1. Business Management and Organization7
Business Management and Organization
Better Business
2nd Edition
Solomon (Contributing Editor) · Poatsy · Martin
chapter
© 2012 Pearson Education, Inc.
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2. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.
© 2012 Pearson Education, Inc.
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3. Learning Objectives
What are the levels of management, and what skills do managers need to be successful?
How are the strategic plan, the corporate vision and the mission statement defined for a business?
Why do managers need tactical plans, operational plans and contingency plans?
What is the significance of organizing, and how are most companies organized?
How do managers ensure the business is on track and moving forward?
In this chapter, we will study:
Technical, interpersonal, decision-making, conceptual, and time management skills necessary for business management.
Strategies managers use to establish the corporate vision and mission statement and keep the company on task.
Management implications of tactical plans, operational plans, and contingency plans.
The significance of organizing, and how most management is organized.
Vertical organizations, horizontal organizations, and network organizations.
What makes a good leader, and the various styles of leadership.
The implications of control within a business.
Teaching Tips
To preview chapter content, consider asking students the following questions from the chapter opening page:
What types of skills do successful managers need to have? And how do they use these skills to be effective?
How can two managers with the same position at competing firms have very different day-to-day tasks?
How can managers use effective leadership to ensure that plans and strategies are properly carried out?
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4. What Is Management?
Working with people and resources to accomplish the goals of the organization
Learning Objective 1: What are the levels of management and what skills do managers need to be successful?
Management is the process of working with people and resources to accomplish the goals of the organization.
The skills of a manager and the process a manager goes through are similar across all management levels.
Management involves four primary functions: planning, organizing, leading, and controlling. These functions integrate all of the company’s resources, including human, financial, and technological. The next section of this chapter will cover these functions in detail.
Teaching Tips
The text offers an example of Indra K. Nooyi, Chairperson and CEO of PepsiCo., as a talented and effective manager (and Fortune’s most powerful woman in business for 2007).
Critical Thinking Question 1 asks students to discuss qualities that define the best managers they have observed.
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5. Five Skills of Successful Managers
Technical skills
Interpersonal skills
Conceptual skills
Decision-making skills
Time management skills
Technical skills include the abilities and knowledge that enable an employee to carry out the specific tasks required of a job, such as drafting skills for an architect. Managers must know how to perform, or at least understand, the skills required of the employees they supervise.
Interpersonal skills enable a manager to interact with other people in order to motivate them. It’s important that a manager develop trust and loyalty with the people he or she interacts with often. Interpersonal skills are important skills at any management level.
Top managers communicate with directors, investors, the business community leaders, and middle managers.
Middle managers must communicate with all levels of management and act as liaisons among groups.
Lower-level managers must motivate, train, and support those who perform the tasks of the organization.
Decision-making skills enable a manager to identify and analyze a problem, examine the alternatives, choose and implement the best plan of action, and evaluate the results.
Conceptual skills enable a manager to think abstractly in order to picture the organization as a whole and the relationships between the parts and to understand the business’ relationship to the rest of the business community.
Time management skills enable a manager to achieve the maximum amount of productivity in a set amount of time.
It is a rare person who is master of all these skills.
Managers must assess the skills that are required in any given situation.
Managers must be willing to acquire these skills quickly if necessary.
Teaching Tips
Ask if these skills are just for managers, or for everyone. Are they learned or innate?
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6. Decision-Making Steps
The following are the steps involved in the decision-making process:
Managers identify problems by analyzing data and searching for trends. Such problems may include poor growth in sales or an increase in customer dissatisfaction.
Once a problem is defined, managers then generate alternative solutions.
Once they have identified several alternatives, managers evaluate the alternatives based on various criteria, such as cost, feasibility, time, resources needed, market acceptance, and compatibility with the company’s mission, values, and goals.
Managers may rank the evaluated alternatives by various criteria.
This evaluation process can be tedious, but identifying and evaluating alternatives is critical to making a good decision.
Once managers have evaluated all alternatives, they choose the best plan of action. When the final choice has been made, plans are put in place to implement the plan of action.
Managers also evaluate the decision to ensure it is carried out correctly and meets the goals of the organization.
If the goals are not being met, the decision-making process may become cyclical, beginning again with identifying the problem.
Teaching Tips
Have students write down a major decision they made recently or need to make and go through the five steps. If they can’t think of a major decision, suggest they use a minor one (what to have for dinner tonight) or a common one in colleges such as what classes to take next term. Ask if the process steps help them make the decision. Discuss, too, whether these steps are more of a rational or emotional approach to decision making and whether a rational approach such as this is always the way to decide. (Opinions should vary!)
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7. Time Management 1. Determine the level of urgency of paperwork
2. Create folders for
3. Designate a time for telephone calls
4. Identify clear agendas for meetings
The following steps are crucial to effective time management for almost any manager:
1. Determine the level of urgency of paperwork. Managers must separate paperwork according to due dates and clearly label each pile. Keeping a schedule and crossing off each task when completed are important time management skills.
2. Create folders for . Managers should filter spam to a specific folder and create other folders based on subject. They should leave the messages requiring an immediate reply in their inbox and address urgent messages right away.
3. Designate a time for telephone calls. Managers should take urgent calls immediately. If possible, they should save messages from other calls and allocate a specific time to return calls.
4. Identify clear agendas for meetings. Managers should distribute an agenda to all attendees before a meeting that specifies the goals the meeting must achieve.
By following steps such as these, managers find that their productivity levels increase and more time is freed for completing other tasks required of the job.
Teaching Tips
Ask students if they can guess the top time wasters at work. Here is one list compiled by Future Visions:
1. Meetings
2. Dealing with communication from others
3. Communicating to others
4. Your boss micromanaging or undervaluing you
5. Work tools and processes designed for company success, but not necessarily yours
Consistently, Future Visions has found that the top three time-wasters, all activities relating to communication, cost people at least two wasted hours per day!
Source:
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8. The Functions of Management
Planning
Organizing
Leading
Controlling
The functions of management include:
Planning
Organizing
Leading
Controlling
Teaching Tips
It is interesting to note (and discuss) that some management textbooks in the 1980s talked about the four primary functions of management as planning, organizing, directing, and controlling. What does the change from “directing” to “leading” say about the evolution of management?
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9. Planning Definitions: Planning Goals Objectives
Goals and objectives should be SMARTER:
Specific
Measurable
Acceptable
Realistic
Timely
Extending
Rewarding
Why do managers need to plan? Goals and plans help to keep you on task.
Planning is the process of establishing goals and objectives and determining the best ways to accomplish them.
Goals are broad, long-term accomplishments an organization wants to achieve within a certain time frame—in most companies, this is about five years.
Objectives are the short-term targets that are designed to help achieve these goals.
Both goals and objectives are best set with deadlines and quantifiable measures.
The acronym SMARTER explains what goals should do. Goals should be Specific, Measurable, Acceptable (to those working to achieve the goals), Realistic, Timely, Extending (the capabilities of those working to achieve the goals), and Rewarding to those working to achieve the goals.
Teaching Tips
Discuss the phrase “Failing to plan is planning to fail.” Is this true? Why or why not?
Planning is sometimes called “the first among equals” of the four management functions. Ask the students why this is the case. (You must have a plan before you can do any of the other activities.)
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10. Visions and Mission Statements
The first step in creating a strategic plan is to establish a corporate purpose
- A vision identifies what the business wants to be in the future
- The mission statement:
Is a more current description
Lists the organization’s purpose
Includes basic goals
Includes philosophies
Learning Objective 2: What strategies do managers use to establish the corporate vision and mission statement and keep the company on task?
A vision identifies what the business wants to be in the future.
The vision may be a series of goals and plans.
The vision should be made clear to all employees and investors.
The mission statement is a more current description of the organization’s purpose, basic goals, and philosophies.
A mission statement only helps management remain focused.
A mission statement lets employees understand the core values of the company for which they work.
A mission statement reflects the personality of a company and can be different in design and content.
Teaching Tips
The text discusses the mission statements of Under Armour and Nike (in Table 7.1).
One resource with suggestions about mission statements: “Mission Statements: The good, the bad, the forgotten” at
Challenge your students to write their own personal mission statement. See online resources like your-best-year-ever.html and statements.htm
One of the end of the chapter team exercises, “On a Mission,” has students research and analyze mission statements.
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11. Four Types of Management Planning
Learning Objective 3: What are the implications of strategic plans, tactical plans, operational plans, and contingency plans within the context of management?
Strategic plans are the main courses of action created by top-level managers that set the approach for achieving the long-term goals and objectives of the organization. Simply put, a strategic plan points the organization to where it wants to be in the future and identifies how it’s going to get there.
Tactical plans specifically determine the resources and the actions required to implement particular aspects of the strategic plan. Middle management generates tactical plans to carry out the goals determined by the strategic plan. Tactical plans are made with a one- to three-year horizon in mind.
In an operational plan, the specifics of carrying out tactical plans are spelled out. First-line managers precisely determine the process by which tactical plans can be achieved. Operational plans depend on daily or weekly schedules and focus on specific departments or employees.
Contingency planning is a set of plans that ensures that the organization will run as smoothly as possible during an unexpected disruption. The particulars of each plan differ depending on the size and function of the company and the magnitude of crisis for which the plan is needed.
Teaching Tips
Review who in the organization typically creates each level of plan and the time frame for each. These items are underlined in the descriptions above. The text doesn’t mention how far out strategic plans can go. They are usually looking out at least 3 years and can go out as far as 10 years or more.
Use the “Beyond the Book” slide on Southwest Airline’s planning to give some specific examples of each of these.
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12. The Strategic Planning Process
A good strategic plan reflects what is going on inside and outside the organization and how those conditions and changes will affect the organization in the future. There are several steps management takes while developing a strategic plan.
Teaching Tips
Ask which comes first—the vision or mission statement? (The mission statement should be derived from the vision.)
Check out statements.com for many corporate, non-profit, personal, family, and other example mission statements.
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13. SWOT Analysis © 2012 Pearson Education, Inc.
A SWOT analysis analyzes Strengths, Weaknesses, Opportunities and Threats and helps determine the strategic fit between an organization’s internal, distinctive capabilities and external possibilities relative to the business and economic environments.
SWOT analysis occurs after creation and communication of the company’s vision and mission statement.
Teaching Tips
It is a valuable exercise to complete an example of a SWOT analysis as a class. One of the easy organizations for a class to analyze is your college.
As you work together on the exercise, emphasize that strengths are internal to the college—what the college already has, not what it could have. The same is true for weaknesses (sometimes starting with weaknesses is the easiest for students).
As students brainstorm opportunities, help them understand that these are events, trends, etc., going on in the environment that your college could take advantage of (the growing interest in online education is a likely example).
As they look for threats, remind them that these are things that could happen outside the college that could impact the college’s mission and goals.
Some ideas are interesting to discuss. For example, is an economic downturn bad for business (a threat) or good for business (an opportunity)? It might even fit under both categories as enrollment may drop in general, but the potential of students returning to college for retraining might increase.
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14. Organizing Usually the next step after planning
The process of structuring resources to carry out plans
- Capital
- Personnel
- Raw materials
- Other resources
Learning Objective 4: What is the significance of organizing, and how is most management organized?
Organizing is the process of structuring the capital, personnel, raw materials, and other resources to carry out the plans in a way that best matches the nature of the work.
Teaching Tips
One example to help illustrate how organizing occurs after planning and what it entails is to discuss what would need to be done to execute a sizable project such as:
Moving to a new house. When will the move occur? Who will get boxes? Who will pack? When will utilities be discontinued at the old house and started at the new house? How much will the move cost?
Planning a vacation with friends. Once the destination is determined, the group has to decide how to get there, how long to stay, where to stay, what the budget for the trip will be, etc. Getting all this put together is the “organizing” part of the project.
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15. The Managerial Pyramid
At the peak of the pyramid, top managers are the corporate officers who are responsible for the organization as a whole.
Most established corporations determine the corporate officers, especially the chief executive officer (CEO), or president. Depending on the size and organizational complexity of the company, top management can also include the chief financial officer (CFO), chief operations officer (COO), and chief information officer (CIO).
Top managers generate the strategic plans, long-term goals, mission statement, and vision for the organization.
They establish the culture of the organization and inspire employees to adopt senior management’s vision of the organization.
In smaller corporations, especially small start-up companies, top managers may also be responsible for planning and carrying out the day-to-day tasks of the company. But as the business grows, such companies will need to add more employees and divide the work into smaller tasks and areas of specialty.
Middle managers can be thought of as top managers but just for one division or a part of an organization. As such, they are responsible for the tactical planning and creating more specific plans that coordinate with the strategic vision set by the top managers.
Included in this management layer are positions such as division managers (finance, marketing, sales, operations, and IT) or team leaders who are not arranged by function but are responsible for a group of employees who must carry out specific tasks for the organization.
The bottom of the managerial pyramid includes first-line managers who carry out operational planning.
These managers fill a supervisory role over those employees who are responsible for carrying out the day-to-day operations of the company.
Teaching Tips
Discuss the fact that not all companies have all three layers of management—some have more, and some have fewer. Typically you’ll find the “extra” layers are middle managers. However, the organizational pattern of a vertically structured business generally can be represented by the managerial pyramid.
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16. Organizational Charts
Part of organizing is to establish an organizational structure.
Organizational structure depends on a variety of factors such as:
The number of employees in the organization.
The speed at which decisions need to be made.
The subjectivity of the business to rapid change.
The collaborative nature of the work.
Smaller companies that have relatively few employees tend to be organized differently than large corporations. Small companies tend to have much simpler structures compared with large companies. Regardless, to accomplish many tasks at the same time, organizations must have some division of labor and allocate work into smaller tasks.
An organizational chart shows how groups of employees fit into the larger organizational structure.
Teaching Tips
You can find some examples of organization charts online, although the examples are often sales tools for charting software and can be very vague. See for example.
Forbes magazine has an early beta version of a “Corporate Org Chart Wiki” that may develop into something interesting over time.
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17. Organizational Structures: Vertical and Horizontal
Vertical organizations
- Organized by specific function (finance, sales, etc.)
- Also called “tall”
- Integration between functions not easy
Horizontal organizations
- Few layers
- Often use teams
- Also called “flat”
Learning Objective 5: What are the differences among vertical organizations, horizontal organizations, and network organizations?
In a vertical organization (or a tall organization), the company is organized by specific function, such as marketing, finance, purchasing, information technology, and human resources.
Levels of expertise within functions are developed and managers can better keep track of economic and environmental conditions that affect their functional area.
Integration between functions and divisions is not always easy with long lines of communication and “reporting up.”
Vertical organization has been the primary structure of business since the industrial revolution.
Vertical organizational structures were criticized as being overspecialized, fragmented, and inflexible.
In a horizontal organization (or a flat organization), the traditional managerial pyramid is flattened.
A horizontally structured organization still has some of the pyramidal aspects, including a CEO and perhaps another layer of middle management, but then the organization often has employees in teams or groups.
The benefit of a horizontal organization is that each team has more responsibility for the outcome of its work.
There are fewer layers of management; if needed, the bosses’ approval can be sought and received faster.
The company can be more responsive since individuals are more empowered to make decisions.
Horizontal structures have been deemed the “model for the knowledge age.”
They are suitable for industries that require rapid responses to quick changes.
Teaching Tips
Texts often discuss span of control and decision-making policies with tall and flat organizations.
In a tall organization, spans of control (the number of people reporting to a supervisor) is narrow (few people report to a manager) and decision-making is centralized (controlled by managers and directed up the chain of command when needed.
In a flat organization, spans of control tend to be wider and decision-making is decentralized as employees are more empowered.
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18. Organizational Structures: Network
Collection of independent, mostly single-function firms that collaborate on a product or service
May be successful for those companies that need to:
- Be flexible and innovative
- Respond quickly
- Save time
- Reduce costs and risk
Network organizations are collections of independent, mostly single-function firms that collaborate on a product or service.
The text offers an example of Boeing’s 787. In the past, airplanes were assembled in one hangar. This time, however, Boeing relied on the expertise of hundreds of manufacturers worldwide to independently manufacture the components of the plane and ship the individual pieces for assembly in their main plant.
Nike, which only owns one manufacturing plant, and Reebok, which only designs and markets but does not produce any of its products, also use network structures.
A network structure is not suitable for every company, but it may be successful for those companies that need:
To be as flexible and innovative as possible.
To respond quickly to threats and opportunities.
To save time.
To reduce costs and risk.
Teaching Tips
Talk about the Boeing example in more detail. See
A new buzz word, “co-creation,” refers to the idea that the most successful companies no longer invent new products on their own.
They create them along with their customers.
The Internet, Facebook, and the iPod are all examples of how customers help define the experience in a network of collaboration and sharing.
They must utilize a “global Web” of suppliers and partners to have the resources they need.
Source: “Here it is. Now, you Design it!” Geoff Colvin, Fortune, May 26, 2008.
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19. Leading
Learning Objective 6: What makes a good leader, and what are the various styles of leadership?
Leading is the process of influencing, motivating, and enabling others to contribute to the success and effectiveness of the organization by achieving its goals. Therefore, the quality of leadership exhibited by managers is a critical determinant of organizational success. The best leaders are defined as those who:
Challenge the process by not always accepting conventional beliefs and practices as the only way to accomplish tasks.
Model the way by serving as a living example of the ideals in which they are asking their employees to share.
Inspire a shared vision and appeal to people’s values and motivate them to care about the corporate goals or an important mission.
Encourage the heart by showing appreciation, providing rewards, and so on, to motivate people in positive ways.
Enable others to act by giving people the access to information and empowering them to perform to their fullest potential.
Teaching Tips
You can generate a lively discussion with the question, “Are all leaders managers and are all managers leaders?” The text does state “managers and leaders are not the same, although it is important for a manager to strive to be both a leader and a manager. Managers are task-oriented and focus on process and control, whereas leaders realize the importance of guiding and inspiring others to help accomplish a task.”
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20. Activities of Real Managers
Fred Luthans at the University of Nebraska–Lincoln conducted a study, identifying two types of managers: successful managers and effective managers:
Successful managers are those who are rapidly and consistently promoted.
Effective managers are those who “get the job done and do it right.”
It might seem that to be successful, you must be effective, but according to the study, the two types have little in common. Luthans first determined that managers’ activities may be assimilated into 11 behavior categories. He then further organized the behaviors into four managerial activities, shown in Table 7.4.
Teaching Tips
Refer to the chapter BizChat box: “Do Successful Managers Need to Be Effective?” that states there are two types of managers: successful managers who are rapidly and consistently promoted and spend their time networking and effective managers who satisfied subordinates and had high-performing units and spend most of their time performing communication and human resources management activities.
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21. The Traits of a Good Leader
Determination
Inspiration
Flexibility and empathy
Innovativeness
Honesty
Self-confidence
Knowledge and competence
There are several traits that most leadership analysts agree are common to good leaders:
Determination: Leaders need to achieve and are constantly striving for improvement. They have a high energy level and are ambitious and persistent in the face of obstacles. Leaders don’t give up easily. True leadership drive, however, does not come at the expense of others; therefore, leaders delegate authority and responsibility to others to promote their success also.
Inspiration: Leaders influence in a positive and moral way (rather than in a selfish and destructive way) and garner trust, respect, and commitment to their vision. They can communicate a vision throughout the organization and inspire others.
Flexibility and empathy: Leaders are good listeners, can perceive the need for a change in tactics, and, if necessary, can adjust their leadership style to fit the situation. Leaders must take into account the overall well-being of others and be mindful of their values and feelings.
Innovativeness: Leaders set goals and have a vision of the future that may be different from the norm. Leaders are not afraid to alter their methods, plans, or even thinking if the situation calls for change. They are resourceful and creative problem-solvers.
Honesty: Leaders are trustworthy and credible.
Self-confidence: Leaders have the confidence to overcome inevitable obstacles and to make tough decisions despite uncertainty. A leader’s confidence promotes calm in stressful situations.
Knowledge and competence: Leaders have a good handle on their business and industry. Good leaders base their decisions on facts. They are well organized and detail-oriented.
Teaching Tips
Have students identify strong leaders in business, politics, sports, or any arena. Sometimes they rely on historical figures (Abraham Lincoln, Martin Luther King) for examples. Ask them why they picked the people that they did. Their reasons usually fit nicely with the characteristics listed on the slide.
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22. Leadership Styles © 2012 Pearson Education, Inc.
Democratic leaders delegate authority and involve employees in decision making. Involving employees makes them become more invested in the process, and the ultimate output is better.
The trade-off is that the democratic style of leadership requires more time and advanced planning.
An autocratic leader makes decisions without consulting others. A good leader knows that autocratic leadership can be an effective style in certain circumstances when quick decisions need to be made or when it seems like the group cannot come to a consensus.
Laissez-faire leaders (or free-reign leaders) take a more hands-off approach to management and act more as consultants rather than participants. They are more advisory in style, encouraging employees to contribute ideas rather than specifically directing their tasks. This style of leadership is often best used with groups and teams.
It is possible for the laissez-fair leader to lose too much involvement in the group’s processes. Both employees and leaders should make sure that all goals are aligned.
Laissez-faire leadership implemented properly can give employees a sense of challenge, commitment, and renewed energy as they are left to handle tasks on their own.
As businesses continue to reduce the layers of management, laissez-faire and democratic styles are becoming the leadership styles of choice.
No one style of leadership will work in every situation. In reality, managers recognize that they need to be flexible and use whatever style works best for the particular situation. You can think of this adaptive style of leadership as contingency leadership. Those who opt for contingency leadership recognize that forces in today’s business environment change, and management may need to respond to different situations in different ways.
Teaching Tips
The “On Target” feature in the text provides a good example of how laissez-faire and democratic styles can work.
Google is an interesting example of how laissez-faire leadership may not work well for a large company. See the “Beyond the Book” slide on Google and the article from which it is drawn.
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23. Controlling
Ensuring that plans and strategies set in place are properly carried out
Control strategies
- Bureaucratic control
- Market control
- Clan control
Learning Objective 7: What are the implications of control within a business?
Controlling is the process that ensures that the plans and strategies set in place by management are properly carried out.
Controlling helps to identify and correct weaknesses and errors in the system.
There are three broad control strategies that managers use either individually or in combination to achieve organizational control:
Bureaucratic control uses rules, regulations, and formal authority to guide performance.
Market control involves evaluating workers on their attainment of specific objectives.
Clan control assumes that employees and management have common goals and values.
Teaching Tips
Discuss how planning and control are closely aligned. Controlling is basically comparing what actually happened with what you planned to have happen. Without a plan, it is difficult to understand if you met your objectives or not.
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24. The Control Cycle © 2012 Pearson Education, Inc.
Most companies have control systems that help measure the plans they set in place to carry out the goals and objectives of the organization. In general, the control system forms a cycle: performance standards are set, performance is measured and compared against the standard, adjustments are made, and the cycle begins again.
Teaching Tips
It is interesting to brainstorm what might happen when a manager finds out that performance does not match the standard set.
If the performance is lower than expected, management might try to encourage those responsible to work harder or, in a more negative response, punish them. Also, it is possible to change the standards instead.
If the performance is higher than expected, management may reward those responsible. They could also raise the standards for the future. They would also want to understand why the performance was higher to see if they can repeat it wherever possible.
The control cycle is similar to the PDCA cycle for Plan, Do, Check, Act, which was developed by Walter A. Shewhart and refined by W. Edwards Deming.
Plan: Design or revise business process components to improve results.
Do: Implement the plan and measure its performance.
Check: Assess the measurements and report the results to decision makers.
Act: Decide on changes needed to improve the process.
Source: Balanced Scorecard Institute
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25. Measuring Performance
Reports
- Financial statements, sales reports, and others
Customer satisfaction
Total quality management (TQM)
- Focuses on quality throughout the process, not just at the end
- Encourages continuous improvement
Six Sigma
- Statistical-based, proactive comparison process
To manage a business and ensure that the goals are being met, managers measure performance in a variety of ways.
Bureaucratic reporting tools such as financial statements and sales reports are used to measure performance. These reports help determine whether the products are competitive, are using capital wisely, and are being produced as efficiently as possible.
In addition to meeting financial, production, and sales measures, another measure of performance is quality so that the products or services the company provides meet or exceed customer requirements.
Many managers use total quality management, an integrated approach to quality management that focuses on quality from the beginning of the production process up through managerial involvement to detect and correct problems.
Another quality initiative that is receiving much attention is Six Sigma, a statistically based, proactive, long-term process designed to look at the overall business process to prevent problems. To achieve the Six Sigma standard, a business must not allow more than 3.4 defects per million opportunities.
Teaching Tips
Six Sigma was developed by Motorola, based on the SPC (Statistical Process Control) ideas of Walter Shewhart. See the “Beyond the Book” slide on SPC for more information.
Many tools, computerized and other, are used to help measure and report on performance.
See for more information about Motorola’s programs.
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26. Corporate Culture
The collection of shared values, norms, and behavior that defines the character of the organization
Google’s Philosophy
Focus on the user and all else will follow.
It’s best to do one thing really, really well.
Fast is better than slow.
Democracy on the Web works.
You don’t need to be at your desk to need an answer.
You can make money without doing evil.
There’s always more information out there.
The need for information crosses all borders.
You can be serious without a suit.
Great just isn’t good enough.
Corporate culture is used to help control an organization.
Setting a strong corporate culture means communicating the culture to employees and encouraging them to embrace it.
In a corporation in which the culture is not well defined, or even worse, it supports questionable behavior, problems result. On the other hand, when the corporate culture is strong, and all employees accept the culture as their own, they are motivated to maintain it and monitor their own behavior.
Teaching Tips
Ask the students if they can get a sense of how management at Google would expect them to act based on what they read in the ten statements on this slide. This illustrates how culture can be a means of control.
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27. Chapter Summary
In what ways do managers apply technical, interpersonal, decision- making, conceptual, and time management skills to business?
What strategies do managers use to establish the corporate vision and mission statement and keep the company on task?
What are the implications of strategic plans, tactical plans, operational plans, and contingency plans within the context of management?
What is the significance of organizing, and how is most management organized?
What are the differences among vertical organizations, horizontal organizations, and network organizations?
What makes a good leader, and what are the various styles of leadership?
What are the implications of control within a business?
Chapter Summary
In what ways do managers apply technical, interpersonal, decision-making, and conceptual skills to business? Technical skills include the abilities and knowledge to complete job tasks. Interpersonal skills are communication skills. Decision-making skills help managers make choices. Conceptual skills allow managers to see “the big picture.” Time management skills relate to maximum productivity in a set amount of time.
What strategies do managers use to reach the corporate vision and keep the company on task? Managers use planning, goals, and objectives to help achieve the corporate vision and to stay on task. The company vision states where the company wishes to be in the future. The mission statement is the current purpose, goals, and philosophies. Based on these, top managers put together a strategic plan at the corporation level. Part of the strategic planning process is conducting a SWOT analysis to help determine an organization’s capabilities and possibilities.
What are the implications of tactical plans, operational plans, and contingency plans within the context of management? Tactical plans determine resources and actions required to implement the strategic plan and are made in a one- to three-year horizon. Operational plans are daily or weekly schedules developed by first-line managers for achieving tactical plans. Contingency planning determines how the company will run with a disruption.
What is the significance of organizing, and how is most management organized? Organizing is the process of arranging capital, personnel, and other resources to carry out plans management has in place. An organization traditionally is structured with top, middle, and first-line managers; this is known as the managerial pyramid.
What are the differences among vertical organizations, horizontal organizations, and network organizations? A vertical organization is organized by specific function. Integration between functions and divisions is not always easy and there are long lines of communication. A horizontal organization is flattened, and the management layer is collapsed with empowered employees in work groups. Network organizations are collections of independent, mostly single-function firms that collaborate on a product or service.
What makes a good leader, and what are the various styles of leadership? The traits include determination, inspiration, flexibility and empathy, innovativeness, honesty, self-confidence, and knowledge and competence. The various styles of leadership are democratic, autocratic, and laissez-faire.
What are the implications of control within a business? There are three broad control strategies that managers use to achieve organizational control. These include bureaucratic control, market control, and clan control. Most companies have a control system cycle. Performance standards are measured with bureaucratic reporting tools such as financial statements and sales reports. Quality measures are also in place to ensure that products or services meet customer requirements. Corporate culture, or the workplace environment, also helps set the tone for personnel to monitor themselves.
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28. Beyond the Book
These slides go beyond the book and offer additional chapter-related content for the instructor.
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29. Planning at Southwest Airlines
Strategic planning: international expansion via alliances
- Canada flights with new partner, WestJet
Tactical planning
- Buying dozens of jets to accommodate higher passenger loads
Operational planning
- Developing plans to reduce flight delays
Contingency planning: fuel price hedging
Invested in a plan in 1999 giving Southwest the right to buy fuel at a set amount at a future date
As other airlines are cancelling flights, retiring planes, and laying off employees, Southwest Airlines, a 37-year-old company, is expanding. They are the largest domestic carrier, but they are planning international expansion.
“In 1999, Gary Kelly, as Southwest’s chief financial officer, decided the airline needed to dump its strategy of covering about one-third of its fuel consumption through hedges designed to cap its expenses after fuel prices rose 15 percent. Instead, Southwest adopted the strategy that has governed its fuel spending this decade. It would hedge as much as 80 percent of its fuel needs through a variety of ‘at the money’ financial instruments that essentially functioned as call options: the right to buy fuel at a set amount at a future date.”
In interviews, Kelly, who was the CFO in 1999 when the fuel hedges where put in place and who is now the CEO, has stated that Southwest is looking to grab market share as competitors struggle with rising prices. The company, however, must be careful not to overreach and to continue its view of meeting long-term goals, not short-term gains.
Southwest Airlines operated the flight most plagued by delays during the month: Flight 2709 from Houston to San Diego, which was late 100 percent of the time.
Sources: “Interview with Southwest Airlines’ CEO Gary Kelly,” Julie Johnsson, Chicago Tribune, July 8, “O’Hare ranks no. 1 in tardy departures,” Julie Johnsson, Chicago Tribune, July 8, 2008.
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30. Control in a Results-Only Work Environment
Traditional workplaces reward employees for “presenteeism”—basically long hours with no guarantee of efficiency
What if businesses created “results-only” work environments where people can do “whatever they want, whenever they want, as long as the work gets done”?
How do businesses control the work and the workers in these types of environments?
Ressler and Thompson—founders of CultureRx, a consultancy that promotes better ways to work—have a long list of reasons for disliking the standard work culture. Atop the list is the commonly held myth that “time + physical presence + hard work = results.” To satisfy bosses, workers must embrace what Ressler and Thompson call “presenteeism,” the idea that traditional workplaces reward long hours over efficient hours.
"Our beliefs about work … are outdated, outmoded, out to lunch," Ressler and Thompson argue. "The only solution is to change the game entirely."
The Results-Only Work Environment they propose is a drastic change for most companies. The basic premise is that "people can do whatever they want, whenever they want, as long as the work gets done."
It’s a paradigm shift, but one company has made the leap. Best Buy CEO Brad Anderson explains in the book’s foreword that the results-only philosophy was tested at Best Buy with encouraging results. Best Buy’s experiment resulted in a 35% increase in productivity, a vast reduction in voluntary turnover, and a much happier workforce, Ressler and Thompson write.
The authors of “Work Sucks” propose that:
Employees have the freedom to work any way they want.
Employees have an unlimited amount of “paid time off,” as long as work gets done.
Employees should not be overworked.
Every meeting should be optional.
No work schedules should be imposed.
There should be no judgment about how you spend your time.
By giving workers more control, Ressler and Thompson hope to reshape the way we think about work: “Work isn’t a place you go—it's something you do.”
Sources: “Results should matter, not just working late,” Seth Brown, June 16, 2008, USA Today. “Why Work Sucks and How to Fix it,” Cali Ressler and Jody Thompson, Portfolio, 2008.
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31. SPC & Control Charts Process:
Take a sample of the items to be measured
Measure each item
Calculate the average measurement for the sample
Plot the average on the control chart
Take corrective action if needed
SPC (Statistical Process Control)
Measures performance of a process
Uses mathematics (i.e., statistics)
Involves collecting, organizing, and interpreting data
Objective:
Provide statistical signal when assignable (non-random) causes of variation are present
Used to:
Control the process as products are produced
Inspect samples of finished products
In this example chart
UCL = Upper Control Limit (highest acceptable average)
LCL = Lower Control Limit (lowest acceptable average)
X-Bar = expected average
Average = actual averages of sample measurements each hour
Can you tell when this process is out of control?
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32. Traditional Management Theory and Google
Managers decide where to allocate resources
Process-driven
Conservative, cautious
Bureaucratic
Employees can dabble with promising new ideas
Innovation-driven
Risk-seeking
Cool
Google is 8 years old and has 18,000 employees. Can they still act like a young upstart company?
Google’s rapid growth is finally slowing, as the company’s sheer size dictates it must. And size necessitates changes. Gone are the days when Google could take full advantage of its quirkiness. It’s the market leader now, which presents a classic conundrum: Which is more important, process or innovation?
Google has to prove that its quirks—its odd hiring practices (e.g., asking 45-year-olds their GPAs), refusal to play the guidance game with Wall Street, the free food, etc.—will stand the test of time.
A basic tenet of Google’s way of doing business is that it is not like other businesses. Founders Larry Page and Sergey Brin celebrated this quality in their famous letter to prospective shareholders before the company’s 2004 IPO.
At Google, what you often end up with instead of resource allocation is a laissez-faire mess. And there were multiple teams working on similar projects.
Google has yet to see returns from acquisitions of dMarc and YouTube.
There’s the possibility that Google truly is inventing an entirely new way of doing business. They’ve introduced a new model for software.
“It may be that they’re in a whole other world from everyone else,” says Bruce Jaffe, a former M&A executive at Microsoft who competed against Google. “They could be such pioneers that no one will know for years.”
Paul Buchheit, a former Google engineer, recalls what he loved about Google’s early days. “I was always so excited at Google, because I didn’t know what would happen next,” he says. “Then I knew what would happen next.” Predictability is a virtue in the world of big business. It's just not particularly Googley.
Source: “Where does Google go next?,” Adam Lashinsky, Fortune, May 26, 2008.
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Publishing as Prentice Hall