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This 314 page Study Guide was uploaded by Jennifer Parent on Thursday February 26, 2015. The Study Guide belongs to 3200 at Louisiana State University taught by McLarty in Spring2015. Since its upload, it has received 215 views. For similar materials see Basic Principles of Management in Business, management at Louisiana State University.
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Management ls 0 The process of deciding the best way to use an organization s resources to produce goods or services ie it is the art of getting things done through people in the organization 0 An organization s resources can include Equipment Employees Money 2012 Cengage Learning Management Is Getting work done through others Ef ciency getting work done with a minimum of e ort waste or expense Effectiveness accomplishing tasks that help ful ll organizational objectives Good managers achieve BOTHH 2011 Cengage Learning Management amp Managers 0 Managers give organizations a sense of purpose amp direction 0 Managers create new ways of producing and distributing goods amp services 0 Managers change how the world works through their actions 2012 Cengage Learning Becoming a Manager 0 From Specialist to Manager Journey begins when people are successful at a specialist task amp are promoted Need to be able to get things done thru others Managers practice the 4 functions Requires leadership amp network building not command amp control but getting things done thru your ability to in uence amp persuade others 0 Mastering the job Tends to be large differences between expectations amp reality more than telling others what to do amp the job tends to be fragmented with multiple issues requiring attention Workload can be tremendous 2012 Cengage Learning The Transition to Management The First Year 0 Initially managers believed their job was to exercise formal authority and manage tasks After 6 months 0 Managers were surprised by pace and workload 0 Realized subordinates wanted help solving problems they couldn t solve After 1 year 0 Realized that people management is most important ie quotpeople challenges are the biggest challenge 2011 Cengage Learning to Management MHHAEIEHSquot IIH Iiiiiliill EiiiPEfliiiiiiiHS es see see gages in the Transition iiHiEiiEllii MHTHEMAMI HHEH ii39ii ii39iiii39iF J39Liiiii Willi ii39iiEii ii ii eeries J39LiL iiiii39liii DEE see EliEii Bethebess Fermel eutherity iiiieneetesks Jele is net menegieg peeple 2 Cengage Learning Initial eeetetieeswere serene Fest eeee Hesse werleleeei Jeb is is erelern seleer enei treulesheeter fer su reiinetes Helenerei deer Eemmunieetiee IiEtE il39I eeci pesitiee rei reemen39t Learning in adept in end een39tl stress Jels is peelsIE deeelepmeet Management Process 0 There are several ways to examine how management works Divide the functions that managers perform into categories Look at the roles that different types of managers play in an organization Look at the competencies that managers need to do their jobs 2012 Cengage Learning he Four Functions of Management Planning Organizing Leadin Controlling 2011 Cengage Learning Management FunctionsPanning 0 Planning 8 Strategizing determining organizational goals and a means for achieving them 0 Planning is a formal process where managers choose goals identify actions amp revise plans 0 It is used to develop overall strategies 0 A strategy is an action that managers take to attain the goals of the organization 2011 Cengage Learning Management FunctlonsOrganzmg 0 Organizing deciding where decisions will be made who will do what jobs and tasks who will work for whom in the company 8 how will different parts of the organization fit together accomplish the common goal ie Strategy is implemented thru organization 0 Assembling 8 coordinating the human nancial physical informational 8 other resources needed to achieve goals 0 Hiring 8 promoting the right people are among the most important management tasks because of the lasting impact these actions have on the organization includes diversity issues 2012 Cengage Learning Management Functions I Leading 0 Leading Inspiring in uencing and motivating others to work hard to achieve organizational goals Also entails articulating to the followers the overall strategic visions for the organization 8 becoming a tireless advocate for that vision 2011 Cengage Learning Management Functions Leading 0 Skilled Leaders Drive strategic thinking Have a plan for the organization Proactively structure the organization Exercise control with a deft hand never too overbearing or demanding While never taking their eyes off the ball Use the right kind of incentives Get the best out of people Build a highquality 2011 Cengage Learning Management Functions Controlling 0 Controlling Monitoring progress toward goal achievement and taking corrective action when progress isn t being made without it organizations can get lost One of the first steps in controlling is drafting plans to follow Other important aspect is creating incentives that align employees and organization s interests these must provide a reason monetary or nonmonetary to motivate people to pursue a desired course of action 2012 Cengage Learning Management Roles 0 Managerial roles are speci c behaviors associated with the task of management They are adopted by managers to accomplish the basic functions of management discussed later 0 They include interpersonal roles Informational roles decisional roles 2012 Cengage Learning Iimzberg s Managerial Roles Interpersonal Roles 0 Figurehead I Leader Liaison Informational Roles o llMonitor o Disseminator 39 Spokesperson Decisional Roles o Entrepreneur 0 Disturbance Hlandller 0 Resource Allocator 39 lN egotiator KCengage Learning Interpersonal Roles 0 Figurehead managers perform ceremonial duties 0 Leader Managers motivate and encourage workers to accomplish organizational objectives 0 Liaison managers deal with people outside their units 2011 Cengage Learning Informational Roles 0 Monitor Managers scan their environment for information and receive unsolicited information 0 Disseminator Managers share information with subordinates and others in the company 0 Spokesperson managers share information with people outside of the company 2011 Cengage Learning Decisional Roles 0 Entrepreneur managers adapt themselves their subordinates and their units to change 0 Disturbance handler managers respond to problems so severe that they demand immediate action 0 Resource allocator managers decide who will get what resources and in what amounts 0 Negotiator managers negotiate schedules projects goals outcomes resources and employee raises 2011 Cengage Learning Feedback gt Interpersonal Informational Decisional o Figurehead Leader UaBon Monitor Disseminator Spokesperson Entrepreneur Disturbance Handler Resource Allocator Negotiator 2012 Cengage Learning Provide Information Process Information Use Information Quali cations 0 This model tells us what managers do but not what they should do 0 Some roles may be more important than others 0 There are other roles not included eg devil s advocate or mentor 0 The model is NOT context dependent it tries to describe what all managers do in all situations In reality what managers do depends on the situation 0 Roles can vary across cultures 0 Model doesn t tell us how to perform these roles 2012 Cengage Learning Management Competencies 0 To ful ll managerial roles managers need to have several competencies skills values amp motivational preferences that allow them to perform their jobs effectively amp become proficient at the 4 functions of management 0 ie What does it take from a personal standpoint to be a good manager 2012 Cengage Learning Skills needed to be a successful manager 0 Technical skills Specialized procedures techniques and knowledge required to get the job done 0 Human interpersonal ampcommunication skills ability to work well with others 0 Conceptual 8 Decision Making skills ability to see the organization as a whole to recognize how the compan fits into its external environment 8 resolve pro lems for the bene t of the organization amp everyone concerned 2011 Cengage Learning anagement Skills lIlgln lrnpentanee Lew lrnpentanee Teennieal Human Ceneeprtual Mertieartien Skills Skills Skills rte Manage I Tee Managers I FirstLine Managers I Migele Managers I Team Leaders 2 Cengage Learning Managerial Values 0 Vital characteristic of a successful manager is the values they hold 8 the strength of those values 0 Values are stable evaluative beliefs that guide our preferences for outcomes or courses of action in a variety of situations They are perceptions about what is good or bad 8 tell us what we quotoughtquot to do They serve as a moral compass 0 Values at the top take priority over values W 2012 Cengage Learning Motivational Preferences 0 Managers must possess needs that motivate them to manage others effectively what drives them 0 Motivation to manage an assessment of how motivated employees are to interact with superiors participate in competitive situations behave assertively with others tell others what to do reward good behavior punish poor behavior erform actions that are highly vi51ble to others and ban 1e and organize administrative tasks 0 Motivations are generally expressed by desires of 4 different categorles Desire to compete Desire to exercise power Desire to be distinct 2012 Cengage Learning Motivational Preferences 0 desire to compete managers are more successful when they are motivated to compete for their jobs 0 desire to exercise power successful managers are motivated to seek power but it should NOT be for personal gain personalized power Good managers have a socialized power orientation seeking power for the accomplishment of organizational goals in a constructive manner 0 desire to be distinct successful managers need to be or are comfortable being different from the people they lead The need to be distinct allows them to act neutrally and act as role models as they stand out and lead others in new directions 0 desire to take action successful managers desire to create momentum by motivating employees to achieve the organization s ambitions for the future A drive for action results is a critical competency for an 2012 Cengage Learning Types of Managers 0 Managers are found at multiple levels in an organization Top or Senior Managers are responsible for the overall performance of an organization or one of its major self contained units Middle or functional Managers lead a particular function or subunit within a function First Line or front line Managers manage employees who are themselves NOT managers 2011 Cengage Learning Multi Divisional anagement Hierarchy Example IVIGT 3200 at Louisiana State University University Chancellor Corporate Level General Manager University I BusinessLevel General Manager Business College Dean CoHege I Functional IVIanager Management Dept Head Course Instructor Department FirstLine IVIanager Course 2012 Cengage Learning 8 General Counsel Vice President Gary C Clark Board of Regents j J President Center for Innovation amp Econ Dev Jose h Alexander Vice President Administration 8 Finance Joseph B Weaver Jr L Vice President Student Affairs L Lee Bird Vice President Research 8 Technology Transfer K Stephen McKeever President V Burns Hargis Robert Whitson Vice President of Agri Pgms 8 Dean CASNR Mgmt amp Marketing VP Enrollment Kvle Wrgv VP for Athletic Programs amp Dir of Intercollegiate Athletics Mike Holder Provost 8 presidequot N Senior Vice President OSUOklahoma City 90b J Slembe39 Natalie Shirley f Academic Deans President Department In School Heads OSUlnst of Tech quotWquot k Bill Path J cam Agn Sciences 5 Natural Resources t President 301quot Educeifontu m SUTulsa and osucus quot 9 39f 39 22 1 quotquot 39 9 Howard Barnett Mm Center In Hee tli Sciences Librar enter ior Veterine ies h Sciences F 1 President OSU Foundation L Kirk Jewell J r President 1 OSU Alumni Association larry Shell J ssoc Athletic Director for Compliance Director 1 mmunication Services Shun Assoc VP Institutional Diversity Lason Kirkgex The Big Picture Org Chart 2012 Cengage Learning Top Manag 0 CEO COO CFO ClO 0 Responsible for overall direction of the organization 0 Responsible for creating a context for change Includes forming a long range visionmission 0 Develop employees commitment to and ownership of company performance e a positive organizational culture through age and action onitoring the business 2011 Cengage Learning Middle Functional Managers Plant manager regional manager divisional manager Set objectives consistent with top management s goals Implement subunit strategies for achieving objectives plan and allocate resources to meet objectives Coordinate and link groups departments and divisions Monitor and manage subunits and individual managers 2011 Cengage Learning irstLine Frontline Managers Of ce manager shift supervisor department manager 0 Train and supervise the performance of non managerial employees 0 Teach entrylevel employees how to do their jobs 0 Encourage monitor and reward employees performance Make detailed schedules and operating plans Implement the speci c plans developed by middle managers 2011 Cengage Learning Team Leaders 0 Speci c type of frontline manager 0 Facilitate team activities toward accomplishing a goal Help team members plan and schedule work learn to solve problems and work effectively with each other Manage internal and external relationships 2011 Cengage Learning Process Vision Establishment Development amp Networking Vision Execution Vision Outcome Managers vs Leaders Management Plans amp Budgets Develops process steps and sets timelines Organizes amp Staffs Maintains structure Controls processes Identifies problems Manages vision order amp predictability Provides expected results 2012 Cengage Learning Leadership Set the direction amp develop the vision Develop strategic plans to achieve the vision Aligns organization Communicates the vision mission amp direction Motivates amp inspires Energizes employees to overcome barriers to change Promotes useful amp dramatic changes Managing for Success in the New Competitive Landscape 0 This requires an understanding of Globalization Technological change The importance of knowledge amp ideas Collaboration across organizational boundaries 2011 Cengage Learning Globalization O Consumer demands transcend national borders 0 Organizations recruit talent from all over the world 0 Internet use is increasing consumer demands amp changing the way people work 2012 Cengage Learning Technology 0 Internet ful lls many business functions Marketplace ebay Distribution Channels Amazon An information service cnncom 0 Drives down costs 0 Speeds up globalization 0 Provides access to information allows better informed decisions amp improves efficiency of decision making Facilitates design of new products 2012 Cengage Learning Importance of Knowledge 0 Knowledge workers workers whose primary contributions are ideas amp problem solving expertise 0 Knowledge management practices aimed at discovering and harnessing an organization s intellectual resources 0 Challenges of managing knowledge workers Job performance evaluation is dif cult because of the lack of quantitative measures of output Motivated by interesting jobs not rewards 2012 Cengage Learning Collaborating for Success 0 Knowledge management ensures communication across boundaries to facilitate collaboration O Collaboration occurs inside the organization across levels functions departments as well as outside with customers competitors investors 0 We must work together to accomplish our goals we are not alone at work anymore 2012 Cengage Learning Competitive Advantage O Competitive Advantage is what makes a company successful must be sustainable over a long period of time 0 Managers have always needed to achieve this ie What makes a company successful amp different 0 Fundamental Success Drivers Innovation quality Service speed Cost competitiveness 2012 Cengage Learning Drivers 0 Innovation is the introduction of new goods amp services by adapting to changes in consumer demands amp competition 0 Quality is the excellence of goods or services Historically pertained to the physical goods that customers bought and the attractiveness lack of defects reliability amp long term dependability Recent focus on preventing defects before they occur achieving zero defects in manufacturing designing products for quality meeting customer wishes 2012 Cengage Learning Drivers 0 Service includes the speed amp dependability with which an organization delivers What customers want 0 Speed is fast amp timely execution response amp delivery of results 0 Cost Competitiveness involves keeping costs low to achieve profits amp be able to offer prices that are attractive to consumers 2012 Cengage Learning Management Success 0 Delivering most or all of these drivers helps to create a competitive advantage Innovation Quality Service Speed Cost Competitiveness 0 Management involves working with people 8 resources to accomplish organizational goals ie a competitive advantage 2012 Cengage Learning Competitive Advantage through People 0 One way topperforming companies excel over competitors is how they treat their workforces 0 Companies that invest in their people create longlasting competitive advantages that are difficult for other companies to duplicate 0 Managers in uence customer satisfaction through employee satisfaction 2011 Cengage Learning Competitive Advantage through Pe0p1e Management Practices it Empioyment Security iEmpiyment security is the uiltimate form of cmmitment cmpanies can maike t their workers iEm pi ryees can innvate and increase company productivity without tea ring the iloss it their ibs Seiective Hiring Iii em piloyees are the basis for a cmpany39s competitive advantage and thse empiyees have em piloyment secu rityr then the com any needs to aggressiveiy recruit and seiectiveily screen apiicants in order to hire the most taliented em piloyees avaiilabie Sei Ma naged Tea ms and Decentraiization Sei r managed teams are respnsibile for their own hiring urchasing iob assignments and production Sei f ma nag ed teams can often produce enormous increases in prwductivity through increased empioyee commitment and creativity Decentrailization ali iows em piyees who are cilosest to and most iknowil edgea bile about p rbil em sr production and customers t ma ike time iy decisions Decentrailization increases em iloyee satisfaction and commitment High Wages Contingent on irganizatinail Performance High wages are needed to attract and retain tailented worikers and to indicate that the organization vaiues its wrkers Em piyees iike company founders sharehilders and managers need to share in the frnanciai rewards when the company is successr uiL Why Because empiyees Wihr have a hnanciai stake in their companies are more iiikeily tw taike a iongrun view of the business and thinik iiike business owners Training and Sikiilil Deveilopment ILiike a hightech company that spends miililions of diliars to upgrade computers or research and deveilrpment ilabs a company whose cm petitive advantage is based n its peopie must invest in the training and sikiilil d eveilopment it its peo pi e Reduction of Status Dihferences A company shuild treat everywney no matter what the jobr as eguraiL There are no reserved parking spaces Everyone eats in the same cafeteria and has simiiar bene tsThe resuilt improved communicatin as em piloyees focus on probiems and soil urtins rather than n how they are iess vaiued than managers Sharing Iiinformation irquot empiyees are to make decisions that are god for the ilongterm healith and success of the com pany they need to be given information abut costs nances productivity deveilopment times and strategies that was previusiy iknwn oniy by company managers 2011 Cengage Learning NFhP LPP N Mistakes Manag insensitive to others abrasive intimidating bu style Cold aloof arrogant Betray trust Overly ambitious thinking of next job playing politics Speci c performance problems with the business Over managing unable to delegate or build a team Unable to staff effectively e to think strategically e to adapt to boss with different style advocate or mentor 2011 Cengage Learning The Management Agreement Managers are expected to set the standard for their department or organization and to model behavior they expect from subordinates Managers cannot Play favorites with employees Put their self before employees Lose their temper with employees Managers must abide by this agreement Successful executives are Proactive action Planners responsible Problem Solvers 2012 Cengage Learning What are the abbreviations 0 eg means for example Origin Latin exempli grdtid 0 Le means in other words or that is Origin Latin id est 0 et a1 means and other authors unnamed or and others Origin Latin et alii 0 etc means and everything else or and so forth Origin Latin quotet cetera Conclusion 39 Successful functional specialists in most careers are inevitably promoted to managers 0 Management requires you to perform many roles effectively to be successful Get work done thru others Plan organize lead amp control Must have the right skills values amp motivations Must craft a strategic vision amp energize others thru communication while building networks amp accumulating power for wise amp constructive purposes 39 Some people are born with these skills but most of us learn them This course will hopefully help you along the way 2012 Cengage Learning MGMT5 HISTORY OF MANAGEMENT 2 2012 Cengage Learning Management Ideas and Practice throughout History lggfg l g mtg EA g Egyptiane anhlsiana to HmnagamantThnItt and Free ee Fla nning r ganiai rig and nt39r39el ling te uilel t39ie pinamide 1 er euhrn39rttingg requeeE in writing rnaltingg deaiene aFter nault ing ata 39 r aeltriee IlI azltnznn ma ai quotL EEID BEE Hehunrlnaelriar 51911 BEES 51m New Em 4430 BEE Ienaplnen er Management ae aerate art lt 1 i JJ 1 r 7 j axe 7 1le 11quot Hum 1H met 1H mm M J m At gt 13M it E was Cat Je n39 put iner 1393939Jl3939L EireEl etfianx aIFamtii Lea erehi traite Manage lil tilts lltiaalii quotL Earhart gt Eli 39erent ergan iratinal n39n aFatrurtmti uquot s i 1am 1 new WEI it it Sty it venetziane Eir 39I39I39tien39iaa Mare Erit iq ue r management anel leaderalni Ila H1 w Edi jf t1 i C i MEEEJE MeeiIriieeellfi Edens339 5 ungIA l h m m mi a 39 M hm elm39la hll I39ETEE 2012 Cengage Learning hy We Need Managers Today During the Industrial Revolution 0 Availability of power enabled lowpaid unskilled labor to replace highpaid skilled artisans 0 Job carried out in large formal organizations rather than elds homes or small shops 2012 Cengage Learning Scienti c Management The thorough study and testing of different work methods to identify the best most ef cient ways to complete a job r Father of Scienti c movement gt Fred Taylor 5 S gt famous for trme studres quot r 1 2012 Cengage Learning ederick W Taylor 5 Principles of Scientific Management First DEVEIDD a science fbr each element bfa man s wbrlcr which replaces the bid rulebfthumb methbclc A a a V V Scienti cally select and then train teach and dEUElEIp the wbrkman whereas in the past he chbse his bwn Secbnd v wbrk ancl tralnecl himself as best he cbuch Thirdi Hea rtin cbbberate with the men 5b as tb ensure all bfthe wbrk being clbne is in accbrclance with the principles b fthe science that has been clevelbbeclt There is an almbst egual divisibn bf the wbrk and the resbbnsibility between the management and the Fburth wbrkmentThe management take birer all the wbrk fbr which they are better39 tteb than the wbrlcmen while in the past almbst all bf the wbrk and the greater part bf the resbbnsibility were thrbwn ubbn the me nt THE PRINCIPlES OF SCIENIIFIC MANAGEMENT 3m 39 x0engage Learning Qe u quot 5 1 FIGURE 4 Smr an mm Uta mm Pasj Frank and Lillian Gilbreth 0 Motion study breaking each task or job into separate motions and then eliminating those that are unnecessar or repetitive 0 Motion study typically yielded production increases of 25 to 300 percent 2012 Cengage Learning A 0 Gantt Chart Visually indicates what tasks must be completed at which times in order to complete a project 0 One of the first to recommend that companies train and develop workers 1 A scienti c investigation in detail of each piece of work and the determination of the best method and the shortest time in which the work can be done 2 A teacher capable of teaching the best method and the shortest timequot 3 Reward for both teacher and pupil when the latter is successfulquot 2012 Cengage Learning 2 Gantt Chart for Starting Construction on a New Headquarters 33 Sept 3 Sip it 139391 it 31 it E i it 39391 NW 11 NW 13 NW 1 ti tin t ti tin tin tin tin THE Iii Weeki 3393 Sepia E I it 13 it 3t it 3 it 3 NW 1 NW 1 NW 35 NW MEEWHEW and SEIIEit aii h ETECWLJHI39E I quotr nrm Hanning with arih itEiE by Hittitenth It Hitlld meeting planning maettngli with arihttiaitii lijtatm E H mitt an ath rm Fern 1m El Eppl39 39lf l by Hnwmhir 1 1 Begin prepartngl amte that innitmlittim F mjalt re Hans and TEIMHWEHHQ Finanrtg EIiE Ed by umber 1E Begin inhiatmm n 33 Sept 3 Sip it 139391 it 31 it 33 it 39391 NW 11 NW 13 NW 1 12 tin tin ti 1 tin tin tin 3393 Sepia Ei it 13 it 3t it 3 it 3Hi1i 1t H t 39 1 NW 35 NW THE Iii Weeki Cengage Learning Bureaucratic Management Max Weber 0 Bureaucracy the exercise of control on the basis of knowledge people led by Virtue of rationallegal authority in other words their knowledge expertise or experience Furthermore the aim of bureaucracy is not to protect authority but to achieve an organization 5 goals in the most ef cient way possible 2012 Cengage Learning Elements of Bureaucratic Organizations Quali catidn Emplpyees are hired an the basis pf their technical training r educatidnal based hiring backgrdund Meritbased prpm ptip n Chain df39 Each jab dccurs within a hierarchy the chain pf cpmmandr in which each pdsitidn cdmmand reperts and is accdu ntable td a higher pdsitidn A grievance precedure and a rig ht td appeal prdtect peeple in lesser ppsitipns Divisidn pf labep Impartial Ftules and prpcedures apply td all members df39the prganiaatidn and will be applied application in an impartial mannerr regardless df dne s pdsiticm r status 1quot rules and prpcedures Flecprded in writing Managers The pwners pf an prganiaatipn shduld ndt manage pr supervise the r ganizatin separate frdm pwners 2012 Cengage Learning Administrative Management Henri Fayol The success of an enterprise generally depends much more on the administrative ability of its leaders than on their technical ability gt developed 14 principles of management 2012 Cengage Learning HHPQONQPerP Nt Fayol s Fourt Principles of Man Division of work Authority and responsibility Discipline Unity of command Unity of direction Subordination of individual interests to the general interest Remuneration Centralization Scalar chain Order E I uit of tenure of personnel e 2012 Cengage Learning Constructive Con ict Mary Parker Follett 0 Con ict the appearance of difference difference of opinions of interestsquot 0 How to Resolve Domination one side Wins and the other loses Compromiseeach side gives up some of What they want Integrative con ict resolution have both parties indicate their preferences and then work together to find an alternative that meets the needs of both 2012 Cengage Learning Mary Parker Follett On constructive con ict As con ict difference is here in this world as we cannot avoid it we should I think use to work for us Instead of condemning it we should set it to work for us On power quotIt seems to me that whereas power usually means powerover the power of some person or group over some other person or group it is possible to develop the conception of powerwith a jointly developed power a coactive not a coercive powerquot On the giving of orders An advanta e of not exacting blind obedience of discussing your instructions with your su ordinates is that if there is any resentment any comeback you get it out into the open and when it is in the open you can deal with it On authority Authority should go with knowledge and egfperience that is where obedience is due no matter whether it is up the line or down 2012 Cengage Learning Mary Parker Follett On leadership quotOf the greatest importance is the ability to grasp a total situation Out of a welter of facts experience desires aims the leader must nd the unifying thread He must see a whole not a mere kaleidoscope of pieces The higher up you go the more ability you have to have of this kindquot On coordination quotThe most important thing to remember about unity is that there is no such thing There is only unifying You cannot et unity and expect it to last a day or ve minutes Every man in a business s ould be taking part in a certain process and that process is unifyingquot On control Central control is coming more and more to mean the corelation of many 0 77 controls rather than a superimposed control 2012 Cengage Learning Hawthorne Studies Elton Mayo Human factors related to work were found to be more important than physical conditions or design of work Workers not just extensions of machines and financial incentives weren t necessarily the most important for motivating workers Managers better understood effect of group social interactions employee satisfaction and attitudes on individual and group performance 2012 Cengage Learning Cooperation and Acceptance of Authority Chester Barnard o o 0 0 Organlzatlon system of consc1ously coordinated activities or forces of two more personsquot 0 The extent to which people willingly cooperate in an organization depends mammonsome Executive Clutch 1 Barnard I Ih v M AHVDO on how workers perceive executive authority and whether they re willing to accept it 2012 Cengage Learning Zone of Indifferen People will be indifferent to managerial d if they 0 are understood 0 are consistent with organization s purpose 0 are compatible with people s personal interests 0 can actually be carried out by those people 2012 Cengage Learning quot W 39 W A Eli Whitney standardized interchangeable parts 0 Garspard Monge techniques for drawing 3D objects on paper 0 Oldsmobile Motor Works handtOmouth inventory 7 0 Henry Ford assembly line production 2012 Cengage Learning Information Management Throughout history organizations have pushed for and quickly adopted new information technologies to reduce the cost or increase the speed with which they can acquire retrieve or communicate information gtHenry Ford and assembly line production 2012 Cengage Learning Systems Management 0 System a set of interrelated elements or parts that function as a whole 0 Subsystems smaller systems within a larger system 0 Synergy occurs when two or more subsystems working together can produce more than they can working apart 2012 Cengage Learning Systems 0 Closed systems can function without interacting with their environments 0 Open Systems interact with their environments and depend on them for survival 2012 Cengage Learning Systems View of Organizations Enr my E mij newts Inf General Envimrimerit EU liEFE E nmpnrm ts Inf Specific Envirnmer I FEEIT39IIIEE39HIEIH I Fride j Management Hmwie g Manufa u ng Pf dlu and EEWiEE TE IIrquuEE I I I I I I if LEEmina Flee hatk frum EI39IIIFII39IEI39II39I IIEEITEE I E 139 I Hag I UE tW H Egul ti A v na y rming Eugtsrjr n r s l PIiI IiEEIFL l Trl s Aquot Emi ulmral ija 2 Cengage Learning E m ti t I l I II 1 I WISH I39I I l TIquot I I E III III I III II I III 39II I III 4N Contingency Management There are no universal management theories the most effective management theory or idea depends on the kinds of problems or situations that managers or organizations are facing at a particular time 2012 Cengage Learning Conclusion 0 Management has a LONG and interesting history 0 Management theory and scienti c application is a relatively NEW concept 0 We can learn from the past to understand how we got Where we are today and guide us toward the future 0 Try not to make the same mistakes multiple times 2012 Cengage Learning MGMT5 ORGANIZATIONAL ENVIRONMENTS AND CULTURES 2012 Cengage Learning W77 Open Systems Organizations interact with their environment thru Inputs amp Outputs in an open system Inputs Goods and services that organizations take in and use to create products or services Outputs The products and services that organizations create Inputs Outputs Raw materials Products Capital gt Organization gt Services Equipme 2012 Cengage Learning Internal Environment The Manager General Macro Environment Specific Environment 2012 Cengage Learning Environment of Managers 0 For managers to be successful they have to understand the circumstances of the situations in which they are working The work of all managers is affected by 2 main environments external 8 internal 0 External Environment constitutes everything outside a rm that might affect the ability of the enterprise to obtain its goals It is subdivided into speci c CompetitiveTask 8 general Macro 2012 Cengage Learning General and Specific Environments External EWTH IIIIIII ll iiliiilii 3 f39 E ME39KETmT iEH gnrl l Irlnrll E39IIJET ima IIIIIII II gl lg v l i l HEI39IJJEHW HEEHJILATHEH mm f a xCengage Learning Environment of Managers O General Macro env1ronment the economy and the technological sociocultural politicallegal demographic amp international forces trends that indirectly affect all organizations The general environment impacts the firm through its in uence on the task environment O Speci c TaskCompetitive environment unique to a firm s industry includes actual amp potential competitors suppliers 8 buyers rms that provide substitute products 8 firms that provide complements directly affects the way it conducts daily business 2012 Cengage Learning Q Interpreting Environmental Factors 0 Threat or opportunity 0 Threat managers typically take steps to protect the company from further harm they arise from circumstances or developments in the external environment that may adversely affect the ability of managers to attain the goals of their enterprise 0 Opportunity managers consider strategic alternatives for taking advantage of those events to improve performance arise from circumstances or developments in the external environment that if exploited through strategies enable managers to better attain the goals of their enterprise 2012 Cengage Learning Interpreting Environmental Factors 0 Internal Environment constitutes everything inside the rm that might effect the ability of managers to pursue certain actions 8 strategies includes the organization of the rm amp the employees 0 A Strengm is an activity the organization is good at amp is a potential source for competitive advantage 0 A weakness is an activity that the organization does not excel at amp may be a source of mpetitive disadvantage 2012 Cengage Learning SWOT analysis is a standard part of strategic planning amp decision making WFWPH General Macro Environment Elements in the external environment that potentially can in uence strategic decision include Laws 8 RegulationsPolitical 8 Legal economy Technology demographics Sociocultural Issues Social values 2012 Cengage Learning General Macro Environment 0 Laws 8 Regulations impact when 8 how business can be done who can do business with whom etc The legislation regulations and court decisions that govern and regulate business behavior Many managers are unaware of the potential legal risks associated with traditional managerial decisions like recruiting hiring and ring employees 2012 Cengage Learning General Macro Environment 0 Economy a growing economy provides a favorable environment for business growth 0 Business con dence indices show how con dent managers are about future business growth 2012 Cengage Learning a General Macro Environment Technological Component Technology is an umbrella term for the knowledge tools and techniques used to transform inputs into outputs 0 Changes in technology can help companies provide better products or produce their products more efficiently 39 3 2012 Cengage Learning General Macro Environment 0 Demographics include characteristics such as age sex ethnicity etc that can impact how business is conducted 2012 Cengage Learning General Macro Environment 0 Sociocultural issuesSocial Vulues include general behavior attitudes and beliefs of people in a particular society 2012 Cengage Learning SpecificTask or Competitive Environment Customers competitors Suppliers industry regulations Advocacy groups 2012 Cengage Learning Customer Component Reactive customer monitoring Identifying and addressing customer trends and problems after they occur Proactive customer monitoring Identifying and addressing customer needs trends and issues before they occur 2012 Cengage Learning Competitor Component Competitors companies in the same industry that sell similar products or services Competitive analysis a process of monitoring the competition that involves identifying competition anticipating their moves and determining their strengths and weaknesses 2012 Cengage Learning Supplier Component 0 Suppliers companies that provide material human nancial and informational resources to other companies 2012 Cengage Learning Industry Regulation Component Regulations and rules that govern the practices and procedures of speci c industries businesses and professions 2012 Cengage Learning Advocacy Groups Concerned citizens who band together to try to in uence the business practices of speci c industries businesses and professions 0 Public communication 0 Media advocacy 0 Product boycott 2012 Cengage Learning External Environment SpecifioTasllt Competitive The task environment is often studied at the industry level OPorter s 5 Forces Model is a popular tool for analyzing a competitivetask environment 0According to this model the ability of a rm to make a pro t is in uenced by 5 competitive forces Threat of entry of potential competitors The power of buyers The power of suppliers The threat of substitute products Intensity of rivalry between established rms 2012 Cengage Learning Porter 3 Five Industry Forces 2012 Cenga Threat of Entry 0 If an industry is pro table new enterprises will attempt to enter it output will increase and prices will fall creating a new equilibrium 0 Managers strive to prevent new competition by increasing barriers to entry 0 Barriers to entry factors that make it costly for potential competitors to enter an industry 8 compete with rms already in the industry Examples include Economies of Scale cost reduction associated with large output Brand Loyalty the preference of consumers for the products I I I II I q q q q 2012 Cengage Learning Bargaining Power of Buyers 0 Buyers are most powerful when They are few in number amp purchase large quantities They can choose between equivalent products from many different rms They can switch easily between the offerings of different rms 0 Buyers are least powerful when They are plentiful and purchase in small quantities They have little choice They cannot switch easily between the offerings of different firms 0 Switching costs make it difficult to switch to decrease buyer power 2012 Cengage Learning Bargaining Power of Suppliers 0 Firm has greater power over suppliers when The firm purchases in large quantities It can choose between multiple suppliers The costs of switching between suppliers is low The firm is not dependent on any single supplier for important inputs 2012 Cengage Learning Threat of Substitutes 0 The goods or services of different businesses or industries that can easily satisfy similar customer needs 0 The existence of substitutes is a strong competitive threat because it limits the price that companies can charge 0 If there are few substitutes firms have the opportunity to raise prices 2012 Cengage Learning Intensity of Rivalry 0 The nature of the product The intensity of rivalry depends on how close the product is to a commodity a product that is difficult to differentiate from those produced by rivals 0 Demand amp Supply conditions If demand is growing the industry will appear favorable Demand trends are influenced by economic growth amp rising income levels 2012 Cengage Learning Intensity of Rivalry 0 A major determinant of the intensity of rivalry in an industry is the amount of productive capacity supply relative to demand If demand for the good exceeds capacity supply in the industry a situation of excess demand exists prices will be bid up by consumers amp rivalry will be reduced However if supply exceeds demand a situation of excess capacity exists firms will compete vigorously for enough sales volume to efficiently utilize their capacity rivalry will be intense amp prices and profits will trend lower Excess demand represents an opportunity and excess capacity a threat 2012 Cengage Learning Intensity of Rivalry Most industries go through periods of both excess demand and excess capacity It is critical for managers to understand how long the excess is likely to persist because that helps define the scale amp longevity of the associated opportunity or threat Managers need to understand how fast their market adjusts amp how quickly demand amp supply will be brought back into balance The speed of the adjustment process is in uenced by both barriers to entryamp barriers to exit 2012 Cengage Learning Barriers to Exit 0 This is the opposite of barriers to entry amp they stop rms from reducing capacity even when demand is weak amp excess capacity exists The xed costs of closing down capacity An unwillingness to reduce capacity due to a belief that demand will soon rebound Government regulations prevent capacity reduction 0 If excess capacity exists amp barriers to exit are high this represents a significant threat that may persist for some time eg the US Steel Industry 2012 Cengage Learning Excess Demand Excess Supply Adjustment Processes High Barriers to Entry Low Barriers to Entry Excess demand will persist Significant Opportunity Excess demand will not persist Transitory Opportunity High Barriers to Exit Excess capacity will persist Significant Threat Low Barriers to Exit 2012 Cengage Learning Excess capacity will not persist Transitory Threat Five forces 5 100 Deal or no deal It39s all or nothing ModelsZuseoom Another Force Beyond Porter s 5 Many observers believe that a 61 force exists as well the complementor Complementors are rms that provide goods or services that are complementary to the product produced by enterprises in the industry e g video games for a video game console In industries Where complements are important strong complementors that make products that consumers demand represent substantial opportunity for a firm to increase its own revenues Weak complementors represent a high threat 2012 Cengage Learning T 5 if f wMLM E HL W 2012 Cengage Learning Impact 0 The forces interact with each other 8 some forces may be more important than other depending on the industry setting 0 Managers need to look at the big picture when trying to understand the competitive forces that determine the nature of rivalry in their industry 0 This will lead them to recognize threats amp opportunities amp react to them with the appropriate strategic response in order to attain the goals of their enterprise 2012 Cengage Learning Environmental Un 0 Managers do not have enough informat about the environment to understand or predict the future 0 Dynamism the degree of discontinuous Change that occurs Within the industry 0 Complexity number of issues to which a manager must attend and the degree to which re interconnected 2012 Cengage Learning Environmental Change The rate at which a company s general and speci c environments change 0 Stable slow rate of change incremental 0 Dynamic fast rate of change discontinuous 2012 Cengage Learning Dynamic Change 0The external environment is NOT stable in most cases Elements of the task amp general environment are always uctuating 0Even when the general environment is relatively stable changes in the task environment can change the nature of the competition in the speci c firm s industry e g price wars new products increasing demand etc OManagers must address 2 types of external environmental change incremental change amp o iscontinuous change 2012 Cengage Learning Incremental Vs Discontinuous Change OIncremental Change changes that do not alter the basic nature of competition in the task environment usually the norm ODiscontinuous Change changes that fundamentally transforms the nature of competition in the task environment A new competitor creates the decline of an old player OPunctuated Equilibrium a view of industry evolution asserting that long periods of equilibrium are punctuated by periods of rapid change when industry structure is evolutionized by innovation 2012 Cengage Learning gunctuated Equilibrium Theory 2012 Cengage Learning Environmental Complexity Simple few environmental factors that affect organizations Complex many environmental factors that affect organizations Resource Scarcity The abundance or shortage of critical resources in an organization s external environment 2012 Cengage Learning 2 Elvironmental Change Environmental Complexity and Resource Scarcity High MEdium E nw irr a l 39 mtg U e ainty Cengage Learning itl39l39lllll39l39ll l lllll l ll l lllllllIFIIIIl39I39IPillllllil39l39llllllll l llllll39lFrill E m m MIME mtg ham fm 513E D Enuirn nmE r1113 EnmpIEJaiw I HEs urcve Scarcity l Envirij nmE ntal ange Environmental Uncertainty 0 The environment is not only constantly changing amp complex the nature of the change is frequently difficult to predict 0 Management tries to deal with this by Collecting information 0 Marketing Research understanding customer needs 8 preferences 0 Competitive intelligence determine what competitors are doing Exerting control over the situation e g acquire other smaller enterprises to control developing technology 2012 Cengage Learning Environmental Scanning Searching the environment for important events or issues that might affect an organization Sorting through information about the environment that is may be unavailable to most people to determine What is important OManagers scan the environment to reduce uncertainty OOrganizational strategies affect environmental scanning OEnVironmental scanning contributes to o rganizational performance 2012 Cengage Learning Environmental Scanning Questions managers can ask about the environment 0Who are our current competitors 0Are there few or many entry barriers to our industry 0What substitutes exist for our products or services 01s the company too dependent on powerful suppliers 01s the company too dependent on powerful customers 2012 Cengage Learning Responding to the Environment Exerting Control 0 Adapting to the environment 0 In uencing the environment 0 Selecting a new environment 2012 Cengage Learning Adapting 0 Adapting at the boundaries Buffering creating supplies of excess resources in case of unpredictable needs internally could be contingent workers externally could be ending inventories Smoothing leveling normal uctuations at the boundaries of the environment 0 Adapting at the core Flexible processes methods for adapting the technical core to changes in the environment Mass Customization use of a network of independent operations in which each performs a speci c process or task 2012 Cengage Learning In uencing 0 Two proactive responses to changing the environment Independent action when a company acts on its own to change some aspect of its current environment Cooperative action two or more organizations work together to change some aspect of the current environment 2012 Cengage Learning In uencing 0 Independent strategies include Competitive aggression exploiting distinctive competence or improving internal ef ciency for competitive advantage Competitive pacification independent action to improve relations with competitors e g helping competitors nd raw materials Public relations establishing and maintaining favorable images in the minds of those making up the environment Voluntary action establishing and maintaining favorable images in the minds of those making up the environment by being active members of the community amp giving back Legal action engaging the company in a private legal battle Political action efforts to in uence elected representatives to create a more favorable business environment 2012 Cengage Learning In uencing 0 Cooperative strategies include Contraction negotiating an agreement between the organization amp another group to exchange goods services information amp patents Cooptation absorbing new elements into the organization39s leadership structure to avert threats to its stability or existence Coalition groups that coalesce and act jointly with respect to a set of political initiatives for some period of time 0 Cooperative strategies make sense when Taking joint action will reduce the organization39s costs amp risllts Cooperation will increase their power their ability to successfully accomplish the changes they desire 2012 Cengage Learning Changing Boundaries 0 Selecting a new environment or changing the boundaries of your environment is another way to exert control 0 Strategic maneuvering organizations can redefine or change which environment they are competing in through domain selection the entrance by a company into another suitable market or industry Diversi cation when a rm invests in different types of businesses or products or when it expands geographically to reduce its dependence on a single market or technology Merger when one or more companies combine with another Acquisition when a rm buys another Divestiture when a rm sells 1 or more businesses 2012 Cengage Learning How do you choose the best way 1 Attempt to change appropriate elements of the environment when you can 2 Choose responses that focus on pertinent elements of the environment 3 Choose responses that offer the most bene t at the lowest cost 2012 Cengage Learning Behavior Matters 0 Opportunistic behavior when one party bene ts at the expense of another 0 Relationship behavior focuses on establishing a mutually bene cial long term relationship between buyers and sellers 2012 Cengage Learning W7 Internal environments consist of the trends and events within an organization that affect the management employees and organizational culture Internal environments are important because they affect what people think feel and do at work It is impacted by how the organization is put together the employees amp the resources the firm has The key component in internal environments is organizational culture or the set of key values beliefs and attitudes shared by members of the organization 2012 Cengage Learning 3 Culture Learning Objectives Describe the elements of organizational culture Discuss the importance of organizational subcultures List 4 categories of artifacts through which corporate culture is deciphered Discuss conditions under which cultural strength improves corporate performance Identify 4 strategies to change amp strengthen organizational culture Compare amp contrast 4 strategies for merging organizational culture Internal Organizational Environment A firm s internal organization can create a situation that is easy or dif cult to work in An enlightened meritocracy may exist offering a host of opportunities for advancement rewards for creativity 8 productivity OR an inert bureaucracy may prevail that punishes change advocates rewards only those who promote the status quo amp inhibit productivity It can be a strength or a weakness depending on the industry and can provide chances for exploiting opportunities amp countering threats 2012 Cengage Learning Organizational Culture It is common to think of the internal organization in terms of its culture Organizational culture is the basic pattern of values 8 assumptions shared by employees within an organization and seen visibly by artifacts It is also determined by the structure control systems incentives amp the type of people working there It is important because it in uences What a manager can amp cannot do and What is encouraged amp discouraged by the organization 2012 Cengage Learning Organizational Culture The concept of organizational culture has been around for decades amp started to gain popularity beyond academic circles in the 1980s Organizational culture directs everyone in the organization toward the right way of doing things It frames and shapes the decisions that managers and other employees should make and the actions they should take 2012 Cengage Learning Organizational Culture Assumptions Values 8 Artifacts 0 Visible component artifacts such as stories 8 legends rituals 8 ceremonies organizational language physical structure 8 d cor 0 Invisible components Shared values conscious beliefs evaluations of what is good or bad right or wrong Shared assumptions unconscious taken for granted perceptions or beliefs mental models of ideals 2012 Cengage Learning 2 Three Levels of Organizational Culture Cengage Learning Symbolic artifacts such as dress codes 0 Workers and managers39 behaviors Io What people say 39 A How decisions are made and explained Widely shared assun39tptious and beliefs Buried deep below surface Rarely discussed or thought about Shared Values Values are stable evaluative beliefs that guide our preferences for outcomes or courses of action in a variety of situations Goodbad rightwrong what we ought to do Shared values values that people within the organization or work unit have in common and place near the top of their hierarchy of values part of culture Espoused values values people say they use 8 in many cases think they use even if they don t Enacted values values people actually rely on to guide their directions 8 actions 2012 Cengage Learning Shared Assumptions The deepest element of organizational culture is the shared assumptions that people carry around in their heads Assumptions are unconscious perceptions or beliefs that have worked so well in the past that they are considered the correct way to think and act toward problems and opportunities These assumptions are so deep that they are taken for granted they are obviously good amp right for the company that no one really questioned its underlying assumption Shared assumptions are the most dif cult to change 2012 Cengage Learning Content of Organizational Culture Organizations differ in their cultural content that is the relative ordering of values amp assumptions Some writers and consultants have attempted to classify organizational culture into several categories One of these models claims there are 7 corporate cultures in the world attention to detail outcome orientation people orientation team orientation aggressiveness Stability innovation amp risk taking 2012 Cengage Learning Content of Organizational Culture Managers like to use organizational culture models because they are handy when guring out what kind of culture they currently have and what kind of culture they want to develop These models the diversity of cultural values in organizations There are dozens of individual values so there are likely as many organizational values Managers need to be wary of models that reduce the variety of organizational cultures into a few simple with catchy labels Otherwise a mistaken impression about their culture could be developed 2012 Cengage Learning Types of Organizational Culture 0 Group Culture Internally oriented 8 exible Based on values 8 norms associated with affiliation Compliance stems from trust tradition and long term commitment Emphasizes member development 0 Hierarchical culture Internally oriented Focused on control 8 stability Values 8 norms associated with bureaucracy Values stability Assumes compliance will occur through formalized rules 2012 Cengage Learning Types of Organizational Culture 0 Rational Culture Externally oriented Focused on control Productivity planning 8 efficiency are primary objectives Members motivated by the belief that performance leads to rewards 0 Adhocracy Externally oriented exible Emphasizes change growth resource acquisition amp innovation Members motivated by the importance or ideological appeal Leaders are entrepreneurial amp risk takers 2012 Cengage Learning Competing Values Framework Figure 1 The Competing Values Culture Modelquot Internal Maintenance Flexible Processes Type Group Dominant Attribute ohesiveness participation teamwork sense of family Leadership Style Mentor facilitator parent gure Bonding Loyalty tradition interpersonal cohesion Strategic Emphasis Toward developing human resources commitment and morale Type Adhocracy Dominant Attribute Entrepreneurship creativity adaptability dynamism Leadership Style Innovator entrepreneur risk taker Bonding Flexibility risk entrepreneurship Strategic Emphasis Toward innovation growth new resources External Type Hierarchy Dominant Attribute rder rules and regulations uniformity ef ciency Leadership Style Coordinator organizer adminis trator Bonding Rules policies and procedures clear expectations Strategic Emphasis Toward stability predictability smooth operations Positioning Type Rational Dominant Attribute ioal achievement environ ment exchange competitiveness Leadership Style Production and achievement oriented decisive Bonding Goal orientation production competition Strategic Emphasis Toward competitive advantage and market superiority ControlOrien ted Processes Adapted from Quinn and Rohrbaugh I 98 2012 Cengage Learning Managing Cultures Make sure that underlying values align with the desired culture Managers should espouse lofty ideals and visions for the company that will inspire organizational members Managers must give constant attention to the mundane details of daily affairs and SET examples Routinely celebrate and reward those who exemplify the values Hire socialize newcomers and promote employees based on the values 2012 Cengage Learning Creation and Maintenance of Organizational Cultures Primary source of organizational culture is the company founder Organizational culture is sustained by organizational stories Organizational heroes at am I supposed to haul my dogs around in a RollsRoycequot Buffett home in Omaha NE 2012 Cengage Learning Your culture What kind of culture do you want to work in To determine the type that best ts you Visit httpCareeradvicemonstercomjobinterview InterviewPreparationAssessCompany CultureBestFitarticleaspx 2012 Cengage Learning Organizational Subcultures Dominant culture the values and assumptions shared most widely by people throughout the organization Organizations have subcultures located throughout their various divisions geographic regions amp occupational groups Some subcultures enhance the dominant culture by espousing parallel assumptions values amp beliefs Other subcultures are called countercultures because they directly oppose the organization s core values 2012 Cengage Learning Organizational Subcultures 0 Subcultures potentially create con ict 8 dissent among employees but they also serve 2 important functions They maintain the organization s standards of performance 8 ethical behavior Employees in the counterculture are an important source of surveillance 8 critique over the dominant order They encourage constructive con ict 8 creative thinking They help the organization to abide by society s ethical values They are the spawning grounds for emerging values that keep the rm aligned with the needs of customers suppliers society 8 other stakeholders 0 If subcultures are suppressed the organization may take longer to discover and adopt values aligned with the emerging environment 2012 Cengage Learning Deciphering an Org Culture Artifacts are the observable symbols and signal of an organization s culture we can t see an organization s shared values 8 assumptions Some experts suggest that artifacts are the essence of corporate culture whereas others view them as symbols or indicators of culture Discovering an organization s culture is much like an anthropological investigation of a new society It involves observing workplace behavior listening to unique language in everyday conversations studying written documents amp interviewing staff about corporate stories 2012 Cengage Learning Org Stories 8c Legends 39 Stories amp legends about past corporate incidents serve as powerful social prescriptions of the way things should or should not be done 0 They also provide human realism to corporate expectations individual performance standards amp assumptions about ideal behaviors amp decisions 39 Stories are important artifacts because they personalize culture amp generate emotions that help people to remember lessons Within these stories m H 39 my V 9 SOUTHWEST AIRLINES 2012 Cengage Learning Rituals 8c Ceremonies Rituals the programmed routines of daily organizational life that dramatize the organization s culture They include how Visitors are greeted how often senior executives Visit subordinates how people communicate with each other amp so on Ceremonies planned activities conducted speci cally for the bene t of an audience such as public rewarding or punishing Ceremonies are more formal artifacts than rituals 2012 Cengage Learning Organizational Language The language of the workplace speaks volumes about the company s culture How employees address coworkers describe customers express anger 8 greet stakeholders are all verbal symbols of cultural values Language also highlights values held by organizational subcultures e g PowerPoint Culture Where communication is oneway from executives to employees 2012 Cengage Learning Physical Structure 8 D cor The size shape location amp age of a building might suggest the company s emphasis on teamwork environmental friendliness exibility or any other set of values Even if a building doesn t make much of a statement there is a treasure trove of physical artifacts inside Desks chairs office space and wall hangings or lack of them are just a few of the items that might convey cultural meaning Each of these artifacts alone might not say much but enough of them together make the company s culture easier to decipher 2012 Cengage Learning 39 Oakley s bunkerlike headquarters symbolizes a culture that is highly protective of its product inventions 7 2012 Cengage Learning Is Organizational Culture Important Does corporate culture really make a difference The answer is YES Various studies indicate that companies with strong cultures are more likely to be successful but only under a particular set of conditions The effect of org culture depends partly on its strength Corporate culture strength refers to how Widely and deeply employees hold the company s dominant values and assumptions 2012 Cengage Learning Strong Corporate Culture 8 Success 0 A strong corporate culture potentially increases the company s success by serving three important functions while being long lasting Control system culture is pervasive amp operates unconsciously like an auto pilot directing employees in ways that are consistent with organizational expectations Social glue it bonds people together amp makes them feel part of the organizational experience The dominant culture helps ful ll employee needs for social identity Sense making culture assists the ability of employees to understand what goes on and why things happen in a company easier to understand expectations amp interact with others 2012 Cengage Learning Organizational Culture Strength 8 Fit Strong cultures are potentially good for business but studies have found only a modestly positively relationship between culture strength amp success A strong organizational culture increases organizational performance only when the cultural content is appropriate for the organization s environment Trouble occurs when there is a misalignment with the rm s environment amp culture causing employees to make decisions amp engage in behaviors that are inconsistent with the company s best interests Strong cultures create a greater risk because culture strength indicates that a greater number of employees will be guided by those values amp assumptions 2012 Cengage Learning Corporate Cults 8c Suppressing Dissent 0 A second reason why companies with strong cultures aren t necessarily more effective is that they become corporate cults that locllt decision makers into mental models and blind them to new opportunities or unique problems A third consideration is that very strong cultures tend to suppress dissenting subculture values In the long run a subcultures nascent values could become important dominant values as the environment changes Strong cultures suppress subcultures thereby undermining the bene ts 2012 Cengage Learning Adaptive Cultures 0 Adaptive Culture is an org culture in which employees focus on the changing needs of customers and other stakeholders and support initiatives to keep pace with these changes Organizational culture experts are starting to piece together the elements of adaptive cultures Adaptive cultures have an external focus Employees pay as much attention to organizational processes as they do organizational goals Employees have a strong sense of ownership Adaptive cultures are proactive and quick Employees in adaptive cultures seek opportunities rather than waiting for them to arrive rather than engaging in paralysis by analysisquot 2012 Cengage Learning Organizational Culture 8 Performance Culture Content fits environment Moderately Corporate Strong culture Performance amp Ethical Conduct Adaptive Culture 2012 Cengage Learning Org Culture 8 Business Ethics An organization s culture in uences more than just the bottom line it can also in uence its ethical conduct This makes sense because good behavior is driven by ethical values An organization can guide the conduct of its business by embedding ethical values in its dominant culture Unfortunately it seems every day that companies make headlines for failing to incorporate ethics into their culture 2012 Cengage Learning 2 Cengage Learning Keys to an Organizational Culture that Fosters Success Consistency I 1 Clear Adaptability Mission Employee Involvement Changing amp Strengthening Organizatianal Egltgr s 0 Can managers change an organization s culture YES but it isn t easy it rarely occurs quickly amp often the culture ends up changing the manager instead 0 Changing an organization39s culture can be a manager s greatest challenge 0 Org culture can be a powerful in uence on the company s success so ensuring the best one is in place may be Vital 2012 Cengage Learning Changing Organizational Cultures 4 0 Culturally consistent rewards 0 Behavioral substitution 0 Change Visible artifacts 0 Hiring people with values and beliefs consistent with desired culture 2012 Cengage Learning Managing Culture During Mergers 0 Along with changing amp strengthening an organization s culture managers need to keep a watchful eye on culture throughout the process of mergers amp acquisitions 0 The corporate world is littered with managers that failed or had a dif cult gestation because of clashing organizational cultures 0 Various studies report that between 60 amp 75 of all mergers fail to return a positive investment 39 Organizational leaders can minimize cultural collisions by conducting a bicultural audit which diagnoses cultural relations between companies amp determines the xtent to which cultural clashes will likel occur 2012 Cengage Learning 4 Strategies to merge different Organizational Cultures Assimilation Acquired company willingly embraces acquiring firm s culture rare but does occur when acquired company has a weak dysfunctional culture Deculturation Acquiring rm imposes its culture on unwilling acquired rm People who can t adapt are terminated Integration Combining two or more cultures into a new composite culture It is a slow 8 risky process because many forces preserve existing culture Separation Merging companies remain distinct entities with minimal exchange of culture or organizational practices eg Cisco 8 Linksys 2012 Cengage Learning Conclusions 39 Organizations do NOT exist in a vacuum The external general amp speci c environment affects the ability of organizations to attain goals 0 The speci c environment can present opportunities that if exploited make it easier for the organization to attain its desired goals or give rise to threats that make attainment problematic 0 Managers need an understanding of the environment that confronts their firm so they can craft strategies to take advantage of opportunities amp counter threats 2012 Cengage Learning Conclusions 0 The environment is something that can be in uenced actively as well as being responded to 0 Managers must understand the internal environment confronting them if they want to address external issues 0 This demands that they appreciate their human capital amp resources in order to build on strengths amp address weaknesses 39 Organizational culture is matters because management is about getting things done through other people and culture is a form of control that guides employee behavior in the accomplishment of organizational tasks 2012 Cengage Learning Conclusions 0 Managers need to understand What cultural values amp assumptions dominate their company amp adjust that culture if it is not aligned with strategy amp environment 39 Cultural values amp assumptions are so deeply embedded that employees don t think about or question them 39 Cultural clashes in mergers are one of the most common reasons Why corporate marriages fail 0 Organizational culture may lurk under the radar screen but it is a powerful force in an organization 2012 Cengage Learning MGMT5 PLANNING AND DECISION MAKING 2012 Cengage Learning The planning process 0 Planning is a primary management function 0 Why Plan Actively affect the future Means for activity Multiple bene ts Positive impacts Good planning organizational success 2012 Cengage Learning Benefits of Planning Intensi ed effort Persistence direction Creation of task strategies Provides direction 8 purpose Helps to allocate resources Helps budgeting processes Assigns roles 8 responsibilities Provides control over the organization 2012 Cengage Learning Pitfalls of Planning 0 Impedes change and prevents or slows adaptation 0 Creates a false sense of certainty 0 Detachment of planners 2012 Cengage Learning 2 Gow To Make a Plan That Works 1 2 3 4 5 Set Develop Develop Track Maintain goals commitment effective progress flexibility action toward plans goal g g achievement ho hat g hen How Cengage Learning Formal vs Functional Plans 0 Differences in methods used 0 Casual plans 0 Formal plans 0 Affecting factors environment size type 0 Functional plans are Characterized by speci c function Most frequent ones include marketing production financial personnel etc Interrelated and interdependent 2012 Cengage Learning Objectives 0 Objectives what you are trying to accomplish they give an organization and its members a direction Longrange beyond the current scal year Shortrange less than 1 year Should span all major org areas Be dynamic ie should change Usually fall into 4 categories 1 pro t oriented 2 service oriented 3 employee well being 4 social responsibility 2012 Cengage Learning MGT by Objectives 0 A philosophy based on converting organizational objectives into personal objectives for employees 0 Also known as management by results goals amp control work planning amp review amp goals management 0 When MBO works best Employees are more aware of objectives Objectives are jointly set by multiple parties MBO can be used to improve motivation 2012 Cengage Learning Planning A plan can provide direction for an organization It tells everyone What the organization is trying to do What its priorities are Where it is going amp how it is going to get there It is the idealized roadmap for organizational success It is also a control mechanism through the comparison of actual results against the plan managers can use that information to make needed adjustments Planning has its limitations not everything can be planned for It is far from perfect 2012 Cengage Learning The Planning Process Step 1 Situational analysis Step 2 Generate alternative goals amp plans Step 3 evaluate goals 8 plans Step 4 Select goals 8 plans Step 5 Implementation Step 6 monitor 8 Control and Repeat Step 1 2012 Cengage Learning Step 1 Analyze the Situation 0 Situational analysis is a process planners use within time 8 resource constraints to gather interpret and summarize all information relevant to the planning issue under consideration 0 Focuses on the internal forces at work in the organization and the in uences from the external environment 2012 Cengage Learning tep 2 Generate goals amp plans 0 Goals or objectives are the target or end that management desires to reach 0 Develop alternatives with creativity 0 Encourages managers and employees to think broadly 2012 Cengage Learning Generate Goals SMART Goals 0 speci c goals are precise describing particular behaviors 8 outcomes 0 Measurable desired results can be quanti ed 0 Attainable must be achievable but challenging 0 relevant contribute to the organization s overall mission 8 be consistent with its values including ethical standards 0 Timely specify a target date for completion 2012 Cengage Learning D eveloping Commitment to Goals 0 Goal commitment the determination to achieve a goal 0 Set goals collectively 0 Make the goal public 0 Obtain top management 5 support 2012 Cengage Learning Generate Plans Plans are the actions or means managers intend to use to achieve organizational goals Types include Strategic plans a plan that outlines the major goals of an organization amp the organizationwide strategies of attaining those goals Operating plans plans that speci c goals actions and responsibility for individual functions Tactical plans the action managers adopt over the short to medium term to deal with a speci c opportunity or threat that has emerged unit plans plans for departments Within functions work teams or individuals 2012 Cengage Learning tep 3 Evaluate goals amp plans 0 Evaluate advantages disadvantages and potential effects of each alternative goal 8 plan 0 prioritize the goals 0 Consider the costs of each initiative 8 the likely investment return 2012 Cengage Learning Effective Action Plans An action plan lists 0 speci c steps how 0 People who 0 resources What 0 Time period when i x for accomplishing a goal 2012 Cengage Learning Step 4 Select goals amp plans 0 Select the most appropriate and feasible alternative 0 Identi es the priorities and tradeoffs among goals and plans 2012 Cengage Learning Step 5 Implement goals amp plans 0 key to achieving goals 0 Managers amp employees must understand the plan have the resources to implement it amp be motivated to do so 0 Linking the plan to other systems in the organization such as rewards helps ensure successful implementation 2012 Cengage Learning Step 6 Monitor 8c Control 0 Monitor actual performance of employees against the goals 8 plans 0 Tracking Progress proximal goals and distal goals 0 Proximal short term or sub goals 0 Distal are long term or primary goals Performance feedback 2012 Cengage Learning Planning Horizons 0 The planning horizon refers to how far out a plan is meant to apply 0 Most strategic plans whether at the business or corporate level are multiyear 0 Organizational threats might require short term plans 0 Operating amp unit plans tend to have shorter time horizons than strategic ones 0 There are exceptions 2012 Cengage Learning ypes of Plans based on frequency 0 single use plans plans that address unique events that do not reoccur 0 Standing plans plans used to handle events that reoccur frequently 0 Contingency plans plans formulated to address speci c possible future events that might have a signi cant impact on the org crisis management planning Scenario planning 2012 Cengage Learning Scenario Planning Scenario planning is based on the realization that the future is inherently unpredictable 8 that an organization should plan for a range of possible futures This leads to creating what if scenarios Some are too optimistic others too pessimistic Plans are created to deal with each type of situation The idea is to get managers to understand the dynamic and complex nature of their situation 8 think through problems in a strategic fashion to generate a range of possible options that might be pursued under different circumstances 2012 Cengage Learning Scenario Planning Traps Treating scenarios as forecasts Failing to make scenarios global enough in scope Failing to focus scenarios in areas of potential impact Treating them as informational only Not using an experienced facilitator 2012 Cengage Learning Maintaining Flexibility 0 Optionsbased planning keep options open by making small simultaneous investments in many alternative plans 0 Slack resources a cushion of resources like extra time or money that can be used to address and adapt to unanticipated changes 2012 Cengage Learning Levels of Planning 0 A plan can be divided into subunits in larger organizations A cor aorate level strategy is concerned with deciding which industries the rm should compete in and how it should enter or exit an industry A business level strategy deals with how to compete in the selected industry An operating strategy deals with the individual functions departments that support the business level strategy 2012 Cengage Learning Glanning from Top to Bottom Top Managers Middle Managers FirstLevel Managers 2 Cengage Learning Starting at the Top O Strategic plans make clear how the company will serve customers and position itself against competitors in the next 2 to 5 years 0 Purpose statement a statement of a company s purpose or reason for existing 0 Strategic objective a more specific goal that unifies companywide efforts stretches and challenges the organization and possess a finish line and a time frame 2012 Cengage Learning Bending in the Middle 0 Tactical plans specify how a company will use resources budgets and people to accomplish speci c goals related to its strategic objective time frame 6 months to 2 years 0 Management by Objectives MBO discuss possible goals collectively set goals jointly develop tactical plans meet regularly to review progress 2012 Cengage Learning Finishing at the Bottom Operational plans 0 Singleuse plans 0 standing plans policies procedures rules and regulations 0 budgets 2012 Cengage Learning Pitfall Too centralized amp Top down Failure to question assumptions Failure to implement Failure to anticipate 39 l s actions Countering Planning Pitfalls Solution Decentralized Planning Scenario Planning amp Devil s advocate Link to goals amp budget RolePlaying 2012 Cengage Learning Why does planning matter Planning is a central activity of managers Must be done well because evidence suggests that While good planning can improve the performance of an org bad planning may be as damaging or more than no planning at all Planning DOES NOT guarantee a perfect strategy Planning is nothing more than a formal decision making process Even the best designed decision making systems will fail to produce the desired results if manager let cognitive biases skew their decisions 2012 Cengage Learning What Is Decision Making explain the steps and limits to rational decision making 0 Understand 3 models of decision making explain how group decisions and group decisionmaking techniques can improve decision making 2012 Cengage Learning Other objectives 0 Discuss the major reasons for poor decisions and describe what managers can do to make better decisions 0 Explain how to make effective decisions as a manager 2012 Cengage Learning Making Deci 0 All managers are decision makers 0 Not all decision makers are managers 0 Pervades all basic management functions planning organizing leading and controlling 0 Managers decision process is key to success 2012 Cengage Learning DECISIONMAKIN IMPULSIVE You give little thought or examination to the issues or possi i ities You t the rst alternative Motto Don t look just leap FATALISTIC You let the environment decide Leave it up to fate Motto It s out of my hands or It s all in the cards COMPLIANT You allow someone else to decide You follow someone else s plans You offer no opinions Motto Whatever you say sigh or It doesn t matter to me stpone thoughts and actions You like to drag things out 39 39 39 input etc or What s the rash 2012 Cengage Learning DECISIONMAKIN AGONIZING You get lost in all data and overwhelmed with analyzing alternatives Motto I don t know what to do or I am so confused PLANNING You use a procedure so that the chances of reaching a satisfying end result decision are increased Motto Let s examine the factspossibilitiesconseaaences or Let s take a look at the big picture PARALYSIS You decide to accept responsibility but are unable to do anything about it Motto I can t face up to it or I am throwing in the towel in this matter INTUITIVE with your gut feelings Decisions are based on intuition and feelings ts s to do don t ask me why 2012 Cengage Learning Intuitive Appr 0 hunches amp intuition used to make decisi 0 Many problems can occur 0 emotional attachment can lead to poor decisions Must identify our own biases Seek independent opinions 2012 Cengage Learning Managerial De 0 Programmed decisions Problem is frequent repetitive routine with much certainty regarding cause 8 effect relationships Decision procedure depends on policies rules etc 0 Non programmed decisions Problem is novel unstructured with much uncertainty regarding cause 8 effect l ision procedure needs creativity intuition rance for ambiguity creative problem solving 2012 Cengage Learning Decision Enviro 0 Higher level more exibility 0 In uences include Patterns of authority purpose of organization Formal amp informal structure Superiors amp subordinates 0 Successful managers appreciate different forces 2012 Cengage Learning Conditions for Decisions 39 Certainty exists when you know the results of the decision Lsk occurs if certain reliable but incomplete information is available precise probabilities are unknown can perform an expected value analysis to determine the expected payoff of each known alternative Uncertainty exists when very little or NO reliable information is available to evaluate the possible outcomes no probabilities known 2012 Cengage Learning Timing Decisions 0 Need must be recognized 0 Quick decisions might be needed 0 Failure to act or taking TOO MUCH time 0 Bottom line is knowing when to make a decision is complicated 2012 Cengage Learning Barriers to Decisions 0 Four basic barriers Complacency the decision maker doesn t see the need for a decision Defensive avoidance decisionmaker denies the importance of danger or presence of an opportunity or the responsibility for taking action panic frantic attempts to solve problems rarely produce the best results Deciding to decide accepting responsibility 8 challenge of decision making is critical to overall effectiveness 2012 Cengage Learning Models of Decision Making 0 effective decisions are a timely decision that meets a desired objective and is acceptable to those individuals affected by it critical to success 0 3 decision making models Rational Model bounded Rationality Model Garbage can Model 2012 Cengage Learning Rational Decisio 0 Rationality is a logical step by step app to decision making with a thorough analysis of alternatives and their consequences comes from classic economic theory 0 Based on the following assumptions The outcomes will be completely rational The decision makers uses a consistent system of erences to choose the best alternative decision maker is aware of all alternatives er can calculate the probability of lternative 2012 Cengage Learning Steps to Rational Dec De ne the problem Identify decision criteria weight the criteria Generate alternative courses of action evaluate each alternative 1 2 3 4 5 6 Compute the optimal decision the choice ment the decision ision 2012 Cengage Learning 1 Define the Problem Existing state Desired state 2012 Cengage Learning 2 Identify Decision Criteria 0 The standards used to guide judgments and decisions 0 Includes generating alterative courses of action aimed at solving the problem 2012 Cengage Learning 3 Weight the Criteria 0 Absolute comparisons each criterion is compared to a standard or ranked on its own merits 0 Relative comparisons each criterion is compared directly to every other criterion 2012 Cengage Learning solute Weighting of Decision Criteria for a Car Purchase 5 critically important 4 important 3 somewhat important 2 not very important 1 completely unimportant 1 Predicted reliability 1 2 3 4 2 Owner satisfaction 1 3 4 5 3 Predicted depreciation 2 3 4 5 4 Avoiding accidents 1 2 3 S 5 Fuel economy 1 2 3 4 6 Crash protection 1 2 3 5 7 Acceleration 2 3 4 5 8 Ride 1 2 4 5 2 3 4 9 Front seat comfort 1 2 Cengage Learning k Relative Comparison of Home Characteristics HOME CHARACTERISTICS L SSQ IP SR 05 NBH Daily commute L 1 1 1 1 0 School system quality SSQ 1 1 1 1 1 Inground pool IP 1 1 0 0 1 Sun room SR 1 1 0 O 0 Quiet street 05 1 1 0 O O Newly built house NBH 0 1 1 0 0 Total weight 2 5m39 3 l 239 l 0 kCengage Learning J 4 Generate Alternative Courses of Action After identifying and weighting the criteria that will guide the decisionmaking process the next process is to identify possible courses of action that could solve the problem The idea is to generate as many alternatives as possible 2012 Cengage Learning 5 Evaluate Each Alternative 0 The next step is to systematically evaluate each alternative against each criterion 0 The key is to use information to systematically evaluate each alternative against each criterion 2012 Cengage Learning griteria Ratings Used to Determine the Best Location for a New Office 8 o u quot 8 a 5 E E 395 8 i g I g 839 2 2 i 8quot gtn 393 3 g is is g 9 E 1 3 39 3939 g 1 5 0mm 3 I 35 5b 3 3 18 3 3 26 3 a 3 a Weid39m 60 59 54 53 40 27 27 26 25 24 21 13 II Mia 0310320220210 104503004105104121440491110 Biloh 04140550310500100414102035034033039030135 londcn 132 137 121 171 011 052 130 010 111 009 042 011 427 O Munich 051 039 039 041 015 011 029 010 051 030 001 050 10 9 laid 020 022 031 020 013 on 054 012 039 010 001 095 141 10 Scum 39EuopemOtm mmcmmtm zoos accused in 2024am WWWM WLDWIIpd 2 Cengage Learning 6 Compute the Optimal Decision rating for criterion A x weight for criterion A rating for criterion B x weight for criterion B rating for criterion C x weight for criterion C etc 2012 Cengage Learning Final Steps 0 7 Make the choice pick the best option possible 0 8 implement the decision sometimes this is the hardest step 0 9 Evaluate the decision did it work amp do adjustments need to be made However most human decisions are not totally rational 2012 Cengage Learning Limits to Rational De 0 In theory fully rational decision makers maximize decision by choosing the optimal solution 0 In practice limited resources make it nearly impossible to maximize decisions 2012 Cengage Learning Bounded Rationality Model 0 Bounded rationality a theory that suggests that there are limits upon how rational a decision maker can actually be Managers tend to select the first satisfactory alternative that is presented They satis ce select the rst alternative that is good enough because the costs in time 8 effort are too great to optimize A satisfactory level of a particular performance variable is obtained instead of the theoretical maximum level 2012 Cengage Learning Bounded Rationality Model 0 Managers suggest the first satisfactory alternative Managers recognize that their conception of the world is simple Managers are comfortable making decisions Without determining all of the alternatives Managers make decisions by rules of thumb or heuristics Heuristics are short cuts in decision making that save mental activity Is limited amp uses a simpli ed decision making model 2012 Cengage Learning Heuristics 8 Cognitive Biases 0 These are psychological barriers to good decisions 0 heuristics rules of thumb are used to satisfice 0 8020 rule 80 of the consequences of a phenomenon stem from 20 of the causes problematic bc it doesn t always hold true 0 Cognitive biases are decision making errors that we are all prone to making 8 have been repeatedly veri ed in research Managers with good information can still make bad decisions 2012 Cengage Learning Cognitive Biases prior hypothesis bias prior beliefs about the relationship between 2 variables tends to make decisions based on those beliefs even when evidence suggests otherwise escalating commitment committing even more resources to failing projects Reasoning by analogy oversimplifying a complex situation Representativeness tendency to generalize from a small sample Illusion of control overemphasize one s ability to control evens Availability error assuming the probability of an outcome based on how easy it is to imagine Framing bias the way in which a problem or decision is presented can affect how it is perceived 2012 Cengage Learning Garbage Can Model A theory that contends that decisions in organizations are unsystematic 8 unsystematic problems solutions participants and choice opportunities are oating around randomly if they happen to l I connect a decision is I I I 39 made 2012 Cengage Learning Garbage Can Model 0 This model illustrates the idea that not all organizational decisions are made in a step by step systematic fashion especially under conditions of high uncertainty the decision process may be chaotic Some decisions appear to happen out of sheer luck This model cannot be used in effective strategic planning situations Managers must make critical decisions quickly with incomplete information and must also involve employees in the process 2012 Cengage Learning Participation in Decision Making 0 Involving others 0 Raises pertinent questions 0 Group or Team Decision Making Better than single person Takes longer Superior for 2 reasons 0 Less responsible 0 More polar 2012 Cengage Learning Advantages of Group Decision Making Groups do a better job than individuals at 0 De ning the problem 0 Generating alternative solutions 0 Providing vital info 0 Creates intellectual stimulation for those involved 0 Participants understand why a decision is made 11 lead to higher commitment to the decision Pitfalls of Group Decision Making Groupthink occurs in highly cohesive groups when group members feel intense pressure to agree with each other so that the group can approve a proposed solution Takes considerable time Strong willed members may dominate Satisficing may still occur Goal displacement can occur group loses sight of its original goal 8 a new less important goal emerges 2012 Cengage Learning Pitfalls of Groupthink 0 Groupthink is most likely to occur under the following conditions The group is insulated from others who might have different perspectives The group leader begins by expressing a strong preference for a particular decision The group has no established procedure for systematically defining problems and exploring alternatives Group members have similar backgrounds and experiences 2012 Cengage Learning Structured Con ict 0 Ctype cognitive con ict focuses on problem and issuerelated differences of opinion willingness to examine compare reconcile differences to produce the best possible solution 0 Atype affective con ict emotional reaction that can occur when disagreements become personal hostility anger resentment distrust cynicism apathy 2012 Cengage Learning Creating CType Devil s advocacy 1Generate a potential solution 2Assign a devil s advocate to criticize and question the solution 3Present the critique of the potential solution to key decision makers 4 Gather additional relevant information whether to use change or not use the ed solution 2012 Cengage Learning Creating CType Con ict Nominal Group Technique 0 Begins with group quiet time 0 Each member shares one idea at a time with the group 0 Group discusses the pros and cons of each idea 0 Group members independently ranllt ideas presented 0 Idea with highest average rank is selected 2012 Cengage Learning Other Techniques Delphi Technique 0 A group of experts respond to questions and to each other until reaching agreement Outside View 0 Requires a planner to identify a reference class of similar past strategic initiatives determining Whether those initiatives succeeded or failed and evaluating a project at hand against those prior initiatives 2012 Cengage Learning Other Techniques BrainstormingElectronic Brainstorming 0 The more ideas the better 0 All ideas are acceptable 0 other members ideas should be used to come up with even more ideas 0 Criticism or evaluation of ideas is not allowed 0 No praise of ideas is allowed 0 Combination 8 improvements on ideas that have been previously presented are 2012 Cengage Learning Improving Decision Making Decision makers are more likely to run into problems of bounded rationality and resort to simple decision making heuristics when they have too much info to process The key is to reduce the amount of information that managers have to process giving them more time to focus on critical issues 2012 Cengage Learning Importance of Decision Making 0 Decisions are central to a manager s ability to perform the four functions of management 0 Managers must be aware of their limitations While making decisions 0 3 methods of decision making can typically occur 0 Encouraging group participation can aid in this process 0 Creative con ict amp creativity can help 2012 Cengage Learning MGMT5 ORGANIZATIONAL STRATEGY 2012 Cengage Learning l strategy An action managers take to attain a goal of an organization 0 It occurs at many different levels in organizations 0 It helps managers to achieve their goal of superior performance 2012 Cengage Learning Superior Performance gt Supenor Performance Requires High Profitability gt Growth in profits over time Central task of managers is to pursue strategies that result in superior performance 2012 Cengage Learning Competitive Advantage 39 Competitive advantage advantage attained when a rm outperforms its rivals This results in higher pro tability 8 pro t growth At the most basic level competitive advantage comes from 2 sources Ability of the rm to lower costs relative to rivals in general all things being equal if a rm has lower costs than its rivals it will outperform them Ability to differentiate its product offering from that of rivals in general if a rm successfully differentiates its product form those of rivals by attributes of superior design quality reliability aftersales service etc it should be able to outperform its rivals 2012 Cengage Learning Competitive Advantage CA 0 Distinctive competency or resources assets capabilities processes employee time information and knowledge that an organization controls that is unique to a rm 8 provides it with a CA 0 Sustainable competitive advantage when other companies cannot duplicate the value a rm is providing to customers thru its distinctive competency it is only sustainable if it can last for a while 2012 Cengage Learning Sustainable Competitive Advantage 0 Barriers to imitation factors that make it dif cult for a rm to imitate the competitive position of a rival Could include intellectual property or processes embedded Within the rm that are hard to see or duplicate 0 Legacy constraints prior investments in a particular way of doing business that are dif cult to change and limit a rm s ability to imitate a successful rival eg Hewlett Packard s retail channels vs Dell s direct sales 2012 Cengage Learning Sustainable Competiti Resources distinctive competencies must be 0 Valuable 0 Rare 0 Imperfectly imitable 0 Nonsubstitutable 2012 Cengage Learning Competitive Advantage CA Low Costs Distinctive Competitive Superior Competencies Advantage Performance Product Differentiation If protected from copying by barriers to imitation amp legacy constraints CA will be sustained 2012 Cengage Learning Competitive Advantage 0 To achieve superior performance a rm must have a competitive advantage which allows it to either have lower costs than rivals or better differentiation in its product offering That competitive advantage will be more sustainable if it is difficult for rivals to copy or imitate the rm s distinctive competencies The key task for managers is to figure out what they must do to build a distinctive competency in one or more activities to gain a competitive advantage over rivals 2012 Cengage Learning a seep7 ororatev muggy and Firm Level Strategies explain the different kinds of corporatelevel strategies Le quottht business or businesses are we in or should we be in describe the different kinds of industrybusiness level strategies ie quotHow should we compete in this industry explain the kinds of firmfunctionaeve strategies Strategy in lower levels is designed to support strategies at higher levels in the organization 2012 Cengage Learning Corporate Level Strategy 39 Strategy concerned with deciding which industries a rms should compete in and how the rm should enter or exit industries It identi es the set of businesses markets or industries in which the organization competes and the distribution of resources among those businesses 0 Also include decisions about how to enter new businesses amp markets either mergers amp acquisitions or new ventures 0 The goal of these strategies is to boost the overall performances of the enterprise measured by pro tability amp pro t growth 2012 Cengage Learning Types of Strategy 0 Single Business Focus Concentration Focusing on a single business makes sense if a rm is growing rapidly amp taking all the time of its managers Expanding into other businesses should only be an option when the growth of the core business is decelerating 0 Vertical integration Moving outputs into businesses that supply inputs to a rm s core business or downstream into businesses that use the outputs of the rm s core business 2012 Cengage Learning Types of Strategy 0 Diversi cation entry into NEW business areas 0 Related Concentric Diversity Diversi cation into a business related to the existing business activities of an enterprise by distinct similarities in one or more activities in the value chain Unrelated Conglomerate Diversity Diversi cation into a business not related to the existing business activities of an enterprise by distinct similarities in one or more activities in the value chain 2012 Cengage Learning Why Diversify 0 It can boost performance by leveraging core competencies ie using valuable skills from current businesses and applying them to a new line of businesses The idea is to create a competitive advantage in the new business by using the competencies that enabled the original business to gain a competitive advantage Realizing economies of scope the cost reductions associated with sharing resources across boundaries Firms that share resources across businesses have to invest proportionally less in the shared resources than companies that cannot share Superior internal governance the ability of senior management to elicit high levels of performance from constituent businesses of a diversified enterprise 2012 Cengage Learning International Expansion 0 This is another corporate strategy that rms can undertake and can be a good way to increase its performance 0 It can enlarge the market for a rm s products boosting pro t growth enabling scale economies which in turn lower unit costs and again increasing pro tability 0 It can also enable a rm to realize location economies and increase pro tability by basing different business activities where they can be erforrned the most ef ciently 2012 Cengage Learning Portfolio Strategy A corporatelevel strategy that minimizes risk by diversifying investment among various businesses or product lines Companies can grow through 0 acquisitions 0 Unrelated diversi cation 2012 Cengage Learning Goa Matrix High Market Growth Small Relative Market Share 2 Cengage Learning Shaped Relationship between Diversification and Risk I l I Single Related Unrelated Business Diversification Diversification 2 Cengage Learning Grand Strategies Broad strategic plans used to help an organization achieve its strategic goals 0 Growth strategy 0 Stability strategy 0 Retrenchment strategy make significant cuts recovery 2012 Cengage Learning IndustryLevel Strategies How should we compete in this industryquot orter s Five Industry Forces IndustryLevel Strategies To build a sustainable competitive advantage managers need a good grasp of industry level strategy This is concerned with deciding how a rm should compete in the industries in which it has elected to participate It is the basic theme that a company emphasizes to compete effectively with rivals in an industry It encompasses 3 related choices the competitive theme that managers emphasize how to segment the market in the industry amp which segments to serve 2012 Cengage Learning Positioning Str 0 The major actions by which an organiz competes in a particular industry or market Cost leadership strategy offer lower prices to attract more customers get a larger piece of market Differentiation strategy do something different so customers will value you and you more 2012 Cengage Learning Competitive Theme Choice 1 0 LowCost Strategy focusing managerial energy and attention on doing everything possible to lower the costs of the organization The successful pursuit of this strategy lets a firm charge less than its rivals and still make pro ts can also lead to gains in market share eg Walmart and SW Airlines This in turn leads to greater economies of scale which are cost advantages derived from a large sales volume Over time cost advantages can be consolidated even further for greater profits 2012 Cengage Learning Low Cost Value Cycle Lower Costs Economies of Higher Lower Prices ScaIe Profitability 8 Profit Growth I Increased Demand 2012 Cengage Learning Competitive Theme Choice 2 Differentiation Strategy increasing the value of a product offering in the eyes of consumers A product can be differentiated by superior reliability better design superior functions and features better service amp support etc e g Nordstrom vs WallVlart The key is that consumers must value the differentiation if a rm is to obtain a competitive advantage by this strategy Differentiation can cause the cost structure of the rm to increase leading managers to sometimes choose to raise prices or attempt to boost profits thru sales amp scale economies Greater profitability amp profit growth can be obtained if increased demand is associated with successful differentiation 2012 Cengage Learning Options for Exploiting Differentiation Increase prices more than costs Option Higher Successful profitability amp Differentiation profit growth i Option 2 I I it Economies of Moderate or no Increased scale amp lower price increase Demand costs 2012 Cengage Learning Segmenting the Market 0 Markets are characterized by different types of consumer Some are wealthy some are not Some are old some are young Some are in uenced by popular culture some never watch TV Some care deeply about status symbols other do not Some place a high value on luxury some on value of money 2012 Cengage Learning Consumer Markets 0 Segmentation characteristics Geographic demographic Psychographic Behavioralistic 0 Different rms can segment the same market in different ways amp various approaches could be reasonable eg Walmart AampF etc 2012 Cengage Learning Segmenting the Market Different approaches all represent different ways of segmenting the market by value preferences age incomes tastes etc There is no single best way to segment but in terms of attaining a competitive advantage some approaches make more sense than others At a minimum a segment MUST have enough demand to be served profitably Managers must have a clear idea of the consumers they are trying to serve what their needs are and how their business is going to serve those needs 2012 Cengage Learning Choosing Segments to Serve 0 After deciding how to segment the market managers then decide which segment to serve Depending on what they select they use one of two methods 0 Focus Strategy Serving a limited number of segments or sometimes just one 0 Broad Market Strategy Serving the entire market 2012 Cengage Learning Segmentation 8 Strategy 0 Using the 3 dimensions of business level strategy allows a variety of different ways to compete in an industry Broad lowcost 8 Broad differentiation strategies aim to serve many segments in an industry amp strive for either a lowcost or a differentiated position Focused lowcost 8 Focused differentiation strategies focus on one or a few speci c segments and strive to attain a low cost or differentiation position relative to that speci c segment 2012 Cengage Learning Agnes of BusinessLevel Strategj Segments Served Retail Example Broad low Broad cost differentiation Many WalMart Sears KMart Macy s Focused low Focused cost differentiation Costco AampF Few Dollar Tree Gap Low Cost Differentiation Competitive Theme 2012 Cengage Learning Positioning Strategies 0 A firm cannot simultaneously be a WalMart amp a Nordstrom a Porsche amp Kia managers must choose between these basic ways of attaining competitive advantage The strategic issue facing managers is What position to choose on a continuum that is anchored at one end by very low costs and at the other by a very high level of differentiation For a firm to have a competitive advantage amp achieve superior performance it must have unique strengths or distinctive competencies that rivals inside their industry lacllt amp enable them to operate more efficiently 2012 Cengage Learning Positioning Strategies The strategic task for managers is to identify a viable position in the industry and then con gure the rm s internal operations as ef ciently as possible to enable the rm to gain a competitive advantage Not all rms can do this Some are more successful than others Ef ciency issues are ongoing Managers are continually seeking ways to improve their internal ef ciencies to impact their rm s performance Organizations that offer products more ef ciently at a lower cost than their rivals tend to be more successful 2012 Cengage Learning Implementing Positioning Strategies 0 The central strategic task of managers is to look for ways of improving operating efficiency and enhancing value through differentiation in order to take the enterprise to a new level of excellence Ef cient operations occur through the correct structuring of the internal organization through the value chain 2012 Cengage Learning Configuring the Value Chain 0 The operations of a rm can be thought of as a value chain composed of a series of distinct activities including production marketing 8 sales etc categorized as either Primary Activities Activities having to do with the design creation and delivery of the product its marketing and its support and after sales services Support Activities Activities that provide inputs that allow the primary activities to occur 0 Each activity adds value to the product offering 2012 Cengage Learning Value Chain Internal Organization Architecture Support Activities Procurement Logistics Info Systems Human Resources Production Marketing amp Customer Sales Service Primary Activities 2012 Cengage Learning Value Chain 0 Organization Architecture The operations of the firm are embedded Within the internal organization architecture of the enterprise which includes the organization structure incentives control systems people and culture of the firm If a firm is to attain a competitive advantage its organization architecture must support its operations and enable it to successfully implement its strategy 2012 Cengage Learning Strategic Fit If a business is to have superior performance its businesslevel strategy must make sense given industry conditions eg there must be sufficient demand to support that strategic choice All elements must be consistent with each other for competitive advantage 8 superior performance to occur Operations of the organization must give it a distinctive competency in one or more activities in the value chain Without unique and valuable skills a firm will NOT outperform rivals 2012 Cengage Learning Strategic Fit Operations Strategy 1 A Business Fits Industry gt suppms Level Strategy COHditionS A Internal Organization Architecture 2012 Cengage Learning Adaptive Strategies 0 Defenders seek moderate steady growth by offering a limited range of products and services to a wellde ned set of customers 0 Prospectors seek fast growth by searching for new market OPPOI tUIIltiES encouraging r1sk taking and being the rst to bring innovative new products to market 0 Analyzers blend the defending and rospecting strate ies 0 eactors do not fo low a consistent strate y 8 tend to be poorer performers than defen ers prospectors or analyzers 2012 Cengage Learning Firm Level Strategies llHow should we compete against a particular firm OUsually accomplished through Direct competition strategies Speci c strategic moves of direct competition 2012 Cengage Learning Direct Competition The rivalry between two companies offering similar products or services that acknowledge each other as rivals and take offensive and defensive positions as they act and react to each other s strategic actions 0 market commonality 0 Resource similarity 2012 Cengage Learning a Framework of Direct Competition gt McDonald39s Wendys 2 3 High C O E II 0 2 McDatfd39s quot1 o x a Low E Luby39s Cafetenas Low xCengage Learning McDonald39s B urger kgt l I IV McDonald39s k Subway High Resource Similarity Competitive Tactics 39 Competitive tactics are actions that managers take to try to outmaneuver rivals in the market While the business level strategy of an enterprise represent its basic competitive theme and tends to be pursued for a long time tactics are individual actions taken to gain advantage over rivals or even to inhibit rivals from emerging in the rst place therefore making it easier to attain competitive advantage 0 They can be short term maneuvers or longerterm actions but they are always about gaining a better market position relative to actual or potential rivals 2012 Cengage Learning Strategic Moves of Direct Competition 0 Attack a competitive move designed to reduce a rival s market share or pro ts 0 Response a countermove prompted by a rival s attack designed to defend or improve a company s market share or profit 2012 Cengage Learning Strategic Moves of Direct Com etition 0 Tactical pricing decisions Price War lowering prices to gain market share Price signaling cutting prices when new competition enters the market to sign a tough ght ahead Razor amp razor blade pricing eg HP printers 0 Tactical product decisions Product proliferation eg laundry detergents that occupy all of the shelf space in a supermarket Bundling typing together a set of related products and charging a single price for them eg cable companies 2012 Cengage Learning Functional Level Strategy 0 Strategies implemented by each functional area of the organization to support the organization s business level strategy 0 Developed by functional area executives with input of amp approval from the executives responsible for business level strategy 2012 Cengage Learning Strategic Planning 0 Strategic planning is a set of procedures for making decisions about the organization39s longterm goals 8 strategies 0 Strategic goals are major targets or end results relating to the organization s longterm survival value amp growth 0 Strategy A pattern of actions and resource allocations designed to achieve the organization s goals 2012 Cengage Learning Questions in Strategic Planning 0 Where will we be active 0 How will we get there 0 How will we win the marketplace 0 How fast will we move and in what sequence will we make prices 0 How will we obtain nancial returns 2012 Cengage Learning Strategic Planning 0 Remember that this forms the context Within which operating amp unit plans are formed 0 There are several steps in forming amp implementing strategic plans amp their relationship to operating amp unit plans 0 The next slide graphically demonstrates the process 2012 Cengage Learning tree Steps of the StrategyMaking Process Assess Naad Comm Choose for magic gt Stadium gt Srategic Chaos Andria Alanaives Rikmm Sitcom satanic We Pom FiatSame Swami 2 Cengage Learning tep 1 Assess Strategic Needs 0 Dif cult because there is a lot of uncertainty in business 0 Also top managers are often slow to recognize the need for strategic change competitive inertia 0 Managers must be aware of strategic dissonance Actions must be consistent with intent 2012 Cengage Learning tep 1 Assess Strategic Needs 0 Strategic Needs should be consistent with the organization s mission Vision values amp goals 0 Mission an organization s basic purpose 8 scope of operations 0 Strategic Vision the long term direction 8 strategic intent of a company that points to the future 0 Values the philosophical properties to which management is committed 0 Goals desired future state an organization attempts to realize 2012 Cengage Learning Step 1 Assess Strategic Needs 0 Mission should describe ends not means imply effort activity be unique and brief 0 Strategic Vision should inspire org employees offering a worthwhile target to achieve together 0 Values should provide the reasoning for action 0 Goals should evolve from the mission vision 8 values and should be SMART they provide a means by which to assess strategy effectiveness 8 evaluate the performance of managers 2012 Cengage Learning Example WalMart s Mission quotto help people save money so they can live betterquot Walmart 1 Save money Live better 2012 Cengage Learning Example DuPont s Vision llDuPont s Vision is to be the world39s most dynamic science company creating sustainable solutions essential to a better safer and healthier life for people everywhere 2012 Cengage Learning Example Merck s Values quotAt Merck we do business on the basis of common values Our success is based on courage achievement responsibility respect integrity and transparency These values determine our actions in our daily dealing with customers and business partners as well as in our teamwork and our collaboration with each other quotRIERCK 2012 Cengage Learning Step 2 Situational Analysis 0 Evaluate the environment of the organization 0 External factors can lead to opportunities or threats Industry PI O le Political activity Indus SIOWth Social issues Competitor pro le Labor issues Competitor analysis Macroeconomic Competitor issues advantages technological Legislation factors 2012 Cengage Learning Looking Outside Environmental scanning Strategic group group of companies Within an industry that top managers choose to compare evaluate and benchmark strategic threats and opportunities McDonald39s 3 Core firms k 1393 central companies in a strategic group Secondary firms 1 firms that use strategies related to but somewhat different from those of core firms 2012 Cengage Learning Situational Analysis 0 Evaluate the environment of the organization 0 internal factors resources can lead to strengths or weaknesses Financial analysis Human Resources Assessment Marketing Audit operations Analysis Other internal resource analysis Organizational culture Strength 2012 Cengage Learning Internal Analysis 0 Distinctive competence something that a company can make do or perform better than competitors 0 Core capabilities less Visible internal decisionmaking routines problemsolving processes and organizational cultures that determine how ef ciently inputs can be turned into outputs 2012 Cengage Learning SWOT Analysis 0 Once these 4 areas are identi ed a SWOT analysis can be used to start the process of choosing strategies 0 These strategies should build on organizational Strengths Correct weaknesses exploit Opportunities Block threats 0 All done to execute the mission realize the Vision meet exceed the goals all while adhering to the values 2012 Cengage Learning Example SWOT Analvsis Fquot W W15 1 nunmom sku gtLu n Imus OIWM annals gtcumur Levant human quotcomma any new gtmapmn Wealawejses l gtAIIOM C IMIOMR quotIII nun VIM gtPcor scan I cm gt Low cunomr mum UMHDU undue I m gt8IJIIm gtMnmm mp 95 I managing wmmu um mum snon at pony um ocmmlcll 1mm gtcnu u II mm puma H quotan has may I popular ammu gtNn distribution dumb Trim I chlr ll cumin mm gt610quot d pach mm Yocrwlqonl amen cmms n my gt In lacuna Ham II population agomam NO mum chm 2012 Cengage Learning Step 3 Choosing Strategic I Alternatives amp Draft Action Plans 0 Riskavoiding strategggaims to protect an existing competitive advantage 0 Riskseeking strategygaims to extend or create a sustainable competitive advantage 2012 Cengage Learning Strategic Reference Points Current Situation Satisfied Sitting on top of the world Perception of New Issues Threats Potential loss Response or NegatIVItY Behavior RiskAverse Conservative DefenS Ve Undesired Strategic Result Reference Points Desired Response or ReSU It Behavior RiskTaking Daring Perception of New Offensive Issues Opportunity Potential gain Positivity Current Situation Dissatisfied At the bottom looking up 2 Cengage Learning Other Steps H nt the strategy This means putting action plans into effect It requires the organization to have the right kind of structure incentives control systems amp culture as well as the right mix of people Strategy is implemented by people but the way that people work is in uenced by the internal organization of the firm 0 Assign responsibilities roles amp create budgets 0 review progress against the plan 0 Incorporate feedback into creating new plans Strategic Plans are living documents that can be amp often are adjusted as new information arrives 2012 Cengage Learning Strategic Planning Process Mission Vision Values amp Goals Feedback Assign sub goals roles Review responsibilities programs lmp39emquott gt timelines amp Strategies budgets against plan 2012 Cengage Learning Decision Making 0 The strategic planning system we have reviewed in this chapter is an example of a rational decision making model 0 Strategic planning is a formal process for making important decisions about strategies tactics amp operations 0 More generally making decisions is a major component of a manager s job 2012 Cengage Learning Why is Strategy Important 0 All organizations compete to obtain scarce resources 8 achieve performance goals this requires a sustainable competitive advantage O Strategies must be crafted 8 implemented to attain those sustainable competitive advantages 0 Designing 8 implementing strategies are not only for top management operating mangers play a key role in strategic success 8 must understand their role in the process of building sustainin a com etitive advanta e 2012 Cengage Learning
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