1-3 Management Key Concepts• Organizations: People working together and coordinating their actions to achieve specific goals.• Goal: A desired future condition that the organization seeks to achieve.• Management: The process of using organizational resources to achieve the organization’s goals by... – Planning, Organizing, Leading, and Controlling
1-4 Additional Key Concepts• Resources are organizational assets and include: • People, • Machinery, • Raw materials, • Information, skills, • Financial capital.• Managers are the people responsible for supervising the use of an organization’s resources to meet its goals.
1-6 Organizational Performance• Measures how efficiently and effectively managers use resources to satisfy customers and achieve goals. – Efficiency: Achievement of the ends with least amount of resources. – Effectiveness:. Achievement of objectives.
1-8 Four Functions of Management Planning Choose GoalsControlling OrganizingMonitor & measure Working together Leading Coordinate
1-9 Planning Planning is the process used by managers toidentify and select appropriate goals andcourses of action for an organization. 3 steps to good planning : 1. Which goals should be pursued? 2. How should the goal be attained? 3. How should resources be allocated? – The planning function determines how effective and efficient the organization is and determines the strategy of the organization.
1-10 Organizing• In organizing, managers create the structure of working relationships between organizational members that best allows them to work together and achieve goals.• Managers will group people into departments according to the tasks performed. – Managers will also lay out lines of authority and responsibility for members.• An organizational structure is the outcome of organizing. This structure coordinates and motivates employees so that they work together to achieve goals.
1-11 Leading• In leading, managers determine direction, state a clear vision for employees to follow, and help employees understand the role they play in attaining goals.• Leadership involves a manager using power, influence, vision, persuasion, and communication skills.• The outcome of the leading function is a high level of motivation and commitment from employees to the organization.
1-12 Controlling• In controlling, managers evaluate how well the organization is achieving its goals and takes corrective action to improve performance.• Managers will monitor individuals, departments, and the organization to determine if desired performance has been reached. – Managers will also take action to increase performance as required.• The outcome of the controlling function is the accurate measurement of performance and regulation of efficiency and effectiveness.
1-13 Management Levels Organizations often have 3 levels of managers: First-line Managers: responsible for day-to-day operation. They supervise the people performing the activities required to make the good or service. Middle Managers: Supervise first-line managers. They are also responsible to find the best way to use departmental resources to achieve goals. Top Managers: Responsible for the performance of all departments and have cross-departmental responsibility. They establish organizational goals and monitor middle managers.
1-21 Managerial SkillsThere are three skill sets that managers needto perform effectively. 1. Conceptual skills: the ability to analyze and diagnose a situation and find the cause and effect. 2. Human skills: the ability to understand, alter, lead, and control people’s behavior. 3. Technical skills: the job-specific knowledge required to perform a task. Common examples include marketing, accounting, and manufacturing.All three skills are enhanced through formaltraining, reading, and practice.
1-22Skill Type Needed by Manager Level TopManagers MiddleManagers LineManagers Conceptual Human Technical
1-23 Management Challenges• Increasing number of global organizations.• Building competitive advantage through superior efficiency, quality, innovation, and responsiveness.• Increasing performance while remaining ethical managers.• Managing an increasingly diverse work force.• Using new technologies.
Scientific Management theory Modern management began in the late 19th century. Organizations were seeking ways to better satisfy customer needs. Machinery was changing the way goods were produced. Managers had to increase the efficiency of the worker-task mix.
Job specialization• Adam Smith, 18th century economist, found firms manufactured pins in two ways: – Craft -- each worker did all steps. – Factory -- each worker specialized in one step.• Smith found that the factory method had much higher productivity. – Each worker became very skilled at one, specific task.• Breaking down the total job allowed for the division of labor.
Evolution of Management Theory Org. Environment Management Science Behavioral Management Administrative ManagementScientific Management 1940 2000
Scientific Management• Defined by Frederick Taylor, late 1800’s.• The systematic study of the relationships between people and tasks to redesign the work for higher efficiency. – Taylor sought to reduce the time a worker spent on each task by optimizing the way the task was done.
The 4 Principles Four Principles to increase efficiency: 1. Study the way the job is performed now & determine new ways to do it. ▪ Gather detailed, time and motion information. ▪ Try different methods to see which is best. 2. Codify the new method into rules. ▪ Teach to all workers. 3. Select workers whose skills match the rules set in Step 2. 4. Establish a fair level of performance and pay for higher performance. ▪ Workers should benefit from higher output.
Problems of Scientific Management• Managers often implemented only the increased output side of Taylor’s plan. – They did not allow workers to share in increased output. – Specialized jobs became very boring, dull. – Workers ended up distrusting Scientific Management.• Workers could purposely “under-perform”• Management responded with increased use of machines.
The Gilbreths• Frank and Lillian Gilbreth refined Taylor’s methods. – Made many improvements to time and motion studies.• Time and motion studies: – 1. Break down each action into components. – 2. Find better ways to perform it. – 3. Reorganize each action to be more efficient.• Gilbreths also studied fatigue problems, lighting, heating and other worker issues.
Administrative Management Seeks to create an organization that leads to both efficiency and effectiveness. Max Weber developed the concept of bureaucracy. A formal system of organization and administration to ensure effectiveness and efficiency. Weber developed the Five principles shown in Figure 2.2.
Bureaucratic PrinciplesFigure 2.2 Written rules System of task A Bureaucracy Hierarchy of relationships should have authority Fair evaluation and reward
Key points of BureaucracyAuthority is the power to hold people accountable for their actions.Positions in the firm should be held based on performance not social contacts.Position duties are clearly identified. People should know what is expected of them.Lines of authority should be clearly identified. Workers know who reports to who.Rules, Standard Operating Procedures (SOPs), & Norms used to determine how the firm operates. • Sometimes, these lead to “red-tape” and other problems.
Fayol’s Principles• Henri Fayol, developed a set of 14 principles: 1. Division of Labor: allows for job specialization. • Fayol noted firms can have too much specialization leading to poor quality and worker involvement. 2. Authority and Responsibility: Fayol included both formal and informal authority resulting from special expertise. 3. Unity of Command: Employees should have only one boss. 4. Line of Authority: a clear chain from top to bottom of the firm. 5. Centralization: the degree to which authority rests at the very top.
Fayol’s Principles6. Unity of Direction: One plan of action to guide the organization.7. Equity: Treat all employees fairly in justice and respect.8. Order: Each employee is put where they have the most value.9. Initiative: Encourage innovation.10. Discipline: obedient, applied, respectful employees needed.
Fayol’s Principles11. Remuneration of Personnel: The payment system contributes to success.12. Stability of Tenure: Long-term employment is important.13. General interest over individual interest: The organization takes precedence over the individual.14. Esprit de corps: Share enthusiasm or devotion to the organization.
Behavioral Management• Focuses on the way a manager should personally manage to motivate employees.• Mary Parker Follett: an influential leader in early managerial theory. – Suggested workers help in analyzing their jobs for improvements. – The worker knows the best way to improve the job. – If workers have the knowledge of the task, then they should control the task.
The Hawthorne Studies• Study of worker efficiency at the Hawthorne Works of the Western Electric Co. during 1924-1932. – Worker productivity was measured at various levels of light illumination. – Researchers found that regardless of whether the light levels were raised or lowered, productivity rose.• Actually, it appears that the workers enjoyed the attention they received as part of the study and were more productive.
Theory X and Y• Douglas McGregor proposed the two different sets of worker assumptions. Theory X: Assumes the average worker is lazy, dislikes work and will do as little as possible. • Managers must closely supervise and control through reward and punishment. Theory Y:Assumes workers are not lazy, want to do a good job and the job itself will determine if the worker likes the work. • Managers should allow the worker great latitude, and create an organization to stimulate the worker.
Theory X v. Theory YFigure 2.3 Theory X Theory Y Employee is lazy Employee is not lazy Managers must closely supervise Must create work setting to build Create strict rules initiative & defined rewards Provide authority to workers
Theory Z• William Ouchi researched the cultural differences between Japan and USA. – USA culture emphasizes the individual, and managers tend to feel workers follow the Theory X model. – Japan culture expects worker committed to the organization first and thus behave differently than USA workers.• Theory Z combines parts of both the USA and Japan structure. – Managers stress long-term employment, work-group, and organizational focus.
Management Science• Uses rigorous quantitative techniques to maximize resources. Quantitative management: utilizes linear programming, modeling, simulation systems. Operations management: techniques to analyze all aspects of the production system. Total Quality Management (TQM): focuses on improved quality. Management Information Systems (MIS): provides information about the organization.
Organization-Environment Theory• Considers relationships inside and outside the organization. – The environment consists of forces, conditions, and influences outside the organization.• Systems theory considers the impact of stages: Input: acquire external resources. Conversion: inputs are processed into goods and services. Output: finished goods are released into the environment.
Systems Considerations• An open system interacts with the environment. A closed system is self- contained. – Closed systems often undergo entropy and lose the ability to control itself, and fails.• Synergy: performance gains of the whole surpass the components. – Synergy is only possible in a coordinated system.
The Organization as an Open SystemFigure 2.4 Input Stage Conversion Output Stage Stage Raw Materials Machines Goods Human skills Services Sales of outputs Firm can then buy inputs
Contingency Theory• Assumes there is no one best way to manage. – The environment impacts the organization and managers must be flexible to react to environmental changes. – The way the organization is designed, control systems selected, depend on the environment.• Technological environments change rapidly, so must managers.
Structures• Mechanistic: Authority is centralized at the top. (Theory X) – Employees closely monitored and managed. – Very efficient in a stable environment.• Organic: Authority is decentralized throughout employees. (Theory Y) – Much looser control than mechanistic. – Managers can react quickly to changing environment.
DECISION MAKING-The Manager as a Decision Maker
Managerial Decision Making• Decision making: the process by which managers respond to opportunities and threats by analyzing options, and making decisions about goals and courses of action.• Decisions in response to opportunities• Decisions in response to threats
Types of Decision Making• Programmed Decisions: routine, almost automatic process.• Non-programmed Decisions: unusual situations that have not been often addressed. – No rules to follow since the decision is new.
The Classical ModelFigure 6.1 List alternatives Assumes all information & consequences is available to manager Assumes manager can process information Rank each alternative from low to high Assumes manager knows the best future course of the organization Select best alternative
The Administrative Model• Administrative Model of decision making:Challenged the classical assumptionsBounded rationality: There is a large number of alternatives and information is vast so that managers cannot consider it all. – Decisions are limited by people’s cognitive abilities.Incomplete information: most managers do not see all alternatives and decide based on incomplete information.
Incomplete Information Factors– Risk: managers know a given outcome can fail or succeed and probabilities can be assigned.– Uncertainty: probabilities cannot be given for outcomes and the future is unknown.– Ambiguous information: information whose meaning is not clear. • Information can be interpreted in different ways.
Incomplete Information Factors• Time constraints and Information costs• Satisfying: Managers explore a limited number of options and choose an acceptable decision rather than the optimum decision.
Decision Making StepsFigure 6.4 Recognize need for a decision Frame the problem Generate & assess alternatives Choose among alternatives Implement chosen alternative Learn from feedback
Cognitive Biases•Suggests decision makers use heuristics todeal with bounded rationality. – A heuristic is a rule of thumb to deal with complex situations. – If the heuristic is wrong, however, then poor decisions result from its use.•Systematic errors can result from use of anincorrect heuristic. – These errors will appear over and over since the rule used to make decision is flawed.
Types of Cognitive BiasesFigure 6.6 Prior Hypothesis Representativeness Cognitive Biases Illusion of Control Escalating Commitment
Types of Cognitive BiasesPrior hypothesis bias: manager allows strong prior beliefs about a relationship between variables and makes decisions based on these beliefs even when evidence shows they are wrong.Representativeness: decision maker incorrectly generalizes a decision from a small sample or one incident.Illusion of control: manager over-estimates their ability to control events.Escalating commitment: manager has already committed considerable resource to project and then commits more even after feedback indicates problems.
Improved Group Decision Making• Devil’s Advocacy: one member of the group acts as the devil’s advocate and critiques the way the group identified alternatives. – Points out problems with the alternative selection.• Dialectical inquiry: two different groups are assigned to the problem and each group evaluates the other group’s alternatives. – Top managers then hear each group present their alternatives and each group can critique the other.• Promote diversity: by increasing the diversity in a group, a wider set of alternatives may be considered.
Devil’s Advocacy v. Dialectic InquiryFigure 6.7 Devil’s Advocacy Dialectic Inquiry Presentation of Alter. 1 Alter. 2 alternative Critique of Debate the two alternative alternatives Reassess Reassess alternative alternatives accept, modify, reject accept 1 or 2, combine
Creating a Learning Organization– Personal Mastery: managers empower employees and allow them to create and explore.– Mental Models: challenge employees to find new, better methods to perform a task.– Team Learning: is more important than individual learning since most decisions are made in groups.– Build a Shared Vision: a people share a common mental model of the firm to evaluate opportunities.– Systems Thinking: know that actions in one area of the firm impacts all others.
Building Group Creativity• Brainstorming: managers meet face-to-face to generate and debate many alternatives. • Group members are not allowed to evaluate alternatives until all alternatives are listed. • Be creative and radical in stating alternatives. • When all are listed, then the pros and cons of each are discussed and a short list created.• Production blocking is a potential problem with brainstorming. • Members cannot absorb all information being presented during the session and can forget their own alternatives.
Building Group Creativity• Nominal Group Technique: Provides a more structured way to generate alternatives in writing. • Avoids the production blocking problem. • Similar to brainstorming except that each member is given time to first write down all alternatives he or she would suggest. • Alternatives are then read aloud without discussion until all have been listed. • Then discussion occurs and alternatives are ranked.
Building Group Creativity• Delphi Technique: provides for a written format without having all managers meet face-to-face. • Problem is distributed in written form to managers who then generate written alternatives. • Responses are received and summarized by top managers. • These results are sent back to participants for feedback, and ranking. • The process continues until consensus is reached. – Delphi allows distant managers to participate.
PLANNING-The Manager as aPlanner and Strategist
The Planning ProcessPlanning is the process used by managers toidentify and select goals and courses of actionfor the organization.•The organizational plan that results from theplanning process details the goals to beattained.•The pattern of decisions managers take toreach these goals is the organization’s strategy.
Three Stages of the Planning ProcessFigure 7.1 Determining the Organization’s mission and goals (Define the business) Strategy formulation (Analyze current situation & develop strategies) Strategy Implementation (Allocate resources & responsibilities to achieve strategies)
Planning Process Stages• Organizational mission: defined in the mission statement which is a broad declaration of the overriding purpose. – The mission statement identifies product, customers and how the firm differs from competitors.• Formulating strategy: managers analyze current situation and develop strategies needed to achieve the mission.• Implementing strategy: managers must decide how to allocate resources between groups to ensure the strategy is achieved.
Levels of PlanningFigure 7.2 Corporate- Business- Functional level Plan level Plan level Plan Goal Corporate Divisional Functional Setting mission & goals goals goals Strategy Corporate- Business- Functional- Formulation level strategy level strategy level strategy Design of Design of Design of Corporate Business-unit Functional Strategy Structure Structure Structure Implementation Control Control Control
Planning at General ElectricFigure 7.3 CEO Corporate Level Corporate Office Business Level GE GE GE GE NBC Aircraft Lighting Motors Plastics Functional Level Manufacturing Accounting Marketing R&D
Planning Levels Corporate-level: decisions by top managers. Considers on which businesses or markets to be in. Provides a framework for all other planning. Business-level: details divisional long-term goals and structure. Identifies how this business meets corporate goals. Shows how the business will compete in market. Functional-level: actions taken by managers in departments of manufacturing, marketing, etc. These plans state exactly how business-level strategies are accomplished.
Characteristics of Plans• Time horizon: refers to how far in the future the plan applies. – Long-term plans are usually 5 years or more. – Intermediate-term plans are 1 to 5 years. • Corporate and business level plans specify long and intermediate term. – Short-term plans are less than 1 year. • Functional plans focus on short to intermediate term.• Most firms have a rolling planning cycle to amend plans constantly.
Types of Plans• Standing plans: for programmed decisions. – Managers develop policies, rules, and standard operating procedures (SOP). • Policies are general guides to action. • Rules are a specific guide to action.• Single-use plans: developed for a one-time, nonprogrammed issue. Usually consist of programs and projects. – Programs: integrated plans achieving specific goals. – Project: specific action plans to complete programs.
Why Planning is ImportantPlanning determines where the organization isnow and where it will be in the future. Goodplanning provides: – Participation: all managers are involved in setting future goals. – Sense of direction & purpose: Planning sets goals and strategies for all managers. – Coordination: Plans provide all parts of the firm with understanding about how their systems fit with the whole. – Control: Plans specify who is in charge of accomplishing a goal.
Scenario Planning• Scenario Planning: generates several forecasts of different future conditions and analyzes how to effectively respond to them. – Planning seeks to prepare for the future, but the future is unknown. – By generating multiple possible “futures” we can see how our plans might work in each. • Allows the firm to prepare for possible surprises. – Scenario planning is a learning tool to improve planning results.
Determining Mission and Goals• This is the first step of the planning process and is accomplished by: A. Define the business: seeks to identify our customer and the needs we can and should satisfy. • This also pinpoints competitors. B. Establishing major goals: states who will compete in the business. • Should stretch the organization to new heights. • Goals must also be realistic and have a time period in which they are achieved.
Strategy Formulation• Managers analyze the current situation to develop strategies achieving the mission.• SWOT analysis: a planning to identify: – Organizational Strengths and Weaknesses. • Strengths: manufacturing ability, marketing skills. • Weaknesses: high labor turnover, weak financials. – Environmental Opportunities and Threats. • Opportunities: new markets. • Threats: economic recession, competitors
Planning & Strategy FormulationFigure 7.5 Corporate-level strategy develop a plan of action maximizing long-run value SWOT analysis identifies strengths & Business-level strategy weaknesses inside the a plan of action to take firm and opportunities advantage of opportunities & threats in the and minimize threats environment. Functional-level strategy a plan of action improving department’s ability to create value
The Five Forces Model Potential for EntryPower of Rivalry Power of Buyer Among Supplier Organizations Substitute Products
The Five Forces1. Level of Rivalry in an industry: how intense is the current competition with competitors? Increased competition results in lower profits.2. Potential for entry: how easy is it for new firms to enter the industry? Easy entry leads to lower prices and profits.3. Power of Suppliers: If there are only a few suppliers of important items, supply costs rise.4. Power of Buyers: If there are only a few, large buyers, they can bargain down prices.5. Substitutes: More available substitutes tend to drive down prices and profits.
Corporate-Level Strategies• Concentrate in single business: McDonalds focuses in the fast food business. – Can become very strong, but can be risky.• Diversification: Organization moves into new businesses and services. Related diversification: firm diversifies in similar areas to build upon existing divisions. Synergy: two divisions work together to obtain more than the sum of each separately. Unrelated diversification: buy business in new areas. • Build a portfolio of unrelated firms to reduce risk or trouble in one industry. Very hard to manage.
International Strategy• To what extent do we customize products and marketing for different national conditions? – Global strategy: a single, standard product and marketing approach is used in all countries. • Standardization provides for lower cost. • Ignore national differences that others can address. – Mulitdomestic strategy: products and marketing are customized for each country of operation. • Customization provides for higher costs. • Embraces national differences and depends on them for success.
Vertical Integration• When the firm is doing well, managers can add more value by producing its own inputs or distributing its products. – BACKWARD vertical integration: the firm produces its own inputs. • McDonalds grows its own potatoes. • Can lower the cost of supplies. – FORWARD vertical integration: the firm distributes its outputs or products. • McDonalds owns the final restaurant. • Firm can lower costs and ensure final quality.
Vertical Value ChainFigure 7.6 Raw Materials Intermediate Manufacturing Assembly Distribution Customer Backward Forward
Business-level StrategiesTable 7.2 market segments Many Low-Cost Differentiation Number of Few Focused Focused Low-Cost Differentiated Low Cost Differentiation Strategy
Business Strategies– Low-cost: gain a competitive advantage by driving down organizational costs. • Managers manufacture at lower cost, reduce waste. • Lower costs than competition mean lower prices.– Differentiation: gain a competitive advantage by making your products different from competitors. • Differentiation must be valued by the customer. • Successful differentiation allows you to charge more for a product.– Stuck in the middle: It is difficult to simultaneously become differentiated and low cost.
Business Strategies• Firms also choose to serve the entire market or focus on a few segments. – Focused low-cost: try to serve one segment of the market but be the lowest cost in that segment. • Cott Company seeks to achieve this in large retail chains. – Focused differentiated: Firm again seeks to focus on one market segment but is the most differentiated in that segment. • BMW provides a good example.
Functional-level Strategies• Seeks to have each department add value to a good or service.• Marketing, service, production all add value to a good or service. – Value is added in two ways: 1. lower the operational costs of providing the value in products. 2. add new value to the product by differentiating. – Functional strategies must fit with business level strategies.
Goals for successful functional strategies: 1. Attain superior efficiency: the measure of outputs for a given unit of input. 2. Attain superior quality: products that reliably do the job they were designed for. 3. Attain superior innovation: new, novel features about the product or process. 4. Attain superior responsiveness to customers: Know the customer needs and fill them.
Designing Organizational Structure• Organizing: the process by which managers establish working relationships among employees to achieve goals. – Organizational Structure: formal system of task & reporting relationships showing how workers use resources. – Organizational design: managers make specific choices resulting in a given organizational structure.• Successful organizational design depends on the organization’s unique situation.
Factors Affecting Organizational DesignFigure 8.1 Environment Determine design Strategy or organizational Technology structure Human Resources
Determinants of Structure The environment: The quicker the environment changes, the more problems face managers. • Structure must be more flexible when environmental change is rapid. – Usually need to decentralize authority. Strategy: Different strategies require the use of different structures. • A differentiation strategy needs a flexible structure, low cost may need a more formal structure. • Increased vertical integration or diversification also requires a more flexible structure.
Determinants of Structure Technology: The combination of skills, knowledge, tools, equipment, computers and machines used in the organization. ▪ More complex technology makes it harder for managers to regulate the organization. Technology can be measured by: ▪ Task Variety: new problems a manager encounters. ▪ Task Analyzability: programmed solutions available to a manager to solve problems. ▪ High task variety and low analyzability present many unique problems to managers. ▪ Flexible structure works best in these conditions. ▪ Low task variety and high analyzability allow managers to rely on established procedures.
Determinants of Structure Human Resources: the final factor affecting organizational structure. ▪ Higher skilled workers who need to work in teams usually need a more flexible structure. ▪ Higher skilled workers often have professional norms Managers must take into account all four factors (environment, strategy, technology and human resources) when designing the structure of the organization.
Job Design Job Design: group tasks into specific jobs. ▪ Results in a division of labor between workers that is effective and efficient. Job simplification: reduction of the tasks each worker performs. ▪ Too much and boredom results. Job enlargement: increase tasks for a given job to reduce boredom. Job enrichment: increases the degree of responsibility a worker has over a job. ▪ can lead to increased worker involvement.
Job Characteristics Model Jobs have five characteristics describing extent of: – Skill variety: employee uses a wide range of skills – Task identity: worker involved in all tasks of job from beginning to end of the production process – Task significance: worker feels the task is meaningful to organization. – Autonomy: employee has freedom to schedule tasks and carry them out. – Feedback: worker gets direct information about how well the job is done. Theseaffect the motivation, satisfaction and performance of employees.
Grouping Jobs into Functions• Once tasks are grouped into jobs, managers must decide how to group jobs together. – Function: people working together with similar skills, tools or techniques to perform their jobs. • Functional structure consists of departments such as marketing, production, and finance. – Workers can learn from others doing similar tasks. Pros – Easy for managers to monitor and evaluate workers. – Hard for one department to communicate with others. Cons – Managers can become preoccupied with their department and forget the firm
Divisional Structures• A division is a collection of functions working together to produce a product. • Divisions create smaller, manageable parts of a firm. Divisions develop a business-level strategy to compete. A division has marketing, finance, and other functions. Functional managers report to divisional managers who then report to corporate management. – Product structure: divisions created according to the type of product or service. – Geographic structure: divisions based on the area of a country or world served. – Market structure: divisions based on the types of customers served.
Product StructureFigure 8.4a CEO Corporation Corporate Managers Washing Machine Lighting Television Division Division Division
Geographic StructureFigure 8.4 b CEO Corporation Corporate Managers Northern Western Southern Eastern Region Region Region Region
Market StructureFigure 8.4c CEO Corporation Corporate Managers Large Business Small Business Educational Individual Customers Customers Institutions Customers
Global Structures• When managers find different problems or demands across the globe, global solutions are needed. – Global geographic structure: different divisions serve each world region. • For customer needs that vary between regions. – Global product structure: Customers in different regions buy similar products so firms keep most functional work at home and set up a division to market product abroad.
Matrix & Product Teams– Matrix structure: managers group people by function and product teams simultaneously. • Results in a complex network of reporting relationships. • Very flexible and can respond rapidly to change. • Each employee has two bosses which can cause problems. – Functional manager gives different directions than product manager and employee cannot satisfy both.– Product Team Structure: no 2-way reporting and the members are permanently assigned to the team and empowered to bring a product to market.
Matrix StructureFigure 8.7a CEO Func. Managers Sales Design Production Product Team Managers team A Product team B Product Team Product team C = two boss employee
Product Team StructureFigure 8.7b CEO Func. Managers Sales Design Production Manufacturing Manufacturing Manufacturing = Product Team Manager = Team member
Hybrid Structures• Many large organizations have divisional structures where each manager can select the best structure for that particular division. – One division may use a functional structure, one geographic, and so on.• This ability to break a large organization into many smaller ones makes it much easier to manage.
Coordinating Functions•To ensure sufficient coordination betweenfunctions, managers delegate authority. – Authority: the power vested in the manager to make decisions and use resources. – Hierarchy of authority: describes the relative authority each manager has from top to bottom. • Span of Control: refers to the number of workers a manager manages. • Line authority: managers in the direct chain of command for production of goods or services. Example: Sales • Staff authority: managers in positions that give advice to line managers. Example: Legal
Tall & Flat Organizations– Tall structures have many levels of authority relative to the organization’s size. • As levels in the hierarchy increase, communication gets difficult. • The extra levels result in more time being taken to implement decisions. • Communications can also become garbled as it is repeated through the firm.– Flat structures have few levels but wide spans of control. • Results in quick communications but can lead to overworked managers.
Minimum Chain of Command – Managers should carefully evaluate: • Do they have the right number of middle managers? • Can the structure be altered to reduce levels?• Centralized v. Decentralized – Decentralized operations puts more authority at lower levels and leads to flat organizations. • Workers must be able to reach decisions. • Divisions and functions can begin to lose sight of organizational goals and focus only on their small area.
Integrating Mechanisms– Direct contact: get managers from different divisions or functions together to solve mutual problems.– Liaison Roles: one manager in each area is responsible for communication with other areas.– Task Forces: temporary committees formed across divisions to solve a specific problem.– Cross-functional teams: works much like a permanent task force that deals with recurring problems.– Matrix structure: already contains many integrating mechanisms.
Strategic Alliances• Strategic alliance: a formal agreement committing two or more firms to exchange resources to produce a good.• Network Structure: a whole series of strategic alliances. – Created between suppliers, manufacturers, and distributors. • Toyota and Honda use many such alliances. – Network structures allow firms to bring resources together in a boundary-less organization.
Organizational Control• Managers must monitor & evaluate: – Are we efficiently converting inputs into outputs? • Must accurately measure units of inputs and outputs. – Is product quality improving? • Are we competitive with other firms? – Are employees responsive to customers? • customer service is increasingly important. – Are our managers innovative in outlook? • Does the control system encourage risk-taking?
Control Systems Formal, target-setting, monitoring, evaluation and feedback systems to provide managers with information to determine if strategy and structure are working effectively and efficiently.• A good control system should: –be flexible so managers can respond as needed. –provide accurate information about the organization. –provide information in a timely manner.
Three Types of ControlFigure 9.1 Conversion Inputs Outputs Process Feedforward Concurrent Feedback Control Control Control (anticipate (manage problems (manage problems problems) as they occur) after they occur)
Control Types Feedforward: use in the input stage of the process. ▪ Managers anticipate problems before they arise. ▪ Managers can give rigorous specifications to suppliers to avoid quality Concurrent: gives immediate feedback on how inputs are converted into outputs. ▪ Allows managers to correct problems as they arise. ▪ Managers can see that a machine is becoming out of alignment and fix it. Feedback: provides after the fact information managers can use in the future. ▪ Customer reaction to products are used to take corrective action in the future.
Control Process StepsFigure 9.2 1. Establish standards of performance, goals, or targets against which performance is evaluated. 2. Measure actual performance 3. Compare actual performance against chosen standards 4. Evaluate results and take corrective action when the standard is not being achieved.
The Control Process1. Establish standards, goals, or targets against which performance is to be evaluated. ▪ Standards must be consistent with strategy, for a low cost strategy, standards should focus closely on cost. ▪ Managers at each level need to set their own standards.2. Measure actual performance: managers can measure outputs resulting from worker behavior or they can measure the behavior themselves. ▪ The more non-routine the task, the harder to measure. ▪ Managers then measure the behavior (come to work on time) not the output.
The Control Process3. Compare actual performance against chosen standards. ▪ Managers must decide if performance actually deviates. ▪ Often, several problems combine creating low performance.4. Evaluate result and take corrective action. ▪ Perhaps the standards have been set too high. ▪ Workers may need additional training, or equipment. ▪ This step is often hard since the environment is constantly changing.
The Goal-Setting ProcessFigure 9.4 Corporate level managers set goals for individual decisions to allow organization to achieve corporate goals. Divisional managers set goals for each function to allow the division to achieve its goals. Functional managers set goals for each worker to allow the function to achieve its goals.
3 Organizational Control SystemsFigure 9.3 Financial Measures or performance Output Goals Control Operating budgets Direct supervision Behavior Management by Objective (MBO) Control Rules & Standard Operating Procedures Values Culture or Clan Norms Control Socialization
Output Control Systems– Financial Controls are objective and allow comparison to other firms. • Profit ratios--measures how efficiently managers convert resources into profits. – Return on Investment (ROI) is the most common. • Liquidity ratios -- measure how well managers protect resources to meet short term debt. – Current & quick ratios. • Leverage ratios -- show how much debt is used to finance operations. – Debt-to-asset & times-covered ratios. • Activity ratios -- measures how managers create value from assets. – Inventory turnover, days sales outstanding.
Output Control Systems– Organizational Goals: after corporate financial goals are set, each division is given specific goals that must be met to attain the overall goals. • Goals and thus output controls, will be set for each area of the firm. – Goals are specific & difficult (not impossible) to achieve. – Goal setting is a management skill developed over time.– Operating budgets: a blueprint showing how managers can use resources. • Managers are evaluated by how well they meet goals and stay in budget. – Each division is often evaluated on its own budgets for cost, revenue or profit.
Output Control Problems– Managers must create output standards that motivate at all levels.– Be careful of creating short-term goals that motivate managers to forget the future. • It is easy to cut costs by dropping R&D now but it leads to future disaster.– If standards are too high, workers may follow unethical behavior to attain them. • Increase sales regardless of issues. This can be done by skipping safe production steps.
Management by Objectives– Management by Objectives (MBO): evaluates workers by attainment of specific objectives. • Goals are set at each level of the firm. • Goal setting is participatory with manager AND worker. • Reviews held looking at progress toward goals. – Pay raises and promotions are tied to goal attainment. • Teams are also measured in this way with goals and performance measured for the team.
Bureaucratic Control– Control through a system of rules and standard operating procedures (SOPs) that shape the behavior of divisions, functions, and individuals. • Rules and SOPs tell the worker what to do. • Standardized actions so outcomes are predictable. • Still need output control to correct mistakes.– Problems of Bureaucratic Control: • Rules easier to make than delete. Leads to “red tape” • Firm can become too standardized and not flexible. • Best used for routine problems.
Organizational Culture & Clan Control – Organizational culture is a collection of values, norms, & behavior shared by workers that control the way workers interact with each other. – Clan Control: control through the development of an internal system of values and norms. • Both culture and clan control accept the norms and values as their own and then work within them. – Examples include dress styles, work hours, pride in work. • These methods provide control where output and behavioral control does not work. • Strong culture and clan control help worker to focus on the organization and enhance its performance.
Values and Norms– Organizational values and norms inform workers about what goals they should peruse and how they should behave to reach these goals. • Some organizations work hard to create a culture that encourages and rewards risk taking. – Microsoft, Oracle seek innovation. • Others, create an environment of caution. – Oil refineries, nuclear power plants must focus on caution.
Creating Strong Organizational CultureFigure 9.5 Values of Founder Socialization Process Organizational Culture Ceremonies & Rites Stories & Language
Personality Traits Personality Traits: Characteristics that influence how people think, feel and behave on and off the job. ▪ Include tendencies to be enthusiastic, demanding, easy- going, nervous, etc. ▪ Each trait can be viewed on a continuum, from low to high. There is no “wrong” trait, but rather managers have a complex mix of traits.
The Big Five Traits:Figure 11.1 I Low Extroversion High II Low Negative Affectivity High III Low Agreeableness High IV Low Conscientiousness High V Low Openness to Experience High
The Big FiveExtroversion: people are positive and feel good about themselves and the world. – Managers high on this trait are sociable, friendly.Negative Affectivity: people experience negative moods, are critical, and distressed. – Managers are often critical and feel angry with others and themselves.Agreeableness: people like to get along with others. – Managers are likable, and care about others.Conscientiousness: people tend to be careful, persevering.Openness to Experience: people are original, with broad interests.
Traits and Managers– Successful managers vary widely on the “Big Five”. • It is important to understand these traits since it helps explain a manager’s approach to planning, leading, organizing, etc. – Managers should also be aware of their own style and try to tone down problem areas.– Internal Locus of Control: People believe they are responsible for their fate. – See their actions are important to achieving goals.– External Locus of Control: People believe outside forces are responsible for their fate. – Their actions make little difference in achieving outcomes. • Managers need an Internal Locus of Control!
Other Traits Self-Esteem: Captures the degree to which people feel good about themselves and abilities. ▪ High self-esteem causes people to feel they are competent, and capable. ▪ Low self-esteem people have poor opinions of themselves and abilities. Need for Achievement: extent to which people have a desire to perform challenging tasks and meet personal standards. Need for Affiliation: the extent to which people want to build interpersonal relationships and being liked. Need for Power: indexes the desire to control or influence others.
Values– Values: describe what managers try to achieve through work and how to behave. • These are personal convictions about life-long goals (terminal values) and modes of conduct (instrumental values). • A person’s value system reflects how important their values are as a guiding principle in life. • Terminal values important to managers include: – Sense of Accomplishment, equality, self-respect. • Instrumental values include: – hard-working, broadminded, capable.
Terminal and Instrumental ValuesFigure 11.3 INSTRUMENTAL TERMINAL VALUES VALUES Prosperous life Ambitious Exciting life Broadminded Sense of Accomplishment Capable A world at peace Cheerful Salvation Clean Self-respect Helpful Pleasure Honest Wisdom Obedient True friendship Loving Equality Responsible
Attitudes– Attitudes: collection of feelings about something. • Job Satisfaction: feelings about a worker’s job. – Satisfaction tends to rise as manager moves up in the organization. – Organizational Citizenship Behaviors: actions not required of managers but which help advance the firm. Managers with high satisfaction perform these “extra mile” tasks. – Organizational Commitment: beliefs held by people toward the organization as a whole. – Committed managers are loyal and proud of the firm. – Commitment can differ around the world.
Moods– Moods: encompass how a manager feels while managing. • Positive moods provide excitement, elation and enthusiasm. • Negative moods lead to fear, stress, nervousness. – Moods can depend on a persons basic outlook as well as on current situations.– Managers need to realize how they feel affects how they treat others and how others respond to them. • Workers prefer to make suggestions to mangers who are in “a good mood”.
Perceptions– Perception is the process through which people select, organize and interpret input. • Manager’s decisions are based on their perception. – Managers need to ensure perceptions are accurate. • Managers are all different and so are their perceptions of a situation. – Perceptions depend on satisfaction, moods, and so forth.– A manager’s past experience can influence their outlook on a new project. • Good managers try not to prejudge new ideas based on the past.
Career Development– Career: sum total of the work-related experiences through a person’s life. • Linear career: person moves through a sequence of jobs of higher levels. – Can build different experience in different positions. • Steady State career: worker chooses to keep the same kind of job over much of a career. – Become highly skilled in a given area. • Spiral Career: worker holds fundamentally different jobs that still build on each other. – Worker gains wide experience yet skills continue to build.
Career StagesFigure 11.7 Preparation for Work Organization Entry Early Mid- career Mid- career Late Career
Career Stages:– Preparation for Work: decide on kind of career, determine qualifications needed.– Organizational entry: find a “first” job. – Managers usually start in a functional area first.– Early career: establishes person in the firm and begins achievement. – Worker learns firm’s values and duties. – Also begins to achieve noteworthy results in the job. – Worker tries to stand out as a good performer. • Mentors (experienced manager who shows you the ropes) are valuable during this stage.
Stages, cont.– Mid-career: usually have been in workforce 20-35 years. – Usually provides major accomplishments. • Career plateaus can occur as chances for further promotion dwindle. – Plateau managers can still enjoy a fruitful career.– Late career: continues as long as the manager works and is active. • Many managers choose to stay active well past normal retirement.
Career ManagementManagers need to consider both personal careermanagement as well as the careers of otherworkers in the firm. • Ethical practice: managers need to ensure worker promotions are based on outcomes, not friendships. – This means all workers are treated equally. • Accommodation of other demands: Workers have many things in their lives besides work. Managers need to consider these issues as well. – The dual career couple is the norm. – Workers have family commitments.
StressResults when people face important opportunityor threats they are uncertain can be handled. – Managers almost always face stress. • Physiological issues: stress can result in sleep problems, headaches, and other issues. – Long-term levels of stress can result in heart attack, and high blood pressure. – Different people experience stress differently. • Psychological issues: stress can result in bad moods, anger, nervousness. – Can result in lower work output and frustration. • Behavioral issues: stress can actually enhance job performance as well as impair it.
Stress & PerformanceFigure 11.8 High Performance Level of Low Low High Positive Stress Negative Stress Level of Stress
Motivation Defined as the psychological forces within a person that determine: 1) direction of behavior in an organization; 2) the effort or how hard people work; 3) the persistence displayed in meeting goals. Intrinsic Motivation: behavior performed for its own sake. ▪ Motivation comes from performing the work. Extrinsic Motivation: behavior performed to acquire rewards. ▪ Motivation source is the consequence of an action.
Motivation EquationFigure 12.1 Inputs from Outcomes Organizational Performance received by members members Time Contribute to Pay Effort organization Job Security Education efficiency, Benefits Experience effectiveness Vacation Skills and Autonomy Knowledge attain goals Responsibility Work Behav.
Expectancy Theory Developed by Victor Vroom and is a very popular theory of work motivation.• Vroom suggests that motivation will be high when workers feel: – High levels of effort lead to high performance. – High performance will lead to the attainment of desire outcomes.• Consists of three areas: – Expectancy, Instrumentality, & Valence.
Expectancy, Instrumentality, & ValenceFigure 12.2 Effort Performance Outcomes Expectancy: Instrumentality Valence: Person’s perception that How desired perception that performance are the outcomes their effort will results in from a result in outcomes job performance
Expectancy, Instrumentality, & Valence Expectancy is the perception that effort (input) will result in a level of performance. ▪ You will work hard if it leads to high performance. ▪ You would be less willing to work hard if you knew that the best you would get on a paper was a D regardless of how hard you tried. ▪ Instrumentality: Performance leads to outcomes. ▪ Workers are only motivated if they think performance leads to an outcome. ▪ Managers should link performance to outcomes. Valence: How desirable each outcome is to a person. ▪ Managers should determine the outcomes workers want most.
High Motivation:• According to the Expectancy Theory, high motivation results from high levels of Expectancy, Instrumentality, & Valence. – If just one value is low, motivation will be low. – This means that even if desired outcomes are closely link to performance, the worker must feel the task is possible to achieve for high motivation to result. – Managers need to consider this relationship to build a high performance firm.
Expectancy TheoryFigure 12.3 High Expectancy High High Valence Instrumentality (Worker desires the (Worker knows that (Worker perceives that outcomes resulting if they try, they can high performance from high perform) leads to outcomes) performance) High Motivation
Need Theory People are motivated to obtain outcomes at work to satisfy their needs. • A need is a requirement for survival. • To motivate a person: 1)Managers must determine what needs worker wants satisfied. 2)Ensure that a person receives the outcomes when performing well.– Several needs theories exist. • Maslow’s Hierarchy of Needs. • Alderfer’s ERG.
Hierarchy of Needs Need Level Description ExamplesTable 12.1 Self- Realize one’s Use abilities Actualization full potential to the fullest Feel good Promotions Esteem about oneself & recognition Social Interpersonal Belongingness interaction, love relations, parties Job security, Safety Security, stability health insurance Food, water, Basic pay level Physiological shelter to buy items Lower level needs must be satisfied before higher needs are addressed.
Alderfer’s ERGTable 12.2 Need Level Description Examples Highest Self-development, Worker continually Growth creative work improves skills Interpersonal Good relations, Relatedness relations, feelings feedback Lowest Food, water, Basic pay level Existence shelter to buy items After lower level needs satisfied, person seeks higher needs. When unable to satisfy higher needs, lower needs motivation is raised.
Motivation-Hygiene TheoryFocuses on outcomes that can lead to highmotivation, job satisfaction, & those that canprevent dissatisfaction. • Motivator needs: related to nature of the work and how challenging it is. – Outcomes are autonomy, responsibility, interesting work. • Hygiene needs: relate to the physical & psychological context of the work. – Refers to a good work environment, pay, job security. – When hygiene needs not met, workers are dissatisfied. Note: when met, they will NOT lead to higher motivation, just will prevent low motivation.
Equity Theory– Considers worker’s perceptions of the fairness of work outcomes in proportion to their inputs. • Adams notes it is the relative rather than the absolute level of outcomes a person receives. – The Outcome/input ratio is compared by worker with another person called a referent. – The referent is perceived as similar to the worker. • Equity exists when a person perceives their outcome/input ratio to be equal to the referent’s ratio. – If the referent receives more outcomes, they should also give more inputs to achieve equity.
Equity TheoryFigure 12.3 Condition Person Referent Example Worker contributes Outcomes = Outcomes more inputs but also Equity Inputs Inputs gets more outputs than referent Worker contributes Underpayment Outcomes < Outcomes more inputs but also Equity Inputs Inputs gets the same outputs as referent Worker contributes Overpayment Outcomes > Outcomes same inputs but also Equity Inputs Inputs gets more outputs than referent
Inequity• Inequity exists when worker’s outcome/input ratio is not equal to referent. – Underpayment inequity: ratio is less than the referent. Worker feels they are not getting the outcomes they should given inputs. – Overpayment inequity: ratio is higher than the referent. Worker feels they are getting more outcomes then they should given inputs.• Restoring Equity: Inequity creates tension in workers to restore equity. In underpayment, workers reduce input levels to correct. Overpayment, worker can change the referent to adjust.• If inequity persists, worker will often leave the firm.
Goal Setting Theory– Focus worker’s inputs in the direction of high performance & achievement of organizational goals. • Goal is what a worker tries to accomplish. – Goals must be specific and difficult for high performance results. – Workers put in high effort to achieve such goals. • Workers must accept and be committed to them. – Feedback on goal attainment also is important. – Goals point out what is important to the firm. • Managers should encourage workers to develop action plans to attain goals.
Learning Theory– Focuses on the linkage between performance and outcomes in the motivation equation shown in Figure 12.1. – Learning: permanent change in person’s knowledge or behavior resulting from practice or experience.– Operant Conditioning: people learn to do things leading to desired outcomes and avoid doing things with adverse outcomes. • Motivation can be increased by linking specific behaviors with specific outcomes. – Managers can use four tools of conditioning to motivate high performance.
Social Learning Theory• Vicarious Learning: or observational learning, occurs when a person is motivated to learn by watching someone else work and be rewarded. – People are motivated to imitate models who are highly competent, expert and receive attractive reinforcers.• Self- reinforcers: desired outcomes a person can give themselves. – Person can reward themselves for success.• Self-efficacy: refers to a person’s belief about their ability to perform a behavior successfully. – People will only be motivated if they think they have the ability to accomplish the task.
Pay and Motivation– Pay can help motivate workers. Expectancy: pay is an instrumentality (and outcome), must be high for motivation to be high. Need Theory: pay is used to satisfy many needs. Equity Theory: pay is given in relation to inputs. Goal Setting Theory: pay linked to goal attainment. Learning Theory: outcomes (pay), is distributed upon performance of functional behaviors.– Pay should be based on performance, many firms do this with a Merit Pay Plan.
Merit Pay– Can be based on individual, group or organization performance. • Individual Plan: used when individual performance (sales) is accurately measured. • Group Plan: use when group works closely together and is measured as a group. • Organization Plan: When group or individual outcomes not easily measured.– Bonus has a higher impact on motivation since – Salary level not related to current performance. – Other items( base salary, cost of living, seniority). – Salary rarely goes down and usually changes little.
Leadership Leadership is the process where a person exerts influence over others and inspires, motivates and directs their activities to achieve goals. Effective leadership increases the firm’s ability to meet new challenges. Leader: The person exerting the influence. ▪ Personal Leadership Style: the ways leaders choose to influence others. ▪ Some leaders delegate and support subordinates, others are very authoritarian. ▪ Managers at all levels have their own leadership style.
Sources of PowerFigure 13.1 Reward Power Legitimate Coercive Power Power Enable managers to be leaders & influence subordinates to achieve goals Expert Referent Power Power
Sources of Power• Used to affect other’s behavior and get them to act in given ways. – Legitimate Power: manager’s authority resulting by their management position in the firm. • Can be power to hire/fire workers, assign work. – Reward Power: based on the manager’s ability to give or withhold rewards. • Pay raises, bonuses, verbal praise. • Effective managers use reward power to signal employees they are doing a good job.
Sources of Power– Coercive Power: based in ability to punish others. • Ranges from verbal reprimand to pay cuts to firing. • Can have serious negative side effects.– Expert Power: based on special skills of leader. • First & middle managers have most expert power. • Often found in technical ability.– Referent Power: results from personal characteristics of the leader which earn worker’s respect, loyalty and admiration. • Usually held by likable managers who are concerned about their workers.
Empowerment Process of giving workers at all levels authority to make decisions and the responsibility for their outcomes. Empowerment helps managers:Get workers involved in the decisions. Increase worker commitment and motivation. To focus on other issues. Effective managers usually empower substantial authority to workers.
Leadership Models– Trait Model: sought to identify personal characteristics responsible foreffective leadership. Research shows that traits do appear to be connected to effective leadership. –Many “traits” are the result of skills and knowledge. –Not all effective leaders possess all these traits.– Behavioral Model: Identifies types of behavior. Consideration: leaders show care toward workers. –Employee-centered. Initiating Structure: managers take steps to make sure work is done. –Done by assigning work, setting goals, etc. –Job-oriented.
Contingency ModelsFiedler’s Model: effective leadership is contingent on both the characteristics of the leader and the situation. – Leader style: the enduring, characteristic approach to leadership a manager uses. • Relationship-oriented: concerned with developing good relations with workers. • Task-oriented: concerned that workers perform so the job gets done.
Fiedler’s Model– Situation characteristic: how favorable a given situation is for leading to occur. • Leader-member relations: determines how much workers like and trust their leader. • Task structure: extent to which workers tasks are clear- cut. – Clear issues make a situation favorable for leadership. • Position Power: amount of legitimate, reward, & coercive power a leader has due to their position. – When positional power is strong, leadership opportunity becomes more favorable.
Fiedler’s Contingency ModelFigure 13.3 Leader- Member Relations GOOD POOR Task HIGH LO W HIGH LOW Structure Position S W S W S W S W Power Kinds of 1 I II III IV V VI VII VIII Leadership Very Very Situations Favorable Unfavorable Relationship-oriented managers most effective in IV, V, VI, VII. Task-oriented managers most effective in I, II, III or VIII.
House’s Path-Goal Model– Model suggests that effective leaders motivate workers to achieve by: 1) Clearly identifying the outcomes workers are trying to achieve. 2) Reward workers for high-performance and attainment. 3) Clarifying the paths to the attainment of the goals. • Path-Goal is a contingency model since it proposes the steps managers should take to motivate their workers. – Based on Expectancy Theory.
Steps to Path-Goal1) Determine the outcomes your subordinates are trying to obtain. • Can range from pay to job security or interesting work. – Once outcomes determined, manager needs to be sure they have the reward power to provide these.2) Reward subordinates for high-performance and goal attainment with the desired outcomes.3) Clarify the paths to goal attainment for workers, remove obstacles to performance, and express confidence in worker’s ability.
Motivating with Path-goal– Path-goal identifies four behaviors leaders can use: 1) Directive behaviors: set goals, assign tasks, show how to do things. 2) Supportive behavior: look out for the worker’s best interest. 3) Participative behavior: give subordinates a say in matters that affect them. 4) Achievement-oriented behavior: Setting very challenging goals, believing in worker’s abilities.– Which behavior should be used depends on the worker and the tasks.
Leader-Substitute Model– Leadership substitute: acts in the place of a leader and makes leadership unnecessary. Possible substitutes can be found: • Characteristics of Subordinates: their skills, experience, motivation. • Characteristics of context: the extent to which work is interesting and fun. • Worker empowerment or Self-managed work teams reduce leadership needs.– Managers need to be aware that they do not always need to directly exert influence over workers.
Transformational Leadership– Started with von Pierer, CEO of Siemens, and allows dramatic improvements in management effectiveness.– Transformational managers: • Make subordinates aware of how important their jobs are by providing feedback to the worker. • Make subordinates aware of their own need for personal growth and development. – Empowerment of workers, added training help. • Motivate workers to work for the good of the organization, not just themselves.
Transformational Leaders– Transformational leaders are charismatic and have a vision of how good things can be. • They are excited and clearly communicate this to subordinates.– Transformational leaders openly share information with workers. • Everyone is aware of problems and the need for change. • Empowers workers to help with solutions.– Transformational leaders engage in development of workers. • Manager works hard to help them build skills.
Transactional Leadership• Involves managers using the reward and coercive power to encourage high performance.• Managers who push subordinates to change but do not seem to change themselves are transactional.• The transactional manager does not have the “vision” of the Transformational leader.
Importance of Good Communication • Good Communication allows a firm to – Learn new skills and technologies. – Become more responsive to customers. – Improve Quality of their product or service. – Foster innovation • Effective communication is needed by all Managers.
The Communication Process– Communication consists of two phases: 1. Transmission phase: information is shared by 2 or more people. 2. Feedback phase: a common understanding is assured.– Starts with the Sender who wants to share information. • Sender must decide on a message to share • Sender also puts the message into symbols or language, a process called encoding.Noise: anything harming the communication process.
The Communication ProcessFigure 15.1 Transmission Phase Message Encoding Medium Decoding NOISE Receiver Sender (now sender) Decoding Medium Encoding Message Feedback Phase
The Communication Process– Messages are transmitted over a medium to a receiver. • Medium: pathway the message is transmitted on (phone, letter). • Receiver: person getting the message.– Receiver next decodes the message. • Decoding allows the receiver to understand the message. • This is a critical point, can lead to mis-understanding.– Feedback is started by receiver and states that the message is understood or that it must be re-sent.
Communication Issues– Encoding of messages can be done verbally or non-verbally • Verbal: spoken or written communication. • Nonverbal: facial gestures, body language, dress.– Sender and receiver communicate based on their perception. • Subjective perception can lead to biases and stereotypes that hurt communication. • Effective Managers avoid communicating based on a pre-set belief.
Dangers of Ineffective Communication – Managers spend most of their time communicating so both they and the subordinates must be effective communicators. To be effective: – Select an appropriate medium for each message. – There is no one “best” medium. • Consider information richness: the amount of information a medium can carry. – Medium with high richness can carry much information to aid understanding. • Is there a need for a paper/electronic trail to provide documentation?
Information Richness and Media TypeFigure 15.2 High Richness Face-to-face communication Verbal communication electronically transmitted Verbal communication electronically transmitted Impersonal written commun- Low ication Richness
Communication MediaFace-to-Face: highest information richness. ▪ Can take advantage of verbal and nonverbal signals. ▪ Provides for instant feedback. ▪ Management by wandering around takes advantage of this with informal talks to workers. ▪ Video Conferences: provide much of this richness. ▪ Reduce travel costs and meeting times.Verbal Communication electronically transmitted: has next highest richness. ▪ Phone conversations, but no visual nonverbal cues. ▪ Do have tone of voice, sender’s emphasis and quick feedback.
Communication MediaPersonally Addressed Written Communication: lower richness than the verbal forms, but still is directed at a given person. ▪ Personal addressing helps ensure receiver reads it. ▪ Letters and e-mail are common forms. ▪ Cannot provide instant feedback to sender but can get feedback later. ▪ Excellent for complex messages needing follow-up.Impersonal Written Communication: lowest richness. ▪ Good for messages to many receivers. Little feedback is expected. ▪ Newsletters, reports are examples.
E-Mail Trends– E-mail use is growing rapidly in large firms, and there are even special e-mail etiquette: • Words in all CAPITALS are seen as “screaming” at the receiver. • Punctuate your messages for easy reading and don’t ramble on. • Pay attention to spelling and treat like a written letter.– E-mail has allowed telecommuting, where workers can work from home and be in touch with e-mail.
Communication NetworksNetworks show information flows in an organization. • Wheel Network: information flow to and from one central member. • Chain Network: members communicate with people next to them in sequence. – Wheel and Chain networks provide for little interaction. • Circle Network: members communicate with others close to them in terms of expertise, office location, etc. • All-Channel Network: found in teams, with high levels of communications between each member and all others.
Communication Networks in Groups & TeamsFigure 15.3 Wheel Network Chain Network All Channel Network Circle Network
Organization Communication Networks Organization chart depicts formal reporting channels. • Communication is informal and flows around issues, goals, and projects. • Vertical Communication: goes up and down the corporate hierarchy. • Horizontal Communication: between employees of the same level. – Informal communications can span levels and departments. • Grapevine: informal network carrying unofficial information through the firm.
Organizational Communications NetworkFigure 15.4 Formal Communication Informal Communication
Technological Advances Internet: global system of computer networks Many firms use it to communicate with suppliers. World Wide Web (WWW): provides multimedia access to the Internet. Intranets: use the same information concepts as the Internet, but keep the network inside the firm. Groupware: software designed to let workers share information and improve communication. Best for team oriented support.