Managing Effectively in a Global World
Introduction to management: Functions and levels – Management: skills and challenges – Sources
of competitive advantage
Introduction to management: Functions and levels
Management: The process of working with people and resources to accomplish organizational goals
efficiently and effectively.
Mana is a dynamic process, we try to deal with one of the basic issues, there are limited needs and
limited resources. Needs have to be fulfilled with resources and we need to try to maximise the
outcomes that we can get from resources ---> the mana process.
Let's look at the four functions of management:
– Planning: Specifying goals and deciding the actions needed to achieve those goals --->
understand where you are and where you want to go. e.g. I figure out how to get to Rome
for a trip. Having an idea of what need to do in order to get the most of the trip.
– Organizing: Assembling and coordinating the resources needed to achieve the goals --->
trying to get all pieces together. You look at an orchestra with different indstrument, we need
to organize them in harmony to make the song beaufitul. All pieces of the system, each piece
plays a role.
– Leading: Stimulating people to be high performers ---> the maestro of the orchestra will be
leading the orchestra, trying to make the most of each instrument for each person in the
organization. The same will happen in a factory, in airline companies.
– Controlling: Monitoring and reacting to performance ---> understand how well you are
doing. So saying you have a goal to achieve something, you decide to go on a diet... each
week I want to lose half a kilo, so you have an idea how well you are doing as time goes by.
How's the company doing? For ex you look at the sales of company each day, what products
are selling most? Why others are not selling?
Now let's analyzie the planning activity:
Anticipate the future: what's going to happen in the next few days in the next year, looking at
different terms? Say you sell ice creams, one way to analyze the situation is to look at a tourist and
the weather, you look at the forecast ---> the temperature, the weather, are you going to have more
supply of ice cream? You are predicting the future. So, once you have you objectives determined,
you decide what actions to engage and again you can choose you business strategy and determine
resources. So in the ice cream example you know the weather is going to be hot, so you want to
make sure you will have enough ice creame to sell , you need to look at suppliers if they have
enough inventories, enough employees to working at the counter, if will have a long queue people
might go to the next shop. Predict the future by understanding the present and past situation.
Four different levels of managers
Top-Level managers
– Senior executives responsible for the overall management and effectiveness of the
organization: imagine a ship....this is the captain! A strategic level to look at: where the ship
should be going? We are setting the direction of the course, so in terms of administration
what is being done is here setting the course of where the org is going. A higher level
making sure that the future of the org is good and we have an "helicopter" view of what is
happening.
– Middle-level managers: Managers located in the middle layers of the organizational
hierarchy, reporting to top-level executives. ---> here the goals set for a more operational
level. Strategic level on top and here more managerial level. The direction has been set by
top managers.
– Frontline managers: Lower-level managers who execute the operational activities of the
organization ---> people still managing things in the org (business processes) but in a very
operational level. Is the bus process being accomplished in the correct manner? Towards the
goal set by the other two levels.
– Team leader: Employees who are responsible for facilitating successful team performance.
---> in a construction work: the top manager: what kind of building are we going to build?
In what type of niche market we are going? We go a level down and here we have to make
sure that the project must be developed, we go one level down and we look specifically at
one building and then when we go to the team we look at leading the consturction work in
there. So there is a hierarchical flow that allows each part of the system to play a role in
achieving the overall goal of the organization
Review questions
– While frontline managers have direct control over their employees, tema leaders do not
– What strategies can team leaders use to direct team members to achieve organizational
objectives?
MANAGEMENT: SKILLS AND CHALLENGES
Three roles that all managers perform
Interpersonal roles
– Leader, liason, figurehead: a mana can take charge of some elements of the organization
(like representing a department) ---> how a managers relates to the organization.
Information roles
– Monitor, disseminator, spokesperson: the man playing role in terms of informatin flows,
looking at how the organization info flow is happening ---> example in sales in a clothing
shop : the managers looks at monitoring those sales and formulates strategies...these
strategies have to be communicated and therefore disseminated throughout the org, to make
sure that everybody understands what the stra is and what it is trying to achieve. We have to
look at communication skills: gathering information, processing it and to verbalize it to
others.
Decision roles
– Entrepreneur, disturbance handler, negotiator ---> get things moving forward in an
entrepreneur level, need to have initiatives to develop new things and to improve constantly
the business. Disturbance handler can be conflict, manager can have different stakeholders,
different people, different organizations interacting, therefore you will have a certain level of
disturbance/conflict ---> how can manager solve this conflict? Conflict can be between a
client with another co-worker e.g. Key thing is, how do you handle these things? Bringing a
offer to others that can be reasonable and can be value, to create a win-win situation.
Managers need Three broad skills
Technical skills
– Ability to perform a specialized task involving a particular method or process: for example a
statistical analysis (technical skill), using software like simple excel or more complex
softwares for technical analysis.
Conceptual and decision skills
– Ability to identify and resolve problems for the benefit of the organization and its members :
identify problems that should be addressed for the greater good of the organization and
being able to resolve them.
Interpersonal and communication skills
– Ability to lead, motivate, and communicated effectively with others, soft skills: how roles
can now be translated into skills, there is a clear alignment between the description of roles
and the description of skills. Inspire people, make them more productive. Soft skills: how do
you provide feedback to a person who is performing well? How do you provide it in a
constructive manner to somebody who is not performing well?
Succesful managers often demonstrate a set of interpersonal skills known as emotional intelligence
(EQ)
– Understanding yourself
– managing yourself
– dealing effectively with other
What are your strenghts, what are the weaknesses, what are the areas you do well, ---> how you
going to be with others, how do you related with others, how you behave with all people together to
accomplish the goal that you have in your organization.
Top manager looks mostly at abstract and complex decisions, so he does not need technical skills
but rather conceptual/decision making skills.
Technical skills high because of more operational type of tasks. Medium level for decision making
because here it is of structure type DM.
Today's Realities
– Globalization: toy centers in different countries sales almost the same toy brands
– Technological change
– The importance of knowledge and ideas
– Collaboration across organizational boundaries
– Increasing diverse labour force
From a manufacturing economy to a knowledge/information economy.
Innovation
– introduction of new goods and services: the company needs to innovate, to be able to
achieve its goals. A company that does not innovate is basically stuck.
– Often the most important innovation is not the product itself, but how it is delivered: movie
industry e.g. : how Netflix has distrupted that in terms of innovating through delivering
internet and media content through internet, inversely we had blockbuster, so see the
innovation is not in the product cause movies are movies but it has been on the level on how
it was delivered.
Quality
– The excellence of your product (goods or services)
– Historically, quality referred to attractiveness, lack of defects, reliability, and long-term
dependability: what are the attributes that your product or service has to present in order to
provide those elements that is perceived by customers as something to pay for. What is the
difference between a dependable car and a not dependable car? They have different levels of
quality, furnishing...materials...
Service
– The speed and dependability with which an organization delivers what customers want:
what about the level of service in Mc Donalds? You cannot stay more than two minutes in a
line for Mc Donalds.
Speed
– Fast and timely execution response, and delivery of results
Cost competitiveness
– Keeping costs low to achieve profits and be able to offer prices that are attractive to
consumers : pricing things in a point that we still make money but in a way that is also
affordable for the customers (as cheap does not always mean dependable) : the result of
price will show how well we manage our organization.
Do not assume that you can settle for delivering just one source of competitive advantage
---> The best managers and companies deliver them all.
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Trade-offs may occur among the five sources of competitive advantage, but this doesn't need
to be a zero-sum game: you are looking at unlimited needs for limited resources, so at the
end of the day you have to juggle, to make trade-offs. Let's imagine this situation: you look
at you wallet and you have 20$ and you go to the supermarket to buy food for cooking
dinner, you choose bast for an entree with cold cobs , so you start to make trade-offs: if I
spend more on high quality pasta I will need to save money for the source : how can the 20$
be maximised to bring the best dinner you can. In management similar attitudes: what are
should I prioritise?
Review questions
– Would you say you relate positively to your current (or previous) boss? Why or why not?
– How does a parent perform the functions of planning, organizing, leading and controlling?
Summary questions
- While frontline managers have direct control over employees, team leaders do not
The Evolution of Management
The origins of management & management pioneers – Contemporary approaches to management
The ORIGINS OF MANAGEMENT & THE MANAGEMENT PIONEERS
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As a formal area of study the field of management is relatively new: a formalized field, a
social science.
However evidence of formalized management practices have been found dating back to
5000 BC
Around 4000 BC, the Egyptians used planning, organizing, leading and controlling to build
their great pyramids
As early 1100 BC, the Chinese applied the managerial concepts of delegation, cooperation,
efficiency, organization and control: even in the cave age for foods (how to split it)
In 500 BC, Sun Tzu discussed the importance of planning and leading in his book The Art
of War: military field
Around 400-350 BC, the Greeks recognized management as a separate art and advocated a
scientific approach to work. ---> trying to optimize an organization as a art form, as a
science.
Around AD 1436, the Venetians standardized production through the use of assembly line
Significant: In 1776 Adam Smith discussed control and the principle of specialization with
regard to manufacturing workers
Here we have an overview on how management has evolved: the evolution of management thought:
The contribution to management as a science, as a skills set, as a trait (proprietà, caratteristica).
Classic Approaches
Systematic management: A classical management approach that attempted to build into operations
the specific procedures and processes that would ensure coordination of effort to achieve
established goals and plans ---> in an operational level trying to think how specific procedures
could be improved in terms to ensure that the processes can be better coordinated, carried out...this
is to increase the quality of output. So achieving th goals.
Scientific management: A classical management approach that applied scientific methods to analyze
and determine the "one best way" to complete production tasks. Introduction by Frederick Taylor.
So in many ways Taylor would be seen as the father of scientific management: here we have his
work: Taylor's four principles of scientific management
– Management should develop a precise, scientific approach for each element of one's work
– Management should scientifically select, train, teach, and develop each worker (what is the
"portfolio" of tasks that an individual carries? How can I teach, improve, develop this
individual to be a better worker? Scientifically helped to choose whether to select work or to
deliver work.
– Management should cooperate with workers
– Management should ensure an appropriate division of work and responsibility: management
should not be something insular and isolated; management must be collaborative, should be
there when performing a certain task to actually attest that the process in the organization
goes smoothly. The vision of labour: who does what in the organization. Imagine owning a
house, what are the tasks that I do and what are the tasks my partner does in the household.
In an organization we have an assignment of responsibilities to each individual. Who must
clean the house?
For scientific management we look at Gantt who worked with and become a protégé of Frederick
Taylor
– He expanded on the piecerate system by suggesting that frontline supervisors should
receive a bonus for each of their workers who completed their assigned daily tasks: need to
provide a certain sense of incentives and motivation to reward people fairly for the goals
they've achieved.
– Gantt is also known for creating the Gantt chart, which helps employees and managers plan
projects by task and time to complete those tasks: what tasks have to be accomplished and
who is responsible for each of those tasks. When do they need to be completed? How one
task is dependent from another one? Now, you are in the kitchen and you create a Gantt
chart for a hot dog ---> first to cook the sausage and then ... so there is a line of procedures
need to be done. The same principle can be applied in manufacturing or also for an IT
project (where professor work).
Other management Pioneers
– Frank and Lillian Gilbreth used "motion studies" to identify and remove wasteful
movements so workers could be more efficient and productive ---> They analyzed what
were the movements workers would do and how could they be optimized. For example,
saving seconds in one worker move (taking and assembling for ex), those seconds in one
day would be one hour---> A higher level of production can be achieved.
Max Weber advocated bureaucracy
– A classical management approach emphasizing a structured, formal network of relationships
among specialized positions in the organization: bureaucracy comes from the study of two
very different organizations: the church and the military (elements of hierarchy, of row, of
governance) ---> today's organizational structure reflects the models of the ancient church
and military.
Characteristics of effective bureaucracy
A good way to try to understand this is to think about the military , also government ---> these
principles will be evident here.
Administrative management Pioneers
Henri Fayol
Advocated administrative management, a classical management approach that attempted to identify
major principles and functions that managers could use to achieve superior organizational
performance. ---> What are the principles? What are the elements, the things that managers should
use, should be present into for their work and skills to allow this optimization and achieve better
results for the organization.
Fayol identified five functions and 14 principles of management.
The five functions are planning, organizing, commanding, coordinating and controlling (look at the
textbook and go over each of the principle, please)
Chester Barnard
Outlined the role of the senior executive:
formulating the purpose of the organization, hiring key individuals, and maintaining organizational
communications: looking at the raws of senior executives , moving from an operational type of
focus to a more strategic focus.
Mary Parker Follett
Emphsizing the continually changing situations that managers face: the work is looking at
understand that management is a dynamic field, chaning all the time. In UK managers are facing the
uncertainties about the exit of the UK from EU. How does the environment changes? Macro
situation.
Review questions
The military is legendary in terms of its bureaucracy. In what ways does this structure benefit the
organization? In what ways might it hinder the organization? So, in what ways does the bureaucracy
provide a positive outcome to the organization or a negative impact?
CONTEMPORARY APPROACHES TO MANAGEMENT
Human relations
A classical management approach that attempted to understand and explain how human
psychological and social processes interact with the formal aspects of the work situation to
influence performance: how human rel (the interpersonal skill) the psycho element, imapct of
perfomance.
Hawthorne effect
People's reactions to being observed or studied resulting in superficial rather than meaningful
changes in behaviour: when people know they are supervised, for a certain moment they may
change the behaviour (for achieving the goals). Providing meaningufl and longstanding change is
difficult in this way.
We can say that there is a hierarchy that needs to be understood among the layers of the pyramid:
starting from the psychological issue.
Another contemporary approach
Sociotechnical sytems theory
An approach to job design that attempts to redesign tasks to ptimize operation of a new technology
while preserving employees' interpersonal relationships and other human aspects of the work. :
important here to understand that when you provide change in the org, you can look from a very
rough and pragmatic point of view that an expression must be move from here to there (e.g.
Executing the xyz functions), at the same time looking at people NOT as pieces of machinery but as
complex human beings to which the social and human relations are important. Here we have the
SocioTechnical system.
Quantitative management*
An approach that emphasizes the application of quantitative analysis to managerial decisions and
problems: for ex with the operational research and so on--> applying quantitative methos for
decision making, how can apply such methods in helping the analysis of complex problems. This
process disappeared, but know it seems it has come back especialy in analytics, trying to make
sense of data, quantitative theoretical skills to support decision making.
{Quantitative management makes use of computers and mathematical techniques to sift
through financial statistics to select stocks.
Managers observe historical quantitative relationships and incorporate these relationships
into “models,” which help them choose their stocks.}
Organizational behaviour
An approach that studies and identifies managements activities that promote employee effectiveness
by examining the complex and dynamic nature of individual, group and organizational processes. :
Here we look at the organization BEHAVIOUR, how the org response from the individual level to
the group level and to the entire org. Provide ways for the complex system to be optimized and
change for good. Understanding the environment is important, internally and externally.
System theory
A theory stating that an organization is a managed system that changes inputs into outputs. ---> you
have timber coming in, a process, and from the process you get benches so there is a systemic
approach to management (human component and machinery)
The line which goes straight from goods and services to inputs is the feedback. What it does? Once
you produce the output you can collect data, can look at satisfaction, quality and you can
MEASURE those things. For ex if producing pen you may lastly say how many pens were
produced in an hour, what were the issues in that line of production. What can be improved.
Contingency perspective
Proposes that the managerial strategies, structures, and processes that result in high performance
depend on the characteristics, or important contingencies, or the situation in which they are applied:
a contingency: one size does not necessarily fit all. There are contingencies and constraint in the
surrounding context that is happening into the decision making that needs to be addressed. A level
of complexity, a decision made today is still valid tomorrow? The context does change.
Modern Contributors
Porter – Competitive strategy---> how do you design strategies to be competitive.
Hamel management innovation ---> why the org needs a cntinuous innovation. The time you stop
innovating you basically die. Adapt to changes and reality ---> customers needs. Improve what you
are providing.
Drucker – need for organizations to set clear objectives
Senge – learning organization
Covey – leader's success
Clear awareness of being in business. Why are you in business? What is your mission? What are
you trying to achieve? Are you there to create a better world? To provide a reward to investors? A
better life to you clients? A little bit of all? As individuals learn, organizations also learn.
Review questions
The workplace has changed dramatically since 1916 when Fayol published his work. Which of
these principles remain important today and why? Which principles are less relevant today and
why?
The Organizational Environment and Culture
Organizational Environment – Organizational Culture
ORGANIZATIONAL ENVIRONMENT
Open systems
– Organizations that are affected by, and that affect, their external environment: a family, there
is a set of stakeholders and processes put together with the objective of reaching a common
goal. An open system does not live on vacuum, it interacts with the external env, it affect
and is affected by the org.
Inputs
– Goods and services organizations take in and use to create products or services
Outputs
– The products and services organizations create
Inputs are resources, the org takes them and with a process of transformation add value and create
outcome (output). Raw materials come in, raw material processes happens and we produce papers,
pins and elements like that.
External environment
All relevant forces outside a firm's boundaries
Macroenvironment
The general environment; includes governments, economic conditions, and other fundamental
factors that generally affect all organizations.
The firm has very little control over the macroenv ---> the change in gov, like the exit of UK from
EU. On the other hand, it needs to be sure that this env is evaluated and the strategy must be in line
with this env.
The competitive environment
The immediate environment surrounding a firm; includes suppliers, customers, rivals, and the like.
The immediate env around the firm. IF I am producing wine, e.g., or cheese, I have my suppliers of
milk and also customers, competitors etc. A very famous framework:
Porter's Five Forces
Each organization functions in a closer, more immediate competitive environment consisting of:
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The rivalry among existing competitors
The threat of new entrants
The threat of substitutes and complementary products
The bargaining power of suppliers
The bargaining power of buyers
How hard would b for new entrants to come in? ---> a restaurant business vs an airline business.
Lower level of capital for restaurant means a higher capacity of entering. Buyers bargaining power:
they can actually dictate the price ---> Apple vs Android, in Apple IOS there is only one supplier,
Android has many like LG, Samsung, Motorola, Haweei: we see that the bargaining power of the
buyer will be much higher on the Android environment than it could be on for example on the IOS
environment. Threat of subsitutes products or services ---> means, in a business where we produce
beverages, like water, there is Coca-Cola a subsitute would be Pepsi. For a bottle of water, we can
imagine tea or juice. The bargaining power of suppliers: how much can the suppliers dictate price
and so forth, so how much is the bargaining, how much power do they have? Cheese manufacturing
operations, if there is just one supplier from milk, think about the power of that supplier of milk; if
conversely you have 20-30 suppliers to choose from it is a very different reality. Now we look at the
level of rivalry and competitors, imagine Pepsi and Coke, or fast food chains like Burger King and
MC Donald's in US, or on cell-phone industry, Vodafone with local Telecom (i.e. Telecom Italy),
how much rivalry exist here?
Keep up with changes in the environment
Environmental complexity
The competitive enviornment is very COMPLEX, there is a high number of variables that play a
role in this environment. What is environemnt telling you?
Environmental dynamism
To see how dynamic is the env, is it relatively stable? OR does it cnstantly change? Look at
countries which have stable economy and those who have not. The env changes so much so should
look for short term type of ventures or depending on the environment, to longer time ventures.
Environmental scanning
– Competitive intelligence
– Benchmarking
Understanding how do you scan the environment... to constantly pick up what the environment is
telling us and trying to collect information from that (bus inteligence)...what's happening in social
media? What information can we collect? What strategy to develop? Anpother important element is
benchmarking. For env scanning: you are in the desert where there is the destert fox (with big ears)
and it is constantly moving around trying to get signals of any sound in the desert. The fox is
basically scanning the envirormnet in order to find wether there would be a lunch opportunity, so
there is life and death here in row. What are the opportunities and what are the threats?
In the exam students are very good at benchmarking, what they do is actually, after receiving the
assignment, turn around to their classmate and say "what did you get"? Say, I got 90% on this test
and the average og the class was 75% so I did really well. You can see how well you are doing
comparing to the class mates. In the case of companies it is exactly the same.
Scenario Development and Forecasting
Scenario
– A narrative that describes a particular set of future conditions
Imagine run an Ice cream shop, what is the scenario? Lot of tourists in a hot weather.
– (can create) Best-case, worst-case (scenario)
Forecasting
– Method for predicting how variables will change the future: next week warm (lot of
tourists), we can forecast how much resource to have in place to have enough inventory and
enough workers.
Adopting at the Boundaries
Buffering
– Creating supplies of excess resources in case of unpredictable needs: the buffer ---> try to
have a little bit extra (materials, resources) if something unpredictable happens. Think of a
simple situation, apply that principle, understand it and then you go up to more complexity.
You have an unexpected visitor ---> you have something to offer like bottle of wine,
biscuits. IF you have so much buffer that buffer may cost a lot, need to have a limit on how
much budget necessary to have.
Smoothing
– Leveling normal fluctuations at the boundaries of the environment: there are fluctuations
into the environment, what to do? Smoothing normal kind of fluctuations (it is difficult to
predict high irregular fluctuations), if you look at data (currency exchange data, weather
data, consumption data) you see there are trends that go up and down and the change can be
smotthed out.
Independent strategies
– Strategies that an organization acting on its own uses to change some aspect of its current
environment: how can the org create strategy to have influence on different levels of
environment? There are things that can be done.
Different elements that can actually produce some level of change into the environment. Sue
somebody for copyright. Or a PR to cope with some of the problems. Or perhaps a cybersecurity
issue which can affect the environment through press and challenging the environment in which
working at.
Cooperative Action
Cooperative strategies
– Strategies used by two or more organizations working together to manage the external
environment: when org get together to collaborate and say, even if we were
competitors...how can we create a win-win situation? Rather than be competitors.
– Contracts
– Cooptation
– Coalition
Change the Boundaries of the Environment
Strategic maneuvering
– An organization's conscious efforts to change the boundaries of its task environment:
actually with the purpose to maneuver, to do some action that will provide beneficial change
to the env they operate in.
Domain selection
– Entrance to a new market or industry with an existing expertise
Diversification
– A firm's investment in a different product, business, or geographic area
Example of a sun-tanning beds producing company. It went bankrupt due to environmental changes.
It didn't not try do enter new domain, nor diversifying its only type of product. That was the only
market section it was able to supply. The company went belly-out (bankrupt).
Mergers
– One or more companies combine with another
Acquisitions
– One firm buys another
Divestiture
– A firm selling one or more business
Prospectors
– Continuously change the boundaries of their task environment by seeking new products and
markets, diversifying and mergin, or acquiring new enterprises.
Envisaging opportunities by constantly changing the boundaries of task environments, and by doing
that they come to different format: mergers, acquisitions, creating new products and so forth...
Defenders
– Companies that stay within a stable product domain as a strategic maneuver: look at oil
companies--> what are the issues between oil companies and electric cars? If oil companies
starts to diversify in electricity they would start to play a different role. So it means staying
in a stable domain and from there making some strategic maneuvers.
Three Criteria Help You Choose the Best Approach
– Managers need to change what can be changed !
– Managers should use the appropriate response
– Managers should choose responses that offer the most benefit at the lowest cost
You do not change for the sake of change, but there must be clear reasons that you can see that this
change can be positive, that would provide positive outcome to the organization. Appropriate
response: how the division will response to the manager? What are the decisions, the tasks you are
going to adapt to this new reality?
Review Question
Think about business environment:
What impact does the aging (people living longer ---> more savings) population have on business in
terms of their product or service offering? What products/services might be positively or negatively
impacted by this shift?
ORGANIZATIONAL CULTURE
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The set of important assumtpions about the organizations and its goals and practices that
members of the company share: in Italy ... are people extroverted or introverted? In
company we look and think in the same way. How the company behaves and act as a group
and individual?
IT companies have disrupted many traditional elements of culture. ---> level 3: part of our business
has to be in business.
What is an Organization Culture?
– A strong culture is one in which everyone understands and believes in the firm's goals,
priorities, and practices ---> Assumptions on value and behaviour to make sure that people
understand them and they actually believe in them. In a strong org culture you will have
strong team players gathered to reach a common objective.
– In a weak culture , different people hold different values, there is confusion about corporate
goals, and it is not clear from one day to the next what principles should guide decisions ---> the principles are not clear, the company cannot be guided in the best way to achieve its
goal.
Review questions
Does national or regional culture impact a company's culture? Why or why not? What examples can
you provide?
Ex. What is the regional or national geographical origin impact on large American multinationals'
culture like Shell petroleum and IBM.
Ethics and Corporate Responsibility
Business ethics – Corporate Social Responsibility
BUSINESS ETHICS
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The moral principles and standards that guide the behaviour of an individual or group: it is
valid within an individual or group, what can be ethical for me not necessarily ethical to
somebody else. Look at difference countries, something is seen as ethical in one country and
unethical in another. Influenced by culture, history and the set of rules in which society life
as a base.
It's a Personal Issue
Most of us think we are good decision makers, ethical, and unbiased
– But most people have unconscious biases that favor themselves and their own group: think
about food, people from certain part of the world would be eating beef, pork, a certain diet.
The choices can be seen ethical for them, but we have our own biases, parts of what we are.
We are biased by our own journey, story. Grown in a family with its own principles.
Managers often:
– Hire people who are like them
– Think they are immune to conflict of interest
Managers can say, I'm absolutely partial here, different genders, different countries. But in an
unconscious level there can be a different. Managers tend to think they are immune but...
– Take more credit than they deserve (they acieve the goal and say "I did it" instead of...
– Blame others when they deserve some blame themselves
We have a certain level of bounded rationality ---> there is a certain level of irrationality at the
unconscious level in decision making, a sort of bias to protect themselves. Try to address the best
we can, and develop strategy. Questions: am I getting more credit than I deserve? Am I giving more
credit? Am I blaming people that dont deserve? Am I taking responsibility on what is happening?
Ethical systems
Ethical issue
– Situation, problem, or opportunity in which an individual must choose among several
actions that must be evaluated as morally right or wrong: is this the right thing to do? Am I
feared, honest, am I thinking of the greater goods? Dealing with an ethical issue.
Business ethics
– The moral principles and standards that guide behaviour in the world of business: when you
agree do to something with somebody, is the agreement set on "stones" or on "sands"? Rigid
or flexible? Those are things that happen in society in general, with the interaction we have
into the business world.
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Moral philosophy
– Principles, rules, and values people use in deciding what is right or wrong: this may change
depending on which country I go, is not that one place is right and the other is wrong --->
the framework with different rules that need to be understood and acknowledged.
Universalism
– The ethical system stating that all people should uphold certain values that society needs to
function: what can be an universal principle? In life: somebody kills somebody else and that
wrong.
Human dignity
– Concerns the value of each person as an end, not a means to the fulfillment of other's
purposes: look at the migrant crisis, all these issues come to try to sustain human dignity.
Business has to care about that otherwise you'd end up in a society where you dont want to
live.
Egoism
– An ethical principle holding that individual self-interest is the actual motive of all conscious
action: making self-serving decisions
Relativism
– Philosophy that bases ethical behaviour on the opinions and behaviours of relevant other
people: not in an egoistic point of view but in relation to others.
Utilitarianism
– An ethical system stating that the greatest good for the greatest number should be the
overriding concern of decision makers: you make decision trying to provide benefit to the
highest number of people, at the end of the day you will be favoring the largest number of
people possible.
Virtue ethics
– Perspective that what is moral comes from what a mature person with "good" moral
character would deem (ritenere, maintain) right: you say, somebody with a good moral
character, with a good long-standing temper in society.
Ethics and the Law
Sarbanes-Oxley Act
– An act that established strict accounting and reporting rules to make senior managers more
accountable and to improve and maintain investor confidence: give a certain level of resp
and accountability over the decisions that managers have, over the principle, with the
intention of making a good level of investors confidence
Ethical Climate Influences Employees
Ethical Climate
– In an organization, the processes by which decisions are evaluated and made on the basis of
right and wrong: organizatinal culture is reflected into the ethical climate, what kind of
people are in the organization? Some kind of people can be considered as dodgy, they do not
have a high standing in ethical conduct and that will be reflected into org in a way at looking
at it in ethical climate.
Danger signs
– Excessive emphasis on short-term revenues over longer-term considerations : for example
we make as much money as we can in runaway...something wrong in going on.
– Failure to establish a written code of ethics : there's no a clear way to universally
communicate what are the ethical standards we follow.
– A desire for simple, "quick fix" solutions to ethical problems: look at some eth issue and
understand them in a quick way --> that would be dangerous (a red flag)
– An unwillingness to take ethical stand that may impose financial costs: money goes over
ethics, the business ethics the organization is following is the least questionable
– Consideration of ethics solely as a legal issue or a public relations tool: say we do this for
show and not for real
–
–
Lack of clear procedures for handling ethical problems: not clear so not necessarily fair to
all and not consistent
Responsiveness to the demands of shareholders at the expense of other contituencies: people
respond to shareholders demands, wether to be able to do that, you would need to recognise
the expasion of your actions in terms of others' needs.
Ethics programs
Compliance-based ethics programs
– Company mechanisms typically designed by corporate counsel to prevent, detect, and
punish legal violations: a set of processes that should be carried on diligently, to make sure
that any problem is firstly prevented, and of course detected with a thorough investigations.
Punished according the established rules.
Integrity-based ethics programs
– Company mechanisms designed to instill in people a personal responsibility for ethical
behavior: one simple example is recycling: instilling in people the responsibility. In the same
way look at different aspect that make the org culture.
A process for ethical decision making
Moral awereness
– Realizing the issue has ethical implications : if you are not aware of the moral and ethical
implications of the problem this is a problem! The first step , for an ethical decision making,
is to be aware of it.
Moral judgement
– Knowing what actions are morally defensible: I decided this and within the moral principles
that guide the org and the society, I can actually defend my position according to the fact
that society agree with that.
Review quetions
Some people argue that ethical codes are "just for show" and in reality do little to deter
(scoraggiare) unethical behaviour by employees. Do you agree? Why or why not?
CORPORATE SOCIAL RESPONSIBILITY
Level 1: you didnt comply with a law or with some aspects of regulations that the government has.
So you will be fined for that. (the less damaging type of cost though)
Level3: people leaving your business (cust defections).
Meeting the criteria to sustain the cost occurring , that is the corporate responsibility of an
organization.
Look at the words: required, expected and desired.
Economic responsibilities
– To produce goods and services that society wants at a price that perpetuates the business and
satisfies its obligations to investors: if you are not fulfilling your economic resp you are
basicaly going out of business, the issue is that you need to privde something that somebody
is willing to pay for in order to make the business valuable---> providing pay-off.
Legal Responsibilities
– To obey local, state, federal and relevant international laws: depending where you're doing
business, in what environment? In a complex one? See online business ---> dealing with
different frameworks , in different countries people buy differently, different taxes to be
paid. These need to be observed and followed.
Do Business Really have a Social Responsibility?
Shareholder model
– Theory of corporate social responsibility that holds that managers are agents of shareholders
whose primary objective is to maximize profit: shar. Model believe in essence that the key
thing here is having the highest level of profitability in the company. Now let's look at it
differently:
Stakeholder model
– Theory of corporate social responsibility that suggests that managers are obliged to look
beyond profitability to help their organizations succeed by interacting with groups that have
a stake in the organization: we look at a pair of sneakers, can we maximize profit using child
labour? It is wrong and unethical! The goal to deliver the best quality at the lowest price
must be looking into boundaries, different environment where you are interacting. For ex
you are polluting a local community (at what cost are you reducing prices?). There are
different views and the outcomes can be different from one view to the other.
You can do good and do Well
– Profit maximization and corporate social responsibility used to be regarded as leading to
opposing policies. But the two views can converge: views can be completely opposite
– Recent attention has also been centered on the possible competitive advantage of socially
responsible actions: companies act responsibly can actually see the source of competitive
advantage. Product A is lightly cheaper but it harms the enviroment and product B which
actually does not harm the env. The price competitiveness of product A can be completely
over-shadowed by the corporate responsibility of product B, becoming this a source of
competitive advantage (harming less the environment).
Development can be sustainable
– Ecocentric management
– Sustainable growth: New Zealand, an island country which have strong program on
fisheries so you ask, what happens if you fish all the fish in the sea surrounding you?
Basically you make money today but you are shooting yourself on the foot! Killing the
sources, fish are hindered to reproduce. Would rather guarantee your business that it will be
in business in the long run?
– Life-cycle analysis: what is the lifecycle of your product? How has it been disposed? The
materials...thrown in a landfield? Need to guarantee a certain level of sustainability of your
business of your growth and make sure the org grows and do well BUT with social
corporate responsibility.
Review questions
– You are the CEO of a medium sized firm with plants in two countries (A and B). There is a
shipment of critical parts held up indefinitely in "country B" due to a paperwork issue.
– You learn that if a customs officer is paid a "facilitation fee" the shipment will be released.
Without these parts your operation in "country A" will shut down.
– What would you do? Consider the moral and ethical dilemmas and also your responsibility to make the
choice.
Planning and Decision Making
Organizational planning and strategy – Decision making process
ORGANIZATIONAL PLANNING AND STRATEGY
Planning:
Conscious, systematic process of making decisions about goals and activities that an individual,
group, work unit, or organization will pursue in the future: two key elements ---> setting an
objective and second you are defining how you're going to get them. Imagine you're getting
together with friends and you say let's have dinner together: objective is to find a nice place where
food wil be in the friends' budget. What time we're going be there? Reservation or not? We look at
all the steps, systematic tasks and activity that need to be done to achieve the goal (pleasant evening
with friends). Six steps of planning:
Planning steps
Step 1:
Situational analysis
A process planners use, within time and resource constraints, to gather, interpret and summarize all
information relevant to the planning issue under consideration: understand the environment and the
resources, the constraints. Basically scanning the environment ---> what is the situation? What do
we want to achieve? You are walking around downtown in the city and you are hungry --< what are
the constraints? A first very rational one: what are the restaurants available around me? The second
one: what is my budget? How much money am I willing to spend? Another less deterministic: what
kind of food I would like to eat?
Step 2:
Generate alternatives and plans
Should stress creativity and encourage managers and employees to think in broadly: what are the
ption I have? Before example: restaurant or supermarket. Go to supermarket and get for example
yogurt or fruit.
– Goals
– Targets or ends that a manager wants to reach
– Specific, measurable, attainable, relevant, time-bound – SMART
Setting the goals on the second step, it where we are generating the alternatives. Are these goals
smart? Specific, relevant...consistent?
Step 3:
Evaluate Goals and Plans
– Managers will evaluate the advantages, disadvantages, and potential effects of each
alternative goal and plan: lunch choice: the supermarket can be healthy and cheap, hot not
can be cheap but not very healthy. You can have a three stars restaurant that can be
expensive. You look at all the advantages and disadvantages. The key things here when a
managers set a goal he generates alternative and evaluate each one of them in ordr to have
an idea on what are the benifit that the alternatives, each one, are providing to you.
Step 4:
Select goals and Plans
Managers will select the most apropriate and feasible alternative.
Once evaluated all the alternative you choose one ---> the sandwich, is fast and is good value for
money for instance. It is the most feasible and the one which provides most value to me.
Step 5:
Implement the Goals and Plans
Managers and employees must understand the plan, have the resources to implement it, and be
motivated to do so: when you're a company you make sure that the alternatives or the plans are
correctly communicated and understood among the layers of the organization. People must be
motivated to do so.
Step 6:
Monitor and Control Performance
– Managers must continuously monitor the actual performance of their work units against
unit's goals and plans: "having lunch", you decided you went to the sandwich shop, then you
measure your experience with sandwhich with your expecttions and decide what could be
improved next time. The same thing would happen when considering a project. You mae a
decision with a repercussion. Professor: "one time I developed a teaching methodology on
some innovation, in terms of how I delivered the contents to my students ---> make the
decision ---> develop this new innovation ---> carry through (compiere, portare avanti)
measure, do some sort of survey, talk to the students, ask for evaluation to see how this
innovation has impacted their learning or looking at the grades of these students. Are they
continually improving? Feedback helps future planning.
Strategy Planning Sets a Long-Term Direction
Strategy
A pattern of actions and resource allocations designed to achieve the organization's goals
When thinking about strategy think about different sports that you like, are there strategy in the
game? Or course. In a game of chess you could definitely see strategy playing a role or a coach
preparing a team on a soccer match.
Strategic planning
A set of procedures for making decisions about the organization's long-term goals and strategies:
what are the procedures we need to make in place to actually guarantee the re-making decisions to
be set on long term goals. Imagine you like soccer, a world cup just finished, what are the goals you
are setting for the next edition? What are you doing, in a country, with young athlets in order to
have a well-qualified number of athlets helping you to win a world cup in the future (long-term).
Strategic goals
Major targets or end results relating to the organization's long-term survival, value, and growth.
In a soccer competition, winning the world cup would be a major goal, going to the quarted finals
would be a goal, going to the final too. But here we have to look at how the sport will survive and
actually thrive within the country, can we do better and better. In business we need to look at
strategicaly and set the goals for the long-run ---> promoting a sustainable growht and fruitful
future.
Tactical and Operational Planning Support the Strategy
Tactical planning
A set procedures for translating broad strategic goals and plans into specific goals and plans that are
relevant to a distinct portion of the organization, such as functional area like marketing. ---> how
does this translate into clear action for the marketing department...how can it translate into a key set
of goal for the IT department, the accounting department...? The vision and the direction into clear
paths to be taken by a portion of the organization or better a functional area of the org.
Operational planning
The process of identifying the specific procedures and processes required at lower levels of the
organziation ---> in a much more operational level, different from strategic level. In the course we
will look at different levels of planning (for example). Operationally, what are we going to do to
achieve the operational goals? Once the broad goal of the organization has been set, there is a
rippling or cascade effect that goes through the organization that comes from a strategic and tactical
level flowing to the operational level.
Strategic management
A process that involves managers from all parts of the organization in the formulation and
implementation of strategic goals and strategies : we are managing the organization in a strategic
manner.
First, establish a Mission, Vision and Goals
Mission
– An organization's basic purpose and scope of operations: why are we in business? Go online
to different companies (as an exercise) and look at the mission statement.
Strategic vision
– The long-term direction and strategic intent of a company
– Provides a perspective on where the organization is headed and what it can become
If you are in a business school, may hear: "we want to become excellent business teachers in our
country". Mission may be something like "provide high quality education to our students in our
nation". Making sure that we continually achieve that goal, as a company.
Second, analyze external opportunities and threats
Stakeholders
Groups and individuals who affect and are affected by the achievement of the organization's
mission, goals and strategies: when we talked about corporate responsibility we thought about
stakeholders who are actually the people involved in the business (employees, society, suppliers,
customers), need to think about the different group of people who could be affected by the
organization.
Third, Analyze Internal Strenghts and Weaknesses
Resources
– Inputs to a system that can enhance performance
– Tangible, intangible assets: some resources can be clear and tangible, some are not. Analyze
what are the things we are doing well and what re those not dong well. Design a desirable
strategy for the company.
Benchmarking
– Process of assessing how well one company's basic functions and skills compare with those
of another company or set of companies: when students receive their grade after an exam,
they also like to see what is the average and what others students got. In this competitive
environment that I am in, how well am I doing? The skilsl that I have, the strengths...how do
these things compare with the otehr things surrounding me?
Fourth, Consuct a SWOT analysis and Formulate Strategy
SWOT analysis
– A comparison of strengths, weaknesses, opportunities, and threats that helps executives
formulate strategy: four SWOT elements... how do they compare among each others?
Understand where we are in terms of business and then we can formulate the corporate
strategy.
Corporate Strategy
– The set of businesses, markets, or industries in which an organization competes and the
distribution of resources among those entities. ---> understand how we are setting our
business...what are the resources that we have, how to allocate them to achieve our goal(s)?
Deal with the issue that we do have a limited level of resources , how to allocate them in
order to achieve the goal ---> the business strategy ---> i.e.
– Low-cost strategy: basically you go to a supermarket without fancy stairs, fancy shelves
and light and after an unpleasant shopping experience you get a bottle of coke spending
less that the other supermarkets. Lowering the price of a product by keeping the same
quality, the same material, and all the same attirbutes.
– Differentiation: yes, it is the same bottle of coke that you buy in a cheap supermarket but
on the other hand it is in a much more pleasant environment, we pack your groceries,
we'll give you bags...it is ok for me to pay a little bit more for this differentiation. There
is not only differentiation of service but also on products...for example we look at a pen
with a high quality standard and we may want to buy a cheaper one but the other one
differentiates from the cheap one by providing prestige and high quality. This is a
strategy a business can take to position itself in a market.
Strategy Implementation and Control
Implementation
– Define strategic tasks
– Assess organization capabilities
– Develop an implementation agenda
– Create an implementation plan
It is a very clear sequential set of steps....how are we going to get there? What are the tasks which
need to be accomplished / the capabilities/when these things will be happening ... these are the
ingredients to implement a strategy.
Review questions
Which hotels use a low-cost strategy to compete in the market place? Which utilize differentiation?
Now thinking about clothing retailers. Can you identify ones that use low-cost and differentiation
strategies?
DECISION MAKING PROCESS
Formal Decision Making has six stages
– Identify and diagnose the problem: think about a bounded rationality from an assignment
in understanding each step , but the first thing to do to be able to make a decision is to
identify ifthere is somethingwhich requires action.
– Generate alternative solutions
– Evaluate alternatives
– Make the choice
– Implement the decision
– Evaluate the decision
The steps are similar to the planning process. It is almost the same thing...
What are the pros and cons that each alternative would generate, then you need to make a choice,
implement it and evaluate from feedback ....what are the negative effect generating from the
decision we made (for ex)
Psychological Biases
Illusion of control
People's belief that they can influence events, even when they have no control over what will
happen: there are some elements of what we call bounded rationality that influnce the DM
process ... sometimes people think that they have more control than they actually do.
Framing effects
A decision bias influenced by the way in which a problem or decision alternative is phrased or
presented: when the problem is presented to you..the way it is presented, the way it is framed, will
that create a bias in yourdecision making? ''don' you want'' different from "would you like" ... these
elements are vital to be understood because they do generate a bias.
Discounting the future
A bias weighting short-term costs and benefits more heavily than longer-term costs and benefits:
you may create an alternative and you choose that because you think that it will immediately solve
the problem BUT it might create problem in the future. Imagine we work in a school and we have
an issue with enrolment, so enrollments are down and youlower the standards of admission so then
you have more people in and you solved your problem...you have the right number. However, if you
lower the standards of admission probably the quality of the student body will be lowered. How
does it affect the public perception of the quality of education we are providing? We solved a
problem in the present but we might have created a problem in the future.
Advantages and Disadvantages of Using Groups
Advantages
– More information improves decisions
– Different Perspectives enhance problem solving
With more people = more information and perspectives.
– Group discussions spur thinking
– May lead to increased understanding
– May increase commitment
Disadvantages
– One person may dominate the discussion and undermine the process
– Original goals may be displaced by less important ones
Because there are two many stakeholders in the DM process it is easy to have someone that
dominates and the other group says "ok...", or you may have discussion which goes to another
direction causing to lose sight of what we want to achieve.
– May lead to groupthink
– A phenomenon that occurs in decision making when group members avoid disagreement
as they strive for consensus (banal example: "let's agree as soon as possible and then
we'll have lunch!" or group wants toavoid conflict ----> dangerous aspect in DM
Review Questions
Have you been in a situation where your group had to make an important decision?
What was that process like?
Was it a positive or a negative experience?
Entrepreneurship
Why people become entrepreneur – Opportunities and challenges when starting a new business
WHY PEOPLE BECOME ENTREPRENEUR
Entrepreneur
Individuals who establishes a new organization without the benefit of corporate sponsorship: key
thing ----> starting a business. If you know people around you that have started a business...it can be
a small business (like catering, small-construction) ---> start from zero and create bus.
Entrepreneurship
The process by which enterprising individuals initiate, manage, and assume the risks and rewards
associated with a business venture.
The level of risk and reward ---> what is the difference between an employee and an entrepreneur?
What are the differences in term of risk when working for a business and running the business.
Develop your own business vs helping someone developing his/her own business. Your hard work
should be paid into rewards in the long term.
Myths and Realities About Entrepreneurship
– Anyone can start a business: this is not necerrarily true because not anybody can be
successful... there are some traits and specific qualities that a successful entrepreneur must
have
– Entrepreneur are gamblers: entr assume a certain level of risk but that does not mean they
gamble ---> risk can be calculated
– Entrepreneurs want the whole show to themselves: it could be true, but successful
entrepreneurs create business when also others within the org are successful ---> it would be
hard to have traits of leadership otherwise
– Entrepreneurs are their own bosses and completely independent: most of the time this is
true, but in other cases, when running a successful business, we will depend on others to
actually get the resources whch allow to achive the goals.
– Entrepreneurs work harder than managers in big companies: it depends on the size of the
company and on the commitment you have. You are going to work hard to be successful.
– Entrepreneurs experience a great deal of stress: if you are a manager in a large company and
you are responsible to manage an entire division or even the entire company...you will
experience stress....a lot of stake of work will create a stressful situation.
– Entrepreneurs are motivated solely by the quest for the dollar: not necessarily true, some
people may be motivated by making money by financial game, but we may also have what
we call "social entrepreneurs" who are motivated to create organizations which will create a
quality of life to people, bringing better standard of living; SO it is not necessarily true that
all entr are motivated by financial games.
– Entrepreneurs seek power and control over other: that is not true...do not need to be a
general or a sort of dictator...successful entrepreneurs are great leader who get people
support them. Some may be seeking power but it doesnt hold true in most of the cases.
– If an entrepreneur is talented, than success will happen quickly: not true ...talent should be
alligned with lot of hard work.
– Any entrepreneur with a good idea can raise venture capital: if you dont have the ability to
communicate the ideas, to show the traits of the commitment you will not raise the capital.
– If an entrepreneur has enough start-up capital, he can't miss (it): that's not true ... a lot of
capital has been lost with unsuccessful businesses. If you have enough capital you can
survive for a certain period of time but at a certain point the business must create money and
start to be self-sustainable.
Inventor is more concerned with the product. An entrepreneur gets the product but also the business.
A promoter won't have creative or business skills and a manager will have the business skills but
not the innovation characteristics.
Review question
What type of entrepreneur can you identify within your local community? A real entrepreneur orjust
a manager? (use the previous picture)
OPPORTUNITIES AND CHALLENGES WHEN STARTING A NEW BUSINESS
The idea
A great product, a viable market, and good timing are essential ingredients in any recipe for
success.
Every business starts with the idea (how many times have we thought about a new idea of product?
i.e. An app for a phone) ... "wouldn't it be great if a product or a service ... people paying money for
that" but an IDEA is definetely NOT a business.
The opportunity
An entrepreneur should consider opportunities in:
– Technical discoveries
– Demographic changes
Think about one of the previous review question set in a class: the aging population in Europe. So
we can think of that and say: how does that create business opportunities? How, for example, a new
migrant population creates new opportunities by entering a new market? People that are aging...can
they create a business opp? We can look at the car market in the United States ---> there are several
brands and the cars are having a revival (ike Dodge, Camaro) , they were born in the 1970s' , they
were called the muscle cars, young were dreaming for them. So the tactic: there is a revival of these
car in the present days so children who were once dreaming for them can now afford them.
In terms of technological discoveries: think about applications like whatsapp or Facebook but not
only in terms of digital technologies, there are also physical products and companies like Dyson
which uses the technology of air movement to go into the fan (ventole, ventilatori) market.
Different businesses can look at opportunities that exist or they may advance in technology that
would provide a better value to the customer. Why not considering the demographic change? With a
closer look at the population getting holder... there can emerge bus opportunities.
– Lifestyle and taste changes : the example of automobility in the US is valid for this
explaining purpose
– Economic Dislocations: crisis can bring opportunities and also changes in economy
– Calamities
– Government initiative and rule changes
– Franchising
When you have something like an earthquake or a major disaster, at the end of the day there could
be some needs that, despite of the hardship of the situation, some entrepreneurs might see
opportunities for that. If reading the latest paper there is to find out the issue of Brexit in the UK
and how that is actually affecting the local market but at the same time (reading the BBC) in an
article is said that Berlin, for example, attracts high-skilled labour that is in London to move in
Berlin and create a cosmopolitan multicultural hi-tech environment over there.
Models for E-Commerce
Transaction fee model
– Charging fees (prezzo) for goods and services: in E-Commerce you have a big issue: “how
do I make money?”. Say, i.e., I am going to be offering information about the weather! …
Would people pay for that? I need to find things that people are willing to pay for or even to
sponsor it. In this case, though, we are simply looking for a fee : providing information or
else offering a song (like a shop)
Subscription model
– Charging fees for goods and services : the difference between these two models ---> imagine
going to Netflix, this works on a subscription model so you pay a monthly fee to Netflix and
that allows you to access the content. Imagine Netflix decides to rent or sell movies --->
downlaod the movie and you'll pay a fee (transaction model). In a subscription model you
pay a flat fee. In any case there must be clear stream of revenue for our business.
Advertising support model
– Charging fees to advertise on a site: thinking about people willing to advertise your site and
getting money of them: an example, if you have a website which provide information about
restaurant. Well, people would not want to pay for that information, however other
restaurants would be happy to pay money to you to advertise on the site. Other restaurants
perhaps want to expose their businesses to people who want to go to restaurants. In
electronic commerce most people would like to access information for free but if you have a
website as a business you can not provide that information for free because it costs, someone
has to pay somewhere. What is the mechanism? The advertise support model.
Intermediary model
– Charging fees to bring buyers and sellers together: we can think about Ebay , we get a fee
when we finish an auction or when we are selling a product, the other thing we can think
about is Travel Websites where we can buy tickets from London to Washington DC, there
are websites like Expedia ---> that is bringing us and American Airline together and we get a
fee for this transaction...could you buy directly from American Airline? Yes of course. So at
the end of the day, the website which is working as the intermediary between the company
(providing the services or the good) and the customer on the other side. It is important that:
whenever designing a new app it is essential to design a clear revenue model to run a
successful business
Affiliate model
– Charging fees to advertise on a site: this is another possible arrangement to create a positive
stream of revenue for our business.
Logically, models can be combined: a cable company ---> you have subscription then we have
access to certain tables of content = if you want to have the new released movies you have to rent
them. There can be also the advertising model or the affiliate.
What does it take, Personally? (to be an entrepreneur)
– Commitment and determination: if you are not determined in making a successful business
… it will not succeed! Successful entrepreneurs have a cear high level of commitment and
determination
– Leadership : you need to be the captain of that ship! If you don't portrait a trait of
–
–
–
–
leadership it is unlikely to become a successful entrepreneur
Opportunity obsession: need to be obsessed by opportunities .. need to constantly scanning
the environment, and try to understand where are opps to improve your business... opps to
expand your market … opps to create new products or services … to get new clients … to
hire somebody that can contribute to our business. Need to be absolutely obsessed to find
opportunity and sometimes creating them.
Tolerance of risk, ambiguity and uncertainty: The difference between somebody on a salary
and somebody running a business: The first is expecting that at the end of the month he/she
will receive our salary. Somebody running a business, well he/she doesn't know! It depends
on how much work you had, hoe much revenue come in, the costs. We imagine that within
business plan all those things will be aligned but the key element here is that at the end of
the day we will be looking at different levels of risks and we need to be tolerant to them.
There is a difference also between somebody who puts into the stock market and somebody
who puts into the saving account, there is different level of tolerance to risk.
Creativity, self-reliance, and ability to adapt:
Motivation to excel (trust in your ability to deliver)
Failure happens, but you can improve the odds of succes
– Anticipate risk : scan the environment and being able to foresee if something could threat
your business nd that allows you to prepare for that
– Consider the role of the economic environment: it depends on the products or services you
are providing . For example we are providing luxury items, if the economy is not going well
it is unlikely that people would spend money on those items (disposable income)
– Utilize business incubators: widely used since they provide a support framework and also
the networks that are necessary to build a successful business as in many cases also the
mentorship, this is when people who have successfully created their business can deliver the
need support.
– Realize there are common management challenges: challenges on both multi-billion
corporation or small family-owned businesses , it is natural to have challenges.
– Going public with an initial public offering (IPO)
Planning
– Business Plan
– Opportunity analysis (perform a SWOT analysis to get an idea of the opportunity in fron of
us … Planning = How can we achieve our goal?
–
The people which form the business but also those who support it. The factors surrounding the
viability of the new venture you are going for. But also the environment and the competition inside
of it. All these factors need to be analyzed to find the real risk in our new venture and actually what
is the potential reward.
Nonfinancial Resources
– Legitimacy
– Networks
– Top-Management Teams
– Advisory Boards
– Partners
– Social Capital
We do not only need money. The advisory board → provides inputs or strategic guides to have a
broad strategic direction of the business. Those are also vital resources for a successful business.
Build Support for Your Idea
– Clear the investment with your immediate boss
– Make cheerleaders who will support your idea
Intra-preneurship ---> starting the project within the company.
– Horse trading for support time, money, and other resources
– Get the blessing of relevant higher-level officials
We are going to start a new research centre in the university. The center is a venture, standalone,
initiative...who am I to work with? Who can support this? I have to negotiate resources with
different people … need to make me sure have high level support. We need to have the right
political environment to succeed. The political role in the UK can play an important function in the
new business formation.
Building Intrapreneurship in Your Organization
Intrapreneurs are new-venture creators working inside big companies
Managing Intrapreneurship is Risky
– Falling to foster intrapreneurship
– Over-reliance on a single project
– Spreading intrapreneurial efforts over too many projects
We are in an university, for example, and we are trying new projects. Firstly we need to make sur
we foster intrapreneurship and we provide the environment for people to grow into the
organization...could be a new project, an innovation center, doing something for students (in uni
context).
Review questions
Assume you are planning on opening a restaurant in your local community. Before taking the
plunge, you go to work for a competitor, gleaning as much information about what works and what
doesn't
Is this ethical? Why or Why not?
Organizing for success
Organization structure – Coordinating work
ORGANIZATION STRUCTURE
eACH OF THE BLOCK WILL BE ASSIGNED A FUNCTION AND BELOW we can see the
reporting line (reporting to the above layers). IT allows us to understand what are the functions and
what is the hierarchical level. After a process of planning we create an aspect of function and
organie the work.
Mechanistic organization
A form of organization that seeks to maximize internal efficiency: really set as a machine, each part
has a specific function. There may be different arrangements and staticism
Organic structure
An organization form that emphasizes flexibility: a higher degree of dynamism
Differentiation
An aspect of the organization's internal environment created by job specialization and the division
of labour. When you specialized and divide labour...look at Mc Donald's fastfood... look at the
structure of the store, how it works. Each person is assigned a specific function (prepare the salads,
assembling the hamburger, packing, delivering the good). All the stages from the time you make the
order until you receive it in a store like that ---> there is a number of people involved in the process
of delivering the good. The task is divided into many specialized functions.
Integration
The degree to which differentiated work units work together and coordinate their efforts: the earlier
example bears a high level of integration, another example is when you do not have integration.
One way to integrate companies, for instance, is to use an information system by allowing the flow
of info between the different units to improve the level of integration and coordination.
Differentiation is looking at the job which has been specialized, while the other considers all the
other parts which can be put together to produce the good we are looking at.
In the right graph there is one individual at the top and a lot of individuals directly reporting to him.
On the left, reporting will span within different degrees ---> narrow span of control.
Review questions
Over the past few decades, many companies have flattened their organizations, reducing the number
of hierarchical layers. This often results in broader spans of control for many managers.
How can an organization best prepare its managers to assume these new roles? ---> orgs used to be
much ore hierachical (like a pyramid structure), by flattening we'll have less level of reports. That
can be a challenge because there would be more people reporting to a single individualat the top of
the hierarchy.
COORDINATING WORK
Integration Coordinates Employees' Efforts
Coordination
The procedures that link various parts of an organization for the purpose of achieving the
organization's overall mission: similar to the concept of integration --> we have to look at the
different procedures that should be working together. One example is actually looking at an
orchestra, the maestro is coordinating when each instrument should be in or out, what is the rythm
of the song. Each part of the organization, basically, working together to achieve the common goal.
Authority and Delegation
Authority
The legitimate right to make decisions and to tell other people what to do: from the position that
you have you can tell "please do this or d that". Think about a supervisor of a construction site --->
this person can assign a worker and say: "this person is going to be mixing concrete" ... he/she has
the authority to tell the person what to do.
Delegation
The assignement of new or additional responsibilities to a subordinate: when delegating things
means that we are giving the power to somebody else (a responsibility level to do a job). For
example I could ask my assistent to upload the grades of my students to the university website. I
have the authority to do so. If they won't do a good job that would be reflected on me.
Responsibility
The assignment of a task that an employee is supposed to carry out: once delegating a task the other
person assumes the responsibility of that task ---> he/she is in charge of doing this.
Accountability
The expectation that employees will perform a job, take corrective action when necessary, and
report their performance: once the assistance is responsible for the task that has been delegated, I
will be accountable ---> there is an expectation that the grades will be uploaded, within a certain
time (in a day or two i.e.), but also the right grade will be assigned to the right student. Who is
accountable for the mistakes? The assistance. The cashier in the supermarket has the duty to receive
payment for the goods sold in the stores, if money is actually missing from the balance of the day,
the cashier is responsible for that loss (depending especially on the rule of the country or the
community).
Decentralization spreads Decision-Making Power
Centralized organization
An organization in which high-level executives make most decisions and pass them down to lower
levels for implementation: in a centralized org there are few people grouped who most of the time
make the decision.
Decentralized organization
An organization in which lower-level managers make important decisions: the key difference here
is the extent to which we have the decision making responsibility and of course at the same time
accountability, stretched (?) to the organization. The level of empowerment on lower level managers
will be much higher than on a centralized organization.
There is the CEO and different departments, these represent a function of the organization. We can
think both as division of labour (a person doing one job) and as the functional structure ----> let's
look at the marketing department and the IT department. The marketing dept will be responsible for
adv and sales ---> the marketing effort of the company. On the other hand the IT department will be
useful for the implementation, training, support of the information Tech that is used to run the
business. H&R will be responsible for hiring, counseling (consulenza).
Advantages of Functional Organizations
– Economies of scale can be realized: we have specialized sectors and those provides
economy of scales to the organization because we have a certain level of expertise there.
– Monitoring of the environment is more effective: by having people experts in different areas
and in different functions it is easier to monitor the env … especially the internal one. Let's
think about medicine: the human body is a system...we have a doctor specialized on lungs,
another one on heart, digestive system and so on … ---< different functions or rather
different organs of the human body. (there can be a main doctor specialized in a holistic
view of the subject but...) the same fundamentals apply to business.
– Performance standards are better maintained: of course if we have experts that are qualified
in what they are doing there is a higher level of standard as a consequence. A person knows
IT and so can provide a good service on that. Somebody else knows marketing and can
provide good services on marketing. These things work together because they provide a
much higher level of understanding.
– Greater opportunity for specialized training and in-depth skill development: providing a
better level of skills for each part of the organization...we do not have to do it all (!); we
need somebody having technical and managerial skills that are necessary to deliver the job.
– Technical specialists are relatively free of administrative work: if we need to do technical
work we have to do that. Mixing technical work with administrative work can be very
dangerous because the span of quality could be extremely high and at the same time the
level of expertise...so you do well one thing or the other. However sometimes if we have an
IT department we may have technical skills but working as a manager. It is important to
assign the right job to the right set of skills.
– Decision making and lines of communication are simple and clearly understood: the CEO of
the company and say the vice-president of marketing will be reporting and people would say
market analysis and so forth. We have a clear line of report. So when the CEO asks the
marketing VP, “how are we viewing our market analysis?”. With a clear org structure, the
lines of communications are very clear and well understood.
Divisional Organizations Develop a Customer Focus
Divisional Organization
Departmentalization that groups units around products, customers, or geographic regions: creating
units that will be around a common thing : let's look at an example (think about the company is
Mitsubishi in Japan)
Division of heavy equipment (A), Electronics (B), Car manufacturing ©, Consulting services (D).
Each of the unit works in a separete business. Each dept can provide a certain level of advantage
---> specialized in different types of product ---> economy of scale.
Matrix Organizations The Best of Both Worlds?
Matrix organization
An organization composed of dual reporting relationships in which some managers report to two
superiors – a functional manager and a divisional manager
Advantages of a Matrix Design
– Cross-functional problem solving leads to better-informed and more creative decisions
– Decision making is decentralized: by having the crossover between projects and functions
and that will create a much larger spread of the accountability, the responsibility, and
actually the authority within which the decision making is done.
– Extensive communications networks help process large amounts of information
– Higher management levels are not overloaded with operational decisions
First we will have a more effective communication across divisions and functions because those
project will kind of re-unite them. For instance, if there is some technological breakthrough
happening in the automotive division, the heavy machinery division can also profit from there
because they may share the same features into a project. This optimizes some level of the DM and
at the same time it specializes the level of strategic operation which does not repeat in the
organization.
– Resource utilization is efficient: achieved through effective economy of scales
Network Organizations Are Built on Collaboration
Network organization
A collection of independent, mostly single-function firms that collaborate on a good or service: a
new kind of organizational structure:
Each of these businesses are built on the idea of collaborating so what the managers/brokers will do
is to look for the expertise, the capacity and the affordance generated from those specialized
businesses (depending on what we are looking at), we are actually bringing them together.
Learning Organization
An organization skilled at creating, acquiring, and transferring knowledge, and at modifying its
behaviour to reflect new knowledge and insights: create an org with the idea that the knowledge
acquired at some point is then transferred throughout the whole organization. Sometimes this is a
big challenge for big organizations. In the Mitsubishi example: how hard is for an idea, generated in
one department, to go to other part of the org. It is not easy … the lines of communications
something inhibit the information flow. The task is to absorb the knowledge and disseminate it.
Agile Organizations Focus on Customers
Total Quality management (TQM)
An integrative approach to management that supports the attainment of customer satisfaction
through a wide variety of tools and techniques that result in high quality goods and services: it
started in the automotive industry ---> how to maximise the quality of the product, what techniques
do we have in place to deliver a high quality car. Try to find an approach that integrates org, for the
design of the deliver and with the follow up of the car ---> a high standard of quality.
Organizing for Flexible and Speed
Lean manufacturing
An operation that strives to achieve the highest possible productivity and total quality, costeffectively, by eliminating unnecessary steps in the production process and continually striving for
improvement:
earlier in the course we discussed about the work of Frederick Taylor when we saw the motion
studies ---> there are clear links to lean manu. There can be a peak in productivity....whatever we
are doing is cost-effective and we are eliminating unnecessary steps to deliver the best possible
product at the lowest possible price ---> the product must be competitive. Think about this: how can
we continually improve and how to remove things that do not add value to our customer.
Just-in-Time (JIT)
A system that calls for subassemblies and components to be manufactured in very small lots and
delivered to the next stage of the production process just as they are needed: this also came up from
the automotive industry … what it did was actually let us understand that inventory costs and it can
also create issues of quality and so on. In order to assemple a car we have to rely on a very complex
system, among the different parts of the system you will have the car seat---> so we will have the
assembly line going and the seat actually installed in the car. Normally automotive firms do not
produce the seat, the normally buy them from affiliate companies which produce them. So the seat
has to be manufactured, delivered and the installed into the car --->what are the costs of doing so?
First we need labour (the seat from the warehouse to the assembling line), cost of maintaining the
warehouse (admin costs, real estate costs, maintenance costs). With the JIT system, by the time we
see that it has been produced and that seat is installed in the car, the seat may arrive at the factory
within 20 minutes before being installed, so the big warehouse can be gone, all the cost that we
have there can be cut, and the quality of the product can be even better because by using, i.e.,
information systems you can predict the production, we can customize it by predicting what kind of
seat will go into that car, so we can have the seat when we need it. The entire production becomes
leaner and by having small batches (lotti) we are more able to control the quality
Review questions
At which level of management the following decisions should be made?
– Determining the size of dividends to be paid to shareholders
– Deciding whether to approve an employee's request for vacation time
Think about a general org structure, and think about those two decision suggested here … at what
level of management should they be done? At a strategic level? A middle level? A more operational
level? Which hierarchical level? Common business decisions....in what function would they be
made?
Managing Human Resources
Staffing the Organization – Training and Developing
STAFFING THE ORGANIZATION
Human resources management (HRM)
– System of organizational activities to attract, develop, and motivate an effective and
qualified workforce: need to attract, maintain, improve the skill set and the effective
qualities of the people working into an org. Creating an effective and profitable business
– Also known as talent, human capital, or personnel management: the same function has been,
through years, made a little bit more functional (human resource management). Tries to
reflect a change in terms of seeing people in term of resources...but more complex than raw
material ---> human.
Competitive intelligence function is similar to HRM scanning the environment. Any business
process requires planning, execution and evaluation. The main business skills of the course are
replicable to every part of hte business.
HR planning
Demand forecasts
Determining how many and what type of people are needed: let's thnk about a production line: we
have a product which is affected by "seasonality" which means that it sells more in a certain period
of time in comparison to other periods of time. In US we could think about christmas trees (real not
plastic), the product has a very specific life span and is sold in a very specific time of the year, and
an entrepreneur starts a new business by seling xmas trees. Now we have demand of workers: how
many peopledo we need? We need people who are able to sort those trees and re-sell them (another
company cares about cutting them), there would be different function. What is the time of the day
we are going to sell more tree? Day or night? When do people start to buy trees? What are the peak
times? Available information which allows us to think about the demand forecast.
Supply of labour
How many and what types of employees the organization actually will have: once seen the demand
forecast --->what kind of people do we need? For ex we need to get people who are strong in order
to get the trees from the truck, orothers who have good sales skills (interacting and communicating
well with customers) : we need to analyze the supply of workers
Job analysis
A tool for determining what is done on a given job and what should be done on that job: when you
hire somebody you hire s. For a specific task. In a xmas tree shop, for instance we are looking about
the planning, what is the demand for labor? What the supply of l that will fulfill that demand? What
are the things that need to be done on this job? Look at the responsibilities that the individual
should have.
Staffing the organization
Recruitment
– The development of a pool of applicants for jobs in an orgnization: trying to attract people
and say go and work here. Professor works in management of information systems so when
looking an IT company, which is specialized in providing IT based resources. One ofthe
vital thing is the ability to develop or to attract a pool of applicants with the best skills
possible.
– Internal, external (point of view): imagine that somebody leavesthe company or somebody
is retiring, we have two options: we can look at the upper level management position and
this person is retiring. Option 1: we can recruit internally --> moving a manager to a new
function or somebody who was a subordinate of the retired, so can be promoted. Need of
course to have a similar skill set in order to occupy the new position. We can both look
internally and externally (recruiting externally and award the position to the person which is
the most suitable for it). These two point of views need to be evaluated at the stage of
changing.
Selection
Choosing from among qualified applicants to hire into an organization: here is trying to basically
pick and choose who we are going to give that position. The selction process should normally be set
on a set of criteria. Before starting interviewing people, we know what skills, what traits we are
looking into the individual. They come from the job description, and that would give the ideal
profile of the invidudual we want to hire.
Strategic Human Resources Management
– People create value
– Talent is rare
– Difficult to imitate
– People can be organized for success
If we think at the human resource function strategically, the first thing we have to think about is the
people in the organization who yield value. Try to evaluate the different components of the
orgnization, in term of labour, why do they stand out? They may stand out for some quality/traits,
they can be highly productive, capable, motivated, skilled and so forth. The key thing is: are we
seeing they are creating value in the value chain of the organization? In some specific area the
demand of some talent can be higher than the supply. When a talent is rare sometimes it is hardto
replicate it. We can acutally provide the right aspects of training development and motivation to
actually help these people to succeed. These are way to think about HR in a strategic manner.
Some ofthem are psychological and psychometric tests which help us to understand the types of
trait that the individual has. Allows to identify something that will be important to be known...in an
interview people will be honest to us. Travelling around the world makes us able to see different
recruitment styles --> some tasks are relied more in some countries than in others. It does regard on
the legislation of the country. If we want to attract the highest possible number of people into the
organization we actually try to learn as much as we can about an individual to ensure that when
hiring we are making a good decision. A good fit between the skill needed and those offered by the
individual.
Interviews
Structured interview
Selection technique that involves asking all applicants the same questions and comparing their
responses to a standardized set of answers: normally it can come as a script ---> asking people
exactly the same things. (tell me a bit about yourself, your qualities, what can be improved) I am a
hard worker and good with number ---> well, best position would be accounting (for example).
Somebody else can be more flexible.
Situational interview
– Focuses on hypothetical situations: imagine you were facing with this decision ... what
would you do? This create an hypothetical situation involving a certain degree of DM. What
is the behaviour of the individual?
Behavioral description interview
– Explores what candidates have actually done in the past: "tell me something that happneed
in the past, and what did you do? Did you anytime confront yourself with an ethical
dilemma? ... So what did you do? The idea is trying to see what kind of action and
reasoining the individual has done.
Selection Methods Must Be Both Reliable and Valid
Reliability
The consistency of test scores (punteggi) over time and across alternative measurements: the
instruments we are usings (interviews or task) must be reliable and consistent, must be an accurate
way to capture and measure the thing we are trying to verify. Are the traits we are looking for
matching the skills of the interviewee?
Validity
The degree to which a selection test predicts or correlates with job performance: to what extent this
instrument is able to really predict the behaviour of the indivdual or the job performance. Making
sure we are predicting that the individual we are hiring will bring a good return to the organization.
Review questions
Some companies are now asking applicants for access to their Facebook account as part of the
background check.
Do you belive this is appropriate? Why or why not?
Social media is playing a vital role in many people's lives as people disclose many various and
important information on social media. Some companies request applicants to provide their FB
username and provide a certain kind of access. Is this ethical? Can a company really have access to
that private information?
Whenever they post a line, what are the potential repercussion that this may have?
TRAINING AND DEVELOPMENT
Needs assessment
An analysis identifying the jobs, people, and departments for which training is necessary: what
people are coming to the company? With what skills are they coming to? What kind of training do
they need in order to perform well? If we are adopting a new technology for example, the adoption
of it...how much train would be needed for this new issue? Who requires an improvement?
Professor is now looking at issues, affiliated with companies, of cybersecurity and the so called IG
training meaning there is a need for an increased level of cybersecurity so therefore we need parts
of it which are not looking at just the system but absolutely looking at what are the skills set that the
workers should have to ensure that the organization has strong Cybersecurity block.
Training
– Teaching lower-level employees how to perform their present jobs: somebody is hired in Mc
Donald's and he will be assembling hamburgers. There is an order of how the hamburger
should be assembled.
Development
– Helping managers and professional employees learn the broad skills needed for their present
and future jobs: when looking at development we look at managerial level where broad
skills are provided that will be needed in currrent but also in future jobs.
Training options achieve many objectives
Orientation training
Training designed to introduce new employees to the company and familiarize them with policies,
procedures, culture, and the like: professor moved from New Zealand uni to US uni, so the context
was different. In every country's university the most important thing is that prof received
orientation. Advisors providing the prof with an overall view of how things worked overthere.
Operational information can be understood but also a little bit of the ethics.
Team training
Training that provides employees with the skills and perspectives they need to collaborate with
others: we can do exercise for bonding and creative a more collaborative environment and so on so
the thing here is trying to get people along with each other ----> better not doing things alone ...
Diversity training
Programs that focus on identifying and reducing hidden biases against people with differences and
developing the skills needed to manage a diversified workforce: in countries which have a high
level of migrants you have for example a workforce with people from different background,
different race whatsoever ---> help people understand diversity and how to maximize the
advantages of having a diverse workforce working for us.
Performance appraisal (PA) : Assessment of an employee's job performance: how can we actually
increase the performance of an individual? The first thing to do is appraising that performance --->
need to understand the goals set for that individual ---> by understanding the previous performances
we can readjust the current perspectives on them. If we think about the Performance appraisal in a
systemic view (of how the process work) it provide that measurement (feedback) which will lead to
continuaous improvement of the individual qualities and performance.
(so normally) What is appraised?
– Results
– Behaviours
– Traits
How is this person basically performing? Quantifying the dollars created by a sales-person. i.e., we
can easily quantify him/her over the dollars he/she sold. But there are also tangible criteria of
evaluation. For example a person can be disrupting the team and be very abrasive to others so we
can evaluate these traits. If the person is just bringing in money that person can actually be creating
some issues with others. Need to balance the binary evaluation of performance by actually
transforming it to a more holistic evaluation of the individual: is he/she actually collaborating with
others?
Purposes
– Administrative
– Developmental
Trying to understand in this case why are we appraising...just for admin reasons? Just because it is
parts of a norm or a required legislation? This from the admin point of view. On the other hand also
look at the performance appraisal for the developmental point of view: saying to John, for ex, you
are doing well here and here and you are not doing well here and here...so John, keep on doing here
but here there are margins to improve. There are opportunities to weight out things and basically
understand how can we improve them. Getting the feedback and try to maximise it, let individual
grow in the organization.
Who should do the appraisal?
Managers and supervisors are a traditional source of appraisal: traditionally in most companies the
appraisal is actually done by the superior or the person we are reporting to. We look at the
university, we have the faculty then the department chair, we have the dean. So the appraisal of the
faculty will be done by the dept chair and the appraisal of the dept chair will be done by the dean
and so forth. The line of reporting we looked earlier on the organizational structure is essential to
understand this.
360-degree appraisal
Process of using multiple sources of appraisal to gain a comprehensive perspective on one's
performance: a holistic view of people ----> try to appraise the performance of the individual not
only from the superior of that person but also by people at the same level as well as from
subordinates ---> we're trying to bring input: how do you think the manager is doing his job? And
so on. Of course there are ups and downs because we may get some biases from different parts of
the divisions but at the same time can provid rich info from the developmental point of view.
Pay Structure
Structure must consider
– Internal factors
– External factors
Thinking about this...how much do we reward...how much do we pay that individual. That should
be determined by internal and we can fear that because this could create a relationship problem and
can affect job satisfaction among people but also we need to be sure we are competitive in the
market which means that the amount of money we are offering is in line with the market. With
certain qualifications and skills we are pretty sure we are offering the same level of pays. We need
to understand the internal and external env to make sure we are rewarded at the righ amount.
Review questions
Have unions outgrown their usefulness in the modern workplace?
Why or why not?
When thinking about labour relations and pay scale and appraisal or performance , think about the
roles that union plays with some of the benefits that unions can provide. Unions were mostly
created during the industrial revolution to give workers a bit more rights to balance the
considerations between labor and capital. Henc think about the legislations in our country, are the
unions still something goods or have just outgrown their usefulness.
Managing Diversity and Inclusion
Introduction to diversity and inclusion – Managing diverse organization
INTRODUCTION TO DIVERSITY AND INCLUSION
Diversity and inclusion initiatives
– Two distinctive sets of diversity and inclusion activities in which organizations engage:
when talking about those two things what we think about is the workforce, understand that
the world has changed and there is actually possibility to leverage competitive advantage in
having diverse workforce in our company. It is also convenient to look from the point of
view of social responsibility to have inclusion in the workforce, making sure that every
person in society has a chance to have a job and to be productive and also be part of the
productive system of wherever they live.
Diversity management
– Proactive in nature
Affirmative action programs
– More reactive and focus on compliance
When we are talking about a more diversity management it means that we proactively understand
the demographic change in society and we manage them. For ex we include group that normally are
not present in the company. Ex we run an engineering company and we are in a group of
counselling and probably here there is a gender bias, or a race bias, or an age bias, cultural
background, religion...we proactlvely strive to create a more diverse environment in company.
Most of the times when we talk about affirmative action programs it is a reaction in most cases to
comply to legislation or to policies that are in place. We have to comply (obey) to certain rules. In
some country we may find there is a complying issue or a complying requirement that a certain
percentage of the workforce we are hiring must be of a certain race or gender. These countries
account for the historical and political facts that bond the society. One is more proactive so it means
it would embrace more diversity and inclusion, while the in the other one we are just complying -->
so diversity can come to the organization by these two means.
Diversity management
Involves basic activities as recruiting, training, promoting, and utilizing to full advantage
individuals with different backgrounds beliefs, capabilities, and cultures: first step is recruitment
----> how can we recruit in a very inclusive manner? Training: helping the workforce in company
understanding the advantages that a diverse workforce can produce, for ex in some companies
issues like discrimination and sexual harassment can arise, so a kind of training can address to these
kind of things in order to have a very harmonic workforce.
Affirmative action
Special efforts to recruit and hire qualified members of groups that have been discriminated against
in the past: in a particular country there will be historical reasons that certain groups (femals,
african american, hispanic, migrant population), which in the past have been discriminated, we are
trying to equate that discrimination and so we are more proactively recruiting qualified members.
The key thing here is that we are not giving a change because that person is "different", but we are
looking at qualified members, a way to create a more EQUITABLE society so governments will
make it right from the past errors. Those pople were discirminated in the past even if they were
qualified.
Each one of these groups was, in history, discriminated against gaining a place in the workforce. By
actually creating diversity program we are actually including them and we create a competitive
advantage.
Even these, in the past, were not hired. People with certain sexual orientation, for example, could
not be included in certain jobs. Think about the military ... would they accept homosexual oriented
people? We talked about ethic and morale, so consider those things that need to be taken in place to
understand how the initiatives allign with the environment but we are sure that we are doing
something good to the people, at the end of the day.
From the above picture, we can look at different types of harassment, one type is very known
through the media are issue regardng sexual harassment (somebody in a position makes a move):
this normally happens in a hierarchy when somebody who has power makes the other individual
unconfortable. Those are things that should be not present in the workplace, the individual must be
free of these kind of issues. Then policies are created whether it is for sexual orientation, race,
religion, it is not something that we will accept and there is due course action against it. When the
complaint comes to light this derives from the ability to make people safe enough to make such
complaints. The individual could be considered guilty beyond reasonable doubt which means there
must be certainty of guilt.
Minorities and Immigrants
In the U.S. Black, Asian, and Hispanic workers hold more than one of every four jobs.
US is a country based on immigration. People are migrating to US for the last 500 years. Inhistory
these groups were discriminated even through policy or law or even culturally. The demographic
composition of the country has now changed and now, every 25% of the workforce of the US
consists of "diverse" workers. Even in the EU, there is the need to include the new population into
the owrkforce.
– Foreign-born workers make up more than 16 percent of the US civilian labor force. About
half of these workers are Hispanic, and 24 percent are Asian: Most of the prof''s university
collegues were born outside the US. Large portion of u population working there wil be of
Asian ad Hispanic background. For ex if we look at IT there is a significant amount of
migrants coming from India because they have skills in that area. So we can notice the
influx coming into specific areas sometimes.
Tomorrow's workers will be more varied than ever
By 2018, it is estimated that one out of three workers will be aged 55 or older: people would keep
on working until the age of 70/71 . What are the cause of this change? According to the country
where we live in, we can notice the longevity of the population and the number of people in the
"older bracket" (that may change the legislation so the retirement age will go up) ---> this will also
bring diversity, we will have people from young age to old age working together.
– Entry-level workers for some positions will be in short supply
– 70% of workers between 45-74 intend to work in retirement
In terms of diversity we can see that even though people retire they still want to keep on working.
Sometimes it could depend from economic factors like the 2008 crisis, depending on the country's
social welfare system that impacted people's pènsions and their ability to go on retirement; but
sometimes they enjoy working so they continue to do so, but on the other hand some entry-level
positions will be in short supply because the position have been filled for a longer time. If we look
at academia and in particular areas, such as chemistry and so forth. We will see the number of
position opening being lower than in other areas than it used to be...that's because hte age of
retirement of professors in that particular area will be changing in the next few years.
– To prevent an exodus of talent, employers need strategies to help retain and attract skilled
older workers: think about this, part of the organizational knowledge will leave if an old
professor retires form the scene. What kind of strategy can we actually do to hold them in
the company?
When we talked about DM earlier, we talked about how group DM can be positive for an org. A
positive outcome will be created. If the group is diverse we can also create a positive outcome. Why
is that? Because what it does is creating an environment with different prospectives that can
leverage a higher level of innovation and creativity. Or better, if we are doing business
internationally we can look at people who have backgrounds in other countries and that can be
absolutely ASSET to us in terms of the group ability to do the process.
Prof deliver the example of his life in many nations ---> he can speak several languages ---> so
there is an Asset for his employer to have prof in a structure because the multicultural background
yields competitive advantage to the organization.
There may be countries with a shortage of qualified skills. The IT example ---> in some countries
the demand for qualified IT jobs is higher than the actual supply into the internal market so we need
to go overseas to recruit. The new people recruited need to settle in the new country and in the new
job. Need to create alternative arrangements. Creating flexibility.
Review question
How is workplace diversity affected by an organization's recruiting, selection, orientation and
training?
How can HRM affect the level of diversity in the workplace?
MANAGING A DIVERSE ORGANIZATION
There is a competitive advantage in this activity but it comes with certain disadvantages.
For example we hire somebody who speaks the local language as the second language, sometimes
could create issues with accent and understanding local slang. Somebody with a wheelchair can be
extremely capable of doing a lot of jobs but we will need to adapt things to this matter ---> the
access to the building must be feasible to the person with wheelchair , need to look at the settings in
term of desk and access, or safe facilities like toilet (structure issues). What about religion? For
instance, somebody won't work on a certain day or require them to pray a n° of times a day. Those
things need to be taken into consideration in order to have a feasible outcome. Let's now look at
different types of organizational settings:
Monolithic organizations
An organization that has a low degree of structural integration – employing few women, minorities,
or other groups that differ from the majority.
Multicultural Organization
An organization that values cultural diversity and seeks to utilize and encourage it:
Pluralistic organization
An organization that has a relatively diverse employee population and makes an effort to involve
employees from a different gender, racial, or cultural backgrounds: beyond multicultural ---> not
just looking into the culture but it is going also in involving and celebrating people with different
race and backgrounds.
How organizations can cultivate a diverse workforce
– Securing top management's leadership and commitment: essential that top management
believes in that. This kind of beliefs and initiatives must become part of the culture
throughout the organization.
– Assessing the organization's progress toward goals: assessing the goals towards more
diverse and pluralistic schemes of organization (a higher level of integration). What are the
goals we want to achieve in terms of this? We look at the percentage, at what the people
represent in our workforce.
– Attracting employees
– Training employees in diversity
– Retaining employees
Important to understand how to leverage diversity and how to celebrate it, but it is also important to
attract employees from a different background but also to retain them. In some IT companies the
level of hiring women ca be high but not as much as the level of retention which is low. Instead, we
need to make sure we're doing both things.
Managing Across Borders
Expatriates
– Parent-company nationals who are sent to work on a foreign subsidiary
Impatriates
– Foreing nationals brought in to work at the parent company
This is when we have international companies and we have people movements. From Fiat (parentcompany) to foreign subsidiaries in Brazil or Mexico for instance.
Host-country nationals
Individuals from the country where an overseas subsidiary is located
Third-country nationals
Individuals from a country other than the home country or the host country of an overseas
subsidiary
Ethnocentrism
The tendency to judge others by the standards of one's group or culture, which are seen as superior:
some groups believe that they are doing the right thing ...
Culture shock
The disorientation and stress associated with being in a foreign environment: when people move in
a different country sometimes we could experience a certain level of c.s. For the process of people
doing things ...
What are we doing here? Explaining well and delivering a high support network ---> setting people
to succeed.
Hofstede's Views of Cultural Differences
Power Distance
The next extent to which a society accepts the fact that power in organizations is distributed
unequally: is some countries hierarchy is clear and people accept that, so the power is not distibuted
equally. But in other countries the role of being a boss may be different.
Uncertainty avoidance
The extent to which people in a society feel threatened by uncertain and ambiguous situations: the
uncertainty level would be different from Italy to Japan, Japan has more predictable society and
people feel confortable with that. In Italy uncertainty is just a fact in life in many incidences so
people deal with that differently.
Individualism/collectivism
– The extent to which people act on their own or as a part of a group: for example in Japan
people are much more group oriented while in America they are much more individualistic.
It is not a matter of being worse or better ... this behavior can bring advantages and
disadvantages.
Review questions
Many organizations require diversity training for all employees
Do you think diversity training reshapes the attitudes of employees?
In what ways?
Do we think this diversity training is actually effective? If it is, in what ways? What can be done
otherwise? Try to figure out how diversity training can be re-shaped in a different manner.
Leadership
Leaders – Developing Leadership
LEADERS
Key leadership behaviours
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Challenge the process : common leaders' behavior. Challenge the process is one of them --->
is it right? Can we imrpve it ? Can we challenge the status quo? Not for the sake of it, we are
not afraid of challenging things that are accepted.
Inspire a shared vision: ability to communicateand inspire...buy in a common vision...let's
make this the best company, the most profitable. Leaders would have that ability. Trait of
leadership can be found in a teacher inspiring pupils to learn.
Enable others to act: a catalyzer that enables other people to develop and to take action
Model the way: serving as a raw odel and at the same time making the path and the direction
we should be going
Encouraging the heart: these trait can be crossed with some other aspect we saw like
entrepreneurship.
Vision
–
A mental image of a possible and desirable future state of the organization: what that
menas? Let's imagine where we will be...a possibility where pur org will be going. Let's
think about opening a small pizza place (a small business) , vision is that we are going to
sell real and frantic pizza so that is the vision. Or a vision of a major IT company that will
be the main source of knowledge in the world and a company which connects the world ...
where the state of the org will be. The leader will be able to share that image/value with
others.
Leading and Managing
Supervisory leadership
– Behavior that provides guidance, support, and corrective feedback for day-to-day activities:
different type of leadership, like supervising leadership ---> a l is making sure and is proving
the right level of guidance to thei ndividual making sure to them they are going to the right
direction --> working as a compass for the individual or for the group.
Strategic leadership
Behavior that gives purpose and meaning to organizations, envisioning and creating positive future:
we are looking at l as a strategic factor ---> what is the importance of the strategic thinking which
applies in the same way to leadership.
Useful Leadership Characteristics
– Drive
– Leadership Motivation
– Integrity
– Self-Confidence
– Knowledge of the Business
Leaders will present those trait --> will be very hard driven and confidence but not on thin areas,
leaders need to have solid and rigid knowledge on what they are doing, need to have ethical
behavior and also a desirable display of integrity which also make an impo charcteristic of a leader.
Coercive = compulsive. /
Legitimate power
– The right, or the authority, to tell others what to do: when we have a position into org / gov /
company , the job has authority and this auth will be my legitimate power ---> do that , do
this ... to people.
Reward power
– influences others because she controls valued rewards: who gets a raise and how much?
Power to rewardthe individuals for having done the right thing. Fulfilling with the
expectation which were put on the worker.
Referent power
– personal characteristics that appeal to others: we have certain traits or characteristics and we
become a sort of raw model but at the same time a referent for others...being a source of
power.
Coercive power
– control over punishments; people comply to avoid those punishments: a common say in the
US "the carrots and the sticks", with "carrots" we mean awards and "sticks" means
punishments. A leaders can have both a source of power to control the awards and the
punishments. Manager can have both power against the individual (can promote or fire)
Expert power
– certain expertise or knowledge: knowledge is power! Deteining a sort of expertise or a
source of knowledge will be a sort of power for an org.
Review questions
Think about a leader you know. This can be a supervisor, a coach, or a professor
Give examples of how this person uses the potential sources of power to influence others.
Think about how this individual used his influencial sources of power against a group or ourselves.
DEVELOPING LEADERSHIP
Traditional approaches to understanding leadership
– Trait approach
– Behavioral approach
– Situational approach
We are looking at the different ways to look at how we can understand leadership.
Trait approach
– A leadership perspective that attempts to determine the personal characteristics that great
leaders share: we are looking at specific characteristic of leadership ---> what are the
personal char of a leader? What are the traits? What are the elements in terms oftheir
personal abilities and characteristics which make them true leaders.
Certain Behaviors May Make Leaders Effective
Behavioral approach
– A leadership perspective that attempts to identify what good leaders do – that is, what
behaviors they exhibit: is this person introverted or extroverted? Looking at the trait is
something, but looking at the behavioral apprach is looking at more specifically ---> how
does a leader behaves? Characteristics vs behaviors
Task performance behaviors
– Action taken to ensure that the work group or organization reaches its goals: what are the
tasks this leader is doing so that the org will achieve the set goals? Different approaches to
be able to understand what is the DNA of theleader and what enables them to make org
effective and prosperous.
Group maintenance behaviors
– Actions taken to ensure the satisfaction of group members, develop and maintain
harmonious work relationships and preserve social stability: What are the things that the
leader is actually doing in the org to maintain the spirit of coop. People must be happy and
the lead. Has to ensure that. A way to use humor to cover the always exsiting degree level of
dissatisfaction within the organization. If one group is not satisfied this is a basis of distaster
---> there could be clashes of interests / conflicts ... ---> need to preserve the social stability
and establish a social path ---> individuals need to trade-off some things which are oly good
for him/her in exchange of the greater good.
Leader-Member Exchange (LMX) theory
– Highlights the importance of leader behaviors not just toward the group as a whole but
toward individuals on a personal basis: how this leader interact with the individual? Not just
the group. What sort of exchange, what relationship is done rather than seeing asmass or
group.
Participation in Decision Making
Authocratic leadership
– A form of leadership in which the leader makes decisions on his or her own and then
announces those decisions to the group: here we are looking at different DM styles that
leader will present ---> leader made the decision and the say "hey, I made this decision!",
decision has been set and lead. Will move forth accordingly.
Democratic leadership
– A form of leadership in which the leader solicits input from subordinates: we have here
different types of leadership --> when he/she has to make the decision he/she consults the
individuals or the subordinate. Sometimes thus kind of democratic leadership can be found
in two levels: 1 that is real democratic ---> whatever the majority of people decides will be
the decision ---> or we can have the consulting democratic leadership. So the sense is that
the leader who consults, at the end of the day, she or he will be the one who makes
thedecision (directly related to the majority of the group or not). In a real democratic
situation the leader may facilitate the vote (A or B)...would be "vox populi vox dei" --->
whatever the groups decides the leader will just facilitate that vote. So democratic type of
leadership can be seen in two different ways: sometimes at the end of the day the
responsibility and the accountability for that decision relies onthe leader or he/she may be
seeking input in a consultative manner.
Laissez-faire
Leadership philosophy characterized by an absence of managerial decisin making: tis kind of
leadership doesnt give any source of orientation or guidance. An absent leader would be a problem
in creating an effective org ... no direction?
The best way to lead depends on the situation
Situational approach
– Leadership perspective proposing that universally important traits and behaviors do not
exist, and that effective leadership behvior varies from situation to situation: in this third
approach there is not actually a set of traits and behaviors ---> it depend on one situation to
another. This approach hassome value but it is better to combine it with the others two
aspects. There are a lot of communalities about traits and behavior but of course it varies
from the context/situation (what industry/ what pople are being led)...when talking about
management theories context should be taken as a prospective, of course ---> this variable
would vary the effectiveness of more prescriptives theories.
The Path-Goal Framework
Path-goal theory
– Concerns how leaders influence subordinates' perceptions of their work goals and the paths
they follow toward attainment of those goals: what is the path that employee follow to
achieve the set goals?
We are looking at a pathway ---> what factors will be determining the leadership. We want to
achieve that all indiivduals will be happy. We want to retain them, because talent is rare and
expensive. But also keeping up with the performance of them.
Hersey and Blanchard's situational theory
A life-cycle theory of leadership postulating that a manager should consider an employee's
psychological and job maturity before deciding whether task performance or maintenance behaviors
are more important: what is job maturity?
Job Maturity
– The level of the employee's skills and technical knowledge relative to the task being
performed: need to have technical skills ... reaching a certain level of maturity.
Psychological maturity
– An employee's self-confidence and self respect: before deciding whether the behavior they
are doing it is important to scan these individuals in term of their skill set but also in terms
of self-confidence and self-respect ---< how to create that life-cycle.
Transformational Leaders Revitalize Organizations
Charismatic Leader
A person who is dominant, self-confident, convinced ofthe moral righteousness of his beliefs, and
able to arouse a sense of excitement and adventure in followers: trying to look in terms of different
types of leader ---> charismatic (charisma) ; aleader here is extremely self-confident and provides a
clear sense of what is right or wrong ... a clear sense of that ... he/she creates excitement among
people.
Transformational Leader
– A leader who motivates people to trascend their personal interests for the good of the group:
Giving up parts of someone's personal interests for the greater good of the firm.
Transactional leaders
Leaders who manage through transactions, using their legitimate, reward, and coercive powers to
give commands and exchange rewards for services rendered: a leader that is managing their
subordinates throughout a transaction (if you do that you will be rewarded otherwise punished). A
coercive / bargaining power that can be a characteristic to be spotted in some leaders.
Authentic leadership adds an ethical dimension
Authentic leadership
– A style in which the leader is true to himself of herself while leading: there is a true belief in
the individual which will bring not just an ethical dimension but also it can motivate and
inspire others.
Pseudo-transformational leaders
Leaders who talk about positive change but allow their self-interest to take precedence over
followers' needs: in colloquial language we say "do the talk, but also do the walk" ---> not just what
is best for the company, but first what is best for the leader who then convinces the group to act
accordingly. That why we call them Pseudo-...
Today's Organizations Offer Many Opportunities to Lead
Servant-leader
A leader who serves others' needs while strengthening the organization: having the ability to serve
others --> help the org to grow and getting stronger by also helping others.
Bridge leaders
A leader who bridges conflicting value systems or different cultures: capable of negotiating and
mitigate a given conflict ---> let's be a society! And move forward as a group!
Shared Leadership
Rotating leadership, in which people rotate through the leadership role based on which person has
the most relevant skills at a particular time: is some organizations like universities, for ex, we may
find the position of director or head of department and sometimes it rotates among faculties based
on these individuals' personal interest or on what point of life they are, or just it's their turn to
provide a new level of service to the organization. The new leader will be suitable with the project
requirement and the characteristic of the task to be carried on at a particular point of time.
Lateral leadership
Style in which collegues at the same hierarchical level are invited to collaborate and facilitate joint
problem solving: here we have not someone who is really leading, but we have a bundle of leaders
working together to solve a given problem ---> all equal contributors to the cause.
Review questions
The trait theory of leadership suggests that there are certain personal characteristics that great
leaders share.
If this is true, what traits do leaders such as Adolf Hitler, Winston Churcill and Pope Francis have in
common?
Motivating People
Principles for motivating people – Developing a satisfied workforce
PRINCIPLES FOR MOTIVATING PEOPLE
Motivation
– Forces that energize, direct, and sustain a person's efforts: how can we be able to direct and
energize people toards a desirable goal? Trying to create that kind of buzz that energizes
people and drives them towards the goal.
Managers must motivate people to
– Join the organization
– Remain in the organization
– Come to work regularly
If we dont have a motivated workforce the org wont be successful, what can we do to get people
come to the org? Recruiting for example ... and, how to make sure they will remain there? People
normally people join companies and they leave managers which means that a lot of time people do
apply for a job and they are looking at the organization. They may say "I am going to be working
for IBM, or Cisco, or Google or Alitalia..." so people apply for the company thinking about the
company. But then we ask them "why did you leave?" and in many times the reason why they left
was not because of th company but the relations with management and how it was acting. There is
so a big responsibility of being a manager in motivating people.
Setting Goals
Goal-setting theory
– A motivation theory stating that people have conscious goals that energize them and direct
their thoughts and behaviors toward a particular end.
So when talking about goal-setting theory there's the need to think about what sort of goals can be
set which would get people moving forward from this. People must be wiling to achieve them.
Meaningful: a meaning, something that people would find truely valuable.
Acceptable: we are not asking something which is not within the organizational culture and within
the ethical framework...Those things would not be acceptable. There must be a good understanding
of what to be acceptable.
Challenging but attainable: means that we want to challenge people..."can you get there?" - too
much challenging is not good though. If we give a huge number of pages to read to students in a
class or a thin article to read, and student can choose, they'd better be addressed to the thin article. If
professor gives a 70 pages article to students perhaps a large part of them won't read it... students
need to be challenged but not overchallenged. Attainable activities.
Specific and quantifiable: something that is very specific where we know exactly what is the goal.
Goal can not be vague, the person needs to understand where we want to be. The other important
thing is that goal has to be quantifiable : in a production line...we want to produce daily 100 pens
with zero defects, those two things are very specific and at the same time quantifiable.
Stretch goals help employees reach new heights
Stretch goals
– Targets that are particularly demanding, sometimes even thought to be impossible: "can we
do that even if it seems impossible? Do we have the right amont of resources? Imagine in
50s 60s we were working for NASA, we needed to send a man to the moon. We needed to
create these types of goals which are basically usual in business. Team innovate to break
boundaries ---> stretch goals type of goals in business.
How can we reward to actually renforce performance. Maybe mother did it to me after getting a
good grade. This is part of the reiforcement technique.
Reiforcing performance
Positive reiforcement
– Applying a consequence that increase the likelihood of a person repeating the behavior that
led to it: if we reach the target we will have a pay raise or a bonus for instance. There are
clear and positive consequences for reaching so people woud say "well, if I do that again I
will get that positive cnsequence again!".
Negative reinforcement
– Removing or withholding an undesirable consequence: this maylead people understand what
will happen if they repeat the desirable behavior or they do not.
Punishment
– Administering an aversive consequence: parents may say to the children to go to their room
if they didnt do their homework.
Extinction
– Withdrawing or failing to provide a reinforcing consequence: you dont do you homework so
I am going to take away your videogame. OR rather trying to create a reinforcement to a
certain type of behavior in terms to lead to a desirable level of performance.
Expectancy Theory
– A theory proposing that people wil behave based on their perceived likelihood that their
effort will lead to a certain outcome and on how highly they value that outcome.
Expectancy
– Employees' perception of the likelihood that their efforts will enable them to attain their
performance goals: here we have an example of killer motivation : people would say "well,
if I work hard I will be promoted" so they work hard an attain the goals they believe in , at
the end of the year the performance evaluation comes say "everything ok" but the worker is
NOT promoted.... that is one of the reason why people often leave the company ... the
expectancy created before was not confirmed creating a high level of frustration.
Instrumentality
– The perceived likelihood that performance will be followed by a particular outcome: what is
the likelihood that that performance will be followed by a certain outcome? Two levels:
carrots or sticks?
Valence
– The value an outcome holds for the person contemplating it: see the extent that is valuable ...
an example: relationship between parents and kids, there is a simple way tograsp this
concept: "if you get all As on your report card from top to bottom I will give you a
Lollypop" maybethat award is not enough for my effort. There is the need to see what is
valuable for an individual. Maybe for someone promotion is more valuable than raise of pay.
It comes into judgement of values.
Alderfer's ERG Theory
– A human needs theory postulating that people have three basic sets of needs that can operate
simultaneously: similar to other previous theories like Mathlow theory of human needs.
Let's have a look:
Existence needs
– All material and physiological desires: need of food...clothing? Sport card?
Relatedness needs
– Involve relationships with other people and are satisfied through the process of mutually
sharing thoughts and feelings : individual need to relate to each other ... a more
psychological need.
Growth needs
Motivate people to productively or creatively change themselves or their environment: people have
this need to see that they are growing and developing ... is it just a change in themselves or in the
environment? The can both bear the creadit of innovation for themselves and also they want to see
the organization is growing and is doing better ---> this gives also a sense of reward.
McClelland – Managers Seek Achievement, Affiliation and Power
Need for Achievement
– A strong orientation toward accomplishment and an obsession with success and goal
attainment: looking at some of the elements managers normally seek to have, like the need
for achievement---> are they creating some value? Is the goal matched? It is the array
moment, the moment in which a boundaries is broken and road to success is being walked
through.
Need for affiliation
– A strong desire to be liked by other people: managers as leader would have this need and
wonder if people who are working with them actually like them. We can make the example
of Niccolò Machiavelli who said to be "loved and feared anytime". Essentially, though, there
is the need to be liked(esteemed, be fond for, adored).
Need for power
– A desire to influence or control other people: by being a leader and a manager, the element
we're talking here is that we do not want to feel accomplished or adored by others, but also
we want to feel we are in charge and this can be also rewarding.
Designing Jobs that motivate
Extrinsic rewards
– Rewards given to a person by the boss, the company, or some other person: rewards given
by basically third parties...whether it is a raise, an award, a recognition ---> there are
different stakeholders which may be in place. For example professor received an award from
the Students Association for the best supervisor of the university (recognition for doing a
good job). Anoter recognition from the dean of "Research Department". So from third
parties.
Intrinsic rewards
– Reward a worker derives directly from performing the job itself: these are basically direct
awards which will come by just doing the job.
Managers Can Make Work More Varied and Interesting
Job Rotation
– Changing from one task to another to alleviate boredom: depending on the job and on the
individual, if the activities are monotonous, that can get quite repetitive. So job rotating can
change the system and yield positive consequences.
Job enlargement
– Giving people additional tasks at the same time to alleviate boredom: here we are increasing
the portfolio of tasks that an individual has. This in order to avoid boredom. For example in
a reception there can be hours in the day when no people come in and perhas an additional
task can be provided to the receptionist : sorting the mails or checking or copying some
material.
Job enrichment
– Changing a task to make it inherently more rewarding, motivating, and satisfying: here we
change the task that a person does to drive them to a higher level of satisfaction . How can
we do something here that would actually create a higher level of satisfaction to our
employees?
Herzberg proposed two important job-related factors
Hygiene factors
– Characteristics of the workplace, such as company policies, working conditions, pay, and
supervision, that can make people dissatisfied: what are the policies, the work conditions,
what type of supervision are making the people satisfied? Have the expectations been met?
How happy are people?
Motivators
– Factors that make a job more mativating, such as additional job responsibilities,
opportunities for personal growth and recognition, and feelings of achievement: here we
have a second level; first one is hygiene and this is the following one. Here we look at things
which makes the job more interesting and motivating, leading to achievement.
Review questions
– Do you agree with Herzberg's assessment that pay is a hygiene factor, not a motivator?
– Would you work harder if you received a raise?
DEVELOPNG A SATISFIED WORKFORCE
Skill variety
– Dirrefent job activities involving several skills and talents: look at somebody and see
him/her as a portfolio of skills. We can compare it to the pocket-knives (coltellino svizzero)
where you have one with two blades and then a more complex one and lot of different
instrument. Let's think about that those instruments are skills , so the technological
affordances ofthe pk cna be used into different jobs. The person can use ther ability to create
value.
Task identity
– The completion of a whole identifiable piece of work: it is a clear attainble goal...when
somebody is in the production line people do not feel satisfied because they do not see the
impact of their job. So important to let tem understand what they are doing within the
process of the entire outcome.
Task significance
– An important, positive impact on the lives of others: make sure people understand the task
they are doing , making a positive difference on people's life.
Autonomy
– Independence and discretion in making decisions: we have a certain the ability and we are
autonomous which is a way to enrich somebody's portfolio of task and deliver motivation.
Feedback
– Information about job performance: how well are we doing? We set the goals (performance
appraisal), the person perform and then they send a feedback.
Growht need strength
– The degree to which individuals want personal and psychological development: to what
extent individual want to see themselves progressing or developing as human beings...
To motivate, empowerment must be done right
Empowerment
– The process of sharing power with employees, thereby enhancing their confidence in their
ability to perform their jobs and their belief that they are influential contributors to the
organziation: Here we are sharing power, giving it to the employees. This to enhance their
confidence , this comes in different level. They contribute to the process (employees).
Procedures – not just outcomes – should be fair
Procedures justice
– Using fair process in decision making and making sure others know that the process was as
fair as possible: one clear example here is the promotion process---> in a company we have
4/5 people with Mary promoted and Bob not and the other two not. Why was Mary
promoted? She might have been very productive...there definetely is a process of decision
making about who gets promoted and why this happened. Say, Johngot fired...why? Maybe
it did something unethical according to the code of conduct of the company. There is a sense
of overall understanding of fairness : among the process of expectation, confirmation ...
people understand their rules and how they work. Another issue is demotivating individual
which is when there is a goal movement (?), for example somebody is told to go this far in
order to be awarded (so he/she needs to to a bit more). This can seem a bit frustrating
because the process is not fair and the rules are changing. So the thing is: making sure the
rules are clear, understood, applied and recognised well throughout the organization.
Companies are improving the quality of work life
Quality of work like (QWL) programs
– Programs designed to create a workplace that enhances employee well-being: here to
understand that employees' well-being is related to their quality of life and with their ability
to perform. Doing things like exercise programmes, work remotely, family days ... doing
things which will foster the productive skills of the people. That is essential in the process of
motivating people and retaining talent, they will be more productive and will be staying on
the job. Important to think about individuals' life not only while they are on the job but also
when they are out with their family on their leisure...not just considerations which are
confined within the organization boundaries.
Review questions
– Why is it so difficult for some managers to empower their people?
– In your opinion, does empowerment always bring a higher level of job satisfaction?
Why empowerment can be a challenge for manager? But also from the viewpoint of the employees.
Teamwork
Understanding Teamwork – Developing Effective Teams
UNDERSTANDING TEAMWORK
The contributions of Teams
– Building block for organizational structure: think about an org structure and teams as the
building blocks, the elemnt which set all together ---> bring down to sectors. Not in an
insular manner but in an interdependent manner (the development of teams)
– Increase productivity, improve quality, and reduce costs: better output and generate
economies of scale. The interrelations of people's task can obviously lead to positive
outcome.
– Enhance speed and be powerful forces for innovation and change: better communication and
lot f entropy that can be generated by groups --> positive to the org.
The New Team Environment
Group
– A collection of people who interact to undertake a task but do not necessarily perform as a
unit or achieve significant performance improvements: group of people undertaking a task
together but not really performance as a unit but as group.
Team
– A small number of people with complementary skills who are committed to a common
purpose, set of performance goals, and approach for which they hold themselves mutually
accountable: there is a bit more formalized structure and at the same time requirements of
outcome not only as perofrmance expectation but also looking at the accountability of a
team ---> a higher level of value cocreation for the output they need to generate.
Organizations have different types of teams
Work teams
– Teams that make or do things like manufacture, assemble, sell or provide service: teams that
are doing a kind of function like providing service or looking at the manufacture ---> a
common goal in what they are doing.
Project and development teams
– Teams that work on long term projects but disband (sciogliersi) once the work is completed:
the sales team we are lookin it in the long run. A project base can take a couple of month or
five to ten year. Think about the development of a new concept car, and once it is done, the
team is disbanded. There could be lots of people re-positioning in this new team. There is a
common goal that ends with a project. It is not an ongoing process.
Parallel teams
– Teams that operate separately from the regular work structure, and exist temporarily: teams
that work in parallel with other work structures --> the sales department, for ex, working as
marketing manager or allocated to a quality taskforce (parallel tema) that the organization
are doing. An assignment which is not full-time though.
Management teams
– Teams that coordinate and give direction to the subunits under their jurisdiction and
integrate work among subunits: getting together the head of IT, the head of marketing, head
of finance, of HR, so the Team will be given a direction overall. In a more complex
hierarchical structure a singular team would have two or more managers, if we have a large
company and we have a team responsibile for the South-East region and we have all the
managers responsible for this region and so forth. IT can be bound to different
organizational structure and the to undrline the function or role of the manager in the
organization. (have an insight on this)
– a team of managers in charge of directing a company, business, etc
The company has little debt and a new management team has promised to improve cashflow
The firm's 30-strong management team has a 12% stake and stands to gain between £5m and £15m
between them in shares.
Transnational teams
– Work groups composed of multinational members whose activities span multiple countries:
say people working for companies like IBM and Microsoft. Let's say it is Microsoft. Well,
M is launching a new product and is targeting the European market, so have the country
manager for key market in Europe and the transnational team to think about what are the
common direction that the project should take ---> from the nature of the project and where
it may come from we need to understand the classification and the origin of the individual
which will benefit of the product.
Virtual teams
– Teams that are physically dispersed and communicate electronically more than face-to-face:
this changed dramatically in the last few years ---> teams that have worked so intensively
which though have never met face to face. How could that be done? Video-conferences, emails, sharing documents, composition and addition. Different software which help them
collaborate with different types of media. With this means, like Skype for example,
professor was able to work quite effectively along different continents.
Self-managed teams empower employees
Traditional work groups
– Groups that have no managerial responsibilities: working to more operational level type of
tasks.
Quality circles
– Voluntary groups of people drawn from various production teams who make suggestions
about quality: people working on operational level can actually provide very useful insights
about quality. An example of Q.C. ---> Anyone in the company can provide suggestions on
how the assembly line can be improved. By doing so, team members can actually be
awarded. If their suggestion would give a certain amount of savings/money to the company,
the company gives them a percentage from that.
Semiautonomous work groups
– Groups that make decisions about managing and carrying out major production activities but
get outside support for quality control and maintenance: they are not completely
autonomous but they get some outside support. They are not completely independent. The
key thing is the nexet type of group:
Autonomous work groups
– Groups that control decisions about adn execution of a complete range of tasks: controlling
the process by itself : the level of control here is higher.
Self-managed teams
– Autonomous work groups which workers are trained to do all of most of the jobs in a unit,
have no immediate supervisor, and make decisions previously made by firstline supervisors:
the group is actually managing itself (there not actually a first line superior). The level of
empowerment in this group will be significantly high in comparison with any other type of
groups ---> the DM process, the expectations derive from the self-managerial organization
of the group.
Self-designing teams
– Teams with the responsibilities of autonomous work groups, plus control over hiring, firing,
and deciding what tasks members perform: the team has a very strong responsibility, so the
autonomous layer of control (who gets in and who gets out), the level of empowerment is
going higher and higher on each group we are listing.
Forming: what is the ground-rules, what is the common understanding that we accept or we do not.
---> what is the framework of ... rules ... that is accepted with teams.
Storming: People start to see the pack order (Dogs are social animals with a well
defined pack hierarchy. Like the wolf pack, each individual in the pack has its own place in that
social order. ) that they are going to be sitting in ---> people with leadership characteristic would
put themselves in a position of power and try to lead the team. The negotiation ... what is may role?
A conflict may happen. There is a quite organic process, the development.
Performing: the group is formed, the roles are set, and so "let's get to work!",
Norming: people start to get along with each others, this is something that happens within a month,
a day, a hour...there is no a prescriptive time, it depends on the type of the task, on the nature of the
team, on the characteristics of the individual, the type of leadership but also the organizational and
the country culture will play a role to how well these figures/steps will develop.
Review questions
– In what ways might electronic communication technology impact the stages of group
development, particularly in virtual and transactional teams?
What in a transantional team? Could it bring advantages or even disadvantages?
– How could a team leader improve communication among team members? How
communication is done and what types of media are used for that communication to happen
---> for a leader would his/her profession be facilitated?
DEVELOPING EFFECTIVE TEAMS
Building effective teams
Team effectiveness is defined by three criteria:
– Productive output of the team meets or exceeds standards of quantity and quality: how can
we define and measure teams' effectiveness ---> how productive is this team? There can be
techniques we saw along in the course like benchmarking (comparison), or we set a goal and
analyze to which extent the team has met it. There can be different aspects that can be looks
at in order to measure those elements.
– Team members realize satisfaction of their personal needs: trying ot make sure there through
developing the work we create the right motivatinal factor that enhances the job satisfaction.
People looking forward to producing and gathering again. If they feel not to be fairly
rewarded that could complicate things.
– Team members remain committed to working together again: when we are working with
entropy, which is happening within a team, we see a level of commitment and bonding
which could be very positive ---> having workstyle and personalities and understanding how
people are working and their skills. A fanny analogy : like a marriage .... we start to know
each others and e commit to stay together as a team ... an organic process which evolves
through stages and is affected by different contexts and situations.
Team characteristics
Norms
– Shared beliefs about how people should think and behave: what are the things that the group
believes we should be doing. The guidelines or principles about which we should act ---->
e.g. Punctuality. In some countries norms about punctuality are stricts in others are softer.
Focus on work (sit down and do the work), in other countries: "let's take it easy...". How
dynamics are affected and how things work in a complex or a group. So the important thing
is not going with the wrong expectations.
Roles
– Different sets of expectations for how different individuals should behave: the set of
expectations of what are the things that each individual should be doing. So, say, this person
here will be doing a leading role, the other one would be doing a more laborious role. Why
not doing a quantitative analyis for that person? Who could be the best candidate to write
reports? Ahah the one who is best at hand-writing...
Team members must fill important roles
Task specialist
– An individual who has more advanced job-related skills and abilities than other group
members possess: again, looking at a set of skills a person has...he has an ability!...A person,
i.e., is not English, so we need to write a report or an e-mail to someone in a contry where
English level is spoken ... need to find who is the person with the most proficient level of
English to write the stuff which has to go overseas, so it is a very clear-cut (sharply defined).
Team maintenance specialist
– Individual who develops and maintains team harmony: this is the person who actually notice
if a conflict has arisen across individuals or levels of frustration with upper management and
so forth and this person will appease and keep a certain level of team harmony.
Some relationships help teams coordinate with others in the organization
Work-flow relationships
– Emerge as materials are passed from one group to another: we may look at one group or one
person where there is a sequencial work step by step, so as we are getting things from this
person and so forth, we start to forge a relationship. When prof began to set up the slides he
sent them to the graphic department of Uninettuno and one of the collegue made them
beautiful and tied them up; thanks to this combination they start to form a relationship.
Service relationships
– Exist when top management centralized an activity to which a large number of other units
must gain access
Advisory relationships
– Created when teams with problems call on centralized sources of expert knowledge: the
team is having an issue...like dealing with Tech, having a problem with a software and so
they call an IT specialist to advise them on that. Ù
Audit relationships
– Develop when people not directly in the chain of command evaluate the methods and
performances of other teams: relationship formed with the person who is auditing, which
means providing the necessary guidance, to the team, about the desirable level which is
expected to be reached.
Stabilization relationships
–
Involve auditing before the fact: howw the interactivity that happens between teams or into
teams (intra or extra org settings), actually creates levels of relationships with internal and in
many cases external partners.
Liaison (collegamento, connessione) relationships
– Involve intermediaries between teams: imagine we have want team based in country A
andthe other based in country B, we have one doing something in China and the other in the
US (depending on the type of company), Chinese team can not speak English and the USA
team do not speak Chinese. A liaison relation will be acting with somebody acting on behalf,
for translation for example, in having a kind of synchronicity among the work that is
happening.
Conflicts arise both within and among teams
Conflict
– A process in which one party perceives that its interests are being opposed or negatively
affected by another party: basically we just need to people to create conflict, but when we
have groups it could be even easiers ... Different teams with different numbers of people ...
well, something is not going the way we expect, something is not fair, ---> so key thing here
is to understand what is at stake and then negotiationg to accomodate the expectations that
exists and the extent to which the expe could be fulfilled.
Conflict management techniques
Avoidance
– A reaction to conflict that involves ignoring the problem by doing nothing at all, or
deemphasizing the disagreement: "oh yes I understand your problem....but let's look at this
later..." trying to pospone the prob and cool it down ---> avoid that. That could be an issue
because the problem may lead a growing level of frustration.
Accomodation
– A style of dealing with conflict involving cooperation on behalf of the other party but not
being assertive (emphatic, firm) about one's own interest: we're trying to accomodate and
making sure we're looking at different levels of how the interest has been address and to
what extent we can fulfill the perception that something has not been fair and addressing
that.
Compromise
– A style of dealing with conflict involving moderate attention to both parties' concerns:
provide a give and take..."let's meet in the middle of the road, approach, and talk about it"
Competing
– A style of dealing with conflict involving strong focus on one's own goals and little or no
concern for the other person's goals: say, your happiness will create my unhappiness
(competing...); that creates conflict. In business there are different cultures and styles
playing on ... let's make a deal ... however, some people can be more concerned with the
others' gains or can be collaborative with the collectivity or can be more focused on their
own gains only.
Collaboration
– Astyle of dealing with conflict emphasizing both cooperation and assertiveness to maximize
both parties' satisfaction: how can we maximize satisfaction ?? How can we be giving and
taking...
Managing Conflict
Superordinate goals
– Higher-level goals taking priority over specific individual or group goals: we are looking at
something bigger here that needs to be achieved. Let's not look at the needy-greedy kind of
things, but let's look at in a broader aspect. Let's look at our major goals here.
Mediator
– A third party who intervenes to help others manage their conflict: this is basically someone
who's saying:" I understand whare you're doing, I understand what is the conflcit, und the
other part", finding a point in which the conflict can be resolved. This could be a very
valuable resource.
First thing to do is gathering the greatest amount of information in order to solve the problem:
information is the raw material for Decision Making. The better information we have, the better the
Decision Making. Then, we need to see what is the action that has been taken and what are the
consequences. If the consequences have been positive the feedback is ok, if negative we will need
to investigate why this happened and provide solutions and alternatives.
Review questions
– Is conflict always negative?
– Under what circumstances might a team leader want to stimulate a conflict in a team?
When can it be positive? A simulation to try to achieve a better goal...other cases?
Communicating
Introduction to communication - Develop effective communication
INTRODUCTION TO COMMUNICATION
Interpersonal Communication
Communication
– The transmission of information and meaning from one party to another through the use of
shared symbols: we have somebody who is actually saying and communicating something
and somebody who is receiving the message. Hand gestures for ex are not the same around
the world, in Italy there are a lo of them but in other cultures they can not be understood.
One-way communication
– A process in which information flows in only one direction from the sender to the receiver,
with not feedback loop: basically we have one individual broadcasting some information
and we do not have a feedback ---> we do not know where the info comes from or whether
it has been understood. In Whatsapp for example we don't know, when the message has been
sent, if the person has actually received the message or we dont know if the person has
understood the message until we receive a reply. In W when we send the message we have
the first and the second thick. A change of color saying that the message has been read. Then
we have a feedback when receiving a reply (one way communication), but not a second part
which provides some feedback of the extent to which that communication was received and
understood.
Two-way communication
– A process in which information flows in two directions the receiver provides feedback, and
the sender is receptive to the feedback: right now prof does not know how I am reacting
because this is a recorded class, if in a classroom with faces there would have been a
reaction like sleeping-like or attentive-like. Prof is sending the message in the best way he
can so it can be clear when received. In a face to face class the prof can get feedback by
simply observing somebody. Think about sending an email, or talking at the phone or skype,
we have different levels of what we call media enrichnment.
One-way communication is common
– The sender has a "meaning" to communicate and encodes the meaning into symbols: I want
to say something so I can use words, symbols or artifacts with meaning. Prof can speak
Japanese and knows that in Japan there is an ideogramatic writing system, basically kanji,
and also a peculiar phonetic system katakana and hiragana and there is a steep learning
curve in trying to understand those symbols , so there are many symbols that can be used.
– Then the sender transmits the message through some channel: this could be visual,
electronic channel or audio. The air would be the medium where the sound travels. I have a
meaning to communicate and I use a different number of options to communicate and allow
the channels to transmit it.
– The receiver decodes the message and inteprets its meaning: whan prof teaches in a class in
a country where the language is English or in a country with a different lang, there would be
differences in the way people would interpret some languages since they can be native
speakers. Need to understand that the meaning is not always linear.
– The receiver may provide feedback to the sender by encoding a message in response: a mess
in resp could be simply nodding or say "ah-ah". Back in Japan HI means yes, so in this
cultural context people provide feedback to the sender by saying this word which in other
cultural context means something else. .
Noise
– interference in the system
– blocks perfect understanding
Examples of noise
– ringing telephones
– thoughts about other things
– simple fatigue or stress
So here we see that there are factors that could inhibit the clearance of the message. If we are now
listening to this lecture and there is a construction site near the place where we are, well that noise
create a sort of interference in our ability to understand what prof is saying. Or perhaps, while
watching the class, we got a message from the phone of something which is bothering us, the act of
concentrating to the content delivered in the lesson can be disturbed by these things. If the professor
is teaching the video class in the evening to students who have worked the entire day, their ability to
concentrate would be drammatically different.
Communication Pitfalls
Perception
The process of receiving and interpreting information: this can vary a lot of times on individual's
background, ability of decoding the symbols that are brought to us. We say something but people
may perceive the content in a different way.
Filtering
The process of withholding, ignoring, or distorting information: when we filter ... A, B, C, ... we can
ignore B and rely on A and C, people may emphasize elements around the use of different biases
during the conversation their having and at different stakes.
Communications flow through different channels
– Oral communication includes face-to-face discussion, telephone conversations, and formal
presentations and speeches: speaking and using different media to transmit the sound....a
video-chat, a phone...basically using our voice and audio as a mean to communicate.
– Written communication includes texts, e-mail, memos, letters, reports, computer files, and
other written documents: writing and using a system directly from the alphabet (sanscript,
arabic....) we have the workd "hello" and we can use a certain graphic format to transmit the
message, people would understand it and will cometo the meaning.
Electronic media offer flexible, efficient channels
Web 2.0
– A set of Internet-based applications that encourage user-provided content and colaboration:
the change was from the previous version Web 1.0 ; this one was much more base on oneway communication while here we have a company which will publish their content on a
web site and this content will be popping to me ---> this way there will be very little
interaction. In Web 2.0 there is a higher amount of interaction so instead of being a one-to-n
communication we will have basically n-to-n . Look at Youtube, for example, look at the
number of individuals that are actually posting the video, those who watch it and those who
comment. There is a clear cycle and much more cocreation of content (n-to-n basis
–
structure)
social networking, podcasts, RSS, and wikis : can look at FB, podcasts, wkis or blogs which
have some high level of interaction , this enable a more dynamic and cocreating process of
communication
Virtual office
– A mobile office in which people can work anywhere, as long as they have the tools to
communicate with customers and colleagues: if prof has his own computer and internet
connection while travelling, he has access to all systems that he needs, like video
conference.. access files from the university databases... upload files ... in the virtual office
example there would be no difference if people stay at home or at the workplace to work as
long as they have the appropriate tools at their disposal for producing what they do
andactually to interact with the others.
Media richness
– The degree to which a communication channel conveys information: we may say that about
the size of a file: comparing the size of a text file to an audio file and then to a video file. So
media richness means that the interaction would required a greater amount of information.
For example, we are listening to the video tape of the lesson and we find that we are able to
understand better the spoken word since they are not written on a book, but this is not only
the reason for which the content is enriched, infact we also understand prof's movement,
how he imposes some word, how he emphasize and highlights concepts. The media
enrichness is not just the information and so video could be probably the best type of
information we can receive.
We have unlimited accessability and accountability of the information.
Among the disadvantages there is a trade-off that can create a lower level of interpersonal
relationship between the sender and the receiver. However in many cases if we look at simple
written language we may find many cues (hints) or non verbal cues that are being given. Another
aspect is the immediancy of response, for example we may say "oh, wait I didnt mean that", well
we do not have this ability to do so ... especially if we are looking at synchronous type of
communication , is not like a ping pong match. IT is not immediate and synchronous type of
communication.
Review question
Think about a presentation or a class you attended where you thought the speaker was engaging and
interesting.
What did this person do that made him/her an effective speaker?
DEVELOPING EFFECTIVE COMMUNICATION
Tips for making formal presentations more powerful
– Spend adequate time on the content of your presentation: we need to look at some common
knowledge about what can make presentation , communication to others more effective and
powerful.
– Clearly understand the objectives of my presentation: what am I going to achieve here? Am
I trying to communicate something? To communicate? Motivate? Both? What is the goal?
– Tell the audience the purpose of the presentation: our todays' topics are... prof says ... what
are the themes we are trying to achieve here.
– Provide meaning not just data: the difference between data and information it is that data a
raw fact and does not have any meaning. Once data is interpreted and understood it provides
substance/meaning. For example translating the function of some numbers.
– Practice, practive, practice: the first time prof did a video for uninettuno few years ago and
today he now has understood how to catch with the camera. For him it is different teaching a
class with six students and a class with 600 students. Practice helps building our selfconfidence.
– Remember that a presentation is more like a conversation than a speech: with synchronous
communication aspect, try to create a form of conversation with the public, that will create a
more effective type of presentation.
– Remember the incredible power of eye contact: look at people's face, see how they are
reacting. They want to be acknowledged and see we are caring about what we are saying. IT
is important
– Allow imperfection: sometimes we can say a wrong word or misread....but that's fine! Do
not get caught up on that.
– Be prepared to answer tough questions
– Provide a crisp wrap-up to a question-and-answer session: sometimes people will ask us
tough questions...it is part of the question...be sure we have the information to answer them
and try to put some meaning in the message we will convey.
Nonverbal signals convey meaning, too
The following suggestions can help you send positive nonverbal signals:
What can we do in terms of nonverbal type of communication that can be positive?
1. use time appropriately: be aware of using the right amount of time that we have and we
manage time accordingly. No need to rush at the end or just go to ten out of twenty slides. In
Uninettuno professor looks at the number of slides, at the number of themes and he actually
understands that this is a 40 minutes lesson...I should be there within the next ten minutes
and so on...
2. Make your office arrangement conducive to open communication: whether we are in office,
or we are speaking to a group, make sure we have a desk and a chair on the other side so it is
easy to see each other faces, a confortable layout to provide ways that the environment that
has been created is ok for both senders and receivers.
3. Remember your body language: what if we are holding a very bad-looking position, are we
sure we are gaining attention from the audience? If someone tells something and we look at
the ceiling in a disoriented way, are we agreeing with them? Certainly no. So body language
can be a very effective way to demostrate we are taking care about the conversation and we
are open to it.
Receivers can improve their listening, reading, and observational skills
Reflection
– Process by which a person states what he or she believes the other person is saying: what
can we do, as listener, to be more effective? Is like a mirror, we're reflecting to. A simple
example. "Hey, you have done a great work". Is essential to understand that the message we
are understanding is actually what the person is trying to say.
Ten keys to effective listening
– Find an area of interest
– Judge content, not delivery
– Hold your fire
– Listen for ideas
– Be flexible
The key thing to be an effective listener is finding an area of common interest in order to create a
certain level of rapport or relationship between us and the person speaking. Judge content, not
delivery: if a person has quite a thick accent, people can judge that the content of the message is not
good and the language is not profieciently spoken ---> we need to focus on the content not on the
manner used by this person to deliver the content. Hold your fire... Overall we need to make sure
we give enough amount of space to listen to people.
– Resist distraction
– Exercise your mind
– Keep your mind open
– Capitalize on thought speed
– Work at listening
Encourage ourselves to concentrate on the information delivered. Using a mobile phone, for
instance, during the video lesson, could be extremely distracting, our cognitive ability to actually
absorb the content the prof is explaining is deviated because we are focusing on other stuff. The
other thing is somebody is telling us an idea which is not immediately resonating to us, we can say
"mmm, ok, I'm listening" and we would be checkin where this person comes from. Perhaps we can
actually try to explore a little bit more the content of that message and this would make us better
listeners. Important to listen how people provide us with information and pay attention on that. This
allows us to do what? Being a better listener, capturing more information and develop more
knowledge.
Observing
– A vital source of useful observations comes from personally visiting people, plants, and
other locations to get a firsthand view: observing how people work, the environment, the
things they like...this is a very important aspect which provides us a new and complex layer
of information.
– You must accurately interpret what you observe: make sure that what we are observing
isinterpreted in the most accurate manner.
Directon of Communication
Downward communication
– Information that flows from higher to lower levels in the organization's hierarchy: the CEO
is going to the vice president and the vp to the manager...a flow from up to down.
Upward communication
– Information that flows from lower to higher levels in the organization's hierarchy: a bottomup type of communication. Now there can be a complain or a request of resources.
Horizontal
– Information shared among people on the same hierarchical level: say we have three V.P.s for
marketing, human resources and IT. We are creating matrix between the direction of the
communication flow and actually the organization's hierarchy. Let's remember the chapter
on organizational structure and see how the flow of information can happen through the
different directions.
Informal Communication
Grapevine
– The social network of informal communications: for instance in the US they say "the
watercooler talk", people stay there and talking about what's happening... so it maight be
said "I heard from the grapevine that this and that has happened...". The informal type of
organization which happens in the orgnization ...becoming aware of it through informal
channels.
– Provides people with information
– Helps them solve problems
– Teaches them how to do with their work succesfully
Two level of knowledge. A lot of tacit (?) knowledge will be spread along this informal channels.
Why ignore it? Because it is informal? Sometimes it could be very rich and fulfilling.
Managing informal communication
– If a manager hears a story that could get out of hand, he should talk to the key people
involved to get the facts and their perspective: between gossip and talks a conflit may arise.
Managers have to detect that isseu and counteract to it.
– Dispel (dissipate, disperse) uncertainties by providing facts; and establish open
communications and trust over time
– A manager should neutralize rumors once they have started
those rumors can be extremely counter-productive. If the information is really valid et's evaluate it,
otherwise it would be untrue gossip which need to be put an end to. It would be extremely
disturbing.
Boundaryless Organizations
– An organization in which there are no barriers (boundaries) to information flow
– Implies information available as needed moving quickly and easily enough so that the
organization functions far better as a whole than as separate parts
A much more dynamic and not a restricted type of information flow, so the key thing here is that
information moves quickly enough not only in just one site/part, if we then look at business
integration espcially using Information system we are able to make sure the separate parts do not
exist in terms of information flow. Also think about the relations between suppliers, manufacturers
and customers where we need to make sure that the information exchanged s valuable; so we avoid
the presence of walls inhibiting the flowing among the different sides ---> to receive and send
information, basically.
Review questions
– Should an employer be allowed to monitor employees' e-mails, even if those e-mails are sent
outside of normal business hours?
– Why or why not?
Think about privacy issues and things like that. Are we talking personal e-mail account? No, we are
talking about business email account. In the contract agreement it can be written, if allowed or not.
Managerial Control
Why are control systems necessary – How to implement control systems
WHY ARE CONTROL SYSTEMS NECESSARY
Managerial control
Control
– Any process that directs the activities of individuals toward the achievement of
organizational goals: making sure that whatever is being set to to is done. Looking at the
production line and measurement of the efficiency of it (quality or the number of product
that has been done within a certain period of time). Controlling: how well are we doing in
contrast with our expectations. Assuring elements because we are progressing towards the
right direction.
With control id doesnt mean we have a state of vigilance which is negative. Important to see how
thingss are progressing.
The 2nd and 3rd points are discussing about clarity ---> we would discuss about performing
expectations, communications ---> whatever the control is, we need to make sure to monitor the
organization in order for it to survive. Make sure that the process of controlling is well written and
understood.
The 4th, do not shoot the messanger! "We are just telling you what has been happening, we have not
responsbility about that". For instance there is a problem with the machine and the employeee using
it, this may come up in a report and the employee may not actually hold any responsibility about the
problem because it is just a mechanical problem which may happen with any machine. Another
example is that free flows of communication can be an issue since information could not go to a
certain point, hence establishing clear communication channels is an important duty.
5th and 6th points: we need to have regular check-ups (like when going to the doctor), this must be
done to the organizational performance. When talking about information systems ---> info must be
accurate and timely in order to be effective. Data is the RAW material for decisions and it is
converted and is given meaning to make more effectively decisions as far as this concerns. If the
information system is not working well that means data is not up to date and info not accessible.
These things will show a clear lack of control.
7th point: organizational structure and members are not demonstrating enough commitment to
integrity. Unethical steps in communication. Many topics already covered throughout the course are
now coming together.
Clear flow where each step fits with each other. A sequencial flow. A system thinking. Input,
process, output and feedback, theory which also apply to the control process.
Managerial Control
Bureaucratic control
– The use of rules, regulations, and authority to guide performance: we can use bur as a way
to guide the process
Market control
– Control based on the use of pricing mechanisms and economic information to regulate
activities within organizations: we use market forces and mechanisms to understand the
activities of the org. Look at share prices for example --> that gives measure ofhow control
will be on place. Then we may look out what are the effect of the market on the company
and vise versa, and we can control that as an indicator of how well we are doing or what
corrective action we need to put in place.
Clan control
– Control based on the norms, values, shared goals, and trust among group members: linked to
org culture and the aspects related to it. People making sure that everybody in the org are
following and embedding the established norms. This also creates a level of trust among
team members. Thinking about a set of standards which can be set out by bureaucracy,
market or clan ---> then a benchmark/comparison/evaluation of these standards of
performance which will give clear indication of things we should continue to do or that have
to be improved.
Control Systems have Four Steps
1. Setting performance standards: what are the elements, the measurements we will be
doing to evaluate the performance and evaluate well the things we are trying to achieve.
2. Measuring performance: after setting standards we benchmark them against the current
performance. The measurement of performance can be done in a quantitative or in a more
qualitative way. This depends on the nature of the variables we are looking at but also on the
context we are trying to work on, it is not necessarily number-dependant, we can put it into
high-low-medium criteria of evaluation, also in perception, what is important here is that we
create a certain level of expectations and a degree to which those expectations have to be
reached at a certain step.
3. Comparing performance against the standards and determining deviations:
comparing the extent to which the perormance is meeting the standards or its behind or
beyond them.
4. Taking action to correct problems and reinforce successes: once we realize what we
are doing we are then able to act upon it. Prof give a first quiz to a class starting a new
semester. Students had some sorts of expectations as they studied "this much" for this quiz
(they are worried if they have made something wrong), and the quiz did not go so well. Prof
asked the student: "what did you expect about this? How much did you studied for the
quiz?" ---> going to the root of the problem and then we can prescribe an action plan. We
will be able to set a course about how that correction has been done, then the student goes
back and studies the exercise needed to pass it. Next quiz ---> 100% !
Common Measures of Performance Standards
Standard
– Expected performance for a given goal: a target that establishes a desired performance level,
motivates performance, and serves as a benchmark against which actual performance is
assessed: what is the standard we are trying to achieve? What the key point the performance
will be measured against?
What can be easily quantified? Look at a benchmark for quantity: how many units have you
produced? Quality? ---> attributes: number of pieces with defects i.e. Number of pieces that were
thrown away. (also satisfaction) . Time: how much time does it take to produce a certain amount of
goods or services and then it all revertsto cost.
Sometimes if we want to increase quality in many sense we have to decrease quantity, that may
increase the cost and may require more time. So when we a dealing with a project or the design of a
new product and so on, we often find trade-offs happening between these. But there are actually
ways to improve this --> managing our business process through the control activities, i.e.
Review questions
– According Tom DeMarco "You can't control what you can't measure."
– Do you think that is always true? If not, what can you control that you can't measure?
Measuring but not controlling? DeM says that we can only control measurable objects.
HOW TO IMPLEMENT CONTROL SYSTEMS
Comparing Performance with the Standard
Princile of exception
– A managerial principle stating that control is enhanced by concentrating on the exceptions to
or significant deviations from the expected result or standard: looking at an exception ...
what is it good about it? You concentrate about this exception and see what it is telling us.
We see the level of deviations that is happening there. Something like students' performance
i.e. IF we are students and average grade is 8.5, in one course grades are 9.5 10 and another
7.5, what is happening in these courses? We can balance and compare these things upon
performance and actually keep on doing what we are doing in the good course and try to
find the elements and replicate them in the course we are not performing well. Important
thing to do is establishing a benchmark and highlight any exception which may teach us
how to deal with probs in a better way.
Bureaucratic Control Occurs Before, During, and After Operations
Feedforward control
–
The control process used before operations begin, including policies, procedures, and rules
designed to ensure that planned activities are carried out properly: before the process begins
we have a certain number of steps or standpoints that should be met to make sure that
whatever has been planned will be carried out appropriately.
Concurrent control
– The control process used while plans are being carried out, including directing, monitoring,
and fine-tuning activities as they are performed: at this point we are looking at the "during"
phase and not at the "after". This is the process used as the production or the delivery of the
service of goods is actually happening. There are indicators here telling how well we are
doing.
Feedback Control
– Control that focuses on the use of information about previous results to correct deviations
from the acceptable standard: once the process has finished this is the kind of control e use
to the end result which will then give feedback. As we are going through the course, each
assignement can be seen as one of the concurrent controls, to see how well we are doing
andthen the final grade will give feedback for how well are have done overall in the course.
Along the assignment we can take corrective reaction and finally see the end result as a
consequences of our gradual effort. The end result also provides feedback as a whole. Think
about a work breakdown structure kind of setting.
{ A work-breakdown structure (WBS)[2] in project management and systems engineering, is
a deliverable-oriented breakdown of a project into smaller components. A work breakdown structure is
a key project deliverable that organizes the team's workinto manageable sections. "A hierarchical
decomposition of the total scope of work to be carried out by the project team to accomplish the project
objectives and create the required deliverables." }
Management Audit Control Various Systems
Management audit
–
An evaluation of the effectiveness and efficiency of various systems within an organization:
auditing is a way to figure out how well the org is doing: a formal process checking the
extent to which how well the org is doing....checking the health of that org.
The external audit is basically scanning the external environment: how are we going to deal with
the other organization? As a partner, supplier, a possible merging or acquisition process on course?
Or a competitor? Need to take precautions.
For the external we are looking at the outside while inside for the internal. How well we are doing?
How well are we able to serve our cust and deliver value to them... it is important to have an holistic
approach to audit. Both int and ext.
Budgetary Controls
Budgeting
– The process of investigating what is being done and comparing the results with the
corresponding budget data to verify accomplishments or remedy differences: how well are
doing in terms of Finanacial health? We check the standards to see if we are going well in
some parts or bad in others; and in so doing taking corrective action whether necessary.
Types of Budgets
Accounting audits
– Procedures used to verify accounting reports and statements: verify the extent to which, in
the reports and in the balance sheets, the statements are actually true and we are making sure
they are actually accurate. If not they may be giving the wrong picture. Need to make sure
that whatever has been reported is actually something that really reflects the reality of the
org. Whether it is for the internal of the external stakeholders.
Activity-based costing (ABC)
– A method of cost accounting designed to identify streams of activity and then to allocate
costs across particular business processes according to the amount of time employees devot
to particular activities: how much time we spend or how much effort/resources/inventory?
Classifying items in terms of their value or their amount to see that not all things are created
equal. For ex 80% of bus products , 10% other product and the remaining 10% another
product: so we have an un(?)even spread and so it is important to understand what is the
core activity there and apply the method into different levels.
Balance sheet
A report that shows the financial picture of a company at a given time and itemizes assets,
liabilities, and stockholder's equity: basically the balance sheet provides a good financial picture,
this is how we are doing financially. A positive cash-flow --> company is getting more money in.
Profit is ok and we don't want to be on the red.
Assets
– The values of the various items the corporation owns
Liabilities
– The amounts a corporation owes to various creditors
Stockholders' equity
– The amount accruing to the corporation's owners
Assets = Liabilities + Stockholders' equity.
Profit and loss Statement
An itemized financial statement of the income and expenses of a company's operations : how much
profit we made and how much loss.
More Effective Control Systems
– The systems are based on valid performance standards: make sure we have validity
because the control system is really capturing what is really happening, because control
systems can capture some sort of data but that info is not really reflected nto reality so in
making decision there might be dififculties. Let's look at Consumer Satisfaction : how do
you measure it? Do you interview them?Do you observe them? Do you look at those who
actually come back ... what is the extent of repeating business that you have? Are you
looking at degrees of loyalty at your customers? How can we measure these variables? It is
important to keep in mind that performance standards measurable with variables like
customer satisfaction can let us understand the what customers may actually bear in mind.
– They communicate adequate information to employees: the info must be well
communicated. Data is transformed to info and this must be communicated effectively and
clearly so people can act upon it and improve the business.
– They are acceptable to employees: one of the example of controll is having a video feed on
the production line to see what the person is doing, there are a lot of tensions in different
areas of the owrld about that. Some poeple will see that acceptable other not. The use of
video camera into sales (shops), what is the selling staff doing ... are they not helping
–
–
customers? Video surveillance can be a point of debate depending on the culturale setting
we are dealing with.
They use multiple approaches: not one point of data we are collecting, we a collecting them
from different points.
They recognize the relationship between empowerment and control: there is a trade-off
here, a kind of balance that need to be established between these two elements.
Balanced Scorecard
– Control system combining four sets of performances measures: financial, customer, business
process, and learning and growth: how these areas are contributing to the success of the
organization, so it does not create an unique point of data ---> how are we doing with
finance? How are we doing with customers? How internally with business process. All these
elements together will contribute directly, so by controling them and by measuring them we
are more likely to create a successful path for our business.
Management Control an Empowered Setting
– Put control where the operation is
– Use Real-time rather than after-the-fact controls
– Rebuild the assumptions underlying management control to build on trust rather than
distrust
Guidelines to ensure we are crating the right type of empowerment – control and freedom --- using
the information in a timely manner , creating an environment of trust.
– Move to control based on peer norms
– Rebuild the incentive systems to reinforce responsiveness and teamwork.
Creating a group, working as a team, trusting each other, and the peers can help each other to
ahcieve th objectives. Isthat easy to do? We need a long time to chieve so in a good manner for a
same positive outcome.
Review questions
– Think about the security procedures at your local airport when you are checking in for a
flight (with all the steps like checking identity documents qand so on...)
– Which steps are feedforward, concurrent or feedback controls?
Innovating and Changing
Managing Technology – Elements of an innovative organization
MANAGING TECHNOLOGY
Forces Driving Technological Development
1. Must be a need, or demand, for the technology: the factors that are driving tech innovations
in an org. The most essential things here is that there should be a NEED for that technology
to actually solve a problem. What are the tasks and what tech helps in doing them ...
2. Meeting the need must be theoretically possible, and the knowledge to do so must be
available from basic science: the need in theory must be possible. We can not create things
within an insufficient level of today's knowledge. We can not do teletransportation ... but,
are we able to do that with our technological material? We should need demand but also a
certain degree of feasibility.
3. Must be able to convert the scientific knowledge into practice in both engineering and
economic terms: the actual knowledge created mustbe converted into basically an
application; the scientific knowledge about data transmission into wireless communication,
well that knowledge could create a framework for technological innovation in software
development that would create new services. Let's look at SMS (short message service) ,
was it feasible? However one of the important aspect to look at is whether there is economic
viability because the level of investment centered in the new technology must be a return on
investment.
4. The funding, skilled labor, time, space, and other resources needed to develop the
technology must be available: need to haveteh correct or the sufficient env or factors in
terms of having qualified people to do that or qualified space...not only need to be feasible,
not only to be translate into a valuable source for customers in terms of economics, but also
we need to make sure we have the right level of resources which make this happen.
5. Entrepreneurial initiative must identify and pull all the necessary elements together:
entreprensurship, leadrship, teamwork ---< all these elements are getting together to enable
the development of new tech and innovation
Measuring Current Technologies
Technology audit
– Process of clarifying the key technologies on which an organization depends: not only
finance, but also technological innovation can be procesed, so what are the key technologies
which are actually supporting our business?
Emerging technologies
– are still under development but may significantly alter the rules of competition in the future:
few years ago we had the video streaming technology which was quite a revolutionary tech.
Now it is quite mature. Few years ago, though. Blockbuster in America was a very large
chain of video rentals, with stores where people went and rent the physical disk. Now an
emerging tech is streaming and broadband supporting technology has been picked up by
Netflix showing movies on demand. The nature of how movie are distributed is shifted. This
altered the competition and how sustainable the business is.
Pacing technologies
– have yet to prove their full value but have the potential to provide a significant advantage
that alters the rules of competition: think about blockchain technology. We may surf online
and find there is so much talking about blockchain technology. The key thing here is, how
would this alter the rules of the game? How third parties that basically have their business as
intermediary and make it valuable or threatening. What is the extent to which this new
technology can be disrupted and can actually change the game.
Key technologies
–
have proved effective but offer a strategic advantage because not everyone uses them: the
technology here has been proven already, people understand what it is, it is effective... does
it still provide a technological advantage or better saying a competitive advantage because
no one has it, so those who have access to that technology...do they have a competitive
advantage in comparison to others?
Base technologies
– are commonplace in the industry; everyone must have them: let's think about the
Internet...we would say it is a base technology that everyone must have if they want to have
any sort of competitive business so that is one element we look at as it was emerging some
time ago but now it is not nice having it even if is a must have for all industries.
Assessing external technological trends
Benchmarking
– the process of comparing the organization's practices and technologies with those of other
companies: we looked at benchmark in different points ofthe course, even in the case of
Porter's five forces, in this case here we are actually focusing on the technological aspects of
the company ... how could we leverage the competitive advantage (after comparing techs)
we may earn from benchmarking competitors?
Assessing external technological trends
Environmental scanning
– focuses on what can be done and what is being developed
– emphasizes identifying and monitoring the sources of new technologies for an industry
We talked about competitive intelligence and we swa different stages of it like scanning the
environment, remember the example of the desert fox? Scanning the env to find something to eat ...
the same if we hold a technological position ---> in a competitive environment if we spot a threat of
an opportunity we have to try to investigate on that and try to leverage the most business benefit for
the organization.
Engaging in Disruptive innovation
Disruptive innovation
– A process by which a product service, or business model takes root initially in simple
applications at the bottom of a market and then moves "up market," eventualy displacing
established competitors: REALLY a technology that, in a colloquial expression --> rock the
boat! It really changes the game. Video sharing, video streaming, YouTube, are all
disruptive technologies ---> ie. They enable peer-to-peer sharing and then we can come up
with issues like piracy, copyright infringement which basically translates, to media
companies, as a potential loss of revenues.
First thing here: ask ourselves, how ready is the market to receive the new technology? When
developing something new we need to figure out the extent to which the need of the market exist
and the willingness of the market to receive that. For example we are in a market with a high level
of young people with high skills in using technology, so there are indicators to see if the market
would accept or quickly adopt something that requires, for example being technological prone and
with a young demographic scenario. (environment)
The tech has to be feasible, in other words it needs to have the right set up which will enable us to
accomplish the tech target without many promises, we should have the maturity here and at the
same time we need to make money. The example of SMS ... when mobiles started to have SMS
some people thought it would have been a great idea to send people the weather forecasts however
with subscription prices. Most of those services actually failed because people we not willing to pay
for that because that info was available from other sources. In an organizational context, we need to
REALLY understand whether this new introduction will be viable for the company.
Know Where to Get New Technologies
Make-or-buy decison
– The question an organization asks itself about whether to acquire new technology from an
outside source or develop itself: for instance, if we are working in sales we can buy a license
or subscribe for a company software from a website like salesforce.com which may provide
SFA (Sales Force Automation) software, or we can say NO we will develop it in house.
There are of course trade-offs we might be wondering about : what are the key elements
here ... would it be better for us to buy or to make it? How does it cost? Are we going to
have any kind of scalex here or not?
Managers should ask the following basic questions:
– Is it important (and possible) in terms of competitive advantage that the technology remain
proprietary? ... We are developing a technology that nobody has, and that tech is developing
a trascending level of competitive advantage for our org. The tech is doing the exact same
thing as others counterparts, this technology is not actually bringing too much advantage in
comparison to the techs available on the market. What are the elements here which will be
giving a real competitive advantage?
– Are the time, skills, and resources for internal development available? Do you have enough
qualified people, capital time? What is the cost benefit?
– Is the technology readily available outside the company? Why re-invent a wheel? It is chper
and faster to simply go and buy the technology outside rather that starting from scratches.
A real and clear path of development of how the technology evolves, how the decision process
evolves, in having the competitive advantage by self-developing or acquiring. Right decision must
be made to bring the highest value to the org.
Who is Responsible for New Technology Innovations?
Chief information officer (CIO)
– Coordinate the technological efforts of the various business units and identify ways that
technology can support the company's strategy: information systems here, the info tech
function is here to support the bus to make sure the bus delivers the best goods and services
possible. The IT is here to help the bus to be abetter bus. Here we have the CIO's role.
Technical innovator
– A person who develops a new technology or has the key skills to install and operate the
technology: somebody here with the skills and ability to innovate. For ex prof, over twelve
years ago, used mobile phone in the classroom to interact with students by being a prof of
management and IT, he did not only have the maangerial skill for spreading that knowledge
but also the technical skills which made him able to innovate. Later on that system was used
in many other classes of the university, so the prof was a sort of technical innovator for the
different sets of skills that he had.
Product champion
– A preson who promotes the idea throughtout the organization, searching for support and
acceptance: convincing collegues or students that a particular kind of technology will bring
benefits to the organziation, so this would be the role of the procut champion.
Executive champion
– An executive who has the status, authority, and financial resources to support the project and
protect the product champion: The prod cham would say "let's look at this technology, at this
innovation...it will be something adding value to us..." and so forth.. but sometimes this
person won't have enough authority therefore we need the project sponsor or champion and
we definetely need to alocate resource, namely funds, people, political willingness...there is
also a politicl game in play...not just rational decision in the play but also power struggling.
So the executive champion provides that sort of backing for the development of the project.
Review questions
– What are the advantages and disadvantages of developing new technologies within the
company?
– What is the best way to keep up with rapid technological changes in the business
environment?
Think about two things: one is thinking about the adv and dis we have in developing the tech in
house. Then think about what would be the best way a company can survive with by keeping up
with the fast changes.
ELEMENTS OF AN INNOVATIVE ORGANIZATION
Becoming world class
– Being world class requires applying the best and latest knowledge and ideas and having the
ability to operate at the highest standards of any place anywhere: we talked about
standards...we have to understand what is the standard (world class) in the existing industry.
This helps us ot create a goal and follow the path. Are we on top of the game?
– World-class companies create high-value products and earn superior prodits over the long
run: a company on top of the game ...can Apple be a world class? Microsoft? IBM?
Samsung? Think about the level of high-value products they create... and how profitable
they are.
– The result is an organization capable of competing successfully on a global basis: need to be
a successful organization worldwide. Think about some Korean organization which started
up 15/20 and after a certain period the began to reach the international markets and what is
the position the hold today. Think about a product like flat screen tv and company which are
world class because of it. How did they get there?
Organization development systematically shapes success
Organizational development (OD)
– The system wide application of behavioral science knowledge to develop, improve, and
reinforce the strategies, structures, and processes that lead to organizational effectiveness:
what is necessary to develop the org? What are the elements? Behavioral science and
knowledge in improving processes...how can we shape success by constantly improving
ourselves ... org dev is a continuous improvement and a cont process that makes the
organization always better ---> delivering better products and services, with better prices,
achieving the most acceptable profit.
Certain Management Practices Make Organizations Great
Strategy
– Focused on customers, continually fine-tuned on marketplace changes, and clearly
communicated to employees: we talked about strategy, about the idea of system thinking,
input, process, output, feedback, strategic planning ... one way to make sure that a company
is making a great org is looking at the strategy, which is always based on facts, good data we
are collecting from our customers, we are always fine-tuning, we are always benchmarking,
monitoring the environment and communicating clearly with employees and stakeholders
where we are and where we want to be.
Execution
– Good people, with decision-making authority on the front lines, doing quality work and
cutting costs: the key elements which make the org way ...they are fundamentls: human
resources, recruiting, retaining our talents, these are of course improtant things ... business
process management, optimization, reaching top levels of efficiency and effectiveness...
Culture
– One that motivates, empowers people to innovate, rewards people appropriately, entails
strong values, challenges people and provides a satisfying work environment: How do we
create a positive culture?? A culture that actually provides the right type of setting and env
for people inside the org to thrive and go forward... What values what are we standing for?
What level of accountability or empowerment? The culture has to promote the
organziational growth within the satisfaction of the workforce.
Structure
– Making the organization easy to work in and easy to work with, characterized by
cooperation and the exchange of information and knowledge throughout the organization:
we talked about this earlier ...how to make a great org? The structure has to facilitate the
flow of information and DM to create it in a higher level of cooperation within the org.
Those things will reflect in the level of performance of hte org and so we can see how well
an org is doing...
We may wonder about which of the listed elements here are contributing to make the business a
great business: no one is more important than the others, each "organ in the body" has a function
distinctive which complements each other.
Motivate people to change
General reasons for resistance
– Inertia : "weeeell, we've always been doing things like that...why do we have to change?"
---> as the business environment changes and evolves, we have requirements for constant
changes, wedon't change for the sake of changing but for the sense of adapting and
improving ---> surviving and growing. Something may be working now but later, perhaps,
not.
– Timing: sometimes when this is happening people are busy or there are uncertainties, so we
need to understand what are th contextual elements happening here that are actually helping
or inhibiting people to change...
– Surprise: people do not like things coming tha they could not foresee, so it is important that
–
there must be a process which evolves through the org s people should not take it as a
surprise and aviod change matter of factly.
Peer pressure: even if we are appearing willing to do the change but the co-workers are not
very happy about it so we do not want to dis-please them ...a sort of resistence.
Change-specific reasons for resistence
– Self-interest: "this is not going to be good for me..I would lose power with it..."
– Misunderstanding: not very well communicated to the person who does not really
understand... people normally reject what they do not clearly understand because there is a
certain level of uncertainty there.
– Different assessments: there could be reasons for resistences as well as for management
tactics.
– Management tactics
These things can hinder the manager when he is heading towards the direction he long for reaching.
Leading Change
1. Establishing a sense of urgency: well, here we explain that we are not changing for the sake
of changing but we are actually implementing some changes for our own good.
2. Creating the guiding Coalition: we are creating a certain level of collaboration here that
people understand and subsequently buy in.
3. Developing a vision and a strategy: these must be shred: people need to understand where
we want to go and how we want to reach that target (place)
4. Communicate the change vision: Vision must be clearly communicated and understood
throughout the organization, especially with the people who would be directly affected by it.
5. Empowerd broad-based action: providing power to the people involved in the chain but at
the same time...
6. Generating short-term wins: providing a short-temr reward for the people involved in the
process in order to stimulate them from a moment of initial inertia to a series of movements
towards the direction we should go to.
7. Consolidating gains and producing more change: how those things are actually translated
into gains and we like also a win-win situation for everyone.
8. Anchoring new approaches in the culture: is the new approach going to change or is it just a
part (or becoming a part / anchoring) of the organizational culture ..> is it temporary so
people go back to the old habits? No it isn't. So it is important that when we look at leading
changes, it is important that these changes are effective in the long stand.
Review questions
– Think about an organizational change that recently affected you
– How effectively did the organization manage the change?
– What could the organization have done differently to reduce resistence to the change?
Can be a place we are working, a school we are attending, a club or even our family. At some
point...a change? How effective was it? Was it well done? What about the levels of resistence?
Corporate Governane: what is it?
Developing a language for corporate governance – Definitions and core concepts – Corporate
governance codes – Waves of Corporate Governance
Corporate governance is one of the most used terms in the press, particularly in the financial press
The presentation is taken from the book:
Huse, Morten 2007: Boards, Governance and Value Creation: The Human Side of Corporate
Governance, Cambridge University Press ---> corporate governance in a management prospective.
DEVELOPING A LANGUAGE FOR CORPORATE GOVERNANCE
This concept has not existed for a long time , it was taken for granted.
Tipically this is prescribed and presented using five words:
– Corporate financial performance: the result of financial perf
– The number of board members that is the insider ratio and is about the CEO position and the
Stockholding or shareholding of board members. The CEO is the executive director of the
company and at the same time the chairman of the board.
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Do we have a particular interest like skiing? In order to enjoy it most we want to be properly
prepared. If I do not maximise my skills in a proper way it would be a bad experience. Then we
need to know the kind of snow we're dealing with ... corner snow, ice snow... need to know my
techniques, what kind of skies I am going to use, the weather, so in order to use them I prepare the
skies in the best way and I need to have a large vocabulary. Prof is also fond on wine in his hobbies
and his vucabulary on wine is also so much wider than the vocabulary of corporate governance.
Having a good vocabulary about a topic, not just red wine or white wine. Corporate governace is
just described by the five words the prof mentioned.
Why is there a need for developing a language about boards and governance? We need to be able to
find tools and to create the best experience and the most obtainable values.
DEFINITIONS AND CORE CONCEPTS
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What is a corporation?
What is corporate governance?
What is a board?
Need to have a stakeholder picture: a stakeholder is somebody who has stake and power in the
organization. Stake means depending in one way or another in the company, while power means the
possibility to influence it. Suggested the word "actors" to embody the meaning of stake and power.
Internal and external in relation to the firm.
There are different definitions for corporate governance to be based on. One of them is accounting:
making sure we are following the corporate governance guidelines that are needed. If we go to a
definition of finance, we find a way of the definition of how shareholders are controlling or
monitoring the management and the board. Definition of corporate governance is related to the
understanding of the interaction between internal and externall actors, with the board as a separete
actor.
Management is related to the internal side of the company, shareholders are the external and
corporate governance in the board side is defined to be an interaction between managers,
shareholders and the boards and the various direct and indirect actors contributing to the value
creation ofthe company.
What is a board?
It is not that easy to define because there are many different system and traditions about what a
board is in different countries:
– USA, UK, etc (here the board is more or less the same as it is the top management team but
there might also be somebody from the outside coming to the board. But the requirements
are strong for them...typically there is no clear distinction between the executive manager
and the board)
– Germany, Netherlans, etc (here there are two theories of boards, it is supposed to be one
supervisory board on the top and then one executive board. The first is supervising while the
second is running the business)
– Scandinavia (typically one board, more or less the same as the supervisory board).
So when comparing USA, and UK there is a single board system which has its roots in the
executive situation, in Scandinavia there is one board also with a supervisory background level;
while Germany Netherlands and other countries there are two boards with roots on both supervisory
(on top, a kind of vertcal division of labour between the suprvisory b and the ex b) and executive.
However in other countries like:
– Italy (here we also have two boards: one administrative board and one controlling board, but
they are on a horizontal level , unlike the vertical disposition of Germany and the
Netherlands)
However, it is not just the formal setting that is important for understanding boards, how are they
working? Let's have a look at the picture:
In the first picture (the sheeps) there seems to be only one person that seems to be thinking, and this
is the CEO. Next to the CEO we find the chair person but, if we look at their faces, they're just
following the CEO. In the second board we see six old men sitting around the table and the men in
the middle is asking whether they should increase the age limit of board members and that peron
enjoys being there, they should be typically highly experienced peoples...it is the old boys network
and one of their main tasks is to protect their own priviledges --> with their knowledge they provide
a lot of help and service to the company with their management but within this framework we are
talking about (the old boys network) how they areprotecting their own priviledges it would not
really ask critical questions to the management. Then according to the financial definition of
corporate governance we flip to the example of the viking in the upper-left picture : he is coming
there as an outsider asking critical questions , making sure the the company is following him even if
other members do not speak the same language. The viking is doing much of the controlling
(critical question from the outside) (developing common and sharing of knowledge among
members ---> the old boys network) . The board on the upper-right side is a kind of a balanced
board; the things on the cartoon boards can be perceived in many different ways.
Explain differences in Corporate Governance definitions?
Explain differences in board traditions?
WHICH GLASSES ARE YOU USING?
By using many glasses we can see different things. Sometimes need to look at details and
sometimes at more intermediate level. So we can understand corp gov by using different glasses.
Who and what really counts?
– Internal and external actors (and which glasses they are using)
The actors may have different level of identity and ideology therefore Corporate Governance is a
kind of battle between ideologies, then we need to understand why the actor (int and ext) are
behaving in the way they are doing.
If we see the company from the managerial prospective it is not very likely that managers are not
mainly thinking about shareholders or stakeholders of the company ...maybe they are more fond on
what is important for themselves as well as the other members. With a shareholders prospective it
means that we are seeing corporate governance and the company from their perspective ...they
might not be interest in what interest the managers but about what interests them. They can be large
or small and thecompany must assure to do what is best for shareholders. A stakeholder definition
can also be called a triangulation definition, it's about balancing different stakeh by underlying what
is best for the society, what is best for employees, the nature ...many sets of balancing coming in.
What is then best for the company? (firm definition) In this perspective the purpose of corporate
governance definition is making sure that the companies boards and top managements will achieve
the most sustainable value situation for the company.
Explain relationships between perspectives (glasses) and values?
CORPORATE GOVERNANCE CODES
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Common Law and Civil Law Systems: a common law system is based on the experiences
(which develop the laws). It is what we typically have is USA, UK, Australia and New
Zealand, it is something like case-oriented , based on what we are learning on the way, so an
incremental development of law, not made before hand. In a Civil Law system we have
somebody at the top who is trying to figure out what is best for the whole society, so the law
is made before hand.
How is corporate governance regulated? Much of this is included in laws and at least in the Civil
Law countries but in Common Law countries there is a more limited amount of laws regulating the
Corporate Governance. There are different codes or practices existing:
Most codes are made by stock exchanges and it is important that companies follow these codes if
they should be listed on the stock exchanges.
Some of the best practices of corporate governance laws are called "soft laws" compared to hard
laws that we find in the formal law systems (Common and Civil).
Evolution of Codes
– Authors and Corporate Governance Definitions: there are many different authors of
corporate governance systems or codes. Typically we find that stock exchanges are core
authors of these codes
– Stock Exchange, Banks, Professional Associations
– Enforcements: Comply or explain: most of the code which is require from companies to
follow them, if they do not follow them they need to explain why, if not complying need to
explain.
– Content of Codes
– Independence, Transparency & Accountability, Evaluations, Board, Working Style:
The different codes have often similar content with little variations. Most of them have content
related with independence, with boards that should be independent with requirements about
transparency and accountability. Most codes have also requirement on how boards should be
evaluated and many requirements about the boards' working styles.
The first most important Corporate Governance code was the Cadbury report, which was made by
Cadbury and his committee, was laregely basedon ethics and corporate social reponsibility. The
different codes were put together in what we call a "combined-code" and finally put together in
2013 as the UK Corporate Governance code. Hoever, this coee is about entrepreneurial behavior in
the company hence a different code has been created which is called the Stewardship code which is
how the company is supposed to relate to the financial market.
Both codes are operating among the comply or explain...
UK codes 2013
The purpose of corporate governance is to facilitate effective, entrepreneurial and prudent
management that can deliver the long-term success of the company.
If we move, for example, in the German's codes, there will be much more focus on how the
companies should relate to the stock market.
Explain the content and evolution of Corporate Governance Codes?
WAVES OF CORPORATE GOVERNANCE
– separation of ownership and management: the starting point from the present corporate
governance movement comes from the USA, in a situation when there where large
corporations with many small owners and none of them was able to control the managers.
– Managerial hegemony: managers were able to give themselves high salaries and lots of
other benefit. They were ble to control the org for their own sake. The era beginning from
1960s to 70s and 80s were called the era of skyrocketing re-moderation; however we saw
that in the 1980s' there was the development of the Welfare state and thanks to it the pension
funds were enlarged and a new possibility to control the managere arouse: new requirement
were set on the board and on the board composition and how the board should work.
– Shareholder activism (aong the first ones: the teacher pensions and California pension)
– Long term insitutional investors
– Technological development of stock exchanges
– Heartless and faceless investors (a heartless investor is somebody who does not know
the company he/she is investing in and a faceless inv is somebody that the company does
not know who he/she is) ---> I would be this if I invest my money in a share fund, for
example, I don't know which company I am investing in and the company doesnt know
who I am. The only think I am interested in is the long share return on investment and I
am not interester whether the company is growing or not , this is the core logic of the
stock exchange.
– External to the firm: these kind of investors are seen outside the firm, so shareholders in
this perspective are seen as external
– Corporate scandals: (Enron, Parmalat that began in the 2000s. They were mixing ownership
and management. Those who were losing in those scandals were mostly many stakeholders
(ext and int) that were not shareholders or the managers. In those situations the UN
Secretary General Kofi Annan was presenting his white papers on Corporate Social
Responsibility clearly telling that corporations are also responsible for the large set of
stakeholders.
– CSR (corporate social responsibility)
– International financial crisis: before the crisis shareholders have been taking much of the
slack resources (risorse morte), of the funds and money of companies and put them in their
own portfolio. As the crisis came there were no buffers or any risk management on behalf of
the company which meant that they were also losing.
– Firm focus: in the last financial scandal we saw a stronger focus on the firm with
emphasis on risk management and on the idea that the company's funds must have been
into the buffer and not in the shareholders' portfolio.
– Family firms (The discussion of stock exchanges and firm in corporate governance
definitions has been forgetting the importance of family firms. This is such an important
issue to focus on, most firms are family firms. Here the vocabulary is different: if we are
talking about normal shareholders outside of the firm, in a family firm it is the opposite: we
have internal shareholders while there can be also an internal manager.
– Family, ownership, firm
– External and internal to the family
– The new economy
– Competence and knowledge society
– IT-society
– Geographicy does not matter
– Virtual organizational forms
Accountability
Values – Accountability and sustainability – Board tasks – Theories
Previous lessons
– Developing language
– Defining corporate governance
– Understanding important actors (external and internals)
– Various perspectives (including that of using different glasses)
– Waves of corporate governance (some of the history)
VALUES
What do we mean by values?
– How and why?
– For whom – wealth (creation) and welfare
– Framing values
There are many types of values, they can be instrumental or terminal.
Instrumental: shows some of the way we are doing things
Terminal: shows the objective we are trying to achieve
Value for whom in the organization. It is important to understand who are those we are working for,
who are those who are impacted, those that are creating wealth and value for. Next, what kind of
values? Guessing any of us is familiar with the pop group ABBA and we can sing the song
"Money,money,money" but values more than just money. We need to understand the welfare of
future generations:
What is the most important for us? When the professor got his grand-daughter it became so visible
that some of the most important values are not just the immediate short term money money... it is
rather the long term sustainable value creation and he definitely wants to think about the society as
a shaping objet to give his grand-daughter and the coming generations a sustainable value.
Why we are accountable beyond short term outcomes?
ACCOUNTABILITY AND SUSTAINABILITY
Accountability is about being a good stweard , many of us know the story in the bible about the
good stwear , the one who was giving the money while the mass was going away. Need to learn
what stewardship and accountability is. We have learned from those holy parable that being a good
steward does not mean letting down talent and resources, it is not even to place them in the bank to
be on the save side and get some rent, but being a good steward and being accountable to the
master, is to be able to use resources and talent fully. The entrepreneural activity has been a good
steard for ex. Important now to understand accountability to whom.
Accountability
– To the management (private economy literature) what it is based for you and for me
privately
– To shareholders (finance literature)
– To society (law, accounting, auditing literature)
– To the firm (management, entrepreneurship, strategy, literature, organizational behavior)
– Bridging the gap between myth and reality
– From defining tasks to creating value
– Perspectives (external and internal)
Accountability is more than a distribution of values but it is also a sustainable value creation. Acc
depends on how value are seen in a long term perspective. Here we can talk about sustainable rent
or competitive advantage.
Two of the most famous professors in management literature are Jay B. Barney and Michael Porter
Barney mostly talks about resources or a resources-based view of the firm, how it is important to
use and explore possibilities to be able to create long term sustainable values. Porter is talking about
competitive advantage and exploiting, so it is the long term sustainable value creation in the
company that is in the core of management literature.
Explain differences between value creation and value distribution?
BOARD TASKS
What are board really doing?
When professor lead seminars on board settings, he often asks "what are you doing in a board?
What are your main activities?
We need to be able to cluster or to put these different tasks a board is doing, in a proper way.
So what are boards doing?
What are boards doing?
Myths and realities (Mace, a professor): in his book this prof was presenting that it is a myth in
most nations and in most laws that boards do the tasks listed below (control, set....). This is what
boards are expected to to but it is a myth. In reality? What are they doing?
– Control, Set goals, Hire/Fire
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(in reality) Advise, Act in Crisis, (form some sort of) discipline : boards are giving advice to
the management on different topics like how to lead the company, marketing, understanding
the market, the business, how to deal with core employees. Then, in particular, there can be
different types of crisis like an economic crisis coming from outside, or an internal crisis,
but the board is much more active during a crisis situation and it is when they often take the
lead. For example when the top management or executive is ending or dieing or smething
like that and the board needs to act directly. The discipline part means having board meeting,
the managers demonstrate discipline in attending the board meeting.
So there is a myth a reality issue which is clearly stating that it is a myths that boards are
controlling, setting goals, hiring and firing the top management team ...in reality they are giving
advice about crisis and form some sort of discipline.
Different types of boards have been outlined, based on academic disciplines for example there
might be type of boards describing them on the base of law, or accounting tradition or another type
can be about the finance tradition , a third type may come from sociology, and a forth on the
management tradition.
Typology of boards
– Aunts (law – meeting formal regulations) : we typically do not expect anything from the
board members that is following the formal criteria behind it.
– Barbarians (finance – controlling behalf of shareholders)
– Clans (sociology – protecting elite priviledges) : might be about networking or voice
networks etc..
– Balanced (management (tradition) – creating firm values) : a much broader and bigger
language to describe what boards are doing and try to integrate them in creating long term
sustainable values.
The sheep board is the aunt board. It is not expeted that that board should do anything different than
meeting the formal requirements. That would almost all times be keeping the manager in position
and not really thinking that the other board members should have any particular contribution than
just being present at the board meeting. IT is clear since the ship next to the CEO is just following
him. / The barbarian board, from the finance literature, is focusing on how external actors are
coming in, we infact see this external viking coming in with his sword and controlling management
on behalf of the external actors which could be the shareholders. This viking is not typically
interested in the long term survival of the company and rather takes things in the short term. The
viking does not necessarily understand how values are created in the country or the copany but
comes there and takes them. The outside board members are representing the external shareholders
not understanding really what company is doing and how value is created in the company. / The
third perspective from sociology is the clan board (the old boys) ; the clan board is looking at how
this priviledge elite is protecting their own priviledges. They may be very knowledgeable, they may
be know a lot about companies, market, law, finance, but being on the board is relatively more
important for them than actually resolve issues, even though they could give a lot of support and
advice to the management. / The challenge and the fourth type of board which is being presented, is
the board that is combining both the internal (sociological) and external perspective: the balancing
board is the board where we can both have controlling functions and service functions , it is the
board where we both have distance (as in the board of the viking) and some kind of closeness (old
boys) ... independence and interdependence (respectively) ... the focus here is creating long term
sustainable value in the company.
So after we have seen all the things boards are doing, it is a challenge to sort them in a good way.
And we need to sort in a way of how the boards are contributing to the value creation of a company.
One of the main work of Michael Porter was about the Value Chain approach to be able to
understadn how values are created in a company. Similarly, should be a challenge for us to see how
the different thigs boards are doing can contribute to value creation to the company. Another aspect
is how resources can be used so that boards are performing these different tasks (Jay Barney --->
how to use resources in a proper way) , what can we do so that boards perform different the
required tasks in a good way? When we sort the boards' tasks we need to watch how this process is
contributing to the value chain but also how to integrate resources in the wisest way for the
company.
What are boards doing
– Focus
– External – on the environment (often past) : mostly boards focuses on what they are
providing ---> to whom ---> shareholders , government and different other stakeholders.
So this will be about what is going out of the company. But also ... how can they get
things from the environment? What they are giving to the environment or what they are
getting from the environment.
– Internal (in the firm) ---> (often present) . Meaning that the board may be diving into an
understanding of the processes taking place when producing during the different types of
activities; we move the attention to the behaviour of the management and the top
management team and we notice they are involved in internal control in setting
compensations but, just to remind, this is focused on what has been taking place inside
the firm. This would also imply giving advice of how to improve firm's and work's
performances (still, an internal focus)
– Strategy – future (decision making)
Tasks (which are many) put together in an overall title or group (ext perspective or int perspective)
Legitimacy and networking: also lobbying
Internal control: managerial behavior and internal audit
Strategic control: or even the formal strategic decision making
We are trying to cluster all the specific tasks that are involved on a company management ,
depending on how they are contributing to the value chain, and how they things can be done to be
able to promote these different tasks.
Explain how board tasks may be sorted?
THEORIES
The six sets of tasks we are representing are all routed in different types of theories. Reflect on
them:
We have already explained the different kinds of boards base and law and accounting discipline.
Within the above set there are different bundles of theories to be understood. Aunt theories are
related to what we find on the formal part of the literature. / Agency theory, stewardship theory and
stakeholder theory are all based on the same assumption that have external perspective.
Team production: how developers work together to create sustainable value advantage to the
company.
The resource based view is closely related to the written papers of Jay B. Barney.
Agency theory
– Separation between ownership and management : it is popular inUS corporations with small
shareholders and the management that is control
– Opportunism : managers are acting for their onw best if they have the possibility to do so
– Bounded rationality : it is impossible to have full control of all the things taken in place ,
information is not divided evenly among all actors.
Agency theory is often called the bible in corporate governance (terms in the Bible --->
opportunism means that man is a sinner , and bounded rationality is akin to the man thrown out of
the garden of Eden with the overall difference between good and bad.
The narrative of Agency Theory initially took place in 1976 and 1985
– Agency theory (shareholders)
– Principal (owner) and agent (managers) : in relation to the firm shareholders are
considered to be external while management is considered to be intenral.
– Stakeholder theory (society) : a main difference between A.T. And Stakeh.T. Is that there are
many principles that the company and the board need to relate to many that are requiring
something from the company , they do not just need to please the value affair of the
shareholder but they need to fulfill the other stakeholders requirements.
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– Sevel agents
Stewardship theory (has become very popular) : the main difference with A.T. Is that the
assumption of oportunism has been taken away in Stewardship theory, here there is
allignment and joint interest between shareholders and the management which means that
there is not the same kind of need for a board that is controlling since the board can do other
things. Basically the company is extisting for the increase of affair volume of external
actors.
– Not opportunistic
Here we have the picture of Salt Lake City with the Mormon Tabernacle , next to the Tab there is a
museum and the Mormon church , when prof went into the museum he immediately observed a
board table :
This should have the been the board table of the corporate movements or the Mormon church,
which were the business activities of the M church? (not in the picture, the table had 7 chairs) , i
the museum there were pictures of the previous Presidents of the Mormon church, which also have
been members of the board. It was fascinating to see ho this board was put together with the
background of the board members.
In 1976 there was the birth of the bible of corporate governance, but corporate governance existed
even before agency theories were developed. Prof has been aboard member, along his career, even
before 1976, and so, what did the board do at that time?
How the boards are used from external actors to control internal actors
Boards have tasks which go beyond the traditional value transmission to shareholders in corporate
governance.
Try to think and memorize that it is not individual action or individual welfare that is most
important but try to see that boards can do something not only for a indivdiual but for more actors.
Just thinking about the example of ABBA, let's know understand what means team production ,
how is it possible to be able to allign the interests of the different actors for a sustainable value
creation in the company.
Here we need to combine both internal and external perspectives.
Team production theory is mostly related to who has the most stake, who has the best knowledge,
who can do best for the company by taking together all the different actor for the best value creation
of the company.
Why is team production important?
Chapter three of the book
Board Members : independence and competence
Independence and identities – The selection process – Reasons for being a board member –
Characteristics and competences – Composition, numbers and diversity
Chapter 4 of the textbook
INDEPENDENCE AND IDENTITIES
Independence and the "ususal suspects" (in the previous sessions) [four main concepts to
describethe boards of directors in addition to corporate financial performance]
– Number of board members
– Outsider ratio
– CEO duality
– Board members' shareholding
We will go through this concepts but there is also to understand that there are different types of
affiliations which can be called identities.
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internal affiliation: strong connection with the exectuvie management or CEO, or they might
be in business relationship to the management and the company (bus consultants)
external affiliation (those who have an identity with external actors that may be
shareholdeers, government or other actors trying to influence the company)
independent (third group of board member, do not have internal affiliation. Purely
independent both from internal and external actors. The external actors may offers the
honors themselves and place their people in there, the board members are hence acting on
behalf of them but independent board members are acting on behalf of themselves for the
sake of the firm and they do not need to respond to the management nor to the external
actors.
Replaceable vs irreplaceable: (for board members), for example in certain countries there
have comes some sort ofregulations or quotas to have some women on board but in order to
have some women on board there is the need to replace some board members who are going
to leave the world. Typically it is hard to replace somebody with internal affiliation or with
external affiliations ; so this means that new people coming in, in this case the women, are
becoming independent board members.
Multiple-board memberships: it would almost be the independent board members that are
members of many boards at the same time
Independence
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Incentives: what kind of inc have the board members? Is it due to their close relationship
with the company , families, money, with the owners?
Family and friendship (ties): are the new entrants part of the family of board members or the
management ad typically are considered to be dependent.
Business ties: people doing business with the company often are considered to be dependent
also.
Knowledge and competence: it is hard to be independent if we are depending by knowledge
and information which is strictly provided by the management, so we are dependent on that
information. So the need emerges to gather the most valuable and autonomously generated
knowledge and information to make independent decisions.
Social identities and identification: if we are part of a gropu which want to hang up and have
joint status or I want to be a part of this old boys network in some way , then that makes us
dependent of the management we do not want to question , delivering answers to support
their discussion will not make us independent. So that is about social identity among who
we are identifying with. But that doesnotnecessarily mean we are identifying with the
managers, we can also identify with other actors / stakeholders.
What is the difference of being an outsider and that of independence? And respond in a proper way
THE SELECTION PROCESS
It is not on the matter of board members being them independent but it is a question about how we
get the board members we want to have. Are we independent? So, what is needed in the company?
Well, independence is not enough since we also need to know about competence , how are board
members selected?
Need to understand these point to get the best match among the terms and the tools we are using:
– Actors involved
– Steps in the process
Core actors
– Main shareholder and shareholders meeting : (in the meeting board members are elected,
there are different ways for doing it and sometimes there is a very strong direction or
guidance given by shareholders which is followed during shareholders' meetings, in some
countries and in some specific corporations this is delegated to some corporate bodies to
select the board members)
– CEO and executives : important in choosing the board members, as they give feedback
about who they are willing to work with and in some places they are among the formal
group of people that are nominating or choosing board members. In other places, there is a
very big distance between the management and the shareholders in the process of selecting
board members. Boards typically make control and evaluation operations of the
management expecting to have a distance (emphasized)
– Board chair and board members: often are important actors when finding people to be on the
board. For replacement and people who want to be there , these actors can give inputs and
suggestions about those who are known by them and would like to work together with. A
strong focus on independent supervisory board , not even the board members should be
acting in finding new board members this should be done especially during the shareholders
meeting and by the external actors.
– (in large corporations there should be a) Nomination committees: they may be a part of the
board, or even independent board members, or they may be somebody completely external
for example elected by the shareholders meeting.
Steps (when going through this we should also examine who are the different actors involved in
the different steps , there are not just shareholders following the whole set of steps or even the
managers as they might be active on different parts; plus their involvement may also vary due to
political repercussions)
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Identifing needs: who are those doing so, and which are the needs? Which are the things
coming up which underly a need for new board members (the example of the requirement of
women on board for some countries, this created a discussion on how the board committees
should position these new entrants on the commision , so the need is clearly obvious when
going through this question)
Formulating requirements: what d we need to get the proper person?
Search: how do we search for finding people? Do we search on a very broad basis or do we
just get down to a "pop corn" situation where we are just suggesting things about people that
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we know about. So we have to come up with the idea of measuring the rationality and the
solidity of the search process. Then, after having done the search :
Evaluating candidates : how do we put up with the list of candidates
Choice/election: who is making the choice? Based on which criteria? On the original
criteria? Rational or ad-hoc? Then when the board members is chosen there could be :
Negotiations, introductions, etc : conversation approaching and some introduction program
to make sure the board member is properly in place.
[Not everything can be really planned in extreme detailed precision] --> Bounded
Rationality : limited knowledge ---> we do not have enough information and we are not
able to search around all the alternatives , we are actually searching around and within the
are based on our primordial/primary understanding.
[It may also be part of a] Political process: need to have board members who can support the
individual desire whether it is from the CEO, the shareholders, the individual shareholders,
all of these might generate a political process in selecting board members
Recruitment evaluation: what is suggested in many corporate governance codes is actually
the suggestion of performing Recruitment Evaluation.
There are different theories also presenting how this process is taken in place , someone would go
saying "similarity attracts thoery" , typically trying to choose somebody that is like him/her , this
would go through homogeneity. But there are also theories where we are looking at people that are
visible and presenting themselves, some kind of competition or tournament theories behind the
selection so those that are visible, presenting themselves which means that we may not go for some
of the best person because they are not as visible.
Explain how board members are selected?
REASON FOR BEING A BOARD MEMBER
What made professor want to become a board member in different types of companies?
– Who want to become a board member – and why? Not everyone wants to be that, people
have different backgrounds which would make some more inclined to be this than others.
– What is a professional board member? What do we mean by "professional"? Is it somebody
with a lot of experience? O i a professional board member somebody making a living out of
being a board member. Somebody doing a good job in a professional behavior (prof
maintains).
– How to become a board member? What are we doing to be able to be there? As already
indicated, it is important to take part in a tournament or being visible in it and to prepare in
different ways to become a board member.
– [If chosen to be a board member...consider this new thought: "do we want to be a member of
this board?"] Considerations before accepting an offer: there might be different things
related to the firm they we need to know. There may be negative figures and responsibilities
which we would not like to be taken on us. So be careful and make accurate investigations
on the target firm before becoming a board member there. In some boards we should need a
lot of time in order to avoid pitfalls (insidie) to do a really good job, whereas in other jobs
things go rather smoother with a proper administrative care making sure we are getting what
we actually need.
– Social identities and identification: we might like to be a board member because we would
enjoy meet together with other people,. Indeed there might people on the board that we want
to identify with and perhaps we want to have a status
(an accepted or official position, especially in a social group ) with that group of people if
we want to become a board member of that association.
Among the most frequent criteria for choosing to become a board member in a company :
– Status, Power, Experiences, Network : prof recently attended a board members and was
quite happy about how it was working, it was bacause it was national, he was asking the
others members "why theywanted to be a board member of that board", someone said that
he was getting a nice network, (so important for the network) , and somebody else said that
it was important for his CV to be on that board, other said that we wasable to learn a lot,
other to support the organization for being a board member. Somebody else, again, said that
he was fighting for the organization since it helping him with developing this purspose.
– Money or other benefits: sometimes is obviously related to the responsibility of what we are
doing, but in other cases there is hardly any monetary compensation that partly covers up
money which we could have been getting from other places , but there are also other
benefits prof remembers when we was at a board of a car business company and in order to
understand what this business was doing he needed to use the company's cars as much as
possible and that was definitely benefit even though it was also important for what he was
doing at the moment in the company but similar also in other settings where other benefis
can be achieve with the same importance.
– Working for a cause
– Using knowledge and skills
It may be a good situation for using knowledge and skills and we may experience that we are in the
core of decision making.
Explain reasons for wanting to be a board member?
CHARACTERISTICS AND COMPETENCE
When talking about this the topic is mostly related to individual characteristics and competences, a
different composition to incorporate the board members together.
What is the ideal board member? What does he/she look like?
One important criteria is that a potential board member must have experience before hand before
joining a board. Need to be able to understand the business, read the balance sheet and also the
financial data that is needed. Ableto understand what has been really taken in place in the company ,
the critical features in the company. Here we have some of typical requirements for board members:
The Demand Side
Characteristcs and competence
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Firm specific (havinga clear uderstanding of what this business is about) --->board members
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should understand the objectives and the traditions of the business, also be able to
understand what the whole business is about and how it is running. Including being able to
read the balance sheet.
General and function-oriented (understanding of finance, law, merging, acquisitions; these
are important for the company and for the decisions taken at the board). It may be things
understanding the market, national issues, the industry, production and overall, the
requirement to have a board member who has experience on the situation in which the
company is going to be or they want to get (the strategic planning and the goal envisaging +
opportunities and threat analysis)
Social skills: social goals competences might be important for developing networks , to be
able to lobbying , to give some kind of legitimacy to the company. The task of
communicating with the environment , tranferring concepts and integration will be key
terms in understanding the social part of this.
Process-oriented (how to run a board) : need to understand how a board is running, through
the video lesson for example, not just being a real participant of a board meeting.
Relational : not far away from the social characteristic. Rel means working with individual
people, and we support each other and work as a team within the board members (relations
is based on the method to work with other board members while other ideas would be on
how to work with the external environment); we must be able to work with people in a
group
Personalities: it is more than just social and relational ... it is important to be appasionate,
friendly, creative , innovative, those different parts of our personality are important to work
in a board and are needed individually or in the group of the board.
Negotiation (skills) : (it is like being a poker player) understand the politics around, the
formal planning and how to related with both internal and external actors ;
Ownership: many says this is one of the most important criteria of being a word member
that we are really represented as one of the owners (...of something)
COMPOSITION, NUMBER AND DIVERSITY
What do we think about this board?
Is this an ideal board? A group of nice looking men, eight people, all the same suits with different
color of ties, this is an ideal board...almost all of the same age... what is the ideal number of board
members? 8? Someone would say 5 6 or 8 people. Do we need to include some additional
perspective into that? One of these will be, Prof knows an important entrepreneur in his country,
which is Norway, what this man is saying about his own company is that he needto have an odd (not
even) number of people on board. He also said that there is a need for an odd number of people and
three are too many , well it can be easier not to have board at all and run the business by himself ,
this means one person doing everything. Boards are too large, in traditional discussion about
America we are goingto find between 15 and 20 people (cosidered to be too large), well, what is the
maximum number of board members? Somebody would say 11 , why? It is because they are not
even. Jesus was able to have 12 and he was a master ... so that is the maximum number.
What we need to understand here, is essentially the identification of the leader...who is the chair
person ---> leading and motivating others who are not able to lead themselves.
COMPOSITION, NUMBERS AND DIVERSITY
(board) Composition
– Insiders, shareholders, independents
– Employee (worker) director: this is compulsory in certain countries and companies for
example in Germany or Scandinavia and southern European countries ,this may become
compulsory in some corporation where we have employee directors as board members.
– Coopted board members: a coopted bm is somebody who is invited to be on the board in
order to make the environment friendly. For instance we may invite a bank mamber at the
board in order to make the bank friendly to us. Or invite a person from the major customer
part to the board in order to make easy relationships with the customer or somebody for the
government to be on the board for similar reasons.
– Diversity: what do we mean by diversity?
– Diversity vs. Homogeneity (with Hom all things are very similar but with dversity there
would be differences
– Age : all board members inthe 50s or 60s , there could be bms much younger or older,
by the way , how old should board members be?
– Background (diversity): are they all coming from the same social background or are they
representing different things? All from an elite group of people or also representing other
parts of society?
– Gender: are women different from man at the board? In which ways?
– Race and religion: minorities typical in the US discussion, there are some quotas
nominating boards including minorities considering different man race and religion.
– Knowledge and education: is everybody coming from the same business school? Is
everybody raised in the same area? Sometimes we would experience that it is always the
same group of people which comes to the various places and they do not really needto
discuss at the board meeting because they know before hand how the otehrs are thinking.
– Deeplevel vs. Surface level diversity: We should go beyond some of the things we have seen
here , this means going beyond the surface level diversity. We can take the example of
women on boards , is it just enough to say that a women are different from a man? How can
these difference impact the way boards are working? Possibly, many women on board may
be considered to be more masculine in value than other men on the board. Well, in a popular
way we may say that in understanding the behavior and women on boards,, we need to
understand value, behavior and objectives. Behavior is related to feminine (word), values
are related to the word "female" and objectives to the word "feminist", it varies also which
values the women on board have...there might be also feminine men on the boards and
definitely also men that are feminist. But almost all women on board are not feminist and
might have very must clean values. So we need to go the surface-level diverstiy and try to
understand what kind of diversity brings some difference to understand the board.
Explain core elements of board composition?
Does one size fit all?
Context – Actors
Chapter 5 and6
One important theory to discuss: Contingency Theory
– There is not one solution for designing a corporate governance system , there is not one
solution to decide how many board member there should be; there are not analogies among
what we are doing as we need to understand both the context and the actors. So when for
example we want to put together board directors , we need to understand which are the
contexts in which we are operating and what are the core actors involved in the process.
CONTEXT
– Resources (being available in the firm and in the whole setting)
– Input, output, design variables and context (need to understand how resources are
applied when the board of directors is contributing to value creation.
– CEO tenure and other characterisics, we need to know something about the CEO andthe
general manager. Prof had an experience with a CEO on a board , he was a wonderful
person, very knowledgeable an friendly BUT it happened that he became really aggressive
which meant that we need to design structures around the board that could avoid his
problem and stress on benefit, however it unfortunately happened that the CEO appeared on
a television programme so he became aggressive and unfortunately he had to leave. When
designing the system we need also to understand the characteristics of the core people.
– Firm size: what makes the difference between corporate governances and board of directors
is the size of the firm = does the large firm need to have more board members? There might
be different systems behind a large corporation. Prof does not completely agree with the
relationship with size, some can argue that small firms with lack of resources should have a
larger number of board members to be able to support the kind of resources being needed.
But still the design depends on the firm size.
– Firm life cycle and thresholds: we have been already presenting the situation of crisis,
indeed boards might be much more active in the event of crisis, but it is not only activity but
there might be other design variables that we need to understand. So the different firms' life
cycle phases may be something like a start-up, a growth, a maturity or a crisis situation.
BUT it is not just the general movement, it may also be the threshold; for example if we are
going to be launched on the stock exchange, this would yield to a considerable amount of
changes taking place.
– Ownership: (getting the most attention) it may be related to what is listed, what is majority
shareholders, family firms, subsidiaries and so on.
– National and cultural differences: in previous classed we've indicated that there is a big
difference between formal systems in different countries, we have for example legislations
in Common Law countries that may be different in Civil Law (things are made before hand
from the top andthis may have different consequences on how boards systems are designed)
countries. But there might also be differences in National Cultures , equality of genders for
example, or equality between different classes of society and the movements of them.
– Industry and competitive environment: a friendly environment vs a hostile environment and
the board would be depending onthese kind of environment or we cna see the differences
between static and dynamic environent (different requirements to boards if things are
changing fast compared to a static layout) , then typically we have a large board dealing
with a static environment and we may needa small board when the env is very dynamic
because it may be able to change fast so need to act fast in different ways. Further, we can
appreciate the difference between homogeneous and complex environment: in case of hom
env we do not need to have a broad set of knowledge among board members bur if it is very
complex we may need different board members having positive and big amounts of
knowledge. What about Hi-Tech firms? What kind of board members do we need here?
What do we think when we see this picture?
This is supposed to be a honey moon, it is such an experience which makes us behave in a different
way with our partner than when we are married for many years and similar with respect to board of
directors, when we just marry, or a board have just employed a new CEO, the board would typically
be more friendly, positive and supportive to the CEO and they rather mentor and suggest how to
cntrol and not to be aggressive , so there are different ways a board would be acting according to the
time the CEO has spent there.
Here we have some experiences the professor had with the life cycle phases , he used to be the chair
person of three small firms at the same time, and it was very interesting to see the difference of how
these three firms were working at the boards. One of these firms was in its start up phase; actually it
already existed before, but it had been fighiting for bankruptcy and so starting up again and it
needed to have the whole process as a startup firm. The second firm was in a growth phase and the
CEO of that firm was one of the most successful entrepreneur in that area. The third firm was in a
crisis situation, there were red figures and the banks interactions were very important.
We were making some sort of discussion but we were also mapping (Stakeholder picture) . The
family stakeholder in the firm which was very entrepreneurial. In the crisis the bank was really
deciding most of the things but we need to pay also much attention to the relationship with
employees, because of bankruptcy risk.
Ownership
– Ownership structure (there can be small and large structures)
– Ownership types : here we need to discover which are the identities of the different owners
– Institutional investors : related to what we said abo stock exchange and listed companies
– Venture capitalists
– Family (firms and) ownership : the language used here may be very different with
respect of the language used in other firms, for example when we talked insiders and
outsiders in family firms it may be different when we are referring the same concepts to
listed companies. An outside board member in a family firm would typically be a person
who is outside of the family.
– Subsidiaries: how are the boards working in subsidiaries? Are they just formal entities or
real decision making bodies? The board members are in charge of the company but how
do the leadership of the mother company deal with the board? When understanding
subsidiaries there can be a coupling with international subsidiaries, need to understand
the characteristics of the home country and also about the guests of the country they are
operating in. Sometimes there are quite formal requirements in the host countries that
the board needs to relate to and sometimes there are regulations also on how much
ownership that can be in the mother company.
One of the things professors is taking care of is governance for non-profit organizations, what about
boards and governance in football clubs (his students making comparisons) in Italy and Germany,
the students think the systems are quite system. While in Germany they think there is an organic
system behind , in Italy they maintain there is a more static way of thinking about football clubs.
We can deepen further into governamental organization and how are the boards working here or
cultural organizations , these are example of some of the ownership types.
Some more about institutional investors
Portfolio managers are thinking more about the formal things around the board and understanding
clearly what has been creating value in the company.
We have to look at the business angel : the name can be considered positive but at the same time it
can be quite dangerous, so let's try to have a deep understanding of the different types of business
angel: a business angel typically is a private person who is investing money in firms in their early
phase , many small firms are needing extra financing to be able to grow and business angels are
private investors going in in early stages. We can have different in ownership:
By doing the consultancy work the business angel gets money (box bottom-left)
Capital provider = making sure things are coming out from the investment.
The Takeover angel = considered as the most dangerous. [Take Over (rilevare)]
Here we have the international context:
Ownership dispersion means that there are typically many small owners . In Germany a very low
ownership dispersion would mean a high concentration of ownership.
Ownership identity : who are the main owners and there are formal regulations in different country
ON who can be owner of a corporation.
The board in US is typically managers and outsiders , the discussion is about the relationship
between executives (insiders) and those coming from the outside.
Explain how different types of contexts may be important for board tasks and composition?
ACTORS
We have already defined CG as the interaction between internal and external actors with the board
of directors directing the company for value creation. Most of the internal act are the managers
while the external are shareholders but there are many others int and ext. When looking at the CG it
is not enough to look at what is happening inside the board room but it is also important to
understand who are the person influencing in different ways. First we made a broad approach to
actors, now we are going to deeply understant how people are using power, how we are thnking and
feeling in different ways.
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Actors and arenas
Behavioral theory of the firm
Trust and trustworthy
Power and power sources
Strategising and power techniques
Actors and Arenas
– Formal and informal arenas
– (there are areans) not available for everybody and the board decision making takes place of
many of them
What do we think when looking at the following picture?
This is a place where typically the woman is not welcome so the arena was not as accepting for
everybody and it was an informal arena. But this is not the only way, we can think about board
members of peple sailing together or playing golf and do different types of activities together, and
thse activities are typically for men not including women for example , or different background
requirements. Professor was travveling a lot some years ago, he was in the lounge of one of the
airport of connecting flights . There was some traffic jam at the airport so prof ended up sit around a
table on a sofa where another person was sit before him. This person did not like professor sitting
after him but he could not do anything because the place was quite crowded. Then other two people
came who were from people, so it was hard to understand their language and then other two people
(prof is norwegian) came speaking Scandinavian language so prof understood what they were
talking about . The five of them were three owners coming from Finland and two Swedish
professional board members who had to go to a board meeting on the northern part of Sweden for a
company there. But why were they sitting there, at the airport in this lounge? They were discussing
lots of important issues that had to be dealt with at the board meeting , without the presence of the
management team and the worker elected board members basically most of the most important
decisions had already been decided upon. So it is important to understand where are the decision
made, who made them and in which setting.
When prof was a board chair of a company he used to go to the board meeting by car with one of
the other board members, nd when they were going to the meeting, with one hour of travel time,
they were discussing all the things which were on the agenda and infact during the meeting they
were very influencial n what they were doing about it.
Behavioral theory of the firm
– Bounded rationality: there is not a clear relationship between input and output
– Satisficing and problematic search:
– Routines and learning
– Political bargaining and quasi-resolutions of conflict
Behavioral theory of boards and governance
– Value creation through knowledge: based on the knowledge existing among the board
members
– Problematic search by the board: search of different solution across the agenda, it is not
necessarily based on what is best but on what is initiated by somebody or by the board or the
management, it is not something to consider in a holistic way.
– Norms and learning processes: It is actually a very dynamic situation, hopefully the different
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actors are learning, maybe not completely but it is a learnign process teaching that the
solution done one time may be different next time it is presented.
Strategizing inside and outside the boardroom: thiswith the purpose of achieving individual
objectives
Let's move on
Again we see these very important concepts. This is now about trust and trustworthy. People are
know trusting each other and the various actors may be trusting each other in different directions.
For example, external actors may not trust internal actors which means that external actors may use
the board members since they do not trust the internal actors! And this is the core of agency theory,
we may probably modify a little bit in order to understand the different kind of trust being included.
We may have trust based on competency to be called competence-based trust. Or we may talk about
integrity-based trust --> more related to ethics. We can also talk about predictability , we may trust
somebody behaving in a negative way but we may also predict the outcomes of our choice. One
example we can deliver is that shareholder might not trust the integrity-based trust of the
management therefore they use the board to control them. Or let's go back to the resource
dependence theory that the internal actors may trust the board members to let they control the
external environment; that may be related to competence, but there are different settings behind and
in relationship to resource knowledge providing advice, so many other things we are discussing
about the various theories it is a peculiar matter of understanding the web of trusts and the trust
relationships.
Trust and trustworthy
– Different types of trust
– Competence based types of trust
– Integrity based types of trust
– Predictability
– Trust between whom (who are the actors trusted in between?)
– Direction of trust
– The role of trust in empowering boards
Emotions
We might be subjected to think that in a business environment there are no emotions, that's
definetely wrong. There are individual people behind and we all have emotions and some of the
most aggressive and emotional situation we encounter in a news paper at least when talking about
corporate governance it is about emotions people might be aggressive even developing negative
relations among each other.
Here we find the image of the famous game Rock, Scissors and Paper, which of them is the most
powerful? Power is relational. So this is crucial to understand the power game inside or outside the
boardroom which is not something fixed. It can vary akin to the famous game.
Power and Strategizing
– Micro-strategizing
– Influence and power
– Direct power
– Indirect power
– Conscience (or awareness) controlling power
– Institutional/structural power
Power and the boardroom
Influences and alliances between the board members
TMTs (topmanagement team) and internal influences
– Power circulation theory: about this can be said that the internal actors have the strongest
power across the management team
– External influences
– Special control and social distancing (we've been going through this in the previous classes.
If we want to be board members and want to be in a group or in an elite or club together
with some of the other board members including the CEO, we would be asking discerning
(acuto, perspicace) questions , you would want to be supportive and friendly and if we have
been critical we wouldn't be invited to join this social group anymore.
– Power bases (institutional, individual, integrational) and strategizing techniques.
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Why are actors and arenas important for understanding boards and governance?
Board Leadership and Structure
Board structures – Board evaluations – Board leadership – Board as a team
Chapter 7 and 8 in the book
BOARD STRUCTURES
In relationship to board leadership.
Formal laws: remember the difference between Common law system and Civil law system. The
discussion about corporate governance which took place in USA and UK, which are both in
Common Law system, there are hardly any laws regulating in a federal level the US corporations. In
practice, corporations in the US are trying to develop regulations or are incorporated in the state
with few regulations. A few laws came in in the federal level in the US and some of them came after
one big international scandal in relation to Enron. If we look at the Civil law countries we can see
the most of the laws are specific for each country but there are many similarities and we are also
getting regulations from the European level and on more formal level from the OECD (the
organization for economic development and cooperation).
Codes of best practice: often regarded as the soft laws; the formal laws setting is very often the
arena for lawyers or also external accountants or auditors WHILE the soft laws is logically the
arena for people from finance.
External norms and rules of the game: this is what sociologist often have more knowledge about. It
is about the passive knowledge of board members being there , kind of things which are not written
down but that are ruling the game. The rules of the game about boards and CG.
Firm level norms, board instructions and board leadership: they all go close to the management part
and to the leadership part and so much more inside the company and not so much on a society level
anymore. The firm level norms are related to the organizational culture, while board instructions, to
a large degree, are the tools that board members are able to use and to develop. The board
leadership is directly related to the chair person or the chair of the board. Clue: the chair gender like
the "chairman" is not used in some country do to the gender diversification sensitiveness.
If we try to understand the soft laws
– CEO duality and independent chairs
– Development in the UK and USA
Remember the discussion of the usual suspect introduced before , the language ued to describe
board of directors. Well, the core language relates to the number of board members, to the insideroutsider ratio, it is about the shareholding and the board members, and is about CEO duality which
mean distinguishing between the chairman and the CEO of the company. We have seen that in the
UK there is a strong focus for NOT having the same person as chairman and CEO whereas in the
US there is still the CEO duality. In many other countries and in the stock exchange there is a strong
pression towards the premise of not having a CEO duality. Another common issue is the power of
the CEO vs the chair person.
In the code of practices (soft laws) there are big variations among the codes made and the authors f
the codes, but also about the differences in the different countries. Anyway there are standard
things, most of the code systems are including descriptions of different committees that are
supposed to be there. It is a kind of divisional labour where we need to be able to specialize and
have our own charges within the board but also in contribution to the board (a relational model).
Other things which are usually found in the soft laws are requirements for evaluation and it is
typically about board instructions, CEO working description, board maintanance mechanisms and
ethics.
– Committees (3)
– Audit or control committees
– Nomination committee (the one which is charged of evaluating and nominating,
sometimes going even far, selecting the new CEO. Sometimes also role in nominating
board members.
– Remuneration committees : those in charge of remuneration and salary of the top
management team and of the CEO.
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CEO work description: many companies have it, but usually it is very passive even if used
actively; but the CEO w d has a kind of reserved power which tells what kind of power is
assigned to the CEO and if it is not within the w d of the CEO it has to be dealt with at the
board level . So the CEO w d is important for setting the board agenda.
Board instructions (again)
Board maintenance mechanisms
Board instructions
– Board meeting structures
– Number of meetings : how many board meetings should there be? We have seen the
contingency perspective , that the number of board meeting is dpending on the context
and on the actors, but typically in large corporations there are eight to eleven meetings a
year, but the number varies. For example if a company is in crisis there may be a need
for more board meetings , in smaller companies the number of board meetings are
usually significantly lower.
– Length of meetings : again it depends on the context , if a firm is in crisis there may be
frequent but not often long board meetings. Some b m can be important for developing
more basic thinking and therefore may be very long. If there are many board members
and if their knowledge and skills should be used then there might be need for longer
meetings than if there are just few board members. Typically a board meeting lasts three
to four hours but there have been variations. What is common in many places is what is
called
– Away-days (two-days meetings) : deepening into details of a certain thing. IT could be
an internal development of the board , it may be related to strategy or to other important
topics that demand special attention for the board need to work creatively together.
Sometimes they would work together well with the management team. These intensive
discussion, as reported recently, are considered very supportive for value creations
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objectives.
Annual agenda: several boards are deciding that setting the agenda a year at a time or
sometimes two years at a time, indicates that there are certain things to deal with and for
example during February we need to have an agenda discussing annual reports, results;
orperhaps during July there might be a strategy meeting. There might be meetings set
aside for particular purposes so making this agenda important: making discussion about
risk management or functional topics like human resources, marketing and similar
things.
Standard meeting agenda: typically members start with a ratification of the previous
meeting minutes from the previous meeting and offer some information from the
management, and continue with an overview of the recent period's financial results.
Then there will be different things coming out. However we are not going to spend so
much time on things that could be read before hand, so reports and info is basically
something distributed before hand and not really discussed during the meeting. These
boards are clearly using most of the time at the meeting on things that need direct
pression or discussion in relationship with creativity and innovation, with clear
negotiations during the meetings, not spending time on things which could be treated
before hand.
And when should the invitation to the board meeting be presented? Typically there should be time
to read through the material before hand, otherwise being a board member is not worth the while.
There should be also guidelines, in board instructions, about how minutes should be written, what
should they contain, the formalities about it, whether there should be some decision to note down.
So there are different inputs when writing minutes. Board instruction will also regulate voting.
– Notice, information minutes and voting
– Ethics and whistleblowing : many board dispose of a separate paragraph about ethics and
whistleblowing (A whistleblower (also written as whistle-blower or whistle blower)[1] is a
person who exposes any kind of information or activity that is deemed illegal, unethical, or not
correct within an organization that is either private or public. ) There should be a stakeholder's
or ethic document that is presented by the board , this is what the board should follow up to.
If for example weare not going to accept correction this is something that the members need
to follow up. OR perhaps they do not want to deal with companies using child labour or
with other prevailing unethical aspect, that is among the things a board have into discussion.
Whistleblowing is another thing, we need to make sure that information is really going
through those who are making the decision, it is a dilemma that most of information to the
board members are going from the CEO to the chair person and then to the other members.
We have known situation where the CEO does not want to disclose information to the chair
person and thus it does not go further. Or it may be that the CEO and the chair person,
formally or informally do not want to present more for the board. So they are not very aware
of the issue. Usual situation. How can this information be earned? Some guidelines can be
provided to whistleblowing which is "how can we gather the best information from the
company in order to make the controlling decisions in a proper way? One time a CEO was
explaining a correction process to the chairman but this one did not find it interesting, hence
it did not report it to the board. Until the media got in touch with this and made a big case
and both the CEO and the chair person had to leave the company. Whistleblowing is to
make sure that this kind of routine are getting through. Next, some are trying to have more
people from the management team, in the previous session we talked about re-circulation
theory where the top management team had to be abe to control the management because
they would know what is going on in the company so if some of them are present in the
board meeting in addition to the CEO , the CEO would be typically more careful and would
say things that are factually wrong. This is actually what concerns this theory. But also there
must be ease to access information from the rest of the company. There are some rules of the
game saying that nobody should go beyond the chair person but these are among the things
that can be institutionalized and not being felt as a threat or a lack of trust from the CEO but
something we would better looking as important.
Board Maintenance Mechanism
– Board evaluations
– Purpose of board evaluation
– Who does what for whom and how
– Board development seminars
– New board member introductions : it is not necessary to invent everything from
scratches (when new coming) , they should get an introduction about the company, the
market, how the boy's working --> how to get to work
List important board structures
BOARD EVALUATIONS different types
– Board object for evaluations: when a board is for example evaluating the manager or the
market but in clear terminology it is the board the object for evaluation
– Report evaluatios: what is written about the external enviroment, is a presentation of
what the board is doing, sometimes there will be plenty of details, when required, but it
is not often written by the board or the management (corporate consultants or CG
officers) , need to create legitimacy in the environment.
– Recruitment evaluations: what is needed to select and evaluate new board members ,
which are the needs or the requirements, which are the situations the company is facing
so they are in need of certain people. That is recruitment evaluation.
– Develpment evaluations: it is the development of the board itself so that it matures
contribution to value creation. Many boards do not work fine but they can do better and
unless they have good procedures to continue their own development the boards will
quickly lose their potential. There is need for self-development and regular evaluation.
On one side we see who is evaluating the board (vertical) , on the other side we see who are in need
or to whom the evaluation is addressed ---> these addressees may be the board itself, or the external
actors, with even academic reasearch coming in in different ways.
Market to board evaluation means that the market is evaluation the board.
Board evaluations
– Regularity
– Structured
– Folowed up: it is not just an exercise being done and then forgotten; when a board
evaluation has taken place it IS IMPORTANT that it is followed up.
Suggest different types of board evaluations?
BOARD LEADERSHIP
Board chair and CEO leadership difference seems to be not too clear as it depends on the situations
and the competences of these two persons.
Working board chair: that often makes this a little bit more complex as often there is a previous
CEO that started that chair, but this is an important figure for understanding what the chair and the
leader should do.
Chairperson has to make sure that the invitation are met, that minutes are written, that the meeting
has taken place in a good way.The chair has also a kind of figurehead role, outside the meeting but
also inside the meeting, he is the one who is facing the external environment, and that is something
additional to the role of the leader in the meeting. Representative fo the company. Mentor/supporter
for the CEO. Sometimes the chair person is taking the role of a strategist (what do we want to do in
the future?). Expert: lawyers for example by being chairpersons and taking care of formal things.
View of the chairperson: using and relating the fundamental skills of all board members. It is ok to
see a chairperson almost like a coach, a leader, or a motivator that would really use the knowledge
and skills of each of the board member.
In the picture we do not typically see the motivational leader but one who is deciding without
letting anybody else coming in.
Describe important characteristics of a board chair?
BOARD AS A TEAM
Normally professor would argue that the board is not a team. It is very difficult to be that. They
meet quite sporadically, peers have more or less the same background. And there is no authority to
give instructions from the chairperson to the other b m. It is very difficult for a board to act as a
team. However, even if is not a team, it is important to act as a team to create value. A team is
characterized by a group of people working together to reach a goal. The knowledge or skills have
to be used and direct properly to create value for the company.
The decision-making culture
– Criticality and independence: the board members in total should be independent and be able
to ask discerning questions, be able not just to follow the CEO but acting independently.
– Creativity: not only the board members but also the whole process
– Cohesiveness: something that is really energizing, that can give extra resources for each
person to give in into the team. Is it good to be together? Can even be negative. Overall
energizing.
– Openess and generosity (use of knowledge and skills): board members are not just "itting on
the fenches" being distant, but actively involved and sharing and giving to each other for the
best of the company (sharing knowl and skills)
– Commitment (preparation and involvement – effort norms) : are b m preparing properly and
getting involved in things taking place? There should be high effort norms indeed.
– Cognitive conflicts (different glasses...) (task related conflicts) : diversity in play, questions
which arise among the participants which let them contributing with each other.
Picture below shows all important aspects in a board:
...while the heart is for cohesion and for what we do want to do for the company.
The overall framework seems to be difficult: (need of balance between distance and closeness,
between service and advice, the balance between the feminine and masculine aspects too)
So it is important to avoid to bump into the vicious cyrcle:
Much of the present corporate governance discussion is related to control, distance, oportunism and
how to avoid oportunism and it is focused on fast decisions, while on the other side when
understanding people and energizing people or using their knowledge then we also need to
understand processes. So we can see in the picture below the traditional distinguishing between
Decision orientation and Process orientation
Embedding in an environment in which we are trying to understand the process. (incorporare
sistemi)
Why is it important that the board work as a team?
Value Creation: A value chain approach
Measurement issue – A value chain approach to value creation – The value creating and balancing
board
Chapter 9, 10 and 11
A summary of the previous sessions, how they are linking together
Are boards creating values?
– The importance of team production (theory of team production)
– Those who have the most important stake (should be board members)
– Those knowing the strategic direction of the firm
– Those being the most competent
– Process oriented boardroom culture: understanding the human side of corporate
governance.
MEASUREMENT ISSUE
A core topic is value creation and what it is.
– How shall board effectiveness be measured? At the firm level
– Firm level outcome
– Value cration in the firm (relating it to sustainable competitive advantage)
– Value distribution from the firm (balancing with it) : however there's not going to be
value creation or distribution from the firm unless there is sustainable value creation in
the firm
–
Board level outcome (when measuring board effectiveness)
– Board task performance and involvement: using a prospective of what is going into the
firm and out of the firm, most studies (five concepts) are understanding the number of
board members, insiders-outsiders ratio, CEO duality, shareholding and board members
and relating this to corporate financial performance. However in the class we've been
arguing that this vocabulary is partly small as we need to understand all the details
coming in between these inputs and these outputs. When understanding board
effectiveness we need to divide into:
– Intermediate steps
Value creation is also related to the things and the values that are important for us; much more
fundamental than just "money,money,money", it is the sustainable value creation that is important
and value which are important to give further to coming generations.
We can also see value creation in an addititional perspective: 4 squares matrix
Explain why we need to be specific and reflecting when measuring values?
A VALUE CHAIN APPROACH TO VALUE CREATION
The value chain approach is something we've been reading in Michael Porter's Value Chain. Then
underline the importance of some British professors discovering the deep aspects of the board rather
than just sitting on the fence, making strategic decisions.
The horizontal upper line explain the board activities in value creation.
Are board really creating values?
We do not mean that the ordinary board behavior should completely change, but there is need to
balance the traditional way of thinking of corporate governance and board of directors with the
entrepreneurial behavior. In this setting we are using the approach of M. Porter to see how values
are created in a company, by following the value chain approach.
M. Porter has seen that values can be created in different phases of a company (the bottom side
of the big white arrow) :
Inbound would refer more to the transport, storage and delivery of goods coming into your business,
whilst outbound refers to the same but for goods going out of your business. Your company will work
different supply-chain partners on inbound and outbound logistics.
How boards are creating values
– Sustainable value creation in the firm
– Value creating tasks (which are the most important)
– Value creating competencies
– Value creating team/board culture
– Value creating leadership
– Value creating structures
We take these things together in Porter's value chain approach.
We were discussing different value creating tasks, in both internal and external perspective.
Internal, external and strategic focus, ending up with six different sets of tasks (table below)
We can start holding thwese tasks and relating them tothe value creating in a company. Then we can
find the following:
The below graph examines the characteristics of board members (chapter 4 of the book)
Board members ought to be abel to use the overall knowledge and skills (of the group).
Value creating team/board culture?
Board and team culture
– Critical attitudes and independence
– Creativity
– Cohesion
– openness and generosity
– preparations and involvement
– cognitive differences and conflict
We will se how these point consitutue particular kinds of dynamic, how that would reflect
paradoxes lie Ying and Yang.
Paradoxes (ying and yang) and dynamics
– Distance/closeness, independence/interdependence, critical attitudes/trust, top-down/bottomup (approaches harmonizing and balancing with each other)
–
Virtuos or vicious dynamics, reinforcing circles of control or collaboration (different
dynamics renforcing each other).
Taking these steps together in a value chain approach will yield to the following relationships:
However, we are going to understand board leadership:
Leadership and structures are closely related to each other.
–
The value chain approach to value creating boards: we have presented a large set of
concepts which described but not only that, also develop ways of improving.The different
words are like tools, just like a nail and the hammer, to develop value creating boards.
Putting all together in the big picture of the value chain.
This language is like a "tool box" , in the beginning we used few tools and word to understand
corporate governance, what we are doing now is going beyond these few tools, beyond this
hammer, so we are able to understand ways for developing corporate governance in much more
detail. We do not see the words just as nails, we are looking at different problems and ways to
improve and we have the tools for doing it through this language.
When we talked about how to prepare for proper skiing, we needed to know what kind of snow,
weather, Vyex we have ... so a large language. Same for the wine, so if CG is important as we need
to develop a specific language like the insiders and outsiders ratio, the number of board members,
the CEO duality and the board members shareholding, the value of corporate financial performance.
How boards are moving aways from a decision oriented situation to a more process oriented
situation. So when we take this approach using and understanding boards from a management and
the process perspective we will se the followiing table: (human side of CG is focused on the
process-oriented aspect, it does also focus on the use of knowledge and skills of the board members
[attributes], result is the result of the discussion in the boardroom)
Explain how the value chain may be used to evaluate and develop boards
THE VALUE CREATING AND BALANCING BOARD
The ABC of boards (most important things to understand the board of directors, by also presenting
the typology of boards and theories presented before, introduce the balances of these things related
to the management of that.
– Integrated rational – strategy
– Participative board (we are focusing on this, not on a distant board)
– Balance of internal and external perspectives
– Balance distance and closeness
– Balance independence and interdependence
– Both integrity and competence based trust
– Avoid aunt, barbarian and clan boards (when developing a system board)
Arenas for board ethics (boards can be understood as a Super-Ego / the basic ethics of th
corporation but we've been discussing through the different elements for understanding boards, also
aspects relating to ethics)
– Managerial ethics (how the board controls it)
– Board members ethics (howthey are acting, what kind of intention do they have, proper
working?)
– Board ethics (are the boards meeting the value creating objectives of the company?)
–
Corporate ethics (is the corporation discussing values, corporate social responsibility,key
standards things with instrumental and terminal ethics behind them)
– Ethical dilemmas
Generally it is not so difficult to make a choice between something that is good and something that
is bad, the real discussion when we want to relate to something that would be bad anyway and these
are some of the dilemmas board members will face at a time or another. These dilemmas can come
through in relationship on how to work with the managerial ethics , questions about distance and
closeness to management; about the board member the usage of time and energy to work together;
about board ethics how to configure what to do.
– (what is behind all the things we are doing?) Theory and system ethics
Going back to the core values: are we doing what is really best for the society? Important to bear in
mind that we need to go away from the ideal money, money, money... and the winner takes it all... to
head to a sustainable value creating attitude in the firm for the purpose of the welfare of coming
generations. Values will be embedded in the company, boards and society itself. Team production is
a central object of discussion when creating sustainable value in a boardroom.
How the management approach to boards contributes to a language to understand and develop
boards and corporate governance?
The contintency perspective appears in all the classes: there is not one best solution, one best way of
deciding a board of directors but we need to understand the context and the actors (chapter 5 and 6
in the book)
Recently we've been hearing discussions about diversity on boards. For example women
introducing to board of directors that there is a business case fo women on boards. One important
thing to understand is that the issue is a matter of competence and not only of independence, a
matter of understanding processes inside the boardroom, experienced to work together and getting
away from stereotypes. Understanding not only independence but even competence.