Organizing and Leading in a Sustainable World

Lecture 2 Introduction to Management (1,2)

Management has to be innovative in order to work in the long run. This sometimes means
stepping away from the well-known ways of doing things, and adapting new ways in order to
stand out from the mass and survive hard times.
Organisation: a social entity that is goal directed and deliberately structured.
Management: the attainment of organisational goals in an effective and efficient manner
through planning, organising, leading, and controlling organisational resources.
To understand this definition, the four management functions are very important:

P 1. Planning: identifying goals for future organisational performance and deciding on the
tasks and use of resources needed to attain them.
- Where does the organisation want to be in the future and how can it get there?
O 2. Organising: assigning tasks, grouping tasks into departments, delegating authority and
allocation resources across the organisation.
- How will the organisation try to accomplish the plan?
3. Leading: the use of influence to motivate employees to achieve organisational goals.
L
This is done by creating a shared culture and values, communicating goals to people
throughout the organisation, and infusing employees with the desire to perform at a
higher level.
C
4. Controlling: monitoring employees´ activities, determining whether the organisation
is moving towards their goals, and making corrections as necessary.
To understand the definition of management, effectiveness and efficiency also have to be
understood.
Effectiveness: the degree to which the organisation achieves a stated goal or succeeds to
accomplish what it tries to do. This means providing a product or service that customers
value.
Efficiency: the amount of resources used to produce a product or service.
Performance: the attainment of organisational goals by using resources in an efficient and
effective way.
 To perform effectively, all managers must possess skills in three different categories:
1. Conceptual skills: the cognitive ability to see the organisation as a whole system, and
the relationships among its parts. It involves knowing where the different teams fit
into the organisation, as well as where the organisation fits in the industry. Being
conceptual means having the ability to think strategically, and to identify, evaluate and
solve complex problems.
2. Human skills: the ability to work with and through other people and effectively as a
group member. These skills show in the way that a manager relates to other people –
motivating, coordinating, leading, communicating, and solving conflicts involved.
3. Technical skills: the understanding of, and proficiency in, the performance of specific
tasks. This includes mastery of the methods, technique, and equipment involved in
specific functions within the organisation. It also includes specialised knowledge ,
analytical ability, and competent use of tools and techniques to solve different
problems.

There are different organisational structures that can be applied on organisations and how they
manage their business – different management types. They lead to differences in what the
employees are meant to do.
Vertical structure differences:
Top managers: at the top of the
hierarchy, responsible for the entire
organisation.
Middle managers: responsible for
business units and major
departments, as well as for teams
and projects.
Project manager: responsible for
temporary work projects involving
people from different functions and
levels of the organisation.
First-line managers: directly
responsible for the production of
goods and services.

Horizontal structure differences:

Functional managers: responsible for departments that perform a single functional task and
have employees with similar training and skills.
General managers: responsible for several departments that perform different functions.
 From being just a normal
worker to becoming
manager, means having to
adapt to new situations and
take on another identity while
working. This, due to the
difference in tasks when
going from employee to
manager:

Being a manager automatically means having to find time to manage the business in a way
that works. One way to be effective and efficient as a manager is by time management: using
techniques that enable getting more done in less time with better results, be more relaxed, and
enjoy the work and social life. This is something that new managers often struggle with.

Diverse manager activities can be organised into 10 roles. A role: a set of expectations for a
manager´s behaviour. The roles can be divided into three categories:

1. Informational roles: describe the

activities used to maintain and
develop an information network.
This category includes the monitor
role, the disseminator role, and the
spokesperson role.
2. Interpersonal roles: pertain to
relationships with others and are
related to human skills. This
category includes the figurehead
role, the leader role, and the liaison
role.
3. Decisional roles: pertain to the
events about which the manager
must make a choice and act. This
category includes the entrepreneur
role, the disturbance handler role,
the resource allocator role, and the
negotiator role.
In recent time what is required of truly effective managers have changed, partly due to rapid
environmental shifts and technological changes. This also means that a new approach to
management is, or should be, adapted:

Innovative management is very important in today´s society. However, the history of

management also plays a big role. Many managers look back in history in order to learn from
other people´s mistakes and successes. Studying history is a way to achieve strategic
thinking, see the big picture, and improve conceptual skills.
A PEST-analysis can be used to evaluate how 4 forces have influenced organisations and the
practice of management:
- Political forces: the influence of political and legal institutions on people and
organisations.
- Economic forces: the availability, production, and distribution of resources in
society. The economic forces influence the allocation of scarce resources.
- Social forces: the aspects that guide and influence relationships among people.
- Technological forces: relate to research and technological development that
people use to bring new products to the market, or to improve already existing
ones.
There are different management perspectives that have had their evolution over time. All of
them have elements that are still used in today´s organisations:

The classical perspective: emerged during the nineteenth and early twentieth century. This
was during the rise of the factory system, the industrial revolution, which brought issues
regarding structure, training, and employee satisfaction. Large and complex organisations
required new approaches to coordination and control, which lead to the evolution of
management with the classical perspective.
This perspective has three subfields:
1. Scientific management: emphasises to improve efficiency and labour productivity
through scientific methods – experiments put into reality. Frederick Winslow Taylor
proposed that workers could be retooled like machines for better productivity. To do
this, he meant that the management would have to change, and that the manner of
change only could be determined by scientific study. Instead of basing decisions off of
rules of thumb and tradition, he wanted them to be based on precise procedures
developed after careful study of individual situations.
In the area of scientific management, there were also other people developing their
own theories and models. Henry Gantt developed the Gantt chart to measure tasks and
plan work, and The Gilbreths pioneered time and motion studies to promote
efficiency. The ideas of scientific management drastically increased productivity
across all industries and are still important today. It is, for example, a big part of the
management at supermarket chains.
There are certain characteristics representing scientific management:
2. Bureaucratic organisations: a systematic approach, developed in Europe, that looked
at the organisation as a whole. This subfield was introduced by Max Weber during the
late 1800s. The idea was to manage organisations on an impersonal and rational basis
by implementing hierarchy, rules, procedures, written decisions and promotion based
in technical qualifications. Weber believed that this approach would be more efficient
and adaptable to change. He meant that impersonalising the organisation by i.e.,
letting managers use power instead of personality to delegate would be more efficient.
This approach has made many organisations more productive, but bureaucracy has
still taken on a negative tone.
There are 6 main characteristics of bureaucracy:

3. Administrative principles: focused on the entire organisation instead of the

individuals. Henri Fayol was the major contributor to this approach. This approach is
based on 14 universal principles of management – many of them still used today, for
example:
- Unity of command – each subordinate receives orders from one superior only.
- Division of work – specialisation can be done in order to produce more and better
work with the same amount of effort.
- Unity of direction – similar activities in an organisation should be grouped
together under one manager.
- Scalar chain – a chain of authority extends from the top to the bottom of the
organisation and should include every employee.
Apart from these principles, he also identified functions of management: planning,
organising, commanding, coordinating, and controlling.
The humanistic perspective: emphasised the importance of understanding human behaviours,
needs, and attitudes in the workplace, as well as social interaction and group processes. Two
early advocates for this perspective was Mary Parker Follett and Chester I. Barnard. Mary
addressed issues timely today, such as ethics, power, and leading in a way that encourages the
employees to give their best. Chester stressed that organisations are not machines, and that
informal relationships are powerful and can help the organisation.
This perspective has three primary subfields:
1. The human relations movement: based on the idea that truly effective control comes
from within the individual worker, rather than from strict authoritarian control. The
Hawthorne studies showed that human relations, rather than money, caused increased
output, and that workers performed better when managers treated them positively.
This is a theory that has been applied on organisations for a long time since then.
However, people that were a part of the study have witnessed about money gained
from it also was a great incentive for working harder.

2. The human resources perspective: the thought was that jobs should be designed so
that tasks are not dehumanising or demeaning, but instead allow workers to reach their
full potential. This perspective focused on work performance, rather than worker
participation, and combined motivation with job design. It was Abraham Maslow and
Douglas McGregor who extended and challenged the current theories of their time.
Maslow suggested a hierarchy of human needs when he saw that workers´ problems
usually stemmed from needs that were not satisfied.
McGregor formulated a framework called theory X and theory Y, where he meant that
the classical perspective was based on Theory X assumptions about workers, and
Theory Y was a more realistic view of workers for guiding management thinking.
Theory X

Employees come to work only to earn a living.

They do not want to take new responsibilities and
do not enjoy work. They would avoid working if
they could.
Managers holding theory X supervise closely,
using the carrot and stick approach to get people to
work. They also issue threats if deadline are missed.

Theory Y

Employees come to work because they want to. They

take pride in what they do, without being pushed.
They exceed expectations.
Managers allow more freedom, delegate tasks,
support growth and development, and encourage
involvement.

3. Behavioural sciences approach: uses scientific methods and draws from sociology,
psychology, anthropology, economics, and many other disciplines to develop theories
about human behaviour and interaction in an organisational setting. One specific set of
management techniques based in this approach is organisation development, which
uses behavioural sciences to improve organisations.
There are also other strategies based on behavioural science, such as: matrix
organisations, self-managed teams, and corporate culture.
Management science / The Quantitative Perspective: provided a way to address the
managerial problems following WW2. This view used mathematics, statistics, and other
quantitative techniques to aid management decision making. It was much thanks to the
development and perfection of the computer that this method was enhanced, since managers
could collect, store, and process large volumes of data that could later be used to make
quantitative decisions. There are subsets of management science, three of them are:
1. Operations research: grew directly out of the study of WW2 operational research
teams, which applied quantitative techniques to problems facing the allies.
2. Operations management: refers to the field of management that specialises in the
production of goods and services. They use management science to solve
manufacturing problems.
3. Information technology (IT): focuses on technology and software to provide relevant
information to managers in a timely and cost-effective manner.

Systems thinking: the ability to see the distinct elements of a situation, as well as the
complexities.
System: a set of irrelated parts that function as a whole to achieve a common purpose.
Subsystems: the moving parts of a system that depend on one another – changes in one part of
the system will affect other parts.
Synergy: the creation of a whole that is greater than the simple sum of its parts.
Managers must understand subsystem interdependence and synergy to understand the impact
on the organisation as a whole when they make changes. This view on management means
that it is the relationship among the parts that form a whole system that matters. The manager
has to be able to see and focus on the bigger picture, and understand what parts of the
organisation that affect each other.

The contingency view: each management situation is thought to be unique – just because
something works within one organisation, doesn’t mean that it will work in every
organisation. From this view, managers have to determine what method will work for every
situation they encounter. Certain contingencies, variables, exist for helping managers with just
that.

Total quality management: focuses on

managing the total organisation to deliver
better quality to customers.
This approach integrates high-quality
values throughout every activity within a
company, with frontline workers intimately
involved in the process.
There are 4 significant elements of quality
management:
Lecture 3 Managerial Planning, Strategy, and Decision Making (7, 8, 9)
One of the primary responsibilities of managers is to set goals for where the organisation or
department should go in the future and plan how to get it there. Goals are important because
organisations exist for a purpose, and goals define and state that purpose.
Goal: a desired future state that the organisation attempts to realise.
Plan: a blueprint for goal achievement which specifies the necessary resource allocation,
schedules, tasks, and other actions.
Planning: the act of determining goals and the means of achieving them.
There are certain characteristics that help identify effective goals:

Organisational mission: the organisation´s reason for existence – what they stand for, do, or
want to focus on. This should be well-defined as a basis for development of all subsequent
goals and plans, otherwise they are unlikely to take the organisation in the direction it needs to
go.

Goals should be aligned in order to be effectively designed. This can be done using a strategy
map:
Strategy map: a visual representation of the key drivers of an organisation´s success. It shows
how specific goals and plans in each area are linked and therefore provides a way to see the
cause-and-effect relationship among them.

Organisations have to plan in order to be prepared for a turbulent environment or a potential

externality. There are different types of plans that have to be made.
Contingency planning: planning the organisation´s responses to be taken in case of
emergencies, setbacks, or unexpected conditions. The managers identify important factors in
the environment, and then forecast a range of alternative responses to the most likely, high
impact, contingencies.
Building scenarios: a forecasting technique to look at current trends and discontinuities and
visualise future possibilities.
Crisis planning: planning for unexpected events that are sudden and devastating in a way that
might destroy the organisation if managers are not prepared with a quick and appropriate
response. Crisis prevention and crisis preparation are two essential stages of crisis planning.

There are different levels of goals and plans:

Mission statement: a broadly stated

definition of purpose that distinguishes the
organisation from others of a similar type. A
well-designed mission statement can enhance
motivation and organisational performance.

Strategic goals (official goals): broad

statements describing the organisation´s
future as a whole.
Strategic plans: defines the steps by which
the organisation intends to reach the strategic
goals.

Tactical goals: the results that major divisions or departments within the organisation intend
to achieve.
Tactical plans: designed to help execute the major strategic plans and to accomplish a
specific part of the company´s strategy.
Operational goals: the expected results from departments, work groups, and individuals.
Operational plans: are developed at the lower levels of the organisation to specify the steps
towards achieving the operational goals.
Strategies are important for organisations, the main reasons for this are:
- They determine which organisations succeed and which ones struggle.
- Strategic blunders can hurt a company.
When thinking strategically, organisations have to think in a long-term view and be able to
see the big picture. They have to include the organisation and the competitive environment,
and consider how they fit together.
Strategy: a plan of action that describes resource allocation and activities for dealing with the
environment, achieving a competitive advantage, and attaining the organisation´s goals.
Competitive advantage: what sets the organisation apart from others and provides it with a
distinctive edge for meeting customer or client needs in the marketplace.
Strategic management: a specific type of planning. The set of decisions and actions used to
formulate and execute strategies that will provide a competitively superior fit between the
organisation and its environment to achieve organisational goals. This is a way of making
choices about how to position the organisation with respect to rival organisations.
The meaning of formulating a strategy is choosing how the organisation will be different. To
achieve competitive advantage, companies must develop strategies with certain elements. The
strategies have to:
- Identify their target customers.
- Exploit core competence; show the consumers what the organisation does well in
comparison to their competitors.
- Build synergy; have the organisational parts interact to produce a joint effect that
is greater than the sum of the parts acting alone.
- Deliver value.

Strategic managers normally think in terms of three levels of strategy:

1. Corporate-level strategy: what business are we in? This pertains to the organisation as
a whole and the combination of different parts that make up the corporate entity.
Strategic actions at this level can contain acquisition of new businesses, or joint
ventures with other corporations in new areas.
2. Business-level strategy: how do we compete? This pertains to each business unit or
product line. Strategic decisions at this level can concern the amount of advertising,
product changes, research, or new-product development.
3. Functional-level strategy: how do we support the business level strategy? This
pertains to the major functional departments within the business unit. These strategies
involve all of the major functions, for example finance, research, development, and
marketing.
Forming and managing a strategy – strategic management - is a process:

Strategy formulation: the planning and decision-making that lead to the establishment of the
firm´s goals and the development of a strategic plan. It includes assessing the external
environment and internal problems to identify strategic issues, then integrating the results into
goals and strategies for the organisation.
Strategy execution: the use of managerial and organisational tools to direct resources towards
accomplishing strategic results. It is the administration and implementation of the strategic
plan.
Formulating a strategy often begins with an audit of internal and external factors that
influence the company´s ability to compete. These can be analysed lightly by performing a
SWOT-analysis which states:
- Internal strengths and weaknesses.
- External opportunities and threats.

There are three approaches to understanding and formulating corporate-level strategy:

1. 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
organisation.
2. The BCG matrix: organises businesses along two dimensions: business growth rate,
and market share. The combination of high and low market share and business growth
provide four categories of a corporate portfolio.
The star: has a large market share in a rapidly growing industry. It has additional
growth potential, and profits should be put into this business as an investment for
future growth and profits. The star will generate profits and a positive cash flow even
when the industry matures, and the market growth slows.
 The cash cow: exists in a mature, slow-growth
industry but is a dominant business within it, with a
large market share. Heavy investments and
advertising is no longer needed, which generates a
positive cash flow. The cash cow can be milked to
invest in other, riskier businesses.
The question mark: exists in a new, rapidly
growing industry, but has only a small market
share. This business is risky – it could become a
star, or it could fail. The cash earned from cash
cows can be invested in the question marks with
the goal of making them future stars.
The dog: is a poor performer, with only a small
market share in a slow-growth market. It provides
little profit for the organisation and might be
discontinued if not turned around.

3. Diversification strategy: the strategy of moving into new lines of businesses. The
purpose 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 existing activities, the
organisation is implementing related diversification. When the firm expands to a
totally new line of business, it is implementing unrelated diversification. The company
can also expand into businesses that either produce the supplies needed to make their
products, or that distribute and sell them to customers. That is called vertical
integration.

Within the strategic business units (SBUs), there are also different forms of strategy
formulation, where the concern is how to compete. One effective model for formulating
strategy is Porter´s competitive strategies, where it is believed that business-level strategies
are the result of understanding competitive forces in the environment. Many organisations
have different SBUs, and they have different competitive environments to take into
consideration.
To find a competitive edge within a specific business environment, a company can adopt one
of three strategies, according to Porter: differentiation, cost leadership, or focus.
 - Differentiation strategy: involves an attempt to distinguish the firm´s products or
services from others in the industry. This strategy can reduce rivalry and fight off
the threat of substitutes because customers are loyal to the brand. However, it
requires costly activities, such as product research and design, and extensive
advertising.
- Cost leadership strategy: the organisation aggressively seeks for efficiency and
cost reductions to produce products more efficiently than competitors. This
strategy allows companies to undercut competitors´ prices, but still offer
comparable quality and earn a profit.
- Focus strategy: the organisation concentrates on a specific regional market or
buyer group. They will use either a differentiation or cost leadership approach, but
only for a narrow target market.
Organisations should consider carefully which strategy to apply, since they are suitable for
different types of businesses in different situations. Using the wrong one can actually end up
hurting the business.
Functional-level strategies are the action plans used by major departments to support the
execution of the business-level strategy. Here, the managers of the different departments
within the organisation adopt strategies that are coordinated with the business-level strategy to
achieve the organisation´s strategic goals.

There are different types of decisions and problems, and different ways of dealing with them.
Decision: a choice made from available alternatives. The actual decision is only a small part
of the entire decision-making process.
Decision-making: the process of identifying problems and opportunities, and then resolving
them. This involves effort both before, during, and after the actual choice.
Management decisions usually fall into one out of two categories:
1. Programmed decisions: involve situations that have occurred often enough to develop
and apply decision rules for the future. These decisions are made in response to
recurring organisational problems.
2. Non-programmed decisions: are made in response to situations that are unique,
weakly defined and largely unstructured, and have important consequences for the
organisation.
One big difference between programmed and non-programmed decisions is the degree of
certainty or uncertainty that managers deal with when making the decision. Programmed
decisions can be made in situations with near to full certainty, while many situations involve
at least some uncertainty that require non-programmed decision-making.
Every decision situation can be organised on a scale according to the available information
and the possibility of failure. The four positions on the scale are certainty, risk, uncertainty,
and ambiguity:
Certainty: all the information needed is
fully available to the decision-maker.
Risk: a decision has clear goals, and
good information id available. But the
future outcomes associated with each
alternative come with chance of some
loss and failure. Enough information is
available to estimate the probability of
success or failure.
Uncertainty: managers know what they
wish to achieve, but have incomplete
information about alternatives and future
events.
Ambiguity: the goal or problem is unclear, alternatives are difficult to define, and information
about outcomes is unavailable.

When making decisions, there are three different approaches:

1. The classical model (the ideal, rational model): based on rational economic
assumptions and managerial beliefs about what ideal decision-making should be.
There are four assumptions underlying this model:
- The decision-maker operates to accomplish goals that are known of and agreed on.
Problems are required to be precisely defined.
- The decision-makes strives for high certainty by gathering all information needed.
All alternatives and the results of them are calculated.
- Criteria for evaluating the alternatives are known, and the decision-maker chooses
the alternative with the highest economic return.
- The decision-maker is rational and uses logic for all the above.
This model is normative, meaning it states how decision-makers should act. It shows
how to reach the ideal outcome for the organisation, but is often unattainable. It is
most useful when applied to programmed decisions and those characterised with
certainty or risk.
2. The administrative model (how managers actually make decisions): descriptive in
nature – it describes how managers actually make decisions in complex situations.
This model recognises the human and environmental limitations that affect the
decision-making process.
There are two concepts that shape this model. Bounded rationality, meaning that
people have limits, boundaries, on how rational they can be. Satisficing, meaning that
decision-makers choose the first solution alternative that satisfies the minimal decision
criteria, since they don’t have the time or ability to process complete information
about complex decisions.
There are also criteria for the administrative model, according to it:
 - Decision goals are often vague and conflicting. Managers are often unaware of
problems and opportunities that exist in the organisation.
- Rational procedures, when used, do not capture the complexity of real
organisational events.
- Searches for alternatives are limited because of human, information, and resource
constraints.
- Most managers settle for a satisficing solution, due to limited information and
vague criteria for a maximising solution.
Intuition also plays an important role in administrative decision-making. This model is
most useful for non-programmed decisions, with uncertainty and ambiguity.
3. The political model: useful for non-programmed decisions under uncertain
conditions. When making complex organisational decisions, managers can often
engage in coalition, meaning they form an informal alliance with others who support
the same goal.
The political model begins with four basic assumptions:
- Organisations are made up of groups with diverse interests, goals, and values.
Managers disagree about certain things.
- Information is ambiguous and incomplete. The ability to be rational is limited by
the complexity of many problems, and personal and organisational constraints.
- Managers do not have the time, resources, or the mental capacity to identify all the
dimensions of a problem and process all relevant information. Instead, they
interact with each other.
- Decisions are the result of bargaining and discussion among coalition members.

Six steps are usually associated with effective decision processes. There are relevant
regardless of whether a decision is programmed or non-programmed, and whether the
classical, administrative, or the political model is chosen:
 1) Recognition of decision requirement: managers confront a decision requirement in
the form of either a problem, or an opportunity. A problem occurs when the
organisational accomplishments are less than the established goals – some aspect of
performance is unsatisfactory. An opportunity exists when managers see a potential
accomplishment that exceeds current goals.
2) Diagnosis and analysis of causes: once a problem or an opportunity comes to a
manager´s attention, the understanding of the situation should be refined. Diagnosis is
the first stage in the decision-making process, where managers analyse underlying
factors associated with the decision situation. Many managers fail to see the real
problem, and only see what they think is the problem. Questions can be asked in order
to actually be able to diagnose it.
3) Development of alternatives: to generate possible alternative solutions that will
respond to the needs of the situation, and correct the underlaying causes. This step is
easy when it comes to programmed decisions, but non-programmed decisions require
developing new courses of action that will meet the organisation´s needs. Decision
alternatives can work as tools to reduce the difference between the current and the
desired performance.
4) Selection of the desired alternative: once feasible alternatives have been developed,
in the third step, one must be selected. Of course, managers try to select the most
promising of several alternative courses of action. The one that best fits the overall
goals and values of the organisation, and achieves the desired result using the fewest
resources, is the best alternative solution. This step often depends on the manager´s
risk propensity, which is their willingness to undertake risk with the opportunity of
gaining an increased payoff.
5) Implementation of the chosen alternative: involves the use of managerial,
administrative, and persuasive abilities to ensure that the chosen alternative is carried
out. The most important part in this step, is that the alternative actually can be put into
action.
6) Evaluation and feedback: decision-makers gather information about how well the
decision was implemented, and whether it was effective in achieving the goals. Since
decision-making is an ongoing process, feedback is important in case changes have to
be made.

There are some mechanisms in the innovative decision-making process that can help reduce
bias-related decision errors:
- Start with brainstorming/electronic brainstorming.
- Use hard evidence – helps take emotions out of the process, preventing managers
to see what they want to see instead of facts and evidence to base their decisions
on.
- Engage in rigorous debate – a good discussion can generate a broader
understanding.
- Avoid groupthink – it is important to realistically challenge the problems.
- Know when to bail out – learn to stop if something is not working.
- Do a post-mortem – review the decisions afterwards in order to learn from them.
Lecture 4 - Guest lecture Sustainability
The word sustainability is from 1713.
Earth day in the US – 1970 – work together for the world.
Stakeholder theory – 1984 – looking at stakeholders instead of just stockholders.
UN Brundtland report – 1987 – first time the UN identified sustainability.
Stakeholder – any person that is impacted by or impacting an organisation.
Rio earth summit – 1992 – focused on the social, environmental, and economic impact on
sustainability.
Triple bottom line – people, planet, profit – 1994. Sustainability in all of those categories.
Global reporting initiative – 1997 – understanding the impact different parts of society is
making.
Sustainable development goals – 2015 – UN project. 17 goals were created around sustainable
solutions. The importance of identifying different goals in different countries. Where do we
need to work harder?
Rise of ESG – 2016 – measure performance of companies from a specific framework,
enabling them to be compared to one another.
ESG – environmental, social, governance
- Refers to a framework to integrate environmental, social, and governance risks and
opportunities into a firms strategy to build long term financial sustainability and
value creation.
 - Looks at what’s important for the stakeholders, in combination with what’s
important for the business.
SDGs – sustainable development goals – help companies prioritise, set, measure, and report
on globally aligned business objectives.

The community/society, ant the environment/planet are, as well as the classical ones, also
considered important stakeholders of a business.
Sustainability is a key driver of business value and success. 99% of CEOs believe
sustainability will be important to the future success of their business.
To close the gap between what businesses are saying vs doing, UN made three urgent calls to
action: raise ambition and impact, change collaboration, and redefine responsible leadership.
Trust in today´s leaders is at an all-time low.
Inner development goals – what we need to achieve the outer SDG. They are transformational
skills for sustainable development: being, thinking, relating, collaborating, acting.
Regenerative business reaches beyond sustainability – humans aligning with nature.

Greenwashing: misleading marketing, where something is falsely promoted to be

environmentally friendly or “better than it is” for the environment.
Green skills: knowledge, abilities, values, and attitudes needed to live in, develop, and support
a sustainable and resource efficient environment.
Lecture 5 Organisation Structure and Managing Corporate Culture (3,4)
Organisational culture: refers to the pattern of beliefs, values, and learned ways of coping
with experience that have developed during the course of an organisations history; and which
tends to be manifested in its material arrangements and in the behaviours of its members.
A factor for managerial dysfunctionality is said to be bounded rationality – the fact that
people have the time and cognitive ability to process only a limited amount of information on
which to base decisions.

The external organisational environment includes all elements existing outside of the
organisation, that have the potential to affect it. Such as competitors, resources, technology,
and economic conditions.
The external environment have two main components:
1. General environment: mostly affects organisations indirectly. It includes social,
economic, legal-political, international, natural, and technological factors. These
factors may not directly change an the day-to-day operations, but it affects the
organisation eventually.
2. Task environment: closer to the organisation. Includes the sectors that conduct day-
to-day transactions with the organisation and directly influence its basic operations
and performance. It generally includes competitors, suppliers, customers, and the
labour market.
A topical perspective of the environment, argues that organisations are evolving into
organisational ecosystems – systems formed by the interaction amongst a community
of organisations, within the environment.
An organisation also has an internal environment which includes all the elements within the
organisation´s boundaries. It defines required employee behaviour in the international
environment, and is indicating how well the organisation will adapt to the external
environment.
General environment:
International dimension: should be considered as managers plan for expansions into global
markets. Includes events originating in foreign countries. An international environment
provides new competitors, customers, and suppliers, and shapes social, technological, and
economic trends.
Technological dimension: includes scientific and technological advancements in a specific
industry, and in society at large. These advancements drive competition and help innovative
companies gain deeper market shares.
Sociocultural dimension: represents demographic characteristics, as well as the norms,
customs, and values of the general population. Important sociocultural characteristics are
geographical distribution and population density, age, and education levels. By understanding
and addressing the right profiles, managers can prepare their organisations for long-term
success.
Economic dimension: represent the general economic health of the country or region where
the organisation operates. Part of the economic environment are consumer purchasing power,
unemployment rates, and interest rates.
Legal-political dimension: includes government regulations and political activities affecting
company behaviour.
Natural dimension: has grown in importance due to the increased sensitivity to the
environment. It includes all elements that occur naturally on earth, such as plants, animals, air,
water, and climate.
Task environment:
Customers: the people and organisations that acquire goods or services from the organisation
– they determine the organisation´s success. The organisations have to listen to the customers
needs in order to be successful.
Competitors: organisation in the same industry or type of business that provide similar goods
or service to the same set of customers.
Suppliers: provide the raw materials that the organisation uses to produce its output.
Labour market: represents people in the environment who can be hired to work for the
organisation.

The reason as to why organisations care so much about factors in the external environment, is
that it often creates uncertainty for the managers. They must be willing and able to respond by
designing the organisation to be adaptable to the environment.
Uncertainty means that managers do not have sufficient information about environmental
factors to understand and predict environmental needs and changes. Under high uncertainty,
much attention must be devoted to external issues.
Strategic issues: events or forces either inside or outside an organisation that are likely to
alter its ability to achieve its objectives.
To be able to compete effectively, many organisations join with other firms in partnerships,
even though they are competitors. To reduce environmental uncertainty, many companies also
involves in mergers or joint ventures.
The internal environment is, as well as the external, very important for organisations. The
internal environment within which managers work, includes corporate culture, production
technology, organisation structure and physical facilities. The corporate culture can be
considered as the most important part of the internal environment, since it generates
competitive advantage.
Corporate culture: the set of key values, beliefs, understandings, and norms shared by
members of an organisation. Glues the organisation together.
It is important that the leaders of a company act ethically and according to the values,
otherwise employees tend to take after, and the culture might start promoting negative values
and behaviours.
Culture can be analysed at two levels:

There are different things organisations can use or do in order to represent the corporate
culture. Such as:
Symbols: objects, acts, or events that convey meaning to others. They can show the
organisation´s important core values concerning how people relate to one another and interact
with the environment.
Stories: narratives based on true events that are repeated frequently and shared among
organisational employees. They paint pictures that help symbolise the firm´s vision and
values, and help employees understand them.
Corporate heroes: figures who exemplify the deeds, character, and attributes of a strong
culture. They are the role models for employees to follow.
Slogans: phrases or sentences that express a key corporate value. Many companies use
slogans or sayings to convey special meaning to employees.
Ceremonies: planned activities at special events that are conducted for the benefit of an
audience. They are held by managers to provide dramatic examples of company values.
The external environment has a big influence on internal corporate culture. Culture can vary
widely across organisations, but within the same industry organisations often reveal similar
cultural characteristics since they are operating in similar environments.
There are four types of corporate culture that are associated with the right fit between culture,
strategy, and the environment. They are based on two dimensions – the extent to which the
external environment requires flexibility or stability, and the extent to which a company´s
strategic focus is internal or external:

Adaptability culture: emerges in an environment that requires fast response and high-risk
decision-making. Managers encourage values that support the company´s ability to rapidly
detect, interpret, and translate signals from the environment into new behaviours. Employees
can make decisions and act freely to meet new needs, and responsiveness to customers is
highly valued. Managers actively create change by encouraging and rewarding creativity,
experimentation, and risk taking.
There is an inherent danger that a risk-taking culture can become dysfunctional.
Achievement culture: suited to organisations that want to serve specific customers in the
external environment, but without the intense need for flexibility and rapid change. This
results-oriented culture values competitiveness, aggressiveness, personal initiative, cost
cutting, and willingness to work hard to achieve results. Winning and achieving goals, holds
the organisation together.
Involvement culture: emphasises an internal focus on the involvement and participation of
employees to adapt rapidly to changing needs from the environment. It places high value of
meeting the needs of employees, with a caring atmosphere. Values such as cooperation,
consideration of employees and customers, and avoiding status differences are emphasised.
Consistency culture: uses an internal focus and a consistency orientation for a stable
environment. It is valued to follow the rules and being thrifty. This culture supports a
methodical, rational, and orderly way of doing things.
Organising: the deployment of organisational resources to achieve strategic goals.
Organising is important because it facilitates the implementation of strategy – it defines how
to do things. It can be done in different ways within different organisations, and there are
different structures to be used.
Organisation structure: defines how tasks are divided and resources deployed. It is defined
as:
- The set of formal tasks assigned to individuals and departments.
- Formal reporting relationships, including lines of authority, decision responsibility,
the number of hierarchical levels, and the span of managers´ control.
- The design of systems to ensure effective coordination of employees across
departments.
Organisation chart: the visual representation of an organisation´s structure.

One of the different organisation structures, is the vertical structure. Which can look like this:

Within this structure, a fundamental principle is that work can be performed more efficiently
if employees task-specialise. Work specialisation/division if labour: the degree to which
organisational tasks are subdivided into separate jobs. Employees perform only the task
relevant to their specialised function.
When work specialisation is extensive, employees focus on a single task. Jobs tend to be
small, but can be performed efficiently.
The chain of command is also a big part of the vertical structure, and is a unbroken line of
authority that links all employees in an organisation and shows the reports to whom. Unity of
command means that each employee is held accountable to one supervisor only. The scalar
principle refers to a clearly defined line of authority that includes all the employees.
The chain of command shows the authority structure of the organisation. Authority is
distinguished by three characteristics:
1. Authority is vested in organisational positions, not people – managers have the
authority because of their position, and other people in the same position would have
the same authority.
2. Authority flows down the vertical hierarchy – higher positions generate more
authority.
3. Authority is accepted by subordinates – subordinates comply because they believe that
managers have a legitimate right to issue orders. If the subordinates choose not to
accept the command, a manager´s authority disappears.
Responsibility: the duty to perform the task or activity as assigned.
Accountability: the people with authority and responsibility are subject to reporting and
justifying task outcomes to those above them.
Delegation: the process managers use to transfer authority and responsibility to positions
below them.
In many organisations, an important distinction is between line authority and staff authority.
They reflect whether the managers work in line or staff departments in the organisation´s
structure.
Line departments: perform tasks that reflects the organisation´s primary goal and mission.
Means that managers have formal authority to direct and control immediate subordinates.
Staff departments: provide specialised skills in support of line departments. For example,
marketing, research, and human resources. Include rights to advise, recommend, and counsel
in the staff specialists´ area of expertise.
Within the vertical structure, the span of management/span of control is the number of
employees reporting to a supervisor. This controls how closely a supervisor can monitor
subordinates. Span of management varies widely and several factors influence it, but there are
some factors that are associated with less supervisor involvement, and thus larger spans of
control:
- Work performed by subordinates is stable and routine.
- Subordinates perform similar tasks.
- Subordinates are concentrated in one location.
- Subordinates are highly trained and need little direction in performing tasks.
- Rules and procedures are available.
- Support systems and personnel are available for the manager.
- Little time is needed in non-supervisory activities.
- Managers´ personal preferences and styles favour a large span.

The span of control in an organisation

determines if the structure is tall or flat. A
tall structure has an overall narrow span
and more hierarchical levels. A flat
structure has a wide span, is horizontally
dispersed, and has fewer hierarchical
levels. An organisation can reorganise to
increase the span of management:
 Centralisation and decentralisation pertain to the hierarchical level at which decisions are
made. Centralisation means that decision authority is at the top of the organisation, and
decentralisation means that decision authority is pushed to lower organisational levels.
The factors that often influence centralisation versus decentralisation are:
- Greater change and uncertainty in the environment are usually associated with
decentralisation.
- The amount of centralisation or decentralisation should fit the firm´s strategy.
- In times of crisis or risk of company failure, authority may be centralised at the
top.

Departmentalisation is another fundamental characteristic of organisation structure. It is the

basis for grouping positions into departments and for grouping departments into the total
organisation. There are five different approaches to structural design, which reflect different
uses of the chain of command in departmentalisation.
2. 1.Vertical functional approach:
-Activities are grouped together by common function
from the bottom to the top of the organisation.
-The functional structure groups positions into
departments based on similar skills, expertise, work
activities, and resource use.
-A strong vertical design.
-Experts work together within their field, but that also
makes communication between the departments
harder.

2.Divisional approach
-Departments are grouped together based on similar organisational outputs.
-Separate divisions can be organised with responsibility for individual products, services, product
groups, major projects, divisions, etc.
-Diverse departments are brought together to produce a single organisational output.
-Works well when a global organisation produces products for different markets.
-The organisation becomes more flexible and responsive to change. Great coordination often exists
within the divisions.
-Coordination across divisions is often poor. Running separate divisions result in high costs.
 3.The matrix: a plurality approach
-Combines aspects of functional and divisional
structures in the same part of the organisation.
-Has dual lines of authority. The vertical structure
provides traditional control within functional
departments, and the horizontal structure provides
coordination across departments.
-Highly effective in a complex, rapidly changing
environment where flexibility, innovation, and adaption
is necessary.
-The dual chain of command generates confusion and
frustration. Can lead to conflicts.

4.Team approach
-Gives managers a way to delegate authority, push responsibility
to lower levels, and be more flexible and responsive.
-One approach is cross-functional teams, which consists of
employees from various departments who are responsible to
meet as a team and resolve mutual problems.
-Another approach is to use permanent teams, groups of
employees who are organised in a way similar to a formal
department.
-Breaks down barriers across departments and improves
coordination and cooperation.
-Can lead to conflicts. Takes a lot of time.

5.Virtual network approach

-The firm subcontracts most of its major functions to
separate companies and coordinates their activities from a
small headquarters organisation.
-Certain services, such as accounting and distribution, are
outsourced to separate organisations that are connected
electronically to the central office.
-The company can focus on what it does best, and outsource
the rest to experts in those areas.
-Generates flexibility and competitiveness on a global scale.
-Generates lack of control. Managers must rely on others.
Employee loyalty can weaken.
Many managers recognise the limits of traditional vertical organisation structures within the
fast-shifting environment they operate. Therefore, the use of teams and networks has grown,
and many companies are moving towards horizontal structures.
Coordination: the managerial task of adjusting and synchronising the diverse activities
among different individuals and departments.
Collaboration: a joint effort between people from different departments to produce outcomes
that meet a common goal or shared purpose.
The vertical functional structure is effective in stable environments, but does not provide the
horizontal coordination needed in times of rapid change. Innovations like cross-functional
teams, task forces, and project managers work within the vertical structure but provide a
means to increase horizontal communication and cooperation. Re-engineering refers to the
radical redesign of business processes to achieve dramatic improvements in certain fields:

Task force: temporary team or committee formed to solve a specific short-term problem
involving several departments.
Cross-functional team: furthers horizontal coordination by including members across the
organisation. Works with continuing problems and might exist for years.
Project manager: person responsible for coordinating activities of several departments for the
completion of a specific project.

Lecture 6 Managing in a Global Environment (5)

Business has become a unified, global field. Managers have to adapt to working in a more
globalised world.
Globalisation refers to the extent to which trade and investments, information, social and
cultural ideas, and political cooperation flow between countries.
One consequence of globalisation is that countries, businesses, and people become more
interdependent.
To succeed on the global market, managers have to develop a global mindset that enables
them to navigate through complexities that exceed what they normally encounter as managers.
The global mindset can be defined as the ability of managers to appreciate and influence
individuals, groups, organisations, and systems that represent different social, cultural,
political, institutional, intellectual, and psychological characteristics. Managers with a global
mindset can see things from more than just their own perspectives. People who have been
exposed to different cultures tend to develop a global mindset more easily.

Corporations are more complex than unincorporated businesses or enterprises. A corporation

is a business entity that legally exists separately from its owners. The owners are
shareholders, their percentage of ownership in the business is represented by their corporate
stocks or shares. The corporation is the legal person. Taxation depends on the national legal
systems.
Corporations can have just one shareholder, director, and officer. However, they usually have
boards of directors and hold shareholder meetings.

Most of the international business is carried out by large international businesses (MNCs –
multinational corporations). There are three types of global companies:
- International companies: importers and exporters with no investments outside
their home country.
- Multinational companies: have investment in other countries, but do not offer
their products in each of those countries.
- Transnational companies: do not consider any particular city or country as their
home base.
Multinational corporations (MNCs) have certain distinctive managerial characteristics:
- They are managed as an integrated worldwide business system, where the different
affiliates act in close cooperations with one another. Capital, technology, and
people are transferred among the country affiliates. MNCs can adapt their
production and other parts of the company, to wherever in the world it is most
advantageous to have it.
- They are controlled by one management authority that makes key decisions for all
parts of the company. Centralisation of management is required to maintain
worldwide integration.
- Top managers at MNCs have to possess and exercise a global perspective. They
regard the entire world as one market.
Large MNCs are accused of many negative contributions to the world. One approach they can
apply, that combines business with social responsibility is the bottom of the pyramid concept
(BOP). It proposes that corporations can alleviate poverty and other social ills, as well as
make profits, by selling to the world’s poorest people.
There are a number of ways for organisations to become involved internationally, either to
acquire resources or to enter new markets:

Exporting: is carried out either directly or indirectly. Direct exports means the company
maintains its production facilities within the home nation and transfers its products for sale in
foreign countries. Indirect export is exporting through domestically based export
intermediaries, with the main disadvantage of the exporter losing control over its products in
the foreign market.
Global outsourcing: engaging in the international division of labour, so that work can be
done in countries with the cheapest sources of labour and supplies.
Licensing: a corporation (licensor) in one country makes certain resources available to
companies in another country (licensee). They enable the licensee to produce and market a
similar product or service to that which the licensor has produced. This offers a business easy
access to new markets at low costs, but limits its participation and control of the
developments.
Direct investing: the company is involved in managing the productive assets, which gives it
more managerial control. The most popular type of direct investment is to engage in strategic
alliances or partnerships.
A joint venture is a business entity created by two or more parties that share ownership, risks,
and rewards.
International management: the management of
business operations conducted in more than one
country.

The basic management functions of planning,

organising, leading, and controlling are the same
no matter if a company operates internationally or
domestically. However, managers will experience
greater difficulties and risks when performing
these on an international scale. Therefore, it is
important for managers to understand the key
factors in the international environment:

Economic environment: represents the economic conditions in the country where the
international organisation operates.
The economic development differs widely among different countries and regions. Countries
can be categorised as either developed or developing, which is based on per capita income.
The legal-political environment: international firms face a challenge of doing business due to
the differing laws and regulation among countries. International managers have to learn the
rules and regulations, and follow them.
The sociocultural environment: a nation´s culture includes the shared knowledge, beliefs,
values, behaviour, and ways of thinking amongst members of the society. An international
business has to take these factors into consideration as to not conduct non-ethical business
practices. What is ok in the managers´ home countries, might not be ok in the rest of the
world.
Ethnocentrism within a country makes it difficult for foreign firms to operate there. It is the
natural tendency to regard ones own culture as superior, and to downgrade or dismiss other
cultural values. It can be found in all countries.
The importance of social context has shown to differ between countries as well. In a high-
context culture people are sensitive to circumstances surrounding social exchanges. People
use communication primarily to build personal social relationships. Relationships and trust
are more important than business. In a low-context culture people use communication
primarily to exchange facts and information. Business is more important than relationships
and trust.
 Lecture 7 Leadership (13)
Leadership occurs among people, involves the use of influence, and is used to attain goals. It
is the ability to influence people towards the attainment of negotiated goals.
There are many different types of leadership, and what is appropriate leadership should
evolve as the needs of organisations change. There are many different things that play a major
role in leadership:

- Technology - Ethical and economic difficulties

- Economic conditions - Corporate governance concerns
- Labour conditions - Globalisation
- Social and cultural norms - New ways of working
- Turbulence and uncertainty of the - Shifting employee expectations
environment - Social transitions

There are, however, 4 approaches that are still in synchronisation with leadership for today´s
turbulent environment:

1. Level 5 leadership
Level 5 leadership refers to the highest level
in a hierarchy of manager capabilities. A key
characteristic of level 5 leaders is humility,
coupled with a will to do what is best for the
organisation. They build organisations based
on solid values that go beyond just making
money, they want to do what is best for the
company in the long run. Level 5 leaders also
want the maximum of subordinates to develop
their fullest potential.

2. Servant leadership
A servant leader transcends self-interest to serve others, the organisation and society. They
operate on two levels:
- For the fulfilment of their subordinates´ goals and needs.
- For the realisation of the larger purpose or mission of their organisation.
Servant leaders share power, ideas, information, recognition, credit for accomplishments, and
even money.
3. Authentic leadership
Authentic leadership refers to individuals who know and understand themselves, and act
consistently with higher-order ethical values. They empower and inspire others with their
openness and authenticity. Authentic leaders inspire trust and commitment because they
respect diverse viewpoints, encourage collaboration, and help others learn, grow, and develop
as leaders.
There are five key characteristics for authentic leaders:
-They pursue their purpose with
passion: leaders who lead without
passion can fall prey to greed and
desires of the ego. Demonstrating a
high level of passion and
commitment to a purpose, inspires
commitment from followers.
-They practice solid values: their
values are shaped by their personal
beliefs, which they stay true to even
under pressure. People know what
the leader stands for, which inspires
trust.
-They lead with their hearts as well as their heads: all leaders have to make tough choices,
but authentic leaders maintain a compassion for others, as well as courage to make difficult
decisions.
-They establish connected relationships: authentic leaders build positive and enduring
relationships, which makes followers want to do their best. They also surround themselves
with good people and work to help others grow and develop.
-They demonstrate self-discipline: self-control and self-discipline keeps leaders from taking
excessive or unethical risks that could harm others, or the organisation. Authentic leaders
openly admit when they make mistakes.
4. Interactive leadership
Interactive leadership has shown to be associated with female leaders. It means that the leader
favours a consensual and collaborative process, and influence derives from relationships
rather than position power and formal authority.

In organisations, good management is essential. But the managers also have to be leaders.
Management and leadership have different qualities associated with them, that provide
different strengths for the organisation. The distinction between these two is:
- “Management organises the production and supply of fish to people.”
- “Leadership teaches and motivates people to fish.”
Management: Promotes stability and order within the existing organisational structure and
systems. It ensures that suppliers are paid, customers invoiced, products and services
produced on time, etc.
Leadership: Promotes vision and change. It means questioning the status quo and being
willing to take responsible risks so that outdated, unproductive, or socially irresponsible
norms can be replaced to meet new challenges.
Good management is needed to help the organisation meet current commitments, while good
leadership is needed to move the organisation into the future.

Manager qualities Leader qualities

- Focus on the organisation. - Focus on people
- Rational - Visionary
- Maintains stability - Promotes change
- Assigns tasks - Defines purpose
- Organises - Nurtures
- Analyses - Innovates
- Position power - Personal power

Effective leadership is hard to define, and can not only be based on traits or strengths…
Traits: distinguishing personal characteristics, such as intelligence, self-confidence, energy,
and independence.
Strengths: natural talents and abilities that have been supported and reinforced with learned
knowledge and skills.
… That led to an interest in looking at the behaviour of leaders and how it might contribute to
leadership success or failure. There are two basic leadership behaviours that have been
identified as important for leadership: attention to tasks, and attention to people.
Task-oriented behaviour and people-oriented behaviour are not the only important leadership
behaviours, but they must both be shown at some reasonable level.
Consideration: falls in the category of people-oriented behaviour. The extent to which the
leader is mindful of subordinates, respects their ideas and feelings, and establishes mutual
trust.
Initiating structure: the degree of task behaviour. The extent to which the leader is task
oriented and directs subordinate work activities towards goal attainment.
Research shows that the most effective supervisors are employee-centred leaders, and the less
effective are job-centred leaders.

The leadership grid has been

developed, which is a two-
dimensional leadership model
that measures the leader´s
concern for people and concern
for production to categorise the
leader in one of five different
leadership styles
Contingency approaches to leadership explore how the organisational situation influences
leader effectiveness.
By understanding this, it comes clear how leaders with widely different styles can all lead
effectively.
There are three different contingency approach models:
1. The situational model of leadership
Focuses on the characteristics of followers in determining appropriate leadership behaviour.
The point of this model is that subordinates vary in readiness, which is determined by the
degree of willingness and ability it demonstrates while performing a task.
Willingness refers to a combination of confidence, commitment, and motivation. One may be
high or low on any of the three.
Ability refers to the amount of knowledge, experience, and demonstrated skill a subordinate
brings to the task.
Effective leaders adapt their style according to the readiness level of their workers.
According to the situational model, a leader can adopt one of four leadership styles:

2. Fiedler´s contingency theory

Within this theory, a person´s leadership style is considered relatively fixed – either it is task
oriented, or relationship oriented. Therefore, it is difficult to change, and the basic idea is to
match the leader´s style with the organisational situation that is most favourable for
effectiveness.
The suitability is determined by whether the situation is favourable or unfavourable for the
leader. That can be analysed through 3 elements:
- The quality of relationships between leader and followers.
- The degree of task structure.
- The extent to which the leader has formal authority over followers.
A highly favourable situation would be one where the leader-follower relationships are
positive, tasks are highly structured, and the leader has formal authority.
According to this pattern:
… task-oriented leaders are more effective when the situation is either highly favourable –
because everyone gets along, the task is clear, and the leader has power - or highly
unfavourable – because the leader can provide the needed structure and task direction.
Relationship-oriented leaders are more effective in situations of moderate favourability,
because human relations skills are important in achieving high group performance.
3. Situational substitutes for leadership
This approach suggests that situational variables can be so powerful that they can substitute
for, or neutralise, the need for leadership.
A substitute for leadership makes the solo leadership style unnecessary or redundant. For
example, professional subordinates who know how to perform their task do not need a leader.
A neutraliser counteracts the leadership style and prevents the leader from displaying certain
behaviours. For example, if the leader is removed from the subordinates, the ability to give
directions is reduced.

There are also differences in how leadership can inspire and motivate people – some
approaches are more effective than others. There are primarily two types of leadership with a
substantial impact:
1. Charismatic leadership
The charismatic leader can inspire and motivate people to do more than they normally would,
despite obstacles and personal sacrifice. Followers are willing to put their personal interests
aside, in favour of the team. The impact of charismatic leaders normally comes from: stating a
vision of a future that employees identify with, displaying an ability to understand the
followers, and trusting subordinates to accomplish results.
Charismatic leaders are skilled in the art of visionary leadership, focusing on the future.
 2. Transformational vs. transactional leadership
Transformational leaders are similar to charismatic leaders, but they have a special ability to
bring about innovation and change by recognising their followers needs, providing meaning,
challenging people to look at old problems in new ways, and acting as role models. They
motivate followers to believe in both the leader, and in themselves, to imagine and create a
better future for the organisation.
Transactional leaders clarify the role and task requirements of subordinates, initiate structure,
provide appropriate rewards, and try to meet the social needs of subordinates. They are
tolerant, hardworking, and fair minded, and they take pride in keeping things running
smoothly and efficiently. They often stress the impersonal aspects of performance, such as
schedules and budgets.

Leadership is a crucial part of organisations, but so is followership. Without effective

followers, no organisations can survive. Many of the qualities that define a good leader, are
also possessed by good followers.

There are 5 follower styles that are

categorised according to two
dimensions.
The first dimension is the quality of
independent, critical thinking versus
dependent, uncritical thinking.
The second dimension is active versus
passive behaviour.
Where a follower is within these
dimensions, determines its followship
style.

- The alienated follower is a passive, but independent, critical thinker. They are
often effective and have experienced setbacks before. Therefore, they are capable,
but they often focus on the negative things about their boss. They do not
participate in developing solutions to problems they see, and they complain
without offering constructive feedback.
- The conformist participates actively in a relationship with the boss but doesn’t use
critical thinking skills, meaning they carry out any order they are given. They
participate willingly, but do not consider the consequences of what their doing.
They are concerned with avoiding conflicts.
- The pragmatic survivor has qualities of all four extremes depending on which
style fits the situation. They use whatever style they benefit from and minimise
risks. They are often found when organisations go through tough times, and do
whatever is needed to get through it.
 - The passive follower is passive and uncritical. They show neither initiative nor
responsibility. They do only what they are told to do, and work best under
supervision – they leave the thinking to the boss. This is often a result of a
micromanaging boss.
- The effective follower is both critical, an independent thinker, and active in the
organisation. They behave the same towards everyone, regardless of their position
in the organisation. They are not risk or conflict averse. They are capable of self-
management and work toward competency, solutions, and positive impact.

Both leaders and followers use power and influence to get things done in an organisation.
Power: the potential ability to influence the behaviour of others. The capacity to cause a
change in a person.
Influence: the effect that a person´s actions have on the attitudes, values, beliefs, or behaviour
of others. The degree of actual change in a person.
Power can be categorised as hard or soft.
Hard power: stems largely from a person´s position of authority and includes legitimate,
reward, and coercive power.
Soft power: includes expert power and referent power, which are based on personal
characteristics and interpersonal relationships.
There are primarily 5 types of power that are available to leaders, they are either hard or soft:
1. Position power (hard power)
Position power is, as it sounds, power as a result of a certain position. A manager´s power
comes from the organisation and gives her the power to reward or punish subordinates to
influence their behaviour. Legitimate-, reward-, and coercive power are forms of position
power.
Legitimate power: the authority granted from a formal management position in an
organisation. Once a person has been selected as supervisor, most employees understand and
accept the source of power as legitimate.
Reward power: stems from the authority to bestow rewards on other people. Managers might
have access to formal rewards like promotions, or disposal rewards like praise and attention.
Managers can use rewards to influence subordinates´ behaviour.
Coercive power: the opposite of reward power. Refers to the authority to punish employees.
Managers have coercive power when they have the right to fire or demote employees if they
do not perform as expected.
2. Personal power (soft power)
Personal power often comes from internal sources, such as special knowledge or personal
characteristics. It is the primary tool of the leader. Expert power and referent power are forms
of personal power.
Expert power: power resulting from a person´s special knowledge or skill regarding the task
being performed. When someone is an expert, people go along with them because of their
knowledge.
Referent power: comes from an individual´s personal characteristics that command others´
respect and admiration, so they want to be like that person. When people admire someone
because of the way they deal with others, the influence is based on referent power.
3. Other sources of power
There are other sources of power that are linked to the role an individual plays in the overall
functioning of the organisation. These sources include personal effort, relationships with
others, and information.
Personal effort: people who show initiative, work hard, take on important projects, and show
interest in learning often gain power as a result.
Network of relationships: people who are part of a network of relationships have great power.
They know what is going on in an organisation, since they have relationships and contacts
within.
Information gatekeepers: people that have access to information, and control over how it is
distributed automatically gains power since information is a resource.
4. Interpersonal influence tactics
People who are perceived as having great power, are typically those who use a wide variety of
tactics and strategies. There are six principles for asserting influence:
Lecture 8 Leading Teams and Human Resources (14,15,16)
Human resource management (HRM): the design and application of formal systems in an
organisation to ensure the effective and efficient use of human talent to accomplish
organisational goals. Includes activities undertaken to attract, develop, and maintain effective
workforce.
HRM strategies outline the organisation´s people objectives, and must be an integrated part of
the overall business strategy. The strategic approach to HRM recognises 3 key elements:
1. All managers are human resource managers.
2. Employees are viewed as assets.
3. It is a matching process, integrating the strategy and goals with the correct approach
to managing the organisation´s human capital.
There are three primary goals of HRM:

Today´s organisations have to compete more on a global basis, which brings many new
challenges to HRM. The biggest challenge is leadership development and training for the
international market. The success of global business strategies depend on the effectiveness of
the organisation´s global HR strategies.
International human resource management (IHRM): a subfield within HRM that
specifically addresses the complexity that results from coordinating and managing diverse
people on a global scale.
In order for the human resources management to be successful from a global perspective,
multinational companies most often have to adapt it to the different countries they operate in.
What works in the home country, might not work in other countries. Therefore, IHRM is very
important.
The first goal of HRM states the importance of
meeting the organisation´s human resources
requirements through job analysis, human resource
planning, employee recruitment and selection.

The first step - job analysis:

- The foundation of HR activities.
A job analysis is a systematic process of gathering and interpreting information about the
essential duties, tasks, and responsibilities of a job, as well as about the context within which
the job is performed.
When performing a job analysis, managers or specialists have to find out everything about the
job. Then they have to prepare a written job description, which summarises the tasks, duties,
and responsibilities in a clear and concise way. They also have to prepare a job specification
which outlines the knowledge, education, skills, and other characteristics needed to be able to
perform the job.
The job analysis helps organisations recruit the right people and match them to appropriate
jobs.
The second step – human resource planning:
Human resource planning is the forecasting of human resource needs, and the projected
matching of individuals with expected vacancies.
Questions are asked in order to formulate specific questions pertaining to HR activities.
Answers to the questions help define the direction of the organisation´s HRM strategy.
By forecasting future human resource needs, organisations can prepare themselves to meet
competitive challenges more effectively than organisations that react to problems only as they
arise.
The third step – recruiting:
Recruiting is activities or practices that define the characteristics of applicants, after which
procedures are applied.
Internal recruiting means an organisation fill their high-level positions with people already
hired within the company. It is less costly than an external search, and generates higher
employee commitment, development, and satisfaction because it offers opportunities for
career advancement to employees rather than outsiders.
External recruitment means recruiting newcomers from outside the organisation, and is often
needed. It gives new insights, skills, and knowledge that can be introduced to the
organisation. There are also more people to pick from, making chances higher to find the
exact right person.
For effective recruiting, realistic job previews should be created. It gives applicants all needed
and realistic information, positive and negative, about the job and organisation.
The fourth step – selecting:
In the selection progress, employers look at the characteristics of an applicant to try to
determine if that person fits with the job. They need people that are well-suited to perform the
job. Therefore, it is important for the employers to be clear about what they expect from
employees, and also have a sense of what type of person that would succeed.
Personality-job fit is the extent to which a person´s ability and personality match the
requirements of a job. The right fit is more likely to contribute and have higher job
satisfaction and commitment.
There are different selection devices that can be used for assessing applicant qualifications:
- Application form: used to collect information about the applicant´s education, job
experience, and other background characteristics.
- Interview: serves as a two-way communication channel that allows the
organisation and the applicant to obtain information about one another. Has high
face validity.
- Employment test: many MNCs use psychometric tests that measure attributes like
intelligence and personality, to provide the employer with an insight of how well
an applicant is suited for the job.
- Assessment centres: present a series of managerial situations to groups of
applicants over a two- or three-day period. Trained judges observe the applicants´
decisions and assess the extent to which they reflect communication and problem-
solving skills.
- Personality test: many employers want to match people´s personalities to the
needs of the job and the organisation. Therefore, they look at the big five
personality factors; extroversion, agreeableness, conscientiousness, emotional
stability, and openness to experience.
Validity: the relationship between score on a selection device and future job performance.

The second goal of HRM is to reward and develop

employees into an effective workforce. It includes
performance appraisal, compensation and benefits, and
training and development.

Training and development:

Training and development represent a planned effort by an organisation to facilitate
employees´ learning of job-related skills and behaviours.
The most common method of training is on-the-job training where an experienced employee
teaches the new employee how to perform the job.
Performance appraisal:
Performance appraisal includes observing and assessing employee performance, recording the
assessment, and providing feedback to the employee. Skilful managers give feedback and
praise, concerning the acceptable elements of the employee´s performance. They also describe
what areas need improvement. Employees can use the information to optimise their job
performance.
Compensation:
Compensation refers to all monetary payments, as well as all goods or commodities used
beyond money, to reward employees.
An organisation´s compensation structure includes wages and salaries, benefits such as a
health insurance, paid vacations, and payments into a pension fund or a fitness centre.
Developing an effective compensation system is important for HRM. It helps attracting and
retaining talented workers and has an impact on strategic performance.
The wage and salary system applied by an organisation should align with their goals and ways
of working. Job-based pay is the most common approach to employee compensation, and
links compensation to the specific tasks an employee performs. Skill-based pay, however, is
becoming more popular, where employees with higher skill levels receive higher pay than
those with lower skill levels. This system encourages employees to develop their skills and
competencies, making them more valuable for the organisation.

The final goal for HRM is to maintain a workforce

that has been recruited, rewarded, and developed.
Maintenance of the workforce includes motivation,
job design and occasional terminations.

Motivation:
Employee motivation is often high in the beginning of a job, but tends to decline if managers
fail in their role as motivators. Declined motivation also means a decline in performance.
Employee motivation affects productivity, and a part of the manager´s job is to channel
motivation towards accomplishing organisational goals.
The contemporary approach to employee motivation is dominated by three types of theory:
1- Content perspectives on motivation
Content theories emphasise the needs that motivate people. People have needs that translate
into an internal drive, that motivates specific behaviours in an attempt to fulfil the needs.
- Hierarchy of needs theory: an early management theory proposed by Abraham
Maslow. It proposes that people are motivated by multiple needs and that those
needs exist in a hierarchical order.
Lower-order needs must be satisfied before higher-order needs are activated. Once
a need is satisfied, it declines in importance and the next, higher, need is activated.
- ERG theory: a simplified version of Maslow´s theory, where three categories of
needs are identified: (1) existence needs, (2) relatedness needs, and (3) growth
needs.
Both models are similar, in hierarchical form and presuming that individuals move
upwards one step at a time. But in this model, Clayton Alderfer reduced the
number of need categories and proposed that movement up the hierarchy is more
complex. He meant that failure to meet a high-order need may trigger a regression
to an already fulfilled lower-order need.
- Two-factor theory: developed by Frederick Herzberg. He believed that two
entirely separate dimensions contribute to an employee´s behaviour at work.
The first one, hygiene factors, involves the presence or absence of job dissatisfiers,
such as working conditions, pay, benefits, company policies, and interpersonal
relationships. When these factors are poor, work is dissatisfying. But good hygiene
factors remove the dissatisfaction.
The second one, motivators, focus on high-level needs and include achievement,
recognition, responsibility, and opportunity for growth. When motivators are
absent, workers are neutral towards work, but when they are present, workers are
highly motivated and satisfied.
This means that hygiene factors and motivators are two distinct factors that
influence motivation.
 - Acquired needs theory: developed by David McClelland. He proposed that certain
types of needs are acquired during the individual´s lifetime – people are not born
with them but may learn them through their life experiences. There are three needs
that are most frequently studied: (1) need for achievement, (2) need for affiliation,
and (3) need for power.

2- Process perspectives on motivation

Process theories explain how people select behavioural actions to meet their needs and
determine whether their choices were successful.
- Equity theory: focuses on individuals´ perceptions of how fairly they are treated
compared to others. It proposes that people are motivated to seek social equity in
the rewards they expect for performance.
It is thought that if people perceive their compensation as equal to what others
receive for similar contributions, they will believe that their treatment is fair and
equitable.
A state of equity exists when the ratio of one person´s outcomes to inputs equals
the ratio of another´s. inequity occurs when the ratios are out of balance. To reduce
an inequity people can change inputs, change outcomes, distort perceptions, or
leave the job.
- Goal-setting theory: proposes that managers can increase motivation by setting
specific, challenging goals that are accepted by subordinates, then helping people
track their progress by providing feedback.
The four key components of goal-setting theory are: (1) goal specificity, (2)
putting up difficult, but achievable, goals, (3) goal acceptance by employees, and
(4) feedback on goal achievement.

3- Reinforcement perspective on motivation

Reinforcement theory looks at the relationship between behaviour and its consequences. It
focuses on changing or modifying employees´ behaviour at work through the use of
immediate rewards and punishments.
- Reinforcement tools: Behaviour modification is the set of techniques by which
reinforcement theory is used to modify human behaviour. It is based on the law of
effect which states that behaviour that is positively reinforced tends to be repeated,
and behaviour that is not reinforced tends not to be repeated. Reinforcement is
anything that causes a certain behaviour to be repeated or inhibited.
Each type of reinforcement is a consequence of a pleasant or unpleasant event
being applied or withdrawn due to a person´s behaviour:
 - Schedules of reinforcement: the frequency with which reinforcement occurs. The
timing of reinforcement has shown to have an impact on how quickly employees
learn and respond with the desired behaviour. The schedule can be selected to have
maximum impact.
There are different types of reinforcement schedules:

Innovative ideas for motivating:

Organisations are moving towards more innovative ideas for motivating their employees.
Recent trends are empowering employees and framing work to have greater meaning.
One way managers can meet higher motivational needs, is to shift power down from the top
of the organisation and share it with employees to enable them to achieve goals.
Empowerment is the delegation of power or authority to subordinates in an organisation. It is
a great way to increase the employee motivation by letting them take more responsibility.
Empowering employees means giving them four elements that enable them to act more freely
to accomplish their jobs. In an empowered organisation:
1. Employees receive information about company performance.
2. Employees have the knowledge and skills to contribute to company goals.
3. Employees have the power to make substantive decisions.
4. Employees are rewarded based on company performance.

Today, many organisations implement

empowering, but to varying degrees.
Higher-level empowerment is still rare.
Current methods of empowerment fall
along a continuum:
Another way to meet higher-level motivational needs is to put a sense of importance and
meaningfulness to the work. Purpose-driven companies reach this by performing work that
gives employees a sense that what they are doing matters and makes a positive difference.
Focus on employee engagement leads to more satisfaction and motivation because the
employees feel appreciated – this is also a great way of reaching a higher level of motivation.
Managers´ attitudes and qualities have also shown to have a great impact on employees and
their motivation.
Job design:
Job design is tied to productivity, job stress, and quality of work-life balance, therefore an
important consideration for motivation. Managers need to know what parts of a job that has
much or little satisfaction and motivation, to be able to compensate for those with little
inherent satisfaction.
Job design is the application of motivational theories to the structure of work for improving
productivity and satisfaction.
There are different approaches to job design:
- Job simplification: pursues task efficiency by reducing the number of tasks one
person must do. Tasks are designed to be simple, repetitive, and standardised. It is
not the best motivator though, since most people don’t like repetitive work.
- Job rotation: systematically moves employees from one job to another, increasing
the number of different task one employee performs, without increasing the
complexity. It provides variety and stimulation at first, but often gets to repetitive
for most people after a while.
- Job enlargements: combines a series of tasks into one new, broader job. It is a
response to the dissatisfaction of employees with simplified jobs – making them
responsible for more than just one. It provides a job variety and a greater challenge
for employees.
- Job enrichment: incorporates high-level motivators in the workplace, including
job responsibility, recognition and opportunities for growth, learning, and
achievement. Employees have control over the resources necessary to perform
their job, make decisions on how to do the work, experience personal growth, and
set their own work pace. It is all about including the employees to increase their
motivation and job satisfaction.
Termination:
Termination is necessary to maintain an effective workforce. When people are not performing
as they are expected to, it demotivates other employees as well. Being able to terminate poor
performers is important.
A team is a unit of two or more people who interact and coordinate their work to accomplish
a common goal to which they are committed and mutually held accountable.
Even though a team is always a group, a group is not always a team. There are some
important differences:

Effective teams can provide many advantages in organisations. They lead to stronger
competitive advantage and higher overall organisational performance:

Creativity and innovation: teams

contribute to a higher level of creativity
and innovation to the organisation since
they include people with diverse skills,
strengths, experiences and perspectives.
Improved quality: organisations that
provide the highest quality work, are those
where closely coordinated teams operate.
Speed of response: tightly integrated teams can work fast, speed product development,
respond more quickly to customer needs, and solve problems more quickly.
Higher productivity and lower costs: members of an effective team often have an energising
effect on each other. The blend of perspectives enables creative ideas to form.
Enhanced motivation and satisfaction: working in teams give the members a feeling of
belongingness and affiliation. It also reduces boredom, increases people´s feelings of dignity
and self-worth, and give people a chance to develop new skills. People working in an
effective team cope better with stress, enjoy their jobs more, and have more motivation and
commitment to the organisation.
To achieve these advantages, organisations use many different types of teams:
- Functional teams: are composed of a manager and its subordinates in the formal
chain of command. It typically includes one department in an organisation.
- Cross-functional teams: are composed of employees from the same hierarchical
level, but from different areas of expertise. A task force is one example, where a
group of employees from different departments are formed to deal with a specific
 activity, existing as a team only until the task is completed. Another example is the
special-purpose team, which is created outside of the formal organisation structure
to undertake a project of special importance to creativity.
- Self-managed teams: designed to increase the participation of workers in
decision-making, with the goal of improving performance. The idea is that the
teams themselves take responsibility for their work, make decisions, monitor their
own performance, meet goals, and adapt to changing conditions. Self-managed
teams are permanent ones.

In organisations all over the world, some people love, and some people hate the idea of
teamwork. Many people have both positive and negative thought on the subject. However,
there are three primary reasons why teams present a dilemma for many people:
1. Having to give up independence
2. Having to put up with free riders
3. Having to face the risk of being a part of a dysfunctional team.

It is a challenge to put together an effective team. They are built by managers who take
specific actions to help people come together and work well as a team.
There are some specific factors associated with team effectiveness:

Team type
Virtual teams: groups made up of geographically or organisationally dispersed members who
are linked primarily through advanced information and telecommunication technologies.
Members of a virtual team uses different technological tools to collaborate and perform their
work.
Many virtual teams are also global teams, which are cross-border teams made up of members
of different nationalities.
One of the primary advantages with virtual teams is the ability to assemble the most talented
group of people to complete a complex project.
Team characteristics
After deciding what type of teams to use, the next concern to managers is designing the team
for greatest effectiveness. They have to take certain team characteristics into consideration.
Size: teams need to be large enough to incorporate the diverse skills needed, enable members
to express their feelings, and aggressively solve problems. But they also have to be small
enough to make members feel like they play a big and important part, and to communicate
effectively and efficiently. Smaller teams, made up of about 3-6 members, tend to perform the
best.
Diversity: teams require a variety of skills, knowledge, and experience. Diverse teams tend to
produce more innovative solutions to problems, thanks to the different points of view.
Gender, ethnic, national, and racial diversity tends to improve team interaction and
performance.
Member roles: in successful teams, the requirements for task performance and social
satisfaction are met by the emergence of two types of roles:
- The task specialist role: people with this role spend time helping the team reach its
goal. They often initiate ideas, give opinions, seek information, summarise, and
energise.
- The socioemotional role: people with this role support team members´ emotional
needs and help strengthen the social entity. They often encourage, harmonise,
reduce tension, follow, and compromise with the group.
Effective teams have people in both task specialist and socioemotional roles.

Team processes
Team processes pertain to those dynamics that change over time and can be influenced by
team leaders.
Stages of team development: after a team has been created, it develops by passing through
distinct stages.
 - Forming stage: a period of orientation and getting to know each other. Uncertainty
is high during this stage. The members should be encouraged to engage in
informal social discussions.
- Storming stage: individual personalities emerge. This stage is market by conflict
and disagreement about things as different perceptions of the team´s goals or how
to achieve them. If the team can not get past this stage, they can never achieve
high performance. During this stage, members should be encouraged to participate,
propose ideas, disagree with one another, and work through the uncertainties.
- Norming stage: conflict is resolved, and team harmony and unity emerge. It
becomes clear who has the power, who the leaders are, and what members´ roles
are. Members accept and understand each other, and differences are resolved. The
members should be encouraged to unite, and the leader should help identify team
norms and values.
- Performing stage: major focus on problem-solving and accomplishing the
assigned task. Members are committed to the mission, coordinated with one
another, and can handle disagreements in a mature way. During this stage, the
leader should focus on managing high task performance.
- Adjourning stage: the emphasis is on wrapping up and gearing down. Task
performance is no longer the priority. The members might feel sorry that the team
is no longer working together, but the leader should encourage them to move on.
Team cohesiveness: the extent to which members are attracted to the team and motivated to
remain in it. High cohesiveness is often considered an attractive feature of teams.
Different characteristics of team structure and context influence cohesiveness. If the team has
a good team interaction, strong shared goals, and the members have a personal attraction to
the team, then the team has high cohesiveness. The team´s presence of competition and its
success are context factors that also influence the cohesiveness.
High cohesiveness has, almost always, good effects on the satisfaction and morale of the team
members. Highly cohesive teams are also more productive, as long as the team members feel
management support.
Team norms: informal standards of conduct that are shared by team members and guides
their behaviour. They are useful as they provide a reference for what is expected and
acceptable. Managers play an important role in shaping norms that will help the team be
effective.
Team conflicts: interactions where one party attempts to block the intentions or goals of
another. Conflicts are inevitable in teams, but they have to be managed. The leader has to
bring them into the open and effectively resolve them. Effective conflict management has a
positive impact on team cohesiveness and performance.
The two basic types of conflicts that occur in teams are task conflicts, which refers to
disagreements among people about the goals or the content of the tasks, and relationship
conflicts, which refers to interpersonal incompatibility that creates tension among people.
Task conflicts can be good for teams, since they lead to better decision-making. Relationship
conflicts, however, tend to have negative effects on morale and productivity.
 Conflicts typically occur when people or teams have to compete over scarce resources, or
when they strive towards different goals. They can also arise from communication
breakdowns and trust issues, which virtual and global teams are extra prone to.
There are five primary styles to handle conflicts:

My way Our way

No way Your way

One way to deal with conflicts is by negotiation, where people engage in give-and-take
discussions and consider different alternatives to reach a decision that is acceptable to both
parties. It is used for formal conflicts.

Managers have a very important role as agents of communication:

They gather important information from

both inside and outside the organisation, and
then distribute the appropriate information to
others who need it to make decisions.
Managers´ communication should be
purpose directed. Meaning it should focus
on the vision, values, and desired outcomes
of the organisation. It influences people to
act in the best way to achieve the goals.
Strategic conversations are facilitated by
using open communication, actively
listening, asking questions, and using
purposeful and timely feedback for learning
and change.

Strategic conversation: people talking across boundaries and hierarchical levels about the
organisation´s vision, critical strategical themes, and the values that help achieve important
goals.
Depending on the purpose and audience of the communication, managers should use different
methods and media to communicate.
Communication: the process where information is exchanged and hopefully understood by
two or more people, usually with an intention to influence or motivate appropriate responses.
Everything a manager says or does will communicate something. But real communication is a
two-way process involving asking questions, seeking and receiving feedback, paying attention
to non-verbal communication of others, and listening actively.
To be a good communicator, you must understand the key elements of the communication
process:

A manager who wants to communicate with

an employee encodes a thought by selecting
how to compose a message, which is the
tangible formulation of the thought sent to
the employee. The message is then sent
through a channel, which can be a phone call,
an e-mail, etc. The employee decodes the
symbols to interpret the meaning of the
message. When the employee responds to the
manager´s communication with a return
message, feedback occurs. It is important in
order to know that both parts are on the same
page on what is being communicated.

To achieve the best possible outcome of communication, managers must understand how
different factors work to influence communication:
Open communication climate:
In an organisation with open communication, all types of information are shared across
functional and hierarchical boundaries. People throughout the organisation need to see the
bigger picture, understand the decisions managers make, and know how their work
contributes to the company. People know where they stand and what rules to play by, and it
helps them understand and commit to goals.
When people have access to more complete information, they are more likely to come up with
creative solutions to problems and make decisions that are good for the company.
If people don’t hear what is happening from managers, rumours often spread, and the
employees will assume the worst.
Communication channels:
Managers have lots of different communication channels to choose from. They should be
chosen based on the receiver, and on the amount of information to be communicated.
Channels differ in their capacity to convey data, and can therefore be classified into a
hierarchy based on information/channel richness.
Channel richness: the amount of information that can be transmitted during a communication
episode.
The hierarchy of channel richness:

The capacity of an information channel is influenced by three characteristics:

1. The ability to handle multiple cues simultaneously.
2. The ability to facilitate rapid, two-way feedback.
3. The ability to establish a personal focus for the communication.
Of course, each communication channel has advantages and disadvantages, and can be an
effective means of communication in the appropriate circumstances. Non routine messages
can be effectively communicated by rich channels, while routine messages can be effectively
communicated through a channel lower in richness. The channel must always fit the message.
Communicating to persuade and influence others:
Communication is not just for conveying information, but also to persuade and influence
people. There are some key points of persuasion:
- Establish credibility: a managers credibility is based on knowledge, expertise, and
interpersonal skills. By showing an ability to make well informed decisions,
managers inspire employees to have stronger confidence in the managers
leadership abilities.
- Build goals on common ground: to be persuasive, managers should describe how
the employees will benefit from embracing a new policy or fulfilling a request. If a
manager cant find common advantages, goals and plans often have to be adjusted.
- Connect emotionally: effective managers learn to understand others´ emotions and
adjust their approach to match the receiver.
- Use multiple media to send important messages: by saying the same thing twice
and in different ways, managers add more weight to the message and keep it at the
top of the employees mind.
Communicating with candour:
Managers have to be direct, honest, and clear about what employees need to do for meeting
objectives, while also expressing respect for others and not making people feel controlled or
exploited. Communicating with candour is a confident, positive approach that lets others
know exactly where you stand and what you´re asking of them. It acknowledges the other
person´s perspective and opinion, while it is also very specific about what the manager wants
and why. There are some valuable techniques for this approach:
 - Use “I statements”: keep the focus on the specific perception you have rather than
accusing or blaming the other person.
- Stick to facts rather than judgements.
- Be clear, specific, and direct in your requests.
Communicating with candour is an important part of creating an open communication
climate. Where this is the norm, everything works faster and better.
Asking questions:
To have successful organisational conversations, managers need to learn to ask questions. It
can benefit both managers and employees in many ways:
- It builds trust and openness between managers and employees.
- It builds critical thinking skills.
- It stimulates the mind and give people a chance to make a difference.
Listening:
Listening involves the skill of grasping both facts and feelings to interpret a message´s
genuine meaning. Only then can the manager provide the appropriate response. It requires
attention, energy and skill, and not listening can lead to communication errors.
Non-verbal communication:
Refers to messages sent through human actions and behaviour, rather than through words.
Managers are watched, and their behaviour, appearance, actions, and attitudes are symbolic of
what they value and expect of others.

Management communication also concerns the whole organisation, not only the interactions
between the manager and employees. Managers use both formal and informal channels of
communication.
Formal communication channels:
- Flow within the chain of command or task responsibility defined by the
organisation.
There are three formal communication channels:
Downwards communication is the most familiar and obvious flow of formal communication,
and refers to the messages and information sent from top management to subordinates in a
downwards direction. Managers can´t communicate everything going an in an organisation, so
to be effective they have to make choices about what is most important. The focus is often on
those areas that require regular communication:
- Goals and strategies.
- Job instructions and rationale.
- Procedures and practices.
- Performance feedback.
- Indoctrination.
Upwards communication includes messages that flow from the lower to the higher levels of
the organisation´s hierarchy. Coupling a healthy flow of upwards and downwards
communication ensures that the circuit between managers and employees is complete. There
are different types of information communicated upwards:
- Problems and exceptions.
- Suggestions for improvement.
- Performance reports.
- Grievances and disputes.
- Financial and accounting information.
Horizontal communication is the diagonal exchange of messages among co-workers which
may occur within or across departments. The purpose is to inform, as well as to request
support and coordinate activities. It falls into one of three categories:
1. Intradepartmental problem solving: messages take place among members of the same
department and concern task accomplishment.
2. Interdepartmental coordination: messages facilitate the accomplishment of joint
projects or tasks.
3. Change initiatives and improvements: messages that are designed to share information
among teams and departments that can help the organisation change, grow and
improve.
Personal communication channels:
- Exist outside the formally authorised channels. They coexist with formal channels
but may avoid hierarchical levels, cutting across vertical chains of command to
connect virtually anyone in the organisation. They are the primary way that
information spreads and work is accomplished.
There are three important types of personal communication channels:
Personal networking is the gain of personal relationships that cross departmental, hierarchical
and even organisational boundaries. People share information across boundaries and reach out
to anyone who can further the goals of the team and organisation. There are some things that
can be done for building a personal communication network:
- Build it before you need it. - Make it win-win.
- Never eat lunch alone (socialise). - Focus on diversity.
The grapevine an informal, person-to-person communication network that is not officially
sanctioned by the organisation. It links employees in all directions, and will always exist in an
organisation. Often, gossip travels through the grapevine, which can help make sense of an
unclear or uncertain situation. Employees use grapevine rumours to fill in information gaps
and clarify management decisions.
Written communication has never been more important than in today´s collaborative
workplace. Managers who are unable to communicate in writing will limit their opportunities
for advancement. Managers can improve their writing skills by:
- Respecting the reader´s time.
- Knowing their point and getting to it.
- Writing clearly rather than impressively.
- Getting a second opinion from a good writer.

There are two additional aspects of effective manager communication:

Using social media to improve internal and external communication:
Social media is a mixture of internet-based apps that allow the creation and exchange of user-
generated content. It is redefining how organisations communicate.
Companies have used social media to build teams that solve problems faster, share
information better among their employees and partners, and respond to customer ideas for
new product designs. It makes it easier for organisations to:
- Listen to customers.
- Communicate to customers.
- Connect employees by social networking.
Developing strategies for managing crisis communication:
The managers ability to communicate effectively during a crisis will determine how
effectively the organisation survives. There are four primary skills for managers to follow
when communicating in a crisis:
1. Stay calm and listen.
2. Be visible and respond to public concerns.
3. Get the truth out quickly.
4. Communicate a vision for the future.
Lecture 9 Managing Small Business Start-ups (10)
Entrepreneurship: the process of initiating a business venture, organising the necessary
resources, and assuming the associated risks and rewards.
Entrepreneur: someone who engages in entrepreneurial activity. An entrepreneur recognises
a viable idea for a business product or service, and carries it out by finding and accessing the
necessary resources. They assume risks and take rewards from the business.
Small business owners can be classified into five different categories:

Entrepreneurship and small businesses play a big part in job creation and innovation.

There are a number of characteristics that many entrepreneurs possess:

- Autonomy: entrepreneurs are driven by the desire for autonomy and cherish the
freedom of making their own decisions about their business. Because of the desire
for independent planning and decision-making, entrepreneurs may consider
working alone. But independence can have negative traits in that aspect, since it
can limit the growth and result of the business. To be able to succeed and grow, a
founder may have to let all the responsibility go and put some on another person
with a different set of managerial skills.
- Entrepreneurial struggle: the ability to persevere and stay positive after long
periods of struggle.
- Power and influence: drives some entrepreneurs forward and can make them very
successful.
- High energy: is important for entrepreneurs, since starting a new business requires
great effort. Many small business owners work more then 40 hours a week. High
energy and passion is a great combination, which can be recognised by people´s
belief in a dream, intense focus, and unconventional risk taking.
- Need to achieve: people are motivated to excel and pick situations in which
success is likely. People with high achievement needs like to set their own goals,
which are moderately difficult so that they are challenging, but not unachievable.
- Self-confidence: entrepreneurs need confidence about their ability to master the
tasks that come with starting a business. It can be things such as winning
customers, handling the technical details, and keeping the business moving. Many
 entrepreneurs have a general feeling of confidence when it comes to managing
future problems.
- Tolerance for ambiguity: the psychological characteristic that allows a person to
be untroubled by disorder and uncertainty. Since starting a business brings high
uncertainty, this trait is important for entrepreneurs.
An entrepreneur don’t need all of these traits, and some are more important than others. They
are simply traits that some entrepreneurs possess and that can be important.

Social entrepreneurship: focuses primarily on creating social value by providing solutions to

social problems, with a second purpose of generating profit.
These social businesses might try to solve problems such as environmental pollution, global
hunger, and deaths from treatable diseases. Their primary focus is on providing social benefits
and operating in socially responsible ways.

When starting an entrepreneurial firm, whether it is with focus on profit or not, there are some
steps that have to be taken:
1. Presenting an idea: some people decide that they want to start a business, and then
searches for ideas. Others start with an idea and then turns it into a business. Personal
skills and market needs must be combined. The idea also has to be viable.
2. Writing a business plan: careful planning is very important when starting a new
business. A business plan is a document specifying the business details, prepared
before opening a new business. The construction of the business plan forces the
entrepreneur to consider the issues and problems, potential investors needed, the
vision for the business, financial projections, the target market, the industry and
competitors, and more.
3. Choosing a legal structure: the entrepreneurs must choose which legal structure that
is appropriate for the company – sole proprietorship, partnership, or cooperation.
Sole proprietorship is an unincorporated business owned by an individual for profit. It
is easy to start and has few legal requirements. The owner has total control and can
make all the decisions without consulting anyone. However, the owner has unlimited
liability for the business.
Partnership is an unincorporated business owned by two or more people. It is also
easy to start, but it is wise to draw up and sign a formal partnership agreement
between the owners. Also here, the owners have unlimited liability for the business.
There is also a big risk of disagreements.
Corporation is an artificial entity created by the state and existing apart from its
owners. It is the corporation that is liable and taxes must be paid on its income.
However, it is expensive and complex to start a corporation.
4. Arranging finance: starting a business usually requires coming up with a significant
amount of initial funding, especially if the business requires big investments to get
started. There are two options when an entrepreneur needs finance:
Debt financing means borrowing money that has to be repaid later. Common sources
for debt financing are family and friends, credit cards, or bank loans. Sometimes,
 finance companies, wealthy individuals, or potential customers can also be sources.
Businesses with high potential can get debt financing from business angels – wealthy
individuals with business experience, who are willing to invest their personal money
to get the business started. They also provide the business with advice and assistance.
Equity financing consists of funds that are invested in, in exchange for ownership in
the company. The money obtained from equity financing is not repaid. A venture
capital firm invests money in new or expanding businesses for ownership and
potential profits. They look for businesses with potential for high rates of return on
investment. Crowdfunding is also a type of equity financing, where businesses raise
capital by receiving small amounts of money from a large number of investors.

There are different ways an entrepreneur can go to become a business owner:

Starting a new business: one of the most common ways to become an entrepreneur. This
requires that the entrepreneur sees a need for a product or service, and fulfils it. The
advantage is the ability to develop and design the business in the way that the entrepreneur
wants it. A potential disadvantage is that it takes a lot of time and energy to get the business
going. It is also risky, with no guarantee for success.
Buying an existing business: preferred by some entrepreneurs in order to reduce risks, mostly
because of the long start-up time and the risk of making mistakes when starting a business
from scratch. The advantage is that the business is already up and running. The potential
disadvantages are that the previous owner might want more for the company than it is actually
worth as goodwill, and that the business might be dysfunctional in some ways.
Buying a franchise: a business arrangement where a firm collects fees in exchange for other
firms operating under its brand name and using its processes. The franchisee invests her
money and owns the business, but does not have to develop a new product, create a new
company, or test the market. The main advantage is that management help is provided by the
owner, franchisors provide an established name and national advertising. Potential
disadvantages are the lack of control, and the fact that it can get expensive.
Participating in a business incubator: it typically provides shared office space, management
support services, and legal advice to entrepreneurs. It is therefore an attractive option for
entrepreneurs who want to start a business from scratch. The advantages are the expertise of
mentors, and the access to a team of lawyers, accountants and other advisors.
Starting an online business: can be done either when an entrepreneur wants to expand a
small business, or start a new one. Apart from the usual steps that have to be taken when
starting a business, the start of an online business also requires the entrepreneur to:
- Find a market niche.
- Create a professional website.
- Choose a domain name.
- Use social media.
Continued growth of a business requires a shift in management style. Entrepreneurial
businesses go through five different stages of growth, each stage requiring different
management skills.

Start-up

1. Start-up: the main challenges include funding the business and adjusting the product
or service in response to market demands.
2. Survival: the business demonstrates that it is a workable business entity. It produces a
product or service and has sufficient customers. The main concerns involve finances –
generating cash flow and making sure that revenues exceeds expenses. The
organisations grows in size and profitability during this period.
3. Success: the company is solidly based and profitable. Systems and procedures are in
place to allow the founder to slow down if desired. The founder has to decide whether
to stay involved or turn the business over to professional managers.
4. Take off: the key problem is to grow rapidly and finance growth. The owner must
learn to delegate, and the company must find sufficient capital to invest in major
growth. If the business is properly managed in this stage, it can become big.
5. Resource maturity: the company´s substantial financial gains may come at the cost of
losing its advantages of small size, including flexibility and the entrepreneurial spirit.
Many companies fuel innovation through investments in research and development.
Lecture 10 Managing Change, Innovation and Diversity (11,12)
Organisational change: the adoption of a new idea or behaviour by an organisation.
Disruptive innovation: innovations in products, services, or processes that radically change
an industry´s rules of the game for producers and consumers.
Embracing disruptive innovation is important for companies that want to remain competitive
on a global basis. Many disruptive innovations come from small entrepreneurial firms.
However, change and embrace is not easy. Many organisations struggle with changing
successfully – in some cases employees don’t have the motivation to come up with new ideas,
or their ideas never get heard by managers, or managers have a hard time implementing ideas
that they think are good.
Successful change requires that organisations are capable of creating and implementing ideas,
which means they have to take on an ambidextrous approach. It means they have to
incorporate structures and processes that are appropriate for both the creative impulse and the
systematic implementation of innovations. Managers encourage flexibility and freedom to
innovate and propose new ideas, but they use a more centralised and standardised approach
for implementing innovations.

Organisations face, and must embrace, many types of change. One vital area is the
introduction of new or improved products and technologies. Product and service innovation is
the primary way in which organisations adapt to changes in markets, technology, and
competition.
Product change: a change in the organisation´s product or service outputs.
Technology change: a change in the organisation´s production process – how they do their
work. They are designed to make the production of a product or service more efficient.
There are three critical innovation strategies for changing products and technologies:
Exploration:
This is the stage where ideas for new products and technologies are born. To encourage
exploration, managers must establish conditions that encourage creativity and allow new ideas
to come forward.
Creative organisations are loosely structured, where managers embrace risk and
experimentation. They involve employees in various projects to avoid them being stuck in
routine jobs. They drive out the fear of making mistakes to enable creative thinking.
Innovative companies can use a bottom-up approach, which means encouraging the flow of
ideas from lower levels and making sure they get heard and acted upon by top executives.
Creating ideas is important, but so is turning them into reality.
Cooperation:
An important aspect of innovation is providing mechanisms for internal and external
cooperation and coordination.
Internal coordination:
Successful innovation requires expertise from several departments at the same time, and failed
innovation is often the result of failed cooperation.
Companies that successfully innovate usually share some characteristics:
- People in research and marketing actively work with customers to understand their
needs and develop solutions.
- Technical specialists are aware of recent developments and make effective use of
new technology.
- A shared new product development process that is advocated and supported by top
management cuts across organisational functions and units.
- Members from key departments cooperate in the development of the new product
or service.
- Each project is guided by a core cross-functional team from beginning to end.
One approach to successful innovation is called the horizontal linkage model:
The model shows that the research, manufacturing, and marketing departments within an
organisation simultaneously contribute to new products and technologies. People from the
departments meet frequently to share ideas and solve problems.
External coordination:
Successful companies often include customers, strategic partners, suppliers, and other
outsiders in the product and service development process, as shown in the picture above.
Today, open innovation is common, which means extending the search for and
commercialisation of new ideas beyond the boundaries of the organisation and industry,
sharing knowledge and resources with other organisations and individuals outside the firm.
Innovation roles:
This means creating structural mechanisms to make sure new ideas are carried forward,
accepted, and implemented. One important aspect is fostering idea champions: people who
see the need for and champion productive change within the organisation.
A successful new idea is generally backed by someone who believes in it wholeheartedly and
is determined to convince others of its value – a champion. Sometimes a new idea is rejected
by top managers, but champions are passionately committed to it despite rejection by others.
Championing an idea successfully requires roles in organisations:

All successful changes involve changes in people and culture, in other words how employees
think – their mindset.
People change: refers to a change in the attitudes and behaviours of a few employees, such as
sending a few managers to a course.
Culture change: a major shift in the norms, values, and mindsets of the entire organisation,
such as when a company is bought by a larger company.
Culture change is hard, but there are two tools that can smooth the process:
Training and development:
Training is used to change people´s mindset. Successful companies want to provide training
and development opportunities for everyone, but might emphasize it extra for managers with
the idea that a change in their mindset will influence people throughout the organisation and
lead to culture change.
Organisation development (OD):
A planned, systematic process of change that uses behavioural science knowledge and
techniques to improve an organisation´s health and effectiveness through its ability to adapt to
the environment, improve internal relationships and increase learning and problem-solving
capabilities.
OD focuses on the human and social aspects of the organisation and works to change attitudes
and relationships among employees, helping to strengthen the organisation´s capacity for
adaption and renewal. OD can help managers address different problems:
- Mergers and acquisitions: cultural differences should be evaluated during the
acquisition process. OD experts can be used to smooth the integration of two
firms.
- Organisational decline and revitalisation: OD techniques can contribute greatly to
cultural revitalisation by managing conflicts, fostering commitment and facilitating
communication during periods of decline.
- Conflict management: OD efforts can help resolve conflicts between teams or
individuals, as well as conflicts related to growing diversity and the global nature
of today´s organisations.
The three most popular and effective techniques used to help meet OD goals are:
- Team-building activities.
- Survey feedback activities.
- Large group interventions.
There are three distinct OD stages for achieving behavioural and attitudinal change:
1. Unfreezing: makes people throughout the organisation aware of problems and the
need for change. It creates the motivation for people to change their attitudes and
behaviours. Managers need to show the difference between the desired performance
and the current performance, and establish a sense of urgency in order to unfreeze
people and create an openness and willingness to change.
2. Changing: occurs when individuals experiment with new behaviour and learn new
skills to be used in the workplace. The change agent (an OD specialist) implements a
specific plan for training managers and employees.
3. Refreezing: occurs when individuals acquire new attitudes or values and are rewarded
for them by the organisation. The change agent supplies new data that shows positive
changes in performance.
A new, creative idea will not benefit the organisation until it is implemented and used fully.
However, employees often seem to resist change. To manage the implementation process
effectively, managers have to be aware of the reasons people resist change and then use
techniques to enlist employee cooperation.
Many people are not willing to change unless they see a problem or a crisis. Managers have to
recognise the need for change and then make others aware of it, since problems are not always
obvious. A need for change is a disparity between existing and desired performance levels.
The first step of implementation is to get others to understand the need for change. However,
most employees will put up a degree of resistance to change. There are different reasons why
people might resist change:
- Self-interest: people resist a change if they think it conflicts with their self-interest.
For example, if the change might increase the workload.
- Lack of understanding and trust: if employees do not fully understand the change,
or don’t trust the person behind it, resistance may occur.
- Uncertainty: when people do not know how a change will affect them and worry
about whether they will be able to meet the demands they can feel threatened and
therefore resist.
- Different assessments and goals: people who will be affected by a change or
innovation may assess the situation differently from the person behind the idea,
thus resisting.
There are two approaches for overcoming resistance to change:
1. Force-field analysis: the thought that change is a result of the competition between
driving and restraining forces.
Driving forces: problems or opportunities that provide motivation for change within
the organisation.
Restraining forces: the various barriers to change, such as lack of resources or
resistance from managers.
When a change is introduced, managers should analyse the forces that drive change –
problems and opportunities – and the forces that resist change – barriers to change. By
removing forces that restrain change, the driving forces will be strong enough to
enable implementation. As barriers are reduced or removed, behaviour will shift to
incorporate the desired changes.
2. Implementation tactics: adopting specific tactics to overcome resistance. There are
some methods that have proven useful for dealing with resistance to change:
- Communication and education: used when solid information about the change is
needed by users and others who may resist implementation. Education can be
especially important when the change involves new technical knowledge, or users
are unfamiliar with the idea.
- Participation: involves users and potential resisters in designing the change. It is
time consuming, but it pays off because users understand and become committed
to the change.
- Negotiation: uses formal bargaining to win acceptance and approval of a desired
change.
 - Coercion: managers use formal power to force employees to change. Resisters are
told to accept the change, or lose rewards or their job. This is, in most cases, not an
effective method since the employees tend to feel like victims. But it is necessary
in crisis situations when a rapid response is urgent.
- Top management support: symbolises to all employees that the change is
important for the organisation. It is especially important when a change involves
multiple departments. The visible support of top management helps overcome
resistance.

Managers are discovering today that it makes good business sense to support different
diversity programmes. It is the right thing to do ethically and culturally, and it can also create
new business opportunities.
A diversified workforce is an important tool for succeeding in a competitive environment – it
provides competitive advantage. Diverse teams that perform efficiently add value by
combining individuals´ strengths, they make the whole grater than the sum of its parts. There
are some examples of how the workplace is changing today and challenging those managers
who want things to be as they have always been:
- Unprecedented generational diversity: a blend of multiple generations present
new challenges for managers today. These generations can be very different from
each other in some aspects, but them working together enriches the organisation
even though they have strong value differences.
- Ageing workers: there are fewer people in each new generation since less people
are born each year than before. This means that the workforce will grow older with
each year that passes.
- Increased diversity: the workforce today is becoming more diverse, since the
number of foreign-born workers increases.
- Growth in women workers: today, women outnumber men in the workplace. But
few women hold manager-positions. Many corporations have initiated coaching
and training programmes that prepare women for those positions.

Managers who want to boost performance and innovation express a view that culturally
diverse teams produce the best results. A heterogeneous team leads to multiple viewpoints
and more prolific ideas, which benefits the organisation.
Diversity from a manager´s point of view, can be defined as all the ways in which employees
in the organisation can be different.
The term diversity in the workplace has changed over time from the traditional view. Today,
it is more inclusive and considering than before.
The traditional model of diversity includes only inborn differences that are directly
observable. The inclusive model instead includes all of the ways in which employees differ,
including those that can be acquired or changed during one´s lifetime.
One of the challenges of managing a diverse workforce is creating an environment where all
employees feel accepted as members of the team, and where their unique talents are
appreciated. When managers create a feeling of inclusiveness, employees become more loyal,
cooperative, and trustworthy.
Inclusion: the degree to which an employee feels like an esteemed member of a group, in
which her uniqueness is highly appreciated. It creates a strong sense of belonging, where
people can have their voices heard and appreciated.
Managing diversity: creating a climate in which the potential advantages of diversity for
organisational performance are maximised, while the potential disadvantages are reduced.
Managers who cultivate a team with a diversity of perspective significantly increase the
chance of creating hard-to-replicate competitive advantage. Diverse teams are more likely to
experience higher efficiency, better quality, less duplication of effort among team members,
and increased innovation and creativity.
Diversity of perspective: is achieved when a manager creates a heterogenous team made up of
people with diverse backgrounds and skill sets.
Homogeneous groups have shown to possibly hinder innovative thinking and reject ideas
form outsiders.
There are numerous pros of diversity in the workplace:
- Better use of employee talent: companies with great talent are those with
competitive advantage. Companies that attract a diverse workforce must also
provide career opportunities and advancements for minorities and women to retain
them.
- Increased understanding of the marketplace: a more diverse workforce enables
the company to understand differences in customers.
- Enhanced breadth of understanding in leadership positions: having a broad
range of talents with different perspectives and values, gives an organisation a
better view of the world in a rapidly changing and complex environment.
- Increased quality of team problem-solving: teams with diverse backgrounds bring
different perspectives to a discussion, which results in more creative ideas and
solutions.
- Reduced costs associated with high turnover, absenteeism, and lawsuits.

To successfully manage a diverse workplace, managers have to understand the complex

attitudes, opinions, and issues that exist in the workplace. These include several factors that
shape personal bias:
- Prejudice: the tendency to view people who are different as being deficient.
- Discrimination: occurs when someone acts out their prejudicial attitudes towards
people who are the targets of their prejudice.
 - Stereotypes: a major component of prejudice. They are exaggerated or irrational
beliefs associated with a particular group of people. Stereotypes have to be
eliminated from a manager´s thoughts for him or her to be successful managing
diversity.
- Ethnocentrism: the belief that one´s own group and culture are inherently superior
to other groups and cultures. It makes it difficult to value diversity. Ethnocentric
viewpoints produce a monoculture that accepts only one way of doing things and
one set of values and beliefs, which can cause problem for minority employees.
Pluralism is, on the other hand, when organisations accommodate several
subcultures.
Managers can learn to value differences, meaning that they should recognise cultural
differences and see them
with an appreciative
attitude. To get there,
managers can learn about
cultural patterns and
typical beliefs of groups,
to help understand why
people act the way they
do. It helps to understand
the difference between stereotyping and valuing cultural differences.
Managers should not only eliminate stereotypical thinking, but also recognise the stereotype
threat that may jeopardise the performance of at-risk employees. It describes the
psychological experience of a person who is aware of a stereotype about his or her identity
group that suggests he or she will not perform well on a task they’re engaged in.

Progressive organisations realise that there is a business advantage of hiring, retaining, and
promoting women in the workplace. However, there are factors that can have an impact on
women´s advancement opportunities and pay:
The glass ceiling: an invisible barrier that exists for women and minorities that limits their
possibilities to move upwards in organisations.
To break through the glass ceiling into senior management roles, top executives suggest
female and minority managers follow some advice:
- Gain profit-and-loss experience: women and minorities are often side-tracked into
staff functions such as HR or administrative services. But it is important to have
experience in a line position with profit-and-loss responsibilities.
- Be assertive and ask for what you want.
- Be willing to take risks: jump in as a problem solver when an organisation is in
crisis – an opportunity known as the glass cliff.
- Highlight your achievements.
- Display confidence and credibility in your body language.
The opt-out trend: some women voluntarily leave a company, sometimes before the glass
ceiling even comes into view. Sometimes, it is due to family-related matters. Many men think
that they leave because they would rather be with their family, when the real scenario might
be that they are expected to do so just because they are women. However, most women leave
their company because they don’t feel valued.
Even though women clearly face many disadvantages, they also have advantage in some
cases.
The female advantage: some people think that women might be better managers since they
possess a more collaborative, less hierarchical, relationship-oriented approach that is in tune
with today´s global and multicultural environment.

A corporate culture is defined by the values, beliefs, understandings, and norms shared by
members of the organisation. Managers who have made strategic decisions to foster diversity
need a plan that moves the corporate culture towards one that reduces obstacles for
disadvantaged types of employees. A successful diversity plan leads to a workforce that
demonstrates, in the long run, cultural competence: the ability to interact effectively with
people of different cultures.
There are five steps for implementing a diversity plan. The steps create cultural competence
among employees by helping them better understand, communicate, and interact with diverse
co-workers:

Many companies believe that diversity initiatives and programmes can help maintain a
competitive advantage. Some examples of things that can be done are:
Enhancing structures and policies: many policies were originally designed to fit the
stereotypical male employee. Now, leading companies are changing structures and policies to
fit and support a diverse organisation.
Expanding recruitment efforts: for many organisations, a new approach to recruitment
means making better use of formal recruiting strategies, offering internship programmes to
give people opportunities, and developing creative ways to draw on previously unused labour
markets.
Establishing mentor relationships: organisations that are successful with diverse employees
must find ways to eliminate the glass ceiling. One of the most successful structures to
accomplish that is the mentoring relationship. A mentor is a higher-ranking organisational
member who is committed to providing opportunities to move upwards and support to a
professional career. Mentoring provides minorities and women with direct training, and the
mentor also acts as a friend or counsellor.
Increasing awareness of sexual harassment: there are various forms of sexual harassment
that can be experienced in the workplace, such as generalised harassments, inappropriate or
offensive behaviour, solicitation with promise of reward, coercion with threat of punishment,
and sexual crimes and misdemeanours.
Using multicultural teams: teams made up of members from diverse national, racial, ethnic,
and cultural backgrounds. They provide greater potential for enhanced creativity, innovation
and value in today´s global marketplace.
Encouraging employee affinity groups: groups based on social identity, such as gender or
race, that are organised by employees to focus on concerns of employees from that group.
They pursue activities that give people a chance to meet, interact with and develop social and
professional ties to others throughout the organisation. These groups are a great way to reduce
social isolation for women and minorities.

Lecture 11 Managing Ethics and Social Corporate Governance (6)

Ethics: the code of moral principles and values that governs the behaviours of a person,
employees, or groups in what is right or wrong. Ethics set standards as to what is right or
wrong in conduct and decision-making.
An ethical issue is present in a situation where the actions of a person or organisation may
harm some people, but benefit others. But they can be very complex since people hold
different views about what is ethical and not.
Ethics can be more clearly understood when it is compared with behaviours governed by law
and free choice. Human behaviour falls into three categories:

Codified law: values and standards are written into the legal system and enforceable in the
courts. Lawmakers set rules that individuals and organisations must follow in a certain way.
Free choice: pertains to behaviour about which the law has no guidance and for which an
individual or organisation enjoys complete freedom.
Ethics: this area has no specific laws, but it has standards of conduct based on shared
principles and core values concerning moral conduct that guide an individual or organisation.
Managers have a big responsibility
when it comes to setting the ethical
climate in an organisation, and can
act as role models for others. They
are responsible for seeing that
resources are used to serve the
interests of stakeholders. One way to
work with ethics is for organisations
to enhance the effectiveness of their
internal reporting mechanisms.
There are many different ways in
which organisations sometimes
behave unethically towards
customers, employees and other
stakeholders:

In today´s society, managers behave

unethically towards customers, employees, and the broader society due to an overemphasis on
pleasing the shareholders. They are under enormous pressure to meet goals, and might
sometimes be encouraged to do whatever is necessary to do so.

Ethical dilemma: occurs in a situation concerning right or wrong when values are in conflict.
Right and wrong can not be clearly identified.
Moral agent: the individual who must make an ethical choice in an organisation.
Most ethical dilemmas involve a conflict between the needs of the individual and the
organisation, or the organisation and the society as a whole. Sometimes, it involves a conflict
of interest between two groups.
Managers that face ethical dilemmas often benefit from a normative strategy to guide their
decision-making. There are five approaches that are highly relevant to managers:
1. Utilitarian approach: holds that moral behaviour produces the greatest good for the
greatest number. A decision-maker is expected to consider the effect of each
alternative decision on all parties, and select the one that optimises the benefits for the
greatest number of people.
2. Individualism approach: holds that acts are moral when they promote the individual´s
best long-term interests. When everyone pursues self-direction, the greater good is
ultimately served because people learn to accommodate each other in their own long-
term interest. This approach is believed to lead to honesty and integrity because that
works best in the long run.
3. Moral-rights approach: asserts that human beings have fundamental rights and
liberties that can not be taken away by an individual´s decision. Therefore, an ethically
correct decision is one that best maintains the rights for those affected by it. Managers
need to avoid interfering with the fundamental rights of others.
 4. Justice approach: holds that moral decisions must be based on standards of equity,
fairness, and impartiality. Three types of justice are of concern to managers: (1)
distributive justice requires that a difference in treatment of people should not be
based on characteristics, (2) procedural justice requires that rules should be clearly
stated and consistently and impartially enforced, and (3) compensatory justice argues
that individuals should be compensated for the cost of their injuries by the partly
responsible.
5. Practical approach: sidesteps debates about what is right or good, and bases decisions
on prevailing standards of the profession and the larger society, taking the interest of
all stakeholders into account. A decision is considered ethical if it would be
considered acceptable by the professional community, one that the manager would not
hesitate to put on the news, and one that a person would typically feel comfortable
explaining to family and friends. This approach can combine elements from the other
approaches.

There are a number of factors influencing a manager´s ability to make ethical decisions:
- Specific personality and behavioural traits.
- Personal needs, family influence, and religious background.
- The corporate culture and pressures from superiors and colleagues.
However, there are specific personality characteristics, such as ego strength, self-confidence,
and a strong sense of independence, that may enable managers to make more ethical choices
despite outside pressures and personal risks.
One important personality trait is the stage of moral development:

Corporate social responsibility (CSR): management´s obligation to make choices and take
actions that will contribute to the welfare and interests of society, not just the organisation.
This can be a difficult concept to grasp, since people have different beliefs as to which actions
improve society´s welfare. There can be moral, legal, and economic complexities in a
situation that make socially responsible behaviour hard to define.
One reason for the difficulty of understanding and applying CSR is that managers must
confront the question “responsibility to whom?”. From a social responsibility perspective,
enlightened organisations view those actors in the internal and external environment as
stakeholders.
Stakeholder: a group or person within or outside the organisation that has some type of
investment or interest in the organisation´s performance and is affected by its actions. The
primary stakeholders, without which an organisation cannot live, are investors, shareholders,
employees, customers, and suppliers.
Each stakeholder has a different criterion for responsiveness because it has different interests
in the organisation.
Stakeholder mapping: a technique that provides a systematic way to identify the
expectations, needs, importance, and relative power of various stakeholders, which may
change over time. It helps managers identify and prioritise the key stakeholders.
some corporations are embracing sustainability or sustainable development to meet the needs
of their stakeholders.
Sustainability: economic development that generates wealth and meets the needs of the
current generation while preserving the environment and society so future generations can
meet their needs as well.
Managers in organisations that embrace sustainability measure their success in terms of a
triple bottom line. It measures an organisation´s social, environmental, and financial
performance. This is sometimes called the three Ps: people, planet, profit.
There is a model for evaluating CSR. It indicated that total CSR can be divided into four
primary criteria: economic, legal, ethical and discretionary responsibilities. Together, they
form a company´s social responsiveness:

Economic responsibility: the business institution is the basic economic unit of society. Its
responsibility is to produce the goods and services that society wants and to maximise profits
for its owners and shareholders. Economic responsibility carried out to the extreme, is called
profit-maximising.
Legal responsibility: defines what society deems as important with respect to appropriate
corporate behaviour. Businesses are expected to fulfil their economic goals within the
framework of legal requirements.
Ethical responsibility: includes behaviours that are not necessarily codified into law and may
not serve the corporation´s direct economic interests. The decision-makers should act with
equity, fairness and impartiality, respect the rights of individuals, and provide different
treatment of individuals only when relevant to the organisations goals and tasks.
Discretionary responsibility: is voluntary and is guided by a company´s desire to make social
contributions not mandated by economics, laws or ethics. Discretionary activities include
generous philanthropic contributions that offer no payback to the company and are not
expected. This is the highest criterion of social responsibility, because it goes beyond societal
expectations to contribute to the community´s welfare.

Management is responsible for creating and sustaining conditions in which people are likely
to behave themselves. There are different ways in which managers can create and support an
ethical organisation:
Practise ethical leadership:
Ethical leadership means that managers are honest and trustworthy, fair when dealing with
employees and customers, and behave ethically in both their personal and professional lives.
Managers and supervisors are important role models for ethical behaviour and they strongly
influence the ethical climate in the organisation by applying high ethical standards to their
own behaviour and decisions.
Implement a code of ethics:
A code of ethics is a formal statement of the company´s values concerning ethics and social
issues. It communicates to employees what the company stands for.
Codes of ethics tend to be divided into principle-based statements – designed to affect
corporate culture; they define the fundamental values and contain the company´s
responsibilities, quality of products, and treatment of employees – and policy-based
statements – outline the procedures to be used in ethical situations including marketing
practises, conflicts of interest, observance of laws, proprietary information, and equal
opportunities.
Implement ethical structures:
Ethical structures represent the various systems, positions and programmes that a company
can undertake to encourage and support ethical behaviour.
An ethics committee is a group of managers that oversees company ethics.
A chief ethics officer is a company executive who oversees all aspects of ethics and legal
compliance
An ethic hotline is confidential and allows employees to report questionable behaviour, as
well as seek guidance concerning ethical dilemmas.
Encourage whistleblowing:
Whistleblowing is the employee disclosure of illegal, unethical or illegitimate practises on the
employer´s part. No organisation can rely only on codes of conduct and ethical structures to
prevent all unethical behaviour.
Whistle-blowers often report wrongdoing to outsiders, such as regulatory agencies or
newspaper reporters. For this to be effective, companies must view it as a benefit to the
company and make efforts to encourage and protect whistle-blowers.