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  1. 1. MANAGEMENT 309 Section 100 Survey of Management Liesl Wesson Summer 2005
  2. 2. Managing and the Manager’s Job One hapter
  3. 3. What is an organization? <ul><li>A group of people working together in a structured and coordinated fashion to achieve a set of goals. </li></ul>
  4. 4. Organizational Resources <ul><li>Human resources </li></ul><ul><li>Financial resources </li></ul><ul><ul><li>Capital investments to support ongoing and long-term operations </li></ul></ul><ul><li>Physical Assets </li></ul><ul><li>Information </li></ul><ul><ul><li>Usable data, information linkages </li></ul></ul>
  5. 5. What is Management? <ul><li>A set of activities </li></ul><ul><ul><li>planning and decision making, organizing, leading, and controlling </li></ul></ul><ul><li>directed at an organization’s resources </li></ul><ul><ul><li>human, financial, physical, and information </li></ul></ul><ul><li>with the aim of achieving organizational goals in an efficient and effective manner. </li></ul>
  6. 6. Basic Purpose of Management EFFICIENTLY Using resources wisely and in a cost-effective way EFFECTIVELY Making the right decisions and successfully implementing them And
  7. 7. What is a Manager? <ul><li>Someone whose primary responsibility is to carry out the management process. </li></ul><ul><li>Someone who plans and makes decisions, organizes, leads, and controls human, financial, physical, and information resources. </li></ul>
  8. 8. The Management Process <ul><li>Planning and Decision Making </li></ul><ul><ul><li>Setting an organization’s goals and selecting a course of action from a set of alternatives to achieve them. </li></ul></ul><ul><li>Organizing </li></ul><ul><li>Leading </li></ul><ul><ul><li>The set of processes used to get members of the organization to work together to advance the interests of the organization. </li></ul></ul><ul><li>Controlling </li></ul>
  9. 9. Kinds of Managers by Level <ul><li>Top Managers </li></ul><ul><li>Middle Managers </li></ul><ul><ul><li>Largest group of managers in organizations who are primarily responsible for implementing the policies and plans of top managers. They also supervise and coordinate the activities of lower level managers. </li></ul></ul><ul><li>First-Line Managers </li></ul><ul><ul><li>Managers who supervise and coordinate the activities of operating employees. </li></ul></ul>
  10. 10. Kinds of Managers by Area <ul><li>Marketing Managers </li></ul><ul><ul><li>Work in areas related to getting consumers and clients to buy the organization’s products or services—new product development, promotion, and distribution. </li></ul></ul><ul><li>Financial Managers </li></ul><ul><li>Operations Managers </li></ul><ul><ul><li>Concerned with creating and managing the systems that create organization’s products and services—production control, inventory, quality control, plant layout, site selection. </li></ul></ul>
  11. 11. Kinds of Managers by Area (cont’d) <ul><li>Human Resource Managers </li></ul><ul><ul><li>Involved in human resource planning, recruiting and selecting employees, training and development, designing compensation and benefit systems, formulating performance appraisal systems, and discharging low-performing employees. </li></ul></ul><ul><li>Administrative Managers </li></ul><ul><li>Other Kinds of Managers </li></ul><ul><ul><li>Organizations have developed specialized managerial positions (e.g., public relations managers) directly related to the needs of the organization. </li></ul></ul>
  12. 12. Managerial Roles (Mintzberg) <ul><li>Interpersonal Roles </li></ul><ul><ul><li>Figurehead, leader, and liaison roles involve dealing with other people. </li></ul></ul><ul><li>Informational Roles </li></ul><ul><ul><li>Monitor, disseminator, and spokesperson roles involve the processing of information. </li></ul></ul><ul><li>Decisional Roles </li></ul><ul><ul><li>Entrepreneur, disturbance handler, resource allocator, and negotiator are managerial roles primarily related to making decisions. </li></ul></ul>
  13. 13. Ten Basic Managerial Roles * See page 18, table 1.2
  14. 14. Managerial Skills <ul><li>Technical </li></ul><ul><ul><li>Skills necessary to accomplish or understand the specific kind of work being done in an organization. </li></ul></ul><ul><li>Interpersonal </li></ul><ul><li>Conceptual </li></ul><ul><ul><li>The manager’s ability to think in the abstract. </li></ul></ul><ul><li>Diagnostic </li></ul>
  15. 15. Managerial Skills (cont’d) <ul><li>Communication </li></ul><ul><ul><li>The manager’s abilities both to convey ideas and information effectively to others and to receive ideas and information effectively from others. </li></ul></ul><ul><li>Decision-Making </li></ul><ul><li>Time-Management </li></ul><ul><ul><li>The manager’s ability to prioritize work, to work efficiently, and to delegate appropriately. </li></ul></ul>
  16. 16. Management: Science or Art? <ul><li>Science of Management </li></ul><ul><ul><li>Assumes that problems can be approached using rational, logical, objective, and systematic ways. </li></ul></ul><ul><li>Art of Management </li></ul><ul><ul><li>Decisions are made and problems solved using a blend of intuition, experience, instinct, and personal insights. </li></ul></ul>
  17. 17. Managing in Organizations <ul><li>For-profit Organizations </li></ul><ul><ul><li>Large businesses </li></ul></ul><ul><ul><li>Small businesses and start-up businesses </li></ul></ul><ul><ul><li>International management </li></ul></ul><ul><li>Not-for-profit Organizations </li></ul><ul><ul><li>Governmental organizations—local, state, and federal </li></ul></ul><ul><ul><li>Educational organizations—public and private schools, colleges, and universities </li></ul></ul><ul><ul><li>Healthcare facilities—public hospitals and HMOs </li></ul></ul><ul><ul><li>Nontraditional settings—community, social, spiritual groups </li></ul></ul>
  18. 18. Traditional and Contemporary Issues and Challenges Two hapter
  19. 19. The Importance of Theory and History <ul><li>Why Theory? </li></ul><ul><ul><li>A theory is a conceptual framework for organizing knowledge and providing a blueprint for action. </li></ul></ul><ul><ul><li>Management theories, used to build organizations, are grounded in reality. Most managers develop their own theories about how they should run their organizations. </li></ul></ul><ul><li>Why History? </li></ul><ul><ul><li>An awareness and understanding of important historical developments in management are also important to contemporary managers in furthering the development of management practices and in avoiding the mistakes of others in the past. </li></ul></ul>
  20. 20. Early Management Pioneers <ul><li>Robert Owen (1771 – 1858) </li></ul><ul><ul><li>Implemented better working conditions, set a minimum age for child labor, provided meals, and reduced work hours. </li></ul></ul><ul><li>Charles Babbage (1792 – 1871) </li></ul><ul><ul><li>Noted English mathematician who focused on creating efficiencies of production through the division of labor, cooperation between management and labor, and the application of mathematics to management problems. </li></ul></ul>
  21. 21. Classical Management Perspective <ul><li>Consists of two different viewpoints: </li></ul><ul><ul><li>Scientific Management </li></ul></ul><ul><ul><ul><li>Concerned with improving the performance of individual workers (i.e., efficiency). </li></ul></ul></ul><ul><ul><li>Administrative Management </li></ul></ul><ul><ul><ul><li>A theory that focuses on managing the total organization. </li></ul></ul></ul>
  22. 22. Scientific Management <ul><li>Frederick Taylor (1856 –1915) </li></ul><ul><ul><li>Considered the “Father of Scientific Management.” </li></ul></ul><ul><ul><li>Replaced old rule-of-thumb methods of how to do work with scientifically-based work methods to eliminate “soldiering” where employees deliberately worked at a pace slower than their capabilities. </li></ul></ul><ul><ul><li>Used time studies of jobs, standards planning, exception rule of management, slide-rules, instruction cards, and piece-work pay systems to control and motivate employees. </li></ul></ul>
  23. 23. Steps in Scientific Management Develop a science for each element of the job to replace old rule-of-thumb methods Scientifically select employees and then train them to do the job as described in step 1 Supervise employees to make sure they follow the prescribed methods for performing their jobs Continue to plan the work, but use workers to get the work done 2 1 4 3
  24. 24. Classical Management Perspective <ul><li>Other Scientific Management Pioneers </li></ul><ul><ul><li>Frank and Lillian Gilbreth </li></ul></ul><ul><ul><ul><li>Reduced the number of movements in bricklaying, resulting in increased output of 200%. </li></ul></ul></ul><ul><ul><li>Henry Gantt </li></ul></ul><ul><ul><ul><li>Developed other techniques, including the Gantt chart, to improve working efficiency through planning/scheduling. </li></ul></ul></ul><ul><ul><li>Harrington Emerson </li></ul></ul><ul><ul><ul><li>Advocated job specialization in both managerial and operating jobs. </li></ul></ul></ul>
  25. 25. Classical Management Perspective (cont’d) <ul><li>Administrative Management Theory </li></ul><ul><ul><li>Focuses on managing the whole organization rather than individuals. </li></ul></ul><ul><li>Henri Fayol </li></ul><ul><ul><li>Was first to identify the specific management functions of planning, organizing, leading, and controlling. </li></ul></ul>
  26. 26. Classical Management Proponents <ul><li>Lyndall Urwick </li></ul><ul><ul><li>Integrated the work of previous management theorists. </li></ul></ul><ul><li>Max Weber </li></ul><ul><ul><li>His theory of bureaucracy is based on a rational set of guidelines for structuring organizations. </li></ul></ul><ul><li>Chester Barnard </li></ul><ul><ul><li>Proposed a theory of the acceptance of authority (by subordinates) as the source of power and influence for managers. </li></ul></ul>
  27. 27. Classical Management Perspective…Today <ul><li>Contributions </li></ul><ul><ul><li>Identified important management processes, functions, and skills. </li></ul></ul><ul><ul><li>Focused attention on management as a valid subject of scientific inquiry. </li></ul></ul><ul><li>Limitations </li></ul><ul><ul><li>More appropriate approach for use in traditional, stable, simple organizations. </li></ul></ul><ul><ul><li>Prescribed universal procedures that are not appropriate in some settings. </li></ul></ul>
  28. 28. Behavioral Management Perspective <ul><li>Behavioral Management </li></ul><ul><ul><li>Emphasized individual attitudes and behaviors, and group processes. </li></ul></ul><ul><ul><li>Recognized the importance of behavioral processes in the workplace. </li></ul></ul><ul><li>Hugo Munsterberg (1863 – 1916) </li></ul><ul><ul><li>A German psychologist, considered the father of industrial psychology. </li></ul></ul>
  29. 29. Behavioral Management Perspective (cont’d) <ul><li>The Hawthorne Studies </li></ul><ul><ul><li>Conducted by Elton Mayo and associates at Western Electric (1927–1935) </li></ul></ul><ul><ul><li>Group study — the effects of a piecework incentive plan on production workers. </li></ul></ul><ul><ul><ul><li>Workers established informal levels of acceptable individual output. </li></ul></ul></ul><ul><ul><ul><li>Over-producing workers were labeled “rate busters” and under-producing workers were considered “chiselers.” </li></ul></ul></ul><ul><ul><li>Interview program </li></ul></ul><ul><ul><ul><li>Confirmed the importance of human behavior in the workplace. </li></ul></ul></ul>
  30. 30. Behavioral Management Perspective (cont’d) <ul><li>Human Relations Movement </li></ul><ul><ul><li>Proposed that workers respond primarily to the social context of work, including social conditioning, group norms, and interpersonal dynamics. </li></ul></ul><ul><ul><li>Assumed that the manager’s concern for workers would lead to increased worker satisfaction and improved worker performance. </li></ul></ul><ul><li>Abraham Maslow </li></ul><ul><ul><li>Advanced a theory that employees are motivated by a hierarchy of needs that they seek to satisfy. </li></ul></ul><ul><li>Douglas McGregor </li></ul><ul><ul><li>Proposed Theory X and Theory Y concepts of managerial beliefs about people and work. </li></ul></ul>
  31. 31. Organizational Behavior <ul><li>A contemporary field focusing on behavioral perspectives on management. </li></ul><ul><li>Important topics in organizational behavior research: </li></ul><ul><ul><li>Job satisfaction and job stress </li></ul></ul><ul><ul><li>Motivation and leadership </li></ul></ul><ul><ul><li>Group dynamics and organizational politics </li></ul></ul><ul><ul><li>Interpersonal conflict </li></ul></ul><ul><ul><li>The design of organizations </li></ul></ul>
  32. 32. Behavioral Management Perspective…Today <ul><li>Contributions </li></ul><ul><ul><li>Provided important insights into motivation, group dynamics, and other interpersonal processes. </li></ul></ul><ul><ul><li>Challenged the view that employees are tools and furthered the belief that employees are valuable resources. </li></ul></ul><ul><li>Limitations </li></ul><ul><ul><li>Complexity of individuals makes behavior difficult to predict. </li></ul></ul><ul><ul><li>Many concepts not put to use because managers are reluctant to adopt them. </li></ul></ul><ul><ul><li>Contemporary research findings are not often communicated to practicing managers in an understandable form. </li></ul></ul>
  33. 33. Quantitative Management Perspective <ul><li>Quantitative Management </li></ul><ul><ul><li>Focuses on decision making, economic effectiveness, mathematical models, and the use of computers to solve quantitative problems. </li></ul></ul><ul><li>Management Science </li></ul><ul><ul><li>Focuses on the development of representative mathematical models to assist with decisions. </li></ul></ul><ul><li>Operations Management </li></ul><ul><ul><li>Practical application of management science to efficiently manage the production and distribution of products and services. </li></ul></ul>
  34. 34. Quantitative Management Perspective…Today <ul><li>Contributions </li></ul><ul><ul><li>Developed sophisticated quantitative techniques to assist in decision making. </li></ul></ul><ul><ul><li>Application of models has increased our awareness and understanding of complex processes and situations. </li></ul></ul><ul><li>Limitations </li></ul><ul><ul><li>Quantitative management cannot fully explain or predict the behavior of people in organizations. </li></ul></ul><ul><ul><li>Mathematical sophistication may come at the expense of other managerial skills. </li></ul></ul><ul><ul><li>Quantitative models may require unrealistic or unfounded assumptions, limiting their general applicability. </li></ul></ul>
  35. 35. Integrating Perspectives for Managers <ul><li>Systems Perspective </li></ul><ul><li>Open system </li></ul><ul><ul><li>An organization that interacts with its external environment. </li></ul></ul><ul><li>Closed system </li></ul><ul><ul><li>An organization that does not interact with its environment. </li></ul></ul><ul><li>Subsystems </li></ul><ul><ul><li>The importance of subsystems is due to their interdependence on each other within the organization. </li></ul></ul>
  36. 36. Systems Perspective <ul><li>Synergy </li></ul><ul><ul><li>Subsystems are more successful working together in a cooperative and coordinated fashion than working alone. </li></ul></ul><ul><li>Entropy </li></ul><ul><ul><li>A normal process in which an organizational system declines due to failing to adjust to change in its environment </li></ul></ul><ul><ul><li>Entropy can be avoided and the organization re-energized through organizational change and renewal. </li></ul></ul>
  37. 37. The Contingency Perspective <ul><li>Universal Perspectives </li></ul><ul><ul><li>Include the classical, behavioral, and quantitative approaches. </li></ul></ul><ul><li>The Contingency Perspective </li></ul><ul><ul><li>Suggests that each organization is unique. </li></ul></ul><ul><ul><li>The appropriate managerial behavior for managing an organization depends (is contingent) on the current situation in the organization. </li></ul></ul>
  38. 38. The Contingency Perspective (cont’d) <ul><li>An Integrative Framework </li></ul><ul><ul><li>Is a complementary way of thinking about theories of management. </li></ul></ul><ul><ul><li>Involves the recognition of current system and subsystem interdependencies, environmental influences, and the situational nature of management. </li></ul></ul>
  39. 39. Contemporary Management Issues and Challenges (cont’d) <ul><li>Contemporary Applied Perspectives </li></ul><ul><ul><li>William Ouchi’s “Theory Z,” Peters and Waterman’s “In Search of Excellence” </li></ul></ul><ul><ul><li>Popular authors: Senge, Covey, Porter, Kotter, and Hamel </li></ul></ul><ul><li>Contemporary Management Challenges </li></ul><ul><ul><li>Management of an increasingly diverse workforce </li></ul></ul><ul><ul><li>Rapid and constant environmental and technological change </li></ul></ul><ul><ul><li>Increasing globalization of markets </li></ul></ul><ul><ul><li>Renewed importance of ethics and social responsibility </li></ul></ul><ul><ul><li>Quality as the basis for competition </li></ul></ul><ul><ul><li>Shift to a predominately service-based economy </li></ul></ul>
  40. 40. The Environment and Culture of Organizations Three hapter
  41. 41. The Business Environment <ul><li>External Environment </li></ul><ul><ul><li>General environment is everything outside an organization’s boundaries—economic, legal, political, socio-cultural, international, and technical forces. </li></ul></ul><ul><ul><li>Task environment is composed of specific groups and organizations that affect the firm. </li></ul></ul><ul><li>Internal Environment </li></ul><ul><ul><li>Conditions and forces present and at work within an organization </li></ul></ul>
  42. 42. The External Environment <ul><li>The General Environment </li></ul><ul><ul><li>The set of broad dimensions and forces in an organization’s surroundings that create its overall context. </li></ul></ul><ul><ul><li>Economic dimension </li></ul></ul><ul><ul><li>Technological dimension refers to the methods available for converting resources into products or services. </li></ul></ul><ul><ul><li>Sociocultural dimension </li></ul></ul><ul><ul><li>Political-legal dimension is the extent of government regulation of business and the general relationship between business and government. </li></ul></ul><ul><ul><li>International dimension is the extent to which the organization is affected by business in other countries. </li></ul></ul>
  43. 43. The External Environment (cont’d) <ul><li>Dimensions of the Task Environment </li></ul><ul><ul><li>Specific groups affecting the organization </li></ul></ul><ul><ul><ul><li>Competitors </li></ul></ul></ul><ul><ul><ul><li>Customers who acquire an organization’s products or resources. </li></ul></ul></ul><ul><ul><ul><li>Suppliers </li></ul></ul></ul><ul><ul><ul><li>Regulators that control, legislate, or influence the organization’s policies or practices: </li></ul></ul></ul><ul><ul><ul><ul><li>regulatory agencies. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>interest groups. </li></ul></ul></ul></ul><ul><ul><ul><li>Strategic partners (allies) who are in a joint venture or partnership with the organization. </li></ul></ul></ul>
  44. 44. The Internal Environment <ul><li>Conditions and stakeholder forces within an organization </li></ul><ul><ul><li>Owners </li></ul></ul><ul><ul><li>Board of directors are elected by the stockholders and are charged with overseeing the general management of the firm to ensure that it is run in a way that best serves the stockholders’ interest. </li></ul></ul><ul><ul><li>Employees </li></ul></ul><ul><ul><li>Physical work environment is the actual physical environment of the organization and the work that people do. </li></ul></ul>
  45. 45. The Organization’s Culture <ul><li>The Importance of Organization Culture </li></ul><ul><ul><li>Culture determines the overall “feel” of the organization, although it may vary across different segments of the organization. </li></ul></ul><ul><li>Determinants of Organizational Culture </li></ul><ul><ul><li>Organization’s founder (personal values and beliefs). </li></ul></ul><ul><ul><li>Symbols, stories, heroes, slogans, and ceremonies that embody and personify the spirit of the organization. </li></ul></ul><ul><ul><li>Shared experiences that bond organizational members together. </li></ul></ul>
  46. 46. Organizational Culture <ul><li>Managing Organizational Culture </li></ul><ul><ul><li>Understand the current culture to understand whether to maintain or change it. </li></ul></ul><ul><ul><li>Reward and promote people whose behaviors are consistent with desired cultural values. </li></ul></ul><ul><li>Changing Organizational Culture </li></ul><ul><ul><li>Develop a clear idea of what kind of culture you want to create. </li></ul></ul><ul><ul><li>Bring in outsiders to important managerial positions. </li></ul></ul><ul><ul><li>Adopt new slogans, stories, ceremonies, and purposely break with tradition. </li></ul></ul>
  47. 47. How Environments Affect Organizations <ul><li>Change and Complexity </li></ul><ul><ul><li>Environmental change occurs in two ways: </li></ul></ul><ul><ul><ul><li>Degree to which change in environment is occurring </li></ul></ul></ul><ul><ul><ul><li>Degree of homogeneity or complexity of the environment </li></ul></ul></ul><ul><ul><li>Uncertainty is a driving force that influences organizational decisions. </li></ul></ul>
  48. 48. How Environments Affect Organizations (cont’d) <ul><li>Competitive Forces </li></ul><ul><ul><li>Porter’s Five Competitive Forces </li></ul></ul><ul><ul><ul><li>Threat of new entrants into the market </li></ul></ul></ul><ul><ul><ul><li>Competitive rivalry among present competitors </li></ul></ul></ul><ul><ul><ul><li>Threat of substitute products </li></ul></ul></ul><ul><ul><ul><li>Power of buyers </li></ul></ul></ul><ul><ul><ul><li>Power of suppliers </li></ul></ul></ul><ul><li>Environmental Turbulence </li></ul><ul><ul><li>Unexpected changes and upheavals in the environment of an organization. </li></ul></ul>
  49. 49. How Organizations Respond to Their Environments (cont’d) <ul><li>Information Management in Organizations </li></ul><ul><ul><li>A boundary spanner is an employee who accumulates information through contacts outside the organization. </li></ul></ul><ul><ul><li>Environmental scanning </li></ul></ul><ul><ul><li>Information systems </li></ul></ul><ul><li>Strategic Response </li></ul><ul><ul><li>Maintaining the status quo, altering the current strategy, or adopting a new strategy. </li></ul></ul><ul><li>Mergers, Acquisitions, Alliances </li></ul><ul><ul><li>Firms can combine (merge), purchase (acquisition), or form new venture partnerships or alliances with another firm. </li></ul></ul>
  50. 50. How Organizations Respond to Their Environments (cont’d) <ul><li>Organizational Design and Flexibility </li></ul><ul><ul><li>An organization may adapt to its environmental conditions by incorporating flexibility in its structural design. </li></ul></ul><ul><ul><li>Mechanistic firms versus organic firms </li></ul></ul><ul><li>Direct Influence of the Environment </li></ul><ul><ul><li>An organization may attempt to change the nature of the competitive conditions in its environment to suit its needs. </li></ul></ul><ul><ul><li>Pursuing new or changed relationships with suppliers, customers, and regulators can alter the organization’s environment in a way that favors the organization. </li></ul></ul>
  51. 51. The Environment and Organizational Effectiveness <ul><li>Models of Organizational Effectiveness </li></ul><ul><ul><li>Systems resource approach </li></ul></ul><ul><ul><li>Internal processes approach focuses on the transformation processes (production efficiencies). </li></ul></ul><ul><ul><li>Goal approach focuses on outputs (achieving organizational goals). </li></ul></ul><ul><ul><li>Strategic constituencies approach focuses on feedback (satisfying stakeholders). </li></ul></ul>
  52. 52. The Ethical and Social Environment Four hapter
  53. 53. Individual Ethics In Organizations <ul><li>Ethics </li></ul><ul><ul><li>An individual’s personal beliefs regarding what is right and wrong or good and bad. </li></ul></ul><ul><li>Ethical Behavior </li></ul><ul><ul><li>This behavior is in the eye of the beholder. However, it also refers to behavior that conforms to generally accepted social norms. </li></ul></ul><ul><li>Examples of Unethical Behavior </li></ul><ul><ul><li>Filing falsified or inflated business expense reports. </li></ul></ul>
  54. 54. Ethics in Organizations <ul><li>Managing Ethical Behavior </li></ul><ul><ul><li>Must begin with top management which establishes the organization’s culture and defines what will and will not be acceptable behavior. </li></ul></ul><ul><ul><li>Training how to handle different ethical dilemmas. </li></ul></ul><ul><ul><li>Develop a written code of ethics </li></ul></ul><ul><ul><li>Individual issues </li></ul></ul>
  55. 55. Applying Ethical Judgments <ul><li>Model for deciding whether or not a particular action or decision is ethical </li></ul><ul><ul><li>Gather relevant factual information. </li></ul></ul><ul><ul><li>Determine the most appropriate moral values. </li></ul></ul><ul><ul><li>Make a judgment based on the rightness or wrongness of the proposed activity or policy. </li></ul></ul><ul><li>Ethical Norms Affecting Actions </li></ul><ul><ul><li>Utility —act optimizes what is best for its constituencies (benefits only or primarily those who are directly involved) </li></ul></ul><ul><ul><li>Rights </li></ul></ul><ul><ul><li>Justice —act is consistent with what is considered fair </li></ul></ul><ul><ul><li>Caring </li></ul></ul>
  56. 56. Social Responsibility and Organizations <ul><li>Social Responsibility </li></ul><ul><ul><li>The set of obligations (to behave responsibly) that an organization has to protect and enhance the social context in which it functions. </li></ul></ul><ul><li>Areas of Social Responsibility </li></ul><ul><ul><li>Stakeholders </li></ul></ul><ul><ul><li>The natural environment </li></ul></ul><ul><ul><li>The general social welfare </li></ul></ul><ul><ul><ul><li>Charitable contributions, support for social issues such as child labor and human rights </li></ul></ul></ul>
  57. 57. Approaches to Social Responsibility (cont’d) <ul><li>Obstructionist Stance </li></ul><ul><ul><li>Do as little as possible to solve social or environmental problems. </li></ul></ul><ul><li>Defensive Stance </li></ul><ul><li>Accommodative Stance </li></ul><ul><ul><li>Meet legal and ethical obligations and go beyond that in selected cases. </li></ul></ul><ul><li>Proactive Stance </li></ul>
  58. 58. Managing Social Responsibility: Formal Organizational Dimensions <ul><li>Legal Compliance </li></ul><ul><ul><li>Extent to which the organization conforms to local, state, federal, and international laws. </li></ul></ul><ul><li>Ethical Compliance </li></ul><ul><li>Philanthropic Giving </li></ul>
  59. 59. Managing Social Responsibility: Informal Organizational Dimensions <ul><li>Organizational Leadership and Culture </li></ul><ul><ul><li>Leadership practices and the culture of the organization can help define the social responsibility stance an organization and its members will adopt. </li></ul></ul><ul><li>Whistle Blowing </li></ul><ul><ul><li>The organizational response to the disclosure by an employee of illegal or unethical conduct on the part of others within the organization is indicative of the organization’s stance on social responsibility. </li></ul></ul>
  60. 60. Evaluating Social Responsibility <ul><li>Concept of Control </li></ul><ul><ul><li>Evaluating responses to questionable legal or ethical conduct </li></ul></ul><ul><li>Corporate Social Audit </li></ul><ul><ul><li>A formal and thorough analysis of the effectiveness of the firm’s social performance conducted by a task force of high-level managers from within the firm. </li></ul></ul><ul><ul><li>Requires the organization to clearly define its social goals, analyzes resources committed to the goals, determines how well goals are being met, and makes recommendations for areas needing additional attention. </li></ul></ul>
  61. 61. The Global Environment Five hapter
  62. 62. The Meaning of International Business <ul><li>Domestic Business </li></ul><ul><ul><li>acquires all of its resources and sells all of its products or services within a single country. </li></ul></ul><ul><li>International Business </li></ul><ul><li>Multinational Business </li></ul><ul><ul><li>transcends national boundaries and buys raw materials, borrows money, and manufactures and sells its products in a world-wide marketplace. </li></ul></ul><ul><li>Global Business </li></ul>
  63. 63. Trends in International Business <ul><li>Economic Recovery </li></ul><ul><ul><li>Industrialized nations in Europe and Asia have rebuilt their economic systems that were devastated in WWII. </li></ul></ul><ul><li>Decreasing Isolation from Foreign Competition </li></ul><ul><ul><li>U.S. consumer goods markets are open to overseas competitors. </li></ul></ul><ul><li>Increasing Globalization of World Markets </li></ul><ul><ul><li>Volume of international trade has increased more than 3,000% from 1960 to 2000. </li></ul></ul>
  64. 64. Managing The Process of Globalization <ul><li>Exporting </li></ul><ul><ul><li>Making a product in the firm’s domestic market and selling it in another country. </li></ul></ul><ul><li>Importing </li></ul><ul><ul><li>Bringing a good, service, or capital into a home country from abroad. </li></ul></ul><ul><ul><li>Advantages and disadvantages </li></ul></ul>
  65. 65. Managing The Process of Globalization (cont’d) <ul><li>Licensing </li></ul><ul><ul><li>Advantages are increased profitability from licensing without additional capital requirements, lower operational costs in foreign markets, and extended profitability from existing technologies. </li></ul></ul><ul><ul><li>Disadvantages are inflexibility in the licensing arrangement, loss of profits from licensee failure, and licensing possibly helps competitors learn to compete. </li></ul></ul><ul><li>Strategic Alliance and Joint Ventures </li></ul><ul><ul><li>Advantages are quick market entry, access to materials and technology, and reduced risk. </li></ul></ul><ul><ul><li>Disadvantage is that shared ownership limits control and profitability. </li></ul></ul>
  66. 66. Managing The Process of Globalization (cont’d) <ul><li>Direct Investment </li></ul><ul><ul><li>Advantages are enhanced operational control, it allows use of existing infrastructure, and no adaptation of in-country product or service is necessary. </li></ul></ul><ul><ul><li>Disadvantages are complexity in managing a foreign operation, greater economic- and political-risk exposure, and greater uncertainty of business risk. </li></ul></ul><ul><ul><li>Maquiladoras are light-assembly plants built in northern Mexico close to the U.S. border which are given special tax breaks by the Mexican government. </li></ul></ul>
  67. 67. The Structure of the Global Economy <ul><li>Market Economies and Systems </li></ul><ul><ul><li>Based on the private ownership of business and allows market factors such as supply and demand to determine business strategy. </li></ul></ul><ul><li>Market Systems </li></ul><ul><ul><li>Clusters of countries that engage in high levels of trade with each other through the elimination of trade barriers such as quotas and tariffs. </li></ul></ul>
  68. 68. Market Economies and Systems <ul><li>High Potential/High Growth Economies </li></ul><ul><ul><li>Characteristics are underdeveloped and immature markets, weak industrial base, weak currency, and poor consumers. </li></ul></ul><ul><ul><li>People’s Republic of China, India, Vietnam, Brazil, Russia. </li></ul></ul><ul><ul><li>Challenges to market development </li></ul></ul><ul><ul><ul><li>A lack of infrastructure for support operations. </li></ul></ul></ul><ul><ul><ul><li>Unfavorable policy changes affecting investments. </li></ul></ul></ul><ul><li>Other Economies </li></ul><ul><ul><li>Some economies defy classification due to their possession of critical and valuable resources (e.g., oil-producing countries) or other social or political factors which distort their internal economies and markets. </li></ul></ul><ul><ul><li>Challenges of other economies </li></ul></ul><ul><ul><ul><li>Ethnic violence </li></ul></ul></ul>
  69. 69. Controls on International Management <ul><li>Key Concepts </li></ul><ul><ul><li>Tariffs are collected on goods shipped across national boundaries. </li></ul></ul><ul><ul><li>Quotas are limits placed on the number or value of goods that can be traded as exports or imports. </li></ul></ul><ul><ul><li>Export restraint agreements are voluntary limits on the volume or value of goods exported to or imported from another country. </li></ul></ul>
  70. 70. The Cultural Environment <ul><li>Language </li></ul><ul><ul><li>In Japanese the word “hai” can mean either “yes” or “I understand.” </li></ul></ul><ul><ul><li>General Motors’ brand name “Nova” when “va” is pronounced “ba” as “no va” in Spanish means “doesn’t go.” </li></ul></ul><ul><li>The Meaning of Colors </li></ul><ul><ul><li>Green is popular in Muslim countries, yet it signifies death in other countries. </li></ul></ul><ul><ul><li>Pink is associated with feminine characteristics in the U.S.; yellow is the most feminine color in other countries. </li></ul></ul>
  71. 71. <ul><li>Social Orientation </li></ul><ul><li>Power Orientation </li></ul><ul><li>Uncertainty Orientation </li></ul><ul><li>Goal Orientation </li></ul><ul><li>Time Orientation </li></ul>Individual Behaviors Across Cultures
  72. 72. Competing in a Global Economy <ul><li>Globalization and Organization Size </li></ul><ul><ul><li>Multinational Corporations (MNCs) adopt a global perspective and compete in the global marketplace. </li></ul></ul><ul><ul><li>Medium-Size Businesses remain primarily domestic organizations that may buy and sell abroad through trade specialists and compete with foreign companies in local markets. </li></ul></ul><ul><ul><li>Small Businesses participate in global markets when they serve as local suppliers for MNCs. </li></ul></ul>
  73. 73. Management Challenges in a Global Economy <ul><li>Planning in a Global Economy </li></ul><ul><ul><li>Requires a broad-based understanding of both environmental issues and competitive issues. </li></ul></ul><ul><li>Organizing in a Global Economy </li></ul><ul><ul><li>Involves addressing issues of creating and managing operations on a world-wide scale. </li></ul></ul><ul><li>Leading in a Global Economy </li></ul><ul><ul><li>Requires learning how to interact with and motivate persons of different cultural, social, and economics backgrounds. </li></ul></ul><ul><li>Controlling </li></ul><ul><ul><li>Involves integrating global operations that encompass time-zone differences, cultural factors, and varying communication methods. </li></ul></ul>
  74. 74. The Multicultural Environment Six hapter
  75. 75. The Organization and Culture <ul><li>Organizational Culture </li></ul><ul><ul><li>Values, beliefs, behaviors, customs, and attitudes that help the members of the organization understand what it stands for, how it does things, and what it considers important. </li></ul></ul><ul><li>Multiculturalism </li></ul><ul><ul><li>The broad issues associated with differences in values, beliefs, behaviors, customs, and attitudes held by people in different cultures. </li></ul></ul><ul><li>Diversity </li></ul><ul><ul><li>When members of a group differ from one another along dimensions such as age, gender, or ethnicity. </li></ul></ul>
  76. 76. Dimensions of Diversity and Multiculturalism <ul><li>Age Distributions </li></ul><ul><ul><li>Average age of the U.S. workforce is gradually increasing and will continue to do so for the next several years. </li></ul></ul><ul><li>Gender </li></ul><ul><ul><li>Females were 46% of the workforce in 1994. </li></ul></ul><ul><li>Ethnicity </li></ul><ul><ul><li>The ethnic composition of the U.S. workforce will change most with the increasing number of Hispanic workers and the decline in white workers. </li></ul></ul>
  77. 77. Dimensions of Diversity and Multiculturalism (cont’d) <ul><li>Other Dimensions of Diversity </li></ul><ul><ul><li>Workforce diversity is expected to increase due to diversity in religious and political beliefs and viewpoints, lifestyles, and various other individual characteristics. </li></ul></ul><ul><li>Multicultural Differences </li></ul><ul><ul><li>The increasing globalization of business and immigration patterns will affect workforce diversity and present challenges to managers to successfully manage diversity. </li></ul></ul>
  78. 78. <ul><li>Resource Acquisition Argument </li></ul><ul><ul><li>Firms who manage diversity effectively will become known among women and minorities as good places to work. </li></ul></ul><ul><li>Creativity Argument </li></ul><ul><li>System Flexibility Argument </li></ul><ul><ul><li>Firms must become flexible as a way of managing a diverse workforce, causing the overall organization to be more flexible. </li></ul></ul><ul><li>Cost Argument </li></ul><ul><li>Marketing Argument </li></ul><ul><ul><li>Firms with diverse workforces will be better able to understand different market segments than those with less diverse ones. </li></ul></ul><ul><li>Problem-Solving Argument </li></ul>How Diversity and Multiculturalism Promote Competitive Advantage
  79. 79. Diversity and Competitive Advantage <ul><li>Diversity promotes competitive advantage by: </li></ul><ul><ul><li>increasing organizational systems’ flexibility. </li></ul></ul><ul><ul><li>bringing added creativity. </li></ul></ul><ul><ul><li>increasing the market scope of products. </li></ul></ul><ul><ul><li>broadening the resources acquisition basis. </li></ul></ul><ul><ul><li>adding a diversity of viewpoints to problem-solving decision-making processes. </li></ul></ul><ul><ul><li>decreasing the cost of doing business. </li></ul></ul>
  80. 80. Multiculturalism and Conflict <ul><li>Sources of Conflict </li></ul><ul><ul><li>Personnel actions being attributed to diversity status. </li></ul></ul><ul><ul><li>Misunderstood, misinterpreted, or inappropriate actions between people or groups. </li></ul></ul><ul><ul><li>Cultural differences in work hours, personal styles, interpersonal relations, and conflict. </li></ul></ul>
  81. 81. Managing Diversity and Multiculturalism in Organizations <ul><li>Individual Strategies </li></ul><ul><ul><li>Understanding the nature and meaning of diversity and multiculturalism. </li></ul></ul><ul><ul><li>Developing empathy in understanding the perspective of others. </li></ul></ul><ul><ul><li>Having a willingness to communicate and discuss diversity and multiculturalism issues. </li></ul></ul>
  82. 82. Managing Diversity and Multiculturalism in Organizations (cont’d) <ul><li>Organizational Approaches </li></ul><ul><ul><li>Organizational Policies </li></ul></ul><ul><ul><ul><li>Actively seek a diverse and varied workforce. </li></ul></ul></ul><ul><ul><ul><li>Positive responses to diversity problems. </li></ul></ul></ul><ul><ul><ul><li>Mission statement of commitment to diversity. </li></ul></ul></ul><ul><ul><li>Diversity and Multicultural Training </li></ul></ul><ul><ul><ul><li>Training that enables organization members to function in a diverse and multicultural environment </li></ul></ul></ul><ul><ul><li>Organizational Culture </li></ul></ul>
  83. 83. Toward The Multicultural Organization <ul><li>Basic Characteristics </li></ul><ul><ul><li>Pluralism in which every organizational group works to understand every other group. </li></ul></ul><ul><ul><li>Full structural integration </li></ul></ul><ul><ul><li>Full integration of the informal network that removes barriers to entry and participation in the organization. </li></ul></ul><ul><ul><li>Absence of prejudice and discrimination . </li></ul></ul><ul><ul><li>No gap in organizational identification </li></ul></ul><ul><ul><li>Low levels of intergroup conflict . </li></ul></ul>
  84. 84. Basic Elements of Planning and Decision Making Seven hapter
  85. 85. Decision Making and the Planning Process <ul><li>The Planning Process </li></ul>Strategic goals Strategic plans Tactical goals Operational goals Operational plans The organization’s mission The Environmental Context • Purpose • Premises • Values • Directions Tactical plans
  86. 86. Organizational Goals <ul><li>Purposes of Goals </li></ul><ul><ul><li>Provide guidance and a unified direction for people in the organization. </li></ul></ul><ul><ul><li>Have a strong affect on the quality of other aspects of planning. </li></ul></ul><ul><ul><li>Serve as a source of motivation for employees of the organization. </li></ul></ul>
  87. 87. Kinds of Goals <ul><li>By Level </li></ul><ul><ul><li>Mission statement is a statement of an organization’s fundamental purpose. </li></ul></ul><ul><ul><li>Strategic goals </li></ul></ul><ul><ul><li>Tactical goals are set by and for middle managers; their focus is on how to operationalize actions to strategic goals. </li></ul></ul><ul><ul><li>Operational goals </li></ul></ul><ul><li>By Area </li></ul><ul><ul><li>Goals set for the different functional areas of the organization. </li></ul></ul><ul><li>By Time Frame </li></ul><ul><ul><li>Goals may be set for long-term, intermediate-term, or short-term time frames and for explicit time frames or open-ended. </li></ul></ul>
  88. 88. Responsibilities of Setting Goals <ul><li>Who Sets Goals? </li></ul><ul><ul><li>All managers should be involved in the goal-setting process. </li></ul></ul><ul><ul><li>Managerial responsibility for goal setting should correspond to the manager’s level in the organization. </li></ul></ul><ul><li>Managing Multiple Goals </li></ul><ul><ul><li>Optimizing allows managers to balance and reconcile inconsistent or conflicting goals. </li></ul></ul>
  89. 89. Kinds of Organizational Plans <ul><li>Strategic Plans </li></ul><ul><ul><li>A general plan outlining resource allocation, priorities, and action steps to achieve strategic goals. The plans are set by and for top management. </li></ul></ul><ul><li>Tactical Plans </li></ul><ul><li>Operational Plans </li></ul>
  90. 90. Time Frames for Planning <ul><li>The Time Dimension of Planning </li></ul><ul><ul><li>is based on the principle of commitment. Planning must provide sufficient time to fulfill the managerial commitments involved. </li></ul></ul><ul><li>Long-range Plans </li></ul><ul><li>Intermediate Plans </li></ul><ul><ul><li>usually cover from 1 to 5 years and parallel tactical plans. </li></ul></ul><ul><ul><li>are the principal focus of organizational planning efforts. </li></ul></ul><ul><li>Short-range Plans </li></ul>
  91. 91. Responsibilities for Planning <ul><li>Planning Staff </li></ul><ul><ul><li>Planning staff personnel gather information, coordinate planning activities, and take a broader view than individual managers. </li></ul></ul><ul><li>Planning Task Force </li></ul><ul><ul><li>Created when the organization wants a special circumstance addressed. </li></ul></ul><ul><li>Board of Directors </li></ul><ul><ul><li>Establishes corporate mission and strategy. </li></ul></ul><ul><li>Chief Executive Officer </li></ul><ul><ul><li>Usually serves as president or chair of the board of directors. Has a major role in the planning process and implements the strategy. </li></ul></ul>
  92. 92. Responsibilities for Planning (cont’d) <ul><li>Executive Committee </li></ul><ul><ul><li>Composed of top executives within the organization. Meet regularly for input to the CEO and review strategic plans. </li></ul></ul><ul><li>Line Management </li></ul><ul><ul><li>Persons with formal authority and responsibility for management of the organization. Help to formulate strategy by providing information. </li></ul></ul>
  93. 93. Types of Operational Plans
  94. 94. Barriers to Goal Setting and Planning <ul><li>As part of managing the goal-setting and planning process, managers must understand the barriers that can disrupt them. Managers must also know how to overcome them. </li></ul>
  95. 95. Using Goals to Implement Plans: The Effectiveness of Formal Goal Setting <ul><li>Strengths (Success) </li></ul><ul><ul><li>Improved employee motivation </li></ul></ul><ul><ul><li>Enhances communication </li></ul></ul><ul><ul><li>Objective performance appraisals </li></ul></ul><ul><ul><li>Focuses attention on appropriate goals </li></ul></ul><ul><ul><li>Provides a systematic management philosophy </li></ul></ul><ul><li>Weaknesses (Failure) </li></ul><ul><ul><li>Poor implementation of the goal setting process </li></ul></ul><ul><ul><li>Lack of top-management support for goal setting </li></ul></ul><ul><ul><li>Delegation of the goal-setting process to lower levels </li></ul></ul><ul><ul><li>Overemphasis on quantitative goals </li></ul></ul><ul><ul><li>Too much paperwork and record keeping </li></ul></ul>
  96. 96. Managing Strategy and Strategic Planning Eight hapter
  97. 97. The Nature of Strategic Management <ul><li>Strategy </li></ul><ul><li>Strategic Management </li></ul><ul><ul><li>A comprehensive and ongoing management process aimed at formulating and implementing effective strategies which align the organization with its environment to achieve major organizational goals. </li></ul></ul><ul><li>Effective Strategies </li></ul><ul><ul><li>Strategies that promote a superior alignment between the organization and its environment and the achievement of its goals. </li></ul></ul>
  98. 98. Components of Strategy <ul><li>Distinctive Competence </li></ul><ul><ul><li>Something an organization does exceptionally well. </li></ul></ul><ul><li>Scope </li></ul><ul><ul><li>Range of markets in which an organization will compete. </li></ul></ul><ul><li>Resource Deployment </li></ul><ul><ul><li>How an organization will distribute its resources across the areas in which it competes. </li></ul></ul>
  99. 99. Types of Strategic Alternatives <ul><li>Business-level Strategy </li></ul><ul><li>Corporate-level Strategy </li></ul><ul><ul><li>The set of strategic alternatives that an organization chooses from as it manages its operations simultaneously across several industries and several markets. </li></ul></ul>
  100. 100. Strategy Formulation and Implementation <ul><li>Strategy Formulation </li></ul><ul><ul><li>The set of processes involved in creating or determining the organization’s strategies </li></ul></ul><ul><li>Strategy Implementation </li></ul><ul><ul><li>The methods by which strategies are operationalized or executed within the organization </li></ul></ul><ul><li>Deliberate Strategy </li></ul><ul><ul><li>A plan, chosen and implemented to support specific goals, that is the result of a rational, systematic, and planned process of strategy formulation and implementation. </li></ul></ul><ul><li>Emergent Strategy </li></ul><ul><ul><li>A pattern of action that develops over time, in the absence of goals or missions, or despite goals and missions. </li></ul></ul>
  101. 101. Using SWOT Analysis to Formulate Strategy <ul><li>Evaluating Organizational Strengths </li></ul><ul><ul><li>Organizational strengths </li></ul></ul><ul><ul><ul><li>are skills and abilities enabling an organization to conceive of and implement strategies. </li></ul></ul></ul><ul><ul><li>Common organizational strengths </li></ul></ul><ul><ul><li>Distinctive competencies </li></ul></ul><ul><ul><ul><li>are useful for competitive advantage and superior performance. </li></ul></ul></ul><ul><ul><li>Imitation of distinctive competencies </li></ul></ul>
  102. 102. Using SWOT Analysis to Formulate Strategy (cont’d) <ul><li>Evaluating Organizational Strengths (cont’d) </li></ul><ul><ul><li>Sustained competitive advantage </li></ul></ul><ul><ul><ul><li>occurs when a distinctive competence cannot be easily duplicated. </li></ul></ul></ul><ul><ul><li>Strategic imitation is difficult when: </li></ul></ul><ul><ul><ul><li>Distinctive competence is based on unique historical circumstances. </li></ul></ul></ul><ul><ul><ul><li>The competence is based on a complex phenomenon, such as organizational culture. </li></ul></ul></ul>
  103. 103. Using SWOT Analysis to Formulate Strategy (cont’d) <ul><li>Evaluating Organizational Weaknesses </li></ul><ul><ul><li>Organizational weaknesses are skills and capabilities that do not enable an organization to choose and implement strategies that support its mission. </li></ul></ul><ul><ul><li>Weaknesses can be overcome </li></ul></ul><ul><ul><li>Competitive disadvantage is a situation in which an organization fails to implement strategies being implemented by competitors. </li></ul></ul>
  104. 104. Using SWOT Analysis to Formulate Strategy (cont’d) <ul><li>Evaluating an Organization’s Opportunities and Threats </li></ul><ul><ul><li>Organizational opportunities are areas in the organization’s environment that may generate high performance. </li></ul></ul><ul><ul><li>Organizational threats are areas in the organization’s environment that make it difficult for the organization to achieve high performance. </li></ul></ul>
  105. 105. Formulating Business-Level Strategies <ul><li>Porter’s Generic Strategies </li></ul><ul><ul><li>Differentiation strategy </li></ul></ul><ul><ul><ul><li>An organization seeks to distinguish itself from competitors through the quality of its products or services. </li></ul></ul></ul><ul><ul><li>Overall cost leadership strategy </li></ul></ul><ul><ul><li>Focus strategy </li></ul></ul><ul><ul><ul><li>An organization concentrates on a specific regional market, product line, or group of buyers. </li></ul></ul></ul>
  106. 106. The Miles and Snow Topology
  107. 107. Implementing Business-Level Strategies <ul><li>Implementing Porter’s Generic Strategies </li></ul><ul><ul><li>Differentiation Strategy </li></ul></ul><ul><ul><li>Overall Cost Leadership Strategy </li></ul></ul><ul><ul><ul><li>To support cost leadership, marketing and sales are likely to focus on simple product attributes and how these product attributes meet customer needs in a low-cost and effective manner. </li></ul></ul></ul><ul><ul><li>Focus Strategy </li></ul></ul><ul><ul><ul><li>This strategy is implemented via the same approaches used for differentiation and cost leadership, depending on which one (differentiation or cost leadership) is the proper basis for competing in or for a specific market segment, product category, or group buyers. </li></ul></ul></ul>
  108. 108. Implementing Business-Level Strategies (cont’d) <ul><li>Implementing Miles and Snow’s Strategies </li></ul><ul><ul><li>Prospector Strategy </li></ul></ul><ul><ul><ul><li>An organization using this strategy must encourage creativity to seek out new market opportunities and to take risks. </li></ul></ul></ul><ul><ul><li>Defender Strategy </li></ul></ul><ul><ul><ul><li>To support this strategy, an organization will focus on defending its current markets by lowering its costs and/or improving the performance of current products. </li></ul></ul></ul><ul><ul><li>Analyzer Strategy </li></ul></ul><ul><ul><ul><li>Organizations using this strategy incorporate elements of both the prospector and the defender strategies in an attempt to maintain current business and to be somewhat innovative. </li></ul></ul></ul>
  109. 109. Formulating Corporate-Level Strategies <ul><li>Strategic Business Units </li></ul><ul><ul><li>Each business or group of businesses within an organization engaged in serving the same markets, customers, or products. </li></ul></ul><ul><li>Diversification </li></ul><ul><ul><li>The number of businesses an organization is engaged in and the extent to which these businesses are related to one another </li></ul></ul><ul><li>Single Product Strategy </li></ul>
  110. 110. Related Diversification <ul><li>Related Diversification </li></ul><ul><ul><li>A strategy in which an organization operates in several different businesses, industries, or markets that are somehow linked. </li></ul></ul><ul><li>Bases of Relatedness in Implementing Related Diversification </li></ul>
  111. 111. Related Diversification (cont’d) <ul><li>Advantages of Related Diversification </li></ul><ul><ul><li>Reduces organization’s dependence on any one of its business activities and thus reduces economic risk. </li></ul></ul><ul><ul><li>Reduces overhead costs associated with managing any one business through economies of scale and economies of scope. </li></ul></ul><ul><ul><li>Allows an organization to exploit its strengths and capabilities in more than one business. </li></ul></ul><ul><ul><li>Synergy exists among a set of businesses </li></ul></ul>
  112. 112. Formulating Corporate-Level Strategies (cont’d) <ul><li>Unrelated Diversification </li></ul><ul><ul><li>A strategy in which an organization operates multiple businesses that are not logically associated with one another. </li></ul></ul><ul><li>Advantages </li></ul><ul><ul><li>Stable corporate-level performance over time due to business cycle differences among the multiple businesses. </li></ul></ul><ul><li>Disadvantages </li></ul><ul><ul><li>Firms with unrelated strategies fail to exploit important synergies, putting them at a competitive disadvantage to firms with related diversification strategies. </li></ul></ul>
  113. 113. Implementing Corporate-Level Strategies <ul><li>Becoming a Diversified Firm </li></ul><ul><ul><li>Internal Development of New Products </li></ul></ul><ul><ul><li>Replacement of Suppliers and Customers </li></ul></ul><ul><ul><ul><li>Backward Vertical Integration </li></ul></ul></ul><ul><ul><ul><ul><li>Beginning a business that furnishes resources previously handled by a supplier. </li></ul></ul></ul></ul><ul><ul><ul><li>Forward Vertical Integration </li></ul></ul></ul>
  114. 114. Implementing Corporate-Level Strategies (cont’d) <ul><li>Becoming a Diversified Firm </li></ul><ul><ul><li>Merger and Acquisitions </li></ul></ul><ul><ul><ul><li>A merger is the purchase of one firm by another firm of approximately the same size. </li></ul></ul></ul><ul><ul><ul><li>An acquisition </li></ul></ul></ul><ul><ul><li>Purposes of Mergers and Acquisitions </li></ul></ul><ul><ul><ul><li>To acquire complementary products or services linked by a common technology and common customers. </li></ul></ul></ul><ul><ul><ul><li>To create or exploit synergies that reduce the combined organizations’ costs of doing business to increase revenues. </li></ul></ul></ul>
  115. 115. Managing Diversification <ul><li>Major Tools for Managing Diversification </li></ul><ul><ul><li>Organization structure </li></ul></ul><ul><ul><ul><li>Detailed discussion of organization structure is contained in Chapter 12. </li></ul></ul></ul><ul><ul><li>Portfolio management techniques </li></ul></ul><ul><ul><ul><li>Methods that diversified organizations use to make decisions about what businesses to engage in and how to manage these multiple businesses to maximize corporate performance. </li></ul></ul></ul><ul><ul><li>Two important portfolio management techniques are the BCG Matrix and the GE Business Screen. </li></ul></ul>
  116. 116. Managing Diversification (cont’d) <ul><li>BCG Matrix </li></ul><ul><ul><li>A method of evaluating businesses relative to the growth rate of their market and the organization’s share of the market. </li></ul></ul><ul><ul><li>The matrix classifies the types of businesses that a diversified organization can engage as: </li></ul></ul><ul><ul><ul><li>“Dogs” —have small market shares and no growth prospects. </li></ul></ul></ul><ul><ul><ul><li>“ Cash cows” </li></ul></ul></ul><ul><ul><ul><li>“ Question marks”—have small market shares in quickly growing markets. </li></ul></ul></ul><ul><ul><ul><li>“ Stars” </li></ul></ul></ul>
  117. 117. Managing Diversification <ul><li>GE Business Screen </li></ul><ul><ul><li>A method of evaluating business in a diversified portfolio along two dimensions, each of which contains multiple factors </li></ul></ul><ul><ul><li>In general, the more attractive the industry and the more competitive a business is, the more resources an organization should invest in that business. </li></ul></ul>
  118. 118. International and Global Strategies <ul><li>Sources of competitive advantage </li></ul><ul><ul><li>Location efficiencies </li></ul></ul><ul><ul><ul><li>Allow companies to locate facilities wherever they can best obtain a cost or differentiation advantage. </li></ul></ul></ul><ul><ul><li>Economies of scale </li></ul></ul><ul><ul><ul><li>. </li></ul></ul></ul><ul><ul><li>Economies of scope </li></ul></ul><ul><ul><ul><li>Lower production costs per unit by sharing expenses across broader product lines. </li></ul></ul></ul>
  119. 119. Strategic Alternatives for International Business <ul><li>Home replication strategy </li></ul><ul><ul><li>Apply the distinctive competences they developed in their home market to the foreign markets that they enter. </li></ul></ul><ul><li>Multidomestic strategy </li></ul><ul><ul><li>Used by firms that manage a portfolio of international business as relatively autonomous and independent units. </li></ul></ul><ul><li>Global strategy </li></ul><ul><ul><li>Companies doing exactly the opposite of those using a multidomestic strategy (they are standardizing across all countries). </li></ul></ul><ul><li>Transnational strategy </li></ul><ul><ul><li>Pursue both centralization and decentralization at the same time, using whichever approach makes more sense in the particular circumstance. </li></ul></ul>
  120. 120. Managing Decision Making and Problem Solving Nine hapter
  121. 121. The Nature of Decision Making <ul><li>Decision Making </li></ul><ul><li>Decision-Making Process </li></ul><ul><ul><li>The process of recognizing and defining the nature of a decision situation, identifying alternatives, choosing the “best” alternative, and putting it into practice. </li></ul></ul><ul><ul><li>An effective decision is one that optimizes some set of factors such as profits, sales, employee welfare, and market share. </li></ul></ul><ul><ul><li>Managers make decisions about both problems and opportunities. </li></ul></ul>
  122. 122. Types of Decisions <ul><li>Programmed Decisions </li></ul><ul><ul><li>A decision that is a fairly structured decision or recurs with some frequency or both. </li></ul></ul><ul><li>Nonprogrammed decisions </li></ul><ul><ul><li>A decision that is relatively unstructured and occurs much less often a programmed decision. </li></ul></ul>
  123. 123. Decision-Making Conditions <ul><li>Decision Making Under Certainty </li></ul><ul><ul><li>A condition in which the decision maker knows with reasonable certainty what the alternatives are and what conditions are associated with each alternative. </li></ul></ul><ul><li>Decision Making Under Risk </li></ul><ul><li>Decision Making Under Uncertainty </li></ul><ul><ul><li>A condition in which the decision maker does not know all the alternatives, the risks associated with each, or the consequences of each alternative. </li></ul></ul>
  124. 124. Steps in the Rational Decision-Making Process
  125. 125. Steps in the Rational Decision-Making Process (cont’d)
  126. 126. Factors that Prevent Rationality <ul><li>Lack of Consensus </li></ul><ul><ul><li>there must be a general agreement of the definition of problems, decisions and decision-making goals at the beginning </li></ul></ul><ul><li>Unclear Means-end Relations </li></ul><ul><li>Noisy Environment </li></ul>
  127. 127. Behavioral Aspects of Decision Making <ul><li>Bounded Rationality </li></ul><ul><ul><li>The concept that decision makers are limited by their values and unconscious reflexes, skills, and habits. </li></ul></ul><ul><li>Satisficing </li></ul><ul><ul><li>The tendency to search for alternatives only until one is found that meets some minimum standard of sufficiency to resolve the problem. </li></ul></ul><ul><li>Coalition </li></ul>
  128. 128. Behavioral Aspects of Decision Making (cont’d) <ul><li>Intuition </li></ul><ul><ul><li>An innate belief about something without conscious consideration. </li></ul></ul><ul><li>Escalation of Commitment </li></ul><ul><ul><li>A decision maker is staying with a decision even when it appears to be wrong. </li></ul></ul><ul><li>Risk Propensity </li></ul><ul><ul><li>The extent to which a decision maker is willing to gamble when making a decision. </li></ul></ul>
  129. 129. Behavioral Aspects of Decision Making (cont’d) <ul><li>Risk Propensity </li></ul><ul><ul><li>The extent to which a decision maker is willing to gamble when making a decision. </li></ul></ul><ul><li>Ethics and Decision Making </li></ul><ul><ul><li>Individual ethics (personal beliefs about right and wrong behavior) combine with the organization’s ethics to create managerial ethics. </li></ul></ul><ul><ul><li>Components of managerial ethics </li></ul></ul>
  130. 130. Group and Team Decision Making in Organizations <ul><li>Forms of Group Decision Making </li></ul><ul><ul><li>Interacting groups or teams </li></ul></ul><ul><ul><ul><li>are the most common form of decision-making groups which consists of an existing group or newly formed team interacting and then making a decision. </li></ul></ul></ul><ul><ul><li>Delphi groups </li></ul></ul><ul><ul><ul><li>are sometimes used for developing a consensus of expert opinion from a panel of experts who individually contribute through a moderator. </li></ul></ul></ul><ul><ul><li>Nominal groups </li></ul></ul><ul><ul><ul><li>are a structured technique designed to generate creative and innovative ideas through the individual contributions of alternatives that are winnowed down through a series of rank-ordering of the alternatives to reach a decision. </li></ul></ul></ul>
  131. 131. Advantages and Disadvantages of Group and Team Decision Making
  132. 132. Managing Group and Team Decision-Making Processes <ul><li>Managers Can Promote the Effectiveness of Group and Team Decision Making </li></ul><ul><ul><li>Being aware of the pros and cons of having a group or team make a decision. </li></ul></ul><ul><ul><li>Setting deadlines for when decisions must be made. </li></ul></ul><ul><ul><li>Avoid problems with dominance by managing group membership. </li></ul></ul><ul><ul><li>Have each group member individually critically evaluate all alternatives. </li></ul></ul><ul><ul><li>As a manager, do not make your position known too early. </li></ul></ul><ul><ul><li>Appoint a group member to be a “devil’s advocate.” </li></ul></ul><ul><ul><li>Hold a follow-up meeting to recheck the decision. </li></ul></ul>
  133. 133. Basic Elements of Organizing Eleven hapter
  134. 134. The Elements Organizing <ul><li>Organizing </li></ul><ul><li>Organization Structure </li></ul><ul><ul><li>The set of building blocks that can be used to configure an organization. </li></ul></ul>
  135. 135. Designing Jobs <ul><li>Job Design </li></ul><ul><ul><li>The determination of an individual’s work-related responsibilities. </li></ul></ul><ul><li>Job Specialization (Division of Labor) </li></ul><ul><ul><li>The degree to which the overall task of the organization is broken down and divided into smaller component parts. </li></ul></ul><ul><ul><li>Benefits of Specialization </li></ul></ul><ul><ul><ul><li>Workers can become proficient at a task. </li></ul></ul></ul><ul><ul><ul><li>Transfer time between tasks is decreased. </li></ul></ul></ul><ul><ul><li>Limitations of Specialization </li></ul></ul>
  136. 136. Adam Smith’s Example of Job Specialization Making a pin (nail) requires 18 tasks 1 worker doing all 18 tasks might make 20 pins (nails) a day. 20 workers = (20 x 20) = 400 pins ______________________________ With specialization: 20 workers make 100,000 pins a day. 1 worker = 5,000 pins 20 pins vs. 5,000 pins per worker
  137. 137. Alternatives to Specialization <ul><li>Job Rotation </li></ul><ul><ul><li>Systematically moving employees from one job to another in an attempt to reduce employee boredom. Most frequent use today is as a training device for skills and flexibility. </li></ul></ul><ul><li>Job Enlargement </li></ul><ul><ul><li>An increase in the total number of tasks workers perform. </li></ul></ul><ul><li>Job Enrichment </li></ul><ul><ul><li>Increasing both the number of tasks the worker does and the control the worker has over the job. </li></ul></ul>
  138. 138. Alternatives to Specialization (cont’d) <ul><li>Job Characteristics Approach: </li></ul><ul><ul><li>Core Dimensions </li></ul></ul><ul><ul><ul><li>Skill variety — the number of tasks a person does in a job. </li></ul></ul></ul><ul><ul><ul><li>Task identity </li></ul></ul></ul><ul><ul><ul><li>Task significance — the perceived importance of the task. </li></ul></ul></ul><ul><ul><ul><li>Autonomy </li></ul></ul></ul><ul><ul><ul><li>Feedback — the extent to which the worker knows how well the job is being performed. </li></ul></ul></ul><ul><ul><li>Growth-Need Strength </li></ul></ul><ul><ul><ul><li>The desire for some people to grow, develop, and expand their capabilities that is their response to the core dimensions. </li></ul></ul></ul><ul><li>Work Teams </li></ul><ul><ul><li>An alternative to job specialization that allows the entire group to design the work system it will use to perform an interrelated set of tasks. </li></ul></ul>
  139. 139. Grouping Jobs: Departmentalization <ul><li>Departmentalization </li></ul><ul><li>Rationale for Departmentalization </li></ul><ul><ul><li>Organizational growth exceeds the owner-manager’s capacity to personally supervise all of the organization. </li></ul></ul><ul><ul><li>Additional managers are employed and assigned specific employees to supervise. </li></ul></ul>
  140. 140. Grouping Jobs: Departmentalization (cont’d) <ul><li>Advantages </li></ul><ul><ul><li>Each department can be staffed by functional-area experts. </li></ul></ul><ul><ul><li>Supervision is facilitated in that managers only need be familiar with a narrow set of skills. </li></ul></ul><ul><li>Disadvantages </li></ul><ul><ul><li>Decision making becomes slow and bureaucratic. </li></ul></ul><ul><ul><li>Employees narrow their focus to the department and lose sight of organizational goals/ issues. </li></ul></ul><ul><li>Functional Departmentalization </li></ul><ul><ul><li>Is the grouping of jobs involving the same or similar activities. </li></ul></ul>
  141. 141. Product Departmentalization Form <ul><li>Advantages </li></ul><ul><ul><li>All activities associated with one product can be integrated and coordinated. </li></ul></ul><ul><ul><li>Speed and effectiveness of decision making are enhanced. </li></ul></ul><ul><li>Disadvantages </li></ul><ul><ul><li>Managers may focus on their product to the exclusion of the rest of the organization. </li></ul></ul><ul><ul><li>Administrative costs may increase due to each department having its own functional-area experts. </li></ul></ul><ul><li>Product Departmentalization </li></ul><ul><ul><li>The grouping of activities around products or product groups. </li></ul></ul>
  142. 142. Customer Departmentalization <ul><li>Customer Departmentalization </li></ul><ul><ul><li>Grouping activities to respond to and interact with specific customers and customer groups. </li></ul></ul><ul><li>Advantage </li></ul><ul><li>Disadvantage </li></ul><ul><ul><li>A large administrative staff is needed to integrate activities of various departments. </li></ul></ul>
  143. 143. Location Departmentalization <ul><li>Location Departmentalization </li></ul><ul><ul><li>The grouping of jobs on the basis of defined geographic sites or areas. </li></ul></ul><ul><li>Advantage </li></ul><ul><ul><li>Enables the organization to respond easily to unique customer and environmental characteristics. </li></ul></ul><ul><li>Disadvantage </li></ul><ul><ul><li>Large administrative staff may be needed to keep track of units in scattered locations. </li></ul></ul>
  144. 144. Departmentalization <ul><li>Other Forms of Departmentalization </li></ul><ul><ul><li>Grouping activities by time </li></ul></ul><ul><ul><ul><li>Assigning responsibilities by a characteristic of the customer, product, or service (e.g., telemarketing calls from business listings). </li></ul></ul></ul><ul><li>Other Considerations </li></ul><ul><ul><li>Departments are often called by other names (e.g., divisions, units, sections, and bureaus). </li></ul></ul><ul><ul><li>Organizations are likely to employ multiple bases of departmentalization, depending on level. </li></ul></ul>
  145. 145. Establishing Reporting Relationships <ul><li>Chain of Command </li></ul><ul><ul><li>A clear and distinct line of authority among the positions in an organization. </li></ul></ul><ul><ul><li>Unity of Command </li></ul></ul><ul><ul><li>Scalar Principle </li></ul></ul><ul><ul><ul><li>A clear and unbroken line of authority must extend from the bottom to the top of the organization. </li></ul></ul></ul>
  146. 146. Establishing Reporting Relationships (cont’d) <ul><li>Narrow Versus Wide Spans </li></ul><ul><ul><li>Span of Management </li></ul></ul><ul><ul><ul><li>The number of people who report to a particular manager. </li></ul></ul></ul><ul><ul><li>A. V. Graicunas </li></ul></ul><ul><ul><ul><li>Subordinate interactions </li></ul></ul></ul><ul><ul><ul><ul><li>Direct </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Cross </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Group </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Formula for the number of interactions of all types: </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>I = N(2N/2 + N - 1), where I is the total number of interactions and N is number of subordinates. </li></ul></ul></ul></ul></ul><ul><ul><li>Ralph Davis </li></ul></ul><ul><ul><ul><li>Operative span for lower-level managers up to 30 workers. </li></ul></ul></ul><ul><ul><ul><li>Executive span for middle and top managers at 3 to 9. </li></ul></ul></ul>
  147. 147. Establishing Reporting Relationships: Tall versus Flat Organizations <ul><li>Tall Organizations </li></ul><ul><ul><li>Are more expensive because of the number of managers involved. </li></ul></ul><ul><ul><li>Foster more communication problems because of the number of people through whom information must pass. </li></ul></ul><ul><li>Flat Organizations </li></ul><ul><ul><li>Lead to higher levels of employee morale and productivity. </li></ul></ul><ul><ul><li>Create more administrative responsibility for the relatively few managers. </li></ul></ul>
  148. 148. Determining the Appropriate Span: Factors Influencing the Span of Management
  149. 149. Distributing Authority <ul><li>Authority </li></ul><ul><li>Delegation </li></ul><ul><ul><li>The process by which managers assign a portion of their total workload to others. </li></ul></ul><ul><li>Reasons for Delegation </li></ul><ul><ul><li>To enable the manager to get more work done by utilizing the skills and talents of subordinates. </li></ul></ul><ul><ul><li>To foster the development of subordinates by having them participate in decision making and problem solving that allows them to learn about overall operations and improve their managerial skills. </li></ul></ul>
  150. 150. Problems in Delegation <ul><li>Manager </li></ul><ul><ul><li>Reluctant to delegate. </li></ul></ul><ul><ul><li>Subordinate’s success threatens superior’s advancement. </li></ul></ul><ul><ul><li>Lack of trust in the subordinate to do well. </li></ul></ul><ul><li>Subordinate </li></ul><ul><ul><li>Reluctant to accept delegation for fear of failure. </li></ul></ul><ul><ul><li>Perceives no rewards for accepting additional responsibility. </li></ul></ul>
  151. 151. Decentralization and Centralization <ul><li>Decentralization </li></ul><ul><ul><li>The process of systematically delegating power and authority throughout the organization to middle- and lower-level managers. </li></ul></ul><ul><li>Centralization </li></ul><ul><li>Factors Determining the Choice of Centralization </li></ul><ul><ul><li>The complexity and uncertainty of the external environment. </li></ul></ul><ul><ul><li>The history of the organization. </li></ul></ul><ul><ul><li>The nature (cost and risk) of the decisions to be made. </li></ul></ul>
  152. 152. Coordinating Activities <ul><li>Coordination </li></ul><ul><li>The Need for Coordination </li></ul><ul><ul><li>Departments and work groups are interdependent; the greater the interdependence, the greater the need for coordination. </li></ul></ul>
  153. 153. Coordinating Activities: Three Major Forms of Interdependence <ul><li>Pooled interdependence </li></ul><ul><ul><li>When units operate with little interaction; their output is simply pooled at the organizational level. </li></ul></ul><ul><li>Sequential interdependence </li></ul><ul><ul><li>When the output of one unit becomes the input of another unit in sequential fashion. </li></ul></ul><ul><li>Reciprocal interdependence </li></ul>
  154. 154. Structural Coordination Techniques <ul><li>The Managerial Hierarchy </li></ul><ul><ul><li>Placing one manager in charge of interdependent departments or units. </li></ul></ul><ul><li>Rules and Procedures </li></ul><ul><li>Liaison Roles </li></ul><ul><ul><li>A manager coordinates interdependent units by acting as a common point of contact, facilitating the flow of information. </li></ul></ul>
  155. 155. Structural Coordination Techniques (cont’d) <ul><li>Task Forces </li></ul><ul><ul><li>Used with multiple units when coordination is complex requiring more than one individual and the need for coordination is acute. </li></ul></ul><ul><li>Integrating Departments </li></ul><ul><ul><li>Permanent organizational units that maintain internal integration and coordination on an ongoing basis. </li></ul></ul>
  156. 156. Differentiating Between Positions <ul><li>Line Positions </li></ul><ul><ul><li>Positions in the direct chain of command that are responsible for the achievement of an organization’s goals. </li></ul></ul><ul><ul><li>Have formal (legitimate) authority to direct the workforce. </li></ul></ul><ul><li>Staff Positions </li></ul><ul><ul><li>Positions intended to provide expertise, advice, and support to line positions. </li></ul></ul><ul><ul><li>Have functional authority to enforce compliance with organizational policies and procedures. </li></ul></ul><ul><li>Administrative Intensity </li></ul><ul><ul><li>The degree to which managerial positions are concentrated in staff positions. </li></ul></ul>
  157. 157. Managing Organization Change and Innovation Thirteen hapter
  158. 158. The Nature of Organization Change <ul><li>Organization Change </li></ul><ul><ul><li>Any substantive modification to some part of the organization (e.g., work schedules, machinery, employees). </li></ul></ul><ul><li>Forces for Change </li></ul><ul><ul><li>External forces in the organization’s general and task environments that force the organization to alter the way in which it competes. </li></ul></ul><ul><ul><li>Internal forces inside the organization that cause it to change its structure and strategy; some internal forces are responses to external pressures. </li></ul></ul><ul><li>Planned Change </li></ul><ul><li>Reactive Change </li></ul>
  159. 159. Managing Change in Organizations <ul><li>Steps in the Change Process (Lewin Model) </li></ul><ul><ul><li>Unfreezing </li></ul></ul><ul><ul><li>Implementing change </li></ul></ul><ul><ul><li>Refreezing </li></ul></ul><ul><ul><ul><li>Involves reinforcing and supporting the change so that it becomes a permanent part of the system. </li></ul></ul></ul>
  160. 160. Understanding Resistance to Change <ul><li>People resist change because of: </li></ul><ul><ul><li>Uncertainty </li></ul></ul><ul><ul><li>Threats to self-interests and power and influence. </li></ul></ul><ul><ul><li>Different perceptions </li></ul></ul><ul><ul><li>Feelings of loss in disrupted social networks, power, security, and familiarity with existing procedures. </li></ul></ul><ul><li>Overcoming Resistance to Change </li></ul><ul><ul><li>Encourage active participation in the change process. </li></ul></ul><ul><ul><li>Provide education and communication about the change process. </li></ul></ul><ul><ul><li>Facilitate the change process </li></ul></ul>
  161. 161. Reengineering in Organizations <ul><li>Reengineering </li></ul><ul><ul><li>The radical redesign of all aspects of a business to achieve major gains in cost, service, or time. </li></ul></ul><ul><li>Need for Reengineering </li></ul><ul><ul><li>Entropy is a normal process leading to system decline. </li></ul></ul><ul><li>Approaches to Reengineering </li></ul><ul><ul><li>Recognizing the need for change and acting on it with a sense of urgency. </li></ul></ul><ul><ul><li>Starting with a clean slate helps open up the process. </li></ul></ul>
  162. 162. Organization Development (OD) <ul><li>Organization Development </li></ul><ul><ul><li>A planned, organization-wide effort, managed from the top, that is intended to increase organizational effectiveness and health through interventions in the organization’s processes using behavioral science knowledge. </li></ul></ul><ul><li>OD Assumptions </li></ul><ul><ul><li>Individuals will influence the organization and the organization will influence the attitudes, perceptions, behaviors, and expectations of individuals. </li></ul></ul>
  163. 163. Organization Development Techniques <ul><li>Diagnostic Activities </li></ul><ul><li>Team Building </li></ul><ul><li>Survey Feedback </li></ul><ul><li>Education </li></ul><ul><li>Intergroup Activities </li></ul><ul><li>Third-Party Peacemaking </li></ul><ul><li>Technostructural Activities </li></ul><ul><li>Process Consultation </li></ul><ul><li>Life and Career Planning </li></ul><ul><li>Coaching and Counseling </li></ul><ul><li>Planning and Goal Setting </li></ul>
  164. 164. Organizational Innovation <ul><li>Innovation </li></ul><ul><li>The Innovation Process </li></ul>Development Organization evaluates, modifies, and improves on a creative idea. Decline Demand for an innovation decreases, and substitute innovations are developed and applied. Application Organization uses developed idea in design, manufacturing, or delivery of new products, services, or processes. Launch Organization introduces new products or services to the marketplace. Growth Demand for new products or services grows. Maturity Most competing organizations have access to the idea.
  165. 165. Forms of Organizational Innovation <ul><li>Radical Innovation </li></ul><ul><ul><li>A new product, service, or technology developed by an organization that completely replaces the existing product, service, or technology in an industry. </li></ul></ul><ul><li>Incremental Innovation </li></ul><ul><ul><li>A new product, service, or technology that modifies an existing one. </li></ul></ul><ul><ul><li>Incremental innovation does not significantly affect competition in an industry. </li></ul></ul>
  166. 166. Forms of Organizational Innovation (cont’d) <ul><li>Technical Versus Managerial Innovations </li></ul><ul><ul><li>Technical innovation </li></ul></ul><ul><ul><ul><li>A change in the physical appearance or performance of a product or service, or the physical processes through which a product or service is manufactured. </li></ul></ul></ul><ul><ul><li>Managerial innovation </li></ul></ul><ul><li>Product Versus Process Innovations </li></ul><ul><ul><li>Product innovation </li></ul></ul><ul><ul><ul><li>A change in the physical characteristics or performance of existing products or service or the creation of brand-new products or services. </li></ul></ul></ul><ul><ul><li>Process innovation </li></ul></ul>
  167. 167. Innovation <ul><li>Reasons for Failing to Innovate </li></ul><ul><ul><li>Lack of resources </li></ul></ul><ul><ul><li>Failure to recognize opportunities </li></ul></ul><ul><ul><li>Resistance to change </li></ul></ul><ul><li>Promoting Innovations in Organizations </li></ul><ul><ul><li>Using the reward system </li></ul></ul><ul><ul><li>Having a supportive organizational culture </li></ul></ul><ul><ul><li>Intrapreneurship in larger organizations </li></ul></ul><ul><ul><ul><li>Inventors </li></ul></ul></ul><ul><ul><ul><li>Production champions </li></ul></ul></ul><ul><ul><ul><ul><li>Middle manager who learns about the project </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Helps overcome organization resistance and convinces others to take innovation seriously </li></ul></ul></ul></ul><ul><ul><ul><li>Sponsors </li></ul></ul></ul>
  168. 168. Managing Human Resources in Organizations Fourteen hapter
  169. 169. The Environmental Context of Human Resource Management <ul><li>Human Resource Management (HRM) </li></ul><ul><ul><li>The set of organizational activities directed at attracting, developing, and maintaining an effective work force. </li></ul></ul><ul><li>The Strategic Importance of HRM </li></ul><ul><ul><li>HRM has become increasingly important as firms have come to realize the value of their human resources in improving productivity. </li></ul></ul><ul><ul><li>HRM is critical to the bottom-line performance of the firm. </li></ul></ul>
  170. 170. The Legal Environment of HRM <ul><li>Equal Employment Opportunity </li></ul><ul><ul><li>Title VII of the Civil Rights Act of 1964 </li></ul></ul><ul><ul><ul><li>Forbids discrimination in all areas of the employment relationship. </li></ul></ul></ul><ul><ul><ul><li>Employers are not required to seek out and hire minorities but they must treat fairly all who apply. </li></ul></ul></ul><ul><ul><li>Adverse impact </li></ul></ul><ul><ul><li>Equal Employment Opportunity Commission </li></ul></ul><ul><ul><ul><li>Federal agency charged with enforcing Title VII as well as several other employment-related laws. </li></ul></ul></ul><ul><ul><li>Affirmative Action </li></ul></ul><ul><ul><ul><li>The commitment of employers to proactively seek out, assist in developing, and hire employees from groups that are underrepresented in the organization. </li></ul></ul></ul>
  171. 171. The Legal Environment of HRM (cont’d) <ul><li>Equal Employment Opportunity (cont’d) </li></ul><ul><ul><li>Pregnancy Discrimination Act </li></ul></ul><ul><ul><li>Age Discrimination in Employment Act of 1967 </li></ul></ul><ul><ul><li>Americans with Disabilities Act of 1990 (ADA) </li></ul></ul><ul><ul><ul><li>Forbids discrimination on the basis of disabilities and requires employers to provide reasonable accommodations for disabled employees. </li></ul></ul></ul><ul><ul><li>Civil Rights Act of 1991 </li></ul></ul><ul><ul><ul><li>Amended the original Civil Rights Act, making it easier to bring discrimination lawsuits while also limiting punitive damages that can be awarded in those lawsuits. </li></ul></ul></ul>
  172. 172. The Legal Environment of HRM (cont’d) <ul><li>Compensation and Benefits </li></ul><ul><ul><li>Fair Labor Standards Act of 1938 (FLSA) </li></ul></ul><ul><ul><ul><li>Sets a minimum wage and requires overtime pay for work in excess of 40 hours per week for non-exempt employees. </li></ul></ul></ul><ul><ul><ul><li>Salaried professional, executive, and administrative employees are exempt from the Act’s minimum wage and overtime provisions. </li></ul></ul></ul><ul><ul><li>Equal Pay Act of 1963 </li></ul></ul><ul><ul><ul><li>Requires men and women to be paid the same amount for doing the same jobs; exceptions are permitted for seniority and merit pay. </li></ul></ul></ul><ul><ul><li>Employee Retirement Income Security Act of 1974 (ERISA) </li></ul></ul><ul><ul><li>Family and Medical Leave Act of 1993 (FMLA) </li></ul></ul><ul><ul><ul><li>Requires employers to provide up to 12 weeks of unpaid leave for family and medical emergencies. </li></ul></ul></ul>
  173. 173. The Legal Environment of HRM (cont’d) <ul><li>Labor Relations </li></ul><ul><ul><li>National Labor Relations Act of 1935 (Wagner Act) </li></ul></ul><ul><ul><ul><li>NLRA set up procedures for employees to vote whether to have a union; if they vote for a union, management is required to bargain collectively with the union. </li></ul></ul></ul><ul><ul><li>National Labor Relations Board (NLRB) </li></ul></ul><ul><ul><li>Labor Management Relations Act of 1947 (Taft-Hartley Act) </li></ul></ul><ul><ul><ul><li>Amended the NLRA to limit the power of unions and increase management’s rights during organizing campaigns. </li></ul></ul></ul><ul><ul><ul><li>Allows the U.S. president to prevent or end a strike that endangers national security. </li></ul></ul></ul>
  174. 174. The Legal Environment of HRM (cont’d) <ul><li>Health and Safety </li></ul><ul><ul><li>Occupational Safety and Health Act of 1970 (OSHA) </li></ul></ul><ul><ul><ul><li>Requires that employers: </li></ul></ul></ul><ul><ul><ul><ul><li>Provide a place of employment that is free from hazards that may cause death or serious physical harm. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Obey the safety and health standards established by Occupational Safety and Health Administration (OSHA). </li></ul></ul></ul></ul><ul><li>Emerging Legal Issues </li></ul>
  175. 175. Change and HRM <ul><li>Temporary Workers </li></ul><ul><ul><li>An increasing trend in organizations is to use more temporary workers without the risk that the organization may have to eliminate their jobs. </li></ul></ul><ul><li>Dual-Career Families </li></ul><ul><ul><li>Firms are increasingly having to make accommodations for dual-career partners </li></ul></ul>
  176. 176. Change and HRM (cont’d) <ul><li>Employment-at-Will </li></ul><ul><ul><li>A traditional view of the workplace in which an organization can fire an employee for any or no reason. </li></ul></ul><ul><ul><li>The new argument is that an organization should be able to fire only people who are poor performers or who violate rules. </li></ul></ul><ul><ul><li>Recent court cases have upheld the new argument in placing limits on an organization’s ability to terminate employees by requiring just cause for firing or dismissal as part of an organization-wide cutback. </li></ul></ul>
  177. 177. Attracting Human Resources <ul><li>Job Analysis </li></ul><ul><ul><li>A systematic analysis of jobs within an organization. </li></ul></ul><ul><ul><ul><li>Job Description —a listing of the job’s duties; its working conditions; and the tools, materials, and equipment use to perform the job. </li></ul></ul></ul><ul><ul><ul><li>Job Specification </li></ul></ul></ul><ul><li>Forecasting HR Demand and Supply </li></ul><ul><ul><li>Replacement chart </li></ul></ul><ul><ul><ul><li>A list of managerial positions in the organization, the occupants, how long they will stay in the position, and who will replace them. </li></ul></ul></ul><ul><ul><li>Employee information system (skills inventory) </li></ul></ul><ul><ul><ul><li>A database of employees’ education, skills, work experience, and career expectations, usually computerized. </li></ul></ul></ul>
  178. 178. Recruiting Human Resources <ul><li>Recruiting </li></ul><ul><ul><li>The process of attracting qualified persons to apply for jobs that are open. </li></ul></ul><ul><li>Internal Recruiting </li></ul><ul><ul><li>Considering present employees as candidates for openings. </li></ul></ul><ul><li>External Recruiting </li></ul><ul><ul><li>Attracting persons from outside the organization. </li></ul></ul><ul><ul><li>Realistic Job Preview (RJP) is considered a successful method to ensure person-job fit. </li></ul></ul>
  179. 179. Selecting Human Resources <ul><li>Validation: </li></ul><ul><ul><li>The process of determining the extent to which a selection device is really predictive of future job performance. </li></ul></ul><ul><ul><ul><li>Predictive validation </li></ul></ul></ul><ul><ul><ul><li>Content validation </li></ul></ul></ul><ul><ul><ul><ul><li>The use of logic and job analysis to determine that selection techniques measure the exact skills needed for job performance. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Used to establish the job relatedness of a selection device </li></ul></ul></ul></ul><ul><li>Application Blanks </li></ul><ul><ul><li>Used to gather information about work history, educational background, and other job-related demographic data. </li></ul></ul><ul><ul><li>Must not ask for information unrelated to the job. </li></ul></ul>
  180. 180. Selecting Human Resources (cont’d) <ul><li>Tests </li></ul><ul><ul><li>Ability, skill, aptitude, or knowledge tests are usually the best predictors of job success. </li></ul></ul><ul><ul><li>Must be validated, administered, and scored consistently. </li></ul></ul><ul><li>Interviews </li></ul><ul><ul><li>Interviews can be poor predictors of job success due to interviewer biases. </li></ul></ul>
  181. 181. Selecting Human Resources (cont’d) <ul><li>Assessment Centers </li></ul><ul><ul><li>A popular method for selecting managers and are particularly good for selecting current employees for promotion. </li></ul></ul><ul><ul><li>A content validation of major parts of the managerial job. </li></ul></ul><ul><li>Other Techniques </li></ul><ul><ul><li>Polygraphs have declined in popularity due to passage of the Polygraph Protection Act. </li></ul></ul><ul><ul><li>Employers now use physical exams, drug tests, and credit checks to screen prospective employees. </li></ul></ul>
  182. 182. Developing Human Resources <ul><li>Training and Development </li></ul><ul><ul><li>Training </li></ul></ul><ul><ul><ul><li>Teaching operational or technical employees how to do the job for which they were hired. </li></ul></ul></ul><ul><ul><li>Development </li></ul></ul><ul><ul><ul><li>Teaching managers and professionals the skills need for both present and future jobs. </li></ul></ul></ul>
  183. 183. Developing Human Resources (cont’d) <ul><li>Training and Development </li></ul><ul><ul><li>Assessing Training Needs </li></ul></ul><ul><ul><ul><li>Determining what needs exist is the first step in developing a training plan. </li></ul></ul></ul><ul><ul><li>Common Training Methods </li></ul></ul><ul><ul><ul><li>Lectures </li></ul></ul></ul><ul><ul><ul><li>Role play and case studies </li></ul></ul></ul><ul><ul><ul><li>On-the-job and vestibule training </li></ul></ul></ul><ul><ul><li>Evaluation of Training </li></ul></ul><ul><ul><ul><li>Training and development programs should always be evaluated. </li></ul></ul></ul><ul><ul><ul><li>Approaches include measuring relevant job performance criteria before and after the training to determine the effect of training. </li></ul></ul></ul>
  184. 184. Developing Human Resources (cont’d) <ul><li>Performance Appraisal </li></ul><ul><ul><li>A formal assessment of how well employees do their jobs. </li></ul></ul><ul><ul><li>Reasons for performance appraisal </li></ul></ul><ul><ul><ul><li>Appraisal validates the selection process and the effects of training. </li></ul></ul></ul><ul><ul><ul><li>Appraisal aids in making decisions about pay raises, promotions, and training. </li></ul></ul></ul><ul><ul><ul><li>Provides feedback to employees to improve their performance and plan future careers. </li></ul></ul></ul>
  185. 185. Developing Human Resources (cont’d) <ul><li>Performance Appraisal (cont’d) </li></ul><ul><ul><li>Objective measures of performance </li></ul></ul><ul><ul><ul><li>Actual output (units produced), scrap rate, dollar volume of sales, and number of claims processed. </li></ul></ul></ul><ul><ul><ul><li>Can become contaminated by outside factors resulting in “opportunity bias” where some have a better chance to perform than others. </li></ul></ul></ul><ul><ul><ul><li>Special performance tests are a method in which each employee is assessed under standardized conditions. </li></ul></ul></ul>
  186. 186. Developing Human Resources (cont’d) <ul><li>Performance Appraisal (cont’d) </li></ul><ul><ul><li>Judgmental Methods </li></ul></ul><ul><ul><ul><li>Ranking —compares employees directly with each other. </li></ul></ul></ul><ul><ul><ul><ul><li>Difficult to do with large numbers of employees. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Employees are ranked only on overall performance. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Do not provide useful information for employee feedback . </li></ul></ul></ul></ul><ul><ul><ul><li>Rating —compares each employee with a fixed standard. </li></ul></ul></ul><ul><ul><ul><ul><li>Graphic rating scales consist of job performance dimensions to be rated on a standard scale. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Behaviorally-anchored rating scale (BARS) is a sophisticated method in which supervisors construct a rating scale where each point on the scale is associated with behavioral anchors. </li></ul></ul></ul></ul>
  187. 187. Developing Human Resources (cont’d) <ul><li>Performance Appraisal (Cont’d) </li></ul><ul><ul><li>Performance Appraisal Errors </li></ul></ul><ul><ul><ul><li>Recency error —the tendency of the evaluator to base judgments on the subordinate’s most recent performance because it is the most easily recalled. </li></ul></ul></ul><ul><ul><ul><li>Errors of leniency and strictness </li></ul></ul></ul><ul><ul><ul><li>Halo error —allowing the assessment of the employee on one dimension to spread to that employee’s ratings on other dimensions. </li></ul></ul></ul>
  188. 188. Developing Human Resources (cont’d) <ul><li>Performance Feedback </li></ul><ul><ul><li>Is best given in a private meeting between the employee and immediate supervisor. </li></ul></ul><ul><ul><li>Discussion should focus on the facts </li></ul></ul><ul><ul><li>Properly training managers can help them conduct more effective feedback interviews. </li></ul></ul><ul><ul><li>“ 360 degree” feedback, in which managers are evaluated by everyone around them, provides a richer array of performance information on which to base an appraisal. </li></ul></ul>
  189. 189. Maintaining Human Resources <ul><li>Determining Compensation </li></ul><ul><ul><li>Compensation </li></ul></ul><ul><ul><ul><li>The financial remuneration given by the organization to its employees in exchange for their work. </li></ul></ul></ul><ul><ul><ul><li>Wages </li></ul></ul></ul><ul><ul><ul><li>Salary </li></ul></ul></ul><ul><ul><ul><li>Incentives represent special compensation opportunities (e.g., sales commissions) that are usually tied to performance. </li></ul></ul></ul><ul><ul><li>Purposes of Compensation </li></ul></ul><ul><ul><ul><li>Provide the means to maintain a reasonable standard of living. </li></ul></ul></ul><ul><ul><ul><li>Provide a tangible measure of the value of the individual to the organization. </li></ul></ul></ul>
  190. 190. Maintaining Human Resources (cont’d) <ul><li>Determining Compensation (cont’d) </li></ul><ul><ul><li>Wage-Level Decision </li></ul></ul><ul><ul><ul><li>The wage-level decision is a management policy decision to pay above, at, or below the going rate for labor in an industry or geographic area. </li></ul></ul></ul><ul><ul><ul><li>Factors that affect the wage-level decision </li></ul></ul></ul><ul><ul><ul><li>Area wage surveys can provide information about the maximum, minimum, and average wages for a particular job in a labor market. </li></ul></ul></ul>
  191. 191. Maintaining Human Resources (cont’d) <ul><li>Determining Compensation (cont’d) </li></ul><ul><ul><li>Wage-Structure </li></ul></ul><ul><ul><ul><li>Job evaluations are the basis for determining the worth of each job relative to other jobs in the organizational wage-structure. </li></ul></ul></ul><ul><ul><ul><li>Wage surveys data and the wage structure are combined to set the actual wages for a job. </li></ul></ul></ul><ul><ul><li>Individual Wage Decisions </li></ul></ul><ul><ul><ul><li>Factors such as seniority, initial qualifications, individual merit, and labor market conditions influence wage decisions. </li></ul></ul></ul>
  192. 192. Maintaining Human Resources (cont’d) <ul><li>Determining Benefits </li></ul><ul><ul><li>Benefits </li></ul></ul><ul><ul><ul><li>Things of value other than compensation that an organization provides to its workers. </li></ul></ul></ul><ul><ul><ul><li>The average company spends an amount equal to more than one-third of its cash payroll on employee benefits. </li></ul></ul></ul><ul><ul><ul><li>A good benefit plan encourages employees to stay with the company and attracts new employees. </li></ul></ul></ul><ul><ul><ul><li>Benefits do not necessarily stimulate high performance. </li></ul></ul></ul><ul><ul><li>Managing Benefits Effectively </li></ul></ul><ul><ul><ul><li>Shop carefully for the best-cost providers. </li></ul></ul></ul><ul><ul><ul><li>Provide only the benefits that employees want. </li></ul></ul></ul>
  193. 193. Maintaining Human Resources (cont’d) <ul><li>Determining Benefits (cont’d) </li></ul><ul><ul><li>Types of Benefits </li></ul></ul><ul><ul><ul><li>Pay for time not worked </li></ul></ul></ul><ul><ul><ul><li>Insurance </li></ul></ul></ul><ul><ul><ul><li>Employee service benefits —Tuition reimbursement and recreational opportunities. </li></ul></ul></ul><ul><ul><li>Cafeteria Benefit Plans </li></ul></ul><ul><ul><ul><li>Flexible plans that provide basic coverage and allow employees to choose the additional benefits they want up to the cost limit set by the organization. </li></ul></ul></ul><ul><ul><li>Other Benefits </li></ul></ul><ul><ul><ul><li>On-site childcare, mortgage assistance, and paid-leave programs. </li></ul></ul></ul>
  194. 194. Managing Labor Relations <ul><li>Labor Relations </li></ul><ul><ul><li>The process of dealing with employees when they are represented by a union. </li></ul></ul><ul><ul><li>Organizations prefer employees remain nonunion because unions limit management’s freedom in many areas. </li></ul></ul><ul><ul><li>The best way to avoid unionization is to practice good employee relations all the time </li></ul></ul>
  195. 195. Managing Labor Relations (cont’d) <ul><li>Collective Bargaining </li></ul><ul><ul><li>The contract contains agreements about wage, hours, and working conditions and how management will treat employees. </li></ul></ul><ul><li>Grievance Procedure </li></ul><ul><ul><li>The step-wise means by which a labor contract is enforced. </li></ul></ul><ul><ul><li>Grievances are filed on behalf of an employee by the union when it believes employees have not been treated fairly under the contract. </li></ul></ul>
  196. 196. New Challenges in the Changing Workplace <ul><li>Managing Knowledge Workers </li></ul><ul><ul><li>Knowledge workers </li></ul></ul><ul><ul><ul><li>Employees whose contributions to an organization are based on what they know (e.g., computer scientists, engineers, and physical scientists). </li></ul></ul></ul><ul><ul><ul><li>They tend to work in high-technology areas and are experts in abstract knowledge areas. </li></ul></ul></ul><ul><ul><ul><li>They like to work independently and identify strongly with their professions. </li></ul></ul></ul>
  197. 197. New Challenges in the Changing Workplace (cont’d) <ul><li>Contingent and Temporary Workers </li></ul><ul><ul><li>Trends in Contingent and Temporary Workers </li></ul></ul><ul><ul><ul><li>There have been dramatic and consistent increases in contingent workers. 10% of the U.S. workforce is either contingent or temporary. </li></ul></ul></ul><ul><ul><li>Managing Contingent Workers </li></ul></ul><ul><ul><ul><li>Careful planning allows for integrating contingent workers into the organization in a coordinated fashion for well-defined time periods. </li></ul></ul></ul><ul><ul><ul><li>Understanding contingent workers and acknowledging their advantages and disadvantages. </li></ul></ul></ul><ul><ul><ul><li>Decide early on how similarly contingent employees will be treated relative to permanent employees. </li></ul></ul></ul>
  198. 198. Basic Elements of Individual Behavior in Organizations Fifteen hapter
  199. 199. Understanding Individuals in Organizations <ul><li>The Psychological Contract </li></ul><ul><ul><li>The overall set of expectations held by an individual with respect to what he or she will contribute to the organization and what the organization will provide in return. </li></ul></ul>Contributions from the Individual • Effort • Ability • Loyalty • Skills • Time • Competencies Inducements from the Organization • Pay • Job security • Benefits • Career opportunities • Status • Promotion opportunities
  200. 200. Understanding Individuals in Organizations (cont’d) <ul><li>The Person-Job Fit </li></ul><ul><ul><li>The extent to which the contributions made by the individual match the inducement offered by the organization. </li></ul></ul><ul><ul><ul><li>Each employee has a specific set of needs to be fulfilled and a set of job-related behaviors to contribute. </li></ul></ul></ul><ul><ul><ul><li>The degree to which the organization can take advantage of those behaviors and, in turn, fulfill an employee’s needs will determine the level of person-job fit. </li></ul></ul></ul><ul><ul><li>Reasons for poor person-job fit: </li></ul></ul><ul><ul><ul><li>Adopting new technologies changes the skills needed by employees. </li></ul></ul></ul>
  201. 201. Personality and Individual Behavior <ul><li>Personality </li></ul><ul><ul><li>The relatively stable set of psychological and behavioral attributes that distinguish one person from another. </li></ul></ul><ul><li>The “Big Five” personality Traits </li></ul><ul><ul><li>Agreeableness </li></ul></ul><ul><ul><li>Conscientiousness —t he number of goals on which a person focuses. </li></ul></ul><ul><ul><li>Negative emotionality </li></ul></ul><ul><ul><li>Extraversion </li></ul></ul><ul><ul><li>Openness —a person’s rigidity of beliefs and range of interests. </li></ul></ul>
  202. 202. Other Personality Traits at Work <ul><li>Locus of Control </li></ul><ul><ul><li>The extent to which people believe that their behavior has a real effect on what happens to them. </li></ul></ul><ul><ul><ul><li>Internal locus of control </li></ul></ul></ul><ul><ul><ul><li>External locus of control </li></ul></ul></ul><ul><li>Self-Efficacy </li></ul><ul><ul><li>A person’s belief about his or her capabilities to perform a task. High self-efficacy individuals believe they can perform well while low self-efficacy individuals doubt their ability to perform. </li></ul></ul>
  203. 203. Other Personality Traits at Work (cont�