Principles of Management

Final Exam Study Guide

Spring 2015
Chapter 5: Managerial Planning and Goal Setting
Describe five key steps in the organizational planning process.
o 1) develop the plan; 2) translate the plan into action; 3) lay out operational factors
needed to achieve goals; 4) execute the plan; and 5) monitor and review plans to learn
from results and shift plans as needed.
Levels of goals and plans: Describe the purpose, focus, and who is involved in
each of the following
Mission statement At the top of the goal hierarchy is the missionthe organizations
reason for existencethat describes the organizations values, aspirations, and reason for
being. The formal mission statement is a broadly stated definition of purpose that
distinguishes the organization from others of a similar type. The content often focuses on
the market and customers, and identifies desired fields of endeavor. Some mission
statements describe company characteristics such as corporate values, product quality,
location of facilities, and attitude toward employees
Strategic plan and goals- Strategic goals are broad statements describing where the
organization wants to be in the future. Sometimes called official goals, they pertain to the
entire organization rather than to specific divisions or departments. Strategic plans define
the action steps by which the company intends to attain strategic goals. A strategic plan is a
blueprint that defines organizational activities and resource allocations. Strategic planning
tends to be long term
Tactical plans and goals- Tactical goals are the results that major divisions and
departments within the organization intend to achieve. Tactical goals apply to middle
management and describe what major subunits must do for the organization to achieve its
overall goals. Tactical plans define what major departments and organizational subunits
will do to implement the organizations strategic plan. They tend to be for a shorter time
period.
Operational plans and goalsOperational goals are the specific results expected from departments, work groups, and
individuals. Operational plans are developed at the lower levels of the organization to
specify action plans toward achieving operational goals and to support tactical plans.
Describe Michael Porters Five Competitive Forces and their significance in
strategic planning and strategy formation. (Separate handout supplied in class)
1. Potential New Entrants:
Potential new entrants. Capital requirements and economies of scale are examples of

two potential barriers to entry that can keep out new competitors. It is far more costly
to enter the automobile industry, for instance, than to start a specialized mail-order
business. In general, Internet technology has made it much easier for new companies
to enter an industry by curtailing the need for such organizational elements as an
established sales force, physical assets such as buildings and machinery, or access to
existing supplier and sales channels.
2. Bargaining Power of Buyers:

Bargaining power of buyers. Informed customers become empowered customers. The Internet

provides easy access to a wide array of information about products, services, and competitors,
thereby greatly increasing the bargaining power of end consumers. For example, a customer
shopping for a car can gather extensive information about various options, such as wholesale
prices for new cars or average value for used vehicles, detailed specifications, repair records,
and even whether a used car has ever been involved in an accident.
3. Bargaining Power of Suppliers:
Bargaining power of suppliers. The concentration of suppliers and the availability of substitute

suppliers are significant factors in determining supplier power. The sole supplier of engines to a
manufacturer of small airplanes will have great power, for example. The impact of the Internet
in this area can be both positive and negative. That is, procurement over the Web tends to give
a company greater power over suppliers, but the Web also gives suppliers access to a greater
number of customers, as well as the ability to reach end users. Overall, the Internet tends to
raise the bargaining power of suppliers
4. Threat of Substitute Products:
Threat of substitute products. The power of alternatives and substitutes for a companys product

may be affected by changes in cost or in trends such as increased health consciousness that will
deflect buyer loyalty. Companies in the sugar industry suffered from the growth of sugar
substitutes; manufacturers of aerosol spray cans lost business as environmentally conscious
consumers chose other products. The Internet created a greater threat of new substitutes by
enabling new approaches to meeting customer needs. For example, offers of low-cost airline
tickets over the Internet hurt traditional travel agencies.
5. Rivalry among Competitors:
Rivalry among competitors. As illustrated in Exhibit 5.7, rivalry among competitors is

influenced by the preceding four forces, as well as by cost and product

differentiation. With the leveling force of the Internet and information technology, it
has become more difficult for many companies to find ways to distinguish
themselves from their competitors, which intensifies rivalry. Porter referred to the
advertising slugfest when describing the scrambling and jockeying for position that
occurs among fierce rivals within an industry. Nintendo and Sony are fighting for
control of the video game console industry, and Pepsi and Coke are battling it out in
the cola wars.
Compare and contrast the value chain and the supply chain (article supplied)
Michael Porters Business-Level Competitive Strategies:

Broad Differentiation: Differentiation / Broad market scope

o Differentiation. The differentiation strategy is an attempt to distinguish the firms
products or services from others in the same industry. The organization may use
advertising, distinctive product features, exceptional service, and new technology to
achieve a product perceived as unique. The differentiation strategy can be
profitable because customers are loyal and will pay high prices for the product.
Companies that pursue differentiation need strong marketing abilities, a creative
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flair, and a reputation for leadership. This strategy can reduce rivalry with
competitors if buyers are loyal.
Focused Differentiation: Differentiation / Narrow market scope
o Focus. With a focus strategy, the organization concentrates on a specific regional
market or buyer group. The firm may use a differentiation or cost leadership
approach but only for a narrow target market.
Cost Leadership (Overall low cost): Low cost / Broad market scope
o Cost Leadership. With a cost leadership strategy, the organization seeks efficient
facilities, pursues cost reductions, and uses tight cost controls to produce products
more efficiently than competitors. A low-cost position means the company can
undercut competitors prices and still offer comparable quality and earn a reasonable
profit.

Focused Cost Leadership: Low cost / Narrow market scope

Chapter 6: Managerial Decision Making

Decision-Making Steps

Recognition of decision requirement

Diagnosis and analysis of causes
Development of alternatives
Selection of desired alternative
Implementation of chosen alternative
Evaluation and feedback
Whether a decision is programmed or nonprogrammed, and regardless of
whether the manager follows the classical, political or administrative model
of decision making, six steps typically are associated with effective decisionmaking processes. These six steps are:

A. Recognition of Decision Requirement

1. Managers confront a decision requirement in the form of either a problem or an
opportunity. A problem occurs when organizational accomplishment is less than
established goals. Some aspect of performance is unsatisfactory. An opportunity exists
when managers see potential accomplishments that exceed current goals.
2. Awareness of a problem or opportunity is the first step in the decision-making sequence and
requires surveillance of the internal and external environment for issues that merit
executive attention. Recognizing decision requirements is difficult because it often means
integrating information in novel ways.
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B. Diagnosis and Analysis of Causes

1. Diagnosis is the step in which managers analyze the underlying causal factors associated
with the decision situation. Managers make a big mistake if they jump right into generating
alternatives without first exploring the cause of the problem more deeply. Studies
recommend that managers ask a series of questions to specify underlying causes, including:
a. What is the state of disequilibrium affecting us?
b. When did it occur?
c. Where did it occur?
d. How did it occur?
e. To whom did it occur?
f. What is the urgency of the situation?
g. What is the interconnectedness of events?
h. What result came from which activity?
C. Development of Alternatives
1. Once the problem or opportunity has been recognized and analyzed, decision makers begin
to consider taking action. The next step is to develop possible alternative solutions that will
respond to the needs of the situation and correct the underlying causes.
2. For a programmed decision, feasible alternatives are often available within the
organizations rules and procedures. Nonprogrammed decisions require developing new
courses of action that will meet the needs of the company.
D. Selection of the Desired Alternative
1. The best alternative is one in which the solution best fits the firms overall goals and values
and achieves the desired results using the fewest resources. The manager tries to select the
choice with the least amount of risk and uncertainty. Making choices also depends on
managers personality factors and willingness to accept risk and uncertainty. Risk
propensity is the willingness to undertake risk with the opportunity of gaining an increased
payoff.
E. Implementation of Chosen Alternative

Exhibit 6.4

1. The implementation stage involves the use of managerial, administrative, and persuasive
abilities to ensure that the chosen alternative is carried out. The success of the chosen
alternative depends on whether or not it is translated into action. Sometimes an alternative
never becomes reality because managers lack resources or energy needed to make things
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happen. Communication, motivation, and leadership skills must be used to see that the
decision is carried out.
F. Evaluation and Feedback
1. In the evaluation step, decision makers gather information or feedback to determine how
well the decision was implemented and whether it achieved its goals. Feedback is
important because decision making is a continuous, never-ending process. Feedback
provides decision makers with information that can start a new decision cycle.
2. By learning from decision mistakes, managers can turn problems into opportunities.
Personal Decision Styles
Directive
Analytic
Conceptual
Behavioral
II. PERSONAL DECISION FRAMEWORK

Exhibit 6.5

Not all managers make decisions in the same way. These differences can be explained by the concept
of personal decision styles. Personal decision style refers to differences between people with respect
to how they perceive problems and make decisions. Research has identified four major decision
styles.

The directive style is used by people who prefer simple, clear-cut solutions to problems.
With an analytical style, managers like to consider complex solutions based on as much data as
they can gather.
People who tend toward a conceptual style also like to consider a broad amount of information.
The behavioral style is characterized by having a deep concern for others as individuals.

Most managers have a dominant decision style. The most effective managers are able to shift among
styles as needed to meet the situation.
Why Managers May Make Bad Decisions
Being influenced by initial impressions
Justifying past decisions
Seeing what they want to see
Perpetuating the status quo
Being influenced by emotions
Overconfidence
III. WHY DO MANAGERS MAKE BAD DECISIONS?
Even the best manager will make mistakes, but managers can increase their percentage of good
decisions by understanding some of the factors that cause people to make bad ones. Most bad
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decisions are errors in judgment that originate in the human minds limited capacity and in the natural
biases managers display during decision making. Awareness of the following six biases can help
managers make more enlightened choices:

Being influenced by initial impressions. The mind often gives disproportionate weight to the first
information it receives when considering decisions. These initial impressions act as an anchor to
subsequent thoughts and judgments. Past events and trends also act as anchors. Giving too much
weight to the past can lead to poor forecasts and misguided decisions.

Justifying past decisions. People dont like to make mistakes, so they continue to support a flawed
decision in an effort to justify or correct the past.

Seeing what you want to see. People frequently look for information that supports their existing
instinct or point of view and avoid information that contradicts it, affecting where they look for
information as well as how they interpret the information they find.

Perpetuating the status quo. Managers may base decisions on what has worked in the past and fail
to explore new options, dig for additional information, or investigate new technologies.

Being influenced by emotions. Managers make better decision whento the extent possiblethey
take emotions out of the decision-making process.

Overconfidence. Most people overestimate their ability to predict uncertain outcomes. Before
making a decision, managers have unrealistic expectations of their ability to understand the risk
and make the right choice.
Group Decision Making

Start with brainstorming

Use hard evidence
Engage in rigorous debate
Avoid groupthink
Know when to bail
Do a postmortem
IV. INNOVATIVE DECISION MAKING
A. Start with Brainstorming
1. One of the best known techniques for rapidly generating creative alternatives is
brainstorming. Brainstorming uses a face-to-face group to spontaneously suggest a broad
range of alternatives for decision making. The keys to effective brainstorming are that
people can build on one anothers ideas, all ideas are acceptable no matter how crazy they
seem, and criticism and evaluation are not allowed. The goal is to generate as many ideas
as possible.
2. Electronic brainstorming, called brainwriting, brings people together in an interactive
group over a computer network. Recent studies show that electronic brainstorming
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generates about 40 percent more ideas than individual brainstorming alone and 25 to 200
percent more than groups.
B. Use Hard Evidence
1. Using evidence can help take emotion out of decision-making process, preventing
managers relying on faulty assumptions or point of view.
2. Evidence-based decision making means a commitment to make more informed and
intelligent decisions based on the best available facts and evidence. Managers should be
alert to potential biases, past assumptions, or intuitions and seek and exam the evidence
with rigor, thus making careful and thoughtful decision.
C. Engage in Rigorous Debate
An important key to better decision making under conditions of uncertainty is to encourage a
rigorous debate of the issue at hand. Good managers recognize that constructive conflict based
on different points of view can focus a problem, clarify ideas, and stimulate creative thinking.
It can also create a broader understanding of issues and alternatives, and improve broader
decision quality. There are several ways to stimulate rigorous debate.
a. One way is by ensuring diversity in terms of age and gender, functional area of
expertise, hierarchical level, and experience with the business.
b. Some groups assign a devils advocate, who has the role of challenging the
assumptions and assertions made by the group.
c. Another approach is to have group members develop as many alternatives as they can
as quickly as they can.
d. Another approach is technique called point-counterpoint, a technique in which two
subgroups assigned competing points of view. The two groups then develop and
exchange proposals and discuss the various options until they arrive at a common set of
understandings and recommendations.
D. Avoid Groupthink
Avoiding groupthink helps groups make better decisions. Groupthink refers to the tendency of
people in groups to suppress contrary opinions. When people slip into groupthink, the desire
for harmony outweighs concerns over decision quality. Group members emphasize
maintaining unity rather than realistically challenging problems and alternatives. Some
disagreement and conflict is much healthier than blind agreement.
E. Know When to Bail
In a fast-paced environment, good manager encourages risk taking and learning from mistakes,
it also teaches a person to know when to pull the plug on something that isnt working.
Escalating commitment means that organizations often continue to invest time and money in
a solution despite strong evidence that it is not appropriate to do so. Managers might block or
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distort negative information because they dont want to be responsible for a bad decision, or
might not accept that their decision is wrong.
F. Do a Postmortem
To improve decision making, managers need to reflect and learn from every decision they make.
1. A technique many companies have adopted from the U.S. Army to encourage examination
of the evidence and continuous learning is the after-action review, a disciplined procedure
whereby managers invest time to review the results of decision on a regular basis and learn
from them. After implementing the decision, managers meet to evaluate what worked, what
didnt, and how to do things better. Many problems are solved by trial and error.
Chapter 7: Designing Adaptive Organizations
What is an organizational chart?
The organization chart is the visual representation of an organization's structure that portrays the
characteristics of vertical structure. It delineates the chain of command, indicates departmental tasks
and how they fit together, and provides order and logic for the organization.
There are several important features of the vertical structure
A. Work Specialization
1. A fundamental principle is that work can be performed more efficiently if employees are
allowed to specialize. Work specialization, sometimes called division of labor, is the
degree to which organizational tasks are subdivided into separate jobs. Production is
efficient because employees perform small, well-defined tasks.
2. Organizations are moving away from this principle because too much specialization leads
to employees being isolated and doing only a single boring job. Many companies are
enlarging jobs to provide greater challenges or assigning teams to tasks so employees can
rotate among the jobs performed by the team.
B. Chain of Command
1. The chain of command is an unbroken line of authority that links all persons in an
organization and shows who reports to whom. It is associated with two underlying
principles. Unity of command means that each employee is held accountable to only one
supervisor. The scalar principle refers to a clearly defined line of authority in the
organization that includes all employees.

What is meant by chain of command?

C. Chain of Command
1. The chain of command is an unbroken line of authority that links all persons in an
organization and shows who reports to whom. It is associated with two underlying
principles. Unity of command means that each employee is held accountable to only one
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supervisor. The scalar principle refers to a clearly defined line of authority in the
organization that includes all employees.
2. Authority, Responsibility, and Delegation
a. The chain of command illustrates the authority structure of the organization. Authority
is the formal and legitimate right of a manager to make decisions, issue orders, and
allocate resources to achieve organizational outcomes. Authority is distinguished by
three characteristics.

Authority is vested in organizational positions, not people. People in the same

position have the same authority because of the position they hold.
Authority flows down the vertical hierarchy. Positions at the top have more formal
authority than those at the bottom.
Authority is accepted by subordinates. The acceptance theory of authority argues
that a manager has authority only if subordinates choose to accept the commands.

b. Responsibility is the duty to perform the task or activity an employee has been
assigned. Managers are assigned the authority commensurate with responsibility.
Accountability is the mechanism through which authority and responsibility are
brought into alignment. Those with authority and responsibility are subject to justifying
task outcomes to those above them in the chain of command.
c. Delegation is another concept related to authority; it is the process managers use to
transfer authority and responsibility to positions below them in the hierarchy.
Organizations encourage managers to delegate authority to the lowest possible level to
gain flexibility to meet customer needs and adapt to the environment
What is meant by span of management?
D. Span of Management
1. The span of management, or span of control, is the number of employees reporting to a
supervisor. This characteristic of structure determines how closely a supervisor can
monitor subordinates.
2. Factors that determine the span of management include:
a. Work performed by subordinates is stable and routine.
b. Subordinates perform similar work tasks.
c. Subordinates are concentrated in a single location.
d. Subordinates are trained and need little direction in performing tasks.
e. Rules and procedures defining task activities are available.
f. Support systems and personnel are available for the manager.
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g. Little time is required in nonsupervisory activities such as coordination with other

departments or planning.
h. Managers' personal preferences favor a large span.
What is meant by a flat versus tall structure?
The average span of control used in an organization determines whether the structure is tall or flat. A
tall structure has an overall narrow span of management and more levels in the hierarchy. A flat
structure has a wide span, is horizontally dispersed, and has fewer hierarchical levels. The trend is
toward wider spans of control as a way to facilitate delegation.
Centralization vs. decentralization
Pros and cons of each
When is each needed?
Centralization and Decentralization

Exhibit 7.2

3. Centralization and decentralization pertain to the hierarchical level at which decisions are
made. Centralization means that decision authority is located near the top of the
organization. With decentralization, decision authority is pushed down the chain of
command to lower organization levels. The trend is toward decentralization, which uses
workers' skills, relieves top managers, has well-informed people make decisions, and
permit rapid response. Factors that influence centralization versus decentralization include:
a. Greater change and uncertainty in the environment are usually associated with
decentralization.
b. The amount of centralization or decentralization should fit the firms strategy.
c. In times of crisis or risk of company failure, authority may be centralized at the top.
Describe the advantages and disadvantages of each type of departmentalism:

Vertical
Functional
A. Vertical Functional Approach
1. What It Is
a. Functional structure is the grouping of positions into departments based on similar
skills, expertise, work activities, and resource use. People, facilities, and other
resources representing a common organizational resource are grouped together into a
single department.
2. How It Works

The major departments under the president are groupings of similar expertise
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and resources, such as accounting, human resources, production, and marketing.

Each of the functional departments is concerned with the organization as a
whole. The functional structure is a strong vertical design. Information flows
up and down the vertical hierarchy, and the chain of command converges at the
top of the organization.

People in a department communicate primarily with others in the same

department to coordinate work and accomplish tasks or implement decisions.
Managers and employees are compatible because of similar training and
expertise.
Divisional- The divisional structure occurs when departments are grouped together based
on organizational outputs. Diverse departments are brought together to produce a single
organizational output. The divisional structure is sometimes called a product structure,
program structure, or self-contained unit structure. Most large corporations have separate
divisions that perform different tasks, use different technologies or serve different
customers.

3.

How It Works

B.

Divisions are created as self-contained units with separate functional departments for
each division. For example, separate engineering departments are created within each
division, and each department is similar and focuses on a single product. The primary
difference between divisional and functional structures is that in divisional structures,
the chain of command from each function converges lower in the hierarchy and
differences of opinion would be resolved at the divisional level rather than by the
president.
Matrix- Matrix Approach
Exhibit 7.6, Exhibit 7.7

1. What It Is

The matrix approach combines aspects of both functional and divisional structures
simultaneously in the same part of the organization. The matrix has dual lines of
authority. The functional hierarchy of authority runs vertically, providing traditional
control within functional departments. The divisional hierarchy runs horizontally,
providing coordination across departments. The matrix structure supports a formal
chain of command for both the functional (vertical) and divisional (horizontal)
relationships.

2.

How It Works

The dual lines of authority make the matrix structure unique. The success of the matrix
structure depends on the abilities of people in key matrix roles.

Two-boss employees report to two supervisors simultaneously and must resolve

conflicting demands from the matrix bosses.
The matrix boss is the product or functional boss who is responsible for one side of
the matrix.
The top leader oversees both the product and functional chains of command and is
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responsible for the entire matrix.

b. Team-based- Team Approach
3.

What It Is

4.

The team approach is probably the most widespread trend in departmentalization. The
vertical chain of command is a powerful means of control, but passing all decisions up
the hierarchy takes too long and keeps responsibility at the top. Managers can delegate
authority, push responsibility to lower levels, and be more flexible and responsive in the
competitive global environment.
How It Works

Cross-functional teams consist of employees from various functional departments,

responsible to meet as a team and resolve mutual problems. Team members report to
their functional departments, but also to the team. These teams provide needed
horizontal coordination to complement existing functional or divisional structures.

Permanent teams are groups of employees brought together in a way similar to a

formal department. Emphasis is on horizontal communication and information sharing
because representatives from all functions coordinate to complete a specific task.
Authority is pushed down to lower levels, and front-line employees are given the
freedom to make decisions and take action on their own.

With a team-based structure, the entire organization is made up of horizontal teams

that coordinate their work with customers to accomplish the organizations goals.

Virtual network
The Virtual Network Approach

What It Is
The most recent approach to departmentalization extends the idea of horizontal
coordination beyond the boundaries of the organization. Outsourcing, which means
farming out certain activities, has become a significant trend. Partnerships, alliances, and
other collaborative forms are now a leading approach to accomplishing strategic goals.
Some organizations take this networking approach to the extreme to create a new kind of
structure. The virtual network structure disaggregates major functions to separate
companies that are brokered by a small headquarters organization.
How It Works

Exhibit 7.8

The organization may be viewed as a central hub surrounded by a network of outsider

specialists. Services such as accounting are outsourced to separate organizations that are
connected electronically to the central office. Networked computer systems, collaborative
software, and the Internet enable organizations to exchange data and information rapidly
and seamlessly. Networks allow a company to concentrate on what it does best and
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contract out other activities to companies with distinctive competence in those areas.
In similar networking approach called the modular approach, a manufacturing firm uses
outside suppliers to provide large chunks of a product, which are then assembled into a
final product by a few workers.
Reengineering: What is it and when is it needed?
Reengineering is the radical redesign of business processes to achieve dramatic improvements
in cost, quality, service, and speed. Because the focus of reengineering is on process rather
than function, reengineering generally leads to a shift away from a strong vertical structure.
Concerning the design of organizational structure relative to business strategy,
what type of structure is favored for each of the following types of business
strategy?

Cost leadership
Differentiation
Two strategies proposed by Porter are differentiation and cost leadership; these strategies
require different structural approaches. The pure functional structure is appropriate for
achieving internal efficiency goals. The vertical functional structure uses task
specialization and a chain of command. It does not enable the organization to be flexible or
innovative. Horizontal teams are appropriate when the primary goal is innovation and
flexibility. The firm can differentiate itself and respond quickly to change. Other forms of
structure represent intermediate steps on the firms path to efficiency or innovation. The
functional structure with cross-functional teams and project teams provides greater
coordination and flexibility than the pure functional structure. The divisional structure
promotes differentiation because each division can focus on specific products and
customers.
A. Structure Follows Strategy
Exhibit 7. 12, Exhibit 7. 13
1. Porters strategies of differentiation and cost leadership typically require different structural
approaches. A simplified continuum illustrates how structural approaches are associated
with strategic and environmental goals. The terms mechanistic and organic refer to
organizations where efficiency is the goal in a stable environment and organizations where
innovation is the goal in a rapidly-changing environment, respectively.
2. The pure functional structure is appropriate for achieving internal efficiency goals, but it
does not enable the organization to be flexible or innovative. A horizontal team structure is
appropriate when the primary goal is innovation and flexibility. The firm can differentiate
itself and respond quickly to change.

Other forms of structure represent intermediate steps on the firms path to efficiency or
innovation. The functional structure with cross-functional teams and project teams
provides greater coordination and flexibility than the pure functional structure. The
divisional structure promotes differentiation because each division can focus on specific
products and customers
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Chapter 8: Managing Change and Innovation

Describe the key aspects of the following three critical innovation strategies
presented in the text:

Exploration
o Bottom-up approach- Innovative companies use a bottom-up approach,
which means encouraging new flow of ideas from lower levels and making sure
they get heard and acted upon by top executives. Some companies also use
internal innovation contests
o Idea incubator- The idea incubator is another popular way to encourage new
ideas within an organization. An idea incubator provides a safe harbor where
ideas from employees throughout the company can be developed without
interference from company bureaucracy or politics.

Cooperation
o Horizontal linkage model- Successful innovation requires expertise from
several departments simultaneously. The horizontal linkage model is one
approach to successful innovation. In this model, people from several
departments meet frequently in teams and task forces to share ideas and solve
problems. The horizontal linkage model is increasingly important in todays
high-pressure business environment that requires developing and
commercializing products and services incredibly fast.
o Open innovation- Open innovation is one of the hottest trends. Open
innovation means extending the search for and commercializing new ideas
beyond the boundaries of the organization and even beyond the boundaries of
the industry. Smart companies find and use ideas from anywhere within and
outside the organization.
o Crowdsourcing- The Internet enables companies to tap into ideas globally and
let hundreds of thousands of people contribute to the innovation process, which
is why some approaches to open innovation are referred to as crowdsourcing.
Crowdsourcing is also being used to gather creative ideas for solving social
problems.
Innovation roles
o Idea champion
o New-venture team
o Skunkworks
o New-venture fund
Innovation Roles
Exhibit 8. 5
o Creating mechanisms to make sure new ideas are carried forward, accepted, and
implemented is the third aspect of product and technology innovation. The
formal definition of an idea champion is a person who sees the need for and
champions productive change within the organization. Personal energy and
effort are required to successfully promote a new idea. Champions are
passionately committed to a new product or idea despite rejection by others.

o Successful innovation in most companies involves interplay of different people.

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The inventor comes up with the new idea and understands its technical value.
The champion believes in the idea, confronts the organizational realities of costs
and benefits, and gains the political and financial support needed to bring it to
reality. The sponsor is a high-level manager who approves and protects the
idea, and removes organizational barriers to its acceptance. The critic
counterbalances the zeal of the champion by challenging the concept, thereby
preventing people in the other roles from adopting a bad idea.
o Entrepreneurship is often facilitated through a new-venture team, which is a
unit separate from the rest of the organization that is responsible for developing
and initiating a major innovation. A skunkworks is a variation of a newventure team in which a separate small, informal, highly autonomous, and often
secretive group focuses on breakthrough ideas for the business. A new-venture
fund provides resources from which individuals and groups can draw to develop
new ideas, products, or businesses.
What is organizational development, often referred to as OD?
1. Organization development (OD) is a planned, systematic process of change that uses
behavioral science knowledge and techniques to improve an organizations health and
effectiveness through its ability to adapt to the environment, improve internal relationships,
and increase learning and problem-solving capabilities. OD can help managers address at
least three types of current problems.
a. Mergers/acquisitions. The disappointing financial results of many mergers and
acquisitions are caused by the failure of executives to determine whether the
administrative style and corporate culture of the two companies fit. They fail to
recognize that the firms may have widely different values, beliefs, and practices. These
differences create stress and anxiety for employees, and these negative emotions affect
future performance. OD experts can help smooth the integration of the firms.
b. Organizational decline/revitalization. Organizations undergoing a period of decline and
revitalization experience a variety of problems such as low level of trust, lack of
innovation, high turnover, and high levels of conflict and stress. The period of
transition requires opposite behaviors to include confronting stress, creating open
communication, and fostering creative innovation. OD techniques can contribute
greatly to cultural revitalization by managing conflicts, fostering commitment, and
facilitating communication.
c. Conflict management. Conflict can occur at any time and place within a healthy
organization. OD efforts can help resolve conflict problems.
What is force-field analysis and how is it used to implement change? What is
the difference between driving versus restraining forces?
1. Force-field analysis suggests that change is a result of the competition between driving
and restraining forces. Driving forces can be thought of as problems or opportunities that
provide motivation for change within the organization. Restraining forces are the various
barriers to change, which could be things such as a lack of resources, resistance from
middle managers, or inadequate employee skills. By selectively removing the barriers that
restrain change, the driving forces will be strong enough to enable implementation of the
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innovation.
Describe five implementation tactics often used to implement change.
A. Implementation Tactics
Exhibit 8 . 8
1. Communication and education are used when users and others who may resist
implementation need solid information about the change. Education is important when the
change involves new technical knowledge or the users are unfamiliar with the idea.
Managers should speak to peoples hearts and minds. People are more likely to accept
changes in their behavior when they both understand the rational reasons for doing so and
see a picture of change that influences their feelings.
2. Participation involves users and potential resisters in designing the change. This approach
is time consuming, but it pays off because users understand and become committed to the
change. Participation also helps managers determine potential problems and understand the
differences in perceptions of change among employees.
3. Negotiation, a more formal means of achieving cooperation, uses formal bargaining to win
acceptance and approval of a desired change. Companies that have strong unions
frequently must formally negotiate change with the unions. The change may then become
part of the union contract.
4. Coercion means managers use formal power to force employees to change. Resisters are
told to accept the change or lose rewards or their jobs. In most cases, this approach should
not be used because employees feel like victims, are angry at change managers, and may
even sabotage the changes. Coercion may be necessary in crisis situations when a rapid
response is urgent.
5. The visible support of top management also helps overcome resistance to change. Top
management support symbolizes to all employees that the change is important for the
organization. Without top management support the desired change will probably not
happen.
Describe the key aspects of Kurt Lewins model of change:

Unfreezing means that people throughout the organization are made aware of problems
and the need for change. This stage creates the motivation for people to change their
attitudes and behaviors.
Changing occurs when individuals experiment with new behavior and learn new skills
to be used in the workplace. This process is sometimes known as intervention, during
which the change agent implements a specific plan for training managers and
employees.
Refreezing occurs when individuals acquire new attitudes or values and are rewarded
for them by the organization. The impact of new behaviors is evaluated and reinforced,
and the change agent supplies new data that show positive changes in performance.
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 What is the Leavitt Diamond and how is it used? (see explanation on the
original chapter study guide)

Chapter 9: Managing Human Resources and Diversity

What are the top three factors for maintaining competitive success?
The strategic approach to human resource management recognizes three key elements. First, all
managers are involved in human resource management. Second, employees are viewed as assets.
In todays brutally competitive business environment, how a company manages its workforce may
be the single most important factor in sustained competitive success. Third, HRM is a matching
process, integrating the organizations strategy and goals with the correct approach to managing
human capital. Current strategic issues of particular concern to managers include:

right people to become more competitive on a global basis;

right people for improving quality, innovation, and customer service;
right people to retain after mergers, acquisitions, or downsizing; and
right people to apply new information technology for e-business.
Strategic human resource management involves three key aspects. What are
they?
The three broad activities of HRM are to attract an effective workforce, develop the
workforce to its potential, and maintain the workforce over the long term. Achieving
these goals requires skills in planning, training, performance appraisal, wage and salary
administration, benefit programs, and termination techniques.

Briefly describe the impact of the following federal legislation on human

resource management:
EEOC
Several federal laws have been passed to insure equal employment opportunity (EEO). The purpose of
these laws is to stop discriminatory practices that are unfair to specific groups and define enforcement
agencies for these laws. EEO legislation attempts to balance the pay given to men and women and
provide employment opportunities without regard to race, religion, national origin, sex, age, or
disability. The Civil Rights Act of 1964 created the Equal Employment Opportunity Commission
(EEOC), the major agency involved with employment discrimination
Affirmative action
Discrimination occurs when some applicants are hired or promoted based on criteria that are not job
relevant. When discrimination is found, remedies include back pay and affirmative action.
Affirmative action requires an employer to take positive steps to guarantee equal employment
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opportunities for people within protected groups. Failure to comply with EEO legislation can result in
substantial fines and penalties for employers.
One issue of growing concern is sexual harassment, which is a violation of Title VII of the Civil Rights
Act. The EEOC guidelines specify that behavior such as unwelcome advances, requests for sexual
favors, and other verbal and physical conduct of a sexual nature becomes sexual harassment when
submission to the conduct is tied to continued employment or advancement, or when the behavior
creates an intimidating, hostile, or offensive work environment
ADA
Employers covered by the ADA have to make sure that people with disabilities:
have an equal opportunity to apply for jobs and to work in jobs for which they are
qualified;
have an equal opportunity to be promoted;
have equal access to benefits and privileges of employment that are offered to other
employees; and
are not harassed because of their disability.
Further, an employer is also required to provide a reasonable accommodation if a person
with a disability needs one in order to apply for a job, perform a job, or enjoy benefits equal to
those offered to other employees. An employer does not have to provide any accommodation
that would pose an undue hardship.
ADEA
To prohibit age discrimination in employment. Be it enacted by the Senate and House of
Representatives of the United States of America in Congress assembled, that this Act may be
cited as the Age Discrimination in Employment Act of 1967.
OSHA

occupational safety and health in the private employment sector (private businesses
and nonprofit organizations). The OSH Act applies to all workplaces and activities
involved in interstate commerce, regardless of the number of employees; in general
industry, construction, maritime, and agriculture. The term interstate commerce is
given a very liberal interpretation, making the OSH Act applicable to all enterprises,
with some specific exemptions. Workplace safety and health at federal facilities are
governed by each federal agency's own rules. Other public sector employers (state,
county, and local government offices and operations) are governed by state rules in
states that have public sector rules.
Name and describe three effective interview strategies.

Define the following aspects of conducting effective employee performance

appraisals?
a. 360-degree feedback
b. Stereotyping
c. Halo effect
1. Performance appraisal is observing and assessing employee performance, recording the
assessment, and providing feedback to the employee. During performance appraisal,
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skilled managers give feedback and praise concerning the acceptable elements of the
employees performance. Performance appraisal can also reward high performers with
merit pay, recognition, and other rewards.
a. Recent thinking is that linking performance appraisal to rewards has unintended
consequences, and that it should be ongoing rather than something that is done once a
year as part of a consideration of raises. HRM professionals concentrate on the
accurate assessment of performance and on training managers to the use the
performance appraisal interview effectively.
2. Assessing Performance Accurately
a. To obtain an accurate performance rating, managers must acknowledge that jobs are
multidimensional and performance may be multidimensional as well. The 360- degree
feedback is a process that uses multiple raters, including self-rating, as a way to
increase self-awareness of strengths and weaknesses and guide employee development.
Members of the appraisal group may include supervisors, co-workers, and customers to
provide appraisal of the employee from a variety of perspectives.
b. Performance review ranking system is a method in which managers evaluate direct
reports relative to one another and categorizes each on a scale. These systems rank
employees according to their relative performance: 20 percent would be placed in the
top group of performers; 70 percent have to be ranked in the middle; and 10 percent are
ranked at the bottom. The bottom tier are given a set period of time to improve their
performance, and if they dont improve, they are fired. The advantages of this system
include identifying the best and worst performers, and creating and sustaining a high
performance culture in which people continuously improve. The disadvantages are that
it may increase cutthroat competition among employees, discourage collaboration and
teamwork, and potentially harm morale.
3. Performance Evaluation Errors
a. Stereotyping occurs when a rater places an employee into a class or category based on
one or a few traits or characteristics.
b. Halo effect refers to giving an employee the same rating on all dimensions of the job
even if performance is good on some dimensions and not good on others.
Chapter 10: Understanding Individual Behavior
What is cognitive dissonance and how does it apply in the workplace?
o Sometimes a person may discover that his or her attitudes conflict with one another
or are not reflected in behavior. This can create a state of cognitive dissonance, a
psychological discomfort that occurs when individuals recognize inconsistencies in
their own attitudes and behaviors.
o The theory of cognitive dissonance states that people want to behave in accordance
with their attitudes and will take corrective action to alleviate the dissonance and
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achieve balance. If corrective action, such as adjusting work hours, is not possible,
individuals may develop negative attitudes toward their employer.
What is locus of control and how does it apply in the workplace?
o Locus of control refers to whether individuals place the primary responsibility for success
or failure within themselves (internally) or on outside forces (externally).
o Some believe that their actions can strongly influence what happens to themthey believe
they are in control of their own fate. These individuals have a high internal locus of
control. Many top leaders of e-commerce and high-tech organizations have a high internal
locus of control.
o People with an internal locus of control are easier to motivate and better able to handle
complex information. They are better at problem solving and are more achievement
oriented, but are also more independent and therefore more difficult to manage.
o Others believe that events occur because of chance, luck, or outside people or events. They
see themselves as the pawns of their fate. These individuals have a high external locus of
control.
o People with an external locus of control are harder to motivate, less involved in their jobs,
and more likely to blame others, but are more compliant and conforming and thus easier to
manage.
What is emotional intelligence and what are its four basic components?
The four components of emotional intelligence include:
Self-awareness. The basis for all the other components. Being aware of what you are feeling.
Self-management. The ability to control disruptive or harmful emotions and balance ones moods
so that worry, anxiety, fear, or anger do not cloud thinking and get in the way of what needs to be
done.
Social awareness. The ability to understand others and practice empathy, which means being able
to put yourself in someone elses shoes, to recognize what others are feeling without them needing
to tell you.
Relationship management. The ability to connect to others, build positive relationships, respond to
the emotions of others, and influence others.
Studies show that there is a positive relationship between job performance and high emotional
intelligence quotient (EQ) in a variety of jobs.
1. Emotional Intelligence (EQ) includes five basic components.
a. Self-awareness means being aware of what you are feeling. It is the basis for all the
other components.
b. Self-management refers to the ability to control disruptive or harmful emotions and
balance ones moods so that worry, anxiety, fear, or anger do not cloud thinking.
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c. Social awareness is the ability to understand others and practice empathy, putting
yourself in someone elses shoes, recognizing the feelings of others without being told.
d. Relationship awareness is the ability to connect to others, build positive relationships,
respond to the emotions of others, and influence others.
2. Studies have found a positive relationship between job performance and high emotional
intelligence quotient (EQ) in a variety of jobs. At times of great change or crisis, managers
rely on a high EQ level to help employees cope with anxiety and stress.
3. Managers with low emotional intelligence can undermine employee morale and harm the
organization. Growing concerns over workplace bullying have prompted enlightened
companies to take action that helps managers develop greater emotional intelligence, such
as by honing their self-awareness.
Compare and contrast type A and type B behavior.
A. A and Type B Behavior
1. Researchers have categorized people as having one of two behavior patterns.
a. Type A Behavior is a behavior pattern characterized by extreme competitiveness,
impatience, aggressiveness, and devotion to work.
b. Type B Behavior is a behavior pattern that lacks Type A characteristics and includes a
more balanced, relaxed lifestyle.
2. Type A individuals can be powerful forces for innovation and leadership within their
organizations. However, many Type A personalities cause stress-related problems for
themselves and sometimes for those around them. Most Type A individuals are highenergy people. Type B individuals experience less conflict with other people and a more
balanced lifestyle.
Chapter 15: Managing Quality and Performance
The Balanced Scorecard: Describe how performance is measured along four
dimensions:
Financial
Customers
Internal Business Processes
Learning and Growth
The Balanced Scorecard

Exhibit 15.2

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1. The balanced scorecard is a comprehensive management control system that balances

traditional financial measures with operational measures relating to a companys critical
success factors. A balanced scorecard contains four major perspectives.
a. The financial performance perspective reflects a concern that the organizations
activities contribute to improving short- and long-term financial performance.
b. Customer service indicators measure such things as how customers view the
organization, as well as customer retention and satisfaction.
c. Internal business process indicators focus on production and operating statistics.
d. Potential for learning and growth indicators focus on how well resources and human
capital are being managed for the companys future.
Managers focus on various elements of the scorecard to set targets, evaluate performance, and
guide discussion about what further actions to take. The balanced scorecard is not right for
every organization in every situation. The simplicity of the system causes managers to
underestimate the time and commitment needed. A key to successful implementation of the
balanced scorecard approach is a performance management orientation rather than a
performance measurement orientation.
Total Quality Management (TQM): Discuss the following components of
TQM.
Quality circles
Benchmarking
Six Sigma
Continuous improvement or kaizen
One popular approach based on decentralized control philosophy is total quality management
(TQM). TQM infuses quality into every activity in a company through continuous improvement. The
TQM philosophy focuses on teamwork,
increasing customer satisfaction, and lowering costs.
Organizations implement TQM by encouraging managers and employees to collaborate across
functions and departments, as well as with customers and suppliers, to identify areas for improvement,
no matter how small. Each quality improvement is a step toward perfection and meeting a goal of zero
effects.
TQM Techniques
1. Quality Circles
a. A quality circle is a group of six to 12 volunteer employees who meet regularly to
discuss and solve problems affecting the quality of their work. They meet during work
hours to identify problems and find solutions. The reason for using quality circles is to
push decision making to a level at which recommendations can be made by those who
do the job.
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2. Benchmarking
Exhibit 15.8
a. Benchmarking is the continuous process of measuring products, services, and practices
against the toughest competitors or those companies recognized as industry leaders.
The key to successful benchmarking lies in analysis. A company must honestly analyze
its current procedures and determine areas for improvement. A company carefully
selects competitors worthy of copying and emulates their internal processes and
procedures.
3. Six Sigma

Exhibit 15.9

a. Six Sigma is a highly ambitious quality standard that specifies a goal of no more than
3.4 defects per million parts. That means being defect-free 99.9997 percent of the time.
Six Sigma has become a generic term for a quality control approach that takes nothing
for granted and emphasizes higher quality and lower costs. The discipline is based on
DMAIC (Define, Measure, Analyze, Improve, and Control). This methodology
provides a structured way for solving problems. Effectively implementing Six Sigma
requires a major commitment from top management because widespread change is
required.
4. Quality partnering
a. Quality partnering involves assigning dedicated personnel with a particular functional
area of the business. In this approach, the quality control personnel work alongside
others within a functional area identifying opportunities for quality improvements
throughout the work process. This integrated, partnering approach to quality makes it
possible to detect and address defects early in the product life cycle, when they can be
corrected most easily.
5. Continuous Improvement
a. Continuous improvement is the implementation of a large number of small,
incremental improvements in all areas of the organization on an on-going basis. All
employees are expected to contribute by initiating changes in their own job activities.
There is no end to the process. Innovations can start simply, and employees can build
on their success.

ISO 9000: Quality Management System

Certification

International marketing passport

International Quality Standards

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The increasing significance of the global economy provides one impetus for total
quality management in the United States. ISO 9000 standards are based on a set of
international standards for quality management systems established by the International
Standards Organization (ISO) in Geneva, Switzerland. Hundreds of thousands of
organizations in 157 countries have been certified to demonstrate their commitment to
quality. ISO certification has become the recognized standard for evaluating and
comparing companies on a global basis, and more U.S. companies are feeling the
pressure to participate in order to remain competitive in international markets. Many
countries and companies require ISO certification before they will do business with an
organization.

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