Management People Performance Change Luis R. Gomez-Mejia David Balk First Edition

Transcription

1 Management People Performance Change Luis R. Gomez-Mejia David Balk First Edition

2 Pearson Education Limited Edinburgh Gate Harlow Essex CM20 2JE England and Associated Companies throughout the world Visit us on the World Wide Web at: Pearson Education Limited 2014 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without either the prior written permission of the publisher or a licence permitting restricted copying in the United Kingdom issued by the Copyright Licensing Agency Ltd, Saffron House, 6 10 Kirby Street, London EC1N 8TS. All trademarks used herein are the property of their respective owners. The use of any trademark in this text does not vest in the author or publisher any trademark ownership rights in such trademarks, nor does the use of such trademarks imply any affiliation with or endorsement of this book by such owners. ISBN 10: ISBN 13: British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Printed in the United States of America

3 Decision Making From Chapter 6 of Management: People, Performance, Change, 1/e. Luis R. Gomez-Mejia. David B. Balkin. Copyright 2012 by Pearson Education. Published by Prentice Hall. All rights reserved. 155

4 Learning Objectives 1 Recognize the nature of management decisions: programmability, uncertainty, risk, conflict, decision scope, and crisis situations. 2 Utilize the six steps of decision making. 3 Apply the criteria of quality and acceptance to a decision. 4 Reap the benefits and avoid the problems of group decision making. 5 Develop time management skills to generate adequate time to make decisions. 6 Know when to delegate, and how to do so wisely. Google Decides about China Some management decisions are not only difficult, they are risky and even unpopular, as Yahoo! and Microsoft found when they entered the Internet market in China. To obtain licenses to conduct business there, both companies agreed to the many demands and restrictions placed on their operations by the Chinese government. They have withstood a storm of criticism from rights groups, the media, and a Congressional subcommittee, most of it springing from the results of their decisions. At the request of the Chinese government, Microsoft shut down the blog of a popular and outspoken writer in Beijing. The company also censors words the government considers sensitive, using its blog-hosting software. Yahoo! gave Chinese authorities information about a journalist who had sent outspoken s to a U.S. human rights organization. He and two other dissidents have since been jailed based on the information. In this uncertain environment, the belated decision by Google, the world s biggest search engine, to finally follow Yahoo! and Microsoft into the Chinese market was a difficult one that entailed a great deal of uncertainty, risk, and conflict. Wall Street analysts approved of the decision, given that with 130 million users, China is second only to the United States in its rate of Internet use and is expected soon to be first by a wide margin. To ignore such a huge market is, many feel, out of the question. Others argue that some 156

5 Decision Making material restricted by Western companies slips by the censors and so does reach Chinese Internet users despite the government s efforts. The companies themselves say that they are less than enthusiastic about the restrictions placed on them, but that human rights conditions in China will not improve without widespread communication. But in spite of these defenses, and the argument that it is providing a service Chinese consumers would not otherwise have, Google has come in for its share of criticism for its decision as well. Like Yahoo! s and Microsoft s offerings, Google s Chinese search engine includes a build-in censor to prevent access to content that might be considered politically sensitive by the Chinese government, such as Falun Gong (the name of a spiritual movement banned in China) and multiparty elections. Google also restricts certain news sites and information about democracy. Unlike its competitors, however, Google already hosts a Chinese-language site from a location outside China that it does not censor, though the Chinese government has tried to limit access to it from within the country. Google is also alone in notifying users when search results have been filtered out, whether by censorship or for any other reason (such as copyright laws). Google has chosen not to introduce or blogging services, which the Chinese government insists must be heavily controlled when based in China. These products, says Google s senior policy counsel Andrew McLaughlin, will be introduced only when we are comfortable that we can do so in a way that strikes a proper balance among our commitments to satisfy users interests, expand access to information, and respond to local conditions. After operating in China for several years, in 2010 Google considered closing down its operations within China due to several attempts by the Chinese government to hack into Google s system and ever stronger government censorship of searches. Sources: The Economist, The Panda Has Two Faces, April 3, 2010, p. 70; Nicholas Kristoff, China s Cyberdissidents and the Yahoos at Yahoo, New York Times, February 19, 2006, p. WK13; Tom Zeller, Jr., Web Firms Questioned on Dealings in China, New York Times, February 16, 2006; Steven Levy, Google and the China Syndrome, Newsweek, February 13, 2006, accessed at and Ben Elgin, Google s Dicey Dance in China, BusinessWeek Online, January 25, CRITICAL THINKING QUESTIONS 1. How would you characterize the nature of Google s decision to enter China in terms of programmability, uncertainty, risk, conflict, and decision scope? 2. Did Google approach its decision differently from the way Yahoo! and Microsoft did? What might account for any differences? 157

6 DECISION MAKING SKILLS FOR MANAGING 1 Decision Making Time management skills. To make good decisions, managers need time to understand the problem and develop creative solutions. They need to be proactive by planning activities and priorities so that enough time is budgeted for the important decisions to be made, and also to become aware of activities that waste time. Delegation skills. Managers who know how to delegate are able to accomplish more than those who feel the need to be involved in every decision, no matter how trivial. Many managers mistakenly believe that subordinates are not able to make effective decisions. Managers unable to delegate find themselves with too many tasks and decisions and too little time to do everything well. At the end of the chapter in our Concluding Thoughts, we will revisit the critical thinking questions regarding the decisions made at Google, Yahoo!, and Microsoft. The world of management in the new millennium is filled with risk and uncertainty. Most of the time, there is a lack of information and a limited amount of time available for managers to make decisions. In some cases, procrastinating and not making a decision (thus sustaining the status quo) takes on greater risk than a proactive change. Each management decision can contribute to or hinder the success of an enterprise. This chapter examines the characteristics of managerial decisions. It identifies the stages that decision makers move through from the beginning to the implementation of the decision. An explanation of group decision making is also provided. Finally, the chapter examines time management and delegation, two skills helpful in the decision-making process. Skills for Managing 1 lists the skills managers need to develop for the decision-making process. decision making The process of identifying problems and opportunities and resolving them. programmed decision Identifying a problem and matching the problem with established routines and procedures for resolving it. nonprogrammed decision The process of identifying and solving a problem when a situation is unique and there are not previously established routines or procedures that can be used as guides. Characteristics of Management Decision Making Decision making is the process of identifying problems and opportunities and resolving them or taking advantage of them. Company decisions are made by managers, teams, and individual employees, depending on the scope of the decision and the design and structure of the organization. Organizations with decentralized structures delegate more decisions to teams and front-line employees. This definition of decision making emphasizes both identifying and resolving a problem. At Intel, for example, CEO Andy Grove determined that the problem was that competing in the memory chip market was draining resources that could be better deployed in the microprocessor chip market. He made the decision to withdraw from the memory chip market, which entailed closing plants and selling off assets, and to concentrate on microprocessors, which involved investing in expanded facilities. The characteristics of management decision making include programmability, uncertainty, risk, conflict, scope, and crisis. Programmability Many times, there are established routines and procedures for resolving company problems. These are programmed decisions. For example, the job of a retail sales clerk consists primarily of making programmed decisions about stocking shelves, taking sales orders, operating a cash register, and constructing sales displays that attract customers. Well-developed procedures are established for each of these tasks in sales policy and procedure manuals developed by the marketing unit. A nonprogrammed decision occurs when the situation is unique and there are no previously established routines or procedures that can be used. Situations that require nonprogrammed decisions are poorly defined and unstructured, yet they have important consequences for the organization. Managers and professionals who have more knowledge and experience 158

7 DECISION MAKING make most nonprogrammed decisions. For example, an outside sales representative with a sales territory and the responsibility for calling on new and continuing customers has a job that requires nonprogrammed decision making. The sales representative must find and call on potential customers, develop rapport with them, determine whether they need the product, and close the sale. Since each customer s needs and financial situation are different, the sales representative must make a series of nonprogrammed decisions. Nonprogrammed decisions tend to be more important than programmed ones because they are more complicated and difficult to make and are likely to have a greater effect on organization performance. Managers are likely to delegate programmed decisions to subordinates, which frees up more time to make the more difficult nonprogrammed decisions. Uncertainty If all the information needed is available, a decision may be made under a condition of certainty. An automobile manufacturer plans for annual employee labor costs because the company has a contract with a labor union and knows with complete certainty what employee wage rates will be. Of course, not all the factors affecting businesses can be controlled by a contract. And when contracts expire, there will be uncertainty until the terms of the new contract are finalized. Most management decisions are made under varying levels of uncertainty. Uncertainty means that incomplete information is available to make a management decision. The decision maker does not know all the alternatives, the risks associated with each, or the outcomes associated with the alternatives. Many important management decisions must be made under high levels of uncertainty. When a company launches a new product, there is uncertainty about whether consumers will buy it. New Coke was rejected by consumers, even though market research gathered prior to the decision revealed that most consumers liked cola that tasted sweeter than traditional Coke. In the network television industry, there is about a one in ten chance that a new prime-time television program will generate sufficient viewer ratings to make a profit. Sometimes television executives must rely on gut instincts because there is little information available. The situation comedy Seinfeld generated poor ratings in its first two seasons, but a few executives championed the show and ultimately it became one of NBC s profitable programs. Risk The degree of uncertainty about the outcome of a management decision is the degree of risk. Under a state of risk, the availability of each alternative and its outcome are associated with probability estimates. For example, medical research provides probability estimates for the risk of survival or mortality after five years of a medical diagnosis of a patient for lung cancer. Risk has both positive and negative aspects. When a manager of mutual funds tries to maximize the profit potential of the fund stock portfolio and minimize the loss potential when the market is falling, the manager copes with both aspects of risk. Many mutual fund managers select some stocks from countercyclical industries, which move in opposite directions in response to market fluctuations, in order to balance the risk by ensuring that all the fund s stocks do not lose value when the economy is declining. Decision environments for risk vary depending on company culture and size. People who work in entrepreneurial firms must be more comfortable with making risky decisions than people who work in large corporations with established procedures. A high-technology company that must deliver cutting-edge products is likely to promote a culture of risk taking, while a U.S. government agency that can plan cash flow for 25 years into the future based on demographic forecasts, such as the Social Security Administration, is more likely to support a culture of risk avoidance. Companies with risk-taking cultures encourage decision makers to take moderate risks. Such companies even tolerate some failures as part of the learning process. Organizations with risk-avoidance cultures are less tolerant of decision outcomes that result in failure. Management Is Everyone s Business 1 provides some examples of how individuals deal with decision-making risk in everyday life. certainty The condition when all the information needed to make a decision is available. uncertainty The condition when the information available to make a management decision is incomplete. risk The level of uncertainty as to the outcome of a management decision. Conflict It is always difficult to get everyone to agree about what to do. Management decision making is often characterized by conflict over opposing goals, utilization of scarce resources, and other priorities. To ensure that the implementation of the decision will go smoothly, effective 159