1.1 Management: What It Is, What Its Benefits Are Management is defined as the pursuit of organizational goals efficiently, meaning to use resources wisely and cost-effectively, and effectively, meaning to achieve results, to make the right decisions, and to successfully carry them out to achieve the organization's goals.
1.2 Six Challenges to Being a Star Manager The six challenges are (1) managing for competitive advantage, which means an organization must stay ahead in four areas—being responsive to customers, innovating new products or services offering better quality, being more efficient; (2) managing for diversity among different genders, ages, races, and ethnicities; (3) managing for globalization, the expanding universe; (4) managing for computers and telecommunications—information technology; (5) managing for right and wrong, or ethical standards; and (6) managing for your own happiness and life goals.
1.3 What Managers Do: The Four Principal Functions The four management functions are represented by the abbreviation POLC: (1) planning—setting goals and deciding how to achieve them; (2) organizing—arranging tasks, people, and other resources to accomplish the work; (3) leading—motivating, directing, and otherwise influencing people to work hard to achieve the organization's goals; and (4) controlling—monitoring performance, comparing it with goals, and taking corrective action as needed.
1.4 Pyramid Power: Levels & Areas of Management Within an organization, there are managers at three levels: (1) top managers make long-term decisions about the overall direction of the organization and establish the objectives, policies, and strategies for it; (2) middle managers implement the policies and plans of their superiors and supervise and coordinate the activities of the managers below them; and (3) first-line managers make short-term operating decisions, directing the daily tasks of nonmanagement personnel. There are three types of organizations: (1) for-profit—formed to make money by offering products or services; (2) nonprofit—to offer services to some, but not to make a profit; and (3) mutual-benefit—voluntary collections of members created to advance members' interests.
1.5 Roles Managers Must Play Successfully The Mintzberg study shows that, first, a manager relies more on verbal than on written communication; second, managers work long hours at an intense pace; and, third, a manager's work is characterized by fragmentation, brevity, and variety. Mintzberg concluded that managers play three broad roles: (1) interpersonal—figurehead, leader, and liaison; (2) informational—monitor, disseminator, and spokesperson; and (3) decisional—entrepreneur, disturbance handler, resource allocator, and negotiator.
1.6 The Entrepreneurial Spirit Entrepreneurship, a necessary attribute of business, is the process of taking risks to create a new enterprise. Two types are (1) the entrepreneur, who sees a new opportunity for a product or service and launches a business to realize it; and (2) the intrapreneur, working inside an existing organization, who sees an opportunity for a product or service and mobilizes the organization's resources to realize it. Entrepreneurs start businesses, managers grow or maintain them. Both (but especially entrepreneurs) have a high need for achievement, high energy level and action orientation, and tolerance for ambiguity. Entrepreneurs are more self-confident and have higher tolerance for risk.
1.7 The Skills Star Managers Need The three skills that star managers cultivate are (1) technical, consisting of job-specific knowledge needed to perform well in a specialized field; (2) conceptual, consisting of the ability to think analytically, to visualize an organization as a whole, and to understand how the parts work together; and (3) human, consisting of the ability to work well in cooperation with other people in order to get things done.
2.1 Evolving Viewpoints: How We Got to Today's Management A rational approach to management is evidence-based management, which means translating principles based on best evidence into organizational practice, bringing rationality to the decision-making process. The two overarching perspectives on management are (1) the historical perspective, which includes three viewpoints—classical, behavioral, and quantitative; and (2) the contemporary perspective, which includes three other viewpoints—systems, contingency, and quality-management. There are five practical reasons for studying theoretical perspectives: They provide (1) understanding of the present, (2) a guide to action, (3) a source of new ideas, (4) clues to the meaning of your managers' decisions, and (5) clues to the meaning of outside ideas.
2.2 Classical Viewpoint: Scientific & Administrative Management The first of the historical perspectives is the classical viewpoint, which emphasized finding ways to manage work more efficiently. It had two branches: (1) Scientific management emphasized the scientific study of work methods to improve productivity by individual workers. It was pioneered by Frederick W. Taylor, who offered four principles of science that could be applied to management, and by Frank and Lillian Gilbreth, who refined motion studies that broke job tasks into physical motions. (2) Administrative management was concerned with managing the total organization. Among its pioneers were Henri Fayol, who identified the major functions of management (planning, organizing, leading, controlling), and Max Weber who identified five positive bureaucratic features in a well-performing organization. The classical viewpoint showed that work activity was amenable to a rational approach, but it has been criticized as being too mechanistic, viewing humans as cogs in a machine.
2.3 Behavioral Viewpoint: Behavorism, Human Relations, & Behavioral Science The second of the historical perspectives, the behavioral viewpoint emphasized the importance of understanding human behavior and of motivating employees toward achievement. It developed over three phases: (1) early behaviorism (2) the human relations movement, and (3) the behavioral science approach. Early behaviorism had three pioneers: (a) Hugo Munsterberg suggested that psychologists could contribute to industry by studying jobs, identifying the psychological conditions for employees to do their best work. (b) Mary Parker Follett thought organizations should be democratic, with employees and managers working together. (c) Elton Mayo hypothesized a so-called Hawthorne effect, suggesting that employees worked harder if they received added attention from managers. The human relations movement suggested that better human relations could increase worker productivity. Among its pioneers were (a) Abraham Maslow, who proposed a hierarchy of human needs, and (b) Douglas McGregor, who proposed a Theory X (managers have pessimistic view of workers) and Theory Y (managers have positive view of workers). The behavioral science approach relied on scientific research for developing theories about human behavior that can be used to provide practical tools for managers.
2.4 Quantitative Viewpoints: Management Science & Operations Research The third of the historical perspectives, quantitative viewpoints emphasized the application to management of quantitative techniques. Two approaches are (1) management science, which focuses on using mathematics to aid in problem solving and decision making; and (2) operations management, which focuses on managing the production and delivery of an organization's products or services more effectively.
2.5 Systems Viewpoint We turn from the study of the historical perspective to the contemporary perspective, which includes three viewpoints: (1) systems, (2) contingency, and (3) quality-management. The systems viewpoint regards the organization as a system of interrelated parts or collection of subsystems that operate together to achieve a common purpose. A system has four parts: inputs, outputs, transformational processes, and feedback. A system can be open, continually interacting with the environment, or closed, having little such interaction.
2.6 Contingency Viewpoint The second viewpoint in the contemporary perspective, the contingency viewpoint emphasizes that a manager's approach should vary according to the individual and the environmental situation.
2.7 Quality-Management Viewpoint The third category in the contemporary perspective, the quality-management viewpoint is concerned with quality (the total ability of a product or service to meet customer needs) and has three aspects: (1) Quality control is the strategy for minimizing errors by managing each stage of production. (2) Quality assurance focuses on the performance of workers, urging employees to strive for "zero defects." (3) Total quality management (TQM) is a comprehensive approach dedicated to continuous quality improvement, training, and customer satisfaction. TQM has four components: (a) make continuous improvement a priority; (b) get every employee involved; (c) listen to and learn from customers and employees; and (d) use accurate standards to identify and eliminate problems.
2.8 The Learning Organization in an Era of Accelerated Change A learning organization is one that actively creates, acquires, and transfers knowledge within itself and is able to modify its behavior to reflect new knowledge. Seven reasons why organizations need to become learning organizations are (1) the rise of virtual organizations, with members connected by electronic networks; (2) the rise of fluid, adaptive, boundaryless organizations; (3) the imperative for speed and innovation; (4) the increasing importance of knowledge workers, those principally concerned with generating or interpreting information; (5) an appreciation for the importance of human capital, the economic or productive potential of employees; (6) an appreciation for the importance of social capital, the economic or productive potential of strong and cooperative relationships; and (7) new emphasis on evidence-based management, in which managers face hard facts about what works and what doesn't. Three roles that managers must perform to build a learning organization are to (1) build a commitment to learning, (2) work to generate ideas with impact, and (3) work to generalize ideas with impact.
3.1 The Community of Stakeholders Inside the Organization
Managers operate in two organizational environments—internal and external—both made up of stakeholders, the people whose interests are affected by the organization's activities. The first, or internal, environment, includes employees, owners, and the board of directors.
3.2 The Community of Stakeholders Outside the Organization
The external environment of stakeholders consists of the task environment and the general environment.
The task environment consists of 11 groups that present the manager with daily tasks to deal with. (1) Customers pay to use an organization's goods and services. (2) Competitors compete for customers or resources. (3) Suppliers provide supplies—raw materials, services, equipment, labor, or energy—to other organizations. (4) Distributors help another organization sell its goods and services to customers. (5) Strategic allies join forces to achieve advantages neither organization can perform as well alone. (6) Employee organizations are labor unions and employee associations. (7) Local communities are residents, companies, governments, and nonprofit entities that depend on the organization's taxes, payroll, and charitable contributions. (8) Financial institutions are commercial banks, investment banks, and insurance companies that deal with the organization. (9) Government regulators are regulatory agencies that establish the ground rules under which the organization operates. (10) Special-interest groups are groups whose members try to influence specific issues that may affect the organization. (11) The mass media are print, radio, TV, and Internet sources that affect the organization's public relations.
The general environment includes six forces. (1) Economic forces consist of general economic conditions and trends—unemployment, inflation, interest rates, economic growth—that may affect an organization's performance. (2) Technological forces are new developments in methods for transforming resources into goods and services. (3) Socio cultural forces are influences and trends originating in a country, society, or culture's human relationships and values that may affect an organization. (4) Demographic forces are influences on an organization arising from changes in the characteristics of a population, such as age, gender, and ethnic origin. (5) Political legal forces are changes in the way politics shapes laws and laws shape the opportunities for and threats to an organization. (6) International forces are changes in the economic, political, legal, and technological global system that may affect an organization.
3.3 The Ethical Responsibilities Required of You as a Manager
Ethics are the standards of right and wrong that influence behavior. Ethical behavior is behavior that is accepted as "right" as opposed to "wrong" according to those standards.
Ethical dilemmas often take place because of an organization's value system. Values are the relatively permanent and deeply held underlying beliefs and attitudes that help determine a person's behavior.
There are four approaches to deciding ethical dilemmas. (1) Utilitarian—ethical behavior is guided by what will result in the greatest good for the greatest number of people. (2) Individual—ethical behavior is guided by what will result in the individual's best long-term interests, which ultimately is in everyone's self-interest. (3) Moral-rights—ethical behavior is guided by respect for the fundamental rights of human beings, such as those expressed in the U.S. Constitution's Bill of Rights. (4) Justice—ethical behavior is guided by respect for the impartial standards of fairness and equity.
Public outrage over white-collar crime (Enron, Tyco) led to the creation of the Sarbanes–Oxley Act of 2002 (SarbOx), which establishes requirements for proper financial record keeping for public companies and penalties for noncompliance.
Laurence Kohlberg proposed three levels of personal moral development: (1) preconventional level of moral development—people tend to follow rules and to obey authority; (2) conventional level—people are conformist, generally adhering to the expectations of others; and (3) postconventional level—people are guided by internal values.
There are three ways an organization may foster high ethical standards. (1) Top managers must support a strong ethical climate. (2) The organization may have a code of ethics, which consists of a formal written set of ethical standards. (3) An organization must reward ethical behavior, as in not discouraging whistleblowers, employees who report organizational misconduct to the public.
3.4 The Social Responsibilities Required of You as a Manager Social responsibility is a manager's duty to take actions that will benefit the interests of society as well as of the organization.
The idea of social responsibility has opposing and supporting viewpoints. The opposing viewpoint is that the social responsibility of business is to make profits. The supporting viewpoint is that since business creates some problems (such as pollution) it should help solve them.
It has been proposed that business organizations not be judged on profits alone—that there is blended value, in which all investments are understood to operate simultaneously in both economic and social realms.
Two types of social responsibility are (1) sustainability, defined as economic development that meets the needs of the present without compromising the ability of future generations to meet their own needs, and (2) philanthropy, making charitable donations to benefit humankind.
Positive ethical behavior and social responsibility can pay off in the form of customer goodwill, better quality of job applicants and retained employees, enhanced sales growth, less employee misconduct and fraud, better stock price, and enhanced profits.
3.5 The New Diversified Workforce Diversity represents all the ways people are alike and unlike—the differences and similarities in age, gender, race, religion, ethnicity, sexual orientation, capabilities, and socioeconomic background.
There are two dimensions of diversity: (1) Internal dimensions of diversity are those human differences that exert a powerful, sustained effect throughout every stage of our lives: gender, ethnicity, race, physical abilities, age, and sexual orientation. (2) External dimensions of diversity consist of the personal characteristics that people acquire, discard, or modify throughout their lives: personal habits, educational background, religion, income, marital status, and the like.
There are five categories in the internal dimension and one category in the external dimension in which the U.S. workforce is becoming more diverse: (1) age, (2) gender, (3) race and ethnicity, (4) sexual orientation, (5) disabilities, and (6) educational level.
There are six ways in which employees and managers may express resistance to diversity: (1) Some express stereotypes and prejudices based on ethnocentrism, the belief that one's native country, culture, language, abilities, or behavior is superior to those of another country. (2) Some employees are afraid of reverse discrimination. (3) Some employees see diversity programs as distracting them from the organization's supposed "real work." (4) Diverse employees may experience an unsupportive social atmosphere. (5) Organizations may not be supportive of flexible hours and other matters that can help employees cope with family demands. (6) Organizations may show lack of support for career building steps for diverse employees.
4.1 Globalization: The Collapse of Time & Distance
Globalization is the trend of the world economy toward becoming more interdependent. Globalization is reflected in three developments: (1) the rise of the global village and e-commerce; (2) the trend of the world's becoming one big market; and (3) the rise of both megafirms and Internet enabled minifirms.
The rise of the "global village" refers to the "shrinking" of time and space as air travel and the electronic media have made global communication easier. The Internet and the Web have led to e-commerce, the buying and selling of products through computer networks.
The global economy is the increasing tendency of the economies of nations to interact with one another as one market.
The rise of cross-border business has led to megamergers, as giant firms have joined forces, and of minifirms, small companies in which managers can use the Internet and other technologies to get enterprises started more easily and to maneuver faster.
4.2 You & International Management
Studying international management prepares you to work with foreign customers or partners, with foreign suppliers, for a foreign firm in the United States, or for a U.S. firm overseas. International management is management that oversees the conduct of operations in or with organizations in foreign countries.
The successful international manager is not ethnocentric or polycentric but geocentric. Ethnocentric managers believe that their native country, culture, language, and behavior are superior to all others. Polycentric managers take the view that native managers in the foreign offices best understand native personnel and practices. Geocentric managers accept that there are differences and similarities between home and foreign personnel and practices, and they should use whatever techniques are most effective.
4.3 Why & How Companies Expand Internationally
Companies expand internationally for at least five reasons. They seek (1) cheaper or more plentiful supplies, (2) new markets, (3) lower labor costs, (4) access to finance capital, and (5) avoidance of tariffs on imported goods or import quotas.
There are five ways in which companies expand internationally. (1) They engage in global outsourcing, using suppliers outside the company and the United States to provide goods and services. (2) They engage in importing, exporting, and countertrading (bartering for goods). (3) They engage in licensing (allow a foreign company to pay a fee to make or distribute the company's product) and franchising (allow a foreign company to pay a fee and a share of the profit in return for using the first company's brand name). (4) They engage in joint ventures, a strategic alliance to share the risks and rewards of starting a new enterprise together in a foreign country. (5) They become whollyowned subsidiaries, or foreign subsidiaries that are totally owned and controlled by an organization.
4.4 The World of Free Trade: Regional Economic Cooperation
Free trade is the movement of goods and services among nations without political or economic obstructions.
Countries often use trade protectionism—the use of government regulations to limit the import of goods and services—to protect their domestic industries against foreign competition. Three barriers to free trade are tariffs, import quotas, and embargoes. (1) A tariff is a trade barrier in the form of a customs duty, or tax, levied mainly on imports. (2) An import quota is a trade barrier in the form of a limit on the numbers of a product that can be imported. (3) An embargo is a complete ban on the import or export of certain products.
Three principal organizations exist that are designed to facilitate international trade. (1) The World Trade Organization is designed to monitor and enforce trade agreements. (2) The World Bank is designed to provide low-interest loans to developing nations for improving transportation, education, health, and telecommunications. (3) The International Monetary Fund is designed to assist in smoothing the flow of money between nations.
A trading bloc is a group of nations within a geographical region that have agreed to remove trade barriers. There are five major trading blocs: (1) North American Free Trade Agreement (NAFTA; U.S., Canada, and Mexico); (2) European Union (EU; 25 trading partners in Europe); (3) Asia-Pacific Economic Cooperation (APEC; 21 Pacific Rim countries); (4) Mercosur (Argentina, Brazil, Paraguay, and Uruguay; and (5) the Central America Free Trade Agreement (CAFTA; the United States and six Central American countries).
Besides joining together in trade blocs, countries also extend special, "most favored nation" trading privileges—that is, grant other countries favorable trading treatment such as the reduction of import duties.
4.5 The Importance of Understanding Cultural Differences
Misunderstandings and miscommunications often arise because one person doesn't understand the expectations of a person from another culture. In low-context cultures, shared meanings are primarily derived from written and spoken words. In high-context cultures, people rely heavily on situational cues for meaning when communicating with others.
Geert Hofstede proposed the Hofstede model of four cultural dimensions, which identified four dimensions along which national cultures can be placed: (1) individualism/collectivism, (2) power distance, (3) uncertainty avoidance, and (4) masculinity/femininity.
Robert House and others created the GLOBE (for Global Leadership and Organizational Behavior Effectiveness) Project, a massive and ongoing cross cultural investigation of nine cultural dimensions involved in leadership and organizational processes: (1) power distance, (2) uncertainty avoidance, (3) institutional collectivism, (4) in-group collectivism, (5) gender egalitarianism, (6) assertiveness, (7) future orientation, (8) performance orientation, and (9) humane orientation.
A nation's culture is the shared set of beliefs, values, knowledge, and patterns of behavior common to a group of people. Visitors to another culture may experience culture shock—feelings of discomfort and disorientation. Managers trying to understand other cultures need to understand four basic cultural perceptions embodied in (1) language, (2) interpersonal space, (3) time orientation, and (4) religion.
Regarding language, when you are trying to communicate across cultures you have three options: Speak your own language (if others can understand you), use a translator, or learn the local language.
Interpersonal space involves how close or far away one should be when communicating with another person, with Americans being comfortable at 3–4 feet but people in other countries often wanting to be closer.
Time orientation of a culture may be either monochronic (preference for doing one thing at a time) or polychronic (preference for doing more than one thing at a time). Managers need to consider the effect of religious differences. In order of size (population), the major world religions are Christianity, Islam, Hinduism, Buddhism, Judaism, and Chinese traditional religion.
5.1 Planning & Uncertainty
Planning is defined as setting goals and deciding how to achieve them. It is also defined as coping with uncertainty by formulating future courses of action to achieve specified results.
Planning has four benefits. It helps you (1) check your progress, (2) coordinate activities, (3) think ahead, and (4) cope with uncertainty.
Organizations respond to uncertainty in one of four ways. (1) Defenders are expert at producing and selling narrowly defined products or services. (2) Prospectors focus on developing new products or services and in seeking out new markets, rather than waiting for things to happen. (3) Analyzers let other organizations take the risks of product development and marketing and then imitate what seems to work best. (4) Reactors make adjustments only when finally forced to by environmental pressures.
5.2 Fundamentals of Planning
An organization's reason for being is expressed in a mission statement. What the organization wishes to become—and the actions needed to get there—are expressed in a vision statement.
From these are derived strategic planning, then tactical planning, then operational planning. In strategic planning, managers determine what the organization's long-term goals should be for the next 1–5 years. In tactical planning, managers determine what contributions their work units can make during the next 6–24 months. In operational planning, they determine how to accomplish specific tasks within the next 1–52 weeks.
Whatever its type, the purpose of planning is to achieve a goal or objective, a specific commitment to achieve a measurable result within a stated period of time.
Strategic goals are set by and for top management and focus on objectives for the organization as a whole. Tactical goals are set by and for middle managers and focus on the actions needed to achieve strategic goals. Operational goals are set by and for first-line managers and are concerned with short-term matters associated with realizing tactical goals.
The goal should be followed by an action plan, which defines the course of action needed to achieve the stated goal. The operating plan, which is typically designed for a 1-year period, defines how you will conduct your business based on the action plan; it identifies clear targets such as revenues, cash flow, and market share.
Plans may be either standing plans, developed for activities that occur repeatedly over a period of time, or single use plans, developed for activities that are not likely to be repeated in the future. There are three types of standing plans: (1) A policy is a standing plan that outlines the general response to a designated problem or situation. (2) A procedure outlines the response to particular problems or circumstances. (3) A rule designates specific required action. There are two types of single-use plans: (1) A program encompasses a range of projects or activities. (2) A project is a single-use plan of less scope and complexity.
5.3 Promoting Goal Setting: Management by Objectives & Smart Goals
Management by objectives (MBO) is a four-step process in which (1) managers and employees jointly set objectives for the employee, (2) managers develop action plans, (3) managers and employees periodically review the employee's performance, and (4) the manager makes a performance appraisal and rewards the employee according to results. The purpose of MBO is to motivate rather than control subordinates.
For MBO to be successful three things have to happen. (1) The commitment of top management is essential. (2) The program must be applied organization wide. (3) Objectives must cascade—becoming more specific at lower levels of the organization.
The five characteristics of a good goal are represented by the acronym SMART. A SMART goal is one that is Specific, Measurable, Attainable, Results oriented, and has Target dates.
5.4 The Planning/Control Cycle
Once plans are made, managers must stay in control using the planning/control cycle, which has two planning steps (1 and 2) and two control steps (3 and 4), as follows: (1) Make the plan. (2) Carry out the plan. (3) Control the direction by comparing results with the plan. (4) Control the direction by taking corrective action in two ways—namely, (a) by correcting deviations in the plan being carried out, or (b) by improving future plans.
5.5 Project Planning
Project planning is the preparation of single use plans, or projects. Project management achieves a set of goals through planning, scheduling, and maintaining progress of the activities. An example of project planning is the skunk works.
A project evolves through a project life cycle involving four stages: (1) Definition—a project manager looks at the big picture, stating the problem, identifying the project's goals and objectives, and determining the budget and schedule. (2) Planning—managers consider the details needed to make the big picture happen, such as identifying equipment, people, and coordination efforts needed. (3) Execution— managers define the management style and establish the control tools, then ensure the work is being done on time and under budget. (4) Closing—the project is accepted by the client.
Deadlines are essential to project planning because they become great motivators both for the manager and for subordinates.
6.1 The Dynamics of Strategic Planning
Every organization needs to have a "big picture" about where it's going and how to get there, which involves strategy, strategic management, and strategic planning. A strategy is a large-scale action plan that sets the direction for an organization. Strategic management involves managers from all parts of the organization in the formulation and implementation of strategies and strategic goals. Strategic planning determines the organization's long-term goals and ways to achieve them.
Three reasons why an organization should adopt strategic management and strategic planning: they can (1) provide direction and momentum, (2) encourage new ideas, and (3) develop a sustainable competitive advantage. Sustainable competitive advantage occurs when an organization is able to get and stay ahead in four areas: (1) in being responsive to customers, (2) in innovating, (3) in quality, and (4) in effectiveness.
Strategic positioning attempts to achieve sustainable competitive advantage by preserving what is distinctive about a company. Three key principles underlie strategic positioning: (1) Strategy is the creation of a unique and valuable position. (2) Strategy requires trade-offs in competing. (3) Strategy involves creating a "fit" among a company's activities.
6.2 The Strategic Management Process
The strategic management process has five steps plus a feedback loop.
Step 1 is to establish the mission statement and the vision statement. The mission statement expresses the organization's purpose. The vision statement describes the organization's long-term direction and strategic intent.
Step 2 is to translate the broad mission and vision statements into a grand strategy that explains how the organization's mission is to be accomplished. Three common grand strategies are (1) a growth strategy, which involves expansion—as in sales revenues; (2) a stability strategy, which involves little or no significant change; and (3) a defensive strategy, which involves reduction in the organization's efforts.
Step 3 is strategy formulation, the translation of the grand strategy into more specific strategic plans, choosing among different strategies and altering them to best fit the organization's needs.
Step 4 is strategy implementation—putting strategic plans into effect.
Step 5 is strategic control, monitoring the execution of strategy and making adjustments.
Corrective action constitutes a feedback loop in which a problem requires that managers return to an earlier step to rethink policies, budgets, or personnel arrangements.
6.3 Establishing the Grand Strategy
To develop a grand strategy (Step 2 above), you need to gather data and make projections. This starts with environmental scanning, careful monitoring of a firm's internal and external environments to detect opportunities and threats.
The process for doing such scanning is called SWOT analysis, a search for the Strengths, Weaknesses, Opportunities, and Threats affecting the organization. Organizational strengths are the skills and capabilities that give the organization special competencies and competitive advantages. Organizational weaknesses are the drawbacks that hinder an organization in executing strategies. Organizational opportunities are environmental factors that the organization may exploit for competitive advantage. Organizational threats are environmental factors that hinder an organization's achieving a competitive advantage.
Another tool for developing a grand strategy is forecasting—creating a vision or projection of the future. Two types of forecasting are (1) trend analysis, a hypothetical extension of a past series of events into the future; and (2) contingency planning, the creation of alternative hypothetical but equally likely future conditions.
6.4 Formulating Strategy
Strategy formulation (Step 3 in the strategic-management process) makes use of several concepts, including (1) Porter's five competitive forces, (2) Porter's four competitive strategies, and (3) product life cycles.
Porter's model for industry analysis suggests that business-level strategies originate in five primary competitive forces in the firm's environment: (1) threats of new entrants, (2) bargaining power of suppliers, (3) bargaining power of buyers, (4) threats of substitute products or services, and (5) rivalry among competitors.
Porter's four competitive strategies are as follows: (1) The cost-leadership strategy is to keep the costs, and hence the prices, of a product or service below those of competitors and to target a wide market. (2) The differentiation strategy is to offer products or services that are of unique and superior value compared to those of competitors but to target a wide market. (3) The cost-focus strategy is to keep the costs and hence prices of a product or service below those of competitors and to target a narrow market. (4) The focused differentiation strategy is to offer products or services that are of unique and superior value compared to those of competitors and to target a narrow market.
A product life cycle is a model of the four stages a product or service goes through: (1) introduction—a new product is introduced into the marketplace and is heavy on start-up costs for production, marketing, and distribution; (2) growth—customer demand increases, the product's sales grow, and later competitors may enter the market; (3) maturity—the product starts to fall out of favor and sales and profits fall off; (4) decline—the product falls out of favor, and the organization withdraws from the marketplace.
Companies needed to choose whether to have a single-product strategy, making and selling only one product within their market, or a diversification strategy, operating several businesses to spread the risk. There are two kinds of diversification: unrelated diversification consists of operating several businesses that are not related to each other; related diversification consists of operating separate businesses that are related to each other, which may reduce risk, produce management efficiencies, and produce synergy or the sum being greater than the parts.
Companies must practice competitive intelligence, gaining information about competitors to try to anticipate their moves, using advertising, news stories, investor information, and informal sources.
6.5 Implementing & Controlling Strategy: Execution
The last two stages of the strategic management process are 4, strategic implementation, and 5, strategic control.
Execution, say Larry Bossidy and Ram Charan, is not simply tactics, it is a central part of any company's strategy; it consists of using questioning, analysis, and follow through to mesh strategy with reality, align people with goals, and achieve results promised. Three core processes of execution are people, strategy, and operations. (1) You have to evaluate talent by linking people to particular strategic milestones, developing future leaders, dealing with nonperformers, and transforming the mission and operations of the human resource department. (2) In considering whether the organization can execute the strategy, a leader must take a realistic and critical view of its capabilities and competencies. (3) The third core process, operations, or the operating plan, provides the path for people to follow. The operating plan should address all the major activities in which the company will engage and then define short-term objectives for these activities, to provide targets for people to aim at.
7.1 The Nature of Decision Making
A decision is a choice made from among available alternatives. Decision making is the process of identifying and choosing alternative courses of action.
A decision-making style reflects the combination of how an individual perceives and responds to information. Decision-making styles may tend to have a value orientation, which reflects the extent to which a person focuses on either task or technical concerns versus people and social concerns when making decisions. Decision-making styles may also reflect a person's tolerance for ambiguity, the extent to which a person has a high or low need for structure or control in his or her life. When the dimensions of value orientation and tolerance for ambiguity are combined, they form four styles of decision making: directive, analytical, conceptual, and behavioral.
7.2 Two Kinds of Decision Making: Rational & Nonrational
Two models managers follow in making decisions are rational and nonrational. In the rational model, there are four steps in making a decision: Stage 1 is identifying the problem or opportunity. A problem is a difficulty that inhibits the achievement of goals. An opportunity is a situation that presents possibilities for exceeding existing goals. This is a matter of diagnosis—analyzing the underlying causes. Stage 2 is thinking up alternative solutions. Stage 3 is evaluating the alternatives and selecting a solution. Alternatives should be evaluated according to cost, quality, ethics, feasibility, and effectiveness. Stage 4 is implementing and evaluating the solution chosen.
The rational model of decision making assumes managers will make logical decisions that will be the optimum in furthering the organization's best interests. The rational model is prescriptive, describing how managers ought to make decisions.
Nonrational models of decision making assume that decision making is nearly always uncertain and risky, making it difficult for managers to make optimum decisions. Three nonrational models are satisficing, incremental, and intuition. (1) Satisficing falls under the concept of bounded rationality—that is, that the ability of decision makers to be rational is limited by enormous constraints, such as time and money. These constraints force managers to make decisions according to the satisficing model—that is, managers seek alternatives until they find one that is satisfactory, not optimal. (2) In the incremental model, managers take small, short-term steps to alleviate a problem rather than steps that will accomplish a long-term solution. (3) Intuition is making choices without the use of conscious thought or logical inference. The sources of intuition are expertise and feelings.
7.3 Evidence-Based Decision Making & Analytics
Evidence-based management means translating principles based on best evidence into organizational practice. It is intended to bring rationality to the decision-making process.
Scholars Jeffrey Pfeffer and Robert Sutton identify seven implementation principles to help companies that are committed to doing what it takes to profit from evidence-based management: (1) treat your organization as an unfinished prototype; (2) "no brag, just facts"; (3) see yourself and your organization as outsiders do; (4) have everyone, not just top executives, be guided by the responsibility to gather and act on quantitative and qualitative data; (5) you may need to use vivid stories to sell unexciting evidence to others in the company; (6) at the very least, you should slow the spread of bad practices; and (7) you should learn from failure by using the facts to make things better.
Applying the best evidence to your decisions is difficult, for seven reasons: (1) There's too much evidence. (2) There's not enough good evidence. (3) The evidence doesn't quite apply. (4) People are trying to mislead you. (5) You are trying to mislead you. (6) The side effects outweigh the cure. (7) Stories are more persuasive, anyway.
Perhaps the purest application of evidence-based management is the use of analytics, or business analytics, the term used for sophisticated forms of business data analysis. Among organizations that have made a commitment to quantitative, fact-based analysis, scholars have found three key attributes: (1) They go beyond simple descriptive statistics and use data mining and predictive modeling to identify potential and most profitable customers. (2) Analytics competitors don't gain advantage from one principal application but rather from multiple applications supporting many parts of the business. (3) A companywide embrace of analytics impels changes in culture, processes, behavior, and skills for many employees, and so requires the support of top executives.
7.4 Making Ethical Decisions
Corporate corruption has made ethics in decision making once again important. Many companies have an ethics officer to resolve ethical dilemmas, and more companies are creating values statements to guide employees as to desirable business behavior.
To help make ethical decisions, a decision tree—a graph of decisions and their possible consequences—may be helpful. Managers should ask whether a proposed action is legal and, if it is intended to maximize shareholder value, whether it is ethical—and whether it would be ethical not to take the proposed action.
A goal for managers should be to rely on moral principles so that their decisions are principled, appropriate, and defensible, in accordance with "the magnificent seven" general moral principles for managers.
7.5 Group Decision Making: How to Work with Others
Groups make better decisions than most individuals acting alone, though not as good as the best individual acting alone.
Using a group to make a decision offers five possible advantages: (1) a greater pool of knowledge; (2) different perspectives; (3) intellectual stimulation; (4) better understanding of the reasoning behind the decision; and (5) deeper commitment to the decision. It also has four disadvantages: (1) a few people may dominate or intimidate; (2) it will produce groupthink, when group members strive for agreement among themselves for the sake of unanimity and so avoid accurately assessing the decision situation; (3) satisficing; and (4) goal displacement, when the primary goal is subsumed to a secondary goal.
Some characteristics of groups to be aware of are (1) groups are less efficient, (2) their size affects decision quality, (3) they may be too confident, and (4) knowledge counts—-decision-making accuracy is higher when group members know a lot about the issues.
Participative management (PM) is the process of involving employees in setting goals, making decisions, solving problems, and making changes in the organization. PM can increase employee job involvement, organizational commitment, and creativity and can lower role conflict and ambiguity.
Using groups to make decisions generally requires that they reach a consensus, which occurs when members are able to express their opinions and reach agreement to support the final decision.
Two problem-solving techniques aid in problem solving. (1) Brainstorming is a technique used to help groups generate multiple ideas and alternatives for solving problems. A variant is electronic brainstorming, in which group members use a computer network to generate ideas. (2) In computer-aided decision making, chauffeur-driven systems may be used, which ask participants to answer predetermined questions on electronic keypads or dials, or group-driven systems may be used, in which participants in a room express their ideas anonymously on a computer network.
7.6 How to Overcome Barriers to Decision Making
When confronted with a challenge in the form of a problem or an opportunity, individuals may respond in perhaps four ineffective ways and three effective ones.
The ineffective reactions are as follows: (1) In relaxed avoidance, a manager decides to take no action in the belief that there will be no great negative consequences. (2) In relaxed change, a manager realizes that complete inaction will have negative consequences but opts for the first available alternative that involves low risk. (3) In defensive avoidance, a manager can't find a good solution and follows by procrastinating, passing the buck, or denying the risk of any negative consequences. (4) In panic, a manager is so frantic to get rid of the problem that he or she can't deal with the situation realistically.
The effective reactions consist of deciding to decide—that is, a manager agrees that he or she must decide what to do about a problem or opportunity and take effective decision-making steps. Three ways to help a manager decide whether to decide are to evaluate (1) importance— how high priority the situation is; (2) credibility—how believable the information about the situation is; and (3) urgency—how quickly the manager must act on the information about the situation.
Heuristics are rules of thumb or strategies that simplify the process of making decisions. Some heuristics or barriers that tend to bias how decision makers process information are availability, confirmation representativeness, sunk cost anchoring and adjustment, and escalation of commitment. (1) The availability bias means that managers use information readily available from memory to make judgments. (2) The confirmation bias means people seek information to support their own point of view and discount data that do not. (3) The representativeness bias is the tendency to generalize from a small sample or a single event. (4) The sunk cost bias is when managers add up all the money already spent on a project and conclude that it is too costly to simply abandon it. (5) The anchoring and adjustment bias is the tendency to make decisions based on an initial figure or number. (6) The escalation of commitment bias describes when decision makers increase their commitment to a project despite negative information about it. An example is the prospect theory, which suggests that decision makers find the notion of an actual loss more painful than giving up the possibility of a gain.
8.1 What Kind of Organizational Culture Will You Be Operating In?
Organizational culture is a system of shared beliefs and values that develops within an organization and guides the behavior of its members. Four types of culture are (1) clan, which has an internal focus and values flexibility; (2) adhocracy, which has an external focus and values flexibility; (3) market, which has a strong external focus and values stability and control; and (4) hierarchy, which has an internal focus and values stability and control.
Organizational culture appears as three layers. Level 1 is observable artifacts, the physical manifestations of culture. Level 2 is espoused values, explicitly stated values and norms preferred by an organization, although employees are frequently influenced by enacted values, which represent the values and norms actually exhibited in the organization. Level 3 consists of basic assumptions, the core values of the organization.
Culture is transmitted to employees in symbols, stories, heroes, and rites and rituals. A symbol is an object, act, quality, or event that conveys meaning to others. A story is a narrative based on true events, which is repeated—and sometimes embellished on— to emphasize a particular value. A hero is a person whose accomplishments embody the values of the organization. Rites and rituals are the activities and ceremonies, planned and unplanned, that celebrate important occasions and accomplishments in the organization's life.
Culture, which can powerfully shape an organization's success over the long term, has four functions. (1) It gives members an organizational identity. (2) It facilitates collective commitment. (3) It promotes social-system stability. (4) It shapes behavior by helping employees make sense of their surroundings.
8.2 Developing High-Performance Cultures
What types of organizational culture can increase an organization's competitiveness and profitability? Three perspectives have been proposed: (1) The strength perspective assumes that the strength of a corporate culture is related to a firm's long-term financial performance; (2) the fit perspective assumes that an organization's culture must align, or fit, with its business or strategic context; and (3) the adaptive perspective assumes that the most effective cultures help organizations anticipate and adapt to environmental changes.
Among the mechanisms managers use to embed a culture in an organization are: (1) formal statements; (2) slogans and sayings; (3) stories, legends, and myths; (4) leader reactions to crises; (5) role modeling, training, and coaching; (6) physical design; (7) rewards, titles, promotions, and bonuses; (8) organizational goals and performance criteria; (9) measurable and controllable activities; (10) organizational structure; and (11) organizational systems and procedares.
8.3 What Is an Organization?
An organization is a system of consciously coordinated activities or forces of two or more people. There are three types of organizations classified according to the three different purposes for which they are formed: for-profit, nonprofit, and mutual-benefit.
Whatever the size of organization, it can be represented in an organization chart, a boxes-and-lines illustration showing the formal lines of authority and the organization's official positions or division of labor. Two kinds of information that organizations reveal about organizational structure are (1) the vertical hierarchy of authority—who reports to whom, and (2) the horizontal specialization—who specializes in what work.
8.4 The Major Elements of an Organization
Organizations have seven elements: (1) common purpose, which unifies employees or members and gives everyone an understanding of the organization's reason for being; (2) coordinated effort, the coordination of individual efforts into a group or organization-wide effort; (3) division of labor, having discrete parts of a task done by different people; (4) hierarchy of authority, a control mechanism for making sure the right people do the right things at the right time; (5) span of control, which refers to the number of people reporting directly to a given manager; (6) authority and accountability, responsibility, and delegation. Authority refers to the rights inherent in a managerial position to make decisions, give orders, and utilize resources. Accountability means that managers must report and justify work results to the managers above them. Responsibility is the obligation you have to perform the tasks assigned to you. Delegation is the process of assigning managerial authority and responsibility to managers and employees lower in the hierarchy. Regarding authority and responsibility, the organization chart distinguishes between two positions, line and staff. Line managers have authority to make decisions and usually have people reporting to them. Staff personnel have advisory functions; they provide advice, recommendations, and research to line managers. (7) Centralization versus decentralization of authority. With centralized authority, important decisions are made by higher-level managers. With decentralized authority, important decisions are made by middle-level and supervisory-level managers.
8.5 Basic Types of Organizational Structures
Organizations may be arranged into seven types of structures. (1) In a simple structure, authority is centralized in a single person; this structure has a flat hierarchy, few rules, and low work specialization. (2) In a functional structure, people with similar occupational specialties are put together in formal groups. (3) In a divisional structure, people with diverse occupational specialties are put together in formal groups by similar products or services, customers or clients, or geographic regions. (4) In a matrix structure, an organization combines functional and divisional chains of command in grids so that there are two command structures—vertical and horizontal. (5) In a team-based structure, teams or workgroups are used to improve horizontal relations and solve problems throughout the organization. (6) In a network structure, the organization has a central core that is linked to outside independent firms by computer connections, which are used to operate as if all were a single organization. (7) In a modular structure, a firm assembles product chunks, or modules, provided by outside contractors.
8.6 Contingency Design: Factors in Creating the Best Structure
The process of fitting the organization to its environment is called contingency design. Managers taking a contingency approach must consider five factors in designing the best kind of structure for their organization at that particular time.
(1) An organization may be either mechanistic or organic. In a mechanistic organization, authority is centralized, tasks and rules are clearly specified, and employees are closely supervised. In an organic organization, authority is decentralized, there are fewer rules and procedures, and networks of employees are encouraged to cooperate and respond quickly to unexpected tasks.
(2) An organization may also be characterized by differentiation or integration. Differentiation is the tendency of the parts of an organization to disperse and fragment. Integration is the tendency of the parts of an organization to draw together to achieve a common purpose.
(3) Organizational size is usually measured by the number of full-time employees. Larger organizations tend to have more rules, regulations, job specialization, and decentralization. Smaller organizations tend to be more informal, have fewer rules, and have less work specialization.
(4) Technology consists of all the tools and ideas for transforming materials, data or labor (inputs) into goods or services (outputs). Firms may be classified according to three forms of technology in increasing levels of complexity. In small batch technology, often the least complex technology, goods are custom-made to customer specifications in small quantities. Large-batch technology is mass production, assembly-line technology. Continuous-process technology is highly routinized technology in which machines do all the work.
(5) The four-stage organizational life cycle has a natural sequence of stages: birth, youth, midlife, and maturity. The birth stage is the nonbureaucratic stage, the stage in which the organization is created. The youth stage is the prebureaucratic stage, a stage of growth and expansion. In the midlife stage, the organization becomes bureaucratic, a period of growth evolving into stability. In the maturity stage, the organization becomes very bureaucratic, large, and mechanistic. The danger at this point is lack of flexibility and innovation.
9.1 Strategic Human Resource Management
Human resource management consists of the activities managers perform to plan for, attract, develop, and retain an effective workforce. The purpose of the strategic human resource management process is to get the optimal work performance that will help realize the company's mission and vision.
Two concepts important to human resource management are (1) human capital, the economic or productive potential of employee knowledge, and (2) social capital, the economic or productive potential of strong, trusting, and cooperative relationships.
Strategic human resource planning consists of developing a systematic, comprehensive strategy for (a) understanding current employee needs and (b) predicting future employee needs.
Understanding current employee needs requires first doing a job analysis to determine, by observation and analysis, the basic elements of a job. Then a job description can be written, which summarizes what the holder of the job does and how and why he or she does it. Next comes the job specification, which describes the minimum qualifications a person must have to perform the job successfully.
Predicting employee needs means a manager needs to become knowledgeable about the staffing an organization might need and the likely sources of staffing, perhaps using a human resource inventory to organize this information.
9.2 The Legal Requirements of Human Resource Management
Four areas of human resource law that any manager needs to be aware of are as follows: (1) Labor relations are dictated in part by the National Labor Relations Board, which enforces procedures whereby employees may vote to have a union and for collective bargaining. Collective bargaining consists of negotiations between management and employees about disputes over compensation, benefits, working conditions, and job security. (2) Compensation and benefits are covered by the Social Security Act of 1935 and the Fair Labor Standards Act, which established minimum wage and overtime pay regulations. (3) Health and safety are covered by the Occupational Safety and Health Act of 1970, among other laws. (4) Equal employment opportunity is covered by the Equal Employment Opportunity (EEO) Commission, whose job it is to enforce anti-discrimination and other employment related laws. Three important concepts covered by EEO are (a) discrimination, which occurs when people are hired or promoted—or denied hiring or promotion—for reasons not relevant to the job, such as skin color or national origin; (b) affirmative action, which focuses on achieving equality of opportunity within an organization; and (c) sexual harassment, which consists of unwanted sexual attention that creates an adverse work environment and which may be of two types—the quid pro quo type, which may cause direct economic injury, and the hostile environment type, in which the person being harassed experiences an offensive work environment.
9.3 Recruitment & Selection: Putting the Right People into the Right Jobs
Recruiting is the process of locating and attracting qualified applicants for jobs open in the organization. (1) Internal recruiting means making people already employed by the organization aware of job openings. (2) External recruiting means attracting job applicants from outside the organization. A useful approach with external recruitment is the realistic job preview, which gives a candidate a picture of both positive and negative features of the job and organization before he or she is hired.
The selection process is the screening of job applicants to hire the best candidates. Three types of selection tools are background information, interviewing, and employment tests. (1) Background information is ascertained through application forms, résumés, and reference checks. (2) Interviewing takes three forms. (a) The unstructured interview involves asking probing questions to find out what the applicant is like. (b) The structured interview involves asking each applicant the same questions and comparing their responses to a standardized set of answers. The first type of structured interview is the situational interview, in which the interview focuses on hypothetical situations. (c) The second type of structured interview is the behavioral description interview, in which the interviewer explores what applicants have actually done in the past. (3) Employment tests are legally considered to consist of any procedure used in the employment selection decision process, but the three most common tests are ability tests, personality tests, and performance tests. Some companies have assessment centers, in which management candidates participate in activities for a few days while being assessed in performance tests by evaluators. Other tests include drug testing, polygraphs, and genetic screening. With any kind of test, an important legal consideration is the test's reliability, the degree to which a test measures the same thing consistently, and validity, whether the test measures what it purports to measure and is free of bias.
9.4 Orientation, Training, & Development
Three ways in which newcomers are helped to perform their jobs are through orientation, training, and development. (1) Orientation consists of helping the newcomer fit smoothly into the job and organization. Following orientation, the employee should emerge with information about the job routine, the organization's mission and operations, and the organization's work rules and employee benefits. (2) Training must be distinguished from development. Training refers to educating technical and operational employees in how to better do their current jobs. (3) Development is the term describing educating professionals and managers in the skills they need to do their jobs in the future. Both training and development may be effected through on-the-job training methods and off-the-job training methods.
9.5 Performance Appraisal
Performance appraisal consists of assessing an employee's performance and providing him or her with feedback. Appraisals are of two general types—objective and subjective. Two good reasons for having objective appraisals are that they measure results and they are harder to challenge legally. (1) Objective appraisals are based on facts and are often numerical. An example is management by objectives. (2) Subjective appraisals are based on a manager's perceptions of an employee's traits or behaviors. Trait appraisals are ratings of subjective attributes such as attitude and leadership. Behavioral appraisals measure specific, observable aspects of performance. An example is the behaviorally anchored rating scale (BARS), which rates employee gradations in performance according to scales of specific behaviors.
Most performance appraisals are made by managers, but they may also be made by co-workers and subordinates, customers and clients, and employees themselves (self-appraisals). Sometimes all of these may be used, in a technique called the 360-degree assessment, in which employees are appraised not only by their managerial superiors but also by their peers, subordinates, and sometimes clients. In another evaluation technique, forced ranking performance review systems, all employees within a business unit are ranked against one another, and grades are distributed along some sort of bell curve. Effective performance feedback can be effected in two ways: (1) Formal appraisals are conducted at specific times throughout the year and are based on performance measures that have been established in advance. (2) Informal appraisals are conducted on an unscheduled basis and consist of less rigorous indications of employee performance.
9.6 Managing an Effective Workforce: Compensation & Benefits
Compensation has three parts: wages or salaries, incentives, and benefits. (1) In the category of wages or salaries, the concept of base pay consists of the basic wage or salary paid employees in exchange for doing their jobs. (2) Incentives include commissions, bonuses, profit-sharing plans, and stock options. (3) Benefits are additional nonmonetary forms of compensation, such as health insurance, retirement plans, and family leave.
9.7 Managing Promotions, Transfers, Disciplining, & Dismissals
Managers must manage promotions, transfers, disciplining, and dismissals. (1) In considering promotions, managers must be concerned about fairness, nondiscrimination, and other employees' resentment. (2) Transfers, or moving employees to a different job with similar responsibility, may take place in order to solve organizational problems, broaden managers' experience, retain managers' interest and motivation, and solve some employee problems. (3) Poor performing employees may need to be disciplined or demoted. (4) Dismissals may consist of layoffs, downsizings, or firings.
10.1 The Nature of Change in Organizations
Among supertrends shaping the future of business: (1) The marketplace is becoming more segmented and moving toward more niche products. (2) There are more competitors offering targeted products, requiring faster speed-to-market. (3) Some traditional companies may not survive radically innovative change. (4) China, India, and other offshore suppliers are changing the way we work. (5) Knowledge, not information, is becoming the new competitive advantage.
Two types of change are reactive and proactive. Reactive change is making changes in response to problems or opportunities as they arise. Proactive change involves making carefully thought out changes in anticipation of possible or expected problems or opportunities.
Forces for change may consist of forces outside the organization or inside it. (1) External forces consist of four types: demographic characteristics, market changes, technological advancements, and social and political pressures. (2) Internal forces may be of two types: employee problems and managers' behavior.
Four areas in which change is most apt to be needed are people, technology, structure, and strategy. (1) People changes may require changes in perceptions, attitudes, performance, or skills. (2) Technology is any machine or process that enables an organization to gain a competitive advantage in changing materials used to produce a finished product. (3) Changing structure may happen when one organization acquires another. (4) Changing strategy may occur because of changes in the marketplace.
10.2 Organization Development: What It Is, What It Can Do
Organization development (OD) is a set of techniques for implementing planned change to make people and organizations more effective. Often OD is put into practice by a change agent, a consultant with a background in behavioral sciences who can be a catalyst in helping organizations deal with old problems in new ways. OD can be used to manage conflict, revitalize organizations, and adapt to mergers.
The OD process follows a three-step process: (1) Diagnosis attempts to ascertain the problem. (2) Intervention is the attempt to correct the diagnosed problems. (3) Evaluation attempts to find out how well the intervention worked.
Four factors that make OD work successfully are (1) multiple interventions are used; (2) top managers give the OD program their support; (3) goals are geared to both short- and long-term results; and (4) OD is affected by culture.
10.3 Promoting Innovation within the Organization
Innovations may be a product innovation or a process innovation. A product innovation is a change in the appearance or performance of a product or service or the creation of a new one. A process innovation is a change in the way a product or service is conceived, manufactured, or disseminated. Innovations may also be an incremental innovation or a radical innovation. An incremental innovation is the creation of a product, service, or technology that modifies an existing one. A radical innovation is the creation of a product, service, or technology that replaces an existing one.
Four characteristics of innovation are that (1) it is an uncertain business; (2) people closest to the innovation know the most about it, at least initially; (3) it may be controversial; and (4) it can be complex because it may cross organizational boundaries.
Innovation doesn't happen as a matter of course. Three ways to make it happen are to provide the right organizational culture, so that it is viewed as a benefit rather than as a boondoggle; to provide the resources; and to provide the rewards, so that experimentation is reinforced in ways that matter. Three steps for fostering innovation are as follows. (1) Recognize problems and opportunities and devise solutions. (2) Gain allies by communicating your vision. (3) Overcome employee resistance and empower and reward them to achieve progress.
10.4 The Threat of Change: Managing Employee Fear & Resistance
The degree to which employees feel threatened by change depends on whether the change is adaptive, innovative, or radically innovative. Adaptive change, the least threatening, is reintroduction of a familiar practice. Innovative change is the introduction of a practice that is new to the organization. Radically innovative change, the most threatening, involves introducing a practice that is new to the industry.
Ten reasons employees resist change are as follows: (1) individuals' predisposition toward change; (2) surprise and fear of the unknown; (3) climate of mistrust; (4) fear of failure; (5) loss of status or job security; (6) peer pressure; (7) disruption of cultural traditions or group relationships; (8) personality conflicts; (9) lack of tact or poor timing; and (10) nonreinforcing reward systems.
Kurt Lewin's change model has three stages—unfreezing, changing, and refreezing—to explain how to initiate, manage, and stabilize planned change. (1) In the unfreezing stage, managers try to instill in employees the motivation to change. One technique used is benchmarking, a process by which a company compares its performance with that of high-performing organizations. (2) In the changing stage, employees need to be given the tools for change, such as new information. (3) In the refreezing stage, employees need to be helped to integrate the changed attitudes and behavior into their normal behavior.
In a model corresponding with Lewin's, John Kotter's suggests an organization needs to follow eight steps to avoid the eight common errors senior management usually commits. The first four represent unfreezing: establish a sense of urgency, create the guiding coalition, develop a vision and strategy, and communicate the change vision. The next three steps represent the changing stage: empower broad-based action, generate short-term wins, and consolidate gains and produce more change. The last step, corresponding to refreezing, is to anchor new approaches in the organization's culture.
11.1 Personality & Individual Behavior
Personality consists of the stable psychological traits and behavioral attributes that give a person his or her identity. There are five personality dimensions and five personality traits that managers need to be aware of to understand workplace behavior.
The Big Five personality dimensions are extroversion, agreeableness, conscientiousness, emotional stability, and openness to experience. Extroversion, an outgoing personality, is associated with success for managers and salespeople. Conscientiousness, or a dependable personality, is correlated with successful job performance. A person who scores well on conscientiousness may be a proactive personality, someone who is more apt to take initiative and persevere to influence the environment.
There are five personality traits that managers need to be aware of in order to understand workplace behavior. (1) Locus of control indicates how much people believe they control their fate through their own efforts. (2) Self-efficacy is the belief in one's personal ability to do a task. Low self-efficacy is associated with learned helplessness, the debilitating lack of faith in one's ability to control one's environment. (3) Self-esteem is the extent to which people like or dislike themselves. (4) Self-monitoring is the extent to which people are able to observe their own behavior and adapt it to external situations. (5) Emotional intelligence indicates the ability to cope, empathize with others, and be self-motivated.
11.2 Values, Attitudes, & Behavior
Organizational behavior (OB) is dedicated to better understanding and managing people at work. OB looks at two areas: individual behavior (discussed in this chapter) and group behavior (discussed in later chapters).
Values must be distinguished from attitudes and from behavior. (1) Values are abstract ideals that guide one's thinking and behavior across all situations. (2) Attitudes are defined as learned predispositions toward a given object. Attitudes have three components. The affective component consists of the feelings or emotions one has about a situation. The cognitive component consists of the beliefs and knowledge one has about a situation. The behavioral component refers to how one intends or expects to behave toward a situation. When attitudes and reality collide, the result may be cognitive dissonance, the psychological discomfort a person experiences between his or her cognitive attitude and incompatible behavior. Cognitive dissonance depends on three factors: importance, control, and rewards. The ways to reduce cognitive dissonance are to change your attitude and/or your behavior, belittle the importance of the inconsistent behavior, or find consonant elements that outweigh the dissonant ones. (3) Together, values and attitudes influence people's workplace behavior—their actions and judgments.
11.3 Work-Related Attitudes & Behaviors Managers Need to Deal With
Managers need to be alert to work-related attitudes having to do with (1) job satisfaction, the extent to which you feel positively or negatively about various aspects of your work; (2) job involvement, the extent to which you identify or are personally involved with your job; and (3) organizational commitment, reflecting the extent to which an employee identifies with an organization and is committed to its goals.
Among the types of behavior that managers need to influence are (1) performance and productivity; (2) absenteeism, when an employee doesn't show up for work, and turnover, when employees leave their jobs; (3) organizational citizenship behaviors, those employee behaviors that are not directly part of employees' job descriptions—that exceed their work-role requirements; and (4) counterproductive work behaviors, behaviors that harm employees and the organization as a whole.
11.4 Perception & Individual Behavior
Perception is the process of interpreting and understanding one's environment. The process can be boiled down to four steps: selective attention, interpretation and evaluation, storing in memory, and retrieving from memory to make judgments and decisions. Perceptual errors can lead to mistakes that affect management.
Four types of distortion in perception are (1) selective perception, the tendency to filter out information that is discomforting, that seems irrelevant, or that contradicts one's beliefs; (2) stereotyping, the tendency to attribute to an individual the characteristics one believes are typical of the group to which that individual belongs; (3) the halo effect, the forming of an impression of an individual based on a single trait; and (4) causal attribution, the activity of inferring causes for observed behavior. Two attributional tendencies that can distort one's interpretation of observed behavior are the fundamental attribution bias, in which people attribute another person's behavior to his or her personal characteristics rather than to situational factors, and the self-serving bias, in which people tend to take more personal responsibility for success than for failure.
The self-fulfilling prophecy (Pygmalion effect) describes the phenomenon in which people's expectations of themselves or others leads them to behave in ways that make those expectations come true.
11.5 Understanding Stress & Individual Behavior
Stress is the tension people feel when they are facing or enduring extraordinary demands, constraints, or opportunities and are uncertain about their ability to handle them effectively. Stress is the feeling of tension and pressure; the source of stress is called a stressor.
There are six sources of stress on the job: (1) Demands created by individual differences may arise from a Type A behavior pattern, meaning people have the personality characteristic that involves them in a chronic, determined struggle to accomplish more in less time. (2) Individual task demands are the stresses created by the job itself. (3) Individual role demands are the stresses created by other people's expectations of you. Roles are sets of behaviors that people expect of occupants of a position. Stress may come about because of role overload, role conflict, or role ambiguity. (4) Group demands are the stresses created by coworkers and managers. (5) Organizational demand are the stresses created by the environment and culture of the organization. (6) Nonwork demands are the stresses created by forces outside the organization, such as money problems or divorce.
Positive stress can be constructive. Negative stress can result in poor-quality work; such stress is revealed through physiological, psychological, or behavioral signs. One sign is burnout, a state of emotional, mental, and even physical exhaustion. Stress can lead to alcohol and other drug abuse.
There are buffers, or administrative changes, that managers can make to reduce the stressors that lead to employee burnout, such as adding extra staff or giving employees more power to make decisions. Some general organizational strategies for reducing unhealthy stressors are to roll out employee assistance programs, recommend a holistic wellness approach, create a supportive environment, make jobs interesting, and make career counseling available.
11.1 Personality & Individual Behavior
Personality consists of the stable psychological traits and behavioral attributes that give a person his or her identity. There are five personality dimensions and five personality traits that managers need to be aware of to understand workplace behavior.
The Big Five personality dimensions are extroversion, agreeableness, conscientiousness, emotional stability, and openness to experience. Extroversion, an outgoing personality, is associated with success for managers and salespeople. Conscientiousness, or a dependable personality, is correlated with successful job performance. A person who scores well on conscientiousness may be a proactive personality, someone who is more apt to take initiative and persevere to influence the environment.
There are five personality traits that managers need to be aware of in order to understand workplace behavior. (1) Locus of control indicates how much people believe they control their fate through their own efforts. (2) Self-efficacy is the belief in one's personal ability to do a task. Low self-efficacy is associated with learned helplessness, the debilitating lack of faith in one's ability to control one's environment. (3) Self-esteem is the extent to which people like or dislike themselves. (4) Self-monitoring is the extent to which people are able to observe their own behavior and adapt it to external situations. (5) Emotional intelligence indicates the ability to cope, empathize with others, and be self-motivated.
11.2 Values, Attitudes, & Behavior
Organizational behavior (OB) is dedicated to better understanding and managing people at work. OB looks at two areas: individual behavior (discussed in this chapter) and group behavior (discussed in later chapters).
Values must be distinguished from attitudes and from behavior. (1) Values are abstract ideals that guide one's thinking and behavior across all situations. (2) Attitudes are defined as learned predispositions toward a given object. Attitudes have three components. The affective component consists of the feelings or emotions one has about a situation. The cognitive component consists of the beliefs and knowledge one has about a situation. The behavioral component refers to how one intends or expects to behave toward a situation. When attitudes and reality collide, the result may be cognitive dissonance, the psychological discomfort a person experiences between his or her cognitive attitude and incompatible behavior. Cognitive dissonance depends on three factors: importance, control, and rewards. The ways to reduce cognitive dissonance are to change your attitude and/or your behavior, belittle the importance of the inconsistent behavior, or find consonant elements that outweigh the dissonant ones. (3) Together, values and attitudes influence people's workplace behavior—their actions and judgments.
11.3 Work-Related Attitudes & Behaviors Managers Need to Deal With
Managers need to be alert to work-related attitudes having to do with (1) job satisfaction, the extent to which you feel positively or negatively about various aspects of your work; (2) job involvement, the extent to which you identify or are personally involved with your job; and (3) organizational commitment, reflecting the extent to which an employee identifies with an organization and is committed to its goals.
Among the types of behavior that managers need to influence are (1) performance and productivity; (2) absenteeism, when an employee doesn't show up for work, and turnover, when employees leave their jobs; (3) organizational citizenship behaviors, those employee behaviors that are not directly part of employees' job descriptions—that exceed their work-role requirements; and (4) counterproductive work behaviors, behaviors that harm employees and the organization as a whole.
11.4 Perception & Individual Behavior
Perception is the process of interpreting and understanding one's environment. The process can be boiled down to four steps: selective attention, interpretation and evaluation, storing in memory, and retrieving from memory to make judgments and decisions. Perceptual errors can lead to mistakes that affect management.
Four types of distortion in perception are (1) selective perception, the tendency to filter out information that is discomforting, that seems irrelevant, or that contradicts one's beliefs; (2) stereotyping, the tendency to attribute to an individual the characteristics one believes are typical of the group to which that individual belongs; (3) the halo effect, the forming of an impression of an individual based on a single trait; and (4) causal attribution, the activity of inferring causes for observed behavior. Two attributional tendencies that can distort one's interpretation of observed behavior are the fundamental attribution bias, in which people attribute another person's behavior to his or her personal characteristics rather than to situational factors, and the self-serving bias, in which people tend to take more personal responsibility for success than for failure.
The self-fulfilling prophecy (Pygmalion effect) describes the phenomenon in which people's expectations of themselves or others leads them to behave in ways that make those expectations come true.
11.5 Understanding Stress & Individual Behavior
Stress is the tension people feel when they are facing or enduring extraordinary demands, constraints, or opportunities and are uncertain about their ability to handle them effectively. Stress is the feeling of tension and pressure; the source of stress is called a stressor.
There are six sources of stress on the job: (1) Demands created by individual differences may arise from a Type A behavior pattern, meaning people have the personality characteristic that involves them in a chronic, determined struggle to accomplish more in less time. (2) Individual task demands are the stresses created by the job itself. (3) Individual role demands are the stresses created by other people's expectations of you. Roles are sets of behaviors that people expect of occupants of a position. Stress may come about because of role overload, role conflict, or role ambiguity. (4) Group demands are the stresses created by coworkers and managers. (5) Organizational demands are the stresses created by the environment and culture of the organization. (6) Nonwork demands are the stresses created by forces outside the organization, such as money problems or divorce.
Positive stress can be constructive. Negative stress can result in poor-quality work; such stress is revealed through physiological, psychological, or behavioral signs. One sign is burnout, a state of emotional, mental, and even physical exhaustion. Stress can lead to alcohol and other drug abuse.
There are buffers, or administrative changes, that managers can make to reduce the stressors that lead to employee burnout, such as adding extra staff or giving employees more power to make decisions. Some general organizational strategies for reducing unhealthy stressors are to roll out employee assistance programs, recommend a holistic wellness approach, create a supportive environment, make jobs interesting, and make career counseling available.
12.1 Motivating for Performance
Motivation is defined as the psychological processes that arouse and direct goal–directed behavior. In a simple model of motivation, people have certain needs that motivate them to perform specific behaviors for which they receive rewards that feed back and satisfy the original need. Rewards are of two types: (1) An extrinsic reward is the payoff, such as money, a person receives from others for performing a particular task. (2) An intrinsic reward is the satisfaction, such as a feeling of accomplishment, that a person receives from performing the particular task itself.
As a manager, you want to motivate people to do things that will benefit your organization—join it, stay with it, show up for work at it, perform better for it, and do extra for it.
Four major perspectives on motivation are (1) content, (2) process, (3) job design, and (4) reinforcement.
12.2 Content Perspectives on Employee Motivation
Content perspectives or need-based perspectives emphasize the needs that motivate people. Needs are defined as physiological or psychological deficiencies that arouse behavior. Besides the McGregor Theory X/Theory Y (Chapter 1), need-based perspectives include (1) the hierarchy of needs theory, (2) the ERG theory, (3) the acquired needs theory, and (4) the two-factor theory.
The hierarchy of needs theory proposes that people are motivated by five levels of need: physiological, safety, love, esteem, and self-actualization needs.
ERG theory assumes that three basic needs influence behavior—existence, relatedness, and growth.
The acquired needs theory states that three needs—achievement, affiliation, and power—are major motives determining people's behavior in the workplace.
The two-factor theory proposes that work satisfaction and dissatisfaction arise from two different factors—work satisfaction from so-called motivating factors, and work dissatisfaction from so-called hygiene factors. Hygiene factors, the lower-level needs, are factors associated with job dissatisfaction—such as salary and working conditions—which affect the environment in which people work. Motivating factors, the higher-level needs, are factors associated with job satisfaction—such as achievement and advancement—which affect the rewards of work performance.
12.3 Process Perspectives on Employee Motivation
Process perspectives are concerned with the thought processes by which people decide how to act. Three process perspectives on motivation are (1) equity theory, (2) expectancy theory, and (3) goal setting theory.
Equity theory focuses on employee perceptions as to how fairly they think they are being treated compared to others. The key elements in equity theory are inputs, outputs (rewards), and comparisons. (1) With inputs, employees consider what they are putting into the job in time, effort, and so on. (2) With outputs or rewards, employees consider what they think they're getting out of the job in terms of pay, praise, and so on. (3) With comparison, employees compare the ratio of their own outcomes to inputs against the ratio of someone else's outcomes to inputs. Three practical lessons of equity theory are that employee perceptions are what count, employee participation helps, and having an appeal process helps.
Expectancy theory suggests that people are motivated by how much they want something and how likely they think they are to get it. The three elements affecting motivation are expectancy, instrumentality, and valence. (1) Expectancy is the belief that a particular level of effort will lead to a particular level of performance. (2) Instrumentality is the expectation that successful performance of the task will lead to the outcome desired. (3) Valence is the value, the importance a worker assigns to the possible outcome or reward. When attempting to motivate employees, according to the logic of expectancy theory, managers should ascertain what rewards employees value, what job objectives and performance level they desire, whether there are rewards linked to performance, and whether employees believe managers will deliver the right rewards for the right performance.
Goal-setting theory suggests that employees can be motivated by goals that are specific and challenging but achievable. In addition, the theory suggests that goals should be set jointly with the employee, be measurable, and have a target date for accomplishment and that employees should receive feedback and rewards.
12.4 Job Design Perspectives on Motivation
Job design is, first, the division of an organization's work among its employees and, second, the application of motivational theories to jobs to increase satisfaction and performance. Two approaches to job design are fitting people to jobs (the traditional approach) and fitting jobs to people.
Fitting jobs to people assumes people are underutilized and want more variety. Two techniques for this type of job design include (1) job enlargement, increasing the number of tasks in a job to increase variety and motivation, and (2) job enrichment, building into a job such motivating factors as responsibility, achievement, recognition, stimulating work, and advancement.
An outgrowth of job enrichment is the job characteristics model, which consists of (a) five core job characteristics that affect (b) three critical psychological states of an employee that in turn affect (c) work outcomes—the employee's motivation, performance, and satisfaction. The five core job characteristics are (1) skill variety—how many different skills a job requires; (2) task identity—how many different tasks are required to complete the work; (3) task significance—how many other people are affected by the job; (4) autonomy—how much discretion the job allows the worker; and (5) feedback—how much employees find out how well they're doing. These five characteristics affect three critical psychological states: meaningfulness of work, responsibility for results, and knowledge of results. Three major steps to follow when applying the job characteristics model are (1) diagnose the work environment to see if a problem exists, (2) determine whether job redesign is appropriate, and (3) consider how to redesign the job.
12.5 Reinforcement Perspectives on Motivation
Reinforcement theory attempts to explain behavior change by suggesting that behavior with positive consequences tends to be repeated whereas behavior with negative consequences tends not to be repeated. Reinforcement is anything that causes a given behavior to be repeated or inhibited.
There are four types of reinforcement. (1) Positive reinforcement is the use of positive consequences to encourage desirable behavior. (2) Negative reinforcement is the removal of unpleasant consequences followed by a desired behavior. (3) Extinction is the withholding or withdrawal of positive rewards for desirable behavior, so that the behavior is less likely to occur in the future. (4) Punishment is the application of negative consequences to stop or change undesirable behavior.
In using positive reinforcement to motivate employees, managers should reward only desirable behavior, give rewards as soon as possible, be clear about what behavior is desired, and have different rewards and recognize individual differences. In using punishment, managers should punish only undesirable behavior, give reprimands or disciplinary actions as soon as possible, be clear about what behavior is undesirable, administer punishment in private, and combine punishment and positive reinforcement.
12.6 Using Compensation & Other Rewards to Motivate
Compensation is only one form of motivator. For incentive compensation plans for work, rewards must be linked to performance and be measurable; they must satisfy individual needs; they must be agreed on by manager and employee; and they must be perceived as being equitable, believable, and achievable by employees.
Popular incentive compensation plans are the following. (1) Pay for performance bases pay on one's results. One kind is payment according to piece rate, in which employees are paid according to how much output they produce. Another is the sales commission, in which sales representatives are paid a percentage of the earnings the company made from their sales. (2) Bonuses are cash awards given to employees who achieve specific performance objectives. (3) Profit sharing is the distribution to employees of a percentage of the company's profits. (4) Gain-sharing is the distribution of savings or "gains" to groups of employees who reduced costs and increased measurable productivity. (5) Stock options allow certain employees to buy stock at a future date for a discounted price. (6) Pay for knowledge ties employee pay to the number of job-relevant skills or academic degrees they earn.
There are also nonmonetary ways of compensating employees. Some employees will leave because they feel the need for work-life balance, the need to expand their skills, and the need to matter. To retain such employees, nonmonetary incentives have been introduced, such as the flexible workplace. Other incentives that keep employees from leaving are thoughtfulness by employees' managers, work-life benefits such as daycare, attractive surroundings, skill-building and educational opportunities, and work sabbaticals.
13.1 Groups versus Teams
Groups and teams are different—a group is typically management-directed, a team self-directed. A group is defined as two or more freely interacting individuals who share collective norms, share collective goals, and have a common identity. A team is defined as a small group of people with complementary skills who are committed to a common purpose, performance goals, and approach for which they hold themselves mutually accountable.
Groups may be either formal, established to do something productive for the organization and headed by a leader, or informal, formed by people seeking friendship with no officially appointed leader.
Teams are of various types, but one of the most important is the work team, which engages in collective work requiring coordinated effort. Work teams may be of four types, identified according to their basic purpose: advice, production, project, and action. A project team may also be a cross-functional team, staffed with specialists pursuing a common objective.
Two types of teams worth knowing about are quality circles, consisting of small groups of volunteers or workers and supervisors who meet intermittently to discuss workplace and quality-related problems, and self-managed teams, defined as groups of workers given administrative oversight for their task domains.
13.2 Stages of Group & Team Development
A group may evolve into a team through five stages. (1) Forming is the process of getting oriented and getting acquainted. (2) Storming is characterized by the emergence of individual personalities and roles and conflicts within the group. (3) In norming, conflicts are resolved, close relationships develop, and unity and harmony emerge. (4) In performing, members concentrate on solving problems and completing the assigned task. (5) In adjourning, members prepare for disbandment.
13.3 Building Effective Teams
There are seven considerations managers must take into account in building a group into an effective team. (1) They must establish measurable goals and have feedback about members' performance. (2) They must motivate members by making them mutually accountable to one another. (3) They must consider what size is optimal. Teams with nine or fewer members have better interaction and morale, yet they also have fewer resources, are possibly less innovative, and may have work unevenly distributed among members. Teams of 10–16 members have more resources, and can take advantage of division of labor, yet they may be characterized by less interaction, lower morale, and social loafing. (4) They must consider the role each team member must play. A role is defined as the socially determined expectation of how an individual should behave in a specific position. Two types of team roles are task and maintenance. A task role consists of behavior that concentrates on getting the team's tasks done. A maintenance role consists of behavior that fosters constructive relationships among team members. (5) They must consider team norms, the general guidelines or rules of behavior that most group or team members follow. Norms tend to be enforced by group or team members for four reasons: to help the group survive, to clarify role expectations, to help individuals avoid embarrassing situations, and to emphasize the group's important values and identity. (6) They must consider the team's cohesiveness, the tendency of a group or team to stick together. (7) They must be aware of groupthink, a cohesive group's blind unwillingness to consider alternatives. Symptoms of groupthink are feelings of invulnerability, certainty of the rightness of their actions, and stereotyped views of the opposition; rationalization and self-censorship; and illusion of unanimity, peer pressure, and the appearance of self-appointed protectors against adverse information. The results of groupthink can be reduction in alternative ideas and limiting of other information. Two ways to prevent groupthink are to allow criticism and to allow other perspectives.
13.4 Managing Conflict
Conflict is a process in which one party perceives that its interests are being opposed or negatively affected by another party. Conflict can be negative. However, constructive, or functional, conflict benefits the main purposes of the organization and serves its interests. Too little conflict can lead to indolence; too much conflict can lead to warfare.
Seven causes of conflict are (1) competition for scarce resources, (2) time pressure, (3) inconsistent goals or reward systems, (4) ambiguous jurisdictions, (5) status differences, (6) personality clashes, and (7) communication failures.
Four devices for stimulating constructive conflict are (1) spurring competition among employees, (2) changing the organization's culture and procedures, (3) bringing in outsiders for new perspectives, and (4) using programmed conflict to elicit different opinions without inciting people's personal feelings. Two methods used in programmed conflict are (1) devil's advocacy, in which someone is assigned to play the role of critic to voice possible objections to a proposal, and (2) the dialectic method, in which two people or groups play opposing roles in a debate in order to better understand a proposal.
14.1 The Nature of Leadership: Wielding Influence
Leadership is the ability to influence employees to voluntarily pursue organizational goals. Being a manager and being a leader are not the same. Management is about coping with complexity, whereas leadership is about coping with change. Companies manage complexity by planning and budgeting, organizing and staffing, and controlling and problem solving. Leadership copes with change by setting a direction, aligning people to accomplish an agenda, and motivating and inspiring people.
To understand leadership, we must understand authority and power. Authority is the right to perform or command; it comes with the manager's job. Power is the extent to which a person is able to influence others so they respond to orders. People may pursue personalized power, power directed at helping oneself, or, better, they may pursue socialized power, power directed at helping others.
Within an organization there are typically five sources of power leaders may draw on; all managers have the first three. (1) Legitimate power is power that results from managers' formal positions within the organization. (2) Reward power is power that results from managers' authority to reward their subordinates. (3) Coercive power results from managers' authority to punish their subordinates. (4) Expert power is power resulting from one's specialized information or expertise. (5) Referent power is power deriving from one's personal attraction.
There are nine influence tactics for trying to get others to do something you want, ranging from most used to least used tactics as follows: rational persuasion, inspirational appeals, consultation, ingratiating tactics, personal appeals, exchange tactics, coalition tactics, pressure tactics, and legitimating tactics.
Four principal approaches or perspectives on leadership, as discussed in the rest of the chapter, are (1) trait, (2) behavioral, (3) contingency, and (4) emerging.
14.2 Trait Approaches: Do Leaders Have Distinctive Personality Characteristics?
Trait approaches to leadership attempt to identify distinctive characteristics that account for the effectiveness of leaders. Representatives of this approach are Kouzes and Posner, gender studies, and leadership lessons from the GLOBE project. (1) Kouzes and Posner identified five traits of leaders. A leader should be honest, competent, forward-looking, inspiring, and intelligent. (2) Women may rate higher than men do on producing high-quality work, goal setting, mentoring employees, and other measures. Women excel in such traits as teamwork and partnering, being more collaborative, seeking less personal glory, being motivated less by self-interest than company interest, being more stable, and being less turf-conscious. (3) Project GLOBE surveyed 17,000 middle managers in 62 countries and determined that visionary and inspirational charismatic leaders who are good team builders do best.
14.3 Behavioral Approaches: Do Leaders Show Distinctive Patterns of Behavior?
Behavioral leadership approaches try to determine the distinctive styles used by effective leaders. Leadership style means the combination of traits, skills, and behaviors that leaders use when interacting with others. We described some important models of leadership behavior.
In the University of Michigan Leadership Model, researchers identified two forms of leadership styles. In job-centered behavior, managers paid more attention to the job and work procedures. In employee-centered behavior, managers paid more attention to employee satisfaction and making work groups cohesive.
In the Ohio State Leadership Model, researchers identified two major dimensions of leader behavior: Initiating structure organizes and defines what group members should be doing. Consideration is leadership behavior that expresses concern for employees by establishing a supportive climate.
One expert concludes from the Michigan and Ohio studies that effective leaders tend to have supportive relationships with employees, use group rather than individual methods of supervision, and set high performance goals.
14.4 Contingency Approaches: Does Leadership Vary with the Situation?
Proponents of the contingency approach to leadership believe that effective leadership behavior depends on the situation at hand—that as situations change, different styles become effective. Three contingency approaches are described.
The Fiedler contingency leadership model determines if a leader's style is task oriented or relationship-oriented and if that style is effective for the situation at hand. Once it is determined whether a leader is more oriented toward tasks or toward people, then it's necessary to determine how much control and influence a leader has in the immediate work environment. The three dimensions of situational control are leader–member relations, which reflects the extent to which a leader has the support of the work group; the task structure, which reflects the extent to which tasks are routine and easily understood; and position power, which reflects how much power a leader has to reward and punish and make work assignments. For each dimension, the leader's control may be high or low. A task-oriented style has been found to work best in either high-control or low-control situations; the relationship oriented style is best in situations of moderate control.
The House path–goal leadership model, in its revised form, holds that the effective leader clarifies paths through which subordinates can achieve goals and provides them with support. Two variables, employee characteristics and environmental factors, cause one or more leadership behaviors—which House expanded to eight from his original four—to be more effective than others.
Hersey and Blanchard's situational leadership theory suggests that leadership behavior reflects how leaders should adjust their leadership style according to the readiness of the followers. Readiness is defined as the extent to which a follower possesses the ability and willingness to complete a task. The appropriate leadership style is found by cross referencing follower readiness (low to high) with one of four leadership styles: telling, selling, participating, delegating.
14.5 The Full-Range Model: Uses of Transactional & Transformational Leadership
Full-range leadership describes leadership along a range of styles, with the most effective being transactional/ transformational leaders. Transactional leadership focuses on clarifying employees' roles and task requirements and providing rewards and punishments contingent on performance. Transformational leadership transforms employees to pursue goals over self-interests. Transformational leaders are influenced by two factors: (1) Their personalities tend to be more extroverted, agreeable, and proactive. (2) Organizational cultures are more apt to be adaptive and flexible.
The best leaders are both transactional and transformational. Four key behaviors of transformational leaders in affecting employees are they inspire motivation, inspire trust, encourage excellence, and stimulate them intellectually.
Transformational leadership has three implications. (1) It can improve results for both individuals and groups. (2) It can be used to train employees at any level. (3) It can be used by both ethical or unethical leaders.
14.6 Four Additional Perspectives
Four additional kinds of leadership are (1) leader–membership exchange model, (2) shared leadership, (3) servant leadership, and (4) e-leadership.
The leader–member exchange (LMX) model of leadership emphasizes that leaders have different sorts of relationships with different subordinates.
Shared leadership is a simultaneous, ongoing, mutual influence process in which people share responsibility for leading. It is based on the idea that people need to share information and collaborate to get things done.
Servant leaders focus on providing increased service to others—meeting the goals of both followers and the organization—rather than to themselves.
E-leadership involves leader interactions with others via the Internet and other forms of advanced information technology, which have made possible new ways for interacting within and between organizations (e-business) and with customers and suppliers (e-commerce). E-leadership can involve one-to-one, one-to- many, within-group and between group and collective interactions via information technology.
15.1 The Communication Process: What It Is, How It Works
Communication is the transfer of information and understanding from one person to another. The process involves sender, message, and receiver; encoding and decoding; the medium; feedback; and dealing with "noise." The sender is the person wanting to share information. The information is called a message. The receiver is the person for whom the message is intended. Encoding is translating a message into understandable symbols or language. Decoding is interpreting and trying to make sense of the message. The medium is the pathway by which a message travels. Feedback is the process in which a receiver expresses his or her reaction to the sender's message. The entire communication process can be disrupted at any point by noise, defined as any disturbance that interferes with the transmission of a message.
For effective communication, a manager must select the right medium. Media richness indicates how well a particular medium conveys information and promotes learning. The richer a medium is, the better it is at conveying information. Face-to-face presence is the richest; an advertising flyer would be one of the lowest. A rich medium is best for nonroutine situations and to avoid oversimplification. A lean medium is best for routine situations and to avoid overloading.
15.2 Barriers to Communication
Barriers to communication are of three types: (1) Physical barriers are exemplified by walls, background noise, and time-zone differences. (2) Semantics is the study of the meaning of words. Jargon, terminology specific to a particular profession or group, can be a semantic barrier. (3) Personal barriers are individual attributes that hinder communication. Nine such barriers are (a) variable skills in communicating effectively, (b) variations in frames of reference and experiences that affect how information is interpreted, (c) variations in trustworthiness and credibility, (d) oversized egos, (e) faulty listening skills, (f) tendency to judge others' messages, (g) inability to listen with understanding, (h) stereotypes (oversimplified beliefs about a certain group of people) and prejudices, and (i) nonverbal communication (messages sent outside of the written or spoken word, including body language).
Seven ways in which nonverbal communication is expressed are through (1) interpersonal space, (2) eye contact, (3) facial expressions, (4) body movements and gestures, (5) touch, (6) setting, and (7) time.
15.3 How Managers Fit into the Communication Process
Communication channels may be formal or informal.
Formal communication channels follow the chain of command and are recognized as official. Formal communication is of three types: (1) Vertical communication is the flow of messages up and down the organizational hierarchy. (2) Horizontal communication flows within and between work units; its main purpose is coordination. (3) External communication flows between people inside and outside the organization.
Informal communication channels develop outside the formal structure and do not follow the chain of command. Two aspects of informal channels are the grapevine and management by wandering around. (1) The grapevine is the unofficial communication system of the informal organization. The grapevine is faster than formal channels, is about 75% accurate, and is used by employees to acquire most on-the-job information. (2) In management by wandering around (MBWA), a manager literally wanders around his or her organization and talks with people across all lines of authority; this reduces distortion caused by formal communication.
15.4 Communication in the Information Age
A modern-day trend is multicommunicating, the use of technology to participate in several interactions at the same time. Contemporary managers use seven communications tools of information technology: (1) The Internet is a global network of independently operating but interconnected computers, linking smaller networks. Two private uses of the Internet are for intranets, organizations' private Internets, and for extranets, extended intranets that connect a company's internal employees with selected customers, suppliers, and other strategic partners. (2) E-mail, for electronic mail, uses the Internet to send computer-generated text and documents between people. E-mail has become a major communication medium because it reduces the cost of distributing information, increases teamwork, reduces paper costs, and increases flexibility. However, e-mail has three drawbacks: wasted time; information overload, in part because of spam, or unsolicited jokes and junk mail; and it leads people to neglect other media. (3) Videoconferencing uses video and audio links along with computers to enable people located at different locations to see, hear, and talk with one another. Telepresence technology consists of high-definition videoconference systems that simulate face-to-face meetings between users. (4) Group support systems entail using state-of-the-art computer software and hardware to help people work better together. (5) Telecommuting involves doing work that is generally performed in the office away from the office, using a variety of information technologies. (6) Handheld devices such as personal digital assistants and smartphones offer users the portability to work from any location. (7) Blogs are online journals in which people write whatever they want about any topic.
Three impediments to productivity of information technology are (1) the technology is misused, as for video games; (2) it requires a lot of fussing with, as in untangling complications caused by spam and viruses; and (3) it can produce information overload—the amount of information received exceeds a person's ability to handle or process it.
15.5 Improving Communication Effectiveness
To become a good listener, you should concentrate on the content of the message. You should judge content, not delivery; ask questions and summarize the speaker's remarks; listen for ideas; resist distractions and show interest; and give the speaker a fair hearing.
To become a good reader, you need to first realize that speed reading usually doesn't work. You should also be savvy about how you handle periodicals and books, transfer your reading load to some of your employees, and ask others to use e-mails and reports to tell you what they want you to do. A top-down reading system that's a variant on the SQ3R system (survey, question, read, recite, review) is also helpful.
To become an effective writer, you can follow several suggestions. Use spelling and grammar checkers in word processing software. Use three strategies for laying out your ideas in writing: go from most important topic to least important; go from least controversial topic to most controversial; and go from negative to positive. When organizing your message, start with your purpose. Write simply, concisely, and directly. Telegraph your writing through use of highlighting and white space.
To become an effective speaker, follow three simple rules. Tell people what you're going to say. Say it. Tell them what you said.
16.1 Managing for Productivity A manager has to deal with six challenges—managing for competitive advantage, diversity, globalization, information technology, ethical standards, and his or her own happiness and life goals. The manager must make decisions about the four management functions—planning, organizing, leading, and controlling—to get people to achieve productivity and realize results. Productivity is defined by the formula of outputs divided by inputs for a specified period of time. Productivity is important because it determines whether the organization will make a profit or even survive. Productivity depends on control.
16.2 Control: When Managers Monitor Performance Controlling is defined as monitoring performance, comparing it with goals, and taking corrective action as needed. There are six reasons why control is needed: (1) to adapt to change and uncertainty; (2) to discover irregularities and errors; (3) to reduce costs, increase productivity, or add value; (4) to detect opportunities; (5) to deal with complexity; and (6) to decentralize decision making and facilitate teamwork.
There are four control process steps. (1) The first step is to set standards. A control standard is the desired performance level for a given goal. (2) The second step is to measure performance, based on written reports, oral reports, and personal observation. (3) The third step is to compare measured performance against the standards established. (4) The fourth step is to take corrective action, if necessary, if there is negative performance.
16.3 The Balanced Scorecard, Strategy Maps, & Measurement Management To establish standards, managers often use the balanced scorecard, which provides a fast but comprehensive view of the organization via four indicators: (1) financial measures, (2) customer satisfaction, (3) internal processes, and (4) innovation and improvement activities.
The strategy map, a visual representation of the four perspectives of the balanced scorecard—financial, customer, internal business, and innovation and learning—enables managers to communicate their goals so that everyone in the company can understand how their jobs are linked to the overall objectives of the organization.
Measurement-managed companies use measurable criteria for determining strategic success, and management updates and reviews three or more of six primary performance areas: financial performance, operating efficiency, customer satisfaction, employee performance, innovation/change, and community/environment. Four mechanisms that contribute to the success of such companies are top executives agree on strategy, communication is clear, there is better focus and alignments, and the organizational culture emphasizes teamwork and allows risk taking. Four barriers to effective measurement are objectives are fuzzy, managers put too much trust in informal feedback systems, employees resist new management systems, and companies focus too much on measuring activities instead of results.
Some areas are difficult to measure, such as those in service industries.
16.4 Levels & Areas of Control In applying the steps and types of control, managers need to consider (1) the level of management at which they operate, (2) the areas they can draw on for resources, and (3) the style of control philosophy.
There are three levels of control, corresponding to the three principal managerial levels. (1) Strategic control, done by top managers, is monitoring performance to ensure that strategic plans are being implemented. (2) Tactical control, done by middle managers, is monitoring performance to ensure that tactical plans are being implemented. (3) Operational control, done by first-level or supervisory managers, is monitoring performance to ensure that day-to-day goals are being implemented.
Most organizations have six areas that they can draw on for resources. (1) The physical area includes buildings, equipment, and tangible products; these use equipment control, inventory-management control, and quality controls. (2) The human resources area uses personality tests, drug tests, performance tests, employee surveys, and the like as controls to monitor people. (3) The informational area uses production schedules, sales forecasts, environmental impact statements, and the like to monitor the organization's various resources. (4) The financial area uses various kinds of financial controls, as we discuss in Section (5) The structural area uses hierarchical or other arrangements such as bureaucratic control, which is characterized by use of rules, regulations, and formal authority to guide performance, or decentralized control, which is characterized by informal and organic structural arrangements. (6) The cultural area influences the work process and levels of performance through the set of norms that develop as a result of the values and beliefs that constitute an organization's culture.
16.5 Some Financial Tools for Control Financial controls include (1) budgets, (2) financial statements, (3) ratio analysis, and (4) audits.
A budget is a formal financial projection. There are two budget-planning approaches, incremental and zero-based. (1) Incremental budgeting allocates increased or decreased funds to a department by using the last budget period as a reference point; only incremental changes in the budget request are reviewed. (2) Zero-based budgeting (ZBB) forces each department to start from zero in projecting the funding needs for the coming budget period. Whether incremental or zero-based, budgets are either fixed, which allocate resources on the basis of a single estimate of costs, or variable, which allow resource allocation to vary in proportion with various levels of activity.
A financial statement is a summary of some aspect of an organization's financial status. One type, the balance sheet, summarizes an organization's overall financial worth—assets and liabilities—at a specific point in time. The other type, the income statement, summarizes an organization's financial results—revenues and expenses—over a specified period of time.
Ratio analysis is the practice of evaluating financial ratios. Managers may use this tool to determine an organization's financial health, such as liquidity ratios, debt management ratios, or return ratios.
Audits are formal verifications of an organization's financial and operational systems. Audits are of two types. An external audit is formal verification of an organization's financial accounts and statements by outside experts. An internal audit is a verification of an organization's financial accounts and statements by the organization's own professional staff.
16.6 Total Quality Management Much of the impetus for quality improvement came from W. Edwards Deming, whose philosophy, known as Deming management, proposed ideas for making organizations more responsive, more democratic, and less wasteful. Among the principles of Deming management are (1) quality should be aimed at the needs of the consumer; (2) companies should aim at improving the system, not blaming workers; (3) improved quality leads to increased market share, increased company prospects, and increased employment; and (4) quality can be improved on the basis of hard data, using the PDCA, or plan-do-check-act, cycle.
Total quality management (TQM) is defined as a comprehensive approach-led by top management and supported throughout the organization-dedicated to continuous quality improvement, training, and customer satisfaction. The two core principles of TQM are people orientation and improvement orientation.
In the people orientation, everyone involved with the organization is asked to focus on delivering value to customers, focusing on quality. TQM requires training, teamwork, and cross-functional efforts.
In the improvement orientation, everyone involved with the organization is supposed to make ongoing small, incremental improvements in all parts of the organization. This orientation assumes that it's less expensive to do things right the first time, to do small improvements all the time, and to follow accurate standards to eliminate small variations.
TQM can be applied to services using the RATER scale, which stands for reliability, assurance, tangibles, empathy, and responsiveness.
Several techniques are available for improving quality. (1) Employee involvement can be implemented through quality circles, self-managed teams, and special-purpose teams-teams that meet to solve a special or one-time problem. (2) Benchmarking is a process by which a company compares its performance with that of high-performing organizations. (3) Outsourcing is the subcontracting of services and operations to an outside vendor. (4) Reduced cycle time consists of reducing the number of steps in a work process. (5) Statistical process control is a statistical technique that uses periodic random samples from production runs to see if quality is being maintained within a standard range of acceptability.
16.7 Managing Control Effectively Successful control systems have four common characteristics: (1) They are strategic and results oriented. (2) They are timely, accurate, and objective. (3) They are realistic, positive, and understandable and they encourage self-control. (4) They are flexible.
Among the barriers to a successful control system are the following: (1) Organizations may exert too much control. (2) There may be too little employee participation. (3) The organization may overemphasize means instead of ends. (4) There may be an overemphasis on paperwork. (5) There may be an overemphasis on one approach instead of multiple approaches.
Connect Management: Management
Connect Management: Management, 4/e
Angelo Kinicki, Arizona State University - Tempe
Brian K. Williams
