Management Practices
MGT-200
Dr. Muhammad Shakil Ahmad
Lecture 1
Management Key Concepts
Organizations
Basically, an organization in its simplest form (and not necessarily a legal entity, e.g.,
corporation or LLC) is a person or group of people intentionally organized to accomplish an
overall, common goal or set of goals. Business organizations can range in size from one person
to tens of thousands.
Goal
A desired future condition that the organization seeks to achieve
Management
Management is the process of reaching organizational goals by working with and through people
and other organizational resources by Planning, Organizing, Leading, and Controlling
Additional Key Concepts
Some of other important concepts of management are as follows
Resources
The things that become available to produce products in a business are termed as organizational
resources. They will include human, monetary, raw materials and capital. All of these items are
resources that a company bases its structure and budgets on.
Managers
A Manager is the person responsible for planning and directing the work of a group of
individuals, monitoring their work, and taking corrective action when necessary.
Achieving High Performance
Organizations must provide a good or service desired by its customers.Following are some
examples
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


Chen One and Addidas manage his firm to provide quality food products.
Physicians, nurses and health care administrators seek to provide healing from sickness.
McDonald’s restaurants provide burgers, fries and shakes that people want to buy.
Measures how efficiently and effectively managers use resources to satisfy customers and
achieve goals.
Organizational Performance
Organizational Performance measures how efficiently and effectively managers use resources to
satisfy customers and achieve goals.
Efficiency
A measure of how well resources are used to achieve a goal.
 Usually, managers must try to minimize the input of resources to attain the same goal.
Effectiveness
A measure of the appropriateness of the goals chosen (are these the right goals?), and the degree
to which they are achieved.
Managerial Functions
Henri Fayol was the first to describe the four managerial functions when he was the CEO of a
large mining company in the later 1800’s.
Fayol noted managers at all levels, operating in for profit or not for profit organization, must
perform each of the following functions:

Planning,

Organizing,

Leading,

Controlling.
PLANNING:
Planning involves choosing tasks that must be performed to attain organizational goals, outlining
how the tasks must be performed, and indicating when they should be performed.It involves
three steps:
 Deciding which goals an organization will pursue,
 Deciding what courses of action to adopt to attain those goals, and
 Deciding how to allocate organizational resources to attain those goals
ORGANIZING:
Organizing can be thought of as assigning the tasks developed in the planning stages, to various
individuals or groups within the organization. Organizing is to create a mechanism to put plans
into action.
Its activities include



Specifying job responsibilities.
Grouping jobs into work units.
Resource allocation
Leading
Leadingis also referred to as motivating, influencing or directing.Leading can be defined as
guiding the activities of organization members in the direction that helps the organization move
towards the fulfillment of the goals.
Its activities include



Directing the workforce.
Motivating your subordinates.
Communicating with employees.
Controlling:
Controlling is the following roles played by the manager:



Gather information that measures performance
Compare present performance to pre established performance norms.
Determine the next action plan and modifications for meeting the desired performance
parameters.
Its activities include:
 Setting performance standards that indicate progress toward long-term goals.
 Monitoring staff performance through performance data evaluation.
 Identifying performance problems by comparing performance data against
 Standards and take corrective actions.
Why to Study Management Practices?
We need to study management because it is essential in most organizations with large
workforces, it builds contact networks and it aids in project implementation.
a) It helps in Achieving Group Goals
It arranges the factors of production, assembles and organizes the resources, integrates the
resources in effective manner to achieve goals. It directs group efforts towards achievement of
pre-determined goals.
b) Optimum Utilization of Resources
Management utilizes all the physical & human resources productively. This leads to efficacy in
management. Management provides maximum utilization of scarce resources by selecting its
best possible alternate use in industry from out of various uses. It makes use of experts,
professional and these services leads to use of their skills, knowledge, and proper utilization and
avoids wastage.
c) Reduces Costs
It gets maximum results through minimum input by proper planning and by using minimum
input & getting maximum output. Management uses physical, human and financial resources in
such a manner which results in best combination. This helps in cost reduction.
d) Establishes Sound Organization
No overlapping of efforts (smooth and coordinated functions). To establish sound organizational
structure is one of the objective of management which is in tune with objective of organization
and for fulfillment of this, it establishes effective authority & responsibility relationship i.e. who
is accountable to whom, who can give instructions to whom, who are superiors & who are
subordinates.
e) Establishes Equilibrium
It enables the organization to survive in changing environment. It keeps in touch with the
changing environment. With the change is external environment, the initial co-ordination of
organization must be changed. So it adapts organization to changing demand of market /
changing needs of societies. It is responsible for growth and survival of organization.
f) Essentials for Prosperity of Society
Efficient management leads to better economical production which helps in turn to increase the
welfare of people. Good management makes a difficult task easier by avoiding wastage of scarce
resource. It improves standard of living. It increases the profit which is beneficial to business and
society will get maximum output at minimum cost by creating employment opportunities which
generate income in hands. Organization comes with new products and researches beneficial for
society.
Decisional Roles of managers
Following are some decisional roles that a manager has.
a) Entrepreneur
In this role, the manger constantly looks out for new ideas and seeks to improve his unit by
adapting it to changing conditions in the environment.
b) Disturbance Handler
In this role, the manager has to work like a fire fighter. He must seek solutions of various
unanticipated problems- a strike may loom large, a major customer may go bankrupt, a supplier
may renege on his contract.
c) Resource Allocator
In this role, the manger has to work and delegate authority among his subordinates. He must
decide who will get what.
d) Negotiator
The manager has to spend considerable time in negotiations. Thus, the president of a company
may negotiate with the union leaders, a new strike issue: the foreman may negotiate with the
workers a grievance problem.
Lecture 02
Management Levels
Organizations often have 3 levels of manager
 Top level managers
 Middle level managers
 Front line managers
Top Managers
These managers perform following functions
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



Responsible for providing the overall
direction of an organization
Develop goals and strategies for entire organization
Spend most of their time planning and leading
Communicate with key stakeholders—stockholders, unions, governmental agencies, etc.,
company policies
Use of multicultural and strategic action competencies to lead firm is crucial
Middle Managers
Middle managers have following roles and responsibilities that they perform.
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Responsible for setting objectives that are consistent with top management’s goals and
translating them into specific goals and plans for first-line managers to implement
Responsible for coordinating activities of first-line managers
Establish target dates for products/services to be delivered
Need to coordinate with others for resources
Ability to develop others is important
Rely on communication, teamwork, and planning and administration competencies to
achieve goals
First-line Managers
These managers perform following functions
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
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

Directly responsible for production of goods or services
Employees who report to first-line managers do the organization’s work
Spend little time with top managers in large organizations
Technical expertise is important
Rely on planning and administration, self-management, teamwork, and communication
competencies to get work done

Restructuring
Restructuring is a common phenomenon, undertaken by many organizations on a regular basis.
This restructuring can be driven by a number of strategic considerations such as



A desire to adopt new, more flexible and modular organizational forms to respond to an
increasingly dynamic business environment
The need for more globally integrated ways of working, or just
The need to improve business performance through cost reductions or productivity gains.
Downsizing
A downsizing strategy reduces the scale (size) and scope of a business to improve its financial
performance.
Downsizing has following functions





Reduce costs
Reduce layers of management to increase decision making speed and get closer to the
customer
Sharpen focus on core competencies of the firm, and outsource peripheral activities
Generate positive reactions from shareholders in order to improve valuation of stock
price
Increase productivity
Empowerment
Its central meaning is to enable people to do things that they would otherwise be unable to do it.
It means to remove the restrictions, artificial or otherwise, that prevent people from doing things
that are within their ability to achieve. Supervisors might be empowered to make some resource
allocation decisions.
Self-Managed Teams
A self-managed team is a group of employees that's responsible and accountable for all or most
aspects of producing a product or delivering a service. Traditional organizational structures
assign tasks to employees depending on their specialist skills or the functional department within
which they work. A self-managed team carries out supporting tasks, such as planning and
scheduling the workflow and managing annual leave and absence, in addition to technical tasks.
Management and technical responsibilities are typically rotated among the team members.
Mintzberg's Management Roles
Management is incorporated into every aspect of an organization, with different roles and
responsibilities. Henry Mintzberg (1973), the Cleghorn Professor of Management Studies at
McGill University, defined ten management roles within three categories
 Interpersonal
 Informational,
 Decisional
Each of the three categories embraces the different roles
1. Interpersonal role
Figurehead
Symbolic head, obliged to perform a number of routine duties of a legal or social nature.
Leader
Responsible for the motivation and activation of subordinates; responsible for staffing, training,
and associated duties.
Liaison
Maintain self-developed network of outside contacts and informers who provide favors and
information.
2. Informational role
Following are the informational roles of mangers in the organizations
a) Mentor
Seeks and receives wide variety of special information (much of it current) to develop thorough
understanding of organization and environment; emerges as nerve center of internal and external
information of the organization.
b) Disseminator
Transmits information received from outsiders or from other subordinates to members of the
organization; some information factual, some
involving interpretation and integration of diverse value positions of organizational influences.
c) Spokesman
Transmits information (plans, policies, results, etc.) within and outside of the organization;
serves as expert on organization's industry.
3. Decisional role
Following are the decisional roles that a manager performs.
a) Entrepreneur
Searches organization and its environment and initiates improvement projects to bring about
change; supervises design of certain projects as well.
b) Disturbance Handler
Managers are responsible for corrective action when organization faces important, unexpected
disturbances.
c) Resource Allocator
Managers are responsible for the allocation of the organization’s resources; makes or approves of
all significant organizational decisions.
d) Negotiator
Managers are responsible for representing the organization at major negotiations.
Managerial Skills
There are three skill sets that managers need to perform effectively.



Conceptual Skills,
Human Relations Skills, and
Technical Skills.
a) Conceptual Skill
Conceptual skill is the ability to visualize (see) the organization as a whole. It includes
Analytical, Creative and Initiative skills. It helps the manager to identify the causes of the
problems and not the symptoms. It helps him to solve the problems for the benefit of the
entire organization. It helps the manager to fix goals for the whole organization and to plan
for every situation.
b) Human Relations Skills
Human relations skills are also called Interpersonal skills. It is an ability to work with people. It
helps the managers to understand, communicate and work with others. It also helps the managers
to lead, motivate and develop team spirit. Human relations skills are required by all managers at
all levels of management. This is so, since all managers have to interact and work with people.
c) Technical Skills
A technical skill is the ability to perform the given job. Technical skills help the managers to use
different machines and tools. It also helps them to use various procedures and techniques. The
low-level managers require more technical skills. This is because they are incharge of the actual
operations.
Skill Type Needed by Manager Level
Management Challenges
Following are some challenges that the firms and organizations are facing.


Increasing number of global organizations.
Building competitive advantage through superior efficiency, quality, innovation, and
responsiveness.
 Increasing performance while remaining ethical managers.
 Managing an increasingly diverse work force.
 Using new technologies.
Building Blocks of Competitive Advantage
Following are some suggestions in order to gain competitive advantage.
a) Analyze your target market and identify your competition
Finding and understanding your target market is crucial – knowing who you are trying to sell to
means you will find the best way to reach and communicate with them, thereby increasing your
chances of making a sale. In order to determine who your target market is just answer the
following simple questions:




What am I selling?
Who will most likely buy or consume my product or service?
Which businesses are going after your same target market
How do they differentiate themselves from other companies in the industry?
b) Be speedy in responding
Often consumers will weigh up a number of different solutions offered by different companies
when considering the purchase of a product/service. Thus it is key that you respond to them in a
timely manner, ideally very soon after their initial enquiry – being the first out the door with a
follow-up mail or call to an initial query will reflect well on your business and your business’
name will likely stick in the mind of the prospect as a strong contender for them to purchase the
product/service from.
c) Appear more professional and engage
It can be intimidating when many of your competitors are from much bigger organizations which
may be longer established than your own. However there are also lots of advantages to being part
of a smaller business; you have fewer internal hurdles to clear when making changes to the
business and can offer better more hands-on customer service. Social media is a great way for
small businesses to engage with its customers. The Social Media Marketing Industry Report
found that SMEs benefit more than bigger companies from using social media when it comes to
making sales, generating leads and partnerships, increasing traffic to their website, subscriptions
and overall marketplace exposure, and cutting marketing costs.
d) Be prepared
Extensive research has found that one of the main ways small business owners can stay
competitive is by being prepared. Future thinking and proactive planning is critical. If the
economy were to face another downturn, your business needs to be prepared to weather market
weakness. Being prepared means taking action in case of a ‘rainy day’ such as reducing costs,
renegotiating contracts and operating leaner.
e) Improve your product/service offering
Small, subtle improvements to your product/service offering can make the world of difference.
You could try making your product rarer, more efficient or better quality than competitive
offerings. Depending on what it is you sell you can work to make it: fresher, quieter,
greener/more ethical, home-made. Having the stamp of approval or endorsement from a
respected local figure or organization is always good. Jump through the hoops to win the support
of a respected figure/organization and then stick their approval seal on every bit of marketing
material you've got.
f) Offer better customer service
This is a really easy one and also free, it’s also imperative for business success. Smile, be polite,
build relationships with your customers and respond to complaints quickly and calmly. It's that
simple. Following these simple but important steps will allow you to develop customer loyalty
and build a happy customer base that will likely refer you to others and be more than willing to
offer glowing testimonials for you. You’re also likely to get repeat business from satisfied
customers. Up-selling to existing customers comes at much lower cost than acquiring new
customers.
g) Offer online ordering where competitors don't
Convenience is a number one priority for Irish consumers these days. So let them buy your
products/enquire about your services while they're browsing the web at work - and get sales
coming in 24/7 too.
h) Make your website more efficient/reliable/quicker/simpler
Websites are very important these days. Get a good one, and you look professional and
encourage people to get on there all the time. Read these great tips on improving your Company
website.
i) Offer freebies/offers that competitors don't.
This can be something as simple as offering free postage on delivery of your product, or having a
cup of tea at the ready when a customer/prospect visits your office. It really does make all the
difference.
Lecture 3
The Evolution of Management Theory
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Scientific Management theory
The 4 Principles
Problems of Scientific Management
The Gilbreths
Bureaucratic Principles
Fayol’s Principles
The Evolution of Management Theory
Scientific Management
Scientific
Management
theory
arose
in
part
from
the
need
to
increase
productivity.
In
the
United
States
especially,
skilled
labor
was
in
short
supply
at
the
beginning
of
the
twenti
eth
century.
The
only
way
to
expand
productivity
was
to
raise
the
efficiency
of
workers.
Therefore,
Frederick
W.
Taylor,
Henry
L.
Gantt,
and
Frank
and
Lillian
Gilbreth
devised
the
body
of
principles
known
as
scientific
management
theory.
Scientific management was defined by Frederick Taylor, late 1800’s. He stressed on the
systematic study of the relationships between people and tasks to redesign the work for higher
efficiency.
Taylor
contended
that
the
success
of
these
principles
required
"a
complete
mental
revolut
ion"
on
the
part
of
management
and
labor.
Rather
than
quarrel
over
profits,
both
sides
s
hould
try
to
increase
production;
by
so
doing,
he
believed,
profits
would
rise
to
such
an
extent
that
labor
and
management
would
no
longer
have
to
fight
over
them.
Taylor believes increasing the efficiency of the workman scientifically would increase the not
only the opportunity for more work, but also the real wealth of the world, happiness, and all
manner of worthwhile improvements in the life of the working person. For Taylor, increased
workman output will result in improved quality of life.
The 4 Principles of scientific management




Replace rule-of-thumb work methods with methods based on a scientific study of the
tasks.
Scientifically select, train, and develop each worker rather than passively leaving them to
train themselves.
Cooperate with the workers to ensure that the scientifically developed methods are being
followed.
Divide work nearly equally between managers and workers, so that the managers apply
scientific management principles to planning the work and the workers actually perform
the tasks
Problems of Scientific Management
Taylor's Scientific Management is criticizedon the following main grounds:
a) Exploitation of Workers
Taylor's Scientific Management put unnecessary pressures on the employees to perform the work
faster. Importance was given to productivity and profitability. This resulted in exploitation of the
employees. Therefore, many employees joined trade unions. This also resulted in mistrust
between management and employees.
b) Problem of Unity of Command
Taylor used functional foremanship. So, the workers have to report to eight bosses. This breaks
the principle of unity of command, where the workers have to report to only one boss. Lack of
unity of command can create confusion and chaos in the organization.
c)
Mechanical Approach
Taylor's approach was a mechanical approach. He gave too much importance to efficiency. He
did not consider the human element. Taylor considered workers as robots, which could speed up
the work at any cost.
d) Problem of Separation of Planning from Doing
Taylor said to separate planning from doing. In reality, we cannot separate planning from doing.
The planners should also be engaged in doing, and then only they will be able to make realistic
plans for the organization.
e) Individualistic Approach
Taylor's scientific management gives too much importance to individual performance and not to
group performance. However, the success of an organization depends not only on individual
performance of workers, but also on group performance of workers.
f) Wrong Assumption
Taylor assumed that workers are motivated only by financial gains. However, in reality, workers
are motivated not financial incentives but also by social needs and personal egos.
g) Narrow Application
Taylor's scientific management has narrow application. It can be applied only when the
performance of the workers can be measured quantitatively. It can be applied only for factories
where the performance can be measured quantitatively. It cannot be used in the service sector
because in this sector the performance of a person cannot be measured quantitatively.
The Gilbreths
Frank and Lillian Gilbreth refined Taylor’s methods. These made many improvements to time
and motion studies.
Time and motion studies include
•
•
•
Break down each action into components.
Find better weach action to be more efficient.
Reorganize.
Administrative Management
Henry Fayol and Max Weber contributed in the administrative management. Both of these presented their
theories that helped managers in improving the efficiency and effectiveness of the mangers.
Henry Fayol
Fayol was a classical management theorist, widely regarded as the father of modern operational
management theory. His ideas are a fundamental part of modern management concepts. Fayol is often
compared to Frederick Winslow Taylor who developed Scientific Management.
Fayol's 14 Principles of Management
Fayol's principles are listed below:
1. Division of Work
When employees are specialized, output can increase because they become increasingly
skilled and efficient.
2. Authority
Managers must have the authority to give orders, but they must also keep in mind that
with authority comes with responsibility.
3. Discipline
Discipline must be upheld in organizations, but methods for doing so can vary.
4. Unity of Command
Employees should have only one direct supervisor.
5. Unity of Direction
Teams with the same objective should be working under the direction of one manager,
using one plan. This will ensure that action is properly coordinated.
6. Subordination of Individual Interests to the General Interest
The interests of one employee should not be allowed to become more important than
those of the group. This includes managers.
7. Remuneration
Employee satisfaction depends on fair remuneration for everyone. This includes financial
and non-financial compensation.
8. Centralization
This principle refers to how close employees are to the decision-making process. It is
important to aim for an appropriate balance.
9. Scalar Chain
Employees should be aware of where they stand in the organization's hierarchy, or chain
of command.
10. Order
The workplace facilities must be clean, tidy and safe for employees. Everything should
have its place.
11. Equity
Managers should be fair to staff at all times, both maintaining discipline as necessary and
acting with kindness where appropriate.
12. Stability of Tenure of Personnel
Managers should strive to minimize employee turnover. Personnel planning should be a
priority.
13. Initiative
Employees should be given the necessary level of freedom to create and carry out plans.
14.
Esprit de Corps
Organizations should strive to promote team spirit and unity.
Max Weber
Max Weber was a historian that wrote about the emergence of bureaucracy from more traditional
organizational forms (like feudalism) and it's rising pre-eminence in modern society. Scott
defines bureaucracy it as "the existence of a specialized administrative staff". According to
Weber, bureaucracy is a particular type of administrative structure developed through rationallegal authority.
Key points of Bureaucracy
a) Authority
Itis the power to hold people accountable for their actions.
Positions in the firm should be held based on performance not on the basis of social contacts.
b) Position duties are clearly identified.
People should know what is expected of them.
c) Lines of authority
Line of authority should be clearly identified. Workers know who reports to whom.
d) Rules, Standard Operating Procedures (SOPs), & Norms
Rules, Standard Operating Procedures (SOPs), & Normsused to determine how the firm
operates. Sometimes, these lead to “red-tape” and other problems.
Lecture 4
Behavioral Management
Focuses on the way a manager should personally manage to motivate employees.Mary Parker
Follett: an influential leader in early managerial theory, following are some important points of
the theory that were suggested by him.



Suggested workers help in analyzing their jobs for improvements.
The worker knows the best way to improve the job.
If workers have the knowledge of the task, then they should control the task.
Mayo's Hawthorne Experiments
George Elton Mayo was in charge of certain experiments on human behavior carried out at the
Hawthorne Works of the General Electric Company in Chicago between 1924 and 1927. His
research findings have contributed to organization development in terms of human relations and
motivation theory.
Flowing from the findings of these investigations he came to certain conclusions as follows:

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


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Work is a group activity.
The social world of the adult is primarily patterned about work activity.
The need for recognition, security and sense of belonging is more important in
determining workers' morale and productivity than the physical conditions under which
he works.
A complaint is not necessarily an objective recital of facts; it is commonly a symptom
manifesting disturbance of an individual's status position.
The worker is a person whose attitudes and effectiveness are conditioned by social
demands from both inside and outside the work plant.
Informal groups within the work plant exercise strong social controls over the work
habits and attitudes of the individual worker.
The change from an established society in the home to an adaptive society in the work
plant resulting from the use of new techniques tends continually to disrupt the social
organization of a work plant and industry generally.
Group collaboration does not occur by accident; it must be planned and developed. If
group collaboration is achieved the human relations within a work plant may reach a
cohesion which resists the disrupting effects of adaptive society.
Theory X and Y
McGregor developed a philosophical view of humankind with his Theory X and Theory Y in
1960. His work is based upon Maslow's Hierarchy of Needs, in that he grouped the hierarchy
into lower-order needs (Theory X) and higher-order needs (Theory Y). He suggested that
management could use either set of needs to motivate employees, but better results would be
gained by the use of Theory Y, rather than Theory X. These two opposing perceptions theorized
how people view human behavior at work and organizational life:
Theory X
With Theory X assumptions, management's role is to coerce and control employees.




People have an inherent dislike for work and will avoid it whenever possible.
People must be coerced, controlled, directed, or threatened with punishment in order
to get them to achieve the organizational objectives.
People prefer to be directed, do not want responsibility, and have little or no
ambition.
People seek security above all else.
Theory Y
With Theory Y assumptions, management's role is to develop the potential in employees and
help them to release that potential towards common goals.






Work is as natural as play and rest.
People will exercise self-direction if they are committed to the objectives (they are
NOT lazy).
Commitment to objectives is a function of the rewards associated with their
achievement.
People learn to accept and seek responsibility.
Creativity, ingenuity, and imagination are widely distributed among the population.
People are capable of using these abilities to solve an organizational problem.
People have potential.

Differences between theory X and Theory Y
Theory Z
Ouchi contrasted American types of organizations that were rooted with the United States'
tradition of individualism with Japanese organizations. this draws upon the Japanese heritage of
collectivism. Ouchi argued that an emerging management philosophy, which came to be called
Theory Z, would allow organizations to enjoy many of the advantages of both systems.
Characteristics of theory Z







Conesus decision making
Guarantee of life time employment
job security
slower more gradual promotions
Quality circles
establishment of strong bonds of responsibility between superiors and subordinates
fitting employees to their jobs
A holistic concern for the workers
Management Science
This area, also called operations research, applies mathematical models and statistical
techniques to management decision making. Some examples of management science would be:


Determining the critical path in a production line (this is the set of steps where any delays
will lead to delays in the entire production process)
Determining the percentage of items produced that have quality errors, and the types of
errors that are present
It uses rigorous quantitative techniques to maximize resources.
Some of them are as follows
Quantitative management
The quantitative approach to management incorporates many analytical and numeric techniques
into management methods. The goal is to have specific formulas that information can be plugged
into to provide the best answer to common management questions.
Operations Management
Operations management applies management science methods to improve the timing of
delivery and streamline production processes. Some examples of operations research would be:


Forecasting inventory and raw material needs for future periods
Determining the best location for a distribution center, to minimize shipping times to all
potential purchasers
Management Information Systems
Management information systems are computer-based systems that generate information useful
in managing a business from raw data. Some examples of management information systems
would be:

Reports giving trends in sales data, and showing seasonal variations
 Reports showing production defect rates, and comparing them to prior periods
Total quality management
It focuses on improved quality.Quality can be defined as the characteristics of a product that
bears on its ability to satisfy the stated or implied needs implied needs
Basic concepts of quality basic concepts of quality
Following are basic concepts of quality







Quality
Grade
Inspection
Quality control Quality control
Quality assurance
Quality management
ISO standards
Organization-Environment Theory
This theory considers relationships inside and outside the organization.
The environment consists of forces, conditions, and influences outside the organization.
Systems theory considers the impact of stages:
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Input: acquire external resources.
Conversion: inputs are processed into goods and services.
Output: finished goods are released into the environment.
Systems Considerations
An open system interacts with the environment.
A closed system is self-contained. The closed systems often undergo entropy and lose the ability to
control itself, and fail. Synergy is only possible in a coordinated system.
Structures
There are two types of structures.
Mechanistic, organic
Mechanistic
Authority is centralized at the top. (Theory X)
• Employees closely monitored and managed.
• Very efficient in a stable environment.
Organic
Authority is decentralized throughout employees. (Theory Y)
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Much looser control than mechanistic.
Managers can react quickly to changing environment.
Contingency Theory
This theory assumes there is no one best way to manage.
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The environment impacts the organization and managers must be flexible to react to
environmental changes.
• The way the organization is designed, control systems selected, depend on the
environment.
Technological environments change rapidly, so must be aware of these changes and should be
well equipped.
Lecture 5
Organizational Environment
Organizational Environment is the set of forces surrounding an organization. These forces may
affect its operation and access to scarce resources.
External Assessment
The purpose of an external audit is to develop a finite list of opportunities that could benefit a
firm and avoid threats. Also, focuses on identifying and evaluating trends and events beyond the
control of a single firm. Following are some reasons of it.
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Increased foreign competition
Population shifts
Demographics (e.g., aging population)
Information technology
The factors that could influence a firm and its strategy could be broadly divided into the following
categories
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Economic Forces
Social, Cultural, Demographic, and environmental forces
Political, governmental, and legal forces
Technological forces
Competitive Forces
Environmental scanning or external assessment is a step where a firm identifies opportunities that could
benefit it and threats that it should avoid. The Managers then formulate strategies To Take advantage of
opportunities and to avoid/reduce impact of threats
Process of External Audit
Step 1
The process of conducting external environment assessment starts with collating information and
intelligence on factors affecting the external environment as highlighted above:
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economic,
social,
political,
technological factors etc
Social
Cultural
Demographic
Competitive Intelligence
A broad definition of competitive intelligence is the action of defining, gathering, analyzing, and
distributing intelligence about products, customers, competitors and any aspect of the
environment needed to support executives and managers in making strategic decisions for an
organization.
Step 2
Designated individuals will then monitor these factors though various sources like magazines, trade
journal, publications, newspapers etc. They will then submit periodic report to the top management which
provides them with continuous strategic information about the environment.
Step 3
Once information is gathered, there will be series of meetings which will assess and evaluate the
opportunities and threats that are present in the market. This assessment will help firm’s align its future
strategies with the result of this assessment.
Step 4
Key external are achieved i.e. long term and annual objectives, measurable goals
Sources of information
Following are the sources of information
 Internet
 Libraries
 Suppliers
 Distributors
 Customers
 competitors
There are some external factors that influence the organization. Among them are
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Market share
Breadth of competing products
World economies
Price competitiveness
Technological advancements
Interest rates
Key External Factors
The following discusses the key factors covered by an external assessment
Political Factors
This exercise dissects the political, governmental, and legal aspects of a particular business. Both
local and global environments are studied because federal, state, local, and foreign governments
are major regulators, deregulators, subsidizers, employers, and customers of organizations. The
growing interdependence among economies, markets, governments, and organizations
underscores the importance of considering the political variables affecting the conception,
development, and operation of any business.
Economic Factors
Economic analysis, a comprehensive study of national, regional, and global economic
performance and trends, represents a highly important phase of strategy development for
planned, start-up, and growing businesses. Economic factors have direct impact on the potential
attractiveness of various business ventures.
Economic analysis yields indications on numerous variables such as: shifts in nature of economy
(e.g. US shifting to a service economy), availability of credit, level of disposable income,
spending propensity of people, interest rates, inflation rates, government deficits, gross domestic
product trends, consumption patterns, unemployment trends, foreign currency fluctuations, stock
market trends, demand shifts in various products and services in different locations, import and
export trade, price indexes, monetary policies, fiscal policies, and tax rates, including economic
policies of other countries and the European Economic Community.
Social Factors
The social component of strategic analysis relates to assessing the social, cultural, demographic,
and environmental profiles of addressable markets.
In the U.S., for instance, cultural, demographic, and environmental trends are shaping the way
Americans live, work, produce, and consume. America is an aging society, and getting less
Caucasian in racial mix.
Technological Factors
Technology is a business enabler that has revolutionary impact on the actual conduct of business.
It contributes to achieving desired business productivity and efficiency. The Internet serves as a
good example; what used to be impossibility in instantaneous global communication has become
a cold reality and an urgent necessity for every business in order to succeed.
Competitive Factors
An equally important part of external assessment is identifying rival firms and ascertaining their
strengths, weaknesses, capabilities, opportunities, threats, objectives, and strategies. Good
competitive intelligence in business, like in the military, remains to be one of the key factors for
success. Weaknesses of competitors can signify external opportunities, while major competitive
strengths can mean key external threats.
Key opportunities & key threats
• Antitrust legislation (Microsoft)
• Tax rates
• Lobbying efforts
• Patent laws
There is always change in government regulations which create opportunities and threats also.
For example, anti-trust legislation where there is an effort to ban the monopolies. Some
organizations think that monopolies should be banned. Similarly, tax rates and lobbying efforts
for special, lobbying entries are those efforts which are made in order to pass special resolution
laws of their own choice. Patents law and intellectual are also relates to the same stories.
Lecture 6
Economic Forces
Monitor Key Economic Variables
Availability of credit
It is defined as the unused portion of an open line of credit, such as a credit card or a revolving loan
(such as a home-equity line of credit). Available credit is the difference between the amount of the
credit line or limit, and the amount that has already been borrowed.
Level of disposable income:
The amount of money that households have available for spending and saving after income taxes
have been accounted for.
Interest rates
Interest is a fee paid by a borrower of assets to the owner as a form of compensation for the use
of the assets.
Inflation rates
Inflation is a rise in the general level of prices of goods and services in an economy over a period
of time.
Federal government budget deficits
A deficit is an excess of expenditures over revenue in a given time period. The Federal
government budget deficits is the difference between government revenues (e.g., tax) and
spending
Consumption patterns
It is defined as the combination of qualities, quantities, acts and tendencies characterizing a community or
human group's use of resources for survival, comfort and enjoyment.
Unemployment trends
Unemployment occurs when a person who is actively searching for employment is unable to find
work. Unemployment is often used as a measure of the health of the economy. The most
frequently cited measure of unemployment is the unemployment rate. This is the number of
unemployed persons divided by the number of people in the labor force.
Unemployment types and causes
There are several types of unemployment, each one defined in terms of cause and severity.
Cyclical
Cyclical unemployment exists when individuals lose their jobs as a result of a downturn in
aggregate demand (AD).If the decline in aggregate demand is persistent, and the unemployment
long-term, it is called either demand deficient, general
Structural
Structural unemployment occurs when certain industries decline because of long term changes in
market conditions. For example, over the last 20 years UK motor vehicle production has declined
while car production in the Far East has increased, creating structurally unemployed car
workers. Globalization is an increasingly significant cause of structural unemployment in many
countries.
Regional
When structural unemployment affects local areas of an economy, it is called ‘regional’
unemployment. For example, unemployed coal miners in South Wales and ship workers in the
North east add to regional unemployment in these areas.
Classical
Classical unemployment is caused when wages are ‘too’ high. This explanation of
unemployment dominated economic theory before the 1930s, when workers themselves were
blamed for not accepting lower wages, or for asking for too high wages. Classical unemployment
is also called real wage unemployment.
Seasonal
Seasonal unemployment exists because certain industries only produce or distribute their
products at certain times of the year. Industries where seasonal unemployment is common
include farming, tourism, and construction.
Frictional
Frictional unemployment, also called search unemployment, occurs when workers lose their
current job and are in the process of finding another one. There may be little that can be done to
reduce this type of unemployment, other than provide better information to reduce the search
time. This suggests that full employment is impossible at any one time because some workers
will always be in the process of changing jobs.
Voluntary
Voluntary unemployment is defined as a situation when workers choose not to work at the
current equilibrium wage rate. For one reason or another, workers may elect not to participate in
the labor market. There are several reasons for the existence of voluntary unemployment
including excessively generous welfare benefits and high rates of income tax. Voluntary
unemployment is likely to occur when the equilibrium wage rate is below the wage necessary to
encourage individuals to supply their labor.
Worker productivity levels
Workforce productivity is the amount of goods and services that a worker produces in a given
amount of time. Factors affecting labor productivity:
 Individual attitudinal
 Motivational and behavioral factors
 Technological factors
Stock market trends
Market trends refer to the general movement of an investment market. People involved with
stock markets attempt to identify the current type of movement that is taking place as well as
project how long the current movement or trend is likely to continue. Determining what type of
investments to buy and sell is greatly influenced by accurately assessing and projecting trends.
Foreign countries’ economic conditions
It is termed as the state of the economy in a country or region. Economic conditions change over
time in line with the economic and business cycle, as an economy goes through expansion and
contraction. Economic conditions are considered to be sound or positive when an economy is
expanding, and are considered to be adverse or negative when an economy is contracting.
Income differences by region/customer
It is defined as the unequal distribution of household or individual income across the various
participants in an economy. Income inequality is often presented as the percentage of income to a
percentage of population.
Social, Cultural, Demographic & Environmental Forces
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Social, cultural, demographic, and environmental changes have a major impact on
virtually all products, services, markets, and customers.
 Social, cultural, demographic, and environmental trends are shaping the way people live,
work, produce, and consume.
 New trends are creating a different type
of
consumer and, consequently, a need for different products, services, and strategies.
All these forces have impact on
 Products
 Services
 Markets
 customers
There are changing trends in the economy. These are due to several factors. Among them are
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More educated consumers
Population aging
Minorities more influential
 Local rather than federal solutions
 Fixation with youth decreasing
 Hispanics increase to 15% by 2021
 African Americans increase to 14% by 2021
Variables for economic change
Following are some variables affecting the economy
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Number of special-interest groups
Number of marriages
Number of divorces
Number of births
Number of deaths
Immigration & emigration rates
Life expectancy rates
Per capita income
Attitudes toward business
Average disposable income
Buying habits
Attitudes toward saving
Racial equality
Average level of education
Government regulation
Attitudes toward customer service
Attitudes toward product quality
Energy conservation
Social responsibility
Value placed on leisure time
Recycling
Waste management
Air & water pollution
Ozone depletion
Endangered species
Lecture 7
Key forces affecting the organization working
Technological Forces
 Revolutionary technological forces
 Internet changes the nature of opportunities and threats
Competitive Forces
It means collection and evaluation of information of competitors. This is done so that several
strategies could be done in order to strengthen the organization.
Political Forces
Businesses can be affected by many aspects of government policy. In particular, all businesses must
comply with the law. They must also consider the impact of any forthcoming legislation on their
operations. This may require taking action before the legislation comes into effect.
Political, Governmental, and Legal Factors Represent Key Forces
Federal, state, local, and foreign governments are major regulators, deregulators, subsidizers,
employers, and customers of organizations.
Political, governmental, and legal factors therefore can represent key opportunities or threats
for both small and large organizations.For industries and firms that depend heavily on governme
nt contracts or subsidies, political forecasts can be the most important part of an external audit.
Globalization of Industry
Globalization of Industry is due to several factors. Among them are
 Worldwide trend toward similar consumption patterns
 Global buyers & sellers
 E-commerce
 Instant transmission of money & information across continents
Key Political, govt., & legal variables
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Government regulation/deregulation
Tax law changes
Special tariffs
Political Action Committees (PACs)
Voter participation rates
Number of patents
Changes in patent laws
Environmental protection laws
Equal employment legislation
Import-export regulations
Political conditions in other countries
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Government budgets
World oil, currency, & labor markets
Location and severity of terrorist activities
Technological Forces
Revolutionary technological forces have profound impact on organizations. For example
 Internet
 Semiconductors
 XML technologies
 UWB communications
Internet has deeper affect on the market. Some of them are as follows
 Alters life cycle of products
 Increases speed of distribution
 Creates new products and services
 Eases limitations of geographic markets
 Alters economies of scale
 Changes entry barriers
Competitive Forces
Competitive forces are the forces in the marketing environment that are based on competition
among customers and competition with other firms. As the organization looks out at its business
environment, competition is a critical factor. Who is buying goods and services and who is
providing them to those customers? Are there many competitors or are there just a few?
Objective of identifying competitive forces is to identify rival firms
 Strengths
 Weaknesses
 Capabilities
 Opportunities
 Threats
 Objectives
 Strategies
Key Questions about Competitors
During the analysis of competitors, following questions about competitors are analyzed.
 Their strengths
 Their weaknesses
 Their objectives and strategies
 Their responses to all external variables (e.g. social, political, demographic, etc.)
Also, comparison is made on the basis of following points.
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Our vulnerability to successful strategic counterattack
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Our product and service positioning relative to competitors
Entry and exit of firms in the industry
Key factors for our current position in industry
Sales and profit rankings of competitors over time
Nature of supplier and distributor relationships
The threat of substitute products or services
7 Characteristics of most competitive U.S. firms
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Market share matters
Understand what business you are in
Broke or not, fix it
Innovate or evaporate
Acquisition is essential to growth
People make a difference
No substitute for quality
Lecture 8
Decision making
Decisions in response to opportunities
In this type of decision, managers respond to ways to improve organizational performance.
Decisions in response to threats
In this type of decision, occurs when managers are impacted by adverse events to the
organization.
Types of Decision Making
There are two basic types of decisions, programmed decisions, Non-programmed decisions
Programmed decisions
Programmed decisions are routine and repetitive, and the organization typically develops specific
ways to handle them. A programmed decision might involve determining how products will be
arranged on the shelves of a supermarket. For this kind of routine, repetitive problem, standard
arrangement decisions are typically made according to established management guidelines.
Non-programmed decisions
Non programmed decisions are typically one shot decisions that are usually less structured than
programmed decision.
Classical model of decision making
It is a prescriptive model that tells how the decision should be made.
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It assumes that managers have access to all the information needed to reach a decision.
Managers can then make the optimum decision by easily ranking their own preferences
among alternatives.
Unfortunately, mangers often do not have all (or even most) required information.
The Administrative Model
Administrative Model of decision making challenged the classical assumptions that managers
have and process all the information. As a result, decision making is risky.
This is due to following two factors.
Bounded rationality
There are a large number of alternatives and information is vast so that managers cannot consider
it all.
Incomplete information
Most managers do not see all alternatives and decide based on incomplete information.
Why Information is Incomplete
This is due to following three reasons.
 Uncertainty& risk
 AmbiguousInformation
 Time constraints &Information costs
Issues of incomplete information
Risk
Managers know a given outcome can fail or succeed and probabilities can be assigned.
Uncertainty
Probabilities cannot be given for outcomes and the future is unknown. Many decision outcomes
are not known such as a new product introduction.
Ambiguous information
Ambiguous information is the Information whose meaning is not clear.Information can be
interpreted in different ways.
Time constraints and Information costs
Managers do not have the time or money to search for all alternatives.This leads the manager to
again decide based on incomplete information.
Satisfying
Managers explore a limited number of options and choose an acceptable decision rather than the optimum
decision.This is the response of managers when dealing with incomplete information.Managers assume
that the limited options they examine represent all options.
Steps of decision making
Step 1
Identifying/clarifying the decision to be made
If the decision has not yet been isolated, it should be identified as a first step. Sometimes the
decision to be made will have been presented to the decision maker. In those situations, Step 1
calls for the clarification of what the decision actually entails.
Step 2
Identifying possible decision options
The next step requires the decision maker to spell out, as clearly as possible, just what the
decision alternatives really are. For instance, if one were attempting to buy a bicycle, do the
decision options only consist of the different types of bicycles, or is another option to refrain
from buying a bicycle altogether?
Step 3
Gathering/processing information
Next, the decision maker collects or processes information that can help guide the decision. If
such information is already at hand, then it simply needs to be processed; that is, studied and
understood by the decision maker. If there is no relevant information available, or if there is
insufficient information, then such information must be collected so it can be processed.
Step 4
Making/implementing the decision
After the information has been considered according to its relevance and significance, a decision
based on that information should be made and, thereafter, implemented.
Step 5
Evaluating the decision
In recognition of the fact that not all of one's decisions are likely to be defensible, the final step
in the five-step decision making process is to determine whether the decision was appropriate.
Ordinarily, this will be done by ascertaining the decision's consequences.
Lecture 9
Cognitive Biases
Cognitive Biases suggests decision makers use heuristics to deal with bounded rationality.A heuristic is a
rule of thumb to deal with complex situations.If the heuristic are wrong, however, then poor decisions
result from its use.Systematic errors can result from use of an incorrect heuristic.These errors will appear
over and over since the rule used to make decision is flawed.
Types of Cognitive Biases
1. Prior hypothesis bias
In this type of cognitive biases, manager allows strong prior beliefs about a relationship between
variables and makes decisions based on these beliefs even when evidence shows they are wrong.
2. Representativeness
Decision maker incorrectly generalizes a decision from a small sample or one incident.
3. Illusion of control
Manager over-estimates their ability to control events.
4. Escalating commitment
Manager has already committed considerable resource to project and then commits more even
after feedback indicates problems.
Improved Group Decision Making
Devil’s Advocacy
One member of the group acts as the devil’s advocate and critiques the way the group identified
alternatives. One member points out problems with the alternative selection.
Dialectical inquiry
Two different groups are assigned to the problem and each group evaluates the other group’s alternatives.
Top managers then hear each group present their alternatives and each group can critique the other.
Promote diversity
It promotes diversity by increasing the diversity in a group, a wider set of alternatives may be considered.
Organizational Learning & Creativity
Organizational Learning
Managers seek to improve member’s ability to understand the organization and environment so as to raise
effectiveness.
The learning organization: managers try to improve the people’s ability to behave creatively to maximize
organizational learning
Creativity
Creativity is the ability of the decision maker to discover novel ideas leading to a feasible course of
action.A creative management staff and employees are the key to the learning organization.
Senge’s Learning Organization Principles
Senge suggests top managers follow several steps to build in learning:
Personal Master
Managers empower employees and allow them to create and explore.
Mental Models
Mental ModelsChallenge employees to find new, better methods to perform a task.
Team Learning
Team Learningis more important than individual learning since most decisions are made in groups.
Build a Shared Vision
A people share a common mental model of the firm to evaluate opportunities.
Systems Thinking
Systems thinkingknow that actions in one area of the firm impact all others.
Individual Creativity
Organizations can build an environment supportive of creativity.Many of these issues are the
same as for the learning organization.Managers must provide employees with the ability to take
risks.If people take risks, they will occasionally fail. Thus, to build creativity, periodic failures
must be rewarded.This idea is hard to accept for some managers.
Building Group Creativity
Following are the techniques to increase group creativity.
1. Brainstorming
Managers meet face-to-face to generate and debate many alternatives. It has following characters.
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Group members are not allowed to evaluate alternatives until all alternatives are listed.
Be creative and radical in stating alternatives.
When all are listed, then the pros and cons of each are discussed and a short list created.
Production blocking
Production blocking is a potential problem with brainstorming.Members cannot absorb all information
being presented during the session and can forget their own alternatives.
2. Nominal Group Technique
It provides a more structured way to generate alternatives in writing. Following are the important points
of this technique.
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It avoids the production blocking problem.
Similar to brainstorming except that each member is given time to first write down all
alternatives he or she would suggest.
Alternatives are then read aloud without discussion until all have been listed.
Then discussion occurs and alternatives are ranked.
3. Delphi Technique
It provides for a written format without having all managers meet face-to-face. In this technique
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Problem is distributed in written form to managers who then generate written
alternatives.
Responses are received and summarized by top managers.
These results are sent back to participants for feedback, and ranking.
The process continues until consensus is reached.
Lecture 10
Planning
Planning is the deliberate social or organizational activity of developing an optimal strategy of
future action to achieve a desired set of goals, for solving novel problems in complex contexts,
and attended by the power and intention to commit resources and to act as necessary to
implement the chosen strategy
Strategy
A plan for managing a company by using speed and agility to mitigate the effect of its
competitors, as well as to anticipate and take advantage of changes in the market through new
product offerings.
Three Stages of the Planning Process
1. Determining the Organization’s mission and goals
Organizational mission is defined in the mission statement which is a broad declaration of the
overriding purpose.The mission statement identifies product, customers and how the firm differs
from competitors.
2. Strategy formulation
Managers analyze current situation and develop strategies needed to achieve the mission.
3. Implementing strategy
Managers must decide how to allocate resources between groups to ensure the strategy is
achieved.
Planning Levels
Corporate-level
At this level, decisions are taken by top managers.
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Considers on which businesses or markets to be in.
Provides a framework for all other planning.
Business-level
It details divisional long-term goals and structure. Following are some important points of the business
level planning
 Identifies how this business meets corporate goals.
 Shows how the business will compete in market.
Functional-level
At functional level, actions taken by managers in departments of manufacturing, marketing,
etc.These plans state exactly how business-level strategies are accomplished.
Characteristics of Plans
Time horizon
It refers to how far in the future the plan applies.
Long-term plans are usually 5 years or more.
Intermediate-term plans are 1 to 5 years.Corporate and business level plans specify long and
intermediate term.
Short-term plans are less than 1 year.Functional plans focus on short to intermediate term.
Types of Plans
1. Standing plans
These plans are for programmed decisions.
Managers develop policies, rules, and standard operating procedures (SOP).Policies are general
guides to action.Rules are a specific guide to action.
2. Single-use plans
Single use plans are developed for a one-time, non-programmed issue. Usually consist of
programs and projects.
Who Plans?
Corporate planning
Corporate level planning is done by top managers.Also approve business and functional level
plans.Top managers should seek input on corporate level issues from all management levels.
Business and functional planning
Business and functional planning is done by divisional and functional managers.Both
management levels should also seek information from other levels.Responsibility for specific
planning may lie at a given level, but all managers should be involved.
Why Planning is Important
Planning determines where the organization is now and where it will be in the future. Good planning
provides:
Participation: all managers are involved in setting future goals.
Sense of direction & purpose: Planning sets goals and strategies for all managers.
Coordination: Plans provide all parts of the firm with understanding about how their systems fit
with the whole.
Control: Plans specify who is in charge of accomplishing a goal.
Scenario Planning
Scenario Planning generates several forecasts of different future conditions and analyzes how to
effectively respond to them.Planning seeks to prepare for the future, but the future is
unknown.By generating multiple possible “futures” we can see how our plans might work in
each. It allows the firm to prepare for possible surprises.Scenario planning is a learning tool to
improve planning results.
Lecture 11
Planning process
This is the first step of the planning process and is accomplished by defining the business,
establishing major goals.
Defining the business seeks to identify our customer and the needs we can and should satisfy.
This also pinpoints competitors.
Establishing major goals
Establishing major goals states that who will compete in the business. It should stretch the
organization to new heights.Goals must also be realistic and have a time period in which they are
achieved.
Mission Statements
A short sentence or paragraph used by a company to explain, in simple and concise terms, its
purposes for being. These statements serve a dual purpose by helping employees to remain
focused on the tasks at hand, as well as encouraging them to find innovative ways of moving
towards an increasingly productive achievement of company goals.
For example mission statement of AT&T is “We are dedicated to being the world’s best at bringing
people together -- giving them easy access to each other and to the information and services they want
and need -- anytime, anywhere”
Strategy Formulation
Managers analyze the current situation to develop strategies achieving the mission.
SWOT analysis
It describes Organizational Strengths, Weaknesses, Opportunities and Threats.
Strengths
Manufacturing ability, marketing skills etc
Weaknesses
High labor turnover, weak financials etc
Opportunities
New markets
Threats
Economic recession, competitors
Corporate-Level Strategies
In corporate level strategies, corporations concentrate in single business. For example
McDonalds focuses in the fast food business.
Diversification
It is defined as the process in which organization moves into new businesses and services.
Related diversification
In related diversification, firm diversifies in similar areas to build upon existing divisions.
Synergy
Synergy means two divisions work together to obtain more than the sum of each separately.
Unrelated diversification
It is defined as to buy business in new areas. Firms build a portfolio of unrelated firms to reduce
risk or trouble in one industry. It is very hard to manage.
International Strategy
International strategy means analyzing that to what extent do we customize products and marketing
for different national conditions?
Global strategy
In global strategy, a single, standard product and marketing approach is used in all
countries.Standardization provides for lower cost. It should be kept in mind that ignores national
differences that others can address.
Multi-domestic strategy
Multi-domestic strategy products and marketing are customized for each country of
operation.Customization provides for higher costs. It embraces national differences and depends
on them for success
Vertical Integration
When the firm is doing well, managers can add more value by producing its own inputs or
distributing its products.
Backward vertical integration
The firm produces its own inputs.McDonalds grows its own potatoes. Can lower the cost of
supplies
Business Strategies
The definition of business strategy is a long term plan of action designed to achieve a particular
goal or set of goals or objectives. Strategy is management's game plan for strengthening the
performance of the enterprise.
Business strategies are developed for cost minimization and differentiation.
Low-cost
Low cost is achieved to gain a competitive advantage by driving down organizational
costs.Managers manufacture at lower cost, reduce waste.Lower costs than competition mean
lower prices.
Differentiation
Differentiation is done to gain a competitive advantage by making your products different from
competitors.Differentiation must be valued by the customer.Successful differentiation allows you
to charge more for a product.
Firms also choose to serve the entire market or focus on a few segments.
Focused low-cost
Try to serve one segment of the market but be the lowest cost in that segment.
For example Cott Company seeks to achieve this in large retail chains.
Focused differentiated
Firm again seeks to focus on one market segment but is the most differentiated in that
segment.BMW provides a good example
Functional-level Strategies
Functional-level Strategies Seek to have each department adds value to a good or service.
Marketing, service, production all adds value to a good or service.Value is added in two ways:
1. Lower the operational costs of providing the value in products.
2. Add new value to the product by differentiating.
Goals for successful functional strategies
Following are the goals for successful functional strategies.
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Attain superiorefficiency the measure of outputs for a given unit of input.
Attain superior quality of products that reliably do the job they were designed for.
Attain superior innovation for new, novel features about the product or process.
Attain superior responsiveness to customers to know the customer needs and fill them.
Lecture 12
Porter’s five-force model
Porters’ model of competitive forces assumes that there are five competitive forces that identify
the competitive power in a business situation. These five competitive forces identified by the
Michael Porter are:
 Threat of substitute products
 Threat of new entrants
 Intense rivalry among existing players
 Bargaining power of suppliers
 Bargaining power of Buyers
Threat of substitute products
Threat of substitute products means how easily your customers can switch to your competitors
product. Threat of substitute is high when:
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There are many substitute products available
Customer can easily find the product or service that you’re offering at the same or less
price
 Quality of the competitors’ product is better
 Substitute product is by a company earning high profits so can reduce prices to the lowest
level.
In the above situations, Customer can easily switch to substitute products. So substitutes are a
threat to your company. When there are actual and potential substitute products available then
segment is unattractive. Profits and prices are affected by substitutes so; there is need to closely
monitor price trends. In substitute industries, if competition rises or technology modernizes then
prices and profits decline.
Threat of new entrants
A new entry of a competitor into your market also weakens your power. Threat of new entry
depends upon entry and exit barriers. Threat of new entry is high when:
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Capital requirements to start the business are less
Few economies of scale are in place
Customers can easily switch (low switching cost)
Your key technology is not hard to acquire or isn’t protected well
Your product is not differentiated
There is variation in attractiveness of segment depending upon entry and exit barriers. That
segment is more attractive which has high entry barriers and low exit barriers.Some new firms
enter into industry and low performing companies leave the market easily. When both entry and
exit barriers are high then profit margin is also high but companies face more risk because
companies with poor performance stay in and fight it out. When these barriers are low then firms
easily enter and exit the industry, profit is low. The worst condition is when entry barriers are
low and exit barriers are high then in good times firms enter and it became very difficult to exit
in bad times.
Industry Rivalry
Industry rivalry means the intensity of competition among the existing competitors in the market.
Intensity of rivalry depends on the number of competitors and their capabilities. Industry rivalry
is high when:
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There are number of small or equal competitors and less when there’s a clear market
leader.
Customers have low switching costs
Industry is growing
Exit barriers are high and rivals stay and compete
Fixed cost are high resulting huge production and reduction in prices
These situations make the reasons for
 advertising wars
 Price wars
 Modifications
 Ultimately costs increase and it is difficult to compete.
Bargaining power of suppliers
Bargaining Power of supplier means how strong is the position of a seller. How much your
supplier has control over increasing the Price of supplies? Suppliers are more powerful when
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Suppliers are concentrated and well organized
a few substitutes available to supplies
Their product is most effective or unique
Switching cost, from one suppliers to another, is high
You are not an important customer to Supplier
When suppliers have more control over supplies and its prices that segment is less attractive. It is
best way to make win-win relation with suppliers. It’s good idea to have multi-sources of
supply.
Bargaining power of Buyers
Bargaining Power of Buyers means, how much control the buyers have to drive down your
products price, Can they work together in ordering large volumes? Buyers have more bargaining
power when:
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Few buyers chasing too many goods
Buyer purchases in bulk quantities
Product is not differentiated
Buyer’s cost of switching to a competitors’ product is low
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Shopping cost is low
Buyers are price sensitive
Credible Threat of integration
Buyer’s bargaining power may be lowered down by offering differentiated product. If you’re
serving a few but huge quantity ordering buyers, then they have the power to dictate you.
Lecture 13
How to gain competitive advantage
Following are the four important ways to gain competitive advantage.
Cost Leadership
Cost leadership is the first competitive advantage businesses often attempt to gain. Cost
leadership as an advantage occurs when a business is able to offer the same quality product as its
competitors, but at a lower price. Cost leadership can occur when a company finds ways to
produce goods at a lower cost through the perfection of production methods or by the utilization
of resources in a more efficient manner than competitors.
Differentiation
Differentiation is a second strategy that businesses often use to set themselves apart from
competitors. In a differentiation strategy, low cost is only one of many possible factors that may
set aside a business from others. Businesses that differentiate themselves typically look for one
or more marketable attributes that they have that can set them apart from their competitors.
Defensive Strategies
Another way for a business to gain a competitive advantage is to utilize a defensive strategy. The
advantage gained by this type of strategy is that it allows the business to further distance itself
from its competition by, in some sense, maintaining a competitive advantage it has gained.
Therefore, this strategy is closely related to differentiation and cost leadership because it is a
method used by businesses to keep those advantages in place once they have been attained.
Alliances
Competitive advantages can also be gained by businesses that seek strategic alliances with other
businesses in related industries or within the same industry. Businesses have to be careful not to
cross the line between alliances and collusion, though. Collusion occurs when businesses within
the same industry work together to artificially control prices.
Value-chain management
Values chain management is the development of a set of functional-level strategies that support a
company’s business-level strategy and strengthen its competitive advantage. Good value-chain
management requires marketing managers to focus on defining the company business in terms of
customer needs.
Customers Wants
Although specifying exactly what customers want is not possible because their needs vary from
product to product, it is possible to identify some general product attributes or qualities that most
customers prefer:
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A lower price to a higher price
High-quality products
 Quick service and good after-sales service
 Products with many useful or valuable features
 Products that are tailored to their unique needs
Customer relationship management
Customer relationship management is thetechnique that uses IT to develop an ongoing
relationship with customers to maximize the value an organization can deliver to them over time
Impact of Increased Quality on Organizational Performance
An organization able to provide, for the same price, a product of higher quality than a
competitor’s product is serving customers better. Higher product quality can increase efficiency
Total quality management (TQM)
Total quality management focuses on improving the quality of an organization’s products and
stresses that all of an organization’s value-chain activities should be directedtoward this goal
Process of total quality management
1. Identify what customers want from the good or service that the company provides
2. Identify what the company actually provides to customers
3. Identify the gap that exists between what the customers want and what they get (quality
gap)
4. Formulate a plan for closing the quality gap
Three Facilities Layouts
Facility layout means planning for the location of all machines, utilities, employee workstations,
customer service areas, material storage areas, aisles, rest rooms, lunchrooms, drinking
fountains, internal walls, offices, and computer rooms, and for the flow patterns of materials and
people around, into, and within buildings.
Layout for manufacturing facilities
There are five basic types of layouts for manufacturing facilities; process, product, cellular
manufacturing (CM), fixed position and Hybrid Layouts:
1. Process layouts (functional layouts, or job shops)
These are designed to accommodate variety in product designs and small batches .Process layout
use general –purpose machines that can be changed over rapidly to new operations for different
product designs. These machines are usually arranged according to type of process being
performed.
For example, all machining would be in one department, all assembly in anther department, and
all painting in anther department, the materials –handling equipment generally consists of forklift
trucks and other mobile vehicles that allow for the variety of paths followed through the facility
by the products produced. The workers must change and adapt quickly to the multitude of
operations to be performed on each unique batch of products being produced. These workers
must be highly skilled & require intensive job instructions and technical supervision.
Process layout require ongoing (continues) planning, scheduling, and controlling functions to
ensure an optimum amount of work in each department and each workstation. Inventory in
process is large; the products are in the production system for relatively long period of time.
2-prduct layout (production lines or assembly lines)
These are designed to accommodate only a few product designs. The machinery or equipment’s
is arranged to ensure continuous flow of material in an orderly mode throughout the plant.
Examples of product layout, Paper mills, dairies, cement factories, and automotive assembly
plants, Auto manufacturing.
Product layout use specialized machines that are set up once to perform a specific operation for a
long period of time on one product, this machinerequires great expense and long down timesTo
change overto a new product design. Companies that produce only a few product types often set
up a different production line for each product type. The facility layout would allow for the
different product lines to separate from each other.
Workers repeatedly perform a narrow range of activities on only a few product designs&
required a small rate of skill, training and supervision.
The planning and scheduling activities are complex, they are not ongoing (continuous), rather
planning & scheduling tend to be done intermittently as product changeovers occur.The primary
objective is to minimize material handling cost by properly arranging the equipment in the
processing sequence. Many types of flow are possible.
3- Cellular manufacturing layouts (CM)
In this layout, machines are grouped into cells, and the cells function somewhat like a product
layout island within a larger shop or process layout. Each cell in a CM layout is formed to
produce a single parts family (a few parts all with common characteristics), they require the same
machines and have similar machine settings. Although the cell layout can take on many different
forms, the flow of parts more likes a product layout than a job shop.CM layout would be attempted for these reasons:
1-Machine changeovers are simplified.
2- Training periods for workers are shortened.
3-Materials-handling costs are reduced.
4- Parts can be made faster and shipped more quickly.
5- Requiredless in-process inventory.
6- Production is easier to automate.
In developing a CM layout, the first step is the cell formation decision, the initial decision about
which production machines and which parts to group into a cell. Next, the machines are arranged
within each cell.
4- Fixed-Position Layouts
Some manufacturing and construction firms use a layout for arranging work that locates the
product in a fixed position and transports workers, materials, machines, and subcontractors to
and from the product. Figure 5.6 demonstrates this type of layout. Missile assembly, large
aircraft assembly, ship construction, and bridge construction are examples of Fixed-position
layouts. Fixed-position layouts are used when a product is very bulky, large, heavy, or fragile.
The fixed-position nature of the layout minimizes the amount of product movement
required.Examples of fixed-position layout include larger shipbuilding and airplane
manufacturing.
5- Hybrid Layouts
Most manufacturing facilities use a combination of layout types) Hybrid Layouts .The
departments are arranged according to the types of processes but the products flow through on a
product layout. As another example of a hybrid layout consider the final assembly of Boeing's
commercial aircraft (i.e., models 737, 747, 757, 767, and 777). During final assembly, each
aircraft unit is located in a fixed-position assembly bay. However, every two or three days each
aircraft unit is rolled out of its bay and pushed into the next assembly bay, where different
assembly tasks are performed. So, even though an aircraft is assembled for two or three days at a
time in a fixed position, it passes through six or eight different assembly bays in a product layout
fashion. It is important to understand the characteristics, advantages, and disadvantages of each
basic type of layout.
Just-in-Time Inventory and Efficiency
Just-in-time (JIT) inventory system gets components to the assembly line just as they are needed
to drive down costs. Major cost savings can result from increasing inventory turnover and
reducing inventory holding costs
Process Reengineering
Process Reengineering is done for the fundamental rethinking and radical redesign of business
processes to achieve dramatic improvement in critical measures of performance such as cost,
quality, service, and speed.
A Stage-Gate Development Funnel
Stage-Gate Development Funnel is a technique that forces managers to make choices among
competing projects so that functional resources are not spread thinly over too many projects
Lecture 14
Organizational Control
Managers must monitor & evaluate to answer the following questions.
 Are we efficiently converting inputs into outputs?
 Is product quality improving?
 Are we competitive with other firms?
 Are employees responsive to customers?
 Are our managers innovative in outlook?
 Does the control system encourage risk-taking?
Control Systems
Control Systems includes Formal, target-setting, monitoring, evaluation and feedback systems to provide
managers with information to determine if strategy and structure are working effectively and efficiently.
A good control system should:
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Be flexible so managers can respond as needed.
Provide accurate information about the organization.
Provide information in a timely manner.
Control Types
There are three types of control, Feed-forward Control (anticipate problems), Concurrent Control
(manage problems as they occur), Feedback Control (manage problems after they occur).
Feed-forward
It is used in the input stage of the process.
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Managers anticipate problems before they arise.
Managers can give rigorous specifications to suppliers to avoid quality
Concurrent
Concurrent gives immediate feedback on how inputs are converted into outputs.
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Allows managers to correct problems as they arise.
Managers can see that a machine is becoming out of alignment and fix it.
Feedback
Feedback provides after the fact information managers can use in the future. Customer reaction to
products is used to take corrective action in the future.
The Control Process
Following are the four steps of the control process.
Step 1
Establish standards, goals, or targets against which performance is to be evaluated. Standards
must be consistent with strategy, for a low cost strategy, standards should focus closely on cost.
Managers at each level need to set their own standards.
Step 2
Measure actual performance: managers can measure outputs resulting from worker behavior or they
can measure the behavior themselves. The more is non-routine the task, the harder to measure. Managers
then measure the behavior (come to work on time) not the output.
Step 3
Compare actual performance against chosen standards.
Managers must decide if performance actually deviates. Often, several problems combine creating low
performance.
Step 4
Evaluate result and take corrective action.
Perhaps the standards have been set too high. Workers may need additional training, or equipment. This
step is often hard since the environment is constantly changing.
The Goal-Setting Process
Corporate level
Corporate level managers set goals for individual decisions to allow organization to achieve
corporate goals.
Divisional managers
Divisional managers set goals for each function to allow the division to achieve its goals.
Functional managers
Functional managers set goals for each worker to allow the function to achieve its goals.
Organizational Control Systems
Following are the three control systems
Output Control Systems, Behavior
Control (management by objective),
Culture or Clan Control
a) Output Control Systems
It consists of two factors, organizational goals, operating budget
1. Organizational Goals
After corporate financial goals are set, each division is given specific goals that must be met to attain the
overall goals.Goals and thus output controls will be set for each area of the firm.
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Goals are specific & difficult (not impossible) to achieve.
Goal setting is a management skill developed over time.
2. Operating budgets
A blueprint shows how managers can use resources.Managers is evaluated by how well they meet goals
and stay in budget.Each division is often evaluated on its own budgets for cost, revenue or profit.
b) Management by Objectives
It is a management model that aims to improve performance of an organization by clearly
defining objectives that are agreed to by both management and employees. According to the
theory, having a say in goal setting and action plans should ensure better participation and
commitment among employees, as well as alignment of objectives across the organization.
Bureaucratic Control
Bureaucratic Control is the Control through a system of rules and standard operating procedures (SOPs)
that shape the behavior of divisions, functions, and individuals. It has following characteristics.
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Rules and SOPs tell the worker what to do.
Standardized actions so outcomes are predictable.
Still need output control to correct mistakes.
Organizational Culture & Clan Control
Organizational culture
Organizational culture is a collection of values, norms, & behavior shared by workers that control the way
workers interact with each other.
Clan Control
Control through the development of an internal system of values and norms.Both culture and clan control
accept the norms and values as their own and then work within them.Examples include dress styles, work
hours, pride in work.These methods provide control where output and behavioral control does not work.
Strong culture and clan control help worker to focus on the organization and enhance its performance.
Values and Norms
Organizational values and norms inform workers about what goals they should peruse and how they
should behave to reach these goals.
Some organizations work hard to create a culture that encourages and rewards risk taking.
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Microsoft, Oracle seeks innovation.
Others create an environment of caution.
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Oil refineries, nuclear power plants must focus on caution.
Lecture-15
Organizational Culture
Organizational culture is the behavior of humans who are part of an organization and the meanings that
the people attach to their actions. Culture includes the organization values, visions, norms, working
language, systems, symbols, beliefs and habits. It is also the pattern of such collective behaviors and
assumptions that are taught to new organizational members as a way of perceiving, and even thinking and
feeling.
Creating Strong Organizational Culture
Following are some activities that help in building strong organizational culture.
Values of Founder, Socialization Process, Ceremonies & Rites, Stories & Language
Values of Founder
Founder’s valuesare critical as they hire the first set of managers.Founders likely hire those who share
their vision.This develops the culture of the firm.
Socialization Process
Newcomers learn norms & values. They learn not only because “they have to” but because they want
to.Organizational behavior, expectations, and background is presented.
Ceremonies and Rites
Formal events that focus on important incidents help in creating strong organizational culture.
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Rite of passage: how workers enter firm & advance.
Rite of integration: build common bonds with office parties, celebrations.
Rites of enhancement: enhance worker commitment to values. Promotions, awards
dinners.
Stories and Language
Organizations repeat stories of founders or events.
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Show workers how to act and what to avoid.
Stories often have a hero that workers can mimic.
Most firms also have their own jargon that only workers understand.
Human Resource Management
Human Resource Management includes all activities used to attract & retain employees and to ensure
they perform at a high level in meeting organizational goals.
These activities are made up of
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Recruitment & selection.
Training and development.
Performance appraisal and feedback.
Pay and benefits.
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Labor relations.
Culture & Managerial Actions
Managers consider the four functions of management:
Planning
This step involves mapping out exactly how to achieve a particular goal. Say, for example, that
the organization's goal is to improve company sales. The manager first needs to decide which
steps are necessary to accomplish that goal. These steps may include increasing advertising,
inventory, and sales staff. These necessary steps are developed into a plan. When the plan is in
place, the manager can follow it to accomplish the goal of improving company sales.
Organizing
After a plan is in place, a manager needs to organize her team and materials according to her plan.
Assigning work and granting authority are two important elements of organizing.
Leading
A manager needs to do more than just plan, organize, and staff her team to achieve a goal. She must also
lead. Leading involves motivating, communicating, guiding, and encouraging. It requires the manager to
coach, assist, and problem solve with employees.
Controlling
After the other elements are in place, a manager's job is not finished. He needs to continuously check
results against goals and take any corrective actions necessary to make sure that his area's plans remain on
track.
Human Resource Management
Human Resource Management includes all activities used to attract & retain employees and to ensure
they perform at a high level in meeting organizational goals.
These activities are made up of
 Recruitment & selection.
 Training and development.
 Performance appraisal and feedback.
 Pay and benefits.
 Labor relations.
HRM Components
The core components of HRM are as follows
a) Recruitment& Selection
Recruitment
Recruitment is done to develop a pool of qualified applicants.
Selection
Selection is done to determine relative qualifications & potential for a job.
b) Training & Development
Training & Development: ongoing process to develop worker’s abilities and skills.
c) Performance appraisal & feedback
It provides information about how to train, motivate, and reward workers. Managers can evaluate and
then give feedback to enhance worker performance.
d )Pay and Benefits
High performing employees should be rewarded with raises, bonuses. Increased pay provides additional
incentive.
e) Benefits
Benefitssuch as health insurance, reward membership in firm should be given to employees
f) Labor relations
Managers need an effective relationship with labor unions that represent workers. Unions help establish
pay, and working conditions.
HRM Legal Environment
Management of HR is a complex area. There are many federal, state and local regulations.
Equal Employment Opportunity (EEO)
It ensures all citizens have equal opportunity for employment without regard to sex, age, race, origin,
religion, or disabilities. It makes effective management of diversity crucial
Equal Employment Opportunity Commission (EEOC)
It enforces laws. Managers must take steps to ensure discrimination does not occur.
a)Human Resource Planning
HR Planning includes all activities managers do to forecast current and future HR needs. HR planning
must be done prior to recruitment and selection Demand forecasts made by managers estimate the number
& qualifications the firm will need. Supply forecasts estimate the availability and qualifications of current
workers and those in the labor market.
b)Recruitment & Selection
Human Resources Planning and Job Analysis Determine recruitment & selection needs
HRM Planning
Outsourcing
Managers can decide to contract with outside workers rather than hiring them. Outsourcing is more
flexible for the firm. Outsourcing often provides human capital at a lower cost.
Job Analysis
Job analysis determines the tasks, duties and responsibilities of the job.A job analysis should be done for
each job in the organization.
Job analysis can be done by:
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Observe current workers.
Questionnaires filled out by worker and managers.
c) Recruitment
External recruiting
Managers look outside the firm for people who have not worked at the firm before. Managers advertise in
newspapers, hold open houses, recruit at universities, and on the Internet. External recruitment is difficult
since many new jobs have specific skill needs.
Internal Recruiting
Positions are filled within the firm. Internal recruiting has several benefits: Workers know the firm’s
culture, may not have new ideas. Managers likely already know the candidates. Internal advancement can
motivate employees.
Selection Process
After a pool of applicants is identified, qualifications related to the job requirements are determined:
Background Information
It includes education, prior employment, college major, etc.
Interview
Almost all firms use one of two types:
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Structured interview: managers ask each person the same job-related questions.
Unstructured interview: held like a normal conversation.
Usually structured interviews preferred; bias is possible.
Physical Ability Test
It is taken to measure strength & endurance. It is good for physically demanding jobs.
Paper & Pencil Tests
It includes either an ability or personality test.
Ability test
It assess if applicant has right skills for the job.
Personality test
Seek traits relevant to job performance. Be sure test is a good predictor of job performance.
Performance Tests
It measures job performance. Typing speed test is one example.
Assessment Center
Candidates are assessed on job-related activities over a period of a few days.
References
Outside people provide candid information about candidate. Can be hard to get accurate information
Lecture 16
Training & Development
Training
Training is done in order to teach organizational members how to perform current jobs.
It help worker’s acquire skills to perform effectively.
Development
It builds worker’s skills to enable them to take on new duties.
Types of Training
Classroom Instruction
In this type of training, workers acquire skills in classroom. It Includes use of videos, role-playing, and
simulations
On-the-Job Training
Learning occurs in the work setting as worker does the job.Training given by co-workers and can be
done continuously.
Apprenticeships
In this type of training, worker contracts with a master worker to learn a skill.
Types of Development
Varied Work Experiences
Top managers must build expertise in many areas. They should be specialists in all fields. Workers
identified as possible top managers given many different tasks.
Formal Education
Tuition reimbursement is common for managers taking classes for MBA or similar. Long-distance
learning can also be used to reduce travel.
Performance Appraisal
Types of performance appraisal
Trait Appraisals
Trait appraisals evaluate the employees on traits (skills, abilities) related to the job.Problem: Even though
a worker has the trait, they may not use it in the job and it is hard to give feedback.
Behavior Appraisals
It is done on the facts that how a worker does the job. Focuses on what a worker does and provides good
feedback options.
Results appraisals
It evaluates that what a worker accomplishes. Sales reps are usually evaluated on what they sell.
Objective appraisals:
These are based on facts (sales figures)
Subjective appraisals:
These are based on a manager’s perceptions of traits, behavior, or results.
Who Appraises Performance?
a) Self
Self-appraisals can supplement manager view.
b) Peer appraisal
Coworker provides appraisal, common in team settings.
c) 360 Degree
It provides appraisal from a variety of people able to evaluate a manager, for example Peers, customers,
superiors, self.
d) Informal appraisals
Manager provides frequent feedback informally.
Pay and Benefits
Pay level
How the firm’s pay incentives compare to other firms in the industry.Managers can decide to offer low or
high relative wages.
Pay Structure
Clusters jobs into categories based on importance, skills, and other issues.
Benefits
Some are required (social security, workers comp).Others (health insurance, day care, and others) are
provided at the employers’ option.
Cafeteria-style plan
Employee can choose the best mix of benefits for them. These can be hard to manage.
Labor Relations
Labor relations consider all activities managers perform to ensure there is a good relationship with labor
unions.
There are laws regulating some areas of employment.
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Fair Labor Standards Act (1938) prohibits child labor, sets a minimum wage and
maximum working hours.
Equal Pay Act (1963) men and women doing equal work will get equal pay.
Work Place Safety (1970) OSHA mandates procedures for safe working conditions.
Unions
Unions represent worker’s interests in organizations. Managers usually have more power over an
individual worker. Workers join together in unions to try and prevent this. Unions are permitted by the
National Labor Relations Act (1935) which also created the NLRB to oversee unions. Not all workers
want unions. Union membership costs money in dues and a worker might not want to strike. Union
membership is lower today than 40 years ago.
Major Equal Employment Opportunity Laws Affecting HRM
Major Laws Affecting HRM in Pakistan
Article 11 of the Constitution prohibits all forms of slavery, forced labor and child labor;
Article 17 provides for a fundamental right to exercise the freedom of association and the right to form
unions;
Article 18 proscribes the right of its citizens to enter upon any lawful profession or occupation and to
conduct any lawful trade or business;
Article 25 lays down the right to equality before the law and prohibition of discrimination on the grounds
of sex alone;
Article 37(e) makes provision for securing just and humane conditions of work, ensuring that children
and women are not employed in vocations unsuited to their age or sex, and for maternity benefits for
women in employment.
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The Industrial and Commercial Employment (Standing Orders) Ordinance -1968
Industrial Relationship Act 2012
Factories Act, 1934
West Pakistan Shops and Establishments Ordinance, 1969
Mines Act, 1923
The Maternity Benefit Ordinance, 1958
Lecture 17
The Nature of Motivation
Motivation is the willingness to exert high levels of effort to reach organizational goals, conditioned by
the effort’s ability to satisfy some individual need.
It is also defined as the psychological forces within a person that determine:
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Direction of behavior in an organization;
The effort or how hard people work;
The persistence displayed in meeting goals.
Types of motivation
There are two types of motivation. Intrinsic motivation, extrinsic motivation
Intrinsic Motivation:
A person’s internal desire to do something for his satisfaction, respect, prestige or loyalty
Extrinsic Motivation
It consists of factors of motivation that comes from outside (environment) or organization like pay,
bonuses, tangible benefits etc.
Outcomes & Inputs
Outcome
Anything a person gets from a job.Examples include pay, autonomy, and accomplishment.
Input
Anything a person contributes to their job. Examples include skills, knowledge, work behavior.
Expectancy Theory
It explains the behavioral direction process. It does not attempt to explain what motivates individuals, but
rather how they make decisions to achieve the end they value.
Expectancy theory components
Expectancy theory is comprised of three components: Expectancy, Instrumentality, and Valance.
a) Expectancy- Probability
The expectancy is the belief that one's effort (E) will result is attainment of desired performance (P) goals.
This belief, or perception, is generally based on an individual's past experience, self-confidence (often
termed self-efficacy), and the perceived difficulty of the performance standard or goal.
b) Instrumentality
The instrumentality is the belief that if one does meet performance expectations, he or she will receive a
greater reward. This reward may come in the form of a pay increase, promotion, recognition or sense of
accomplishment. It is important to note that when it is perceived that valued rewards follow all levels of
performance, then instrumentality is low. For example, if a professor is known to give everyone in the
class an "A" regardless of performance level, then instrumentality is low.
c) Valance
The valance refers the value the individual personally places on the rewards. This is a function of his or
her needs, goals, values and Sources of Motivation.
The Motivation Equation
Need Theories
Need Theories are the theories of motivation that focus on what needs people are trying to satisfy at work
and what outcomes will satisfy those needs.
Need
It is a requirement or necessity for survival and well-being. Managers must determine what needs a
worker wants satisfied and ensure that a person receives the outcomes when performing well.
Maslow’s Hierarchy of Needs
Maslow (1943) stated that people are motivated to achieve
certain needs. When one need is fulfilled a person seeks to
fulfill the next one, and so on.
The earliest and most widespread version of Maslow's
(1943, 1954) hierarchy of needs includes five motivational
needs, often depicted as hierarchical levels within a pyramid.
Maslow’s hierarchy of needs from the most basic to the highest
a) Physiological needs
Physiological needs are basic and include needs for food, water, and shelter. Maslow took the position
that until these needs are satisfied to the degree necessary to maintain life, other needs will not motivate
people.
b) Safety needs
Safety needs pertain to the desire to be safe, secure and free from threats to our existence. These needs
can be satisfied in the workplace by job continuity, or retirement benefits.
c) Belongingness needs
Belongingness needs involve the desire to affiliate with and be accepted by others. These needs are
satisfied for most people by family and community relationship outside of work and friendship on the job.
d) Esteem needs
Esteem needs are related to the two-pronged desire to have a positive self-image and to have our
contributions valued and appreciated by others. According to Maslow, once people begin to satisfy their
need to belong, they tend to want to be held in esteem both by themselves and by others this kind of need
produces such satisfactions as power, prestige, status and self-confidence.
e) Self-actualization needs
Self-actualization needs pertain to the requirement of developing our capabilities and reaching our full
potential. Maslow regards this as the highest need in his hierarchy. It is the desire to become what one is
capable of becoming- to maximize one’s potential and to accomplish something.
Alderfer’s ERG Theory
Clayton P. Alderfer's ERG theory from 1969 condenses Maslow's five human needs into three
categories: Existence, Relatedness and Growth.
Existence Needs
Include all material and physiological desires (e.g., food, water, air, clothing, safety, physical
love and affection).
Relatedness Needs
Encompass social and external esteem; relationships with significant others like family, friends,
co-workers and employers. This also means to be recognized and feel secure as part of a group or
family. Maslow's third and fourth levels.
Growth Needs
Internal esteem and self-actualization; these impel a person to make creative or productive
effects on himself and the environment (e.g., to progress toward one's ideal self). Maslow's
fourth and fifth levels. This includes desires to be creative and productive, and to complete
meaningful tasks.
Even though the priority of these needs differ from person to person, Alberger's ERG theory
prioritizes in terms of the categories' concreteness. Existence needs are the most concrete, and
easiest to verify. Relatedness needs are less concrete than existence needs, which depend on a
relationship between two or more people. Finally, growth needs are the least concrete in that
their specific objectives depend on the uniqueness of each person.
Motivation-Hygiene Theory
Motivation-Hygiene Theory attempts to explain the factors that motivate individuals through
identifyingand satisfying their individual needs, desires and the aims pursue to satisfy these
desires.
Herzberg's research proved that people will strive to achieve 'hygiene' needs because they are
unhappy without them, but once satisfied the effect soon wear off - satisfaction is temporary.
Then as now, poorly managed organizations fail to understand that people are not 'motivated' by
addressing 'hygiene' needs. People are only truly motivated by enabling them to reach for and
satisfy the factors that Herzberg identified as real motivators, such as achievement, advancement,
development, etc., which represent a far deeper level of meaning and fulfillment.
Examples of Herzberg's 'hygiene' needs (or maintenance factors) in the workplace are:
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policy
relationship with supervisor
work conditions
salary
company car
status
security
relationship with subordinates
personal life
Herzberg's research identified that true motivators were other completely different factors,
notably:
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achievement
recognition
work itself
responsibility
advancement
McClelland’s Needs for Achievement, Affiliation, and Power
McClelland says that, regardless of our gender, culture, or age, we all have three motivating
drivers, and one of these will be our dominant motivating driver. This dominant motivator is
largely dependent on our culture and life experiences.
These characteristics are as follows
Achievement
 Has a strong need to set and accomplish challenging goals.
 Takes calculated risks to accomplish their goals.
 Likes to receive regular feedback on their progress and achievements
 Often likes to work alone.
Affiliation
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Power
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Wants to belong to the group.
Wants to be liked, and will often go along with whatever the rest of the group wants to
do.
Favors collaboration over competition
Doesn't like high risk or uncertainty
Wants to control and influence others.
Likes to win arguments
Enjoys competition and winning
Equity Theory
Equity Theory, developed by J. Stacey Adams, says that an employee perceives what he or she
got from a job situation (outcomes) in relation to what he or she put into it (inputs) and then
compares the inputs outcomes ratio with the inputs-outcomes ratios of relevant others and finally
corrects any inequity.
There are two types of inequity: underpayment inequity and overpayment inequity.
Underpayment inequity exists when a person’s own outcome– input ratio is perceived to be less
than that of a referent. In comparing yourself to a referent, you think you are not receiving the
outcomes you should be, given your inputs. Overpayment inequity exists when a person
perceives that his or her own outcome–input ratio is greater than that of a referent. In comparing
yourself to a referent, you think you are receiving more outcomes than you should be, given your
inputs.
Operant Conditioning Theory
Operant Conditioning theory states that People learn to perform behaviors that lead to desired
consequences and learn not to perform behaviors that lead to undesired consequences. Linking
specific behaviors to the attainment of specific outcomes can motivate high performance and
prevent behaviors that detract from organizational effectiveness.
Social Learning Theory
Social Learning Theory takes into account how learning and motivation are influenced by people’s
thoughts and beliefs and their observations of other people’s behavior
Merit Pay and Performance
Merit Pay Plan
A compensation plan that bases pay on based on individual, group and/or organization performance.
Individual plan
When individual performance (sales) can accurately be measured
Lecture 18
Personality Traits
Personality Traits are the characteristics that influence how people think, feel and behave on and off the
job. These may Include tendencies to be enthusiastic, demanding, easy-going, nervous, etc.Each trait can
be viewed on a continuum, from low to high.There is no “wrong” trait, but rather managers have a
complex mix of traits.
What Are the Big Five Dimensions of Personality?
Today, many researchers believe that they are five core personality traits. Evidence of this theory has
been growing over the past 50 years, beginning with the research of D. W. Fiske (1949) and later
expanded upon by other researchers including Norman (1967), Smith (1967), Goldberg (1981), and
McCrae & Costa (1987).
The "big five" are broad categories of personality traits. While there is a significant body of literature
supporting this five-factor model of personality, researchers don't always agree on the exact labels for
each dimension. However, these five categories are usually described as follows:
Extraversion
This trait includes characteristics such as excitability, sociability, talkativeness, assertiveness and high
amounts of emotional expressiveness.
Agreeableness
This personality dimension includes attributes such as trust, altruism, kindness, affection, and other prosocial behaviors.
Conscientiousness
Common features of this dimension include high levels of thoughtfulness, with good impulse control and
goal-directed behaviors. Those high in conscientiousness tend to be organized and mindful of details.
Neuroticism
Individuals high in this trait tend to experience emotional instability, anxiety, moodiness, irritability, and
sadness.
Openness
This trait features characteristics such as imagination and insight, and those high in this trait also tend to
have a broad range of interests.
Traits and Managers
Successful managers vary widely on the “Big Five”. It is important to understand these traits since it
helps explain a manager’s approach to planning, leading, organizing, etc.
Some traits associated with the managers are as follows
Internal Locus of Control:
People believe they are responsible for their fate.theySee their actions are important to achieving goals.
External Locus of Control
People believe outside forces are responsible for their fate.Their actions make little difference in
achieving outcomes.
Self-Esteem
Self-Esteemcaptures the degree to which people feels good about themselves and abilities. High selfesteem causes people to feel they are competent, and capable. Low self-esteem people have poor opinions
of themselves and abilities.
Need for Achievement
Need for AchievementIs the extent to which people have a desire to perform challenging tasks and meet
personal standards.
Need for Affiliation
Need for Affiliation Is the extent to which people want to build interpersonal relationships and being
liked.
Need for Power
It indexes the desire to control or influence others.
Values
Values describe what managers try to achieve through work and how to behave.
These are personal convictions about life-long goals (terminal values) and modes of conduct
(instrumental values).
A person’s value system reflects how important their values are as a guiding principle in life.
Terminal values important to managers include Sense of Accomplishment, equality, self-respect.
Instrumental values include hard-working, broadminded, and capable.
Terminal and Instrumental Values
Terminal values
In our personal lives, Terminal Values are those things that we can work towards or we think are
most important and we feel are most desirable – terminal values are desirable states of existence.
Terminal Values include things like happiness, self-respect, family security, recognition,
freedom, inner harmony, comfortable life, professional excellence, etc
Instrumental values
Instrumental Values are core values, permanent in nature, comprise personal characteristics and character
traits.
Instrumental Values refer to preferable modes of behavior and include values like honesty, sincerity,
ambition, independence, obedience, imaginativeness, courageousness, competitiveness, and also some
negative traits too.
Organizations also have Instrumental Values (which can be ascertained from the organizational culture)
and these are permanent in nature and difficult to change.
Attitudes
An attitude is "a relatively enduring organization of beliefs, feelings, and behavioral tendencies
towards socially significant objects, groups, events or symbols". Attitudes are collection of
feelings about something.
For example job satisfaction and organizational commitment
Job Satisfaction
These are the feelings about a worker’s job.Satisfaction tends to rise as manager moves up in the
organization.
Organizational Citizenship Behaviors
These are the actions not required of managers but which help advance the firm. Managers with high
satisfaction perform these “extra mile” tasks.
Organizational Commitment
Organizational commitments are the beliefs held by people toward the organization as a
whole.Committed managers are loyal and proud of the firm.Commitment can differ around the world.
Moods
Moods: encompass how a manager feels while managing.
Positive and negative moods
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Positive moods provide excitement, elation and enthusiasm.
Negative moods lead to fear, stress, and nervousness
Moods can depend on a person's basic outlook as well as on current situations.Managers need to realize
how they feel affects how they treat others and how others respond to them.Workers prefer to make
suggestions to mangers that are in “a good mood”.
Perceptions
Perception is the process through which people select, organize and interpret input. Manager’s decisions
are based on their perception. Managers need to ensure perceptions are accurate. Managers are all
different and so are their perceptions of a situation. Perceptions depend on satisfaction, moods, and so
forth.
Lecture 19
Career Development
Definition of Career
It is the sum total of the work-related experiences through a person’s life.
Types of career
a) Linear career
In this type, person moves through a sequence of jobs of higher levels. These careers can build different
experience in different positions.
b) Steady State career
In this type, worker chooses to keep the same kind of job over much of a career.
The workers become highly skilled in a given area.
c) Spiral Career
Worker holds fundamentally different jobs that still build on each other.Worker gains wide experience yet
skills continue to build.
Career Stages
Following are the stages of career
a) Preparation for Work
At this stage, managers decide on kind of career, determine qualifications needed.
b) Organizational entry
Managers find a “first” job.Managers usually start in a functional area first.
c) Early career
This establishes person in the firm and begins achievement.Worker learns firm’s values and duties.Also
begins to achieve noteworthy results in the job.Worker tries to stand out as a good performer.Mentors
(experienced manager who shows you the ropes) are valuable during this stage.
d) Mid-career
Mid-career time period usually have been in workforce 20-35 years. Mid-career usually provides major
accomplishments.
Career plateaus can occur as chances for further promotion dwindle. Plateau managers can still enjoy a
fruitful career.
e) Late career
It continues as long as the manager works and is active.Many managers choose to stay active well past
normal retirement.
Career Management
Managers need to consider both personal career management as well as the careers of other workers in the
firm. In this regard, they have to take care of ethical practices and accommodation of other demands.
Ethical practice
Managers need to ensure worker promotions are based on outcomes, not friendships.This means all
workers are treated equally.
Accommodation of other demands
Workers have many things in their lives besides work. Managers need to consider these issues as well.
Stress
Stress Results when people face important opportunity or threats they are uncertain can be
handled.Managers almost always face stress.
Physiological issues, Psychological issues, Behavioral issues are the issues that are related to stress.
Physiological issues
Stress can result in sleep problems, headaches, and other issues.Long-term levels of stress can result in
heart attack, and high blood pressure.Different people experience stress differently.
Psychological issues
Stress can result in bad moods, anger, and nervousness. Psychological issuescan result in lower work
output and frustration.
Behavioral issues
Stress can actually enhance job performance as well as impair it.
Sources of Stress
Role Conflict
Role Conflict results from conflict between managerial roles. Conflict can result when managers want to
present a problem with the firm but still want to present firm in best possible light.
Role Overload
Managers have too many duties and activities.Most managers have several roles but they can become
over-powering.
Organizational Conflict
The discord that arises when goals, interests or values of different individuals or groups are incompatible
and those people block or thwart each other’s efforts to achieve their objectives.
Types of Conflict
Conflict is classified into the following four types:
Interpersonal conflict
Interpersonal conflict refers to a conflict between two individuals. This occurs typically due to how
people are different from one another. We have varied personalities which usually results to incompatible
choices and opinions. Apparently, it is a natural occurrence which can eventually help in personal growth
or developing your relationships with others. In addition, coming up with adjustments is necessary for
managing this type of conflict. However, when interpersonal conflict gets too destructive, calling in a
mediator would help so as to have it resolved.
Intrapersonal conflict
Intrapersonal conflict occurs within an individual. The experience takes place in the person’s mind.
Hence, it is a type of conflict that is psychological involving the individual’s thoughts, values, principles
and emotions. Interpersonal conflict may come in different scales, from the simpler mundane ones like
deciding whether or not to go organic for lunch to ones that can affect major decisions such as choosing a
career path. Intragroup conflict
Intragroup conflict
Intragroup conflict is a type of conflict that happens among individuals within a team. The
incompatibilities and misunderstandings among these individuals lead to an intragroup conflict. It is
arises from interpersonal disagreements (e.g. team members have different personalities which may lead
to tension) or differences in views and ideas (e.g. in a presentation, members of the team might find the
notions presented by the one presiding to be erroneous due to their differences in opinion). Within a team,
conflict can be helpful in coming up with decisions which will eventually allow them to reach their
objectives as a team. However, if the degree of conflict disrupts harmony among the members, then some
serious guidance from a different party will be needed for it to be settled.
Intergroup conflict
Intergroup conflict takes place when a misunderstanding arises among different teams within an
organization. For instance, the sales department of an organization can come in conflict with the customer
support department. This is due to the varied sets of goals and interests of these different groups. In
addition, competition also contributes for intergroup conflict to arise. There are other factors which fuel
this type of conflict. Some of these factors may include a rivalry in resources or the boundaries set by a
group to others which establishes their own identity as a team.
Different points of view regarding the priority objectives
The existence of different purposes or objectives frequently leads to conflicts of interests or priorities
even when the organizations have the same purposes
a) Different points of view regarding the methods used
The persons or the groups may have common objectives but different opinions regarding their
accomplishment
b) Perception differences or differences in the value system
The majority of conflicts reside in the different way in which people see the reality, as not all of them
perceive the same reality, and conflicts appear due to the fact that we do not see the same reality
c) Perception differences or differences in the value system
The majority of conflicts reside in the different way in which people see the reality, as not all of them
perceive the same reality, and conflicts appear due to the fact that we do not see the same reality
d) Competition regarding insufficient resources
The limited character of organizational resources and the dependence to such resources may generate
competitions that might turn into conflicts; the insufficiency of resources has the capacity to transform
masked or slow conflicts into open and acute conflicts; also, the more limited are the resources, the higher
is the conflict potential
e) Difference of power, status and culture in the situations
In which the parties have a significant difference in power, status and culture.
f) Competition for supremacy
Competition for supremacy is present when a person tries to compete or outshine another person, such as
when two employees are in a fierce competition to get a promotion or an influential position within the
same organization
g) Ambiguity
The ambiguous purposes and objectives, the imprecision in establishing tasks, authority and responsibility
of some jobs and compartments, lack of clarity in transmitting decisions or the deformed presentation of
reality are sources of conflict
Top 4 Causes of Conflict in the Workplace
Conflict has a bad reputation. Most often, conflict is associated with raised voices, heated debates, and
high frustration.
1. Personality Differences
The workplace brings together a wide array of personalities. In the myriad of different backgrounds,
genders, cultures, political and religious beliefs, there are countless opportunities for ruffled feathers.
The best cure is communication. Whether the issue involves an offense to core values or simply the
irritation of pet peeves, it is important to establish boundaries immediately.
Too often, people avoid difficult conversations in hopes that a problem will just go away, which of course
it rarely does. By addressing an issue promptly, it improves the chances for a peaceful resolution and
common understanding. But if it’s put on the back burner, emotions may surface when anger levels are
high, and increase the chances of an unproductive, high volume blowout.
2. Non-Compliance with Rules and Policies
Whether you are pestered by another’s disregard for company policy, or are rebelling against a rule
yourself, non-compliance is a common gateway to office conflict. Rules are usually in place for a reason;
so whichever side of a policy dispute you may find yourself, you should be clear about why a rule is in
place, and what the consequences are for slip-ups. If agreement cannot be reached between differing
parties or the rules themselves, it may be a good idea to look for a helpful mediator to resolve the issue.
Just remember to keep the focus on the issue, not the person.
3. Misunderstandings
Botched communication is one of the top reasons for conflict in and out of the office. A great way to
proactively decrease the potential for crossed wires is to employ effective listening techniques: give full
attention, be genuinely interested, catch non-verbal messages, paraphrase, and collaborate. Keeping
thorough records of communications can be a safety net when dealing with frequent mis-communicators.
4. Competition
Sometimes quotas and incentives can make it easy to forget the big picture. We stop seeing others as team
members and start to see them as competitors. Healthy competition is a good motivator, but sometimes it
inspires anti-productive behavior and unsavory results. The best defense in a highly competitive
environment is managing your own emotions. Accept what emotions arise and deal with them
positively. Tired of always coming in second or third? Start focusing on competing with yourself rather
than others. Remember that one person’s success is good for the team on a whole
Lecture 20
Conflict Management Strategies
Following are the compromising strategies
a) Compromise
Each party is concerned about not only their goal accomplishment but also the goal accomplishment of
the other party and is willing to engage in a give-and-take exchange to reach a reasonable solution.
b) Collaboration
both parties try to satisfy their goals by coming up with an approach that leaves them both better off and
does not require concessions on issues that are important to either party.
c) Accommodation
It is an ineffective conflict-handling approach in which one party, typically with weaker power, gives in
to the demands of the other, typically more powerful, party.
d) Avoidance
An ineffective conflict handling approach in which the parties try to ignore the problem and do nothing to
resolve their differences.
e) Competition
An ineffective conflict handling approach in which each party tries to maximize its own gain and has little
interest in understanding the other party’s position and arriving at a solution that will allow both parties to
achieve their goals.
f) Negotiation
Method of conflict resolution in which the parties consider various alternative ways to allocate resources
to come up with a solution acceptable to all of them.
Third-party Negotiators
Third party negotiators are mediators and arbitrators
Mediators
Mediator facilitates negotiations but no authority to impose a solution
Arbitrator
Arbitrator can impose what he thinks is a fair solution to a conflict that both parties are obligated to abide
by
Political Strategies for Gaining and Maintaining Power
Functional versus Dysfunctional Conflict
Functional Conflict is the conflict that supports the goals of the group and improves its performance.
Dysfunctional Conflict is the conflict that hinders group performance
Conflict Management Techniques
Following are some conflict management techniques
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Problem solving
Super ordinate goals
Expansion of resources
Avoidance
Smoothing
Compromise
Authoritative command
Altering the human variable
Restructuring the organization
Appointing a devil’s advocate
Factors Influencing Conflict
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Content Related vs. Personal
Size of Conflict
Rigidity of the Issue
Power Differences
Individual Personalities, Traits, and Dispositions
Lecture 21
Defining conflict
“Conflict is an expressed struggle between at least two interdependent parties who perceiveincompatible
goals, scare resources, and interference from others in achieving their goals.”
Scarce resources – tangible things like oil, water, money, land…..two biggest scarce resources are power
and self-esteem (matches up to relational goals and identity/face goals).
Source of Conflict
Organizational conflict appears in a variety of forms and has varying causes. These can generally be
separated into several categories.
Katz identifies three sources of conflict. These are:
a) Structural conflict
Structural conflict arises out of the need to manage the interdependence between different organizational
sub-units
b) Role conflict
Role conflict arises from sets of prescribed behavior
c) Resources conflict
Resources conflict stemming from interest groups competing for organizational resources
Robbins identifies three sources of organizational conflict and indicates that an understanding of the
source of a conflict improves the probability of effective conflict management. The main factors which
serve as sources of conflict are identified as
a) Communicational Conflicts
Conflicts arise from misunderstandings etc.
b) Structural Conflicts
Structural conflicts related to organizational roles
c) Personal Conflicts
Personal conflicts stemming from individual differences
Types of Conflict
There is linkage between sources of organizational conflict to the unit of analysis involved. Units of
analysis are the parties to a conflict. They perceive, initiate and sustain a conflict. Their characteristics
specify the conditions which affect the course of a conflict and determine the mode of its management.
Thus, we have conflicts that originate in the individual person, conflicts that have their basis in the
relationship between individuals, and conflicts that occur as a result of interactions between groups.
These may be described as:
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Intrapersonal conflict,
Interpersonal conflict, and
Interdepartmental conflict
Intrapersonal Conflict
Intrapersonal conflict is internal to the individual (though its effects can profoundly influence
organizational functioning)
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The most difficult form of conflict to analyze and manage.
Intrapersonal conflict is basically a conflict between two incompatible tendencies.
It arises when a stimulus evokes two different and incompatible tendencies and the
individual is required to discriminate between these tendencies.
In such a situation it is common for individuals to experience frustrations and to allow their conflict
situation to be expressed in a range of behavioral strategies ranging from apathy (laziness) to absenteeism,
excessive smoking or destructive behavior. it is essential to diagnose individual perception and utilize
some techniques that would reduce anxiety
Interpersonal Conflict
Interpersonal conflict emphasizes the interaction of human factors in an organization. Here we are
concerned with these factors as they appear in a dyadic relationship. Broadly there are two classes of
factors as conflict sources. These are:
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Personal. Individuals are not identical, constant or consistent. When two individuals are
brought together and kept together, each with his own qualities, needs and skills, a
conflict may ensue if their attributes are not meshed together in a coordinated way.
Functional: Individuals in organizations have roles which are expected sets of behaviour
associated with their position. In practice, however, role specifications tend to be
ambiguous and incomplete, and in their interaction with others, some individuals often
feel dissatisfied with their role or position
Interpersonal conflict occurs when people:
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Are interdependent (meaning they are connected, and what one person does impacts the
other)
Are mutually aware that their goals are incompatible (one person will achieve while the
other will not)
Perceive each other as interfering with the attainment of their own goals.
Principles of interpersonal conflict
Conflict is inevitable--It is a part of every interpersonal relationship. One study found that on average
couples have 182 conflicts per year, which is approximately 3.5 conflicts a week, with each lasting
approximately 25 minutes long, and another 30 minutes to sulk. Just because you have conflict doesn't
mean your relationship is in danger either. It just means that you have a relationship.
Interdepartmental Conflict
The third major cause of organizational conflict is structural. Organizations are designed around product
lines, regions or technical specialties. These activities are assigned to departments that often have
mutually exclusive structured interests and goals and that interact within a framework of scarce resources
and task dependence. When resources are relatively fixed and when one department's gain is at the
expense of another, conflict should be expected. If two sub-units in an organizational system have
differentiated goals and are functionally interdependent, conditions exist for conflict. Interdependence
produces the need for collaboration, but it also presents occasions for conflict.
Managing Intrapersonal Conflict
Intrapersonal conflict is predicated upon an inappropriateness between individual needs and
organizational requirements. Intrapersonal conflict unfolds over time and manifests itself in a complex
and multiform range of attitudinal and behavioural consequences. These may vary from psychosomatic
consequences (e.g. frustration, emotional instability) to physical consequences (e.g. absenteeism,
destructive behaviour). As such consequences are obviously correlated with decreased performance and
work-motivation, managing intrapersonal conflict will help the individual to promote his capacity for
adaptation and attain an equilibrium in his relationship with the organization.
Intrapersonal conflict management strategies
There are number of methods of conflict management can be employed. These are conveniently divided
into (1) cognitive strategies and (2) behavioral strategies.
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Cognitive strategies: often called defense mechanisms, help an individual to falsify,
distort or deny a particular conflict. Cognitive strategies represent an attempt to control or
manage negative and disturbing feelings associated with conflict and to allow an
individual to carry on with his normal activities. Cognitive strategies include repression
(an attempt to push conflict out of existence), rationalization (hiding the truth from
oneself), fantasy or even denial of reality.
Behavioral strategies: for coping with intrapersonal conflict include escape, withdrawal
and aggression (especially against convenient targets).
Note: These strategies cannot resolve intrapersonal conflict in any permanent way. They can be
successful in the short-run. They can help an individual to reduce his level of anxiety and diminish his
tension. They can prevent or avoid disruptive behavior, but they cannot generate a solution
Solution to intrapersonal conflict
This can come about through the involvement of an expert consultant, acting in an accepting manner and
encouraging the individual to evaluate his situation rationally and decide upon more effective responses.
Interventions in intrapersonal conflicts entail consideration of substantive issues, discussions and selfobservations, helping an individual to unload his burdensome thoughts and reactions and reorienting his
thinking towards a more benevolent and self-maintaining pattern of behavior.
Importance of consultancy approach
The strength of this approach to conflict management is that it helps an individual to concentrate on his
situation and on ways to evaluate alternatives that may have gone unnoticed. The consultant remains
detached from an individual, but his intervention, listening, probing, interviewing and explicit
confrontation of the conflict issues, sets the basis for self-diagnosis and improved performance. It
eliminates distortion and increases self-knowledge. It is a method which seeks not merely an
improvement in individual, but a successful change in the situational (e.g. reevaluating a conflict
situation), attitudinal (e.g. reduced anxiety, increased self-esteem) and behavioural (e.g. stimulate
productive behavior) components of a conflict.
Negative and positive effects
Conflict can have negative and positive effects--It's all about the way you deal with conflict.
Negative effects:
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Often leads to increased negative regard for the opponent.
May deplete energy better spent elsewhere.
May lead you to hide feelings or close yourself off from a more intimate relationship.
Positive effects:
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Forces you to examine a problem and work toward a solution.
May emerge with a stronger relationship.
Enables you to state your needs.
Often prevents conflict from decaying.
Emphasizes the relationship is worth the effort.
Stages of conflict management
No Conflict
The presence of no conflict is ideal in an organization but not likely to last. With changing work
environments filled with a diverse group of employees, it is likely that conflict will arise at some point as
employees work to complete tasks and projects.
Latent Conflict
People have different ideas, values, personalities and needs, which can create situations where others
agree with their thoughts or actions. This in itself is not a problem, unless an event occurs to expose these
differences.
Emergence
At the emergence stage, conflict starts to set in as the parties involved recognize that they have different
ideas and opinions on a given topic. The differences cause discord and tension.
Escalation
If the parties involved in a conflict cannot come to a resolution, the conflict may escalate. When a conflict
escalates, it may draw more people into the situation, heightening any already existing tension. Louis
Kriesberg, the founding director of the Program on the Analysis and Resolution of Conflicts, describes
the escalation stage as intense and notes that during this stage people pick sides and view their opponents
as the enemy.
Stalemate
Stalemate is the most intense stage and arises out of a conflict escalating. During the stalemate stage, the
conflict has spiraled out of control to a point where neither side is in a position to win. By this point,
participants are not willing to back down from their stances, and each side insists that its beliefs are
ultimately right.
De-Escalation
Even the most intense conflicts calm down at some point, as one or more of the persons involved in the
conflict realize they are likely to reach a conclusion if they continue with their unwillingness to look at
the conflict from all sides. During this stage, parties begin to negotiate and consider coming up with a
solution.
Settlement or Resolution
After hearing from all parties involved in the conflict, participants are sometimes able to come up with a
resolution for the problem they are facing. As a business owner, you may have to work with the involved
parties to settle the conflict amicably by shifting the focus to what is really important.
Lecture 22
Conflict management
First, understand the factors contributing to conflict. Next, we identify the methods for resolving conflict
There are two forms of conflict resolution.


Distributive conflict resolution
Integrative conflict resolution
Distributive Conflict Resolution
Distributive or “competitive” negotiation assumes a relatively fixed pie, and the parties “compete” to
distribute that pie among themselves. It is a “zero-sum exchange” in that the parties assume that
whatever one side gains, the other loses. It has following characteristics.




Winning through the use of negative behaviors
Disagreement to prevent others from reaching their goals
Serves personal needs and goals at the expense of others
Conflict as WIN – lose
Integrative Conflict Resolution
An effective integrated conflict management system addresses the sources of conflict and provides a pervasive
method for promoting competence in dealing with conflict throughout the organization.
It has following characteristics.





Foster cooperation and shared solutions
Modifying ideas, bargaining for an acceptable compromise
Search for solutions and provide support for others
Cooperative and not mutually exclusive
Objective is to share values, highlight common objectives, and help achieve consensus
Once individuals realize that it will be impossible to achieve the desired goal without resources and
abilities beyond their own, the transition can take place.
Integrative conflict resolution skill set
It is the ability to establish effective working relationships. Managers must have cooperative and
problem-solution attitudes. And they must be able to manage the group process and group decision
making be knowledgeable about the issues
Interpersonal Relationships are at the core of our ability to resolve conflict. Effective development of
interpersonal relationships among co-workers can potentially decrease the severity of grievances filed
Strategies for Dealing with Conflict
a) Be Objective
One should analyze and separate content and personal issues. Then comes the planning stage for
strategic communication
b) Be Aware of Preferred Style of Conflict Resolution
All the members should Plan, Recognize, Contain, and Cope with each other in order to handle
the conflict in effective way.
c) Distinguish Symptoms from Causes
Symptoms let us know a conflict is present. Causes of conflict are issues underlying the
symptoms
d) Identify Success of Methods already Implemented
All the members should ignore problems. They should persuade each other to cooperate in order to
resolve issues. They should compromise the situation to meet the overall goals of objectives.
Successful Conflict Resolution
Conflict is successfully handled by
a) Managing stress while remaining alert and calm
By staying calm, you can accurately read and interpret verbal and nonverbal communication.
b) Control your emotions and behavior.
When you’re in control of your emotions, you can communicate your needs without
threatening, frightening, or punishing others.
c) Pay attention to the feelings being expressed as well as the spoken words of others.
d) Be aware of and respectful of differences.
Unhealthy ways of managing and resolving conflict
Unhealthy responses to conflict are characterized by:





An inability to recognize and respond to matters of great importance to the other person
Explosive, angry, hurtful, and resentful reactions
The withdrawal of care, resulting in rejection, isolation, shaming, and fear of
abandonment
The expectation of bad outcomes
The fear and avoidance of conflict
Healthy ways of managing and resolving conflict
•
Healthy responses to conflict are characterized by:




The capacity to recognize and respond to important matters
A readiness to forgive and forget
The ability to seek compromise and avoid punishing
A belief that resolution can support the interests and needs of both parties
Four key conflict resolution skills
The ability to successfully manage and resolve conflict depends on four key skills. Together, these four
skills form a fifth skill that is greater than the sum of its parts: the ability to take conflict in stride and
resolve differences in ways that build trust and confidence.
Skill 1: Quickly relieve stress



The capacity to remain relaxed and focused in tense situations is a vital aspect of conflict
resolution.
If you don’t know how to stay centered and in control of yourself, you may become
emotionally overwhelmed in challenging situations.
The best way to rapidly and reliably relieve stress is through the senses: sight, sound,
touch, taste, and smell. But each person responds differently to sensory input, so you
need to find things that are soothing to you.
Skill 2: Recognize and manage your emotions



Emotional awareness is the key to understanding yourself and others. If you don’t know
how you feel or why you feel that way, you won’t be able to communicate effectively or
smooth over disagreements.
Although knowing your own feelings may seem simple, many people ignore or try to
sedate strong emotions like anger, sadness, and fear. But your ability to handle conflict
depends on being connected to these feelings.
If you’re afraid of strong emotions or if you insist on finding solutions that are strictly
rational, your ability to face and resolve differences will be impaired.
Skill 3: Improve your nonverbal communication skills



The most important information exchanged during conflicts and arguments is often
communicated nonverbally. Nonverbal communication includes eye contact, facial
expression, tone of voice, posture, touch, and gestures.
When you’re in the middle of a conflict, paying close attention to the other person’s
nonverbal signals may help you figure out what the other person is really saying, respond
in a way that builds trust, and get to the root of the problem.
Simply nonverbal signals such as a calm tone of voice, a reassuring touch, or a concerned
facial expression can go a long way toward defusing a heated exchange.
Skill 4: Use humor and play to deal with challenges



You can avoid many confrontations and resolve arguments and disagreements by
communicating in a playful or humorous way.
Humor can help you say things that might otherwise be difficult to express without
creating a flap. [MunaBhai….]
However, it’s important that you laugh with the other person, not at them. When humor
and play are used to reduce tension and anger, reframe problems, and put the situation
into perspective, the conflict can actually become an opportunity for greater connection
and intimacy.
Lecture 23
The Classical Model
Classical Model of Decision Making is a prescriptive model of decision making that assumes the decision
maker can identify and evaluate all possible alternatives and their consequences and rationally choose the
most appropriate course of action.
It is a prescriptive model that tells how the decision should be made.


It assumes that managers have access to all the information needed to reach a decision.
Managers can then make the optimum decision by easily ranking their own preferences
among alternatives.
Steps of Decision Making Process:
Following are the important steps of the decision making process. Each step may be supported bydifferent
tools and techniques.
Step 1: Identification of the purpose of the decision:
In this step, the problem is thoroughly analysed. There are a couple of questions one should ask
when it comes to identifying the purpose of the decision.
 What exactly is the problem?
 Why the problem should be solved?
 Who are the affected parties of the problem?
 Does the problem have a deadline or a specific time-line?
Step 2: Information gathering:
A problem of an organization will have many stakeholders. In addition, there can be dozens of
factors involved and affected by the problem.
In the process of solving the problem, you will have to gather as much as information related to
the factors and stakeholders involved in the problem. For the process of information gathering,
tools such as 'Check Sheets' can be effectively used.
Step 3: Principles for judging the alternatives:
In this step, the baseline criteria for judging the alternatives should be set up. When it comes to
defining the criteria, organizational goals as well as the corporate culture should be taken into
consideration.
As an example, profit is one of the main concerns in every decision making process. Companies
usually do not make decisions that reduce profits, unless it is an exceptional case. Likewise,
baseline principles should be identified related to the problem in hand.
Step 4: Brainstorm and analyse the different choices:
For this step, brainstorming to list down all the ideas is the best option. Before the idea
generation step, it is vital to understand the causes of the problem and prioritization of causes.
For this, you can make use of Cause-and-Effect diagrams and Pareto Chart tool. Cause-andEffect diagram helps you to identify all possible causes of the problem and Pareto chart helps
you to prioritize and identify the causes with highest effect.
Then, you can move on generating all possible solutions (alternatives) for the problem in hand.
Step 5: Evaluation of alternatives:
Use your judgment principles and decision-making criteria to evaluate each alternative. In this
step, experience and effectiveness of the judgment principles come into play. You need to
compare each alternative for their positives and negatives.
Step 6: Select the best alternative:
Once you go through from Step 1 to Step 5, this step is easy. In addition, the selection of the best
alternative is an informed decision since you have already followed a methodology to derive and
select the best alternative.
Step 7: Execute the decision:
Convert your decision into a plan or a sequence of activities. Execute your plan by yourself or
with the help of subordinates.
Step 8: Evaluate the results:
Evaluate the outcome of your decision. See whether there is anything you should learn and then
correct in future decision making. This is one of the best practices that will improve your
decision-making skills.
The rational model proposes that people follow a rational, four step sequence when making decisions.
The four steps are:




Identifying the problem
Generating solutions
Selecting a solution
Implementing and evaluating the solution
Some of the limitations not considered in this model are issues such as not having enough information
relevant to the problem and also the fact that problems can change in a short period of time.
Assumptions are that decision makers




Decision makers are perfectly rational, fully objective, and logical.
Have carefully defined the problem and identified all viable alternatives.
Have a clear and specific goal
Decision makers will select the alternative that maximizes outcomes in the organization’s
interests rather than in their personal interests.
Assumptions of Rationality
Bounded Rationality
In bounded rationality, managers make decisions rationally, but are limited (bounded) by their ability to
process information.
Assumptions are that decision makers


Will not seek out or have knowledge of all alternatives
Will satisfice—choose the first alternative encountered that satisfactorily solves the
problem—rather than maximize the outcome of their decision by considering all
alternatives and choosing the best.
Lecture 24
Intuition
Intuition is receiving input and ideas without knowing exactly how and where you got them
from. You simply know it is not from yourself. Like creativity, intuitive inspiration often
happens when someone virtually «fuses» in an activity, when one is highly focused on the
respective activity in a state of joy and fulfillment. Intuition can be trained and in its highest level
leads into a conscious contact with non-incarnated beings, a process usually called channeling.
Intuitive decision making
Decisions are made on the basis of experience, feelings, and accumulated judgment.
Types of Problems and Decisions
Structured Problems



Involve goals that are clear.
Are familiar (have occurred before).
Are easily and completely defined—information about the problem is available and
complete.
a) Programmed Decision
A repetitive decision that can be handled by a routine approach
Types of Programmed Decisions
Policy
Policy is a general guideline for making a decision about a structured problem.
Procedure
Procedure is a series of interrelated steps that a manager can use to respond (applying a policy) to a
structured problem.
Rule
Rule is an explicit statement that limits what a manager or employee can or cannot do.
Unstructured Problems


Problems that are new or unusual and for which information is ambiguous or incomplete.
Problems that will require custom-made solutions.
b) Non-programmed Decisions
 Decisions that is unique and nonrecurring.
 Decisions that generate unique responses.
Programmed versus Non programmed Decisions
Programmed Decisions are made using a rule, procedure, or quantitative method.



The problems have probably happened multiple of times when someone had to make a
decision consistently, like what to do about reordering inventory.
Can make decisions based on prior experience.
It's normally the same, like a routine.
Non-programmed



Decisions deal
with
the
unusual
or
exceptional
situations.
Special cases are cases that people have to deal with, not machines.
These types of decisions might have not been addressed before.
Require a custom made solution.
Decision-Making Conditions
Certainty
Certainty is a situation in which a manager can make an accurate decision because the outcome of every
alternative choice is known.
Risk
Risk is a situation in which the manager is able to estimate the likelihood (probability) of outcomes that
result from the choice of particular alternatives.
Uncertainty
Limited information prevents estimation of outcome probabilities for alternatives associated with the
problem and may force managers to rely on intuition, hunches, and “gut feelings”.



Maximax: the optimistic manager’s choice to maximize the maximum payoff
Maximin: the pessimistic manager’s choice to maximize the minimum payoff
Minimax: the manager’s choice to minimize maximum regret.
Types of Decision Makers
a) Directive
Use minimal information and consider few alternatives.
b) Analytic
Make careful decisions in unique situations.
c) Conceptual
Maintain a broad outlook and consider many alternatives in making decisions.
d) Behavioral
Avoid conflict by working well with others and being receptive to suggestions.
Decision-Making Biases and Errors
a) Heuristics
Uses “rules of thumb” to simplify decision making.
b) Overconfidence Bias
One holds unrealistically positive views of one’s self and one’s performance.
c) Immediate Gratification Bias
In Immediate Gratification Bias, one Chooses alternatives that offer immediate rewards and that to avoid
immediate costs.
d) Anchoring Effect
Fixating on initial information and ignoring subsequent information.
e) Selective Perception Bias
Selecting organizing and interpreting events based on the decision maker’s biased perceptions.
f) Confirmation Bias
In confirmation biases, decision makers seek out information that reaffirms past choices and discounting
contradictory information.
g) Framing Bias
Selecting and highlighting certain aspects of a situation while ignoring other aspects.
h) Availability Bias
Availability bias Loses decision-making objectivity by focusing on the most recent events.
i) Representation Bias
Drawing analogies and seeing identical situations when none exist.
j) Randomness Bias
Randomness bias creates unfounded meaning out of random events.
k) Sunk Costs Errors
In sunk costs errors, one Forgets that current actions cannot influence past events and relate only to future
consequences.
l) Self-Serving Bias
Taking quick credit for successes and blaming outside factors for failures.
m) Hindsight Bias
Mistakenly believing that an event could have been predicted once the actual outcome is known (afterthe-fact).
Habits of highly reliable organizations (HROs)
Following are some Habits of highly reliable organizations (HROs)




Are not tricked by their success.
Let unexpected circumstances provide the solution.
Embrace complexity.
Anticipate, but also anticipate their limits.
Characteristics of an Effective Decision-Making Process





It focuses on what is important.
It is logical and consistent.
It acknowledges both subjective and objective thinking and blends analytical with
intuitive thinking.
It requires only as much information and analysis as is necessary to resolve a particular
dilemma.
It is straightforward, reliable, easy to use, and flexible.
Lecture 25
Leadership
Leadership is the process where a person exerts influence over others and inspires, motivates
anddirects their activities to achieve goals.
Effective leadership increases the firm’s ability to meet new challenges.
Leader
The person who leads or commands a group, organization, or country
Personal Leadership Style
Personal Leadership Styleisthe ways leaders choose to influence others.Some leaders delegate and
support subordinates, others are very authoritarian.Managers at all levels have their own leadership style.
Leadership styles may vary over different cultures.


European managers tend to be more people-oriented than American or Japanese
managers.
Japanese culture is very collective oriented, while American focuses more on
profitability.
Time horizons also are affected by cultures.


U.S. firms often focus on short-run efforts.
Japanese firms take a longer-term outlook.
Sources of Power of leader
Used to affect other’s behavior and get them to act in given ways.
a. Legitimate Power
Legitimate power of manager is authority resulting by their management position in the firm.Can be
power to hire/fire workers, assign work.
b. Reward Power
Reward power is based on the manager’s ability to give or withhold rewards.Pay raises, bonuses, verbal
praise.Effective managers use reward power to signal employees they are doing a good job.
c. Coercive Power
Coercive power is based in ability to punish others.It ranges from verbal reprimand to pay cuts to firing.It
can have serious negative side effects.
d. Expert Power
Expert power is based on special skills of leader.


First & middle managers have most expert power.
Often found in technical ability.
e. Referent Power
It results from personal characteristics of the leader which earn worker’s respect, loyalty and admiration.

Usually held by likable managers who are concerned about their workers.
Empowerment
Empowerment is the process of giving workers at all levels authority to make decisions and the
responsibility for their outcomes. Empowerment helps managers:
Leadership Models
Trait Model
Leadership trait theory focuses on the leader’s values and beliefs; personality; need for achievement or
acceptance; orientation to power; gender; confidence; and mental, physical, and emotional attributes.
Early leadership trait theory assumed that people were born with specific traits and that some traits
aligned with strong leadership. People with the “right” traits would become the best leaders.
Trait Model soughs to identify personal characteristics responsible for effective leadership. Research
shows that traits do appear to be connected to effective leadership. Many “traits” are the result of skills
and knowledge. Not all effective leaders possess all these traits.
Behavioral Model
As the questions about how to measure traits continued to challenge trait theory, researchers began
thinking about measuring behavior. While you can’t easily measure confidence or loyalty in a person,
they noted, you can define a behavior or a set of behaviors that seem to embody the trait. Researchers
define behaviors as observable actions, which makes measuring them more scientifically valid than trying
to measure a human personality trait.
Behavioral theory contains some very different assumptions from trait theory. Trait theory assumes that a
leader is bornwith specific traits that make him or her good leader.
Behavioral theory, on the other hand, assumes that you can learn to become a good leader because you are
not drawing on personality traits. Your actions—what you do—define your leadership ability.
Behavioral Model Identifies types of behavior.
Consideration: leaders show care toward workers.
Employee-centered
Initiating Structure meansmanagers take steps to make sure work is done.


Done by assigning work, setting goals, etc.
Job-oriented.
Contingency Models
Fred Fiedler developed what is known as the Contingency Model of Leadership. He is famous
for being the first management theorist to say that leadership effectiveness depends on the
situation. The most astounding thing is that nobody else seems to have thought of that before
Fred, which says a lot about academics and management theorists. Every manager would have
known it.
Fiedler’s (1967) contingency theory holds that situational factors interact with leader traits and
behavior to influence leadership effectiveness. According to Fiedler, is no ideal leadership
behaviour. Both task-oriented and relationship-oriented leaders can be effective if their
orientation (favorability) fits the situation. Favorability is determined by



Leader-Member Relations – the respect and trust that followers have for the leader
Task Structure – the extent to which subordinates’ responsibilities can be structured and
performance measured
Leader Position Power – the control the leader has over subordinates’ rewards
Situation characteristicshows how favorable a given situation is for leading to occur.
Leader-member relations:determines how much workers like and trust their leader.
Task structuredescribes theextent to which workers tasks are clear-cut.
 Clear issues make a situation favorable for leadership.
Position Powerentails theamount of legitimate, reward, & coercive power a leader has due to
their position.

When positional power is strong, leadership opportunity becomes more favorable.
Using Fiedler’s Model
Fielders’ model can combine leader-member relations, task structure, and position power to
identify leadership situations. It identifies situations where given types of managers might
perform best.
Leader-Substitute Model
Leadership substitute: acts in the place of a leader and makes leadership unnecessary. Possible
substitutes can be found:



Characteristics of Subordinates: their skills, experience, motivation.
Characteristics of context: the extent to which work is interesting and fun.
Worker empowerment or Self-managed work teams reduce leadership needs.
Managers need to be aware that they do not always need to directly exert influence over workers.
Transformational Leadership
Transformational managers make subordinates aware of how important their jobs are by providing
feedback to the worker. They make subordinates aware of their own need for personal growth and
development. They stress on empowerment of workers, added training help. Transformational leaders
engage in development of workers. Transformational leaders openly share information with workers.
Transformational leaders are charismatic and have a vision of how good things can be.
Transactional Leadership
Transactional leaders Involve managers in activities using the reward and coercive power to encourage
high performance and to attain organizational goals. Managers who push subordinates to change but do
not seem to change themselves are transactional.The transactional manager does not have the “vision” of
the Transformational leader.
Gender and Leadership
The number of women managers is rising but still relatively low in top levels.Stereotypes suggest women
are supportive and concerned with interpersonal relations. Similarly, men are seen as taskfocused.Research indicates that actually there is no gender-based difference in leadership
effectiveness.However, women are seen to be more participative than men.
Lecture 26
The Manager: Omnipotent or Symbolic?
Omnipotent View of Management
Managers are directly responsible for an organization’s success or failure. The quality of the
organization is determined by the quality of its managers. Managers are held accountable for an
organization’s performance. Yet it is difficult to attribute good or poor performance directly to
their influence on the organization.
Much of an organization’s success or failure is due to external forces outside of managers’
control. The ability of managers to affect outcomes is influenced and constrained by external
factors. Among them are the economy, customers, governmental policies, competitors, industry
conditions, technology, and the actions of previous managers. Managers symbolize control and
influence through their action.
The Organization’s Culture
Organizational Culture is a system of shared meanings and common beliefs held by
organizational members that determines, in a large degree, how they act towards each other. The
way we do things around here are values, symbols, rituals, myths, and practices
Implications:



Culture is a perception.
Culture is shared.
Culture is descriptive.
Dimensions of Organizational Culture
Strong versus Weak Cultures
Strong Cultures are cultures in which key values are deeply held and widely held. they have a
strong influence on organizational members.
Factors Influencing the Strength of Culture





Size of the organization
Age of the organization
Rate of employee turnover
Strength of the original culture
Clarity of cultural values and beliefs
Benefits of a Strong Culture





Creates a stronger employee commitment to the organization.
Aids in the recruitment and socialization of new employees.
Fosters higher organizational
performance by instilling and
Promotes employee initiative.
Organizational Culture
Sources of Organizational Culture
a) The organization’s founder
 Vision and mission
b) Past practices of the organization
 The way things have been done
c) The behavior of top management
Continuation of the Organizational Culture
Recruitment of like-minded employees who “fit” helps in continuation of organizational culture.
Also socialization of new employees to help them adapt to the culture
Organizational Culture Profile
Benefits of Strong Corporate Cultures
Strong
Organizational
Culture
Social
Control
Social
Glue
Improves
Sense-Making
Strengthening Organizational Culture
Strong versus Weak Organizational Cultures
How Employees Learn Culture
a) Stories
Narratives of significant events or actions of people that convey the spirit of the organization
b) Rituals
Repetitive sequences of activities that express and reinforce the values of the organization
c) Material Symbols
Physical assets distinguishing the organization
d) Language
Acronyms and jargon of terms, phrases, and word meanings specific to an organization
How Culture Affects Managers
Cultural Constraints on Managers



Whatever managerial actions the organization recognizes as proper or improper on its
behalf
Whatever organizational activities the organization values and encourages
The overall strength or weakness of the organizational culture
Contingencies of Org Culture & Performance
Strong organizational cultures do not always result in higher organizational performance
because:
1. Culture content might be misaligned with the organization’s environment.
2. Strong cultures may focus on mental models that could be limiting
3. Strong cultures suppress dissenting values from subcultures.
How an Organization’s Culture Is Established and Maintained
Lecture 27
Socialization
It is a process of adaptation to a new work role. Adjustments must be made whenever individuals
change jobs
The assumptions of employee socialization:
Socialization strongly influences employee performance and organizational stability. It provides
information on how to do the job and ensuring organizational fit. New members suffer from
anxiety, which motivates them to learn the values and norms of the organization.
The Socialization Process
a) Pre arrival stage
Individuals arrive with a set of values, attitudes and expectations which they have developed
from previous experience and the selection process.
b) Encounter stage
Individuals discover how well their expectations match realities within the organization. Where
differences exist, socialization occurs to influence the employee with the organization’s
standards.
c) Metamorphosis stage
Individuals have adapted to the organization, feel accepted and know what is expected of them.
Managerial Decisions Affected by Culture
Following are some factors that affect managerial decisions
a) Planning
 The degree of risk that plans should contain
 Whether plans should be developed by individuals or teams
 The degree of environmental scanning in which management will engage
b) Organizing
 How much autonomy should be designed into employees’ jobs
 Whether tasks should be done by individuals or in teams
 The degree to which department managers interact with each other
c) Leading
 The degree to which managers are concerned with increasing employee job satisfaction
 What leadership styles are appropriate
 Whether all disagreements—even constructive ones—should be eliminated
d) Controlling
 Whether to impose external controls or to allow employees to control their own actions
 What criteria should be emphasized in employee performance evaluations
 What repercussions will occur from exceeding one’s budget
Organization Culture Issues
Following are some organizational culture issues
a) Creating an Ethical Culture
 High in risk tolerance
 Low to moderate aggressiveness
 Focus on means as well as outcomes
b) Creating an Innovative Culture
 Challenge and involvement
 Freedom
 Trust and openness
 Playfulness/humor
 Conflict resolution
 Debates
 Risk-taking
Suggestions for Managers: Creating a More Ethical Culture





Be a visible role model.
Communicate ethical expectations.
Provide ethics training.
Visibly reward ethical acts and punish unethical ones.
Provide protective mechanisms so employees can discuss ethical dilemmas and report
unethical behavior without fear.
c) Creating a Customer-Responsive Culture
 Hiring the right type of employees (ones with a strong interest in serving customers)
 Having few rigid rules, procedures, and regulations
 Using widespread empowerment of employees
 Having good listening skills in relating to customers’ messages
 Providing role clarity to employees to reduce ambiguity and conflict and increase job
satisfaction
 Having conscientious, caring employees willing to take initiative
Spirituality and Organizational Culture
Workplace Spirituality
Workplace spirituality is the recognition that people have an inner life that nourishes and is
nourished by meaningful work that takes place in the context of community.
Characteristics of a Spiritual Organization





Strong sense of purpose
Focus on individual development
Trust and openness
Employee empowerment
Toleration of employees’ expression
Benefits of Spirituality
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Improved employee productivity
Reduction of employee turnover
Stronger organizational performance
Increased creativity
Increased employee satisfaction
Increased team performance
Increased organizational performance
Defining the External Environment
External Environment
External Environment is those factors and forces outside the organization that affect the
organization’s performance.
Components of the External Environment
Specific environment
External forces that have a direct and immediate impact on the organization that affect the
organization
General environment
Broad economic, socio-cultural, political/legal, demographic, technological, and global
conditions that may affect the organization
The External Environment
How the Environment Affects Managers
Environmental Uncertainty
The extent to which managers have knowledge of and are able to predict change their
organization’s external environment is affected by:


Complexity of the environment: the number of components in an organization’s external
environment.
Degree of change in environmental components: how dynamic or stable the external
environment is.
Stakeholder Relationships
Stakeholders
Any constituencies in the organization’s environment that are affected by the organization’s
decisions and actions
Why Manage Stakeholder Relationships?
It can lead to improved organizational performance. It’s the “right” thing to do given the
interdependence of the organization and its external stakeholders.
Managing Stakeholder Relationships
1.
2.
3.
4.
Identify the organization’s external stakeholders.
Determine the particular interests and concerns of the external stakeholders.
Decide how critical each external stakeholder is to the organization.
Determine how to manage each individual external stakeholder relationship.
Organizational Stakeholders
Lecture 28
What Is Social Responsibility?
The Classical View States that management’s only social responsibility is to maximize profits
(create a financial return) by operating the business in the best interests of the stockholders
(owners of the corporation). Expending the firm’s resources on doing “social good” unjustifiably
increases costs that lower profits to the owners and raises prices to consumers.
The Socioeconomic View
Management’s social responsibility goes beyond making profits to include protecting and
improving society’s welfare. Corporations are not independent entities responsible only to
stockholders. Firms have a moral responsibility to larger society to become involved in social,
legal, and political issues.“ To do the right thing”
To whom is Management Responsible?
From Obligation to Responsiveness to Responsibility
Social Obligation

The obligation of a business to meet its economic and legal responsibilities and nothing
more.
Social Responsiveness

When a firm engages in social actions in response to some popular social need.
Social Responsibility

A business’s intention, beyond its legal and economic obligations, to do the right things
and act in ways that are good for society.
For example
Managerial Ethics
Ethics is defined by the Principles, values, and beliefs that define what is right and wrong
behavior.
Factors That Affect Ethical and Unethical Behavior
Factors That Affect Employee Ethics
Moral Development
It is a measure of independence from outside influences
Levels of Individual Moral Development
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Pre-conventional level
Conventional level
Principled level
Stage of moral development interacts with:
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Individual characteristics
The organization’s structural design
The organization’s culture
The intensity of the ethical issue
Stages of Moral Development
Factors That Affect Employee Ethics
Moral Development
Research Concludes that
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People proceed through the stages of moral development sequentially.
There is no guarantee of continued moral development.
Most adults are in Stage (“good corporate citizen”).
Individual Characteristics Affecting Ethical Behaviors
Values
Values are Basic convictions about what is right or wrong on a broad range of issues
Personality Variables
Ego strength
A personality measure of the strength of a person’s convictions
Locus of Control
A personality attribute that measures the degree to which people believe they control their own
life.
Internal locus: the belief that you control your destiny.
External locus: the belief that what happens to you is due to luck or chance.
Structural Variables
Structural variables are organizational characteristics and mechanisms that guide and influence
individual ethics:
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Performance appraisal systems
Reward allocation systems
Behaviors (ethical) of managers
Determinants of Issue Intensity
How Managers Can Improve Ethical Behavior in An Organization
1. Hire individuals with high ethical standards.
2. Establish codes of ethics and decision rules.
3. Lead by example.
4. Set realistic job goals and include ethics in performance appraisals.
5. Provide ethics training.
6. Conduct independent social audits.
7. Provide support for individuals facing ethical dilemmas.
Lecture 29
Managing in a Global Environment
Q1: What’s your global perspective?
I’m not going to work for a large corporation. Why should I care about the ins and outs of
managing globally?
Three global attitudes
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Ethnocentric Attitude
Polycentric Attitude
Geocentric Attitude
a) Ethnocentric Attitude
The best work approaches and practices are those of the home country.
b) Polycentric Attitude
The host country knows the best work approaches and practices for running their business.
c) Geocentric Attitude
A world-oriented view that focuses on using the best approaches and people from around the
globe.
Key Information about Three Global Attitudes
Adopting a Global Perspective
The world today is a much smaller place. “If you are not thinking international, you are not
thinking business management.”
Global mindset:
“Broad, wholesome, charitable views of men and things cannot be acquired by vegetating in one
corner of the earth all one’s lifetime” ----Mark Twain
Reasons for engaging in international business:
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Profits
Customers
Suppliers
Capital
Labor
The Global Marketplace
Opportunities and Challenges
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Coping with the sudden appearance of new competitors
Acknowledging cultural, political, and economic differences
Dealing with increased uncertainty, fear, and anxiety
Adapting to changes in the global environment
Regional Trading Agreements
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The European Union (EU)
North American Free Trade Agreement (NAFTA)
U.S.-Central America Free Trade Agreement (CAFTA)
Free Trade Area of the Americas
The World Trade Organization (WTO)
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Evolved from the General Agreement on Tariffs and Trade (GATT) in 1995.
Functions as the only global organization dealing with the rules of trade among nations.
Has 149 member nations and 32 observer governments.
Monitors and promotes world trade.
Q2: What are different Types of International Organizations?
Different Types of International Organizations
Multinational Corporation (MNC)

Maintains operations in multiple countries
What’s the difference?
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Multi-domestic Corporation
Global Company
Transnational Corporation (Borderless Organization)
Born Global/International New Ventures (INVs)
Multi-domestic Corporation
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Decentralizes management and other decisions to the local country.
Gives foreign operations more freedom to operate as separate entities
Global Company
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Centralizes its management and other decisions in the home country.
Seeks total integration of global operations
Transnational Corporation (Borderless Organization)

Eliminated structural divisions that impose artificial geographic barriers and is organized
along business lines that reflect a geocentric attitude.
Born Global/International New Ventures (INVs)

Commit resources upfront (material, people, financing) to doing business in more than one
country.
Alternative multinational structures for global operations.
Q3: How organizations go global?
Common forms of international business–from market entry to direct investment
strategies.
Market entry strategies involve the sale of goods or services to foreign markets but do not require
expensive investments.
Types of market entry strategies:
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Global sourcing
Exporting
Importing
Licensing agreement
Franchising
Direct investment strategies require major capital commitments but create rights of ownership
and control over foreign operations.
Types of direct investment strategies:
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Joint ventures
Wholly owned subsidiaries
Lecture 30
Global outsourcing
Purchasing materials or labor from around the world wherever it is cheapest
Examples of Global outsourcing
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labor-intensive manufactured products produced using low-cost Chinese labor
Call centers staffed with low-cost English speaking workers in the Philippines and India
IT work performed by low-cost programmers in India and Eastern Europe
But what exactly does global sourcing entail?
Global sourcing entails identifying, evaluating, negotiating and configuring supply across
multiple geographies to reduce costs, maximize performance and mitigate risks.
Exporting and importing
Exporting: making products domestically and selling them abroad.
Importing: acquiring products made abroad and selling them domestically.
Examples: Galanz
Licensing and Franchising
Licensing and Franchising means practicing and using another person's business philosophy

Franchisor, franchisee
The franchisor grants the independent operator the right to distribute its products, techniques,
and trademarks for a percentage of gross monthly sales and a royalty fee

Example: 7 Eleven
Strategic alliances and joint venture
Strategic Alliances
Partnerships between an organization and a foreign company in which both share resources and
knowledge in developing new products or building new production facilities
Joint Venture
A specific type of strategic alliance in which the partners agree to form a separate, independent
organization for some business purpose.
Foreign Subsidiary
Directly investing in a foreign country by setting up a separate and independent production
facility or office.
How to Manage in a Global Environment?
Managing in a Global Environment
The Legal Environment
Stability or instability of legal and political systems
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Legal procedures are established and followed
Fair and honest elections held on a regular basis
Differences in the laws of various nations
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Effects on business activities
Effects on delivery of products and services
The Economic Environment
Economic Systems
Market economy
An economy in which resources are primarily owned and controlled by the private sector.
Command economy
An economy in which all economic decisions are planned by a central government.
Monetary and Financial Factors
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Currency exchange rates
Inflation rates
Diverse tax policies
The Cultural Environment
National Culture
National Culture is the values and attitudes shared by individuals from a specific country that
shape their behavior and their beliefs about what is important. May have more influence on an
organization than the organization culture.
Hofstede’s Framework for Assessing Cultures
Individualism
versus
Collectivism
Long-Term
versus
Short-Term
Orientation
Power
Distance
Culture
Achievement
versus
Nurturing
Uncertainty
Avoidance
How countries compare on Hofstede’s dimensions of national culture.
Global Management in Today’s World
Challenges
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Openness associated with globalization
Significant cultural differences (e.g., Americanization)
Adjusting leadership styles and management approaches
Risks
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Loss of investments in unstable countries
Increased terrorism
Economic interdependence