PRINC OF MANAGEMENT
PRINC OF MANAGEMENT MGT 3200
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MGT 3200 DECISION MAKING PART ONE I DECISION MAKING AND MANAGEMENT Decisions are means to an end rather than ends in themselves They are organizational mechanisms through an attempt is made to achieve operative goals and overall organizational goals Decisionmaking is a key activity at all levels of management Managers also must make decisions related to all functions of management not only to the planning function Thus decisionmaking techniques are applicable and valuable to all management functions However while decisionmaking is applicable to all management functions it is most closely associated with the planning function II TYPES OF DECISIONS A Programmed decisions are specific procedures that have been developed for repetitive and routine problems Thus decisions are programmed to the extent that they are repetitive and routine and a specific procedure has been developed for handling them B Nonprogrammed decisions are specific to management problems that are novel and unique They are complex and unstructured Thus there is no established procedure for handling them either because it has not arisen in exactly the same manner before or because is complex or extremely important Such decisions deserve special treatment While the two classifications are broad they point out the importance of differentiating between programmed and nonprogrammed decisions The management of most organizations faces great numbers of programmed decisions Such decisions should be treated without expending unnecessary organizational resources on them On the other hand nonprogrammed decisions must be properly identified as this is the type of decision that forms the basis for allocating billions of dollars worth of resources a year Unfortunately it s the process involved in this type of decision that we know the least about Traditionally programmed decisions have been handled through rules standard operating procedures etc Operational researchers through the development of mathematical models have facilitated the handling of the types of decisions On the other hand nonprogrammed decisions have traditionally been handled by general problemsolving processes judgment intuition and creativity Unfortunately the advances that modern management techniques made in improving nonprogrammed decisionmaking have not been nearly as great as the advances that they have made in programmed decisionmaking Ideally the main concern of top management should be nonprogrammed decisions while lstline management should be concerned with programmed decisions Middlelevel management in most organizations concentrates mostly on programmed decisions although in some cases they will participate in nonprogrammed decisionmaking Obviously problems arise in organizations where top management expends too much time and effort on programmed decisions one result of this neglect of longrange planning In such cases longrange planning is subordinated to other activities whether the organization is successful or is having problems If the organization is successful this justifies continuing the policies and practices that achieved success If the organization experiences difficulty its current problems have lSt priority and occupy the time of top management In either case longterm planning ends up being neglected III DECISIONMAKING CONDITIONS A Certainty When a decision is made under conditions of certainty the managers knows all the available alternatives and the outcomes associated with each In this case the manager has perfect knowledge about all alternatives and their outcomes There is no element of chance that intervenes between the alternative and its income The outcomes of alternatives are known with 100 probability 7 absolute certainty Certainty is an ideal situation for managerial decisionmaking Under certainty a manager simply picks the alternative with the best outcome Managerial decisions are seldom made under conditions of certainty This is the exception rather than the rule B Risk Decisions under risk are most common This condition involves a lack of complete certainty regarding the outcomes of various alternatives but an awareness of the probabilities associated with their occurrence Thus alternatives are known but outcomes are in doubt For example when you get ready to roll a die you know they are six alternatives but the outcome of the roll is n doubt It s a gamble Managers assess probabilities of various outcomes based upon past experience research and other information The key element in decision making under conditions of risk is accurately determining the probabilities associated with each alternative No matter which alternative you select it will be a calculated gamble because there is no sure thing here as opposed to when you make a decision under conditions of certainty C Uncertainty When decisions are made under conditions of uncertainty managers don t know alternatives their potential outcomes or the probability of the outcomes occurrence These decisions are the most difficult In such situations a manager has no knowledge on which to estimate the probability of various outcomes Decisions under uncertainty generally occur in cases where there is no historical data available from which to infer probabilities or in instances that are so novel and complex it s impossible to make comparative judgments The most common case for this type of decisionmaking involves the introduction of new technology IV MODELS OF DECISION MAKING Ideally managers should be completely rational In reality managers are seldom if ever rational Managers many times have to make decisions on incomplete knowledge A TRADITIONAL ECONOMIC MODEL 7 ECONOMIC MAN This theory assumes that decisions are made under the conditions of certainty The manager according to traditional economic theory has perfect knowledge This is a prescriptive model Speci cally this model assumes four things about the decision making conditions 1 The manager has perfect knowledge of all alternatives 2 The manager has perfect knowledge of all outcomes of all alternatives 3 The manager has a wellordered and stable set of preferences 4 The manager has the necessary ability to evaluate all the consequences of all the alternatives The traditional model of decision making makes two general assumptions about decision makers l managers seek to maximize benefits or minimize costs ECONOMIC MA and 2 managers are completely rational B BOUNDED RATIONALITY MODEL 7 ADMINISTRATIVE MAN Herbert Simon suggest that managerial decisions are bounded by the limited mental capacity and emotions of the manager as well as environmental forces over which the manager has no control Simon said that rather than Economic Man there is Administrative Man Administrative Man possesses bounded rationality Managers are unable to grasp the full complexity of managerial decisions due to both their limited mental capacity and emotions and the uncertainty of future events Therefore a manager s rationality is bounded by these three things limited mental capacity emotions and unforseeability of future events There are many alternatives and their consequences that may remain unknown to a manager Thus all intended rational behavior is bounded Thus according to Simon managers can only consider a limited number of alternatives and a limited number of consequences That is managers construct a simplified model of the real situation In addition Simon says that managers don t maximize their bene ts rather that managers satisfice In other words managers select the 1st alternative that meets a minimally acceptable standard this is called the aspiration level which is subjectively de ned performance goal that the alternative must meet rather than going through and evaluating all the alternatives and selecting the best one Satisficing should not be viewed as traditional In fact it may be quite sensible considering the limits of human information processing the costs of searching for and identifying alternatives and the uncertainty of future events This model also assumes that managers use heuristics A heuristic is a labor saving device a short cut a rule of thumb Managers use heuristics because of their limited information processing capabilities Heuristics help us cope with complex environments by simplifying them They reduce the costs of thinking Heuristics have two advantages 1 time savings and 2 they may produce more good decisions than bad decisions However we adopt heuristics often times without being aware of them They implicitly guide our judgment This can be a major drawback if we over rely on them they can lead to errors sometimes severe errors Heuristics at times can lead us to faulty conclusions When heuristics lead to errors in judgment they are called biases There are two heuristics that are of primary concern to us the availability heuristic and the representativeness heuristic The availability heuristic is used when managers assess the frequency of an event by the degree to which those instances of that event are easily recalled in memory This can be a very useful aid in decisionmaking since instances of events of greater frequency are generally recalled more easily than events of less frequency Therefore this heuristic will often lead to accurate judgments However this heuristic is fallible because the availability of information in memory is affected by other factors that are not related to the objective frequency of the judged event Events that evoke emotion are vivid are recent are easily imagined and are specific will be more available in memory more easily recalled than events that are unemotional in nature are bland are in the distant past are difficult to imagine or are vague These irrelevant factors cause the availability heuristic at times to lead to errors ie events are judged as more frequent than is really the case For example in the annual performance review of an employee s last three months performance is given the greatest weight by the manager in assessing the employee s yearly performance Also if something negative should happen in those three months this event is given greater weight as well because it s vivid and is also probably attached to some emotion for the manager such as anger and is seen as being more frequent than it really is Thus the availability bias causes the annual performance review of the employee to not be an accurate re ection of the employee s year long performance The representativeness heuristic re ects the tendency of managers to assess the likelihood of an occurrence by matching it with a preexisting category ie stereotype It is basically where managers use stereotypes categories in making judgments For example a manager who is interviewing job applicants may compare these applicants to hisher stereotype of the ideal applicant ie characteristics of those people who have done well on the job If the applicant matches the stereotype they are hired If not they are not selected Another example is when a manager predicts the success of a new product heshe compares that new product with past successful and unsuccessful products If the new product resembles past successful products the manager is more likely to go full steam ahead investing all the necessary resources to launch the new product If the new product matches unsuccessful products the manager is likely to be very cautious about investing a lot of resources into marketing the new product Heshe is likely to proceed very slowly and gradual in marketing the new product In some cases this heuristic can lead to good judgments However it can also lead to behavior that is irrational and morally reprehensible It can lead to prejudice and discrimination based on nonjob related factors such as sex age race and religion These stereotypes may be used to judge a person s potential performance on the job The problem with stereotypes is that they don t allow us to see the real person Our perceptions based on these stereotypes are biased and unfair The stereotype doesn t allow us to see the uniqueness of the individual An example of a problem with this heuristic is the interviewing example above Employing our ideal applicant stereotype may make us turn away someone who does not fit the stereotype but could be an excellent performer on the job if given the opportunity Thus this heuristic causes us to miss opportunities and make mistakes Stereotypes are good in that they help us store lots of information they structure our perceptions and they reduce the load placed on memory However the help a stereotype provides in terms of making it easier for us to process and organize information is achieved at a price That price is prejudice and discrimination Simon s bounded reality model is a descriptive model Decisions in this model are made under conditions of incomplete information such as risk and uncertainty C IRRATIONAL MODELIMPLICIT FAVORITE MODEL IRRATIONAL MAN According to this model the decision maker selects a favorite early on in the evaluation of alternatives Once this implicit favorite is chosen the rest of the alternatives are evaluated against it The decision maker distorts the information about the implicit favorite and the other alternatives so that the positive features of the implicit favorite are highlighted Basically the decision maker distorts information and selects decision rules in order to favor their implicit favorite This model assumes that the decision maker simply goes through the motions of generating and evaluating more alternatives as a way to justify their initial choice favorite NOTE this is irrational behavior and it s also a waste of time and money because a decision has already been made Thus the manager wants hisher decision making process to appear rational while in reality it s far from it The decision made in this case is intuitive The irrational model is most applicable to nonprogrammed decisions ie selecting one s first real job car or partner MGT 3200 DECISION MAKING PART TWO V IMPROVING THE DECISION MAKING PROCESS A FOUR TECHNIQUES FOR DEVELOPING BETTER ALTERNATIVES l BRAINSTORMING Brainstorming helps with the generation of alternatives This technique is designed to generate ideas not evaluate them Brainstorming involves a group of 7 to 9 people who are presented with a problem and are asked to identify as many potential solutions as possible Brainstorming sessions last from an hour to an hour and a half A session is likely to generate 50 to 150 ideas Typically most ofthese ideas will be impractical but a few will be high quality Brainstorming is based on the premise that when people interact in an unrestrained setting they will generate creative ideas For example as one person generates an idea it will stimulate ideas in others e g kind of like the wave in Death Valley You get synergy Brainstorming has four rules l criticism is prohibited 2 39 39 39 39 J fr 39 quot the more off the wall idea the better 3 quantity is wanted don t worry about quality 4 combination and improvement are sought This technique has been successful yet there are times when inhibition of ideas do occur e g especially when ideas are lst expressed It is very difficult to totally eliminate the evaluation of ideas when they are generated Disadvantagescostly and time consuming 2 Synectics the connecting together of diverse elements Helps with generation of alternatives as well as the evaluation of alternatives This technique utilizes fantasy and analogy to facilitate creative idea generation and encourages new ways of looking at the problem Synectic group members are selected to represent a variety of backgrounds and training An experienced facilitator formulates the problem for the group Members respond by stating the problem as they see it It s only after the problem has been thoroughly reviewed and analyzed do members suggest possible solutions The facilitator s job is to structure the problem and helps lead the discussion away from the traditional ways of thinking They help individuals overcome internal inhibitions resulting from traditional ways of perceiving and thinking They can also use the superhero technique to stimulate creativity Synectics much like brainstorming relies upon group processes However it differs from brainstorming in that evaluation is not separated from idea generation In addition synectics also has a technical expert present to aid the group in the evaluation of the feasibility of ideas Synectics is more appropriate for complex and technical problems It s costly and time consuming It s less widely used than brainstorming It also does not separate evaluation from generation This impairs alternative generation 3 NOMINAL GROUP TECHNIQUE NGT Helps with generation of alternatives and evaluation of alternatives NGT differs from brainstorming and synectics in two very important ways 1 it does not rely on free association of ideas 2 it purposely restricts verbal interaction This technique was inspired by research that discovered more and better ideas are discovered by several persons working aloneseparately than by the same persons working in an interacting group Thus NGT is a group in name only NGT is particularly useful when individual ideas need to be tapped but where group consensus is desired NGT consists of a highly structured procedure involving five steps Step One 7 to 9 members of varying backgrounds and training are brought together as a group and are familiarized with a problem such as What alternatives are available for increasing morale at this company Step Two Working silently and alone each group member is asked to prepare a list of ideas in response to the problem Step Three After a period often to fteen minutes members share their ideas on at a time in a roundrobin manner A facilitator records the ideas on a ip chart for all to see The roundrobin process continues until all the ideas are presented and recorded Step Four A period of structured interaction follows in which members openly discuss and evaluate each recorded idea At this point ideas are reworded deleted combined or added Step Five Each group member votes privately by ranking the recorded ideas in order of assessed importance Following a brief discussion of the vote s outcome a nal secret ballot is conducted The group s preference is the alternative that receives the highest votes This concludes the meeting As you can see NGT allows for only limited and structured interaction between group members It s been successful with groups that have up to 9 members Its principal benefit is that it minimizes inhibiting effects of group interaction in the initial identification of alternatives It s proactive rather than reactive However it s time consuming and costly 4 THE DELPHI TECHNIQUE Much like NGT the Delphi technique is a structured approach to creative problem solving using a group of experts However unlike NGT which entails facetoface interaction between members the Delphi technique allows for no facetoface interaction between members The unique aspect of the Delphi technique is that experts are not brought together to discuss their ideasviews Rather the experts are intentionally kept apart so that their initial judgments ideas will not be in uenced by social pressure or other psychological aspects of group behavior Another characteristic of the Delphi technique is that experts remain anonymous to one another The Delphi technique uses a structured technique much like the one used in NGT The steps involved in the process for both techniques are quite similar However In the Delphi technique questionnaires are used to obtain 1 the alternatives generated by the experts 2 the evaluation of the alternatives by the experts and 3 the final vote on the alternatives The Delphi technique tries to eliminate the group processes in creative problem solving as much as possible It tries to eliminate for example power struggles undue persuasion an unwillingness to abandon a publicly expressed ideaaltemative and the bandwagoning effect of majority opinion The Delphi technique has also been used in technological forecasting Hence this provides the reason for the name Delphi Delphi was the seat of the most important temple to the Greek god Apollo Apollo was a great seer It was believed by powerful people at the time that Apollo could foretell the future Kings and other powerful rulers would come to the temple to have the future told to them through Apollo s priestesses or oracles The disadvantages of the Delphi technique are the design of the questionnaire can limit the results obtained it can be extremely timeconsuming even more so than the other techniques several days or weeks may elapse between steps and member interest and motivation may decline if too much time passes between steps Whereas brainstorming and synectics try to capitalize on group interaction NGT and Delphi want to minimize it Research has shown that NGT is better than Synectics and brainstorming in terms of decision quality However the Delphi technique is better than NGT in terms of decision quality B OPERATIONS RESEARCH TECHNIQUES OR These help in evaluating alternatives To reiterate a systematic way of evaluating alternatives is through OR techniques The following are a number of OR techniques 1 Probability Analysis is used for evaluating alternatives under conditions of risk or uncertainty It uses both subjective and objective probabilities There are two approaches in probability analysis payoff matrix and decision tree 2 Queuing Theory is used to determine the optimal balance between the cost of increasing service and the amount of time individuals machines or materials must wait for service It is used for analyzing the costs of waiting lines 3 Linear Programming LP is used for optimally allocating limited resources among multiple users to maximize benefits or minimize losses The most frequently and extensively used of the OR techniques LP has the greatest practical utility to managers 4 Simulation is used for imitating a set of real conditions so that likely outcomes of alternatives can be compared This typically is applied to compleX problems where it is too costly or impossible to work with reallife pilot studies of fullscale applications This includes such things as scaleddown models or computer simulations OR techniques are useful as an aid for evaluating alternatives However they cannot replace the need for managers to think independently and to make judgments They should be viewed as an aid supplement to less systematic forms of decision making OR techniques generally require quantitative data Thus for many problems where factors can seldom be quantified OR techniques may not be applicable MGT 3200 ORGANIZING JOBS JOB DESIGN Organizing is the process by which employees and their jobs are related to each other for accomplishing organizational objectives It consists of dividing work among groups and individuals and coordinating group and individual activity Job design involves organizing work elements or tasks into jobs It specifies three things 1 a job s content 2 the work methods or procedures to be used in its performance and 3 how it is related to other jobs in the organization 1 JOB DESIGN TERMINOLOGY A THE FIVE CORE JOB CHARACTERISTICS Methods exist for measuring job content The methods most researchers use on rely on questionnaires completed by job applicants that measure the jobholders perceptions of certain job characteristics Hackman and Oldham 1976 have identi ed several characteristics that account for variation in job content Any job can be described using the following characteristics 1 Skill variety is the degree to which a job requires the employees to perform a wide range of operations in their work andor the degree to which employees must use a variety of equipment and procedures in their work Specializedroutine jobs have low skill variety High skill variety jobs require more education more training and more experience they provide more challenge allow for more creativity and give more prestige than low skill variety jobs 2 Task identity is the extent to which employees do an entire or whole piece of work and clearly identify with the results of their effort Specialized jobs are low in task identity because the employee only performs a small segment ofthe job The employee does not see the big picture At AstonMartin craftsmen handmake each engine and autograph it This allows for high task identity Task identity is increased when an employee completes a job from beginning to end 3 Task significance This refers to the extent to which the job and its performance exert a considerable impact on the lives of others With high task significance there is a feeling of accomplishment Specializedjobs are typically low in task significance 4 Autonomy The extent to which employees have a major say in scheduling their work selecting the equipment and methods they will use checking their own work quality control and deciding the procedures to be followed Autonomy is the extent to which they are allowed to make important decisions regarding their jobs JOB DEPTH Jobs that are high in autonomy allow the employees to decide what they are to do how to do it and when to do it as long as the work is performed within time cost and quality limits In a specialized job autonomy is severely limited because the production technology controls what is to be done how it is to be done and when it is to be done 5 Performance feedback is the degree to which employees as they are working receive information that reveals how well they are performing on the job Feedback can come from coworkers supervisors subordinates clients or even the job itself Also feedback can come from performance appraisal awards and promotions and personal evaluations of one s own feelings B JOB BREADTH AND JOB DEPTH You can also think of j ob design as involving job breadthrange and job depth The breadthrange of a job refers to the number of tasks that a jobholder performs Job breadthrange varies from few to many different tasks Jobs with relatively few tasks low job breadthrange are more specialized than those with many tasks high job breadthrange HORIZONTAL LOADINGS The depth of a job refers to the amount of discretion that an individual has to decide job activities and job outcomes Job depth varies from little to considerable discretion in the choice of activities and outcomes Relatively little depth is characteristic of relatively specialized jobs VERTICAL LOADINGS II JOB DESIGN STRATEGIES There are three basic job design strategies A CRAFT JOBS In craft jobs the worker makes a whole product and the worker is very skilled These types of jobs were the most predominant form of work until the start of the Industrial Revolution They now constitute a very small percentage of jobs B SPECIALIZED JOBS This type of j ob was the result of the Industrial Revolution Specialization results from the diversion of an activity into smaller and smaller task elements This division of labor in turn leads to specialists who have a limited area of expertise Today specialized jobs constitute the largest percentage of jobs C ENRICHED JOBS This type ofj ob is held by a very smell percentage of employees in the US only 5 of employers in the US practice some form of job enrichment This job design strategy represents a move backward toward craft jobs where employees perform a larger and more complete segment of the work This type of job design strategy may be the result of39 39 J quot 39 and 39 39 levels in society So injob design we have moved from craftjobs to specializedjobs and now somewhat back to craft through enriched jobs III SPECIALIZED JOBS Loads on average low on every job characteristic except feedback medium to high A BENEFITS OF SPECIALIZED JOBS 1 Less skilled employees can be hired because ofthe simplicity ofj ob assignments Thus you can pay them less 2 Jobs can be learned in less time thus reducing training costs 3 Constant repetition leads to an area of limited expertise which increases productivity 4 More opportunities for utilizing the primary talents of the employee 5 Work is performed quicker because the employee does not lose time shifting from one activity to another 6 Dependence on particular employee skills is minimized remember Taylor wanted employees to be interchangeable B PROBLEMS ASSOCIATED WITH SPECIALIZED JOBS 1 low employee motivation 2 low job satisfaction 3 low quality job performance 4 high absenteeism 5 high turnover quitting jobs 6 sabotage and strikes 7 alcohol and drug abuse 1 and 2 are antecedents to 37 1 and 2 refer to undesirable psychological states such as feelings of depersonalization carelessness indifference frustration and 14 dissatisfaction cognitive and affective states 37 are outcomes of these undesirable states IV ENLARGED JOBS Job enlargement is the allocation of a wider variety of similar tasks requiring the same skill level to an employee in order to make the job more of a challenge It s intent is to keep one from getting bored so quickly However these new tasks are often easily learned and do not present much of a challenge Job enlargement broadens job scopebreadth It s an improvement over job specialization but it has had limited success in motivating employees The primary reason for this limited success is that a few more similar tasks often don t provide significant challenge and stimulation Two boring tasks don t make a challenging job A JOB ROTATION shifting workers through a set of jobs in planned sequence It can be useful in relieving boredom and monotony but with simple tasks the benefits are shortlived learn them and become bored It is most successful as a development tool where you rotate employees through a series of challenging jobs in order to increase their capabilities expand job assignment exibility and increase understanding of various aspects of the operation This helps to increase cooperativeness across the different functions or departments because you have seen things from their perspectiveyou understand the better empathy and stimulates innovation because it promotes the exchange of ideas Thus you get crosstraining and maximum exibility in job assignments However there are potential problems with such a strategy The departments may view the rotating employee as temporary help give them only trivial things to do and may question that person s loyalty to the department Also training costs are increased and productivity is reduced at times such as when the rotating employee is new or has limited expertise in a certain job V ENRICHED JOBS There is a definite distinction that needs to be drawn between job enlargement and job enrichment Job enrichment necessarily involves job enlargement However job enlargement doesn t necessarily lead to job enrichment For example you can give a person twenty more boring things to do iob enlargement but it will not give the person discretion over his job job enrichment Horizontal loadings deal with job range This type of loading involves adding more tasks to a job In contrast vertical loadings deal with job depth Thus vertical 15 loadings give the person more discretion over work activities and outcomes It gives the person more control and more responsibility The intent of enriched jobs is to increase the meaningfulness of work and the experienced responsibility of work outcomes by increasing job content Jobs are enriched by allowing employees greater freedom or selfdirection and the opportunity to perform interesting and challenging work improve quality of work life QWL Enriched jobs on average load high on all job characteristics Enriched jobs involve the delegation of authority to the employee You give the employee the power to make important decisions about hisher job A A MODEL OF JOB ENLARGEMENT THE JOB CHACTERISTICS MODEL HACKMAN AND OLDHAM 1980 SEE FIGURE 1 The model consists of three elements 1 job core dimensions 2 critical psychological states and 3 personal and work outcomes The model also includes moderators that in uence the relations in the model the relation between core job dimension and critical psychological states and the relation between critical psychological states and personal and work outcomes With respect to moderators simply put they affect the effectiveness of job enrichment The model states that if you have a job that loads high on the job core dimension this in turn will lead to the critical psychological states of meaningfulness responsibility and knowledge of results These critical psychological states in turn will lead to the personal and work outcomes of high internal motivation high quality job performance high job satisfaction and low absenteeism and turnover With respect to the moderators the model states that the high growth need strength person is more responsive to job enrichment that when people are dissatisfied with context factors such as pay supervision and company policy they are less responsive to job enrichment and that people with weak skills and limited knowledge will not be as responsive to job enrichment B BENEFITS OF ENRICHED JOBS 1 high employee motivation 2 high job satisfaction 3 high quality job performance 4 low absenteeism 5 low turnover quitting job C JOB ENRICHMENT PROGRAM BASED UPON THE JOB CHACTERISTICS MODEL There are ve steps involved in job enrichment Each of these steps increases one of more of the ve job characteristics 1 Form Natural Work Units As much as possible individuals are grouped together to form a meaningful work unit This unit is given continuing responsibility for a body of related work or a whole piece of work The objective here is to increase the employee s feeling of ownership over their job Forming natural work units should increase task identity and task signi cance 2 Combining Tasks Combine several tasks into a larger job requiring a broader range of skills This is an attempt to increase skill variety and task identity 3 Establishing Client Relationships As much as possible employees are put into contact with people who use their product or service such as customers This is designed to increase skill variety task signi cance autonomy and feedback 4 Vertical LoadingMost Important Step Here the gap between doing and controlling is closed The employees are given more latitude in and responsibility for their jobs This step primarily increases autonomy However it also increases all the other characteristics In vertical loading the person as allowed to set schedules establish work pace choose work methods develop other workers and overall problemsolve Problem solving involves troubleshooting and crisis management 5 OPENING FEEDBACK CHANNELS Employees are provided with increased feedback on their performances by opening up the communication channels Primarily it s an attempt to increase performance feedback Feedback should be a continuous on going process Here you allow people to check the quality of their own work This helps them provide their own feedback which is seen as most valid type of feedback D PROBLEMS ASSOCIATED WITH ENRICHED JOBS 1 Some workers may not want enriched jobs Enrichment may place greater demands on workers and some may not relish this added responsibility 2 Workers even when they desire enriched jobs may not have the skills necessary to perform enriched jobs Therefore you have training costs and it is also difficult to train certain skills required in enriched jobs such as social skills 3 Enriched job employees may also want greater extrinsic rewards such as pay due to greater responsibility etc that comes with enriched jobs 4 Unions are less than enthusiastic about design They see it as a new version of speed up Theoretically job enrichment results in layoffs Also unions have specific job descriptions for each position that have been negotiated through collective bargaining agreements They are reluctant to change these 5 Supervisors of employees of enriched jobs may have disenriched jobs as a result of the enrichment process The autonomy of employee reduces the supervisor s job of watching over the employee As a result organizations may do away with supervision of enriched jobs or use the supervisor as a trainer and developer of employees in enriched jobs As you can see management may opposeresist job enrichment programs due to a loss ofpower disenrichedjobs and possibly evenjob loss 6 Potential benefits of job enrichment may not offset technological costs You have to look at the most efficient method of producing your product or service Careful diagnosis 7 Poor employee performance is just one factor in productivity Rather than redesigning the job you may have to change outdated production methods obsolete tools shoddy materials etc REMEMBER JOB DESIGN SHOULD BE A CONTINGENCY APPROACH VI CONSTRAINTS ON JOB DESIGN A STRATEGY OF THE ORGANIZATION The strategy of the organization should drive the design of jobs Thus different job design strategies will be needed for different strategies For example if your organization has a prospector strategy to find and exploit new opportunitiesbe innovative then the job design strategy that would best suit this strategy would be enriched jobs which allow for more selfdetermination and more creativity 18 On the other hand if your organization s strategy is to be a defender to hold onto one s market share through overall cost leadership you would select a specialized job design because that would allow for the greatest efficiency in producing your product service and it would allow you to keep your prices down B EMPLOYEE FACTORS Two primary factors are availability and motivation Ability managers simply should not design jobs that require greater ability than the employee possesses If the job requires a trained employee but none are available then you may train an unskilled employee or brealddivide the present job into simplified tasks so that an unskilled employee can perform the job Motivation you should tailor the design of the job to the motivation of the employee An employee who sees the job as a means to get personal fulfillment recognition etc will require a different job design enriched than an employee who sees the job as simply a means to a paycheck specializedjob design Whether the employee sees the job as an end to itself or a means to an end will in uence the job design So you have to assess whether an employee has an instrumental orientation sees work as a means to end such as a paycheck or an expressive orientation towards work sees work as an end in itself such as wants to grow through hisher work or wants personal fulfillment and satisfaction from the work itself You also have to consider one s sensitivity to the external environment Some people are hypersensitive which means that they need relatively little stimulation to get them to their activation level a moderate level of arousal which leads to high performance remember the YerkesDodson law whereas other people are hyposensitive which means that they need a lot of stimulation from their external environment to achieve their activation level Thus people that are hypersensitive would be best suited to a specialized job because the environment provides very little stimulation whereas people that are hyposensitive would be best suited to an enriched job because it provides them with a lot of stimulation and challenge C ECONOOMIC FACTORS Required or necessary resources may not be available to improve or redesign jobs e g may not have the money to buy a new piece of equipment or hire a job design specialist D TECHNOLOGICAL FACTORS Job design is in uenced by available technology The more the design of the job is in uenced by technological factors or technology the less job design exibility that exists For example it is easier to redesign craft work than assembly line work which in turn is easier to redesign than automated work Thus job redesign is limited by the technological system in the organization E UNION COOPERATION Unions have both direct and indirect in uences on job design Unions in the US have generally resisted job design efforts They see job design programs as schemes to get more work out of fewer employees Some parts of union see job design as clashing with the basic credo of unions a fair day s pay for a fair day s work Also union s have their own job descriptions for certain jobs such as electricians etc Thus unions have job descriptions that specify which job duties comprise job makeup As a result an attempt to change these job duties through job design is met with resistance by the unions F MANAGEMENT SUPPORT up u I If management views mp1 and 39 as major objectives then it will spend more time and effort on job design than if management does not value or values to a lesser extent employee satisfaction and development means 1 The JobCharacteristics Model I 1 gt PSYCHOLOGICAL gt OUTCOMES CHARACTERISTICS STATES Skill variety Experienced Task identity gtmeaningtnlness 223230 ol the work Task significance High quotgrowthquot satisfaction Experienced Au onomy o responsnblltty gt lOl39 outcomes or me work Hsgl39t general iob sattslactlen Knowledge of the gt actual results ot the work activities J K Moderators 1 Knowledge and skill 2 Growth need strength 3 quotContextquot satisfactions Feedback High wOrk effectiveness Note From Job Redesign by J Ft Hackrnan and 3 Fl Otdham 1980 Readlng MA Addison I Wesley OZ 21 MGT 3200 ORGANIZATIONAL DESIGN I THE SPECIALIZATION COORDINATION DILEMA After you have designed your jobs the next question you must ask yourself is how these jobs can be effectively organized into work units When you design an organization there is a tradeoff between specialization and coordination of different specialties The more you specialize the more difficult it is to coordinate the different work units Coordination across boundaries is where problems occur due to different values goals training etc In contrast coordination within boundaries is easier to achieve due to similar values goals training etc So what you need to do in organizational design to be successful is to identify critical interdependencies and draw boundaries around them What happens between boundaries is cooperation or lack of it Which problems are you willing to deal with the problems associated with a lack of coordination or the problems associated with a lack of specialization is the question you must ask yourself in designing an organization s structure II ORGANIZATIONAL DESIGN STRATEGIES A PRIMITIVE STRUCTUREAGENCY FORM This type of structure has one boss and a few employees All the employees report directly to the boss and he provides the necessary coordination thru personal supervision or informal means Thus each employee acts as an agent or extension of the boss who coordinates all company activities and performs all managerial tasks This type of structure is quite exible but breaks down under conditions of complexity because of the limited informationprocessing capacity of the boss B FUNCTIONAL DESIGN This type of organizational design was big during the 20 s 30 s and 40 s with Fortune 500 companies large mass production firms An example of a functionally designed organization is Domino s Pizza I am not talking about the pizza store on the corner but rather about the parent company who uses a functional design A functionally designed organization groups its activities into separate units or departments in which each undertakes a distinctive function e g marketing production etc So you have a specialization and a focused concentration of functional activities 22 l ADVANTAGES 1 Lots of specialization provides the best development of expertise because of its emphasis on functional interests within specialized departments 2 Results in ef cient use of resources because you don t duplicate specialists and you achieve economies of scale and overhead Also you are more ef cient because of your greater focus on specialization 3 Provides a simple communication network 4 Simpli es training of functional specialists 5 Gives status to major functional areas 6 Preserves strategic control at the top management levels 7 Provides career path for specialistsfunctional departments help reinforce and enhance development of expertise 2 DISADVANTAGES 1 Coordination is achieved at higher levels of the organization This causes the coordination process to take longer In addition the larger the number of departments the harder it is to coordinate work units 2 No common concern for the overall mission of the organization People identify with specialty not with overall tasks 3 Interdepartmental cooperation is a problem due to different values goals etc 4 Cost of coordination can be high eg have to have a lot of con ict resolution meetings between different departments or have to hire a professional integrator 5 Employees identify with specialty which makes changes dif cult 6 Preparation of broadly trained managers is limited The main type of manager developed in the functional design is a functional manager 7 Client satisfaction can be lower than with other designs because of the coordination problems associated with this design 8 Slow to respond to environmental change 9 Slow to innovate 3 WHEN DO YOU USE IT 1 When you have a stable environment 2 When you have one or a few product lines 3 When ef ciency and quality are your goals 4 When the organization is small to medium in size Sot the problem you are willing to deal with when you choose a functional design id the dif culties associated with a lack of coordination 23 C PRODUCT DESIGN Most Fortune 500 companies changed to product designs in the 50 s and most Fortune 500 companies are structured in this manner today For example 3M is structured along product lines 3M has 40 count em 40 product divisions With product design each major product line is administered through a separate and semiautonomous division This allows both responsiveness to the environment and efficient coordination of a large number of specialized units So specialists are grouped together to perform all the duties necessary to produce an individual good or service Each separate unit in a product design is a replica of an individual functionally designed organization Product design allows you to set up profit centers since they have identifiable cash ows consisting of expenses and revenues Product design is better able to accommodate growth than a functionally designed organizationyou just merely slap on a new division 1 ADVANTAGES 1 Pro t centers allow you to pinpoint problems quicker because you get measures of performance in a shorter time They also allow you to establish responsibility for task completionresponsibility is easily defined 2 It develops broadly trained managers ie general managers 3 It focuses on client needs and provides greater customer service and satisfaction due to its focus on product It achieves bettermore rapid coordination 4 It facilitates coordination between functions for rapid responses because individuals now identify with their product more than with their specialty 5 Shared concern for the task of the organization They identify with their product more than their specialty 2 DISADVANTAGES 1 Coordination between product areas is difficult Again coordination across boundaries is where problems of coordination occur in organizations 2 It duplicates specialists Remember underneath each product is a functional design Thus in a product design specialists RampD Human Resources etc are duplicated for each product They in turn may not be fully utilized which is inefficient 24 3 Less expertise is developed than in the functional design For example in a product design you may not be able to afford to duplicate the entire human resource department you had in a functional design You may only be able to give each of your products just one of your human resource professionals Now each human resource professional who was a specialist in the functional design ie only doing one part of the human resource management activities must now become a generalist ie do all the human resource activities for their product Therefore we will have less specialization and less expertise being developed because we have less division oflabor 4 Loses economies of scale Not as efficient as the functional design 5 A change in product line can be disastrous because the specialist shave not kept up to date in their technical areas since they were more focused on their product than their specialty Thus they may not have the technical skills to produce an entirely new and different product 3 WHEN DO YOU USE IT 1 When you have a highly uncertain environment that requires rapid adaptation 2 When the organization is large 3 When the organization has multiple product lines 4 When the goals of the organizations are external effectiveness and adaptation multiple products and client satisfaction The functional design keeps you up to date technically within a specialty The product design is very sensitive and responsive to the marketplace D MATRIX DESIGN Developed at TRW a southern California aerospace firm in the late 1950 s by Simon Ramo Matrix design is used in RampD aerospace and engineering organizations This design was born out of necessity TRW an aerospace rm had multiple hightech products with short product lives These projects needed to be completed on time on budget and according to specifications These projects required a great deal of technical expertise A matrix design is basically a product design overlaid onto a functional design The matrix design is structured to reap the benefits of both these designs while avoiding the disadvantages associated with each So what you have in a matrix is employees belonging to two groups a functional group and a product or project group The functional group is permanent whereas the project group is temporary once the project is completed the group is disbanded and the members return to their functional group for reassignment to another project group 25 Thus the employees have two or more bossesa permanent boss in the functional department and one or more temporary bosses who direct various projects In a matrix organization you have two different types of managers a functional manager and a project manager The functional manager s job is to keep the employees in his department technologically up to date with regard to the area of expertise or function The project manager is responsible for the projectits completion on time within budget and according to specifications The project manager is usually not a specialist in a technical area In matrix organizations these are people who by design are project managers Functional managers are responsible for developing and deploying skilled personnel and project managers that are responsible for project completion Project managers are often considered entrepreneurs confronting and removing obstacles to success of project or product They are often called product champions Project managers are fairly autonomous positions that have access to the functional resources of the organization Functional managers have vertical authority whereas project managers have horizontal authority which often turns out to be nothing more than persuasion With a matrix design you can tailor your personnel mix to the type of project or lifecycle of the project Thus a matrix design is extremely exible This type of design places a premium on teamwork communication and social skills 1 ADVANTAGES 1 Extremely exible and responsive It is ideally suited for uctuating work loads and it allows the organization to respond quickly to various market segments that are critical to its success 2 High rate of new product innovation due to interdisciplinary nature of the product teams eg ideas of personnel guy spurs new ideas in RampD guy 3 It allows you to achieve specialization without suffering great losses in coordination due to functional home and project teams 4 Establishes responsibility for all matters relating to a project through the project manager 5 Minimizes duplication of specialists 6 Integration of project completion needs at lower levels where people have the right information and the expertise to complete the projectachieves coordination 7 Sets up career paths for both experts functional managers and broadly trained managers project managers This achieves specialization 26 2 DISADVANTAGES 1 Lose command of control Top management loses control over activities 2 Multiple authority roles Unity of command principle is lost 3 Personal stress and strain due to ambiguity and reporting to two supervisors You need people with high tolerance for ambiguity and high stress tolerance 4 Places a premium on teamwork Employees need good interpersonal skills 5 Power struggles within the organization between the functional and project managers 6 Employee allegiance is difficult to obtain You have con ict between technical sophistication and project completion Employees have mixed identities Employees experience role con ict 7 Very expensive in terms of communication and control costs You have to have a lot of staff meetings and con ict resolution meetings to resolve problems con icts between managers and team members 8 Linestaff separation is blurred 3 WHEN DO YOU USE IT 1 When you have technologically sophisticated products or services with temporary multiple products You need experts but you have to be responsive to the environment 2 When you have a dynamic uncertain environment that exerts pressure for technical quality and different and new products 3 When creativity and innovation needs to be balanced against completion deadlines This type of design works on face to face interaction and bargaining The day to day operations of a matrix organization is often described as an internal marketplace The reasons for this are l the existence of product championsentrepreneurs and 2 the bargaining that goes on for quality employees between different project managers Functional managers are the providers of scarce resources quality employees that different project managers desire Functional managers are in a powerful position and as a result this position can often be abused for political reasons Written rules and regulations in a matrix are undesirable because of the dynamic changing form of the organization e g a good rule one day becomes obsolete the next 111 STRUCTURAL CHACTERISTICS A SCALAR CHAIN OR CHAIN OF COMMAND Chain of command exists whenever one individual reports to or is made subordinate to another 27 The chain of command refers to vertical authority The higher the manager s level in the organization such as top over middle or firstline the higher the manager s formal authority Chain of command accomplishes two things 1 de nes level of authority and 2 it routes directives and information up and down the organizationprovides an information decision network A gangplank is often used to bypass the strict chain of command It provides for quicker coordination B UNITY OF COMMAND This refers to the fact that subordinates should report to one and only one boss Violation of this principle occurs to varying degrees in all organizations and the greatest violation comes in the matrix design This principle also clarifies responsibility and who reports to whom It supplements tha scalar chain C DELEGATION OF AUTHORITY Authority is the right to exact action from others or to command Delegation is the process in which authority passes from one level to another The delegation of authority extends a manager s reach It also enables a manager to identify and utilize employee talents It empowers your employees giving them freedom to think and experiment When one delegates you are providing the employee with a chance to grow and develop You give the employee freedom to succeed 1 WHAT CANNOT BE DELEGATED When managers delegate they don t reduce their accountability they remain responsible for their own actions and the actions of their subordinates You can delegate authority but not responsibility 2 THE PARITY OF AUTHORITY AND RESPONSIBILITY No one should be expected to shoulder responsibility without the commensurate authority 3 WHY DO MANAGERS RESIST DELEGATION Managers are typically reluctant to delegate authority for a number of reasons 1 the manager feels like he she lacks trained subordinates 2 the manager feels like he she is only capable of doing the work bu GNU 28 the manager may fear that the subordinates will make costly mistakes the manager may fear that if the subordinate handles the task well then the subordinate could become a competitor The manager might be shown up by the subordinate the manager may believe that delegating makes them look lazy the manager may nd that it is easier to do it themselves This is especially true when the manager has difficulty communicating directions clearly the manager resists delegating for fear of losing control 4 MAKING DELEGATION EFFECTIVE For delegation to be effective a manager must 1 9 4 UI ON 1 make sure the employee is willing to accept authority Some people are content to let the manager make all the decisions With this type of person it is probably best not to delegate authority to them be sure the employee understands what is expected of them be sure the employee has the knowledge skills and abilities necessary to perform the task that is being delegated If they do not have the ability it does not matter how motivated they are to do the task well They will perform poorly if they don t have the necessary ability specify deadlines for the completion of the delegated task Again ere the employees knows exactly what is expected and when it is expected Avoid generalities provide the employee structure establish controls the evaluate the employee s performance Set up checkpoints to see how well they are doing on the task This allows you to get ongoing feedback on the employee s performance Don t wait until the employee has almost completed or has completed the task before you check the work Catch problems as they pop up before they become serious problems reward delegates who get things done Tap into WIFM People will do what benefits them People resist authority because they are not sure that there is anything to be gained by accepting it Rewarding employees who get things done is a great way to show them what s in it for them admit that others can do the task just as well as you can Express confidence in your subordinates to get things done Believe it and you will see it People will resist taking on authority because they lack selfconfidence or fear failure You must pump up your subordinate Following these steps will help to reduce resistance in your subordinates in terms of accepting authority 5 CENTRALIZED VS DECENTRALIZED ORGANIZATIONS Centralized is the extent to which authority isn t delegated but concentrated at higher levels of management Decentralized is the extent to which authority is delegated 29 Remember these are relative terms and not absolutes They represent opposite ends along a delegation of authority continuum Usually you won t nd a completely centralized or decentralized organization a SIGNS OF DECENTRALIZATION You know your organization is becoming decentralized as l more decisions are made by lower levels of management 2 more important decisions are made by lower levels of management 3 more exibility is allowed for lower level managers in interpreting policies 4 more autonomy is allowed for lower level managers in decision making b ADVANTAGES OF CENTRALIZATION AND DECENTRALIZATION There are advantages associated with centralization and decentralization Advantages of Centralization l a greater uniformity of decisions is possible 2 top level managers are more aware of the organization s plans and thus are more likely to make decisions in the organization s best interest official and operative are more likely to be similar 3 it requires fewer skilled and higher paid managers saves money in this regard 4 it requires less extensive planning and reporting procedures Advantages of Decentralization 1 lower level managers can deal with problems on the spot 2 it provides opportunity for lower level managers to develop their decision making skills EMPLOYEE DEVELOPMENT 3 motivation of lower level managers is boosted when they re entrusted to make decisions rather than just always following orders Their jobs are enriched 4 it spreads the organization s work load out and allows top managers more time for strategic planning Decentralization becomes necessary as an organization grows in size because coordination problems force you to make others responsibleaccountable for coordination With decentralization it allows one to be more responsive to the environment because it provides for quicker coordination D SPAN OF CONTROL Span of control refers to the number of subordinatespeople who report directly to a supervisor A span of control can be wide or narrow With a wide span a manager would supervise many employees whereas with a narrow span a manager would supervise few 30 Spans of control are rarely uniform throughout an entire organization Thus management levels are rarely uniform for different departments 1 RELATIONSHIP BETWEEN SPAN OF CONTROL AND ORG HEIGHT A relationship eXists between the span of control and organizational height The narrower the span of control the taller the organization eg more management levels and the wider the span of control the atter the organization e g fewer management levels 2 THE PARADOX OF MANAGERIAL CONTROL The paradox of managerial control with narrow spans of control is that narrow spans of control allow managers tighter control over their subordinates but this loosens overall control from top to bottom in the organization because there are now more managerial levels The result of narrow spans of control and hence more levels of management is a greater distortion of communication traveling up and down the scalar chain in the organization These successive management levels act as filters in the communication process Therefore in an organization where there are narrow spans of control top management has less control over lower levels of management 3 ADVANTAGESDISADVANTAGES OF WIDE SPANS OF CONTROL Widening spans of control has both its advantages and disadvantages On one hand it can lead to substantial payroll savings by eliminating managerial jobs downsizing and it can improve overall communication from the top to the bottom of the organization However on the downside it can decrease managerial control and supervisorsubordinate communication on each managerial level It also can increase career gridlock this at organizational design leaves little chance for moving up because you have eliminated management levels and there are less opportunities for advancement in a at structure thus promotionspay increases are slower Also in a at structure managerial workload is increased which can be more stressful because you are overloaded Just look at what happens to managers when organizations downsize ie became atter and have looser managerial control on any given level They are asked to do more and supervise more people 4 WHAT S THE OPTIMAL SPAN OF CONTROL There is no optimal span of control There are a number of factors that in uence how many people a manager can effectively supervise in any given situation There are three broad classes of factors personal job and environmental SEE APPENDIX A IV INTERDPENDENCE AND COORDINATION Thompson was concerned with internal interdependence He classified internal interdependence into three types pooled sequential and reciprocal According to 31 Thompson each of these different interdependencies is associated with a different technology and different coordination mechanisms A POOLED INTERDEPENDENCE This is the lowest form of interdependence Work does not ow between units Each department is part of an organization and contributes to the common good of the organization but works independently McDonald s and branch banks are examples of this type of interdependence The connection between branches is that they share the same financial resources from a common pool and the overall success of the organization Pooled interdependence would exist in firms with a mediating technology It provides products or services that link clients from the external environment and in doing so each department can work independently e g banks brokerage firms and real estate offices Management implications Thompson says managers should use rules and procedures to standardize across departments Each department should use the same procedures and financial statements so their outcomes can be measured and pooled Very little day to day coordination is required among units This type of interdependence requires the least coordination and coordination is achieved through rules and procedures B SEQUENTIAL ONEWAY INTERDEPENDENCE Parts produced in one department become inputs to another department This is a higher level of interdependence than pooled because departments exchange resources and depend upon others to perform well e g on time on schedule within quality guidelines etc Sequential interdependence exists in firms with longlinked technology This type of technology refers to each stage of production using as inputs the production of the preceding stage and produces inputs for the following stage eg automobile assembly line Management implications coordination among departments is required Extensive planning and scheduling are needed due to the oneway ow of materials Some day to day coordination is also needed to ensure that problems and exceptions to plans are handled satisfactorily C RECIPROCAL INTERDEPENDENCE This is the highest level of interdependence twoway This type of interdependence exists when the output of operation A is the input for operation B and the output of operation B becomes the input again to operation A 32 Reciprocal interdependencies exist in rms with extensive technologies which provide a wide variety of services and products in combination to clients hospitals are a great example Management implications structure must allow for frequent communication and adjustment departments should be close together It requires extensive planning but plans will not solve all problems You need continuous interaction and mutual adjustment through group meetings and face to face interactions This type of interdependence requires the highest degree of coordination 33 ORGANIZATIONAL DESIGN TYPES PrlmltlveAgency W VP VP VP Recruiting 1 Selecting Training Compensation PRODUCT I I I vP ProductA vP Product B vP Product C VP Product D VP Product E I M atrlx combination product amp functional functions r r Industrlal Mechanlcal Electrlcal Human Research amp Englneerlng Englneering Englneerlng Resources Development quot 1 lht 1 47 Hellcopter UJiOITILOJU39U
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