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Brief Contents
1
Introduction to Management and
Organizations1
SUPPLEMENT 1A A Brief History
of Management
24
SUPPLEMENT 1B Small and
Medium-Sized Enterprises
and Organizations
30
SUPPLEMENT 1C Entrepreneurship35
2
Environmental Constraints on
Managers44
3
Decision Making
4
Planning and Strategic
Management104
70
5
Organizational Structure and Design 130
6
Human Resource Management
161
7
Managing Innovation and Change
194
8
Understanding Groups and Teams
220
9
Motivating and Rewarding
Employees244
10
Leadership272
11
Managing Communication and
Information302
12
Foundations of Control
328
13
Operations Management
356
iii
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Contents
Prefaceix
Acknowledgmentsxii
About the Authors
1
xiii
Introduction to Management and
Organizations1
What Does It Mean to Be “Global”?
What Are the Different Types of Global Organizations?
How Organizations Go Global
Which Is More Important to a Manager:
National Culture or Organizational Culture?
Why Study Management?
3
Organizational Culture
Strong Versus Weak Cultures
Developing an Organization’s Culture
What Is Management?
Efficiency and Effectiveness
4
4
How the Environment Affects Managers
Assessing Environmental Uncertainty
Who Are Managers?
4
The Organizational Setting
6
How Are Managers Different from Nonmanagerial
Employees?7
What Titles Do Managers Have?
7
Is the Manager’s Job Universal?
8
What Do Managers Do?
10
Four Functions Approach
10
Management Roles Approach
12
Functions versus Roles13
Skills and Competencies Approach
13
What Factors Are Reshaping and Redefining
Management?15
Why Are Customers Important to the Manager’s
Job?15
Why Is Innovation Important to the Manager’s Job?
15
Importance of Social Media to the Manager’s Job
16
Importance of Sustainability to the Manager’s Job
17
Chapter Summary 18 • Learning Objectives Checklist 18
• Developing Management Skills 18 • Team Exercises 20
• Business Cases 21
SUPPLEMENT 1A A Brief History of
Management24
SUPPLEMENT 1B Small and
Medium-Sized Enterprises and
Organizations30
SUPPLEMENT 1C Entrepreneurship35
2
Environmental Constraints
on Managers
44
The External Environment
The Specific Environment
The General Environment
45
46
47
Understanding the Global Environment
PESTEL—Global Environment
52
52
53
53
54
56
57
59
60
62
62
Chapter Summary 63 • Learning Objectives Checklist 63
• Developing Management Skills 64 • Team Exercises 66
• Business Cases 67
3
Decision Making
70
The Decision-Making Process
What Defines a Decision Problem?
What Is Relevant in the Decision-Making Process?
How Does the Decision Maker Weigh the Criteria
and Analyze Alternatives?
What Determines the Best Choice?
71
72
72
Factors Affecting Decision Making
What Are the Three Approaches Managers
Use to Make Decisions?
Types of Problems and Decisions
Decision-Making Conditions
Group Decision Making
Individual Versus Group Decision Making
Decision-Making Biases and Errors
75
72
74
76
77
79
80
81
82
Contemporary Issues in Managerial Decision Making
84
How Does National Culture Affect
Managers’ Decision Making?
84
Why Are Creativity and Design Thinking Important
in Decision Making?
85
How Is Big Data Changing the Way Managers Make
Decisions?88
Ethics, Corporate Social Responsibility,
and Decision Making
Four Views of Ethics
Improving Ethical Behaviour
Corporate Social Responsibility
90
90
92
94
Chapter Summary 97 • Learning Objectives Checklist 97
• Developing Management Skills 98 • Team Exercises 99
• Business Cases 101
4
Planning and Strategic Management 104
What Is Planning and Why Do Managers
Need to Plan?
Planning Defined
Why Do Managers Plan?
105
106
106
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vi Contents
Planning and Performance
Criticisms of Planning
107
107
6
Human Resource Management
161
How Do Managers Set Goals and Develop Plans?
What Types of Goals Do Organizations Have,
and How Do They Set Those Goals?
What Types of Plans Do Managers Use and How
Do They Develop Those Plans?
108
The Human Resource Management Process
Environmental Factors Affecting HRM
108
Organizational Strategy: Choosing a Niche
Why Is Strategic Management Important?
The Strategic Management Process
Step 1: Identify the Organization’s Current Vision,
Mission, Goals, and Strategies
Step 2: Do an Internal Analysis
Step 3: Do an External Analysis
Step 4: Formulate Strategies
Step 5: Implement Strategies
Step 6: Evaluate Results
113
113
114
Planning Human Resource Needs
166
(1) How Does an Organization Do a Current HR
Assessment?166
(2) How Are Future Employee Needs
Determined?168
(3) Balancing Supply and Demand
168
What Strategies Do Managers Use?
1 Corporate Strategy
2 Competitive Strategy
3 Functional Strategy
Social Media as a Strategic Weapon
Big Data as a Strategic Weapon
Competitive Strategies
119
119
120
121
121
122
123
110
114
116
116
118
119
119
Chapter Summary 124 • Learning Objectives Checklist 124
• Developing Management Skills 125 • Team Exercises 126
• Business Cases 127
5
Organizational Structure and Design 130
Key Elements in Organizational Structure
131
Work Specialization
132
Departmentalization133
Chain of Command
134
138
Span of Control
Centralization and Decentralization
139
Formalization140
What Contingency Variables Affect Structural
Choice?141
Mechanistic or Organic142
The “If”: Contingency Variables
143
Common Organizational Designs
Traditional Organizational Designs
Contemporary Organizational Designs
144
144
145
Contemporary Organizational Design Challenges
150
Designing Office Space
150
Keeping Employees Connected
151
Building a Learning Organization
151
Integrating Sustainability into the Organizational
Structure153
Managing Global Structural Issues
154
Designing Efficient and Effective Flexible Work
Arrangements154
Chapter Summary 157 • Learning Objectives Checklist 157
• Developing Management Skills 157 • Team Exercises 158
• Business Cases 159
162
164
Recruiting170
Where Does a Manager Recruit Applicants?
170
Selection170
How Effective Are Tests and Interviews as Selection
Devices?172
How Can You “Close the Deal”?
174
175
Orientation and Training
How Are New Hires Introduced to the
Organization?176
Training177
Total Rewards: Five Key Components
1 Strategic Compensation
2 Benefits
3 Work–Life Balance
4 Performance and Recognition
5 Career Development
179
179
181
181
182
183
Contemporary Human Resource Management Issues
184
How Can Workforce Diversity Be Managed?
184
What Is Sexual Harassment?
185
Bullying186
Occupational Health and Safety
187
Employee Wellness
187
Chapter Summary 188 • Summary of Learning Objectives 188
• Developing Management Skills 189 • Team Exercises 190
• Business Cases 191
7
Managing Innovation and Change
194
What Is Change and How Do Managers
Deal with It?
195
Why Do Organizations Need to
Change?195
Who Initiates Organizational Change?
196
How Does Organizational Change
Happen?197
How Do Organizations Implement Planned
Changes?198
How Do Managers Manage Resistance to Change?
199
Why Do People Resist Organizational Change?
200
What Are Some Techniques for Reducing Resistance
to Organizational Change?
201
Common Approaches to Organizational
Change201
Making Change Happen Successfully
202
Communicating Effectively When Undergoing
Change203
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vii
Contents
What Reaction Do Employees Have to Organizational
Change?204
What Causes Stress? Stressors
205
How Can Stress Be Reduced?
206
How Can Managers Encourage Innovation in an
Organization?207
How Are Creativity and Innovation Related?
208
What’s Involved in Innovation?
208
How Can a Manager Foster Innovation?
210
How Does Design Thinking Influence
Innovation?212
Chapter Summary 213 • Learning Objectives Checklist 213
• Developing Management Skills 214 • Team Exercises 216
• Business Cases 217
8
Understanding Groups
and Teams
What Is a Group and What Stages of Development
Do Groups Go Through?
What Is a Group?
Are Work Groups and Work Teams
the Same?
Stages of Group Development
Key Aspects of Group Behaviour
1 Roles
2a Norms
2b Conformity
3 Status Systems
4 Group Size
5 Group Cohesiveness
220
221
221
222
223
225
225
226
226
227
227
227
Turning Groups into Effective Teams
228
Characteristics of Effective Teams
229
What Contextual Factors Lead to Team
Effectiveness?230
What Team Composition Factors Lead
to Effectiveness?
231
How Does Work Design Affect Team
Effectiveness?232
What Team Processes Are Related to Team
Effectiveness?232
How Can a Manager Shape Team
Behaviour?233
Current Challenges in Managing Teams
235
What’s Involved with Managing Global
Teams?235
How Do Team Composition Factors Affect
Managing a Global Team?
236
How Does Team Structure Affect Managing
a Global Team?
236
How Do Team Processes Affect Managing
a Global Team?
237
Beware! Teams Are Not Always the Answer
237
Chapter Summary 238 • Learning Objectives Checklist 238
• Developing Management Skills 239 • Team Exercises 240
• Business Cases 241
9
Motivating and Rewarding
Employees244
Motivation245
Early Theories of Motivation (1950s and 1960s)
Maslow’s Hierarchy of Needs Theory
McGregor’s Theory X and Theory Y
Herzberg’s Two-Factor Theory
McClelland’s Three-Needs Theory
246
246
246
247
248
Contemporary Theories of Motivation
249
Goal-Setting Theory
249
How Does Job Design Influence
Motivation?250
Four-Drive Theory
252
Equity Theory
253
Expectancy Theory
255
Integrating Contemporary Theories of Motivation
257
Current Issues in Motivation
Motivating Employees When the Economy Stinks
Motivating Unique Groups of Workers
Designing Effective Rewards Programs That
Motivate Employees
Employee Recognition Programs
Improving Work–Life Balance
Suggestions for Motivating Employees
257
258
259
261
262
264
264
Chapter Summary 266 • Learning Objectives Checklist 266
• Developing Management Skills 267 • Team Exercises 267
• Business Cases 269
10
Leadership272
Who Are Leaders and What Is Leadership?
274
What Do Early Leadership Theories Tell Us About
Leadership?275
THE LEADER What Traits Do Leaders Have?
275
THE BEHAVIOURS What Behaviours Do
Leaders Exhibit?
277
Contingency Theories of Leadership
278
What Was the First Comprehensive Contingency
Model?278
How Do Followers’ Willingness and Ability
Influence Leaders?
280
How Participative Should a Leader Be?
282
How Do Leaders Help Followers?
282
Contemporary Views of Leadership
How Do Leaders Interact with Followers?
How Do Transactional Leaders Differ from
Transformational Leaders?
How Do Charismatic Leadership and Visionary
Leadership Differ?
284
285
Current Issues in Leadership
Why Do Leaders Need to Empower Employees?
Team Leadership
Managing Power
Providing Ethical Leadership
288
288
289
290
290
285
286
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viii Contents
Does National Culture Affect Leadership?
291
How Does Emotional Intelligence Affect Leadership? 292
Why Is Trust the Essence of Leadership?
Why Is It Important That Followers Trust
Their Leaders?
A Final Thought Regarding Leadership
293
294
295
Chapter Summary 296 • Learning Objectives Checklist 296
• Developing Management Skills 297 • Team Exercises 299
• Business Cases 300
11
Managing Communication and
Information302
Effective Communication
303
How Does the Communication Process Work?
303
Are Written Communications More Effective
305
than Verbal Ones?
Is the Grapevine an Effective Way to Communicate? 305
306
How Do Nonverbal Cues Affect Communication?
What Barriers Keep Communication from Being
Effective?307
How Can Managers Overcome Communication
Barriers?310
Technology and Managerial Communication
Networked Communication
Wireless Communication
312
313
315
What Communication Issues Do Managers Face Today? 317
How Do We Manage Communication in an Internet
World?318
How Does Knowledge Management Affect
Communication?319
What’s Involved with Managing the Organization’s
320
Knowledge Resources?
What Role Does Communication Play in Customer
Service?321
How Can We Get Employee Input and Why
Should We?
322
Why Should Managers Be Concerned with
322
Communicating Ethically?
Chapter Summary 323 • Learning Objectives Checklist 323
• Developing Management Skills 324 • Team Exercises 325
• Business Cases 325
12
Foundations of Control
328
Keeping Track of an Organization’s Finances
338
Keeping Track of an Organization’s Information
340
Keeping Track of Employee Performance
340
Keeping Track Using a Balanced Scorecard
Approach342
Contemporary Issues in Control
Corporate Governance
Cross-Cultural Differences
Workplace Concerns
344
344
345
347
Chapter Summary 351 • Learning Objectives Checklist 351
• Developing Management Skills 351 • Team Exercises 352
• Business Cases 353
13
Operations Management
356
Why Is Operations Management Important
to Organizations?
357
What Is Operations Management?
357
How Do Service and Manufacturing
Firms Differ?
358
How Do Businesses Improve
Productivity?359
What Is Value Chain Management and
Why Is It Important?
1 What Is Value Chain Management?
2 How Does Value Chain Management
Benefit Businesses?
361
361
362
How Is Value Chain Management Done?
362
Supply Chain Management
363
What Are the Requirements for Successful Value
Chain Management?
364
What Are the Obstacles to Value Chain
Management?368
What Contemporary Issues Do Managers Face
in Managing Operations?
370
What Role Does Technology Play in Operations
Management?370
371
How Do Managers Control Quality?
How Are Projects Managed?
375
How Does Lean Manufacturing Work?
379
379
How to Decide About Outsourcing
Chapter Summary 380 • Learning Objectives Checklist 380
• Developing Management Skills 381 • Team Exercises 382
• Business Cases 382
What is Control?
Why Is Control Important?
Performance Standards
329
329
331
Glossary386
The Control Process
What Is Measuring?
What We Measure
How Do Managers Compare Actual Performance
to Planned Goals?
What Managerial Action Can Be Taken?
331
332
333
Endnotes397
What Should Managers Control?
When to Introduce Control
337
337
334
336
Your Essential Management Reading List
395
Name/Organization Index
441
Subject Index
448
List of Canadian Companies, by Province
461
List of International Companies, by Country
463
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Preface
W
elcome to the ninth Canadian edition of
Fundamentals of Management, by Stephen P.
Robbins, David A. DeCenzo, Mary Coulter, and
Ian Anderson. This edition continues the fresh approach to
management coverage of the previous editions through the
following:
• current and relevant examples
• updated theory
• a new pedagogically sound design
The philosophy behind this revision was to put additional emphasis on the idea that management is for everyone.
Students who are not managers, or who do not envision
themselves as managers, may not always see why studying
management is important. We use examples from a variety
of settings to help students understand the relevance of
studying management to their day-to-day lives.
Chapter Pedagogical Features
We have enhanced the ninth Canadian edition with a rich
variety of pedagogical features, including the following:
• Learning outcomes to guide student learning begin
each chapter. These questions are repeated at the start
of each major chapter section to reinforce the learning
outcome.
• An opening case starts the body of the chapter and is
threaded throughout to help students apply a story to
the concepts they are learning.
• The use of infographics in each chapter presents information graphically to help visual learners with the related concepts. In addition, an increase in photographs
enhances business concepts throughout the text.
•
Sustainability is an important topic and it’s
critical for our students—our future business
leaders—to be familiar with it. So we added
an icon to help you and your students recognize how
pervasive sustainability is.
• And the Survey Says . . . provides relevant Canadian and
global data to help students understand business metrics and the Canadian significance of various management topics.
• Tips for Managers provide “take-aways” from the
­chapter—things that managers and would-be managers can start to put into action right now, based on what
they have learned in the chapter.
• Technology and the Manager’s Job looks at the impact
technology has on managers.
• What’s Cooking in Hospitality? is a new feature that looks
at management issues in the hospitality sector—one
that employs over 600 000 Canadians and generates
more than $80 billion in revenue.
• Bust this Myth—Management Myths Debunked features
common management myths that help illustrate what
students can learn from this text. The fun video component in the Revel edition highlights the myths and why
they are just that—myths—and then explains why.
• A Question of Ethics was added to the ninth Canadian
edition. This feature provides students with real-life
ethical scenarios that managers face.
End-of-Chapter Applications
The entire end-of-chapter section provides a wealth of exercises and applications.
• The Summary of Learning Outcomes provides responses
to the outcome-based questions identified at the beginning of each chapter.
• Discussion Questions allow students to review their understanding of the chapter content.
• Developing Management Skills lets students apply material to their daily lives as well as to real business situations related to the chapter material, helping them
see that planning, leading, organizing, and controlling
are useful in one’s day-to-day life, too. This feature
includes several exercises, such as the ones described
below.
• Dilemma presents an everyday scenario for students to
resolve using management tools.
• Becoming a Manager provides suggestions for students
on activities and actions they can do right now to help
them prepare to become a manager.
• 3BL: The Triple Bottom Line helps students apply sustainability to business situations.
• Be the Consultant emphasizes the importance of interpersonal and organizational skills.
• Team Exercises give students a chance to work together
in groups to solve a management challenge.
• Hey, You’re the Boss Now and Diversity Matters increase
the diversity component of the text and give students a hands-on perspective of being a supervisor or
manager.
• The Business Cases are decision-focused scenarios that
ask students to determine what they would do if they
were in the situation described.
ix
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x Preface
New to the Ninth Canadian Edition
In addition to the new pedagogical features highlighted
above, we have introduced or revised other learning aids
and made significant changes to content.
Case Program
This edition offers a variety of cases that can be used in or
out of the classroom.
• End-of-Chapter Cases: At the end of each chapter we
offer brief, chapter-specific cases in the Developing
Management Skills and Business Cases sections. These
cases include a variety of open-ended questions for
classroom discussion or small-group assignment. A
third case has been added to each chapter.
Chapter-by-Chapter Highlights
Below, we highlight the new material that has been added
to this edition.
Chapter 1
• Updated opening case on Calgary mayor Naheed
Nenshi
• New section on the new world of management, including innovation, social media, and sustainability
• New end-of-chapter (EOC) material (Hey, You’re the
Boss Now on Generations X, Y, and Z, and Developing
Management Skills on becoming politically adept)
• Management Myth Debunked: Only those who want to
be managers need to take a course in management
• New exhibits on characteristics of organizations, management levels, and activities by management level
• New case on Holocracy (Zappos)
• New EOC material (Be the Consultant on understanding
culture)
Chapter 3
• New opening case on socially responsible investing
(SRI)
• New case on Credit Valley Hospital
• Updated case on Blue Jays Baseball
• New content on national culture’s impact on decision
making, creativity and design thinking, big data, and
quantitative decision-making aids
• New decision-making example on purchasing a car
• Management Myth Debunked: A good decision should
be defined by its outcome
• New exhibits on the decision making process and social responsibility
Chapter 4
• Updated opening case on Stantec
• New cases on Zara Fast Fashion and the Prince Edward
County wine region
• Updated case on SilverBirch
• New content on contingency factors and planning,
why strategic management is important, social media
as a strategic weapon, and big data as a strategic
weapon
• Management Myth Debunked: Planning is a waste of
time because no one can predict the future
• Updated EOC material on competitive intelligence
Chapter 5
• Updated case on Shopify
• Updated opening case on Empire Company (Sobeys)
• New supplement on Entrepreneurship with expanded
content
• Updated cases on Pfizer and Levitt-Safety
Chapter 2
• New opening case on Spin Master
• New case on the movie theatre industry
• New content on the internet of things and a new case
on Miovision Technologies Inc.
• New sections on the sharing economy, what is the
economy like today, what does it mean to be global,
and national culture versus organizational culture
• Management Myth Debunked: It doesn’t matter what
an organization’s culture is like; I can be happy working anywhere
• New case on Yahoo
• New content on today’s organizational design challenges, flexible working arrangements, and authority
versus responsibility
• Updated content on learning organizations, organizational structure, span of control, and work specialization
• Management Myth Debunked: Bureaucracies are
inefficient
• New Exhibits on authority versus power and contemporary organizational designs
Chapter 6
• New opening case on Freshco Retail Maintenance
• New exhibits on Gen X, Y, and Z, and how culture can
be described
• Two new cases on spotting talent and dealing with
­romance in the workplace
• And the Survey Says . . . on the sharing economy
• Updated case on Wellington West
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Preface
• New content on recruitment, closing the deal, Canadian
employment legislation, and bullying
• Updated content on performance management and
recruitment and selection
• Management Myth Debunked: Managers don’t need
to know about human resources because that’s the job
of the HR department
• New exhibit on recruitment sources
• New EOC material (Developing Your Interpersonal Skills
on giving good feedback)
Chapter 7
• New opening case on Article
• Two new cases on Under Armour and Island Water Tech
• Updated content on categories of change
• Management Myth Debunked: There’s nothing managers can do to reduce the stress inherent in today’s
jobs
• New exhibit on categories of change
Chapter 8
• Updated opening case on The Virgin Group
• New case on team building
• Two updated cases on Whole Foods Canada and Toyota
Canada
• Management Myth Debunked: Teams always outperform employees working individually
• New exhibits on groups versus teams, global teams,
and stages of group development
• New content on team effectiveness, work design,
team processes, conformity, status systems, and group
cohesiveness
Chapter 9
• New opening case on GestureTek (gamification)
• New case on Gravity Payments
• Two updated cases on DevFacto Technologies and
Ubisoft Entertainment SA
• Management Myth Debunked: Motivation is all about
“Show me the money”
• New exhibit on job characteristics
• New content on burnout, job design influencing
motivation, job characteristics, motivating employees when the economy stinks, and gamification and
rewards
• Updated content on pay for performance, diverse
workforces, open-book management, flextime, and integrating contemporary theories of motivation
xi
Chapter 10
• New opening case on HSBC Canada
• Two new cases on Starbucks and developing Gen Y
leaders
• Updated case on ROWE
• New content on Fiedler, Vroom, LMX theory, empowerment, emotional intelligence and leadership, national
culture
• Management Myth Debunked: Leadership can’t be
taught
• New exhibit on The Fiedler Model
• Updated EOC material (Management Skills Builder on
increasing your power)
Chapter 11
• New chapter on managing communication and
information
• New opening case on Mini Mioche
• Three new cases on Twitter, delivering bad news, and
e-mail
• Management Myth Debunked: Managers should try to
stifle the grapevine
• New exhibit on active listening
• Adapted EOC material (Hey, You’re the Boss Now on getting started with social media, 3BL on communication
styles of men and women, Be the Consultant on writing
better e-mails)
Chapter 12
• New opening case on Comptoir Agricole Ste-Anne
• Two new cases on Visa OCE and Lululemon
• Updated case on Balanced Scorecard
• New material on workplace violence, and disciplining
difficult employees
• Management Myth Debunked: A lack of employee
turnover is a sign of a good manager
• New exhibits on acceptable range of variation and controlling workplace violence
Chapter 13
• New opening case on Maple Leaf Foods
• Two new cases on tragedy in fashion and cow-milking
robots
• New content on blockchain, value chain management,
conflict management, and quality
• Management Myth Debunked: In the future of manufacturing, robots will replace almost all workers
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Acknowledgments
A number of people have worked hard to update and
enliven this ninth Canadian edition of Fundamentals of
Management. Kathryn O’Handley was content developer on this project. Her attention to detail, kindness,
patience, positivity, and support made working on this
resource enjoyable and enriching. Kathy also played a
key role in handling many aspects of the editorial work
needed during the production process. Karen Townsend,
portfolio manager, has a deep understanding of the market and was very supportive of new content and new
directions, while continuing to always be in the author’s
corner.
I’d also like to thank content manager Madhu Ranadive,
project manager Pippa Kennard, and copy editor Audrey
Dorsch, as well as the many others—proofreaders,
designers, permissions researchers, marketing and sales
representatives—who have contributed to the transformation of my manuscript into this resource and seen it delivered into your hands. The Pearson Canada sales team is
an exceptional group, and I know they will do everything
xii
possible to make the book successful. My local rep, Molly,
is the best in the business and a pleasure to work with.
Finally, I would like to thank the reviewers of this textbook for their detailed and helpful comments:
Kristy Calles, Bow Valley College
Cheryl Dowell, Algonquin College
Sonja Johnston, St. Mary’s University
Lara Loze, Durham College
Edward Marinos, Sheridan College
Ed McHugh, Nova Scotia Community College
Carol Ann Samhaber, Algonquin College
Halinka Szwender, Camosun College
Susan Thompson, Trent University
Peter Vogopoulos, Vanier College
Wenli Yang, Centennial College
I dedicate this book to my wife, Tracy, who is my loving
support and inspiration, and my two sons, Shaun and
Isaac.
Ian Anderson
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About the Authors
STEPHEN P. ROBBINS received his PhD from the University of Arizona. He previously worked for the Shell Oil Company and Reynolds Metals Company and has
taught at the University of Nebraska at Omaha, Concordia University in Montreal, the
University of Baltimore, Southern Illinois University at Edwardsville, and San Diego
State University. He is currently professor emeritus in management at San Diego State.
Dr. Robbins’s research interests have focused on conflict, power, and politics in
organizations, behavioural decision making, and the development of effective interpersonal skills. His articles on these and other topics have appeared in such journals as
Business Horizons, the California Management Review, Business and Economic Perspectives,
International Management, Management Review, Canadian Personnel, Industrial Relations,
and The Journal of Management Education.
Dr. Robbins is the world’s best-selling textbook author in the areas of management
and organizational behaviour. His books have sold more than 5 million copies and
have been translated into 20 languages. His books are currently used at more than 1500
US colleges and universities as well as hundreds of schools throughout Canada, Latin
America, Australia, New Zealand, Asia, and Europe.
Dr. Robbins also participates in masters track competition. Since turning 50 in 1993,
he’s won 23 national championships and 14 world titles. He was inducted into the US
Masters Track & Field Hall of Fame in 2005 and is currently the world record holder at
100m and 200m for men 65 and over.
DAVID A. DECENZO (PhD, West Virginia University) is president of Coastal
Carolina University in Conway, South Carolina. In his capacity as president,
Dr. DeCenzo is responsible for the overall vision and leadership of the university. He has been at Coastal since 2002, when he took over leadership of the
E. Craig Wall Sr. College of Business. Since then, the college established an economics major and developed an MBA program. During that period, student
enrolment and faculty positions nearly doubled. The college also established
significant internship opportunities locally, nationally, and internationally in
major Fortune 100 companies. As provost, Dr. DeCenzo worked with faculty
leadership to pass a revised general education core curriculum as well as institute a minimum salary level for the university’s faculty members. Before joining the Coastal faculty in 2002, he served as director of partnership development
in the College of Business and Economics at Towson University in Maryland.
He is an experienced industry consultant, corporate trainer, and public speaker.
Dr. DeCenzo is the author of numerous textbooks that are used widely at colleges
and universities throughout the United States and the world.
Dr. DeCenzo and his wife, Terri, have four children and reside in Pawleys Island,
South Carolina.
xiii
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xiv About the Authors
MARY COULTER (PhD, University of Arkansas) held different jobs, including high
school teacher, legal assistant, and city government program planner, before completing her graduate work. She has taught at Drury University, the University of Arkansas,
Trinity University, and Missouri State University. She is currently professor emeritus of
management at Missouri State University. Dr. Coulter’s research interests were focused
on competitive strategies for not-for-profit arts organizations and the use of new media
in the educational process. Her research on these and other topics has appeared in
such journals as International Journal of Business Disciplines, Journal of Business Strategies,
Journal of Business Research, Journal of Nonprofit and Public Sector Marketing, and Case
Research Journal. In additional to Fundamentals of Management, Dr. Coulter has published other books with Prentice Hall including Management (with Stephen P. Robbins),
Strategic Management in Action, and Entrepreneurship in Action.
When she’s not busy writing, Dr. Coulter enjoys puttering around in her flower
gardens, trying new recipes, reading different types of books, and enjoying many different activities with Ron, Sarah and James, Katie and Matt, and especially with her
new grandkids, Brooklynn and Blake, who are the delights of her life!
IAN ANDERSON received his Master’s of Business Administration in Innovation
Leadership from the University of Fredericton. Before commencing his college teaching career, he was the director of human resources for a large Ottawa-based IT company. Ian is also a human resources and management consultant with Association
Management, Consulting & Educational Services (AMCES), is a certified Change
Management Professional, and has been actively consulting for more than 25 years.
At Algonquin College, Ian is a professor in management, leadership, and human resources, and he coaches students in business-case and college-marketing competitions.
In his spare time, Ian enjoys coaching Special Olympics soccer and volunteering
with his favourite charity, the Capital City Condors. He has coached competitive and
recreational hockey and soccer for more than 20 years. As a sommelier, he provides
tutored tastings and wine and scotch education. Ian’s parents, Bob and Katharine, are
from the Niagara area.
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Supplement 1A
A Brief History
of Management
Henry Ford once said, “History is more or less bunk.” Well . . . Henry Ford was wrong!
History is important because it can put current activities in perspective. We propose
that you need to know management history because it can help you understand what
today’s managers do. In this module, you’ll find an annotated timeline that discusses
key milestones in management theory. We believe this approach will help you better
understand the origins of many contemporary management concepts.
Early Management
Management has been practised a long time. Organized endeavours directed by people responsible for planning, organizing, leading, and controlling activities have existed for thousands of years. Regardless of what these individuals
were called, someone had to perform those functions.
The Industrial Revolution may be the most important pre-twentiethcentury influence on management. Why? Because with the industrial age
came the birth of the corporation. With large, efficient factories pumping
out products, someone needed to forecast demand, make sure adequate
supplies of materials were available, assign tasks to workers, and so forth.
Again, that someone was managers! It was indeed a historical event
for two reasons: (1) because
of all the organizational
aspects (hierarchy, control,
job specialization, and so
forth) that became a part of
the way work was done and
(2) because management
had become a necessary
component to ensure the
success of the enterprise.
Transcendental Graphics/
Archive Photos/Getty Images
1780s–Mid-1800s
The Egyptian pyramids are proof that projects of tremendous
scope, employing tens of thousands of people, were completed
in ancient times.1 It took more than 100 000 workers some twenty
years to construct a single pyramid. Someone had to plan what was
to be done, organize
people and materials
to do it, make sure
those workers got
the work done,
and impose some
controls to ensure
that everything was
done as planned.
That someone was
managers.
Stephen Studd/Getty Images
3000–2500 BCE
This is an important year because
it’s the year Adam Smith’s Wealth
of Nations was published. In it, he
argued the economic advantages
of the division of labour (or job
specialization)—that is, breaking
down jobs into narrow, repetitive
tasks. Using division of labour,
individual productivity could
be increased dramatically. Job
specialization continues to be a
popular way to determine how
work gets done in organizations.
As you’ll see in Chapter 5, it does
have its drawbacks.
Fotosearch/Stringer/Archive
Photos/Getty Images
1776
At the arsenal of
Venice, warships
were floated along
the canals, and at
each stop, materials
and riggings were
added to the ship.2
Sounds a lot like a car
“floating” along an
assembly line, doesn’t
it? In addition, the
Venetians used warehouse and inventory systems to keep track of
materials, human resource management functions to manage the
labour force (including wine breaks), and an accounting system to
keep track of revenues and costs.
Antonio Natale/Getty Images
1400s
3000 BCE–1776
1911–1947
Late 1700s–1950s
1940s–1950s
1960s–present
Early Management
Classical Approaches
Behavioural Approach
Quantitative Approach
Contemporary Approaches
24
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25
Supplement 1A A Brief History of Management
Classical Approaches
Beginning around the beginning of the twentieth century, the discipline of management
began to evolve as a unified body of knowledge. Rules and principles were developed
that could be taught and used in a variety of settings. These early management proponents were called classical theorists.
1911
Bettmann/Corbis
That’s the year Frederick W. Taylor’s Principles of Scientific Management was published. His
groundbreaking book described a theory of scientific management—the use of scientific methods to
determine the “one best way” for a job to be done. His theories were widely accepted and used by
managers around the world, and Taylor became known as the “father” of scientific management.3
Other major contributors to scientific management were Frank and Lillian Gilbreth (early
proponents of time-and-motion studies and parents of the large family described in the original
book Cheaper by the Dozen) and Henry Gantt (whose work on scheduling charts was the foundation
for today’s project management).
1916–1947
Hulton Archive/Getty Images
Unlike Taylor, who focused on an individual production worker’s job, Henri Fayol
and Max Weber looked at organizational practices by focusing on what managers
do and what constitutes good management. This approach is known as general
administrative theory. Fayol was introduced in Chapter 1 as the person who first
identified five management functions. He also identified fourteen principles of
management—fundamental rules of management that could be applied to all
organizations.4 (See Exhibit S1A-1 for a list of these fourteen principles.) Weber is
known for his description and analysis of bureaucracy, which he believed was an
ideal, rational form of organizational structure, especially for large organizations.
In Chapter 5, we elaborate on these two important management pioneers.
Exhibit S1A-1 Fayol’s Fourteen Principles of Management
1. Division of work. This principle is the same as Adam Smith’s
division of labour. Specialization increases output by making
employees more efficient.
2. Authority. Managers must be able to give orders. Authority gives
them this right. Along with authority, however, goes responsibility.
Whenever authority is exercised, responsibility arises.
3. Discipline. Employees must obey and respect the rules that
govern the organization. Good discipline is the result of effective
leadership, a clear understanding between management and
workers regarding the organization’s rules, and the judicious use of
penalties for infractions of the rules.
4. Unity of command. Every employee should receive orders from
only one superior.
5. Unity of direction. Each group of organizational activities that
have the same objective should be directed by one manager using
one plan.
6. Subordination of individual interests to the general interest.
The interests of any one employee or group of employees should
not take precedence over the interests of the organization as a
whole.
7. Remuneration. Workers must be paid a fair wage for their
services.
8. Centralization. Centralization refers to the degree to which
subordinates are involved in decision making. Whether
decision making is centralized (to management) or decentralized
(to subordinates) is a question of proper proportion. The task
is to find the optimum degree of centralization for each
situation.
9. Scalar chain. The line of authority from top management to
the lowest ranks represents the scalar chain. Communications
should follow this chain. However, if following the chain creates
delays, cross-communications can be allowed if agreed to by all
parties and if superiors are kept informed. Also called chain of
command.
10. Order. People and materials should be in the right place at the
right time.
11. Equity. Managers should be kind and fair to their subordinates.
12. Stability of tenure of personnel. High employee turnover is
inefficient. Management should provide orderly personnel planning
and ensure that replacements are available to fill vacancies.
13. Initiative. Employees who are allowed to originate and carry out
plans will exert high levels of effort.
14. Esprit de corps. Promoting team spirit will build harmony and
unity within the organization.
3000 BCE–1776
1911–1947
Late 1700s–1950s
1940s–1950s
1960s–present
Early Management
Classical Approaches
Behavioural Approach
Quantitative Approach
Contemporary Approaches
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26 Supplement 1A
Behavioural Approach
The behavioural approach to management focused on the actions of workers. How do you motivate and lead employees in order to get high levels of performance?
1960s–Today
Managers get things done by working with people. Several early
management writers recognized how important people are to
an organization’s success.5 For instance, Robert Owen, who was
concerned about deplorable working conditions, proposed an
idealistic workplace. Hugo Munsterberg, a pioneer in the field
of industrial psychology, suggested using psychological tests for
employee selection, learning theory concepts for employee training,
and studies of human behaviour for employee motivation. Mary
Parker Follett was one of the first to recognize that organizations
could be viewed from both individual and group behaviour. She
thought that organizations should be based on a group ethic rather
than on individualism.
An organization’s people continue to be an important focus of
management research. The field of study that researches the
actions (behaviours) of people at work is called organizational
behaviour (OB). OB researchers do empirical research on
human behaviour in organizations. Much of what managers do
today when managing people—motivating, leading, building
trust, working with a team, managing conflict, and so forth—
has come out of OB research. These topics are explored in
depth in Chapter 13.
Hawthorne Works Factory of Morton
College
Shutterstock
Design Pics/ Newscom
Late 1700s–Early 1900s
SelfActualization
Esteem
Social
Safety
Physiological
1930s–1950s
1924–Mid-1930s
The Hawthorne studies, a series of studies that provided new insights
into individual and group behaviour, were without question the most
important contribution to the behavioural approach to management.6
Conducted at the Hawthorne (Cicero, Illinois) Works of the Western
Electric Company, the studies were initially designed as a scientific
management experiment. Company engineers wanted to see the
effect of various lighting levels on worker productivity. Using
control and experimental groups of workers, they expected to find
that individual output in the experimental group would be directly
related to the intensity of the light. However, much to their surprise,
they found that productivity in both groups varied with the level
of lighting. Not able to explain it, the engineers called in Harvard
professor Elton Mayo. Thus began a relationship that lasted until 1932
and encompassed numerous experiments in the behaviour of people
at work. What were some of their conclusions? Group pressures
can significantly affect individual productivity, and people behave
differently when they’re being observed. Scholars generally agree that
the Hawthorne studies had a dramatic impact on management beliefs
about the role of people in organizations and led to a new emphasis
on the human behaviour factor in managing organizations.
The human relations movement is important to management
history because its supporters never wavered from their
commitment to making management practices more humane.
Proponents of this movement uniformly believed in the
importance of employee satisfaction—a satisfied worker
was believed to be a productive worker.7 So they offered
suggestions like employee participation, praise, and being
nice to people to increase employee satisfaction. For instance,
Abraham Maslow, a humanistic psychologist who is best
known for his description of a hierarchy of five needs (a wellknown theory of employee motivation), said that once a need
was substantially satisfied, it no longer served to motivate
behaviour. Douglas McGregor developed Theory X and
Theory Y assumptions, which related to a manager’s beliefs
about an employee’s motivation to work. Even though both
Maslow’s and McGregor’s theories were never fully supported
by research, they are important because they represent the
foundation from which contemporary motivation theories were
developed. Both are described more fully in Chapter 9.
3000 BCE–1776
1911–1947
Late 1700s–1950s
1940s–1950s
1960s–present
Early Management
Classical Approaches
Behavioural Approach
Quantitative Approach
Contemporary Approaches
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Supplement 1A A Brief History of Management
Quantitative Approach
The quantitative approach, which focuses on the application of statistics, optimization models, information models,
computer simulations, and other quantitative techniques to management activities, provided tools for managers to
make their jobs easier.
1950s
The quantitative approach to management—which is the
use of quantitative techniques to improve decision making—
evolved from mathematical and statistical solutions developed
for military problems during World War II. After the war was
over, many of these techniques used for military problems
were applied to businesses.8 For instance, one group of military
officers, dubbed the “Whiz Kids,” joined Ford Motor Company in
the mid-1940s and immediately began using statistical methods
to improve decision making at Ford.
After World War II, Japanese organizations enthusiastically
embraced the concepts espoused by a small group of quality
experts, the most famous being W. Edwards Deming (photo
below) and Joseph M. Juran. As these Japanese manufacturers
began beating US competitors in quality comparisons, Western
managers soon took a more serious look at Deming’s and
Juran’s ideas.9 Their ideas became the basis for total quality
management (TQM), which is a management philosophy
devoted to continual improvement and responding to customer
needs and expectations. We’ll look closer at Deming and his
beliefs about TQM in Chapter 6.
Richard Drew/AP Images
Bert Hardy/Hulton Archive/Getty Images
1940s
3000 BCE–1776
1911–1947
Late 1700s–1950s
1940s–1950s
1960s–present
Early Management
Classical Approaches
Behavioural Approach
Quantitative Approach
Contemporary Approaches
27
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28 Supplement 1A
Contemporary Approaches
Most of the early approaches to management focused on managers’ concerns inside the organization. Starting in
the 1960s, management researchers began to look at what was happening in the external environment outside the
organization.
1960s
Frederic J. Brown/Newscom
Although Chester Barnard, a telephone company
executive, wrote in his 1938 book The Functions
of the Executive that an organization functioned
as a cooperative system, it wasn’t until the 1960s
that management researchers began to look more
carefully at systems theory and how it related to
organizations.10 The idea of a system is a basic
concept in the physical sciences. As related to
organizations, the systems approach views systems
as a set of interrelated and interdependent parts
arranged in a manner that produces a unified
whole. Organizations function as open systems,
which means they are influenced by and interact
with their environment. Exhibit S1A-2 illustrates
an organization as an open system. A manager has
to efficiently and effectively manage all parts of the
system in order to achieve established goals. See
Chapter 2 for additional information on the external
and internal factors that affect how organizations
are managed.
Exhibit S1A-2 Organization as an Open System
Environment
Organization
Inputs
Raw Materials
Human Resources
Capital
Technology
Information
Transformation
Process
Employees’ Work
Activities
Management Activities
Technology and
Operations Methods
Outputs
Products and Services
Financial Results
Information
Human Results
Feedback
Environment
3000 BCE–1776
1911–1947
Late 1700s–1950s
1940s–1950s
1960s–present
Early Management
Classical Approaches
Behavioural Approach
Quantitative Approach
Contemporary Approaches
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29
Supplement 1A A Brief History of Management
Image Source/Getty Images
Contemporary Approaches
1960s
1980s–Present
Early management theorists proposed management principles
that they generally assumed to be universally applicable. Later
research found exceptions to many of these principles. The
contingency approach (or situational approach) says that
organizations, employees, and situations are different and
require different ways of managing. A good way to describe
contingency is “if . . . then.” If this is the way my situation is,
then this is the best way for me to manage in this situation.
One of the earliest contingency studies was done by Fred
Fiedler and looked at what style of leadership was most
effective in what situation.11 Popular contingency variables
have been found to include organization size, the routineness
of task technology, environmental uncertainty, and individual
differences.
Although the dawn of the information age is said to have begun
with Samuel Morse’s telegraph in 1837, the most dramatic changes
in information technology occurred in the latter part of the
twentieth century and have directly affected the manager’s job.12
Managers now may manage employees who are working from
home or halfway around the world. An organization’s computing
resources used to be mainframe computers locked away in
temperature-controlled rooms and accessed only by the experts.
Now, practically everyone in an organization is connected—wired
or wireless—with devices no larger than the palm of the hand.
Just like the impact of the Industrial Revolution in the 1700s on
the emergence of management, the information age has brought
dramatic changes that continue to influence the way organizations
are managed.
Industrial Revolution
The advent of machine power, mass
production, and efficient transportation
that began in the late eighteenth century in
Great Britain.
division of labour (or job specialization)
The breakdown of jobs into narrow,
repetitive tasks.
scientific management
The use of the scientific method to define
the one best way for a job to be done.
general administrative theory
Descriptions of what managers do and what
constitutes good management practice.
principles of management
Fayol’s fundamental or universal principles
of management practice.
Hawthorne studies
Research done in the late 1920s and early
1930s devised by Western Electric industrial
engineers to examine the effect of different
work environment changes on worker
productivity, which led to a new emphasis
on the human factor in the functioning of
organizations and the attainment of their
goals.
organizational behaviour (OB)
The field of study that researches the
actions (behaviours) of people at work.
systems approach
An approach to management that views
an organization as a system, which is a set
of interrelated and interdependent parts
arranged in a manner that produces a
unified whole.
open systems
Systems that dynamically interact with
their environment.
contingency approach (or situational
approach)
An approach to management that says that
individual organizations, employees, and
situations are different and require different
ways of managing.
quantitative approach
The use of quantitative techniques to
improve decision making.
total quality management (TQM)
A managerial philosophy devoted to
continual improvement and responding to
customer needs and expectations.
3000 BCE–1776
1911–1947
Late 1700s–1950s
1940s–1950s
1960s–present
Early Management
Classical Approaches
Behavioural Approach
Quantitative Approach
Contemporary Approaches
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Supplement 1B
Small and MediumSized Enterprises and
Organizations
“A big business starts small.”
—Richard Branson
According to billionaire serial entrepreneur Richard Branson, small businesses “are
the lifeblood of the economy that drive innovation, create jobs and push humanity forward.”1 His advice to anyone thinking of starting their own business is to “start small
but always think big.”2
In this module we will discuss the characteristics of small and medium-sized
enterprises and organizations, and the prominent factors that are key to their success:
management skills and competencies, human resources, access to financing, innovation capacity, and networks and partnerships.
What Are Small and Medium-Sized
Enterprises?
Small and medium-sized enterprises (SMEs) refer to all businesses with fewer than
500 employees, whereas firms with 500 or more employees are classified as “large”
businesses.
Canada has more than 1.5 million SMEs, which generate close to half of Canada’s
private-sector gross domestic product (GDP). SMEs account for the vast majority of
businesses in Canada, represent over 60 percent of private-sector employment, and
generate more than 80 percent of new job creation.3 They are active in all sectors of
the Canadian economy, with two-thirds in the service sector (64 percent), one-fifth in
the goods-producing sector (21 percent), and a significant number (15 percent) in the
resource-based sector.4
The majority of SMEs are self-managed enterprises, offering entrepreneurs the
pride of personal achievement, the ability to help their customers and clients, the
benefits of being their own boss, and the opportunity to make more money.5 The
biggest challenges for SMEs are finding new markets and customers, dealing with
finances, and handling government regulations and paperwork. Entrepreneurs also
work longer hours, logging an average of 48.7 hours per week. Thirty-five percent
of entrepreneurs work more than 50 hours per week, compared with 5 percent of
employees.6
While about 75 percent of SMEs in Canada have been in business for five years or
more, failure rates are relatively high in the first few years after startup, with two out
of five firms not surviving beyond their second year of operation.7 Debt financing is
the primary source of financing for SMEs, with debt accounting for 75 percent of their
long-term financing structure. SMEs use more informal financing sources, including
owner savings and retained earnings. Use of government financing is less important
for SMEs than other types of financing.8
30
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Supplement 1B Small and Medium-Sized Enterprises and Organizations
Key Findings9, 10
• Canada’s 1.2 million SMEs generate 45 percent of private-sector GDP.
• Eighty-six percent of Canadian exporters are SMEs, generating $106 billion in exports.
• Ninety-eight percent of SMEs have less than 100 employees, and 80 percent are
either self-employed businesses or micro organizations (one to four employees).
• In 2014, 16% of SMEs were majority owned by women, and 20% were equally
owned by women and men.
• Since 2002, SMEs created over 1.2 million jobs, accounting for almost 90 percent of
all private jobs created.
• SMEs employ over 8 million Canadians, 70 percent of the total private labour
force.
• Forty-one percent of Canada’s entrepreneurs have previously owned a business.
What Are Small and Medium-Sized
Organizations?
Small and medium-sized organizations (SMOs) are community organizations that, like
SMEs, have fewer than 500 paid staff. SMOs comprise nearly 99 percent of nonprofits
in Canada. The term community organization is used broadly to include a wide variety
of nonprofit organizations in Canada: charitable and voluntary organizations; parapublic organizations such as hospitals and postsecondary education institutions; and
social economy organizations, community economic development organizations, and
cooperatives.11
Imagine Canada, working with a consortium of organizations, conducted the largest survey of nonprofit enterprises in Canada. According to 2015 data, Canada has
approximately 161 000 nonprofit and voluntary organizations, which generate revenues greater than $250 billion and employ over 2 million people.12 The organizations
are spread throughout Canada, with more than 900 in PEI and more than 20 000 in
Toronto alone. One-third of all organizations are hospitals, universities, and colleges,
while sport and recreation organizations comprise another 21 percent.13 This sector
also reports close to 20 million volunteers contributing more than 2 billion volunteer
hours per year—the same as 1 million full-time jobs!14 The Capital City Condors have
a membership base of 120, whereas the entire Canadian nonprofit sector features 139
million memberships.15 Exhibit S1B-1 shows the economic impact of the nonprofit sector in Canada, compared to other industries.
Key Findings16
• Canada’s nonprofit and voluntary sector is the second largest in the world; the
Netherlands is the largest, while the United States is fifth.
• Fifty-four percent of the estimated 161 000 nonprofits and charities in Canada are
run entirely by volunteers.
• Two million people are employed by these organizations, representing 11.1 percent of the economically active population.
• The nonprofit and voluntary sector represents $79.1 billion, or 7.8 percent, of the
GDP (larger than the automotive or manufacturing industries).
• Forty-nine percent of revenues are from government, although this figure drops to
36 percent when hospitals, universities, and colleges are excluded.
• Canadians contribute more than 2 billion hours annually through SMOs.
31
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32 Supplement 1B
Exhibit S1B-1 Gross Domestic Product: Nonprofit Sector and Selected
Industries, 2006
SOURCE: Based on Statistics Canada, Satellite Account of Nonprofit Institutions and Volunteering, 2007, Catalogue no.
13-015-X (Ottawa: Statistics Canada, 2009), p. 11, http://www.statcan.gc.ca/pub/13-015-x/13-015-x2009000-eng.pdf.
Motor vehicle
manufacturing
5,967
Agriculture
13,591
Retail trade
75,276
Mining
86,429
Non-profit
sector
100,696
0
20,000
40,000
60,000
80,000 100,000 120,000
Millions of dollars
Looking at the Canadian nonprofit sector can help us understand that management is very similar in all organizations. SMOs participate fully in social, economic,
community, and civic life. They run food banks and homeless shelters, provide child
care, build bike paths, and welcome new Canadians to the country. Increasingly, governments at all levels rely on community organizations to deliver essential public
services.
SMOs face significant challenges, including increasing service demands, diminishing financial resources, and staff burnout. They receive most of their revenue from
earned income and government sources. Large community organizations represent
less than 1 percent of the market but receive almost one-third of revenues.
SMEs and SMOs in Canada: Key
Characteristics
SMEs and SMOs in Canada have many important similarities as well as significant
differences. The key distinction between SMEs and SMOs is whether they seek to generate a profit or are nonprofit. At the same time, successful SMOs are run with a profit
mentality to ensure that they remain financially viable. With the rise of social entrepreneurship, the boundaries between SMEs and SMOs may become somewhat blurred.17
Another major difference between SMEs and SMOs is their use of volunteers.
While some SMEs may have unpaid family members or others who work in the enterprise, volunteers are the lifeblood of SMOs. Most SMOs rely heavily on volunteers to
deliver their mission.
For SMEs, success is usually defined in terms of growth—in sales, profits, firm
size, and market share. SMOs, even those that provide goods and services, typically
equate success with the ability of an organization to deliver on its mission and to
achieve results for communities and individuals. Revenue or profit growth is not as
relevant for SMOs as it is for SMES, given their different missions.
The prominent key success factors for SMEs and for SMOs are management skills
and competencies, human resources, access to financing, innovation capacity, and networks and partnerships.
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Supplement 1B Small and Medium-Sized Enterprises and Organizations
Management in SMEs and SMOs
Management skills and competencies are integral to business success for SMEs. Research has shown that business failures can be attributed in large part to management
and organizational weaknesses. For example, some studies have found that almost half
of bankruptcies result from these internal factors rather than external ones.18
SMEs require a wide variety of management skills, including leadership, strategic
planning, financial and human resources management, communications and marketing, organizational development, entrepreneurial skills, and networking and partnership skills. In the startup phase, management focuses more on vision, marketing, and
communications skills. As a firm expands, financial and human resources management and expertise become more prominent.
Many of these same management skills and competencies are also important
for SMOs. SMOs often lack middle-management levels, featuring only an executive
director and perhaps a few project managers, resulting in a lack of time for planning.
The management of issues around the recruitment, training, support, recognition,
and retention of volunteers, as well as volunteer burnout, is critically important for
community organizations, given that they rely heavily on volunteers to deliver their
missions. The ability to work effectively with boards of directors is also a unique management competency.19
Human Resources in SMEs and SMOs
The supply of skilled labour is an important issue for both SMEs and SMOs. Demographic trends will likely mean even greater shortages of skilled employees and managers. Staff training and development must become more prominent to cope with this challenge. SMOs also face unique human resources challenges relating to recruiting, training,
and retention of volunteers. As demand for SMOs increases, the need for volunteer leaders and long-term commitments from volunteers becomes crucial. The majority of SMOs
also report significant challenges in obtaining board members.20 Lower compensation
levels in the nonprofit sector contribute to difficulties in finding the right staff.
Financing in SMEs and SMOs
Access to financing is equally critical for both SMEs and SMOs; however, the financing
challenges they face are very different. Smaller and startup organizations have difficulty accessing external financing due to a lack of assets and collateral, smaller profits,
and uncertain return on investment. A lack of investment capital is a further problem
for SMEs in Canada.21
SMOs face significant challenges with regard to both financing (access to private and commercial revenue sources) and funding (grants and contributions from
government/-public sources for goods and services provided). Typically funding is
tied to projects and does not cover the operational, administrative, and overhead costs.
SMOs must absorb or finance these costs from other sources, which limits their financial capability and flexibility.
Innovation in SMEs and SMOs
Innovation applies to both SMEs and SMOs in terms of new and improved products,
services, and processes. For SMEs, innovation is seen as the single most important
factor for growth and success and is usually measured in terms of research and development (R&D). SMEs in Canada spend much less on R&D than larger firms, but as a
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34 Supplement 1B
Exhibit S1B-2 Criteria for Successful Innovation in SMOs
Adaptability
The extent to which an organization has had to adapt innovative practices to deliver
programs and services
Criticality
How mission-critical the activity is for the association
Sustainability
The viability of the program/service
Replicability
The ability to duplicate the program/service in another organization
Impact
How the programs/services help to improve the organization’s work
Partnerships
Building partnerships between organizations in the sector or across sectors
percentage of revenue R&D spending by SMEs is much greater.22 Since SMEs have
fewer resources, they may select innovation opportunities missed by larger firms.
Their organizational flexibility can be a big advantage, but the ability to bring these
innovations to market and make money on them is more challenging than for larger
firms.
For SMOs, innovation is their lifeblood. Through their strong local networks,
hands-on experience, and community interaction, they are able to find innovative
solutions to community and individual needs. The bigger challenge is how to apply
these community-based innovations to other areas of activity and to other communities and regions.
The Peter Drucker Canadian Foundation has studied hundreds of examples of
innovation by Canadian nonprofit organizations and has identified six key criteria for
successful innovation, shown in Exhibit S1B-2.
Networks and Partnerships in SMEs
and SMOs
Networks and partnerships are critical for organizations to access information, knowledge, expertise, and technology. Firms can use these partnerships to help predict and
take advantage of strategic opportunities and to mobilize available resources. They are
also important factors for fostering innovation.23
SMEs in Canada benefit from organizations such as local and national chambers
of commerce, boards of trade, and the Canadian Federation of Independent Businesses
(CFIB). This infrastructure fosters the exchange of knowledge and expertise as well
as the development of collaboration among firms for common purposes. SMOs have
much less access to infrastructure networks. Networks such as the Calgary Chamber
of Charities or the British Columbia Voluntary Organizations Coalition are deliberately cross-sector and provide opportunities for collaboration and collective action,
but the majority of SMOs continue to operate alone.
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Supplement 1C
1
Entrepreneurship
You may decide that you want to run your own business rather than work for someone
else. This type of employment will require that you manage yourself and may involve
managing other people as well. Thus, an understanding of management is equally important whether you are a manager in someone else’s business or running your own.
With $25 in allowance savings, Matt Hill started Lawn Troopers at the age of nine.
Now an engineering graduate, Matt’s lawn care business has forty employees and has
expanded to snow and waste removal. In 2014 he won Youth Entrepreneur of the Year
at the Small Business Achievement Awards. One big perk of winning the award—
Kevin O’Leary, formerly of CBC’s Dragon’s Den, will serve as his mentor.
There are numerous factors that allow an
entrepreneur to be successful. Personal traits
such as optimism and dedication are high on
the list. For Matt, his path was forged from the
outset as a result of determination and hard
work. While building his business, he paid
for his education out of company profits and
completed his degree at Queen’s University.
Entrepreneurs need access to capital—human,
financial, and technological. They need a solid
business plan with the right partners. Timing
and luck always play a part, but there is no substitute for hard work and “sweat equity.”
In this supplement, we’re going to look at
the activities engaged in by entrepreneurs like
Matt Hill. We’ll start by looking at the context
of entrepreneurship and then examining entrepreneurship from the perspective of the four
managerial functions: planning, organizing, leading, and controlling. Running a business like Lawn Troopers requires Matt to use each of the functions. Matt has to create a
detailed action plan aimed at achieving some organizational goal. For example, when
Matt wanted to increase sales during the winter months when lawn care business was
slow, he added snow removal to his list of services. Matt may have spent time mapping out the necessary steps needed to increase his customer base. Perhaps it involved
increasing advertisements in a particular region or contacting prior customers to see
if they were interested in purchasing more services. Matt also began a new business,
Scooper Troopers, using a revolutionary dog waste collection technology.
Once a plan is in place, Matt has to get busy getting organized. He has to allocate resources to any new business venture. He needs to identify different roles and
ensure that he assigns the right number of employees (and perhaps hire more) to carry
out the new venture. He then needs to delegate authority, create job descriptions, and
provide direction so that his team of sales representatives can work toward higher
sales numbers without having barriers in their way. As his two businesses grow, Matt
spends more time connecting with his employees on an interpersonal level. He is no
longer simply managing the tasks of his employees; he leads them. Not all managers
can be effective leaders, but Matt is good at communicating, motivating, inspiring, and
encouraging his employees to achieve greater productivity. With a plan in place, Matt
decided to explore a pilot project of Scooper Troopers prior to launching it fully. This
Lawn Troopers
Matt Hill, pictured with former star of
Dragon’s Den Kevin O’Leary, accepts
the Youth Entrepreneur of the Year
Award in 2014.
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36 Supplement 1C
gave him a chance to evaluate his results against his goals. In doing so, Matt exercised
control over the business. He took corrective actions to work toward his goal of creating another successful business.
What Do Entrepreneurs Do?
Describing what entrepreneurs do isn’t an easy or simple task! No two entrepreneurs’
work activities are exactly alike. In a general sense, entrepreneurs create something
new, something different. They search for change, respond to it, and exploit it.
Initially, an entrepreneur is engaged in assessing the potential for the entrepreneurial venture and then dealing with startup issues. In exploring the entrepreneurial
context, entrepreneurs gather information, identify potential opportunities, and pinpoint possible competitive advantage(s). Then, armed with this information, an entrepreneur researches the venture’s feasibility—uncovering business ideas, looking at
competitors, and exploring financing options.
After looking at the potential of the proposed venture and assessing the likelihood of pursuing it successfully, an entrepreneur proceeds to plan the venture. This
process includes such activities as developing a viable organizational mission, exploring organizational culture issues, and creating a well-thought-out business plan. Once
these planning issues have been resolved, the entrepreneur must look at organizing
the venture, which involves choosing a legal form of business organization, addressing other legal issues such as patent or copyright searches, and coming up with an
appropriate organizational design for structuring how work is going to be done.
Only after these startup activities have been completed is the entrepreneur ready
to actually launch the venture. A launch involves setting goals and strategies and
establishing the technology–operations methods, marketing plans, information systems, financial–accounting systems, and cash flow management systems.
Once the entrepreneurial venture is up and running, the entrepreneur’s attention
switches to managing it. What’s involved with actually managing the entrepreneurial venture? An important activity is managing the various processes that are part of
every business: making decisions, establishing action plans, analyzing external and
internal environments, measuring and evaluating performance, and making needed
changes. Also, the entrepreneur must perform activities associated with managing
people, including selecting and hiring, appraising and training, motivating, managing
conflict, delegating tasks, and being an effective leader. Finally, the entrepreneur must
manage the venture’s growth, including such activities as developing and designing
growth strategies, dealing with crises, exploring various avenues for financing growth,
placing a value on the venture, and perhaps even eventually exiting the venture.
What Planning Do Entrepreneurs
Need to Do?
Planning is important to entrepreneurial ventures. Once a venture’s feasibility has
been thoroughly researched, an entrepreneur then must look at planning the venture.
The most important thing that an entrepreneur does in planning the venture is developing a business plan—a written document that summarizes a business opportunity
and defines and articulates how the identified opportunity is to be seized and exploited. A written business plan can range from basic to thorough. The most basic type of
business plan would simply include an executive summary, sort of a mini-business plan
that’s no longer than two pages. A synopsis type of plan is a little more involved. It’s
been described as an “executive summary on steroids.” In addition to the executive
summary, it includes a business proposal that explains why the idea is relevant to
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Supplement 1C Entrepreneurship
potential investors. A summary business plan includes an executive summary and a page
or so of explanation of each of the key components of a business plan. A full business
plan is the traditional business plan, which we describe fully next. Finally, an operational
business plan is the most detailed (fifty or more pages) and is used by ventures already
operating with an existing strategy. It’s often used to “plan the business” but also can
be used to raise additional money or to attract potential acquirers. It’s important for
entrepreneurs to know which type of business plan they need for their purposes.
What’s in a Full Business Plan?
For many would-be entrepreneurs, developing and writing a business plan seems like
a daunting task. However, a good business plan is valuable. It pulls together all the elements of the entrepreneur’s vision into a single coherent document. The business plan
requires careful planning and creative thinking. But if done well, it can be a convincing
document that serves many functions. It serves as a blueprint and road map for operating the business. And the business plan is a “living” document, guiding organizational
decisions and actions throughout the life of the business, not just in the startup stage.
If an entrepreneur has completed a feasibility study, much of the information
included in it becomes the basis for the business plan. A good business plan covers six
major areas: executive summary, analysis of opportunity, analysis of the context, description of the business, financial data and projections, and supporting documentation.
The executive summary is a synopsis of the key points that
the entrepreneur wants to make about the proposed entrepreneurial venture. These
might include a brief mission statement; primary goals; brief history of the entrepreneurial venture, maybe in the form of a timeline; key people involved in the venture;
nature of the business; concise product or service descriptions; brief explanations
of market niche, competitors, and competitive advantage; proposed strategies; and
selected key financial information.
EXECUTIVE SUMMARY
An analysis of opportunity details the perceived
favourable circumstance in a specific industry and market. This includes (1) sizing up
the market by describing the demographics of the target market, (2) describing and
evaluating industry trends, and (3) identifying and evaluating competitors.
ANALYSIS OF OPPORTUNITY
ANALYSIS OF THE CONTEXT An analysis of the context describes the broad external changes and trends taking place in the economic, political–legal, technological, and
global environments.
The description of the business outlines how the
entrepreneurial venture is going to be organized, launched, and managed. It includes
a thorough description of the mission statement; a description of the desired organizational culture; marketing plans including overall marketing strategy, pricing, sales
tactics, service–warranty policies, and advertising and promotion tactics; product
development plans such as an explanation of development status, tasks, difficulties
and risks, and anticipated costs; operational plans, including a description of proposed
geographic location, facilities and needed improvements, equipment, and work flow;
human resource plans, including a description of key management persons, composition of board of directors including their background experience and skills, current
and future staffing needs, compensation and benefits, and training needs; and an overall schedule and timetable of events.
DESCRIPTION OF THE BUSINESS
FINANCIAL DATA AND PROJECTIONS Financial data and projections should
cover at least three years of projections and contain projected income statements, pro
forma cash flow analysis (monthly for the first year and quarterly for the next two),
pro forma balance sheets, breakeven analysis, and cost controls. If major equipment or
other capital purchases are expected, the items, costs, and available collateral should
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38 Supplement 1C
be listed. All financial projections and analyses should include explanatory notes,
especially where the data seem contradictory or questionable.
SUPPORTING DOCUMENTATION Supporting documentation is an important
component of an effective business plan. The entrepreneur should back up his or her
descriptions with charts, graphs, tables, photographs, or other visual tools. In addition, it might be important to include information (personal and work-related) about
the key participants in the entrepreneurial venture.
Components of a Good Business Plan
Just as the idea for an entrepreneurial venture takes time to germinate, so does the writing of a good business plan. It’s important for an entrepreneur to put serious thought
and consideration into the plan. It’s not an easy thing to do. However, the resulting
document should be valuable in current and future planning efforts.
What Issues Are Involved in Organizing
an Entrepreneurial Venture?
Once the startup and planning issues for the entrepreneurial venture have been addressed, the entrepreneur is ready to begin organizing the entrepreneurial venture.
The main organizing issues an entrepreneur must address include the legal forms of
organization, organizational design and structure, and human resource management.
What Are the Legal Forms of Organization for
Entrepreneurial Ventures?
The first organizing decision that an entrepreneur must make is a critical one. It’s the
form of legal ownership for the venture. The two primary factors affecting this decision
are taxes and legal liability. An entrepreneur wants to minimize the impact of both of
these factors. The right choice can protect the entrepreneur from legal liability as well
as save tax dollars, in both the short run and the long run.
The three basic ways to organize an entrepreneurial venture are sole proprietorship, partnership, and corporation. However, other options exist, such as limited liability partnerships and professional corporations. Each has its own tax consequences,
liability issues, and pros and cons.
The decision regarding the legal form of organization is important because it has
significant tax and liability consequences. Although the legal form of organization can
be changed, it’s not easy to do. An entrepreneur needs to think carefully about what’s
important, especially in the areas of flexibility, taxes, and amount of personal liability,
in choosing the best form of organization.
What Type of Organizational Structure
Should Entrepreneurial Ventures Use?
The choice of an appropriate organizational structure is also an important decision
when organizing an entrepreneurial venture. At some point, successful entrepreneurs
find that they can’t do everything. They need people. The entrepreneur must then
decide on the most appropriate structural arrangement for effectively and efficiently
carrying out the organization’s activities. Without a suitable type of organizational
structure, an entrepreneurial venture may soon find itself in a chaotic situation.
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Supplement 1C Entrepreneurship
In many small firms, the organizational structure tends to evolve with very little
intentional and deliberate planning by the entrepreneur. For the most part, the structure
may be very simple—one person does whatever is needed. As an entrepreneurial venture grows and the entrepreneur finds it increasingly difficult to go it alone, employees
are brought on board to perform certain functions or duties that the entrepreneur can’t
handle. As the company continues to grow, these individuals tend to perform those
same functions. Soon, each functional area may require managers and employees.
As the venture evolves to a more deliberate structure, an entrepreneur faces
a whole new set of challenges. All of a sudden, he or she must share decision making and operating responsibilities, which are typically the most difficult things for an
entrepreneur to do—letting go and allowing someone else to make decisions. After all,
he or she reasons, how can anyone know this business as well as I do? Also, what might
have been a fairly informal, loose, and flexible atmosphere that worked well when the
organization was small may no longer be effective. Many entrepreneurs are greatly
concerned about keeping that “small company” atmosphere alive even as the venture
grows and evolves into a more structured arrangement. But having a structured organization doesn’t necessarily mean giving up flexibility, adaptability, and freedom. In
fact, the structural design may be as fluid as the entrepreneur feels comfortable with
and yet still have the rigidity it needs to operate efficiently.
Organizational design decisions in entrepreneurial ventures also revolve
around the six elements of organizational structure discussed in Chapter 5: work
specialization, departmentalization, chain of command, span of control, amount of
­centralization-decentralization, and amount of formalization. Decisions about these
elements will determine whether an entrepreneur designs a more mechanistic or
organic organizational structure. When would each be preferable? A mechanistic
structure would be preferable when cost efficiencies are critical to the venture’s competitive advantage, when more control over employees’ work activities is important, if
the venture produces standardized products in a routine fashion, and when the external environment is relatively stable and certain. An organic structure would be most
appropriate when innovation is critical to the organization’s competitive advantage;
for smaller organizations where rigid approaches to dividing and coordinating work
aren’t necessary; if the organization produces customized products in a flexible setting; and where the external environment is dynamic, complex, and uncertain.
What Human Resource Management
(HRM) Issues Do Entrepreneurs Face?
As an entrepreneurial venture grows, additional employees must be hired to perform
the increased workload. As employees are brought on board, two HRM issues of particular importance are employee recruitment and employee retention.
An entrepreneur wants to ensure that the venture has the people to do the required
work. Recruiting new employees is one of the biggest challenges that entrepreneurs face.
In fact, the ability of small firms to successfully recruit appropriate employees is consistently rated as one of the most important factors influencing organizational success.
Entrepreneurs, particularly, look for high-potential people who can perform multiple roles during various stages of venture growth. They look for individuals who “buy
into” the venture’s entrepreneurial culture—individuals who have a passion for the
business. Unlike their corporate counterparts who often focus on filling a job by matching a person to the job requirements, entrepreneurs look to fill in critical skills gaps.
They’re looking for people who are exceptionally capable and self-motivated, flexible,
multiskilled, and who can help grow the entrepreneurial venture. While corporate managers tend to focus on using traditional HRM practices and techniques, entrepreneurs
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40 Supplement 1C
are more concerned with matching characteristics of the person to the values and culture of the organization; that is, they focus on matching the person to the organization.
Getting competent and qualified people into the venture is just the first step in
effectively managing the human resources. An entrepreneur wants to keep the people
he or she has hired and trained. A unique and important employee-retention issue
entrepreneurs must deal with is compensation. Whereas traditional organizations are
more likely to view compensation from the perspective of monetary rewards (base
pay, benefits, and incentives), smaller entrepreneurial firms are more likely to view
compensation from a total rewards perspective. For these firms, compensation encompasses psychological rewards, learning opportunities, and recognition in addition to
monetary rewards (base pay and incentives).
What Issues Do Entrepreneurs Face in
Leading an Entrepreneurial Venture?
Leading is an important function of entrepreneurs. As an entrepreneurial venture
grows and people are brought on board, an entrepreneur takes on a new role—that of
a leader. In this section, we want to look at what’s involved with that. First, we’re going
to look at the unique personality characteristics of entrepreneurs. Then we’re going to
discuss the important role entrepreneurs play in motivating employees through empowerment and leading the venture and employee teams.
What Type of Personality Do Entrepreneurs Have?
Think of someone you know who is an entrepreneur. Maybe it’s someone you personally know or maybe it’s someone you’ve read about, like Bill Gates of Microsoft. How
would you describe this person’s personality? One of the most researched areas of entrepreneurship has been the search to determine what—if any—psychological characteristics entrepreneurs have in common, what types of personality traits entrepreneurs
have that might distinguish them from non-entrepreneurs, and what traits entrepreneurs have that might predict who will be a successful entrepreneur.
Is there a classic “entrepreneurial personality”? Although trying to pinpoint specific
personality characteristics that all entrepreneurs share has the same problem as identifying the trait theories of leadership—that is, being able to identify specific personality traits that all entrepreneurs share—this hasn’t stopped entrepreneurship researchers
from listing common traits. For instance, one list of personality characteristics included
the following: high level of motivation, abundance of self-confidence, ability to be
involved for the long term, high energy level, persistent problem solver, high degree of
initiative, ability to set goals, and moderate risk-taker. Another list of characteristics of
“successful” entrepreneurs included high energy level, great persistence, resourcefulness, the desire and ability to be self-directed, and relatively high need for autonomy.
Another development in defining entrepreneurial personality characteristics was
the proactive personality scale to predict an individual’s likelihood of pursuing entrepreneurial ventures. The proactive personality is a personality trait describing those
individuals who are more prone to take actions to influence their environment—that
is, they’re more proactive. Obviously, an entrepreneur is likely to exhibit proactivity as
he or she searches for opportunities and acts to take advantage of those opportunities.
Various items on the proactive personality scale were found to be good indicators of a
person’s likelihood of becoming an entrepreneur, including gender, education, having
an entrepreneurial parent, and possessing a proactive personality. In addition, studies have shown that entrepreneurs have greater risk propensity than do managers.
However, this propensity is moderated by the entrepreneur’s primary goal. Risk propensity is greater for entrepreneurs whose primary goal is growth versus those whose
focus is on producing family income.
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Supplement 1C Entrepreneurship
How Can Entrepreneurs Motivate Employees?
When you’re motivated to do something, don’t you find yourself energized and willing to work hard at doing whatever it is you’re excited about? Wouldn’t it be great if
all of a venture’s employees were energized, excited, and willing to work hard at their
jobs? Having motivated employees is an important goal for any entrepreneur, and employee empowerment is an important motivational tool entrepreneurs can use.
Although it’s not easy for entrepreneurs to do, employee empowerment—giving
employees the power to make decisions and take actions on their own—is an important motivational approach. Why? Because successful entrepreneurial ventures must
be quick and nimble, ready to pursue opportunities and go off in new directions.
Empowered employees can provide that flexibility and speed. When employees are
empowered, they often display stronger work motivation, better work quality, higher
job satisfaction, and lower turnover.
Empowerment is a philosophical concept that entrepreneurs have to “buy into.” It
doesn’t come easily. In fact, it’s hard for many entrepreneurs to do. Their life is tied up
in the business. They’ve built it from the ground up. But continuing to grow the entrepreneurial venture is eventually going to require handing over more responsibilities
to employees. How can entrepreneurs empower employees? For many entrepreneurs,
it’s a gradual process.
Entrepreneurs can begin by using participative decision making, in which employees provide input into decisions. Although getting employees to participate in decisions
isn’t quite taking the full plunge into employee empowerment, at least it’s a way to begin
tapping into the collective array of employees’ talents, skills, knowledge, and abilities.
Another way to empower employees is through delegation—the process of
assigning certain decisions or specific job duties to employees. By delegating decisions
and duties, the entrepreneur is turning over the responsibility for carrying them out.
When an entrepreneur is finally comfortable with the idea of employee empowerment, fully empowering employees means redesigning their jobs so they have discretion over the way they do their work. It’s allowing employees to do their work
effectively and efficiently by using their creativity, imagination, knowledge, and skills.
If an entrepreneur implements employee empowerment properly—that is, with
complete and total commitment to the program and with appropriate employee
training—results can be impressive for the entrepreneurial venture and for the
­
empowered employees. The business can enjoy significant productivity gains, quality improvements, more satisfied customers, increased employee motivation, and
improved morale. Employees can enjoy the opportunities to do a greater variety of
work that is more interesting and challenging.
How Can Entrepreneurs Be Leaders?
The last topic we want to discuss in this section is the role of an entrepreneur as a
leader. In this role, the entrepreneur has certain leadership responsibilities in leading
the venture and in leading employee work teams.
Today’s successful entrepreneur must be like the leader of a jazz ensemble known
for its improvisation, innovation, and creativity. Max DePree, former head of Herman
Miller, Inc., a leading office furniture manufacturer known for its innovative leadership
approaches, said it best in his book, Leadership Jazz: “Jazz band leaders must choose
the music, find the right musicians, and perform—in public. But the effect of the performance depends on so many things—the environment, the volunteers playing the
band, the need for everybody to perform as individuals and as a group, the absolute
dependence of the leader on the members of the band, the need for the followers to
play well.... The leader of the jazz band has the beautiful opportunity to draw the best
out of the other musicians. We have much to learn from jazz band leaders, for jazz, like
leadership, combines the unpredictability of the future with the gifts of individuals.”
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42 Supplement 1C
The way an entrepreneur leads the venture should be much like the jazz leader—
drawing the best out of other individuals, even given the unpredictability of the situation. One way an entrepreneur does this is through the vision he or she creates for the
organization. In fact, the driving force through the early stages of the entrepreneurial
venture is often the visionary leadership of the entrepreneur. The entrepreneur’s ability to articulate a coherent, inspiring, and attractive vision of the future is a key test
of his or her leadership. But if an entrepreneur can do this, the results can be worthwhile. A study contrasting visionary and nonvisionary companies showed that visionary companies outperformed the nonvisionary ones by six times on standard financial
criteria, and their stocks outperformed the general market by fifteen times.
As we see in Chapter 8, many organizations—entrepreneurial and otherwise—are
using employee work teams to perform organizational tasks, create new ideas, and
resolve problems. The three most common types of employee work teams in entrepreneurial ventures are empowered teams (teams that have the authority to plan and implement process improvements), self-directed teams (teams that are nearly autonomous
and responsible for many managerial activities), and cross-functional teams (work teams
composed of individuals from various specialties who work together on various tasks).
Developing and using teams is necessary because technology and market
demands are forcing entrepreneurial ventures to make products faster, cheaper, and
better. Tapping into the collective wisdom of a venture’s employees and empowering them to make decisions just may be one of the best ways to adapt to change. In
addition, a team culture can improve the overall workplace environment and morale.
For team efforts to work, however, entrepreneurs must shift from the traditional
­command-and-control style to a coach-and-collaboration style.
What Controlling Issues Do
Entrepreneurs Face?
Entrepreneurs must look at controlling their venture’s operations in order to survive
and prosper in both the short run and long run. The unique control issues that face
entrepreneurs include managing growth, managing downturns, exiting the venture,
and managing personal life choices and challenges.
How Is Growth Managed?
Growth is a natural and desirable outcome for entrepreneurial ventures. Growth is
what distinguishes an entrepreneurial venture. Entrepreneurial ventures pursue
growth. Growing slowly can be successful, but so can rapid growth.
Growing successfully doesn’t occur randomly or by luck. Successfully pursuing
growth typically requires an entrepreneur to manage all the challenges associated with
growing, which entails planning, organizing, and controlling for growth.
How Are Downturns Managed?
Although organizational growth is a desirable and important goal for entrepreneurial
ventures, what happens when things don’t go as planned—when the growth strategies
don’t result in the intended outcomes and, in fact, result in a decline in performance?
There are challenges, as well, in managing the downturns.
Nobody likes to fail, especially entrepreneurs. However, when an entrepreneurial
venture faces times of trouble, what can be done? How can downturns be managed
successfully? The first step is recognizing that a crisis is brewing. An entrepreneur
should be alert to the warning signs of a business in trouble. Some signals of potential performance decline include inadequate or negative cash flow, excess number of
employees, unnecessary and cumbersome administrative procedures, fear of conflict
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Supplement 1C Entrepreneurship
and taking risks, tolerance of work incompetence, lack of a clear mission or goals, and
ineffective or poor communication within the organization.
Although an entrepreneur hopes to never have to deal with organizational downturns, declines, or crises, these situations do occur. After all, nobody likes to think
about things going bad or taking a turn for the worse. But that’s exactly what the
entrepreneur should do—think about it before it happens. (Remember feedforward
control from Chapter 12.) It’s important to have an up-to-date plan for covering crises. It’s like mapping exit routes from your home in case of a fire. An entrepreneur
wants to be prepared before an emergency hits. This plan should focus on providing
specific details for controlling the most fundamental and critical aspects of running
the venture—cash flow, accounts receivable, costs, and debt. Beyond having a plan for
controlling the venture’s critical inflows and outflows, other actions would involve
identifying specific strategies for cutting costs and restructuring the venture.
What’s Involved with Exiting the Venture?
Getting out of an entrepreneurial venture may seem to be a strange thing for entrepreneurs to do. However, the entrepreneur may come to a point at which he or she decides
it’s time to move on. That decision may be based on the fact that the entrepreneur
hopes to capitalize financially on the investment in the venture—called h
­ arvesting—or
that the entrepreneur is facing serious organizational performance problems and wants
to get out, or even on the entrepreneur’s desire to focus on other pursuits (­personal
or business). The issues involved with exiting the venture include choosing a proper
­business valuation method and knowing what’s involved in the process of selling a
business.
Although the hardest part of preparing to exit a venture may involve valuing it,
other factors are also important. These include being prepared, deciding who will sell
the business, considering the tax implications, screening potential buyers, and deciding whether to tell employees before or after the sale. The process of exiting the entrepreneurial venture should be approached as carefully as the process of launching it.
If the entrepreneur is selling the venture on a positive note, he or she wants to realize
the value built up in the business. If the venture is being exited because of declining
performance, the entrepreneur wants to maximize the potential return.
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Chapter 1
Jeff Whyte/Shutterstock
Introduction to
Management and
Organizations
Learning Objectives
1.1
Explain why it’s important to study management.
1.2
Define management.
1.3
Describe who managers are and where they work.
1.4
Describe what managers do.
1.5
Describe the factors that are reshaping and redefining
management.
1
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2 Chapter 1
Naheed Nenshi was born in Toronto and completed a master’s degree at Harvard in public policy.
He worked for the renowned international consulting firm McKinsey, which has been referred to
as “special forces training for business leadership.”1 In 2010, at 38 years of age, Nenshi became
Calgary’s thirty-sixth mayor and the first Muslim mayor of a major North American city. In 2013, he
was re-elected with 74 percent of the vote.
After leaving McKinsey, Nenshi started a business called Ascend Group to assist public,
private, and nonprofit organizations grow their businesses. He developed strategies for the Canadian
marketplace for companies such as Gap, Banana Republic, and Old Navy. He was Canada’s first
tenured professor in the field of nonprofit management, at Mount Royal University’s Bissett School
of Business.
His work as an entrepreneur taught Nenshi the most about business, but designing policy
for the Alberta provincial government attracted him to politics. His main focus is to make cities like
Calgary run more smoothly. He is the author of Building Up: Making Canada’s Cities Magnets for
Talent and Engines of Development, and his initiatives in Calgary include an ambitious multidecade
transit plan.2
Naheed Nenshi is a good example of a successful manager today and exemplifies the skills
managers must have to deal with the problems and challenges of managing in the twenty-first century. This text is about the important managerial work that Mayor Nenshi and the millions of other
managers like him do. It recognizes the reality faced by today’s managers: NEW technologies and
new ways of organizing work are altering old approaches. Today’s successful managers must be
able to blend tried-and-true management styles with new ideas.
Assume for a moment that it’s your first day in an introductory physics class. Your instructor
asks you to take out a piece of paper and describe Newton’s second law of motion. How would you
react? I expect most students would respond with something like “How would I know? That’s why
I’m taking this course!”
Now let’s change the situation to the first day in an introductory management class. Your
instructor asks you to write an answer to this question: “What traits does one need to be an effective leader?” When we’ve done this on the first day, we find that students always have an answer.
Everyone seems to think they know what makes a good leader.
This example illustrates a popular myth about the study of management: It’s just common
sense. Well, we can assure you . . . it’s not! When it comes to managing, much of what passes
for common sense is just plain wrong. You might be surprised to know that the academic study
of management is filled with insights, based on extensive research, that often run counter to what
seems to be common sense. That’s why we decided to tackle head on this common-sense perception by examining in each chapter a particular “management myth” and then “debunking” this myth
by explaining how it is just a common-sense myth.
Here is a common myth about management:
Only those who need to be managers need to take a course in management.
Anyone who works in an organization—not just managers—can gain insight into how
organizations work and the behaviours of their boss and co-workers by taking a course in
management.
This chapter’s “debunked” myth often surprises students majoring in subjects like accounting, finance, statistics, information technology, or advertising. Since they don’t expect
to be managers, they see spending a semester studying management as a waste of time and
irrelevant to their career goals. Later in this chapter, we’ll explain why the study of management
is valuable to every student, no matter what you’re majoring in or whether you are a manager
or aspire to be a manager. For full details on this management myth, check out our Bust the
Myth video in Revel.
Although we’d like to think that all managers are good at what they do, you may have discovered through jobs you’ve had that managers can be good at what they do or maybe not so
good, or even good one day and not so good the next! One thing you need to understand is that all
­managers—good or not so good—have important jobs to do. And this text is about the work managers do. In this chapter, we introduce you to managers and management: who they are, where
they work, what management is, what they do, and why you should spend your time studying management. Finally, we’ll wrap up the chapter by looking at some key factors reshaping and redefining
organizations and the way managers manage.
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Chapter 1 Introduction to Management and Organizations
3
Why Study Management?
1.1
Explain why it’s important to study management.
Good managers are important because
• organizations need their skills and abilities, especially in today’s uncertain, complex, and chaotic
environment.
• they’re critical to getting things done.
• they play a crucial role in employee satisfaction and engagement.
You may be wondering why you need to study management. If you are an accounting
major, marketing major, or any major other than management, you may not understand how studying management will help you in your career. Let’s look at some reasons why you may want to understand more about management.
First, all of us have a vested interest in improving the way organizations are managed.
Why? Because we interact with them every day of our lives and an understanding of
management offers insights into many organizational aspects. When you renew your
driver’s licence or get your car tags, are you frustrated that a seemingly simple task
takes so long? Were you surprised when well-known businesses you thought would
never fail went bankrupt, or were you angry when entire industries had to rely on government bailout money to survive declining economic conditions? Are you annoyed
when you use a drive-through and get ready to enjoy your food or drink and then realize something is missing or that it’s not what you ordered? Such problems are mostly
the result of managers doing a poor job of managing.
Organizations that are well managed—such as Apple, Canadian Tire, Tim Hortons,
Nike, Westjet, and Google—develop a loyal following and find ways to prosper even
when the economy stinks. Poorly managed organizations may find themselves with
a declining customer base and reduced revenues and may have to file for bankruptcy
protection even in a strong economy. By studying management, you will be able to
recognize poor management and work to get it corrected. In addition, you will be able
to recognize good management and encourage it, whether it is in an organization with
which you are simply interacting or an organization in which you are employed.
The second reason for studying management is the reality that for most of you, once
you graduate and begin your career, you will either manage or be managed. For those who
plan to be managers, an understanding of management forms the foundation on
which to build your own management skills and abilities. For those of you who don’t
see yourself managing, you’re still likely to have to work with managers. Also, assuming that you’ll have to work for a living and recognizing that you’re likely to work in
an organization, you’re likely to have some managerial responsibilities even if you’re
not a manager. Our experience tells us that you can gain a great deal of insight into the
A Question of Ethics
• 26 percent of new managers feel they’re unprepared to
transition into management roles.
Moving to a management position isn’t easy, as these statistics
indicate.3
• 58 percent of new managers don’t receive any training to
help them make the transition.
1. Does an organization have an ethical responsibility to assist
its new managers in their new positions? Why or why not?
• 48 percent of first-time managers fail in that transition.
2. What could organizations do to make this transition easier?
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4 Chapter 1
way your boss (and co-workers) behave and how organizations function by studying
management. Our point is that you don’t have to aspire to be a manager to gain valuable information from a course in management.
What Is Management?
1.2
management
Coordinating work activities so
that they are completed efficiently
and effectively with and through
other people.
Define management.
Managers plan, lead, organize, and control, and Naheed Nenshi certainly carries out
all of these tasks. He has to coordinate the work activities of over 13 000 city ­employees
efficiently and effectively. Working collaboratively with City Council, he has to make
sure that work is carried out consistently to protect his brand. He also has to support his managers. Nenshi likes to joke among his managerial team that the mayor is
always right—but only as far as the door of his office. He will defend the decisions of
his team even if he didn’t agree with them.4
Simply speaking, management is what managers do. But that simple statement
does not tell us much, does it? Here is a more thorough explanation: Management is
coordinating work activities so that they are completed efficiently and effectively with
and through other people. Management researchers have developed three specific categories to describe what managers do: functions, roles, and skills. In this section, we’ll
consider the challenges of balancing efficiency and effectiveness, and then examine the
approaches that look at what managers do. In reviewing these categories, it might be
helpful to understand that management is something that is a learned talent, rather
than something that comes “naturally.” Many people do not know how to be a manager when they first are appointed to that role. See Supplement 1A for the history of
management’s roots to understand how management theory has developed over time.
Efficiency and Effectiveness
efficiency
Getting the most output from the
least amount of inputs.
effectiveness
Completing activities so that
organizational goals are achieved.
Efficiency refers to getting the most output from the least amount of inputs or, as management expert Peter Drucker explained, “Doing things right.”5 Because managers
deal with scarce inputs—including resources such as people, money, and e­ quipment—
they are concerned with the efficient use of those resources by getting things done at
the least cost.
Just being efficient is not enough, however. Management is also responsible
for being effective—completing activities so that organizational goals are achieved.
Effectiveness is often described as “doing the right things”—that is, those work activities that will help the organization reach its goals. Hospitals might try to be efficient by
reducing the number of days that patients stay in hospital. However, they may not be
effective if patients get sick at home shortly after being released.
While efficiency is about ways to get things done, effectiveness deals with the ends,
or attaining organizational goals. (See Exhibit 1-1.) Management is concerned, then, not
only with completing activities to meet organizational goals (effectiveness) but also with
doing so as efficiently as possible. In successful organizations, high efficiency and high
effectiveness typically go hand in hand. Poor management is most often due to both
inefficiency and ineffectiveness or due to effectiveness achieved through inefficiency.
Who Are Managers?
1.3
Describe who managers are and where they work.
As mayor of Calgary, Naheed Nenshi is responsible for more than 13 000 city employees. His focus is on developing a more effective and disciplined organization. To that
end, he has instituted zero-based budget reviews of every business unit at the City.
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Chapter 1 Introduction to Management and Organizations
Exhibit 1-1 Efficiency, Effectiveness, and Performance in Student Meetings
The best student meetings are efficient and effective.
Efficiency
Effectiveness
High
Low
Low
High
High Effectiveness–Low Efficiency
High Effectiveness–High Efficiency
• Each member reports on their activities,
challenges, and next steps
• Members may not come prepared
• Meetings may not start or end on time
• Meetings generally take too long
• Team members come to meetings
fully prepared and engaged
• Each member reports on their activities,
challenges, and next steps
• Meetings start and end on time
Low Effectiveness–Low Efficiency
High Efficiency–Low Effectiveness
• Meetings drag on and on
• Members are late or not participating
• Meetings degenerate into debates or
arguments; discussion centres on
previous work
• Meetings end in 10 minutes no matter
what was accomplished
• Members are checking e-mails and
texting during meetings
• Members go through the motions
Many initiatives have been citizen focused, such as a collaborative budgeting process
with more than 20 000 Calgarians providing input, or creating video archives of City
Council meetings for public review.
Managers may not be who or what you might expect. They could be under age 18
or even over age 80. They run large corporations as well as entrepreneurial startups.
They are found in government departments, hospitals, small businesses, nonprofit
agencies, museums, schools, and even nontraditional organizations such as political
campaign offices and consumer cooperatives. They can be found doing managerial
work in every country around the globe and operate at many levels, from top-level
managers to first-line managers.
No matter where managers are found or what gender they are, managers have
exciting and challenging jobs. And organizations need managers more than ever in
these uncertain, complex, and chaotic times. Managers do matter! How do we know
that? The Gallup Organization, which has polled millions of employees and tens of
thousands of managers, has found that the single most important variable in employee
productivity and loyalty is neither pay nor benefits nor workplace environment—it
is the quality of the relationship between employees and their direct supervisors.6
A KPMG/Ipsos-Reid study found that many Canadian companies with high scores
for effective human resource practices also scored high on financial performance and
best long-term investment value.7 In addition, global consulting firm Watson Wyatt
Worldwide found that the way a company manages its people can significantly affect
its financial performance.8 We can conclude from such reports that managers do matter!
Defining who managers are used to be fairly simple: Managers were the organizational members who told others what to do and how to do it. It was easy to
differentiate managers from nonmanagerial employees. But life is not quite as simple
anymore. In many organizations, the changing nature of work has blurred the
distinction between managers and nonmanagerial employees. Many nonmanagerial jobs now include managerial activities.9 For example, at General Cable
Corporation’s facility in Moose Jaw, Saskatchewan, managerial responsibilities are
shared by managers and team members. Most of the employees at General Cable
are cross-trained and multiskilled. Within a single shift, an employee may be a team
leader, an equipment operator, a maintenance technician, a quality inspector, and
an improvement planner.10
5
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6 Chapter 1
How do we define who managers are? A manager
is someone who works with and through other people
by coordinating their work activities in order to accomplish organizational goals. A manager’s job is not about
personal achievement—it is about helping others do their
work and achieve results.
Nomad_Soul/Fotolia
The Organizational Setting
All managers share one common element: They work
in an organizational setting. An organization is a
deliberate arrangement of people brought together to
accomplish some specific purpose. For instance, your
college or university is an organization, as are the
United Way, your neighbourhood convenience store,
the Saskatchewan Roughriders football team, fraternities and sororities, and global companies such
as Nestlé, Lego, and Samsung. These and all organizations share three common characteristics. (See
Exhibit 1-2.)
Ted Hall started Spearhead Timberworks by building a barn for a
family friend. Now running a multimillion-dollar operation located
in Nelson, British Columbia, Hall abandoned conventional tools and
embraced digital design and manufacturing. As a manager of 60 employees, Hall must be on top of just-in-time delivery and compressed
construction schedules. He has to wear many hats: master carpenter,
technology innovator, quality-control master, mentor, trainer, and
listener. With each role come unique challenges.
The
first characteristic of an organization is that it has a distinct purpose, which is
typically expressed as a goal or set of goals. For example, Bob Iger, Walt Disney
Company’s president and CEO, has said his company’s goal is to create amazing
family entertainment and to provide customers with extraordinary experiences,
which will lead to increasing shareholder value.11 The second characteristic is that
people in an organization work to achieve those goals. How? By making decisions
and engaging in work activities to make the desired goal(s) a reality. For instance,
at Disney, many employees work to create the content and experiences that are
so important to the company’s businesses. Others provide supporting services
or interact with guests (customers) directly. Finally, the third characteristic is that
an organization is structured in some way that defines and limits the behaviour
of its members. Disney, like most large organizations, has a fairly complex structure with different businesses, departments, and functional areas. Within that
structure, rules, regulations, and policies might guide what people can or cannot
do; some m
­ embers will supervise other members; work teams might be formed
or disbanded; or job descriptions might be created or changed so organizational
members know what they’re supposed to do. That structure is the setting within
which managers manage.
WHAT THREE CHARACTERISTICS DO ALL ORGANIZATIONS SHARE?
manager
Someone who works with
and through other people
by coordinating their work
activities in order to accomplish
organizational goals.
organization
A deliberate arrangement of
people who act together to
accomplish some specific purpose.
Exhibit 1-2 Three Characteristics of Organizations
Goals
People
B
A
Structure
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7
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Chapter 1 Introduction to Management and Organizations
This retail supervisor can also have tasks of his own, apart from supervising employees.
How Are Managers Different from
Nonmanagerial Employees?
Although managers work in organizations, not everyone who works in an organization
is a manager. For simplicity’s sake, we’ll divide organizational members into two categories: nonmanagerial employees and managers. Nonmanagerial employees are people
who work directly on a job or task and have no responsibility for overseeing the work
of others. The employees who ring up your sale at Home Depot, take your order at the
Starbucks drive-through, or process your class registration forms are all nonmanagerial
employees. These nonmanagerial employees may be called associates, team members,
contributors, or even employee partners. Managers, on the other hand, are individuals
in an organization who direct and oversee the activities of other people in the organization so organizational goals can be accomplished. A manager’s job isn’t about personal
achievement—it’s about helping others do their work. That may mean coordinating the
work of a departmental group, leading an entire organization, or supervising a single
person. It could involve coordinating the work activities of a team with people from different departments or even people outside the organization, such as temporary employees or individuals who work for the organization’s suppliers. This distinction doesn’t
mean, however, that managers don’t ever work directly on tasks. Some managers do
have work duties not directly related to overseeing the activities of others.
What Titles Do Managers Have?
Although they can have a variety of titles, identifying exactly who the
managers are in an organization shouldn’t be difficult. In a broad sense,
managers can be classified as top, middle, first-line, or team leaders. (See
Exhibit 1-3.) Top ­managers are those at or near the top of an organization. They’re usually responsible for making decisions about the direction of the organization and defining policies and values that affect all
organizational members. Top managers typically have titles such as
vice-president, president, chancellor, managing director, chief operating
officer, chief executive officer, or chairperson of the board. In the chapter
nonmanagerial employees
People who work directly on a job
or task and have no responsibility
for overseeing the work of others.
top managers
Managers at or near the top
level of the organization, who
are responsible for making
organization-wide decisions and
establishing the plans and goals
that affect the entire organization.
Exhibit 1-3 Management Levels
Management level
Example job title
Top Manager
Managing Director
Middle Manager
District Manager
First-Line Manager
Shift Manager
Team Leader
Production Team Leader
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8 Chapter 1
middle managers
Managers between the first-line
level and the top level of the
organization, who manage the
work of first-line managers.
lower-level managers
Managers at the lowest level of
the organization, who manage the
work of nonmanagerial employees
directly or indirectly involved with
the production or creation of the
organization’s products.
first-line managers
Supervisors responsible for
directing the day-to-day activities
of nonmanagerial employees.
team leaders
Individuals who are responsible
for managing and facilitating the
activities of a work team.
opening case, Naheed Nenshi is the popular and successful mayor of Canada’s
­fourth-largest city. He is involved in creating and implementing broad and comprehensive changes that affect the entire city of Calgary and the province of Alberta.
Middle managers are those managers found between the lowest and top levels
of the organization. These individuals often manage other managers and maybe
some nonmanagerial employees and are typically responsible for translating the
goals set by top managers into specific details that lower-level managers will see get
done. Middle managers may have such titles as department or agency head, project
leader, unit chief, district manager, division manager, or store manager. First-line
managers are those individuals responsible for directing the day-to-day activities
of nonmanagerial employees. First-line managers are often called supervisors, shift
managers, office managers, department managers, or unit coordinators. We want to
point out a special type of manager that has become more common as organizations
use employee work teams. These managers, or team leaders, are individuals who
are responsible for managing and facilitating the activities of a work team.
Not all organizations get work done using a traditional pyramidal form, with
the four levels of managers on the top of the pyramid. Some organizations, for
example, are more flexible and loosely structured, with work being done by everchanging teams of employees who move from one project to another as work
demands arise. Although it is not as easy to tell who the managers are in these
organizations, we do know that someone must fulfill that role—there must be
someone who works with and through other people by coordinating their work to
accomplish organizational goals.
Is the Manager’s Job Universal?
So far, we’ve discussed the manager’s job as if it were a generic activity. If management
is truly a generic discipline, then what a manager does should be the same whether he
or she is a top-level executive or a first-line supervisor; in a business firm or a government agency; in a large corporation or a small business; or located in Paris, Ontario, or
Paris, France. Is that the case? Let’s take a closer look.
Although a supervisor of the Genius Bar in an
Apple Store may not do exactly the same things that Apple’s CEO Tim Cook does, it
doesn’t mean that their jobs are inherently different. The differences are of degree and
emphasis but not of activity.
As managers move up in the organization, they do more planning and less
direct overseeing of others. (See Exhibit 1-4.) All managers, regardless of level, make
LEVEL IN THE ORGANIZATION.
Exhibit 1-4 Management Activities by Organizational Level
SOURCE: Based on T. A. Mahoney, T. H. Jerdee, and S. J. Carroll, “The Job(s) of Management,” Industrial Relations
4, no. 2 (1965), p. 103.
Organizing
24%
Planning
15%
Controlling
10%
Leading
51%
First-Level Managers
Planning
18%
Controlling
13%
Organizing
33%
Leading
36%
Middle Managers
Planning
28%
Organizing
36%
Controlling
14%
Leading
22%
Top Managers
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Chapter 1 Introduction to Management and Organizations
9
decisions. They plan, organize, lead, and control, but the amount of time they spend
on each activity is not necessarily constant. In addition, “what” they plan, organize,
lead, and control changes with the manager’s level. For example, as we’ll demonstrate
in Chapter 5, top managers are concerned with designing the overall organization’s
structure, whereas lower-level managers focus on designing the jobs of individuals
and work groups.
PROFIT VERSUS NOT-FOR-PROFIT. Does a manager who works for the Canadian
Cancer Society or the City of Calgary do the same things that a manager at Shopify or
Amazon does? That is, is the manager’s job the same in both profit and not-for-profit
organizations? The answer, for the most part, is yes. All managers make decisions, set
goals, create workable organization structures, hire and motivate employees, secure
legitimacy for their organization’s existence, and develop internal political support
in order to implement programs. Of course, the most important difference between
the two is how performance is measured. Profit—the “bottom line”—is an unambiguous measure of a business organization’s effectiveness. Not-for-profit organizations
don’t have such a universal measure, which makes performance measurement more
difficult. But don’t think this means that managers in those organizations can ignore
finances. Even not-for-profit organizations need to make money to continue operating.
However, in not-for-profit organizations, “making a profit” for the “owners” is not the
primary focus.
Managers work in a variety of situations, and therefore the people to whom they
are held accountable vary considerably. Large organizations in the private sector
are often publicly held, which typically means that their shares are available on the
stock exchange for public trading. Managers of publicly held companies report to a
board of directors that is responsible to shareholders (also known as stockholders).
There are also numerous privately held organizations (whose shares are not available on the stock exchange), both large and small. Privately held organizations can
be individually owned, family owned, or owned by some other group of individuals. A number of managers work in the nonprofit sector, where the emphasis is
on providing charity or services rather than on making a profit. Examples of such
organizations include the SPCA (Society for the Prevention of Cruelty to Animals),
Toronto’s Royal Ontario Museum, and Vancouver’s Bard on the Beach Festival.
Other organizational forms, such as nongovernmental ­organizations (NGOs),
partnerships, and cooperatives, also require managers. Many of these nonprofit
organizations are referred to as SMOs (small and medium-sized organizations).
Supplement 1B compares SMOs and SMEs (small and medium-sized enterprises)
in Canada.
Many managers work in the public sector as civil servants for the local, provincial,
or federal government. The challenges of managing within government departments
can be quite different from the challenges of managing in publicly held organizations.
Critics argue that working for governments is less demanding because there are few
measurable performance objectives, allowing employees to feel less accountable for
their actions.
Some managers and employees work for Crown corporations, such as Canada
Post, the CBC, and the Business Development Bank of Canada. Crown corporations
are structured like private sector corporations and have boards of directors, chief executive officers (CEOs), and so on but are owned by governments rather than shareholders. Employees in Crown corporations are not civil servants, and managers in Crown
corporations are more independent than the senior bureaucrats who manage government departments.
Many of Canada’s larger organizations are actually subsidiaries of American parent organizations (e.g., Safeway, General Motors, and Ford Motor Company). Their
managers often report to American top managers and are not always free to set their
private sector
The part of the economy run
by organizations that are free
from direct government control;
enterprises in this sector operate
to make a profit.
publicly held organization
A company whose shares are
available on the stock exchange for
public trading by brokers/dealers.
privately held organizations
Companies whose shares are not
available on the stock exchange
but are privately held.
nonprofit sector
The part of the economy run by
organizations that operate for
purposes other than making a
profit (that is, providing charity or
services).
nongovernmental organization
(NGO)
A nongovernmental organization
that emphasizes humanitarian
issues, development, and
sustainability.
public sector
The part of the economy directly
controlled by government.
civil servants
People who work in a local,
provincial, or federal government
department.
Crown corporations
Commercial companies owned by
the government but independently
managed.
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Marie Laure JOSSELIN/AFP/Getty Images
10 Chapter 1
own goals and targets. Conflicts can arise when Canadian
managers and the American managers to whom they
report do not agree on how things should be done.
SIZE OF ORGANIZATION. Would you expect the job of a
manager in a local FedEx store that employs twelve people
to be different from that of a manager who runs the FedEx
global distribution centre in Toronto? This question is best
answered by looking at the jobs of managers in small businesses and comparing them with our previous discussion of
managerial roles. First, however, let’s define a small business.
No commonly agreed-upon definition of a small business
is available because different criteria are used to define small.
For example, an organization can be classified as a small busiAs mayor of Calgary, Naheed Nenshi works closely with City
ness using such criteria as number of employees, annual sales,
Council, which acts as a de facto board of directors. A municipal
or total assets. Small businesses (those that employ fewer than
government is dramatically different than a federal one. Nenshi
100 individuals) represent 98 percent of all Canadian comsays, “If the federal government disappeared while we were talkpanies. These businesses employ almost half of all Canadian
ing, it would take a couple of weeks to notice. But if the municipal
government disappeared, there go the traffic lights, the water, the
workers. See Supplement 1B for more data on small and
electricity, the gas. ... [Y]ou would, frankly, notice pretty quickly
medium enterprises and their contribution to the economy.
because you might be dead.”12
So, is the job of managing a small business different
from that of managing a large one? Managers in both small and large organizations
perform essentially the same activities, but how they go about those activities and the
proportion of time they spend on each are different. (You can find more information on
managing small, entrepreneurial organizations in Supplement 1C: Entrepreneurship.)
universality of management
The reality that management is
needed in all types and sizes of
organizations, at all organizational
levels, in all organizational work
areas, and in organizations in all
countries around the globe.
MANAGEMENT CONCEPTS AND NATIONAL BORDERS. The last generic issue
concerns whether management concepts are transferable across national borders. If
managerial concepts were completely generic, they would also apply universally in any
country in the world, regardless of economic, social, political, or cultural differences.
Studies that have compared managerial practices among countries have not generally
supported the universality of management concepts. In Chapter 2, we’ll examine some
specific differences between countries and describe their effect on managing. At this
point, it’s important for you to understand that most of the concepts discussed in the
rest of the text primarily apply to Canada, Great Britain, Australia, and other Englishspeaking countries. Managers likely will have to modify these concepts if they want to
apply them in India, China, Chile, or other countries whose economic, political, social,
or cultural environments differ from that of the so-called free-market democracies.
What Do Managers Do?
1.4 Describe what managers do.
planning
A management function
that involves defining goals,
establishing a strategy for
achieving those goals, and
developing plans to integrate and
coordinate activities.
management functions
Planning, organizing, leading, and
controlling.
No Two Organizations Are Alike, and neither are managers’ jobs. But their jobs do
share some common elements, as you’ll see in these three approaches to describing
what managers do.
Four Functions Approach
According to the functions approach, managers perform certain activities or duties as
they efficiently and effectively coordinate the work of others. What are these activities
or functions? In the early part of the twentieth century, French industrialist Henri Fayol
first proposed that all managers perform five functions: planning, organizing, commanding, coordinating, and controlling.13 Today, most management texts (including this
one) are organized around four ­management functions: planning, organizing, leading,
and controlling. (See Exhibit 1-5.) But you do not have to be a manager to have a need
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11
Chapter 1 Introduction to Management and Organizations
Exhibit 1-5 Management Functions
NINGning goal
s,
AN
fi
PL ludes de strategy
, and
Inc blishing
a
est loping plans to
ve
e
te activities
d
rdina
coo
In
arin
mp
g any signi
co correctin
fica
nt
d
an iations
v
e
d
LEADING Every organization contains people. Part of a manager’s job is to work with
and through people to accomplish organizational goals. This task is the leading function. When managers motivate subordinates, direct the work of individuals or teams,
select the most effective communication channel, or resolve behaviour issues, they are
leading. Knowing how to manage and lead effectively is an important, and sometimes
difficult, skill because it requires the ability to successfully communicate. Leading is not
just for managers, however. As a student, you might want to practise leadership skills
when working in groups or club activities. You might also want to evaluate whether
you need to improve your leadership skills in anticipation of the needs of future jobs.
ZING
ORGANIZING Managers are also responsible for arranging work to
accomplish the organization’s goals. We call this function organizing.
When managers organize, they determine what tasks are to be done, who
is to do them, how the tasks are to be grouped, who reports to whom (i.e.,
they define authority relationships), and where decisions are to be made. When you work
in a student group, you engage in some of these same organizing activities—deciding on
a division of labour and what tasks will be carried out to get an assignment completed.
Achieving the
organization's
stated purpose
NI
GA determining what tasks a
ORludes o is to do them, how t re to b
h
he
e
,w
Inc
t
d, who rep
o
a
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t
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do e gr
a
h
ill make decisi
b
ons om re
ho w
to
,
dw
an
take any road. However, if you have some place in particular you want to
go, you have to plan the best way to get there. Because organizations exist
to achieve some particular purpose, someone must clearly define that
purpose and the means for its achievement. Managers performing the
planning function define goals, establish an overall strategy for achieving those goals, and develop plans to integrate and coordinate activities.
This work can be done by the CEO and senior management team for the
overall organization. Middle managers often have a planning role within
their units. Planning, by the way, is not just for managers. As a student, for
example, you need to plan for exams and for your financial needs.
ING
ROLL
NT onitoring perform
COcludes mg it with goals, ance,
PLANNING If you have no particular destination in mind, then you can
LEA DIN G
s,
In c
ee
oy
l
d ir u d e s m o t i v a ti n g e m p l r s ,
e
e ct
h
ot
in g t
sel
m u ts
h e a c ti viti e s o f
e
com nflic
n ic c t in g t h e
e
v
i
t
o
c
c
a ti o
m o s t e ffe
in g
n ch
a n n e l, a n d r e s o l v
organizing
A management function that
involves determining what tasks
are to be done, who is to do them,
how the tasks are to be grouped,
who reports to whom, and where
decisions are to be made.
leading
A management function that
involves motivating subordinates,
directing the work of individuals or
teams, selecting the most effective
communication channels, and
resolving employee behaviour
issues.
CONTROLLING The final management function is controlling. After the goals are set
(planning), the plans formulated (planning), the structural arrangements determined controlling
(organizing), and the people hired, trained, and motivated (leading), there has to be some A management function that
evaluation of whether things are going as planned (controlling). To ensure that work involves monitoring actual
is proceeding as it should, managers need to monitor and evaluate employees’ perfor- performance, comparing actual
mance. Actual ­performance must be compared with previously set goals. If the perfor- performance to a standard, and
mance of individuals or units does not match the goals set, the manager’s job is to get taking corrective action when
performance back on track. This process of monitoring, comparing, and ­correcting is what necessary.
we mean by the controlling function. Individuals, whether
working in groups or alone, also face the responsibility of
controlling; that is, they must make sure the goals and actions
are achieved and take corrective action when necessary. The
budget is the most common example of controlling.
The functions approach suggests that managers
always plan, organize, lead, and then control, which
in practice may not always happen in this logical and
sequential order. Regardless of the order in which the
functions are carried out, managers do plan, organize,
lead, and control as they manage. Some have argued that
this approach is not appropriate or relevant.14 In the next
section we will look at another perspective—the management roles perspective, developed by Henry Mintzberg.
A leader has to be many things.
Z_amir/Fotolia
to plan, organize, lead, and control, so understanding these processes is
important for everyone. Let us briefly define what each of these functions encompasses.
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12 Chapter 1
And the Survey Says...15
Canadian companies on the Toronto Stock Exchange featured
women in leadership roles as follows:
A Fortune 500 study found that organizations with two or more
women on their boards
69 percent of companies had at least one female director.
• had 53 percent higher return on equity
33 percent of newly created or vacated board seats were
filled by women.
• demonstrated greater accountability
54 percent had a written board diversity policy.
• conducted more extensive regular reviews of nonfinancial
performance indicators
Reetu Gupta (right) became the new president and CEO of the
Easton’s Group of Hotels in 2018. After starting as a receptionist,
Reetu worked her way up to accounting and then sales. She was
named as one of Canada’s Top 40 under 40.16
Chris So/The Toronto Star/Getty Images
What’s Cooking in Hospitality?
As you study management functions in more depth, the exercises in Team Exercises,
found at the end of each chapter, will give you the opportunity to practise some of the
key skills that are part of doing what a manager does. Skill-building exercises cannot
make you an instant managerial expert, but they can provide you with a basic understanding of some of the skills you will need to master to become an effective manager.
Management Roles Approach
• Henry Mintzberg, a prominent management researcher at McGill University,
studied actual managers at work and discovered they spent little time in reflection, and most time in reaction.
management roles
Specific categories of managerial
behaviour.
• Management roles refer to specific managerial actions or behaviours. (Think of
the different roles you play and the different behaviours you are expected to perform in the roles of student, employee, volunteer, etc.)
• These ten roles, shown in Exhibit 1-6, are grouped around interpersonal relationships, the transfer of information, and decision making.
Exhibit 1-6 Mintzberg’s Managerial Roles
Role
Description
Examples of Identifiable Activities
Figurehead
Symbolic head; performs routine legal
or social duties
Greeting visitors; signing legal documents
Leader
Motivates subordinates; oversees
staffing, training, and associated duties
Performing virtually all activities that
­involve subordinates
Liaison
Maintains network of contacts who
provide favours and information
Acknowledging e-mail; external board
work; meeting with stakeholders
Interpersonal
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Chapter 1 Introduction to Management and Organizations
Role
Description
Examples of Identifiable Activities
Monitor
Sifts through a wide variety of internal
and external information
Reading periodicals and reports;
­maintaining business network; LinkedIn
Disseminator
Conveys complex information to
members of the organization
Holding informational meetings; making/
taking phone calls
Spokesperson
Communicates with stakeholders
on organizational plans and actions
Holding board meetings and media
sessions
Entrepreneur
Identifies opportunities and brings
about corrective changes
Organizing strategy to develop new
programs
Disturbance handler
Takes corrective action when
­ rganization faces major disturbances
o
Resolving disturbances and crises
Resource allocator
Makes or approves all significant
­organizational decisions
Scheduling; requesting authorization;
budgeting
Negotiator
Represents the organization at major
negotiations; sets purchasing and
contract terms
Union contract negotiations
Informational
Decisional
You just learned about Mintzberg’s ten management roles. You can learn to be more
effective at managing people by using the following tips to enhance those management
roles:
Mintzberg’s Ten Roles
How to Enhance Your Managerial Skills
Figurehead
Lead by example, improve your reputation, and be a good role model.
Leader
Improve your emotional intelligence and earn respect from your team.
Liaison
Work on your professional networking skills; use tools such as
LinkedIn.
Monitor
Keep up to date with industry news by learning how to gather and
process information more effectively.
Disseminator
Develop your communication skills and learn how best to share
information through written communication and informal briefings.
Spokesperson
Work on your presentation skills; attend conferences and workshops.
Entrepreneur
Develop your creativity and problem-solving skills; learn more about
change management.
Disturbance handler
Read about mediation and practise conflict resolution.
Resource allocator
Practise managing budgets and prioritizing your time effectively.
Negotiator
Practise with role playing to learn about win-win negotiations.
Functions versus Roles
• Both approaches appear to do a good job of describing what managers actually do.
• Many of Mintzberg’s roles align well with one or more of the functions.
• The functions approach stands out because of its simplicity and clarity. Managers
carry out so many diverse activities and utilize such varying techniques that functions are needed for categorizing ways to achieve organizational goals.17 But don’t
disregard the roles approach; it offers another way to understand and appreciate what
managers do.
Skills and Competencies Approach
• Says that managers need certain skills and competencies as they manage others.
• What these researchers say managers do: They identified four general management skills, including18
13
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14 Chapter 1
conceptual skills
A manager’s ability to analyze and
diagnose complex situations.
– Conceptual skills: Analyzing and diagnosing complex situations to see how
things fit together and to facilitate making good decisions.
Analyze and diagnose
Simon/Fotolia
interpersonal skills
A manager’s ability to work with,
understand, mentor, and motivate
others, both individually and in
groups.
– Interpersonal skills: Working well with other people both individually and in
groups by communicating, motivating, mentoring, delegating, etc.
Working well with others
Simon/Fotolia
technical skills
Job-specific knowledge and
techniques needed to perform
work tasks.
– Technical skills: Job-specific knowledge, expertise, and techniques needed to
perform work tasks. (For top-level managers, knowledge of the industry and a
general understanding of the organization’s processes and products; for middleand lower-level managers, specialized knowledge required in the areas where
they work—finance, human resources, marketing, computer systems, manufacturing, and information technology.)
Possessing expert job knowledge
Simon/Fotolia
political skills
A manager’s ability to build a
power base and establish the right
connections.
– Political skills: Building a power base and establishing the right connections to
get needed resources for their groups.
Political adeptness
Simon/Fotolia
– Other important managerial competencies:19 decision making, team building,
decisiveness, assertiveness, politeness, personal responsibility, trustworthiness,
loyalty, professionalism, tolerance, adaptability, creative thinking, resilience, listening, self-development.
Who: Robert Katz and others
When: 1970s to present
How: Studies by various researchers
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Chapter 1 Introduction to Management and Organizations
15
What Factors Are Reshaping and
Redefining Management?
1.5
Describe the factors that are reshaping and redefining management.
Welcome to the new world of management!
Changing Workplaces + Changing Workforce
In today’s world, managers are dealing with changing workplaces, a changing workforce, changing technology, and global uncertainties. For example, grocery stores continue to struggle to retain their customer base and to keep costs down. At Overwaitea’s
Save-on-Foods, a grocery chain in British Columbia, everyone, including managers, is
looking for ways to better serve customers. The company’s president, Darrell Jones,
who started his career bagging groceries while still in high school, is guiding the
company through these challenges by keeping everyone’s focus—baggers, checkers,
and stockers—on exceptional customer service. The pace of change in recent years
has quickened, and customers are more interested in their food and its nutritional
value—organics, hormone free and grass fed, for example—which makes the job more
complex.20 Managers everywhere are likely to have to manage in changing circumstances, and the fact is that how managers manage is changing. Throughout the rest of
this text, we’ll be discussing these changes and how they’re affecting the way managers plan, organize, lead, and control. We want to highlight four specific changes that
are increasingly important to organizations and managers everywhere: customers,
innovation, social media, and sustainability.
Why Are Customers Important
to the Manager’s Job?
Matthi/Shutterstock
A manager must understand the importance of customers. Without them,
most organizations would cease to exist. Yet, focusing on the customer
has long been thought by many managers to be the responsibility of the
marketers. We’re discovering, however, that employee attitudes and
behaviours play a big role in customer satisfaction. Think of the times
you’ve been treated poorly (or superbly) by an employee during a service
encounter and how that affected the way you felt about the situation.
Managers are recognizing that delivering consistent high-quality
customer service is essential for survival and success in today’s competitive environment and that employees are an important part of that equation.22 The implication is clear—they must create a customer-responsive
organization where employees are friendly and courteous, accessible,
knowledgeable, prompt in responding to customer needs, and willing to
do what’s necessary to please the customer.23
Why Is Innovation Important
to the Manager’s Job?
Success in business today demands innovation. Innovation means doing
things differently, exploring new territory, and taking risks. And innovation isn’t just for high-tech or other technologically sophisticated organizations; innovative efforts are needed in all types, all levels, all areas,
and all sizes of organizations. You’d expect companies such as Apple,
Google, Toyota, and Instagram to be on a list of the world’s fifty most
John Chambers, CEO of Cisco Systems, likes
to listen to voice mails forwarded to him from
dissatisfied customers because he wants to hear
first-hand the emotions and frustrations they’re
experiencing. He can’t get that type of insight by
reading an e-mail.21
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16 Chapter 1
Technology and the Manager’s Job
Is It Still Managing When What You’re Managing Are Robots?
The office of tomorrow is likely to include workers that are faster,
smarter, more responsible—and who just happen to be robots.24
Surprised? Although robots have been used in factory and industrial settings for a long time, it’s becoming more common to find
robots in the office, and it’s bringing about new ways of looking
at how work is done and at what and how managers manage. So
what would a manager’s job be like managing robots? And even
more intriguing is how these “workers” might affect how human
co-workers interact with them.
As machines have become smarter and smarter, researchers have been exploring the human–machine interaction and
how people interact with the smart devices that are now such an
integral part of our professional and personal lives. One insight
is that people find it easy to bond with a robot, even one that
doesn’t look or sound anything like a real person. In a workplace
setting, if a robot moves around in a “purposeful way,” people
tend to view it, in some ways, as a coworker. People name their
robots and can even describe the robot’s moods and tendencies.
As telepresence robots become more common, the humanness
becomes even more evident. For example, when Erwin Deininger,
the electrical engineer at Reimers Electra Steam, a small company
in Clear Brook, Virginia, moved to the Dominican Republic when
his wife’s job transferred her there, he was able to still be “present” at the company via his VGo robot. Now “robot” Deininger
moves easily around the office and shop floor, allowing the “real”
Deininger to do his job just as if he were there in person. The
company’s president, satisfied with how the robot solution has
worked out, has been surprised at how he acts around it, feeling
at times that he’s interacting with Deininger himself.
There’s no doubt that robotic technology will continue to be
incorporated into organizational settings. The manager’s job will
become even more exciting and challenging as humans and
machines work together to accomplish the organization’s goals.
Discussion Questions
1. What’s your response to the title of this box: Is it still
managing when what you’re managing are robots? Discuss.
2. If you had to manage people and robots, how do you
think your job as manager might be different than what the
chapter describes? (Think in terms of functions, roles, and
skills/competencies.)
innovative companies.25 But what about the likes of Panera Bread? Here’s a company
that’s using technology to improve everything it does. It’s installing a new master
system across its North American locations (over 1800) that will provide customers
with new ways to order their food (and even entertain themselves) and kitchen staff
with capabilities to better handle custom orders. Or how about Kickstarter, which created the crowdfunding phenomenon? Now, it’s looking at ways to better encourage
creativity among potential projects and startups and is also expanding its business
beyond fundraising into publishing and distribution. In today’s challenging environment, innovation is critical, and managers need to understand what, when, where,
how, and why innovation can be fostered and encouraged throughout an organization. In a presentation a few years ago, a manager in charge of Walmart’s global business explained his recipe for success (personal and organizational): Continually look
for new ways to do your job better; that is, be innovative. Managers not only need to
be innovative personally but also encourage their employees to be innovative. We’ll
share stories of innovative practices and approaches throughout the text.
Importance of Social Media to the Manager’s Job
social media
Forms of electronic
communication through which
users create online communities
to share ideas, information,
personal messages, and other
content.
You probably can’t imagine a time when employees did their work without e-mail
or Internet access. Yet, some twenty years ago, as these communication tools were
becoming more common in workplaces, managers struggled with the challenges of
providing guidelines for using them. Today, it’s all about social media, which are
forms of electronic communication through which users create online communities to
share ideas, information, personal messages, and other content. Social platforms such
as Facebook, Twitter, LinkedIn, Tumblr, Instagram, and others are used by more than
a billion people.26 And employees don’t use these just on their personal time but also
for work purposes. That’s why managers again are struggling with guidelines for
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Chapter 1 Introduction to Management and Organizations
employee use as they attempt to navigate the power and peril of social media. Martell
Home Builders is an Atlantic Canadian custom homebuilder. Social media allowed
them to create a direct-to-consumer model where they were no longer reliant on a
middleman to bring them business. Using content creation and blogging such as “14
Must-Have Tools for New Homeowners” and “Home Staging Tips & Techniques,”
Martell was able to grab the attention of homebuyers. Today, about 86 percent of all
their leads come directly from consumers.27 And they’re not alone. More and more
businesses are turning to social media not just as a way to connect with customers
but also as a way to manage their human resources and tap into their innovation and
talent. That’s the potential power of social media. But the potential peril is in how it’s
used. When the social media platform becomes a way for boastful employees to brag
about their accomplishments, for managers to publish one-way messages to employees, or for employees to argue or gripe about something or someone they don’t like
at work, then it’s lost its usefulness. To avoid this, managers need to remember that
social media are tools that needs to be managed to be beneficial. With innovative
social media strategies, Martell has made the homebuilding experience more connected. They use photo galleries of the clients’ homes being built, which allows the
homebuyer to share their excitement with their family and friends on social networks.28 In the remainder of the text, we’ll look at how social media is impacting how
managers manage, especially in the areas of human resource management, communication, teams, and strategy.
Importance of Sustainability to the Manager’s Job
BMW is probably not a company that would come to mind in a section
describing sustainability. Yet, BMW, the iconic German manufacturer of highperformance luxury autos, is making a huge bet on green, wired cars for
people who reside in cities.29 Its all-electric car, called the i3, is unlike anything that
BMW—or any other car ­manufacturer—has made. The car’s weight-saving, carbonfibre body is layered with electronic services and smartphone apps ready to make life
simpler and more efficient for the owner and better for the planet. Company executives recognized that it had to add products that would meet the challenges of a
changing world. This corporate action by a well-known global company affirms that
sustainability and green management have become mainstream issues for managers.
What’s emerging in the twenty-first century is the concept of managing in a sustainable way, which has had the effect of widening corporate responsibility not only
to managing in an efficient and effective way but also to responding strategically to a
wide range of environmental and societal challenges.30 Although “sustainability” may
mean different things to different people, the World Business Council for Sustainable
Development describes a scenario in which all Earth’s inhabitants can live well with
adequate resources.31 From a business perspective, sustainability has been defined
as a company’s ability to achieve its business goals and increase long-term shareholder value by integrating economic, environmental, and social opportunities into
its business strategies.32 Sustainability issues are now moving up the business agenda.
Managers at BMW, Walmart, and other global businesses are discovering that running an organization in a more sustainable way will mean making informed business
decisions based on (1) communicating openly with various stakeholders and understanding their requirements and (2) factoring economic, environmental, and social
aspects into how they pursue their business goals. Throughout the rest of the text,
we’ll explore sustainability as it relates to various aspects of managing. Just look for
this
for those conversations, and look for the 3BL: Triple Bottom Line discussions
at the end of each chapter.
sustainability
A company’s ability to achieve
its business goals and increase
long-term shareholder value
by integrating economic,
environmental, and social
opportunities into its business
strategies.
17
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18 Chapter 1
Chapter Summary
Learning Objectives Checklist
1.1
Explain why it’s important to study management.
One reason it’s important to study management is that all
of us interact with organizations daily, so we have a vested
interest in seeing that organizations are well managed. Another reason is the reality that in your career you will either
manage or be managed. By studying management you can
gain insights into the way your boss and fellow employees
behave and how organizations function.
1.2
Define management.
Management is the process of getting things done, effectively and efficiently, with and through other people. Efficiency
means doing a task correctly (“doing things right”) and getting the most output from the least amount of inputs. Effectiveness means “doing the right things” by doing those
work tasks that help the organization reach its goals.
1.3
Describe who managers are and where they work.
Managers are individuals who work in an organization directing and overseeing the activities of other people. Managers are usually classified as top, middle, first-line, or team
leader. Organizations, which are where managers work, have
three characteristics: goals, people, and a deliberate structure.
1.4
Describe what managers do.
What managers do can be described using three approaches: functions, roles, and skills/competencies. The functions
approach says that managers perform four functions: planning, organizing, leading, and controlling. Mintzberg’s roles
­approach says that what managers do is based on the ten
roles they use at work, which are grouped around interpersonal ­relationships, the transfer of information, and decision
making. The skills/competencies approach looks at what
managers do in terms of the skills and competencies they
need and use. Four critical management skills are conceptual,
­interpersonal, technical, and political. Additional managerial
competencies include aspects such as dependability, personal
orientation, emotional control, communication, and so forth.
All managers plan, organize, lead, and control, although how
they do these activities and how often they do them may
vary according to level in the organization, whether the organization is profit or not-for-profit, the size of the organization,
and the geographic location of the organization.
1.5
Describe the factors that are reshaping and
redefining management.
In today’s world, managers are dealing with changing
workplaces, a changing workforce, global economic and
political uncertainties, and changing technology. Four
areas of critical importance to managers are delivering
high-quality customer service, encouraging innovative
efforts, using social media efficiently and effectively, and
recognizing how sustainability contributes to an organization’s effectiveness.
Discussion Questions
1. How does a manager’s job vary with his or her level in
the organization?
2. What are the three skills that affect managerial
effectiveness?
3. How is management universal?
4. Are effective organizations always efficient? Discuss. If
you had to choose between being effective or being efficient, which would you say is more important? Why?
5. Is your instructor a manager? Discuss in terms of planning, organizing, leading, and controlling and in terms
of Mintzberg’s managerial roles.
6. What similarities exist with the job activities of the
owner of an automotive repair shop that employs
two people and those of the executive director of the
Canadian Cancer Society?
7. What are some of the skills that an entrepreneur must
possess?
Developing Management Skills
Dilemma
Management is about achieving the highest possible return
given the investment of money, people, time, and other
resources. It is also about achieving results in the most efficient manner. Think about where you hope to be in your life
five years from now (that is, your major goal). What is your
competitive advantage for achieving your goal? Your education is a way of managing yourself and developing your
career, which helps you achieve that goal. Here are some
other things you can do to get the most out of yourself.
Becoming a Manager
• What is a better way of completing this task?
• What is my 80/20 rule—what 20 percent of my efforts
are resulting in 80 percent of my outputs?
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Chapter 1 Introduction to Management and Organizations
• What is the best use of my time today?
• How can I make better use of the abilities and time of
my colleagues, subordinates, and superiors?
• Am I thinking for myself as much as I could?
Becoming Politically Adept
Anyone who has had much work experience knows that
organizational politics exists everywhere. That is, people
try to influence the distribution of advantages and disadvantages within the organization in their favour. Those
who understand organizational politics typically thrive.
Those who don’t, regardless of how good their actual
job skills are, often suffer by receiving less positive performance reviews, fewer promotions, and smaller salary
increases. If you want to succeed as a manager, it helps to
be politically adept. Research has shown that people differ
in their political skills.33 Those who are politically skilled
are more effective in their use of influence tactics. Political
skill also appears to be more effective when the stakes
are high. Finally, politically skilled individuals are able to
exert their influence without others detecting it, which is
important in being effective so that you’re not labelled as
playing politics. A person’s political skill is determined by
(1) networking ability, (2) interpersonal influence, (3) social
astuteness, and (4) apparent sincerity.
SKILL BASICS
Forget, for a moment, the ethics of politicking and any negative impressions you might have of people who engage in
organizational politics. If you want to become more politically adept in your organization, follow these steps:
• Develop your networking ability. A good network can
be a powerful tool. You can begin building a network by getting to know important people in your
work area and the organization and then developing relationships with individuals in positions of
power. Volunteer for committees or offer your help on
projects that will be noticed by those in positions of
power. Attend important organizational functions so
that you can be seen as a team player and someone
who’s interested in the organization’s success. Start a
file list of individuals you meet, even if for a brief moment. Then, when you need advice on work, use your
connections and network with others throughout the
organization.
• Work on gaining interpersonal influence. People will listen to you when they’re comfortable and feel at ease
around you. Work on your communication skills so
that you can communicate easily and effectively with
others. Work on developing a good rapport with people in all areas and at all levels of your organization.
Be open, friendly, and willing to pitch in. The amount
19
of interpersonal influence you have will be affected by
how well people like you.
• Develop your social astuteness. Some people have an
innate ability to understand people and sense what
they’re thinking. If you don’t have that ability, you’ll
have to work at developing your social astuteness
by doing things such as saying the right things at the
right time, paying close attention to people’s facial
expressions, and trying to determine whether others
have hidden agendas.
• Be sincere. Sincerity is important to getting people to
want to associate with you. Be genuine in what you
say and do. And show a genuine interest in others and
their situations.
Diversity Matters
Innovation is a term that is mentioned frequently as a
driver of business growth. More recently diversity among
employees and senior leaders has been tied to innovation.34 The report Innovation, Diversity and Market Growth
identifies two types of diversity.
Inherent diversity is the gender, racial, and socioeconomic diversity of an organization, which leads to a
higher number of innovative ideas. Employees who reflect
the diversity of the Canadian and global marketplace are
much more able to identify unmet client needs. Acquired
diversity focuses on how a company’s leadership acquires
a global mindset and social media skills to enable it to better understand and appreciate diversity.
Studies have demonstrated that organizations with
both inherent and acquired diversity were 75 percent more
likely to see ideas go to market, 70 percent more likely to
have captured a new market in the past twelve months,
and 45 percent more likely to have improved market share
during that same period than organizations that don’t have
these traits.35
Organizations with strong inherent and acquired
diversity are more likely to have a culture with these six
key characteristics:
Employees who are
1. listened to frequently
2. encouraged to propose new ideas
3. empowered to make decisions
inherent diversity
The gender, racial, and socioeconomic diversity of an
organization
acquired diversity
A company’s acquisition of a global mindset and social
media skills to enable it to better understand and appreciate
diversity
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20 Chapter 1
Leaders who are
1. freely taking advice from their team
2. giving regular and actionable feedback
3. sharing credit for organizational success
Hey, You’re the Boss Now!
Generation X (1961–1980), Generation Y (1981–1995), and
Generation Z (born after 1995) will constitute the majority
of the Canadian workforce in the near future. According
to the Canadian Management Centre, millennials (born
1980–2000) make up 29 percent of today’s workplace and
will constitute roughly 75 percent of the workforce by
2028. This will provide challenges and opportunities for
employers as each generation has its own attitudes and
styles. Those styles fundamentally clash, indicating that
there is work to be done by the organization to ensure a
smooth transition of millennials into the workforce.
As a manager in an organization, mentoring is an
excellent way to ease this transition of millennials (including you). Jeanne Meister and Karie Willyerd, cofounders of
the executive development firm Future Workplace, identify three kinds of mentoring that can help organizations
prepare millennials for success.36
With reverse mentoring, the purpose of matching
you with a senior executive is to provide your insight and
expertise on a certain topic of interest to the executive, such
as social media, technology, or cloud computing. You will
benefit from their experience in other areas but will bring
strengths to the table as well.
In group mentoring, millennials have a peer-to-peer
connection to deal with common issues of relevance. Use of
technology can assist individuals and groups in the sharing of
ideas, allowing 24/7 access to virtual members across the globe.
With anonymous mentoring, you select a mentor outside your organization. When thrust into a management
role without a lot of experience, you may be hesitant to
share your shortcomings within your company. An outside
mentor provides anonymity and perspective.
reverse mentoring
A junior employee providing insight and expertise on a certain
topic to a senior executive.
group mentoring
Millennials sharing ideas in groups in a peer-to-peer format.
anonymous mentoring
Using a mentor outside an organization who can provide
anonymity and perspective.
Team Exercises
3BL: The Triple Bottom Line
WHAT ARE THE BUSINESS CASE BENEFITS OF 3BL?
The components of the triple bottom line are people, profit,
and planet. The focus on people deals with employee aspects,
such as diversity, empowerment, and health and safety. It
also expands to charitable contributions and corporate relations. Organizations that focus on more than the financial
bottom line typically generate profit through ethical behaviour as well as cost savings through sustainable practices.
The planet element looks beyond environmentalism and
finds eco-efficiency in operations, manufacturing, and product development.37 Over the next twelve chapters, we will
examine 3BL in practical circumstances.
THINKING STRATEGICALLY ABOUT 3BL
The business case benefits of 3BL are illustrated in Exhibit 1-7.
Exhibit 1-7 The Business Case Benefits of 3BL
SOURCE: Adapted from B. Willard, The Next Sustainability Wave (Canada: New Society Publishers, 2005), p. 130.
Business Case Benefits
Business Case Components
Reduction in human resources (HR) costs
Recruiting costs are lower due to stronger employer branding;
higher employee morale decreases turnover costs.
Reduction in operational costs
Manufacturing expenses are lowered through cost
savings and continuous improvement; water, energy, and
consumables expenses are reduced.
Decreased risk
Risks of nonsustainable practices are reduced; stakeholder
relations are improved; and access to financing is increased.
Business improvements
Productivity is increased due to higher employee morale;
sustainability awareness leads to higher innovation.
Financial improvements
Revenue increases due to greater market access and
customer loyalty; improved relationships with regulators.
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Chapter 1 Introduction to Management and Organizations
Be the Consultant
In teams of four or five people, discuss the following
scenario. One person will report to the class on your
recommendations.
Your student association has decided to open a new
campus comedy club. They have strong financial backing with a bank loan of $750 000. They have little experience in the hospitality industry or with managing small
businesses and have asked your team for advice and
support. A student employment program from Human
21
Resources and Skills Development Canada has provided
each of you with a six-month contract to help get the
club up and running.
How will you split up the key management functions
of planning, organizing, leading, and controlling? What
are three key decisions that you will have to make in
each of the four functions that will help the comedy club
become successful? What metrics will you use to evaluate
the effectiveness of your managerial roles at the end of six
months?
Business Cases
Shopify
It may surprise you that two snowboard enthusiasts who
simply wanted a better way to sell their snowboards online
created an ecommerce platform that now has over 600 000
merchants in 175 countries, including Pixar, Angry Birds,
and the Foo Fighters.38 Shopify became Canada’s first Internet startup since the dot-com crash to reach a billiondollar valuation, thanks to $100 million in venture capital
raised primarily through the Ontario Municipal Employees Retirement System (OMERS Ventures).39
Tobias Lütke, CEO and cofounder, has created a business that allows companies of all sizes to set up online
stores, simplifying a task that used to take months and trimming it down to as little as half an hour. Shopify takes care
of everything behind the scenes in return for a subscription
fee and transaction fees. A typical Shopify customer spends
less than $100 per month for the software use, a drop in the
bucket compared to the cost to retailers a few years ago
to operate an ecommerce site. Retailers using Shopify have
made more than $63 billion in sales.40
“I think everyone in the company has a sense Shopify is
doing well,” said Lütke, noting that the 3000+ employees own
a significant chunk of the firm. “Most don’t realize how well it’s
going.” Joining the “unicorn club” by reaching the $­ 1-billion
level is very rare. In the past decade only 40 tech firms, including Facebook and Twitter, have reached this elusive level.
Shopify has been doubling in size every year for the
past four years and has emerged as the poster child of a
group of online software providers who have substantially
reduced the cost of ecommerce, enabling even small companies to build a commanding web presence. The accolades have poured in, with Shopify featured as one of Fast
Company’s 50 Most Innovative Companies.41
Shopify focuses on developing entrepreneurs, both internally and externally. It launched a Build-A-Business contest, inviting online entrepreneurs to dream up something to
sell using Shopify and compete to bring in the most revenue
within two months for the chance to win more than $500 000
in prizes. “Our first two competitions were extremely
successful. In total 4438 new businesses were created, selling over $15 million worth of products,” said Lütke.42 Harley Finkelstein, Shopify’s chief platform officer, is a judge
for the Future Entrepreneurial Leaders (FuEL) Awards.43
Shopify’s commitment to its people is evident even in
the little details. It has moved its head office for the second
time in a year to accommodate its recently doubled workforce. Its new office is in Ottawa’s trendy Byward Market
area, so staff members have a great variety of fun places to
eat and play after work. The office itself is a mix of glass
and exposed brick, with open concept workspaces.
Shopify has many benefits and perks, including very
popular company video-game tournaments, share options
for all employees, daily catered lunches, and even the chance
to go to any conference at the company’s expense. They believe employees will produce their best work when they can
wear their choice of clothing, start work later in the morning,
and play video games whenever they need a break.
“Our mission continues to be to make it as easy as
possible for retailers of all sizes to start and run a business online,” said Lütke.44 That mission also extends to its
employees—hardworking, talented individuals who get
­
things done and always push themselves to improve.
Discussion Questions
1. As a company gets bigger, does it become harder to
stay innovative? Why or why not?
2. What are the perks that appeal to you?
Building a Better Boss
Google doesn’t do anything halfway. So when it decided to
“build a better boss,” it did what it does best: look at data.
Using data from performance reviews, feedback surveys,
and supporting papers turned in for individuals being
nominated for top-manager awards, Google tried to identify what a great boss is and does. The project, dubbed Project Oxygen, examined some 100 variables and ultimately
identified seven characteristics or habits of Google’s most
effective managers. The “big seven” are as follows:
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22 Chapter 1
• Provide an unambiguous vision of the future.
• Express interest in employees’ well-being. (Make new
team members feel welcome and get to know your
employees as people.)
• Focus on being productive and on end results. (Focus
on helping the team achieve its goals by prioritizing
work and getting rid of obstacles.)
• Display good communication skills, especially listening. (Learn to listen and to share information; encourage open dialogue, and pay attention to the team’s
concerns.)
• Help individuals reach their long-term work goals.
(Notice employees’ efforts so they can see how their
hard work is furthering their careers; appreciate
employees’ efforts and make that appreciation known.)
• Provide an unambiguous vision of the future. (Lead
the team, but keep everyone involved in developing
and working toward the team’s vision.)
• Ensure that you have the necessary technical abilities
to support employee efforts. (Understand the challenges facing the team and be able to help team members solve problems.)
Now, managers at Google aren’t just encouraged to be
great managers; they know what being a great manager
­involves. And the company is doing its part as well. Using
the list, Google started training managers as well as providing individual coaching and performance review sessions.
You could say that Project Oxygen breathed new life
into Google’s managers. Laszlo Bock, Google’s senior vicepresident for people operations, says the company’s efforts
paid off quickly. “We were able to have a statistically significant improvement in manager quality for 75 percent of
our worst-performing managers.”
Discussion Questions
1. Describe the findings of Project Oxygen using
Mintzberg’s role approach.
2. Are you surprised at what Google found out about
“building a better boss”? Explain your answer.
3. What is the difference between encouraging managers
to be great managers and knowing what being a great
manager involves?
4. What could other companies learn from Google’s
experiences?
5. Would you want to work for a company like Google?
Why or why not?
Who Needs a Boss?
“Holacracy.”45 That’s the word of the day at Zappos, the
Nevada-based online shoe and apparel retailer. During a
four-hour, year-end employee meeting in 2013, CEO Tony
Hsieh announced that he was eliminating the company’s
traditional managerial and structural hierarchy to implement a holacracy. What is a holacracy, you ask? In a nutshell, it’s an organizational system with no job titles, no
managers, and no top-down hierarchy with upper, middle,
or lower levels where decisions can get hung up. The idea
behind this new type of arrangement is to focus on the
work that needs to be done and not on some hierarchical
structure where great ideas and suggestions can get lost
in the channels of reporting. The holacracy concept was
dreamed up by Brian Robertson, the founder of a Pennsylvania software startup. Its name comes from the Greek
word holos, a single, autonomous, self-sufficient unit that’s
also dependent on a larger unit.46 A simple explanation of
Robertson’s vision of a holacracy is workers as partners, job
descriptions as roles, and partners organized into circles.47
At Zappos, they’re learning how to manage without
managers!
At Zappos, work (and the 1500 employees who do
it) will be organized around self-governing employee
­circles—about 400 of these circles. (It might help you grasp
this idea by thinking of these employee circles as types of
overlapping employee “groups” but with more fluid membership and individual roles/responsibilities.) In these circles, employees can take on any number of roles, and the
expectation is that each employee will help out wherever
he or she can. Without titles or a hierarchy, anyone can initiate a project and implement innovative ideas. The hope is
that circle members will pool ideas and watch out for each
other. The goal is radical transparency and to get more people to take charge. Yet, trusting individuals who probably
know the details of the job better than any “manager” to
work conscientiously, creatively, and efficiently is good as
long as there is a way to keep standards high. The last thing
Zappos wants is for a “slacker” mentality to take hold.
Hsieh has always approached leading his business in
unique and radical ways. He strongly believes in the power
of the individual and has created a highly successful organization (which is now part of Amazon) that’s known for its
zany culture, where corporate values are matched with personal values, and where “weirdness and humility” are celebrated.48 However, as the company moves away from the
traditional work model to this new system, it may face some
challenges. Both Zappos and Robertson caution that while
a holacracy might eliminate the traditional manager’s job,
there is still structure and accountability. Poor performers
will be obvious because they won’t have enough “roles” to
fill their time, or a circle charged with monitoring the company’s culture may decide they’re not a good fit. Also, just
because there are no “traditional” managers doesn’t mean
that leaders won’t emerge. But it will be important to watch
for dominant personalities emerging as authority figures,
which could potentially cause other employees to be resentful or to rebel. Zappos says that it will not be leaderless.
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Chapter 1 Introduction to Management and Organizations
Some individuals will have a bigger role and scope of purpose, but leadership is also distributed and expected in each
role. “Everybody is expected to lead and be an entrepreneur
in their own roles, and holacracy empowers them to do
so.”49 Also, there will be some structure arrangement where
“the broadest circles can to some extent tell sub-groups what
they’re accountable for doing.”50 But accountability, rather
than flowing only up, will flow throughout the organization in different paths. Other challenges they’re still trying
to figure out include who has the ultimate authority to hire,
fire, and decide pay. The hope is that eventually the authority for each of these roles will be done within the holacratic
framework as well. So, if no one has a title and there are no
bosses, is Tony Hsieh still the CEO? So far, he hasn’t publicly
commented about how his own role is impacted.
In March 2015, Hsieh sent a memo to employees stating it was taking too long to make the transition to the new
23
management system.51 He offered all employees who felt
they couldn’t work under this radically new management
system the choice to stay or to leave with three months’ severance. About 18 percent of the company’s workforce (210
employees) chose to leave over the next 10 months. However, by 2016 the company was up to 1600 ­employees.52
Obviously, some individuals felt that holacracy was not
for them.
Discussion Questions
1. What is a holacracy?
2. What benefits do you see to an organization where
there are no job titles, no managers, and no hierarchy?
3. What challenges does a holacratic approach have?
4. Discuss why you would or would not like to work in
an organization like this.
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Chapter 2
Chrisdorney/Shutterstock
Environmental
Constraints on
Managers
Learning Objectives
2.1
Explain what the external environment is and why it is important.
2.2
Describe globalization and discuss how it affects organizations.
2.3
Define what organizational culture is and explain why it is important.
2.4
Explain how the environment affects managers.
Spin Master started in 1994 when cofounder Ronnen Harary approached his childhood friend Anton
Rabie and they developed a novelty toy called the Earth Buddy, which became a huge success.
That was followed by air-powered, radio controlled toy aircraft called Air Hogs. This entrepreneur-run
business won hundreds of awards due to its creative focus.1 Where it struggled was in operations.
Rabie convinced Ben Gadbois, a Montreal-bred CPA who was global president of a large US firm
based in Chicago, to join Spin Master and help it through a major crisis.2 They had launched a new toy
that had high sales, but Spin Master was unable to manage its growth and was on the brink of failure due
to excessive overhead. Gadbois conducted an operational review, pinpointing three major challenges:
management decision making, sales forecasting, and the lack of an effective global expansion model.3
The new operational focus hasn’t stifled innovation. A toy called Hatchimals was such a smash
hit that it sold out at Christmas in 2016. Their cartoon Paw Patrol was the top-ranked TV show in
2017 among kids aged 2 to 5 years old.4
44
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