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1-1. The Exceptional Manager: What You Do, How You Do It. chapter one McGraw-Hill/Irwin Copyright ©2003, The McGraw-Hill Companies, Inc. All Rights Reserved.

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Presentation on theme: "1-1. The Exceptional Manager: What You Do, How You Do It. chapter one McGraw-Hill/Irwin Copyright ©2003, The McGraw-Hill Companies, Inc. All Rights Reserved."— Presentation transcript:

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2 The Exceptional Manager: What You Do, How You Do It. chapter one McGraw-Hill/Irwin Copyright ©2003, The McGraw-Hill Companies, Inc. All Rights Reserved

3 1-3 Major Questions You Should Be Able to Answer: 1.1 Management—What It Is, What Its Benefits Are What are the rewards of being an exceptional manager—of being a star in my workplace? 1.2 Six Challenges to Being a Star Manager What are six challenges I could look forward to as a manager? 1.3 What Managers Do—The Four Principle Functions What would I actually do—that is, what would be my four principle functions as a manager?

4 1-4 Major Questions You Should Be Able to Answer… Continued: What are the levels and areas of management I need to know to move up, down, and sideways? 1.4 Pyramid Power—Levels & Areas of Management What are the levels and areas of management I need to know to move up, down, and sideways? To be an exceptional manager, what roles must I play successfully? 1.5 Roles Managers Must Play Successfully To be an exceptional manager, what roles must I play successfully? To be a terrific manager, what skills should I cultivate? 1.6 The Skills Star Managers Need To be a terrific manager, what skills should I cultivate?

5 1-5 One-Minute Guide to Success Four Rules of Success Rule 1: Rule 1: Attend every class. No cutting allowed Rule 2: Rule 2: Don’t postpone studying, then cram the night before a test Rule 3: Rule 3: Read or review lectures and readings more than once Rule 4: Rule 4: Learn how to use this book Using the Book Effectively Read the first page of the chapter to get an overview Read “Forecast: What’s Ahead in This Chapter” Read “The Big Picture” Read the section itself—try to answer the Major Questions Use the Key Terms and Summary at the end to see how well you understand the concepts Use the Book’s “Click-Along” Feature

6 1-6 Staying Ahead in Your Career Take charge of your career and avoid misconceptions Take charge of your career and avoid misconceptions Develop new capacities Develop new capacities Anticipate & adapt to, even embrace change Anticipate & adapt to, even embrace change Keep learning Keep learning Develop your people & communication skills Develop your people & communication skills

7 1-7 Management Defined Management: efficiently effectively by Management: 1.) the pursuit of organizational goals efficiently and effectively by 2) integrating the work of people through 3) planning, organizing, leading, and controlling the organization’s resources Efficiency: Efficiency: use resources—wisely and cost-effectively Effectiveness: Effectiveness: to achieve results, to make the right decisions and successfully carry them out so that they achieve the organization’s goals

8 1-8 The Multiplier Effect Multiplier Effect: Multiplier Effect: Your influence as manager on the organization is multiplied far beyond the results that can be achieved by just one person acting alone

9 1-9 Executive Pay Average yearly income for CEOs and Presidents of small and midsize firms by region Mid- Atlantic States MidwestWestSouthSoutheastNortheast $246,000 $264,000 $288,000 $304,000 $318,000 $324,000 Panel 1.1

10 1-10 Managing for Competitive Advantage Competitive Advantage: Competitive Advantage: the ability of an organization to produce goods or services more effectively than competitors do, thereby outperforming them This means an organization must stay ahead in four areas: 1.Being responsive to customers 2.In innovating 3.In quality 4.In efficiency

11 1-11 Challenges to Being a Star Manager Challenge #1 Managing for Competitive AdvantageChallenge #1 Managing for Competitive Advantage Being Responsive to Customers Being Responsive to Customers Innovation: Finding ways to deliver new or better goods or servicesInnovation: Finding ways to deliver new or better goods or services Quality Quality Efficiency Efficiency

12 1-12 Challenges to Being a Star Manager Challenge # 2 Managing for Diversity Challenge # 2 Managing for Diversity Challenge # 3 Managing for Globalization Challenge # 3 Managing for Globalization Challenge #4 Managing for Information Technology Challenge #4 Managing for Information Technology Challenge # 5 Managing for Ethical Standards Challenge # 5 Managing for Ethical Standards

13 1-13 Challenge # 6 Managing for Your Own Happiness & Life Goals Challenge # 6 Managing for Your Own Happiness & Life Goals Many students in business schools report that they would rather be entrepreneurs, consultants, or venture capitalists than managers. Challenges to Being a Star Manager

14 1-14 The Management Process Planning You set goals and decide how to achieve them Organizing You arrange tasks, people, & other resources to accomplish the work You arrange tasks, people, & other resources to accomplish the work Leading You motivate, direct & otherwise influence people to work hard to achieve the organization’s goals Controlling You monitor performance, compare it with goals and take corrective action as needed Panel 1.2

15 1-15 The Levels and Areas of Management Levels of Management Functional Areas R&D Marketing Finance Production Human resources Top Managers Middle Managers First-Line Managers Nonmanagerial personnel Panel 1.3

16 1-16 Top Managers Make long-term decisions about the overall direction of the organization Establish the objectives, policies and strategies for it

17 1-17 Middle Managers Implement policies of top managers above them Supervise and coordinate the activities of the first-line managers below them

18 1-18 First-Line Managers Make short-term operating decisions Direct the daily tasks of nonmanagerial personnel

19 1-19 Functional Managers vs. General Managers Functional Manager: Functional Manager: is responsible for just one organizational activity General Manager: General Manager: is responsible for several organizational activities

20 1-20 Mintzberg’s Useful Findings 1. A manager relies more on verbal than on written communication 2. A manager works long hours at an intense pace 3. A manager’s work is characterized by fragmentation, brevity & variety

21 1-21 Managerial Roles Figurehead Role Figurehead Role you perform symbolic tasks that represent the organization Leadership Role Leadership Role Your leadership is expressed in your decisions about training, motivating and disciplining people Liaison Role Liaison Role you act like a politician, forming outside alliances that will help you achieve your organization’s goals 1. Interpersonal Roles

22 1-22 Managerial Roles Monitor Role Monitor Role you should be constantly alert for useful information Disseminator Role Disseminator Role managers need to constantly disseminate important information to employees via and meetings Spokesperson Role Spokesperson Role to act as diplomat and put the best face on the activities of your work unit or organization to people outside it 2. Informational Roles

23 1-23 Managerial Roles Entrepreneur Role Entrepreneur Role to initiate and encourage change and innovation Disturbance Handler Role Disturbance Handler Role unforeseen problems require you to be a disturbance handler, fixing problems Resource Allocator Role Resource Allocator Role you’ll never have enough time, money and so on, so you’ll have to set priorities about the use of resources 3. Decisional Roles Negotiator Role Negotiator Role working with others outside and inside the organization to accomplish your goals

24 1-24 Technical Skills—the Ability to Perform a Specific Job Technical Skills: Technical Skills: consist of job- specific knowledge needed to perform in a specialized field

25 1-25 Conceptual Skills—the Ability to Think Analytically Conceptual Skills Conceptual Skills consist of the ability to think analytically, to visualize an organization as a whole and understand how the parts work together

26 1-26 Human Skills—the Ability to Interact Well with People Human Skills Human Skills consist of the ability to work well in cooperation with other people to get things done

27 1-27 Key Terms competitive advantage conceptual skills controlling decisional roles effective efficient first-line managers four management functions functional managers general managers human skills informational roles innovation interpersonal roles leading management management process middle managers organization organizing planning technical skills top managers

28 1-28 Management in Action What unique managerial skills were needed during the crisis? What unique managerial skills were needed during the crisis? To what extent were Mr. Michaud, Mr. Senchak, Mr. Stocker, and middle managers at Blue Cross and Blue Shield efficient and effective? Was either of these criteria— efficiency or effectiveness—more important than the other? To what extent were Mr. Michaud, Mr. Senchak, Mr. Stocker, and middle managers at Blue Cross and Blue Shield efficient and effective? Was either of these criteria— efficiency or effectiveness—more important than the other? Using Panel 1.2 as a guide, describe which of the four functions of management were displayed in the case Using Panel 1.2 as a guide, describe which of the four functions of management were displayed in the case Which of the three types of managerial roles did Mr. O’Neal, Mr. Duffy, and middle managers at Blue Cross and Blue Shield display? Which of the three types of managerial roles did Mr. O’Neal, Mr. Duffy, and middle managers at Blue Cross and Blue Shield display?

29 1-29 Ethical Dilemma Aggressively pursue the clients of a fired broker, but not use false statements in letters or phone conversations. Aggressively pursue the clients of a fired broker, but not use false statements in letters or phone conversations. Send clients a letter informing them that the broker no longer worked in the firm, and ask them if they would like to be reassigned to another broker. Send clients a letter informing them that the broker no longer worked in the firm, and ask them if they would like to be reassigned to another broker. Let the fired employee retain his or her clients. Let the fired employee retain his or her clients. Invent other options. (Discuss). Invent other options. (Discuss). What would you do to prevent this situation from happening again at Waddell & Reed?

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31 Management Theory: Essential Background for the Successful Manager chapter two McGraw-Hill/Irwin Copyright ©2003, The McGraw-Hill Companies, Inc. All Rights Reserved

32 1-32 Major Questions You Should Be Able to Answer: What’s the payoff in studying different management perspectives, both yesterday’s and today’s? 2.1 Evolving Viewpoints: How we got to Today’s Management Outlook What’s the payoff in studying different management perspectives, both yesterday’s and today’s? If the name of the game is to manage work more efficiently, what can the classical viewpoints teach me? 2.2 The Classical Viewpoints: Scientific & Administrative Management If the name of the game is to manage work more efficiently, what can the classical viewpoints teach me? To understand how people are motivated to achieve, what can I learn from the behavioral viewpoints? 2.3 The Behavioral Viewpoints: Early Behaviorism, Human Relations, & Behavioral Science To understand how people are motivated to achieve, what can I learn from the behavioral viewpoints? 2.4 The Quantitative Viewpoints: Management Science & Operations Research If the manager’s job is to solve problems, how might the two quantitative approaches help? 2.4 The Quantitative Viewpoints: Management Science & Operations Research If the manager’s job is to solve problems, how might the two quantitative approaches help?

33 1-33 Major Questions You Should Be Able to Answer Continued: How can an exceptional manager be helped by the systems viewpoint? 2.5 The Systems Viewpoint How can an exceptional manager be helped by the systems viewpoint? In the end, is there one best way to manage in all situations? 2.6 The Contingency Viewpoint In the end, is there one best way to manage in all situations? Can the quality-management viewpoint offer guidelines for true managerial success 2.7 The Quality-Management Viewpoint Can the quality-management viewpoint offer guidelines for true managerial success 2.8 The Learning Organization Organizations must learn or perish. How do I build a learning organization? 2.8 The Learning Organization Organizations must learn or perish. How do I build a learning organization?

34 1-34 The Manager’s Toolbox: Mindfulness Over Mindlessness: Being a Learner in a Learning Organization Entrapment in old categories: Entrapment in old categories: there is no “right way” of doing things--you should act as though the information is true only for certain uses or under certain circumstances Automatic behavior: Automatic behavior: in automatic behavior we take in and use limited signals from the world around us without letting other signals penetrate as well—in contrast mindfulness is being open to new information—it requires you to engage more fully in what you are doing Acting from a single perspective: Acting from a single perspective: a single perspective that gives you an automatic reaction reduces your options—trying out different perspectives gives you more choices in how to respond mindfulness Developing mindfulness means consciously adapting, being open to novelty, alert to distinctions, sensitive to different contexts, aware of multiple perspectives, & being oriented in the present

35 1-35 Is Management an Art or a Science? 1. You observe events and gather facts 2. You pose a possible solution or explanation based on those facts 3. You make a prediction of future events 4. You test the prediction under systematic conditions Management can be approached deliberately, rationally, systematically. That’s what the scientific method is, a logical process, embodying four steps:

36 1-36 Two Overarching Perspectives About Management & Four Practical Reasons for Studying Them Historical: Historical: includes three viewpoints— classical, behavioral, & quantitative Contemporary: Contemporary: also includes three viewpoints— systems, contingency & quality-management

37 1-37 Two Overarching Perspectives About Management & Four Practical Reasons for Studying Them Guide to action Guide to action knowing management principles helps you develop a set of principles that will guide your actions Source of new ideas Source of new ideas being aware of various perspectives can also provide new ideas when you encounter new situations Clues to meaning of your managers’ decisions Clues to meaning of your managers’ decisions it can help you understand the focus of your organization, where the top managers are “coming from” Clues to meaning of outside events Clues to meaning of outside events finally, it may allow you to understand events outside the organization that could affect it or you

38 1-38 Historical Management Perspective: Classical Viewpoint The Classical Viewpoint: The Classical Viewpoint: emphasized finding ways to manage work more efficiently— two branches: Scientific and Administrative

39 1-39 Panel 2.1: The Historical Perspective Classical Viewpoint Emphasis on ways to manage work more efficiently Scientific Management Emphasized scientific study of work methods to improve productivity of individual workers Proponents: Frederick W. Taylor Frank & Lillian Gilbreth Administrative Management Concerned with managing the entire organization Proponents: Henry Taylor Max Weber Behavioral science approach Relies on scientific research for developments theory to provide practical manager tools Behavioral Viewpoint Emphasis on importance of understanding human behavior & motivating & encouraging employees toward achievement Early Behaviorists Proponents: Hugo Munsterberg, Mary Parker Follet, Elton Mayo Human Relations Movement Proposed better human relations could increase worker productivity Proponents: Abraham Maslow Douglas McGregor Quantitative Viewpoint Applies quantitative techniques to management Operations Management Focuses on managing the production and delivery of an organization’s products or services more effectively Management Science Focuses on using mathematics to aid in problem solving and decision making

40 1-40 Scientific Management Scientific Management: Scientific Management: emphasized the scientific study of work methods to improve the productivity of individual workers Two of its chief proponents were Frederick W. Taylor, & Frank and Lillian Gilbreth

41 1-41 Frederick Taylor & the Four Principles of Scientific Management 1. Evaluate a task by scientifically studying each part of the task 2. Carefully select workers with the right abilities for the task 3. Give workers the training and incentives to do the task with the proper work methods 4. Use scientific principles to plan the work methods and ease the way for workers to do their jobs

42 1-42 Administrative Management Administrative Management: Administrative Management: concerned with managing the total organization Among the pioneering theorists were Henry Fayol & Max Weber

43 1-43 Henry Fayol and the Functions of Management Planning You set goals and decide how to achieve them Organizing You arrange tasks, people, & other resources to accomplish the work You arrange tasks, people, & other resources to accomplish the work Leading You motivate, direct & otherwise influence people to work hard to achieve the organization’s goals Controlling You monitor performance, compare it with goals and take corrective action as needed Henry Fayol Henry Fayol was the first to systematize management management behavior– he was the first to identify the major functions of management: planning, organizing, leading, controlling, as well as coordinating

44 1-44 Max Weber & the Rationality of Bureaucracy 1. A well-defined hierarchy of authority 2. Formal rules and procedures 3. A clear division of labor 4. Impersonality 5. Careers based on merit To Weber, a bureaucracy was a rational, efficient ideal organization based on principles of logic—he felt good organizations should have five bureaucratic features:

45 1-45 The Problem with the Classical Viewpoint mechanistic The classical viewpoint tends to be too mechanistic: it tends to view humans as cogs within a machine, not taking into account the importance of human needs

46 1-46 Historical Management Perspective: The Behavioral Viewpoint Behavioral Viewpoint: Behavioral Viewpoint: emphasized the importance of understanding human behavior and motivating employees toward achievement—developed over three phases: early behaviorism, the human relations movement, & behavioral science

47 1-47 The Early Behaviorists: Munsterberg, Follett, and Mayo 1. Study jobs and determine which people are best suited to specific jobs 2. Identify the psychological conditions under which employees did their best work 3. Devise management strategies to influence employees to follow the management’s interests Hugo Munsterberg & The First Application of Psychology to Industry Munsterberg felt science could contribute to industry in three ways:

48 1-48 The Early Behaviorists: Munsterberg, Follett, and Mayo 1. Organizations should be operated as “communities” with managers and subordinates working together in harmony 2. Conflicts should be resolved by having the managers and workers talk over differences and find solutions that would satisfy both parties: integration 3. The work process should be under the control of workers with relevant knowledge rather than of managers who should act as facilitators Mary Parker Follett & Power Sharing Among Employees & Managers Follett thought organizations should become more democratic, with managers and employees working cooperatively

49 1-49 The Early Behaviorists: Munsterberg, Follett, and Mayo 1. In later experiments, variables such as wage levels, rest periods and length of the work day were varied 2. Worker performance seemed to increase over time leading Mayo and his colleagues to hypothesize the Hawthorne Effect 3. That employees worked harder if they received added attention, if they thought managers cared about their welfare and that supervisors paid attention to them 4. They succeeded in drawing attention to the “social man” and how managers using good human relations could improve worker productivity Elton Mayo & the Supposed Hawthorne Effect Elton Mayo and his colleagues conducted studies at Western Electric’s Hawthorne Plant and began with an investigation to see if different lighting affected workers’ productivity

50 1-50 The Human Relations Movement: Pioneered by Maslow & McGregor 1. What motivates you? Food, Security, Love? Recognition, Self-fulfillment? 2. Probably all of these, though some more than others 3. Maslow proposed that the needs are physiological, safety, social, esteem, and self-actualization (discussed in detail in chapter 12) Human Relations Movement: Human Relations Movement: proposed that better human relations could increase worker productivity One of the earliest to study motivation, Maslow proposed his “hierarchy of human needs” in Abraham Maslow & the Hierarchy of Needs

51 1-51 The Human Relations Movement: Douglas McGregor & Theory X versus Theory Y Pessimistic negative view towards workers Pessimistic negative view towards workers Workers are irresponsible Workers are irresponsible Workers are resistant to change Workers are resistant to change Workers lack ambition, hate to work Workers lack ambition, hate to work Workers would rather be led than lead Workers would rather be led than lead Optimistic positive view of workers: human relations proponents’ view Optimistic positive view of workers: human relations proponents’ view Workers are capable of accepting responsibility Workers are capable of accepting responsibility Workers are capable of self- direction Workers are capable of self- direction Workers are capable of self- control Workers are capable of self- control Workers are capable of being imaginative and creative Workers are capable of being imaginative and creative Theory X Theory Y Y

52 1-52 The Behavioral Science Approach Behavioral Science Behavioral Science relies on scientific research for developing theories about human behavior that can be used to provide practical tools for managers

53 1-53 Historical Management Perspective: The Quantitative Viewpoints Quantitative Management Quantitative Management the application of management of quantitative techniques, such as statistics, and computer simulations— two branches are management science and operations management

54 1-54 The Quantitative Viewpoints: Management Science Management Science Management Science focuses on using mathematics to aid in problem solving and decision making

55 1-55 The Quantitative Viewpoints: Operations Management Operations Management Operations Management focuses on managing the production and delivery of an organization’s products or services more effectively

56 1-56 The Contemporary Perspective: The Systems Viewpoint The Systems Viewpoint The Systems Viewpoint regards the organization as a system of interrelated parts By adopting this perspective you can look at your organization in two ways 1. A collection of subsystems— parts making up the whole system 2. A part of the larger environment

57 1-57 Panel 2.2: The contemporary perspective: Three Viewpoints The System Viewpoint Regards the organization as a system of interrelated parts that operate together to achieve a common purpose The Contingency Viewpoint Emphasizes that a manager’s approach should vary according to—I.e. be contingent on—the individual and environmental situation The Quality Management Viewpoints Three approaches Quality Control Strategy for minimizing errors by managing each state of production Proponent: Walter Stewart Quality Assurance Focuses on the performance of workers urging employees to strive for “zero defects” Total Quality Management Comprehensive approach dedicated to continuous quality improvement, training, and customer satisfaction Proponents: W. Edward Deming Joseph M. Juran

58 1-58 The Four Parts of a System Inputs The people, money, information, equipment, and materials required to produce and organization’s goods or services Outputs The products, services, profits, losses, employee satisfaction or discontent, and the like that are produced by the organization Transformational Processes The organization’s capabilities in management and technology that are applied to converting inputs to outputs Feedback Information about the reaction of the environment to the outputs that affect the inputs

59 1-59 Panel 2.3: The Four Parts of a System Input The people, money, information, equipment and materials required to produce and organization’s goods or services Example: For a jewelry designer- designer money, artistic talent, gold and silver tools, marketing expertise Transformational Process The organization’s capabilities in management and technology that are applied to converting inputs to outputs Example: Designer’s management skills (planning, organizing, leading, controlling) gold and silver smithing tools and expertise, website for marketing Output The products, services, profits, losses, employee satisfaction or discontent, and the like that are produced by the organization Example: Gold and silver rings, bracelets, etc. Feedback Information about the reaction of the environment to the outputs that affect the inputs Example: Web customers like Africa style designs, dislike imitation Old English designs

60 1-60 Open and Closed Systems Open System Open System continually interacts with its environment Closed System Closed System has little interaction with its environment; it receives very little feedback from the outside

61 1-61 The Contemporary Perspective: The Contingency Viewpoint The Contingency Viewpoint The Contingency Viewpoint emphasizes that a manager’s approach should vary according to—that is, be contingent on—the individual and the environmental situation

62 1-62 The Contemporary Perspective: The Quality Management Viewpoint The Quality Management Viewpoint The Quality Management Viewpoint includes quality control, quality assurance, and total quality management

63 1-63 Quality Control & Quality Assurance Quality Control Quality Control is defined as the strategy for minimizing errors by managing each stage of production Quality Assurance Quality Assurance focused on the performance of workers, urging employees to strive for “zero defects” Quality Quality refers to the total ability of a product to meet customer needs

64 1-64 Total Quality Management: Creating an Organization Dedicated to Continuous Improvement 1. Make Continuous Improvement a Priority 2. Get Every Employee Involved 3. Listen to and Learn from Customers and Employees 4. Use Accurate Standards to Identify and Eliminate Problems Total Quality Management Total Quality Management is a comprehensive approach—led by top managers and supported throughout the organization—dedicated to continuous quality improvement, training and customer satisfaction Four Components of TQM:

65 1-65 The Learning Organization: Handling Knowledge & Modifying Behavior 1. Creating and Acquiring Knowledge 2. Transferring Knowledge 3. Modifying Behavior A Learning Organization A Learning Organization is an organization that actively creates, acquires, and transfers knowledge within itself and is able to modify its behavior to reflect new knowledge Note the three parts

66 1-66 How to Build a Learning Organization: Three Roles Managers Play 1. You Can Build a Commitment to Learning 1. You Can Build a Commitment to Learning you as a manager need to invest in learning, publicly promote it, creating rewards and symbols of it, and similar activities to instill in employees a commitment to learning 2. You Can Work to Generate Ideas with Impact 2. You Can Work to Generate Ideas with Impact you need to generate ideas with impact--that is, add value for customers, employees, and shareholders—by increasing employee competence through training, experimenting with new ideas and other leadership activities 3. You Can Work to Generalize Ideas with Impact 3. You Can Work to Generalize Ideas with Impact reduce the barriers to learning among employees within your organization—you can create a psychologically safe and comforting environment that increases sharing of successes, failures and best practices

67 1-67 Key Terms administrative management behavioral science behavioral viewpoint classical viewpoint closed system contemporary perspective contingency viewpoint feedback historical perspective human relations movement inputs learning organization management science open system operations management outputs quality quality assurance quality control quality management viewpoint quantitative management scientific management subsystems total quality management TQM transformational process

68 1-68 Management in Action 1. Is Boeing making changes more reflective of managerial art or managerial science? Explain. 2. What advice would Frederick Taylor and Frank and Lillian Gilbreth probably offer managers at Boeing? 3. How might Boeing managers reduce resistance to change by using behavioral viewpoints and the human relations movement? 4. To what extent is Boeing using management science to reduce costs and increase productivity? Explain. 5. Are the changes made at Boeing consistent with recommendations derived from qualitative viewpoints? Provide evidence to support your opinions.

69 1-69 Ethical Dilemma 1. Leave the laws as they are. 2. Create regulations requiring that certified professionals test all recycled airbags for safety. 3. Do not allow secondhand air bags to be reused. 4. Invent other options. (Discuss). What would you do if you were a member of the National Highway and Traffic Safety Administration?

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71 The Manager’s Changing Work Environment & Responsibilities chapter three McGraw-Hill/Irwin Copyright ©2003, The McGraw-Hill Companies, Inc. All Rights Reserved

72 1-72 Major Questions You Should Be Able to Answer: Stockholders are only one group of stakeholders. Who are the stakeholders important to me inside the organization? 3.1 The Community of Stakeholders Inside the Organization Stockholders are only one group of stakeholders. Who are the stakeholders important to me inside the organization? Who are stakeholders important to me outside the organization? 3.2 The Community of Stakeholders Outside the Organization Who are stakeholders important to me outside the organization? What does the successful manager need to know about ethics and values? 3.3 The Ethical Responsibilities Required of You as a Manager What does the successful manager need to know about ethics and values? 3.4 The Social Responsibilities Required of You as a Manager is being socially responsible really necessary? 3.4 The Social Responsibilities Required of You as a Manager is being socially responsible really necessary?

73 1-73 Major Questions You Should Be Able to Answer Continued: What trends in workplace diversity should managers be aware of? 3.5 The New Diversified Workforce What trends in workplace diversity should managers be aware of? Do I have what it takes to be an entrepreneur? 3.6 The Entrepreneurial Spirit Do I have what it takes to be an entrepreneur?

74 1-74 The Manager’s Toolbox: Conscientious Managers Who Can Deal with Change A is for Accountability: A is for Accountability: you need to take responsibility and be accountable for you and your team’s performance—the days are gone when you can say “it’s not my job” B is for Balance: B is for Balance: there is always pressure to do more, learn more, create more, and it can make you feel like you need to take your work home with you—but it is important to maintain balance in your life. C is for Control: C is for Control: you can distinguish between urgent tasks and important tasks: Things with deadlines are all urgent, but may not be important—important tasks add value and are closely tied to long-term organizational success

75 1-75 Internal & External Stakeholders Stakeholders Stakeholders people whose interests are affected by an organization’s activities Managers operate in two organizational environments made up of various stakeholders: Internal Stakeholders External Stakeholders

76 1-76 Panel 3.1: The Organization’s Environment The General Environment The General Environment Economic Forces International Forces Technological Forces Political-legal Forces Socio-cultural Forces Demographic Forces Internal Stakeholders Employees Owners Board of Directors The Task Environment Customers Media Interest Groups Governments Lenders Unions Allies Distributors Suppliers Competitors External Stakeholders

77 1-77 Internal Stakeholders Internal Stakeholders Internal Stakeholders consist of employees, owners, and the board of directors, if any

78 1-78 Internal Stakeholders Employees In many of today’s forward looking organizations, employees are considered the “talent”—the most important resource Owners Owners of an organization consist of all those who can claim it as their legal property Board of Directors Its members are elected by stockholders to see that the company is being run according to their best interests—in nonprofit organizations, called board of trustees, or board of regents

79 1-79 The Community of Stakeholders Outside the Organization External Stakeholders External Stakeholders people or groups in the organization’s external environment that are affected by it The environment consists of: The Task Environment The General Environment

80 1-80 The Task Environment The Task Environment The Task Environment consists of 11 groups that present you with daily tasks to handle: Customers Competitors Suppliers Distributors Strategic allies Employee organizations Local communities Financial institutions Government regulators Special-interest groups Mass media

81 1-81 The Task Environment Customers Customers those who pay to use an organization’s goods or services Competitors Competitors people or organizations that compete for customers or resources Distributor Distributor is a person or an organization that helps another organization sell its goods and services to customers Strategic Allies Strategic Allies describe the relationship of two organizations who join forces to achieve advantages neither can perform as well alone Employee Organizations Employee Organizations unions and associations—as a rule of thumb unions represent hourly workers, associations tend to represent salaried workers

82 1-82 The Task Environment Local Communities Local Communities schools and municipal governments rely on the organization for their tax base—families and merchants depend on the organization for its payroll for their livelihood Financial Institutions Financial Institutions entrepreneurs may rely on credit cards, established companies need loans and rely on lenders such as commercial banks, investment banks, and insurance companies Government Regulators Government Regulators regulatory agencies that establish ground rules under which organizations can operate Special Interest Groups Special Interest Groups groups whose members try to influence specific issues Mass Media Mass Media no manager can afford to ignore the power of the mass media— most organizations have a public-relations person or department to communicate effectively with the press

83 1-83 The General Environment The General Environment The General Environment or macro environment includes six forces: Economic Technological Sociocultural Demographic Political-legal International

84 1-84 The General Environment Economic Forces Economic Forces consist of general economic conditions and trends— unemployment, inflation, interest rates, economic growth—that may affect an organization’s balance Technological Forces Technological Forces new developments for transforming resources into goods or services Sociocultural Forces Sociocultural Forces influences and trends originating in a country, society, or culture’s human relationships and values that may affect and organization Demographic Forces Demographic Forces influences on an organization arising from changes in characteristics of a population—age, gender or ethnic origin Political-legal Forces Political-legal Forces changes in the way politics shape laws and shape the opportunities for and threats to an organization International Forces International Forces changes in the economic, political, legal, and technological global system that may affect an organization

85 1-85 The Ethical Responsibilities Required of You as a Manager Ethical Dilemma Ethical Dilemma a situation in which you have to decide whether to pursue a course of action that may benefit you or your organization but is unethical or even illegal Ethics Ethics the standards of right and wrong that influence behavior Ethical Behavior Ethical Behavior is behavior accepted as “right” as opposed to “wrong” according to those standards

86 1-86 Four Approaches to Deciding Ethical Dilemmas 1. The Utilitarian Approach 1. The Utilitarian Approach guided by what will result in the greatest good for the greatest number of people 2. The Individual Approach 2. The Individual Approach guided by what will result in the individual’s best long- term interests, which ultimately, are everyone’s interests 3. The Moral Rights Approach 3. The Moral Rights Approach guided by respect for the fundamental rights of human beings 4. The Justice Approach 4. The Justice Approach guided by respect for impartial standards of fairness and equity

87 1-87 How Organizations Can Promote Ethics 1. Support by Top Managers of a Strong Ethical Climate 2. Ethics Codes & Training Programs:Code of Ethics 2. Ethics Codes & Training Programs: Code of Ethics consists of a formal written set of ethical standards guiding and organization’s actions 3. Rewarding Ethical Behavior: Protecting WhistleblowersWhistleblower 3. Rewarding Ethical Behavior: Protecting Whistleblowers Whistleblower is an employee who reports organizational misconduct to the public

88 1-88 The Social Responsibilities Required of You as a Manager Social Responsibility Social Responsibility is a manager’s duty to take actions that will benefit the interests of society as well as of the organization An example of social responsibility is Philanthropy Philanthropy donating money to worthwhile recipients

89 1-89 Four Managerial Approaches to Social Responsibility 1. The Obstructionist Manager Obstructionist Approach 1. The Obstructionist Manager Obstructionist Approach managers put economic gain first and resist social responsibility as being outside the organization’s self- interest 2. The Defensive Manager Defensive Approach 2. The Defensive Manager Defensive Approach managers make the minimum commitment to social responsibility—obeying the law but doing nothing more 3. The Accommodative Manager Accommodative Approach 3. The Accommodative Manager Accommodative Approach managers do more than the law requires, if asked, and demonstrate moderate social responsibility 4. The Proactive Manager Proactive Approach 4. The Proactive Manager Proactive Approach managers actively lead the way in being socially responsible for all stakeholders, using the organization’s resources to identify and respond to social problems

90 1-90 How to Think About Diversity: Which Differences Are Important? Diversity Diversity represents all the ways people are unlike and alike—the differences and similarities in age, gender, race, religion, ethnicity, sexual orientation, capabilities and socioeconomic background Internal Dimensions of Diversity Internal Dimensions of Diversity are human differences that exert a powerful, sustained effect throughout every stage of our lives External Dimensions of Diversity External Dimensions of Diversity include an element of choice; they consist of the personal characteristics that people acquire, discard, or modify throughout their lives Internal dimensionsExternal Dimensions GenderPersonal habits Ethnicity Educational background Race Religion Physical abilities Income Age Marital status Sexual orientation Geographic location Work experience Recreational habits Appearance

91 1-91 Trends in Workforce Diversity Age: More Older People in the Workforce

92 1-92 Trends in Workforce Diversity Gender: More Women Working Obstacles to women’s progress: so-called Glass Ceiling Glass Ceiling the metaphor for an invisible barrier preventing women and minorities from being promoted to top executive jobs

93 1-93 Trends in Workforce Diversity Race & Ethnicity: More People of Color in the Workforce

94 1-94 Trends in Workforce Diversity Sexual Orientation: More Gays and Lesbians Become More Visible

95 1-95 Trends in Workforce Diversity People with Differing Physical & Mental Abilities Americans with Disabilities Act Americans with Disabilities Act prohibits discrimination against the disabled

96 1-96 Trends in Workforce Diversity Educational Levels: Mismatches Between Education and Workforce Needs underemployed College Graduates may be in jobs for which they are overqualified underemployed working at jobs that require less education than they have High School Dropouts and others may not have the literacy skills needed for many jobs

97 1-97 Barriers to Diversity 1. Stereotypes & Prejudices Ethnocentrism 1. Stereotypes & Prejudices Ethnocentrism belief that one’s native country, culture, language, abilities, or behavior is superior to those of another culture 2. Fear of Reverse Discrimination 3. Resistance to Diversity Program Priorities 4. Unsupportive Social Atmosphere 5. Lack of Support for Family Demands 6. Lack of Support for Career-Building Steps

98 1-98 Entrepreneurship Defined: Taking Risks in Pursuit of Opportunity Entrepreneur Entrepreneur someone who sees a new opportunity for a product and launches a business to try to realize it Intrapreneur Intrapreneur someone who works inside an existing organization who sees opportunity for a product or service and mobilizes the organization’s resources to try to realize it Entrepreneurship Entrepreneurship is the process of taking risks to try to create a new enterprise

99 1-99 Key Terms Accommodative approach Americans with Disabilities Act Code of ethics Competitors Customers Defensive approach Demographic forces distributor diversity Economic forces ethnocentrism entrepreneur Entrepreneurship Ethical behavior Ethical Dilemma Ethics External dimensions of diversity General environment Glass ceiling Governmental regulators Individual approach Internal dimensions of diversity Internal locus of control Internal stakeholders International forces Intrapreneur Justice approach Moral rights approach Obstructionist approach Owners Philanthropy Political-legal forces Proactive approach Sociocultural forces Social responsibility Special-interest groups Stakeholders Strategic allies Supplier Task environment Technological forces Underemployed Utilitarian approach Value system Values Whistleblower

100 1-100 Management in Action 1. How do stakeholders vary between a publicly held firm and an employee-owned company? 2. Do employees have different ethical responsibilities? 3. To what extent do managers have different roles in an employee-earned firm? 4. Given the trends in workforce diversity discussed in this chapter, to what extent will future employees want to be affiliated with an employee-owned company? Discuss your rationale. 5. Would you like to work in an employee-owned company? Why or why not?

101 1-101 Ethical Dilemma 1. Redesign your position in protest over school board’s lack of support. 2. Do what the school board ordered. 3. Ignore the school board’s order and give the failing grade. 4. Invent other options. (Explain). What would you do if you were Christine Pelton?

102 1-102

103 Global Management: Managing Across Borders chapter four McGraw-Hill/Irwin Copyright ©2003, The McGraw-Hill Companies, Inc. All Rights Reserved

104 1-104 Major Questions You Should Be Able to Answer: What three important developments of globalization will probably affect me? 4.1 Globalization—The Collapse of Time & Distance: What three important developments of globalization will probably affect me? Why learn about international management, and what characterizes the successful international manager? 4.2 You & International Management Why learn about international management, and what characterizes the successful international manager? Why do companies expand internationally, and how do they do it? 4.3 Why & How Companies Expand Internationally: Why do companies expand internationally, and how do they do it?

105 1-105 Major Questions You Should Be Able to Answer Continued: How may foreign countries differ in their economic, political, and legal characteristics? 4.4 Economics & Political-Legal Differences: How may foreign countries differ in their economic, political, and legal characteristics? What are barriers to free trade, and what organizations and trading bloc promote trade? 4.5 The World of Free Trade—Regional Economic Cooperation: What are barriers to free trade, and what organizations and trading bloc promote trade? What are the principal areas of cultural differences? 4.6 The Importance of Understanding Cultural Differences: What are the principal areas of cultural differences?

106 1-106 The Manager’s Toolbox: Being a Star Road Warrior Frequent travel may be needed because personal encounters are essential to teamwork: Frequent travel may be needed because personal encounters are essential to teamwork: phones, , and videoconferencing aren’t entirely feasible—teamwork requires personal encounters Frequent travel requires frequent adjustments: Frequent travel requires frequent adjustments: Two Lessons Business Travelers Have Learned

107 1-107 Globalization: The Collapse of Time & Distance 1. The rise of the “global village” and electronic commerce 2. The world’s becoming one market instead of many national ones 3. The rise of both megafirms and Internet-enabled minifirms worldwide Globalization Globalization trend of the world economy toward becoming a more interdependent system

108 1-108 The Rise of the “Global Village” & Electronic Commerce Global Village Global Village refers to the “shrinking” of time and space as air travel and the electronic media have made it easier for people of the globe to communicate with one another e-commerce e-commerce or electronic commerce—the buying and selling of products and services through computer networks

109 1-109 One Big World Market: The Global Economy Global Economy Global Economy refers to the increasing tendency of economies of the world to interact with one another as one market instead of many national markets Negative Effects Can have some insecurity Economic crises in some countries can soon affect other countries Ex. the “Asian Crisis” p. 108 Positive Effects U.S. exports, international trade, and U.S. workers are connected Growth of jobs and income in other countries will mean growth of jobs and income for the U.S.

110 1-110 Cross-Border Business: The Rise of Both Megamergers & Minifirms Worldwide Megamergers The trend in the 1990’s was that oil, telecommunications, financial services, and pharmaceuticals weren’t suited to being mid-sized So they would cross- border: merge with other big companies Minifirms The Internet and the World Wide Web allow almost anyone to be global with two important results: 1. Small Companies Get Started More Easily 2. Small Companies Can Maneuver Faster

111 1-111 Why Learn About International Management? Multinational Corporation Multinational Corporation or multinational enterprise, is a business firm with operations in several countries Multinational Organization Multinational Organization is a nonprofit organization with operations in several countries

112 1-112 Why Learn About International Management? You May Deal with Foreign Customers or Partners You May Deal with Foreign Customers or Partners You May Deal with Foreign Suppliers You May Deal with Foreign Suppliers You May Work for a Foreign Firm in the United States You May Work for a Foreign Firm in the United States You May Work for an American Firm Outside the United States You May Work for an American Firm Outside the United States

113 1-113 The Successful International Manager: Geocentric, not Ethnocentric or Polycentric Ethnocentric Managers Ethnocentric Managers believe that their native country, culture, language, and behavior is superior to all others Polycentric Managers Polycentric Managers take the view that native managers in the foreign offices best understand native personnel and practices, and so the home office should leave them alone Geocentric Managers Geocentric Managers accept that there are differences and similarities between home and foreign personnel and practices that they should use whatever techniques are most effective The Lesson is Clear: if you become an Expatriate Manager it is imperative you try to lean all you can about the local culture so you can deal effectively and avoid being beaten by your competitors The Lesson is Clear: if you become an Expatriate Manager living or working in a foreign country—it is imperative you try to lean all you can about the local culture so you can deal effectively and avoid being beaten by your competitors

114 1-114 Why Companies Expand Internationally 1. Availability of Supplies 2. New Markets 3. Lower Labor Costs: maquiladoras 3. Lower Labor Costs: maquiladoras manufacturing plants allowed to operate in Mexico with special privileges in return for employing Mexican citizens 4. Access to Finance Capital 5. Avoidance of Tariffs & Import Quotas

115 1-115 Panel 1.4: How Companies Expand Internationally Global Outsourcing Importing, exporting, & countertrading Licensing & franchising Joint ventures Wholly owned subsidiaries Highest risk & investment Lowest risk & investment

116 1-116 How Companies Expand Internationally 1. Global Outsourcing Global Outsourcing 1. Global Outsourcing Global Outsourcing using suppliers outside the United States to provide labor, goods or services 2. Importing, Exporting, & Countertrading - Importing - Importing a company buys goods outside the country and resells them domestically - Exporting - Exporting a company produces goods domestically and sells them outside the country

117 1-117 How Companies Expand Internationally 3. Licensing & Franchising - Licensing - Licensing a company allows a foreign company to pay it a fee to make or distribute the first company’s product or service Franchising - Franchising is a form of licensing in which a company allows a foreign company to pay it a fee and a share of the profits in return for using the first company’s brand name and a package of materials and services

118 1-118 How Companies Expand Internationally 4. Joint Ventures Joint Venture 4. Joint Ventures Joint Venture also known as a strategic alliance with a foreign company to share the risks and rewards for starting a new enterprise together in a foreign country 5. Wholly-Owned Subsidiaries - Wholly Owned Subsidiary - Wholly Owned Subsidiary is a foreign subsidiary that is totally owned and controlled by an organization - Greenfield Venture - Greenfield Venture is a foreign subsidiary that the owning organization has built from scratch

119 1-119 Economic Differences: Adjusting to Other Countries’ Economies 1. Free Market Economy 1. Free Market Economy the production of goods and services are controlled by private enterprise and the interaction of forces of supply and demand, rather than by the government 2. Command Economy 2. Command Economy or central-planning economy the government owns most businesses and regulates the amounts, types, and prices of goods and services 3. Mixed Economy 3. Mixed Economy most of the important industries are owned by the government, but others are controlled by private enterprise - Privatization - Privatization state-owned businesses were sold off to private enterprise Principal Economic Systems:

120 1-120 Developed versus Less Developed Countries Developed Countries Developed Countries are those with a high level of economic development and generally high average level of income among their citizens Less Developed Countries Less Developed Countries also known as developing countries consist of nations with low economic development and low average incomes

121 1-121 Infrastructure & Resources Infrastructure Infrastructure consists of the physical facilities that form the basis for its level of economic development Exchange Rate Exchange Rate is the rate at which one country’s currency can be exchanged for another country’s currency

122 1-122 Political-Legal Differences: Adjusting to Other Countries’ Governments & Laws Democratic Democratic rely on free elections and representative assemblies Totalitarian Totalitarian ruled by a dictator, a single political party, or a special- membership group Governmental Systems: Democratic VS. Totalitarian

123 1-123 Political-Legal Differences: Adjusting to Other Countries’ Governments & Laws Instability: Even developed countries can be victimized by political instability Riots Civil disorders Revolutions or changes in government Expropriation Expropriation is a government’s seizure of a foreign companies assets Political Risk Political Risk Political Risk the risk that political changes will cause loss of a company’s assets or impair its foreign operations

124 1-124 Political-Legal Differences: Adjusting to Other Countries’ Government & Laws Foreign Corrupt Practices Act of 1977: Foreign Corrupt Practices Act of 1977: which makes it illegal for employees of the U.S. companies to bribe political decision makers in foreign nations Laws & Regulations

125 1-125 The World of Free Trade: Regional Economic Cooperation Free Trade Free Trade the movement of goods and services among nations without political or economic obstruction

126 1-126 Barriers to International Trade 1. Tariff 1. Tariff is a trade barrier in the form of a customs duty, or tax, levied mainly on imports 2. Import Quotas 2. Import Quotas are trade barriers in the form of a limit on the numbers of product that can be imported Dumping - Dumping the practice of a foreign company’s exporting products abroad at a lower price than the price in the home market—or even below the costs of production—in order to drive down the price of a domestic product 3. Embargo 3. Embargo is a complete ban on the import or export of certain products Trade Protection Trade Protection the use of government regulations to limit the import of good and services—there are three devices by which countries try to exert protectionism:

127 1-127 Organizations Promoting International Trade 1. The World Trade Organization (WTO) 1. The World Trade Organization (WTO) is designed to monitor and enforce trade agreements 2. The World Bank 2. The World Bank is to provide low-interest loans to developing nations for improving transportation, education, health and telecommunications 3. The International Monetary Fund (IMF) 3. The International Monetary Fund (IMF) is designed to assist in smoothing the flow of money between nations

128 1-128 Major Trading Blocs 1. NAFTA—North American Free Trade Agreement 1. NAFTA—North American Free Trade Agreement is a trading bloc consisting of of the United States, Canada, and Mexico 2. EU—European Union 2. EU—European Union consists of 15 trading partners in Europe 3. ASEAN—Association of Southeast Asian Nations 3. ASEAN—Association of Southeast Asian Nations is a trading bloc consisting of nine countries in Asia 4. Mercosur 4. Mercosur is the largest trade bloc in Latin America and has four members: Argentina, Brazil, Paraguay, and Uruguay Trading Bloc Trading Bloc also known as an economic community, is a group of nations within a geographical region that have agreed to remove trade barriers with each other

129 1-129 The Importance of National Culture Culture Culture shared set of beliefs, values, knowledge, and patterns of behavior common to a group of people

130 1-130 What are Different Cultural Perceptions of Language? Speak your own language Use a translator Learn the local language More than 3,000 different languages are spoken throughout the world- in trying to communicate across cultures, you have three options:

131 1-131 What are Different Cultural Perceptions of Nonverbal Communication? Interpersonal space Eye contact Facial expressions Body movements and gestures Touch Nonverbal Communication Nonverbal Communication consists of messages sent outside the written or spoken word—five ways which nonverbal communication can be expressed:

132 1-132 Panel 4.2 Different Norms Variations in meaning of different types of nonverbal communication around the world Japan Japan Business cards are exchanged before bowing or handshaking—a weak handshake is common— lengthy or frequent eye contact is considered impolite Thailand Thailand Public displays of temper or affection are frowned on—it is considered impolite to point at anything using your foot or to show the soles of your feet The Philippines The Philippines Handshaking and a pat on the back are common greetings Indonesia Indonesia Handshaking and head noddings are customary greetings South Korea South Korea Men bow slightly and shake hands-sometimes with two hands—women refrain from shaking hands it is considered polite to cover your mouth while laughing Malaysia Malaysia Touching someone casually on the top of the head (even a child’s) is considered impolite—it’s best to use your right hand to eat and touch people and things China China Hugging or taking someone’s arm is considered inappropriate-winking or beckoning with one’s index finger is considered rude

133 1-133 What are Different Cultural Perceptions of Time Orientation? Monochronic Time Monochronic Time is a preference for doing one thing at a time Polychronic Time Polychronic Time is a preference for doing more than one thing at a time Time orientation is different in many cultures—there are two types of time:

134 1-134 What are Different Cultural Perceptions of Religion? For example, the primary work-related values of various religions Catholics- consideration Protestant- employer effectiveness Buddhists- social responsibility Muslims-continuity In those religions studied, there was virtually no agreement among religions as to the most important work-related value Different religions have different work related values 5.9 million Confucianism 18 million Judaism 309 million Buddhism 719 million Hinduism 950 million Islam 1.7 billionChristianity Current Followers of the Major World Religions

135 1-135 Key Terms Association of Southeast Asian Nations (ASEAN) command economy countertrading culture democratic governments developed countries dumping e-commerce embargo ethnocentric managers European Union (EU) exchange rate expatriate manager exporting Foreign Corrupt Practices Act franchising free-market economy free trade geocentric managers global economy global outsourcing global village globalization greenfield venture import quota importing infrastructure International Monetary Fund (IMF) joint venture less-developed countries licensing maquiladores Mercosur mixed economy monochronic time most favored nation multinational corporation multination organization nonverbal communication North American Free Trade Agreement (NAFTA) outsourcing political risk polycentric managers polychronic time privatization tariff trade protectionism trading bloc wholly-owned subsidiary World Bank World Trade Organization (WTO)

136 1-136 Management in Action 1. Why did Daimler-Benz merge with Chrysler? 2. What were the key sources of conflict that kept employees at Chrysler and Daimler-Benz from cooperating with each other? 3. To what extent are cultural differences between the United States and Germany contributing to problems associated with the merger? Explain. 4. How is Dieter Zetsche trying to overcome source of conflict between Daimler-Chrysler’s U.S. employees and their German counterparts? 5. Why is it so difficult to successfully create a megamerger between two international firms?

137 1-137 Ethical Dilemma 1. Allow Mr. Monti the expanded power he desires. 2. Not allow Mr. Monto any additional power and authority. 3. Reduce the amount of power and authority possessed by Mr. Monti’s investigators. 4. Invent other options. What would you do if you were a voting member of an EU national government?

138 1-138

139 Planning: The Foundation of Successful Management chapter five McGraw-Hill/Irwin Copyright ©2003, The McGraw-Hill Companies, Inc. All Rights Reserved

140 1-140 Major Questions You Should Be Able to Answer: How do I tend to deal with uncertainty, and how can planning help? 5.1 Planning and Uncertainty: How do I tend to deal with uncertainty, and how can planning help? What are mission and vision statements, three types of planning and goals, and SMART goals? 5.2 Fundamentals of Planning: What are mission and vision statements, three types of planning and goals, and SMART goals? How does the planning/control cycle help keep a manager’s plans headed in the right direction? 5.3 The Planning/Control Cycle: How does the planning/control cycle help keep a manager’s plans headed in the right direction?

141 1-141 Major Questions You Should Be Able to Answer Continued: What is MBO, and how can it be implemented successfully to achieve results? 5.4 Promoting Goal Setting—Management by Objectives What is MBO, and how can it be implemented successfully to achieve results? What is project planning, why is it important, and what is the project life cycle? 5.5 Project Planning: What is project planning, why is it important, and what is the project life cycle? How can break-even analysis help a manager turn a profit? 5.6 A Project-Planning Tool—Break-even Analysis: How can break-even analysis help a manager turn a profit?

142 1-142 How Do Exceptional Managers Make Their Own Luck? Make a list and consider your motives Make a list and consider your motives Cultivate optimism and confidence Cultivate optimism and confidence Ask for help Ask for help Some steps to improve your luck:

143 1-143 Planning & Uncertainty Planning Planning previously defined as setting goals and deciding how to achieve them—another definition: Planning is coping with uncertainty by formulating future courses of action to achieve specified results

144 1-144 Benefits of Planning 1. Planning Helps You Check on Your Progress 2. Planning Helps You Coordinate Activities 3. Planning Helps You Think Ahead 4. Above All, Planning Helps You Cope with Uncertainty

145 1-145 Three Types of Uncertainty State Uncertainty State Uncertainty when the environment is considered unpredictable Response Uncertainty Response Uncertainty when the consequences of a decision are uncertain Effect Uncertainty Effect Uncertainty when the effects of environmental changes are unpredictable

146 1-146 Responding to Uncertainty Defenders Defenders are expert at producing and selling narrowly defined products and services Analyzers Analyzers let the organizations take the risks of product development and marketing and then imitate what seems to work best Prospectors Prospectors focus on developing new markets or services and in seeking out new markets rather than waiting for things to happen Reactors Reactors make adjustments only when finally forced to by environmental pressures

147 1-147 Making Plans Mission Statement Mission Statement “ What is our reason for being?” Vision Statement Vision Statement “What do we want to become?” Strategic Planning Strategic Planning Done by top managers for the next 1-5 yearsGoals Action plans Tactical Planning Tactical Planning Done by middle managers for the next 6-24 monthsGoals Action plans Operat- ional Planning Operat- ional Planning Done by first-line managers for the next 1-52 weeksGoals Action plans Panel 5.1

148 1-148 Mission Statements Mission Statement Mission Statement expresses the purpose of the organization Amazon.com Mission Statement “use the Internet to offer products that educate, inform, and inspire. We decided to build an online store that would be customer friendly and easy to navigate and would offer the broadest possible selection.”

149 1-149 Vision Statements Vision Vision is a long-term goal describing “what” an organization wants to become—it is a clear sense of the future and the actions needed to get there Vision Statement Vision Statement expresses what the organization should become, where it wants to go strategically Amazon.com Vision Statement “Our vision is to build a place to find and discover anything our customers might want to buy…[including] car parts and spark plugs”

150 1-150 Types of Planning Strategic Planning Strategic Planning top managers determine what the organization’s long-term goals should be for the next 1-10 years with the resources they expect to have available

151 1-151 Types of Planning Tactical Planning Tactical Planning middle managers determine what contributions their departments or similar work units can make with their given resources during the next 6 months to 2 years

152 1-152 Types of Planning Operational Planning Operational Planning first-line managers determine how to accomplish specific tasks with available resources within the next 1-week to 1-year period

153 1-153 Goals & Action Plans Means-end chain Means-end chain because in the chain of management (operational, tactical, strategic) the accomplishment of low-level goals are the means leading to the accomplishment of high- level goals or ends As with planning, goals are of the same three types, also like planning, goals are arranged in a hierarchy known as:

154 1-154 Types of Goals 1. Strategic Goals 1. Strategic Goals are set by and for top management and focus on objectives for the organization as a whole 2. Tactical Goals 2. Tactical Goals are set by and for middle managers and focus on the actions needed to achieve strategic goals 3. Operational Goals 3. Operational Goals are set by and for first-line managers and are concerned with short-tem matters associated with realizing tactical goals

155 1-155 Setting SMART Goals S pecific easurable ttainable esults-Oriented arget Dates M A R T

156 1-156 Relationship between goal difficulty and performance Panel 5.2 LowModerateChallengingImpossible High Medium LowPerformance Goal Difficulty A Performance of committed individuals with adequate ability B Performance of committed individuals who are working at capacity C Performance of individuals who lack commitment to high goals A B C

157 1-157 The planning/control cycle The Two Planning Steps The Two Control Steps Make the Plan Carry out the plan Control the direction in two ways: (a)By correcting deviations in the plan being carried out (return to Step 2) or (b)By improving future plans (go to Step 1 to start over Control the direction in by comparing the results with the plan Panel 5.3

158 1-158 Management By Objectives Is a four-step process in which 1. Managers and employees jointly set objectives for the employee 2. Managers develop action plans 3. Managers and employees periodically review the employee’s performance 4. The manager makes a performance appraisal and rewards the employee according to the results

159 1-159 The Four-Step Process for Motivating Employees 1. Jointly Set Objectives 2. Develop Action Plan 3. Periodically Review Performance 4. Give Performance Appraisal & Rewards, If Any

160 1-160 Three Types of Objectives Used in MBO Improvement Objective “Increase sport-utility sales by 10%” Personal Development Objective “Attend five days of leadership training” Maintenance Objective “Continue to meet the increased sales goals specified last quarter” Panel 5.4

161 1-161 MBO Requirements 1. The Commitment of Top Management is Essential 2. It Must Be Applied Organization-wide 3. Objectives Must “Cascade”—MBO works by cascading 3. Objectives Must “Cascade”—MBO works by cascading objectives down through the organization; that is, objectives are structured in a unified hierarchy, becoming more specific at lower levels of the organization For MBO to be successful, three things have to happen:

162 1-162 Project Planning Task or work assignments— Task or work assignments— the simplest plan, this is something you might do using a “to-do” list Program Program single-use plan encompassing a range of projects or difficulties Project Project a single-use plan of less scope and complexity than a program

163 1-163 The Project Life Cycle Stage 1 Definition Stage 2 Planning Stage 3 Execution Stage 4 Closing Panel 5.5

164 1-164 Four Stages of the Project Life Cycle Stage 1 Definition Stage 1 Definition you look at the big picture—you state the problem, look at the assumptions and risks, identify the projects goals and objectives, and determine the budget and schedule Stage 2 Planning Stage 2 Planning you consider the details needed to make the big picture happen—identify the facilities and equipment needed, people and their duties, and schedule and coordination efforts if needed Stage 3 Execution Stage 3 Execution the actual work stage--you define management style and establish control tools— your main focus is to complete the project on time and under budget while trying to meet the client’s expectations Stage 4 Closing Stage 4 Closing occurs when the project is accepted by the client—install deliverables and carry out training—may also have to write a report in which you document everything that has happened

165 1-165 Break-Even Analysis Break-even analysis Break-even analysis is a way of identifying how much revenue is needed to cover the total costs of developing and selling a product

166 1-166 Costs/Revenues (in dollars) Profit Variable Costs Total Costs Total Sales Revenue Break-even point Fixed Costs $3,000,000 $2,400,00 $1,800,00 $1,200,000 $600,000 Loss 010,00030,00050,000 70,000 20,00040,00060,000 Sales Units (of shirts and blouses) Break-even analysis Panel 5.6

167 1-167 Benefits and Limitations of Break-even Analysis For doing future “what-if” alternate scenarios of costs, prices, and sales For analyzing the profitability of past projects Benefits Benefits Break-even analysis has two benefits: Limitations Limitations Break-even analysis is not a cure-all: It oversimplifies The assumptions may be faulty

168 1-168 Key Terms analyzers Break-even analysis cascading defenders effect uncertainty Management by objectives (MBO) Means-end chain mission mission statement operational goals operational planning planning planning/control cycle program project project life cycle prospectors reactors response uncertainty skunkworks SMART goals state uncertainty strategic goals strategic planning tactical goals tactical planning vision vision statement

169 1-169 Management in Action 1. If planning is coping with uncertainty, what kind of uncertainty were Mondavi and Pearson dealing with– state, effect, response? 2. Which adjective best describes Mondavi’s approach to uncertainty—defender, prospector, analyzer, reactor? 3. Would you say that Pearson’s goals were SMART goals? 4. In the planning/control cycle, what should Pearson have done to have had a better chance of success?

170 1-170 Ethical Dilemma 1. Allow the retention bonuses to be paid as proposed by Kmart management. 2. Not allow any retention bonuses because the company is bankrupt. 3. Allow retention bonuses equitably for both managers and rank-and-file employees. 4. Invent other options. (Discuss). What would you do if you were presiding judge in the bankruptcy court?

171 1-171

172 Strategic Management: How Star Managers Realize a Grand Design chapter six McGraw-Hill/Irwin Copyright ©2003, The McGraw-Hill Companies, Inc. All Rights Reserved

173 1-173 Major Questions You Should Be Able to Answer: Am I really managing if I don’t have a strategy? 6.1 The Dynamics of Strategic Planning: Am I really managing if I don’t have a strategy? What’s the five-step recipe for the strategic- management process? 6.2 The Strategic Management Process What’s the five-step recipe for the strategic- management process? How can SWOT and forecasting help me establish my strategy? 6.3 Establishing the Grand Strategy How can SWOT and forecasting help me establish my strategy?

174 1-174 Major Questions You Should Be Able to Answer Continued: How can two techniques—Porter’s competitive strategies and the product life cycle—help me formulate strategy? 6.4 Formulating Strategy How can two techniques—Porter’s competitive strategies and the product life cycle—help me formulate strategy? How can two techniques—balanced scorecard and measured management—help me carry out control strategy? 6.5 Carrying Out & Controlling Strategy: How can two techniques—balanced scorecard and measured management—help me carry out control strategy?

175 1-175 Successful Top Managers Lesson #1 Lesson #1—in an Era of Management Fads, Strategic Planning is Still Tops Lesson #2 Lesson #2—A Manager’s Most Valuable Character Trait: Be Willing to Make Large, Painful Decisions to Suddenly Alter Strategy

176 1-176Strategy Strategy Strategy is a large scale action plan that sets the direction for the organization Strategic Management Strategic Management is a process that involves managers from all parts of the organization in the formulation and the implementation of strategies and strategic goals Strategic Planning Strategic Planning determines not only the organization’s long-term goals for the next 1-5 year regarding growth and profits, but also the ways the organization should achieve them

177 1-177 Why Strategic Management & Strategic Planning Are Important 1. Provide Direction & Momentum 2. Encourage New Ideas 3. Develop a Sustainable Competitive Advantage

178 1-178 The Strategic Management Process 1. Establish the mission and vision 2. Establish the grand strategy (using SWOT and forecasting) 3. Formulate the strategic plans (using e.g. Porter) 4. Carry out the strategic plan 5. Maintain strategic control Feedback: Revise actions, if necessary, based on feedback Panel 6.1

179 1-179 The Mission Statement should answer some or all of the following questions 1.Who are our customers? 2.What are our major products or services? 3.In what geographical areas do we compete? 4.What is our basic technology? 5.What is our commitment to economic objectives ? 6.What are our basic beliefs, values, aspirations, and philosophical priorities? 7.What are our major strengths and competitive advantages? 8.What are our public responsibilities, and what image do we wish to project? 9.What is our attitude toward our employees? Step 1 Establish the Mission and Vision

180 1-180 A powerful Vision Statement should answer “yes” to the following questions 1.Is is appropriate for the organization and for the times? 2.Does it set standards of excellence and reflect high ideals? 3.Does it clarify purpose and direction? 4.Does it inspire enthusiasm and encourage commitment? 5.Is it well articulated and easily understood? 6.Does it reflect the uniqueness of the organization, its distinctive competence, what it stands for, what it’s able to achieve? 7.Is it ambitious? Step 1 Establish the Mission and Vision

181 1-181 Growth Strategy Stability Strategy Defense Strategy Grand Strategy Grand Strategy explains how the organization’s mission is to be accomplished—three common grand strategies are: Step 2 Establish the Grand Strategy

182 1-182 Strategic Formulation Strategic Formulation is the process of choosing among different strategies and altering them to best fit the organization’s needs Step 4 Carry Out the Strategic Plan Strategic Implementation Strategic Implementation is putting the strategic plans into effect Step 3 Formulate Strategic Plans

183 1-183 Strategic Implementation Strategic Implementation is putting the strategic plans into effect Step 4 Carry Out the Strategic Plan

184 1-184 Strategic Control Strategic Control consists of monitoring the execution of strategy and making adjustments, if necessary Engage people Engage people Keep it simple Keep it simple Stay focused Stay focused Keep moving Keep moving Step 5 Maintain Strategic Control

185 1-185 SWOT Analysis SWOT Inside Matters Outside Matters Strengths Weaknesses Threats Opportunities

186 1-186 Inside Matters— Inside Matters—analysis of internal Strengths & Weaknesses SWOT Analysis S—Strengths: inside matters S—Strengths: inside matters Strengths could be work processes, organization, culture, staff, product quality, production capacity, image, financial resources & requirements, service levels, other internal matters W--Weaknesses: inside matters W--Weaknesses: inside matters Weaknesses could be the same categories as stated for Strengths: work processes, organization, culture, etc. Panel 6.2

187 1-187 Outside Matters—analysis of external Opportunities & Threats SWOT Analysis O—Opportunities: outside matters opportunities could be market segment analysis, industry & competition analysis, impact of technology on organization, product analysis, governmental impacts, other external matters T—Threats: outside matters Threats could be in the same categories as stated for Opportunities: market segment analysis, etc. Panel 6.2

188 1-188 Strategic Planning Tools & Techniques Forecasting Forecasting is a vision or projection of the future— two types: Trend Analysis Trend Analysis is a hypothetical extension of a past series of events into the future Contingency Planning Contingency Planning also known as scenario planning & scenario analysis is the creation of alternative hypothetical but equally likely future conditions

189 1-189 Porter’s Four Competitive Strategies 1. Cost Leadership Strategy 2. Differentiation Strategy 3. Cost-Focus Strategy 4. Focused Differentiation Strategy

190 1-190 Porter’s Four Competitive Strategies StrategyWideNarrow 1. Cost-leadership 2. Differentiation 3. Cost focus 4. Focused-differentiation Panel 6.3

191 1-191 The Product Life Cycle Product Life Cycle Product Life Cycle is a model that graphs the four stages that a product or a service goes through during the “life” of its marketability 1. Introduction 2. Growth 3. Maturity 4. Decline

192 1-192 The Product Life Cycle Stage 1 Introduction Stage 2 Growth Stage 3 Maturity Stage 4 Decline Panel 6.4

193 1-193 The Product Life Cycle Stage 1 Introduction Stage Stage 1 Introduction Stage is the stage in the product life cycle in which a new product is introduced into the marketplace Stage 2 Growth Stage Stage 2 Growth Stage which is the most profitable stage, is the period in which customer demand increases, the product’s sales grow, and later competitors may enter the market Stage 3 Maturity Stage Stage 3 Maturity Stage is the period in which the product starts to fall out of favor and sales and profits to fall off Stage 4 Decline Stage Stage 4 Decline Stage is the period in which the product falls out of favor, and the organization withdraws from the marketplace

194 1-194 The Balanced Scorecard The Balanced Scorecard The Balanced Scorecard gives top managers a fast but comprehensive view of the organization via four indicators: 1. Financial Measures 2. Customer Satisfaction 3. Internal Processes 4. The Organization’s Innovation and Improvement Activities

195 1-195 The Balanced Scorecard 1.Financial Perspective “How do we look to shareholders?” Goals Measures 3. Internal Business Perspective “What must we excel at?” Goals Measures 2. Customer Perspective “Ho do customers see us?” Goals Measures 4. Innovation & Learning Perspective “Can we continue to improve and create value? Goals Measures Panel 6.5

196 1-196 Successful Measurement-managed Firms Top executives agree on strategy Top executives agree on strategy Communication is clear Communication is clear There is better focus and alignments There is better focus and alignments The organizational culture emphasizes teamwork and allows risk taking The organizational culture emphasizes teamwork and allows risk taking

197 1-197 Barriers to Effective Management Objectives are fuzzy Objectives are fuzzy Managers put too much trust in informal feedback systems Managers put too much trust in informal feedback systems Employees resist new measurement systems Employees resist new measurement systems Companies focus too much on measuring activities instead of results Companies focus too much on measuring activities instead of results

198 1-198 Key Terms balanced scorecard contingency planning cost-focus strategy cost-leadership strategy decline stage differentiation strategy focused-differentiation strategy forecast grand strategy growth stage growth strategy introduction stage maturity stage organizational strengths organizational opportunities organizational threats organizational weaknesses Porter’s four competitive strategies product life cycle stability control strategic management strategy strategy formulation strategy implementation SWOT analysis trend analysis

199 1-199 Management in Action 1. As described in this article, does Intel’s strategy seem clear or confusing? Explain. 2. How would you describe Intel’s grand strategy? 3. Using Panel 6.2 as a framework, conduct a SWOT analysis of Intel. What are your conclusions? 4. Which of Porter’s four generic competitive strategies is Intel pursuing? Explain. 5. Using the descriptions in Panel 6.5 describe the driving force behind Intel’s strategic decisions.

200 1-200 Ethical Dilemma 1. Yes, because the action will make the company more money. 2. No, because the move is bad public relations and might cost the company goodwill and government contracts. 3. I’d delay the decision until I see what action the U.S. Senate takes. 4. Other possible options. (Discuss). If you were in charge of corporate strategy for Stanley Works, would you continue to relocate your nominal headquarters to Bermuda?

201 1-201

202 Individual & Group Decisions: How Managers Make Things Happen chapter seven McGraw-Hill/Irwin Copyright ©2003, The McGraw-Hill Companies, Inc. All Rights Reserved

203 1-203 Major Questions You Should Be Able to Answer: How do I decide to decide? 7.1 The Nature of Decision Making How do I decide to decide? How do people know when they’re being logical or illogical? 7.2 Two Kinds of Decision Making—Rational & Nonrational How do people know when they’re being logical or illogical? What are the fours steps in practical decision making? 7.3 Solving Problems and Seizing Opportunities What are the fours steps in practical decision making?

204 1-204 Major Questions You Should Be Able to Answer Continued: How do I work with others to make things happen? 7.4 Group Decision Making How do I work with others to make things happen? Trying to be rational isn’t always easy—What are the barriers? 7.5 How to Overcome Barriers to Decision Making Trying to be rational isn’t always easy—What are the barriers?

205 1-205 How Exceptional Managers Make Decisions When should you make a decision and when should you delay? When should you make a decision and when should you delay? Understanding Understanding Comfort level about outcome Comfort level about outcome Future possible alternatives Future possible alternatives Seizing the opportunity Seizing the opportunity

206 1-206 How Exceptional Managers Make Decisions Making Tough Choices Decide in a timely fashion Decide in a timely fashion Don’t agonize over minor decisions Don’t agonize over minor decisions Separate outcome from process Separate outcome from process Learn when to stop gathering facts Learn when to stop gathering facts When overwhelmed, narrow your choices When overwhelmed, narrow your choices

207 1-207 Decision Making Defined Decision Decision is a choice made from among available alternatives Decision Making Decision Making is the process of identifying and choosing alternative courses of action

208 1-208 Types of Decisions Programmed Decisions Programmed Decisions are repetitive and routine Nonprogrammed Decisions Nonprogrammed Decisions are those that occur under nonroutine, unfamiliar circumstances

209 1-209 General Decision Making Styles Decision-making Style Decision-making Style reflects the combination of how an individual perceives and responds to information

210 1-210 Decision Making Conditions AnalyticalConceptual DirectiveBehavioral High Low Tolerance for ambiguity Task & technical concerns People & social concerns Value Orientation Panel 7.1

211 1-211 Using Knowledge Knowledge of styles helps you to understand yourself Knowledge of styles helps you to understand yourself You can increase your ability to influence others by being aware of styles You can increase your ability to influence others by being aware of styles Knowledge of styles gives you an awareness of how people can take the same information yet arrive at different decisions using a variety of decision-making strategies Knowledge of styles gives you an awareness of how people can take the same information yet arrive at different decisions using a variety of decision-making strategies

212 1-212 Rational Decision Making Rational Model of Decision Making Rational Model of Decision Making also called the classical model explains how managers should make decisions; it assumes managers will make logical decisions that will be optimum in furthering the organization’s best interests The Rational Model is based on unrealistic assumptions: The Rational Model is based on unrealistic assumptions: Complete information, no uncertainty Logical, unemotional analysis, Best Decision for the organization

213 1-213 Nonrational Decision Making Nonrational models of decision making Nonrational models of decision making explain how managers do make decisions; they assume the decision making is nearly always uncertain and risky, making it difficult for managers to make the optimum decisions Five Nonrational Models are: Five Nonrational Models are: Satisficing Incremental Coalitional Garbage can Intuitional

214 1-214 Nonrational Models 1.Satisficing Model 1.Satisficing Model managers seek alternatives until they find one that is satisfactory, not optimal 2.Incremental Model 2.Incremental Model managers take small, short-term steps to alleviate a problem 3.Coalitional Model 3.Coalitional Model managers band together in groups favoring different alternatives, and the groups bargain, negotiate, and compromise on a particular problem 4.Garbage Can Model 4.Garbage Can Model managers virtually make random decisions 5.Intuitive Model 5.Intuitive Model consists of a manager’s quickly sizing up a situation and making a decision based on his or her experience or practice

215 1-215 Some Hindrances to Perfectly Rational Decision Making Complexity Complexity Time and money constraints Time and money constraints Different cognitive capacity, values, skills, habits, and unconscious reflexes Different cognitive capacity, values, skills, habits, and unconscious reflexes Imperfect information Imperfect information Information overload Information overload Different priorities Different priorities Conflicting goals Conflicting goals Panel 7.2

216 1-216 The Four Steps in Practical Decision Making Stage 2 Think up alternative solutions Stage 3 Evaluate alternatives & select a solution Stage 4 Implement & evaluate the solution chosen Stage 1 Identify the problem or opportunity Panel 7.3

217 1-217 Stage 1 Problems Problems difficulties that inhibit the achievement of goals Diagnosis Diagnosis analyzing underlying causes Stage 1 Identify the problem or opportunity Opportunities Opportunities situations that present possibilities for exceeding existing goals

218 1-218 Stage 2 For a programmed decision— For a programmed decision— the alternative will be easy and obvious Stage 2 Think up alternative solutions For a nonprogrammed decision— For a nonprogrammed decision— the more creative and innovative the alternative, the better0

219 1-219 Stage 3 Is solution ethical? Stage 3 Evaluate alternatives & select a solution Is solution feasible? Is solution ultimately effective?

220 1-220 Is Solution Ethical? The Smell Test Can you look yourself in the eye and tell yourself that the decision you have made is okay? Or does the situation have a bad smell to it? Here are some tests for business people worried about whether they’re committing fraud The “What Would Your Parent Say?” Test Could you explain to your parents (or family) the basis for the action you are considering? The Deposition Test Could you swear in court or in a deposition (testimony taken by lawyers while you’re under oath) that the activity you are doing is right? Panel 7.4

221 1-221 Stage 4 Evaluation Evaluation You need to follow up and evaluate the results of the decision Stage 4 Implement & evaluate the solution chosen Successful Implementation Successful Implementation you need to: Plan carefully Be sensitive to those affected

222 1-222Evaluation What should you do if the solution is not working? Give it more time Give it more time Change it slightly Change it slightly Try another alternative Try another alternative Start over Start over

223 1-223 Group-aided decision making: potential advantages and disadvantages Potential Advantages Potential Disadvantages 1. Greater pool of knowledge1. A few people dominate 2. Different perspectives2. Groupthink 3. Intellectual stimulation3. Satisficing 4. Better understanding of decision rationale 4. Goal displacement 5. Deeper commitment to the decision Panel 7.5

224 1-224 Groups & Decision Making They are less effective They are less effective Their size affects decision quality Their size affects decision quality They may be too confident They may be too confident Knowledge counts Knowledge counts

225 1-225 When to use groups in decision making 1. When it can increase quality 2. When it can increase acceptance 3. When it can increase development Panel 7.6

226 1-226 Participative Management Participative Management (PM) Participative Management (PM) the process of involving employees in Setting goals Making decisions Solving problems Making changes in the organization

227 1-227 Increasing PM’s Effectiveness Top management is continually involved Top management is continually involved Middle and supervisory managers are supportive Middle and supervisory managers are supportive Employees trust managers Employees trust managers Employees are ready Employees are ready Employees don’t work in interdependent jobs Employees don’t work in interdependent jobs PM is implemented with TQM PM is implemented with TQM

228 1-228 Group Problem-Solving Techniques Dos Use active listening skills Involve as many members as possible Seek out the reasons behind arguments Dig for facts Don’ts Avoid log rolling and horse trading (“I’ll support your pet project, if you support mine”) Avoid making an agreement simply to keep relations amicable and not rock the boat Try to achieve consensus by putting question to a vote

229 1-229 More Group Problem-Solving Techniques 1. Interacting Group 2. Nominal Group 3. The Delphi Group 4. Computer-Aided Decision Making 1. Chauffer-driven systems 2. Group-driven systems

230 1-230 Ineffective Reactions to Decision Situations 1. Relaxed Avoidance 2. Relaxed Change 3. Defense Avoidance 4. Panic

231 1-231 Effective Reactions to Decision Situations 1. Importance 2. Credibility 3. Urgency Deciding to Decide Deciding to Decide a manager agrees that he or she must decide what to do about a problem or opportunity and take effective decision-making steps

232 1-232Heuristics Heuristics Heuristics strategies that simplify the process of making decisions

233 1-233 Decision Making Biases 1. Availability Bias 2. Representative Bias 3. Anchoring and Adjustment Bias 4. Escalation of Commitment Bias

234 1-234 Key Terms availability bounded rationality coalitional model consensus deciding to decide decision decision making decision-making style Delphi group Diagnosis escalation of commitment garbage-can model goal displacement Groupthink Heuristics incremental model interacting group intuitive model nominal group nonprogrammed decisions nonrational models of decision making opportunities panic participative management (PM) problems programmed decision rational models of decision making relaxed avoidance relaxed change representative bias satisficing model

235 1-235 Management in Action 1. What examples of programmed and nonprogrammed decisions were made by management? 2. What types of decision-making styles see, to characterize Gordon McFadden and Philip Knight? Explain your rationale. 3. Which of the five nonrational models of decision-making best characterizes the decision making at Nike? Explain. 4. Describe the apparent advantages and disadvantages of group decision making among Nike’s top management team. 5. How would you describe the decision-making culture at Nike?

236 1-236 Ethical Dilemma 1. Fire Mr. Wu. That is, go along with Enron’s request, because they are an important client. 2. Not fire Mr. Wu and let his recommendation to clients stand in order to encourage independent decision making and fiduciary responsibility to all clients. Send a tactful letter to Enron executives who complained. 3. Buck the whole problem to your own supervisor, even though your being neutral will satisfy no one and may even invite litigation 4. Invent other options. (Discuss) What would you do if you were a PaineWebber supervisor aware of the rumors about Enron’s stability and received the Enron complaint?

237 1-237

238 Organizational Culture, Structure, & Design: Building Blocks of Organizations chapter eight McGraw-Hill/Irwin Copyright ©2003, The McGraw-Hill Companies, Inc. All Rights Reserved

239 1-239 Major Questions You Should Be Able to Answer: How do I find out about an organization’s “social glue,” its normal way of doing business? 8.1 The Kinds of Organizational Structure You May Be Operating In How do I find out about an organization’s “social glue,” its normal way of doing business? How do for-profit, nonprofit, and mutual-benefit organizations differ? 8.2 What Is an Organization? How do for-profit, nonprofit, and mutual-benefit organizations differ? When I join an organization, what seven elements should I look for? 8.3 The Major Elements of an Organization When I join an organization, what seven elements should I look for?

240 1-240 Major Questions You Should Be Able to Answer Continued: How would one describe the eight organizational cultures? 8.4 Basic Types of Organizational Structures How would one describe the eight organizational cultures? What factors affect the design of an organization’s structure? 8.5 Contingency Design—Factors to Consider in Creating the Best Structure What factors affect the design of an organization’s structure? Why do organizations resist learning, and what is a new way for employees in an organization to view themselves? 8.6 Toward Building a Learning Organization Why do organizations resist learning, and what is a new way for employees in an organization to view themselves?

241 1-241 Mentoring: The New Rules Choose anyone you can learn from, not just someone higher up Choose anyone you can learn from, not just someone higher up Choose more than one mentor Choose more than one mentor Pick your mentors, don’t wait to be picked Pick your mentors, don’t wait to be picked Do a self-assessment Do a self-assessment Look for someone different from you Look for someone different from you Investigate your prospects Investigate your prospects Show your prospective mentor how you can be helpful Show your prospective mentor how you can be helpful Agree on how your mentoring relationship will work Agree on how your mentoring relationship will work

242 1-242 What is an Organizational Culture? Organizational Culture Organizational Culture sometimes called corporate culture is a system of shared beliefs and values that develops within an organization and guide the behavior of its members

243 1-243 Levels of Culture The Invisible Level: Not seen by the naked eye The Visible Level: Manifestations

244 1-244 Characteristics of Invisible Level Values Values Beliefs Beliefs Assumptions Assumptions

245 1-245 Manifestations of Culture Symbols Symbols objects, acts, qualities, or events that convey meaning to others Stories Stories narratives based on true events, which are repeated—and sometimes embellished—to emphasize a particular value Heroes Heroes people whose accomplishments embody the values of the organization Rites and Rituals Rites and Rituals are the activities and ceremonies, planned and unplanned, that celebrate important occasions and accomplishments

246 1-246 Four Functions of Organizational Culture 1. It gives members an organizational identity 2. It facilitates collective commitment 3. It promotes social-system stability 4. It shapes behavior by helping employees make sense of their surroundings

247 1-247 Organizations Organization Organization is a system of consciously coordinated activities or forces of two or more people—There are three types of organizations, according to their purpose

248 1-248 Three Types of Organizations 1. For-Profit Organizations 2. Nonprofit Organizations 3. Mutual-Benefit Organizations

249 1-249 The Organization Chart Organization Chart Organization Chart is a box-and-lines illustration showing the formal lines of authority and the organization’s official positions or division of labor

250 1-250 Information in Organization Charts The Vertical Hierarchy of Authority: A glance up and a glance down shows the chain of command The Vertical Hierarchy of Authority: A glance up and a glance down shows the chain of command The Horizontal Specialization: A glance to the left and right on the line of an organization chart shows the different jobs or work specialization The Horizontal Specialization: A glance to the left and right on the line of an organization chart shows the different jobs or work specialization

251 1-251 Organization Chart—Example for a Hospital Director of Personne l Director of Admissions Director of Nutrition & Food Services Director of X-Ray & Laboratory Services Chief Physician Director of Pharmac y Director of Patient & Public Relations Director of Accounting Director of Surgery Director of Outpatient Services Board of Directors Strategic Planning Advisor Chief Executive Officer Legal Counsel President Cost Containment Staff Executive Administrative Director Executive Medical Director Panel 8.1

252 1-252 An Organization’s Major Elements 1. Common Purpose 2. Coordinated Effort 3. Division of Labor 4. Hierarchy of Authority 5. Span of Control

253 1-253 Spans of Control: Narrow versus Wide F CEO Narrow Key: T = Top manager M = Middle manager F = First-line (supervisory) manager T MMM FFFF FFFF F T M F FF M F F F T MMM FFF FFFF F M F FF Wide CEO M FF F M F FF M FF F M FF F M F FF M FF F M F FF M FF F M F FF Panel 8.2

254 1-254 An Organization’s Major Elements Authority Authority refers to the rights inherent in a managerial position to make decisions, give orders, and utilize resources Accountability Accountability managers must report and justify work results to managers above them Responsibility Responsibility is the obligation you have to perform the tasks assigned to you Delegation Delegation is the process of assigning managerial authority and responsibility to managers and employees lower in the hierarchy

255 1-255 Line Positions versus Staff Positions Board of Directors Strategic Planning Advisor Chief Executive Officer Legal Counsel President Cost Containment Staff Executive Administrative Director Executive Medical Director Line and Staff: Line and Staff: Line have solid lines, staff have dotted lines Panel 8.3

256 1-256 Line Vs. Staff Line Managers Line Managers have authority to make decisions and usually have people reporting to them Staff Personnel Staff Personnel have authority functions; they provide advice, recommendations, and research to line managers

257 1-257 Centralized Vs. Decentralized Organizations Centralized Authority Centralized Authority important decisions are made by higher-level managers Decentralized Authority Decentralized Authority important decisions are made by middle-level and supervisory-level managers

258 1-258 Types of Organizational Structures 1. Simple Structure 2. Functional Structure 3. Divisional Structure 4. Conglomerate Structure 5. Hybrid Structure 6. Matrix Structure 7. Team-Based Structure 8. Network Structure

259 1-259 Simple Structure There is only one hierarchical level of management beneath the owner Owner AdministrativeAssistant Panel 8.4

260 1-260 Functional Structure Structure for a business President VicePresident,MarketingVicePresident,FinanceVicePresident,ProductionVicePresident,HumanResources Structure for a hospital ChiefAdministrator Chief of MedicalServices Director of AdministrativeServices OutpatientServices Nutrition & Food Services Panel 8.5

261 1-261 Divisional Structure 1. Product Divisions 1. Product Divisions group activities are arranged around similar products or services 2. Customer Divisions 2. Customer Divisions group activities around common customers or clients 3. Geographic Divisions 3. Geographic Divisions group activities around defined regional locations

262 1-262 Divisional Structure Divisional StructurePresident Motion Pictures & TV DivisionMusicDivision Magazine & BookDivisionInternetProductsDivision Product Divisional Structure President ConsumerLoansMortgageLoansBusinessLoansAgricultureLoans Customer Divisional Structure President Western Region RegionNorthernRegionSouthernRegionEasternRegion Geographic Divisional Structure Panel 8.6

263 1-263 Conglomerate Structures President LightingProductsAppliancesAircraftEnginesPlasticsFinancialServicesBroad-casting This resembles the structure of General Electric Panel 8.7

264 1-264 Hybrid Structures Vice- President, Production Vice- President, Marketing Vice- President, Finance Vice- President, Human Resources Functional divisional structure President PresidentCadillacPresidentBuickPresidentPontiacPresidentChevrolet Product Divisional Structure Manager Region I Manager Region II Manager Region III Manager Region IV Geographical divisional structure A Hypothetical example of what GM might use Panel 8.8

265 1-265 Matrix Structure Panel 8.9 President VicePresident,EngineeringVicePresident,FinanceVicePresident,ProductionVicePresident.Marketing Project Manager, Taurus Project Manager, Mustang Project Manager, Explorer Project Manager, Expedition Functional Structure Subordinate reports to both Vice President of marketing & to project Manager for Mustang Project structure Example of Ford Motor Company

266 1-266 Team-Based Structures Panel 8.10 President VicePresident, Research & DevelopmentVicePresident,DesignVicePresident,EngineeringVicePresident,Marketing Product Team Manager,Manufacturing Light Trucks Product Team Manager,ManufacturingSedans Manager,Manufacturing Sport Cars Project team members Functional structure Project teams

267 1-267 Network Structure Core of personal computer company USA DesignStudioSweden EngineeringCompanyJapan ComponentsAssembly Mexico, Asia DistributionCompanyCanada Accounting & Finance USA Panel 8.11

268 1-268 Contingency Design Contingency Design Contingency Design the process of fitting the organization to the environment

269 1-269 Factors Affecting Organizational Design 1. Mechanistic vs. Organic 2. Differentiation vs. Integration 3. Size 4. Technology 5. Life Cycle

270 1-270 Characteristics of Mechanistic & Organic Organizations Centralized hierarchy of authority Decentralized hierarchy of authority Many rules and procedures Few rules and procedures Specialized tasks Shared tasks Formalized communication Informal communication Few teams or task forces Many teams or task forces Narrow span of control, taller structure Wider span of control, flatter structure Organic organizations Mechanisticorganizations Panel 8.12

271 1-271 Lawrence & Lorsch Model Differentiation Differentiation the tendency of parts of an organization to disperse and fragment Integration Integration the tendency of the parts of an organization to draw together to achieve a common purpose

272 1-272Size Organizational Size Organizational Size is usually measured by the number of full-time employees The larger the organization, the more mechanistic.

273 1-273 Technology  Small-Batch Technology  Large-Batch Technology  Continuous Process

274 1-274 Organizational Life Cycle Birth Stage Birth Stage the nonbureaucratic stage in which the organization is created Youth Stage Youth Stage the organization is in a prebureaucratic stage, a stage of growth and expansion Midlife Stage Midlife Stage the organization becomes bureaucratic, a period of growth evolving into stability Maturity Stage Maturity Stage the organization becomes very bureaucratic, large and mechanistic

275 1-275 Why Organizations Resist Learning 1. People believe competition is always better than collaboration 2. Fragmentation leads to specialized fiefdoms that resist learning 3. Unless encouraged, people won’t take risks, the basis of learning

276 1-276 Key Terms authority birth stage centralized authority common purpose contingency design continuous-process technology coordinated effort customer divisions decentralized authority delegation division of labor divisional structure functional structure geographic divisions hero hierarchy of authority hybrid structure large-batch technology matrix structure maturity stage mechanistic organization midlife stage network structure organic differentiation Organization organization chart organizational culture organizational life cycle organizational size Paradigms product divisions Responsibility rites and rituals simple structure small-batch technology story Symbol team-based structure technology youth stage

277 1-277 Management in Action 1. How would you describe the “core culture” of Arthur Andersen? 2. Would you say there was more than one culture, and were they in conflict? 3. What kind of divisional structure does the company seem to have had? 4. Was Andersen characterized by differentiation or integration, according to Lawrence and Lorsch model?

278 1-278 Ethical Dilemma 1. Leave it alone because it rewards individual achievement. 2. Keep the basic ranking process, but drop the requirement that the PRC must unanimously agree on each person’s evaluation. The company might use an average ranking across all raters as the final rating. 3. Drop the entire ranking process because it is too subjective. 4. Invent other options. Discuss. What would you do to the performance evaluation system?


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