2004 The McGraw-Hill Companies, Inc. All rights reserved.

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2 Chapter 1 Management and Its Evolution

3 Learning Objectives After reading this chapter, you should be able to: Understand the roles played by individuals, teams, and managers in carrying out company activities. Practice the four major functions of management Recognize the interpersonal, informational, and decisional roles played by top level managers. Apply the general skills needed to carry out managerial responsibilities. Integrate the major elements from the various perspectives of management theory.

4 The performance of organizations depends to a large extent on how their resources are allocated and their ability to adapt to changing conditions. Successful organizations know how to manage people and resources efficiently to accomplish organizational goals and to keep those goals in tune with changes in the external environment.

5 Management in the New Millennium A firm can be efficient by making the best use of people, money, physical plant, and technology. It is ineffective if its goals do not provide a sustained competitive advantage. A firm with excellent goals would fail if it hired the wrong people, lost key contributors, relied on outdated technology, and made poor investment decisions.

6 Levels of management Strategic Managers Tactical Managers Operational Managers

7 Strategic Managers The firm s senior executives with overall responsibility for the firm. Developing the company s goals Focus on long-term issues Emphasize the growth and overall effectiveness of the organization Concerned primarily with the interaction between the organization and its external environment.

8 Tactical Managers Responsible for translating the general goals and plans developed by strategic managers into specific objectives and activities. Shorter time horizon Coordination of resources These are middle managers

9 Operational Managers Lower-level managers who supervise the operations of the organization. Directly involved with non-management employees Implementing the specific plans developed with tactical managers. This is a critical role to the organization. Operational managers are the link between management and nonmanagement staff

10 Management Functions Planning Organizing Leading Controlling

11 Planning The management function that assesses the management environment to set future objectives and map out activities necessary to achieve those objectives. To be effective, the objectives of individuals, teams, and management should be coordinated to support the firm s mission.

12 Organizing The management function that determines how the firm s human, financial, physical, informational, and technical resources are arranged and coordinated to perform tasks to achieve desired goals. The deployment of resources to achieve strategic goals.

13 Leading The management function that energizes people to contribute their best individually and in cooperation with other people. This involves: Clearly communicating organizational goals Inspiring and motivating employees Providing an example for others to follow Guiding others Creating conditions that encourage management of diversity

14 Controlling The management function that measures performance, compares it to objectives, implements necessary changes, and monitors progress. Many of these issues involve feedback or identifying potential problems and taking corrective action.

15 Management as a set of roles Day-to-day management activities are routine, orderly, and rational. These include: Interpersonal roles - communication with superiors, peers, subordinates, and people from outside the organization. Information Roles - obtaining, interpreting, and giving out information. Decisional Roles - choosing among competing alternatives.

16 Management as a set of skills The four basic management functions require a set of skills to be carried out properly. Because most managerial tasks are unique, ambiguous, and situation-specific, there is seldom one best way to approach them.

17 Management as a set of skills Four major categories of skills will help you become a good manager: Strategic Skills - the ability to see the big picture, focus on key objectives without getting mired in details, and having a sense what is happening inside and outside the company. Task-Related Skills - the ability to define the best approach to accomplish personal and organizational objectives. They include consideration of all resources, including time, organizational structure, financial resources, and people. They also involve the ability to prioritize, remain flexible to make necessary changes, and ensure that value is being created

18 Management as a set of skills People-Related Skills - getting work done through others and with others. Include the ability to delegate tasks, share information, resolve conflicts, be a team player, and work with people from very different backgrounds Self-Awareness Skills - Being aware of your personal characteristics can help you adapt to others and can help you understand why you react to them the way you do. These skills can help you to avoid rushed judgments, appreciate the nuances of particular situations, size up opportunities, capitalize on your personal strengths, and avoid situations in which you are likely to fail.

19 Skills for Managerial Success Strategic Skills Environmental assessment scanning Strategy formulation Mapping strategic intent and defining mission Strategy implementation Human resource congruency Task Skills Setting and prioritizing objectives Developing plan of action and implementation Responding in a flexible manner Creating value Working through the organizational structure Allocating human resources Managing time efficiently

20 Skills for Managerial Success (continued) People Skills Delegating Influencing Motivating Handling conflict Win-win negotiating Networking Communicating Verbal Nonverbal Listening Cross-cultural management Heterogeneous teamwork Self-Awareness Skills Personal adaptability Understanding personal biases Internal locus of control

21 The Evolution of Management Thought Early Management Thought Classical Perspective Contemporary Management Perspectives Behavioral Perspective

22 Early Management Thought Early ideas about management strategy Sun Tzu, The Art of War Early ideas about leadership Nicolò Machiavelli, The Prince Early ideas about the design and organization of work Adam Smith, The Wealth of Nations division of labor

23 The Operational Perspective Scientific Management Frederick W. Taylor Quantitative Management Ford W. Harris Quality Management Walter A. Shewhart Bureaucratic Management Max Weber Administrative Management Henri Fayol

24 Taylor s Four Principles of Scientific Management Scientifically study each part of a task and develop the best method of performing the task. Carefully select workers and train them to perform the task by using the scientifically developed method. Cooperate fully with workers to ensure that they use the proper method. Divide work and responsibility so that management is responsible for planning work methods using scientific principles and workers are responsible for executing the work accordingly.

25 Key Characteristics of Weber s Ideal Bureaucracy Specialization of labor Formal rules and procedures Impersonality Well-defined hierarchy Career advancement based on merit

26 Fayol s 14 Principles of Management Division of work Authority Discipline Unity of command Unity of direction Subordination of individual interest to the general interest Remuneration Centralization Scalar chain Order Equity Stability and tenure Initiative Esprit de corps

27 Behavioral Perspective The behavioral perspective acknowledges that psychological and social processes of human behavior can result in improvements in productivity and work satisfaction. The Hawthorne effect - when a manager shows concern for employees, their motivation and productivity levels are likely to improve. Human Relations Approach - the relationship between employees and a supervisor is a vital aspect of management. Employee motivation Leadership style

28 Hawthorne Effect The discovery that paying special attention to employees motivates them to put greater effort into their jobs. (from the Hawthorne management studies, performed from at Western Electric Company s plant near Chicago)

29 Maslow s Hierarchy of Needs Self-Actualization Need for Self Esteem Need for Social Relations Need for Security Physical Needs

30 McGregor s Theory X and Theory Y Leaders and managers who hold Theory X assumptions believe that employees are inherently lazy and lack ambition. A negative perspective on human behavior. Leaders and managers who hold Theory Y assumptions believe that most employees do not dislike work and want to make useful contributions to the organization. A positive perspective on human behavior.

31 Contemporary Management Perspectives Systems Theory Contingency Theory The Learning Organization Perspective

32 Systems Theory Views the organization as a system of interrelated parts that function in a holistic way to achieve a common purpose. Systems theory concepts that affect management thinking: Open and closed systems Subsystems Synergy Equifinality

33 Contingency Theory States that there is no one best way to manage an organization. Because what works for one organization may not work for another Situational characteristics (contingencies) differ Managers need to understand the key contingencies that determine the most effective management practices in a given situation

34 The Learning Organization The management approach based on an organization anticipating change faster than its counterparts to have an advantage in the market over its competitors. There are two ways organizations can learn: Experimental learning External learning

35 Chapter 2 Managing in a Global Environment

36 Learning Objectives After reading this chapter, you should be able to: Understand the landscape of the global market. Develop an awareness for the role of culture in international management. Recognize the major options firms face when they choose a global strategy and the conditions that make a strategic choice most appropriate. Determine the best mode of entry into foreign markets given each firm s unique characteristics. Develop effective human resource practices for managing international subsidiaries. Become aware of ethical issues in international operations.

37 The Changing Pattern of International Business Changing world output and world trade picture The U.S. no longer dominates the world economy Large U.S. multinationals no longer dominate international business The centrally planned communist economies that made up roughly half the world suddenly become accessible to Western businesses The global economy has become more knowledgeintensive

38 The Changing Pattern of International Business (continued) Lowered trade barriers General Agreement on Tariffs and Trade (GATT) World Trade Organization (WTO) Integrated Economic Markets The European Union (EU) The North American Free Trade Act (NAFTA) The Association of Southeast Asian Nations (ASEAN) The Asia Pacific Economic Cooperation (APEC)

39 The Changing Pattern of International Business (continued) Global consumer preferences Tastes and preferences are converging Presence of mass media, exposure to goods from various countries, and standardized products Globalized production Cost efficiency

40 Example of Globalized Production Of the $20,000 sticker price of a General Motors Automobile LeMans: $6,000 goes to South Korea, where the car was assembled $3,000 goes to Japan for sophisticated high-tech parts (engines, transaxles, electronics) $800 goes to Taiwan, Singapore, and Japan for small parts $500 goes to Great Britain for advertising and marketing services $1,000 goes to Ireland for data processing $7,600 goes to GM and its external professional firms in the United States

41 The Changing Pattern of International Business (continued) Technological innovations Advances in communications, information processing, and transportation technology Fiber optics, wireless technology, the Internet and World Wide Web, and satellite technology Management across cultures Adaptation to business strategies, structures, operational policies, and human resource programs

42 Major Factors Affecting International Business General business environment Legal system Common law Civil law Muslim law Economic environment Cultural environment Culture shock

43 Dimensions of Culture Power Distance Individualism Uncertainty Avoidance Masculinity / Femininity Long-term/ Short-term Orientation

44 Entry Strategy and Strategic Alliances Four key decisions of a firm contemplating foreign expansion: Which countries to enter When to enter Scale of involvement How to enter

45 Choosing Foreign Countries The appeal of a particular country is likely to be greater when: The size of the domestic market is large The present wealth of consumers in that market is high and projected to grow in the future The needed resources are readily available The firm s product offerings are suitable to a particular market A positive business environment exists

46 When to Enter Foreign Countries and Scale of Involvement When to Enter First-mover advantages Pioneering costs Scale of Involvement Lowest if the firm simply decides to export its products to the foreign location Highest if the firm decides to have a wholly owned subsidiary in the foreign country

47 Modes of Entry Exporting Turnkey Project Licensing Franchising Wholly Owned Subsidiary Strategic Alliance Joint Venture

48 Advantages and Disadvantages of Various Modes of Entry Choices Mode of Entry Exporting Advantages Economies of scale Lower foreign expenses Disadvantages No low cost sales High transportation costs Potential tariffs Turnkey Project Access to closed markets Competition from local client Loss of competitive advantage Licensing Quick expansion Lower expenses and risks Lower political risk Loss of competitive advantage Limited ability to use profits in one country to increase competition in another country Franchising Quick expansion Lower development costs and risks Lower political risk Loss of competitive advantage Potential quality control problems Limited ability to use profits in one country to increase competition in another country

49 Advantages and Disadvantages of Various Modes of Entry Choices (continued) Mode of Entry Joint Venture Advantages Knowledge of local markets Lower development costs and risk Access to closed markets Disadvantages Potential for conflict of interest Loss of competitive advantage Strategic Alliance Access to closed markets Pooled resources increase partner s capabilities Complementary skills & assets Loss of competitive advantage Potential overestimation of partner s capabilities Wholly Owned Subsidiary Maximum control over proprietary knowledge/ technology Greater strategic flexibility Efficiencies of global production system Large capital outlay Lack of local knowledge Increased risk

50 Examples of Strategic Alliances General Electric Snecma of France Toshiba IBM Mitsui General Electric Toyota GM, TRW Canon Hewlett-Packard Mitsubishi Caterpillar

51 Basic Approaches to Managing an International Subsidiary Ethnocentric Approach Polycentric Approach Geocentric Approach

52 Why International Assignments End in Failure Career blockage Culture shock Lack of pre-departure cross-cultural training Overemphasis on technical qualifications Getting rid of a troublesome employee Family problems

53 Selection Key Human Resource Management Factors for Global Firms Selection criterion should include cultural sensitivity Training Length of assignment determines depth of training Cross-cultural training is critical to success Career Development International assignments should be part of career advancement plan Compensation and Benefits Incentives and quality-of-life concerns

54 Three approaches to cross-cultural training Impression Approach Affective Approach Information-Giving Approach

55 Ethics and Social Responsibility Globalization greatly increases the possibility that managers will face an ethical dilemma. Different cultures have different notions of right and wrong. U.S. Foreign Corrupt Practice Act (1977). Many firms and industry groups have developed their own codes of conduct for foreign operations.

56 Applications of Management Perspectives For the Manager Firms are prevented from capitalizing on business opportunities overseas by a lack of awareness of: How to enter foreign markets How to operate in diverse national settings By developing a better appreciation of the unique challenges that may confront them, managers can learn how to function well overseas. Groom managers for their role in globalization.

57 Applications of Management Perspectives For Managing Teams Many firms are entering joint ventures with companies in other countries. Joint ventures usually require teams made up of employees from different nations. The ability of international teams to work together in a climate of mutual respect is a key to success. This requires: Cross-cultural sensitivity. Understanding of the international context in which the firm operates.

58 Applications of Management Perspectives For Individuals The career mobility of employees is likely to be enhanced if they have international skills. International savvy is increasingly valued. Many firms require employees to have international experience before they can move into the upper management ranks.

59 Chapter 3 Managing Social Responsibility and Ethics

60 Learning Objectives After reading this chapter, you should be able to: Apply the four key ethical criteria that managers and employees should use when making business decisions. Understand why businesses establish codes of ethics as a method of guiding employee conduct. Recognize ways to encourage ethical behavior in business.

61 Learning Objectives(continued) Make ethical decisions in morally challenging situations. Value corporate social responsibility. Understand the influence of various stakeholders on a company s priorities, policies, plans, and goals.

62 Ethics and social responsibility should be high- priority concerns of all members of an organization, not just managers and executives.

63 What are Business Ethics? Ethics are principles that explain what is right or wrong, good or bad, and what is appropriate or inappropriate in various settings Business ethics provide standards or guidelines for the conduct and decision making of employees and managers.

64 What are Business Ethics? (continued) Without a code of ethics: There is no consensus regarding ethical principles Different people will use different ethical criteria in determining whether a practice or behavior is ethical or unethical Business ethics are not the same things as laws.

65 Ethics Approaches People utilize different ethical value systems These systems are based on: Personal experiences Religious background Education Family training

66 Approaches for Ethical Decision Making Utilitarianism A means of making decisions based on what is good for the greatest number of people. Individualism The degree to which a society values personal goals, autonomy, and privacy over group loyalty, commitment to group norms, involvement in collective activities, social cohesiveness, and intense socialization. Individual self-interest should be promoted as long as it does not harm others.

67 Approaches for Ethical Decision Making (continued) Rights approach A means of making decisions based on the belief that each person has fundamental human rights that should be respected and protected. Justice approach An approach to decision making based on treating all people fairly and consistently when making business decisions. Distributive Justice Procedural Justice

68 A company needs to ensure agreement about the relevant criteria on which to judge the ethics of a business decision so that people do not base decisions on personal value systems. Code of Ethics Corporate Credos Ethical Policy Statements

69 Numerous companies have adopted ethical policy statements that inform employees of acceptable standards of conduct St. Paul Companies Employees may accept gifts of inexpensive pens or appointment diaries, but not liquor, lavish entertainment, travel, or clothing. Eli Lilly and Company Employees may not conduct business with a company with which they or their relatives are associated, unless Eli Lily has given specific approval and authorization.

70 Company Examples (continued) General Dynamics Corporation Employees may not use or share inside information (that is not available to the general public) for personal gain. J.D. Edwards and Company Profanity and racial and sexual slurs are prohibited. Language should convey a loving, caring, and sensitive attitude toward other people.

71 Managing Ethics Ethics Training Ethical Structures Whistleblower Policies

72 Ethics Training Usually contains three elements: Messages from top executives emphasizing ethical business practices Discussion of Code of Ethics Procedures for discussing or reporting unethical behavior

73 Ethical Structures Ethical structures are the procedures and divisions or departments within a company that promotes and advocates ethical behavior. Two types of ethical structures: Ethics Officer Ethics Committee

74 Whistleblower Policies Should Include the Following Key Features The policy encourages reporting unethical conduct. Meaningful procedure to deal fairly with reported violations. Those who report violations are protected from retaliation. Alternative reporting procedures. Anonymous reporting to an ethics officer/committee. Feedback to employees on ethics violations. Top management support and involvement.

75 Eight Ways Mangers Can Influence the Ethical Behavior of Associates Take actions that develop trust. Act consistently. Be truthful and avoid white lies and manipulative actions. Demonstrate integrity. Meet with employees to discuss and define what is expected of them. Ensure employees are treated equitably. Adhere to clear standards that are seen as just and reasonable. Respect employees.

76 Four Examples of Ethical Dilemmas At Work Performance appraisal Employee discipline Office romance Giving gifts in the workplace

77 Performance Appraisals Formal evaluations of an employee s performance provided on a recurring basis To perform effective evaluations, the supervisor should devote substantial time to collecting accurate performance information Rating are used for: Letting employees know which skills they have mastered and which require improvement A basis for pay increases, future work assignments, promotions, and sometimes layoffs

78 Employee Discipline Guidelines for giving employee discipline in a fair and impartial way: Notify employees in advance of a company s work rules and the consequences for violating them Investigate the facts of an employee s misconduct before applying discipline Be consistent in the response to rule violations

79 Office Romances Suggestions for ethical employee conduct in a romantic relationship in the workplace: Public displays of affection at work should be eliminated Employees should be prohibited from dating people they directly supervise

80 Giving Gifts Ethical test of accepting gifts: Think about how a manager or co-worker would perceive the gift and the person who gave it If you feel uncomfortable explaining the gift, the discomfort probably means it would be ethically problematic The laws and ethics related to giving gifts between parties as a business practice are highly diverse from culture to culture

81 Social Responsibility Do corporations have a responsibility to conduct their affairs ethically? Should corporations be judged by the same standards as individuals? Should a business be concerned with more than the pursuit of profits for its shareholders?

82 Benefits of Social Responsibility Socially responsible companies: Are good corporate citizens to the community and to the environment. Policies can enhance the image of a company as well as its product brands from the perspective of the consumers. Have fewer conflicts with stakeholder groups who disagree with the company over how it uses its resources. Are more likely to influence stakeholders to become loyal customers and become advocates of the company s products. Research shows that corporate social responsibility is related to higher financial performance and the ability to recruit better quality job applicants.

83 Costs of Social Responsibility Socially responsible companies may: Lose focus on the business goals while focusing on goals related to good corporate citizenship. Divert needed resources for improving the business into other social responsibility projects which could put a company at a competitive disadvantage.

84 Organizational Stakeholders Owners Employees Governments Customers Social Activist Groups Competitors Community

85 Strategies for Managing Stakeholders Confrontation Damage Control Accommodation Proactive Approach

86 Strategies for Managing Stakeholders (continued) Confrontation strategies use courts, public relations, and lobbying to fight a stakeholder group. Damage control strategies admit mistakes and attempt to improve public image and their relationship with stakeholders. Accommodation strategies accept social responsibility for business practices and make appropriate changes. Proactive strategies signify a partnership with the stakeholder and go beyond the groups expectations.

87 Applications: Management is Everyone s Business For the Manager It is critical for a manager to be seen as an ethical person. Managers are role models for other employees and are held to a higher standard of personal conduct. Managers are responsible for creating an environment that supports ethical behavior and discourages unethical behavior. A manager should set goals for ethical conduct.

88 Applications: Management is Everyone s Business For Managing Teams Teams must place a high priority on behaving ethically. When teams or groups tolerate unethical conduct, it can be very difficult to extinguish this norm. Tolerance of unethical activities can lead to more serious breaches of conduct that can damage the reputation of the entire team.

89 Applications: Management is Everyone s Business For Individuals Front-page ethical test How would I feel if my decision became a headline in a local newspaper? Would I feel comfortable describing my actions or decision to a customer or stockholder? Golden rule ethical test Would I be willing to be treated in the same manner? Personal gain test Is an opportunity for personal gain clouding my judgment?

90 Chapter 4 Managing Organizational Culture and Change

91 Learning Objectives After reading this chapter, you should be able to: Build and maintain an appropriate company culture. Understand the roles of symbols, rites, ceremonies, heroes, and stories in an organization's culture. Identify the various categories of organizational cultures and the characteristics of people who fit best with them. Adapt to organizational change and the forces that drive change. Work with employees who resist change. Use tools to help implement change, including Lewin s threestep model of change and force field analysis.

92 Organizational Culture A system of shared values, assumptions, beliefs, and norms that unite the members of an organization. Reflects employees views about the way things are done around here. The culture specific to each firm affects how employees feel and act and the type of employee hired and retained by the company.

93 Levels of Corporate Culture Visible Culture Expressed Values Core Values

94 Functions Performed By Organizational Culture Employee Self-Management Sense of shared identity Facilitates commitment Stability Sense of continuity Satisfies need for predictability, security, and comfort

95 Functions Performed By Organizational Culture (cont) Socialization Internalizing or taking organizational values as one s own Implementation Support of the Organization s Strategy If strategy and culture reinforce each other, employees find it natural to be committed to the strategy

96 Stages of the Socialization Process Pre-arrival Encounter Metamorphosis

97 Creating and Sustaining Organizational Culture Cultural Symbols Company Rituals and Ceremonies Company Heroes Stories Organizational Policies and Decision Making Leadership Language

98 Characteristics and Types of Organizational Culture Cultural Uniformity versus Heterogeneity Strong versus Weak Cultures Culture versus Formalization National versus Organizational Culture

99 Characteristics and Types of Organizational Culture (continued) Types: Traditional Control or Employee Involvement Traditional control emphasizes the chain of command relies on top-down control and orders Employee involvement emphasizes participation involvement and

100 Four Types of Culture Classification Baseball team culture--rapidly changing environment Club culture--seeks loyal, committed people Academy culture--hires experts who are willing to make a slow steady climb up a ladder Fortress culture--focused on surviving and reversing sagging fortunes

101 Competing Values Framework Based on two dimensions: focus and control Focus--whether the primary attention of the organization is directed toward internal dynamics or directed outward toward the external environment Control--the extent to which the organization is flexible or fixed in how it coordinates and controls activities

102 Types of Change Planned Change--change that is anticipated and allows for advanced preparation Dynamic Change--change that is ongoing or happens so quickly that the impact on the organization cannot be anticipated and specific preparations cannot be made

103 Forces for Change: Environmental Forces Put pressure on a firm s relationships with customers, suppliers, and employees. Environmental forces include: Technology Market forces Political and regulatory agencies and laws Social trends

104 Forces for Change: Internal Forces Arise from events within the company. May originate with top executives and managers and travel in a top-down direction. May originate with front-line employees or labor unions and travel in a bottom-up direction.

105 Resistance to Change Self-Interest Cultures that Value Tradition Lack of Trust and Understanding Different Perspectives and Goals Uncertainty

106 Models of Organizational Change: The Star Model The Star Model: Five Points Types of change-evolutionary or transformational Structure Reward system Processes People

107 Lewin s Three-Step Model of Organizational Change Unfreezing--melting away resistance Change--departure from the status quo Refreezing--change becomes routine

108 Lewin s Force Field Analysis Model Increase driving forces that drive change Reduce restraining forces that resist change or do both

109 Force-field Model of Change Desired state Restraining forces Status quo Driving forces Time

110 Implementing Organizational Change Top-down Change Change Agents Bottom-up Change

111 Eight Steps to a Planned Organizational Change Establish a sense of urgency. Form a powerful coalition of supporters of change. Create a vision of change. Communicate the vision of change. Empower others to act on the vision. Plan and create shortterm wins. Consolidate improvements and produce still more change. Institutionalize new approaches.

112 Tactics for Introducing Change Communication and Education Employee Involvement Negotiation Coercion Top-Management Support

113 Applications: Management is Everyone s Business For the Manager Certain types of changes routinely provoke strong employee resistance: Changes that affect skill requirements. Changes that represent economic or status loss. Changes that involve disruption of social relationships. By being aware of the sources of resistance, managers can better apply tactics to make the changes more palatable for employees.

114 Applications: Management is Everyone s Business For Managing Teams Teams can help test the waters for a proposed change. Various employee teams can serve as focus groups in order to find ways to make a change in policy more acceptable to employees.

115 Applications: Management is Everyone s Business For Individuals Learning the specifics about the company culture can help you determine your fit with the organization and the possibility of succeeding. Ask questions and gather information during the recruiting process to get a handle on the company culture and assess whether you will function comfortably in it.

116 Chapter 5 Managing the Planning Process

117 Learning Objectives After reading this chapter, you should be able to: To take advantage of the benefits of planning at every level of the organization Recognize major planning pitfalls and develop quality planning programs Balance formal planning with opportunistic planning Establish objectives to drive the entire planning process Prepare action plans at the strategic, tactical, and operational levels Learn how to implement plans successfully

118 What is planning? The management function that: assesses the management environment to set future objectives; and maps out actions necessary to achieve those objectives. Planned actions require careful resource allocation. Plans must be accompanied by implementation guidelines.

119 Key Elements to a Plan Objectives Actions Resource Allocation Implementation Guidelines

120 Benefits of Planning Develop a sense of direction and purpose Identifying the factors that affect the organization Assessment of external forces Encouraging participation Coordination of efforts Establishment of priorities Focusing attention on different time horizons

121 Benefits of planning (continued) Understanding circumstances contributing to past success or failure Assurance of the availability of adequate resources Establishing performance standards Supporting organizational control systems Developing what if scenarios Management development

122 The Pitfalls of Planning Poor forecasts of future conditions Plans imposed from above Planning as a self-contained activity Extensive bureaucratization Inflexible adherence to objectives and processes

123 Keys to Successful Planning Involving different organizational levels Using both numerical and judgmental methods Viewing planning as continuous and capable of adapting to change Avoiding paralysis of the analysis Concentrating on a manageable set of issues

124 Formal Planning and Opportunistic Planning Formal planning systems are designed to: Deliberately identify objectives; and to Structure the major tasks of the organization to accomplish them. Opportunistic planning involves: Programmatic actions triggered by unforeseen circumstances. It can coexist with formal planning and can help the formal plan function more smoothly.

125 Setting objectives The Formal Planning Charting a course of action to meet the objectives Implementation Process Involves

126 Setting Objectives Objectives are more general at the top and become more specific at the lower level Overall objectives of the organization reflect its mission Objectives should be specific and measurable. Objectives should be challenging and achievable Objectives should specify a timetable or deadline for accomplishment. Objectives should be prioritized.

127 Key Steps of the MBO Cycle Insert Figure 5.2 here

128 Charting a Course of Action Strategic Action Plans Tactical Action Plans Operational Action Plans

129 To be effective, a strategic action plan should meet the following criteria: Proactivity The degree to which the strategic action plan takes a long-term view of the future. Congruency The extent to which the strategic action plan fits with organizational characteristics and the external environment. Synergy The integration of the efforts of various organizational subunits to better accomplish corporate-wide business objectives.

130 Two important aspects of tactical action plans: Division of Labor The formal assignment of authority and responsibility to job holders. Helps ensure that tasks of jobholders are appropriate for accomplishing the department s tactical action plan, which in turn should support the organization s strategic action plan. Budgeting Controlling and allocating funds. Variable budgeting Moving budgeting

131 A Typical Operating System Control Inputs Transformation Outcome Feedback Loop

132 Benefits of Operational Planning The opportunity to use feedback for continued incremental learning. The ability to visualize alternative types of operations i.e., alternative ways to use resources to create the product or service. The ability to predict the effects of modifications in operations on the efficiency of operations. The ability to evaluate the effectiveness of operations.

133 Implementation Means of implementation: Authority Persuasion Policy Feedback mechanism

134 A Six-Stage Approach to Facilitate Organizational Problem Solving Identify performance gaps. Identify tasks and work processes necessary for accomplishing the plan. Check for organizational congruence. If any congruencies or inconsistencies are found, intervene to create alignment in order to effectively implement the plan. Execute the plan. Learn from the consequences.

135 Mechanisms to Deal with Organizational Change Deal with power and politics Reduce individual anxiety and resistance Maintaining control during the transition period

136 Applications: Management is Everyone s Business For the Manager Managers are expected to collaborate with employees to: Define objectives for their unit. Clearly communicate the relative importance of those objectives. Managers need to develop a plan to accomplish the objectives and lay out the implementation steps. A good planning process: Smoothes the way change is conducted. Gives employees a sense of continuity.

137 Applications: Management is Everyone s Business For Managing Teams Teams require a great deal of coordination and integration to function effectively. A sound planning process can help teams: Define what they are trying to accomplish. Develop mechanisms to achieve objectives in a more efficient manner.

138 Applications: Management is Everyone s Business For Individuals Efficient time allocation requires setting personal objectives and determining the best way to accomplish them. It is important to: periodically reassess objectives, redefining or changing them as needed, and adjusting implementation plans accordingly.

139 Chapter 6 Decision Making

140 Learning Objectives After reading this chapter, you should be able to: Know how to implement the six stages of management decision making. Apply the criteria of quality and acceptance to a decision. Recognize the characteristics of management decisions: programmability, uncertainty, risk, conflict, and decision scope. Reap the advantages and avoid the disadvantages of group decision making. Develop the skill of time management to allow adequate time to make decisions. Know when to delegate, and do so wisely.

141 Introduction Making decisions under conditions of risk and uncertainty is one of the most important activities that managers engage in. Generally, there is a lack of information and a limited amount of time available to make the decision. Procrastinating and not making a decision sometimes has greater risk than making it.

142 Decision Making The process of identifying problems and opportunities and resolving them. Management decisions can be made by managers, teams, or individual employees, depending on: The scope of the decision, and The design and structure of the organization.

143 Characteristics of Management Decision Making Programmability Decision Scope Uncertainty Conflict Risk Crisis

144 Characteristics of Management Decision Making (Cont) Programmed Decisions Programmability Non-programmed Decisions Certainty Uncertainty Uncertainty

145 Characteristics of Management Decision Making (Cont) Risk occurs when the outcome of management decision is uncertain Risk has both positive and negative aspects Decision environment for risk vary depending upon company culture and size Conflict occurs when there are opposing goals, scares resources, or differences in priorities Crisis a situation that involves small amounts of time to make a decision that can impact the survival of the organization

146 Characteristics of Management Decision Making (Cont) Decision Scope the effect and time horizon of a decision Strategic Decisions long term perspective of 2-5 years and affect on the organization Tactical Decisions short term perspective of 1 year or less and focus on subunits Operational Decisions shortest time perspective, generally less than a year, often measured on a daily or weekly basis

147 Stages of Decision Making Identifying and diagnosing the problem Generating alternative solutions Evaluating alternatives Selecting the best alternative Implementing the decision Evaluating the decision

148 Typical problems that require decisions A high level of employee turnover. A reduction in firm profits. Unacceptable levels of shrinkage in a store. Lower than planned quality of finished goods. An unexpected increase in workplace injuries. The invention of a new technology that can increase the productivity of the workforce.

149 Evaluating Alternatives Decision criteria should be related to the performance goals of the organization and its subunits. Decision criteria can include: Costs Profits Timeliness Whether the decision will work Fairness

150 Evaluating Alternatives (continued) A practical way to apply decision criteria is to consider: Decision quality aspect of decision making based on such facts as costs, revenues, and product design specifications. Decision acceptance aspect of decision making based on people s feelings.

151 Approaches to selecting the best alternative Optimizing selecting the best alternative from among multiple criteria. Satisficing selecting the first alternative solution that meets a minimum criterion.

152 Key factors for successful implementation Providing resources (staff, budgets, office space) that will be needed for the activities that are required for successful implementation. Exercising leadership to persuade others to move the implementation forward. Developing communication and information systems that enable management to know if the decision alternative is meeting its planned objectives. Recognition and rewards for individuals and teams that are successful with implementation.

153 Assumptions of the Rational Decision Making Process The problem is clear and unambiguous. There is a single, well-defined goal that all parties agree to. Full information is available about criteria. All the alternatives and their consequences are known.

154 Assumptions of the Rational Decision Making Process (continued) The decision preferences are clear. The decision preferences are constant and stable over time. There are no time and cost constraints affecting the decision. The decision solution will maximize the economic payoff.

155 Factors That Limit Rational Decision Making Organization Politics Emotions and Personal Preferences Illusion of Control

156 Satisficing Model Nonrational Decision Making Models Bounded rationality the ability of a manager to be perfectly rational is limited by factors such as cognitive capacity and time constraints Therefore, decision makers apply heuristics, or decision rules, that quickly eliminate alternatives By using the heuristic known as satisficing, a manager seeks out the first decision alternative that appears to be satisfactory Satisficing is an accurate model many management decisions.

157 Garbage Can Model Nonrational Decision Making Models (continued) This model suggests that managers have a set of preestablished solutions to problems located in garbage cans. The garbage can model is likely to be used when decision makers are undisciplined and have no clear immediate goals. The decision making process lacks structure This can lead to serious difficulties

158 Advantages and Disadvantages of Group Decision Making Advantages Increased acceptance Greater pool of knowledge Different perspectives Greater comprehension Training ground Disadvantages Social pressure Minority domination Logrolling Goal displacement Groupthink

159 Managing Group Decision Making Leadership Style Devil s s Advocate Role Stimulating Creativity

160 Leader Decision Making Styles Decide and persuade Discover facts and decide Consult and decide Consult with group and decide Group decision

161 Decision Making Techniques to Stimulate Group Creativity Brainstorming Storyboarding Delphi Technique Nominal Group Technique (NGT)

162 Skills for decision making process Time management skills To make good decisions, managers need time to understand the problem and develop creative solutions. 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.

163 Effective Time Management Practices Plan a list of things that need to be done today. Plan weekly, monthly, and annual schedules of activities. Schedule difficult and challenging activities when you are at your highest level of energy and alertness. Set deadlines.

164 Effective Time Management Practices (continued) Answer phone messages and in batches during a lull in your work schedule. Have a place to work uninterrupted. Do something productive during non-productive activities.

165 Effective Delegation Determine what you want done. Match the desired task with the most appropriate employee. Communicate clearly when assigning the task. Ask questions to make sure the task is fully understood. Set clear guidelines.

166 Effective Delegation (continued) Keep communication channels open. Allow employees to do the task the way they feel comfortable doing it. Trust employees capabilities. Check on the progress of the assignment. Hold the employee responsible for the work. Recognize what the employee has done, and show appropriate appreciation.

167 Applications of Management Perspectives For the Manager Procrastination is a major barrier to effective decision making. Managers need to establish clear priorities by: Determining which activities produce the greatest value. Setting dates for completion of these activities. Setting priorities forces managers to make decisions and helps control procrastination.

168 Applications of Management Perspectives For Managing Teams Overly relying on team meetings is a barrier to making effective team decisions. A team should be able to manage its workflow if: Subgroups or individual team members are assigned tasks; and They are given responsibility for decision making associated with these tasks.

169 Applications of Management Perspectives For Individuals When you feel fearful, angry, anxious, or frustrated: You are not likely to think clearly and focus on the problem. It is not a good time to make a decision. It is better to postpone the decision until after you have coped with the source of the stress and are in a more comfortable emotional state.