Making a Career Decision

• Career– The sequence of positions occupied by a person during

the course of a lifetime• Three-step, self-assessment process

– Identify and organize your skills, interests, work-related needs, and values.

– Convert this information into general career fields and specific job goals.

– Test your career possibilities by talking with knowledgeable people in the fields, organizations, or jobs you desire.

Getting Into The Organization

• Jobs advertised on the Internet– Job and career web sites

• Low probability of immediate success• Security of e-resumes

• Preparing your resume– Proper formatting– Salient content

• Ways to Excel at an Interview– Prepare, prepare, prepare

• Know the company and its industry

Developing a Management Career

• The organization’s responsibilities for career development:– Communicating clearly the organization’s goals and

future strategies.– Creating personal growth opportunities. – Offering financial assistance through tuition

reimbursement to help employees keep current.– Helping employees to learn by providing paid time off

off-the-job training and adjusting workloads to allow employees to develop skills, abilities, and knowledge.

Developing a Management Career (cont’d)

• Manage your career as a entrepreneur would manage a small business– Know yourself; your strengths and weaknesses.– Manage your reputation by letting others know about

your achievements. Make accomplishments visible.– Build a network contacts through professional

associations, conferences, and social gatherings.– Develop current specific skills and abilities that are in

high demand.

Developing a Management Career (cont’d)

• Managing your career (cont’d)– Avoid learning organization-specific skills that can’t be

transferred quickly to other employers.– Balance your specialist and generalist competencies. – Document your achievements that offer objective

evidence of your competencies.– Keep your mobility options open with contingency

plans that you can call on when needed.

The Pre-modern Era

• Ancient massive construction projects– Egyptian pyramids– Great Wall of China

• Michelangelo, the manager.

Adam Smith’s Contribution To The Field Of Management

• Wrote the Wealth of Nations (1776)– Advocated the economic advantages that

organizations and society would reap from the division of labor:

• Increased productivity by increasing each worker’s skill and dexterity.

• Time saved that is commonly lost in changing tasks.• The creation of labor-saving inventions and

machinery.

The Industrial Revolution’s Influence On Management

Practices• Industrial revolution

– Machine power began to substitute for human power• Lead to mass production of economical goods

– Improved and less costly transportation systems became available

• Created larger markets for goods.

– Larger organizations developed to serve larger markets• Created the need for formalized management practices.

Classical Contributions

• Classical approach– The term used to describe the hypotheses of

the scientific management theorists and the general administrative theorists.

• Scientific management theorists– Fredrick W. Taylor, Frank and Lillian Gilbreth, and

Henry Gantt

• General administrative theorists– Henri Fayol and Max Weber

Scientific Management

• Frederick W. Taylor– The Principles of Scientific Management (1911)

• Advocated the use of the scientific method to define the “one best way” for a job to be done

– Believed that increased efficiency could be achieved by selecting the right people for the job and training them to do it precisely in the one best way.

– To motivate workers, he favored incentive wage plans.– Separated managerial work from operative work.

Taylor’s Four Principles of Management1. Develop a science for each element of an individual’s work, which

replaces the old rule-of-thumb method.

2. Scientifically select and then train, teach, and develop the worker. (Previously, workers chose their own work and trained themselves as best they could.)

3. Heartily cooperate with the workers so as 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 takes over all work for which it is better fitted than the workers. (Previously, almost all the work and the greater part of the responsibility were thrown upon the workers.)

Exhibit HM-1

Scientific Management Contributors

• Frank and Lillian Gilbreth– Bricklaying efficiency improvements– Time and motion studies (therbligs)

• Henry Gantt– Incentive compensation systems– Gantt chart for scheduling work operations

General Administrative Theory• General administrative theorists

– Writers who developed general theories of what managers do and what constitutes good management practice

– Henri Fayol (France)• Fourteen Principles of Management: Fundamental or universal

principles of management practice

– Max Weber (Germany)• Bureaucracy: Ideal type of organization characterized by division

of labor, a clearly defined hierarchy, detailed rules and regulations, and impersonal relationships

Fayol’s Fourteen Principles of Management

Exhibit HM-2

• Division of work

• Authority

• Discipline

• Unity of command

• Unity of direction

• Subordination of the individual

• Remuneration

• Centralization

• Scalar chain

• Order

• Equity

• Stability of tenure of personnel

• Initiative

• Esprit de corps

Weber’s Ideal Bureaucracy

Exhibit HM-3

• Division of Labor• Authority Hierarchy• Formal Selection• Formal Rules and Regulations• Impersonality• Career Orientation

Human Resources Approach

• Robert Owen– Scottish businessman and reformer who advocated for

better treatment of workers.– Claimed that a concern for employees was profitable

for management and would relieve human misery.• Hugo Munsterberg

– Created the field of industrial psychology—the scientific study of individuals at work to maximize their productivity and adjustment.

• Psychology and Industrial Efficiency (1913)

Human Resources Approach

• Mary Parker Follett – Recognized that organizations could be viewed from

the perspective of individual and group behavior.– Believed that individual potential could only be

released by group association.• Chester Barnard

– Saw organizations as social systems that require human interaction and cooperation.

– Expressed his views on the “acceptance of authority” in his book The Functions of the Executive (1938).

Hawthorne Studies

• A series of studies done during the 1920s and 1930s that provided new insights into group norms and behaviors– Hawthorne effect

• Social norms or standards of the group are the key determinants of individual work behavior.

• Changed the prevalent view of the time that people were no different than machines.

Human Relations Movement

• Based on a belief in the importance of employee satisfaction—a satisfied worker was believed to be a productive worker.

• Advocates believed in people’s capabilities and were concerned with making management practices more humane.– Dale Carnegie– Abraham Maslow– Douglas McGregor

The Quantitative Approach

• Operations Research (Management Science)– Evolved out of the development of mathematical

and statistical solutions to military problems during World War II.

– Involves the use of statistics, optimization models, information models, and computer simulations to improve management decision making for planning and control.

Social Events That Shaped Management Approaches

• Classical approach– The desire for increased efficiency of labor intensive

operations• Human resources approach

– The backlash to the overly mechanistic view of employees held by the classicists.

– The Great Depression.• The quantitative approaches

– World War II

What is the Process Approach?

• Management theory jungle (Harold Koontz) – The diversity of approaches to the study of

management—functions, quantitative emphasis, human relations approaches—each offer something to management theory, but many are only managerial tools.

• Process approach– Planning, leading, and controlling activities are circular

and continuous functions of management.

The Systems Approach

• Defines a system as a set of interrelated and interdependent parts arranged in a manner that produces a unified whole– Closed system : a system that is not influenced

by and does not interact with its environment– Open system: a system that dynamically

interacts with its environment– Stakeholders: any group that is affected by

organizational decisions and policies

The Organizatio

n and Its Environmen

t

Exhibit HM-4

The Contingency Approach

• The situational approach to management that replaces more simplistic systems and integrates much of management theory

• Four popular contingency variables– Organization size (coordination)– Routineness of task technology (task complexity

dictates structure)– Environmental uncertainty (change management)– Individual differences (managerial styles , motivational

techniques, and job design)Exhibit HM-5

Copyright © 2005 Prentice Hall, Inc.All rights reserved.

Chapter 1Managers

and Management

1PART I: Introduction

1–29

Learning Outcomes (cont’d)After reading this chapter, I will be

able to:1. Describe the difference between managers and operative employees.

2. Explain what is meant by the term management.

3. Differentiate between efficiency and effectiveness.

4. Describe the four primary processes of management.

5. Classify the three levels of managers and identify the primary responsibility of each group.

1–30

Learning Outcomes (cont’d)After reading this chapter, I will be

able to:6. Summarize the essential roles performed by managers.

7. Discuss whether the manager’s job is generic.

8. Describe the four general skills necessary for becoming a successful manager.

9. Describe the value of studying management.

10. Identify the relevance of popular humanities and social science courses to management practices.

1–31

Who Are Managers And Where Do They Work?

• Organization– A systematic arrangement of people brought together to

accomplish some specific purpose; applies to all organizations—for-profit as well as not-for-profit organizations.

– Where managers work (manage).• Common characteristics

– Goals– Structure– People

1–32

Common Characteristics of Organizations

Exhibit 1.1

1–33

People Differences

• Operatives– People who work directly on a job or task and

have no responsibility for overseeing the work of others.

• Managers– Individuals in an organization who direct the

activities of others.

1–34

Organizational Levels

Exhibit 1.2

1–35

Identifying Managers

• First-line managers– Supervisors responsible for directing the day-to-day

activities of operative employees• Middle managers

– Individuals at levels of management between the first-line manager and top management

• Top managers– Individuals who are responsible for making decisions about

the direction of the organization and establishing policies that affect all organizational members

1–36

How Do We Define Management?

• Management– The process of getting things done, effectively

and efficiently, through and with other people– Efficiency

• Means doing the thing correctly; refers to the relationship between inputs and outputs; seeks to minimize resource costs

– Effectiveness• Means doing the right things; goal attainment

1–37

Efficiency and Effectiveness

Exhibit 1.3

1–38

Management

Process Activities

Exhibit 1.4

Management process:planning, organizing, leading, and controlling

1–39

Management Processes

• Planning– Includes defining goals, establishing strategy, and

developing plans to coordinate activities• Organizing

– Includes determining what tasks to be done, who is to do them, how the tasks are to be grouped, who reports to whom, and where decisions are to be made

1–40

Management Processes (cont’d)

• Leading– Includes motivating employees, directing the

activities of others, selecting the most effective communication channel, and resolving conflicts

• Controlling– The process of monitoring performance,

comparing it with goals, and correcting any significant deviations

1–41

Mintzberg’s Managerial Roles

• Interpersonal– Figurehead– Leader– Liaison

• Informational– Monitor– Disseminator– Spokesperson

• Decisional– Entrepreneur– Disturbance handler– Resource allocator– Negotiator

Exhibit 1.5Source: The Nature of Managerial Work (paperback) by H. Mintzberg. Table 2, pp. 92–93. Reprinted by permission of Pearson Education Inc., Upper Saddle River, New Jersey.

1–42

Is The Manager’s Job Universal?

• Level in the organization– Do managers manage differently based on where they

are in the organization?• Profit versus not-for-profit

– Is managing in a commercial enterprise different than managing in a non-commercial organization?

• Size of organization– Does the size of an organization affect how managers

function in the organization?

1–43

Distribution of Time per Activityby Organizational Level

Exhibit 1.6Source: Adapted from T. A. Mahoney, T. H. Jerdee, and S. J. Carroll, “The Job(s) of Management.” Industrial Relations 4, no. 2 (1965), p. 103.

1–44

Exhibit 1.7

Importance of Managerial Roles in

Small and Large Businesses

Source: Adapted from J. G. P. Paolillo, “The Manager’s Self Assessments of Managerial Roles: Small vs. Large Firms,” American Journals of Small Business, January–March 1984, pp. 61–62.

1–45

Is The Manager’s Job Universal? (cont’d)

• Management concepts and national borders– Is management the same in all economic, cultural,

social and political systems?• Making decisions and dealing with change.

– Do managers all make decisions and deal with change in the same ways?

1–46

General Skills for Managers• Conceptual skills

– A manager’s mental ability to coordinate all of the organization’s interests and activities

• Interpersonal skills– A manager’s ability to work with, understand, mentor, and motivate

others, both individually and in groups

• Technical skills– A manager’s ability to use the tools, procedures, and techniques of a

specialized field

• Political skills– A manager’s ability to build a power base and establish the right

connections

1–47

Specific Skills for Managers

• Behaviors related to a manager’s effectiveness:– Controlling the organization’s environment and its

resources.

– Organizing and coordinating.

– Handling information.

– Providing for growth and development.

– Motivating employees and handling conflicts.

– Strategic problem solving.

1–48

Management Charter Initiative Competencies for Middle

Managers

Exhibit 1.8

1. Initiate and implement change and improvement in services, products, and systems

2. Monitor maintain, and improve service and product delivery

3. Monitor and control the use of resources

4. Secure effective resource allocation for activities and projects

5. Recruit and select personnel

6. Develop teams, individuals, and self to enhance performance

7. Plan, allocate, and evaluate work carried out by teams, individuals and self

8. Create, maintain, and enhance effective working relationships

9. Seek, evaluate, and organize information for action

10. Exchange information to solve problems and make decisions

1–49

How Much Importance Does The Marketplace Put On Managers?

• Good (effective) managerial skills are a scarce commodity.– Managerial compensation packages are one measure of

the value that organizations place on them.– Management compensation reflects the market forces

of supply and demand.• Management superstars, like superstar athletes in

professional sports, are wooed with signing bonuses, interest-free loans, performance incentive packages, and guaranteed contracts.

1–50

Why Study Management?

• We all have a vested interest in improving the way organizations are managed.– Better organizations are, in part, the result of good

management.• You will eventually either manage or be managed.

– Gaining an understanding of the management process provides the foundation for developing management skills and insight into the behavior of individuals and the organizations.

1–51

How Does Management Relate To Other Disciplines?

AnthropologyAnthropology

EconomicsEconomics PhilosophyPhilosophy

Political SciencePolitical Science PsychologyPsychology

SociologySociology

ManagementManagement

Copyright © 2005 Prentice Hall, Inc.All rights reserved.

Chapter 2The Management Environment

2PART I: Introduction

2–53

Learning OutcomesAfter reading this chapter, I will be

able to:1. Describe the three waves in modern social history and their implications for organizations.

2. Explain the importance of viewing management from a global perspective.

3. Identify the ways in which technology is changing the manager’s job.

4. Describe the difference between an e-business, e-commerce, and an e-organization.

5. Define social responsibility and ethics.

2–54

Learning Outcomes (cont’d)After reading this chapter, I will be

able to:6. Explain what is meant by the term entrepreneurship and identify the components of the entrepreneurial venture.

7. Describe the management implications of a diversified workforce.

8. Identify which work/life concepts are affecting employees.

9. Explain why many corporations have downsized.

10. Describe the key variables for creating a customer-responsive culture.

2–55

Learning Outcomes (cont’d)After reading this chapter, I will be

able to:11. Explain why companies focus on quality and continuous improvement.

2–56

The Changing Economy

• Agriculture– Until the late nineteenth century, all economies were

agrarian.• Industrialization

– From the late 1800s until the 1960s, most developed countries moved from agrarian societies to industrial societies.

• Information– Information technology is transforming society from its

manufacturing focus to one of service.

2–57

The Changing Economy

Exhibit 2.1

Old Economy

• National borders limit competition• Technology reinforces rigid

hierarchies and limits access to information

• Job opportunities are for blue-collar industrial workers

• Population is relatively homogeneous• Business is estranged from its

environment• Economy is driven by large

corporations• Customers get what business chooses

to give them

New Economy

• National borders no longer define an organization’s operating boundaries

• Technological change makes information more accessible

• Job opportunities are for knowledge workers

• Population is characterized by cultural diversity

• Business accepts its social responsibilities

• Economy is driven by small entrepreneurial firms

• Customer needs drive business

2–58

A Global Marketplace

• Global village– The concept of a boundaryless world; the

production and marketing of goods and services worldwide.

• Borderless organization– A management structure in which internal

arrangements that impose artificial geographic barriers are broken down

2–59

Global Competition

• Multinational corporations (MNCs)– Companies that maintain significant operations in two or more

countries simultaneously but are based in one home country.

• Transnational corporation (TNC)– A company that maintains significant operations in more than one

country simultaneously and decentralizes decision making in each operation to the local country.

• Strategic alliances– A domestic firm and a foreign firm share the cost of developing

products or building production facilities in a foreign country.

2–60

Stages of Going Global

Exhibit 2.3

2–61

Globalization’s Effect On Managers

• Parochialism– A narrow focus in which one sees things solely through

one’s own view and from one’s own perspective• Hofstede’s framework for assessing cultures:

– Power distance– Individualism versus collectivism– Quantity of life versus quality of life– Uncertainty avoidance– Long-term versus short-term orientation

2–62

Global Leadership and Organizational Behavior Effectiveness (GLOBE)• An ongoing cross-cultural

investigation of leadership and national culture– Confirms and extends

Hofstede’s earlier work on national cultural dimensions and leadership.

– Also found that the strength of cultural dimensions appear to be changing.

• Cultural Dimensions– Assertiveness– Future orientation– Gender differentiation– Uncertainty avoidance– Power distance– Individualism/Collectivism– In-group collectivism– Performance orientation– Humane orientation

2–63

GLOBE Highlights

Exhibit 2.4Source: M. Javidan and R. J. House, “Cultural Acumen for the Global Manager: Lessons from Project GLOBE,” Organizational Dynamics, Spring 2001, pp. 289–305.

2–64

GLOBE Highlights

Exhibit 2.4 (cont’d)Source: M. Javidan and R. J. House, “Cultural Acumen for the Global Manager: Lessons from Project GLOBE,” Organizational Dynamics, Spring 2001, pp. 289–305.

2–65

Emphasis on Technology

• Technology– Any equipment, tools, or operating methods that are designed

to make work more efficient• Information Technology (IT)

– Benefits of IT• Cost savings (e.g., inventory control)• Freedom from fixed locations for operations

– Challenges• Increased worker skill requirements• A leveling of the the competitive playing field that increases

competition

2–66

Internet Business Terms

• E-commerce– Any computer transaction that occurs when data are

processed and transmitted over the Internet• E-organization

– The applications of e-business concepts offered to stakeholders.

• E-business– The full breadth of activities included in a successful

Internet-based enterprise

2–67

What Defines

an E-Business?

Exhibit 2.5

2–68

In What Ways Does Technology Alter A Manager’s Job?

• Effectiveness and efficiency– Managers have access to more complete and

accurate information than before, enabling them to function as better managers.

• Place– Telecommuting: the linking of a worker’s

computer and modem with those of co-workers and management at an office.

2–69

Society’s Expectations of Business

• Social responsibility– A firm’s obligation, beyond that required by the law and

economics, to pursue long-term goals that are beneficial to society.

• Social obligation– The obligation of a business to meet its economic and legal

responsibilities and no more.• Social responsiveness

– The ability of a firm to adapt to changing societal conditions.

2–70

Arguments for Social Responsibility

Exhibit 2.6

• Public expectations

• Long-run profits

• Ethical obligation

• Public image

• Better environment

• Discouragement of further government regulation

• Balance of responsibility and power

• Stockholder interests

• Possession of resources

• Superiority of prevention over cures

Source: Adapted from R. J. Monsen Jr., “The Social Attitudes of Management,” in J. M. McGuire, ed. Contemporary Management: Issues and Views (Upper Saddle River, NJ: Prentice Hall, 1974), p. 616: and K. Davis and W. Frederick, Business and Society: Management, Public Policy, Ethics, 5th ed. (New York: McGraw-Hill, 1984), pp. 28–41.

2–71

Arguments against Social Responsibility

Exhibit 2.6 (cont’d)

• Violation of profit maximization

• Dilution of purpose

• Costs

• Too much power

• Lack of skills

• Lack of accountability

• Lack of broad public support

Source: Adapted from R. J. Monsen Jr., “The Social Attitudes of Management,” in J. M. McGuire, ed. Contemporary Management: Issues and Views (Upper Saddle River, NJ: Prentice Hall, 1974), p. 616: and K. Davis and W. Frederick, Business and Society: Management, Public Policy, Ethics, 5th ed. (New York: McGraw-Hill, 1984), pp. 28–41.

2–72

Ethics and Business

• Ethics– A set of rules or principles that defines right

and wrong conduct• Code of ethics

– A formal document that states an organization’s primary values and the ethical rules it expects managers and operatives to follow

2–73

Three Views of Ethics

Exhibit 2.7

• Utilitarian view of ethicsMaking decisions solely on the basis of their

outcomes or consequences. • Rights view of ethics

Respecting and protecting individual liberties and privileges

• Theory of justice view of ethicsFairly and impartially imposing and enforcing

rules.Source: G. F. Cavanaugh, D. J. Moberg, and M. Valasquez, “The Ethics of Organizational Politics.” Academy of Management Journal (June 1981): 363–74.

2–74

What Is Entrepreneurship?

• Entrepreneurship– The process of initiating a business venture,

organizing the necessary resources, and assuming the risks and rewards

• Steps in the entrepreneurial process– Exploring the entrepreneurial context.– Identifying opportunities and competitive advantages– Starting the venture.– Managing the venture

2–75

What Do Entrepreneurs Do?

• No two entrepreneurs are exactly alike– They are creating something new, something different. – They’re searching for change, responding to it, and

exploiting it.• Intrapreneur

– A persons within an organization who demonstrates entrepreneurial characteristics—has confidence in his or her abilities, is willing to seize opportunities for change, and expects surprises and capitalizes on them.

2–76

Diversity and the Workforce of 2010

• Increasing workforce diversity– More variation in the background of organizational members

in terms of gender, race, age, sexual orientation, and ethnicity• Characteristics of the future workforce

– More heterogeneous/diverse– Increasingly older– More multicultural

• Diversity will require more managerial sensitivity to individual differences.

2–77

Mars Incorporated Diversity Philosophy

Exhibit 2.8

“Distinctive voices working together within a common culture” is one of the ways we have described how we do business at Mars. We believe that the success of our business can be enhanced by having a workforce made up of associates from many different backgrounds, much as our society and consumer base consist of a wide variety of individuals. We value the talents and contributions of our diverse workforce in reaching toward our future and in playing responsible leadership roles.

Source: www.mars.com/other_policies/diversity.as

2–78

Labor Supply and Demand Adjustments

• Downsizing– An activity in an organization designed to create a

more efficient operation through extensive layoffs• Rightsizing

– Linking staffing levels to organizational goals• Outsourcing

– An organization’s use of outside firms for providing necessary products and services

2–79

Flexible Workforces

• Core employees– The small group of full-time employees of an

organization who provide some essential job tasks for the organization

• Contingent workforce– Part-time, temporary, and contract workers who

are available for hire on an as-needed basis

2–80

Contingent Workers

Exhibit 2.9

• Part-time employees Work fewer than 40 hours a week Are a good source of staffing for peak hours. May be involved in job sharing

• Temporary employees Are generally employed during peak periods Can fill in for employees for an extended period of time Create a fixed labor cost during a specified period

• Contract workers Are hired by organizations to work on specific projects. Are paid when the firm receives particular deliverables. Are a labor cost that is fixed by contract

2–81

Is There a Pending Labor Shortage in the United States?

• 2010 U.S. Labor Shortage– Fewer available workers

– Retiring baby boomers

– Immigration restrictions

• Implication for managers– More sophisticated recruitment

and retention strategies

2–82

Making a Company’s Culture More Customer-responsive

• Actions that create employees with the competence, ability, and willingness to solve customer problems as they arise:– Selection: hiring the right personalities and attitudes

– Training: developing the customer-focus employees

– Organizing: creating customer-friendly controls

– Empowerment: independence in relating to customers

– Leadership: commitment to the customer-focus vision

– Evaluation: performance measured by behaviors

– Rewards: contingent on outstanding customer service

2–83

Shaping a Customer-Responsive

Culture

Exhibit 2.10

2–84

Increased Concern for Quality

• Continuous improvement– Organizational commitment to constantly improving

the quality of a product or service• Joseph Juran• W. Edwards Deming

– Kaizen: the Japanese term for an organization committed to continuous improvement

• Work process engineering– Radical or quantum change in an organization

2–85

Components of Continuous Improvement

Exhibit 2.11

1. Intense focus on the customer.

2. Concern for continuous improvement.

3. Improvement in the quality of everything the organization does.

4. Accurate measurement.

5. Empowerment of employees.

Copyright © 2005 Prentice Hall, Inc.All rights reserved.

Chapter 3

Foundations of Planning

3

PART II: Planning

3–87

Learning OutcomesAfter reading this chapter, I will be

able to:1. Define planning.

2. Explain the potential benefits of planning.

3. Identify potential drawbacks to planning.

4. Distinguish between strategic and tactical plans.

5. Recognize when directional plans are preferred over specific plans.

6. Define management by objectives and identify its common elements.

3–88

Learning Outcomes (cont’d)After reading this chapter, I will be

able to:7. Outline the steps in the strategic management process.

8. Describe the four grand strategies.

9. Explain SWOT analysis.

10. Describe how entrepreneurs identify a competitive advantage.

3–89

Planning Defined

• Defining the organization’s objectives or goals• Establishing an overall strategy for achieving

those goals• Developing a comprehensive hierarchy of

plans to integrate and coordinate activities

Planning is concerned with ends (what is to be done) as well as with means (how it is to be done).

3–90

Reasons for

Planning

Exhibit 3.1

3–91

Criticisms Of Formal Planning

• Planning may create rigidity.• Plans can’t be developed for a dynamic

environment.• Formal plans can’t replace intuition and creativity.• Planning focuses managers’ attention on today’s

competition, not on tomorrow’s survival.• Formal planning reinforces success, which may

lead to failure.

3–92

Planning and Performance

• Formal planning generally means higher profits, higher return on assets, and other positive financial results.

• Planning process quality and implementation probably contribute more to high performance than does the extent of planning.

• When external environment restrictions allowed managers few viable alternatives, planning did not lead to higher performance.

3–93

Types of Plans

Exhibit 3.2

BREADTH TIME SPECIFICITY FREQUENCY OF USE FRAME OF USE

Strategic Long term Directional Single use

Tactical Short term Specific Standing

3–94

Planning: Focus and Time

• Strategic plans– Plans that are organization-wide, establish overall objectives,

and position an organization in terms of its environment• Tactical plans

– Plans that specify the details of how an organization’s overall objectives are to be achieved

• Short-term plans– Plans that cover less than one year

• Long-term plans– Plans that extend beyond five years

3–95

Strategic Planning

• Strategic plans – Apply broadly to the entire organization.– Establish the organization’s overall objectives.– Seek to position the organization in terms of its environment. – Provide direction to drive an organization’s efforts to achieve

its goals.– Serve as the basis for the tactical plans.– Cover extended periods of time.– Are less specific in their details.

3–96

Tactical Planning

• Tactical plans (operational plans)– Apply to specific parts of the organization.

– Are derived from strategic objectives.

– Specify the details of how the overall objectives are to be achieved.

– Cover shorter periods of time.

– Must be updated continuously to meet current challenges.

3–97

Directional versus Specific Plans

Exhibit 3.3

3–98

Specific and Directional Plans

• Specific plans– Plans that have clearly defined objectives and

leave no room for misinterpretation.• “What, when, where, how much, and by whom”

(process-focus)

• Directional plans– Flexible plans that set out general guidelines.

• “Go from here to there” (outcome-focus)

3–99

Single-Use and Standing Plans

• Single-use plans– A plan that is used to meet the needs of a

particular or unique situation• Single-day sales advertisement

• Standing plan– A plan that is ongoing and provides guidance for

repeatedly performed actions in an organization• Customer satisfaction policy

3–100

Management by Objectives

• Management by Objectives (MBO)– A system in which specific performance objectives are

jointly determined by subordinates and their supervisors, progress toward objectives is periodically reviewed, and rewards are allocated on the basis of that progress.

– Links individual and unit performance objectives at all levels with overall organizational objectives.

– Focuses operational efforts on organizationally important results.

– Motivates rather than controls.

3–101

Cascading of Objectives

Exhibit 3.4

3–102

Elements of MBO

• Goal specificity• Participative decision making• Explicit time period for performance• Performance feedback

3–103

Setting Employee Objectives

• Identify an employee’s key job tasks.• Establish specific and challenging goals for each

key task.• Allow the employee to actively participate.• Prioritize goals.• Build in feedback mechanisms to assess goal

progress.• Link rewards to goal attainment.

3–104

GoalGoalDifficultyDifficulty

Is There a Downside to Is There a Downside to MBO?MBO?

GoalGoalSpecificitySpecificity

Top Top ManagementManagement ParticipationParticipation

3–105

Strategic Management• Strategic Management Process

– A nine-step process that involves strategic planning, implementation, and evaluation

Exhibit 3.5

3–106

The Organization’s Current Identity

• Mission statement– Defines the present purpose of the organization.

• Objectives– Specific measures (milestones) for achievement,

progress, and performance.• Strategic plan

– A document that explains the business founders’ vision and describes the strategy and operations of that business.

3–107

Analyze the Environment

• Environmental scanning– Screening large amounts of information to

detect emerging trends and create a set of scenarios

• Competitive intelligence– Accurate information about competitors that

allows managers to anticipate competitors’ actions rather than merely react to them

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SWOT: Identifying Organizational Opportunities

SWOT analysisAnalysis of an organization’s strengths, weaknesses, opportunities, and threats in order to identify a strategic niche that the organization can exploit

Exhibit 3.6

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SWOT Analysis• Strengths (strategic)

– Internal resources that are available or things that an organization does well.

• Core competency: a unique skill or resource that represents a competitive edge.

• Weaknesses– Resources that an organization lacks or activities that it does not do well.

• Opportunities (strategic)– Positive external environmental factors.

• Threats– Negative external environmental factors.

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Grand Strategies

• Growth strategy– A strategy in which an organization attempts to increase the level of

its operations.

• Stability strategy– A strategy that is characterized by an absence of significant change.

• Retrenchment strategy– A strategy characteristic of a company that is reducing its size,

usually in an environment of decline.

• Combination strategy– The simultaneous pursuit by an organization of two or more of

growth, stability, and retrenchment strategies.

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Growth Strategies

• Direct Expansion– Involves increasing a company’s size, revenues, operation, or

workforce.• Merger

– Occurs when two companies, usually of similar size, combine their resources to form a new company.

• Acquisition– Occurs when a larger company

buys a smaller one and incorporates the acquired company’s operations into its own.

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Competitive Strategies

• Strategies that position an organization in such a way that it will have a distinct advantage over its competition:– Cost-leadership strategy

• Becoming the lowest-cost producer in an industry.– Differentiation strategy

• Attempting to be unique in an industry within a broad market.– Focus strategy

• Attempting to establish an advantage (such as cost or differentiation) in a narrow market segment.

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Sustaining a Competitive Advantage

• Competitive advantage counts for little if it cannot be sustained over the long-term.– Factors reducing competitive advantage

• Evolutionary changes in the industry• Technological changes• Customer preferences• Imitation by competitors

– Defending competitive advantage• Patents, copyrights, trademarks, regulations, and tariffs• Competing on price• Long-term contracts with suppliers (and customers)

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Evaluating StrategyStrategyStrategy

FormulationFormulation

EvaluationEvaluation

ImplementationImplementationand Executionand Execution

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Quality as a Strategic Weapon

• Benchmarking– The search for the best practices among competitors or

noncompetitors that lead to their superior performance.• ISO 9000 series

– Standards designed by the International Organization for Standardization (ISO) that reflect a process whereby independent auditors attest that a company’s factory, laboratory, or office has met quality management requirements.

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Attaining Six Sigma Quality

• Six Sigma– A philosophy and measurement process developed in

the 1980s at Motorola.

– To design, measure, analyze, and control the input side of a production process to achieve the goal of no more than 3.4 defects per million parts or procedures.

– A philosophy and measurement process that attempts to design in quality as a product is being made.

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Six Sigma 12-Process Steps• Select the critical-to-quality characteristics.• Define the required performance standards.• Validate measurement system, methods, and procedures.• Establish the current processes’ capability.• Define upper and lower performance limits.• Identify sources of variation.• Screen potential causes of variation to identify the vital few variables needing

control.• Discover variation relationship for the vital variables.• Establish operating tolerances on each of the vital variables.• Validate the measurement system’s ability to produce repeatable data.• Determine the capability of the process to control the vital variables.• Implement statistical process control on the vital variables.

Exhibit 3.7

Source: Cited in D Harold and F. J. Bartos, “Optimize Existing Processes to Achieve Six Sigma Capability,” reprinted from Control Engineering Practice, © 1998, p. 87, with permission from Elsevier Science.

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Identifying A Competitive Advantage

• Environmental sources of entrepreneurial opportunity– The unexpected– The incongruous– The process need– Industry and market structures– Demographics– Changes in perception– New knowledge

Copyright © 2005 Prentice Hall, Inc.All rights reserved.

Chapter 4

Foundations of Decision Making 4PART II: Planning

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Learning OutcomesAfter reading this chapter, I will be

able to:1. Describe the steps in the decision-making process.

2. Identify the assumptions of the rational decision-making model.

3. Explain the limits to rationality.

4. Define certainty, risk, and uncertainty as they relate to decision making.

5. Describe the actions of the bounded-rational decision maker.

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Learning Outcomes (cont’d)After reading this chapter, I will be

able to:6. Identify the two types of decision problems and the two types of decisions that are used to solve them.

7. Define heuristics and explain how they affect the decision-making process.

8. Identify four decision-making styles.

9. Describe the advantages and disadvantages of group decisions.

10. Explain three techniques for improving group decision making.

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Decision-making

• Decision-making process– A set of eight steps that includes identifying a

problem, selecting a solution, and evaluating the effectiveness of the solution

• Problem– A discrepancy between an existing and a desired state

of affairs• Decision criteria

– Factors that are relevant in a decision

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Examples of Planning-Function Decisions

What are the organization’s long-term objectives? What strategies will best achieve those objectives? What should the organization’s short-term objectives be? What is the most efficient means of completing tasks? What might the competition be considering? What budgets are needed to complete department tasks? How difficult should individual goals be?

Exhibit 4.1

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The Decision-Making Process

Exhibit 4.2

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Criteria and Weight in Car-Buying Decision

(Scale of 1 to 10)CRITERION WEIGHT

Price 10

Interior comfort 8

Durability 5

Repair record 5

Performance 3

Handling 1

Exhibit 4.3

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Assessment of Car Alternatives

Exhibit 4.4

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Weighting of Vehicles(Assessment Criteria X Criteria Weight)

Exhibit 4.5

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Decision-making (cont’d)

• Decision implementation– Putting a decision into action; includes

conveying the decision to the persons who will be affected by it and getting their commitment to it.

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Making Decisions: The Rational Model

• Certainty– The implication that the outcome of every possible

alternative is known.• Uncertainty

– A condition under which there is not full knowledge of the problem and reasonable probabilities for alternative outcomes cannot be determined.

• Risk– The probability that a particular outcome will result from a

given decision.

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Assumptions of Rationality

Exhibit 4.6

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What Is Creative Potential?

• Expertise– Understanding, abilities, knowledge, proficiencies, necessary

in the field of creative endeavor.• Creative-thinking skills

– The personality characteristics associated with creativity, the ability to use analogies, as well as the talent to see the familiar in a different light.

• Intrinsic task motivation– The desire to work on something because it’s interesting,

involving, exciting, satisfying, or personally challenging.

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Three Elements of Creativity

CreativityThe ability to produce novel and useful ideas

Exhibit 4.7Source: T. M. Amabile. “Motivating Creativity in Organizations,” Califormia Management Review (Fall 1997), p. 43. Copyright © 1997, by The Regents of the University of California. Reprinted by permission of the Regents.

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Making Decisions: The Rational Model

• Rational– Describes choices that are consistent and value-maximizing

within specified constraints.• Bounded rationality (Herbert Simon)

– Behavior that is rational within the parameters of a simplified model that captures the essential features of a problem.

• Satisfice– Making a “good enough” decision: choosing the first-

identified alternative that satisfactorily and sufficiently solves the problem.

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Common Decision-making Errors

• Heuristics: Using judgmental shortcuts– Availability heuristic

• The tendency to base judgments on information that is readily available.

– Representative heuristic• The tendency to base judgments of probability on things

(objects or events) that are familiar– Escalation of commitment

• An increased commitment to a previous decision despite negative information about the decision’s present outcomes.

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How Do Problems Differ?• Well-structured problems

– Straightforward, familiar, easily defined problems

• Ill-structured problems– New problems in which information is ambiguous or incomplete

• Programmed decision– A repetitive decision that can be handled by a routine approach

• Nonprogrammed decisions– Decisions that must be custom-made to solve unique and nonrecurring

problems

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Programmed Decision-Making Aids

• Policy– A general guide that establishes parameters for making

decisions about recurring problems.• Procedure

– A series of interrelated sequential steps that can be used to respond to a well-structured problem (policy implementation).

• Rule– An explicit statement that tells managers what they ought or

ought not to do (limits on procedural actions).

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Types of Problems, Types of Decisions,

and Level in the Organization

Exhibit 4.8

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Technology And Decision Making• Expert systems

– Software that acts like an expert in analyzing and solving ill-structured problems

• Use specialized knowledge about a particular problem area rather than general knowledge

• Use qualitative reasoning rather than numerical calculations• Perform at a level of competence higher than that of nonexpert

humans.

• Neural networks– Software that is designed to imitate the structure of

brain cells and connections among them

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Decision Making: Styles

• Directive style– Characterizes the low tolerance for ambiguity and a

rational way of thinking of individuals who are logical and efficient and typically make fast decisions that focus on the short term.

• Analytic style– Characterizes the high tolerance for ambiguity

combined with a rational way of thinking of individuals who prefer to have complete information before making a decision.

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Decision Making: Styles (cont’d)

• Conceptual style– Individuals who tend to be very broad in outlook,

to look at many alternatives, and to focus on the long run and often look for creative solutions.

• Behavioral style– Individuals who think intuitively but have a low

tolerance for uncertainty; they work well with others, are open to suggestions, and are concerned about the individuals who work for them.

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Decision-Making Styles

Exhibit 4.9

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Group Decision Making

• Advantages– Make more accurate

decisions– Provides more complete

information– Offers a greater diversity of

experiences and perspectives– Generates more alternatives– Increases acceptance of a

solution– Increases the legitimacy of a

decision.

• Disadvantages– Is more time-consuming

and less efficient– Minority domination can

influence decision process– Increased pressures to

conform to the group’s mindset (groupthink)

– Ambiguous responsibility for the outcomes of decisions

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When Are Groups Most Effective?

• Creativity– Groups tend to be more creative than individuals.

• Acceptance of the final solution– Groups help increase the acceptance of decisions.

• Effectiveness of group decision making– Groups of five to seven members are optimal for

decision process speed and quality.

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Improving Group Decision Making

• Brainstorming– An idea-generating process that encourages

alternatives while withholding criticism.• Nominal group technique

– A decision-making technique in which group members are physically present but operate independently.

• Electronic meeting– A type of nominal group technique in which

participants are linked by computer.

Copyright © 2005 Prentice Hall, Inc.All rights reserved.

Chapter 5Basic Organization Designs

5

PART III: Organizing

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Learning OutcomesAfter reading this chapter, I will be

able to:1. Identify and define the six elements of organization structure.

2. Describe the advantages and disadvantages of work specialization.

3. Contrast authority and power.

4. Identify the five different ways by which management can departmentalize.

5. Contrast mechanistic and organic organizations.

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Learning Outcomes (cont’d)After reading this chapter, I will be

able to:6. Summarize the effect of strategy, size, technology, and environment on organization structures.

7. Contrast the divisional and functional structures.

8. Explain the strengths of the matrix structure.

9. Describe the boundaryless organization and what elements have contributed to its development.

10. Explain what is meant by the term learning organization.

11. Describe what is meant by the term organization culture.

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The Elements of Structure

• Organization design– A process in which managers develop or

change their organization’s structure.• Work specialization

– A component of organization structure that involves having each discrete step of a job done by a different individual rather than having one individual do the whole job.

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Economies and Diseconomies of Work Specialization

Exhibit 5.1

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Organizational Structure: Control

• Chain of command– The continuous line of authority that extends from upper

organizational levels to the lowest levels and clarifies who reports to whom.

• Unity of Command– The management principle that no person should report to

more than one boss.• Span of control

– The number of subordinates a manager can direct efficiently and effectively.

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Chain of Command

Exhibit 5.2

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Organizational Structure: Control (cont’d)

• Authority– The rights inherent in a managerial position to

give orders and expect them to be obeyed.• Power

– An individual’s capacity to influence decisions.• Responsibility

– An obligation to perform assigned activities.

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Types of Organizational Authority

• Line authority– The position authority (given and defined by the

organization) that entitles a manager to direct the work of operative employees.

• Staff authority– Positions that have some authority (e.g.,

organization policy enforcement) but that are created to support, assist, and advise the holders of line authority.

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Line Versus Staff Authority

Exhibit 5.3

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Authority Versus Power: Authority

Exhibit 5.4a

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Authority Versus Power: Power

Exhibit 5.4b

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Types of PowerCoercive power Power based on fear.

Reward power Power based on the ability to distributesomething that others value.

Legitimate power Power based on one’s position in theformal hierarchy.

Expert power Power based on one’s expertise, special skill, or knowledge.

Referent power Power based on identification with aperson who has desirable resources orpersonal traits.

Exhibit 5.5

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Centralization And Decentralization

• Centralization– A function of how much decision-making

authority is pushed down to lower levels in an organization; the more centralized an organization, the higher the level at which decisions are made

• Decentralization– The pushing down of decision-making authority to

the lowest levels of an organization

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Types of Departmentalization

Functional

Product

Customer

Geographic

Process

Exhibit 5.6

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Departmentalization• Functional departmentalization

– The grouping of activities by functions performed

• Product departmentalization– The grouping of activities by product produced

• Customer departmentalization– The grouping of activities by common customers

• Geographic departmentalization– The grouping of activities by territory

• Process departmentalization– The grouping of activities by work or customer flow

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Contingency Variables Affecting Structure

• Mechanistic organization– The bureaucracy; a structure that is high in

specialization, formalization, and centralization• Organic organization

– An adhocracy; a structure that is low in specialization, formalization, and centralization

Structure follows strategy

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Mechanistic versus Organic Organizations

• Rigid hierarchical relationships • Fixed duties • Many rules • Formalized communication

channels• Centralized decision authority• Taller structures

• Collaboration (both vertical and horizontal)

• Adaptable duties• Few rules• Informal communication• Decentralized decision authority• Flatter structures

Exhibit 5.7

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Technology and Structure

• Unit production– Production in terms of units or small batches

• Mass production– Production in terms of large batch

manufacturing• Process production

– Production in terms of continuous processing

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Organization Design Applications

• Simple structure– An organization that is low in specialization and

formalization but high in centralization• Functional structure

– An organization in which similar and related occupational specialties are grouped together

• Divisional structure– An organization made up of self-contained units

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Functional Structure

Exhibit 5.8

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Divisional Structure

Exhibit 5.9

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Other Organizational Structures

• Matrix structure– An organization in which specialists from functional

departments are assigned to work on one or more projects led by a project manager

• Team-based structure– An organization that consists entirely of work groups or

teams• Boundaryless organization

– An organization that is not defined or limited by boundaries or categories imposed by traditional structures

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Sample Matrix Structure

Exhibit 5.10

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Virtual Organization

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Learning Organization

• An organization that has developed the capacity to continuously adapt and change because all members take an active role in identifying and resolving work-related issues.– Organization design

– Information sharing

– Leadership

– Organizational culture

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Characteristics of a Learning Organization

Exhibit 5.11

Source: Based on P. M. Senge, The Fifth Discipline: The Art and Practice of Learning Organizations (New York: Doubleday, 1990); and R. M. Hodgetts, F. Luthans, and S. M. Lee, “New Paradigm Organizations: From Total Quality to Learning to World Class.” Organizational Dynamics (Winter 1994), pp. 4–19.

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Organization Culture

• Organization culture– A system of shared meaning within an organization

that determines, to a large degree, how employees act– Shared values are shown in cultural elements:

• Stories, rituals, material symbols, and language unique to the organization

– Results from the interaction between:• The founders’ biases and assumptions• What the first employees learn subsequently from their own

experiences.

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10 Characteristics of Organization Culture

• Member identity• Group emphasis• People focus• Unit integration• Control

• Risk tolerance • Reward criteria• Conflict tolerance• Means-end orientation• Open-systems focus

Exhibit 5.12