Chapter 9 Producing World-Class Goods & Services

U.S. Manufacturing Foreign Competition U.S. Auto Industry not keeping up with imports Insourcing of jobs for Japan, Europe & South Korea How can U.S. firms reverse this perception of falling behind?

Insourcing Foreign firms move production facilities to U.S. Service sector jobs the USA does best: Accounting Computer Networking

What are U.S. Manufacturer doing to become more Competitive Focus on Customers Maintain close relationships with suppliers & other firms to meet/exceed customer needs Practice continuous improvement Focus on quality Save on cost through site selection Rely on internet to unite companies Adopt new production techniques enterprise resource planning, computer integrated manufacturing, flexible manufacturing, & lean manufacturing

Production to Operation Management Manufacturing Services Production managementOperation management Manager Activities that Manager Activities that help produce goods help turn resources into goods & services INPUTS PRODUCTION CONTROL OUTPUTS capitalPlan Goods entrepreneurshipRoute Services landSchedule Ideas laborDispatch knowledgeFollow-up

Production Processes Value added during production Form Utility = process of adding value to input as a good or service is produced Processes in manufacturing physical or chemical assembly intermittent or continuous All done to meet a want; with acceptable quality; at the lowest possible cost

Improving Production Technique & Cutting Costs Mass Production = make a limit variety of goods as efficiently & at a very low cost. Not very flexible or responsive to customers desires Supply chain bottle necks = suppliers unable to deliver consistent amounts of inputs Firms required to have greater inventory of inputs or parts which is costly to store & track Reducing cost by using CAD design & computerized inventory within Computer-aided Manufacturing (CAM) or Computer-integrated Manufacturing (CIM) firms

Improving Quality & Consumer Choice Flexible Manufacturing production of a variety of products with the same machine. Industrial Automation & Robotics Mass Customization Lean Manufacturing: using less inputs to make products

Operations Management Planning Facility Location Facility Layout Material Requirement Planning Purchasing Inventory Control Quality Control

Product Layout How do all the parts (inputs come together to make the product? Assembly Line Layout

Process Layout Recipe of steps taken to make product or implement a service & ship to customer, distributor, or outlet

Other Layouts Cellular or Module Layout Fixed-Position Layout

Materials Requirement Planning Scheduling when materials/parts are available at the right time & place MRP ( a computer-based operations system) is a form of ERP (enterprise resource planning) manages finance, planning requirements, human resources, & order fulfillment

Purchasing Responsible for finding quality materials from the best (reliable) suppliers & negotiated the best price. Internet purchasing & reduction in the number of suppliers used by a firm reduces costs through volume pricing & discounts.

JIT – Just In Time: Inventory Control Reduces storage costs by decreasing amount of storage time for products

Quality Control Work/product inspected by others costly & no additional product made if defective or low quality product scrapped or fixed if customer discovers the defect might be dissatisfied or by from another firm

Six Sigma Quality & others 3.4 defects per million units SQC (Statistical Quality Control) all phases of production checked to find defects SPC (Statistical process control) samples taken at each stage of production Reduces cost of quality inspection at end of production

International Standard ISO 9000 – >140 countries use; standards ISO 1400 – collection of best practices

PERT & GANTT Charts ProgramGantt Charts Evaluation &show timing of processes Reviewin manufacturing Technique Analyze & sequence tasks Estimate time needed Draw a PERT network (chart) Identify the critical path

The Future Because of the competition of foreign firms & domestic one, the need for managers is great. Some careers: Product Design Production & Operations Management Inventory Management

Chapter 10 Motivating Employees & Building Self-Managed Teams

Intrinsic Reward vs Extrinsic Reward Worthwhile workBonuses Making a differenceBenefits Saving the planetApproval of others Wise use of resourcesRecognition Saving moneyPromotion

Frederick Taylor Scientific management Time Methods Rules of work Goals: to improve productivity to benefit the worker & the firm Tools: Observation & a Stopwatch time-motion studies

Followers of Taylor Henry Gantt – remember the Gantt Charts from an earlier chapter Frank & Lillian Gilbeth – principles of motion economy; break each job down into steps to reduce wasted motion Elton Mayo – Hawthorne studies; 1927 levels of illumination & productivity What matter more than light intensity? Special place to meet; having more input on decisions; more pay from being more productive

Maslow’s Hierarchy of Needs Self-Actualization Need Esteem Need Social Need Safety Need Physiological Need

Applying Maslow’s Theory Andrew Grove, former CEO & current Chairman of Intel Motivate people to do more by knowing how to manage their needs & achievement

Herzberg’s Motivating Factors Sense of achievement Earned Recognition Interest in the work itself Opportunity for growth Opportunity for Importance of responsibility advancement Peer & group relationships Status Supervisor fairness Company policies & rule Pay Job security Supervisor Working condition friendliness

Herzberg’s Motivators Job Hygiene Factors

Applying Herzberg’s Theories 22 firms have been on the Fortune 100 list of best places to work every year since Why do employees that want to work for these firms? NordstromSynovus TimberlandW. L. Gore

Keeping Worker/Employees Happy Sincere appreciation for a job well done = Praise & Recognition Job Enrichment: Strategies for motivating worker through the job itself Task completion; challenge; achievement; recognition

5 characteristics of work that Motivates Skill Variety Task Identity Task Significance Autonomy Feedback

Job Enlargement & Rotation Maytag redesign of process allowed employees to assemble an entire water pump, rather than just one part. Cross-trained to do several jobs relieves boredom

McGregor’s Theory X & Theory Y Theory X Theory Y People dislike workPeople like work must be forced,work toward goal controlled, directed,for which there is threatenedcommitment/reward Little ambition & Conditionally accept likes to be directed,responsibility of work avoid responsibilityImagination & Potential Incentive vary

Ouchi’s Theory Z Type JType A Japanese management American management Lifetime employment Short term employment collective responsibility individual responsibility consensual decisions individual decisions slow evaluation rapid evaluation slow promotion rapid promotion implied control explicit control career path variable special career path holistic concern for segmented concern for employee

Theory Z Hybrid of Type J & A Moving toward Type J in American firms Employee involvement, key to increased productivity Employee control implied & informal Shared responsibility & decisions Environment of trust& cooperation Employee guaranteed employment & will accept slow evaluation & promotion

Goal Setting Theory & Management by Objectives Peter Drucker, “Managers cannot motivate people; they can only thwart people’s motivation because people motivate themselves.” MBO – Ford Motor Company U.S. Defense Dept.

Victor Vroom - Expectancy Theory 1)Can I complete the task? 2)If I do, what will be my reward? 3)Is the reward worth it? Managers: What reward are valued by employees? Individual performance standard Are standards attainable Guaranteed rewards tied to performance Make sure that rewards are adequate

Reinforcement Theory Carrot & Stick Approach Carrot = positive incentives Stick = negative consequences Extinction/Punishment/Positive/Negative

Equity Theory Treating Employees Fairly What is fair? Is It Worth It? Secrecy may cause workers to exaggerate the pay of others, or their own contributions. Openness and frequent communication can defuse this problem.

Listening Create a corporate culture that rewards listening Train supervisors & managers to listen Remove barriers to open communication Actively undertake efforts to facilitate communication

Self-managed Team: open communication at work To produce high quality, customized goods & services requires extensive personal service & attention to detail Working Smart, not just hard Managers must know the needs of: their employees distributors/dealers customers Remember, motivation from the worthwhile work of the job itself is key.

Chapter 11 Human Resource Management Finding & Keeping the Best Employees

Working with People is just the beginning Developing the Ultimate Resource HR = Human Resource: The first step what does the firm need How many need to be recruited & selected? What skills & characteristics do the recruits need? What training can be done to prepare them? Hone their abilities Motivate their Loyalty & Effort Evaluate their potential Schedule the work they will do Career development

Challenges People with good ideas needed Shortages in future growth areas Computers, biotech, robotics, “the sciences” Workers from declining industries (skilled & unskilled) steel, automobiles, garment/apparel making Worker unprepared for business environment Age & societal shift of the workforce: job-sharing; DINK Laws & regulation Worker attitude toward work Morale & downsizing & use of temporary workers

Find out your firm’s HR Need 1)Human resource inventory a)Include Ages, Names, Education, Capabilities, b)Training, Special skills, & other important information (languages spoken) 2)Prepare a job analysis 3)Assess future demand 4)Assess future supply 5)Establish a strategic plan to reach your recruitment goals

Job Analysis A.Observe current worker doing the job B.Discuss job with managers C.Have workers keep a diary of their activities From this information, outline all the separate activities into a job description. What requirements do people need to qualify for this job? During recruitment do the prospects understand and like doing what your firm needs done. Is it something they can see themselves doing?

Checklist of Job Specifications Example: Two year experience Positive attitude Well-groomed appearance Good communication skills High school diploma & 2 yrs college credit

External vs Internal recruitment External Sources Internal Sources employment agenciesTransfers personal applicationsPromotions new graduatesEmployee recommendation former employeesRetrained employees part-time workersDepartment reorganization competitor firms unions advertisements business associates college professors internet job fairs internships

Selecting Productive Employees Obtain complete application forms Conduct initial and follow-up interview Give employment tests Background investigation Physical exams Probationary period

Contingent Workers Less than Full-time: 1-34 hrs temporary, fill in work may have priority for full-time after a probationary period Receive less than full benefits More flexibility for workers & firms

Training for Optimum Performance In what skills does the firm need more training? What should the training look like? How effective was the training?

Training Employee Orientation On-The-Job Training/shadowing/field training Apprentice programs Off-The-Job training Online training Vestibule training Job simulation

Management Development On-the job coaching Understudy positions Job rotation Off-the job course & training

Networking Contacts/associations Mentorship Diversity in management development

Performance Appraisal Set Standards Communication of standards Evaluate performance Discuss results with employees Taking corrective action Use results to make decisions

The dos & don’ts of evaluations Don’t even start, if you or the other person has had a trying day. Don’t attack their personality Allow sufficient time (take the phone off the hook) Talk privately & don’t make the employee uncomfortable Include the employee in the self-improvement part of the program Don’t bring out a list of problem areas that should have been handled at another time End with positive suggestions for improvement

Attract & Keep the Best Attract sufficient numbers Provide employees with incentives to work efficiently Keep valued employees from going to competitor firms or starting their own Maintain competitiveness: cost low & productivity high Provide some financial security through insurance & retirement benefits

Pay Systems Salary Hourly Wage Piecework System Commission Bonus Plans Profit-sharing Plans Gain-sharing Plans Stock Options

How many ways do you get paid? Commission: 75% up front & 25% split over months 10, 11 & 12 as earned Trail fees/continuation of business/royalties Overrides: paid % of team production PAC Commission: for every additional purchase on a monthly or more frequent basis Bonuses: 10%, 20% or 30% based on team business Renewals: Continuation of program Finders Fee: Based on a referral of service

Compensating Teams When goals met, all receive bonus Those who contribute exceptionally can also be recognized for their work Fringe Benefits Parking spot closest to the office Sick leave Cafeteria Plans Vacation Time

Scheduling Flextime Plans 8 hrs/day6am-3pm;7am-4pm; 8am-5pm 5 days/wk9am-6pm; 10am-7pm 10 hrs/day70 on/70 off 4 days/wk

Home-Based & Mobile Work Benefits Challenges fewer sick daysjob appraisal tougher higher job satisfactionless team cohesion broaden talent poolwork sharing/contacts reduces office space costsisolation/lost influence less commuting timezoning for home office environmentally friendlyless interpersonal interaction

Job-sharing 2 part-time employees share a full-time position Who does it works for: single moms parentsolder workers those developing a side interest/business folks who want less stress

Up, Over & Out Promoting & Reassigning Terminating Retiring/Losing

HR Laws National Labor Relations Board Civil Rights Act of 1964 Title VII (seven) Equal Employment Opportunity Act (1972) Amended Title VII Gave broad powers to EEOC Affirmative Action; Reverse Discrimination

More Laws Social Security Act of 1935 Age Discrimination in Employment Act of 1967 Occupational Safety & Health Act of 1970 Vocational Rehabilitation Act of 1973 Employment Retirement Income Security Act of 1974 Americans With Disabilities Act (1990) Civil Rights Act of 1991 Firms must act in accordance with these and other laws or face costly court cases.

Chapter 12 Dealing with Employee-Management Issues & Relationships

Basic Issues Recruitment/Selection Pay/Compensation Working Conditions: schedule/overtime/atmosphere Evaluations Intervention/Discipline/Termination Benefits Insurance/Retirement/Others

Collective Bargaining Union versus non-union jobs Public Sector versus Private Sector Jobs Historical Union Causes: Child Labor Laws 40 hour work week/Minimum wage Safety & Job security Better Pay/Benefits Many of these are codified in U.S. & state laws

The Rise of Organized Labor in U.S – Craft union meeting in Philadelphia Shoe Makers Copper & silversmiths Craft Union has members that are skilled in some specialty As the industrialization of America grew & short- lived, local/regional labor groups came & went, greater demand for unskilled factory labor lead to the formation of the first national labor organization.

Knight of Labor Uriah Smith Stevens – 1869 founded By 1886 – 700,000 members Included employers & workers promoted social causes & economic issues Goal: amass significant political power & eventually restructure the entire U.S. economy

The fall of the Knight of Labor Blamed for a bomb that killed 8 policemen at a labor rally at Haymarket Square in Chicago in 1886 A rival group, The American Federation of Labor (AFL), was formed in 1886 & was the top labor union by 1890 (under the leadership of Samuel Gompers) – a craft union Masons, carpenters, plumbers, etc.

AFL branches into unskilled labor Committee of Industrial Organizations (CIO) under the leadership of John L. Lewis, head of the United Mine Workers start recruiting industrial workers with no defined skill. In 1935, CIO changed its name to the Congress of Industrial Organizations & broke away from the AFL, soon rivaled the AFL in size & power. The National Labor Relations Act (Wagner Act) in 1935 gave the workers the right to join/form a union.

AFL-CIO merger George Meany (1955) 16 million union members 7 unions left of the AFL-CIO in 2005 to form the SEIU, Service Employees International Union (1.8 million members) Today, AFL-CIO membership is 9 million

Labor Legislation 1932 – Norris-LaGuardia Act 1935 – National Labor Relations Act (Wagner Act) 1938 – Fair Labor Standards Act 1947 – Labor-Management Relations Act (Taft-Hartley Act) 1959 – Labor-Management Reporting & Disclosure Act(Landrum-Griffin Act)

National Labor Relations Board Certify or Decertify Union Collect support: unionizing or decertification 30% of workers  petition NLRB Election to change require over 50% of votes cast – Secret Ballot NLRB certifies results of election

Important Concepts Negotiated Labor-Management Agreement Union Security Clause if a worker receives benefit from a union, they must join the union or pay dues, even if they are not a member. Closed Shop – must be union member to be hired (outlawed by Taft-Hartley Act – 1947)

Current Shop Arrangements Union Shop – must become member to keep job Agency Shop – must pay due whether member or not Open Shop – membership in union is optional, no due paid if not a member.

Right-to-work Laws Taft-Hartley Act gave states the right to pass Right-to-work Laws = Open Shop 22 states have right-to-work laws IDNVAZUTWYNDSDNBIA KSOKTXLAARMSALTNVA NCSCGAFL

Resolving Disagreements Grievance (two side see different side of an issue) Seniority Overtime Promotion Layoffs Transfers Job Assignment Shop Steward may settle many grievances

Mediation & Arbitration Bargaining Zone = options either side wants Impasse = no agreement after Mediation = use of a 3 rd party; a mediator makes suggestions to move toward resolution (cooling off period) Arbitration = individual or panel decides the outcome; both sides must agree to this

Union Tactics Strike = collective refusal to work Primary Boycott Secondary Boycott: prohibited by Taft-Hartley Act Work Slow Down

Management Tactics Lockout = Keep union workers from working Injunction against what the union is doing (striking, boycotting, etc.) Strikebreaker/Replacement workers/(scabs) 1938 Supreme Court ruling allows this First used in the 1980s

Global Competition & Technology Put pressure on unions that have made many unions to grant concession or givebacks when negotiating terms of a new contract. Pay increases reduced; overtime pay reduced Resistance against retirement givebacks UAW membership down 60% Union membership down from 35.5% of labor to 12.5% throughout the economy & 8% in the private sector States with higher percentages of union workers over 15% have been hit harder in the current economy.

Unionization: making a comeback? Growing membership not in industrial workers (mostly white males) in healthcare workers (nursing, more females) & white collar jobs & foreign-born workers Does nursing lack the respect of the general public? Are nurses underpaid workers? $25-$55/hr Do the goals of organized labor match the need for more health care professionals while holding down healthcare costs? Do gains in pay disappear in higher union dues?

Management-Labor Partnerships Cooperation not confrontation Shared responsibility in the design of tasks for workers to increase productivity In order to compete, waste & inefficiency must be reduced Do the objectives of union change over time? Job security & benefits

Controversial Issues Executive Compensation CEO pay in the rest of the world is 20 to 50 times an average worker’s pay CEO pay in the USA can be 400 to 500 times an average worker’s pay For a major corporations CEO compensation in 2004 was $36 million when an average worker was paid $33,176

The Past Level of CEO Pay 1960 – average CEO pay was $160,000/yr With inflation at 4.5% for 50 yrs, the CEO pay equivalent to 1960 for 2010 would be: $1,445,222 $36 million is nearly 25 times that number Why the disproportionate increases in CEO pay?

Reasons for high CEO Pay Stock Options = 57% of CEO pay Golden Parachutes “You shouldn’t pay anyone to fail.” - Charles Elson, director of the Center for Corporate Governance at the University of Delaware Bonuses for the meeting of goals

What is reasonable & appropriate? Peter Drucker, management consultant, suggested, “CEOs not be paid more than 20 times their lowest paid employee.” That translates into this concept, “If you want to earn one million dollars per year as a CEO, then your lowest paid employee should earn $50,000 a year.(not $33,176) If a CEO makes barely $1,000,000/yr then movie stars & athletes won’t make that much.

Pay Equity Equal pay for equal work Men versus women Asian/White/Colored Improvements & cracking the Glass Ceiling

Sexual Harassment Quid pro quo Hostile work environment

Child Care/Elder Care Flexible scheduling to assist workers take care of children & aging parents or spouses Provide company day care Time off: Maternity leave; Paternity leave; Bereavement leave; etc.

Drug Testing 6.2% of the U.S. workforce believed to be heavy drinkers. 40% of industrial injuries & fatalities linked to alcohol consumption. 8% of full-time workers ages use illegal drugs. 3.5 times more likely to be involved in a workplace accident & 5 times more likely to file for workman’s compensation than nonusers. Productivity Lost: $81 billion/yr; $11,000 per drug using worker (7.3 million) 70% of companies test job applicants for substance abuse.

Violence A growing problem 16% of workplace death Homicide is 3 rd as a cause of death at work Stress How people are treated at work Being Proactive: before violence happens