ITM Summary

Table of contents
Chapter 1 .................................................................................................................................................. 3
The definition of management ............................................................................................................ 3
The four management functions ......................................................................................................... 3
Management skills ............................................................................................................................... 4
Chapter 2 .................................................................................................................................................. 4
Management and organization ............................................................................................................ 4
Classical perspective ............................................................................................................................ 5
Humanistic perspective ........................................................................................................................ 6
Recent historical trends ....................................................................................................................... 6
Chapter 3 .................................................................................................................................................. 7
External environment........................................................................................................................... 7
Organization-environment relationships ............................................................................................. 7
Chapter 7 .................................................................................................................................................. 8
Goal setting and planning overview..................................................................................................... 8
Goal setting in organizations ................................................................................................................ 8
Operational planning............................................................................................................................ 9
Benefits and limitations of planning .................................................................................................. 10
Planning for a turbulent environment ............................................................................................... 10
Chapter 8 ................................................................................................................................................ 11
What is strategic management? ........................................................................................................ 11
Strategic management process.......................................................................................................... 11
Formulating corporate-level strategy ................................................................................................ 12
Formulating business-level strategy .................................................................................................. 13
Formulation functional-level strategies ............................................................................................. 14
Global strategy ................................................................................................................................... 14
Strategy execution ............................................................................................................................. 15
Chapter 4 ................................................................................................................................................ 15
Organizing the vertical structure ....................................................................................................... 15
Departmentalization .......................................................................................................................... 19
Organizing for horizontal coordination .............................................................................................. 20
Factors shaping structure ................................................................................................................... 21

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Chapter 9 ................................................................................................................................................ 22
Types of decisions and problems ....................................................................................................... 22
Decision-making models .................................................................................................................... 23
Decision-making steps........................................................................................................................ 24
Why do managers take poor decisions? ............................................................................................ 26
Chapter 13 .............................................................................................................................................. 27
Contemporary leadership .................................................................................................................. 27
From management to leadership ...................................................................................................... 27
Behavioural approaches ..................................................................................................................... 27
Contingency approaches .................................................................................................................... 29
Charismatic and transformational leadership ................................................................................... 29
Power and influence .......................................................................................................................... 29
Chapter 14 .............................................................................................................................................. 30
The strategic role of human resource management ......................................................................... 30
The influence of globalization on HRM .............................................................................................. 31
Maintaining an effective workforce ................................................................................................... 31
Content perspectives on motivation.................................................................................................. 31
Process perspectives on motivation .................................................................................................. 32
Reinforcement perspective on motivation ........................................................................................ 33

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Chapter 1
Introduction to management

The definition of management

Management = the attainment of organizational goals in an effective and efficient manner through
planning, organizing, leading and controlling organizational resources.

Effectiveness and efficiency

Effectiveness = the degree to which organization achieves a stated goal.

Efficiency = the use of minimal resources (raw materials, money and people) to produce the desired
volume of output.

Higher effectiveness comes with lower efficiency; higher efficiency comes with lower effectiveness.
So companies have to make a choice for higher effectiveness at the cost of efficiency or higher
efficiency at the cost of the effectiveness; a so called “trade off”.

The four management functions

Planning = identifying goals for future organizational performance and deciding on the tasks and use
of resources needed to attain them. In other words, managerial planning defines where the
organization wants to be in the future and how to get there.

Organizing = following the planning and reflecting how the organization tries to accomplish the plan.
This involves assigning tasks, grouping tasks into departments, delegating authority and allocating
resources across the organization.

Leading = the use of influence to motivate employees to achieve organizational goals. This means
creating a shared culture and values, communicating goals to people throughout the organization
and infusing employees with the desire to perform at a high level.

Controlling = monitoring employees’ activities, determining whether the organization is moving

towards its goals and making corrections as necessary.

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Management skills
Although some management theorists propose a long list
of skills, the necessary skills for managing a department
or an organization can be placed in three categories:
conceptual, human and technical.

Conceptual skills = the cognitive ability to see the organization as a whole system and the
relationships among its parts. This involves knowing where one’s team fits into the total organization
and know how the organization fits into the industry, the community and the broader business and
social environment.

Human skills = the ability to work with and through other people and to work effectively as a group
member. This is demonstrated in the way a manager relates to other people, including the ability to
motivate, facilitate, coordinate, lead, communicate and resolve conflicts.

Technical skills = the understanding and proficiency in the performance of specific tasks. This
includes mastery of the methods, techniques and equipment involved in specific functions such as
engineering, manufacturing or finance.

Chapter 2
The evolution of management thinking

Management and organization

There are three forces that have influenced organizations and the practice of management overtime.

Social forces = refer to those aspects of a culture and influence relationships among people. What do
people value? What do people need? What are the standards of behavior among people? These
forces shape what is known as the social contract, which refers to the unwritten, common rules en
perceptions about relationships among people and between employees and management.

Political forces = refer to the influence of political and legal institutions on people and organizations.

Economic forces = pertain to the availability, production and distribution of resources in a society.
Governments, military agencies, churches, schools and
business organizations in every society need resources to
achieve their goals, and economic forces influence the
allocation of scarce resources.

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Classical perspective
The classical perspective emerged during 19th and the early 20th century:
- Rise of the large complex factory system “industrial revolution”.
- Problems regarding managerial structure, including organizing the operations, training
employees and labor dissatisfaction.
- Need for new approaches to coordination and control.

Scientific management

Scientific management = emphasizes scientifically

determined jobs and management practices as the
way to improve efficiency and labor productivity.

F. Taylor (Frederick Winslow Taylor) was a young

engineer in the late 1800s and he proposed that
workers ‘could be retooled like machines, their
physical and mental gears recalibrated for better
productivity’. Taylor insisted that improving
productivity meant that management itself would
have to change and, further, that the manner of change could be determined only y scientific study;
hence, the label scientific management emerged.

Bureaucratic organizations

Bureaucratic organizations approach = a systematic approach developed in Europe that looked at

the organization as a whole. It’s a subfield within the classical perspective.

M. Weber (Max Weber) was a German theorist who introduced most of the concepts of
bureaucratic organizations. During the late 1800s, many European organizations were managed on a
personal, family-like basis. Employees were loyal to a single individual rather than to the organization
or its mission. The dysfunctional consequence of this management practice was that the resources
were used to realize individual desires rather than organizational goals. Weber envisioned
organizations that would be managed on an impersonal, rational basis.

Six characteristics of Weberian bureaucracy:

1. Division of labor, with clear definitions of authority and responsibility;

2. Positions organized in a hierarchy of authority;
3. Managers subject to rules and procedures that will ensure reliable predictable behavior;
4. Management separate from the ownership of the organization;
5. Administrative acts and decisions recorded in writing;
6. Personnel selected and promoted based on technical qualifications.

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Humanistic perspective
Humanistic perspective = the importance of understanding human behaviors, needs and attitudes in
the workplace, as well as social interactions and group processes. There are three primary subfields
based on the humanistic perspective: the human relations movement, the human resources
perspective and the behavioral sciences approach.

Human relations management

Human relations movement = movement based on the idea that truly effective control comes from
within the individual worker rather than from strict, authoritarian control.

The early work on industrial psychology and personnel selection received little attention because of
the prominence of scientific management. Then a series of studies at a Chicago electric company,
which came to be known as the Hawthorne studies, changed that all.

Recent historical trends

The post-World War II period saw the rise of new concepts, along with a continued strong interest in
the human aspect of managing, such as team and group dynamics and other ideas that relate to the
humanistic perspective. Three new concepts that appeared were systems thinking, the contingency
view and total quality management.

Systems thinking = the ability to see both the distinct elements of a system or situation and the
complex and changing interaction among those elements.

Total quality management = management that focuses on managing the total organization to deliver
better quality to customers.

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Chapter 3
The organization and corporate culture

External environment
The external environment = includes all elements existing
outside the boundary of the organization that have the
potential to affect the organization. This environment
includes competitors, resources, technology and economic
conditions that will influence the organization.

General environment

The general environment = mostly affects organizations

indirectly, including social, economic, legal-political,
international, natural and technological factors that can
influence all organizations with differing impacts.

Task environment

The task environment = is closer to the organization itself and includes the sectors that conduct day-
to-day transactions with the organization and directly influence its basic operations and
performance.

Organization-environment relationships
The reason for why organizations care so much about factors in the external environment is that the
environment often creates great uncertainty for organization managers, and they must be willing and
able to response by designing the organization to be adaptable to the environment.

Environment uncertainty

Uncertainty means that managers do not

have sufficient information about
environmental factors to understand and
predict environmental needs and changes.

Environmental characteristics that influence

uncertainty are the number of factors that
affect the organization and the extent to
which those factors change.

Adapting to the environment

Environmental changes may evolve unexpectedly, such as shifting customer tastes for social media
sites, or they may occur violently, such as the devastating Japanese earthquake and tsunami. The
level of turbulence created by an environmental shift will determine the type of response that
managers must make in order for the organization to survive.

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Chapter 7
Managerial planning and goal setting

Goal setting and planning overview

A goal is a desired future circumstance or condition that the organization attempts to realize. Goals
are important because organizations exist for a purpose, and goals define and state that purpose.

Levels of goals and plans

1. Planning starts with defining a formal mission that

defines the basic purpose of the organization,
especially for external audiences.
2. Strategic goals/plans get established by top
managers, those reflect a commitment to both
organizational efficiency and effectiveness.
3. Tactical goals/plans get established by middle
managers that focus on the major actions the division
must take to fulfill it part in the strategic plan set by
top management.
4. Operational plans identify the specific procedures or
processes needed at lower levels of the organization,
such as individual departments and employees.

Goal setting in organizations

Goals are socially constructed, which means they are defined by an individual or group. Managers
typically have different ideas about what goals should be, so they discuss and negotiate which goals
to pursue.

Organizational mission

At the top of the foal hierarchy is the mission being the organization’s primary reason for existence.
The mission describes the organization’s values, aspirations and its reason for being. A well-defined
mission is the basis for development of all subsequent goals and plans. Without a mission clarity,
goals and plans may be developed haphazardly and are unlikely to take the organization in the
direction it needs to go.

The formal missions statement is a broadly stated definition of purpose that distinguishes the
organization from others of a familiar type. Too often they can be rhetoric and have low impact on
employee behavior or how the organization really behaves with its public. The difference between
the espoused values and the real values if made public can be very damaging to corporate
reputations.

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Goals and plans

Strategic goals = broad statements describing where the organization wants to be in the future.
These goals pertain to the organization as a whole rather than to specific divisions or departments.

Strategic plans = define the action steps by which the company intends to attain strategic goals. The
strategic plan is the blueprint that defines the organizational activities and resource allocations – in
the form of cash, personnel, space and facilities.

Tactical goals = the results that major divisions and departments within the organization intend to
achieve. These goals apply to middle management and describe what major subunits must do for the
organization to achieve its overall goals.

Tactical plans = designed to help execute the major strategic plans and to accomplish a specific part
of the company’s strategy.

Operational goals = precise and measurable goals, and the results expected from departments, work
groups and individuals.

Operational plans = the department manager’s tool for daily and weekly operations. Goals are stated
in quantitative terms, and the department plan describes how goals will be achieved.

Operational planning
Managers use operational goals to direct employees and resources towards achieving specific
outcomes than enable the organization to perform efficiently and effectively. One consideration is
how to establish effective goals. Then managers use a number of planning approaches, including
management by objectives (MBO), single-use plans and standing plans. Some companies use disaster
planning so they are better prepared for dealing with crises that may arise in the future.

Criteria for effective goals

Research has identified certain factors that characterize effective goals:

1. Effective goals must be specific and measurable;

2. Effective goals must have a defined time period;
3. Effective goals must cover key result areas;
4. Effective goals must be challenging but realistic;
5. Effective goals must be linked to rewards.

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Benefits and limitations of planning
Benefits of planning:

• Goals and plans provide a source of motivation and commitment;

• Goals and plans guide resource allocation;
• Goals and plans are a guide to action;
• Goals and plans set a standard of performance.

Limitations of planning:

• Goals and plans can create a false sense of certainty;

• Goals and plans may cause rigidity in a turbulent environment;
• Goals and plans can get in the way of intuition and creativity.

Planning for a turbulent environment

One way managers can gain benefits from planning and control its limitations is by using innovative
planning approaches that are in tune with today’s turbulent environment. Three approaches that
help brace the organization for unexpected events are contingency planning, building scenarios and
crisis planning.

Contingency planning, building scenarios and crisis planning

Contingency plans = define company responses to be taken in case of emergencies, setbacks or

unexpected conditions. To develop contingency plans, managers identify important factors in the
environment, such as economic downturns, declining markets, increases in cost of supplies etc.

Scenario building = involves looking at current trends and discontinuities and visualizing future
possibilities. Rather than looking only at history and thinking about what could be. The events that
cause the most damage to companies are those that no one even conceived of.

Crisis planning = enables firms to cope with unexpected events that are so sudden and devastating
that they have the potential to destroy the organization if managers aren’t prepared with a quick and
appropriate response.

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 Chapter 8
Strategy formulation and execution

What is strategic management?

Strategic management = refers to the set of decisions and actions used to formulate and execute
strategies that will provide a competitively superior fit between the organization and its environment
so as to achieve organizational goals.

Purpose of strategy

Competitive advantage = refers to what sets the organization apart from others and provides it with
a distinctive edge for meeting customer or client needs in the marketplace.

Levels of strategy

1. Corporate-level strategy = pertains to

the organization as a whole and combination
of business units and product lines that make
up the corporate entity.
2. Business-level strategy = pertains to
each business unit or product line.
3. Functional-level strategy = pertains
to the major functions departments within the
business unit.

Strategic management process

Scan External Identify Strategic
Environment: Factors:
-National -Opportunities
-Global -Threats

Execute Strategy via

Changes in:
Evaluate Current: Define New: Formulate Strategy: -Leadership/culture
-Mission -Mission -Corporate -Structure
-Goals SWOT -Goals -Business -Human resources
-Strategies -Grand strategy -Functional -Communication
systems

Scan Internal Identify Strategic

Environment: Factors:
-Core competence -Strengths
-Synergy -Weaknesses
-Value creation

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Strategy formulation versus execution

Strategy formulation = includes assessing the external environment an internal problems to identify
strategic issues, the integrating the results into goals and strategy.

Strategy execution = the use of managerial and organizational tools to direct resources towards
accomplishing strategic results. It is the administration and implementation of the strategic plan.

SWOT analysis

SWOT analysis = includes a careful assessment of strengths, weaknesses, opportunities and threats
that affect organizational performance. Managers obtain external information about opportunities
and threats from a variety of sources, including customers, government reports, professional
journals, suppliers, bankers, critical friends or professional association meetings.

Formulating corporate-level strategy

Three approaches to understanding corporate-level strategy are portfolio strategy, the BCG matrix
and diversification.

Portfolio strategy

Corporations like to have a balanced mix of business divisions called strategic business units (SBUs).
And SBU has an unique business mission, product line, competitors and markets relative to other
SBUs in to corporation. Some executives don’t like to become over-dependent on one business.
Portfolio strategy = pertains to the mix of business units and product lines that fit together in a
logical way to provide synergy and competitive advantage for the corporation.

The BCG matrix

BCG matrix = organizes businesses along two dimensions: business growth rate and market share.
Business growth rate pertains to how rapidly the entire industry is increasing. Market share defines
whether a business unit has a larger or smaller share than competitors. The combinations of high and
low market share and high and low business growth provides four categories for a corporate
portfolio.

1. Stars = rapid growth and expansion

2. Question Marks = new ventures. Risky – a
few become stars, others are divested.
3. Cash Cows = milk to finance question marks
and stars.
4. Dogs = no investment. Keep if some profit.
Consider divestment.

Diversification strategy

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 Diversification = the strategy of moving into new lines of business, as search leader Google did by
purchasing YouTube and BlackBerry.

The purpose of diversification is to expand the firm’s business operations to produce new kinds of
valuable products and services. When the new business is related to the company’s existing business
activities, the organization is implementing a strategy of related diversification.

Unrelated diversification = occurs when an organization expands into a totally new line of business.

Vertical integration = the company expands into businesses that either produce the supplies needed
to make products and services or that distribute and sell those products and services to customers.

Formulating business-level strategy

Now we turn to strategy formulation within the SBU, in which the concern is how to compete.

The competitive environment

The competitive environment is different for different kinds of businesses. Most large companies
have separate business lines and do an industry analysis for each line of business or SBU.

Porter’s competitive strategies

Broad Differentiation Cost Leadership

• Acts in a flexible, loosely knit way; strong • Strong central authority; tight cost
coordination among departments controls
• Strong capability in basic research • Maintains standard operating
• Creative flair, thinks ‘out of the box’ procedures
• Strong marketing abilities • Easy-to-use manufacturing
• Rewards employee innovation technologies
• Corporate reputation for quality or • Highly efficient procurement and
Strategic Target

technological leadership distribution systems

Focused Differentiation
• Uses characteristics of differentiation
strategy directed at particular target
customer
• Values flexibility and customer intimacy
• Pushes empowerment to employees with
customer contact
Narrow
• Close supervision; finite employee
empowerment
Focused Cost Leadership
• Uses characteristics of cost leadership
strategy directed at particular target
customer
• Frequent detailed control reports
• Measures cost of providing product or
service and maintaining customer
loyalty

Distinctiveness Low Costs

Source of Advantage

- Differentiation strategy = involves an attempt to distinguish the firm’s products or services

from others in the industry.
- Cost leadership strategy = the organization aggressively seeks efficient facilities, pursues cost
reductions and uses tight cost controls to produce products more efficiently than
competitors.
- Focus strategy = the organization concentrates on a specific regional market or buyer group

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Formulation functional-level strategies
Functional-level strategies are the action plans used by major departments to support the execution
of business-level strategy. Major organizational functions include marketing, production, finance,
human resources and research and development. Managers in these and other departments adopt
strategies that are coordinated with business-level strategy to achieve the organization’s strategic
goals.

Global strategy

1. Globalization strategy =product design and

adertising strategy are standardized throughout
the world.
2. Multidomestic strategy = competition in
each country us handled independently of
industry competition in other countries.
3. Transnational strategy = seeks to achieve
both global standardization and national
responsiveness. A true transnational
strategy is difficult to achieve though,
because one goal requires close global
coordination while the other requires local
flexibility.

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Strategy execution
The final step in the strategic management process is strategy execution – how strategy is
implemented or put into action.

1. Visible leadership = leadership is the ability to influence people and adopt the new behaviors
needed for putting the strategy into action.
2. Clear roles and accountability = people need to understand how their individual actions can
contribute to achieving the strategy.
3. Candid communication = manager openly and avidly promote their strategy ideas, but they
also listen to others and encourage disagreement and debate.
4. Appropriate human resource practices = the organization’s human resources are its
employees. The human resource function recruits, selects, trains, compensates, transfers,
promotes and lays off employees to achieve strategic goals.

Chapter 4
The dynamics of alternative organizational forms

Organizing the vertical structure

Organization structure = 1. The set if formal tasks assigned to individuals and departments; 2. Formal
reporting relationships, including lines of authority, decision responsibility, number of hierarchical
levels and span of manager’s control; 3. The design of systems to ensure effective coordination of
employees across departments.

Organization chart = the visual representation of an organization’s structure.

Example organization chart; water bottling plant:

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 President

Vice President Director Human Vice President Director

Accounting Resources Production Marketing

Information Benefits Maintenance Mountain

Centre Administrator Supervisor Region Sales

Financial Analyst Industrial Quality Control Midstate Sales

Relations Manager
Manager

Chief Accountant Bottling Plan Western Sales

Superintendent

Accounts Bottling
Payable Supervisors

Payroll Clerk

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Work specialization

Work specialization / division of labor = the degree to which organizational tasks are subdivided into
separate jobs (also shown in the organizational chart for a water bottling plant).

Chain of command

The chain of command = an unbroken line of authority that links all employees in an organization and
shows to reports to whom. It is associated with two underlying principles: unity of command (= each
employee is held accountable to only one supervisor) and the scalar principle (= refers to a clearly
defined line of authority in the organization that includes all employees. The chain of command
illustrates the authority structure of the organization.

Authority = the formal and legitimate right of a manager to make decisions, issue orders and allocate
resources to achieve organizationally desired outcomes.

1. Authority is vested in organizational positions, not people. Managers have authority

because of the position they hold, and other people in the same position would have the
same authority.
2. Authority flows down the vertical hierarchy. Positions at the top of the hierarchy are vested
with more formal authority than the positions at the bottom.
3. Authority is accepted by subordinates. Although authority flows from the top down,
subordinates comply because they believe that managers have a legitimate right to issue
orders.

The acceptance theory of authority = argues that a manager has authority only if subordinates
choose to accept his or her commands. If subordinates refuse to obey because the order is outside
their zone of acceptance, a manager’s authority disappears.

Responsibility = the duty to perform the task or activity as assigned. Typically, managers are assigned
authority commensurate with responsibility.

Delegation = the process managers use to transfer authority and responsibility to positions below
them in the hierarchy.

Span of management

The span of management / the span of control = the number of employees reporting to a
supervisor. This characteristic if structure determines how closely a supervisor can monitor
subordinates.

Factors that are associated with less supervisor involvement and thus larger spans of control:

• Workers are stable and routine;

• Subordinates perform similar work tasks;
• Subordinates are concentrated in a single location;
• Subordinates are highly trained and need a little direction in performing tasks;
• Rules and procedures defining task activities are available;
• Support systems and personnel are available for the manager.

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 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 and more hierarchical levels. A flat structure has a wider
span, is horizontally dispersed and has fewer hierarchical levels.

a. Example tall structure

President

Executive Vice President Executive Vice President Executive Vice President Vice President

Staff Specialists Operating Managers Operating Managers Operating Managers

Staff Specialists Staff Specialists Staff Specialists

b. Example flat structure

President

Operating Managers Operating Managers

Centralization and decentralization

Centralization = decision authority is located near the top of the organization.

Decentralization = decision authority is pushed downwards to lower organization levels.

Factors that typically influence centralization versus decentralization:

• Greater change and uncertainty in the environment are usually associated with
decentralization.
• The amount of centralization or decentralization should fit in the firm’s strategy.
• In times of crisis or risk of company failure, authority may be centralized at the top.

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Departmentalization
Departmentalization = the basis for grouping positions into departments and departments into the
total organizations. Managers make choices about how to use the chain of command to group
people together to perform their work. Five approaches to structural design reflect different uses of
the chain of command in departmentalization:

1. Vertical functional approach / U-form

Activities are grouped together by common functions

from the bottom to the top of the organization.
The functional structure is a strong vertical design.
Information flows up and down the vertical hierarchy, Human Manu- Accounting
and the chain of command converges at the top of Resouces facturing

the organization.

2. Divisional approach / M-form

Activities are grouped together

based on similar organizational
outputs. In a divisional structure,
Product Product
divisions are created as self-contained Division 1 Division 2
units, with separate functional
departments for each division.
Human Manu- Accounting Human Manu- Accounting
resources facturing resources facturing
The primary difference
between divisional and functional structures is that in a divisional structure, the chain of command
from each function converges lower in the hierarchy.

3. The matrix: a plurality approach

The matrix combines aspects of both functional and

divisional structures simultaneously in the same part
of the organization. The matrix structure evolved as a
Human Manu- Accounting
way to improve horizontal coordination and information resources facturing
sharing.
The success of the matrix depends on the abilities of Product
Division 1
people in key matrix roles. Two-boss employees, those
who report to two supervisors simultaneously, must
resolve conflicting demands from the matrix bosses. Product
Division 2
The top leader oversees both the product and the
functional chains of command. His or her responsibility is to maintain a power balance between the
two sides of the matrix.

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 4. Team approach

The team approach gives managers a way to delegate

authority, push responsibility to lower levels, and be more
flexible and responsive in a complex and competitive
global environment.
cross-functional teams = consists of employees from
various functional departments who are responsible to
meet as a team and resolve mutual problems.
Permanent teams = groups of employees who are organized
in a way similar to a formal department. Each team brings together employees from all functional
areas focused on a specific task or project.

5. Virtual network approach

designer Manu-
The firm subcontracts most of its major functions to facturer
separate companies and coordinates their activities
from a small headquarters organization. Central Hub
The idea behind networks is that a company can concentrate
on what it does best and contract out other activities to
companies with distinctive competence in those specific areas, Humn
which enables a company to do more with less. Resources Marketer
Agency

Organizing for horizontal coordination

In general, the trend is toward breaking down barriers between departments, and many companies
are moving towards horizontal structures based on work processes rather than departmental
functions.

The need for coordination

As organizations grow and evolve, it needs systems to process information and enable
communication among people in different departments and at different levels.

Coordination = refers to the managerial task of adjusting and synchronizing the diverse activities
among different individuals and departments.

Collaboration = a joint effort between people from two or more departments to procedure
outcomes that meet a common goal or shared purpose and that are typically greater than what any
of the individuals or departments could achieve working alone.

Coordination and collaboration within business organizations is just as important. Without

coordination, a company’s left hand will not act in concert with the right hand, causing problems and
conflicts. Coordination is required regardless of whether the organization has a functional, divisional
or team structure.

Re-engineering = refers to the radical redesign of business processes to achieve dramatic

improvements in cost, quality, service and speed. Because the focus of re-engineering is on
horizontal workflows rather than function, re-engineering generally leads to a shift away from a
strong vertical structure to one emphasizing stronger horizontal coordination.

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 Factors shaping structure
Some degree of vertical hierarchy is often needed to organize a large number of people effectively to
accomplish complex tasks within a coherent framework. Without a vertical structure, oriole in large,
global firm wouldn’t know what to do. However, in today’s environment, an organization’s vertical
structure often needs to be balanced with strong horizontal mechanisms to achieve peak
performance.

Structure follows strategy and environment

Differentiations strategy = the organization attempts to develop innovative products to the market.

Cost leadership strategy = the organization strives for internal efficiency.

The terms mechanic and organic can be used to explain structural responses to strategy and the
environment.

Goals of efficiency and a stable environment are associated with a mechanic system. This type of
organization typically has a rigid, vertical centralized structure, with most decisions made at the top.
The organization is highly specialized and characterized by rules, procedures and a clear hierarchy of
authority.

With goals of innovation and a rapidly changing environment, the organization tends to be much
looser, free-flowing and adaptive, using an organic system. The structure is more horizontal, and
decision-making authority is decentralized. People at lower levels have more responsibility and
authority for solving problems, enabling the organization to be more fluid and adaptable to changes.

Relationship of structural approach to strategy and the environment:

Functional Functional with Interdepartmental Divisional Horizontal
structure Task Forces, Integrators Structure Teams

Strategic Goals:
Differentiation, innovation, flexibility

Strategic
Goals

Strategic Goals:
Cost leadership, efficiency, stability

Mechanistic Organic

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Chapter 9
Managerial decision-making

Types of decisions and problems

Decision = a choice made from available alternatives.

Decision-making = the process of identifying problems and opportunities and then resolving them.

Programmed and non-programmed decisions

Programmed decisions = involve situations that have occurred often enough to enable decision rules
to be developed and applied in the future. They are made in response to recurring organizational
problems.

Non-programmed decisions = decisions which are made in response to situations that are unique,
are weakly defined and largely unstructured, and have important consequences for the organization.

Facing certainty and uncertainty

Certainty = all the information the decision-maker needs is fully available. Managers have
information on operating conditions, resource costs or constraints, and each course of action and
possible outcome.

Risk = a decision has clear-cut goals and that goof information is available, but the future outcomes
associated with each alternative are subject to some chance of loss or failure. However, enough
information is available to estimate the probability of a successful outcome versus failure.

Uncertainty = managers know which goals they wish to achieve, but information about alternatives
and future vents is incomplete. Factors that may affect a decision, such as price, production cost,
volume or future interest rates, are difficult to analyze and predict.

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Decision-making models
The approach that managers use to make decisions usually falls into one of three types: the classical
model, the administrative model or the political model.

The ideal, rational model

The classical model of decision-making = it is based on rational economic assumptions and

managerial beliefs about what ideal decision-making should be. This model has arisen within the
management literature because managers are expected to make decisions that are economically
sensible and in the organization’s best economic interests.

Four assumptions underlying the classical model:

• The decision-maker operates to accomplish goals that are known of and agreed on. Problems
are required to be precisely formulated and defined.
• The decision-maker strives for conditions of high certainty, gathering complete information.
All alternatives and the positional results of each are calculated.
• Criteria for evaluating alternatives are known. The decision-maker selects the alternative
that will maximize the economic return to the organization.
• The decision-maker is rational and uses logic to assign values, order preferences, evaluate
alternatives and make the decision that will maximize the attainment of organizational goals.

The classical model of decision-making is normative (= it defines how a decision-maker should make
decisions. It does not so much describe how managers actually make decisions as it provides
guidelines on how to reach an ideal outcome for the organization).

How manager actually make decisions

Administrative model / descriptive in nature = this approach to decision-making describes how

manager actually make decisions in complex situations, rather than dictating how they should make
decisions according to a theoretical ideal. This approach recognizes the human and environmental
limitations that affect the degree to which managers can pursue a rational decision-making process.

The political model

The political model = decision-making approach for making non-programmed decisions when
conditions are uncertain, information is limited, and there are manager conflicts about what goals to
pursue or what course of action to take. Managers often engage in coalition building for making
complex organizational decisions.

Coalition = and informal alliance among manager who support a specific goal. And coalition building
is the process of forming alliances among managers.

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Four basic assumptions of the political model:

• Organizations are made up of groups with diverse interests, goals and values. Managers
disagree about problem priorities and may not understand, or share, the goals and interests
of other managers
• Information Is ambiguous and incomplete. The attempt to be rational is limited by the
complexity of many problems, as well as personal and organizational constraints.
• Managers do not have the time, resources or mental capacity to comprehensively identify all
the dimensions of the problem and process all relevant information. Managers interact with
each other exchanging viewpoints to gather information and reduce ambiguity.
• Manager engage in the push and pull of debate to decide goals and discuss alternatives.
Decisions are the result of bargaining and discussion among coalition members.

Classical model Administrative model Political model

Clear-cut problem and goals
Condition of certainty
Full information about alternatives
and their outcomes
Rational choice by individual for
maximizing outcomes
Vague problem and goals
Condition of uncertainty
Limited information about
alternatives and their outcomes
Satisfying choice for resolving
problem using intuition
Pluralistic; conflicting goals
Condition of uncertainty or ambiguity
Inconsistent viewpoints; ambiguous
information
Bargaining and discussion among
coalition members

Decision-making steps
Whether a decision is programmed or non-
programmed and regardless of manager’s
choice of the classical, administrative or political
models of decision-making, six steps are
typically associated with effective decision
processes.

Recognition of decision requirement

Managers confront a decision requirement in

the form of either a problem or an opportunity.

Problem: occurs when organizational

accomplishment is less than established goals.
Some aspect of performance is unsatisfactory.

Opportunity: exists when managers see a potential accomplishment that significantly exceeds
specified current goals. Managers see the possibility of enhancing performance beyond current
levels.

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Diagnosis and analysis of causes

Diagnosis = the first stage in the decision-making process in which manager analyze underlying
causal factors associated with the decision situation.

Questions recommended to be asked to specify underlying causes:

• What is the state of disequilibrium affecting us?

• When did it occur?
• Where did it occur?
• How did it occur?
• To whom did it occur?
• What is the urgency of the problem?
• What is the interconnectedness of events?
• What result came from which activity?

Development of alternatives

The next stage is to generate possible alternative solutions that will respond to the needs of the
situation and correct the underlying causes.

Programmed decisions: feasible alternatives are easy to identify and in larger organizations they are
usually available within the organization’s rules and procedures.

Non-programmed decisions: require developing new courses of action that will meet the company’s
needs. For decisions made under conditions of high uncertainty, managers may develop only one or
two custom solutions that will satisfice for handling the problem. However, studies find that limiting
the search for alternatives is a primary cause of decision failure.

Selection of the desired alternative

Once feasible alternatives are developed, one must be selected. Managers try to select the most
promising of several alternative courses of action. The best alternative solution is one which best fits
the overall goals and values the organization and achieves the desired results using the fewest
resources.

Risk propensity = the willingness to undertake risk with the opportunity of gaining an increased
payoff.

Implementation of the chosen alternative

The implementation stage = involves the use of managerial, administrative and persuasive abilities to
ensure that the chosen alternative is carried out.

The ultimate success of the chosen alternative depends on whether it can be translated into action.
Sometimes an alternative never becomes reality because managers lack the resources or energy
needed to make things happen. Implementation may require discussion with many people effected
by the decision.

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Evaluation and feedback

Decision-makers gather information that informs them how well the decision was implemented and
whether it was effective in achieving its goals. Feedback is important because decision-making is an
ongoing process. The decision taken may fail, thus generating a new analysis of the problem,
evaluation of alternatives and selection of a new alternative. Feedback is the part of monitoring that
assesses whether a new decision need to be made.

Why do managers take poor decisions?

Six biases that help managers make more enlightened choices:

• Being influenced by ignition impressions. When considering decisions, the mind often gives
disproportionate weight to the early information it receives. These initial impressions,
statistics or estimates, act as an anchor to our subsequent thoughts and judgments.
• Justifying past decisions. Many managers fall into the trap of making choices that justify
their past decisions, even if those decisions no longer seem valid.
• 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.
• 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 emotion. A study found that effective regulation of emotions was a
characteristic of higher-performing traders. Lower-performing traders were less effective in
managing and modulating their emotional responses.
• Overconfidence. Most people overestimate their ability to predict uncertain outcomes.

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Chapter 13
Leadership

Contemporary leadership
The concept of what is appropriate leadership should evolve as the need of organizations change. A
significant influence on leadership styles has been and will continue to be the turbulence and
uncertainty of the environment.

Servant leadership

Servant leader = transcends self-interest to serve others,

the organization and society.

Authentic leadership

Authentic leadership = refers to individuals who know and

understand themselves, who espouse and act consistent
with high-order ethical values, and who empower and
inspire others with their openness and authenticity.

From management to leadership

There are many differences between management and leadership. Good management is essential in
organizations, yet managers have to be leaders too, because distinctive qualities are associated with
management and leadership that provide different
strengths for the organization.

Management organizes the production and supply of fish

to people, whereas leadership teaches and motivates
people to fish. Organizations need both type of skills.

a primary distinction between management and

leadership is that management promotes stability and
order within the existing organizational structure and
systems. Leadership, on the other hand, promotes vision
and change.

Behavioural approaches
Two basic leadership behaviors identified as important for leadership are attention to tasks and
attention to people.

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Task versus people bias

Task-oriented behavior and people-oriented behavior have been identified as applicatable to

effective leadership in a variety of situations.

Two major behaviors are consideration and initiating structure:

Consideration = falls in the category of people-oriented behavior and is the extent to which the
leader us mindful of subordinates, respects their ideas and feelings and establishes mutual trust.

Initiating structure = the degree of task behavior; that is, the extent to which the leader is task
oriented and directs subordinate work activities towards goal attainment.

The leadership grid

each axis on the grid is a nine-point scale, with 1 meaning low concern and 9 meaning high concern.

Team management = (9,9) often is considered the most effective style and is recommended for
leaders because organization members work together to accomplish tasks.

Country club management = (1,9) occurs when primary emphasis is given to people rather than to
work outputs.

Authority-compliance management = (9,1) occurs when efficiency in operations is the dominant

orientation.

Middle-of-the-road management = (5,5) reflects a moderate amount of concern for both people and
production.

Impoverished management = (1,1) the absence of a management philosophy; managers exert little
effort towards interpersonal relationships or work accomplishment.

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Contingency approaches
How can two people with widely different styles both be effective leaders? The answer lies in
understanding contingency approaches to leadership, which explore how the organizational
situation influences leader effectiveness.

Charismatic and transformational leadership

Some leadership approaches are more effective than others for bringing about high levels of
commitment and enthusiasm.

Transformational versus transactional leadership

Transformational leaders = distinguished by their special ability to bring out innovation and change
by recognizing follower’s needs and concerns, providing meaning, challenging people to look at old
problems in new ways, and acting as role models for the new values and behaviors. Transformational
leaders inspire followers not just to believe in the leader personally, but to believe in their own
potential to imagine and create a better future for the organization. They create significant change in
both followers and the organization.

Transactional leaders = clarify the role and task requirements of subordinates, initiate structure,
provide appropriate rewards and try to be considerate and meet the social needs of subordinates.
The transactional leader’s ability to satisfy subordinates may improve productivity. They excel at
management functions, are hardworking, tolerant and fair minded.

Power and influence

Power = the potential ability to influence the behavior of others

Influence = the effect that a person’s actions have on the attitudes, values, believes or behavior of
others.

Position power

Legitimate power, reward power and coercive power are all form of position power used by
managers to change employee behavior.

Legitimate power = power coming from a formal management position in an organization and the
authority granted to it. Once a person has been selected as a supervisor, most employees understand
that they are obligated to follow his or her direction with respect to work activities.

Reward power = stems from the authority to bestow rewards on other people. Managers may have
access to formal rewards such as pay increases or promotions. They also have their disposal rewards
such as praise, attention and recognition.

Coercive power = refers to the authority to punish or recommend punishment. Managers have
coercive power when they have the right to fire or demote employees, criticize them or withhold pay
increases.

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Personal power

Personal power most often comes from internal sources, such as an individual’s special knowledge or
personal characteristics. Two types of personal power are expert power and referent power.

Expert power = power resulting from a person’s special knowledge or skill regarding the tasks being
performed.

Referent power = comes from an individual’s personal characteristics that command other’s
identification, respect and admiration so they wish to emulate that individual.

Chapter 14
Managing human recourses

The strategic role of human resource management

The strategic approach to HRM recognizes three key elements:

1. All managers are human resource managers;

2. Employees are viewed as assets. Employees, not buildings and machinery, give a company its
workforce;
3. HRM is a matching process, integrating the organization’s strategy and goals with the correct
approach to managing the firm’s human capital.

Current strategic issues of particular concern to managers include hiring and retaining the right
people with the following competencies:

• Becoming more competitive on a global basis;

• Improving quality, innovation and customer service;
• Applying new information technologies for e-business.

All these strategic decisions determine a company’s need for skills and employees.

Company strategy

Find the right people

HRM planning HRM Environment
Job analysis Legislation
Forecasting Trends in society
International events
Recruiting Changing technology
Selecting

Maintain an Effective Workforce Manage talent

Wages and salary Training
Benefits Development
Labor relations Appraisal
Terminations

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The influence of globalization on HRM
An issue of significant concern for today’s organizations is competing on a global basis, which brings
tremendous new challenges for HRM. Most companies are still in the early stages of developing
effective HRM policies, structures and services that respond to the current reality of globalization.

International human resource management (IHRM) = a subfield that specifically addresses the
added complexity that results from coordination and managing diverse people on a global scale.

Research in IHRM has revealed that, as the world becomes increasingly interconnected, some human
resource practices and trends are converging.

Maintaining an effective workforce

How do managers maintain a workforce that has been recruited and rewarded and developed?
Maintenance of the current workforce involves motivation, job design and occasional terminations.

Motivation

Motivation = refers to the forces either within or external to a person that arouse enthusiasm and
persistence to pursue a certain course of action.

Employee motivation affects productivity, and part of a manager’s job is to channel motivation
towards the accomplishment of organizational goals. The study of motivation helps managers
understand what prompts people to initiate action, what influences their choice of action and why
they persist in that action over time.

Content perspectives on motivation

Hierarchy of needs theory = one of the early management theories proposed by Abraham Maslow. It
proposes that people are motivated by multiple needs and that these needs exist in a hierarchical
order.

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Two-factor theory

Hygiene factors = involves

the presence or absence of
job dissatisfier, such as
working codintions, pay,
company policies and
interpersonal relationships.

Motivatiors = focus on
high-level needs and
include achievement,
recognition, responsibility
and opportunity for growth.

Process perspectives on motivation

Process theories = explain how people select behavioral actions to meet their needs and determine
whether their choices were successful. The most popular process theory is probably equity theory.

Equity theory

Equity theory = focuses on individuals’ perceptions of how fairly they are treated compared with
others.

Compared to this, if people perceive their compensation as equal to what other receive for similar
contributions, they will believe that their treatment is fair and equitable. People evaluate equity by a
ratio of inputs to outcomes. Inequity occurs when the input-to-outcome ratios are out of balance.

The most common methods for reducing a perceived inequity are:

• Change inputs = a person may choose to increase or decrease his or her inputs to the
organization;
• Change outcomes = a person may change his or her outcomes;
• Distort perceptions = research suggests that people may distort perceptions of equity if they
are unable to change inputs or outcomes;
• Leave the job = people who feel inequitably treated may decide to leave their jobs rather
than suffer the inequity of being under- or overpaid.

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Goal-setting theory

goal-setting theory = proposes that manager can increase motivation by setting specific, challenging
goals that are accepted as valid by subordinates, then helping people track their progress towards
goal achievement by providing timely feedback.

Four key components of goal-setting theory:

• Goal specificity = the degree to which goals are concrete and unambiguous;
• In terms of foal difficulty = hard goals are more motivating that easy ones;
• Goal acceptance = employees have to ‘buy into ‘the foals and be committed to them;
• Feedback = people get information about how well they are doing in progressing towards
goal achievement.

Reinforcement perspective on motivation

Reinforcement theory = looks at the relationship between behavior and its concequenses. It focuses
on changing or modifying employees’ on-the-job behavior through the appropriate use of immediate
rewards and punishments.

Reinforcement

Behavior modification = the set of techniques y which reinforcement theory is used to modify
human behavior. The basic assumption underlying behavior modification is the law of effect

Law of effect =states that behavior that s=is positively reinforced tends to be repeated, and behavior
that is not reinforced tends not to be repeated.

Reinforcement = anything that causes a certain behavior to be repeated or inhibited.

Four types of reinforcement:

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