1. The Management Environment
PART I: Introduction 2
Chapter 2
The Management Environment
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2. Learning Outcomes After reading this chapter, I will be able to:
Describe the three waves in modern social history and their implications for organizations.
Explain the importance of viewing management from a global perspective.
Identify the ways in which technology is changing the manager’s job.
Describe the difference between an e-business, e-commerce, and an e-organization.
Define social responsibility and ethics.
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3. Learning Outcomes (cont’d) After reading this chapter, I will be able to:
Explain what is meant by the term entrepreneurship and identify the components of the entrepreneurial venture.
Describe the management implications of a diversified workforce.
Identify which work/life concepts are affecting employees.
Explain why many corporations have downsized.
Describe the key variables for creating a customer-responsive culture.
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4. Learning Outcomes (cont’d) After reading this chapter, I will be able to:
Explain why companies focus on quality and continuous improvement.
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5. The Changing Economy Agriculture Industrialization Information
Until the late nineteenth century, all economies were agrarian.
Industrialization
From the late 1800s until the 1960s, most developed countries moved from agrarian societies to industrial societies.
Information
Information technology is transforming society from its manufacturing focus to one of service.
One of the biggest problems in managing an organization today is trying to hold on to the past. To better understand the turbulent business world, let’s look back on the road that we have traveled.
Futurist Alvin Toffler divides history into three revolutionary waves:
The first wave was agriculture. Until the 19th century, all economies were agrarian-based.
The second wave was industrialization. The first two-thirds of this century saw most developed countries move from agrarian-based to machine-based economies.
Starting in the 1970s, the third wave, information, is replacing low-skilled, blue-collar jobs with opportunities for educated and skilled technical specialists, professionals, and knowledge workers.
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6. The Changing Economy Old Economy National borders limit competition
Technology reinforces rigid hierarchies and limits access to information
Job opportunities are for blue-collar industrial workers
Population is relatively homogeneous
Business is estranged from its environment
Economy is driven by large corporations
Customers get what business chooses to give them
New Economy
National borders no longer define an organization’s operating boundaries
Technological change makes information more accessible
Job opportunities are for knowledge workers
Population is characterized by cultural diversity
Business accepts its social responsibilities
Economy is driven by small entrepreneurial firms
Customer needs drive business
Exhibit 2.1
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7. A Global Marketplace Global village Borderless organization
The concept of a boundaryless world; the production and marketing of goods and services worldwide.
Borderless organization
A management structure in which internal arrangements that impose artificial geographic barriers are broken down
The world has become a global village, a world without boundaries in which managers must adapt to a variety of cultures, systems, and techniques.
By the mid-1960s, multinational corporations (MNCs) were common. Even though this type of corporation maintained significant operations in two or more countries simultaneously, decision making was controlled by the home office.
Now, transnational corporations (TNCs) also maintain significant operations in more two or more countries, but decision making is decentralized.
Many large companies are breaking down internal arrangements that impose artificial geographic barriers, thereby forming a new type of organization—the borderless organization. They are moving to borderless management in order to increase efficiency and effectiveness in a competitive global marketplace.
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8. Global Competition Multinational corporations (MNCs)
Companies that maintain significant operations in two or more countries simultaneously but are based in one home country.
Transnational corporation (TNC)
A company that maintains significant operations in more than one country simultaneously and decentralizes decision making in each operation to the local country.
Strategic alliances
A domestic firm and a foreign firm share the cost of developing products or building production facilities in a foreign country.
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9. Stages of Going Global
In Stage I (passive response), managers move into the global market by exporting products to foreign countries. This is a passive, low-risk step because managers make no serious effort to tap foreign markets. Rather, the organization fills foreign orders only when it gets them.
In Stage II (initial overt entry), manages commit to either selling products overseas or having them made in foreign factories. Yet, there are still no company employees outside of the company’s home country.
Stage III (established international operations) represents a strong commitment by managers to pursue international markets aggressively. They can license or franchise to another firm the right to use the organization’s brand name, technology, or product specifications. Joint ventures involve larger commitments; a domestic and a foreign firm share the cost of developing new products or building production facilities. These are called strategic alliances—partnerships which provide a fast cost-effective way for companies to compete globally
Exhibit 2.3
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10. Globalization’s Effect On Managers
Parochialism
A narrow focus in which one sees things solely through one’s own view and from one’s own perspective
Hofstede’s framework for assessing cultures:
Power distance
Individualism versus collectivism
Quantity of life versus quality of life
Uncertainty avoidance
Long-term versus short-term orientation
The spread of capitalism underscores the growing global interdependence and the potential for goods, capital, and labor to move across national borders. The global marketplace, however, can present challenges for managers; for instance, managing in a different national culture.
Parochialism refers to a narrow focus, in which one sees things solely according to his own perspective. An extension of this narrow focus is a person with an ethnocentric view who sees his or her own culture as better than any other.
Organizational forms and goals can only be understood within their social context. In the global marketplace, success is promoted by a variety of managerial and organizational structures—each derived according to the given business environment. Managers must acknowledge that societal issues may affect operations in another country. Understanding cultural environments, therefore, is critical to managing in the global village
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11. Global Leadership and Organizational Behavior Effectiveness (GLOBE)
An ongoing cross-cultural investigation of leadership and national culture
Confirms and extends Hofstede’s earlier work on national cultural dimensions and leadership.
Also found that the strength of cultural dimensions appear to be changing.
Cultural Dimensions
Assertiveness
Future orientation
Gender differentiation
Uncertainty avoidance
Power distance
Individualism/Collectivism
In-group collectivism
Performance orientation
Humane orientation
Geert Hofstede surveyed over 116, 000 IBM employees in forty countries. By analyzing various dimensions of a country’s culture, he was able to provide a framework for understanding the role of management in the global village. His data indicated that national culture has a major impact on work-related values and attitudes, and he classified those values and attitudes into the following four dimensions of national culture:
Individualism refers to a loosely knit social framework in which people are supposed to look after their own interests and those of their immediate family. Collectivism is characterized by a tight social framework in which people expect others in their group to look after them and protect them.
Power distance is a measure of the extent to which a society accepts the unequal distribution of power in organizations and institutions. A high power distance society accepts wide differences in organizational power, so titles and rank carry a lot of weight.
A society that is high in uncertainty avoidance is characterized by a high level of anxiety among its people. Because the people feel threatened by ambiguity and uncertainty, they create mechanisms to provide security and reduce risk.
Some cultures emphasize the quantity of life and value assertiveness and the acquisition of money and material goods. Some cultures stress the quality of life and value relationships and promote the welfare of others.
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12. GLOBE Highlights Exhibit 2.4
Source: M. Javidan and R. J. House, “Cultural Acumen for the Global Manager: Lessons from Project GLOBE,” Organizational Dynamics, Spring 2001, pp. 289–305.
Exhibit 2.4
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13. GLOBE Highlights Exhibit 2.4 (cont’d)
Source: M. Javidan and R. J. House, “Cultural Acumen for the Global Manager: Lessons from Project GLOBE,” Organizational Dynamics, Spring 2001, pp. 289–305.
Exhibit 2.4 (cont’d)
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14. Emphasis on Technology
Any equipment, tools, or operating methods that are designed to make work more efficient
Information Technology (IT)
Benefits of IT
Cost savings (e.g., inventory control)
Freedom from fixed locations for operations
Challenges
Increased worker skill requirements
A leveling of the the competitive playing field that increases competition
Technology includes any equipment, tools, or operating methods that are designed to make work more efficient. The integration of technology into the production process has made it possible to enhance the process of changing inputs into outputs by replacing human labor with computers and electronic equipment. Technology can improve customer service. For example, state-of-the-art equipment can allow a business to customize the orders, so that making a “one-of-a-kind” product can be done as efficiently as producing a whole shipload of standardized products. Technology also can be used to provide better, more useful information; so, company officials can have complete information on their products lines in several thousand stores within 24 hours.
New technologies are changing the knowledge, skills, and abilities that employees need to succeed. Not only will repetitive tasks continue to be computerized but many jobs will be upgraded. Furthermore, reengineered jobs will require self-motivated, computer literate employees with excellent communication skills. Technology can level the competitive playing field by providing companies (no matter what size or market power) with the ability to innovate, to bring products to market fast, and to respond to customer requests.
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15. Internet Business Terms
E-commerce
Any computer transaction that occurs when data are processed and transmitted over the Internet
E-organization
The applications of e-business concepts offered to stakeholders.
E-business
The full breadth of activities included in a successful Internet-based enterprise
Technology can also change the relationship between business and customers. Consider the proliferation of ecommerce. Because it empowers customers, their expectations about convenience, comparability, speed, price, and service are changing. Businesses will have to meet the needs of empowered customers, if they want to succeed.
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16. What Defines an E-Business?
Exhibit 2.5
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17. In What Ways Does Technology Alter A Manager’s Job?
Effectiveness and efficiency
Managers have access to more complete and accurate information than before, enabling them to function as better managers.
Place
Telecommuting: the linking of a worker’s computer and modem with those of co-workers and management at an office.
Organizations have become integrative communication centers in which managers have quicker access to information. With that information, they can better formulate plans, make faster decisions, more clearly define jobs, and monitor work activities. Therefore, technology allows managers to perform the four functions of management more quickly and efficiently.
In addition, technology has changed how their work is performed. For instance, telecommuting is the linking of a worker’s computer and modem with those of coworkers and managers at an office. Rather than simply observing the behavior of on-site employees, managers must now communicate with off-site workers and monitor their performance.
Addressing such challenges will require managers to establish performance standards which will ensure that high-quality work is completed on time. In addition, since traditional “face-time” is removed in decentralized work sites, a manager’s need to “control” the work will have to change. Instead, there will have to be more employee involvement, allowing workers to make those decisions which affect them. The emphasis, then, will be on the final output, not the means by which it is accomplished.
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18. Society’s Expectations of Business
Social responsibility
A firm’s obligation, beyond that required by the law and economics, to pursue long-term goals that are beneficial to society.
Social obligation
The obligation of a business to meet its economic and legal responsibilities and no more.
Social responsiveness
The ability of a firm to adapt to changing societal conditions.
Managers must often make decisions that involve social responsibility: a term that can be defined as business firm’s obligation (beyond that required by the law and economics) to pursue long-term goals that are good for society. This definition assumes that the firm obeys the law and pursues economic interests.
A business has fulfilled its social obligation when it meets its economic and legal responsibilities and no more. Such a firm pursues social goals only to the extent that they contribute to its economic goals.
The ability of a firm to adapt to changing societal conditions is social responsiveness. The firm’s response is guided by social norms.
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19. Arguments for Social Responsibility
Public expectations
Long-run profits
Ethical obligation
Public image
Better environment
Discouragement of further government regulation
Balance of responsibility and power
Stockholder interests
Possession of resources
Superiority of prevention over cures
The major arguments for the assumption of social responsibilities by business are as follows:
By becoming socially responsible, business can minimize government intervention.
Because business has significant power in society, an equally significant amount of responsibility is required to balance it.
Social responsibility will improve the price of a business’s stock in the long run.
Business has the resources to support public and charitable projects that need assistance.
Business should act on social problems before they become so serious that they divert energy from the production of goods and services. By becoming socially responsible, business can minimize government intervention.
Business should act on social problems before they become so serious that they divert energy from the production of goods and services.
Source: Adapted from R. J. Monsen Jr., “The Social Attitudes of Management,” in J. M. McGuire, ed. Contemporary Management: Issues and Views (Upper Saddle River, NJ: Prentice Hall, 1974), p. 616: and K. Davis and W. Frederick, Business and Society: Management, Public Policy, Ethics, 5th ed. (New York: McGraw-Hill, 1984), pp. 28–41.
Exhibit 2.6
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20. Arguments against Social Responsibility
Violation of profit maximization
Dilution of purpose
Costs
Too much power
Lack of skills
Lack of accountability
Lack of broad public support
The major arguments against the assumption of social responsibilities by business are as follows
Business is most socially responsible when it attends strictly to economic interests and leaves other activities to other institutions.
The pursuit of social goals dilutes the primary purpose of business: that is, economic productivity.
Many socially responsible activities do not pay their own way.
Business has too much power already. If it pursued social goals, it would have even more power.
Business people are poorly qualified to cope with social issues.
There are no direct lines of social accountability from the business sector to the public.
There is no broad mandate from society for business to become involved in social issues.
Source: Adapted from R. J. Monsen Jr., “The Social Attitudes of Management,” in J. M. McGuire, ed. Contemporary Management: Issues and Views (Upper Saddle River, NJ: Prentice Hall, 1974), p. 616: and K. Davis and W. Frederick, Business and Society: Management, Public Policy, Ethics, 5th ed. (New York: McGraw-Hill, 1984), pp. 28–41.
Exhibit 2.6 (cont’d)
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21. Ethics and Business Ethics Code of ethics
A set of rules or principles that defines right and wrong conduct
Code of ethics
A formal document that states an organization’s primary values and the ethical rules it expects managers and operatives to follow
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22. Three Views of Ethics Utilitarian view of ethics Rights view of ethics
Making decisions solely on the basis of their outcomes or consequences.
Rights view of ethics
Respecting and protecting individual liberties and privileges
Theory of justice view of ethics
Fairly and impartially imposing and enforcing rules.
Behaviors that were once considered reprehensible (lying, misrepresenting, covering up mistakes) have become, for many, either acceptable or necessary practices. Concern over this decline in ethical standards is being addressed at two levels:
1. Ethics education is being widely expanded in college curriculums
2. Organizations are creating codes of ethics and introducing ethics training programs.
Ethics commonly refers to the rules or principles that define right and wrong conduct. However, one’s definition of ethical conduct will be influenced by how he or she views the concept of ethics. An individual who has a utilitarian view of ethics will make decisions solely on the basis of their outcomes or consequences. The person who espouses a rights view of ethics will respect and protect individual liberties and privileges. One who upholds the theory of justice view of ethics will impose rules fairly and impartially.
A number of factors will determine whether a manager acts ethically or not: for example, the individual’s values, morality, personality, and experiences; the organization’s culture; and the issue that is being questioned. In most situations which involve questions of ethics, ambiguity can be a problem for managers. A code of ethics can reduce ambiguity. Such a code is a formal document that states an organization’s primary values and the ethical rules it expects managers and operatives to follow.
Source: G. F. Cavanaugh, D. J. Moberg, and M. Valasquez, “The Ethics of Organizational Politics.” Academy of Management Journal (June 1981): 363–74.
Exhibit 2.7
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23. What Is Entrepreneurship?
The process of initiating a business venture, organizing the necessary resources, and assuming the risks and rewards
Steps in the entrepreneurial process
Exploring the entrepreneurial context.
Identifying opportunities and competitive advantages
Starting the venture.
Managing the venture
Some individuals exhibit the entrepreneurial spirit: the willingness to start a business, take calculated risks, and learn from their mistakes. Because entrepreneurial businesses usually start small, most can be defined as small business—one that has fewer than 500 employees.
What explains the increased popularity of individuals starting their own business? While there has always been a segment of the population that wants to control its own destiny, recent changes in the economy have promoted the entrepreneurial spirit.
Downsizing of large corporations, for example, has displaced millions of workers and managers. Many of them have used their severance pay or early retirement bonuses to start a business of their own. After seeing their friends being laid off and concluding that their opportunities in downsize corporations will be limited, others have voluntarily chosen self-employment.
Another driving force is the increasing options in franchising. In large organizations, those who seize opportunities for change and who embrace change are called intrapreneurs. Since this behavior occurs in a large organization, however, it can never capture the autonomy and risk inherent in being and entrepreneur.
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24. What Do Entrepreneurs Do?
No two entrepreneurs are exactly alike
They are creating something new, something different.
They’re searching for change, responding to it, and exploiting it.
Intrapreneur
A persons within an organization who demonstrates entrepreneurial characteristics—has confidence in his or her abilities, is willing to seize opportunities for change, and expects surprises and capitalizes on them.
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25. Diversity and the Workforce of 2010
Increasing workforce diversity
More variation in the background of organizational members in terms of gender, race, age, sexual orientation, and ethnicity
Characteristics of the future workforce
More heterogeneous/diverse
Increasingly older
More multicultural
Diversity will require more managerial sensitivity to individual differences.
Workforce diversity requires managers to be more sensitive to the differences each group brings to the work setting. They must deal with the different values, needs, interests, and expectations of employees. They must avoid any action that can be interpreted as being sexist, racist, or offensive to minorities; and they must not illegally discriminate against any employee.
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26. Mars Incorporated Diversity Philosophy
“Distinctive voices working together within a common culture” is one of the ways we have described how we do business at Mars. We believe that the success of our business can be enhanced by having a workforce made up of associates from many different backgrounds, much as our society and consumer base consist of a wide variety of individuals. We value the talents and contributions of our diverse workforce in reaching toward our future and in playing responsible leadership roles.
Exhibit 2.8
Source:
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27. Labor Supply and Demand Adjustments
Downsizing
An activity in an organization designed to create a more efficient operation through extensive layoffs
Rightsizing
Linking staffing levels to organizational goals
Outsourcing
An organization’s use of outside firms for providing necessary products and services
In the past, a simple rule held true: hire employees during good times and fire employees in bad times. Modern organizations, however, are responding to the global business environment in other ways, such as redesigning jobs or downsizing—extensive layoffs intended to cut costs and boost efficiency. At issue for these corporations is staffing their ranks properly, or rightsizing, according to their strategic goals.
As a result, many firms are now outsourcing—using outside firms to provide necessary products and services. Rather than disappearing, big companies are changing how they operate, for instance, blending large size with agility by dividing into smaller, more flexible units.
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28. Flexible Workforces Core employees Contingent workforce
The small group of full-time employees of an organization who provide some essential job tasks for the organization
Contingent workforce
Part-time, temporary, and contract workers who are available for hire on an as-needed basis
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29. Contingent Workers Part-time employees Temporary employees
Work fewer than 40 hours a week
Are a good source of staffing for peak hours.
May be involved in job sharing
Temporary employees
Are generally employed during peak periods
Can fill in for employees for an extended period of time
Create a fixed labor cost during a specified period
Contract workers
Are hired by organizations to work on specific projects.
Are paid when the firm receives particular deliverables.
Are a labor cost that is fixed by contract
Thousands of organizations have cut costs and increased flexibility by converting many full-time jobs into part-time positions, thereby creating the contingent workforce. Faced with a volatile business environment, organizations with large numbers of permanent, full-time workers are cumbersome. Those that rely on contingent workers, on the other hand, are more flexible. But, temporary workers present special challenges for management. Each contingent worker may need to be treated differently in terms of practices and “policies.” Managers must also make sure that contingent workers do not think of themselves as “second-class.” In addition, managers must motivate part-time workers to be committed to doing good work.
The contingent workforce consists of several types of workers:
Part-time employees work fewer than 40 hours per week.
Temporary employees are employed during peak production periods.
Contract workers are hired to work on specific projects.
Exhibit 2.9
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30. Is There a Pending Labor Shortage in the United States?
2010 U.S. Labor Shortage
Fewer available workers
Retiring baby boomers
Immigration restrictions
Implication for managers
More sophisticated recruitment and retention strategies
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31. Making a Company’s Culture More Customer-responsive
Actions that create employees with the competence, ability, and willingness to solve customer problems as they arise:
Selection: hiring the right personalities and attitudes
Training: developing the customer-focus employees
Organizing: creating customer-friendly controls
Empowerment: independence in relating to customers
Leadership: commitment to the customer-focus vision
Evaluation: performance measured by behaviors
Rewards: contingent on outstanding customer service
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32. Shaping a Customer-Responsive Culture
Exhibit 2.10
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33. Increased Concern for Quality
Continuous improvement
Organizational commitment to constantly improving the quality of a product or service
Joseph Juran
W. Edwards Deming
Kaizen: the Japanese term for an organization committed to continuous improvement
Work process engineering
Radical or quantum change in an organization
Total Quality Management (TQM) or “continuous improvement” was inspired by quality experts, like W. Edwards Deming. As a management philosophy, TQM is driven by an intense focus on customers. The objective is to create an organization committed to continuous improvement, or kaizen.
Although TQM has changed the way organizations do business, in a dynamic global environment, focusing on incremental change may not be enough. In fact, this focus on continuous improvement may provide a false sense of security, when radical or quantum change or work process engineering is really needed. Some organizations must overhaul their operations before they consider a long-term program of continuous improvement..
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34. Components of Continuous Improvement
Intense focus on the customer.
Concern for continuous improvement.
Improvement in the quality of everything the organization does.
Accurate measurement.
Empowerment of employees.
Exhibit 2.11
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35. Web Links Visit the Robbins/DeCenzo companion Website
At for this chapter’s Internet resources, including chapter quiz and student PowerPoints.
Diversity Perspectives
Log onto and imagine the possible perceptions of the workers and the new division manager toward each other.
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36. Web Links (cont’d) Enhancing Your Skill in Ethical Decision Making
Now you can assume the role of a Boeing manager in a hypothetical scenario involving ethical challenges. Log onto and enhance your skill in ethical decision making!
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37. Insert Video Link Here (Size to this window)
Video Case Application Conducting Business Ethically and Responsibly: Patagonia
Insert Video Link Here (Size to this window)
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