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Summary Management - Richard L. Daft
Principles of Management (University of Melbourne)
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Summary
Management
Daft, Richard L.
10th Edition
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Contents
1. Innovative Management for turbulent times ..................................................................................... 6
1.1. Why innovation matters............................................................................................................... 6
1.2. The definition of management ..................................................................................................... 6
1.4. Organizational Performance ........................................................................................................ 6
1.5. Management skills........................................................................................................................ 7
1.6. Management types ...................................................................................................................... 7
1.6.1. Vertical differences ............................................................................................................... 8
1.6.2. Horizontal differences ........................................................................................................... 8
1.7. What is it like to be a manager..................................................................................................... 8
1.7.1. Making the leap: becoming a new manager ......................................................................... 8
1.7.2. Manager Activities & Roles ................................................................................................... 9
1.8. Managing in small businesses and non-profit organizations ....................................................... 9
1.9. Management and the new workplace ....................................................................................... 10
1.3. The four management types ...................................................................................................... 11
2. The evolution of management thinking ............................................................................................ 12
2.1. Management and organization .................................................................................................. 12
2.2. Classical perspective................................................................................................................... 12
2.3. Humanistic perspective .............................................................................................................. 13
2.4. Quantitative science perspective ............................................................................................... 14
2.5. Recent historical trends.............................................................................................................. 14
2.6. Innovative management thinking for a changing world ............................................................ 15
3. The environment and corporate culture ........................................................................................... 16
3.1. The external environment .......................................................................................................... 16
3.2. The organization-environment relationship .............................................................................. 17
3.2.1. Environmental uncertainty.................................................................................................. 17
3.2.2. Adapting to the environment .............................................................................................. 17
3.3. The internal environment: corporate culture ............................................................................ 18
3.4. Environment and culture............................................................................................................ 18
3.5. Shaping corporate culture for innovative response ................................................................... 19
4. Managing in a global environment.................................................................................................... 21
4.1. A borderless world ..................................................................................................................... 21
4.2. Getting started internationally ................................................................................................... 21
4.3. The international business environment ................................................................................... 22
4.4. The economic environment ....................................................................................................... 22
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4.5. The legal-political environment ................................................................................................. 23
4.6. The sociocultural environment .................................................................................................. 23
4.7. International trade alliances ...................................................................................................... 24
4.8. Multinational corporations ........................................................................................................ 24
4.9. Managing in a global environment ............................................................................................ 25
4.10. Serving the bottom of the pyramid .......................................................................................... 25
5. Managing ethics and social responsibility ......................................................................................... 27
5.1. What is managerial ethics? ........................................................................................................ 27
5.2. Ethical dilemmas: what would you do? ..................................................................................... 27
5.3. Criteria for ethical decision-making ........................................................................................... 28
5.4. Manager’s ethical choices .................................................................................................... 29
5.5. What is corporate social responsibility? .................................................................................... 29
5.6. The ethic of sustainability and the natural environment ........................................................... 30
5.7. Evaluating corporate social responsibilities ............................................................................... 30
5.8. Managing company ethics and social responsibility .................................................................. 30
6. Small business start ups .................................................................................................................... 32
6.1. What is entrepreneurship? ........................................................................................................ 32
6.2. Entrepreneurship today ............................................................................................................. 32
6.3. Who are entrepreneurs? ............................................................................................................ 33
6.4. Social entrepreneurship ............................................................................................................. 33
6.5. Launching an entrepreneurial start-up ...................................................................................... 33
6.6. Managing a growing business .................................................................................................... 35
7. Planning and goal setting .................................................................................................................. 35
7.1. Overview of the goal-setting and planning process ................................................................... 36
7.2. Goal-setting in organizations...................................................................................................... 36
7.3. Operational planning .................................................................................................................. 37
7.4. Benefits and limitations of planning .......................................................................................... 38
7.5. Planning for a turbulent environment ....................................................................................... 38
7.6. Innovative approaches to planning ............................................................................................ 39
8. Strategy formulation and execution ................................................................................................. 40
8.1. Thinking strategically .................................................................................................................. 40
8.2. What is strategic management? ................................................................................................ 40
8.3. The strategic management process ........................................................................................... 41
8.4. Formulating corporate-level strategy ........................................................................................ 41
8.5. Formulating business-level strategy........................................................................................... 42
8.6. Formulating functional-level strategy ........................................................................................ 43
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8.7. New trends in strategy ............................................................................................................... 44
8.8. Global strategy ........................................................................................................................... 44
8.9. Strategy execution...................................................................................................................... 44
9. Managerial decision making .............................................................................................................. 46
9.1. Types of decisions and problems ............................................................................................... 46
9.2. Decision-making models ............................................................................................................ 47
9.3. Decision-making steps ................................................................................................................ 48
9.4. Personal decision framework ..................................................................................................... 49
9.5. Why do managers make bad decisions? .................................................................................... 49
9.6. Innovative group decision making ............................................................................................. 50
10. Designing adaptive organizations.................................................................................................... 51
10.1. What are your leadership beliefs? ........................................................................................... 51
10.2. Organizing the vertical structure .............................................................................................. 51
10.3. Departmentalization ................................................................................................................ 52
10.4. Organizing for horizontal coordination .................................................................................... 54
10.5. Factors shaping structure ......................................................................................................... 55
11. Managing Change and innovation................................................................................................... 57
11.1. Innovation and the changing workplace .................................................................................. 57
11.2. Changing things: new products and technologies ................................................................... 57
11.3. Changing people and culture ................................................................................................... 59
11.4. Implementing change ............................................................................................................... 60
12. Human resource management........................................................................................................ 61
12.1. Getting the right people on the bus ......................................................................................... 61
12.2. The strategic role of HRM is to drive organizational performance .......................................... 61
12.3. The impact of federal legislation on HRM ................................................................................ 62
12.4. The changing nature of careers................................................................................................ 62
12.5. Finding the right people ........................................................................................................... 63
12.6. Managing talent ....................................................................................................................... 64
12.7. Maintaining an effective workforce ......................................................................................... 65
13. Managing diversity .......................................................................................................................... 67
13.1. The changing workplace ........................................................................................................... 67
13.2. Managing diversity ................................................................................................................... 67
13.3. Factors shaping personal bias .................................................................................................. 68
13.4. Factors affecting women's careers........................................................................................... 69
13.5. Cultural competence ................................................................................................................ 69
13.6. Diversity initiatives and programs ............................................................................................ 70
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13.7. New diversity initiatives ........................................................................................................... 71
14. Understanding individual behavior ................................................................................................. 72
14.1. Are you self-confident? ............................................................................................................ 72
14.2. Organizational behavior ........................................................................................................... 72
14.3. Attitudes ................................................................................................................................... 73
14.4. Perception ................................................................................................................................ 73
14.4.1. Perceptual selectivity ........................................................................................................ 74
14.4.2. Perceptual distortion ......................................................................................................... 74
14.4.3. Attributions ....................................................................................................................... 74
14.5. Personality and behavior.......................................................................................................... 75
14.6. Emotions................................................................................................................................... 76
14.7. Learning .................................................................................................................................... 76
14.8. Stress and stress management ................................................................................................ 77
15. Leadership ....................................................................................................................................... 77
15.1. The nature of leadership .......................................................................................................... 78
15.2. Contemporary leadership......................................................................................................... 78
15.3. From management to leadership ............................................................................................. 78
15.4. Leadership traits ....................................................................................................................... 78
15.5. Behavioral approaches ............................................................................................................. 79
15.6. Contingency approaches .......................................................................................................... 80
15.7. Charismatic and transformational leadership .......................................................................... 80
15.8. Followership ............................................................................................................................. 81
15.9. Power and influence................................................................................................................. 82
16. Motivating employees ..................................................................................................................... 84
16.1. The concept of motivation ....................................................................................................... 84
16.2. Content perspectives on motivation ........................................................................................ 84
16.3. Process perspective on motivation .......................................................................................... 86
16.4. Reinforcement perspective on motivation .............................................................................. 87
16.5. Social learning theory ............................................................................................................... 88
16.6. Job design for motivation ......................................................................................................... 88
16.7. Innovative ideas for motivation ............................................................................................... 89
17. Managing communication............................................................................................................... 91
17.1. Communication is the manager’s job ................................................................................. 91
17.2. Communicating among people ................................................................................................ 91
17.3. Organizational communication ................................................................................................ 92
17.4. Workplace communication ...................................................................................................... 94
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18. Leading teams ................................................................................................................................. 95
18.1. Why teams at work? ................................................................................................................ 95
18.2. How to make teams effective .................................................................................................. 96
18.3. Types of teams ......................................................................................................................... 96
18.4. Innovative uses of teams .......................................................................................................... 97
18.5. Team characteristics................................................................................................................. 98
18.6. Team processes ........................................................................................................................ 98
18.7. Managing team conflict............................................................................................................ 99
18.8. Work team effectiveness ....................................................................................................... 101
19. Managing quality and performance .............................................................................................. 102
19.1. The meaning of control .......................................................................................................... 102
19.2. Feedback control model ......................................................................................................... 103
19.3. Financial control ..................................................................................................................... 104
19.4. The changing philosophy of control ....................................................................................... 105
19.6. Trends in quality and financial control ................................................................................... 106
19.5. Total quality management ..................................................................................................... 106
20. Appendix: Managing the value chain, web 2.0, and e-business ................................................... 108
20.1. The organization as a value chain .......................................................................................... 108
20.1.1. Service and manufacturing operations ........................................................................... 108
20.1.2. Supply chain management .............................................................................................. 109
20.2. Facilities layout ....................................................................................................................... 109
20.3. Technology automation ......................................................................................................... 110
20.4. Inventory management .......................................................................................................... 110
20.4.1. Knowledge management and Web 2.0 ........................................................................... 111
20.5. The internet and e-business ................................................................................................... 112
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1. Innovative Management for turbulent
times
Management is the attainment of organizational goals in an effective and efficient
manger. The four management functions include planning, organizing, leading and
controlling and are discussed in this chapter. Managers need conceptual, human and
technical skills and there are different types of management responses to the rapid
change of today’s environment.
1.1. Why innovation matters
Management is the attainment of organizational goals in an effective and efficient
manger. The four management functions include planning, organizing, leading and
controlling and are discussed in this chapter. Managers need conceptual, human and
technical skills and there are different types of management responses to the rapid
change of today’s environment.
1.2. The definition of management
Management is the attainment of organizational goals in an effective and efficient
manner.
Rather than having specific tasks, managers are responsible for creating and
coordinating an entire system. A good manager motivates his employees and keeps
them focused and productive. They also have to be able to recognize the role and
importance of other people.
Management: The attainment of organizational goals in an effective and efficient
manner through planning, organizing, leading and controlling organizational resources.
1.4. Organizational Performance
The other part of management is the attainment of organizational goals in an
efficient and effective manner. An Organization is a social entity that is goal directed
and deliberately structured.
The other part of the definition of management is the attainment of organizational
goals in an efficient and effective manner. Management and organizations are so
important because they bring together knowledge, people and raw materials to
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perform task no individual could do alone.
Organization: a social entity that is goal directed and deliberately structured. A social
entity means being made up of two people and more. Goal directed means designed
to achieve some outcome, such as making profit. Deliberately structured means that
tasks are divided and organization members get the responsibility of the task
performance.
Effectiveness: the degree to which the organization achieves a stated goal. For
example: providing a product clients value.
Efficiency: The use of minimal resources – raw materials, money and people – to
produce a desired volume of output. Efficiency can be calculated as the amount of
resources used to produce a product or service.
1.5. Management skills
A manager's job requires conceptual, human and technical skills, they are described
in this section.
A manager’s job is complex and requires a range of skills according to Katz:
Conceptual skills: the cognitive ability to see the organization as a whole system and
the relationships among its parts. These skills involve the manager’s thinking,
information processing and planning abilities. It also means thinking strategically, like
viewing in the long-term and the ability to identify and solve complex problems.
Human skills: the ability to work with and through other people and to work
effectively as a group member. This means the managers behaviour towards the
employees, for example how he communicates to- or motives his employees.
Technical skills: the understanding of and proficiency in the performance of specific
tasks. Technical skills include among others specialized knowledge and analytical
ability.
If managers are not able to apply all their skills this can result in poor performance of
the company. For example at Home Depot the manager was unable to build a team
characterized by trust and respect, resulting in employees afraid to tell the truth about
the real performance of the company.
1.6. Management types
An important determinant of the manager’s job is hierarchical level. Top, middle and
first line managers have different responsibilities.
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1.6.1. Vertical differences
An important determinant of the manager’s job is hierarchical level. Top, middle and
first line managers have different responsibilities.
Top manager: a manager who is at the top of the organizational hierarchy and is
responsible for the entire organization. They are responsible for setting goals, defining
and achieving strategies, monitoring and making decisions that affect the entire
organization.
Middle manager: a manager who works at the middle levels of the organization and is
responsible for business units and major departments. They are responsible for
implementing the strategies and policies defined by top management and they are
generally concerned with the near future rather than long term planning. The position
of the middle manager has escalated because of the growing use of teams and
projects.
Project manager: a manager responsible for a temporary work project that involves the
participation of other people from various functions and levels of the organization.
First-line manager: a manager who is at the first or second management level and is
directly responsible for the production of goods and services. They have titles like
supervisor and they are responsible for groups on non-management employees. Their
concern is to apply the rules to achieve efficient production.
1.6.2. Horizontal differences
The other major difference in management jobs occurs horizontally across the
organization.
Functional manager: a manager who is responsible for a department that performs a
single functional task and has employees with similar training and skills. Sales, finance
and human resources are examples of functional departments.
General Manager: a manager who is responsible for several departments that perform
different functions.
1.7. What is it like to be a manager
The key to success in becoming a managers involves more than learning a new set of
skills, you need to work on your personal identity as well.
1.7.1. Making the leap: becoming a new manager
Linda Hill found that the key to success is to recognize that becoming a manager
involves more than learning a new set of skills. Rather, becoming a manager means a
profound transformation in the way people think of themselves, called personal
identity, which includes letting go of deeply attitudes and habit and learning new ways
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of thinking. The main transformations in becoming a manager from individual to
manager are:




Specialist
Getting things done on your own
Individual actor
Work relatively independently
manner
--> generalist
--> getting thing done through others
--> network builder
-->works in highly interdependent
1.7.2. Manager Activities & Roles
Managers have to deal with a great variety in activities at a fast pace. For example
attending meetings, planning the day, responding to mail, take phone calls and
monitor the employees. Mintzberg observed managers of a mail company and found
out that diverse manager activities can be organized in ten roles.
Role: A set of expectations for one’s behavior.
Informational
Interpersonal
Decisional
• Monitor (seek and receive • Figurehead (ceremonial
• Entrepeneur (new ideas)
information)
and symbolic duties)
• Disseminator (forward
information)
•Leader (direct and
motivate subordinates)
•Disturbance handler
(resolve conflict)
• Disseminator (forward
information)
•Liaison (maintain
information inside and
outside the organization)
•Resource allocator
(allocate resources)
• Negotiator (negotiating
& bargaining)
Informational roles describe the activities used to maintain and develop an
information network. The interpersonal roles relate to relationships with others and
involve human skills. The decisional roles relate to making decisions and taking action
and involve both conceptual as well as human skills.
1.8. Managing in small businesses and non-profit organizations
Managing a large corporation and a small business is different from each other.
In small businesses managers often see the spokesperson role as important because
they have to promote the company to the world. Also the entrepreneurial role is very
important in small businesses because managers have to be innovative in order to
compete. Managers in non-profit organizations also use the same management
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talents; they only focus on other goals like keeping operational cost low. In this case
monitoring results is a lot harder because the results are usually intangible.
1.9. Management and the new workplace
Environmental shifts have changed the fundamentals of a manager's job into the new
workplace.
Environmental shifts like changes in technology change the fundamentals of a
manager’s job.
The new workplace
The old workplace
Forces
Technology
Focus
Workforce
Pace
Events
Digital
Global
Diverse
Change, speed
Turbulent, frequent
crises
Mechanical
Local, domestic markets
Homogenous
Stability, efficiency
Calm, predictable
Characteristics
Recources
Information, knowledge Physical assets
Work
Flexible, virtual
Structured, localized
Workforce
Empowered employees
Loyal employees
Empowering
Autocratic
Management
competencies
Leadership
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Doing work
By teams
By individuals
Relationships
Collaboration
Conflict, competition
Design
Experimentation,
learning
Top-down control
Companies often hire an interim manager while working with a team. This enables
them to benefit from special skills without making a long-term commitment.
Interim manager: A manager who is not affiliated with a specific organization but
works on a project-by-project basis or provides expertise to organizations in a specific
area.
Because of these transitions mangers have to rethink their approach in organizing,
directing and motivating employees. For example they have to:




Empower their leadership style
Focus on collaborative relationships
Focus on team-building skills
Build learning organizations
1.3. The four management types
The four management styles include planning, organizing, leading and controlling.




Planning: the management function concerned with defining goals for future
organizational performance and deciding on the tasks and resources needed to
attain them. For example, at Time Warner the marketing chiefs of the various
divisions are getting together every three weeks to talk about future projects
and how the divisions can work to together in making all projects more
successful.
Organizing: the management function concerned with assigning tasks, grouping
tasks into departments, and allocating resources to departments. In other
words, how the organization is going to accomplish its plan.
Leading: the management function that involves the use of influence to
motivate employees to achieve the organization’s goals. This implies for
example that the manager has to communicate goals, create a shared culture
and motivate employees to perform at a high level.
Controlling: the management function concerned with monitoring employees’
activities, keeping the organization on track toward its goals, and making
corrections as needed. During the process the manager has to ensure the
company is moving towards its goals.
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2. The evolution of management thinking
Social, political and economic forces have influenced the practice of management.
There are three different perspectives explained is this chapter, the classical, the
humanistic and the management science perspective. Recent trends discussed
include systems theory, contingency view and total quality management.
2.1. Management and organization
Social, political and economic forces influence the practise of management.
Social, political and economic forces have influenced organizations and the practice of
management.
Social forces: the aspects of a culture that guide and influence relationships among
people – their values, needs, and standards of behaviour. An example is the difference
between generation X (employees in their thirties/forties) and generation Y (young
workers). Generation X employees have had their impact on the workplace but
generation Y might have even more, they aren’t hesitant to question their superiors
and challenge the status quo.
Political forces: the influence of political and legal institutions on people and
organizations, for example contract- and property rights.
Economic forces: forces that affect the availability, production, and distribution of a
society’s resources among competing users.
2.2. Classical perspective
The classical perspective of management includes three subfields: scientific
management, bureaucratic organizations and administrative principles.
The early study of management as we know it today began with the so called classical
perspective. Classical perspective: a management perspective that emerged during the
nineteenth and early twentieth centuries that emphasized a rational, scientific
approach to the study of management and sought to make organizations efficient
operating machines. This perspective contains 3 subfields:

Scientific management: a subfield of the classical management perspective that
emphasized scientifically determined changes in management practices as the
solution to improving labour productivity. This approach implied, developing
standard measures, select workers with the appropriate abilities, train them,
support them and provide their wage. However this approach ignored the
social context and worker’s needs. The father of this subfield was Taylor he
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

suggested “In the past the man has been first. In the future, the system must be
first”. Other important pioneers: Gantt (Gantt chart), Frank and Lilian Gilbreth
(time and motion study)
Bureaucratic organizations: a subfield of the classical management perspective
that emphasized management on an impersonal, rational basis through such
elements as clearly defined authority and responsibility, formal record-keeping,
and separation of management and ownership. M. Weber introduced most of
the concepts on bureaucratic organizations; he believed that an organization
would be more efficient and adaptable to change if it was based on rational
authority.
Administrative principles: A subfield of the classical management perspective
that focuses on the total organization rather than the individual worker,
delineating the management functions of planning, organizing, commanding,
coordinating and controlling. Contributors were Henry Fayol (14 general
principles of management & 5 basic functions), Mary Parker Follett and Chester
I. Barnard (informal organization, acceptance theory of authority).
2.3. Humanistic perspective
The humanistic perspective has three subfields discussed in this paragraph: human
relations movement, human resources perspective and behavioural sciences
approach.
Humanistic perspective: a management perspective that emerged near the late
nineteenth century and emphasized understanding human behaviour, needs, and
attitudes in the workplace. This perspective has three subfields:

Human relations movement: a movement in management thinking and practice
that emphasizes satisfaction of employees’ basic needs as the key to increased
worker productivity. This movement was inspired by the Hawthorne studies: a
series of experiments on worker productivity begun in 1924 at the Hawthorne
plant of Western Electric Company in Illinois; attributed employees’ increased
out-put to managers’ better treatment of them during the study. From this
study they found that human relations best explained increased output.
Employees performed better when managers treated them in a positive
manner. Later they found out money was the may well have been the single
most important factor. Researches realize that the researcher can influence the
outcome of an experiment by being too closely involved with research
subjects, nowadays called the Hawthorne effect.
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

Human resources perspective: a management perspective that suggests jobs
should be designed to meet higher- level needs by allowing workers to use
their full potential. Abraham Maslow and Douglas McGregor (Theory X & Y)
were the main contributors to this perspective.
Behavioural sciences approach: a subfield of the humanistic management
perspective that applies social science in an organizational context, drawing
from economics, psychology, sociology and other disciplines. One specific
technique in this field is the organization development (OD); they applied
behavioural science to improve the organizations health and effectiveness.
Theory Y
Theory X
•The average human being does not
inherently dislike work
•The average human being dislikes work
• Therefore they must be controlled or
threatened with punishment
• The average human being prefers to be directed
• A person will exercise self-control if he/she
is committed
• The average human being learns to seek
responsibility
• The capacity to be creative is widely
distributed in the population
• Under the condition of modern industrial
life, the potentialities of human beings are
only partly utilized
2.4. Quantitative science perspective
The quantitative science perspective is a perspective that applies mathematics,
statistics and other quantitative techniques to managerial problems.
Quantitative science perspective: A management perspective that emerged after
World War II and applied mathematics, statistics and other quantitative techniques to
managerial problems (also called management science).
2.5. Recent historical trends
Systems thinking, contingency view and total quality management are recent trends
that grew out of the humanistic perspective.
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Three recent trends that grew out of the humanistic perspective:

Systems thinking: an extension of the humanistic perspective that describes
organizations as open systems characterized by entropy, synergy and
subsystem interdependence. It consists of 5 components: inputs, a
transformation process, outputs, feedback and the environment. A System: is a
set of interrelated parts that function as a whole to achieve a common
purpose. Some ideas in this theory significantly affected management thinking:
o Synergy: the concept that the whole is greater than the sum of its parts.
Organizational units can accomplish more working together than alone.
o Subsystem: parts of a system that depends on one another for their
functioning.

Contingency view: an extension of the humanistic perspective in which the
successful resolution of organizational problems is thought to depend on
managers’ identification of key variations in the situation at hand. So
management concepts were no longer universal, managers had to adapt their
methods per situation, because what might work in one situation might nog
work in another.
Total quality management (TQM): a concept that focuses on managing the total
organization to deliver quality to customers. Four significant elements of TQM
are employee involvement, focus on the customer, benchmarking (find out how
others do something better they you do) and continuous improvement.
Nowadays TQM is still important, six sigma is a TQM approach that is still used.

2.6. Innovative management thinking for a changing world
Recent trends include customer relationship management, outsourcing and supply
chain management.
Three popular recent trends are customer relationship management, outsourcing and
supply chain management.



Customer relationship management: systems that help companies track
customers’ interaction with the firm and allow employees to call up information
on past transactions.
Outsourcing: contracting out selected functions or activities of an organization
to other organizations that can do the work more cost-efficiently.
Supply chain management: managing the sequence of suppliers and purchasers,
covering all stages of processing from obtaining raw materials to distributing
finished goods to final customers.
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3. The environment and corporate culture
An organization has an internal and an external environment. The external
environment includes the general environment and the task environment. This
chapter also describes strategies to adapt their organization in case of uncertainty:
boundary-spanning roles, inter-organizational partnerships and mergers. Culture is
an important aspect of the internal environmental and the fundamental values can
be understood through visible manifestations.
3.1. The external environment
The external environment consists of the general environment and the task
environment, this chapter discusses the dimensions of both environments.
Each organization has two environments, the internal environment: the environment
that includes the elements within the organizations boundaries which can be
employees, management and corporate culture and the external organizational
environment: includes all elements existing outside the organizations boundaries that
have the potential to affect the organization. This environment has 2 layers:

General environment: the layer of the external environment that affects the
organization indirectly, it includes social, demographic and economic factors.
Consists of the:
o International dimension: represents events originating in foreign
countries as well as opportunities for US companies in other countries.
It represents a context that influences all other aspects of the external
environment. It provides new competitors, customers and suppliers, and
shapes social, technological and economic trends.
o Technological dimension: includes scientific and technological
advancements in the industry and society at large.
o Sociocultural dimension: represents the demographic characteristics,
norms, values and customs of the population within which the
organization operates. For example it includes geographical distribution,
population density, and age and education levels.
o Economic dimension: represents the overall economic health of the
country or region in which the organization operates. For example;
consumer purchasing power, unemployment rate and interest rates.
o Legal-political dimension: includes federal, state and local government
regulations and political activities designed to influence company
behaviour. Managers must consider a variety of pressure groups: an
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
interest group that works within the legal-political framework to
influence companies to behave in socially responsible ways.
o Natural dimension: includes all elements that occur naturally on earth,
including plants, animals, rocks and natural resources such as air, water
and climate. This dimension has no voice of its own, so there is a lot of
concern by pressure groups.
Task environment: the layer of the external environment that directly influences
the organizations operations and performance. In includes:
o Customers: people and organizations in the environment who acquire
goods or services from the organization.
o Competitors: other organizations in the same industry or type of
business that provide goods or services to the same set of customers.
o Suppliers: people and organizations who provide the raw materials in the
organizations uses to produce its output.
o Labour market: the people available for hire by the organization. Every
organization needs a supply of trained, qualified personnel.
3.2. The organization-environment relationship
Boundary-spanning roles, inter-organizational partnerships, mergers and joint
ventures are strategies to adopt to face uncertainty.
3.2.1. Environmental uncertainty
Uncertainty means that managers do not have enough information about
environmental factors to understand and predict environmental needs and changes.
3.2.2. Adapting to the environment
If an organization faces uncertainty they can use several strategies to adapt:


Boundary-spanning roles: roles assumed by people and/or departments that link
and coordinate the organization with key elements in the external
environment. They detect and process information about changes in the
environment, and they represent the organizations interest to the
environment. For example; the use of business intelligence, this is software
that searches to large amounts of data to spot patterns, trends and
relationships. Another growing area is competitive intelligence; which are
activities to get as much information about you rivals.
Inter-organizational partnerships: companies reduce their boundaries and
increase collaboration with other organizations in order to become more
effective and to share resources. Manager’s shift from an adversarial
orientation to a partnership orientation, the new paradigm is based on trust
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
and the ability of partners to work out equitable solutions to conflicts so that
everyone profits.
Mergers: the combining of 2 or more organizations into one or joint ventures: a
strategic alliance or program by 2 or more organizations. A joint venture
typically occurs when a project is too complex, uncertain or expensive for one
company to handle alone.
3.3. The internal environment: corporate culture
The internal environment is defined by its culture and can be understood through
visible manifestations like symbols and stories.
Managers have to think about culture because it plays a significant role in
organizational success.
Culture: the set of key values, beliefs, understandings and norms that members of an
organization share. Culture can be analysed at 3 levels:
1. (Visible) artefacts: all the things you can observe by watching members of the
organization. For examples: office layout, symbols, slogans and ceremonies
2. (Invisible) expressed values and beliefs, which can be discerned from how people
explain and justify what they do.
3. (Invisible) underlying assumptions and deep beliefs are the essence of culture and
subconsciously guide behaviour and decisions. The fundamental values can be
understood through visible manifestations of:





Symbol: an object, act or event that conveys meaning to others. For example;
logos, buildings, office layout, cars and job titles, language used within the
company.
Stories: a narrative based on true events and repeated frequently and shared
among organizational employees.
Heroes: a figure who exemplifies the deeds, character and attributes of a strong
corporate culture. Heroes are role models for employees to follow.
Slogans: a phrase of sentence that succinctly expresses a key corporate value.
Ceremonies: a planned activity at a special event that is conducted for the
benefit of an audience.
3.4. Environment and culture
There are four kinds of culture, adaptability, achievement, involvement and
consistency.
Research has found evidence that the relationship between corporate culture and
external environment is critical. In adaptive cultures managers are concerned about
customers and those internal people and processes that bring about useful change. In
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the unadaptive corporate cultures, managers are concerned about themselves, and
their values tend to discourage risk taking and change.
In considering what cultural values are important, managers consider the external
environment and the company’s strategy and goals. The categories are based on 2
dimensions:
1. The extent to which the external environment requires flexibility or stability.
2. The extent to which a company’s strategic focus is internal or external.




Adaptability culture: a culture characterized by values that support the
company’s ability to interpret and translate signals from the environment into
new behaviour responses.
Achievement culture: a results-oriented culture that values competitiveness,
personal initiative and achievement.
Involvement culture: a culture that places high on meeting the needs of
employees and values cooperation and equality.
Consistency culture: a culture that values and rewards a methodical, rational,
orderly way of doing things.
3.5. Shaping corporate culture for innovative response
This section presents the four organizational outcomes based on the relative
attention managers pay to cultural values and business performance.
Companies that succeed in a turbulent world are those that pay careful attention to
both cultural values and business performance. The following exhibit illustrates four
organizational outcomes based on the relative attention managers pay to cultural
values and business performance.
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Quadrant D represents the high performance culture: a culture based on a solid
organizational mission or adaptive values to guide decisions and business practices
and to encourage individual employee ownership of bottom line results and the
organization’s cultural backbone.
Cultural leader: a manger that uses signals and symbol to influence corporate culture,
which they do in 2 key areas:
1. The cultural leader articulates a vision for the organizational culture that employees
can believe in.
2. The cultural leader heeds the day-to-day activities that reinforce the cultural
vision.
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4. Managing in a global environment
The process of globalization includes the domestic, international, multinational and
global stage, each described in this chapter. Exporting, global outsourcing, licensing
and direct investing are strategies in entering international markets. The economic,
legal-political and sociocultural environments differ for every country and are
important to notice when going international.
4.1. A borderless world
The domestic, international, multinational and global stage are stages in the process
of globalization.
Business has also become a unified, global field. Globalization: refers to the extent to
which trade and investments, information, social and cultural ideas, and political
cooperation flow between countries. The process of globalization passes through 4
stages:




Domestic stage: market potential is limited to the home country, with all
production and marketing facilities located at home.
International stage: exports increase and the company usually adopts a multidomestic approach, meaning that competition is handled for each country
independently.
Multinational stage: the company has marketing and production facilities
located in many countries, with more than one-third of its sales outside the
home country, a globalization approach is adopted.
Global (or stateless) stage: these corporations operate in true global fashion,
making sales and acquiring resources in whatever country offers the best
opportunities at lowest costs.
4.2. Getting started internationally
Exporting, global outsourcing, licensing and direct investing are strategies in entering
international markets.
Market entry strategy: an organizational strategy for entering a foreign market.
Strategies to enter international markets are:

Exporting: an entry strategy in which the organization maintains its production
facilities within its home country and transfers its products for sale in foreign
countries. A form of exporting to less-developed countries is
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


called countertrade: the barter of products for other products rather than their
sale for currency.
Global outsourcing (or offshoring): engaging in the international division of
labour so as to obtain the cheapest sources of labour and supplies regardless of
country.
Licensing: an entry strategy in which an organization in one country makes
certain resources available to companies in another to participate in the
production and sale of its products abroad. A special form of licensing
is franchising: a form of licensing in which an organization provides its foreign
franchisees with a complete package of materials and services.
Direct investing: an entry strategy in which the organization is involved in
managing its production facilities in a foreign country. 3 forms of direct
investment:
o The most popular type of direct investing is a joint venture: a variation of
direct investing in which an organization shares costs and risks with
another firm to build a manufacturing facility, develop new products or
set up a sales and distributions network.
o Wholly owned foreign affiliate: a foreign subsidiary over which an
organization has complete control.
o The most costly and risky direct investment is called a Greenfield
venture: whereby a company builds a subsidiary from scratch in a
foreign country.
4.3. The international business environment
International management is the management of business operations conducted in
more than one country.
International management: the management of business operations conducted in more
than one country. The key factors that influence international environment are the
economic environment, the legal-political environment and the sociocultural
environment.
4.4. The economic environment
The economic environment categorizes countries in developing or developed by
among others infrastructure.
This represents the economic conditions in the country where the international
organizations operate. Countries can be categorized as either developing or
developed. Developing countries are referred to as less-developed countries; this is
classified by per capita income (nation’s product divided by total population). One
important factor in assessing competitiveness is the country’s infrastructure: physical
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facilities that support economic activities. For example: airports and telephone lines.
Also the exchange rate, the rate at which one countries currency is exchanged for
another country, is an important factor.
4.5. The legal-political environment
Political risk and instability are important aspects of the legal-political environment
and they are discussed here.
Political risk: a company’s risk of loss of assets, earning power or managerial control
due to politically based events or actions by host governments. Another problem for
international companies is political instability: events such as riots, revolutions or
government upheavals that affect the operations of an international company.
Differing laws and regulations also make doing business a true challenge for
international firms.
4.6. The sociocultural environment
Hofstede's value dimensions include power distance, uncertainty avoidance,
individualism and masculinity.
Hofstede’s value dimensions:




Power distance: the degree to which people accept inequality in power among
institutions, organizations and people.
Uncertainty avoidance: a value characterized by people’s intolerance for
uncertainty and ambiguity and resulting support for beliefs that promise
certainty and conformity.
Individualism and collectivism: Individualism: a preference for a loosely knit
social framework in which individuals are expected to take care of
themselves, collectivism: a preference for a tightly knit social framework in
which individuals look after one another and organizations protect their
member’s interests
Masculinity/femininity. Masculinity: a cultural preference for heroism,
assertiveness, works centrality and material success. Femininity: a cultural
preference for relationships, cooperation, group decision-making and quality of
life.
Later a fifth dimension was identified: long-term orientation: a greater concern for the
future and high value on thrift and perseverance, versus short-term orientation: a
concern with the past and present and a high value on meeting social obligations.
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In addition to the ones identified by Hofstede, the GLOBE project identifies the
following characteristics:





Assertiveness
Future orientation
Gender differentiation
Performance orientation
Humane orientation
Emphasis on social context varies among countries some are high-context culture: a
culture in which communication is used to enhance personal relationships and some
are low-context culture: a culture in which communication is used to exchange facts
and information.
Other cultural characteristics that influence international organizations are language,
religion, social organization, education and attitudes. For example; instrumental
attitude: employees are treated as a resource to be used, or humanistic attitude:
people are valued as an end in themselves rather than as a means to an end. Another
attitude is ethnocentrism: a cultural attitude marked by the tendency to regard one’s
own culture as superior to others.
4.7. International trade alliances
The development of regional trading alliances and international trade agreements are
recent trends in the international business environment.
One of the most visible changes in the international business environment in recent
years has been the development of regional trading alliances and international trade
agreements.




Gatt (General agreement on tariffs and trade)
European Union
NAFTA (North American Free Trade Agreement)
Chin-ASEAN free trade area
4.8. Multinational corporations
A multinational Corporation is an organization that receives more than 25% of its
total sales revenues from operations outside the parent company’s home country, its
characteristics are described in this paragraph.
Multinational Corporation (MNC): an organization that receives more than 25% of its
total sales revenues from operations outside the parent company’s home country, also
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called global corporation or transnational corporation. MNCs have distinctive
managerial characteristics:
1. An MNC is managed as an integrated worldwide business system in which
foreign affiliates act in close alliance and cooperation with one another.
2. An MNC is ultimately controlled by a single management authority that makes
key strategic decisions relating to the parent and all affiliates.
3. MNC top managers are presumed to exercise a global perspective.
Ethnocentric companies: which place emphasis on their home countries.
Polycentric companies: which are oriented toward the markets of individual foreign
host countries.
Geocentric companies: which are truly world oriented and favour no specific country.
4.9. Managing in a global environment
Cultural intelligence is a person's ability to use reasoning and observation skills to
interpret unfamiliar gestures and situations, it includes three components: cognitive,
emotional and physical aspects.
Managers will be most successful in foreign assignment if they are culturally flexible,
in other words they need cultural intelligence: a person’s ability to use reasoning and
observation skills to interpret unfamiliar gestures and situations and device
appropriate behavioural responses. Developing a high level of CQ enables a person to
interpret unfamiliar situations and adapt quickly. Cultural intelligence includes 3
components:
1. Cognitive component: involves a person’s observational and learning skills and the
ability to pick up clues.
2. Emotional aspect: concerns one’s self-confidence and self-motivation.
3. Physical aspect: refers to a person’s ability to shift his or her speech patterns,
expressions and body language to be in tune with people from a different culture.
Culture shock: feelings of confusion, disorientation and anxiety that result from being
immersed in a foreign culture.
To be effective on an international level, managers need to interpret the culture of the
country and organization in which they are working and develop the sensitivity
required to avoid making blunders.
4.10. Serving the bottom of the pyramid
The bottom of the pyramid concept is the idea that large corporations can both
alleviate social problems and make a profit by selling goods and services to the
world’s poorest people.
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Bottom of the pyramid concept (BOP): the idea that large corporations can both
alleviate social problems and make a profit by selling goods and services to the world’s
poorest people. Traditionally these people are not served by large companies because
products and services are too expensive. This concept has two motives; make money
and play a role in addressing global problems such as poverty or environment
destruction. Social enterprises are a form of BOP, they are organizations that make
money and plough it back into social or environmental goals.
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5. Managing ethics and social
responsibility
Ethics is the code of moral principles and values that governs the behaviours of a
person or group with respect to what is right or wrong, four relevant approaches in
ethical decisions making include: utilitarian, individualism, moral-rights and justice
approach. The chapter also describes the four general categories that summarize
corporate social responsibility; the obligation of an organization’s management to
make decisions and take actions that will enhance the welfare and interests of
society as well as the organization.
5.1. What is managerial ethics?
Ethics are the code of moral principles and values that govern the behaviours of a
person or group with respect to what is right or wrong, it falls into three categories
described here.
Ethics: the code of moral principles and values that governs the behaviours of a
person or group with respect to what is right or wrong. In a situation where an action
or a person can harm the organization or benefit others an ethical issue is present.
Human behavior falls into three categories:
1. Domain of codified law (legal standard)
2. Domain of ethics (social standard)
3. Domain of free choice (personal standard)
5.2. Ethical dilemmas: what would you do?
An ethical dilemma is a situation that arises when all alternative choices or
behaviours are deemed undesirable because of potentially negative consequences,
making it difficult to distinguish right from wrong.
Ethical dilemma: a situation that arises when all alternative choices or behaviours are
deemed undesirable because of potentially negative consequences, making it difficult
to distinguish right from wrong. The person that has to make an ethical decision is
called a moral agent.
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5.3. Criteria for ethical decision-making
The four relevant approaches in ethical decision making are the utilitarian, the
individualism, the moral-rights and the justice approach.
There are 4 relevant approaches for managers:






Utilitarian approach: the ethical concept that moral behaviours produce the
greatest goods for the greatest number. This means picking the alternative that
benefits the greatest number of people.
Individualism approach: the ethical concept that acts are moral when they
promote the individuals best long-term interests.
Moral-rights approach: the ethical concept that moral decisions are those that
best maintain the rights of those people affected by them. So managers need
to avoid interfering with the fundamental rights of others. Six moral rights
should be considered when making a decision.
o The right of free consent
o The right to privacy
o The right of freedom of conscience
o The right of free speech
o The right to due process
o The right to life and safety
Justice approach: the ethical concept that moral decisions must be based on
standards of equity, fairness and impartiality. There are 3 types of justices:
o Distributive justice: the concern that different treatment of people
should not be based on arbitrary characteristics. In the case of
substantive differences, people should be treated differently in
proportion to the difference among them.
o Procedural justice: the concept that rules should be clearly stated and
consistently and impartially enforced.
o Compensatory justice: the concept that individuals should be
compensated for the cost of their injuries by the party responsible and
also that individuals should not be held responsible for matters over
which they have no control.
Virtue ethics approach: the ethical concept that says that moral behaviour
stems from personal virtues.
Practical approach: sidesteps debates about what is right, good, or just and
bases decisions on prevailing standards of the profession and the larger
society, taking the interest of all stakeholders into account.
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5.4. Manager’s ethical choices
A manager value system is shaped at pre-conventional, conventional and postconventional level.
A manager’s value system can be shaped by things like personal needs or religious
background. There are 3 stages of moral development:



Pre-conventional: individuals are concerned with external rewards and
punishments and obey authority to avoid detrimental personal consequences
Conventional: people learn to conform to the expectations of good behaviour
as defined by colleagues, family, friends and society.
Post-conventional: also called principled level, individuals are guided by an
internal set of values based on universal principles of justice and right and will
even disobey rules or laws that violate these principles.
5.5. What is corporate social responsibility?
Corporate social responsibility means distinguishing right from wrong and doing
right, the four general categories that summarize CSR are presented in this section.
Corporate social responsibility (CSR): the obligation of an organization’s management
to make decisions and take actions that will enhance the welfare and interests of
society as well as the organization. In other words, distinguishing right from wrong
and doing right. There are four general categories that summarize what constitutes
CSR:




Instrumental theories which focus on profit maximization, and therefore
consider CSR simply in terms of impact on profit maximization.
Political theories which ascribe responsibilities to organizations as part of the
social contract or ‘license to operate’ that it assumes exists between business
and society.
Integrative theories which suggest that the long-term success and profitability
or organizations is closely allied to the well-being of society.
Ethical theories which apply ethics on organizations and deduct the
responsibility of firms from universal and/or conventional norms and values
and fundamental principles.
Managers have to ask themselves, ‘whom am I responsible to?’ to understand and
apply CSR. From this perspective managers view their environment as a variety of
stakeholders they have to be responsible to.
Stakeholder: any group within or outside the organization that has a stake in the
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organization’s performance. For example: shareholders, investors, employees,
customers.
5.6. The ethic of sustainability and the natural environment
Sustainability is the economic development that generates wealth and meets the
needs of the current population while preserving the environment for the needs of
future generations.
Going green has become a new business imperative, driven by shifting social
attitudes, new governmental policies etc. These and other corporations
embrace sustainability: economic development that generates wealth and meets the
needs of the current population while preserving the environment for the needs of
future generations
5.7. Evaluating corporate social responsibilities
Economic, legal, ethical and discretionary responsibility are criteria in evaluating CSR.
Another model for evaluating CSR is divided in four primary criteria




Economic (or classical) responsibility: be profitable (extreme form: profitmaximizing view)
Legal responsibility: obey the law.
Ethical responsibility: do what is right, avoid harm.
Discretionary responsibility: is purely voluntary and is guided by a company’s
desire to make social contributions not mandated by economics, law or ethics.
5.8. Managing company ethics and social responsibility
There several ways of ways in which managers can create and support an ethical
origination like ethical leadership, code of ethics and others which are highlighted in
this paragraph.
There are several ways of ways in which managers can create and support an ethical
origination:

Ethical leadership: managers are honest and trustworthy.

Code of ethics: a formal statement of the organization’s values regarding ethics
and social issues, they tend to exist in 2 types:
o Principle-bases standards: designed to affect corporate culture, define
fundamental values and contain general language about company
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



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responsibilities, quality of products and treatment of employees, often
called corporate credos.
o Policy-based statements: generally outline the procedures to be used in
specific ethical situations.
Ethics committee: a group of executives assigned to oversee the organization’s
ethics by ruling on questionable issues and disciplining violators.
Chief ethics officer: a company executive who oversees ethics and legal
compliance.
Ethics hotlines
Ethics training: training programs to help employees deal with ethical questions
and values.
Support for whistle-blowers: the disclosure by an employee of illegal, immoral
or illegitimate practice by the organization. For this practice to be effective,
companies must see whistle-blowing as a benefit to the company and make
effort to protect the whistle-blower.
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6. Small business start ups
Entrepreneurship is the process of initiating a business venture, organizing the
necessary resources and assuming the associate risks and rewards. In this chapter
the six important characteristics of entrepreneurship are described. The steps in
launching an entrepreneurial start-u include coming up with a viable idea, setting up
a business plan, choosing a legal structure, arranging finances and the last step is to
pick tactics.
6.1. What is entrepreneurship?
Entrepreneurship is the process of initiating a business venture, organizing the
necessary resources and assuming the associated risks and rewards. There are
several categories of small business owners which are described in this paragraph.
Entrepreneurship: the process of initiating a business venture, organizing the
necessary resources and assuming the associated risks and rewards.
Entrepreneur: someone who recognizes a viable idea for a business product or service
and carries it out by finding and assembling the necessary resources to undertake the
business venture. One of the fastest growing segments of small business is one-owner
operations, called sole proprietorships.
Small business owners are sometimes classified in five different categories.





Idealists: rewarded by the chance to work on something new and creative
Optimizers: personal satisfaction from being a business owner
Hard workers: enjoy the challenged to build a larger, more profitable business.
Jugglers: like the chance a small business gives them to handle everything
themselves.
Sustainers: enjoy balancing work and personal life.
6.2. Entrepreneurship today
Entrepreneurship is still increasingly important for the economy because they are an
engine for job creation and innovation.
Despite the recent economic turbulence, entrepreneurship is still increasingly
important for the economy. They are an engine for job creation and innovation.
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6.3. Who are entrepreneurs?
Internal locus of control, high energy level, need to achieve, self-confidence,
awareness of passing time and tolerance for ambiguity are characteristics of
entrepreneurs.
Entrepreneurs are often people that are unhappy with their current job and see an
opportunity or have a vision for a new venture. There are 6 important characteristics
of entrepreneurs:






Internal locus of control: the belief by individuals that their future is within their
control and that external forces have little influence. The opposite is external
locus of control: is the belief by individuals that their future is not within their
control but rather is influenced by external forces.
High energy level.
Need to achieve: people are motivated to excel and pick situations in which
success is likely.
Self-Confidence.
Awareness of passing time.
Tolerance for ambiguity: is the psychological characteristic that allows a person
to be
untroubled by disorder and uncertainty.
6.4. Social entrepreneurship
A social entrepreneur is committed to both good business and positive social change.
Social entrepreneur: entrepreneurial leaders who are committed to both good business
and positive social change. They create new business models that meet critical human
needs and solve important problems that remain unsolved by current economic and
social institutions. Their primary goal is improving society rather maximizing profit.
6.5. Launching an entrepreneurial start-up
The steps in launching an entrepreneurial start-u include coming up with a viable
idea, setting up a business plan, choosing a legal structure, arranging finances and the
last step is to pick tactics.
1. The first step in becoming an entrepreneur is to come up with a viable idea.
2. Step two is to carefully plan by setting up a business plan: a document specifying
the business details prepared by an entrepreneur prior to opening a new business.
3. The third step is to choose a legal structure, there are three basis choices:
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


Sole proprietorship: an unincorporated business owned by an individual for
profit. It is easy to start and has few legal requirements, the drawback however
is that the owner has unlimited liability for the business, so your business as
well as your personal assets are at risk.
Partnership: an unincorporated business owned by two or more people. This is
also relatively easy to start but also in a partnership you have unlimited liability
and the possibility of disagreement among partners is very high.
Corporation: an artificial entity created by the state and existing apart from its
owners. The advantage are continuity and limited liability, on the other hand
it’s expensive and complex to create a corporation.
4. The next step is to arrange your financing. There are two options in the financing
decision:


Debt financing: borrowing money that has to be repaid at a later date. An
example is angel financing: angels are wealthy individuals, typically with
business experience and contact, who believe in the idea for the stat-up and
are willing to invest their personal fund to help the business get started.
Equity financing: this financing method consists of funds that are invested in
exchange for ownership in the company and money invested by the owners.
An example of equity financing is investing by a venture capital firm: a group of
companies or individuals that invests money in new or expanding business for
ownership and potential profits.
5. The last step is to pick your tactics how to become an entrepreneur:




Start a new business, the advantage here is that you can design and develop
the business in your own way. The disadvantage is that it is risky and it takes a
long time to start up and make profit.
Buy an existing business, in this way you reduce risk and start up time. The
disadvantage is the need to pay for goodwill and the existing business may
have bad habits and procedures or outdated technology, which may be why
the business if for sale.
Buy a franchise: is an arrangement by which the owner of a product or service
allows others to purchase the right to distribute the product or service with
help from the owner. The advantage is that management help is provided by
the owner however you have limited control, it can be expensive and you have
high start-up costs and monthly payments.
Participate in a business incubator: typically provides shard office space,
management support services, and management and legal advice to
entrepreneurs.
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In order to start an online business you should take the following steps:
1.
2.
3.
4.
Find a nice market
Create a professional website
Choose a domain name
Build online relationships
6.6. Managing a growing business
The five stages of growth include, start-up, survival, success, take off and resource
maturity.
There are five stages of growth for an entrepreneurial company:





Start-up: main problems are producing and obtaining customers.
Survival: business is a workable entity, main problems are generating sufficient
money to run the business and making sure revenues exceed expenses.
Success: the company is solidly based and profitable.
Take-off: main problem is how to grow rapidly and finance that growth.
Resource maturity: the company has the staff and financial resources to begin
acting like a mature company with detailed planning and control systems.
The management functions of planning, organizing, leading and controlling should be
tailored to each stage of growth.
7. Planning and goal setting
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A goal is a desired future state that the organization attempts to realize, a plan is a
blueprint for goal achievement and specifies the necessary the resource allocations,
schedules, tasks, and other actions. This chapter descries the different layers of goals
and plans and the benefits and limitations of them. Innovative approaches in
planning include stretch goals, performance dashboards and intelligence teams.
7.1. Overview of the goal-setting and planning process
A goal is a desired future state that the organization attempts to realize, a plan is
a blueprint for goal achievement and specifies the necessary the resource
allocations, schedules, tasks, and other actions.
One of the primary responsibilities of managers is to decide where the organization
should go in the future, and how to get there, by setting goals and planning.
Goal: a desired future state that the organization attempts to realize.
Plan: a blueprint for goal achievement and specifies the necessary the resource
allocations, schedules, tasks, and other actions. Goals specify future ends, plans
specify today’s means. The concept of Planning: usually incorporates both ideas; it
means determining the organization’s goals and defining the means for achieving
them. The levels of goals and plans:
Mission statement
Strategic goals/plans – senior management – organization as a whole
Tactical goals/plans – middle management – major divisions, functions
Operational goals/plans – lower management – departments, individuals
The organizational planning process prevents managers for thinking day-to-day.
1.
2.
3.
4.
5.
Develop the plan – mission and strategic goals
Translate the plan – define tactical plans and objectives
Plan operations – define operational goals and plans
Execute the plan – management by objectives, performance dashboards
Monitor and learn – hold planning and operational reviews.
7.2. Goal-setting in organizations
The different types of defining goals are strategic, tactical and operational goals.
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At the top of the goal hierarchy is the mission: the organization’s reason for existence.
Mission statement: a broadly stated definition of the purpose that distinguishes the
organization from others of a similar type. It usually focusses on the market and
customers. There are several levels of defining goals:



Strategic goals: broad statements describing where the organization wants to
be in the future, they pertain to the organization as a whole. Strategic plans: the
action steps by which an organization intends to attain strategic goals. It tends
to be long-term, from two to five years.
After the strategic goals and plans, the next step is to define tactical goals:
goals that define the outcomes that major divisions and departments must
achieve for the organization to reach its overall goals. Tactical plans: plans
designed to help execute major strategic plans and to accomplish a specific
part of the company’s strategy. They typically have a shorter time horizon than
strategic plans, over the next year or so.
Operational goals: the results expected from departments, work groups and
individuals within the organization, they are precise and
measurable. Operational plans: plans developed at the organization’s lower
levels that specify action steps toward achieving operational goals and that
support tactical plans. It is the manager’s tool for daily and weekly operations.
An increasingly popular technique for achieving goal alignment is the strategy map: a
visual representation of the key drivers of an organization’s success. Because it shows
how specific goals and plans in each area are linked, it provides a powerful way for
mangers to see the cause-and-effect relationships among goals and plans.
7.3. Operational planning
Management by objectives is a system whereby managers and employees define
goals for every department, project, and person and use them to monitor subsequent
performance, the four major activities are listed in this section.
Managers use operational goals to direct employees and resources toward achieving
specific outcome that enable the organization to perform efficiently and effectively.
There are 5 characteristics of effective goal setting:





Specific and measurable
Defined time period
Cover key result areas
Challenging but realistic
Linked to rewards
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Management by objectives (MBO): a system whereby managers and employees define
goals for every department, project, and person and use them to monitor subsequent
performance. Four major activities make MBO successful:
1. Set goals – involves employees at all levels and looks beyond day-to-day
activities
2. Develop action plan – both for individuals and departments
3. Review progress – between managers and subordinates
4. Appraise overall performance – evaluate if goals are achieved
Single-use plans: are developed to achieve a set of goals that are unlikely to be
repeated in the future.
Standing plans: on-going plans that provide guidance for tasks or situations that occur
repeatedly within the organization.
7.4. Benefits and limitations of planning
Benefits of planning and goal setting include serving as a source of motivation,
determining resource allocation, setting a standard for performance and providing a
guide to action. Limitations include the potential to create a false sense of certainty,
get in the way of creativity and intuition and create rigidity that hinders response to
a turbulent environment.
Benefits of planning and goal setting include serving as a source of motivation,
determining resource allocation, setting a standard for performance and providing a
guide to action. Limitations include the potential to create a false sense of certainty,
get in the way of creativity and intuition and create rigidity that hinders response to a
turbulent environment.
7.5. Planning for a turbulent environment
Contingency plans, scenario building and crisis planning are methods that help brace
the organization for unexpected events.
There are three methods that help brace the organization for unexpected events:



Contingency plans: define company responses to be taken in the case of
emergencies, setbacks, or unexpected conditions.
Scenario building: involves looking at current trends and discontinuities and
visualizing future possibilities.
Crisis planning: plans to enable them to cope with unexpected events that are
so sudden and devastating that they have the potential to destroy the
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organization if managers aren’t prepared with a quick and appropriate
response. Crisis planning has two stages:
o Crisis prevention: managers try to prevent crisis from occurring and
detect warning signs.
o Crisis preparation: detailed planning to handle a crisis when it occurs.
Three steps:
 Designating a crisis management team and spokesperson
 Creating a detailed crisis management plan
 Setting up an effective communications system
7.6. Innovative approaches to planning
Stretch goals, performance dashboards and intelligence teams are guidelines for
innovative planning.
A relative new approach in planning is decentralized planning: planning experts work
with managers in major divisions or departments to develop their own goals and
plans.
There are three guidelines for innovative planning:



Stretch goals: reasonable yet highly ambitious goals that are so clear,
compelling, and imaginative that the fire up employees and engender
excellence.
Performance dashboards: keep track of key performance metrics.
Intelligence team: a cross-functional group of managers and employees, usually
led by a competitive intelligence professional, who work together to gain an
deep understanding of a specific business issue, with the aim of presenting
insights, possibilities, and recommendations about goals and plans related to
that issue.
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8. Strategy formulation and execution
Strategic management refers to the set of decisions and actions used to formulate
and execute strategies that will provide a competitively superior fit between the
organization and its environment so as to achieve organizational goals. There are
several levels of strategy: corporate, business and functional-level. Three approaches
in understanding corporate-level strategy include portfolio strategy, the BCG matrix
and diversification.
8.1. Thinking strategically
Thinking strategically means to take the long-term view and to see the big picture.
Thinking strategically means to take the long-term view and to see the big picture. It
is important for both businesses and non-profit organizations.
8.2. What is strategic management?
Strategic management refers to the set of decisions and actions used to formulate
and execute strategies that will provide a competitively superior fit between the
organization and its environment so as to achieve organizational goals. This
paragraph explains the different levels of strategy.
Strategic management: refers to the set of decisions and actions used to formulate and
execute strategies that will provide a competitively superior fit between the
organization and its environment so as to achieve organizational goals. The first step
in strategic management is to define a strategy: the plan of action that describes
resource allocation and activities for dealing with the environment, achieving a
competitive advantage, and attaining the organizations goals. A competitive
advantage: refers to what sets the organization apart from others and provides it with
a distinctive edge for meeting customer or client needs in the market place. Strategy
changes over time and to remain competitive companies develop strategies that focus
on:



Core competence: something the organization does especially well in
comparison to its competitors, it represents a competitive advantage.
Providing synergy: when organizational parts interact to produce a joint effect
that is greater than the sum of the parts acting alone. If managed well it can
create additional value with existing resources.
Creating value for customers, value can be defined as the combination of
benefits received and costs paid.
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There are several levels of strategy:



Corporate-level strategy: pertains to the organization as a whole and the
combination of business units and product lines that make up the corporate
entity.
Business-level strategy: pertains to each business unit or product line, it
concerns new product development, amount of advertising etc.
Functional-level strategy: pertains to the major functional departments within
the business unit, it involves all of the major functions including R&D, finance,
manufacturing and marketing.
8.3. The strategic management process
One tool in strategy formulation and execution is SWOT analysis, this paragraph
describes the model.
Strategy formulation: includes the planning and decision making that lead to the
establishment of the firm’s goals and the development of a specific strategic plan.
Strategy execution: the use of managerial and organizational tools to direct resources
toward accomplishing strategic results. It is the administration and implementation of
the strategic plan.
To start formulating a strategy companies often begin with an audit of the internal
and external environment that will affect the organizations competitive situation. One
tool is SWOT analysis: includes a careful assessment of strengths, weaknesses,
opportunities, and threats that affect organizational performance. Strengths are
positive internal characteristics that the organization can use to achieve its goals and
weaknesses restrict the organizations performance. Threats are characteristics of the
external environment that may prevent the organization form achieving its goals,
opportunities have the potential to help achieve or exceed goals.
8.4. Formulating corporate-level strategy
Three approaches in understanding corporate-level strategy include portfolio
strategy, the BCG matrix and diversification.
There are three approaches in understanding corporate-level strategy:

Portfolio strategy: corporations like to have a balanced mix of business
divisions called strategic business units (SBU’s): an SBU has a unique business
mission, product line, competitors, and markets relative to other SBU’s in the
corporation. Portfolio strategy: pertains to the mix of business units and
product lines that fit together in a logical way to provide synergy and
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

competitive advantage for the corporation. Managers don’t want to depend on
one business too much.
BCG matrix: organizes businesses along two dimensions – business growth rate
and market share. See picture below.
Diversification: the strategy of moving into new lines of business. The purpose
is to expand the firm’s business operations to produce new kinds of valuable
products and services. There are three forms of diversification:
o Related diversification: when the new business is related to the
company’s existing business activities.
o Unrelated diversification: when an organization expands into a totally
new line of business.
o Vertical integration: the company expands into businesses that either
produce supplies needed to make products and services or that
distribute and sell those products and services to customers. In recent
years there has been a shift towards vertical integration.
o
8.5. Formulating business-level strategy
Porter’s competitive forces model suggests using differentiation, cost leadership and
focus strategy to find completive edge with the five forces described in this
paragraph.
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A popular approach in formulating strategy is Porters competitive forces and
strategies. See the exhibit below for the model.
Porter suggests three strategies to find competitive edge with these forces:



Differentiation strategy: involves an attempt to distinguish the firm’s products
or services from other in the industry. Differentiation creates entry barriers and
can reduce rivalry with competitors if buyers are loyal to a brand. For example
Starbucks has benefited from this strategy.
Cost leadership strategy: the organization aggressively seeks efficient facilities,
pursues cost reductions, and uses tight cost controls to produce products more
efficiently than competitors. The low price acts as a barrier against new
entrants and substitute products.
Focus strategy: the organization concentrates on a specific regional market or
buyer group. The company will use either a differentiation or cost leadership
approach, but only for a narrow target market.
A study called the Evergreen project, found that a clear strategic direction was a key
factor that distinguished winners from losers.
8.6. Formulating functional-level strategy
Functional-level strategies are the actions plans used by major departments to
support the execution of business-level strategy.
Functional-level strategies are the actions plans used by major departments to
support the execution of business-level strategy.
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8.7. New trends in strategy
Strategic flexibility and strategic partnership are new trends.


Strategic flexibility: because in many industries today things change so fast,
managers have to be ready to shift the strategy.
Strategic partnerships: collaboration with other organizations is an important
part in successfully entering new areas of business these days. Some
companies even collaborate with competitors to expand into new areas of
business.
8.8. Global strategy
The four corporate global strategies include export, globalization, multi-domestic and
transnational strategy.
There are four corporate global strategies:




Export strategy: domestically focused, exports a few domestically produced
products to selected countries.
Globalization strategy: product design and advertising strategies are
standardized throughout the world, and it treats the world as a single global
market. The theory is that people everywhere want to buy the same products
and live the same way.
Multi-domestic strategy: competition in each country is handled independently
of industry competition in other countries. It is present in many countries but
adapts products/advertising to local tastes and needs.
Transnational strategy: seeks to achieve both global standardization and
national responsiveness. It combines standardization and customization for
product/advertising strategies.
8.9. Strategy execution
The final step in the strategic management process is to execute the strategy and
there are six silent killers of strategy described in this section.
The final step in the strategic management process is to execute the strategy. One
key to effective execution is alignment, which means that everyone is moving in the
same direction. There are six silent killers of strategy:



Top down or liassez-faire senior management style
Unclear strategy and conflicting priorities
An ineffective senior management team
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


Poor vertical communication
Poor coordination across functions, businesses, or borders
Inadequate down-the-line leadership skills and development
There are four primary tools to solve the problem of poor strategy execution:




Visible leadership: motivate people, shape culture and values, model desired
behaviours.
Clear roles and accountability: delegate authority and responsibility, create
teams, and define roles.
Candid communication: open lines of communication, encourage debate, and
be honest.
Appropriate human resource practices: recruit employees, manage transfers
and promotions, and provide training.
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9. Managerial decision making
A decision is a choice made from available alternatives. The classical model, the
administrative model and the political model are decision making models. This
chapter also describes the steps in the decision-making process and the four major
decision styles; directive, analytical, conceptual and behavioural. The six steps in
decision making include recognition, diagnosis and analysis, development of
alternatives, selection of desired alternative, implementation of chosen alternative,
and evaluation and feedback.
9.1. Types of decisions and problems
A key difference between programmed and non-programmed decisions is the degree
of certainty or uncertainty.
Decision: a choice made from available alternatives.
Decision making: the process of identifying problems and opportunities and then
resolving them. There are two categories of management decisions:


Programmed decisions: involve situations that have occurred often enough to
enable decision rules to be developed and applied in the future. For example:
the decision to reorder office supplies at a certain level.
Non-programmed decisions: are made in response to situations that are unique,
are poorly defined and largely unstructured, and have important consequences
for the organization.
A key difference between the two categories is the degree of certainty or uncertainty
that managers face. There are four positions




Certainty: mans that all the information the decision maker needs is fully
available. Only in this situation programmed decisions can be made, the
following situations require non-programmed decisions.
Risk: means that a decision has clear-cut goals and that good information is
available, but the future outcomes associated with each alternative are subject
to change. However, enough information is available to allow the probability of
successful outcome for each alternative to be estimated.
Uncertainty: means that managers know which goals they wish to achieve, but
information about alternatives and future events is incomplete. In this case
managers may have to make assumptions which might be incorrect.
Ambiguity: means that the goals to be achieved or the problem to be solved is
unclear, alternatives are difficult to define, and information about outcomes is
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unavailable. Ambiguity is by far the most difficult decision situation and can
create a wicked decision problem, which are associated with conflicts, rapidly
changing circumstances, fuzzy information and unclear links. In this case there
often is no right answer.
9.2. Decision-making models
The classical model, the administrative model and the political model are decision
making models, they are described in this section with their underlying assumptions.

The classical model: based on rational economic assumptions and manger
beliefs what ideal decision making should be. The four underlying assumptions
are:
o The decision maker operates to accomplish goals that are known and
agreed on. Problems are precisely formulated and defined.
o The decision maker strives for certainty, gathering complete
information.
o Criteria for evaluating are known, decision maker selects alternative that
maximizes economic return to the organization.
o The decision maker is rational and uses logic.
The classical model is considered to be normative: it defines how a decision
maker should make decisions. The model is most useful when
applied to programmed decisions.

The administrative model: recognizes the human and environmental limitations
that affect the degree to which mangers can pursue a rational decision-making
process. It is considered to be descriptive: it describes how managers actually
make decisions in complex situations rather than dictating how they should
make decisions according to theoretical ideal. The model is based on two
concepts:
o Bounded rationality: means that people have limits, or boundaries, on
how rational they can be.
o Satisficing: means that decision maker choose the first solution
alternative that satisfies minimal decision criteria.
The administrative model also relies on four assumptions:
o
o
Decision goals are often vague and conflicting. Managers often are unaware of
problems or opportunities that exist in the organization.
Rational procedures are not always used, and, when they are they are limited
to a simplistic view of the problem.
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o
o
Manager’s searches for alternatives are limited because of human, information
and resource constraints.
Most managers settle for a satisficing solution rather than a maximizing
solution.
Another aspect of the model is intuition: a quick apprehension of a decision
situation based on past experience but without conscious thought.

The political model: is useful for making non-programmed decisions. Managers
often engage in coalition: an informal alliance among managers who support a
specific goal. Coalition building is the process of forming alliances among
managers. The model begins with four assumptions:
o Organizations are made up of groups with diverse interests, goals, and
values.
o Information is ambiguous and incomplete.
o Managers do not have the time, resources, or mental capacity to identify
all dimensions of the problem and process all relevant information.
o Managers engage in the push and pull of debate to decide goals and
discuss alternatives.
9.3. Decision-making steps
The six steps in decision making include recognition, diagnosis and analysis,
development of alternatives, selection of desired alternative, implementation of
chosen alternative, and evaluation and feedback.
There are six steps in the decision making process:
1. Recognition of decision requirement: managers have to make a decision in the
form of either a problem or an opportunity. A problem: occurs when
organization accomplishment is less that established goals. An opportunity:
exists when mangers see potential accomplishment that exceeds specified
current goals.
2. Diagnosis and analysis of causes: the understanding of the situation should be
refined. Diagnosis: managers analyse underlying causal factors associated with
the decision situation. Kepner and Tregoe recommend that managers ask a
series of questions to specify underlying causes.
3. Development of alternatives: alternatives should be generated that respond to
the needs of the situation.
4. Selection of desired alternative: in this stage managers try to select the best
alternative. The one which best fits the overall goals and values of the
organization and achieves the desired results using the fewest resources. They
also want to reduce risk and uncertainty. Personality factors also influences a
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managers choice, like risk propensity: the willingness to undertake risk with the
opportunity of gaining an increased payoff.
5. Implementation of chosen alternative. Implementation: the use of managerial,
administrative, and persuasive abilities to ensure that the chose alternative is
carried out. The ultimate success of the chosen alternative depends on
whether it can be translated into action.
6. Evaluation and feedback: decision makers gather information that tells them
how well the decision was implemented and whether it was effective in
achieving its goals. Feedback is an important aspect of monitoring.
9.4. Personal decision framework
The four major decision styles are the directive, analytical, conceptual and
behavioural style.
Managers do not all make decisions in the same way; they have a personal decision
style: refers to distinctions among people with respect to how they evaluate problems,
generate alternatives, and make choices. There are four major decision styles:




Directive style: is used by people who prefer simple, clear-cut solutions to
problems.
Analytical style: is used by managers who like to consider complex solutions
based on as much data they can gather.
Conceptual style: is used by people who tend to like to consider a broad
amount of information; however they are more socially oriented than those
with an analytical style.
Behavioural style: the style adopted by managers having a deep concern for
others as individuals.
The most effective managers are able to switch styles as needed for the situation.
9.5. Why do managers make bad decisions?
Being aware of errors in judgement helps to avoid decision traps and make better
decisions.
Managers sometimes make bad decisions; being aware of the following errors in
judgment helps them avoid decision traps and make better decisions:



Being influenced by initial impressions
Justifying past decisions
Seeing what you want to see
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


Perpetuating the status quo: managers might base decisions on what worked
well in the past.
Being influenced by emotions
overconfidence
9.6. Innovative group decision making
The steps in group decision making include brainstorming, debating, avoiding
groupthink, knowing when to bail, acting with speed and not ignoring crisis.
The rapid pace of the business environment calls for people throughout the
organization to be involved in decision making and have the information, skills, and
freedom they need to respond immediately to problems and questions. The steps in
group decision making are:
1. Start with brainstorming: use a face-to-face interactive group to spontaneously
suggest a wide range of alternatives for decision making. A recent approach
is electronic brainstorming: bringing people together in an interactive group
over a computer network.
2. Engage in rigorous debate: divergent points of view can improve decision
quality. Some groups assign a devil’s advocate: someone who has the role of
challenging the assumptions and assertions made by the group. Another way is
to use point-counterpoint: which breaks a decision-making group into two
subgroups and assigns them different, often competing responsibilities.
3. Avoid groupthink: the tendency of people in groups to suppress contrary
opinions. In this case the desire for harmony outweighs concerns over decision
quality.
4. Know when to bail: pull the plug when it’s not working. Managers should
avoid escalating commitment: the tendency to continue to invest time and
money in a solution despite strong evidence that it is not appropriate.
5. Act with speed
6. Don’t ignore a crisis
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10. Designing adaptive organizations
Fundamental characteristics of vertical organization structure include work
specialization, chain of command, span of management and
centralization/decentralization. Departmentalization is the basis for grouping
positions into departments based on similar skills, expertise, work activities, and
resource use. The five approaches of structural design are: vertical function,
divisional, matrix, team-based and virtual network. This chapter describes the
advantages and disadvantages of the approaches. The horizontal structure has to do
with coordination, reengineering and task forces.
10.1. What are your leadership beliefs?
Organizing is the deployment of organizational resources to achieve strategic goals.
In recent years, many companies have realigned departmental groups to attain new
strategic goals or to cope with a turbulent environment. All of these groups us the
fundamental concept of organizing: the deployment of organizational resources to
achieve strategic goals.
10.2. Organizing the vertical structure
Fundamental characteristics of vertical organization structure include work
specialization, chain of command, span of management and
centralization/decentralization.
Organizational structure: how tasks are divided and resources deployed. It is defined
as (1) the set of formal tasks assigned to individuals and departments; (2) formal
reporting relationships, including lines of authority, decision responsibility, number of
hierarchical levers, and span of mangers control; (3) the design of systems to ensure
effective coordination of employees across departments. The vertical structure is
presented in the organizational chart: the visual representation of an organizations
structure. Fundamental characteristics of vertical organization structure include:


Work specialization: is the degree to which organizational tasks are subdivided
into separate jobs. Work can be performed more efficiently if employees are
allowed to specialize.
Chain of command: an unbroken line of authority that links all employees in an
organization and shows who reports to whom. It is associated with two
underlying principles: 1. Unity of command: means that each employee is held
accountable to only 1 supervisor; 2. Scalar principle: refers to a clearly defined
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line of authority in the organization that includes all employees. The chain of
command illustrates:
o Authority: the formal and legitimate right of a manager to make
decisions, issue orders, and allocate resources to achieve
organizationally desired outcomes. Three characteristics:
 Authority is vested in organizational positions, not people.
 Authority flows down the vertical hierarchy.
 Authority is accepted by subordinates.
o Responsibility: the duty to perform the task or activity as assigned.
o Accountability: the fact that people with authority and responsibility are
subject to reporting and justifying task outcomes to those above them
in the chain of command.
o Delegation: the process managers use to transfer authority and
responsibilities to positions below them in the hierarchy.
An important distinction in many organizations is between line authority: people
in management positions have formal authority to direct and
control immediate subordinates; and staff authority: includes the right to advise,
recommend, and counsel in the staff specialist area of
expertise.

Span of management: the number of employees reporting to a supervisor also
called span of control. When subordinates must be closely involved, the span
should be small. The average span of control used in an organization
determines whether the structure is tall or flat. A tall structure: has an overall
narrow span of management and a relatively large number of hierarchical
levels. Flat structure: has a wide span and has fewer hierarchical levels.

Centralization/decentralization. Centralization: means that decision authority is
located near the top of the organization. Decentralization: decision authority is
pushed downward to lower organization levels. Factors that typically influence
centralization versus decentralization are as follows:
o Greater change and uncertainty in the environment are usually
associated with decentralization.
o The amount of centralization or decentralization should fit the films
strategy.
o In times of crisis or risk of company failure, authority may be centralized
at the top
10.3. Departmentalization
The five approaches of structural design are: vertical function, divisional, matrix,
team-based and virtual network and they are explained in this paragraph.
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Departmentalization: the basis for grouping positions into departments and
departments into the total organization. There are five approaches of structural
design:




Vertical functional structure: the grouping of positions into departments based
on similar skills, expertise, work activities, and resource use. It is structured by
organizational resources, because each type of functional activity represents
specific resources for organizational tasks. Each of the departments is
concerned with the organization as a whole, and information flows up and
down the vertical hierarchy.
Divisional structure: occurs when departments are grouped together based on
similar organizational outputs. Here diverse departments are brought together
to produce a single organizational output. In this structure divisions are created
as self-contained units with separate functional departments for each division.
It also encourages decentralization. An alternative for assigning divisional
responsibility is to group company activities by geographic region or customer
group.
Matrix approach: combines aspects of both functional a divisional structures
simultaneously in the same part of the organization. It has dual lines of
authority, horizontally and vertically, which results in some employees
reporting to two supervisors simultaneously. The success of the approach
depends on the abilities of people in key matrix roles. Two-boss employees:
employees who report to two supervisors simultaneously, must resolve
conflicting demands from the matrix bosses. Matrix boss: the product or
functional boss, who is responsible for one side of the matrix. Top leader:
oversees both the product and functional chains of command.
Team-based approach: gives managers a way to delegate authority, push
responsibility to lower levels, and be more flexible and more responsive. There
are two forms:
o Cross-functional teams: consist of employees from various functional
departments who are responsible to meet as a team and resolve mutual
problems.
o Permanent teams: groups of employees who are organized in a way
similar to a formal department. Each team brings together employees
from all functional areas focused on a specific task or project.
With a team-based structure: the entire organization is made up of horizontal
teams that coordinate their work and work directly with customers
to accomplish the organization’s goals.

Virtual network structure: means that the firm subcontracts most of its major
functions to separate companies and coordinates their activities from a small
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headquarters organization. The organization can be viewed as a central hub
surrounded by a network of outside specialists, sometimes spread all over the
world. A similar approach to networking is the modular approach: a
manufacturing team uses outside suppliers to provide entire chunks of a
product, which are then assembled into a final product by a handful of workers.
Each of these approaches has strengths and weaknesses.
Structural approach
Advantages
Disadvantages
Functional
Efficient use of resources
and economies of scale.
Poor communication and
slow response to external
changes.
Divisional
Flexible and responsive,
concerns for customer
needs and excellent
coordination across
functional departments.
Duplication of resources
across divisions, less
technical depth and
specialization, poor
communication across
divisions.
Matrix
Efficient use of resources,
flexible and adaptable,
expertise available to all
divisions.
Team
Reduced barriers among
Dual loyalties and conflict,
departments, quicker
time and resources spend
decisions and better morale,
on meetings, unplanned
enthusiasm from
decentralization.
employees.
Virtual network
Can draw on expertise
world-wide, flexible and
responsive, reduced
overhead costs.
Frustration from dual chain
of command.
Lack of control, greater
demand on managers,
weaker employee loyalty.
10.4. Organizing for horizontal coordination
The horizontal structure has to do with coordination, reengineering and task forces.
As organizations grow and evolve, two things happen. First, new positions and
departments are added to deal with factors in the external environment or with new
strategic needs. Second, senior managers have to find a way to tie all of these
departments together. The organization needs systems to process information and
enable communication among people in different departments and different
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levels. Coordination: the quality of collaboration across departments. It is the outcome
of information and cooperation. The next step involves reengineering: the radical
redesign of business processes to achieve dramatic improvements in cost, quality,
service and speed. To represent their departments and share information that enables
coordination, companies sometimes use a task force: a temporary team or committee
formed to solve a short-term problem involving several departments. Another way to
increase coordination is to use project managers: persons who are responsible for
coordinating the activities of several departments for the completion of a specific
project. Their distinctive feature is that they are not a member of one of the
departments that are being coordinated.
10.5. Factors shaping structure
Firms can be categorized according to three basic types; small-batch, mass and
continuous process production.
Studies demonstrate that business performance is strongly influenced by how well the
company’s structure is aligned with its strategic intent and the needs of the
environment. A mechanistic, vertical structure is appropriate for a cost leadership
strategy, which typically occurs in a stable environment. An organic, horizontal
approach is needed for a differentiation strategy and when the organization needs
flexibility to cope with an uncertain environment.
Technology also has its influence on structure, according to Joan Woodwarf
manufacturing firms could be categorized according to three basic types of
production technology:



Small-batch production: firms produce goods in batches of one or a few
products designed to customer specification.
Mass production: long production runs used to manufacture a large volume of
products with the same specifications. Standard products go into inventory for
sale as customers need them.
Continuous process production: the entire workflow is mechanized in
sophisticated and complex form of production technology. Because the
process runs continuously, it has no starting and no stopping.
The difference among the three manufacturing technologies is called technical
complexity: the degree to which machinery is involved in the production to the
exclusion of people.
A form of technology is service technology: intangible outputs and direct contact
between employees and customers. It has two features; the output is intangible and
there is direct contact with the customer. Another type of technology that influences
structure is digital technology: technology characterized by use of the internet and
other digital processes to conduct or support business operations. Organizations
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based on digital technology tent to be flexible and decentralized. In other words
digital technology encourages boundarylessness, where information and work
activities flow freely among various organizational participants.
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11. Managing Change and innovation
Organizational change is defined as the adoption of a new idea or behaviour by an
organization. There are 3 critical innovation strategies for changing products and
technologies: exploration, cooperation and entrepreneurship. There exist people and
culture changes and organizational development can help to smooth the process.
Three types of OD include team building, survey feedback and large-group
interventions, the different stages of OD are also described in this chapter.
11.1. Innovation and the changing workplace
Organizational change is defined as the adoption of a new idea or behaviour by an
organization.
Organizational change: is defined as the adoption of a new idea or behaviour by an
organization. Sometimes these changes are a response to the external environment,
such as customer demand, and sometimes they come from inside the organization.
One example of external forces is disruptive innovation: the innovations in products,
services, or processes that radically change an industries rules of the game for
producers and consumers. However, changing is not easy; in order to be successful it
requires that originations be capable of both creating and implementing ideas, which
means the organization must be ambidextrous. An ambidextrous approach: means
incorporating structures and processes that are appropriate for both the creative
impulse and fore the systematic implementation of innovations. With this approach
managers encourage flexibility and freedom to innovate but they use a more rigid,
centralized, and standardized approach for implementing innovations.
11.2. Changing things: new products and technologies
There are 3 critical innovation strategies for changing products and technologies:
exploration, cooperation and entrepreneurship.
Product change: a change in the organizations product or service outputs.
Technology change: a change in the organizations production process.
There are 3 critical innovation strategies for changing products and technologies:

Exploration: designing the organization to encourage creativity and the
initiation of new ideas. It involves:
o Creativity: refers to the generation of novel ideas that might meet
perceived needs or respond to opportunist for the organization.
o Experimentation
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Idea incubators: provides a safe harbour where ideas from employees
throughout the company can be developed without interference from
company bureaucracy or politics.
Cooperation: another important expect of innovation is providing mechanisms
for both internal and external coordination. Successful innovation requires
expertise from several departments simultaneously, and failed innovation is
often the result of failed cooperation.
o Horizontal linkage model: an approach to product change that
emphasizes shared development of innovations among several
departments. This approach is increasingly important because today’s
environment requires rapidly developing and commercializing products
and services. Some companies use fast cycle teams: a multifunctional,
and sometimes multinational, team that works under stringent timelines
and is provided with high levels of resources and empowerment to
accomplish and accelerated product development project; to deliver
products and services faster than competitors.
o Customers, partners
o Open innovation: means extending the search for and commercialization
of new ideas beyond the boundaries of the organization and beyond the
boundaries of the industry. One form of open innovation is
crowdsourcing: taps ideas from around the world and lets thousands of
people participate in the innovation process, usually via the internet.
Entrepreneurship: creating mechanisms to make sure new ideas are carried
forward, accepted, and implemented.
o Idea champions: a person who sees the need for and champion’s
productive change within the organization. Change does not occur by
itself, personal energy and effort are required to successfully promote a
new idea. There are 4 roles in organizational change:
 Inventor: comes up with new ideas and understands the technical
aspects.
 Champion: believes in the idea, visualizes benefits, confronts
realities and gains support.
 Sponsor: high-level managers who approves the idea and
protects it.
 Critic: challenges the concept and provides a reality test and
criteria.
o New venture teams: a unit separate from the mainstream of the
organization that is responsible for developing and initiating innovation.
o Skunkworks: a separate small, informal, highly autonomous and often
secretive group that focuses on breakthrough ideas for the business. It
is a variation of a new venture team.
o


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o
New venture fund: a fund providing resources from which individuals and
groups can draw to develop new ideas, products or businesses.
11.3. Changing people and culture
There exist people and culture changes and organizational development can help to
smooth the process. Three types of OD include team building, survey feedback and
large-group interventions, the different stages of OD are also described in this
section.
People change: a change in the attitudes and behaviours of a few employees in the
organization
Culture change: a major shift in the norms, values attitudes and mind-set of the entire
organization.
Two specific tools can smooth the process: training and development,
and organizational development: a planned, systematic process of change that uses
behavioural science knowledge and techniques to improve an organizations health
and effectiveness through its ability to adapt the environment, improve internal
relationships, and increase learning and problem-solving capabilities. OD can help
managers with at least three types of current problems
1. Mergers/acquisitions: the disappointing financial results of many mergers and
acquisitions are caused by the failure of executives to determine whether the
administrative style and corporate culture of the two companies fit.
2. Organizational decline/revitalization: OD techniques can contribute greatly to
cultural revitalization by managing conflicts, fostering commitment and
facilitating communication.
3. Conflict management
There are different types of OD techniques; these are the most popular and effective:



Team building: enhances the cohesiveness and success of organizational groups
and teams.
Survey feedback: a type of OD intervention in which questionnaires on
organizational climate and other factors are distributed among employees and
their results reported back to them by a change agent.
Large-group intervention: brings together participants from all parts of the
organization to discuss problems or opportunities and plan for change.
There are three stages in OD to achieve behavioural an attitudinal change:

Unfreezing: makes people throughout the organization aware of problems and
need for change. This stage is often associated with diagnosis, which uses and
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

outside expert called a change agent: an OD specialist who performs a
systematic diagnosis of the organization and identifies work-related problems.
Changing: occurs when individuals experiment with new behaviour and learn
new skills to be used in the workplace.
Refreezing: occurs when individuals acquire new attitudes or values and are
rewarded for them by the organization.
11.4. Implementing change
People resist change for several reasons: self-interest, lack of understanding and
trust, uncertainty and different assessments and goals. Force-field analysis and
implementation tactics can help in overcoming resistance to change.
The final step to be managed in the change process is implementation. To effectively
manage the implementation process, managers should be aware of the reasons people
resist change and use techniques to enlist employee cooperation. Managers need to
make employees ware of the need for change: a disparity between existing and desired
performance levels. People resist change for several reasons:




Self-interest: people thing the change conflicts with their self-interest.
Lack of understanding and trust: employees often distrust the intentions
behind the change or don’t understand the intended purpose.
Uncertainty: the lack of information about future events causes fear of the
unknown.
Different assessments and goals: manager in each department pursue different
goals, and the innovation may detract from performance and goals
achievement for some departments.
There are two strategies in overcoming resistance to change:
1. Force-field analysis: the process of determining which forces drive and which
restrain a proposed change.
2. Use one of the five implementation tactics:
o Communication, education: are used when solid information about the
change is needed by users and others who may resist implementation.
o Participation: involves users and potential resisters in designing the
change.
o Negotiation: use formal bargaining to win acceptance and approval.
o Coercion: managers use formal power to force employees to change.
o Top management support: the visible support of top management helps
overcome resistance to change, it symbolizes that the change is
important for the organization.
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12. Human resource management
Human resource management refers to the design and application of formal systems
in organizations to ensure the effective and efficient use of human talent to
accomplish organizational goals. This chapter examines the three primary goals of
HRM; finding the right people, maintain an effective workforce and manage talent.
The three steps in finding the right people are planning, recruiting and selecting. The
key activities in developing employees into an effective workforce are training and
development and performance appraisal.
12.1. Getting the right people on the bus
Human resource management refers to the design and application of formal systems
in organizations to ensure the effective and efficient use of human talent to
accomplish organizational goals.
Human resource management (HRM): refers to the design and application of formal
systems in organizations to ensure the effective and efficient use of human talent to
accomplish organizational goals. This includes activities undertaken to attract,
develop, and maintain an effective workforce.
12.2. The strategic role of HRM is to drive organizational performance
They key elements of the strategic approach of HRM are that all managers are HR
manager, employees are viewed as assents and HRM is not a matching process.
The strategic approach to HRM recognizes three key elements:
1. All managers are HR managers
2. Employees are viewed as assets, they give the company its competitive
advantage, not buildings and machinery.
3. HRM is not a matching process, integrating the organization’s strategy and
goals with the correct approach to managing the firm’s human capital.
Strategic decisions are related to human resource considerations, success depends on
the ability to manage human capital: the economic value of the combined knowledge,
experience, skills and capabilities of employees.
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12.3. The impact of federal legislation on HRM
The EEOC investigates complaints about discrimination, if this is found a remedy
includes affirmative action.
Effectively managing human resources is a complex challenge because legal and
regulatory environment is constantly changing. The Equal Employment Opportunity
Commission (EEOC) investigates complaints concerning discrimination: occurs when
some applicants are hired or promoted based on criteria that are not job relevant.
When discrimination is found, remedies include providing back pay and
taking affirmative action: requires that an employer take s positive steps to guarantee
equal employment opportunities for people within protected groups. It is a formal
document that can be reviewed and the goal is to reduce or eliminate internal
inequities among affected employee groups.
12.4. The changing nature of careers
Downsizing, outsourcing, rightsizing and restructuring have led to the elimination of
many positions in organizations and a change of workplace.
Another current issue is the changing nature of careers and a shift in the relationship
between employers and employees. Downsizing, outsourcing, rightsizing and
restructuring have led to the elimination of many positions in organizations.
New social contract
Old social contract
Employee
Personal responsibility
Job security
Partner in business
A cog in the machine
improvement
knowing
Learning, skill development
Employer
Creative development
opportunities
Lateral career moves;
incentive compensation
Challenging assignments
Information and resources;
decision making authority
Standard training programs
Traditional compensation
package
Routine jobs
Limited information
The rapid change and uncertainty bring new challenges for HRM:
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


Becoming an employer of choice: a company that is highly attractive to
potential employees because of HR practices that focus not just on tangible
benefits such as pay and profit sharing, but also on intangibles (such as trustbased work climate).
Using temporary and part-time employees. The use of contingency workers:
people who work for an organization, but not on a permanent full-time basis, is
becoming more popular. A related trend is the use of temporary teams.
Promoting work/life balance: one approach is to let employee’s wok part of the
time from home or another remote location. Telecommuting: means using
computer and telecommunications equipment to do work without going to an
office.
12.5. Finding the right people
The three steps in finding the right people are planning, recruiting and selecting and
they are described in this paragraph.
Underlying the organizations effort to attract people is a matching model: the
organization and the individual attempt to match the needs, interest, and values that
they offer each other. The first step in finding the right people is human resources
planning, the second step is recruiting and the third step is to select.


Human resources planning: the forecasting of human resource needs and the
projected matching of individuals with expected vacancies.
Recruiting: activities or practices that define the characteristics of applicants to
whom selection procedures are ultimately applied (also called talent
acquisition). Today much of the recruiting is done via the internet, called ecruiting. One highly effective method of recruiting is getting referrals from
current employees. Basic building blocks of HRM include:
o Job analysis: a systematic process of gathering and interpreting
information about the essential duties, tasks, and responsibilities of a
job, as well as about the context within which the job is performed. It
also enhances recruiting effectiveness by enabling the creation
of realistic job previews: gives applicants all pertinent and realistic
information – positive and negative – about the job and the
organization.
o Job description: a clear and concise summary of the specific tasks, duties,
and responsibilities.
o Job specifications: outlines the knowledge, skills, education, physical
abilities, and other characteristics needed to adequately perform the job.
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
Selection: employers assess applicants’ characteristics in an attempt to
determine the fit between the job and the applicant characteristics. The most
used forms selection are:
o Application form: is used to collect information about the applicant’s
education, previous job experience, and other background
characteristics.
o Interview: used as a selection technique in almost every job category in
nearly every organization. There are different forms of interviews:
 Structured interview: use a set of standardized questions that are
asked of every applicant so comparisons can easily be made.
 Nondirective interview: allow the participant a great deal of
freedom in determining the course of the conversation, with the
interviewer taking care not to influence the person’s remarks.
 Panel interview: candidate meets with several interviewers who
take turns asking questions.
 Computer-based interview: requires a candidate to answer a
series of multiple-choice questions tailored to the specific job.
o Employment test: a written or computer-based test designed to measure
a particular attribute such as intelligence or aptitude. It might include a
cognitive ability test, which measures an applicant’s thinking, reasoning,
verbal, and mathematical abilities. It also might include physical ability
tests that measure qualities such as strength, energy, and endure. Also
personality test might be used or brain teasers.
o Assessment centre: present a series of managerial situation to groups of
applicants over a two- or three-day period. Some organizations use this
technique for frontline employees as well by administering work sample
tests: which require an applicant to complete simulated tasks that are a
part of the desired job.
12.6. Managing talent
The key activities in developing employees into an effective workforce are training
and development and performance appraisal.
The next goal in HRM is to develop employees into effective workforce, key
development activities include

Training and development. Training is typically used to refer to teaching people
how to perform tasks related to their present jobs, while development means
teaching people broader skills that are not only useful in their present jobs but
also prepare them for greater responsibilities in future jobs. There are several
types:
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On-the-job training: an experience employee is asked to take a new
employee under his or her wing and show the newcomer how to
perform job duties.
o Corporate universities: an in-house training and education facility that
offers broad-based learning opportunities for employees – and
frequently for customers, suppliers, and strategic partners as well –
throughout their careers.
o Promotion from within helps companies retain and develop valuable
people.
o Mentoring and coaching. Mentoring: an experienced employee guides
and supports a newcomer or less-experienced employee. Coaching: a
method of directing, instructing, and training a person with the goal to
develop specific management skills.
Performance appraisal: comprises the steps of observing and assessing
employee performance, recording the assessment, and providing feedback to
the employee. HRM professionals concentrate on two things to make
performance appraisal a positive force in their organizations:
o The accurate assessment of performance through the development and
application of assessment systems such as rating scales. A recent trend
is called 360-degree feedback: a process that uses multiple raters,
including self-rating, as a way to increase awareness of strength and
weaknesses and guide employee development. Another alternative
performance-evaluation method is the performance-review raking
system.
o Training managers effectively to use the performance appraisal
interview, so they can provide feedback that will reinforce good
performance and motivate employee development. One bias in
evaluating is stereotyping: a rater places an employee into a class or
category based on or a few trait or characteristics. Another rating error
is halo effect: a manager gives an employee the same rating on all
dimensions even if his or her performance is good in some dimensions
and poor on others. An approach in overcoming these errors is
the behaviourally anchored rating scale (BARS): a rating technique that
relates an employee’s performance to specific job-related incidents.
o

12.7. Maintaining an effective workforce
Compensation, benefits, rightsizing and termination are different ways in
maintaining an effective workforce.

Compensation: refers to (1) all monetary payments and (2) all goods or
commodities used in lieu of money to reward of employees.
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Wage and salary systems
 Job-based pay
 Skills-based pay
o Compensation equity: managers strive to maintain a sense of fairness
and equity within the pay structure and thereby fortify employee
morale. Job evaluation: refers to the process of determining the value or
worth of jobs within an organization through an examination of job
content. Managers may also obtain wage and salary surveys: show what
other organization pay incumbents in jobs that match a sample of key
jobs selected by the organization.
o Pay-for- performance: also called incentive pay, means tying at least part
of compensation to employee effort and performance, whether it be
through merit based pay, bonuses, team incentives, or various gainsharing or profit-sharing plans.
Benefits: an effective compensation package requires more than money. The
benefits offered by the organization are equally important to salary.
Rightsizing: intentionally reducing the company’s workforce to the point where
the number of employees is deemed to be right for the company’s current
situation. This sometimes necessary because the organization has more people
then they need and they have to let some employees go.
Termination: despite the best effort of managers, employees will leave. For
example because they retire, they find another job or be forced out because of
poor performance. Managers can use exit interviews: an interview conducted
with departing employees to determine why they are leaving, to learn about
pockets of dissatisfaction.
o



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13. Managing diversity
Diversity is all the ways in which employees differ; this chapter describes the
dividends of diversity. Prejudice, discrimination, stereotyping and ethnocentrism are
factors that shape personal biases. The complex issues that managers and employees
face in a diverse workplace are presented as well. Cultural competence is the ability
to interact effectively with people of different cultures and the steps in
implementing a diversity plan include uncovering it, strengthening top management,
choosing solutions, demanding results and maintaining momentum.
13.1. The changing workplace
Today organizations recognize that everyone is not the same and that the
differences people bring to the workplace are valuable.
Today organizations recognize that everyone is not the same and that the differences
people bring to the workplace are valuable. The following statistics illustrate how the
workplace is changing and challenging managers who are trying to build cohesive
teams:





Three-generation workforce
Aging workers
Growth in Hispanic and Asian workers
Woman outnumbering men
Growth in foreign-born population
National cultures are intangible, pervasive and difficult to comprehend. So to succeed
in the global marketplace, mangers need to understand other cultures and deal with
them effectively.
13.2. Managing diversity
Diversity is all the ways in which employees differ, this paragraph list the dividends
of diversity.
Diversity: all the ways in which employees differ. Today companies are embracing a
more inclusive definition of diversity that recognizes a spectrum of differences that
influence how employees approach define who they are as people in the workplace. A
diverse workforce poses unique challenges. Managing diversity: creating a climate in
which the potential advantages of diversity for organizational or maximized while the
potential disadvantages are minimized. The dividends of diversity include the
following:
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



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Better use of employee talent
Increased understanding of the marketplace
Enhanced breath of understanding in leadership positions
Increased quality of team problem solving
Reduced cost associated with high turnover, absenteeism and lawsuits
13.3. Factors shaping personal bias
Prejudice, discrimination, stereotyping and ethnocentrism are factors that shape
personal biases.
Several factors shape personal biases;



Prejudice: the tendency to view people who are different as being deficient.
Discrimination: when someone acts out their prejudicial attitudes toward
people who are the targets of their prejudice.
A component of prejudice is stereotypes: rigid, exaggerated, irrational beliefs
associated with a particular group of people.
o Stereotyping is often based on folklore, media portrayals and other
unreliable sources of information.
o Stereotypes contain negative connotations.
o Stereotypes assume that all members of a group have the same
characteristics.
Managers should rid themselves of stereotypical thinking but they should also
person who,
recognize the stereotype threat: a psychological experience of a
when engaged in a task, is aware of a stereotype about his or her identify group
suggesting that he or she will not perform well on
that task. This might
jeopardize the performance of the at-risk employees.

Ethnocentrism: the belief that one’s own group or subculture is inherently
superior to other groups or cultures. Ethnocentrism viewpoints and a standard
set of cultural practices produce a monoculture: a culture that accepts only one
way of doing things and one set of values and beliefs, which can cause
problems for minority employees. The goal for organizations seeking cultural
diversity is pluralism rather than monoculture and ethno-relativism rather than
ethnocentrism. Ethno-relativism: the belief that groups and subcultures are
inherently equal. Pluralism: an organization accommodates several subcultures,
including employees who would otherwise feel isolated and ignored.
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13.4. Factors affecting women's careers
One of the prejudices that keep woman from top positions is the glass ceiling; an
invisible barrier that separates women from top management positions.
Progressive organizations realize the business advantage of hiring, retaining, and
promoting women in the workplace. However the glass ceiling and the decision to opt
out have an impact on women’s advancement opportunities and pay. Yet women are
sometimes favoured in leadership roles for demonstrating behaviours and attitudes
that help them succeed in the workplace, a factor called the ‘female advantage’.



The glass ceiling: is an invisible barrier that separates women from top
management positions.
Some women choose to get off the fast track, referred to as the opt-out trend.
Opt-out proponents say women are deciding that corporate success isn’t
worth the price in terms of reduced family and personal time, greater stress,
and negative health effects. Another school of thought says women don’t want
corporate power and status in the same way that men do.
Some people think woman might actually be better managers because of the
more collaborative, less hierarchical, relationship-oriented approach that is in
tune with today’s environment.
13.5. Cultural competence
Cultural competence is the ability to interact effectively with people of different
cultures and the steps in implementing a diversity plan include uncovering it,
strengthening top management, choosing solutions, demanding results and
maintaining momentum.
Cultural competence: the ability to interact effectively with people of different
cultures. There are five steps for implementing a diversity plan:
1. Uncover diversity problems in the organization: a cultural audit is a tool that
identifies problems or areas needing improvement in a corporate culture.
2. Strengthen top management commitment
3. Choose solutions to fit a balanced strategy
4. Demand results and revisit the goals
5. Maintain momentum to change the culture
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13.6. Diversity initiatives and programs
Organizations may develop initiatives and programs that address their unique
diversity problems in five ways: changing structures and policies, focusing on
diversity recruiting, establishing mentor relationship, accommodating special needs
and providing diversity skills training.
Organizations may develop initiatives and programs that address their unique
diversity problems in five ways:





Changing structures and policies: to facilitate and support diversity.
Focusing on diversity recruiting: make better use of formal recruiting
strategies, offer internships and draw on previously unused labour markets.
Establishing mentor relationships: a mentor: is a higher-ranking organization
member who is committed to providing upward mobility and support to a
protégé’s professional career.
Accommodating special needs: the key to attracting and keeping for instance
elderly or disabled people may include long-term care insurance and special
health or life insurance benefits.
Providing diversity skills training. Diversity training: special training to help
people identify their own cultural boundaries, prejudices, and stereotypes and
develop the skills for managing and working in a diverse workplace. The first
step is typically diversity awareness training to make employees aware of the
assumptions they make and to increase people’s sensitivity and openness to
those who are different from them. The next step is diversity skills training to
help people learn how to communicate and work effectively in a divers
environment.
Although psychological closeness between men and women in the workplace may be
a positive experience, sexual harassment is not. There are several forms:





Generalized: sexual remarks and actions that are not intended to lead to sexual
activity but that are directed toward a co-worker based solely on gender and
reflect on the entire group
Inappropriate/offensive: causes discomfort in a co-worker, whose reaction is
avoiding the harasser may limit his or her freedom and ability to function in the
workplace
Solicitation with promise of reward: this action treads a fine line as an attempt
to ‘purchase’ sex, with the potential for criminal prosecution.
Coercion with threat of punishment: coerces a co-worker into sexual activity
by using the threat of power to jeopardize the victim’s career.
Sexual crimes and misdemeanours: these acts would, if reported to the police
be considered felony crimes and misdemeanours.
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13.7. New diversity initiatives
Multicultural teams and employee network groups are two approaches to diversity
management.
There are two approaches to diversity management:


Multicultural teams: teams made up of members from diverse national, racial,
ethnic and cultural backgrounds. They provide even greater potential for
enhanced creativity, innovation, and value in today’s global marketplace.
However they are more difficult to manage because of the increased potential
for miscommunication and misunderstanding.
Employee network groups: are based on social identity, such as gender or race,
and are organized by employees to focus on concerns of employees from that
group. They reduce social isolation and help employees be more effective.
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14. Understanding individual behaviour
Individuals differ along the dimensions of attitudes, personality, perception,
emotions, learning, and responses to stress. The three components of attitudes
include cognitive, affective and behavioural attitude. Perception is the cognitive
process people use to make sense out of the environment by selecting, organizing
and interpreting information from the environment. Personality is the set of
characteristics that underlie a relatively stable pattern of behaviour in response to
ideas, objects, or people in the environment. And emotions can be thought of as a
mental state that arises spontaneously within a person based on interaction with the
environment rather than through conscious effort and is often accompanied by
physiological changes or sensation.
14.1. Are you self-confident?
Emotional intelligence includes self-awareness, self-management, social awareness
and relationship management.
Emotion: can be thought of as a mental state that arises spontaneously within a
person based on interaction with the environment rather than through conscious
effort and is often accompanied by physiological changes or sensation. You can catch
emotions from others, for example when someone is happy and enthusiastic this can
rub on others, this is called emotional contagion. Managers can increase their
effectiveness by understanding positive and negative emotions and developing
emotional intelligence (EQ), which includes four basis components:




Self-awareness: being aware of what you’re feeling.
Self-management: the ability to control disruptive or harmful emotions and
balance one’s moods so that worry, anxiety, fear or anger do not cloud thinking
and get in the way of what needs to be done.
Social awareness: the ability to understand others and practice empathy, which
means being able to put yourself in someone else’s shoes.
Relationship management: the ability to connect to others, build positive
relationships, respond to the emotions of others, and influence others.
Studies show a positive relationship between job performance and high levels of EQ.
14.2. Organizational behaviour
Perception is the cognitive process people use to make sense out of the environment
by selecting, organizing and interpreting information from the environment. Among
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the judgments that people make as part of the perceptual process are selectivity,
distortion and attribution.
Perception: the cognitive process people use to make sense out of the environment by
selecting, organizing and interpreting information from the environment. You can
think of perception as a step-by step process: first observe, then screen and third
organize.
14.3. Attitudes
The three components of attitudes include cognitive, affective and behavioural
attitude.
Attitude: an evaluation – either positive or negative- that predisposes a person to act
in a certain way. Attitudes determine how people perceive the work environment,
interact with others, and behave on the job so it is important for managers to
understand employee’s attitudes. There are three components of attitude:



Cognitive: thoughts, includes beliefs, opinions etc.
Affective: feelings and emotions.
Behavioural: the person’s intention to behave.
Two attitudes that might relate to high performance are job satisfaction: a positive
attitude towards one’s job, and organizational commitment: refers to an employee’s
loyalty to and engagement with the organization. Results of studies indicate that
companies with highly committed employees perform better. Trust in management
decisions and integrity are important components of organizational commitment and
thus important to focus on for managers.
Sometimes an attitude conflicts with another or is not reflected in behaviour, and this
conflict can create a state of cognitive dissonance: a psychological discomfort that
occurs when individuals recognize inconsistencies in their own attitudes and
behaviour.
14.4. Perception
A dimension of self-confidence is self-efficacy; an individual’s strong belief that he or
she can successfully accomplish a specific task or outcome.
Self-efficacy: an individual’s strong belief that he or she can successfully accomplish a
specific task or outcome. It is one dimensions of self-confidence: general assurance in
one’s own ideas, judgment, and capabilities. Personality traits, attitudes, values, and
characteristics such as self-confidence and self-efficacy influence how people behave,
including how they handle work situations and relate to others. This makes it
important for managers to understand others.
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14.4.1. Perceptual selectivity
Perceptual selectivity: is the process by which individuals subconsciously screen and
select the various objects and stimuli that vie for their attention. Primacy and regency
are important to perceptual selectivity; primacy supports the old truism that first
impressions really do count, and regency reflects the reality that the last impression
might be a lasting impression.
14.4.2. Perceptual distortion
Once people have perceived data, they begin grouping it into patterns. Perceptual
distortion: errors in perceptual judgment that arise from inaccuracies in any part of the
perceptual process. Some common perceptual errors:




Stereotyping: the tendency to assign an individual to a group or broad category
and then attribute widely held generalizations about the group to the
individual.
Halo effect: occurs when the perceiver develops an overall impression of a
person or situation based on one characteristic, either favourable or
unfavourable.
Projection: is the tendency of perceivers to see their own personal traits in
other people; that is, they project their own needs, feeling, values, and
attitudes into their judgment of others.
Perceptual defence: the tendency of perceivers to protect themselves against
ideas, objects, or people that are threatening.
14.4.3. Attributions
Once people have perceived data, they begin grouping it into patterns. Perceptual
distortion: errors in perceptual judgment that arise from inaccuracies in any part of the
perceptual process. Some common perceptual errors:




Stereotyping: the tendency to assign an individual to a group or broad category
and then attribute widely held generalizations about the group to the
individual.
Halo effect: occurs when the perceiver develops an overall impression of a
person or situation based on one characteristic, either favourable or
unfavourable.
Projection: is the tendency of perceivers to see their own personal traits in
other people; that is, they project their own needs, feeling, values, and
attitudes into their judgment of others.
Perceptual defence: the tendency of perceivers to protect themselves against
ideas, objects, or people that are threatening.
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14.5. Personality and behaviour
The Big Five dimensions describe an individual’s extroversion, agreeableness,
conscientiousness, emotional stability, and openness to experience.
Personality: the set of characteristics that underlie a relatively stable pattern of
behaviour in response to ideas, objects, or people in the environment. The Big Five
personality factors: dimensions that describe an individual’s extroversion,
agreeableness, conscientiousness, emotional stability, and openness to experience.





Extroversion: the degree to which a person is outgoing, sociable, assertive, and
comfortable with interpersonal relationships.
Agreeableness: the degree to which a person is able to get along with others by
being good-natured, likable, cooperative, forgiving, understand, and trusting.
Conscientiousness: the degree to which a person is focused on few goals, thus
behaving in ways that are responsible, dependable, persistent, and
achievement-oriented.
Emotional stability: the degree to which a person is calm, enthusiastic, and selfconfident, rather than tense, depressed, moody, or insecure.
Openness to experience: the degree to which a person has a broad range of
interests and is imaginative, creative, artistically sensitive, and willing to
consider new things.
An individual’s personality influences his or her work-related attitudes and
behaviours. Four areas related to personalities that are of particular interest to
managers:
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


Locus of control: refers to how people perceive the cause of life events –
whether they place the primary responsibility within themselves or on outside
factors. People that feel in control of their fate have a high internal locus of
control, people who believe that events in their life occur because of chance,
luck, or outside people and events have a high external locus of control.
Authoritarianism: the belief that power and status differences should exist in
the organization.
Machiavellianism: is characterized by the acquisition of power and the
manipulation of other people for purely personal gain.
Problem-solving styles and the myers-briggs type indicator: managers also
need to realize that individuals solve problems and make decisions in different
ways. Carl Jung believed differences resulted from our preferences in how we
go about gathering and evaluating information. People use either sensation or
intuition in gather their information and they evaluate information by thinking
or feeling. He also distinguishes between introversion and extroversion, and
judging and perceiving. A widely used test that measures how people differ on
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all four of Jung’s set of paired opposites is the Myers-Briggs type
indicator (MBTI): measures a person’s preferences for introversion versus
extroversion, sensation versus intuition, thinking versus feeling, and judging
versus perceiving.
An important responsibility of managers is try to match employee and job
characteristics so that work is done by people who are well suited to do it. Person-jobfit: the extent to which a person’s ability and personality match the requirements of a
job. A related concern is person-environment fit, which looks at how well the
individual will fit in the overall organizational environment.
14.6. Emotions
Emotional intelligence includes self-awareness, self-management, social awareness
and relationship management.
Emotion: can be thought of as a mental state that arises spontaneously within a
person based on interaction with the environment rather than through conscious
effort and is often accompanied by physiological changes or sensation. You can catch
emotions from others, for example when someone is happy and enthusiastic this can
rub on others, this is called emotional contagion. Managers can increase their
effectiveness by understanding positive and negative emotions and developing
emotional intelligence (EQ), which includes four basis components:




Self-awareness: being aware of what you’re feeling.
Self-management: the ability to control disruptive or harmful emotions and
balance one’s moods so that worry, anxiety, fear or anger do not cloud thinking
and get in the way of what needs to be done.
Social awareness: the ability to understand others and practice empathy, which
means being able to put yourself in someone else’s shoes.
Relationship management: the ability to connect to others, build positive
relationships, respond to the emotions of others, and influence others.
Studies show a positive relationship between job performance and high levels of EQ.
14.7. Learning
Learning is a change in behaviour or performance that occurs because of the result of
experience.
Learning: a change in behaviour or performance that occurs because of the result of
experience. One model of the learning process depicts learning as a four-stage cycle:
1. A person encounters a concrete experience.
2. This is followed by thinking and reflective observation.
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3. This leads to abstract conceptualization.
4. And that leads to active experimentation.
Researchers have identified four fundamental learning styles: labelled diverger,
assimilator, converger and accommodator.
14.8. Stress and stress management
The two categories of ill effects of stress are type A and type B behaviour. Task
demands and interpersonal demands are possible stress causers in the organization.
Stress: an individual’s physiological and emotional response to external stimuli that
place physical or psychological demand on the individual and create uncertainty and
lack of personal control when important outcomes are at stake. These stimuli, called
stressors, produce some combination of frustration and anxiety. Stress isn’t always
negative; it can be a positive force if the level is not to high, stimulating desire change
and achievement. Researchers have observed two categories of the ill effects of
stress:


Type A behaviour: behaviour pattern characterized by extreme competitiveness,
impatience, aggressiveness, and devotion to work. Type A managers can be
powerful forces for innovation and change, but they can also create high stress
for themselves and others.
Type B behaviour: behaviour pattern that lacks Type A characteristic and
includes a more balanced, relaxed lifestyle.
Even prior to recent economic difficulties, workplace stress has been skyrocketing
worldwide for some years. One way to identify work stressors is to think about stress
caused by the demands of job tasks and stress caused by interpersonal pressures and
conflicts.


Task demands are stressors arising from the tasks required of a person holding
a particular job. Task demands also sometimes cause stress because of role
ambiguity: people are unclear about what task behaviour are expected of them.
Interpersonal demands are stressors associated with relationships in the
organization. Role conflict occurs when an individual perceives incompatible
demands from others.
In addition to avoiding the behaviours that cause unnecessary stress for employees,
good managers in today’s high pressure environment are proactive in identifying
when people are suffering from too much stress.
15. Leadership
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Leadership is defined as the ability to influence other people toward the attainment
of goals, and there are several ways to develop leadership qualities. Leadership styles
are also important because they need to fit the environment of the organization,
traits and strengths are what define a manager’s leadership style. This is also
influenced by their behaviour and sort of power they use. In order to be a successful
leader you need to manage your different types of followers.
15.1. The nature of leadership
Leadership is the ability to influence people towards the attainment of goals.
The attitude and behaviours of leaders shape the conditions that determine how well
employees can do their jobs; thus, leaders play a tremendous role in the organization’s
success. Leadership: is defined as the ability to influence people towards the
attainment of goals.
15.2. Contemporary leadership
Leadership is the ability to influence people towards the attainment of goals.
The attitude and behaviours of leaders shape the conditions that determine how well
employees can do their jobs; thus, leaders play a tremendous role in the organization’s
success. Leadership: is defined as the ability to influence people towards the
attainment of goals.
15.3. From management to leadership
Leadership and and management are two different concepts and they are both
important to organization, the difference is explained in this section.
Leadership and management reflect two different set of qualities and skills that
provide different benefits to the organization. Management promotes stability and
efficient organizing to meet current commitments, whereas leadership often inspires
engagement and organizational change to meet new conditions. Both leadership and
management are important to organizations, and people can learn to be good leaders
as well as good managers.
15.4. Leadership traits
Leadership and management are two different concepts and they are both important
to organization, the difference is explained in this section.
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Traits: distinguishing personal characteristics of a leader, such as intelligence, honesty,
self-confidence and even appearance. The early research looked at leaders who had
achieved a level of greatness, referred to the great man approach: find out what made
great people great, and select future leaders who already exhibited the same traits or
could be trained to develop them. Recent research found that effective leaders
typically possess varied traits, and no single leader can have a complete set of
characteristics that is appropriate for handling any problem, challenge, or opportunity
that comes along. Therefore, rather than just understanding their traits, the best
leaders recognize and hone their strengths: natural talents and abilities that have been
supported and reinforced with learned knowledge and skills and provide each
individual with his or her best tools for accomplishment and satisfaction.
15.5. Behavioural approaches
Consideration and initiating structure are two types of behaviour that are applicable
to effective leadership, later also the leadership grid was introduced as effective.
Two types of behaviour that have been identified as applicable to effective leadership
are task-oriented behaviour and people-orientated behaviour. Ohio State researchers
identified two major behaviours they called consideration and initiating
structure. Consideration: falls in the category of people-oriented behaviour and is the
extent to which the leader is mindful of subordinates, respect their ideas and feelings,
and establishes mutual trust. Initiating structure: the degree of task behaviour, that is,
the extent to which the leader is task-oriented and directs subordinate work activities
toward goal attainment. Research at the University of Michigan also did similar
research and found that the most effective supervisor were those who established
high performance goals and displayed supportive behaviour towards subordinates.
These were referred to as employee-centred leaders; the less effective leaders were
called job-centred leaders.
Building on the work of the Ohio State and Michigan studies, Blake and Mouton
proposed a two-dimensional theory called the managerial grid, later restated as
the leadership grid: a two-dimensional leadership theory that measures the leader’s
concern for people and production. It defines five styles of management:



Team management: considered the most effective style and is recommended
for managers because organization members work together to accomplish
tasks.
Country club management: occurs when primary emphasis is given to people
rather than to work outputs.
Authority compliance management: occurs when efficiency in operations is the
dominant orientation.
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

Middle-of-the-road management: reflects a moderate amount of concern for
both people and production.
Impoverished management: the absence of a management philosophy, managers
exerts little effort toward interpersonal relationships or work accomplishment.
15.6. Contingency approaches
Contingency approaches are models of leadership that describe the relationship
between leadership and specific organizational situation, it includes the situational
model, the leadership model and the substitutes-for-leadership concept.
Leadership and management reflect two different set of qualities and skills that
provide different benefits to the organization. Management promotes stability and
efficient organizing to meet current commitments, whereas leadership often inspires
engagement and organizational change to meet new conditions. Both leadership and
management are important to organizations, and people can learn to be good leaders
as well as good managers.
15.7. Charismatic and transformational leadership
A charismatic leader has the ability to inspire and motivate people to do more than
they usually do, a transformational leader is distinguished by their special ability to
bring about innovation and change, and in this section these two leadership
approaches are further explained.
Two types of behaviour that have been identified as applicable to effective leadership
are task-oriented behaviour and people-orientated behaviour. Ohio State researchers
identified two major behaviours they called consideration and initiating
structure. Consideration: falls in the category of people-oriented behaviour and is the
extent to which the leader is mindful of subordinates, respect their ideas and feelings,
and establishes mutual trust. Initiating structure: the degree of task behaviour, that is,
the extent to which the leader is task-oriented and directs subordinate work activities
toward goal attainment. Research at the University of Michigan also did similar
research and found that the most effective supervisor were those who established
high performance goals and displayed supportive behaviour towards subordinates.
These were referred to as employee-centred leaders; the less effective leaders were
called job-centred leaders.
Building on the work of the Ohio State and Michigan studies, Blake and Mouton
proposed a two-dimensional theory called the managerial grid, later restated as
the leadership grid: a two-dimensional leadership theory that measures the leader’s
concern for people and production. It defines five styles of management:
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




Team management: considered the most effective style and is recommended
for managers because organization members work together to accomplish
tasks.
Country club management: occurs when primary emphasis is given to people
rather than to work outputs.
Authority compliance management: occurs when efficiency in operations is the
dominant orientation.
Middle-of-the-road management: reflects a moderate amount of concern for
both people and production.
Impoverished management: the absence of a management philosophy, managers
exerts little effort toward interpersonal relationships or work accomplishment.
15.8. Followership
A charismatic leader has the ability to inspire and motivate people to do more than
they usually do, a transformational leader is distinguished by their special ability to
bring about innovation and change, and in this section these two leadership
approaches are further explained.
Leadership matters, but without effective followers no organization can survive. One
model of followership came up with five follower styles, which are categorized
according to two dimensions, critical thinking: thinking independently and being
mindful of the effect of one’s behaviour on achieving goals; versus, uncritical thinking:
failing to consider the possibilities beyond what one is told; accepting others’ ideas
without thinking. The second dimension of follower style is active versus passive
behaviour. The five follower’s styles:





The alienated follower: is passive, yet independent, critical thinker. They are
capable, but they focus exclusively on the shortcomings of their superiors.
The conformist: participates actively in a relationship with the boss but doesn’t
use critical thinking skills.
The pragmatic survivor: has qualities of all 4 extremes, depending on which
style fits with the prevalent situation. This type of person uses whatever style
benefits his or her own position and minimizes risk.
The passive follower: exhibits neither critical, independent thinking nor active
participation. Being passive and uncritical, these people show neither initiative
nor a sense of responsibility.
The effective follower: Effective follower is both a critical, independent thinker
and active in the organization. Effective followers behave the same toward
everyone, regardless of their position in the organization.
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15.9. Power and influence
Power is the potential ability to influence the behaviour or others, they result from
position power, personal power or other sources of power, discussed in this
paragraph.
Power: the potential ability to influence the behaviour of others. Influence: the effect a
person’s actions have on the attitudes, values, beliefs, or behaviour of others. Power
results form an interaction of leaders and followers.



Position power: the traditional manager’s power comes from the position in the
organization.
o Legitimate power: power coming from a formal management position in
an organization and the authority granted to it.
o Reward power: stems from the authority to bestow rewards on other
people.
o Coercive power: refers to the authority to punish or recommend
punishment.
Personal power: comes from internal sources, such as an individual’s special
knowledge or personal characteristics.
o Expert power: power resulting from a person’s special knowledge or skill
regarding the tasks being performed.
o Referent power: comes from an individual’s personal characteristics that
command others’ identification, respect and admiration so they wish to
emulate that individual.
Other sources of power: there are other sources of power that are not linked
to a particular person or positon but rather to the role an individual plays in the
overall functioning of the organization.
o Personal effort: people who show initiative, work beyond what is
expected from them, take on undesirable but important projects, and
show interest in learning often gain power as a result.
o Network of relationships: people who are enmeshed in a network of
relationships have greater power.
o Information: is a primary business source, and people who have access
to it and control over how and to whom it is distributed are typically
powerful.
There are different ways in which you use power to influence others, implement
decisions, and facilitate change:
1. Use rational power: use facts, data, and logical argument to persuade others
that a proposed idea, request, or decision is appropriate.
2. Make people like you: people would rather say yes to someone they like.
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3. Rely on the rule of reciprocity: leaders can influence others through the
exchange of benefits and favours.
4. Develop allies: develop networks of allies; people who can help the leader
accomplish his or her goals.
5. Be assertive- ask what you want: make a direct and personal request.
6. Make use of higher authority: leaders have to use their formal authority, as well
as gain the support of people at higher levels to back them up.
7. Reward the behaviours you want: use organizational rewards and punishments
to influence other’s behaviour.
Research indicates that people rate leaders as ‘more effective’ when they are
perceived to use a variety of influence tactics described above.
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16. Motivating employees
Employee motivation is the forces to a person that arouse enthusiasm and
persistence, this chapter describes the several approaches in motivating employees.
Then, the content-, process-, reinforcement- and social learning-theories are
discussed. Also job design- changing the structure of the work itself – is discussed
and the trend of employee empowerment and engagement.
16.1. The concept of motivation
Motivation are the arousal, direction, and persistence of behaviour, and it's
influenced by intrinsic and extrinsic rewards.
Motivation: the forces either within or external to a person that arouse enthusiasm
and persistence to pursue a certain course of action. Employee motivation affects
productivity, and part of a managers’ job is to channel motivation toward the
accomplishment of organizational goals. People have needs that translate into an
internal tension that motivates specific behaviours with which to fulfil the need. To
the extent that the behaviour is successful, the person is rewarded in the sense that
the need is satisfied. There are two types of rewards; intrinsic rewards: the satisfaction
received in the process of performing a particular action, in other words satisfaction
from the work itself. And extrinsic rewards: a reward given by another person,
typically a manager, and include promotions, pay increases and bonuses. Although
extrinsic rewards are important, good managers strive to help people achieve intrinsic
rewards as well.
16.2. Content perspectives on motivation
Content theories emphasize the needs that motivate people, this paragraph
discusses the four content theories.
Content theories: emphasize the needs that motivate people. These needs translate
into an internal drive that motivates specific behaviours in an attempt to fulfil the
needs. There are four content theories:

The most famous content theory is Maslow’s hierarchy of needs theory: theory
that proposes that people are motivated by multiple needs and that these
needs exist in a hierarchical order. There are five general types of motivating
needs in order of ascendance:
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Physiological needs: the most basic human physical needs include food,
water and oxygen.
o Safety needs: safe and secure physical and emotional environment and
freedom from threats.
o Belongingness needs: reflect the desire to be accepted by one’s peers,
have friendships, be part of a group, and be loved.
o Esteem needs: relate to the desire for a positive self-image and to receive
attention, recognition and appreciation from others.
o Self-actualization needs: include the need for self-fulfilment, which is the
highest need category.
Clayton Alderfer’s ERG theory: a modification of the needs hierarchy theory
that proposes three categories of needs: existence, relatedness and growth.
Alderfer reduced the number of need categories to three and proposed that
movement up the hierarchy is more complex, reflecting a frustration-regression
principle: failure to meet a high-order need may trigger a regression to an
already fulfilled lower order need.
Two factory theory by Frederick Herzberg, his findings suggested the notion
that 2 factors influence work motivation:
o Hygiene factors: involves the presence or absence of job dissatisfiers,
such as working conditions, pay, company policies, and interpersonal
relationships. When they are poor, work is satisfying. However, good
hygiene factors simply remove dissatisfaction; they do not in themselves
cause people to become highly satisfied and motivated in their work.
o Motivators: focus on high level needs and include achievement,
recognition, responsibility, and opportunity for
growth.
The manager’s role is to
remove dissatisfiers – that is, to provide hygiene factors sufficient to
meet basic needs – and then to use motivators to meet higher-level
needs and propel employees toward greater achievement and
satisfaction.
The acquired needs theory by David McClelland, it proposes that certain types
of needs are acquired during the individual’s lifetime. People are not born with
these needs but they may learn them through their life experiences. The three
needs most frequently studied:
o Need for achievement: the desire to accomplish something difficult, attain
a high standard of success, master complex tasks and surpass others.
o Need for affiliation: the desire to form close personal relationships, avoid
conflict, and establish warm friendships.
o Need for power: the desire to influence or control others, be responsible
for others, and have authority over others.
o



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16.3. Process perspective on motivation
Content theories emphasize the needs that motivate people, this paragraph
discusses the four content theories.
Content theories: emphasize the needs that motivate people. These needs translate
into an internal drive that motivates specific behaviours in an attempt to fulfil the
needs. There are four content theories:



The most famous content theory is Maslow’s hierarchy of needs theory: theory
that proposes that people are motivated by multiple needs and that these
needs exist in a hierarchical order. There are five general types of motivating
needs in order of ascendance:
o Physiological needs: the most basic human physical needs include food,
water and oxygen.
o Safety needs: safe and secure physical and emotional environment and
freedom from threats.
o Belongingness needs: reflect the desire to be accepted by one’s peers,
have friendships, be part of a group, and be loved.
o Esteem needs: relate to the desire for a positive self-image and to receive
attention, recognition and appreciation from others.
o Self-actualization needs: include the need for self-fulfilment, which is the
highest need category.
Clayton Alderfer’s ERG theory: a modification of the needs hierarchy theory
that proposes three categories of needs: existence, relatedness and growth.
Alderfer reduced the number of need categories to three and proposed that
movement up the hierarchy is more complex, reflecting a frustration-regression
principle: failure to meet a high-order need may trigger a regression to an
already fulfilled lower order need.
Two factory theory by Frederick Herzberg, his findings suggested the notion
that 2 factors influence work motivation:
o Hygiene factors: involves the presence or absence of job dissatisfiers,
such as working conditions, pay, company policies, and interpersonal
relationships. When they are poor, work is satisfying. However, good
hygiene factors simply remove dissatisfaction; they do not in themselves
cause people to become highly satisfied and motivated in their work.
o Motivators: focus on high level needs and include achievement,
recognition, responsibility, and opportunity for
growth.
The manager’s role is to
remove dissatisfiers – that is, to provide hygiene factors sufficient to
meet basic needs – and then to use motivators to meet higher-level
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
needs and propel employees toward greater achievement and
satisfaction.
The acquired needs theory by David McClelland, it proposes that certain types
of needs are acquired during the individual’s lifetime. People are not born with
these needs but they may learn them through their life experiences. The three
needs most frequently studied:
o Need for achievement: the desire to accomplish something difficult, attain
a high standard of success, master complex tasks and surpass others.
o Need for affiliation: the desire to form close personal relationships, avoid
conflict, and establish warm friendships.
o Need for power: the desire to influence or control others, be responsible
for others, and have authority over others.
16.4. Reinforcement perspective on motivation
Reinforcement theory is a motivation theory based on the relationship between a
given behaviour and its consequences, the four tools are positive reinforcement,
avoidance learning, punishment and extinction, this section explains them.
Reinforcement theory: a motivation theory based on the relationship between a given
behaviour and its consequences. It focusses on changing or modifying employee’s onthe-job behaviour through the appropriate use of immediate rewards and
punishment. Behavioural modification: is the set of techniques by which reinforcement
theory is used to modify human behaviour. The basic assumption underlying it is
the law of effect: which states that behaviour that is positively reinforced tends to be
repeated, and behaviour that is not reinforced tends not to be
reinforced. Reinforcement: is defined as anything that causes a certain behaviour to be
repeated or inhibited. There are four reinforcement tools:



Positive reinforcement: is the administration of a pleasant and rewarding
consequence following a desired behaviour, such as praise for an employee
who arrives on time or does a little extra work. Research found that financial as
well as non-financial positive reinforcement does help to improve performance.
Avoidance learning: is the removal of an unpleasant consequence once a
behaviour is improved, thereby encouraging and strengthening the desired
behaviour. Sometimes called negative reinforcement, the idea is that people
will change a specific behaviour to avoid the undesired results that behaviour
provokes.
Punishment: the imposition of unpleasant outcomes on an employee. It
typically occurs following undesirable behaviour and the use of it is
controversial and often criticized because it fails to indicate the correct
behaviour.
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
Extinction: the withholding of a positive reward. It imposes an unpleasant
outcome such as withholding praise or other positive outcomes. With
extinction, undesirable behavior is essentially ignored.
16.5. Social learning theory
The three forms of social learning theory are vicarious learning, self-reinforcement
and self-efficacy.
Social learning theory: is related to the reinforcement perspective, but it imposes that
an individual’s motivation can result not just from direct experience of rewards and
punishments but also from the person’s thoughts and beliefs and his or her
observations of other people’s behaviour. There are three important elements:



Vicarious learning: occurs when an individual sees others perform certain
behaviours and get rewarded for them. Managers can enhance an individual’s
motivation to perform desired behaviours by ensuring that the individual:
o Has a chance to observe the desirable behaviours.
o Accurately perceives the behaviors.
o Remembers the behavior.
o Has the necessary skills to perform the behaviours.
o Sees that the behaviours are rewarded by the organization.
Self-reinforcement: refers to an individual motivating him or herself by setting
goals and ways of reaching them and then providing positive reinforcement to
him- or herself when goals are achieved.
Self-efficacy: an individual’s belief about his or her ability to successfully
accomplish a specific task or outcome. Managers increase self-efficacy by
ensuring that people have the training, skills, and resources they need to
perform well and by expressing confidence and trust in employee’s abilities.
16.6. Job design for motivation
Job design is the application of motivational theories to the structure of work for
improving productivity and satisfaction. This sections reviews the different ways to
apply job design like job enrichment and enlargement.
A job in an organization is a unit of work that a single employee is responsible for
performing. Job design: is the application of motivational theories to the structure of
work for improving productivity and satisfaction. Managers in many companies are
redesigning simplified jobs into jobs that provide greater variety and satisfaction. One
technique to provide this is to systematically rotate employees from one job to
another, called job rotation. Another approach is job enlargement, which is combining
a series of small tasks into one new broader job. Overall the trend is toward job
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enrichment: which means incorporating high-level motivators into the work, including
responsibility, recognition, and opportunities for growth, learning, and achievement.
One significant approach to job design is the model by Hackman and Oldham, their
research concerned work redesign: which is defined as altering jobs to increase both
the quality of employee’s work experience and their productivity. Their research into
the design of hundreds of jobs yielded the job characteristic model: a model of job
design that comprises core job dimensions, critical psychological states, and employee
growth-need strength.
16.7. Innovative ideas for motivation
Empowerment and engagement are important tools for managers to increase
motivation by incentive compensation, they are explained here.
Organizations are increasingly using various types of incentive compensation as a way
to motivate employees to higher levels of performance. One significant way managers
can meet higher motivational needs is to shift power down from the top and share it
with employees. Empowerment: is power sharing, the delegation of power or authority
to subordinates in an organization. Empowering employees involves giving them 4
elements that enable them to act more freely to accomplish their jobs:
1.
2.
3.
4.
Employees receive information about company performance.
Employees have knowledge and skills to contribute to company goals.
Employees have the power to make substantive decisions.
Employees are rewarded based on company performance.
In recent years managers have focused on employee engagement: a situation in which
employees enjoy their work, contribute enthusiastically to meeting goals, and feel a
sense of belonging and commitment to the organization. Managers create an
environment that promotes engagement by providing employees with a sense of
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meaning, a sense of connection, and a sense of competence and growth.
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17. Managing communication
Communication is the process by which information is exchanged and understood by
two or more people, and it’s an important aspect of the organization. Therefor
managers should give it priority and make it part of the job. This chapter describes
the communication process and the interpersonal aspects of communicating. Formal
communication channels are those that flow within the chain of command or task
responsibility defined by the organization, this chapter describes the different types
in the organization and a manager’s role in (crisis) communication.
17.1. Communication is the manager’s job
Managers use communication to direct everyone's attention towards the vision,
values and desired goals of the organization, this paragraph explains the
communication process.
Managers’ communication is purpose-directed, in that it directs everyone’s attention
toward the vision, values and desired goals of the team or organization, and influences
people to act in a way to achieve the goals. Managers facilitate strategic
conversations by using an open communication, actively listening to others. Strategic
conversation: refers to people talking across boundaries and hierarchical levels about
the team or organization’s vision, critical strategic themes, and the values that help
achieve important goals. Communication: is the process by which information is
exchanged and understood by two or more people, usually with the intent to motivate
or influence behaviour. Manager’s communication is a two-way street that includes
listening and other forms of feedback. Two essential elements in every
communication situation are the sender and the receiver. The sender encodes: to
select symbols with which to compose a message. The message: is the tangible
formulation of the idea that is sent to the receiver’s. The message is sent through
a channel: the communication carrier. The receiver decodes: translating the symbols
used in a message for the purpose of interpreting its meaning. Finally, feedback: a
response by the receiver response to the sender’s communication occurs. Without
feedback communication is one-way.
17.2. Communicating among people
Channel richness is the amount of information that can be transmitted during a
communication, in this paragraph several forms like instant messaging are discussed.
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Managers have a choice of many channels through which to communicate. Channel
richness: is the amount of information that can be transmitted during a communication
episode. The capacity of an information channel is influenced by three characteristics:



The ability to handle multiple cues simultaneously.
The ability to facilitate rapid, two-way feedback.
The ability to establish a personal focus for the communication.
Instant messaging: allows users to see who is connected to a network and share shorthand messages or document with the instantly. It’s important for managers to
understand that each communication channel has advantages and disadvantages and
that each can be an effective means of communication in the appropriate
circumstances. The key is to select a channel to fit the message.
Communication is not just for conveying information, but also to persuade and
influence people.
Communication apprehension: an individual’s level of fear or anxiety associated with
interpersonal communications.
To improve the effectives of workplace communication, managers should be aware of
various factors that influence how people communicate. One important consideration
is gender roles, the learned behaviours associated with being male or female. They
should also be aware that their body language –facial expressions, gestures, touch and
use of space – can communicate a range of messages, from enthusiasm, warmth, and
confidence to arrogance, indifference, and displeasure. Nonverbal communication:
refers to messages sent through human actions and behaviours rather than through
words. There are three cues during face-to-face communication:



The verbal: the actual spoken words.
The vocal: the pitch, tone and timbre of a person’s voice.
The facial expressions.
One of the most important tools of manager’s communication is listening, both to
employees and customers. Listening: involves the skill of grasping both facts and
feelings to interpret a message’s genuine meaning. A good listener finds areas of
interest, is flexible, works hard at listening, and used thought speed to mentally
summarize, weigh and anticipate what the speaker says. Good listening means shifting
from thinking about self to empathizing with the other person and thus requires a
high degree of emotional intelligence.
17.3. Organizational communication
Organizational communication typically flows downward, upward and horizontally
via a centralized or decentralized network.
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Formal communication channels: are those that flow within the chain of command or
task responsibility defined by the organization. Organization-wide communications
typically flow in three directions:



Downward communication: refers to the messages and information sent from
top management to subordinates in downward direction. It usually
encompasses these five topics:
o Goals and strategies
o Job instructions and rationale
o Procedures and practices
o Performance feedback
o Indoctrination
A major problem with
downward communication is drop off, the distortion or loss of message
content.
Upward communication: includes messages that flow from the lower to the
higher levels in the organization’s hierarchy. Five types of information
communicated upward:
o Problems and exceptions
o Suggestions for improvement
o Performance reports
o Grievances and disputes
o Financial and accounting information
Horizontal communication: is the lateral or diagonal exchange of messages
among peers or co-workers. It may occur within or across departments. It falls
into one of three categories:
o Intradepartmental problem solving
o Interdepartmental coordination
o Change initiatives and improvements
Team communication, a special form of horizontal communication, presents unique
challenges for managers. Research into team communication has focused on two
characteristics: the extent to which team communications are centralized and the
nature of the team’s task. In a centralized network: team members must communicate
through one individual to solve problems or make decisions. In a decentralized
network: individuals can communicate freely with other team members. Centralized
communication networks achieved faster solutions for simple problems but for more
complex problems, the decentralized communication works faster.
Personal communication channels: exist outside the formally authorized channels and
do not adhere to the organization’s hierarchy of authority. There are three important
types:
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


Personal networking: refers to the acquisition and cultivation of personal
relationships that cross departmental, hierarchical, and even organizational
boundaries.
The grapevine: an informal, person-to-person communication network that is
not officially sanctioned by the organization.
Written communication
17.4. Workplace communication
Managers can develop four primary skills for communicating in a crisis, this
paragraph explains them together with the things managers can do to enhance
organizational communication.
A manager’s skill at communication becomes even more crucial during times of rapid
change, uncertainty or crisis. Managers can develop four primary skills for
communicating in a crisis:




Stay calm, listen hard.
Be visible.
Get the awful truth out.
Communicate with a vision for the future.
The rapidly changing digital environment is brings sweeping changes to workplace
communication. The significant increase in the use of social media signals a growing
appetite among users for instant access and immediate sharing of information.
Perhaps the most important thing managers can do to enhance organizational
communication is to create a climate of trust and openness. Second, managers should
develop and use formal communication channels in all directions. Third, they should
encourage the use of multiple channels, including both formal and informal
communications. Fourth, the structure should fit communication needs.
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18. Leading teams
A team is a unit of two or more people who interact and coordinate their work to
accomplish a common goal for which there are committed and hold themselves
mutually accountable. Formal and self-directed teams are created are different types
of teams, virtual teams and global teams are two types that are increasingly being
used. Size, diversity and member roles are team characteristics of particular concern.
This chapter also describes the five stages of the team process; forming, storming,
norming, performing and adjourning. There are also different types of team conflict
and styles to resolve them.
18.1. Why teams at work?
A team is a unit of two or more people who interact and coordinate their work to
accomplish a common goal for which there are committed and hold themselves
mutually accountable, this chapter summarizes the components of a team and the
reasons why teams present a dilemma for many people.
Teams have become the primary way in which many companies accomplish their
work. A team: is a unit of two or more people who interact and coordinate their work
to accomplish a common goal for which they are committed and hold themselves
mutually accountable. The definition of a team has four components:




Two or more people are required.
People in a team have regular interaction.
People in a team share a performance goal.
People in a team are committed to the goals and hold themselves mutually
accountable.
There are three primary reasons teams present a dilemma for many people:



We have to give up our independence.
We have to put up with free riders: refers to a team member who attains
benefits from team membership but does not actively participate I and
contribute to the team’s work.
Teams are sometimes dysfunctional.
Dysfunction
Effective team characteristics
Lack of trust
Trust
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Fear of conflict
Healthy conflict
Lack of commitment
Commitment
Avoidance of accountability
Accountability
Inattention to results
Results oriented
18.2. How to make teams effective
Rallying people around a compelling purpose, sharing power and admitting ignorance
are ways in which leaders can contribute to team success.
In organization effective teams are built by mangers who take specific actions to help
people come together and perform well as a team. Work team effectiveness is based
on three outcomes – productive output, personal satisfaction, and the capacity to
adapt and lean. The factors that influence team effectiveness begin with the
organizational context. Within that context, managers define teams. Important team
characteristics are the type of team, the team structure, and team composition. Team
size and roles are also important. Team leaders play an important role in shaping team
effectiveness. In addition to managing internal processes there are three specific ways
in which leaders contribute to team success:



Rally people around a compelling purpose.
Share power.
Admit ignorance.
18.3. Types of teams
Two types of teams are self-directed teams and formal teams, which themselves can
be a horizontal or vertical team.
Teams have become the primary way in which many companies accomplish their
work. A team: is a unit of two or more people who interact and coordinate their work
to accomplish a common goal for which they are committed and hold themselves
mutually accountable. The definition of a team has four components:




Two or more people are required.
People in a team have regular interaction.
People in a team share a performance goal.
People in a team are committed to the goals and hold themselves mutually
accountable.
There are three primary reasons teams present a dilemma for many people:
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


We have to give up our independence.
We have to put up with free riders: refers to a team member who attains
benefits from team membership but does not actively participate I and
contribute to the team’s work.
Teams are sometimes dysfunctional.
Dysfunction
Effective team characteristics
Lack of trust
Trust
Fear of conflict
Healthy conflict
Lack of commitment
Commitment
Avoidance of accountability
Accountability
Inattention to results
Results oriented
18.4. Innovative uses of teams
Virtual and global teams are two types of teams that are increasingly being used,
they are described in this paragraph.
There are two types of teams that are increasingly being used:


Virtual teams: is made up of geographically or organizationally dispersed
members who are linked primarily through advanced information and
telecommunication technologies. Virtual teams present unique challenges:
o Using technology to build relationships is crucial for effective virtual
teams.
o Shaping culture through technology involves creating a virtual
environment in which people feel safe to express concerns, admit
mistakes, share ideas, acknowledge fears, or ask for help.
o Monitoring progress and rewarding member’s means that leaders stay
on top of the project’s development and make sure everyone knows
how the team is progressing toward meeting goals.
Global teams: are cross-border work teams made up of members of different
nationalities whose activities span multiple countries. Some global teams are
made up of members who come from different countries or cultures and meet
face-to-face, but may are virtual global teams whose members remain in
separate locations around the world an conduct their work electronically.
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18.5. Team characteristics
Size, diversity and member roles are team characteristics of particular concern.
Team characteristics particularly concern:



Size: teams need to be large enough to incorporate the diverse skills needed to
complete a task, enable members to express good and bad feelings, and
aggressively solve problems. However, they should also be small enough to
permit members to feel an intimate part of the team and to communicate
effectively and efficiently.
Diversity: in terms of functional area and skills, thinking styles and personal
characteristics is often a source of creativity. In addition, diversity may
contribute to a healthy level of disagreement that leads to better decision
making.
Member roles: for a team to be successful over the long run, it must be
structured so as to both maintain its members’ social well-being and
accomplish its task. Two types of roles:
o Task specialist role: a role in which the individual devotes person time
and energy to helping the team accomplish its task. They often display
the following behaviors:
 Initiate ideas
 Give opinion
 Seek information
 Summarize
 Energize
o Socio-emotional role: a role in which the individual provides support for
team member’s emotional needs and social unity. They display the
following behaviors:
 Encourage
 Harmonize
 Reduce tension
 Follow
 Compromise
18.6. Team processes
This paragraph describes the five stages of the team process; forming, storming,
norming, performing and adjourning.
After a team has been created, it develops through distinct stages:
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




Forming: the stage of team development characterized by orientation and
acquaintance.
Storming: the stage of team development in which individual personalities and
roles emerge along with resulting conflicts.
Norming: the stage of team development in which conflicts developed during
the storing stage are resolved and team harmony and unity emerge.
Performing: the stage of team development in which members focus on
problem solving and accomplishing the team’s assigned task.
Adjourning: the stage of team development in which members prepare for the
teams’ disbandment.
Another important aspect of the team process is cohesiveness. Team cohesiveness: is
defined as the extent to which members are attracted to the team and motivated to
remain in it. Several characteristics influence cohesiveness:





Team interaction.
Shared goals.
Personal attraction to the team.
Presence of competition.
Team success.
The outcome of team cohesiveness can fall into two categories; morale and
productivity. As a general rule, morale is higher in cohesive teams because of
increased communication among members, a friendly team climate, maintenance of
membership because of commitment to the team, loyalty, and member participation
in team decisions and activities. With respect to productivity of the team as a whole,
research finding suggest that teams in which members share strong feeling of
connectedness and generally positive interactions tend to perform better.
A team norm: is an informal standard of conduct that is shared by team members and
guides their behaviour. They develop in four common ways:




Primacy: firs behavior precedents.
Carryover from other experiences.
Explicit statements from leader or members.
Critical events in team history.
18.7. Managing team conflict
Conflict refers to antagonistic interaction in which one party attempts to block the
intentions or goals of another, task and relationship conflict are examples of conflicts
in teams.
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Conflict: refers to antagonistic interaction in which one party attempts to block the
intentions or goals of another. There are two basic types of conflict that occur in
teams:
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Task conflict: refers to the disagreements among people about the goals to be
achieved or the content of the tasks to be performed.
Relationship conflict: refers to interpersonal incompatibility that creates tension
and personal animosity among people.
A degree of conflict leads to better decision making because multiple viewpoints are
expressed. However, conflict that is too strong, that is focused on personal rather
than work issues, or that is not managed appropriately can be damaging to the team’s
morale and productivity. Several factors can lead to conflict:
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Competition over resources such as money, information or supplies.
People are pursuing different goals.
Communication breakdown.
Trust issues.
Lack of non-verbal cues.
The two major dimensions are the extent to which an individual is assertive versus
cooperative in his or her approach to conflict. There are five different styles:
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The competing style
The avoiding style
The compromising style
The accommodating style
Collaboration style
The use of the following tools can resolve conflicts among people or departments:
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Superordinate goals: a goal that cannot be reached by a single party.
Mediation: using a third party to settle a dispute.
One distinctive type of conflict management is negotiation: a strategy whereby people
engage in give-and-take discussions and consider various alternatives to reach a joint
decision that is acceptable to both parties. Integrative negotiation: is based on a winwin assumption, in that all parties want to come up with a creative solution that can
benefit both sides. Distributive negotiation: assumes the ‘size of the pie’ is fixed and
each party attempts to get as much of it as they can. Rules for a win-win solution are:
1. Separate the people from the problem.
2. Focus on interests, not current demands.
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3. Generate many alternatives for mutual gain.
4. Insist that results be based on objective standard.
18.8. Work team effectiveness
Productive output, satisfaction of members and capacity to adapt and learn are
possible positive outcomes of effective teams.
The possible positive outcomes of effective teams are:
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Productive output, effective teams can unleash enormous energy and
creativity from employees. Social facilitation: refers to the tendency for the
presence of others to enhance one’s motivation and performance.
Satisfaction of members. Effective teams provide multiple opportunities for
people to satisfy their individual needs and to develop both personally and
professionally.
Capacity to adapt and learn; when teams activities are effectively coordinated,
members learn to anticipate one another’s actions and respond appropriately.
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19. Managing quality and performance
Organizational control refers to the systematic process of regulating organizational
activities to make them consistent with the expectations established in plans,
targets, and standards for performance. All well-designed control systems involve
the use of feedback to determine whether performance meet established standards,
this involves 4 steps: establishing standards, measuring performance, comparing
performance and taking corrective action. There are two opposite forms of control,
hierarchical and decentralized control, two important approaches of decentralized
control include open book management and total quality management.
19.1. The meaning of control
Organizational control refers to the systematic process of regulating organizational
activities to make them consistent with the expectations established in plans,
targets, and standards for performance. An often used measure of organizational
control is the balanced scorecard.
Organizational control: refers to the systematic process of regulating organizational
activities to make them consistent with the expectations established in plans, targets,
and standards for performance. Effectively controlling in an organization requires
information about performance standards and actual performance, as well as actions
taken to correct any deviation from the standards. Most organizations focus on
measuring and controlling financial performance, such as sales, revenue, and profit.
Yet managers increasingly recognize the need to also measure intangible aspects of
performance to manage the value-creating activities of the organization. One way in
which you can measure intangibles is the balanced scorecard: is a comprehensive
management control system that balances traditional financial measures with
operational measures relating to a company’s critical success factors. A balanced
scorecard contains four major perspectives; financial, customer service, business
process and potential for learning and growth. Managers record, analyse, and discuss
these various metrics to determine how well the organization is achieving its strategic
goals.
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19.2. Feedback control model
Managers set up control systems that consist of four key steps; establishing
standards, measuring performance, comparing performance and taking corrective
action. Budgetary control is one of the most used forms of managerial control, the
several types are discussed in this paragraph.
All well-designed control systems involve the use of feedback to determine whether
performance meet established standards. Managers set up control systems that
consist of four key steps:
1. Establish standards of performance. Within the organization overall strategic
opal, managers define goals for organizational departments in specific,
operation terms that include a standard of performance against which to
compare organizational activities.
2. Measure actual performance. Most organizations prepare formal report of
quantitative performance measurements that managers review daily, weekly,
or monthly. These measurements should be related to the standards set in the
first step.
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3. Compare performance to standards. Typically performance reports simplify
comparisons by placing the performance standards for the reporting period
alongside the actual performance for the same period and by computing the
variance – that is, the difference between each actual amount and the
associated standard.
4. Take corrective action. Managers what changes, if any, are needed.
Budgetary control, one of the most commonly used methods of managerial control, is
the process of setting targets for an organization’s expenditures, monitoring results
and comparing them to the budget, and making changes as needed. The fundamental
unit of analysis for a budget control system is called a responsibility centre: is defined
as any organizational department or unit under the supervision of a single person who
is responsible for its activity. There are several types of budgets:
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Expense budget: a budget that outlines the anticipated and actual expenses for
a responsibility centre.
Revenue budget: a budget that identifies the forecasted and actual revenues of
the organization.
Cash budget: a budget that estimates and reports cash flows on a daily or
weekly basis to ensure that the company has sufficient cash to meet its
obligations.
Capital budget: a budget that plans and reports investments in major assets to
be depreciated over several years.
Budgeting is an important part of organizational planning and control. May companies
use top-down budgeting: which means that the budgeted amount for the coming year
are literally imposed on middle- and lower- level managers. Although this process
provides some advantages, the movement toward employee empowerment,
participation, and learning means that many organizations are adopting bottom-up
budgeting: a process in which lower-level managers anticipate their departments
resource needs and pass them up to top management for approval.
19.3. Financial control
The balance sheet and the income statement are two major financial statements and
the most common financial analysis focusses on ratios.
In every organization, managers need to watch how well the organization is
performing financially. Financial statements proved the basic information used for
financial control of an organization. Two major financial statements are:

The balance sheet: shows the firm’s financial position with respect to assets and
liabilities at a specific point in time. It provides three types of information:
assets, liabilities and owner’s equity.
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
The income statement: summarizes the firm’s financial performance for a given
time interval, usually one year. The bottom line indicates the net income –
profit or loss – for the given period.
A manager needs to be able to evaluate financial reports that compare organizations
performance with earlier data or industry norms. The most common financial analysis
focuses on rations, statistics that express the relationship between performance
indicators such as profits and assets, sales and inventory. Ratios are state as a fraction
or a proportion, some measurement ratios include:
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Liquidity ratio: indicates an organizations ability to meet its current debt
obligations. An example is the current ratio.
Activity ratio: measures internal performance with respect to key activities
defined by management. Examples are inventory turnover of conversion ratio.
Profitability ratio: states profits relative to a source of profits, such as sales or
assets. Examples are profit margin on sales, gross margin and return on total
assets (ROA).
Leverage ratio: leverage refers to funding activities with borrowed money. An
example is debt ratio.
19.4. The changing philosophy of control
There are two opposite forms of control, hierarchical and decentralized control one
important aspect of decentralized control includes open book management.
Manager’s approach to control is changing in many of today’s organizations. In
connection with the shift to employee participation and empowerment, many
companies are adopting a decentralized rather that a hierarchical control
process. Hierarchical control: involves monitoring and influencing employee behaviour
through extensive use of rules, policies, hierarchy of authority, written
documentations, reward systems, and other formal mechanisms. Hierarchical methods
define explicit rules, policies, and procedures for employee behaviour. Control lies on
centralized authority, the formal hierarchy, and close personal
supervision. Decentralized control: the use of organizational culture, group norms, and
a focus on goals, rather than rules and procedures, to foster compliance with
organizational goals. With decentralized control, power is more dispersed and is based
on knowledge and experience as much as position. One important aspect of
decentralized control is many organizations is open book management: allows
employees to see for themselves – through charts, computer print outs, meetings, and
so forth – the financial condition of the company. The goal is to get every employee
thinking like a business owner.
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19.6. Trends in quality and financial control
Major trends in quality and financial control include ISO 9000 standards, EVA, MVA,
ABC and increased corporate governance.
Some of the major trends in quality and financial control include:
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International quality standards: ISO 9000 standards: represent an international
consensus of what constitutes effective quality management as outlined by the
International Organization for Standardization.
Economic value-added (EVA): a control system that measures performance in
terms of after-tax profits minus the cost of capital invested in tangible assets.
Market value-added (MVA): a control system that measures the stock market’s
estimate of the value of a company’s past and expected capital investment
projects.
Activity-based costing (ABC): a control system that identifies the various
activities needed to provide a product and allocates costs accordingly.
Increased corporate governance: the system of governing an organization to
ensure accountability, fairness, and transparency in the organization
relationships with stakeholders.
19.5. Total quality management
Total quality management is an organization-wide effort to infuse quality into every
activity in a company through continuous improvement. Techniques to implement
TQM include: quality circles, benchmarking, six sigma, reducing cycle time and
continuous improvement.
Another popular approach based on a decentralized control philosophy is total quality
management (TQM): an organization-wide effort to infuse quality into every activity in
a company through continuous improvement. The TQM philosophy focuses on
teamwork, increasing customer satisfaction and lowering costs. Techniques to
implement TQM:
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Quality circles: a group of 6 to 12 volunteer employees who meet regularly to
discuss and solve problems affecting the quality of their work.
Benchmarking: is defined as the continuous process of measuring products,
services, and practices against the toughest competitors or those companies
recognized as industry leader to identify areas for improvement.
Six sigma: is a quality control approach that emphasizes a relentless pursuit of
higher quality and lower costs.
Reduced cycle time: refers to the steps taken to complete a company process.
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
Continuous improvement: the implementation of a large number of small,
incremental improvements in all areas of the organization on an on-going basis,
also called kaizen.
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20. Appendix: Managing the value chain,
web 2.0, and e-business
Operations management refers to using various tools and techniques to ensure that
goods and services are delivered successfully to customers or clients. There are two
forms of operations; manufacturing organizations and service organizations. And
there are four common types of facilities layout; process, product, cellular, and fixedposition layout.
20.1. The organization as a value chain
Operations management refers to using various tools and techniques to ensure that
goods and services are delivered successfully to customers or clients. There are two
forms of operations; manufacturing organizations and service organizations.
The organization is a system used for transforming inputs into outputs. At the centre
of this transformation process is the technical core: which is the heart of the
organizations production of its product or service. The organization can be thought of
as a value chain that receives input from the environment, such as raw materials and
other recourses, and adds value by transforming them into products and services for
customers. Inputs into the technical core typically include materials and equipment,
human resources, land and buildings, and information. Outputs from the technical
core are the goods and services produced by the organization and sold or provided to
customers and clients. Operations strategy and control feedback shape the quality of
outputs and the efficiency of operations within the technical core. Operations
management: refers to using various tools and techniques to ensure that goods and
services are delivered successfully to customers or clients. This involves bringing
people, processes, raw materials, and technology together to create value.
20.1.1. Service and manufacturing operations
Manufacturing organizations: are those that produce physical goods. In
contrast, service organizations: produce nonphysical outputs, such as educational or
communication services. Services differ from manufactured products in two ways.
First, the service customer is involved in the actual production process. Second,
manufactured goods can be placed in inventory, whereas service outputs, being
intangible, cannot be stored. There are also some similarities, for instance, most
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manufacturing firms have substantial service components, and most service firms
have some tangible element that must be managed. They also face similar operation
problems:
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Each kind of organization is concerned with scheduling.
Both manufacturing and service organizations must obtain materials and
supplies.
Both types of organizations are concerned with quality and productivity.
20.1.2. Supply chain management
Supply chain management: refers to managing the sequence of suppliers and
purchasers, covering all stages of processing form obtaining raw materials to
distributing finished goods to consumers. It means managing all the activities that
facilitate the satisfactory fulfilment of an order at the highest degree of customer
satisfaction and the lowest possible cost. The most recent advances in supply chain
management involve using Internet technologies to achieve the right balance of low
inventory levels and customer responsiveness. Integrating every company along the
supply chain means a quicker response to end consumers by reducing the time it
takes to move critical data through the information pipeline.
20.2. Facilities layout
There are two forms of operations; manufacturing organizations and service
organizations.
Another important consideration for operation management is planning the facilities
layout for producing goods or services. The four most common types:
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Process layout: a facilities layout in which machines that perform the same
function are grouped together in one location. The advantage of the process
layout in that it has the potential for economies of scale and reduced costs. The
drawback is that the actual path a product or service takes can be long and
complicated.
Product layout: a facilities layout in which machines and tasks are arranged
according to the sequence of steps in the production of a single product. This
layout is efficient when the organization produces or provides huge volumes of
identical products or services.
Cellular layout: a facilities layout in which machines dedicated to sequences of
production are grouped into cells in accordance with group-technology
principles. Arranging employees in cluster facilitates teamwork and joint
problem solving.
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
Fixed-position layout: a facilities layout in which the product remains in one
location and the required tasks and equipment are brought in. This layout is not
good for high volume, but it is often necessary for large bulky products, custom
orders, and special events.
20.3. Technology automation
There are three advances in manufacturing and service operations: radio-frequency
identification, flexible manufacturing and lean thinking.
A goal for many of today’s operations mangers is to find the right combination of
technology and management to most efficiently produce gods and services. There are
three advances in manufacturing and service operations:
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Radio-frequency identification (RFID): tags that emit a weak radio sigh that
enables employees to know what sizes are missing on the shelf and what items
are available in the stock room.
Flexible manufacturing systems: the use of automated production lines that
can be adapted quickly to produce more than one kind of product. The
machinery uses sophisticated computer technology to coordinate and integrate
the machines. It also enables mass customization: a process by which products
are produced cost-effectively in high volume but are customized to meet
individual needs.
Lean thinking: means combining advanced technology and innovative
management processes and using highly trained employees to solve problems,
cut waste, improve the productivity, quality, and efficiency of products and
services, and increase customer value.
20.4. Inventory management
There are three types of inventory; finished-goods, work-in-progress and raw
materials. Knowledge management refers to the efforts to systematically gather
knowledge, organize it, make it widely able throughout the organization, and foster a
culture of continuous learning and knowledge sharing.
Inventory: is the goods the organization keeps on hand for use in the production
process. There are three types of inventory:
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Finished-goods inventory: includes items that have passed through the entire
production process but not have been sold.
Work-in-progress inventory: includes materials moving through stages of the
production process that are not completed products.
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Raw materials inventory: includes the basis inputs to the organizations
production process.
Inventory management is vitally important to organizations, because inventory sitting
idly on the shop floor or in the warehouse costs money. Just-in-time inventory
systems: are designed to reduce the level of an organizations inventory and its
associated costs, aiming to push to zero the amount of time that raw material and
finished products are sitting in the factory, being inspected, or in transmit. It is also
referred to as stockless system, zero inventory systems or Kanban systems. Advanced
information technology makes just-in-time inventory management work seamlessly,
but it has also transformed management in other ways. An organizations information
technology (IT): consists of the hardware, software, telecommunications, database
management, and other technologies it uses to store date and make them available in
the form of information for organization decision making.
20.4.1. Knowledge management and Web 2.0
Knowledge management: refers to the efforts to systematically gather knowledge,
organize it, make it widely able throughout the organization, and foster a culture of
continuous learning and knowledge sharing. One IT application for knowledge
management is the use of business intelligence software: that analyses data and
extracts useful insights, patterns, and relationship that might be significant. Another
hot topic in corporate IT concerns expert-locator systems: identify and catalogue
experts in a searchable database so people can quickly identify who has knowledge
they can use.
Many organizations use groupware: software that works on a computer network or via
the Internet to link people or workgroups across a room or around the globe. The
software enable managers or team member to communicate, share information, and
work simultaneously on the same document, chart, or diagram and see changes and
comments as they are made by others. Many of today’s organizations also incorporate
the use of new technologies collectively referred to as Web 2.0 to support knowledge
sharing. Web 2.0 encompasses a range of tools, the most commonly used being blogs,
wikis, and social networks. Another IT component for many organizations is an
approach to information management called enterprise resource planning: integrate
and optimize all the various business processes across the entire firm. An enterprise
resource planning system can collect, process, and provide information about an
organization’s entire enterprise, including orders, product design, production,
purchasing, inventory, distribution, human resources, receipt of payment, and
forecasting of future demand.
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20.5. The internet and e-business
E-business is any business that takes place by digital processes over a computer
network rather than in physical space. There are three key components of ebusiness: intranet, extranet and the Internet.
Managers in almost every organization have incorporated the Internet as part of their
information technology strategies. Most large organizations, and many small ones, are
involved in some type of e-business: any business that takes place by digital processes
over a computer network rather than in physical space. E-commerce: is a more limited
term that refers specifically to business exchanges or transactions that occur
electronically. The key components of e-business are:
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An organization operates an intranet: an internal communications system that
uses the technology and standards of the Internet but is accessible only to
people within the organization.
The next component is an extranet: an external communications system that
uses the Internet and is shared by two or more organizations. With an extranet,
each organization moves certain data outside of tis private intranet, but makes
the data available only to the other companies sharing the same extranet.
The final piece is the Internet, which is accessible to the general public.
There are two strategic approaches for traditional organization setting up an Internet
operation.
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Market expansion: an Internet division allows a company to establish direct
links to customers and expand into new markets.
Increasing efficiency: with this approach, the e-business initiative is seen
primarily as a way to improve the bottom line by increasing productivity and
cutting costs.
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