“Essentials of Management ”

(Introductory Session)

Hergovind Singh

Managing and the Manager’s Job

What is an organization?
• A group of people working together in a structured and coordinated fashion to achieve a set of goals.

Organizational Resources
• Human resources • Financial resources
– Capital investments to support ongoing and long-term operations

• Physical Assets
• Information
– Usable data, information linkages

What is Management?
• A set of activities
– planning and decision making, organizing, leading/Directing, and controlling

• •

directed at an organization’s resources
– human, financial, physical, and information

with the aim of achieving organizational goals in an efficient and effective manner.

Basic Purpose of Management

Using resources wisely and in a cost-effective way

Making the right decisions and successfully implementing them

What is a Manager?
• Someone whose primary responsibility is to carry out the management process. • Someone who plans and makes decisions, organizes, leads, and controls human, financial, physical, and information resources.

The Management Process
• Planning and Decision Making
– Setting an organization’s goals and selecting a course of action from a set of alternatives to achieve them.

• Organizing • Directing/Leading
– The set of processes used to get members of the organization to work together to advance the interests of the organization.

• Controlling

Kinds of Managers by Level
• Top Managers • Middle Managers
– Largest group of managers in organizations who are primarily responsible for implementing the policies and plans of top managers. They also supervise and coordinate the activities of lower level managers.

• First-Line Managers
– Managers who supervise and coordinate the activities of operating employees.

Kinds of Managers by Area
• Marketing Managers
– Work in areas related to getting consumers and clients to buy the organization’s products or services—new product development, promotion, and distribution.

• Financial Managers • Operations Managers
– Concerned with creating and managing the systems that create organization’s products and services—production control, inventory, quality control, plant layout, site selection.

Kinds of Managers by Area (cont’d)
• Human Resource Managers
– Involved in human resource planning, recruiting and selecting employees, training and development, designing compensation and benefit systems, formulating performance appraisal systems, and discharging low-performing employees.

• Administrative Managers • Other Kinds of Managers
– Organizations have developed specialized managerial positions (e.g., public relations managers) directly related to the needs of the organization.

Managerial Roles
• Interpersonal Roles
– Figurehead, leader, and liaison roles involve dealing with other people.

• Informational Roles
– Monitor, disseminator, and spokesperson roles involve the processing of information.

• Decisional Roles
– Entrepreneur, disturbance handler, resource allocator, and negotiator are managerial roles primarily related to making decisions.

Ten Basic Managerial Roles

Figurehead Leader Liaison Monitor Disseminator Spokesperson

Sample Activities
Attending ribbon-cutting ceremony for new plant Encouraging employees to improve productivity Coordinating activities of two projects Scanning industry reports to stay abreast of developments Sending memos outlining new organizational initiatives Making a speech to discuss growth plans Developing new ideas for innovation Resolving conflict between two subordinates Reviewing and revising budget requests Reaching agreement with a key supplier or labor union



Entrepreneur Disturbance handler Resource allocator Negotiator

Managerial Skills
• Technical
– Skills necessary to accomplish or understand the specific kind of work being done in an organization.

• Interpersonal
• Conceptual
– The manager’s ability to think in the abstract.

• Diagnostic

Managerial Skills (cont’d)
• Communication
– The manager’s abilities both to convey ideas and information effectively to others and to receive ideas and information effectively from others.

• Decision-Making
• Time-Management
– The manager’s ability to prioritize work, to work efficiently, and to delegate appropriately.

Management: Science or Art?

• Science of Management
– Assumes that problems can be approached using rational, logical, objective, and systematic ways.

• Art of Management
– Decisions are made and problems solved using a blend of intuition, experience, instinct, and personal insights.

Managing in Organizations
• For-profit Organizations
– Large businesses – Small businesses and start-up businesses – International management

• Not-for-profit Organizations
– Governmental organizations—local, state, – Educational organizations—public and private schools, colleges, and universities – Healthcare facilities—public hospitals and – Nontraditional settings—community, social, spiritual groups

Traditional and Contemporary Issues and Challenges

The Importance of Theory and History
• Why Theory?
– A theory is a conceptual framework for organizing knowledge and providing a blueprint for action. – Management theories, used to build organizations, are grounded in reality. Most managers develop their own theories about how they should run their organizations.

• Why History?
– An awareness and understanding of important historical developments in management are also important to contemporary managers in furthering the development of management practices and in avoiding the mistakes of others in the past.

Early Management Pioneers
• Robert Owen (1771–1858)
– Implemented better working conditions, set a minimum age for child labor, provided meals, and reduced work hours.

• Charles Babbage (1792–1871)
– Noted English mathematician who focused on creating efficiencies of production through the division of labor, cooperation between management and labor, and the application of mathematics to management problems.

Classical Management Perspective
• Consists of two different viewpoints:
– Scientific Management • Concerned with improving the performance of individual workers (i.e., efficiency). – Administrative Management • A theory that focuses on managing the total organization.

Scientific Management
• Frederick Taylor (1856–1915)
– Considered the ―Father of Scientific Management.‖ – Replaced old rule-of-thumb methods of how to do work with scientifically-based work methods to eliminate ―soldiering‖ where employees deliberately worked at a pace slower than their capabilities. – Used time studies of jobs, standards planning, exception rule of management, slide-rules, instruction cards, and piecework pay systems to control and motivate employees.

Steps in Scientific Management

1 Develop a science for each element of the job to replace old rule-of-thumb methods

2 Scientifically select employees and then train them to do the job as described in step 1

3 Supervise employees to make sure they follow the prescribed methods for performing their jobs

4 Continue to plan the work, but use workers to get the work done

Classical Management Perspective
• Other Scientific Management Pioneers
– Frank and Lillian Gilbreth • Reduced the number of movements in bricklaying, resulting in increased output of 200%. – Henry Gantt • Developed other techniques, including the Gantt chart, to improve working efficiency through planning/scheduling. – Harrington Emerson • Advocated job specialization in both managerial and operating jobs.

Classical Management Perspective (cont’d)
• Administrative Management Theory
– Focuses on managing the whole organization rather than individuals.

• Henri Fayol
– Was first to identify the specific management functions of planning, organizing, leading, and controlling.

Classical Management Proponents
• Lyndall Urwick
– Integrated the work of previous management theorists.

• Max Weber
– His theory of bureaucracy is based on a rational set of guidelines for structuring organizations.

• Chester Barnard
– Proposed a theory of the acceptance of authority (by subordinates) as the source of power and influence for managers.

Classical Management Perspective…Today
• Contributions
– Identified important management processes, functions, and skills. – Focused attention on management as a valid subject of scientific inquiry.

• Limitations
– More appropriate approach for use in traditional, stable, simple organizations. – Prescribed universal procedures that are not appropriate in some settings.

Behavioral Management Perspective
• Behavioral Management
– Emphasized individual attitudes and behaviors, and group processes. – Recognized the importance of behavioral processes in the workplace.

• Hugo Munsterberg (1863–1916)
– A German psychologist, considered the father of industrial psychology.

Behavioral Management Perspective (cont’d)
• The Hawthorne Studies
– Conducted by Elton Mayo and associates at Western Electric (1927–1935) – Group study— the effects of a piecework incentive plan on production workers. • Workers established informal levels of acceptable individual output. • Over-producing workers were labeled ―rate busters‖ and underproducing workers were considered ―chiselers.‖ – Interview program • Confirmed the importance of human behavior in the workplace.

Behavioral Management Perspective (cont’d)
• Human Relations Movement
– Proposed that workers respond primarily to the social context of work, including social conditioning, group norms, and interpersonal dynamics. – Assumed that the manager’s concern for workers would lead to increased worker satisfaction and improved worker performance.

• Abraham Maslow
– Advanced a theory that employees are motivated by a hierarchy of needs that they seek to satisfy.

• Douglas McGregor
– Proposed Theory X and Theory Y concepts of managerial beliefs about people and work.

Organizational Behavior
• A contemporary field focusing on behavioral perspectives on management. • Important topics in organizational behavior research:
– – – – – Job satisfaction and job stress Motivation and leadership Group dynamics and organizational politics Interpersonal conflict The design of organizations

Behavioral Management Perspective…Today
• Contributions
– Provided important insights into motivation, group dynamics, and other interpersonal processes. – Challenged the view that employees are tools and furthered the belief that employees are valuable resources.

• Limitations
– Complexity of individuals makes behavior difficult to predict. – Many concepts not put to use because managers are reluctant to adopt them. – Contemporary research findings are not often communicated to practicing managers in an understandable form.

Quantitative Management Perspective
• Quantitative Management
– Focuses on decision making, economic effectiveness, mathematical models, and the use of computers to solve quantitative problems.

• Management Science
– Focuses on the development of representative mathematical models to assist with decisions.

• Operations Management
– Practical application of management science to efficiently manage the production and distribution of products and services.

Quantitative Management Perspective…Today
• Contributions
– Developed sophisticated quantitative techniques to assist in decision making. – Application of models has increased our awareness and understanding of complex processes and situations.

• Limitations
– Quantitative management cannot fully explain or predict the behavior of people in organizations. – Mathematical sophistication may come at the expense of other managerial skills. – Quantitative models may require unrealistic or unfounded assumptions, limiting their general applicability.

Integrating Perspectives for Managers
• Systems Perspective

• Open system
– An organization that interacts with its external environment.

• Closed system
– An organization that does not interact with its environment.

• Subsystems
– The importance of subsystems is due to their interdependence on each other within the organization.

Systems Perspective
• Synergy
– Subsystems are more successful working together in a cooperative and coordinated fashion than working alone.

• Entropy
– A normal process in which an organizational system declines due to failing to adjust to change in its environment – Entropy can be avoided and the organization re-energized through organizational change and renewal.

The Contingency Perspective
• Universal Perspectives
– Include the classical, behavioral, and quantitative approaches.

• The Contingency Perspective
– Suggests that each organization is unique. – The appropriate managerial behavior for managing an organization depends (is contingent) on the current situation in the organization.

The Contingency Perspective (cont’d)
• An Integrative Framework
– Is a complementary way of thinking about theories of management. – Involves the recognition of current system and subsystem interdependencies, environmental influences, and the situational nature of management.

Contemporary Management Issues and Challenges (cont’d)
• Contemporary Applied Perspectives
– William Ouchi’s ―Theory Z,‖ Peters and Waterman’s ―In Search of Excellence‖ – Popular authors: Senge, Covey, Porter, Kotter, and Hamel

• Contemporary Management Challenges
– – – – – – Management of an increasingly diverse workforce Rapid and constant environmental and technological change Increasing globalization of markets Renewed importance of ethics and social responsibility Quality as the basis for competition Shift to a predominately service-based economy

The Environment and Culture of Organizations

The Business Environment
• External Environment
– General environment is everything outside an organization’s boundaries—economic, legal, political, socio-cultural, international, and technical forces. – Task environment is composed of specific groups and organizations that affect the firm.

• Internal Environment
– Conditions and forces present and at work within an organization

The External Environment
• The General Environment
– The set of broad dimensions and forces in an organization’s surroundings that create its overall context. – Economic dimension – Technological dimension refers to the methods available for converting resources into products or services. – Sociocultural dimension – Political-legal dimension is the extent of government regulation of business and the general relationship between business and government. – International dimension is the extent to which the organization is affected by business in other countries.

The External Environment (cont’d)
• Dimensions of the Task Environment
– Specific groups affecting the organization
• Competitors • Customers who acquire an organization’s products or resources. • Suppliers • Regulators that control, legislate, or influence the organization’s policies or practices: –regulatory agencies. –interest groups. • Strategic partners (allies) who are in a joint venture or partnership with the organization.

The Internal Environment
• Conditions and stakeholder forces within an organization
– Owners – Board of directors are elected by the stockholders and are charged with overseeing the general management of the firm to ensure that it is run in a way that best serves the stockholders’ interest. – Employees – Physical work environment is the actual physical environment of the organization and the work that people do.

The Organization’s Culture
• The Importance of Organization Culture
– Culture determines the overall ―feel‖ of the organization, although it may vary across different segments of the organization.

• Determinants of Organizational Culture
– Organization’s founder (personal values and beliefs). – Symbols, stories, heroes, slogans, and ceremonies that embody and personify the spirit of the organization. – Shared experiences that bond organizational members together.

Organizational Culture
• Managing Organizational Culture
– Understand the current culture to understand whether to maintain or change it. – Reward and promote people whose behaviors are consistent with desired cultural values.

• Changing Organizational Culture
– Develop a clear idea of what kind of culture you want to create. – Bring in outsiders to important managerial positions. – Adopt new slogans, stories, ceremonies, and purposely break with tradition.

How Environments Affect Organizations • Change and Complexity
– Environmental change occurs in two ways: • Degree to which change in environment is occurring • Degree of homogeneity or complexity of the environment – Uncertainty is a driving force that influences organizational decisions.

How Environments Affect Organizations (cont’d) • Competitive Forces
– Porter’s Five Competitive Forces • Threat of new entrants into the market • Competitive rivalry among present competitors • Threat of substitute products • Power of buyers • Power of suppliers

• Environmental Turbulence
– Unexpected changes and upheavals in the environment of an organization.

How Organizations Respond to Their Environments (cont’d)
• Information Management in Organizations
– A boundary spanner is an employee who accumulates information through contacts outside the organization. – Environmental scanning – Information systems

• Strategic Response
– Maintaining the status quo, altering the current strategy, or adopting a new strategy.

• Mergers, Acquisitions, Alliances
– Firms can combine (merge), purchase (acquisition), or form new venture partnerships or alliances with another firm.

How Organizations Respond to Their Environments (cont’d)
• Organizational Design and Flexibility
– An organization may adapt to its environmental conditions by incorporating flexibility in its structural design. – Mechanistic firms versus organic firms

• Direct Influence of the Environment
– An organization may attempt to change the nature of the competitive conditions in its environment to suit its needs. – Pursuing new or changed relationships with suppliers, customers, and regulators can alter the organization’s environment in a way that favors the organization.

The Environment and Organizational Effectiveness
• Models of Organizational Effectiveness
– Systems resource approach – Internal processes approach focuses on the transformation processes (production efficiencies). – Goal approach focuses on outputs (achieving organizational goals). – Strategic constituencies approach focuses on feedback (satisfying stakeholders).

The Ethical and Social Environment

Individual Ethics In Organizations
• Ethics
– An individual’s personal beliefs regarding what is right and wrong or good and bad.

• Ethical Behavior
– This behavior is in the eye of the beholder. However, it also refers to behavior that conforms to generally accepted social norms.

• Examples of Unethical Behavior
– Filing falsified or inflated business expense reports.

Ethics in Organizations
• Managing Ethical Behavior
– Must begin with top management which establishes the organization’s culture and defines what will and will not be acceptable behavior. – Training how to handle different ethical dilemmas. – Develop a written code of ethics – Individual issues

Applying Ethical Judgments
• Model for deciding whether or not a particular action or decision is ethical
– Gather relevant factual information. – Determine the most appropriate moral values. – Make a judgment based on the rightness or wrongness of the proposed activity or policy.

• Ethical Norms Affecting Actions
– Utility—act optimizes what is best for its constituencies (benefits only or primarily those who are directly involved) – Rights – Justice—act is consistent with what is considered fair – Caring

Social Responsibility and Organizations
• Social Responsibility
– The set of obligations (to behave responsibly) that an organization has to protect and enhance the social context in which it functions.

• Areas of Social Responsibility
– Stakeholders – The natural environment – The general social welfare • Charitable contributions, support for social issues such as child labor and human rights

Approaches to Social Responsibility (cont’d)
• Obstructionist Stance
– Do as little as possible to solve social or environmental problems.

• Defensive Stance

• Accommodative Stance
– Meet legal and ethical obligations and go beyond that in selected cases.

• Proactive Stance

Managing Social Responsibility: Formal Organizational Dimensions
• Legal Compliance
– Extent to which the organization conforms to local, state, federal, and international laws.

• Ethical Compliance

• Philanthropic Giving

Managing Social Responsibility: Informal Organizational Dimensions
• Organizational Leadership and Culture
– Leadership practices and the culture of the organization can help define the social responsibility stance an organization and its members will adopt.

• Whistle Blowing
– The organizational response to the disclosure by an employee of illegal or unethical conduct on the part of others within the organization is indicative of the organization’s stance on social responsibility.

Evaluating Social Responsibility
• Concept of Control
– Evaluating responses to questionable legal or ethical conduct

• Corporate Social Audit
– A formal and thorough analysis of the effectiveness of the firm’s social performance conducted by a task force of highlevel managers from within the firm. – Requires the organization to clearly define its social goals, analyzes resources committed to the goals, determines how well goals are being met, and makes recommendations for areas needing additional attention.

The Global Environment

The Meaning of International Business
• Domestic Business
– acquires all of its resources and sells all of its products or services within a single country.

• International Business • Multinational Business
– transcends national boundaries and buys raw materials, borrows money, and manufactures and sells its products in a world-wide marketplace.

• Global Business

Trends in International Business
• Economic Recovery
– Industrialized nations in Europe and Asia have rebuilt their economic systems that were devastated in WWII.

• Decreasing Isolation from Foreign Competition
– U.S. consumer goods markets are open to overseas competitors.

• Increasing Globalization of World Markets
– Volume of international trade has increased more than 3,000% from 1960 to 2000.

Managing The Process of Globalization
• Exporting
– Making a product in the firm’s domestic market and selling it in another country.

• Importing
– Bringing a good, service, or capital into a home country from abroad. – Advantages and disadvantages

Managing The Process of Globalization (cont’d)
• Licensing
– Advantages are increased profitability from licensing without additional capital requirements, lower operational costs in foreign markets, and extended profitability from existing technologies. – Disadvantages are inflexibility in the licensing arrangement, loss of profits from licensee failure, and licensing possibly helps competitors learn to compete.

• Strategic Alliance and Joint Ventures
– Advantages are quick market entry, access to materials and technology, and reduced risk. – Disadvantage is that shared ownership limits control and profitability.

Managing The Process of Globalization (cont’d)
• Direct Investment
– Advantages are enhanced operational control, it allows use of existing infrastructure, and no adaptation of in-country product or service is necessary. – Disadvantages are complexity in managing a foreign operation, greater economic- and political-risk exposure, and greater uncertainty of business risk. – Maquiladoras are light-assembly plants built in northern Mexico close to the U.S. border which are given special tax breaks by the Mexican government.

The Structure of the Global Economy
• Market Economies and Systems
– Based on the private ownership of business and allows market factors such as supply and demand to determine business strategy.

• Market Systems
– Clusters of countries that engage in high levels of trade with each other through the elimination of trade barriers such as quotas and tariffs.

Market Economies and Systems
• High Potential/High Growth Economies
– Characteristics are underdeveloped and immature markets, weak industrial base, weak currency, and poor consumers. – People’s Republic of China, India, Vietnam, Brazil, Russia. – Challenges to market development • A lack of infrastructure for support operations. • Unfavorable policy changes affecting investments.

• Other Economies
– Some economies defy classification due to their possession of critical and valuable resources (e.g., oil-producing countries) or other social or political factors which distort their internal economies and markets. – Challenges of other economies • Ethnic violence

Controls on International Management
• Key Concepts
– Tariffs are collected on goods shipped across national boundaries. – Quotas are limits placed on the number or value of goods that can be traded as exports or imports. – Export restraint agreements are voluntary limits on the volume or value of goods exported to or imported from another country.

The Cultural Environment
• Language
– In Japanese the word ―hai‖ can mean either ―yes‖ or ―I understand.‖ – General Motors’ brand name ―Nova‖ when ―va‖ is pronounced ―ba‖ as ―no va‖ in Spanish means ―doesn’t go.‖

• The Meaning of Colors
– Green is popular in Muslim countries, yet it signifies death in other countries. – Pink is associated with feminine characteristics in the U.S.; yellow is the most feminine color in other countries.

Individual Behaviors Across Cultures
• Social Orientation • Power Orientation • Uncertainty Orientation • Goal Orientation • Time Orientation

Competing in a Global Economy
• Globalization and Organization Size
– Multinational Corporations (MNCs) adopt a global perspective and compete in the global marketplace. – Medium-Size Businesses remain primarily domestic organizations that may buy and sell abroad through trade specialists and compete with foreign companies in local markets. – Small Businesses participate in global markets when they serve as local suppliers for MNCs.

Management Challenges in a Global Economy
• Planning in a Global Economy
– Requires a broad-based understanding of both environmental issues and competitive issues.

• Organizing in a Global Economy
– Involves addressing issues of creating and managing operations on a world-wide scale.

• Leading in a Global Economy
– Requires learning how to interact with and motivate persons of different cultural, social, and economics backgrounds.

• Controlling
– Involves integrating global operations that encompass timezone differences, cultural factors, and varying communication methods.

The Multicultural Environment

The Organization and Culture
• Organizational Culture
– Values, beliefs, behaviors, customs, and attitudes that help the members of the organization understand what it stands for, how it does things, and what it considers important.

• Multiculturalism
– The broad issues associated with differences in values, beliefs, behaviors, customs, and attitudes held by people in different cultures.

• Diversity
– When members of a group differ from one another along dimensions such as age, gender, or ethnicity.

Dimensions of Diversity and Multiculturalism
• Age Distributions
– Average age of the U.S. workforce is gradually increasing and will continue to do so for the next several years.

• Gender
– Females were 46% of the workforce in 1994.

• Ethnicity
– The ethnic composition of the U.S. workforce will change most with the increasing number of Hispanic workers and the decline in white workers.

Dimensions of Diversity and Multiculturalism (cont’d)
• Other Dimensions of Diversity
– Workforce diversity is expected to increase due to diversity in religious and political beliefs and viewpoints, lifestyles, and various other individual characteristics.

• Multicultural Differences
– The increasing globalization of business and immigration patterns will affect workforce diversity and present challenges to managers to successfully manage diversity.

How Diversity and Multiculturalism Promote Competitive Advantage
• Resource Acquisition Argument
– Firms who manage diversity effectively will become known among women and minorities as good places to work.

• Creativity Argument • System Flexibility Argument
– Firms must become flexible as a way of managing a diverse workforce, causing the overall organization to be more flexible.

• Cost Argument • Marketing Argument
– Firms with diverse workforces will be better able to understand different market segments than those with less diverse ones.

• Problem-Solving Argument

Diversity and Competitive Advantage
• Diversity promotes competitive advantage by:
– – – – – increasing organizational systems’ flexibility. bringing added creativity. increasing the market scope of products. broadening the resources acquisition basis. adding a diversity of viewpoints to problem-solving decision-making processes. – decreasing the cost of doing business.

Multiculturalism and Conflict
• Sources of Conflict
– Personnel actions being attributed to diversity status. – Misunderstood, misinterpreted, or inappropriate actions between people or groups. – Cultural differences in work hours, personal styles, interpersonal relations, and conflict.

Managing Diversity and Multiculturalism in Organizations
• Individual Strategies
– Understanding the nature and meaning of diversity and multiculturalism. – Developing empathy in understanding the perspective of others. – Having a willingness to communicate and discuss diversity and multiculturalism issues.

Managing Diversity and Multiculturalism in Organizations (cont’d)
• Organizational Approaches
– Organizational Policies
• Actively seek a diverse and varied workforce. • Positive responses to diversity problems. • Mission statement of commitment to diversity.

– Diversity and Multicultural Training
• Training that enables organization members to function in a diverse and multicultural environment

– Organizational Culture

Toward The Multicultural Organization
• Basic Characteristics
– Pluralism in which every organizational group works to understand every other group. – Full structural integration – Full integration of the informal network that removes barriers to entry and participation in the organization. – Absence of prejudice and discrimination. – No gap in organizational identification – Low levels of intergroup conflict.

Basic Elements of Planning and Decision Making

Decision Making and the Planning Process
• The Planning Process
The Environmental Context
The organization’s mission • Purpose • Premises • Values • Directions

Strategic goals

Strategic plans

Tactical goals

Tactical plans

Operational goals

Operational plans

Organizational Goals
• Purposes of Goals
– Provide guidance and a unified direction for people in the organization. – Have a strong affect on the quality of other aspects of planning. – Serve as a source of motivation for employees of the organization.

Kinds of Goals
• By Level
– Mission statement is a statement of an organization’s fundamental purpose. – Strategic goals – Tactical goals are set by and for middle managers; their focus is on how to operationalize actions to strategic goals. – Operational goals

• By Area
– Goals set for the different functional areas of the organization.

• By Time Frame
– Goals may be set for long-term, intermediate-term, or shortterm time frames and for explicit time frames or open-ended.

Responsibilities of Setting Goals
• Who Sets Goals?
– All managers should be involved in the goal-setting process. – Managerial responsibility for goal setting should correspond to the manager’s level in the organization.

• Managing Multiple Goals
– Optimizing allows managers to balance and reconcile inconsistent or conflicting goals.

Kinds of Organizational Plans
• Strategic Plans
– A general plan outlining resource allocation, priorities, and action steps to achieve strategic goals. The plans are set by and for top management.

• Tactical Plans • Operational Plans

Time Frames for Planning

• The Time Dimension of Planning
– is based on the principle of commitment. Planning must provide sufficient time to fulfill the managerial commitments involved.

• Long-range Plans

• Intermediate Plans
– usually cover from 1 to 5 years and parallel tactical plans. – are the principal focus of organizational planning efforts.

• Short-range Plans

Responsibilities for Planning
• Planning Staff
– Planning staff personnel gather information, coordinate planning activities, and take a broader view than individual managers.

• Planning Task Force
– Created when the organization wants a special circumstance addressed.

• Board of Directors
– Establishes corporate mission and strategy.

• Chief Executive Officer
– Usually serves as president or chair of the board of directors. Has a major role in the planning process and implements the strategy.

Responsibilities for Planning (cont’d)
• Executive Committee
– Composed of top executives within the organization. Meet regularly for input to the CEO and review strategic plans.

• Line Management
– Persons with formal authority and responsibility for management of the organization. Help to formulate strategy by providing information.

Types of Operational Plans
Plan Single-use plan Program Project Description Developed to carry out a course of action not likely to be repeated in the future Single-use plan for a large set of activities Single-use plan of less scope and complexity than a program Developed for activities that recur regularly over a period of time Standing plan specifying the organization’s general response to a designated problem or situation Standing plan outlining steps to be followed in particular circumstances Standing plans describing exactly how specific activities are to be carried out

Standing plan Policy Standard operating procedure Rules and regulations

Barriers to Goal Setting and Planning
• As part of managing the goal-setting and planning process, managers must understand the barriers that can disrupt them. Managers must also know how to overcome them.
Major Barriers Inappropriate goals Improper reward system Dynamic and complex environment Reluctance to establish goals Resistance to change Constraints Understanding the purposes of goals and planning Communication and participation Consistency, revision, and updating Effective reward systems

Overcoming the Barriers

The Effectiveness of Formal Goal Setting
• Strengths (Success)
– Improved employee motivation – Enhances communication – Objective performance appraisals – Focuses attention on appropriate goals – Provides a systematic management philosophy

Using Goals to Implement Plans:
• Weaknesses (Failure)

– Poor implementation of the goal setting process – Lack of top-management support for goal setting – Delegation of the goal-setting process to lower levels – Overemphasis on quantitative goals – Too much paperwork and record keeping

Managing Strategy and Strategic Planning

The Nature of Strategic Management
• Strategy

• Strategic Management
– A comprehensive and ongoing management process aimed at formulating and implementing effective strategies which align the organization with its environment to achieve major organizational goals.

• Effective Strategies
– Strategies that promote a superior alignment between the organization and its environment and the achievement of its goals.

Components of Strategy
• Distinctive Competence
– Something an organization does exceptionally well.

• Scope
– Range of markets in which an organization will compete.

• Resource Deployment
– How an organization will distribute its resources across the areas in which it competes.

Types of Strategic Alternatives
• Business-level Strategy

• Corporate-level Strategy
– The set of strategic alternatives that an organization chooses from as it manages its operations simultaneously across several industries and several markets.

Strategy Formulation and Implementation
• Strategy Formulation
– The set of processes involved in creating or determining the organization’s strategies

• Strategy Implementation
– The methods by which strategies are operationalized or executed within the organization

• Deliberate Strategy
– A plan, chosen and implemented to support specific goals, that is the result of a rational, systematic, and planned process of strategy formulation and implementation.

• Emergent Strategy
– A pattern of action that develops over time, in the absence of goals or missions, or despite goals and missions.

Using SWOT Analysis to Formulate Strategy
• Evaluating Organizational Strengths
– Organizational strengths • are skills and abilities enabling an organization to conceive of and implement strategies. – Common organizational strengths
– Distinctive competencies • are useful for competitive advantage and superior performance. – Imitation of distinctive competencies

Using SWOT Analysis to Formulate Strategy (cont’d)
• Evaluating Organizational Strengths (cont’d)
– Sustained competitive advantage • occurs when a distinctive competence cannot be easily duplicated. – Strategic imitation is difficult when: • Distinctive competence is based on unique historical circumstances. • The competence is based on a complex phenomenon, such as organizational culture.

Using SWOT Analysis to Formulate Strategy (cont’d)
• Evaluating Organizational Weaknesses
– Organizational weaknesses are skills and capabilities that do not enable an organization to choose and implement strategies that support its mission. – Weaknesses can be overcome
– Competitive disadvantage is a situation in which an organization fails to implement strategies being implemented by competitors.

Using SWOT Analysis to Formulate Strategy (cont’d)
• Evaluating an Organization’s Opportunities and Threats
– Organizational opportunities are areas in the organization’s environment that may generate high performance. – Organizational threats are areas in the organization’s environment that make it difficult for the organization to achieve high performance.

Formulating Business-Level Strategies
• Porter’s Generic Strategies
– Differentiation strategy • An organization seeks to distinguish itself from competitors through the quality of its products or services. – Overall cost leadership strategy

– Focus strategy • An organization concentrates on a specific regional market, product line, or group of buyers.

The Miles and Snow Topology
Strategy Type Prospector Definition Is innovative and growth oriented, searches for new markets and new growth opportunities, encourages risk taking Protects current markets, maintains stable growth, serves current customers Maintains current markets and current customer satisfaction with moderate emphasis on innovation No clear strategy, reacts to changes in the environment, drifts with events Examples Amazon.com 3M Rubbermaid Bic eBay.com Mrs. Fields Dupont IBM Yahoo International Harvester (in the 1960s and 1970s) Joseph Schlitz Brewing Co. W. T. Grant




Implementing Business-Level Strategies
• Implementing Porter’s Generic Strategies
– Differentiation Strategy – Overall Cost Leadership Strategy • To support cost leadership, marketing and sales are likely to focus on simple product attributes and how these product attributes meet customer needs in a low-cost and effective manner. – Focus Strategy • This strategy is implemented via the same approaches used for differentiation and cost leadership, depending on which one (differentiation or cost leadership) is the proper basis for competing in or for a specific market segment, product category, or group buyers.

Implementing Business-Level Strategies (cont’d)
• Implementing Miles and Snow’s Strategies
– Prospector Strategy • An organization using this strategy must encourage creativity to seek out new market opportunities and to take risks. – Defender Strategy • To support this strategy, an organization will focus on defending its current markets by lowering its costs and/or improving the performance of current products. – Analyzer Strategy • Organizations using this strategy incorporate elements of both the prospector and the defender strategies in an attempt to maintain current business and to be somewhat innovative.

Formulating Corporate-Level Strategies
• Strategic Business Units
– Each business or group of businesses within an organization engaged in serving the same markets, customers, or products.

• Diversification
– The number of businesses an organization is engaged in and the extent to which these businesses are related to one another

• Single Product Strategy

Related Diversification
• Related Diversification
– A strategy in which an organization operates in several different businesses, industries, or markets that are somehow linked.

• Bases of Relatedness in Implementing Related Diversification
Basis of Relatedness Similar technology Common distribution and marketing skills Common name brand and reputation Common customers Examples Phillips, Boeing, Westinghouse, Compaq RJR Nabisco, Phillip Morris, Procter & Gamble Disney, Universal Merck, IBM, AMF-Head

Related Diversification (cont’d)
• Advantages of Related Diversification
– Reduces organization’s dependence on any one of its business activities and thus reduces economic risk. – Reduces overhead costs associated with managing any one business through economies of scale and economies of scope. – Allows an organization to exploit its strengths and capabilities in more than one business. – Synergy exists among a set of businesses

Formulating Corporate-Level Strategies (cont’d)
• Unrelated Diversification
– A strategy in which an organization operates multiple businesses that are not logically associated with one another.

• Advantages
– Stable corporate-level performance over time due to business cycle differences among the multiple businesses.

• Disadvantages
– Firms with unrelated strategies fail to exploit important synergies, putting them at a competitive disadvantage to firms with related diversification strategies.

Implementing Corporate-Level Strategies
• Becoming a Diversified Firm
– Internal Development of New Products – Replacement of Suppliers and Customers • Backward Vertical Integration
– Beginning a business that furnishes resources previously handled by a supplier.

• Forward Vertical Integration

Implementing Corporate-Level Strategies (cont’d)
• Becoming a Diversified Firm
– Merger and Acquisitions • A merger is the purchase of one firm by another firm of approximately the same size. • An acquisition – Purposes of Mergers and Acquisitions • To acquire complementary products or services linked by a common technology and common customers. • To create or exploit synergies that reduce the combined organizations’ costs of doing business to increase revenues.

Managing Diversification
• Major Tools for Managing Diversification
– Organization structure • Detailed discussion of organization structure is contained in Chapter 12. – Portfolio management techniques • Methods that diversified organizations use to make decisions about what businesses to engage in and how to manage these multiple businesses to maximize corporate performance. – Two important portfolio management techniques are the BCG Matrix and the GE Business Screen.

Managing Diversification (cont’d)
• BCG Matrix
– A method of evaluating businesses relative to the growth rate of their market and the organization’s share of the market. – The matrix classifies the types of businesses that a diversified organization can engage as: • ―Dogs‖—have small market shares and no growth prospects. • ―Cash cows‖ • ―Question marks‖—have small market shares in quickly growing markets. • ―Stars‖

Managing Diversification
• GE Business Screen
– A method of evaluating business in a diversified portfolio along two dimensions, each of which contains multiple factors – In general, the more attractive the industry and the more competitive a business is, the more resources an organization should invest in that business.

International and Global Strategies
• Sources of competitive advantage
– Location efficiencies • Allow companies to locate facilities wherever they can best obtain a cost or differentiation advantage. – Economies of scale . – Economies of scope • Lower production costs per unit by sharing expenses across broader product lines.

Strategic Alternatives for International Business
• Home replication strategy
– Apply the distinctive competences they developed in their home market to the foreign markets that they enter.

• Multidomestic strategy
– Used by firms that manage a portfolio of international business as relatively autonomous and independent units.

• Global strategy
– Companies doing exactly the opposite of those using a multidomestic strategy (they are standardizing across all countries).

• Transnational strategy
– Pursue both centralization and decentralization at the same time, using whichever approach makes more sense in the particular circumstance.

Managing Decision Making and Problem Solving

The Nature of Decision Making
• Decision • Decision-Making Process
– The process of recognizing and defining the nature of a decision situation, identifying alternatives, choosing the ―best‖ alternative, and putting it into practice. – An effective decision is one that optimizes some set of factors such as profits, sales, employee welfare, and market share. – Managers make decisions about both problems and opportunities.

The Gorry and Scott Morton Grid

Management levels
Operational control Structured
Accounts receivable Order entry

Management control
Budget analysis-engineered costs Short-term forecasting

Strategic planning
Tanker fleet mix Warehouse and factory location

Degree of problem structure

Inventory control

Production scheduling
Cash management

Variance analysis-overall budget Budget preparation Sales and production

Mergers and acquisitions New product planning R&D planning


PERT/COST systems

The DSS Focuses on Semi structured Problems

Computer Solution

Manager + Computer (DSS) Solution

Manager Solution





Types of Decisions
• Programmed Decisions
– A decision that is a fairly structured decision or recurs
with some frequency or both.

• Nonprogrammed decisions
– A decision that is relatively unstructured and occurs much less often a programmed decision.

Decision-Making Conditions
• Decision Making Under Certainty
– A condition in which the decision maker knows with reasonable certainty what the alternatives are and what conditions are associated with each alternative.

• Decision Making Under Risk • Decision Making Under Uncertainty
– A condition in which the decision maker does not know all the alternatives, the risks associated with each, or the consequences of

each alternative.

Steps in the Rational Decision-Making Process

Step 1. Recognizing and defining the decision situation 2. Identifying alternatives

Detail Some stimulus indicates that a decision must be made. The stimulus may be positive or negative. Both obvious and creative alternatives are desired. In general, the more important the decision, the more alternatives should be considered. Each alternative is evaluated to determine its feasibility, its satisfactoriness, and its consequences.

Example A plant manager sees that employee turnover has increased by 5 percent. The plant manager can increase wages, increase benefits, or change hiring standards. Increasing benefits may not be feasible. Increasing wages and changing hiring standards may satisfy all conditions.

3. Evaluating alternatives

Steps in the Rational Decision-Making Process (cont’d)

Step 4. Selecting the best alternative

Detail Consider all situational factors, and choose the alternative that best fits the manager’s situation. The chosen alternative is implemented into the organizational system.

Example Changing hiring standards will take an extended period of time to cut turnover, so increase wages. The plant manager may need permission from corporate headquarters. The human resource department establishes a new wage structure. The plant manager notes that, six months later, turnover has dropped to its previous level.

5. Implementing the chosen alternative

6. Following up and evaluating the results

At some time in the future, the manager should ascertain the extent to which the alternative chosen in step 4 and implemented in step 5 has worked.

Factors that Prevent Rationality

• Lack of Consensus
– there must be a general agreement of the definition of problems, decisions and decision-making goals at the beginning

• Unclear Means-end Relations
• Noisy Environment

Behavioral Aspects of Decision Making

• Bounded Rationality
– The concept that decision makers are limited by their values and unconscious reflexes, skills, and habits.

• Satisficing
– The tendency to search for alternatives only until one is found that
meets some minimum standard of sufficiency to resolve the problem.

Behavioral Aspects of Decision Making (cont’d)

• Intuition
– An innate belief about something without conscious consideration.

• Escalation of Commitment
– A decision maker is staying with a decision even when it appears to be wrong.

• Risk Propensity
– The extent to which a decision maker is willing to gamble when making a decision.

Behavioral Aspects of Decision Making (cont’d) • Risk Propensity
– The extent to which a decision maker is willing to gamble when making a decision.

• Ethics and Decision Making
– Individual ethics (personal beliefs about right and wrong behavior) combine with the organization’s ethics to create managerial ethics. – Components of managerial ethics

Group and Team Decision Making in Organizations • Forms of Group Decision Making
– Interacting groups or teams • are the most common form of decision-making groups which consists of an existing group or newly formed team interacting and then making a decision. – Delphi groups • are sometimes used for developing a consensus of expert opinion from a panel of experts who individually contribute through a moderator. – Nominal groups • are a structured technique designed to generate creative and innovative ideas through the individual contributions of alternatives that are winnowed down through a series of rank-ordering of the alternatives to reach a decision.

Advantages and Disadvantages of Group and Team Decision Making

Advantages 1. More information and knowledge are available. 2. More alternatives are likely to be generated. 3. More acceptance of the final decision is likely. 4. Enhanced communication of the decision may result. 5. Better decisions generally emerge.

Disadvantages 1. The process takes longer than individual decision making, so it is costlier. 2. Compromise decisions resulting from indecisiveness may emerge. 3. One person may dominate the group. 4. Groupthink may occur.

Managing Group and Team Decision-Making Processes
• Managers Can Promote the Effectiveness of Group and Team Decision Making
– Being aware of the pros and cons of having a group or team make a decision. – Setting deadlines for when decisions must be made. – Avoid problems with dominance by managing group membership. – Have each group member individually critically evaluate all alternatives. – As a manager, do not make your position known too early. – Appoint a group member to be a ―devil’s advocate.‖ – Hold a follow-up meeting to recheck the decision.

Basic Elements of Organizing

The Elements Organizing
• Organizing

• Organization Structure
– The set of building blocks that can be used to configure an organization.

Designing Jobs
• Job Design
– The determination of an individual’s work-related responsibilities.

• Job Specialization (Division of Labor)
– The degree to which the overall task of the organization is broken down and divided into smaller component parts. – Benefits of Specialization • Workers can become proficient at a task. • Transfer time between tasks is decreased. – Limitations of Specialization

Adam Smith’s Example of Job Specialization
Making a pin (nail) requires 18 tasks
1 worker doing all 18 tasks might make 20 pins (nails) a day. 20 workers = (20 x 20) = 400 pins ______________________________

With specialization:
20 workers make 100,000 pins a day. 1 worker = 5,000 pins 20 pins vs. 5,000 pins per worker

Alternatives to Specialization
• Job Rotation
– Systematically moving employees from one job to another in an attempt to reduce employee boredom. Most frequent use today is as a training device for skills and flexibility.

• Job Enlargement
– An increase in the total number of tasks workers perform.

• Job Enrichment
– Increasing both the number of tasks the worker does and the control the worker has over the job.

Alternatives to Specialization (cont’d)
• Job Characteristics Approach:
– Core Dimensions • Skill variety—the number of tasks a person does in a job. • Task identity • Task significance—the perceived importance of the task. • Autonomy • Feedback— the extent to which the worker knows how well the job is being performed. – Growth-Need Strength • The desire for some people to grow, develop, and expand their capabilities that is their response to the core dimensions.

• Work Teams
– An alternative to job specialization that allows the entire group to design the work system it will use to perform an interrelated set of tasks.

Grouping Jobs: Departmentalization
• Departmentalization

• Rationale for Departmentalization
– Organizational growth exceeds the owner-manager’s capacity to personally supervise all of the organization. – Additional managers are employed and assigned specific employees to supervise.

Grouping Jobs: Departmentalization (cont’d)
• Functional Departmentalization
– Is the grouping of jobs involving the same or similar activities.

• Advantages
– Each department can be staffed by functional-area experts. – Supervision is facilitated in that managers only need be familiar with a narrow set of skills.

• Disadvantages
– Decision making becomes slow and bureaucratic. – Employees narrow their focus to the department and lose sight of organizational goals/ issues.

Product Departmentalization Form
• Product Departmentalization
– The grouping of activities around products or product groups.

• Advantages
– All activities associated with one product can be integrated and coordinated. – Speed and effectiveness of decision making are enhanced.

• Disadvantages
– Managers may focus on their product to the exclusion of the rest of the organization. – Administrative costs may increase due to each department having its own functional-area experts.

Customer Departmentalization
• Customer Departmentalization
– Grouping activities to respond to and interact with specific customers and customer groups.

• Advantage • Disadvantage
– A large administrative staff is needed to integrate activities of various departments.

Location Departmentalization
• Location Departmentalization
– The grouping of jobs on the basis of defined geographic sites or areas.

• Advantage
– Enables the organization to respond easily to unique customer and environmental characteristics.

• Disadvantage
– Large administrative staff may be needed to keep track of units in scattered locations.

• Other Forms of Departmentalization
– Grouping activities by time • Assigning responsibilities by a characteristic of the customer, product, or service (e.g., telemarketing calls from business listings).

• Other Considerations
– Departments are often called by other names (e.g., divisions, units, sections, and bureaus). – Organizations are likely to employ multiple bases of departmentalization, depending on level.

Establishing Reporting Relationships
• Chain of Command
– A clear and distinct line of authority among the positions in an organization. – Unity of Command – Scalar Principle • A clear and unbroken line of authority must extend from the bottom to the top of the organization.

Establishing Reporting Relationships (cont’d)
• Narrow Versus Wide Spans
– Span of Management • The number of people who report to a particular manager. – A. V. Graicunas • Subordinate interactions –Direct –Cross –Group –Formula for the number of interactions of all types: » I = N(2N/2 + N - 1), where I is the total number of interactions and N is number of subordinates. – Ralph Davis • Operative span for lower-level managers up to 30 workers. • Executive span for middle and top managers at 3 to 9.

Establishing Reporting Relationships:
Tall versus Flat Organizations
• Tall Organizations
– Are more expensive because of the number of managers involved. – Foster more communication problems because of the number of people through whom information must pass.

• Flat Organizations
– Lead to higher levels of employee morale and productivity. – Create more administrative responsibility for the relatively few managers.

Determining the Appropriate Span: Factors Influencing the Span of Management
1. Competence of supervisor and subordinates (the greater

the competence, the wider the potential span). 2. Physical dispersion of subordinates (the greater the dispersion, the narrower the potential span). 3. Extent of nonsupervisory work in a manager’s job (the more nonsupervisory work, the narrower the potential span). 4. Degree of required interaction (the less required interaction, the wider the potential span). 5. Extent of standardized procedures (the more procedures, the wider the potential span). 6. Similarity of tasks being supervised (the more similar the tasks, the wider the potential span). 7. Frequency of new problems (the higher the frequency, the narrower the potential span). 8. Preferences of supervisors and subordinates.

Distributing Authority
• Authority

• Delegation
– The process by which managers assign a portion of their total workload to others.

• Reasons for Delegation
– To enable the manager to get more work done by utilizing the skills and talents of subordinates. – To foster the development of subordinates by having them participate in decision making and problem solving that allows them to learn about overall operations and improve their managerial skills.

Problems in Delegation
• Manager
– Reluctant to delegate. – Subordinate’s success threatens superior’s advancement. – Lack of trust in the subordinate to do well.

• Subordinate
– Reluctant to accept delegation for fear of failure. – Perceives no rewards for accepting additional responsibility.

Decentralization and Centralization
• Decentralization
– The process of systematically delegating power and authority throughout the organization to middle- and lower-level managers.

• Centralization

• Factors Determining the Choice of Centralization
– The complexity and uncertainty of the external environment. – The history of the organization. – The nature (cost and risk) of the decisions to be made.

Coordinating Activities
• Coordination

• The Need for Coordination
– Departments and work groups are interdependent; the greater the interdependence, the greater the need for coordination.

Three Major Forms of Interdependence
• Pooled interdependence
– When units operate with little interaction; their output is simply pooled at the organizational level.

Coordinating Activities:

• Sequential interdependence
– When the output of one unit becomes the input of another unit in sequential fashion.

• Reciprocal interdependence

Structural Coordination Techniques
• The Managerial Hierarchy
– Placing one manager in charge of interdependent departments or units.

• Rules and Procedures • Liaison Roles
– A manager coordinates interdependent units by acting as a common point of contact, facilitating the flow of information.

Structural Coordination Techniques (cont’d)
• Task Forces
– Used with multiple units when coordination is complex requiring more than one individual and the need for coordination is acute.

• Integrating Departments
– Permanent organizational units that maintain internal integration and coordination on an ongoing basis.

Differentiating Between Positions
• Line Positions
– Positions in the direct chain of command that are responsible for the achievement of an organization’s goals. – Have formal (legitimate) authority to direct the workforce.

• Staff Positions
– Positions intended to provide expertise, advice, and support to line positions. – Have functional authority to enforce compliance with organizational policies and procedures.

• Administrative Intensity
– The degree to which managerial positions are concentrated in staff positions.

Managing Organization Change and Innovation

The Nature of Organization Change
• Organization Change
– Any substantive modification to some part of the organization (e.g., work schedules, machinery, employees).

• Forces for Change
– External forces in the organization’s general and task environments that force the organization to alter the way in which it competes. – Internal forces inside the organization that cause it to change its structure and strategy; some internal forces are responses to external pressures.

• Planned Change • Reactive Change

Managing Change in Organizations
• Steps in the Change Process (Lewin Model)
– Unfreezing – Implementing change – Refreezing • Involves reinforcing and supporting the change so that it becomes a permanent part of the system.

Understanding Resistance to Change
• People resist change because of:
– – – – Uncertainty Threats to self-interests and power and influence. Different perceptions Feelings of loss in disrupted social networks, power, security, and familiarity with existing procedures.

• Overcoming Resistance to Change
– Encourage active participation in the change process. – Provide education and communication about the change process. – Facilitate the change process

Reengineering in Organizations
• Reengineering
– The radical redesign of all aspects of a business to achieve major gains in cost, service, or time.

• Need for Reengineering
– Entropy is a normal process leading to system decline.

• Approaches to Reengineering
– Recognizing the need for change and acting on it with a sense of urgency. – Starting with a clean slate helps open up the process.

Organization Development (OD)
• Organization Development
– A planned, organization-wide effort, managed from the top, that is intended to increase organizational effectiveness and health through interventions in the organization’s processes using behavioral science knowledge.

• OD Assumptions
– Individuals will influence the organization and the organization will influence the attitudes, perceptions, behaviors, and expectations of individuals.

Organization Development Techniques
• Diagnostic Activities • Team Building • Survey Feedback • Education • Intergroup Activities • Third-Party Peacemaking • Technostructural Activities • Process Consultation • Life and Career Planning • Coaching and Counseling • Planning and Goal Setting

Organizational Innovation
• Innovation

• The Innovation Process

Organization evaluates, modifies, and improves on a creative idea.

Organization uses developed idea in design, manufacturing, or delivery of new products, services, or processes.

Organization introduces new products or services to the marketplace.

Demand for an innovation decreases, and substitute innovations are developed and applied.

Most competing organizations have access to the idea.

Demand for new products or services grows.

Forms of Organizational Innovation
• Radical Innovation
– A new product, service, or technology developed by an organization that completely replaces the existing product, service, or technology in an industry.

• Incremental Innovation
– A new product, service, or technology that modifies an existing one. – Incremental innovation does not significantly affect competition in an industry.

Forms of Organizational Innovation (cont’d)
• Technical Versus Managerial Innovations
– Technical innovation • A change in the physical appearance or performance of a product or service, or the physical processes through which a product or service is manufactured. – Managerial innovation

• Product Versus Process Innovations
– Product innovation • A change in the physical characteristics or performance of existing products or service or the creation of brand-new products or services. – Process innovation

• Reasons for Failing to Innovate
– Lack of resources – Failure to recognize opportunities – Resistance to change

• Promoting Innovations in Organizations
– Using the reward system – Having a supportive organizational culture – Intrapreneurship in larger organizations • Inventors • Production champions – Middle manager who learns about the project – Helps overcome organization resistance and convinces others to take innovation seriously • Sponsors

Managing Human Resources in Organizations

The Environmental Context of Human Resource Management
• Human Resource Management (HRM)
– The set of organizational activities directed at attracting, developing, and maintaining an effective work force.

• The Strategic Importance of HRM
– HRM has become increasingly important as firms have come to realize the value of their human resources in improving productivity. – HRM is critical to the bottom-line performance of the firm.

The Legal Environment of HRM
• Equal Employment Opportunity
– Title VII of the Civil Rights Act of 1964 • Forbids discrimination in all areas of the employment relationship. • Employers are not required to seek out and hire minorities but they must treat fairly all who apply. – Adverse impact – Equal Employment Opportunity Commission • Federal agency charged with enforcing Title VII as well as several other employment-related laws. – Affirmative Action • The commitment of employers to proactively seek out, assist in developing, and hire employees from groups that are underrepresented in the organization.

The Legal Environment of HRM (cont’d)
• Equal Employment Opportunity (cont’d)
– Pregnancy Discrimination Act – Age Discrimination in Employment Act of 1967 – Americans with Disabilities Act of 1990 (ADA) • Forbids discrimination on the basis of disabilities and requires employers to provide reasonable accommodations for disabled employees. – Civil Rights Act of 1991 • Amended the original Civil Rights Act, making it easier to bring discrimination lawsuits while also limiting punitive damages that can be awarded in those lawsuits.

The Legal Environment of HRM (cont’d)
• Compensation and Benefits
– Fair Labor Standards Act of 1938 (FLSA) • Sets a minimum wage and requires overtime pay for work in excess of 40 hours per week for non-exempt employees. • Salaried professional, executive, and administrative employees are exempt from the Act’s minimum wage and overtime provisions. – Equal Pay Act of 1963 • Requires men and women to be paid the same amount for doing the same jobs; exceptions are permitted for seniority and merit pay. – Employee Retirement Income Security Act of 1974 (ERISA) – Family and Medical Leave Act of 1993 (FMLA) • Requires employers to provide up to 12 weeks of unpaid leave for family and medical emergencies.

The Legal Environment of HRM (cont’d)
• Labor Relations
– National Labor Relations Act of 1935 (Wagner Act) • NLRA set up procedures for employees to vote whether to have a union; if they vote for a union, management is required to bargain collectively with the union. – National Labor Relations Board (NLRB) – Labor Management Relations Act of 1947 (Taft-Hartley Act) • Amended the NLRA to limit the power of unions and increase management’s rights during organizing campaigns. • Allows the U.S. president to prevent or end a strike that endangers national security.

The Legal Environment of HRM (cont’d)
• Health and Safety
– Occupational Safety and Health Act of 1970 (OSHA) • Requires that employers: – Provide a place of employment that is free from hazards that may cause death or serious physical harm. – Obey the safety and health standards established by Occupational Safety and Health Administration (OSHA).

• Emerging Legal Issues

Change and HRM
• Temporary Workers
– An increasing trend in organizations is to use more temporary workers without the risk that the organization may have to eliminate their jobs.

• Dual-Career Families
– Firms are increasingly having to make accommodations for dual-career partners

Change and HRM (cont’d)
• Employment-at-Will
– A traditional view of the workplace in which an organization can fire an employee for any or no reason. – The new argument is that an organization should be able to fire only people who are poor performers or who violate rules. – Recent court cases have upheld the new argument in placing limits on an organization’s ability to terminate employees by requiring just cause for firing or dismissal as part of an organization-wide cutback.

Attracting Human Resources
• Job Analysis
– A systematic analysis of jobs within an organization. • Job Description—a listing of the job’s duties; its working conditions; and the tools, materials, and equipment use to perform the job. • Job Specification

• Forecasting HR Demand and Supply
– Replacement chart • A list of managerial positions in the organization, the occupants, how long they will stay in the position, and who will replace them. – Employee information system (skills inventory) • A database of employees’ education, skills, work experience, and career expectations, usually computerized.

Recruiting Human Resources
• Recruiting
– The process of attracting qualified persons to apply for jobs that are open.

• Internal Recruiting
– Considering present employees as candidates for openings.

• External Recruiting
– Attracting persons from outside the organization. – Realistic Job Preview (RJP) is considered a successful method to ensure person-job fit.

Selecting Human Resources
• Validation:
– The process of determining the extent to which a selection device is really predictive of future job performance. • Predictive validation • Content validation
– The use of logic and job analysis to determine that selection techniques measure the exact skills needed for job performance. – Used to establish the job relatedness of a selection device

• Application Blanks
– Used to gather information about work history, educational background, and other job-related demographic data. – Must not ask for information unrelated to the job.

Selecting Human Resources (cont’d)
• Tests
– Ability, skill, aptitude, or knowledge tests are usually the best predictors of job success. – Must be validated, administered, and scored consistently.

• Interviews
– Interviews can be poor predictors of job success due to interviewer biases.

Selecting Human Resources (cont’d)
• Assessment Centers
– A popular method for selecting managers and are particularly good for selecting current employees for promotion. – A content validation of major parts of the managerial job.

• Other Techniques
– Polygraphs have declined in popularity due to passage of the Polygraph Protection Act. – Employers now use physical exams, drug tests, and credit checks to screen prospective employees.

Developing Human Resources
• Training and Development
– Training • Teaching operational or technical employees how to do the job for which they were hired. – Development • Teaching managers and professionals the skills need for both present and future jobs.

Developing Human Resources (cont’d)
• Training and Development
– Assessing Training Needs • Determining what needs exist is the first step in developing a training plan. – Common Training Methods • Lectures • Role play and case studies • On-the-job and vestibule training – Evaluation of Training • Training and development programs should always be evaluated. • Approaches include measuring relevant job performance criteria before and after the training to determine the effect of training.

Developing Human Resources (cont’d)
• Performance Appraisal
– A formal assessment of how well employees do their jobs. – Reasons for performance appraisal • Appraisal validates the selection process and the effects of training. • Appraisal aids in making decisions about pay raises, promotions, and training. • Provides feedback to employees to improve their performance and plan future careers.

Developing Human Resources (cont’d)
• Performance Appraisal (cont’d)
– Objective measures of performance • Actual output (units produced), scrap rate, dollar volume of sales, and number of claims processed. • Can become contaminated by outside factors resulting in ―opportunity bias‖ where some have a better chance to perform than others. • Special performance tests are a method in which each employee is assessed under standardized conditions.

Developing Human Resources (cont’d)
• Performance Appraisal (cont’d)
– Judgmental Methods • Ranking—compares employees directly with each other. – Difficult to do with large numbers of employees. – Employees are ranked only on overall performance. – Do not provide useful information for employee feedback. • Rating—compares each employee with a fixed standard. – Graphic rating scales consist of job performance dimensions to be rated on a standard scale. – Behaviorally-anchored rating scale (BARS) is a sophisticated method in which supervisors construct a rating scale where each point on the scale is associated with behavioral anchors.

Developing Human Resources (cont’d)
• Performance Appraisal (Cont’d)
– Performance Appraisal Errors • Recency error—the tendency of the evaluator to base judgments on the subordinate’s most recent performance because it is the most easily recalled. • Errors of leniency and strictness • Halo error—allowing the assessment of the employee on one dimension to spread to that employee’s ratings on other dimensions.

Developing Human Resources (cont’d)
• Performance Feedback
– Is best given in a private meeting between the employee and immediate supervisor. – Discussion should focus on the facts – Properly training managers can help them conduct more effective feedback interviews. – ―360 degree‖ feedback, in which managers are evaluated by everyone around them, provides a richer array of performance information on which to base an appraisal.

Maintaining Human Resources
• Determining Compensation
– Compensation • The financial remuneration given by the organization to its employees in exchange for their work. • Wages • Salary • Incentives represent special compensation opportunities (e.g., sales commissions) that are usually tied to performance. – Purposes of Compensation • Provide the means to maintain a reasonable standard of living. • Provide a tangible measure of the value of the individual to the organization.

Maintaining Human Resources (cont’d)
• Determining Compensation (cont’d)
– Wage-Level Decision • The wage-level decision is a management policy decision to pay above, at, or below the going rate for labor in an industry or geographic area. • Factors that affect the wage-level decision • Area wage surveys can provide information about the maximum, minimum, and average wages for a particular job in a labor market.

Maintaining Human Resources (cont’d)
• Determining Compensation (cont’d)
– Wage-Structure • Job evaluations are the basis for determining the worth of each job relative to other jobs in the organizational wage-structure. • Wage surveys data and the wage structure are combined to set the actual wages for a job. – Individual Wage Decisions • Factors such as seniority, initial qualifications, individual merit, and labor market conditions influence wage decisions.

Maintaining Human Resources (cont’d)
• Determining Benefits
– Benefits • Things of value other than compensation that an organization provides to its workers. • The average company spends an amount equal to more than one-third of its cash payroll on employee benefits. • A good benefit plan encourages employees to stay with the company and attracts new employees. • Benefits do not necessarily stimulate high performance. – Managing Benefits Effectively • Shop carefully for the best-cost providers. • Provide only the benefits that employees want.

Maintaining Human Resources (cont’d)
• Determining Benefits (cont’d)
– Types of Benefits • Pay for time not worked • Insurance • Employee service benefits—Tuition reimbursement and recreational opportunities. – Cafeteria Benefit Plans • Flexible plans that provide basic coverage and allow employees to choose the additional benefits they want up to the cost limit set by the organization. – Other Benefits • On-site childcare, mortgage assistance, and paid-leave programs.

Managing Labor Relations
• Labor Relations
– The process of dealing with employees when they are represented by a union. – Organizations prefer employees remain nonunion because unions limit management’s freedom in many areas. – The best way to avoid unionization is to practice good employee relations all the time

Managing Labor Relations (cont’d)
• Collective Bargaining
– The contract contains agreements about wage, hours, and working conditions and how management will treat employees.

• Grievance Procedure
– The step-wise means by which a labor contract is enforced. – Grievances are filed on behalf of an employee by the union when it believes employees have not been treated fairly under the contract.

New Challenges in the Changing Workplace
• Managing Knowledge Workers
– Knowledge workers • Employees whose contributions to an organization are based on what they know (e.g., computer scientists, engineers, and physical scientists). • They tend to work in high-technology areas and are experts in abstract knowledge areas. • They like to work independently and identify strongly with their professions.

New Challenges in the Changing Workplace (cont’d)
• Contingent and Temporary Workers
– Trends in Contingent and Temporary Workers • There have been dramatic and consistent increases in contingent workers. 10% of the U.S. workforce is either contingent or temporary. – Managing Contingent Workers • Careful planning allows for integrating contingent workers into the organization in a coordinated fashion for well-defined time periods. • Understanding contingent workers and acknowledging their advantages and disadvantages. • Decide early on how similarly contingent employees will be treated relative to permanent employees.

Basic Elements of Individual Behavior in Organizations

Understanding Individuals in Organizations
• The Psychological Contract
– The overall set of expectations held by an individual with respect to what he or she will contribute to the organization and what the organization will provide in return. Contributions from the Individual • Effort • Ability • Loyalty • Skills • Time • Competencies Inducements from the Organization • Pay • Job security • Benefits • Career opportunities • Status • Promotion opportunities

Understanding Individuals in Organizations (cont’d)
• The Person-Job Fit
– The extent to which the contributions made by the individual match the inducement offered by the organization. • Each employee has a specific set of needs to be fulfilled and a set of job-related behaviors to contribute. • The degree to which the organization can take advantage of those behaviors and, in turn, fulfill an employee’s needs will determine the level of person-job fit. – Reasons for poor person-job fit: • Adopting new technologies changes the skills needed by employees.

Personality and Individual Behavior
• Personality
– The relatively stable set of psychological and behavioral attributes that distinguish one person from another.

• The ―Big Five‖ personality Traits
– Agreeableness – Conscientiousness—the number of goals on which a person focuses. – Negative emotionality – Extraversion – Openness—a person’s rigidity of beliefs and range of interests.

Other Personality Traits at Work
• Locus of Control
– The extent to which people believe that their behavior has a real effect on what happens to them. • Internal locus of control • External locus of control

• Self-Efficacy
– A person’s belief about his or her capabilities to perform a task. High self-efficacy individuals believe they can perform well while low self-efficacy individuals doubt their ability to perform.

Other Personality Traits at Work (cont’d)
• Authoritarianism
– The extent to which an individual believes that power and status differences are appropriate within hierarchical social organizations.

• Machiavellianism • Self-Esteem
– The extent to which a person believes she/he is a worthwhile individual.

• Risk Propensity

Emotional Intelligence
• Five dimensions of EQ: • Self-awareness • Managing emotions
– a person’s capacity to ensure that feelings do not interfere with getting things accomplished

• Motivating oneself • Empathy
– a person’s ability to understand how others are feeling

• Social skill

Attitudes and Individual Behavior
• Attitudes
– Complexes of beliefs and feelings that people have about specific ideas, situations, or other people.

• The Three Components of Attitudes:
– Affective component reflects the feelings and emotions an individual has toward a situation. – Cognitive component – Intentional component is how a person expects to behave in a given situation.

• Cognitive Dissonance
– The conflict individuals experience among their own attitudes.

Work-Related Attitudes
• Job Satisfaction or Dissatisfaction
– An attitude that reflects the extent to which an individual is gratified or fulfilled by his or her work.

• Job Satisfaction and Work Behaviors
– Job satisfaction is influenced by personal, group, and organizational factors. – Dissatisfied employees are absent from work more often, may experience stress which disrupts coworkers, and may be continually looking for another job. – High levels of job satisfaction do not necessarily lead to high job performance.

Work-Related Attitudes (cont’d)
• Organizational Commitment
– An attitude that reflects an individual’s identification with and attachment to an organization.

• Organizational Commitment and Work Behaviors
– Employee commitment strengthens with an individual’s age, years with the organization, sense of job security, and participation in decision making.

Affect and Mood in Organizations
• Positive Affectivity • Negative Affectivity
– A tendency to be generally downbeat and pessimistic, tend to see things in a negative way, and seem to be in a bad mood.

Perception and Individual Behavior
• Perception
– The set of processes by which an individual becomes aware of and interprets information.

• Selective Perception
– The process of screening out information that we are uncomfortable with or that contradicts our beliefs.

• Stereotyping
– The process of categorizing or labeling people on the basis of a single attribute (e.g., gender and race).

Perception and Perceptual Processes
• Attribution
– A mechanism through which we observe behavior and attribute a cause to it.

• Ways in Which Attributions Are Formed:
– Consensus • The extent to which other people in the same situation behave the same way. – Consistency – Distinctiveness

Stress and Individual Behavior
• Stress
– A person’s response to a strong stimulus (i.e., a stressor).

• General Adaptation Syndrome (GAS)
– The general cycle of the stress process. – Stage 1 Alarm • Panic, wondering how to cope, and a feeling of helplessness. – Stage 2 Resistance – Stage 3 Exhaustion

Stress and Individual Behavior (cont’d)
• Personality Types
– Type A personality • Extremely competitive (aggressive), devoted to work, have a strong sense of time urgency (impatient). – Type B personality • Less competitive, less devoted to work, have a weaker sense of time urgency. • Less likely to experience personal stress or to come into conflict with other people.

Causes and Consequences of Stress
• Causes of Work Stress
Organizational Stressors

Task Demands
• Quick decisions • Critical decisions • Incomplete information for decisions

Physical Demands
• Temperature extremes • Poorly designed office • Threats to health

Role Demands
• Role ambiguity • Role conflict

Interpersonal Demands
• Group pressures • Leadership styles • Conflicting personalities

Causes and Consequences of Stress (cont’d)
• Consequences of Stress
– Negative personal consequences • Behavioral • Psychological—sleep disturbances, depression, family problems. • Medical – Negative work-related consequences • Poor quality work output and lower productivity. • Job dissatisfaction, low morale, and a lack of commitment. • Withdrawal through indifference and absenteeism. – Burnout • A feeling of exhaustion that may develop when someone experiences too much stress for an extended period of time.

Managing Stress
• Stress Management Strategies for Individuals
– Regular exercise • reduces tension and stress, and improves self-confidence and feelings of optimism. – Relaxation

– Time management • reduces stress by prioritizing activities to accomplish them in their order of importance. – Support Groups

Managing Stress (cont’d)
• Stress Management Strategies for Organizations
– Organizations also bear the costs of stress-related claims. – Organizational wellness/stress management programs can be used to promote healthful employee activities and derive the benefits of increased organizational productivity.

Creativity in Organizations
• Creativity
– The ability of an individual to generate new ideas or to conceive of new perspectives in existing ideas.

• The Creative Individual
– Background experiences and creativity – Personal traits and creativity • Creative persons have personal traits of openness, an attraction to complexity, high levels of energy, independence, autonomy, strong self-confidence, and a strong belief in their own creativity. – Cognitive abilities and creativity • They are both divergent and convergent thinkers, a skill they use to see differences and similarities in situations, phenomena, and events.

Creativity in Organizations, cont’d
Characteristics of Creative People
•Tolerance for ambiguity •Not inhibited by conformity pressure •Good verbal communicator •Imaginative •Reasonably intelligent •Intrinsically motivated •Willing to take risks and fail

Situations that Enhance Creativity
• • • • Specific and difficult goals Time pressure Supportive culture Heterogeneity

The Creative Process
• Preparation
– Formal education and training is used to ―get up to speed.‖ – Experiences on the job provide additional knowledge and ideas.

• Incubation
– A period of less intense conscious concentration during which knowledge and ideas acquired, during preparation, mature and develop.

The Creative Process (cont’d)
• Insight
– A spontaneous breakthrough in which the creative person achieves a new understanding of some problem or situation.

• Verification
– Determines the validity or truthfulness of the insight. – Tests are conducted and prototypes are built to see if the insight leads to the expected results.

• Enhancing Creativity in Organizations
– Make creativity part of the organization’s culture. – Reward creativity; refrain from punishing creative failures.

Types of Workplace Behavior
• Workplace Behavior
– A pattern of action by the members of an organization that directly or indirectly influences organizational effectiveness.

• Performance Behaviors
– The total set of work-related behaviors an organization expects an individual to display.

• Withdrawal Behaviors
– Absenteeism occurs when an individual does not show up for work when expected for legitimate or feigned reasons. – Turnover occurs when individuals quit their jobs for workrelated or personal reasons.

Types of Workplace Behavior (cont’d)
• Dysfunctional Behavior
– The behaviors that detract from, rather than contribute to, organizational performance.

• Organizational Citizenship
– The behavior of individuals that makes a positive overall contribution to the organization. – The determinants of organizational citizenship is a complex mosaic of individual, social, and organizational variables. • The personality, attitudes, and needs of the individual. • The social context, or work group, in which the individual works.

Managing Employee Motivation and Performance

The Nature of Motivation
• Motivation
– The set of forces that cause people to behave in certain ways. – The goal of managers is to maximize desired behaviors and minimize undesirable behaviors.

• The Importance of Motivation in the Workplace
– Determinants of Individual Performance • Motivation • Ability • Work environment

Historical Perspectives on Motivation
• The Traditional Approach
– Frederick Taylor (Scientific Management) – Assumptions • Work is inherently unpleasant.

• The Human Relations Approach
– Emphasized the role of social processes in the workplace. – Assumptions • Maintaining the appearance of employee participation is important.

• The Human Resource Approach
– Assumptions • Management’s job is to encourage participation and create a work environment that motivates employees. • Employees want to and are able to make genuine contributions

Content Perspectives on Motivation
• Content Perspectives
– Approaches to motivation that try to answer the question, ―What factors in the workplace motivate people?‖

• Content Perspectives of Motivation
– – – – Maslow’s Hierarchy of Needs Aldefer’s ERG Theory Herzberg’s Two-Factor Theory McClelland’s Achievement, Power, and Affiliation Needs

Content Perspectives on Motivation (cont’d)
• The Need Hierarchy Approach
– Maslow’s Hierarchy of Needs • People must, in a hierarchical order, satisfy five groups of needs: – Physiological needs for basic survival and biological function. – Security needs – Belongingness needs for love and affection. – Esteem needs for positive self-image/self-respect and recognition and respect from others. – Self-actualization needs – Weakness of Maslow’s theory • Five levels of need are not always present.

Content Perspectives on Motivation (cont’d)
• The ERG Theory (Alderfer)
– People’s needs are grouped into three overlapping categories—existence, relatedness, and growth. – Maslow’s hierarchy is collapsed into three levels: • Existence needs • Relatedness needs • Growth needs – ERG theory assumes that: • Multiple needs can be operative at one time (there is no absolute hierarchy of needs). • If a need is unsatisfied, a person will regress to a lower-level need and pursue that need (frustration-regression).

Content Perspectives on Motivation (cont’d)
• The Two-Factor Theory (Herzberg)
– People’s satisfaction and dissatisfaction are influenced by two independent sets of factors—motivation factors and hygiene factors. – Theory assumes that job satisfaction and job dissatisfaction are on two distinct continuums: • Motivational factors (work content) are on a continuum that ranges from satisfaction to no satisfaction. • Hygiene factors (work environment) are on a separate continuum that ranges from dissatisfaction to no dissatisfaction. • Motivation is a two-step process:

Content Perspectives on Motivation (cont’d)
• Individual Human Needs (McClelland)
– The need for achievement • The desire to accomplish a goal or task more effectively than in the past. – The need for affiliation

– The need for power

Process Perspectives on Motivation
• Process Perspectives
– Approaches to motivation that focus on why people choose certain behavioral options to satisfy their needs and how they evaluate their satisfaction after they have attained their goals.

• Process Perspectives of Motivation
– – – – Expectancy Theory Porter-Lawler Extension of Expectancy Theory Equity Theory Goal-Setting Theory

Process Perspectives on Motivation (cont’d)
• Expectancy Theory
– Motivation depends on how much we want something and how likely we are to get it. – Assumes that: • Behavior is determined by a combination of personal and environmental forces. • People make decisions about their own behavior in organizations. • Motivation leads to effort, when combined with ability and environmental factors, that results in performance which, in turn, leads to various outcomes that have value (valence) to employees.

Process Perspectives on Motivation (cont’d)
• Elements of Expectancy Theory
– Effort-to-Performance Expectancy • The employee’s perception of the probability that effort will lead to a high level of performance. – Performance-to-Outcome Expectancy • The employee’s perception of the probability that performance will lead to a specific outcome—the consequence or reward for behaviors in an organizational setting.

Process Perspectives on Motivation (cont’d)
• Elements of Expectancy Theory (cont’d)
– Valence • An index of how much an individual values a particular outcome. • It is the attractiveness of the outcome to the individual. – For motivated behavior to occur: • Both effort-to-performance expectancy and performance-tooutcome expectancy probabilities must be greater than zero. • The sum of the valences must be greater than zero.

Process Perspectives on Motivation (cont’d)
• The Porter-Lawler Extension of Expectancy Theory
– Assumptions: • If performance in an organization results in equitable and fair rewards, people will be more satisfied. • High performance can lead to rewards and high satisfaction. – Types of rewards: • Extrinsic rewards • Intrinsic rewards

Process Perspectives on Motivation (cont’d)
• Equity Theory
– People are motivated to seek social equity in the rewards they receive for performance. – Equity is an individual’s belief that the treatment he or she receives is fair relative to the treatment received by others. – Individuals view the value of rewards (outcomes) and inputs of effort as ratios and make subjective comparisons of themselves to other people.

outcomes (self) inputs (self)


outcomes (other)

inputs (other)

Process Perspectives on Motivation (cont’d)
• Equity Theory (cont’d)
– Conditions of and reactions to equity comparisons: • Feeling equitably rewarded. • Feeling under-rewarded—try to reduce inequity.
– Change inputs by trying harder or slacking off. – Change outcomes by demanding a raise. – Distort the ratios by altering perceptions of self or of others.

• Feeling over-rewarded. – Increase or decrease inputs. – Distort ratios by rationalizing.

Process Perspectives on Motivation (cont’d)
• Goal-Setting Theory
– Assumptions • Behavior is a result of conscious goals and intentions. • Setting goals influence the behavior of people in organizations.

• Characteristics of Goals
– Goal difficulty • Extent to which a goal is challenging and requires effort. – Goal specificity • Clarity and precision of the goal. – Acceptance • The extent to which persons accept a goal as their own. – Commitment • The extent to which an individual is personally interested in reaching a goal.

Reinforcement Perspectives on Motivation
• Reinforcement Theory
– The role of rewards as they cause behavior to change or remain the same over time. – Assumes that: • Behavior that results in rewarding consequences is likely to be repeated, whereas behavior that results in punishing consequences is less likely to be repeated.

Reinforcement Perspectives on Motivation (cont’d)
• Kinds of Reinforcement in Organizations
– Positive reinforcement • Strengthens behavior with rewards or positive outcomes after a desired behavior is performed. – Avoidance
– Punishment • Weakens undesired behavior by using negative outcomes or unpleasant consequences when the behavior is performed. – Extinction

Reinforcement Perspectives on Motivation (cont’d)
• Providing Reinforcement in Organizations
– Reinforcement schedules • Fixed interval schedule—reinforcement applied at fixed time intervals, regardless of behavior. • Variable interval • Fixed ratio —reinforcement applied after a fixed number of behaviors, regardless of time. • Variable Ratio – Behavior modification (OB mod) • A method for applying the basic elements of reinforcement theory in an organizational setting. • Specific behaviors are tied to specific forms of reinforcement.

Popular Motivational Strategies
• Empowerment and Participation
– Empowerment • The process of enabling workers to set their own work goals, make decisions, and solve problems within their sphere of influence. – Participation • The process of giving employees a voice in making decisions about their work. – Areas of Participation for Employees • Making decisions about their jobs. • Decisions about administrative matters (e.g., work schedules). • Participating in decision making about broader issues of product quality.

Popular Motivational Strategies (cont’d)
• Techniques and Issues in Empowerment
– Using work teams • Collections of employees empowered to plan, organize, direct, and control their work. – Changing the overall method of organizing the firm by becoming more decentralized. – Conditions necessary for empowerment: • Organization must be sincere about spreading power to lower levels. • Organization must be committed to empowering workers. • Organization must be prepared to increase its commitment to training.

Popular Motivational Strategies (cont’d)
• New Forms of Working Arrangements
– Variable Work Schedules • Compressed work schedule—Working a full forty-hour week in less than five days. • Flexible work schedules (flextime) • Job sharing • Telecommuting—Allowing employees to spend part of their time working off-site, usually at home, by using e-mail, the Internet, and other forms of information technology.

Using Reward Systems to Motivate Performance
• Reward System
– The formal and informal mechanisms by which employee performance is defined, evaluated, and rewarded.

• Effects of Organizational Rewards
– Effect of Rewards on Attitudes • job satisfaction is affected by employee satisfaction with intrinsic and extrinsic rewards. – Effect of Rewards on Behaviors • Extrinsic rewards affect employee satisfaction and reduce turnover. • Employees tend to work harder for rewards based on performance. – Effect of Rewards on Motivation • Employees will work harder when performance will be measured.

Using Reward Systems to Motivate Performance (cont’d)
• Designing Effective Rewards
– – – – Reward system must meet an individual’s needs. Rewards should compare favorably with other organizations. Distribution of rewards must be perceived to be equitable. Reward system must recognize different needs.

Approaches to Rewarding Employees
• Merit system
• A reward system whereby people get different pay raises at the end of the year depending on their overall job performance.

• Incentive system
• A reward system whereby people get different pay amounts at each pay period in proportion to what they do. • Popular incentive systems: – Piece-rate incentive plan – – Individual incentive plan – reward individual performance at the time when high performance occurs. – Sales commissions – paid a percentage of sales over a period of time. – Other types:
» Paying incentives based on both individual and group performance.

Approaches to Rewarding Employees
• Team and Group Incentive Reward Systems
• Gain sharing is group based, and all members get bonus when pre-determined levels are exceeded. Aligns employee and corporate interests. – Scanlon plan • Profit sharing provides a varying annual bonus to employees based on corporate profits. • Employee Stock Ownership Programs (ESOPs) gradually grant stock ownership of the firm to employees as a reward.

• Executive Compensation
• Generally includes base salary, annual bonuses based on performance, stock option plans, and other types of compensation

Managing Leadership and Influence Processes

The Nature of Leadership
• The Meaning of Leadership
– Process: what leaders actually do. • Using noncoercive influence to shape the group’s or organization’s goals. • Helping to define organizational culture. – Property: who leaders are. • The set of characteristics attributed to individuals perceived to be leaders. – Leaders • People who can influence the behaviors of others without having to rely on force. • People who are accepted as leaders by others.

The Nature of Leadership (cont’d)
• Power and Leadership
– Power is the ability to affect the behavior of others. • Legitimate power is granted through the organizational hierarchy. • Reward power • Coercive power is the capability to force compliance by means of psychological, emotional, or physical threat. • Referent power • Expert power is derived from the possession of information or expertise.

The Nature of Leadership (cont’d)
• Using Power
– Legitimate request • Compliance by a subordinate with a manager’s request because the organization has given the manager the right to make the request. – Instrumental compliance – Coercion • Threatening to fire, punish, or reprimand subordinates if they do not do something. – Rational persuasion – Personal identification • Using the referent power of a superior’s desired behaviors to shape the behavior of a subordinate. – Inspirational appeal – Information distortion • Withholding or distorting information (which may create an unethical situation) to influence subordinates’ behavior

The Search for Leadership Traits
• Traits Approach to Leadership
– Assumed that a basic set of personal traits that differentiated leaders from nonleaders could be used to identify leaders and as a tool for predicting who would become leaders. – The trait approach was unsuccessful in establishing empirical relationships between traits and persons regarded as leaders. – Hundreds of studies boil down to five common traits…

Leadership Behaviors
• Michigan Studies (Rensis Likert)
– Identified two forms of leader behavior • Job-centered behavior—managers who pay close attention to subordinates’ work, explain work procedures, and are keenly interested in performance. • Employee-centered behavior • These two forms of leader behaviors were considered to be at opposite ends of the same continuum and similar to (respectively) Likert’s System 1 and System 4 of organizational design.

Leadership Behaviors (cont’d)
• Ohio State Studies
– The studies did not interpret leader behavior as being onedimensional as did the Michigan studies. – Identified two basic leadership styles that can be exhibited simultaneously: • Initiating-structure behavior • Consideration behavior—the leader shows concern for subordinates and attempts to establish a friendly and supportive climate.

Leadership Behaviors (cont’d)
• Ohio State Studies (cont’d)
– Initial assumption of the research was that leaders who exhibit high levels of both behaviors would be most effective leaders. Subsequent research indicated that: • Employees of supervisors ranked highly on initiating structure were high performers, although they expressed low levels of satisfaction and had higher absenteeism. • Employees of supervisors ranked highly on consideration had low- performance ratings, but they had high levels of satisfaction and had less absenteeism. • Other situational variables were making consistent leader behavior predictions difficult.

Situational Approaches to Leadership
• Situational Models of Leader Behavior
– Assume that: • Appropriate leader behavior varies from one situation to another. • Key situational factors that are interacting to determine appropriate leader behavior can be identified.

• Leadership Continuum (Tannenbaum and Schmidt)
– Variables influencing the decision-making continuum: • Leader’s characteristics • Subordinates’ characteristics—independence needs, readiness for responsibility, tolerance of ambiguity, interest in the problem, understanding goals, knowledge, experience, and expectations. • Situational Characteristics

Situational Approaches to Leadership (cont’d)
• Least-Preferred Coworker Theory (Fiedler)
– The appropriate style of leadership varies with situational favorableness (from the leader’s viewpoint). – Least preferred coworker (LPC) • The measuring scale that asks leaders to describe the person with whom they are least able to work well. • High LPC scale scores indicate a relationship orientation; low LPC scores indicate a task orientation on the part of the leader. – Contingency variables determining situational favorableness: • Leader-member relations—the nature of the relationship between the leader and the work group. • Task structure • Position Power—the power vested in the leader’s position.

Situational Approaches to Leadership (cont’d) • Path-Goal Theory (Evans and House)
– The primary functions of a leader are to make valued or desired rewards available in the workplace and to clarify for the subordinate the kinds of behavior that will lead to goal accomplishment or rewards. – Leader Behaviors:
• Directive leader behavior—letting subordinates know what is expected of them, giving guidance and direction, and scheduling work. • Supportive leader behavior • Participative leader behavior—consulting with subordinates, soliciting suggestions, and allowing participation in decision making. • Achievement-oriented leader behavior—setting challenging goals, expecting subordinates to perform at high levels, encouraging and showing confidence in subordinates.

The Path-Goal Theory
• Situational Factors:
Work Situation
Follower lacks selfconfidence Lack of job challenge

Leadership Style

Impact on Followers
Increases selfconfidence to complete task Encourages setting high but attainable goals Clarifies follower need for making suggestions and involvement Clarifies path to get rewards

Expected Results
Increased effort. job satisfaction, and performance; fewer grievances Improved performance and greater job satisfaction Improved performance and greater satisfaction; less turnover


Improper Participative procedures and poor decisions

Ambiguous job Directive

Improved performance and job satisfaction

Path Goal Theory to Leadership (cont’d)
• The Path-Goal Framework
Subordinates’ personal characteristics • Perceived ability • Locus of control Leader behaviors • Directive • Supportive • Participative • Achievementoriented Environmental characteristics • Task structure • Work group

Subordinates’ motivation to perform

Situational Approaches to Leadership (cont’d)
• Vroom Decision Tree Approach
– Attempts to prescribe a leadership style appropriate to a given situation. – Basic Premises • The degree to which subordinates should be encouraged to participate in decision making depends on the characteristics of the situation. • No one decision-making process is best for all situations. • After evaluating the different problem attributes, a leader can choose a decision path on one of two decision trees that determines the decision style and specifies the amount of employee participation.
– Decision significance – Decision Timeliness

Situational Approaches to Leadership (cont’d)
• Vroom Decision Tree Approach (cont’d)
– Decision-Making Styles • Decide • Consult (individually) - manager presents program to group members individually, obtains their suggestions, then makes the decision. • Consult (group) • Facilitate—manager presents the problem to the group, defines the problem and its boundaries, and then facilitates group member discussion as they make the decision. • Delegate

Situational Approaches to Leadership (cont’d)
• The Leader-Member Exchange (LMX) Approach
– Stresses the importance of variable relationships between supervisors and each of their subordinates. – Leaders form unique independent relationships (―vertical dyads‖) with each subordinate in which the subordinate becomes a member of the leader’s out-group or in-group.

Subordinate 1

Subordinate 2 Out-Group

Subordinate 3

Subordinate 4

Subordinate 5


Related Perspectives on Leadership
• Substitutes for Leadership
– A concept that identifies situations in which leader behavior is neutralized or replaced by characteristics of subordinates, the task, and the organization.
Characteristics that Substitute for Leadership Subordinate
Ability Experience Need for independence Professional orientation Indifference towards organizational goals

Routineness The availability of feedback Intrinsic satisfaction

Formalization Group cohesion Inflexibility A rigid reward structure

Related Perspectives on Leadership (cont’d)
• Charismatic Leadership (House)
– Charisma, an interpersonal attraction that inspires support and acceptance, is an individual characteristic of a leader. – Charismatic persons are more successful than noncharismatic persons. – Charismatic leaders are self-confident, have a firm conviction in their belief and ideals, and possess a strong need to influence people.

Related Perspectives on Leadership (cont’d)
• Charismatic Leadership (cont’d)
– Charismatic leaders in organizations must be able to: • envision the future, set high expectations, and model behaviors consistent with expectations. • energize others through a demonstration of excitement, personal confidence, and patterns of success. • enable others by supporting them, by empathizing with them.

Related Perspectives on Leadership (cont’d)
• Transformational Leadership
– Leadership that goes beyond ordinary expectations, by transmitting a sense of mission, stimulating learning, and inspiring new ways of thinking. – Seven keys to successful leadership

Political Behavior in Organizations
• Political Behavior
– The activities carried out for the specific purpose of acquiring, developing, and using power and other resources to obtain one’s preferred outcomes. – Common Political Behaviors • Inducement—offering to give something to someone else in return for that person’s support. • Persuasion • Creation of an obligation—providing support for another person’s position that obliges that person to return the favor at a future date. • Coercion • Impression management—making a direct and intentional effort to enhance one’s image in the eyes of others.

Political Behavior in Organizations (cont’d)
• Managing Political Behavior
– Be aware that even if actions are not politically motivated, others may assume that they are. – Reduce the likelihood of subordinates engaging in political behavior by providing them with autonomy, responsibility, challenge, and feedback. – Avoid using power to avoid charges of political motivation.

Managing Work Groups and Teams

Groups and Teams in Organizations
• Group
– Two or more people who interact regularly to accomplish a common purpose or goal.

• Functional Group
– A permanent group created to accomplish a number of organizational purposes with an indefinite time horizon.

• Informal or Interest Group
• Task Group
– A group created by the organization to accomplish a relatively narrow range of purposes within a stated time horizon.

Groups and Teams in Organizations (cont’d)
• Team
– A group of workers who function as a unit, often with little or no supervision, to carry out work-related tasks, functions, and activities. – Sometimes are called self-managed teams, cross-functional teams, or high performance teams. – Benefits of teams • Give more responsibility for task performance to the workers who do the tasks. • Enable the organization to shed its bureaucracy and to promote flexibility and responsiveness.

Groups and Teams in Organizations (cont’d)
• Why People Join Groups and Teams
– – – – – Interpersonal attraction Group activities—activities of the group appeal to them. Group goals Need satisfaction—fulfills an individual’s need for affiliation. Instrumental benefits

Groups and Teams in Organizations (cont’d)
• Types of Teams
Problem-solving team Management team Work team Virtual team
Most popular team type; comprises knowledge workers who gather to solve a problem and then disband. Consists mainly of managers from various functional areas who coordinate the work among other teams. Are responsible for the daily work of the organization; when empowered, they are self-managed teams. A new type of team that interacts by computer; member enters and leaves the network as needed and may take turns serving as leader. Declining in popularity, quality circles, comprising of workers and supervisors, meet intermittently to discuss workplace problems.

Quality circle

Groups and Teams in Organizations (cont’d)
• Stages of Group and Team Development
– Forming – Storming • Defensiveness, intragroup competition, and the formation of factions; arguing among members, even when they agree. – Norming – Performing • The ability of the group/team to prevent or work through problems.

Characteristics of Groups and Teams
• Role
– The part an individual plays in helping the group reach its goals. • Task-specialist role • Socioemotional role—providing social and emotional support to others on the team.

• Role Structures
– The set of defined roles and interrelationships among those roles that the group or team members define and accept. – Are the result of role episodes in which the expected role is translated and defined into the enacted role. – Role ambiguity

Characteristics of Groups and Teams (cont’d)
• The Development of a Role
– The first two stages of role development are group processes as the group members let the individuals know what is expected of them. – The other two parts are individual processes as the new group members perceive and enact their roles.

Expected role

Sent role

Perceived role

Enacted role

Characteristics of Groups and Teams (cont’d)
• Role Structures
– Role ambiguity—occurs when the sent role is unclear. – Role conflict—occurs when the messages and cues comprising the sent role are clear but contradictory or mutually exclusive. • Interrole conflict • Intrarole conflict is caused by conflicting demands from different sources. • Intrasender conflict • Person-role conflict is the discrepancy between role requirements and an individual’s values, attitudes, and needs. – Role overload—occurs when role expectations exceed an individual’s capacities.

Characteristics of Groups and Teams (cont’d)
• Behavioral Norms
– Norms are standards of behavior that a group accepts and expects of its members. – Norms define the boundaries between acceptable and unacceptable behavior. • Norm generalization • Norm variation

Characteristics of Groups and Teams (cont’d)
• Behavioral Norms (cont’d)
– Norm conformity—individuals conform as response to: • Group or team pressure to conform to group behavior. • Individual traits that reflect their propensity to conform. • The influence of situational factors (e.g., group size and unanimity). – Individual responses to norm conformity: • Adopt the norms of the group. • Try to obey the ―spirit‖ of the norms while retaining individuality. – Socialization • Norm conformity that occurs when a person makes the transition from being an outsider to being and insider in the organization.

Characteristics of Groups and Teams (cont’d)
• Cohesiveness
– The extent to which members are loyal and committed to the group; the degree of mutual attractiveness within the group.

• Factors That Influence Group Cohesiveness
Factors That Increase Cohesiveness Intergroup competition Personal attraction Favorable evaluation Agreement on goals Interaction Factors That Reduce Cohesiveness Group size Disagreement on goals Intragroup competition Domination Unpleasant experiences

Characteristics of Groups and Teams (cont’d)
• Consequences of Cohesiveness
– The interaction between cohesiveness and performance norms • The best situation High is high cohesiveness combined with Moderate High high performance performance performance
Performance norms

Low performance

Lowest performance

Low Low



Characteristics of Groups and Teams (cont’d)
• Formal and Informal Leadership
– Informal leader • A person who engages in leadership activities but whose right to do so has not been formally recognized by the organization or group. • An informal leader, ideally, may also be the formal leader for the group or he may supplement the formal leader in fulfilling leadership roles. – Formal leader • A person who has been elected or designated to engage in leadership activities by the group members or who has been formally appointed or recognized by the organization as the leader for the group.

Interpersonal and Intergroup Conflict
• The Nature of Conflict
– Conflict – There is an optimal level of conflict in an organization: • Too little conflict and the organization becomes complacent and apathetic, and lacking in innovation and underperforms. • Too much conflict creates a dysfunctional organization where hostility and non-cooperation predominate, and suffers from low performance.

Interpersonal and Intergroup Conflict (cont’d)
Causes of Conflict
• Interpersonal Conflict
– Personality clash – Differing beliefs or perceptions

• Conflict Between Organization and the Environment
– Conflict with competition – Conflict with consumer groups

• Intergroup Conflict
– Interdependence – Different goals – Competition for scarce resources

Managing Conflict in Organizations
• Ways for Managing Conflict
Stimulating conflict
Increase competition among individual teams Hire outsiders to shake things up Change established procedures

Controlling conflict
Expand resource base Enhance coordination of interdependence Set supraordinate goals Match personalities and work habits of employee

Resolving and eliminating conflict
Avoid conflict Convince conflicting parties to compromise Bring conflicting parties together to confront and negotiate conflict

Basic Elements of Control

The Nature of Control in Organizations
• Control
– The regulation of organizational activities so that some targeted element of performance remains within acceptable limits. – Control provides a mechanism for adjusting performance to keep organizations moving in the right direction.

The Nature of Control in Organizations (cont’d)
• The Purpose of Control
– Control is one of the four basic management functions. The control function, in turn, has four basic purposes.
Adapt to environmental change Limit the accumulation of error

Control helps the organization

Cope with organizational complexity

Minimize costs

The Nature of Control in Organizations (cont’d)
• Types of Controls
– Areas of Control • Physical resources—inventory management, quality control, and equipment control. • Human resources • Information resources—sales and marketing forecasts, environmental analysis, public relations, production scheduling, and economic forecasting. • Financial resources

The Nature of Control in Organizations (cont’d)
• Types of Controls (cont’d)
– Levels of Control
Strategic control Structural control Operations control Financial control

– Responsibilities for Control • Controller—a position in organizations that helps line managers with their control activities.

The Nature of Control in Organizations (cont’d)
• Steps in the Control Process
– Establish Standards • Control standard—a target against which subsequent performance will be compared. – Measure Performance • Performance measurement is a constant, ongoing process. • Performance measures must be valid indicators (e.g., sales, costs, units produced) of performance. – Compare Performance Against Standards • Define what is a permissible deviation from the performance standard. – Determine the Need for Corrective Action • Maintain the status quo (do nothing). • Change the standard if it was set too high or too low.

Financial Control
• Financial Control
– Control of financial resources (i.e., revenues, shareholder investment) as they flow into the organization, are held by the organization (i.e., working capital, retained earnings), and flow out of the organization (i.e., payment of expenses). – Budgetary Control • Budgets may be established at any organizational level. • Budgets are typically for one year or less. • Budgets may be expressed in financial terms, units of output, or other quantifiable factors. • Budgets serve four purposes

Financial Control (cont’d)
• Types of Budgets
Type of Budget Financial budget Cash-flow or cash budget What Budget Shows Sources and uses of cash All sources of cash income and cash expenditures in monthly, weekly, or daily periods Costs of major assets such as a new plant, machinery, or land Forecast of the organization’s assets and liabilities in the event that all other budgets are met

Capital-expenditures budget Balance-sheet budget

*See page 664, table 20.1

Financial Control (cont’d)
• Types of Budgets (cont’d)
Type of Budget Operating budget Sales or revenue budget Expense budget Profit budget What Budget Shows Planned operations in financial terms Income the organization expects to receive from normal operations Anticipated expenses for the organization during the coming time period Anticipated differences between sales or revenues and expenses Planned operations in nonfinancial terms Hours of direct labor available for use Square feet or meters of space available for various functions Number of units to be produced during the coming time period

Nonmonetary budget Labor budget Space budget Production budget

*See page 664, table 20.1

Financial Control (cont’d)
Strengths and Weaknesses of Budgeting
– Budgets facilitate effective operational controls. – Budgets facilitate coordination and communication between departments. – Budgets establish records of organizational performance, which can enhance planning.

– Budgets can hamper operations if applied too rigidly. – Budgets can be time consuming to develop. – Budgets can limit innovation and change.

Other Tools of Financial Control
• Financial Statements
– Financial statement is a profile of some aspect of an organization’s financial circumstances. – Balance sheet • A listing of assets (current and fixed), liabilities (short- and longterm), and stockholders’ equity at a specific point in time (typically, year-ending) that summarizes the financial condition of the organization. – Income statement • Summary of financial performance over a period of time, usually one year.

Other Tools of Financial Control (cont’d)
• Ratio Analysis
– The calculation of of one or more financial ratios to assess some aspect of the organization’s financial health.

• Financial Audits
– Audit—an independent appraisal of an organization’s accounting, financial, and operational systems. • External audits—financial appraisals conducted by experts who are not employees of the organization to verify to external parties that the organization’s financial and accounting procedures are legal and proper. • Internal audits—appraisals conducted by employees of the organization to determine the accuracy, efficiency, and appropriateness of financial and accounting procedures.

Structural Control
• Bureaucratic Control
– A form of organizational control characterized by formal and mechanistic structural arrangements.

• Clan Control
– An approach to organizational control characterized by informal and organic structural arrangements.

Structural Control (cont’d)
• Organizational Control
Bureaucratic Control
Employee compliance Strict rules, formal controls, rigid hierarchy

Goal of control approach

Clan Control
Employee commitment Group norms, culture, self-control Directed toward enhanced performance above and beyond the minimum Flat structure, shared influence Directed at group performance Extended and informal

Degree of formality

Directed toward minimum levels of acceptable performance
Tall structure, top-down influence Directed at individual performance Limited and formal

Performance expectations

Organization design

Reward system


Strategic Control
• Integrating Strategy and Control
– Strategic control • Control aimed at ensuring that the organization is maintaining an effective alignment with its environment and moving toward achieving its strategic plan. • Focuses on structure, leadership, technology, human resources, and informational and operational systems. • Focuses on the extent to which implemented strategy achieves the organization’s goals. – International Strategic Control • Focuses on whether to manage the global organization from a centralized or decentralized perspective.

Managing Control in Organizations
• Characteristics of Effective Control
– Integration with Planning – Flexibility • The control system must be flexible enough to accommodate change. – Accuracy – Timeliness • A control system should provide information as often as necessary. – Objectivity

Managing Control in Organizations (cont’d)
• Resistance to Control
– Overcontrol
• Trying to control too many details becomes problematic when control affects employee behavior and employees perceive control attempts as unreasonable.

– Inappropriate Focus
– Rewards for Inefficiency
• Rewarding operational efficiency can lead employees to behave in ways that are not in the best interests of the organization.

– Too much accountability

Overcoming Resistance to Control
• Resistance to control can be overcome by:
– Designing effective controls that are properly integrated with organizational planning and aligned with organizational goals and standards. – Creating controls that are flexible, accurate, timely, and objective. – Encouraging employee participation in the planning and implementing of control systems. – Developing a system of checks and balances in the control systems through the use of multiple standards and information systems that allow the organization to verify the accuracy of performance indicators.

Managing Operations, Quality, and Productivity

The Nature of Operations Management
• Operations Management
– The set of managerial activities used by an organization to transform resource inputs into products, services, or both.

• The Importance of Operations
– Efficient and effective management of operations is necessary for competitiveness and overall organization performance.

The Nature of Operations Management (cont’d)
• Manufacturing and Production
– Manufacturing - A form of business that combines and transforms resource inputs into tangible outcomes that are then sold to others.

• Service Operations
– Service organization

• The Role of Operations in Organizational Strategy
– Operations management has a direct impact on competitiveness, quality, productivity, and effectiveness. – Operations management and organizational strategy have reciprocal effects on each other. – Strategic goals cannot be met if there are deficiencies and insufficiencies in operations resources.

Designing Operations Systems
• Determining Product-Service Mix
– Involves deciding how many and what kinds of products to offer in the marketplace.

• Capacity Decisions
– Involve choosing the amount of products, services, or both that can be produced by an organization. – High-risk decisions due to uncertainty about future product demand and the significant costs of additional, possibly excess, capacity.

Designing Operations Systems (cont’d)
• Facilities Decisions
– Facilities—the physical locations where products or services are created, stored, and distributed. • Location – Layout—the physical configuration of facilities, the arrangement of equipment within facilities, or both. • Product layout—facilities arranged around the product; used when large quantities of a single product are needed. • Process layout • Fixed position layout—facilities arranged around a single work area; used for the manufacture of large and complex products. • Cellular layout

Organizational Technologies
• Manufacturing Technology
– Technology—the set of processes and systems used by organizations to convert resources into products or services. – Automation—the process of designing work so that it can be completely or almost completely performed by machines. • Computer-assisted manufacturing (CAM) • Computer-aided design (CAD)—the use of computers to design and complete products and to simulate performance so that prototypes need not be constructed. • Flexible manufacturing systems—the use of robotic systems and computers to coordinate and integrate automated production and material handling facilities.

Organizational Technologies (cont’d)
• Manufacturing Technology (cont’d)
– Robotics—the science and technology of the construction, maintenance, and use of robots.

• Service Technology
– Services are rapidly moving toward automated systems and procedures (e.g., automated teller machines).

Implementing Operations Systems Through Supply Chain Management
• Supply Chain Management
– The process of managing operations control, resource and inventory acquisition and purchasing, and thus improving overall efficiency and effectiveness.

• Operations Management as Control
– Operations management can be used as a control by coordinating it with other organizational functions to insure that the system focuses on the elements that are most crucial to goal attainment.

Implementing Operations Systems Through Supply Chain Management (cont’d)
• Purchasing Management
– Controlling the buying of the materials and resources is at the heart of effective supply chain management.

• Inventory Management
– Inventory control (Materials Control) – Just-in-time (JIT) method • An inventory system than has necessary materials arriving as soon as they are needed (just in time) so that the production process is not interrupted.

Implementing Operations Systems Through Supply Chain Management (cont’d)
• Inventory Management (cont’d)
– Inventory Types, Purposes, and Sources
Type Raw materials Purpose Provide the materials needed to make the product Source of Control Purchasing models and systems Shop-floor control systems High-level production scheduling systems in conjunction with marketing Transportation and distribution control systems

Work-in-process Enables overall production to be divided into stages of manageable size Finished goods Provide ready supply of products on customer demand and enable long, efficient production runs Distributes products to customers

In-transit (pipeline)

Managing Total Quality
• Quality
– The totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs. – Quality is both a relative and absolute concept.

Managing Total Quality (cont’d)
• The Importance of Quality
– Malcolm Baldrige Award • Named after a former secretary of commerce, this prestigious award is given to firms that achieve major quality improvements. – Competition – Productivity • Quality enhancement programs decrease the number of defects, reduce resources dedicated to rework, and reduces the need for inspectors as employees become responsible for quality. – Costs • Improved quality reduces costs from customer returns, warranty, and lawsuits for faulty products, and lost sales to future customers.

Managing Total Quality (cont’d)
• Eight Dimensions of Quality
1. Performance. A product’s primary operating characteristic. Examples are automobile acceleration and a television’s picture clarity. 2. Features. Supplements to a product’s basic functioning characteristics, such as power windows on a car. 3. Reliability. A probability of not malfunctioning during a specified period.

4. Conformance. The degree to which a product’s design and operating characteristics meet established standards.
5. Durability. A measure of product life. 6. Serviceability. The speed and ease of repair. 7. Aesthetics. How a product looks, feels, tastes, and smells. 8. Perceived quality. As seen by a customer.

Managing Total Quality (cont’d)
• Total Quality Management (TQM)
– A strategic commitment by top management to change its whole approach to business and to make quality a guiding factor in everything the organization does.
Strategic commitment

Employee involvement




Quality improvements

Managing Total Quality (cont’d)
• TQM Tools and Techniques
– Benchmarking • the process of learning how and what other firms do in an exceptionally high-quality manner. – Outsourcing – Speed • the time needed by the organization to get something accomplished. – ISO 9000 • a set of quality standards created by the International Organization for Standardization by which firms can be certified. – Statistical Quality Control (SQC)

Managing Total Quality (cont’d)
• Guidelines for increasing the speed of operations:
– – – – Start from scratch Minimize the number of approvals needed to do something Use work teams as a basis for organization Integrate speed with the organization’s culture

Managing Productivity
• Productivity
– An economic measure of efficiency that summarizes the value of outputs relative to the value of the resources used to produce them.

• Levels of Productivity
– The unit of analysis used to calculate or define productivity. • Aggregate productivity • Industry productivity—the total productivity of all the firms in an industry. • Company productivity • Unit productivity • Individual productivity—the productivity attained by a single person.

Managing Productivity (cont’d)
Forms of Productivity
• Total factor productivity • Labor productivity
– An overall indicator of how well an organization uses all of its resources (i.e., labor, capital, materials, and energy) to create all of its products and services. Productivity = Outputs Inputs – A partial productivity ratio that uses only one category of resource (labor) to gage the organization’s productivity in utilizing that resource. Labor Outputs = Productivity Direct Labor

Managing Productivity (cont’d)
• The Importance of Productivity
– Productivity is a primary determinant of an organization’s level of profitability and its ability to survive.

• Productivity Trends
– The United States has the highest level of productivity in the world, although the gap is closing as other countries become more productive. – Manufacturing productivity growth continues to exceed that of the service sector.

Managing Productivity (cont’d)
• Improving Productivity
– Improving Operations • Spending more resources on research and development helps identify new products, new uses for existing products, and new methods for making products. – Increasing Employee Involvement • Increased employee participation can increase quality and productivity. • Cross-training of employees allows the firm to function with fewer workers.

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