Chapter 1: The Global Context of Business Globalization Process by which the world economy is becoming a single independent system. - Technology made travel, communication easier and cheaper - Social media is connecting people around the world daily Imports Product made or grown abroad but sold domestically Exports Product made or grown domestically but shipped and sold abroad The world bank uses per-capita income to make distinctions among countries 1. High income countries- annual per-capita income > US $12,366. o Include Canada, US, most European countries, Australia, Japan, South Korea, Israel, Kuwait, UAE, and the Cayman Islands 2. Upper-middle-income countries- annual per-capita income between US $3,956 and US $12,235 o Include China, Columbia, Lebanon, Turkey, Argentina, and South Africa 3. Low-middle-income countries- annual per-capita income between US $1,006 and US $3,955 o Include Ukraine, Philippines, Armenia, Guatemala, Pakistan, and Vietnam. 4. Low-income countries (developing countries)- annual per-capita income of US $1,005 or less. - Include Malawi, Bangladesh, Haiti, Togo, and Afghanistan. - Less attractive for international business due to low literacy rates, weak infrastructures, unstable governments 3 key geographic regions that are home to most of the world’s largest economics, biggest corporations, influential financial markets, and highest income customers 1. North America 2. Europe 3. Asia North America - US dominates the North American business region - - Single largest national marketplace and has been the most stable economy in the world for decades Europe Western Europe dominated by Germany, UK, France, Spain, and Italy. The transformation of this region via the EU, into an integrated economic system has further increased its importance. Asia Pacific - Consists of Japan, China, Thailand, Malaysia, Singapore, Indonesia, South Korea, Taiwan, Philippines, Vietnam, and Australia. - Major force on the world economic stage, and its influence is growing - Many economists predicted that the 21st century would be dominated by China BRICS- Brazil, Russia, India, China, South Africa - A group of 5 important and powerful emerging markets in the business world Brazil- strong in commodities and agriculture Russia- strong in energy supplying China- major hub of manufacturing activity India- leading service provider at various levels South Africa- rich in minerals and other resources (gateway to African continent) BRICS-Plus - Expansion plan talked on which includes - Mexico, Thailand, Egypt, Guinea, and Tajikistan - Absolute advantage- exists when a country can produce something better than any other country It can produce a larger output of goods or services using the same or fewer input resources Adam smith 1776 Countries should focus on producing goods and services that they have an absolute advantage in and buy products that they do not produce more efficiently than other nations Comparative advantage- exists when a country can produce a good better than other goods - All countries have a comparative advantage in some products, but no country has a comparative advantage in all products - Developed countries tend to have a comparative advantage in making high-tech products, while developing countries tend to have a comparative advantage in making products that require lots of low-cost labour National competitive advantage is based on 4 conditions 1. Factor conditions o Factors of production (land, capital, entrepreneurs, natural resources, information) 2. Demand conditions o Reflect a large domestic consumer base that promotes strong demand for innovative products. 3. Related and supporting industries o Include strong local or regional suppliers and/or industrial customers 4. Strategies, structures, and rivalries o Refer to firms and industries that stress cost reduction, product quality, higher productivity, and innovative new products. This combination increases the likelihood that companies will engage in international business International competitiveness refers to the ability of a country to generate more wealth than its competitors in world markets. - IOW. Competitive marketing of domestic products against foreign products Balance of trade - Difference in value between its total exports and total imports Surplus (favourable balance of trade) - Exports > Imports Deficit (unfavourable balance of trade) - Imports > Exports Even if a country has a Surplus, it can still have a Deficit. Balance of payments - Flow of all money into or out of a country because of trade and other transactions - Unfavourable balance= more money flowing out than in Exchange rate - Rate at which the currency of one nation can be exchanged for the currency of another nation - When the value of a country’s domestic currency rises, it’s harder for domestic companies to export to foreign markets; and easier for foreign companies to enter domestic markets Why go international? - A company feels it must shift its production to a low-cost foreign country to remain competitive Market research and/or the prior market entry of competitors may indicate whether there is an international demand for a firm’s products. If there is a International demand for its product, a firm must still figure out whether to adopt the product - if they decide to do so, they must figure out how to change the product to meet the special demands and expectations of foreign customers. - They should also decide on the level of it’s international involvement The most basic levels of involvement are exporters and importers, organizing as an international firm, or operate as a multinational firm. Exporter - A firm that makes products in one country and then distributes and sells them in other countries Importer - A firm that buys products in foreign markets and then imports them for resale domestically Importers & exporters - Importers and exporters tend to conduct most of their business in their home nations. - They represent the lowest level of involvement in international operations International firms Firm that conducts a significant portion of his business in foreign countries - May be large and influential in the global economy but remain a domestic firm with international operations Multinational firms Firm that designs, producers, and markets products in many nations Independent agent Foreign individual or organization that agrees to represent an exporters interest in foreign markets. - They act as sales representatives (sell the export’s products, collect payment, and ensure that customers are satisfied) - Often represents several firms at once and usually do not specialize in a product or market Licensing arrangements Firms give individuals or companies in a foreign country the right to manufacture or market their products in that area - in return, the exporter typically receives a fee plus ongoing payments called royalties o Royalties are usually calculated as a percentage of the license holder’s sales - When a company wants to enter a foreign market, a licensing agreement will grant the foreign corporate partner, the right to use patents, trademarks, and brand names of the company Branch office A location that an exporting firm develops in a foreign country to sell the products more effectively - Send managers to work overseas - A company has more direct control than agents or license holders - Provide a more visible public presence in foreign countries Strategic alliance A company finds a partner in a foreign country where it looks like to conduct business - each party agrees to invest resources and capital in a new business or else to cooperate in someway for mutual benefit - Alliances give firms greater control over their foreign activities then independent agents and licensing arrangements do - Alliances allow firms to benefit from a knowledge and expertise of their foreign partners Foreign direct investment (FDI) Buying or establishing tangible assets in another country Social and cultural differences - language barriers can cause inappropriate naming of products - The average physical stature of people in different countries can make a difference - Deals can be lost based on cultural misunderstandings Economic differences - level of economic development in the financial infrastructure in a country - Navigating the economic differences and identifying the global opportunities as a major challenge for today’s corporations as growth is quiet often fuelled by nations across the globe Legal and political differences include tariffs, quotas, local-content laws, and business-practice laws Quota Restricts the total number of certain products that can be imported into the country - indirectly raises the prices of those imports by reducing their supply - Embargo: A government order forbidding exportation and/or importation of a certain product o Ultimate form of quota Tariff A tax levied on imported products - directly affect the prices of products, effectively raising the price of imports to customers - Raise money for the government and somewhat discourage the sale of imported products Subsidy Government payment given to a domestic business to help with compete with foreign firms - can have negative affect on producers in other countries Protectionism The practice of protecting domestic business at the expense of free market competition Local-content laws Laws requiring that product sold in a particular country be at least partly made in that country - firms must either invest directly or have a local joint venture partner - Act like trade barriers Agreement on internal trade (AIT) Requires all 10 provinces to remove barriers to agricultural trade Business practice law Law or regulation governing business practices in given countries Cartel Any Association of producers whose purpose is to control supply of and prices for a given product Dumping Selling a product for less abroad than in the producing home nation - forbidden by many countries General agreement on Tariffs and Trade (GATT) International trade agreement to reduce trade barriers (tariffs and quotas) by encouraging nations to protect domestic industries within agreed-upon limits and to engage in multilateral negotiations - signed after World War II World trade organization (WTO) Organization through which member nations negotiate trading agreements and resolve disputes about trade policies and practices 1. 2. 3. 1995 Empowered to peruse 3 goals Promote trade by encouraging members to adopt fair trade practices Reduce trade barriers by promoting multilateral negotiations Establish fair procedures for resolving disputes among members Unlike GATT, the WTO‘s decisions are binding, and many people feared that it would make sweeping decisions and boss countries around. European Union (EU) Agreement among major western European nations to eliminate or make uniform most trade barriers affecting group members - Initially included only principal European nations such as Italy, Germany, France, and UK - Eliminated most quotas and set uniform tariff levels on products imported and exported within its group - The largest free market place in the world and produces nearly 1/4 of total global wealth North American free trade agreement (NAFTA) Objective was to create a free trade area for Canada, US, and Mexico. It eliminated trade barriers, promoted fair competition, and increased investment opportunities - most Canadians opposed to NAFTA as they feared that jobs will be lost or Canada would be flooded with product manufactured in Mexico. - Supporters of NAFTA argued that the agreement would open US markets for Canadian products and create more employment Trade deals are created to help with economic stability and provide opportunities for growth for companies and governments On September 30th 2018, Canada and it’s partners agreed to change NAFTA with a couple of changes and a new name. US-Mexico-Canada Agreement (USMCA) This trade agreement replaces NAFTA as the deal to clarify trade between these three nations by gradually eliminating tariffs and reducing other trade barriers - maintains the independent and impartial chapter 9 binational dispute resolution review panel - It opens up 3.59% of the Canadian dairy market to US - The revised automotive rules of origin require higher levels of North American content (from 62.5% to 75%) - USMCA will see the “de minimis threshold” on imported goods purchased online - The limit on the amount of goods that can be imported duty free- lifted from $20 to $150 - The China clause (article 32.10) has language about procedures when starting free trade negotiations with non-member countries The trans-pacific partnership Originally this agreement was to include 12 member states, including Canada, the United States, Australia, Brunei Darussalam, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam - Renamed to Comprehensive and progressive agreement for trans-pacific partnership TTP Comprehensive agreement that will increase Canada’s foothold in Asia Pacific - it promises to help open new markets - Has many domestic opponents, such as dairy farmers, the auto sector Canada European Union Comprehensive Economic and Trade Agreement (CETA) Before CETA, Only 25% of Canadian goods were duty-free in the EU. With CETA, 98% are now duty free, and eventually 99% of tariffs will be eliminated Chapter 2: organizational change, development, and innovation Organizations face two basic sources of pressure to change ( external sources and internal sources ) - External sources o Ex. Increased competitiveness of business (deregulation, advanced technology) o This forces business to become leaner and meaner - Internal sources o Ex. Low productivity, conflict, strikes, sabotage o Employee opinion o Time for change !! o Usually occur in response to organizational changes that are designed to deal with external environment Making change work An IBM study that found that most CEOs saw their organizations as being poor at executing change - The majority reported budget, quality, or time problems What factors can organizations change? - Goals and strategies o Introduction of new products, and the pursuit of new markets represent such changes - Technology o Can vary from minor to major - Job design o Redesigning Individual groups of jobs to offer more or less variety, autonomy, identity, significance, and feedback - Structure - - o Modification in rules, policies, procedures Processes o Stages of a project changes Culture o One of the most important and difficult changes o Because organizational culture is a major factor in providing an organization with a competitive advantage and long term effectiveness, changing an organization’s culture is considered to be a fundamental aspect of organizational change People o The actual content of the membership can be changed through a revised hiring process o The existing membership can be changed in terms of skills and attitudes by various training and development methods A change in one area very often calls for changes in others The change process Kurt Lewin: 3 stages (unfreezing, changing, refreezing) Unfreezing Occurs when it’s recognized that the current situation is unsatisfactory - Realization that the present structure, task design, or technology is ineffective or members skills or attitudes are inappropriate - Crisis like dramatic drop in sales, big lawsuits, or unexpected strikes stimulate unfreezing Change Occurs when a program or plan is implemented to move the organization or its members to a more satisfactory rate - Change efforts can range from minor to major - People must have the capability any opportunity and motivation to change in order for change to occur Refreezing The condition that exists when newly developed behaviours, attitudes, or structures become an enduring part of the organization - Routines and policies are in place to support the change Organizational learning The process through which an organization acquires, develops, and transfers knowledge throughout the organization - - 2 methods: Knowledge acquisition o Involves acquisition, distribution, And interpretation of knowledge that exists internal to the organization Knowledge development o Involves generating new knowledge internally through dialogue and experience o Occurs when members interact and share experiences and knowledge, and through the distribution of new knowledge throughout the organization Learning organization Organization that has systems and processes for creating, acquiring, and transferring knowledge to modify and change its behaviour to reflect new knowledge and insights - Organizational change is more likely to occur in a learning organization - “Organization that is adaptive in its capacity for change” Four crucial dimensions for a learning organization 1. Vision/ support 2. Culture 3. Learning systems/ dynamics 4. Knowledge management/infrastructure These 4 factors contribute to the opportunity, motivation, and capability to learn and thus change - Learning organizations are better able to change and transform themselves because of their greater capacity for acquiring and transferring knowledge Diagnosis The systematic collection of information relevant to impending organizational change - Initial diagnosis can provide information that contributes to unfreezing by showing that a problem exists - Once unfreezing occurs, further diagnosis can clarify the problem and suggest just what changes should be implemented Change agents Experts in the application of behavioural science knowledge to organizational diagnosis and change - For complex, non-routine problems - The change agent brings an independent, objective perspective to the diagnosis At the unfreezing stage, defence mechanisms might be activated to deny or rationalize the signals that change is needed Resistance Overt or covert failure by organizational members to support a change effort Common reasons: - Politics and self interest o People might feel like they personally will lose status, power, or even their jobs with the advent of the change - Low individual tolerance for change o People who seek routine are cognitively rigid and have a short term focus are inclined to resist change - Lack of trust o People may understand but not trust the motives of those proposing the change - Different assessments of the situation o The targets of change might feel that the situation does not warrant the proposed change and that the advocates of change have misread the situation - Strong emotions o Might induce strong emotions in people trying to make sense of the change - Strong organizational identification o People who identify very strongly with an organization usually resist any change - A resistant organizational culture o Some organizational cultures have especially stressed and rewarded stability and tradition o Advocates of change in such cultures are viewed as misguided deviants or aberrant outsiders 2 major themes: 1. Change is unnecessary because there is only a small gap between organization’s current identity and its ideal identity 2. Change is an obtainable because the gap between the current and ideal identities is too large - Champions of change welcome it from the beginning and maintain change-supportive perceptions over time Doubters of change resist change and persist in their resistance Converts are employees who are resistant at first but come to see the value of change Defectors have initial change-supportive perceptions but become resistant over time Champions have more momentum for change than converts Defectors exhibit less momentum than doubters Involving the people who are targets of change in the change process often reduces their resistance Transformation a leaders are particularly adept at overcoming resistance to change - They do this by 1. “Striking while the iron is hot” a. Sensitivity to when followers are ready for change 2. Unfreeze current thinking by installing practices that constantly It’s possible to do a thorough evaluation by considering a range of variables 1. Reactions: did the participants like the change programs ? a. Reflect resistance 2. Learning: what knowledge was acquired in the program? a. Reflect change 3. Behaviour: what changes in the job behaviour occurred ? a. Reflect successful unfreezing 4. Outcomes: what changes in productivity, absence, and so on occurred ? a. Indicate whether refreezing is useful for the organization Organizational development (OD) A planned, ongoing effort to change organizations to be more effective and more human - Uses the knowledge of behavioural science to foster a culture of organizational self examination and readiness for change The fact that OD is planned distinguish it from other changes - OD efforts tend to be ongoing in at least 2 senses 1. Many OD programs extend over a long period of time, involving sever distinct phases of activities 2. If OD becomes institutionalized, continual re-examination and readiness for further change become permanent parts of the culture In trying to make organizations more effective and more human, organizational development gives recognition to the critical link between personal processes and organizational outcomes Team building An effort to increase the effectiveness of work teams by improving interpersonal processes, goal clarification, and role clarification - What is our team trying to accomplish and who is responsible for what Survey feedback The collection of data from organizational members and the provision of feedback about the results - Most effective when presented to natural working units in face to face meetings Total quality management (TQM) Systematic attempts to achieve continuous improvement in the quality of an organization’s products or service Typical characteristics include obsession with customer satisfaction, a concerned for good relations with suppliers, continuous improvement of work processes, the prevention of quality errors, frequent measurement and assessment, extensive training, and high employee involvement and teamwork Tools that empower employees to diagnose and solve quality problems - Flowchart of work processes o Illustrate graphically the operations and steps in accomplishing some task, noting who does what and when - Pareto analysis o Collects frequent data on the causes of errors and problems, showing where attention should be directed for maximum improvement - Fishbone diagrams o Illustrate graphically the factors that could contribute to a particular quality problem - Statistical process control o Gives employees hard data about the quality of their own output that enabled them to correct any deviations from standard performance These tools to improve the diagnoses and correction of quality problems will not have the desired impact if they fail to improve quality in the eyes of the customer Ultimate excellence, value for the money, conformance to specifications, and meeting or exceeding customer expectations are all potential definitions of quality Organizations with a real commitment to TQM make heavy use of customer surveys, focus groups, mystery shoppers, and customer clinics to stay close to their customers Reengineering is the radical design of organizational processes to achieve major improvements in such factors as time, cost, quality, or service - What businesses are we really in? And if we were creating this organization today, what would it look like? Organizational processes are activities or work that have to be accomplished to create outputs that internal or external customers value - Ex. Designing a new product is a process that might involve people holding a variety of jobs in several different departments Advanced technology allows organizations that to radically modify and radically simplify important organizational processes Re-engineering is oriented towards one of both of the following goals - The number of meditating steps in a process is reduced, making the process more efficient - Collaboration among the people involved in the process is enhanced Aspects of re-engineering include the following practices - Jobs are redesigned and usually enriched o Several jobs are combined into one to reduce meditating steps and provide greater employee control - A strong emphasis is placed on teamwork - Work is performed by the people most logically suited to the task - Unnecessary checks and balances are removed o Expensive and redundant controls can sometimes be removed - Advanced technology is exploited Problems of organizational development (OD) - OD efforts involve a complex series of changes - Novelty effects of the fact that participants receive special treatment might produce short term gains that really do not persist over time - Self reports of changes after OD might involve unconscious attempts to please the change agent - Organizations may be reluctant to publicize failures Innovation is the process of developing and implementing new ideas in an organization - Covers everything from recognizing the idea, importing it to the organization, and giving it a unique application Includes product innovations, process innovations, or managerial innovations Idea generation —> idea implementation —> idea diffusion Product innovations Have a direct impact on the cost, quality, style, or availability of a product or service - Easiest to identify with innovations that result in tangible products Process innovations New ways of designing products, making products, or delivering services - Usually invisible to customers although they help organization perform more effectively and efficiently - New technology Managerial innovations New forms of strategy, structure, human resource systems, and managerial practices that facilitate organizational change and adaption - Job enrichment, participation, re-engineering and quality programs Creativity The production of novel but potentially useful ideas - Key aspect of developing new ideas - Not every creative idea gets implemented - There is no correlation between level of intelligence and creativity - Creativity relevant skills include ability to tolerate ambiguity, withhold early judgment, see things in new ways, and be open to new and diverse experiences - Intrinsic motivation lies at the core of creativity Idea champions People who recognize an innovative idea and guide it through to implementation - In larger organizations, may be labeled as intrapreneurs or corporate entrepreneurs Creative deviance Defying orders by management to stop working on a creative idea - Idea champions and creative deviance are often necessary because of the paradox by which organizations profess to want creativity but are inclined to reject creative ideas Gatekeepers People who span organizational boundaries to import new information, translate it for local use, and disseminate it to project members - Have well developed communication networks with other professionals outside the organization and with those on their own team or project - Perceived as highly competent and as a good source of new ideas - They have innovative orientation, they read extensively, and they can tolerate ambiguity Open innovation The use of web-enabled input from external sources to facilitate innovation - Become more common as the costs of collecting, processing, and storing information have decreased due to web enablement, and as knowledge has become more widely distributed - To be successful, requires an identity shift by in house R&D and creative employees who may be used to obsessive secrecy and unused to intensive collaboration with external parties Internal communication - Decentralization, informality, and a lack of bureaucracy all foster the exchange of information that innovation requires - Inter division is a driver of innovation Resources and rewards Abundant resources greatly enhance the chances of successful innovation Innovation depends on individual factors (creativity), social factors (a dedicated champion and good communication), and organizational factors (resources and rewards) Diffusion Process by which innovations move through an organization The following factors are critical determinants of the rate of diffusion of a wide variety of innovations - Relative advantage o Diffusion is more likely when the new idea is perceived as truly better than the one it replaces - Compatibility o Diffusion is easier when the innovation is compatible with the values, beliefs, needs, and current practices of potential new adopters - Complexity o Complex innovations that are fairly difficult to comprehend and use are less likely to diffuse - Trial-ability o If an innovation can be given a limited trial run, it’s chances of diffusion will be improved - Observability o When the consequences of an innovation are more visible, diffusion will be more likely to occur - Adaptability o Innovations often have to be custom tailored to diffuse effectively Chapter 3: decision making Decision A choice from two or more alternatives - Top level managers make decisions about their organizations goals, where to locate manufacturing facilities or what new markets to move in to - Middle and lower level managers make decisions about production schedules, product quality problems, pay raises, and employee disciplines The decision making process 1. Identifying a problem a. Problem- a discrepancy between an existing and a desired state of affairs b. My sales reps need new computers ! 2. Identifying decision criteria a. Decision criteria- criteria that define what is relevant in making a decision b. Memory and storage c. Display quality d. Battery life e. Warranty f. Display quality 3. Allocating weights to the criteria a. Make weights for the items to give them proper priority b. Memory and storage … 10 c. Battery life ………………… 8 d. Carrying weight …………. 6 e. Warranty……………………. 4 f. Display quality …………… 3 4. Developing alternatives a. Make (create) viable alternatives that can solve the problem and list, don’t analyze them yet b. Types of laptops (MacBook, HP, Sony…..) 5. Analyzing alternatives a. Analyze using the criteria chosen in step 2 b. Represent an assessment of the alternatives using the decision criteria, but not the weighting c. When you multiply (alternative x assigned weight) = weighted alternatives d. Adding the total scores for each alternative gives you the sum of its weighted criteria 6. Selecting an alternative a. What alternative generated highest total score ? Or best alternative b. If it’s found that the “best alternative” is not the right one, you might need to review the criteria before implementing the alternative 7. Implementing the alternative a. Involves conveying the decision to those affected by it and getting their commitment to it 8. Evaluating decision effectiveness a. Last step b. Evaluating the outcome or regular of the decision to see if problem was resolved Decisions in the management functions Planning - What are the organization’s long-term objectives? - What strategies will best achieve those objectives? - What should the organization’s short term objectives be? - How difficult should individual goals be? Organizing - How many employees should I have report directly to me? - How much centralization should there be in the organization? - How Should jobs be designed? - When should the organization implement a different structure? Leading - How do I handle employees who appear to be low in motivation? - What is the most effective leadership style in a given situation? - How will a specific change affect worker productivity? - What is the right time to stimulate conflict? Controlling - What activities in the organization need to be controlled? - How should these activities be controlled? - When is a performance deviation significant? - What type of management information system should the organization have? Rational decision making Making decisions that are consistent and value-maximizing within specified constraints Assumptions of rationality Rational decision maker- fully objective and logical The problem faced- clear and unambiguous Decision maker- have a clear and specified goal and know alternatives and consequences - Making decisions rationally would consistently lead to selecting the alternative that maximizes the likelihood of achieving that goal - These apply to personal and managerial decisions, but we need to add one more assumption for managerial decisions o Decisions are made in the best interests of the organization Bounded rationality Limitations on a person’s ability to interpret, process, and act on information Satisfice Accepting solutions that are “good enough” - Opposite of maximizing (best of the best) - Managers can’t analyze all information on all alternatives realistically, so they satisfice - They’re being rational within the lots of their ability to process information - They satisfice because decisions managers make don’t fit the assumptions of perfect rationality Escalation of commitment An increased commitment to a previous decision despite evidence that it might have been wrong - Managers decision-making is usually influenced by the organization’s culture, internal politics, power considerations, and escalation of commitment Intuitive decision making Making decisions based on experience, feelings, and accumulated judgement - 5 different aspects of intuition o o o o o Experience based decisions ▪ Managers make decisions based on their past experiences Affect initiated decisions ▪ Managers make decisions based on feelings or emotions Cognitive based decisions ▪ Managers make decisions based on skills, knowledge, and training Subconscious mental processing ▪ Managers use data from subconscious mind to help them make decisions Values of ethics based decisions ▪ Managers make decisions based on ethical values and culture Evidence based management (EBMgt) The systematic use of the best available evidence to improve management practice - Similar to managerial decision making - 4 essential elements of EBMgt 1. Decision maker’s expertise and judgement 2. External evidence that’s been evaluated by the decision maker 3. Opinions, preferences, and values of those who have a stake in the decision 4. Relevant organizational (internal) factors such as context, circumstances, and organizational members - The strength or influence of each of these elements on a decision will vary on each decision Types of decisions - Structured problems o Problems that are straightforward, familiar and easily defined - Programmed decisions o Repetitive decisions that can be handled by a routine approach o Solution is usually self evident or at least reduced to a few familiar alternatives o 3 types: procedure, rule, policy Procedure A series of interrelated sequential steps that a decision maker can use to respond to a structured problem Rule Explicit statement that tells a decision maker what he or she cannot do - Frequently used because they’re simple to follow and ensure consistency Policy Guideline for making a decision - Establishes general parameters for the decision maker rather than specifically stating what should or should not be done (which is rule) Usually contain an ambiguous term that leaves interpretation to the decision maker “Satisfied” “whenever possible” “competitive” Unstructured problems Problems that are new or unusual and for which information is ambiguous or incomplete - The toughest are wicked problens, Which are characterized by the fact that the problem and the solution are interrelated, key stakeholders have wildly different perspectives and frames of reference, the constraints related to the problem and the resources needed to resolve it change overtime, the problem is never definitely solved since it is a continuing work in progress Non programmed decisions Decisions that are unique and non recurring and require custom made solutions Most decisions fall between the extremes (fully programmed and non programmed) - Best to think that a decision is mainly programmed or mainly non programmed Decision making conditions When managers make decisions they face three conditions: Certainty, risk, and uncertainty Certainty - A condition in which a decision maker can make accurate decisions because the outcome of every alternative is known Risk - A condition in which a decision maker is able to estimate the likelihood of certain outcomes The ability to assign probabilities to outcomes may be the result of personal experiences or secondary information With risk, managers have historical data that let them assign probabilities to different alternatives Expected revenue x probability = expected value of each alternative Uncertainty The condition in which a decision maker is not certain about the outcomes and cannot even make reasonable probability estimates - When a manager is uncertain, the choice of alternative is influenced by the limited amount of information available to the decision maker and by The psychological orientation of the decision maker - The optimistic manager will follow a maximax choice (maximizing the maximum possible payoff) to get the largest possible gain - The pessimist manager will follow a maximin choice (maximizing the minimum possible payoff) to make the best of a situation should the worst possible outcome occur Although managers will try to quantify a decision when possible by using pay off and regret matrices, uncertainty often forces them to rely more on intuition, creativity, hunches, and “gut feel” Decision making styles differ along 2 dimensions: - Individuals way of thinking o Some people are more rational and logical in the way they process info o A rational type processes info in order and makes sure it’s logical and consistent before making a decision o An intuitive type does not have to process info in a certain order and is comfortable looking at it as a whole - Individuals tolerance for ambiguity o People will a low tolerance for ambiguity need consistency and order in the way they structure information so that ambiguity is minimized o People that can tolerate high levels of ambiguity are able to process many thoughts at the same time Linear-nonlinear thinking style Your thinking style reflects 2 things 1. The source of information you tend to use (external or internal factors) 2. Whether you process the information in a linear (rational, logical, analytical) or nonlinear way (intuitive, creative, insightful) Linear thinking style Decision style characterized by a person’s preference for using External data and fact and processing this information through rational, logical thinking to guide decisions and actions Nonlinear thinking style Decisions style characterized by a person’s preference for internal sources of information and processing this information with internal insights, feelings, and hunches - Some employees may take their time weighing alternatives and rely on how they feel about it, while others rely on external data before logically making a decision Heuristics “Rule of thumb” - Simplify their decision making - Can be useful to decision makers because they help make sense of complex, uncertain, and ambiguous information - Still not 100% reliable Overconfidence bias Decision makers thinking they know more than they do or hold unrealistic positive views of themselves and their performance Immediate gratification bias Decision makers who tend to want immediate rewards and to avoid immediate costs Decision choices that provide quick pay offs or more appealing than pay offs in the future Anchoring effect Describes how decision makers fixate on initial information at a starting point and then once set, fail to adequately adjust for subsequent information Selective perception bias Decision makers who selectively organize and interpret events based on their biased perceptions Influences the information they pay attention to, the problems they identify, and the alternatives they developed Confirmation bias Decision makers who seek out information that reaffirms their past choices and discount information or contradicts past judgments Tend to accept at face value information that confirms their preconceived views, and are crucial and skeptical of the information that challenges their views Framing bias Decision makers certain aspects of a situation while excluding others By drawing attention to specific aspects of a situation and highlighting them, while at the same time downplaying or admitting other aspects, they distort what they see and create incorrect reference points Availability bias Decision makers tend to remember events that are most recent and vivid in their memory - It distorts the ability to recall events in an objective manner and results in distorted judgements and probability estimates Representation bias Decision makers assess the likelihood of an event based on how closely it resembles other events - Draw analogies and see identical situations where they don’t exist Randomness bias Decision makers try to create meaning out of random events - This is done because most decision makers have difficulty dealing with chance Sunk costs error Decision makers forget that current choices cant correct the past. - Incorrectly fixate on past expenditure of time, money, or effort in assessing choices rather than on future consequences Self serving bias Decision makers who are quick to take credit for their successes and to blame failure on outside factors Hindsight bias Decision makers with tendency to falsely believe that they would have accurately predicted the outcome of an event once that outcome is actually known Guidelines for effective decisions making - Understand cultural differences o Best way depends on the values, beliefs, attitudes, and behavioral patterns of the people involved - Create standards for good decision making o Use available info, consider all available and viable options, and don’t create conflicts of interest - Know when it’s time to call it quits o When it’s evident that a decision isn’t working, don’t be afraid to stop - Use an affective decision making process o 6 categories: 1. It focuses on what’s important 2. It’s logical and consistent 3. It acknowledges both subjective and objective thinking and blends analytical with intuitive thinking 4. It requires only as much information and analysis as is necessary to resolve a particular dilemma 5. It encourages and guides the gathering of relevant information and informed opinion 6. It’s straightforward, reliable, easy to use, and flexible - 1. 2. 3. 4. 5. Build an organization that can spot the unexpected and quickly adapt to the changed environment o Karl Weick: highly reliable organizations (HROs) They’re not tricked by their success They defer to the experts on the front line They let unexpected circumstances provide the solution They embrace complexity They anticipate, but also recognize their limit Design thinking Approaching management problems as designers approach design problems - Identifying the problems: Says that managers should look at problem identification collaboratively and integratively with the goal or gaining a deep understanding of the situation - Identify and evaluate alternatives: opening up your perspective and gaining insights by using observation and inquiry skills and not relying simply on rational analysis - Design thinking also has broad implications for managers in other areas Big data The vast amount of quantifiable information that can be analyzed by highly sophisticated data processing - 3 Vs: high volume, high velocity, and/or high variety information assets - No matter how comprehensive or well analyzed, needs to be tempered by good judgement Chapter 4: Communication Communication Process by which information is exchanged between a sender and a receiver - The sender must encode his or her thoughts into some form that can be transmitted to the receiver - The receiver must initiate feedback that tells the sender accurate understanding or that the message has been received/understood Effective communication Occurs when the right people receive the right information in a timely manner Chain of command Lines of authority and formal relating relationships (his has authority over him who has authority of him ….) - 3 necessary forms of communication - Downward communication o Flows from top of the organization to the bottom (training and providing for the below) - Upward communication o Flows from bottom to the organization to the top - Horizontal communication o Flows up and down (between departments of functional units) - Directions and instructors pass downward and ideas and suggestions pass upward Flaws of informal communication Informal communication Helps people accomplish their jobs more effectively - There is growing recognition in contemporary organizations that good ideas don’t respect organizational boundaries and that informal networks can be important sources of innovation by freeing up communication Slowness The chain can be slow especially for horizontal communication between departments and it’s not a good mechanism for reacting quickly to customer problems Filtering The tendency for a message to be watered down or stopped during transmission - Overzealous filtering will preclude the right people from getting the right information, and the organization will suffer accordingly - Upward filtering often occurs because people are afraid that management will use the information against them - Downward filtering is often due to time pressure or simple lack of attention to detail, but more sinister motives may be at work. - Downward filtering communication is often done to maintain to edge on their subordinates Voice The constructive expression of disagreement or concern about work unit or organization practices - Speaking up - Voice directed horizontally to teammates - Voice directed vertically to boss or management - Meeting employees informally on their own turf and not unfairly punishing honest mistakes can foster a positive climate for voice Psychological safety A shared belief that it is safe to take social risks The following contributed to silence - I cant attack the boss’s pet idea - I don’t have solid data to speak up - I cant bypass the boss - I cant publicly embarrass the boss I cant look like I’m not a team player Mum effect Mum effect The tendency to avoid communicating unfavourable news to others - Employees who desire to impress their bosses to achieve a promotion have strong motives to withhold bad news - When managers are perceived as more open-minded, employees are more likely to open up about such negative events Issues of voice and silence are especially relevant to power dynamics, organizational politics, and ethics The grapevine “X days without a major accident” - Informal communication network in organization - Often cuts across formal lines of communication that are recognized by management Distinguishing features of grapevine systems - Communicating information by word of mouth (emails and social media) - Organizations have several grapevine systems, some of which may be loosely coordinated - The grapevine can transmit information relevant to the performance of the organization as well as personal gossip Pros of grapevine - It can keep employees informed about important organizational matters - Sometimes regular substitute for formal communication - Can test employee reactions to proposed changes without making formal commitments Cons of grapevine - Rumours Jargon Specialized language used by job holders or members of particular occupations or organizations - When jargon is an efficient means of communicating with peers and provides a touch of status to those who have mastered it - It can also serve as a barrier to communicating with others - The barrier it presents to the people outside the organization or profession is a problem Non verbal communication The transmission of messages by some medium other than speech or writing - Can be very powerful in that they often convey “the real stuff” - Raise eyebrow, empathetic shrug - Body language and manipulation of objects Body language Non verbal communication by means of a sender’s bodily motions, facial expressions, or physical location - Two important messages are the extent to which the sender likes and is interested in the receiver and the senders views concerning the relative status of the sender and the receiver - Senders who feel they’re more higher statues act more relaxed - Smiling, gesturing, maintaining eye contact have a favourable impact when not over done Non verbal communication can also occur through the use of various objects like props, artifacts, and costumes - Neatness was a typical cue for conscientiousness and distinctive décor for openness - Proper clothing may enhance self esteem and self confidence to a noticeable degree Gender differences in communication - Girls see conversations as a way to develop networks of connection and intimacy - Boys see conversations as a way to achieve status and to maintain independence - “One up, one down” o Men tend to be more sensitive to power dynamics and will use communication as a way to position themselves in an one-up situation o Women are more concerned with rapport building, and they communicate in ways that avoid putting others down o Resulting in women finding themselves in a one-down position, which can have a negative effect on their careers Key differences in male and female communication styles that place women in a one-down position - Getting credit o Men are more likely than women to flex something good they’ve done - Confidence and boasting o Men tend to be more boastful about themselves and their capabilities and to minimize their doubts (so men tend to be more confident) - Asking questions o Men realize that asking questions can put them in a one-down position and reflect negatively on them (men are less likely than women to ask questions) - Apologies - - - - o Men see ritual apologizes as weakness Feedback o Blunt and straightforward o Can lead to misunderstandings when a man interprets a woman’s praise, esther than the criticism as the main message Compliments o Men are more likely to provide a critique and interpret literally Ritual opposition o Use ritual opposition as a form of communication and to exchange ideas o Takes the form of attacking others’ pov, challenging them in public, and being argumentative (for women its a personal attack and something to be avoided) Managing up and down o Men spend more time communicating with their superior and talking about their achievements (influences who gets recognized and promoted) Indirectness o “How would you feel” o Women tend to be indirect when giving orders Differences across cultures in non verbal communication - Facial expressions - Gestures - Gaze - Touch Cultural context The cultural information that surrounds a communication system - Always important in accurately decoding a message - Cultures tend to differ in opinion on the extent to which context influences the meaning of communication - High context cultures means that the message contained us strongly influenced by the context in which the message is sent - Low context cultures means that the message can be interpreted more literally because more meaning resides in the message than in the context in which the communication occurs Information richness The potential information carrying capacity of a communication medium - Two dimensions 1. The degree to which information is synchronous between senders and receivers 2. The extent to which both parties can receive nonverbal and para verbal cues - Face to face is very high in richness - Phone call is fairly rich - Letters, email, texting are not rich Computer meditated communication (CMC) Forms of communication that rely on computer technology to facilitate information exchange Enterprise social media A private work related social media platform that is accessible only by organizational members - Essential feature of these platforms is the capacity to communicate with specific co workers or to broadcast messages widely - Ability to post, edit, record, store, and share ideas such that they can be accessed by all members - Most important features o Post o Search o Comment o Evaluate others ideas Basic principles of effective communication - Take the time - Be accepting of the other person - Do not confuse the person with the problem - Say what you feel - Listen actively - Give timely and specific feedback - Assume differences until you know otherwise - Recognize differences within cultures - Watch your language (and theirs) Congruence A condition in which a person’s words, thoughts, feelings, and actions all contain the same message Active listening A technique for improving the accuracy of information reception by paying close attention to the sender - Watch your body language o Show that you are paying attention and interested o Sit up, lean forward, maintain eye contact - Paraphrase what the speaker means o Reflecting back on what the speaker has said o Shows interest and that you received the right message - Show empathy o “Yes, that client has irritated me too” - Ask questions o Have people repeat, clarify, or elaborate - Wait out pauses o Don’t feel pressured to talk when the speaker goes silent Employer branding Promoting a clear and consistent image of the positive and distinctive features of an organization as an employer - First and foremost used to attract and recruit new employees, also effective to reinforce commitment of existing employees Meant to convey the values of the organization and emphasize why it’s an attractive place to work Effective branding conveys both tangible (pay, location, responsibilities, learning opportunities) and more symbolic aspects of the employment experience Gets the right information to the right people, encouraging new workers to join and reminding current employees why they should stay 360 degree feedback Performance appraisal that used the input of supervisors, employees, peers, and clients or customers of the appraised individual - Used for employee development rather than salary determination - Data about a person’s performance Employee survey An anonymous questionnaire that enables employees to state their candid opinions and attitudes about an organization and its practices - Useful when administered periodically Suggestion systems Programs designed to enhance upward communication by soliciting ideas for improved work operations from employees - Ex. Suggestions box Mount Everest case What are people’s reasons/motivation to climb Everest? - Commitment - Pride - Challenging themselves - Publicity o Company or business they work for/with will benefit - Income (job) What are the personal qualities of those who climb? - Self driven - Rational Objective Confidence to overcome obstacles Experience Preparation (mentally/physically) How are these qualities similar to business leaders? - Good judgement o Accept the fact that some things could go wrong - Awareness and preparation that challenges aren’t always in our control o Ability to make decisions based on environmental conditions and changes - Risk taking, focus, adaptability - Working efficiently under pressure - Having a strategy o Planning function o Thinking through, analyzing the steps - Contingency plan - Communication
