovation: taking creative ideas and turning them into useful products or work methods

Stimulating and Nurturing Innovation • An environment that stimulates innovation includes three variables: the organization’s structure, culture, and human resource practices.

Exhibit 7.8 Innovation Variables

Structural Variables • Organic structures • Abundant resources • High interunit communication • Minimal time pressure

• Work and nonwork support

Cultural Variables • Acceptance of ambiguity • Tolerance of the impractical • Low external controls • Tolerance of risks • Tolerance of conflict • Focus on ends • Open-system focus • Positive feedback

Human Resource Variables • Idea champion: individual who actively and enthusiastically supports new ideas, builds support, overcomes resistance, and ensures that innovations are implemented

Stimulating Innovation • Innovation is the foundation of many of the world’s most successful organizations. • The top five innovative firms are Apple, Netflix, Square, Tencent, and Amazon. • So, how do managers stimulate innovation? The following slides highlight a few approaches.

Disruptive Innovation Definition • Disruptive innovation: innovations in products, services, or processes that radically change an industry’s rules of the game • Sustaining innovation: small and incremental changes in established products rather than dramatic breakthroughs

Exhibit 7.9 Examples of Past Disruptive Innovators Established Business

Disruptor

Established Business

Disruptor

Compact disc

Apple iTunes

Traveler’s checks

ATMs and Visa

Carbon paper

Xerox copy machine

Encyclopedias

Wikipedia

Canvas tennis shoes

Nike athletic shoes

Newspaper classified ads

Craigslist

Portable radio

Sony Walkman

AM/FM radio stations

Sirius XM

Sony Walkman

Apple iPod

Tax preparation services

Intuit’s Turbo Tax

Typewriters

IBM PC

Yellow Pages

Google

Weekly news magazines

CNN

Paper maps

Garmin’s GPS

TV networks

Cable and Netflix

Paperback books

Kindle

Local travel agencies

Expedia

Lawyers

Legal Zoom

Stockbrokers

eTrade

Taxis

Uber

Why Disruptive Innovation Is Important • Disruptive innovations are a threat to many established businesses, and responding with sustaining innovations isn’t enough.

Who’s Vulnerable? • Large, established, and highly profitable organizations are most vulnerable to disruptive innovations because they have the most to lose and are most vested in their current markets and technologies.

Implications • For entrepreneurs • For corporate managers – Skunk works: a small group within a large organization, given a high degree of autonomy and unhampered by corporate bureaucracy, whose mission is to develop a project primarily for the sake of radical innovation • For career planning

Review Learning Objective 7.1 • Describe making the case for change. – Change agent – External forces – Internal forces

Review Learning Objective 7.2 • Compare and contrast views on the change process. – Calm waters metaphor – White-water rapids metaphor – Lewin’s three-step model

Review Learning Objective 7.3 • Classify areas of organizational change. – Strategy – Structure – Technology – People

Review Learning Objective 7.4 • Explain how to manage change. – People resist change because of uncertainty, habit, concern over personal loss, and the belief that the change is not in the organization’s best interest. – Techniques for reducing resistance to change include: education and communication, participation, facilitation, negotiation, manipulation and co-optation, and coercion

Review Learning Objective 7.5 • Discuss contemporary issues in managing change. – Managers lead the change process by: ▪ Making organization change capable ▪ Understanding own role ▪ Giving employees a role in change process – Managers help employees deal with stress by: ▪ Ensuring employees’ abilities match job ▪ Improving organizational communication ▪ Using a performance planning program ▪ Redesigning jobs

Review Learning Objective 7.6 • Describe techniques for stimulating innovation. – Creativity – Innovation – Design thinking and innovation

Review Learning Objective 7.7 • Explain why managing disruptive innovation is important. – Disruptive innovation exists when a smaller company with fewer resources is able to successfully challenge established incumbent businesses. – Disruptive innovation presents an asset to organizations that recognize the market potential of the technology.

Management Fifteenth Edition

Chapter 8 Foundations of Planning

Learning Objectives 8.1 Define the nature and purposes of planning.

8.2 Classify the types of plans organizations might use. 8.3 Identify the key contingency factors in planning. 8.4 Compare and contrast approaches to objective setting. 8.5 Discuss contemporary issues in planning.

What is Planning? • Planning: management function that involves setting goals, establishing strategies for achieving those goals, and developing plans to integrate and coordinate work activities • Formal planning – Specific, time-oriented goals – Goals written and shared

Why Do Managers Plan? • Provides direction • Reduces uncertainty • Minimizes waste and redundancy • Establishes the goals and standards for controlling

Planning and Performance • Formal planning is associated with positive financial results • Quality of planning/implementation more important than the extent of it • External factors can reduce the impact of planning on performance

• Planning-performance relationship seems to be influenced by the planning time frame

Goals and Plans • Goals (objectives): desired outcomes or targets • Plans: documents that outline how goals are going to be met

Exhibit 8.1 Types of Plans

Strategic and Operational Plans • Strategic plans: plans that apply to the entire organization and establish the organization’s overall goals • Operational plans: plans that encompass a particular operational area of the organization

Long-term and Short-term Plans • Long-term plans: plans with a time frame beyond three years • Short-term plans: plans covering one year or less

Specific and Directional Plans • Specific plans: plans that are clearly defined and leave no room for interpretation • Directional plans: plans that are flexible and set out general guidelines

Exhibit 8.2 Specific Versus Directional Plans

Single-Use and Standing Plans • Single-use plans: a one-time plan specifically designed to meet the needs of a unique situation • Standing plans: ongoing plans that provide guidance for activities performed repeatedly

Contingency Factors in Planning • Three contingency factors affect planning 1. Level in the organization 2. Degree of environmental uncertainty 3. Length of future commitments

Exhibit 8.3 Planning in the Hierarchy of Organizations

Objectives and Goals • Objectives and goals are the same thing. • Objectives: Desired outcomes for individuals, groups, or the entire organization. • They provide management with direction and serve as a means to measure progress.

• Stated Objectives: Official statements of what the organization wants the public to believe. • Real Objectives: Objectives that the organization actually pursues.

Approaches to Setting Objectives • Traditional objective-setting: an approach to setting objectives in which top managers set objectives that then flow down through the organization and become subgoals for each organizational area

Exhibit 8.4 Traditional Objective Setting

Exhibit 8.4 illustrates what can happen as the objectives make their way down from the top of the organization to lower levels.

Management by Objectives (MBO) • Management by objectives (MBO): a process of setting mutually agreed-upon goals and using those goals to evaluate employee performance • MBO involves setting objectives that cascade down through the organization that are translated into operational objectives at each level

Exhibit 8.5 Planning in the Hierarchy of Organizations

How Can Managers Plan Effectively in Dynamic Environments? • Develop plans that are specific but flexible • Keep planning even when the environment is uncertain • Allow lower organizational levels to set goals and develop plans

How Can Managers Use Environmental Scanning? • Environmental scanning: screening information to detect emerging trends • Competitive intelligence: gathering information about competitors that allows managers to anticipate competitors’ actions rather than merely react to them

Exhibit 8.6 Environmental Scanning What

Where

General Environment Political

Lobbyists; political representative

Economic

Fed minutes; financial news

Social

Social media

Technological

Patent reports

Specific Environment Industry

Business media; industry associations

Competitors

Web sites; others in the industry

Suppliers

Vendors

Customers

Surveys; focus groups

Digital Tools • Business intelligence: data that managers can use to make more effective strategic decisions • Digital tools: technology, systems, or software that allow the user to collect, visualize, understand, or analyze data • Social Media: Facebook, LinkedIn, Twitter, and other social media sites are becoming increasingly important places to extract competitive intelligence

Virtual Reality • Virtual Reality: a three-dimensional, interactive, computer-generated experience that occurs within a simulated environment. • Potential applications include interviewing job candidates, virtual meetings, complex job training, and previewing office or plant layouts.

Review Learning Objective 8.1 • Define the nature and purposes of planning. – Planning involves defining the organization’s goals, establishing an overall strategy for achieving those goals, and developing plans for organizational work activities. – The four purposes of planning include providing direction, reducing uncertainty, minimizing waste and redundancy, and establishing the goals or standards used in controlling.

Review Learning Objective 8.2 • Classify the types of plans organizations might use. – Goals are desired outcomes. Plans are documents that outline how goals will be met. ▪ Strategic/financial ▪ Stated/real ▪ Long-term/short-term ▪ Specific/directional ▪ Single-use/standing

Review Learning Objective 8.3 • Identify the key contingency factors in planning. – Organizational level – Degree of environmental uncertainty – Length of future commitments

Review Learning Objective 8.4 • Compare and contrast approaches to objective setting. – Traditional goal-setting and MBO – Six characteristics of well-written goals – Five steps of goal-setting – Contingency factors

Review Learning Objective 8.5 • Discuss contemporary issues in planning. – Planning in dynamic environments – Environmental scanning ▪ Competitive intelligence – Virtual reality

Management Fifteenth Edition

Chapter 9 Managing Strategy

Learning Objectives 9.1 Define strategic management and explain why it’s important. 9.2 Explain what managers do during the six steps of the strategic management process. 9.3 Describe the three types of corporate strategies. 9.4 Describe competitive advantage and the competitive strategies organizations use to get it.

What is Strategic Management? • Strategic management: what managers do to develop the organization’s strategies • Strategies: the plans for how the organization will do what it’s in business to do, how it will compete successfully, and how it will attract and satisfy its customers in order to achieve its goals • Business model: how a company is going to make money

Why is Strategic Management Important? • Has a positive impact on performance • Helps managers decide how to act in face of change and uncertainty • Helps complex and diverse organizations work together

Exhibit 9.1 Strategic Management Process

Exhibit 9.1 illustrates the six-step process of strategic management, which encompasses strategy planning, implementation, and evaluation. Copyright © 2021, 2018, 2016 Pearson Education, Inc. All Rights Reserved

Step 1: Identifying the Organization’s Current Mission, Goals, and Strategies • Mission: the purpose of an organization

Exhibit 9.2 Components of a Mission Statement

Step 2: Doing an External Analysis • Opportunities: positive trends in the external environment • Threats: negative trends in the external environment

Step 3: Doing an Internal Analysis • Resources: an organization’s assets that are used to develop, manufacture, and deliver products to its customers • Capabilities: an organization’s skills and abilities in doing the work activities needed in its business

• Core competencies: the organization’s major valuecreating capabilities that determine its competitive weapons

SWOT Analysis • Strengths: any activities the organization does well or its unique resources • Weaknesses: activities the organization does not do well or resources it needs but does not possess • SWOT analysis: an analysis of the organization’s strengths, weaknesses, opportunities, and threats

Step 4: Formulating Strategies • Three main types of strategies managers will formulate: – Corporate – Competitive – Functional

Step 5: Implementing Strategies • No matter how effectively an organization has planned its strategies, performance will suffer if the strategies aren’t implemented properly.

Step 6: Evaluating Results • How effective have strategies been at helping the organization achieve its goals • What adjustments are necessary?

Exhibit 9.3 Types of Organizational Strategies

What is Corporate Strategy? • Corporate strategy: an organizational strategy that determines what businesses a company is in or wants to be in, and what it wants to do with those businesses

What Are the Types of Corporate Strategy? • Growth strategy: a corporate strategy that’s used when an organization wants to expand the number of markets served or products offered, either through its current business(es) or through new business(es) – Concentration – Vertical integration – Horizontal integration – Diversification

Stability and Renewal Strategies • Stability strategy: a corporate strategy in which an organization continues to do what it is currently doing • Renewal strategy: a corporate strategy designed to address declining performance

How Are Corporate Strategies Managed? • BCG matrix: a strategy tool that guides resource allocation decisions on the basis of market share and growth rate of SBUs – Stars – Cash cows – Question marks – Dogs

Competitive Strategies • Competitive strategy: an organizational strategy for how an organization will compete in its business(es) • Strategic business unit (SBU): the single independent businesses of an organization that formulate their own competitive strategies

The Role of Competitive Advantage • Competitive advantage: What sets an organization apart; its distinctive edge • Competitive advantage can stem from: – Quality – Low cost – Technology – Other factors

Sustaining Competitive Advantage (1 of 2) Businesses must not only develop a competitive advantage but they must also sustain it. • Economic Moat: sustaining competitive advantage by protecting long-term profits and market share using various means.

• Economic moat was a term popularized by Warren Buffett as a way to visualize the concept of keeping a competitive advantage.

Sustaining Competitive Advantage (2 of 2) • Porter’s Five Forces Model: – Threat of new entrants – Threat of substitutes – Bargaining power of buyers – Bargaining power of suppliers – Current rivalry

Choosing a Competitive Strategy • Cost leadership strategy • Differentiation strategy • Focus strategy • Stuck in the middle

Functional Strategies • Functional strategies: a strategy used by an organization’s various functional departments to support the competitive strategy

Examples of Differentiation Strategies • Quality • Innovation strategies – Transfer technology from one division to another – Invest in R&D – Improve the process – First mover: an organization that’s first to bring a product innovation to the market or to use a new process innovation

Exhibit 9.4 First Mover Advantages and Disadvantages

Other Differentiation Strategies • Customer Service • Mass Customization • Social Media

Review Learning Objective 9.1 • Define strategic management and explain why it’s important. – Strategic management is what managers do to develop the organization's strategies – A business model is how a company is going to make money.

Review Learning Objective 9.2 • Explain what managers do during the six steps of the strategic management process. 1. Identify the current mission, goals, and strategies 2. Do an external analysis 3. Do an internal analysis 4. Formulate strategies 5. Implement strategies 6. Evaluate strategies

Review Learning Objective 9.3 • Describe the three types of corporate strategies. – Growth strategies: concentration, vertical integration, horizontal integration, and diversification – Stability strategies – Renewal strategies: retrenchment and turnaround – BCG matrix

Review Learning Objective 9.4 • Describe competitive advantage and the competitive strategies organizations use to get it. – Competitive advantage – Porter’s five forces model – Porter’s three competitive strategies: ▪ Cost leadership ▪ Differentiation ▪ Focus

Management Fifteenth Edition

Chapter 10 Entrepreneurial Ventures

Learning Objectives 10.1 Define entrepreneurship and explain why it’s important. 10.2 Explain what entrepreneurs do in the planning process for new ventures. 10.3 Describe the six legal forms of organization and the choice of appropriate organizational structure. 10.4 Describe how entrepreneurs lead organizations. 10.5 Explain how managers control organizations and exit the venture.

What is Entrepreneurship? • Entrepreneurship: the process of starting new businesses, generally in response to opportunities • Entrepreneurial ventures: organizations that pursue opportunities, are characterized by innovative practices, and have growth and profitability as their main goals

Small Business Versus Entrepreneurship • A small business is an organization that is independently owned, operated, and financed. • Small business owners see risk where entrepreneurs see opportunity. • Entrepreneurs want to change the world and have a passion that goes beyond profits. • Small business owners want to make a living.

Entrepreneurship Versus Self-Employment? • Self-employment: individuals who work for profit or fees in their own business, profession, trade, or farm.

Why is Entrepreneurship Important? • Innovation • Economic growth • Job creation • Global entrepreneurship

The Entrepreneurial Process 1. Explore the entrepreneurial context 2. Identify opportunities and possible competitive advantages 3. Start the venture 4. Manage the venture

What Do Entrepreneurs Do? • No two entrepreneurs are exactly the same. Generally, they: – Create something new and different – Search for, respond to, and exploit change – Research feasibility – Launch and manage new ventures

A Hybrid Path to Entrepreneurship • Over half of new-venture start-ups fail in the first four years. • One way to increase the odds of success is to keep your day job and start the venture on the side. – Lets you test ideas with less pressure to make a living. – It’s a lower risk path with higher survival rates.

Identifying Environmental Opportunities and Competitive Advantage • Sources of opportunity: – The unexpected – The incongruous – The process need – Industry and market structures – Demographics – Changes in perception – New knowledge

Researching the Venture’s Feasibility—Ideas • When exploring idea sources, entrepreneurs should look for: – Limitations of what is currently available – New and different approaches – Advances and breakthroughs – Unfilled niches – Trends and changes

Exhibit 10.1 Evaluating Potential Ideas Personal Considerations

Marketplace Considerations

Do you have the capabilities to do what you’ve selected?

Who are the potential customers for your idea: who, where, how many?

Are you ready to be an entrepreneur?

What similar or unique product features does your proposed idea have compared to what’s currently on the market?

Are you prepared emotionally to deal with the stresses and challenges of being an entrepreneur?

How and where will potential customers purchase your product?

Are you prepared to deal with rejection and failure?

Have you considered pricing issues and whether the price you’ll be able to charge will allow your venture to survive and prosper?

Are you ready to work hard?

Have you considered how you will need to promote and advertise your proposed entrepreneurial venture?

Do you have a realistic picture of the venture’s potential? Have you educated yourself about financing issues? Are you willing and prepared to do continual financial and other types of analyses? Copyright © 2021, 2018, 2016 Pearson Education, Inc. All Rights Reserved

Feasibility Study • Feasibility study: an analysis of the various aspects of a proposed entrepreneurial venture designed to determine its feasibility

Researching the Venture’s Feasibility—Competitors • Potential questions include: – What types of products or services are competitors offering? – What are their products’ strengths and weaknesses? – How do they handle marketing, pricing, and distribution? – How do they attempt to do differently from other competitors?

Researching the Venture’s Feasibility—Financing • Venture capitalists: external equity financing provided by professionally managed pools of investor money • Angel investors: a private investor (or group of private investors) who offers financial backing to an entrepreneurial venture in return for equity in the venture

• Initial public offering (IPO): the first public registration and sale of a company’s stock

Developing a Business Plan • Business plan: a written document that summarizes a business opportunity and defines and articulates how the identified opportunity is to be seized and exploited

Business Plan—Major Areas • Executive summary • Analysis of opportunity • Analysis of the context • Description of the business

• Financial data and projections • Supporting documentation

Legal Forms of Organization (1 of 3) • Sole proprietorship: a form of legal organization in which the owner maintains sole and complete control over the business and is personally liable for business debts • General partnership: a form of legal organization in which two or more business owners share the management and risk of the business

Legal Forms of Organization (2 of 3) • Limited liability partnership (LLP): a form of legal organization consisting of general partner(s) and limited liability partner(s) • Corporation: a legal business entity that is separate from its owners and managers

• Closely held corporation: a corporation owned by a limited number of people who do not trade the stock publicly

Legal Forms of Organization (3 of 3) • S corporation: a specialized type of corporation that has the regular characteristics of a C corporation but is unique in that the owners are taxed as a partnership as long as certain criteria are met • Limited liability company (LLC): a form of legal organization that’s a hybrid between a partnership and a corporation • Operating agreement: the document that outlines the provisions governing the way an LLC will conduct business

Exhibit 10.2 Legal Forms of Business Ownership (1 of 3) Structure

Ownership requireme nts

Tax treatment

Liability

Advantages

Drawbacks

Sole proprietorship

One owner

Income and losses “pass through” to owner and are taxed at personal rate

Unlimited personal liability

Low start-up costs, freedom from most regulations, owner has direct control, all profits go to owner, easy to exit business

Unlimited personal liability, personal finances at risk, miss out on many business tax deductions, total responsibility, may be more difficult to raise financing

General partnership

Two or more owners

Income and losses “pass through” to partners and are taxed at personal rate; flexibility in profit-loss allocations to partners

Unlimited personal liability

Ease of formation, pooled talent, pooled resources, somewhat easier access to financing, some tax benefits

Unlimited personal liability, divided authority and decisions, potential for conflict, continuity of transfer of ownership

Exhibit 10.2 Legal Forms of Business Ownership (2 of 3) Structure

Ownershp requirements

Tax treatment

Liability

Advantages

Drawbacks

Limited liability partnership (LLP)

Two or more owners

Income and losses “pass through” to partners and are taxed at personal rate; flexibility in profit-loss allocations to partners

Limited, although one partner must retain unlimited liability

Good way to acquire capital from limited partners

Cost and complexity of forming can be high, limited partners can’t manage w/o losing liability protection

C Corporation

Unlimited number of shareholders, no limits on types of stock or voting arrangement

Dividend income taxed at corporate and personal shareholder levels, losses and deductions are corporate

Limited

Limited liability, transferable ownership, continuous existence, easier access to resources

Expensive to set up, closely regulated, double taxation, extensive record keeping, charter restrictions

Exhibit 10.2 Legal Forms of Business Ownership (3 of 3) Structure

Ownership requirements

Tax treatment

Liability

Advantages

Drawbacks

S corporation

Up to 75 shareholders, no limits on types of stock or voting arrangement

Income and losses “pass through” to partners and are taxed at personal rate; flexibility in profit-loss allocations to partners

Limited

Easy to set up, limited liability and tax benefits of partnership, can have tax-exempt entity as shareholder

Must meet certain requirements, may limit future financing options

Limited liability company (LLC)

Unlimited number of “members,” flexible membership arrangements for voting rights and income

Income and losses “pass through” to partners and are taxed at personal rate; flexibility in profit-loss allocations to partners

Limited

Greater flexibility, not constrained by regulations on C and S corporations, taxed as partnership not corporation

Cost of switching from one form to this can be high, need legal and financial advice in forming operation agreement

Organizational Design and Structure • Organizational design decisions in entrepreneurial decisions revolve around six key elements: – work specialization – departmentalization – chain of command – span of control – amount of centralization/decentralization – amount of formalization

Human Resource Management • Employee recruitment • Employee retention

Personality Characteristics of Entrepreneurs • Proactive personality: a personality trait that describes individuals who are more prone to take actions to influence their environments

Motivating Employees Through Empowerment • Employee empowerment—giving employees the power to make decisions and take actions on their own to solve problems—is an important motivational approach.

The Entrepreneur as Leader • Leading the venture • Leading employee work teams

Exhibit 10.3 Strengths of Entrepreneurs Risk: Can manage high-risk situations; mitigating risk rather than seeking it Knowledge: Strives to acquire in-depth information about the industry Independence: Can manage every aspect of his/her organization Confidence: Believes in oneself and his/her ability to succeed Delegation: Unafraid to assign tasks to others Determination: Strong work ethic; undeterred by failure Relationships: Able to build mutually beneficial relationships Selling: Speaks boldly on behalf of the organization; can influence others Profitability: Sets clear goals; measures progress; good judge of opportunities Disruption: Constantly has new ideas for products and services Copyright © 2021, 2018, 2016 Pearson Education, Inc. All Rights Reserved

Venture Stages and Leadership Needs • Start-up stage: The entrepreneur is the heart and soul of the business. The firm is informal, flexible, and ambiguous. • Transition stage: The venture moves from an informal organization to one that is more structured. The entrepreneur must learn to delegate in this stage.

• Scaling stage: The uniqueness of entrepreneurship is gone, and the concepts of management become generalizable.

Potential Control Problems and Actions • Entrepreneurs need to develop controls in these areas: – Keep a close eye on the numbers: Monitor expenses, cash flow, inventory, etc. – Monitor the competition: Competitive intelligence is key to long-term success. – Maintain regular contact with customers: Make sure your customers are still satisfied with your product. – Monitor employee performance: Are employees continuing to work as expected. Do they need training? – Monitor employee workloads: Are key people trying to do too much?

Exiting the Venture • Harvesting: exiting a venture when an entrepreneur hopes to capitalize financially on the investment in the venture

Five Exit Options 1. Merger or acquisition 2. Selling to a friendly buyer 3. Initiate an IPO 4. Treat it as a cash cow

5. Liquidation

Business Valuation Methods • Asset valuations • Earnings valuations • Cash-flow valuations

Review Learning Objective 10.1 • Define entrepreneurship and explain why it’s important. – Entrepreneurial ventures are characterized by innovative practices and have growth and profitability as their main goals – Entrepreneurship is important because it brings forward innovative ideas, creates new start-up firms, and creates jobs.

Review Learning Objective 10.2 • Explain what entrepreneurs do in the planning process for new ventures. – Entrepreneurs must identify environmental opportunities and competitive advantage – They must research a venture’s feasibility, first generating and then evaluating ideas – Feasibility study – Business plan

Review Learning Objective 10.3 • Describe the six legal forms of organization and the choice of appropriate organizational structure. – Two primary factors that affect the decision about how to organize a business are taxes and legal liability: ▪ Sole proprietorship ▪ General partnership ▪ Limited liability partnership (LLP) ▪ Corporation ▪ S corporation ▪ Limited liability corporation (LLC)

Review Learning Objective 10.4 • Describe how entrepreneurs lead organizations. – Personality traits: ▪ High level of motivation ▪ Abundance of self-confidence ▪ Ability to be involved for the long term ▪ High energy level – Proactive personality trait

Review Learning Objective 10.5 • Explain how managers control organizations and exit the venture. – Managing growth: ▪ Planning for growth ▪ Organizing for growth ▪ Controlling growth – Managing downturns – Exiting the venture: ▪ Harvesting ▪ Valuation methods

Management Fifteenth Edition

Chapter 11 Designing Organizational Structure

Learning Objectives 11.1 Describe six key elements in organizational design. 11.2 Contrast mechanistic and organic structures. 11.3 Discuss the contingency factors that favor either the mechanistic model or the organic model of organizational design.

11.4 Describe traditional organizational design options. 11.5 Discuss organizing for flexibility in the twenty-first century.

Elements of Organizational Design • Organizing: management function that involves arranging and structuring work to accomplish the organization’s goals • Organizational structure: the formal arrangement of jobs within an organization

• Organizational chart: the visual representation of an organization’s structure • Organizational design: creating or changing an organization’s structure

Exhibit 11.1 Purposes of Organizing Purposes Divides work to be done into specific jobs and departments. Assigns tasks and responsibilities associated with individual jobs. Coordinates diverse organizational tasks. Clusters jobs into units. Establishes relationships among individuals, groups, and departments. Establishes formal lines of authority. Allocates and deploys organizational resources.

Work Specialization • Work specialization: dividing work activities into separate job tasks

Exhibit 11.2 Economies and Diseconomies of Work Specialization

Departmentalization • Departmentalization: the basis by which jobs are grouped together

Exhibit 11.3 The Five Common Forms of Departmentalization (1 of 3)

Exhibit 11.3 The Five Common Forms of Departmentalization (2 of 3)

Exhibit 11.3 The Five Common Forms of Departmentalization (3 of 3)

Today’s View on Departmentalization • Two trends are: – Cross-functional teams: a work team composed of individuals from various functional specialties. This has become more popular as tasks become more complex. – Customer departmentalization: emphasizes monitoring and responding to customers’ needs

Chain of Command • Chain of command: the line of authority extending from upper organizational levels to the lowest levels, which clarifies who reports to whom

Authority • Authority: the line of authority extending from upper organizational levels to the lowest levels, which clarifies who reports to whom • Line authority: authority that entitles a manager to direct the work of an employee

• Staff authority: positions with some authority that have been created to support, assist, and advise those holding line authority

Responsibility • Responsibility: the obligation or expectation to perform any assigned duties • Unity of command: the management principle that each person should report to only one manager

Span of Control • Span of control: the number of employees a manager can efficiently and effectively manage

Exhibit 11.4 Contrasting Spans of Controls

As Exhibit 11.4 shows, if one organization has a span of four and the other a span of eight, the organization with the wider span will have two fewer levels and approximately 800 fewer managers. Copyright © 2021, 2018, 2016 Pearson Education, Inc. All Rights Reserved

Centralization and Decentralization • Centralization: the degree to which decision making is concentrated at upper levels of the organization • Decentralization: the degree to which lower-level employees provide input or actually make decisions

Exhibit 11.5 Centralization or Decentralization More Centralization

More Decentralization

Environment is stable.

Environment is complex, uncertain.

Lower-level managers are not as capable or Lower-level managers are capable and experienced at making decisions as upper- experienced at making decisions. level managers. Lower-level managers do not want a say in decisions.

Lower-level managers want a voice in decisions.

Decisions are relatively minor.

Decisions are significant.

Organization is facing a crisis or the risk of company failure.

Corporate culture is open to allowing managers a say in what happens.

Company is large.

Company is geographically dispersed.

Effective implementation of company strategies depends on managers retaining say over what happens.

Effective implementation of company strategies depends on managers having involvement and flexibility to make decisions.

Employee Empowerment • Employee empowerment: giving employees more authority (power) to make decisions

Formalization • Formalization: how standardized an organization’s jobs are and the extent to which employee behavior is guided by rules and procedures

Mechanistic and Organic Structures • Mechanistic organization: an organizational design that’s rigid and tightly controlled • Organic organization: an organizational design that’s highly adaptive and flexible

Exhibit 11.6 Mechanistic Versus Organic Organizations

Strategy and Structure • An organization’s structure should facilitate goal achievement. Because goals are an important part of the organization’s strategies, it’s only logical that strategy and structure are closely linked.

Size and Structure • There’s considerable evidence that an organization’s size affects its structure, but once an organization grows past a certain size, size has less influence on structure.

Technology and Structure • Unit production: the production of items in units or small batches • Mass production: the production of items in large batches • Process production: the production of items in continuous processes

Exhibit 11.7 Woodward’s Findings on Technology and Structure blank

Unit Production

Mass Production

Process Production

Structural characteristics:

Low vertical differentiation

Moderate vertical differentiation

High vertical differentiation

blank

Low horizontal differentiation

High horizontal differentiation

Low horizontal differentiation

blank

Low formalization

High formalization

Low formalization

Most effective structure:

Organic

Mechanistic

Organic

Environmental Uncertainty and Structure • In stable and simple environments, mechanistic designs can be more effective. • The greater the uncertainty, the more an organization needs the flexibility of an organic design.

Traditional Organizational Design Options • Simple structure: an organizational design with little departmentalization, wide spans of control, centralized authority, and little formalization • Functional structure: an organizational design that groups together similar or related occupational specialties

• Divisional structure: an organizational structure made up of separate, semiautonomous units or divisions

Exhibit 11.8 Traditional Organizational Designs

Team Structures • Team structure: an organizational structure in which the entire organization is made up of work teams

Matrix and Project Structures • Matrix structure: an organizational structure that assigns specialists from different functional departments to work on one or more projects • Project structure: an organizational structure in which employees continuously work on projects

Exhibit 11.9 Example of a Matrix Organization

The Virtual Organization • Virtual organization: an organization that consists of a small core of full-time employees and outside specialists temporarily hired as needed to work on projects • Sometimes called “Network” or “Modular” organization

Telecommuting • Telecommuting: a work arrangement in which employees work at home and are linked to the workplace by computer

Compressed Workweeks, Flextime, and Job Sharing • Compressed workweek: a workweek where employees work longer hours per day but fewer days per week • Flextime (or flexible work hours): a scheduling system in which employees are required to work a specific number of hours a week but are free to vary those hours within certain limits • Job sharing: the practice of having two or more people split a full-time job

The Contingent Workforce • Contingent workers: temporary, freelance, or contract workers whose employment is contingent on demand for their services

Review Learning Objective 11.1 • Describe six key elements in organizational design. 1. Work specialization 2. Departmentalization 3. Chain of command 4. Span of control 5. Centralization/decentralization 6. Formalization

Review Learning Objective 11.2 • Contrast mechanistic and organic structures. – Mechanistic structure: rigid, tightly controlled – Organic structure: highly adaptable, flexible

Review Learning Objective 11.3 • Discuss the contingency factors that favor either the mechanistic model or the organic model of organizational design. – An organization’s structure should support the strategy. – Structure can be affected by size and technology. – Organic structure is most effective with unit production and process production technology. – Mechanistic structure is most effective with mass production technology.

Review Learning Objective 11.4 • Describe traditional organizational design options. – Simple structure: little departmentalization, wide spans of control, authority centralized in one person, and little formalization – Functional structure – Divisional structure

Review Learning Objective 11.5 • Discuss organizing for flexibility in the twenty-first century. – Structures: ▪ Team ▪ Matrix ▪ Project – Virtual organization – Compressed workweeks, flextime, job sharing – Contingent workforce

Management Fifteenth Edition

Chapter 12 Managing Human Resources

Learning Objectives 12.1 Explain the importance of human resource management and the human resource management process. 12.2 Describe the external influences that affect the human resource management process. 12.3 Discuss the tasks associated with identifying and selecting competent employees. 12.4 Explain how companies provide employees with skills and knowledge. 12.5 Describe strategies for retaining competent, high-performing employees. 12.6 Identify two important trends in organizational career development. 12.7 Discuss contemporary issues in managing human resources. Copyright © 2021, 2018, 2016 Pearson Education, Inc. All Rights Reserved

Why Human Resource Management is Important • Human resource management (HRM) can be a significant source of competitive advantage • HRM is an important part of organizational strategies • The way organizations treat their people can significantly impact performance

The Human Resource Management Process • To ensure an organization has qualified people to perform all the work, specific HRM activities need to be done • Exhibit 12.1 shows the eight activities in this process

Exhibit 12.1 HRM Process

External Factors that Affect the Human Resource Management Process • The economy: lasting impact of the Great Recession

Labor Unions • Labor union: an organization that represents workers and seeks to protect their interests through collective bargaining

Laws and Rulings • Affirmative action: Organizational programs that enhance the status of members of protected groups

Exhibit 12.2 Major HRM Laws—Equal Employment Opportunity and Discrimination Law or Ruling

Year

Description

Equal Pay Act

1963

Prohibits pay differences for equal work based on gender

Civil Rights Act, Title VII

1964 (amended 1972)

Prohibits discrimination based on race, color, religion, national origin, or gender

Age Discrimination in Employment Act

1967 (amended 1978)

Prohibits discrimination against employees 40 years and older

Vocational Rehabilitation Act

1973

Prohibits discrimination on the basis of physical or mental disabilities

Americans with Disabilities Act

1990

Prohibits discrimination against individuals who have disabilities or chronic illnesses; also requires reasonable accommodations for these individuals

Exhibit 12.2 Major HRM Laws— Compensation/Benefits Law or Ruling

Year

Description

Worker Adjustment and Retraining Notification Act

1990 Requires employers with more than 100 employees to provide 60 days’ notice before a mass layoff or facility closing

Family and Medical Leave Act 1993 Gives employees in organizations with 50 or more employees up to 12 weeks of unpaid leave each year for family or medical reasons Health Insurance Portability and Accountability Act

1996 Permits portability of employees’ insurance from one employer to another

Lilly Ledbetter Fair Pay Act

2009 Changes the statute of limitations on pay discrimination to 180 days from each paycheck

Patient Protection and Affordable Care Act

2010 Healthcare legislation that puts in place comprehensive health insurance reforms

Exhibit 12.2 Major HRM Laws—Health/Safety

Law or Ruling

Year Description

Occupational Safety and Health Act (OSHA)

1970 Establishes mandatory safety and health standards in organizations

Privacy Act

1974 Gives employees the legal right to examine personnel files and letters of reference

Consolidated Omnibus Reconciliation Act (COBRA)

1985 Requires continued health coverage following termination (paid by employee)

Global HRM • Work councils: groups of nominated or elected employees who must be consulted when management makes decisions involving personnel • Board representatives: employees who sit on a company’s board of directors and represent the interests of the firm’s employees

Demography • Workers age 55 and older make up 16.3% of the workforce • Hispanics make up 13% of the workforce • Women make up almost 47% of the workforce • Gen Yers make up almost 24% of the workforce

• Blacks make up about 13% of the workforce

Human Resource Planning • Human resource planning: ensuring that the organization has the right number and kinds of capable people in the right places and at the right times • Two steps: – Assessing current human resources – Meeting future HR needs

Current Assessment • Job analysis: an assessment that defines jobs and the behaviors necessary to perform them • Job description (position description): a written statement that describes a job • Job specifications: a written statement of the minimum qualifications a person must possess to perform a given job successfully

Meeting Future HR Needs/Increased Scrutiny in Selection Process • Future HR needs are determined by the organization’s mission, goals, and strategies. • Companies that do not carefully scrutinize the qualifications or backgrounds of employees surely pose risks of increased liability, poor reputation, and lower performance.

Recruitment and Decruitment • Recruitment: locating, identifying, and attracting capable applicants • Decruitment: reducing an organization’s workforce

Exhibit 12.3 Recruiting Sources Source

Advantages

Disadvantages

Internet

Reaches large numbers of people; can get immediate feedback

Generates many unqualified candidates

Employee referrals

Knowledge about the organization provided by current employee; can generate strong candidates because a good referral reflects on the recommender

May not increase the diversity and mix of employees

Company website

Wide distribution; can be targeted to specific groups

Generates many unqualified candidates

College recruiting

Large centralized body of candidates

Limited to entry-level positions

Professional recruiting organizations

Good knowledge of industry challenges and requirements

Little commitment to specific organization

Social media

Takes advantage of current employees’ connections; particularly effective at recruiting younger candidates

Not nearly as effective in reaching older or senior candidates

Exhibit 12.4 Decruitment Options Option

Description

Firing

Permanent involuntary termination

Layoffs

Temporary involuntary termination; may last only a few days or extend to years

Attrition

Not filling openings created by voluntary resignations or normal retirements

Transfers

Moving employees either laterally or downward; usually does not reduce costs but can reduce intraorganizational supply–demand imbalances

Reduced workweeks

Having employees work fewer hours per week, share jobs, or perform their jobs on a part-time basis

Early retirements

Providing incentives to older and more senior employees for retiring before their normal retirement date

Job sharing

Having employees share one full-time position

Selection • Selection: screening job applicants to ensure that the most appropriate candidates are hired

Exhibit 12.5 Selection Decision Outcomes

As shown in Exhibit 12.5, any selection decision can result in four possible outcomes—two correct and two errors.

Validity and Reliability • A valid selection device is characterized by a proven relationship between the selection device and some relevant criterion. • A reliable selection device indicates that it measures the same thing consistently.

Exhibit 12.6 Selection Tools Tool

Characteristics

Application forms

Almost universally used Most useful for gathering information Can predict job performance but not easy to create one that does

Written tests

Must be job-related Include intelligence, aptitude, ability, personality, and interest tests Are popular (e.g., personality tests; aptitude tests) Relatively good predictor for supervisory positions

Performance simulation tests

Use actual job behaviors Work sampling—test applicants on tasks associated with that job; appropriate for routine or standardized work Assessment center—simulate jobs; appropriate for evaluating managerial potential

Interviews

Almost universally used Must know what can and cannot be asked Can be useful for managerial positions

Background investigations

Used for verifying application data—valuable source of information Used for verifying reference checks—not a valuable source of information

Physical examinations

Assessing an Applicant’s Future Job Performance • Work sample tests: Hands-on simulations of part or all of the work that workers in a job routinely must perform. – One of the most reliable and valid tools for predicting future performance – More elaborate simulations can be designed and administered through an assessment center to determine managerial potential

Realistic Job Preview • Realistic job preview (RJP): a preview of a job that provides both positive and negative information about the job and the company

Orientation • Orientation: introducing a new employee to his or her job and the organization • Work unit orientation: familiarizes employees with the goal of the work unit and their specific job • Organization orientation: informs employees about the company’s goals, history, philosophy, procedures and rules

Exhibit 12.7 Entry Socialization Options (1 of 2) Formal vs. Informal The more a new employee is segregated from the ongoing Entry Socialization Options work setting and differentiated in some way to make explicit his or her newcomer’s role, the more socialization is formal. Specific orientation and training programs are examples. Informal socialization puts new employees directly into the job, with little or no special attention. Individual vs. Collective New members can be socialized individually. This describes how it’s done in many professional offices. Or they can be grouped together and processed through an identical set of experiences, as in military boot camp. Fixed vs. Variable This refers to the time schedule in which newcomers make the transition from outsider to insider. A fixed schedule establishes standardized stages of transition. This characterizes rotational training programs where new hires might spend three months in each of half-dozen departments before final assignment. Variable schedules give no advance notice of their transition timetable. This describes the typical promotion system where one isn’t advanced to the next stage until one is “ready.”

Exhibit 12.7 Entry Socialization Options (2 of 2) Serial vs. Random Serial socialization is characterized by the use of role models who train and encourage the newcomer. Apprenticeship and mentoring programs are examples. In random socialization, role models are deliberately withheld. New employees are left on their own to figure things out. Investiture vs. Divestiture Investiture socialization assumes that the newcomer’s qualities and qualifications are the necessary ingredients for success, so these qualities and qualifications are confirmed and supported. Divestiture socialization tries to strip away certain characteristics of the recruit. Fraternity and sorority “pledges” go through divestiture rituals to shape them into the proper role.

Exhibit 12.8 Types of Training

Exhibit 12.9 Traditional Training Methods Method

Characteristics

On-the-job

Employees learn how to do tasks simply by performing them, usually after an initial introduction to the task.

Job rotation

Employees work at different jobs in a particular area, getting exposure to a variety of tasks.

Mentoring and coaching

Employees work with an experienced worker who provides information, support, and encouragement; also called apprenticeships in certain industries.

Experiential exercises

Employees participate in role-playing, simulations, or other face-to-face types of training.

Workbooks/ manuals

Employees refer to training workbooks and manuals for information.

Classroom lectures

Employees attend lectures designed to convey specific information.

Exhibit 12.9 Technology-Based Training Methods Method

Characteristics

C D-R O M/D V D/ videotapes/audiotapes/ podcasts

Employees listen to or watch selected media that convey information or demonstrate certain techniques.

Videoconferencing/ teleconferencing/satellite TV

Employees listen to or participate as information is conveyed or techniques demonstrated.

E-learning

Internet-based learning where employees participate in multimedia simulations or other interactive modules.

Mobile learning

Learning delivered via mobile devices.

Virtual reality

Using VR headsets and customized software, employees learn through simulated practices

Evaluating Employee Performance • Performance Evaluation: the practice of providing job feedback to an employee that may be used to improve performance and for compensation and promotion decisions

Exhibit 12.10 Performance Appraisal Methods (1 of 2) Method

Description

Advantages/Disadvantages

Written Essay

Evaluator writes a description of employee’s strengths and weaknesses, past performance, and potential; provides suggestions for improvement.

+ Simple to use − May be better measure of evaluator’s writing ability than of employee’s actual performance

Critical Incident

Evaluator focuses on critical behaviors that separate effective and ineffective performance.

+ Rich examples, behaviorally based − Time-consuming, lacks quantification

Graphic Rating Scale

Popular method that lists a set of performance factors and an incremental scale; evaluator goes down the list and rates employee on each factor.

+ Provides quantitative data; not time-consuming − Doesn’t provide in-depth information on job behavior

Exhibit 12.10 Performance Appraisal Methods (2 of 2) Method

Description

Advantages/Disadvantages

BARS (Behaviorally Anchored Rating Scale)

Popular approach that combines elements from critical incident and graphic rating scale; evaluator uses a rating scale, but items are examples of actual job behaviors.

+ Focuses on specific and measurable job behaviors − Time-consuming; difficult to develop

Multiperson Comparison

Employees are rated in comparison to others in work group.

+ Compares employees with one another − Difficult with large number of employees; legal concerns

MBO

Employees are evaluated on how well they accomplish specific goals.

+ Focuses on goals; results oriented − Time-consuming

360-Degree Appraisal

Utilizes feedback from supervisors, employees, and coworkers.

+ Thorough − Time-consuming

Electronic Performance Monitoring • Electronic performance monitoring: the use of electronic instruments to collect, store, analyze, and report individual or group performance.

Compensation and Benefits • Skill-based pay: a pay system that rewards employees for the job skills they can demonstrate • Variable pay: a pay system in which an individual’s compensation is contingent on performance

Exhibit 12.11 What Determines Pay and Benefits

Other Pay Factors • Bonuses vs. Annual Pay Raises • Pay Secrecy vs. Transparency • Benefit Options

Two Trends Shaping Career Development • Lifelong learning: many organizations now support employee lifelong learning through tuition reimbursement and leadership programs • Internships: internships are becoming more popular as organizations realize this is a way to evaluate a potential employee without a commitment to a full-time job

Sexual Harassment • Sexual harassment: any unwanted action or activity of a sexual nature that explicitly or implicitly affects an individual’s employment, performance, or work environment

Bullying in the Workplace • Workplace bullying: occurs when an individual experiences a number of negative behaviors repeatedly over a period of time that results in physical or mental harm

Review Learning Objective 12.1 • Explain the importance of human resource management and the human resource management process. 1. Competitive advantage 2. Organizational strategies 3. Impact of employee treatment on organizational performance

Review Learning Objective 12.2 • Describe the external influences that affect the human resource management process. – Economy – Labor unions – Legal environment – Demographic trends

Review Learning Objective 12.3 • Discuss the tasks associated with identifying and selecting competent employees. – Planning: ▪ Job analysis ▪ Job description ▪ Job specification – Recruitment/decruitment – Selection – Realistic job preview

Review Learning Objective 12.4 • Explain how companies provide employees with skills and knowledge. – Orientation – Training: ▪ Profession/industry-specific training ▪ Management/supervisory skills ▪ Mandatory/compliance information ▪ Customer service training – Traditional training versus technology-based methods

Review Learning Objective 12.5 • Describe strategies for retaining competent, highperforming employees. – Performance management system – Performance appraisal methods – Factors influencing compensation and benefits – Skill-based pay systems versus variable pay system

Review Learning Objective 12.6 • Identify two important trends in organizational career development. 1. Organizations are now actively supporting lifelong learning 2. Internships have expanded as a way to evaluate potential employees without making a commitment to full-time employment

Review Learning Objective 12.7 • Discuss contemporary issues in managing human resources. – Downsizing – Sexual harassment – Controlling HR costs

Management Fifteenth Edition

Chapter 13 Managing Groups and Teams

Learning Objectives 13.1 Define groups and the stages of group development. 13.2 Describe the major components that determine group performance and satisfaction. 13.3 Define teams and best practices influencing team performance.

What is a Group? • Group: two or more interacting and interdependent individuals who come together to achieve specific goals • Formal groups • Informal groups

Exhibit 13.1 Examples of Formal Work Groups Group

Description

Command groups

Groups determined by the organizational chart and composed of individuals who report directly to a given manager.

Task groups

Groups composed of individuals brought together to complete a specific job task; their existence is often temporary because when the task is completed, the group disbands.

Cross-functional teams

Groups that bring together the knowledge and skills of individuals from various work areas or groups whose members have been trained to do each other’s jobs.

Self-managed teams

Groups that are essentially independent and that, in addition to their own tasks, take on traditional managerial responsibilities such as hiring, planning and scheduling, and evaluating performance.

Stages of Group Development (1 of 2) 1. Forming: the first stage of group development in which people join the group and then define the group’s purpose, structure, and leadership 2. Storming: the second stage of group development, characterized by intragroup conflict

3. Norming: the third stage of group development, characterized by close relationships and cohesiveness

Stages of Group Development (2 of 2) 4. Performing: the fourth stage of group development when the group is fully functional and works on group task 5. Adjourning: the final stage of group development for temporary groups during which group members are concerned with wrapping up activities rather than task performance

Exhibit 13.2 Stages of Group Development

Exhibit 13.3 Group Performance/Satisfaction Model

External Conditions Imposed on the Group • External conditions include: – Organization's strategy – Authority relationships – Formal rules and regulations – Availability of resources – Employee selection criteria

Group Member Resources • Knowledge • Abilities • Skills • Personality traits

Group Structure (1 of 2) • Role: behavior patterns expected of someone occupying a given position in a social unit • Norms: standards or expectations that are accepted and shared by a group’s members • Conformity: – Groupthink: when a group exerts extensive pressure on an individual to align his or her opinion with others’ opinions

Exhibit 13.4 Examples of Asch’s Cards

Group Structure (2 of 2) • Status systems: – Status: a prestige grading, position, or rank within a group • Group size: – Social loafing: the tendency for individuals to expend less effort when working collectively than when working individually • Group cohesiveness: the degree to which group members are attracted to one another and share the group’s goals

Exhibit 13.5 Group Cohesiveness and Productivity

Group Processes: Decision Making • Advantages: – Generate more complete information and knowledge – Increase acceptance of a solution – Increase legitimacy • Disadvantages: – Take more time – A dominant minority can unduly influence outcome; groupthink – Individual responsibilities are ambiguous

Exhibit 13.6 Creative Group Decision Making

Group Processes: Conflict Management • Conflict: perceived incompatible differences that result in interference or opposition – Traditional view of conflict: the view that all conflict is bad and must be avoided – Human relations view of conflict: the view that conflict is a natural and inevitable outcome in any group

Interactionist View of Conflict • Interactionist view of conflict: the view that some conflict is necessary for a group to perform effectively – Functional conflicts: conflicts that support a group’s goals and improve its performance – Dysfunctional conflicts: conflicts that prevent a group from achieving its goals

Exhibit 13.7 Conflict and Group Performance

Types of Conflict • Task conflict: conflict over content and goals of the work • Relationship conflict: conflict based on interpersonal relationships • Process conflict: conflict over how work gets done

Group Tasks • It’s the complexity and interdependence of tasks that influence a group’s effectiveness.

The Difference Between Groups and Teams • Work teams: groups whose members work intensely on a specific, common goal using their positive synergy, individual and mutual accountability, and complementary skills

Exhibit 13.8 Groups Versus Teams Work Teams

Work Groups

Leadership role is shared

One leader clearly in charge

Accountable to self and team

Accountable only to self

Team creates specific purpose

Purpose is same as broader organizational purpose

Work is done collectively

Work is done individually

Meetings characterized by open-ended discussion and collaborative problemsolving

Meetings characterized by efficiency; no collaboration or open-ended discussion

Performance is measured directly by evaluating collective work output

Performance is measured indirectly according to its influence on others

Work is decided upon and done together

Work is decided upon by group leader and delegated to individual group members

Can be quickly assembled, deployed, refocused, and disbanded

blank

Types of Work Teams (1 of 2) • Problem-solving team: a team from the same department or functional area that’s involved in efforts to improve work activities or to solve specific problems • Self-managed work team: a type of work team that operates without a manager and is responsible for a complete work process or segment

Types of Work Teams (2 of 2) • Cross-functional team: a work team composed of individuals from various functional specialties • Virtual team: a type of work team that uses technology to link physically dispersed members in order to achieve a common goal

Creating Effective Work Teams (1 of 2) • Clear goals • Relevant skills • Mutual trust • Unified commitment

Creating Effective Work Teams (2 of 2) • Good communication • Negotiating skills • Appropriate leadership • Internal and external support

Exhibit 13.9 Characteristics of Effective Teams

Building Team Skills • In building team skills, managers must view their role as more of being a coach and developing team members in order to create more committed, collaborative, and inclusive teams.

Review Learning Objective 13.1 • Define groups and the stages of group development. – Formal/informal groups – Stages of group development: ▪ Forming ▪ Storming ▪ Norming ▪ Performing ▪ Adjourning

Review Learning Objective 13.2 • Describe the major components that determine group performance and satisfaction. – External conditions and group member resources affect work group performance – Group decision making – Conflict management

Review Learning Objective 13.3 • Define teams and best practices influencing team performance. – Managing global teams – Building team skills – Understanding social networks

Management Fifteenth Edition

Chapter 14 Managing Communication

Learning Objectives 14.1 Define the nature and function of communication. 14.2 Describe the communication process. 14.3 Explain how communication can flow most effectively in organizations. 14.4 Describe how the internet and social media affect managerial communication and organizations. 14.5 Discuss how to become a better communicator.

What is Communication? • Communication: the transfer and understanding of meaning • Interpersonal communication: communication between two or more people • Organizational communication: all the patterns, networks, and systems of communication within an organization

Functions of Communication • Control • Motivation • Emotional expression • Information

Methods and Challenges of Interpersonal Communication • Message: a purpose to be conveyed – Encoding: converting a message into symbols – Channel: the medium a message travels along – Decoding: retranslating a sender’s message

Methods • Communication process: the seven elements involved in transferring meaning from one person to another – Noise: any disturbances that interfere with the transmission, receipt, or feedback of a message

Exhibit 14.1 The Communication Process

Modes of Communication • Oral Communication • Written Communication • Nonverbal Communication

Nonverbal Communication • Nonverbal communication: communication transmitted without words – Body language: gestures, facial configurations, and other body movements that convey meaning – Verbal intonation: an emphasis given to words or phrases that conveys meaning

Barriers • Information overload: when information exceeds our processing capacity • Filtering: the deliberate manipulation of information to make it appear more favorable to the receiver • Jargon: specialized terminology or technical language that members of a group use to communicate among themselves

Additional Barriers to Effective Communication • Emotions • Silence • National Culture

Overcoming the Barriers • Use feedback • Simplify language • Listen actively – Active listening: listening for full meaning without making premature judgments or interpretations

• Constrain emotions • Watch nonverbal cues

Formal Versus Informal • Formal communication: communication that takes place within prescribed organizational work arrangements • Informal communication: communication that is not defined by the organization’s structural hierarchy

Direction of Flow (1 of 2) • Downward: communication that flows downward from a manager to employees – Town hall meeting: informal public meetings where information can be relayed, issues can be discussed, or employees can be brought together to celebrate accomplishments

Direction of Flow (2 of 2) • Upward communication: communication that flows upward from employees to managers • Lateral communication: communication that takes place among any employees on the same organizational level • Diagonal communication: communication that cuts across work areas and organizational levels

Networks • Communication networks: the variety of patterns of vertical and horizontal flows of organizational communication • Grapevine: the informal organizational communication network

Exhibit 14.2 Organizational Communication Networks

Communication Networks • The form of network you should use to communicate your message depends on your goal • No single network is best for all situations

The 24/7 Work Environment • IT has made it possible to stay connected around the clock, seven days per week. • IT has made it possible for people in organizations to be fully accessible, at any time, regardless of where they are.

Working from Anywhere • Wireless communication technology has the ability to improve work for managers and employees.

Balancing the Pluses and Minuses • Communication and the exchange of information among organizational members are no longer constrained by geography or time. • Constantly staying connected has its downsides, such as impeding creativity.

Social Media • Devoting a channel for information exchange about a specific topic can help compartmentalize the conversation. • It can also start a useful conversation in which employees can share their experiences and make suggestions for creating competitive advantage.

Cybersecurity • Countless headlines show the vulnerability of computer networks and private information • The risk of compromising sensitive information is greater today given that almost all transactions are digital • Take steps to secure systems and information

Sharpening Your Persuasion Skills • Persuasion skills: skills that enable a person to influence others to change their minds or behavior

Sharpening Your Speaking Skills • Speaking skills: skills that refer to the ability to communicate information and ideas in talking so others will understand

Sharpening Your Writing Skills • Writing skills: skills that entail communicating effectively in text as appropriate for the needs of the audience

Sharpening Your Reading Skills • Reading skills: skills that entail an understanding of written sentences and paragraphs in work-related documents

Review Learning Objective 14.1 • Define the nature and function of communication. – Communication ▪ Interpersonal ▪ Organizational – Functions ▪ Controlling ▪ Motivating ▪ Expressing emotion ▪ Informing

Review Learning Objective 14.2 • Describe the communication process. – Communication process – Evaluating communication methods – Communication methods – Barriers

Review Learning Objective 14.3 • Explain how communication can flow most effectively in organizations. – Formal/informal – Direction of flow – Communication networks – Workplace design

Review Learning Objective 14.4 • Describe how the internet and social media affect managerial communication and organizations. – 24/7 work environment – Social media – Choosing the right media

Review Learning Objective 14.5 • Discuss how to become a better communicator. – Active listening – Persuasion skills – Speaking skills – Writing skills – Reading skills

Management Fifteenth Edition

Chapter 15 Understanding and Managing Individual Behavior

Learning Objectives 15.1 Identify the focus and goals of individual behavior within organizations. 15.2 Explain the role that attitudes play in job performance. 15.3 Describe different personality theories. 15.4 Describe perception and the factors that influence it. 15.5 Discuss learning theories and their relevance in shaping behavior.

Focus and Goals of Organizational Behavior • Behavior: the actions of people • Organizational behavior: the study of the actions of people at work

Exhibit 15.1 “Organization as an Iceberg” Metaphor

Focus of Organizational Behavior • Individual behavior • Group behavior • Organizational aspects

Goals of Organizational Behavior (1 of 2) • Employee productivity: a performance measure of both efficiency and effectiveness • Absenteeism: the failure to show up for work • Turnover: the voluntary and involuntary permanent withdrawal from an organization

Goals of Organizational Behavior (2 of 2) • Organizational citizenship behavior (OCB): discretionary behavior that is not part of an employee’s formal job requirements, but which promotes the effective functioning of the organization • Job satisfaction: an employee’s general attitude toward his or her job • Counterproductive workplace behavior: any intentional employee behavior that is potentially damaging to the organization or to individuals within the organization

Attitudes and Job Performance • Attitudes: evaluative statements, either favorable or unfavorable, concerning objects, people, or events

Attitude Components • Cognitive component: that part of an attitude that’s made up of the beliefs, opinions, knowledge, or information held by a person • Affective component: that part of an attitude that’s the emotional or feeling part

• Behavioral component: that part of an attitude that refers to an intention to behave in a certain way toward someone or something

Job Satisfaction • High level of satisfaction = positive attitude Dissatisfaction = negative attitude • Linked to: – Productivity – Absenteeism – Turnover – Customer satisfaction – OCB – Counterproductive behavior

Job Involvement and Organizational Commitment (1 of 2) • Job involvement: the degree to which an employee identifies with his or her job, actively participates in it, and considers his or her job performance to be important to self-worth • Organizational commitment: the degree to which an employee identifies with a particular organization and its goals and wishes to maintain membership in that organization

Job Involvement and Organizational Commitment (2 of 2) • Perceived organizational support: employees’ general belief that their organization values their contribution and cares about their well-being

Employee Engagement • Employee engagement: when employees are connected to, satisfied with, and enthusiastic about their jobs

Attitudes and Consistency • People generally seek consistency among their attitudes and between their attitudes and behavior; they try to reconcile differing attitudes and align their attitudes and behavior so they appear rational and consistent.

Cognitive Dissonance Theory • Cognitive dissonance: any incompatibility or inconsistency between attitudes or between behavior and attitudes

Attitude Surveys • Attitude surveys: surveys that elicit responses from employees through questions about how they feel about their jobs, work groups, supervisors, or the organization

Exhibit 15.2 Sample Employee Attitude Survey Her are some sample statements from an employee attitude survey: I have ample opportunities to use my skills/abilities in my job. My manager has a good relationship with my work group. My organization provides me professional development opportunities. I am told if I’m doing good work or not. I feel safe in my work environment. My organization is a great place to work.

Implications for Managers • Managers should be interested in their employees’ attitudes because they influence behavior.

Personality • Personality: the unique combination of emotional, thought, and behavioral patterns that affect how a person reacts to situations and interacts with others

MBTI® • The MBTI® is a popular personality-assessment instrument. • It classifies individuals as exhibiting a preference in four categories: – Extraversion or introversion (E or I) – Sensing or intuition (S or N) – Thinking or feeling (T or F) – Judging or perceiving (J or P)

Exhibit 15.3 Examples of MBTI® Personality Types Type

Description

I–S–F–P (introversion, sensing, feeling, perceiving)

Sensitive, kind, modest, shy, and quietly friendly. Such people strongly dislike disagreements and will avoid them. They are loyal followers and quite often are relaxed about getting things done.

E–N–T–J (extraversion, intuition, Warm, friendly, candid, and decisive; also thinking, judging) skilled in anything that requires reasoning and intelligent talk, but may sometimes overestimate what they are capable of doing.

The Big Five Model • Big Five Model: personality trait model that includes extraversion, agreeableness, conscientiousness, emotional stability, and openness to experience

The Dark Triad • Three negative traits are dubbed the Dark Triad. 1. Machiavellianism: a measure of the degree to which people are pragmatic, maintain emotional distance, and believe that ends justify means 2. Narcissism: a person with a grandiose sense of selfimportance that is arrogant and requires excessive admiration 3. Psychopathy: a person who lacks concern for others and lacks guilt or remorse when their actions cause harm to others.

Additional Personality Insights (1 of 2) • Locus of control: a personality attribute that measures the degree to which people believe they control their own fate

Additional Personality Insights (2 of 2) • Self-esteem: an individual’s degree of like or dislike for himself or herself • Self-monitoring: a personality trait that measures the ability to adjust behavior to external situational factors

Other Personality Traits • Risk-Taking: an individual’s willingness to take chances • Proactive personality: a personality trait that describes individuals who are more prone to take actions to influence their environments

Personality Types in Different Cultures • No personality type is common for a given country, yet a country’s culture influences the dominant personality characteristics of its people.

Emotions and Emotional Intelligence • Emotions: intense feelings that are directed at someone or something • Emotional intelligence: the ability to notice and to manage emotional cues and information

Five Dimensions of Emotional Intelligence • Self-awareness • Self-management • Self-motivation • Empathy

• Social skills

Implications for Managers: Personality • Managers are likely to have higher-performing and more satisfied employees if consideration is given to matching personalities with jobs. • The single best trait associated with superior job performance is conscientiousness.

Exhibit 15.4 Holland’s Personality-Job Fit

Perception • Perception: process by which we give meaning to our environment by organizing and interpreting sensory impressions

Factors that Influence Perception • A number of factors act to shape and sometimes distort perception including: – Perceiver – Target characteristics – Context

Exhibit 15.5 What Do You See?

Attribution Theory (1 of 2) • Attribution theory: a theory used to explain how we judge people differently depending on what meaning we attribute to a given behavior • Attribution depends on three factors: – Distinctiveness – Consensus – Consistency

Exhibit 15.6 Attribution Theory

Attribution Theory (2 of 2) • Fundamental attribution error: the tendency to underestimate the influence of external factors and to overestimate the influence of internal or personal factors • Self-serving bias: the tendency of individuals to attribute their successes to internal factors while blaming personal failures on external factors

Shortcuts Used in Judging Others • Selective perception: we make selections based on our own background, experience, interests and other factors unique to us • Assumed similarity: the assumption that others are like oneself

• Stereotyping: judging a person based on a perception of a group to which that person belongs

Additional Shortcuts Used in Judging Others • Halo effect: a general impression of an individual based on a single characteristic • Contrast effect: our perception of someone or something can be influenced by the context or surroundings

Implications for Managers: Perception • Managers need to recognize that their employees react to perceptions, not to reality.

Learning • Learning is defined as any relatively permanent change in behavior that occurs as a result of experience • Two learning theories help us understand individual behavior: – 1. Operant Conditioning – 2. Social Learning Theory

Operant Conditioning • Operant conditioning: a theory of learning that says behavior is a function of its consequences

Social Learning • Social learning theory: a theory of learning that says people can learn through observation and direct experience

Shaping: A Managerial Tool • Shaping behavior: the process of guiding learning in graduated steps using reinforcement or lack of reinforcement

Implications for Managers: Learning • Employees are going to learn on the job: are managers going to manage their learning through the rewards they allocate and the examples they set, or allow it to occur haphazardly?

Review Learning Objective 15.1 • Identify the focus and goals of individual behavior within organizations. – Organization behavior (OB) focuses on three areas: individual behavior, group behavior, and organizational aspects. – Behaviors include productivity, absenteeism, turnover, organizational citizenship, and job satisfaction.

Review Learning Objective 15.2 • Explain the role that attitudes play in job performance. – Cognitive component, affective component, behavioral component – Job satisfaction, job involvement, organizational commitment, employee engagement

Review Learning Objective 15.3 • Describe different personality theories. – MBTI® – Big Five Model – Personality traits

Review Learning Objective 15.4 • Describe perception and the factors that influence it. – Perception – Fundamental attribution error – Self-serving bias – Shortcuts: ▪ Assumed similarity ▪ Stereotyping ▪ Halo effect

Review Learning Objective 15.5 • Discuss learning theories and their relevance in shaping behavior. – Operant conditioning – Social learning theory – Shaping behavior

Management Fifteenth Edition

Chapter 16 Motivating Employees

Learning Objectives 16.1 Define motivation. 16.2 Compare and contrast early theories of motivation. 16.3 Compare and contrast contemporary theories of motivation. 16.4 Discuss current issues in motivation.

What is Motivation? • Motivation: the process by which a person’s efforts are energized, directed, and sustained toward attaining a goal

Maslow’s Hierarchy of Needs Theory • Hierarchy of needs theory: Maslow’s theory that human needs—physiological, safety, social, esteem, and selfactualization—form a sort of hierarchy

Exhibit 16.1 Maslow’s Hierarchy of Needs

Levels of Needs (1 of 2) • Physiological needs: a person’s needs for food, drink, shelter, sexual satisfaction, and other physical needs • Safety needs: a person’s needs for security and protection from physical and emotional harm • Social needs: a person’s needs for affection, belongingness, acceptance, and friendship

Levels of Needs (2 of 2) • Esteem needs: a person’s needs for internal factors such as self-respect, autonomy, and achievement, and external factors such as status, recognition, and attention • Self-actualization needs: a person’s need to become what he or she is capable of becoming

McGregor’s Theory X and Theory Y • Theory X: the assumption that employees dislike work, are lazy, avoid responsibility, and must be coerced to perform • Theory Y: the assumption that employees are creative, enjoy work, seek responsibility, and can exercise selfdirection

Herzberg’s Two-Factor Theory • Two-factor theory (motivation-hygiene theory): the motivation theory that intrinsic factors are related to job satisfaction and motivation, whereas extrinsic factors are associated with job dissatisfaction

Exhibit 16.2 Herzberg’s Two-Factor Theory

Herzberg’s Two Factors • Hygiene factors: factors that eliminate job dissatisfaction, but don’t motivate • Motivators: factors that increase job satisfaction and motivation

Exhibit 16.3 Contrasting Views of Satisfaction and Dissatisfaction

As shown in Exhibit 16.3, Herzberg proposed that a dual continuum existed: The opposite of “satisfaction” is “no satisfaction,” and the opposite of “dissatisfaction” is “no dissatisfaction.” Copyright © 2021, 2018, 2016 Pearson Education, Inc. All Rights Reserved

Three-Needs Theory (1 of 2) • Three-needs theory: the motivation theory that says three acquired (not innate) needs— achievement, power, and affiliation—are major motives in work • Need for achievement (nAch): the drive to succeed and excel in relation to a set of standards

Three-Needs Theory (2 of 2) • Need for power (nPow): the need to make others behave in a way that they would not have behaved otherwise • Need for affiliation (nAff): the desire for friendly and close interpersonal relationships

Exhibit 16.4 TAT Pictures

Goal-Setting Theories • Goal-setting theory: the proposition that specific goals increase performance and that difficult goals, when accepted, result in higher performance than do easy goals • Self-efficacy: an individual’s belief that he or she is capable of performing a task

Exhibit 16.5 Goal-Setting Theory

Reinforcement Theory • Reinforcement theory: the theory that behavior is a function of its consequences • Reinforcers: consequences immediately following a behavior, which increase the probability that the behavior will be repeated

Designing Motivating Jobs (1 of 2) • Job design: the way tasks are combined to form complete jobs • Job scope: the number of different tasks required in a job and the frequency with which those tasks are repeated • Job enlargement: the horizontal expansion of a job by increasing job scope

Designing Motivating Jobs (2 of 2) • Job enrichment: the vertical expansion of a job by adding planning and evaluating responsibilities • Job depth: the degree of control employees have over their work • Job characteristics model (JCM): a framework for analyzing and designing jobs that identifies five primary core job dimensions, their interrelationships, and their impact on outcomes

Exhibit 16.6 Job Characteristics Model

Five Core Job Dimensions (1 of 2) • Skill variety: the degree to which a job requires a variety of activities so that an employee can use a number of different skills and talents • Task identity: the degree to which a job requires completion of a whole and identifiable piece of work

• Task significance: the degree to which a job has a substantial impact on the lives or work of other people

Five Core Job Dimensions (2 of 2) • Autonomy: the degree to which a job provides substantial freedom, independence, and discretion to the individual in scheduling work and determining the procedures to be used in carrying it out • Feedback: the degree to which carrying out work activities required by a job results in the individual’s obtaining direct and clear information about his or her performance effectiveness

Redesigning Job Design Approaches (1 of 2) • Relational perspective of work design: an approach to job design that focuses on how people’s tasks and jobs are increasingly based on social relationships • Proactive perspective of work design: an approach to job design in which employees take the initiative to change how their work is performed

Redesigning Job Design Approaches (2 of 2) • High-involvement work practices: work practices designed to elicit greater input or involvement from workers

Equity Theory (1 of 2) • Equity theory: The theory that an employee compares his or her job’s input-outcomes ratio with that of relevant others and then corrects any inequity

Equity Theory (2 of 2) • Referents: the persons, systems, or selves against which individuals compare themselves to assess equity • Distributive justice: perceived fairness of the amount and allocation of rewards among individuals • Procedural justice: perceived fairness of the process used to determine the distribution of rewards

Exhibit 16.7 Equity Theory

Expectancy Theory • Expectancy theory: the theory that an individual tends to act in a certain way based on the expectation that the act will be followed by a given outcome and on the attractiveness of that outcome to the individual

Exhibit 16.8 Expectancy Model

Exhibit 16.8 illustrates the three relationships in the expectancy model.

Expectancy Relationships • Expectancy or effort-performance linkage • Instrumentality or performance-reward linkage • Valence or attractiveness of reward

Integrating Contemporary Theories of Motivation • Exhibit 16.9 on the next slide presents a model that integrates much of what we know about motivation. • The information is based on the simplified expectancy model shown in Exhibit 16.8.

Exhibit 16.9 Integrating Contemporary Theories of Motivation

Managing Cross-Cultural Motivational Challenges • In today’s global business environment, managers can’t assume motivational programs that work in one location will work in others. • Most current motivation theories were developed in the United States by Americans and about Americans.

Motivating Unique Groups of Workers • Diverse employees • Professionals • Contingent workers

Flexibility • Compressed workweeks • Flextime • Job sharing • Telecommuting

Motivating Professionals • Job challenge • Finding solutions to problems • Support • Perception that their work is important

Motivating Contingent Workers • Opportunity to become a permanent employee • Opportunity for training • Equity in compensation and benefits

Designing Appropriate Rewards Programs • Open-book management: a motivational approach in which an organization’s financial statements (the “books”) are shared with all employees • Employee recognition programs: personal attention and expressing interest, approval, and appreciation for a job well done • Pay-for-performance programs: variable compensation plans that pay employees on the basis of some performance measure

Review Learning Objective 16.1 • Define motivation. 1. Identify problem 2. Identify decision criteria 3. Weight the criteria

Review Learning Objective 16.2 • Compare and contrast early theories of motivation. – Maslow’s hierarchy of needs – Theory X/Theory Y – Herzberg’s theory – Three-needs theory

Review Learning Objective 16.3 • Compare and contrast contemporary theories of motivation. – Goal-setting theory – Reinforcement theory – Job enlargement/enrichment/characteristics model – Equity theory – Expectancy theory

Review Learning Objective 16.4 • Discuss current issues in motivation. – Managing cross-cultural challenges – Motivating unique groups of workers – Designing appropriate rewards programs

Management Fifteenth Edition

Chapter 17 Being an Effective Leader

Learning Objectives 17.1 Define leader and leadership. 17.2 Compare and contrast early theories of leadership. 17.3 Describe the three major contingency theories of leadership. 17.4 Describe contemporary views of leadership. 17.5 Compare the various theories of leadership for their validity. 17.6 Discuss twenty-first century issues affecting leadership.

Who Are Leaders and What is Leadership? • Leader: someone who can influence others and who has managerial authority • Leadership: a process of influencing a group to achieve goals

Leadership Traits • Research focused on identifying personal characteristics that differentiated leaders from non-leaders was unsuccessful who can influence others and who has managerial authority. • It proved impossible to identify a set of traits that would always differentiate a leader (the person) from a nonleader of influencing a group to achieve goals.

Exhibit 17.1 Ten Traits Associated with Leadership Trait

Description

Drive

Leaders exhibit a high effort level. They have a relatively high desire for achievement, they are ambitious, they have a lot of energy, they are tirelessly persistent in their activities, and they show initiative.

Desire to lead

Leaders have a strong desire to influence and lead others. They demonstrate the willingness to take responsibility.

Honesty and integrity

Leaders build trusting relationships with followers by being truthful or nondeceitful and by showing high consistency between word and deed.

Selfconfidence

Followers look to leaders for an absence of self-doubt. Leaders, therefore, need to show self-confidence in order to convince followers of the rightness of their goals and decisions.

Intelligence

Leaders need to be intelligent enough to gather, synthesize, and interpret large amounts of information, and they need to be able to create visions, solve problems, and make correct decisions.

Job-relevant knowledge

Effective leaders have a high degree of knowledge about the company, industry, and technical matters. In-depth knowledge allows leaders to make well-informed decisions and to understand the implications of those decisions.

Extraversion

Leaders are energetic, lively people. They are sociable, assertive, and rarely silent or withdrawn.

Proneness to guilt

Guilt proneness is positively related to leadership effectiveness because it produces a strong sense of responsibility for others. Copyright © 2021, 2018, 2016 Pearson Education, Inc. All Rights Reserved

Exhibit 17.1 (cont.) Ten Traits Associated with Leadership Trait

Description

Emotional Intelligence

Empathetic leaders can sense others’ needs, listen to what followers say (and don’t say), and read the reactions of others.

Conscientiousness

People who are disciplined and able to keep commitments have an apparent advantage when it comes to leadership.

Leadership Behaviors • Behavioral theories: leadership theories that identify behaviors that differentiate effective leaders from ineffective leaders

University of Iowa Studies • Autocratic style: a leader who dictates work methods, makes unilateral decisions, and limits employee participation • Democratic style: a leader who involves employees in decision making, delegates authority, and uses feedback as an opportunity for coaching employees • Laissez-faire style: a leader who lets the group make decisions and complete the work in whatever way it sees fit

Ohio State Studies • Initiating structure: the extent to which a leader defines his or her role and the roles of group members in attaining goals • Consideration: the extent to which a leader has work relationships characterized by mutual trust and respect for group members’ ideas and feelings • High–high leader: a leader high in both initiating structure and consideration behaviors

University of Michigan Studies • Two dimensions of leadership: – Employee oriented – Production oriented

The Managerial Grid • Managerial grid: a two-dimensional grid for appraising leadership styles

Exhibit 17.2 Behavioral Theories of Leadership Study

Behavioral Dimension

Conclusion

University of Iowa

Democratic style: involving subordinates, delegating authority, and encouraging participation Autocratic style: dictating work methods, centralizing decision making, and limiting participation Laissez-faire style: giving group freedom to make decisions and complete work

Democratic style of leadership was most effective, although later studies showed mixed results.

Ohio State

Consideration: being considerate of followers’ ideas and feelings Initiating structure: structuring work and work relationships to meet job goals

High–high leader (high in consideration and high in initiating structure) achieved high subordinate performance and satisfaction, but not in all situations.

University of Michigan

Employee oriented: emphasized interpersonal relationships and taking care of employees’ needs Production oriented: emphasized technical or task aspects of job

Employee-oriented leaders were associated with high group productivity and higher job satisfaction.

Managerial Grid

Concern for people: measured leader’s concern for subordinates on a scale of 1 to 9 (low to high) Concern for production: measured leader’s concern for getting job done on a scale of 1 to 9 (low to high)

Leaders performed best with a 9,9 style (high concern for production and high concern for people).

The Fiedler Model • Fiedler contingency model: a leadership theory proposing that effective group performance depends on the proper match between a leader’s style and the degree to which the situation allows the leader to control and influence • Least-preferred coworker (LPC) questionnaire: a questionnaire that measures whether a leader is task or relationship oriented

Fiedler’s Situational Contingencies • Leader–member relations: describes the degree of confidence, trust, and respect employees have for their leader • Task structure: describes the degree to which job assignments are formalized and structured

• Position power: describes the degree of influence a leader has over activities such as hiring, firing, discipline, promotions, and salary increases

Exhibit 17.3 The Fiedler Model

Hersey and Blanchard’s Situational Leadership Style • Situational leadership theory (SLT): a leadership contingency theory that focuses on followers’ readiness • Readiness: the extent to which people have the ability and willingness to accomplish a specific task

SLT Leadership Styles • Telling (high task–low relationship) • Selling (high task–high relationship) • Participating (low task–high relationship) • Delegating (low task–low relationship)

Four Stages of Follower Readiness • R1: both unable and unwilling • R2: unable but willing • R3: able but unwilling • R4: both able and willing

Path-Goal Model • Path-goal theory: a leadership theory that says the leader’s job is to assist followers in attaining their goals and to provide direction or support needed to ensure that their goals are compatible with the goals of the group or organization

Four Leadership Behaviors • Directive leader • Supportive leader • Participative leader • Achievement-oriented leader

Exhibit 17.4 Path-Goal Model

Exhibit 17.4 illustrates that path-goal theory proposes two situational or contingency variables that moderate the leadership behavior–outcome relationship. Copyright © 2021, 2018, 2016 Pearson Education, Inc. All Rights Reserved

Leader-Member Exchange (LMX) Theory • Leader-member exchange theory (LMX): the leadership theory that says leaders create in-groups and out-groups and those in the in-group will have higher performance ratings, less turnover, and greater job satisfaction

Charismatic Leadership • Charismatic leader: an enthusiastic, self-confident leader whose personality and actions influence people to behave in certain ways

Transformational/Transactional Leadership • Transactional leaders: leaders who lead primarily by using social exchanges (or transactions) • Transformational leaders: leaders who stimulate and inspire (transform) followers to achieve extraordinary outcomes

Authentic Leadership • Authentic leadership: leaders who know who they are, know what they believe in, and act on those values and beliefs openly and candidly

Ethical Leadership • An ethical leader puts public safety ahead of profits, holds culpable employees accountable, and creates a culture in which employees feel that they could and should do a better job.

Servant Leadership and Followership • Servant leaders go beyond their own self-interest and focus on helping followers grow and develop. • Followership maintains leaders need good followers to be effective. Good follower traits are: – Ability to self manage – They have a strong commitment to purpose – Enthusiasm – They build competence – Courageous, honest, and credible

Integrating Theories of Leadership (1 of 2) • Traits: traits probably play a small role in leadership. • Behaviors: three metacategories of behaviors appear to be the most important leadership behaviors. 1. Task-oriented behavior 2. Relations-oriented behavior 3. Change-oriented behavior

Integrating Theories of Leadership (2 of 2) • Contingency factors: the most relevant contingency factors affecting leadership are: – Follower’s experience – Follower’s ability – Organizational culture – National culture

Managing Power (1 of 2) • Legitimate power: the power a leader has as a result of his or her position in the organization • Coercive power: the power a leader has to punish or control • Reward power: the power a leader has to give positive rewards

Managing Power (2 of 2) • Expert power: power that’s based on expertise, special skills, or knowledge • Referent power: power that arises because of a person’s desirable resources or personal traits

Developing Trust • Credibility: the degree to which followers perceive someone as honest, competent, and able to inspire • Trust: the belief in the integrity, character, and ability of a leader

Five Dimensions of Trust • Integrity • Competence • Consistency • Loyalty

• Openness

Leading Virtual Teams • Emerging technologies make working remotely more and more common. • The lack of a “face-to-face” feature presents unique leadership challenges. • Managers need to become effective virtual leaders.

• The informal interaction or “water cooler talk” is restricted in the virtual world. Managers need to overcome this in some way.

Leadership Training • Leader training is most effective when there are multiple sessions that combine: – Information – Demonstration – Practice-methods

• Some people aren’t meant to be leaders.

When Leadership May Not Be Important • Some factors may negate the leader’s influence. These factors are: – High levels of experience – Education – Training – Professional orientation – Indifference toward organizational rewards

Review Learning Objective 17.1 • Define leader and leadership. – A leader influences and has authority – Leadership involves influencing a group to achieve its goal – Leading is a function of management

Review Learning Objective 17.2 • Compare and contrast early theories of leadership. – University of Iowa studies – Ohio State studies – University of Michigan studies – Managerial grid

Review Learning Objective 17.3 • Describe the three major contingency theories of leadership. – Fiedler’s model – Hersey and Blanchard’s situational leadership theory – Path goal model, Robert House

Review Learning Objective 17.4 • Discuss contemporary views of leadership. – Leader-membership exchange theory (LMX) – Transactional/transformational leader – Charismatic/visionary leader – Authentic leadership – Ethical leadership – Team leader

Review Learning Objective 17.5 • Compare the various theories of leadership for their validity. – Traits may play a very small role in defining leaders – Relationship-oriented behaviors are the most important leadership behavior – Contingency factors most relevant to leadership are follower’s experience and ability; and organizational and national culture

Review Learning Objective 17.6 • Describe twenty-first century issues affecting leadership. – Five sources of a leader’s power – Issues of: ▪ managing power ▪ developing trust ▪ empowering employees ▪ leading across cultures ▪ becoming an effective leader

Management Fifteenth Edition

Chapter 18 Monitoring and Controlling

Learning Objectives 18.1 Explain the nature and importance of control. 18.2 Describe the three steps in the control process. 18.3 Explain how organizational and employee performance are measured. 18.4 Describe tools used to measure organizational performance. 18.5 Discuss contemporary issues in control.

What Is Controlling and Why Is It Important? • Controlling: management function that involves monitoring, comparing, and correcting work performance

Why Is Controlling Important? • Planning • Empowering employees • Protecting the workplace

Exhibit 18.1 Planning-Controlling Link

The Control Process • Control process: a three-step process of measuring actual performance, comparing actual performance against a standard, and taking managerial action to correct deviations or inadequate standards

Exhibit 18.2 The Control Process

Step 1: Measuring Actual Performance • How we measure • What we measure

Step 2: Comparing Actual Performance Against the Standard • Range of variation: the acceptable parameters of variance between actual performance and the standard

Exhibit 18.3 Acceptable Range of Variation

Exhibit 18.4 Green Earth Gardening Supply—June Sales Product

Standard

Actual

Over (Under)

Vegetable plants

1,075

913

(162)

Perennial flowers

630

634

Annual flowers

800

912

112

Herbs

160

140

(20)

Flowering bulbs

170

286

116

Flowering bushes

225

220

(5)

Heirloom seeds

540

672

132

3,600

3,777

177

Total

Step 3: Taking Managerial Action • Correct actual performance – Immediate corrective action: corrective action that corrects problems at once to get performance back on track – Basic corrective action: corrective action that looks at how and why performance deviated before correcting the source of deviation

Revise the Standard • If performance consistently exceeds the goal, then a manager should look at whether the goal is too easy and needs to be raised. • Managers must be cautious about revising a standard downward.

Managerial Decisions in Controlling • Depending on the results, a manager’s decision is to do nothing, correct the performance, or revise the standard.

Exhibit 18.5 Managerial Decisions in the Control Process

Exhibit 18.5 summarizes the decisions a manager makes in controlling.

What is Organizational Performance? • Performance: the end result of an activity • Organizational performance: the accumulated results of all the organization’s work activities

Measures of Organizational Performance • Organizational Productivity: the amount of goods or services produced divided by the inputs needed to generate that output • Organizational effectiveness: a measure of how appropriate organizational goals are and how well those goals are being met

Exhibit 18.6: Popular Industry and Company Rankings Fortune (www.fortune.com)

IndustryWeek (www.industrywee k.com)

Forbes (www.forbes.co m)

Customer Satisfaction Indexes

Fortune 500

IndustryWeek 1000

World’s Largest Public Companies

American Customer Satisfaction Index— University of Michigan Business School

Global 500

IndustryWeek US 500

blank

Customer Satisfaction Measurement Association

World’s Most 50 Best Admired Companies Manufacturers

blank

100 Best Companies to Work For

blank

IndustryWeek Best Plants

100 Fastestblank Growing Companies

Controlling for Employee Performance • Disciplinary action: actions taken by a manager to enforce the organization’s work standards and regulations • Progressive disciplinary action: an approach to ensure that the minimum penalty appropriate to the offense is imposed

Exhibit 18.7: Types of Discipline Problems and Examples of Each

Feedforward/Concurrent/Feedback Controls • Feedforward control: control that takes place before a work activity is done • Concurrent control: control that takes place while a work activity is in progress • Management by walking around: a term used to describe when a manager is out in the work area interacting directly with employees • Feedback control: control that takes place after a work activity is done

Exhibit 18.8 Types of Control

Financial Controls • Traditional controls – Ratio analysis: ▪ Liquidity ▪ Leverage ▪ Activity ▪ Profitability – Budget analysis: ▪ Quantitative standards ▪ Deviations

Exhibit 18.9: Popular Financial Ratios Objective

Ratio

Calculation

Meaning

Liquidity

Current ratio

Current assets Current liabilities

Tests the organization’s ability to meet short-term obligations

Liquidity

Acid test

Current assets less inventories Current liabilities

Tests liquidity more accurately when inventories turn over slowly or are difficult to sell

Leverage

Debt to assets

Total debt Total assets

The higher the ratio, the more leveraged the organization

Leverage

Times interest earned

Profits before interest/taxes Total interest charges

Measures how many times the organization is able to meet its interest expenses

Activity

Inventory turnover

Sales Inventory

The higher the ratio, the more efficiently inventory assets are used

Activity

Total asset turnover

Sales Total Assets

The fewer assets used to achieve a given level of sales, the more efficiently management uses the organization’s total assets

Profitability

Profit margin on sales

Net profit after taxes Total sales

Identifies the profits that are generated

Profitability

Return on investment

Net profit after taxes Total assets

Measures the efficiency of assets to generate profits

Information Controls • Management information system (MIS): a system used to provide management with needed information on a regular basis • Data versus information

Balanced Scorecard • Balanced scorecard: a performance measurement tool that looks at more than just the financial perspective

Benchmarking of Best Practices • Benchmarking: a performance measurement tool that looks at more than just the financial perspective • Benchmark: the standard of excellence against which to measure and compare

Exhibit 18.10: Suggestions for Internal Benchmarking Suggestions 1. Connect best practices to strategies and goals. The organization’s strategies and goals should dictate what types of best practices might be most valuable to others in the organization. 2. Identify best practices throughout the organization. Organizations must have a way to find out what practices have been successful in different work areas and units. 3. Develop best practices reward and recognition systems. Individuals must be given an incentive to share their knowledge. The reward system should be built into the organization’s culture. 4. Communicate best practices throughout the organization. Once best practices have been identified, that information needs to be shared with others in the organization. 5. Create a best practices knowledge-sharing system. There needs to be a formal mechanism for organizational members to continue sharing their ideas and best practices. 6. Nurture best practices on an ongoing basis. Create an organizational culture that reinforces a “we can learn from everyone” attitude and emphasizes sharing information.

Social Media as a Control Tool • Facebook, Twitter, and other social media platforms can be a valuable tool to gather feedback • Recent examples helped government officials provide flood and fire information and direct resources during natural disasters

Global Differences in Control • Distance creates formalized controls, e.g. formal reports • Impact of technology • Constraints due to local laws • Comparability issues in data collection

• Be prepared for global turmoil and disasters

Workplace Privacy • Employers can read your email, tap your telephone, monitor your work by computer, store and review computer files. • Reasons companies monitor: – Productivity/internet traffic – Concerns about offensive/inappropriate material – Protecting company secrets

Employee Theft • Employee theft: any unauthorized taking of company property by employees for their personal use

Exhibit 18.11 Controlling Employee Theft

Corporate Governance • Corporate governance: the system used to govern a corporation so that the interests of corporate owners are protected – The role of boards of directors – Financial reporting and the audit committee – Compliance offices and positions

Review Learning Objective 18.1 • Explain the nature and importance of control. – Controlling = monitoring, comparing, correcting – Important: ▪ Are goals being met? ▪ Provides information/feedback ▪ Protects organization and assets

Review Learning Objective 18.2 • Describe the three steps in the control process. – Measuring – Comparing – Taking action

Review Learning Objective 18.3 • Explain how organizational and employee performance are measured. – Productivity – Effectiveness – Industry and company rankings

Review Learning Objective 18.4 • Describe tools used to measure organizational performance. – Feedforward controls – Concurrent controls – Feedback controls – Financial controls – Information controls – Balanced scorecards – Benchmarking

Review Learning Objective 18.5 • Discuss contemporary issues in control. – Cross-cultural differences – Workplace privacy – Employee theft – Workplace violence – Customer interactions – Corporate governance

Management Fifteenth Edition

Chapter 18A Planning and Control Techniques Module

Environmental Scanning • The goal is to detect emerging trends, to anticipate and interpret changes in the environment. • Competitor intelligence is gathering information about their competitors. • Managers have expanded their scope to gain vital information on global forces that might affect their organizations.

Forecasting • Forecasts: predictions of outcome – Quantitative forecasting: forecasting that applies a set of mathematical rules to a series of past data to predict outcomes – Qualitative forecasting: forecasting that uses the judgment and opinions of knowledgeable individuals to predict outcomes

Exhibit PC.1 Forecasting Techniques: Quantitative Technique

Description

Application

Time series analysis

Fits a trend line to a mathematical equation and projects into the future by means of this equation

Predicting next quarter’s sales on the basis of four years of previous sales data

Regression models

Predicts one variable on the basis of known or assumed other variables

Seeking factors that will predict a certain level of sales (e.g., price, advertising expenditures)

Econometric models

Uses a set of regression equations to simulate segments of the economy

Predicting change in car sales as a result of changes in tax laws

Economic indicators

Uses one or more economic indicators to predict a future state of the economy

Using change in GNP to predict discretionary income

Substitution effect

Uses a mathematical formula to predict how, when, and under what circumstances a new product or technology will replace an existing one

Predicting the effect of streaming video services on the sale of Bluray players

Exhibit PC.1 Forecasting Techniques: Qualitative Technique

Description

Application

Jury of opinion

Combines and averages the opinions of experts

Polling the company’s human resource managers to predict next year’s college recruitment needs

Sales force Combines estimates from field composition sales personnel of customers’ expected purchases

Predicting next year’s sales of industrial lasers

Customer evaluation

Surveying major car dealers by a car manufacturer to determine types and quantities of products desired

Combines estimates from established customers’ purchases

Forecasting Effectiveness • The goal of forecasting is to provide managers with information to facilitate decision making • Many managers do not have accurate forecasts and/or use them to their advantage • Forecasting ability can be a company’s distinctive competence • Forecasting difficulty is compounded in rapidly changing environments

Techniques for Allocating Resources • Resources: an organization’s assets—including financial, physical, human, intangible, and structural/cultural—that are used to develop, manufacture, and deliver products to its customers

Budgeting • Budget: a numerical plan for allocating resources to specific activities • Budgeting: the process of allocating resources to pay for designated future costs

Two Common Budgeting Approaches • Incremental budgeting: process starting with the current budget from which managers decide whether they need additional resources and the justification for requesting it • Zero-based budgeting: Process starting with an established point of zero rather than using the current budget as the basis for adding, modifying, or subtracting resources

Exhibit PC.2 Types of Budgets

Exhibit PC.3 How to Improve Budgeting Suggestion Collaborate and communicate. Be flexible. Goals should drive budgets—budgets should not determine goals. Coordinate budgeting throughout the organization. Use budgeting/planning software when appropriate. Remember that budgets are tools. Remember that profits result from smart management, not because you budgeted for them.

Scheduling • Scheduling: detailing what activities have to be done, the order in which they are to be completed, who is to do each, and when they are to be completed – Gantt chart: a scheduling chart developed by Henry Gantt that shows actual and planned output over a period of time

Exhibit PC.4 A Gantt Chart

Load Charts • Load chart: a modified Gantt chart that schedules capacity by entire departments or specific resources

Exhibit PC.5 A Load Chart

PERT Network Analysis (1 of 2) • PERT network: a flowchart diagram showing the sequence of activities needed to complete a project and the time or cost associated with each – Events: end points that represent the completion of major activities in a PERT network – Activities: the time or resources needed to progress from one event to another in a PERT network

PERT Network Analysis (2 of 2) • Slack time: the amount of time an individual activity can be delayed without delaying the whole project • Critical path: the longest sequence of activities in a PERT network

Exhibit PC.6 Steps in Developing a PE RT Network Step

1. Identify every significant activity that must be achieved for a project to be completed. The accomplishment of each activity results in a set of events or outcomes. 2. Determine the order in which these events must be completed. 3. Diagram the flow of activities from start to finish, identifying each activity and its relationship to all other activities. Use circles to indicate events and arrows to represent activities. This results in a flowchart diagram called a PERT network. 4. Compute a time estimate for completing each activity. This is done with a weighted average that uses an optimistic time estimate (to) of how long the activity would take under ideal conditions, a most likely estimate (tm) of the time the activity normally should take, and a pessimistic estimate (tp) that represents the time that an activity should take under the worst possible conditions. The formula for calculating the expected time (te) is then te = (to +4tm +tp)/6 5. Using the network diagram that contains time estimates for each activity, determine a schedule for the start and finish dates of each activity and for the entire project. Any delays that occur along the critical path require the most attention because they can delay the whole project.

Exhibit PC.7 Events and Activities in Constructing an Office Building Event

Description

Expected Time (in weeks)

Preceding Event

Approve design and get permits

None

Dig subterranean garage

Erect frame and siding

Construct floor

Install windows

Put on roof

Install internal wiring

D, E, F

Install elevator

Put in floor covering and paneling

Put in doors and interior decorative trim

I, H

Turn over to building management group

Exhibit PC.8 PERT Network for Constructing an Office Building

Breakeven Analysis • Breakeven analysis: a technique for identifying the point at which total revenue is just sufficient to cover total costs – Breakeven point can be computed graphically or by using the formula: 𝑇𝐹𝐶 𝐵𝐸 = 𝑃 − 𝑉𝐶

Exhibit PC.9 Breakeven Analysis

Linear Programming • Linear programming: a mathematical technique that solves resource-allocation problems

Exhibit PC.10 Production Data for Cinnamon-Scented Products Department

Number of Hours Required (per unit) Potpourri Bags

Number of Hours Required (per unit) Scented Candle

Monthly Production Capacity (in hours)

Manufacturing

1200

Assembly

900

$10

$18

blank

Profit per unit

Exhibit PC.11 Graphical Solution to Linear Programming Problem

Project Management • Project: a one-time-only set of activities that has a definite beginning and ending point in time • Project management: the task of getting a project’s activities done on time, within budget, and according to specifications

Exhibit PC.12 Project Planning Process

The essential features of the project planning process are shown in Exhibit PC.12.

Scenario Planning • Scenario: a consistent view of what the future is likely to be

Management Fifteenth Edition

Chapter 18B Managing Operations Module

The Role of Operations Management • Operations management: the transformation process that converts resources into finished goods and services

Exhibit MO.1 The Operations System

Exhibit M O.1 portrays the transformation process that converts resources into finished goods and services in a simplified fashion. Copyright © 2021, 2018, 2016 Pearson Education, Inc. All Rights Reserved

Services and Manufacturing • Manufacturing organizations: organizations that produce physical goods • Service organizations: organizations that produce nonphysical products in the form of services

Managing Productivity • For countries, high productivity can lead to economic growth and development. • For individual organizations, increased productivity gives them a more competitive cost structure and the ability to offer more competitive prices.

Strategic Role of Operations Management • Today, successful organizations recognize the crucial role that operations management plays as part of the overall organizational strategy to establish and maintain global leadership.

What is Value Chain Management? (1 of 2) • Value: the performance characteristics, features, and attributes, and any other aspects of goods and services for which customers are willing to give up resources • Value chain: the entire series of organizational work activities that add value at each step from raw materials to finished product

What is Value Chain Management? (2 of 2) • Value chain management: the process of managing the sequence of activities and information along the entire value chain

Goal of Value Chain Management • The goal of value chain management is to create a value chain strategy that meets and exceeds customers’ needs and desires and allows for full and seamless integration among all members of the chain.

Benefits of Value Chain Management • Four primary benefits: – Improved procurement – Improved logistics – Improved product development – Enhanced customer order management

Value Chain Strategy • Six main requirements of a successful value chain strategy: – Coordination and collaboration – Technology investment – Organizational processes – Leadership – Employees – Organizational culture and attitudes

Exhibit MO.2 Value Chain Strategy Requirements

Value Change Management and Impact on the Organization • Organizational processes: the ways that organizational work is done. Can change dramatically • Leadership: Need a strong commitment to implement • Employees: Need to be committed to ongoing training and be flexible • Organizational Culture and Attitudes: Must be supportive to succeed

Technology’s Role in Operations Management • Smart companies are looking at ways to harness technology to improve operations management.

The Robots are Coming! • Robots will continue to replace humans in a variety of jobs • They are currently very common on factory floors • Jobs being replaced tend to be mind-numbing or physically tasking

Quality Management • Quality: the ability of a product or service to reliably do what it’s supposed to do and to satisfy customer expectations • Quality initiatives: – Planning for quality – Organizing and leading for quality – Controlling for quality

Quality Goals • ISO 9001: a series of international quality management standards that set uniform guidelines for processes to ensure products conform to customer requirements • Six Sigma: a quality program designed to reduce defects and help lower costs, save time, and improve customer satisfaction

Mass Customization and Lean Organization • Mass customization: providing customers with a product when, where, and how they want it • Lean organization: an organization that understands what customers want, identifies customer value by analyzing all activities required to produce products, and then optimizes the entire process from the customer’s perspective