Ch.1 - A New Manifesto For Management Justin Poteet Leo Mardjuki Aaron Brown

 Main focus: ◦ Value appropriation - Productivity improvement and cost cutting by any means to maximize shareholder value  Strategy characteristics: ◦ Strategy, Structure, and Systems – run operations in a machine like fashion breaking down the complex assembly into its simplest component tasks ◦ Strict dominant logic within company ◦ Enhancing competitiveness by improving operational efficiencies ◦ Downsizing or cutting down labor costs to maximize company’s value ◦ Exists in a zero-sum, dog-eat-dog world ◦ Retaining all the value from the company’s products and services within the company

 Main focus: ◦ Value Creation – Focusing on continuous innovation and relationship building to maximize company value.  Strategy characteristics: ◦ Purpose, Process, People ◦ Encouraging people to work collectively toward shared goals and values ◦ Focus on Product differentiation and innovation ◦ Reverse Logic ◦ All stakeholders considered in making decisions

 Please organize into four groups  You will be given a worksheet with a management model  You will have minutes to complete the research  You can use any available resource: including our textbook

“Once strategy had been set at the top, structures and systems would banish troublesome human idiosyncrasy, thus enabling large, diversified companies to be run in the same machine-like ways. Like the workers on Henry Ford’s assembly lines, all employees were replaceable parts.”

 Operational Efficiencies ◦ continuous improvement ◦ process reengineering  Productivity Improvement and Cost Cutting  Keeping the value created by products and services strictly within the company

 Two generations of top managers have learned to frame their tasks through three Ss: ◦ Crafting Strategy ◦ Designing the Structure to fit ◦ Locking both in place with supporting Systems “A monkey will be able to run when I’m gone.” -Harold Geneen – accountant who ran ITT in the 1970s built a system that he boasted, “A monkey will be able to run when I’m gone.” -Harold Geneen – accountant who ran ITT in the 1970s built a system that he boasted,

 The period between was marked by growth and expansion in the west*  Profits grew by increasing market size not by market share*  Mid 1970s first oil shock*  Poor Management Practices EXPOSED *A challenge to traditional Management theory: Ed Weymes htm

“In a recent poll asking the public to rank professionals by ethical standards, people consistently rate managers the lowest of the low below even Politicians and Journalists” “In the recent World Economic forum (2004) survey on trust, only 7 percent of respondents reported that global companies operate in the best interests of society.” “In a recent poll asking the public to rank professionals by ethical standards, people consistently rate managers the lowest of the low below even Politicians and Journalists”

 The new roles of management breaks form the narrow economic assumptions of the past to recognize that: ◦ Modern societies are not market economies; they are organizational economies: Companies create value and advance economic progress. ◦ The growth of firms and economy is dependent on management quality ◦ The foundation of a firm is the “moral contract” with employees and society  employability and value creation

 Focus continuously on creating value for themselves and others, rather than expropriating as much value as they can  The three Ss (strategy, structure, and systems) that were the core of management theory give way to the three Ps: ◦ Purpose ◦ Process ◦ People

 Business world is full of companies that earn profits by continuously creating value for themselves and others ◦ Canon ◦ Intel ◦ Kao ◦ Unipart

 Moral Contract based on employability ◦ This relationship enhances retention rates  Intel’s Andy Grove way to avoid layoffs  Adopted the 90 percent rule  everyone accepting a 10 percent pay cut  Sold 20 percent of the company to IBM  $250 million in cash.  Implemented the 125 percent rule  work extra ten hours a week with no pay increase

 The new model leads to exciting and invigorating work environments ◦ Reverse Logic  Mutually leads to satisfying and durable long-term relationship between the individual and the organization

 Both models can work independently  The best companies will incorporate the new model to the foundation of the traditional model of management  Different companies in different markets need to find balance between these two management models

 1) What is the differences between the traditional management theory versus the new management theory? Describe the pros and cons of each, and provide examples of companies that would implement each strategy.  2) Andy Grove (CEO) of Intel in the 1980s, avoided layoffs by requiring employees to take a 10 percent reduction in salary to avoid layoffs. How would you have balanced your management strategy to protect the interest of your employees while also satisfying your stakeholders by combining new and traditional management theories? Explain.  3) What are the 3 S’s and what are the 3 P’s. How would you combine these to create an effective management strategy in your company?