Exam 2 Study Guide

What is efective srategy?

Outline: 

6.1 What is Effective Strategy?

6.2 The Strategic-Management Process

6.3 Establishing the Mission & the Vision

6.4 Assessing the Current Reality

7.1 Two Kinds of Decision Making: Rational & Nonrational

7.2 Making Ethical Decisions

7.3 Evidence-Based Decision Making & Analytics

7.5 How to Overcome Barriers to Decision Making

7.6 Group Decision Making How to Work with Others

* Management in Action pg. 221-223  

Companies use Tracking Devices to Help Make Decisions

8.1 Aligning Strategy, Culture, & Structure

8.2 What Kind of Organizational Culture Will You Be Operating In?

8.4 Organizational Structure

8.5 The Major Elements of an Organization

8.7 Contingency Design: Factors in Creating the Best Structure

9.1 Strategic Human Resource Management

9.2 Recruitment & Selection: Putting the Right People into the Right Jobs

9.3 Managing an Effective Workforce: Compensation & Benefits

9.7 The Legal Requirements of Human Resource Management

6.1 What is Effective Strategy?

Strategic Positioning & its Principles 

Strategic Positioning ???? Attempts to achieve sustainable competitive advantage by preserving  what is distinctive about a company

1. Strategy is the Creation of a Unique & Valuable Position

• Few needs, many customers

• Broad needs, few customers

• Broad needs, many customers

2. Strategy Requires Trade-offs in Competing

• Companies have to choose what strategy to follow as well as what strategy not to  follow

3. Strategy Involves Creating a “Fit” among Activities

• “Fit” is about how companies interact and reinforce one another

Does Strategic Management Work for Small as Well as Large Firms? 

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• Studies found that while strategic management is beneficial for large firms it is also  beneficial for smaller companies

• While the improvement in financial performance was small  

6.2 The Strategic-Management Process

The 5 Steps of the Strategic-Management Process:

1. Establish the Mission & the Vision

2. Assess the Current Reality

Current Reality Assessment ???? To look at where the organization stands and see what is  working and what could be different so as to maximize efficiency and effectiveness in achieving  the organization’s mission

3. Formulate the Grand Strategy

Grand Strategy ???? Explains how the organization’s mission is to be accomplished. Three  common grand strategies are growth, stability, and defensive If you want to learn more check out “What % of people do you think would work purposely slow to reduce the amount of work that is expected of them?
We also discuss several other topics like ∙ What if some offspring had wrinkled peas?
Don't forget about the age old question of psyclass

Strategy Formulation ???? The process of choosing among different strategies and altering them  to best fit the organization’s needs

4. Implement the Strategy

Strategy Implementation ???? Putting strategic plans into effect

5. Maintain Strategic Control: The Feedback Loop

Strategic Control ???? Consists of monitoring the execution of strategy and making adjustments,  if necessary

6.3 Establishing the Mission & the Vision

Mission ???? Organization’s purpose or reason for being

• Customers

• Products or Services

• Geographical area

• Technology

• Basic beliefs or values

• Competitive Advantage

• Public Responsibilities

Vision ???? Long-Term goal of what it wants to become

• Vision statement is short, positive and inspiring

• Appropriate for the current time

• Set Standards of excellence

• Clarify purpose and direction

• Inspire enthusiasm

• Encourage commitment

• Reflect the uniqueness of the organization

6.4 Assessing the Current Reality

Competitive Intelligence 

Competitive Intelligence ???? Gaining information about one’s competitors’ activities so that you  can anticipate their moves and react appropriately We also discuss several other topics like What is Cylon?

Ways to Gain Competitive Intelligence

• The public prints and advertising

• Investor information

• Informal sources

SWOT Analysis 

Environmental Scanning ???? Careful monitoring of an organization’s internal and external  environments to detect early signs of opportunities and threats that may influence the firm’s  plans

SWOT Analysis ???? A search for the Strengths, Weaknesses, Opportunities, and Threats affecting  the organization

Strengths or Weakness – Inside  

• Work processes

• Organization

• Culture

• Staff

• Product quality

• Production capacity

• Image

• Financial resources and requirements

• Service levels

Opportunities or Threats – Outside  

• Market segment analysis

• Industry and competition analysis

• Impact of technology on organization

• Product analysis

• Governmental impacts

Inside Matters 

Organizational Strengths ???? The skills and capabilities that give the organization special  competencies and competitive advantages in executing strategies in pursuit of its vision Organizational Weaknesses ???? The draw-backs that hinder an organization in executing  strategies in pursuit of its vision We also discuss several other topics like geol 107 uiuc

Outside Matters 

Organizational Opportunities ???? Environmental factors that the organization may exploit for  competitive advantage

Organizational Threats ???? Environmental factors that hinder an organization’s achieving a  competitive advantage

Forecasting: Predicting the Future 

Forecast ????A vision or projections of the future

Trend Analysis ???? A hypothetical extension of past series of events into the future Contingency Planning ???? (Scenario Analysis) The creation of alternative hypothetical but equally  likely future conditions

Benchmarking ???? A process by which a company compares its performance with that of high performing organizations  

Porter’s Model for Industry Analysis ???? That business-level strategies originate in five primary  competitive forces in the firm’s environment:  

1. Threats of new entrants

2. Bargaining power of suppliers

3. Bargaining power of buyers

4. Threats of substitute products or services

5. Rivalry among competitors

7.1 Two Kinds of Decision Making: Rational & Nonrational

Decision ???? A choice made from among available alternatives.

Decision Making ???? The process of identifying and choosing alternative courses of action

Decision Making in the Real World 

2 Kinds of thinking:

System 1 – Intuitive and Largely Unconscious

• Operates automatically and quickly

• Fast, automatic, intuitive and largely unconscious

System 2 – Analytical and Conscious

• Slow, deliberate, analytical, and consciously effortful mode

Rational Decision Making 

Rational Model of Decision Making ???? (Classical Model) It assumes managers will make logical  decisions that will be the optimum in furthering the organization’s best interest

The 4 Stages:

1. Identify the Problem or Opportunity

Problems ???? Difficulties that inhibit the achievement of goals

Opportunities ???? Situations that present possibilities for exceeding existing goals Diagnosis ???? Analyzing the underlying causes

2. Think Up Alternative Solutions

o Both Obvious and Creative

3. Evaluate Alternatives & Select a Solution

o Ethics

o Feasibility

o Effectiveness

4. Implement & Evaluate the Solution Chosen

o Implementation

▪ Plan carefully

▪ Be sensitive to those affected

o Evaluation

▪ Give it more time

▪ Change it slightly

▪ Try another alternative

▪ Start over

Nonrational Decision Making: 

Nonrational Models of Decision Making ???? They assume that decision making is nearly always  uncertain and risky, making it difficult for managers to make optimal decisions

• Descriptive rather than prescriptive

• Satisficing and Intuition

1. Bounded Rationality & the Satisficing Model

Bounded Rationality ???? The concept suggests that the ability of decision makers to be rational is  limited by numerous constraints – Herbert Simon

Satisficing Model ???? Managers seek alternatives until they find one that is satisfactory, not  optimal

2. The Intuition Model

Intuition ???? Making a choice without the use of conscious thought or logical inference

7.2 Making Ethical Decisions

The Dismal Record of Business Ethics 

Ethics Officer ???? Someone trained about matters of ethics in the workplace, particularly about  resolving ethical dilemmas

• In 2007 it became apparent that larger organizations in the financial  

industry were no longer making sound business decisions

• The media made the public aware of Ponzi schemes, and insider trading

Road Map to Ethical Decision Making 

A Decision Tree ???? A graph of decisions and their possible consequences; it is used to create a  plan to reach a goal

1. Is the Proposed Action Legal

2. If Yes, Does the Proposed Action Maximize Shareholder Value

3. If Yes, Is the Proposed Action Ethical

4. If No, Would it be Ethical NOT to take the Proposed Action

7.3 Evidence-Based Decision Making & Analytics

Evidence-Based Decision Making 

Seven Implementation Principles:

1. Treat your organization as an unfinished prototype

2. No brag, just facts

3. See yourself and your organization as outsider’s do

4. Evidence-based management is not just for senior executives

5. Like everything else, you still need to sell it

6. If all else fails, slow the spread of bad practice

7. The best diagnostic question: What happens when people fail?

What Makes it Hard to be Evidence Based

• There is too much evidence

• The evidence is not good evidence

• The evidence doesn’t apply

• People are trying to mislead you

• You are trying to mislead you

• The side effects outweigh the cure

In Praise of Analytics 

Analytics ???? (Business Analytics) Term used for sophisticated forms of business data analysis

1. Use of Modeling: Going beyond Simple Descriptive Statistics

Predictive Modeling ???? Data-mining technique used to predict future behavior and anticipate  the consequences of change

2. Having Multiple Applications, Not Just One

3. Support from the Top

The Uses of “Big Data” 

Big Data ???? Includes not only data in corporate databases but also web-browsing data trails,  social network communications, sensor data, and surveillance data

Big Data Analytics ???? The process of examining large amounts of data of a variety of types to  uncover hidden patterns, unknown correlations, and other useful information

• Business are interested in analyzing online data to better generate ads, products  and experiences

7.5 How to Overcome Barriers to Decision Making

How do Individuals Respond to a Decision Situation 

Four Ineffective Reactions

1. Relaxed Avoidance

Relaxed Avoidance ???? A manger decides to take no action in the belief that there will be no  great negative consequences

2. Relaxed Change

Relaxed Change ???? A manager realizes that complete inaction will have negative consequences  but opts for the first available alternative that involves low risk

3. Defensive Avoidance

Defensive Avoidance ???? A manager can’t find a good solution and follows

a. Procrastinating

b. Passing the buck

c. Denying the risk of any negative consequences

4. Panic

Panic ???? A manager is so frantic to get rid of the problem that he or she can’t deal with the  situation realistically

Three Effective Reactions

Deciding to Decide ???? A man agrees that he or she must decide what to do about a problem or  opportunity and take effective decision making steps

1. Importance – How high a priority is this situation

2. Credibility – How believable is the information regarding the situation

3. Urgency – How quickly must I act on the information regarding the situation

Nine Common Decision-Making Biases: 

Heuristics ???? Strategies that simplify the process of making decisions

1. The Availability Bias ???? Managers use information readily available from memory to  make judgments

2. The Representative Bias ???? The tendency to generalize from a small sample or a single  event

3. The Confirmations Bias ???? When people seek information to support their point of view  and discount data that does not

4. The Sunk-Cost Bias ???? (Sunk-Cost Fallacy) When Managers add up all the money already  spent on a project and conclude it is too costly to simply abandon it

5. The Anchoring & Adjustment Bias ???? The tendency to make decisions based on an initial  figure

6. The Overconfidence Bias ???? The bias in which people’s subjective confidence in their  decision making is greater than their objective accuracy

7. The Hindsight Bias ???? The tendency of people to view events as being more predictable  than they really are

8. The Framing Bias ???? Tendency of decision makers to be influenced by the way a  situation or problem is presented to them

9. The Escalation of Commitment Bias ???? Decision makers increase their commitment to a  project despite negative information about it

7.6 Group Decision Making

Advantages & Disadvantages of Group Decision Making 

Advantages

• Greater pool of knowledge

• Different perspectives

• Intellectual stimulation

• Better understanding of decision rationale

• Deeper commitment to the decision

Disadvantages

• A few people dominate or intimidate

• Groupthink

Groupthink ???? Occurs when group members strive to agree for the sake of unanimity and thus  avoid accurately assessing the decision situation

• Satisficing

• Goal Displacement

Goal Displacement ???? Occurs when the primary goal is subsumed by a secondary goal

What Managers Need to Know about Groups & Decision Making 

1. They are less efficient

2. Their size affects decision quality

3. They may be too confident

4. Knowledge Counts

Minority Dissent ???? Dissent that occurs when a minority in a group publicly opposes the beliefs,  attitudes, ideas, procedures, or policies assumed by the majority of the group

Group Problem-Solving Techniques 

Consensus ???? Occurs when members are able to express their opinions and reach agreement to  support the final decision

Dos:  

• Use active listening skills

• Involve as many members as possible

• Seek out the reasons behind arguments

• Dig for the facts

Don’ts

• Avoid log rolling and horse trading

• Avoid making an agreement simply to keep relations amicable and rock the boat • Don’t try to achieve consensus by putting things to a vote

More Group Problem-Solving Techniques 

• Brainstorming

Brainstorming ???? A technique used to help groups generate multiple ideas and alternates for  solving problems

Electronic Brainstorming ???? Members of a group come together over a computer network to  generate ideas and alternatives

• The Delphi technique

The Delphi Technique ???? A group process that uses physically dispersed experts who fill out  questionnaires to anonymously generate ideas; the judgments are combined and in effect  averaged to achieve a consensus of expert opinion

• Computer-aided decision making

Decision Support System ???? A computer-based information system that provides a flexible tool  for analysis and helps managers focus on the future

8.1 Aligning Strategy, Culture, & Structure

What does it mean to “Fit”? 

Person-Organization Fit ???? Reflects the extent to which your personality and value match the  climate and culture in an organization

• Associated with more positive work attitudes and task performance, lower stress, and  fewer intentions to quit

How an Organization’s Culture & Structure are used to Implement Strategy 1. Organizational Culture: The shared assumptions that affect how work gets done

Organizational Culture ???? (Corporate culture) is defined as the set of shared, taken-for-granted  implicit assumptions that a group holds and that determines how it perceives, thinks about, and  reacts to its various environments

2. Organizational Structure: Who reports to whom & who does what

Organizational Structure ???? A formal system of task and reporting relationships that  coordinates and motivates an organization’s members so that they can work together to  achieve the organization’s goals

8.2 What Kind of Organizational Culture will you be Operating in?

4 Types of Organizational Culture: 

1. Clan Culture: An employee-focused culture valuing flexibility, not stability

Clan Culture ???? Has an internal focus and values flexibility rather than stability and control 2. Adhocracy Culture: A risk-taking culture valuing flexibility

Adhocracy ???? Has an external focus and values flexibility

3. Market Culture: A competitive culture valuing profits over employee satisfaction

Market Culture ???? Has a strong external focus and values stability and control  4. Hierarchy Culture: A structured culture valuing stability and effectiveness

Hierarchy Culture ???? Has an internal focus and values stability and control over flexibility

The 3 Levels of Organizational Culture: 

1. Observable Artifacts – Physical manifestations of culture

2. Espoused Values – Explicitly stated values and norms

Espoused Values ???? Are the explicitly stated values and norms preferred by an organization Enacted Values ???? Represent the values and norms actually exhibited in the organization 3. Basic Assumptions – Core values of the organization

How Employees Learn Culture 

1. Symbols

2. Stories

3. Heroes

4. Rites & Rituals

Symbol ???? An object, act, quality or event that conveys meaning to others

Story ???? A narrative based on true events, which is repeated – and sometimes embellished  upon – to emphasize a particular value

Hero ???? A person whose accomplishments embody the values of the organization Rites and Rituals ???? Are the activities and ceremonies, planned and unplanned, that celebrate  important occasions and accomplishments in the organization’s life

The Importance of Culture 

• An organization’s culture matters

• Employees are happier with clan cultures

• Elements of these cultures can be used to boost innovation and quality • Changing the organizational culture won’t necessarily boost financial performance • Market cultures tend to produce better results

8.4 Organizational Structure

Organization ???? A system of consciously coordinated activities or forces of two or more people  (Chester I. Barnard)

The Organization: 

• For-Profit

• Nonprofit

• Mutual-Benefit

The Organization Chart 

Organization Chart ???? Is a box-and-lines illustration showing the formal lines of authority and  the organization’s official positions or work specialization

Organization Charts reveal:

1. The vertical hierarchy of authority

➢ Who Reports to Whom

2. The horizontal specialization

➢ Who Specializes in what Work

8.5 The Major Elements of an Organization

Common Elements of Organizations: 

1. Common Purpose

Common Purpose ???? Unifies employees or members and gives everyone an understanding of  the organization’s reason for being

2. Coordinated Effort

Coordinated Effort ???? The coordination of individual efforts into a group or organization wide  effort

3. Division of Labor

Division of Labor ???? (Work Specialization) The arrangement of having discrete parts of a task  done by different people

4. Hierarchy of Authority

Hierarchy of Authority ???? (Chain of Command) A control mechanism for making sure the right  people do the right things at the right time

Flat Organization ???? One with an organizational structure with few or no levels of middle  management between top managers and those reporting to them

Unity of Command ???? In which an employee should report to no more than one manager 5. Span of Control

Span of Control ???? (Span of Management) refers to the number of people reporting directly to a  given manager

Narrow Span of Control ???? A mangers has a limited number of people reporting , an  organization is said to be tall when there are many levels with narrow spans of control Wide Span of Control ???? A manager has several people reporting, an organization is said to be  flat when there are only a few levels with wide spans of control

6. Authority, Responsibility, & Delegation

Authority ???? Refers to the rights inherent in a managerial position to make decisions, give  orders, and utilize resources

Responsibility ???? The obligation you have to perform the tasks assigned to you Delegation ???? The process of assigning managerial authority and responsibility to managers and  employees lower in the hierarchy

Line Mangers ???? Have authority to make decisions and usually have people reporting to them Staff Personnel ???? Have authority functions; they provide advice, recommendations, and  research to line managers

7. Centralization versus Decentralization of Authority

Centralized Authority ???? Important decisions are made by higher-level managers Decentralized Authority ???? Important decisions are made by middle-level and supervisory-level  managers

8.7 Contingency Design: Factors in Creating the Best Structure

3 Factors to be Considered in Designed an Organization’s Structure 

Contingency Design ???? The process of fitting the organization to its environment 1. Environment – mechanistic versus organic

Mechanistic Organization ???? Authority is centralized, task and rules are clearly specifies and  employees are closely supervised

Organic Organization ???? Authority is decentralized, there are fewer rules and procedures, and  networks of employees are encouraged to cooperate and respond quickly to unexpected tasks 2. Environment – differentiation versus integration

Differentiation ???? The tendency of the parts of an organization to disperse and fragment

Integration ???? The tendency of the parts of an organization to draw together to achieve a  common purpose

3. Link between strategy, culture, and structure

9.1 Strategic Human Resource Management

Human Resource Management

Human Resource (HR) Management ???? Consists of the activities managers perform to plan for,  attract, develop, and retain an effective workforce

Human Resources as part of Strategic Planning:

• Human capital: Potential of Employee Knowledge & Actions

• Knowledge workers: Potential of Brain Workers

• Social capital: Potential of Strong & Cooperative Relationships

Human Capitol ???? Is the economic or productive potential of employee knowledge, experience,  and actions

Knowledge worker ???? Is someone who occupation is principally concerned with generating or  interpreting information, as opposed to manual labor

Social Capitol ???? The economic or productive potential of strong, trusting, and cooperative  relationships

Planning the Human Resources Needed 

Strategic Human Resource Planning ???? Consists of developing a systematic, comprehensive  strategy for  

a. Understanding current employee needs  

b. Predicting future employee needs

1. Understanding Current Employee Needs:

o Job analysis ???? To determine, by observation and analysis, the basic elements of  a job

o Job Description and Job Specification

Job Description ???? Summarizes what the holder of the job does and how and why they do it

Job Specification ???? Describes the minimum qualifications a person must have to perform the  job successfully

2. Predicting Future Employee Needs

o The staffing the organization might need

o The likely sources for staffing

Human Resource Inventory ???? A report listing your organization’s employees by name,  education, training, languages, and other important information

9.2 Recruitment & Selection: Putting the Right People into the Right Jobs

Recruitment: How to Attract Qualified Applicants

Recruiting ???? The process of locating and attracting qualified applicants for jobs open in the  organization

1. Internal Recruiting: Hiring from the inside

Internal Recruiting ???? Means making people already employed by the organization aware of job  openings

Job Posting ???? Placing information about job vacancies and qualifications on bulletin boards, in  newsletters, and on the organization’s intranet

2. External Recruiting: Hiring from the Outside

External Recruiting ???? Means attracting job applicants form outside the organization

Realistic Job Preview ???? Gives a candidate a picture of both positive and negative features of  the job and the organization before they are hired

Selection: How to Choose the Best Person for the Job 

Selection Process ???? The screening of job applicants to hire the best candidate

1. Background Information: Application Forms, Resumes, & Reference Checks 2. Interviewing: Unstructured, Situational, & Behavioral-Description

Unstructured Interview ???? Involves asking probing questions to find out what the applicant is  like

Structured Interview ???? Involves asking each applicant the same questions and comparing their  responses to a standardizes set of answers

Situational Interview ???? The interviewer focuses on hypothetical situations

Behavioral-Description Interview ???? The interviewer explores what applicants have actually  done in the past

3. Employment Test: Ability, Personality, Performance, Integrity & Others Employment Tests ???? Legally considered to consist of any procedure used in the employment  selection decision process, even application forms, interviews, and educational requirements

Ability Tests ???? Measure physical abilities, strength and stamina, mechanical ability, mental  abilities, and clerical abilities

Performance Tests ???? Measure performance on actual job tests – so called job tryouts

Assessment Center ???? In which managements candidates participate in activities for a few days  while being assessed by evaluators

Personality Tests ???? Measure such personality traits as adjustment, energy, sociability,  independence, and need for achievement

Integrity Tests ???? Assess attitudes and experiences related to a person’s honesty, dependability,  trustworthiness, reliability, and prosocial behavior

4. Reliability & Validity: Are the Tests Worth It?

Reliability ???? The degree to which a test measures the same thing consistently Validity ???? The test measures what it purports to measure and is free of bias

9.3 Managing an Effective Workforce: Compensation & Benefits

Compensation ???? Wages or Salaries, Incentives, and Benefits

Wages or Salaries

Base Pay ???? Consists of the basic wage or salary paid employees in exchange for doing  their jobs

Benefits ???? (Fringe Benefits) Additional nonmonetary forms of compensation

9.7 The Legal Requirements of Human Resource Management

1. Labor Relations

National Labor Relations Board ???? Enforces procedures whereby employees may vote to have a  union and for collective bargaining

Collective Bargaining ????Consists of negotiations between management and employees about  disputes over compensation, benefits, working conditions, and job security

2. Compensation & Benefits

Fair Labor Standards Act ???? (1938) Established minimum living standards for workers engaged  in interstate commerce, including provision of federal minimum wage

3. Health & Safety

4. Equal Employment Opportunity

Equal Employment Opportunity (EEO) Commission ???? Enforce antidiscrimination and other  employment-related laws

Workplace Discrimination, Affirmative Action, Sexual Harassment, & Bullying 

1. Workplace Discrimination

Workplace Discrimination ???? Occurs when people are hired or promoted – or denied hiring or  promotion – for reasons not relevant to the job

Adverse Impact ???? Occurs when an organization uses an employment practice or procedure  that results in unfavorable outcomes to a protected class over another group of people

Disparate Treatment ???? Results when employees from protected groups are intentionally  treated differently

2. Affirmative Action

Affirmative Action ???? Focuses on achieving equality of opportunity within an organization

3. Sexual Harassment

Sexual Harassment ???? Consists of unwanted sexual attention that creates an adverse work  environment

Two Types of Sexual Harassment:

a. Quid Pro Quo Harassment ???? The person to whom the unwanted sexual  attention is directed is put in the position of jeopardizing being hired for a job or  obtaining job benefits or opportunities unless they comply

b. Hostile Environment ???? The person being sexually harassed doesn’t risk  economic harm but experiences an offensive or intimidating work environment

Bullying ???? Repeated mistreatment of one or more persons by one or more perpetrators; it is  abusive physical, psychological, verbal, or nonverbal behavior that is threatening, humiliating,  or intimidating