Creating a Customer-Responsive Culture Harrah's Entertainment, the worlds largest faming company, is fanatical about customer service and for good reason, Company refearch showed that customers who were satis- fied with the service they received at a Marrah’s casino increased their gaming expendi tures by 10 percent and those who yere extremely satisfied increased their gaming, expenditures by 24 percent. When cydtomer service translates into these types of results, of course managers would want to freate a customer-responsive culture! ‘What does a customer fve culture look like?” Exhibit 2-10 describes five char- acteristics of customer-responsjfe cultures and offers suggestions as to what managers can, do to create that type of cult Spirituality and Organizational Culture What do Southwest Airlines, Chick-fil-A, Ford, Xerox, Timberland, and Hewlett- Packard have in common? They're among a growing number of organizations that have ‘Scanned with CamSeannerCHAPTER 2 | UNDERSTANDING MANAGEMENT'S CONTEXT 59 Greece cane ‘Creating a Customer-Responsive V Type of employee Hire people with personalities and attitudes consistent with murs re rca meee aongoae aaa Sood Isterng sil ‘Vype ohh endement Des obs employes havea much contra spose toanluly etme but fd nes and proces, ‘V Empowerment Give service-contact employees the dlscretion to make day-to-day decisions on job-related activities, {Role clarity Reduce uncertainty about what senvice-contact employees can ‘and cannot do by continual training on product knowledge, listening, and other behaviocal skills Consistent fesire to satisfy Clarify organizations cornitment to doing whatever it takes, and deigit customers ‘even if it's outside an fployee's normal job requirements embraced workplace spirituality. What is workplace spirituality? I's a culture in which organizational values promote a sense of purpose through meaningful work tak- ing place in the context of community. * Organizations with a spiritual culture recog- nize that people have a mind and a spirit, seek to find meaning and purpose in their work, and desire to connect with other human beings and be part of a community. And such desires aren't limited to workplaces, as a recent study showed that coll dents also are searching for meaning and purpose in life.” Workplace spirituality seems to be important now for a number of reasons. Employ- ees are looking far ways to cape with the siresses and pressures ofa turbulent pace of life. Contemporary lifestyles—single-parent families, geographic mobility, temporary jobs, technologies that create distance between people—underscore the lack of community that e stu ‘Scanned with CamSeannercas ree OD (fhe External Environment: Describe the constraints Constraints an lenges ‘and challenges acing ‘managers in today's extemal ‘envionment. External environment includes 2 components: 4- Specific environment 2- General environment Despite the fact that appliance sales are expected to climb forthe first time in four years, Whirlpool Corporation, which already shut down 10 percent of its production capacity, continues to cut costs and scale down capacity even more.” And it's not alone in its pro- tective, defensive actions. The decade from 2000 to 2009 was a challenging one for organizations. For instance, some well-known stand-alone businesses at the beginning of the decade were acquired by other companies during this time, including Compaq (naw «part of Hewlett-Packard), Gillette (now a part of Procter & Gamble), Anheuser-Busch (now a part of Anheuser-Busch InBev). and Merrill Lynch (now a part of Bank of America); others disappeared altogether, including Lehman Brothers, Circuit City, and Steve & Barry's (all now bankrupt) and WorldCom and Enron (both done in by ethies scandals) * Anyone who doubts the impact the external environment has on managing just needs to look at what's happened during the last decade. shown in Exhibit 2-2, it includes several different compo- Spi toe cues to meet elo an hn sociocultural component is concerned with societal and cultural factors such as values, attitudes, ends, traditions, lifestyles, beliefs, tastes, and patterns of behavior. The ‘economy. Although all these components pose potential constraints on managers” deci sions and actions, we're going to take a closer look at two of them—the economic and demographic aspects. Then, we'll look at how changes taking place in those components constrain managers and organizations. We'll wrap up this section by exami ‘mental uncertainty and stakeholder relationships. ‘Scanned with CamSeannerEine ‘Components of External Environment Activate Windows ot Seings taco W ‘Scanned with CamScannerthan the rest of the world combined."* Consider the impact ot such population trends on organizations and managers in the future. A How the External Environment Affects Managers Knowing war the various components of the external environment are and examining certain aspects of that environment are important to managers. However, understanding how the environment affects managers is equally as important. We're going to look at three ways the environment constrains and challenges managers—first, through its impact on jobs and employment; next, tiroughthe environmental uncertainty thatisipresent and finally, through the various stakeholder relationships that exist between an organization and its external constituencies. JOBS AND EMPLOYMENT As any or all external environmental conditions (economic, demographic, technological, globalization, etc.) change, one of the most powerful con- straints managers face is the impact of such changes on jobs and employment—both in poor conditions and in good conditions. The power of this constraint became painfully obvious during the recent global recession as millions of jobs were eliminated and unem- ployment rates rose to levels not seen in many years. Economists now predict that about a quarter of the 8.4 million jobs climinated in the United States during this most recent economic downturn won't he coming hack and will instead be replaced by other types of work in growing industries." Other countries face the same issues. Although such readjust ments aren't bad in and of themselves, they do create challenges for managers who must balance work demands and having enough of the right types of people with the right skills to do the organization's work. Not only do changes in external conditions affect the types of jobs that are available, they affect how those jobs are created and managed. For instance, many employers use ‘Seanad with CamScannerASSESSING ENVIRONMENTAL UNCERTAINTY Another constraint posed by external environments is the amount of uncertainty found in that environment, which can affect organizational outcomes. Environmental uncertainty refers to the degree of change and complexity in an organization’s environment. The matrix in Exhibit 2-3 shows these two aspects. the organization, and so forth. For instance, Zippo Manufacturing, best known for its Zippo lighters, faces a relatively stable environment, with few competitors and little technological change. The main external concern for the company is probably the declining numbers of tobacco smokers, although the company’s lighters have other uses and global markets remain attractive. In contrast, the recorded music industry faces a dynamic (highly uncertain and unpredictable) environment. Digital formats and music-downloading sites turned the indus- try upside down and brought high levels of uncertainty. If change is predictable, is that considered dynamic? No. Think of department stores that typically make one-quarter to one-third of their sales in November and December. The drop-off from December to January is significant, But because the change is predictable, the environment isn’t considered dynamic. When we talk about degree of change, we mean change that’s unpredictable. If change can be accurately anticipated, it’ not an uncertainty for managers. The other dimension of uncertainty describes the degree of environmental complexity, which looks at the number of components in an organization's environment and the extent of the knowledge that the oreanization has about thase comnonents. An organi: tion with fewer ‘Scanned with CamSeannermake decisions. imac ourcone fthe Decision-Making Process Describe the eight stops ‘was the type of day that airline managers dread. A record-setting blizzard was moving up. in the decision-making process. the East Coast, covering roads, railroads, and airport runways with as much as 27 inches of snow: One ofthe major ailines that would have to dal with the storm, American Aine, “has almost 80,000 employees who help make flights possible and four whe cancel them.” Danny Burin, who works the company's Fort Worth, Tora, contol center, i one ofthese four, But fortunately for Danny, snowstorms are fil simple to deal with Becase theyre sally easier to predict and altine crews can workaround them quickly with deers and snowplow.” Bu sil, even tis doesn't man that the decisions he has to make are c35y, ‘especially when his decisions affect hundreds of flights and thousands of passcngcrs!” Although most decisions managers make dont involve the weather, you ean se that deci sions play an important role in what an organization has to do a is able to da. Managers as a Managers at all levels and inal areas of organizations make decisions. That i, they decision makers: is ec ee eee and lower-level managers make decisions about production schedules, product quality prob- faking decisions isn't something that just man- agers do; all organizational members make decisions that affeet their jobs and the ‘organization they work for. But our focus inthis chapter ison how managers make decisions. Although decision making is typically described as choosing among alternatives, that view is too simplistic. Why? Because decision making is (and should be) a process, not jjusta simple act of choosing among alternatives.’ Even for something as straightforward ‘as deciding where to go for lunch, you do more than just choose burgers or pizza. Granted, {yout may nat spend a lot af time contemplating your hunch decision, but yen still go through the process when making that decision, Exhibit 7-1 shows the eight steps in the decision-making process. This process is as relevant to personal decisions as it is 10 178 ‘Scanned with CamSeannerDecision-Making Process Steps involved ina decision making:- Del Cone Act Goto ‘Scanned with CamScanner! Implementing the Alternative Perey Evaluating Decision Effectiveness corporate decisions. ‘SCARS Ao HSTBIE Ue eps Hm WE OTE) ‘Step 1: Identifying a Problem ‘Your team is dysfunctional, your customers are leaving, or your plans are no longer relevant.* ERE SES NO EE OE Ee ‘ion? Amanda is a sales manager whose reps need new laptops because their old ones are ‘outdated and inadequate for doing ther job. To make it simple, assume i's not economical 10 ‘add memory tothe old computers and it's the company’s policy to purchase, aot lease. Now we Javea problem —a disparity between the sales reps current computers (existing condition) and their need to have more efficient ones (desired condition). Amanda has decision to make. How do managers identify problems? Inthe real world, most problems don't come with ‘con signs flashing “problem.” When her reps started complaining about their computers, ceene problem ‘Scanned with CamSeannerCn Important Decision Criteria ‘Step 2: Identifying Decision Criteria (Once a manager has identified a problem, he o she must dently the deefson criteria that are important or relevant to resolving the problem, Every decision maker has eritria guid- ing his o her decisions even if they're not explicitly stated. In our example, Amanda decides afler careful consideration that memory and storage capabilities, display quality, battery life, warranty, and carrying weight are the relevant eriteria in her decision, simple way isto give the ‘most important criterion a weight of 10 and then assign weights to the rest using that sta dard. Of course, you could use any number as the highest weight. The weighted eriteria for ‘our example are shown in Exhibit 7-2, J werner and storage 10 Battery life Carrying weight Warranty Display quality ‘Scanned with CamSeannerry Battery uy Carying) ry Eee eed ality LHP FroBook 10 3 10 8 5 ‘Sony VAIO 8 z 7 8 7 Lenovo ideaPad a 5 ? 10 10 ‘Apple Macbook 8 7 7 a 7 ‘Toshiba Satelite 7 8 7 8 7 Sony NW 8 3 6 10 8 Dall rspiton 10 7 a 6 7 HP Paviion 4 w 4 8 0 In this step, a decision maker needs to be cre~ ative. And the alternatives are only listed, not evaluated just yet. Our sales manager, Amanda, identifies eight laptops as possible choices. (See Exhibit 73.) How? By aR ee ae eae er OT CTS using the criteria established in Step 2. Exhibit 7-3 shows the assessed values that Amanda ave each alternative after doing some research on them. Keep in mind that these data rep resent an assessment of the eight alternatives using the decision criteria, but nor the weight. ing. When you multiply cach alternative by the assigned weight, you get the weighted alternatives as shown in Exhibit 7-4. The total score for each alternative, then, is the sum of | cHapTER 7 | MANAGERS AS DECISION MAKERS 181 ‘Scanned with CamSeannerHow? By ing the criteria established in Step 2. Exhibit 7-3 shows the assessed values that Amanda gave each alternative afler doing some research on them. Keep in mind that these data rep- resent an assessment ofthe eight alternatives using the decision criteria, but not the weight- ing. When you multiply each alternative by the assigned weight, you get the weighted alternatives as shown in Exhibit 7-4. The total score for each alternative, then, i the sum of its weighted criteria ‘Sometimes a decision maker might be able to skip this step. If one alternative scores, highest on every criterion. you wouldn't need to consider the weivhts because that alterna- tive would already be the top choice. Or if the weights were all equal, you could evaluate an alternative merely by summing up the assessed values for cach onc. (Look again at Exhibit 7-3.) Forexample, the score for the HP ProBook would be 36 and the score for the ‘Sony NW would be 35. ro Exe ry Bed HP ProBook 100 24 60 32 1S 23 Sony VAIO 80 56 a2 32 22H Lenovo WieaPad 80 40 2 40 30232 ‘Apple Macbook 80 56 2 32 22 ‘Toshiba Satelite 70 6 a2 2 2 29 Sony NW 80 24 36 40 2 208 Dell inspiron 100 56 48 2 2 249 HP Pavilion 40 80 24 2 30206 Evaluation of Alternatives. ‘Scanned with CamSeanner ct1UZ PART THREE | PLANNING in Step 5. In our example (Exhibit 7-4), Amanda would choose the Dell Inspiron because it scored higher than all other alternatives (249 total). ‘We know that if the people who must implement a decision participate in the process, they’te more likely to suppor it than if you {just tell them what to do, Another thing managers may need to do during implementation is reassess the environment for any changes, especially if its a long-term decision, Are the criteria, alternatives, and choice still the best ones, or has the environment changed in such way that we need to reevaluate? Step 8: Evaluating Decision Effectiveness ‘The last step in the decision-making process involves evaluating the oulcome or result ofthe If the evaluation shows that the problem still exists, then the manager needs to assess what went wrong, Was the problem incorrectly defined? Were errors made when evaluating alternatives? Was the right alternative selected ‘but poorly implemented? The answers might lead you to redo an earlier step or might even require starting the whole process over. s ‘Scanned with CamSeannerERIN DOTOUEE Managers Making Decisions Explain the four ways monagers make decisions. = ‘+ what are the organization’ long-term objectives? ‘+ What strategies will best achieve those objectives? ‘+ What should the organization’ short-term objectives be? ‘= How dificult should individual goals be? Organizing ‘+ How many employees should | have report directly to me? ‘= How much centralization should there be in the organization? ‘© How should jobs be designed? ‘© When should the organization implementa different structure? Leading ‘+ How do I handie employees who appear to be unmotivated? ‘+ What is the most effective leadership sie in a given situation? ‘+ How will a specitic change affect worker productivity? ‘+ When isthe right time to stimulate confer? Controlting ‘= What activites in the organization need to be controlled? ‘= How should those activities be contolled? ‘+ When is @ performance deviation significant? ‘© What type of management information system should the organization have? ‘Scanned with CamSeannerbefor, it stil is a decision, Le’ lookat four perspectives on how managers make decisions, Decision making perspectives:- Making Decisions: Rationality When Hewlett-Packard (HP) acquired Compaq, the company did no research on how cus- tomers viewed Compag products until “months after then-CEO Carly Fiorina publicly announced the deal and privately warned her top management team that she didn’t want to hicar any dissent pertaining to the acquisition.” By the time they discovered that customers perceived Compaq products as inferior—just the opposite of what customers felt about HP products—it was too late, HPs performance suffered and Fiorina lost her job. ‘We assume that managers will use rational decision making; that is, they'll make logical and consistent choices to maximize value.” Afterall, managers have all sors of tools and techniques to help them be rational decision makers. Butas the 11P example ilustrates, ‘managers aren't always rational. What does it mean to be a “rational” decision maker? Let's Get Real ASSUMPTIONS OF RATIONALITY. Peet Lr pers Trea eee en reer s€ assumptions apply to any deci Sen een eer ee (or managerial. However, for managerial decision making, we necd to add oe adios sssumption—deisions ste adi the Bet interests of the vrganization, ‘These assumptions of rationality aren’t very realistic, but the next concept can help explain how most decisions get made in organizations. ‘Scanned with CamSeannerDespite the unrealistic assumptions, managers are expected to be rational when making cisions." They understand that “good” deision makers are supposed to do certain ‘things and exhibit good decision making behaviors as they identify problems, consider ut prudently. When they da so, they show others that they're competent and that their decisions are the result of intelligent deliberation. However, a more realistic approach to describing how managers make de they can’t possibly analyze all information on all alternatives, managers satistice, rather than maximize. That is, they accept solutions that are “good enough” They're being, rational within the limits (bounds) of their ability to process information. Let's look at an example. ‘Suppose that you're a finance major and upon graduation you want 2 job, preferably as ‘personal financial planner, with a minimum salary of $35,000 and within a hundred miles of your hometown. You accept a job offer as a business credit analyst—not exactly a personal Eocene) Pee coy ‘satisfice ‘Scanned with CamSeanner184 PART THREE | PLANNING Let's Get Real financial planner but still in the finance field—at a bank 50 miles from home at a starting. salary of $34,000, Ifyou had done a more comprehensive jb search, you would have dis covered a job in personal financial planning ata trust company only 25 mile from your hometown and starting at a salary of $38,000. You weren’t a perfectly rational decision maker because you didn't maximize your decision by searching all possible alternatives and then choosing the best. But because the fist jo offer was satisfactory (or good enough”) you behaved in a bounded rationally manner by acceping it ‘Most decisions that managers make don’t fit the assumptions of perfect rationality, so they satisfice. However, keep in mind that their decision making is also likely influenced ty the organization’ culture internal polities, power considerations, and by a phenomenon called escalation of commitment, which is an increased commitment toa previous deci- sion despite evidence tat it may have been wrong The Challenger space shultle disas- ter is offen used as an example of escalation of commitment. Decision makers chose to Iaunch the shuttle that day even though the decision was questioned by several individuals who believed tha it was a bad one. Why would decision makers escalate commitment to abad decision? Because they dn’t want to admit that ther inital decision may have been flawed. Rather than search for new alternatives, they simp crease their commitment to the orginal solution, ‘Scanned with CamSeanner