MANAGEMENT 309MANAGEMENT 309Section 100Section 100

Survey of ManagementSurvey of Management

Liesl Wesson

Summer 2005

Liesl Wesson

Summer 2005

Managing and the Manager’s JobManaging and the Manager’s JobOne

hapter

What is an organization?What is an organization?

• A group of people working together in a structured and coordinated fashion to achieve a set of goals.

• A group of people working together in a structured and coordinated fashion to achieve a set of goals.

Organizational ResourcesOrganizational Resources

• Human resources

• Financial resources– Capital investments to support ongoing and long-term

operations

• Physical Assets

• Information– Usable data, information linkages

• Human resources

• Financial resources– Capital investments to support ongoing and long-term

operations

• Physical Assets

• Information– Usable data, information linkages

What is Management?What is Management?

• A set of activities– planning and decision making, organizing, leading, and

controlling

• directed at an organization’s resources – human, financial, physical, and information

• with the aim of achieving organizational goals in an efficient and effective manner.

• A set of activities– planning and decision making, organizing, leading, and

controlling

• directed at an organization’s resources – human, financial, physical, and information

• with the aim of achieving organizational goals in an efficient and effective manner.

Basic Purpose of ManagementBasic Purpose of Management

EFFICIENTLYUsing resources wisely and

in a cost-effective way

EFFECTIVELYEFFECTIVELYMaking the right decisions andMaking the right decisions and

successfully implementing themsuccessfully implementing them

AndAnd

What is a Manager?What is a Manager?

• Someone whose primary responsibility is to carry out the management process.

• Someone who plans and makes decisions, organizes, leads, and controls human, financial, physical, and information resources.

• Someone whose primary responsibility is to carry out the management process.

• Someone who plans and makes decisions, organizes, leads, and controls human, financial, physical, and information resources.

The Management ProcessThe Management Process

• Planning and Decision Making– Setting an organization’s goals and selecting a course of

action from a set of alternatives to achieve them.

• Organizing

• Leading – The set of processes used to get members of the

organization to work together to advance the interests of the organization.

• Controlling

• Planning and Decision Making– Setting an organization’s goals and selecting a course of

action from a set of alternatives to achieve them.

• Organizing

• Leading – The set of processes used to get members of the

organization to work together to advance the interests of the organization.

• Controlling

Kinds of Managers by LevelKinds of Managers by Level

• Top Managers

• Middle Managers– Largest group of managers in organizations who are

primarily responsible for implementing the policies and plans of top managers. They also supervise and coordinate the activities of lower level managers.

• First-Line Managers– Managers who supervise and coordinate the activities of

operating employees.

• Top Managers

• Middle Managers– Largest group of managers in organizations who are

primarily responsible for implementing the policies and plans of top managers. They also supervise and coordinate the activities of lower level managers.

• First-Line Managers– Managers who supervise and coordinate the activities of

operating employees.

Kinds of Managers by AreaKinds of Managers by Area

• Marketing Managers– Work in areas related to getting consumers and clients to

buy the organization’s products or services—new product development, promotion, and distribution.

• Financial Managers

• Operations Managers– Concerned with creating and managing the systems that

create organization’s products and services—production control, inventory, quality control, plant layout, site selection.

• Marketing Managers– Work in areas related to getting consumers and clients to

buy the organization’s products or services—new product development, promotion, and distribution.

• Financial Managers

• Operations Managers– Concerned with creating and managing the systems that

create organization’s products and services—production control, inventory, quality control, plant layout, site selection.

Kinds of Managers by Area Kinds of Managers by Area (cont’d)(cont’d)

• Human Resource Managers– Involved in human resource planning, recruiting and

selecting employees, training and development, designing compensation and benefit systems, formulating performance appraisal systems, and discharging low-performing employees.

• Administrative Managers

• Other Kinds of Managers– Organizations have developed specialized managerial

positions (e.g., public relations managers) directly related to the needs of the organization.

• Human Resource Managers– Involved in human resource planning, recruiting and

selecting employees, training and development, designing compensation and benefit systems, formulating performance appraisal systems, and discharging low-performing employees.

• Administrative Managers

• Other Kinds of Managers– Organizations have developed specialized managerial

positions (e.g., public relations managers) directly related to the needs of the organization.

Managerial Roles (Mintzberg)Managerial Roles (Mintzberg)

• Interpersonal Roles– Figurehead, leader, and liaison roles involve dealing with

other people.

• Informational Roles– Monitor, disseminator, and spokesperson roles involve the

processing of information.

• Decisional Roles – Entrepreneur, disturbance handler, resource allocator, and

negotiator are managerial roles primarily related to making decisions.

• Interpersonal Roles– Figurehead, leader, and liaison roles involve dealing with

other people.

• Informational Roles– Monitor, disseminator, and spokesperson roles involve the

processing of information.

• Decisional Roles – Entrepreneur, disturbance handler, resource allocator, and

negotiator are managerial roles primarily related to making decisions.

Ten Basic Managerial RolesTen Basic Managerial Roles

Category Role Sample Activities

Interpersonal Figurehead Attending ribbon-cutting ceremony for new plant Leader Encouraging employees to improve productivity Liaison Coordinating activities of two projects

Informational Monitor Scanning industry reports to stay abreast of developments

Disseminator Sending memos outlining new organizational initiatives

Spokesperson Making a speech to discuss growth plans

Decisional Entrepreneur Developing new ideas for innovation Disturbance

handler Resolving conflict between two subordinates

Resource allocator Reviewing and revising budget requests Negotiator Reaching agreement with a key supplier or labor

union

*See page 18, table 1.2

Managerial SkillsManagerial Skills

• Technical– Skills necessary to accomplish or understand the specific

kind of work being done in an organization.

• Interpersonal

• Conceptual– The manager’s ability to think in the abstract.

• Diagnostic

• Technical– Skills necessary to accomplish or understand the specific

kind of work being done in an organization.

• Interpersonal

• Conceptual– The manager’s ability to think in the abstract.

• Diagnostic

Managerial Skills (cont’d)Managerial Skills (cont’d)

• Communication– The manager’s abilities both to convey ideas and information

effectively to others and to receive ideas and information effectively from others.

• Decision-Making

• Time-Management– The manager’s ability to prioritize work, to work efficiently,

and to delegate appropriately.

• Communication– The manager’s abilities both to convey ideas and information

effectively to others and to receive ideas and information effectively from others.

• Decision-Making

• Time-Management– The manager’s ability to prioritize work, to work efficiently,

and to delegate appropriately.

Management: Science or Art?Management: Science or Art?

• Science of Management– Assumes that problems can be approached using rational,

logical, objective, and systematic ways.

• Art of Management – Decisions are made and problems solved using a blend of

intuition, experience, instinct, and personal insights.

• Science of Management– Assumes that problems can be approached using rational,

logical, objective, and systematic ways.

• Art of Management – Decisions are made and problems solved using a blend of

intuition, experience, instinct, and personal insights.

Managing in OrganizationsManaging in Organizations

• For-profit Organizations– Large businesses– Small businesses and start-up businesses– International management

• Not-for-profit Organizations– Governmental organizations—local, state, and federal – Educational organizations—public and private schools,

colleges, and universities– Healthcare facilities—public hospitals and HMOs– Nontraditional settings—community, social, spiritual groups

• For-profit Organizations– Large businesses– Small businesses and start-up businesses– International management

• Not-for-profit Organizations– Governmental organizations—local, state, and federal – Educational organizations—public and private schools,

colleges, and universities– Healthcare facilities—public hospitals and HMOs– Nontraditional settings—community, social, spiritual groups

Traditional and Contemporary Issues and Challenges

Traditional and Contemporary Issues and Challenges

Twohapter

The Importance of Theory and The Importance of Theory and HistoryHistory

• Why Theory?– A theory is a conceptual framework for organizing knowledge

and providing a blueprint for action.– Management theories, used to build organizations, are

grounded in reality. Most managers develop their own theories about how they should run their organizations.

• Why History?– An awareness and understanding of important historical

developments in management are also important to contemporary managers in furthering the development of management practices and in avoiding the mistakes of others in the past.

• Why Theory?– A theory is a conceptual framework for organizing knowledge

and providing a blueprint for action.– Management theories, used to build organizations, are

grounded in reality. Most managers develop their own theories about how they should run their organizations.

• Why History?– An awareness and understanding of important historical

developments in management are also important to contemporary managers in furthering the development of management practices and in avoiding the mistakes of others in the past.

Early Management PioneersEarly Management Pioneers

• Robert Owen (1771–1858)– Implemented better working conditions, set a minimum age

for child labor, provided meals, and reduced work hours.

• Charles Babbage (1792–1871)– Noted English mathematician who focused on creating

efficiencies of production through the division of labor, cooperation between management and labor, and the application of mathematics to management problems.

• Robert Owen (1771–1858)– Implemented better working conditions, set a minimum age

for child labor, provided meals, and reduced work hours.

• Charles Babbage (1792–1871)– Noted English mathematician who focused on creating

efficiencies of production through the division of labor, cooperation between management and labor, and the application of mathematics to management problems.

Classical Management Classical Management PerspectivePerspective

• Consists of two different viewpoints:– Scientific Management

• Concerned with improving the performance of individual workers (i.e., efficiency).

– Administrative Management • A theory that focuses on managing the total organization.

• Consists of two different viewpoints:– Scientific Management

• Concerned with improving the performance of individual workers (i.e., efficiency).

– Administrative Management • A theory that focuses on managing the total organization.

Scientific ManagementScientific Management

• Frederick Taylor (1856–1915) – Considered the “Father of Scientific Management.”– Replaced old rule-of-thumb methods of how to do work with

scientifically-based work methods to eliminate “soldiering” where employees deliberately worked at a pace slower than their capabilities.

– Used time studies of jobs, standards planning, exception rule of management, slide-rules, instruction cards, and piece-work pay systems to control and motivate employees.

• Frederick Taylor (1856–1915) – Considered the “Father of Scientific Management.”– Replaced old rule-of-thumb methods of how to do work with

scientifically-based work methods to eliminate “soldiering” where employees deliberately worked at a pace slower than their capabilities.

– Used time studies of jobs, standards planning, exception rule of management, slide-rules, instruction cards, and piece-work pay systems to control and motivate employees.

Steps in Scientific ManagementSteps in Scientific Management

Develop a science

for each element ofthe job to replace oldrule-of-thumb methods

Scientifically select

employees and thentrain them to do the jobas described in step 1

Supervise employeesto make sure theyfollow the prescribedmethods for performingtheir jobs

Continue to plan

the work, but use workers to get the work done

21 43

Classical Management Classical Management Perspective Perspective

• Other Scientific Management Pioneers– Frank and Lillian Gilbreth

• Reduced the number of movements in bricklaying, resulting in increased output of 200%.

– Henry Gantt • Developed other techniques, including the Gantt chart, to

improve working efficiency through planning/scheduling.– Harrington Emerson

• Advocated job specialization in both managerial and operating jobs.

• Other Scientific Management Pioneers– Frank and Lillian Gilbreth

• Reduced the number of movements in bricklaying, resulting in increased output of 200%.

– Henry Gantt • Developed other techniques, including the Gantt chart, to

improve working efficiency through planning/scheduling.– Harrington Emerson

• Advocated job specialization in both managerial and operating jobs.

Classical Management Classical Management Perspective (cont’d)Perspective (cont’d)

• Administrative Management Theory– Focuses on managing the whole organization rather than

individuals.

• Henri Fayol – Was first to identify the specific management functions of

planning, organizing, leading, and controlling.

• Administrative Management Theory– Focuses on managing the whole organization rather than

individuals.

• Henri Fayol – Was first to identify the specific management functions of

planning, organizing, leading, and controlling.

Classical Management ProponentsClassical Management Proponents

• Lyndall Urwick – Integrated the work of previous management theorists.

• Max Weber– His theory of bureaucracy is based on a rational set of

guidelines for structuring organizations.

• Chester Barnard– Proposed a theory of the acceptance of authority (by

subordinates) as the source of power and influence for managers.

• Lyndall Urwick – Integrated the work of previous management theorists.

• Max Weber– His theory of bureaucracy is based on a rational set of

guidelines for structuring organizations.

• Chester Barnard– Proposed a theory of the acceptance of authority (by

subordinates) as the source of power and influence for managers.

Classical Management Perspective…Classical Management Perspective…TodayToday

• Contributions– Identified important management processes, functions, and

skills.– Focused attention on management as a valid subject of

scientific inquiry.

• Limitations– More appropriate approach for use in traditional, stable,

simple organizations.– Prescribed universal procedures that are not appropriate in

some settings.

• Contributions– Identified important management processes, functions, and

skills.– Focused attention on management as a valid subject of

scientific inquiry.

• Limitations– More appropriate approach for use in traditional, stable,

simple organizations.– Prescribed universal procedures that are not appropriate in

some settings.

Behavioral Management Behavioral Management PerspectivePerspective

• Behavioral Management– Emphasized individual attitudes and behaviors, and group

processes.– Recognized the importance of behavioral processes in the

workplace.

• Hugo Munsterberg (1863–1916)– A German psychologist, considered the father of industrial

psychology.

• Behavioral Management– Emphasized individual attitudes and behaviors, and group

processes.– Recognized the importance of behavioral processes in the

workplace.

• Hugo Munsterberg (1863–1916)– A German psychologist, considered the father of industrial

psychology.

Behavioral Management Behavioral Management Perspective (cont’d)Perspective (cont’d)

• The Hawthorne Studies– Conducted by Elton Mayo and associates at Western Electric

(1927–1935)– Group study— the effects of a piecework incentive plan on

production workers.• Workers established informal levels of acceptable individual

output.• Over-producing workers were labeled “rate busters” and under-

producing workers were considered “chiselers.”– Interview program

• Confirmed the importance of human behavior in the workplace.

• The Hawthorne Studies– Conducted by Elton Mayo and associates at Western Electric

(1927–1935)– Group study— the effects of a piecework incentive plan on

production workers.• Workers established informal levels of acceptable individual

output.• Over-producing workers were labeled “rate busters” and under-

producing workers were considered “chiselers.”– Interview program

• Confirmed the importance of human behavior in the workplace.

Behavioral Management Perspective Behavioral Management Perspective (cont’d)(cont’d)

• Human Relations Movement– Proposed that workers respond primarily to the social

context of work, including social conditioning, group norms, and interpersonal dynamics.

– Assumed that the manager’s concern for workers would lead to increased worker satisfaction and improved worker performance.

• Abraham Maslow– Advanced a theory that employees are motivated by a

hierarchy of needs that they seek to satisfy.

• Douglas McGregor– Proposed Theory X and Theory Y concepts of managerial

beliefs about people and work.

• Human Relations Movement– Proposed that workers respond primarily to the social

context of work, including social conditioning, group norms, and interpersonal dynamics.

– Assumed that the manager’s concern for workers would lead to increased worker satisfaction and improved worker performance.

• Abraham Maslow– Advanced a theory that employees are motivated by a

hierarchy of needs that they seek to satisfy.

• Douglas McGregor– Proposed Theory X and Theory Y concepts of managerial

beliefs about people and work.

Organizational BehaviorOrganizational Behavior

• A contemporary field focusing on behavioral perspectives on management.

• Important topics in organizational behavior research:– Job satisfaction and job stress– Motivation and leadership– Group dynamics and organizational politics– Interpersonal conflict– The design of organizations

• A contemporary field focusing on behavioral perspectives on management.

• Important topics in organizational behavior research:– Job satisfaction and job stress– Motivation and leadership– Group dynamics and organizational politics– Interpersonal conflict– The design of organizations

Behavioral Management Perspective…Behavioral Management Perspective…TodayToday

• Contributions– Provided important insights into motivation, group dynamics,

and other interpersonal processes.– Challenged the view that employees are tools and furthered

the belief that employees are valuable resources.

• Limitations– Complexity of individuals makes behavior difficult to predict.– Many concepts not put to use because managers are

reluctant to adopt them.– Contemporary research findings are not often communicated

to practicing managers in an understandable form.

• Contributions– Provided important insights into motivation, group dynamics,

and other interpersonal processes.– Challenged the view that employees are tools and furthered

the belief that employees are valuable resources.

• Limitations– Complexity of individuals makes behavior difficult to predict.– Many concepts not put to use because managers are

reluctant to adopt them.– Contemporary research findings are not often communicated

to practicing managers in an understandable form.

Quantitative Management Quantitative Management Perspective Perspective

• Quantitative Management– Focuses on decision making, economic effectiveness,

mathematical models, and the use of computers to solve quantitative problems.

• Management Science– Focuses on the development of representative mathematical

models to assist with decisions.

• Operations Management– Practical application of management science to efficiently

manage the production and distribution of products and services.

• Quantitative Management– Focuses on decision making, economic effectiveness,

mathematical models, and the use of computers to solve quantitative problems.

• Management Science– Focuses on the development of representative mathematical

models to assist with decisions.

• Operations Management– Practical application of management science to efficiently

manage the production and distribution of products and services.

Quantitative Management Quantitative Management Perspective…TodayPerspective…Today

• Contributions– Developed sophisticated quantitative techniques to assist in

decision making.– Application of models has increased our awareness and

understanding of complex processes and situations.

• Limitations– Quantitative management cannot fully explain or predict the

behavior of people in organizations.– Mathematical sophistication may come at the expense of

other managerial skills.– Quantitative models may require unrealistic or unfounded

assumptions, limiting their general applicability.

• Contributions– Developed sophisticated quantitative techniques to assist in

decision making.– Application of models has increased our awareness and

understanding of complex processes and situations.

• Limitations– Quantitative management cannot fully explain or predict the

behavior of people in organizations.– Mathematical sophistication may come at the expense of

other managerial skills.– Quantitative models may require unrealistic or unfounded

assumptions, limiting their general applicability.

Integrating Perspectives for Integrating Perspectives for ManagersManagers

• Systems Perspective

• Open system– An organization that interacts with its external environment.

• Closed system– An organization that does not interact with its environment.

• Subsystems– The importance of subsystems is due to their

interdependence on each other within the organization.

• Systems Perspective

• Open system– An organization that interacts with its external environment.

• Closed system– An organization that does not interact with its environment.

• Subsystems– The importance of subsystems is due to their

interdependence on each other within the organization.

Systems PerspectiveSystems Perspective

• Synergy– Subsystems are more successful working together in a

cooperative and coordinated fashion than working alone.

• Entropy– A normal process in which an organizational system declines

due to failing to adjust to change in its environment– Entropy can be avoided and the organization re-energized

through organizational change and renewal.

• Synergy– Subsystems are more successful working together in a

cooperative and coordinated fashion than working alone.

• Entropy– A normal process in which an organizational system declines

due to failing to adjust to change in its environment– Entropy can be avoided and the organization re-energized

through organizational change and renewal.

The Contingency PerspectiveThe Contingency Perspective

• Universal Perspectives– Include the classical, behavioral, and quantitative

approaches.

• The Contingency Perspective– Suggests that each organization is unique.– The appropriate managerial behavior for managing an

organization depends (is contingent) on the current situation in the organization.

• Universal Perspectives– Include the classical, behavioral, and quantitative

approaches.

• The Contingency Perspective– Suggests that each organization is unique.– The appropriate managerial behavior for managing an

organization depends (is contingent) on the current situation in the organization.

The Contingency Perspective The Contingency Perspective (cont’d)(cont’d)

• An Integrative Framework– Is a complementary way of thinking about theories of

management.– Involves the recognition of current system and subsystem

interdependencies, environmental influences, and the situational nature of management.

• An Integrative Framework– Is a complementary way of thinking about theories of

management.– Involves the recognition of current system and subsystem

interdependencies, environmental influences, and the situational nature of management.

Contemporary Management IssuesContemporary Management Issues and Challenges (cont’d) and Challenges (cont’d)

• Contemporary Applied Perspectives– William Ouchi’s “Theory Z,” Peters and Waterman’s “In

Search of Excellence”– Popular authors: Senge, Covey, Porter, Kotter, and Hamel

• Contemporary Management Challenges– Management of an increasingly diverse workforce– Rapid and constant environmental and technological change– Increasing globalization of markets– Renewed importance of ethics and social responsibility– Quality as the basis for competition– Shift to a predominately service-based economy

• Contemporary Applied Perspectives– William Ouchi’s “Theory Z,” Peters and Waterman’s “In

Search of Excellence”– Popular authors: Senge, Covey, Porter, Kotter, and Hamel

• Contemporary Management Challenges– Management of an increasingly diverse workforce– Rapid and constant environmental and technological change– Increasing globalization of markets– Renewed importance of ethics and social responsibility– Quality as the basis for competition– Shift to a predominately service-based economy

The Environment and Culture of Organizations

The Environment and Culture of Organizations

Threehapter

The Business EnvironmentThe Business Environment

• External Environment– General environment is everything outside an organization’s

boundaries—economic, legal, political, socio-cultural, international, and technical forces.

– Task environment is composed of specific groups and organizations that affect the firm.

• Internal Environment– Conditions and forces present and at work within an

organization

• External Environment– General environment is everything outside an organization’s

boundaries—economic, legal, political, socio-cultural, international, and technical forces.

– Task environment is composed of specific groups and organizations that affect the firm.

• Internal Environment– Conditions and forces present and at work within an

organization

The External EnvironmentThe External Environment

• The General Environment– The set of broad dimensions and forces in an organization’s

surroundings that create its overall context.– Economic dimension – Technological dimension refers to the methods available for

converting resources into products or services.– Sociocultural dimension – Political-legal dimension is the extent of government

regulation of business and the general relationship between business and government.

– International dimension is the extent to which the organization is affected by business in other countries.

• The General Environment– The set of broad dimensions and forces in an organization’s

surroundings that create its overall context.– Economic dimension – Technological dimension refers to the methods available for

converting resources into products or services.– Sociocultural dimension – Political-legal dimension is the extent of government

regulation of business and the general relationship between business and government.

– International dimension is the extent to which the organization is affected by business in other countries.

The External Environment The External Environment (cont’d)(cont’d)

• Dimensions of the Task Environment– Specific groups affecting the organization

• Competitors

• Customers who acquire an organization’s products or resources.

• Suppliers

• Regulators that control, legislate, or influence the organization’s policies or practices:

–regulatory agencies.

–interest groups.

• Strategic partners (allies) who are in a joint venture or partnership with the organization.

• Dimensions of the Task Environment– Specific groups affecting the organization

• Competitors

• Customers who acquire an organization’s products or resources.

• Suppliers

• Regulators that control, legislate, or influence the organization’s policies or practices:

–regulatory agencies.

–interest groups.

• Strategic partners (allies) who are in a joint venture or partnership with the organization.

The Internal EnvironmentThe Internal Environment

• Conditions and stakeholder forces within an organization– Owners– Board of directors are elected by the stockholders and are

charged with overseeing the general management of the firm to ensure that it is run in a way that best serves the stockholders’ interest.

– Employees – Physical work environment is the actual physical

environment of the organization and the work that people do.

• Conditions and stakeholder forces within an organization– Owners– Board of directors are elected by the stockholders and are

charged with overseeing the general management of the firm to ensure that it is run in a way that best serves the stockholders’ interest.

– Employees – Physical work environment is the actual physical

environment of the organization and the work that people do.

The Organization’s CultureThe Organization’s Culture

• The Importance of Organization Culture– Culture determines the overall “feel” of the organization,

although it may vary across different segments of the organization.

• Determinants of Organizational Culture– Organization’s founder (personal values and beliefs).– Symbols, stories, heroes, slogans, and ceremonies that

embody and personify the spirit of the organization.– Shared experiences that bond organizational members

together.

• The Importance of Organization Culture– Culture determines the overall “feel” of the organization,

although it may vary across different segments of the organization.

• Determinants of Organizational Culture– Organization’s founder (personal values and beliefs).– Symbols, stories, heroes, slogans, and ceremonies that

embody and personify the spirit of the organization.– Shared experiences that bond organizational members

together.

Organizational CultureOrganizational Culture

• Managing Organizational Culture– Understand the current culture to understand whether to

maintain or change it.– Reward and promote people whose behaviors are consistent

with desired cultural values.

• Changing Organizational Culture– Develop a clear idea of what kind of culture you want to

create.– Bring in outsiders to important managerial positions.– Adopt new slogans, stories, ceremonies, and purposely

break with tradition.

• Managing Organizational Culture– Understand the current culture to understand whether to

maintain or change it.– Reward and promote people whose behaviors are consistent

with desired cultural values.

• Changing Organizational Culture– Develop a clear idea of what kind of culture you want to

create.– Bring in outsiders to important managerial positions.– Adopt new slogans, stories, ceremonies, and purposely

break with tradition.

How Environments Affect How Environments Affect OrganizationsOrganizations

• Change and Complexity– Environmental change occurs in two ways:

• Degree to which change in environment is occurring• Degree of homogeneity or complexity of the

environment– Uncertainty is a driving force that influences

organizational decisions.

• Change and Complexity– Environmental change occurs in two ways:

• Degree to which change in environment is occurring• Degree of homogeneity or complexity of the

environment– Uncertainty is a driving force that influences

organizational decisions.

How Environments Affect How Environments Affect Organizations (cont’d)Organizations (cont’d)

• Competitive Forces– Porter’s Five Competitive Forces

• Threat of new entrants into the market• Competitive rivalry among present competitors• Threat of substitute products• Power of buyers• Power of suppliers

• Environmental Turbulence– Unexpected changes and upheavals in the

environment of an organization.

• Competitive Forces– Porter’s Five Competitive Forces

• Threat of new entrants into the market• Competitive rivalry among present competitors• Threat of substitute products• Power of buyers• Power of suppliers

• Environmental Turbulence– Unexpected changes and upheavals in the

environment of an organization.

How Organizations Respond toHow Organizations Respond toTheir Environments (cont’d)Their Environments (cont’d)

• Information Management in Organizations– A boundary spanner is an employee who accumulates

information through contacts outside the organization.– Environmental scanning – Information systems

• Strategic Response– Maintaining the status quo, altering the current strategy, or

adopting a new strategy.

• Mergers, Acquisitions, Alliances– Firms can combine (merge), purchase (acquisition), or form

new venture partnerships or alliances with another firm.

• Information Management in Organizations– A boundary spanner is an employee who accumulates

information through contacts outside the organization.– Environmental scanning – Information systems

• Strategic Response– Maintaining the status quo, altering the current strategy, or

adopting a new strategy.

• Mergers, Acquisitions, Alliances– Firms can combine (merge), purchase (acquisition), or form

new venture partnerships or alliances with another firm.

How Organizations Respond toHow Organizations Respond toTheir Environments (cont’d)Their Environments (cont’d)

• Organizational Design and Flexibility– An organization may adapt to its environmental conditions

by incorporating flexibility in its structural design.– Mechanistic firms versus organic firms

• Direct Influence of the Environment– An organization may attempt to change the nature of the

competitive conditions in its environment to suit its needs.– Pursuing new or changed relationships with suppliers,

customers, and regulators can alter the organization’s environment in a way that favors the organization.

• Organizational Design and Flexibility– An organization may adapt to its environmental conditions

by incorporating flexibility in its structural design.– Mechanistic firms versus organic firms

• Direct Influence of the Environment– An organization may attempt to change the nature of the

competitive conditions in its environment to suit its needs.– Pursuing new or changed relationships with suppliers,

customers, and regulators can alter the organization’s environment in a way that favors the organization.

The Environment and The Environment and Organizational EffectivenessOrganizational Effectiveness

• Models of Organizational Effectiveness– Systems resource approach– Internal processes approach focuses on the transformation

processes (production efficiencies).– Goal approach focuses on outputs (achieving organizational

goals).– Strategic constituencies approach focuses on feedback

(satisfying stakeholders).

• Models of Organizational Effectiveness– Systems resource approach– Internal processes approach focuses on the transformation

processes (production efficiencies).– Goal approach focuses on outputs (achieving organizational

goals).– Strategic constituencies approach focuses on feedback

(satisfying stakeholders).

The Ethical and Social EnvironmentThe Ethical and Social Environment

Fourhapter

Individual Ethics In OrganizationsIndividual Ethics In Organizations

• Ethics– An individual’s personal beliefs regarding what is right and

wrong or good and bad.

• Ethical Behavior– This behavior is in the eye of the beholder. However, it also

refers to behavior that conforms to generally accepted social norms.

• Examples of Unethical Behavior– Filing falsified or inflated business expense reports.

• Ethics– An individual’s personal beliefs regarding what is right and

wrong or good and bad.

• Ethical Behavior– This behavior is in the eye of the beholder. However, it also

refers to behavior that conforms to generally accepted social norms.

• Examples of Unethical Behavior– Filing falsified or inflated business expense reports.

Ethics in OrganizationsEthics in Organizations

• Managing Ethical Behavior– Must begin with top management which establishes the

organization’s culture and defines what will and will not be acceptable behavior.

– Training how to handle different ethical dilemmas.– Develop a written code of ethics– Individual issues

• Managing Ethical Behavior– Must begin with top management which establishes the

organization’s culture and defines what will and will not be acceptable behavior.

– Training how to handle different ethical dilemmas.– Develop a written code of ethics– Individual issues

Applying Ethical JudgmentsApplying Ethical Judgments

• Model for deciding whether or not a particular action or decision is ethical– Gather relevant factual information.– Determine the most appropriate moral values.– Make a judgment based on the rightness or wrongness of the

proposed activity or policy.

• Ethical Norms Affecting Actions– Utility—act optimizes what is best for its constituencies

(benefits only or primarily those who are directly involved)– Rights – Justice—act is consistent with what is considered fair– Caring

• Model for deciding whether or not a particular action or decision is ethical– Gather relevant factual information.– Determine the most appropriate moral values.– Make a judgment based on the rightness or wrongness of the

proposed activity or policy.

• Ethical Norms Affecting Actions– Utility—act optimizes what is best for its constituencies

(benefits only or primarily those who are directly involved)– Rights – Justice—act is consistent with what is considered fair– Caring

Social Responsibility and Social Responsibility and OrganizationsOrganizations

• Social Responsibility– The set of obligations (to behave responsibly) that an

organization has to protect and enhance the social context in which it functions.

• Areas of Social Responsibility– Stakeholders– The natural environment– The general social welfare

• Charitable contributions, support for social issues such as child labor and human rights

• Social Responsibility– The set of obligations (to behave responsibly) that an

organization has to protect and enhance the social context in which it functions.

• Areas of Social Responsibility– Stakeholders– The natural environment– The general social welfare

• Charitable contributions, support for social issues such as child labor and human rights

Approaches to Social Approaches to Social Responsibility (cont’d)Responsibility (cont’d)

• Obstructionist Stance– Do as little as possible to solve social or environmental

problems.

• Defensive Stance

• Accommodative Stance– Meet legal and ethical obligations and go beyond that in

selected cases.

• Proactive Stance

• Obstructionist Stance– Do as little as possible to solve social or environmental

problems.

• Defensive Stance

• Accommodative Stance– Meet legal and ethical obligations and go beyond that in

selected cases.

• Proactive Stance

Managing Social Responsibility:Managing Social Responsibility:Formal Organizational DimensionsFormal Organizational Dimensions

• Legal Compliance – Extent to which the organization conforms to local, state,

federal, and international laws.

• Ethical Compliance

• Philanthropic Giving

• Legal Compliance – Extent to which the organization conforms to local, state,

federal, and international laws.

• Ethical Compliance

• Philanthropic Giving

Managing Social Responsibility:Managing Social Responsibility:Informal Organizational Informal Organizational

DimensionsDimensions• Organizational Leadership and Culture

– Leadership practices and the culture of the organization can help define the social responsibility stance an organization and its members will adopt.

• Whistle Blowing– The organizational response to the disclosure by an

employee of illegal or unethical conduct on the part of others within the organization is indicative of the organization’s stance on social responsibility.

• Organizational Leadership and Culture– Leadership practices and the culture of the organization can

help define the social responsibility stance an organization and its members will adopt.

• Whistle Blowing– The organizational response to the disclosure by an

employee of illegal or unethical conduct on the part of others within the organization is indicative of the organization’s stance on social responsibility.

Evaluating Social ResponsibilityEvaluating Social Responsibility

• Concept of Control– Evaluating responses to questionable legal or ethical

conduct

• Corporate Social Audit– A formal and thorough analysis of the effectiveness of the

firm’s social performance conducted by a task force of high-level managers from within the firm.

– Requires the organization to clearly define its social goals, analyzes resources committed to the goals, determines how well goals are being met, and makes recommendations for areas needing additional attention.

• Concept of Control– Evaluating responses to questionable legal or ethical

conduct

• Corporate Social Audit– A formal and thorough analysis of the effectiveness of the

firm’s social performance conducted by a task force of high-level managers from within the firm.

– Requires the organization to clearly define its social goals, analyzes resources committed to the goals, determines how well goals are being met, and makes recommendations for areas needing additional attention.

The Global EnvironmentThe Global EnvironmentFive

hapter

The Meaning of International The Meaning of International BusinessBusiness

• Domestic Business– acquires all of its resources and sells all of its products or

services within a single country.

• International Business

• Multinational Business– transcends national boundaries and buys raw materials,

borrows money, and manufactures and sells its products in a world-wide marketplace.

• Global Business

• Domestic Business– acquires all of its resources and sells all of its products or

services within a single country.

• International Business

• Multinational Business– transcends national boundaries and buys raw materials,

borrows money, and manufactures and sells its products in a world-wide marketplace.

• Global Business

Trends in International BusinessTrends in International Business

• Economic Recovery– Industrialized nations in Europe and Asia have rebuilt their

economic systems that were devastated in WWII.

• Decreasing Isolation from Foreign Competition– U.S. consumer goods markets are open to overseas

competitors.

• Increasing Globalization of World Markets– Volume of international trade has increased more than

3,000% from 1960 to 2000.

• Economic Recovery– Industrialized nations in Europe and Asia have rebuilt their

economic systems that were devastated in WWII.

• Decreasing Isolation from Foreign Competition– U.S. consumer goods markets are open to overseas

competitors.

• Increasing Globalization of World Markets– Volume of international trade has increased more than

3,000% from 1960 to 2000.

Managing The Process of Managing The Process of GlobalizationGlobalization

• Exporting– Making a product in the firm’s domestic market and selling it

in another country.

• Importing– Bringing a good, service, or capital into a home country from

abroad.– Advantages and disadvantages

• Exporting– Making a product in the firm’s domestic market and selling it

in another country.

• Importing– Bringing a good, service, or capital into a home country from

abroad.– Advantages and disadvantages

Managing The Process of Managing The Process of Globalization (cont’d)Globalization (cont’d)

• Licensing– Advantages are increased profitability from licensing without

additional capital requirements, lower operational costs in foreign markets, and extended profitability from existing technologies.

– Disadvantages are inflexibility in the licensing arrangement, loss of profits from licensee failure, and licensing possibly helps competitors learn to compete.

• Strategic Alliance and Joint Ventures– Advantages are quick market entry, access to materials and

technology, and reduced risk.– Disadvantage is that shared ownership limits control and

profitability.

• Licensing– Advantages are increased profitability from licensing without

additional capital requirements, lower operational costs in foreign markets, and extended profitability from existing technologies.

– Disadvantages are inflexibility in the licensing arrangement, loss of profits from licensee failure, and licensing possibly helps competitors learn to compete.

• Strategic Alliance and Joint Ventures– Advantages are quick market entry, access to materials and

technology, and reduced risk.– Disadvantage is that shared ownership limits control and

profitability.

Managing The Process of Managing The Process of Globalization (cont’d)Globalization (cont’d)

• Direct Investment– Advantages are enhanced operational control, it allows use

of existing infrastructure, and no adaptation of in-country product or service is necessary.

– Disadvantages are complexity in managing a foreign operation, greater economic- and political-risk exposure, and greater uncertainty of business risk.

– Maquiladoras are light-assembly plants built in northern Mexico close to the U.S. border which are given special tax breaks by the Mexican government.

• Direct Investment– Advantages are enhanced operational control, it allows use

of existing infrastructure, and no adaptation of in-country product or service is necessary.

– Disadvantages are complexity in managing a foreign operation, greater economic- and political-risk exposure, and greater uncertainty of business risk.

– Maquiladoras are light-assembly plants built in northern Mexico close to the U.S. border which are given special tax breaks by the Mexican government.

The Structure of the Global The Structure of the Global EconomyEconomy

• Market Economies and Systems– Based on the private ownership of business and allows

market factors such as supply and demand to determine business strategy.

• Market Systems– Clusters of countries that engage in high levels of trade with

each other through the elimination of trade barriers such as quotas and tariffs.

• Market Economies and Systems– Based on the private ownership of business and allows

market factors such as supply and demand to determine business strategy.

• Market Systems– Clusters of countries that engage in high levels of trade with

each other through the elimination of trade barriers such as quotas and tariffs.

Market Economies and SystemsMarket Economies and Systems

• High Potential/High Growth Economies– Characteristics are underdeveloped and immature markets,

weak industrial base, weak currency, and poor consumers.– People’s Republic of China, India, Vietnam, Brazil, Russia.– Challenges to market development

• A lack of infrastructure for support operations.• Unfavorable policy changes affecting investments.

• Other Economies– Some economies defy classification due to their possession

of critical and valuable resources (e.g., oil-producing countries) or other social or political factors which distort their internal economies and markets.

– Challenges of other economies• Ethnic violence

• High Potential/High Growth Economies– Characteristics are underdeveloped and immature markets,

weak industrial base, weak currency, and poor consumers.– People’s Republic of China, India, Vietnam, Brazil, Russia.– Challenges to market development

• A lack of infrastructure for support operations.• Unfavorable policy changes affecting investments.

• Other Economies– Some economies defy classification due to their possession

of critical and valuable resources (e.g., oil-producing countries) or other social or political factors which distort their internal economies and markets.

– Challenges of other economies• Ethnic violence

Controls on International ManagementControls on International Management

• Key Concepts– Tariffs are collected on goods shipped across national

boundaries.– Quotas are limits placed on the number or value of goods

that can be traded as exports or imports.– Export restraint agreements are voluntary limits on the

volume or value of goods exported to or imported from another country.

• Key Concepts– Tariffs are collected on goods shipped across national

boundaries.– Quotas are limits placed on the number or value of goods

that can be traded as exports or imports.– Export restraint agreements are voluntary limits on the

volume or value of goods exported to or imported from another country.

The Cultural EnvironmentThe Cultural Environment

• Language– In Japanese the word “hai” can mean either “yes” or “I

understand.”– General Motors’ brand name “Nova” when “va” is

pronounced “ba” as “no va” in Spanish means “doesn’t go.”

• The Meaning of Colors– Green is popular in Muslim countries, yet it signifies death in

other countries.– Pink is associated with feminine characteristics in the U.S.;

yellow is the most feminine color in other countries.

• Language– In Japanese the word “hai” can mean either “yes” or “I

understand.”– General Motors’ brand name “Nova” when “va” is

pronounced “ba” as “no va” in Spanish means “doesn’t go.”

• The Meaning of Colors– Green is popular in Muslim countries, yet it signifies death in

other countries.– Pink is associated with feminine characteristics in the U.S.;

yellow is the most feminine color in other countries.

• Social Orientation

• Power Orientation

• Uncertainty Orientation

• Goal Orientation

• Time Orientation

• Social Orientation

• Power Orientation

• Uncertainty Orientation

• Goal Orientation

• Time Orientation

Individual Behaviors Across Individual Behaviors Across CulturesCultures

Competing in a Global EconomyCompeting in a Global Economy

• Globalization and Organization Size– Multinational Corporations (MNCs) adopt a global

perspective and compete in the global marketplace.– Medium-Size Businesses remain primarily domestic

organizations that may buy and sell abroad through trade specialists and compete with foreign companies in local markets.

– Small Businesses participate in global markets when they serve as local suppliers for MNCs.

• Globalization and Organization Size– Multinational Corporations (MNCs) adopt a global

perspective and compete in the global marketplace.– Medium-Size Businesses remain primarily domestic

organizations that may buy and sell abroad through trade specialists and compete with foreign companies in local markets.

– Small Businesses participate in global markets when they serve as local suppliers for MNCs.

Management ChallengesManagement Challengesin a Global Economyin a Global Economy

• Planning in a Global Economy– Requires a broad-based understanding of both environmental

issues and competitive issues.

• Organizing in a Global Economy– Involves addressing issues of creating and managing

operations on a world-wide scale.

• Leading in a Global Economy– Requires learning how to interact with and motivate persons of

different cultural, social, and economics backgrounds.

• Controlling– Involves integrating global operations that encompass time-

zone differences, cultural factors, and varying communication methods.

• Planning in a Global Economy– Requires a broad-based understanding of both environmental

issues and competitive issues.

• Organizing in a Global Economy– Involves addressing issues of creating and managing

operations on a world-wide scale.

• Leading in a Global Economy– Requires learning how to interact with and motivate persons of

different cultural, social, and economics backgrounds.

• Controlling– Involves integrating global operations that encompass time-

zone differences, cultural factors, and varying communication methods.

The Multicultural EnvironmentThe Multicultural EnvironmentSix

hapter

The Organization and CultureThe Organization and Culture

• Organizational Culture– Values, beliefs, behaviors, customs, and attitudes that help

the members of the organization understand what it stands for, how it does things, and what it considers important.

• Multiculturalism– The broad issues associated with differences in values,

beliefs, behaviors, customs, and attitudes held by people in different cultures.

• Diversity– When members of a group differ from one another along

dimensions such as age, gender, or ethnicity.

• Organizational Culture– Values, beliefs, behaviors, customs, and attitudes that help

the members of the organization understand what it stands for, how it does things, and what it considers important.

• Multiculturalism– The broad issues associated with differences in values,

beliefs, behaviors, customs, and attitudes held by people in different cultures.

• Diversity– When members of a group differ from one another along

dimensions such as age, gender, or ethnicity.

Dimensions of Diversity and Dimensions of Diversity and MulticulturalismMulticulturalism

• Age Distributions– Average age of the U.S. workforce is gradually increasing

and will continue to do so for the next several years.

• Gender– Females were 46% of the workforce in 1994.

• Ethnicity– The ethnic composition of the U.S. workforce will change

most with the increasing number of Hispanic workers and the decline in white workers.

• Age Distributions– Average age of the U.S. workforce is gradually increasing

and will continue to do so for the next several years.

• Gender– Females were 46% of the workforce in 1994.

• Ethnicity– The ethnic composition of the U.S. workforce will change

most with the increasing number of Hispanic workers and the decline in white workers.

Dimensions of Diversity and Dimensions of Diversity and Multiculturalism (cont’d)Multiculturalism (cont’d)

• Other Dimensions of Diversity– Workforce diversity is expected to increase due to diversity

in religious and political beliefs and viewpoints, lifestyles, and various other individual characteristics.

• Multicultural Differences– The increasing globalization of business and immigration

patterns will affect workforce diversity and present challenges to managers to successfully manage diversity.

• Other Dimensions of Diversity– Workforce diversity is expected to increase due to diversity

in religious and political beliefs and viewpoints, lifestyles, and various other individual characteristics.

• Multicultural Differences– The increasing globalization of business and immigration

patterns will affect workforce diversity and present challenges to managers to successfully manage diversity.

• Resource Acquisition Argument– Firms who manage diversity effectively will become known

among women and minorities as good places to work.

• Creativity Argument• System Flexibility Argument

– Firms must become flexible as a way of managing a diverse workforce, causing the overall organization to be more flexible.

• Cost Argument• Marketing Argument

– Firms with diverse workforces will be better able to understand different market segments than those with less diverse ones.

• Problem-Solving Argument

• Resource Acquisition Argument– Firms who manage diversity effectively will become known

among women and minorities as good places to work.

• Creativity Argument• System Flexibility Argument

– Firms must become flexible as a way of managing a diverse workforce, causing the overall organization to be more flexible.

• Cost Argument• Marketing Argument

– Firms with diverse workforces will be better able to understand different market segments than those with less diverse ones.

• Problem-Solving Argument

How Diversity and How Diversity and MulticulturalismMulticulturalism

Promote Competitive AdvantagePromote Competitive Advantage

Diversity and Competitive Diversity and Competitive AdvantageAdvantage

• Diversity promotes competitive advantage by:– increasing organizational systems’ flexibility.– bringing added creativity.– increasing the market scope of products.– broadening the resources acquisition basis.– adding a diversity of viewpoints to problem-

solving decision-making processes.– decreasing the cost of doing business.

• Diversity promotes competitive advantage by:– increasing organizational systems’ flexibility.– bringing added creativity.– increasing the market scope of products.– broadening the resources acquisition basis.– adding a diversity of viewpoints to problem-

solving decision-making processes.– decreasing the cost of doing business.

Multiculturalism and ConflictMulticulturalism and Conflict

• Sources of Conflict– Personnel actions being attributed to diversity

status.– Misunderstood, misinterpreted, or inappropriate

actions between people or groups.– Cultural differences in work hours, personal styles,

interpersonal relations, and conflict.

• Sources of Conflict– Personnel actions being attributed to diversity

status.– Misunderstood, misinterpreted, or inappropriate

actions between people or groups.– Cultural differences in work hours, personal styles,

interpersonal relations, and conflict.

Managing Diversity and Managing Diversity and Multiculturalism in OrganizationsMulticulturalism in Organizations

• Individual Strategies– Understanding the nature and meaning of diversity

and multiculturalism.– Developing empathy in understanding the

perspective of others.– Having a willingness to communicate and discuss

diversity and multiculturalism issues.

• Individual Strategies– Understanding the nature and meaning of diversity

and multiculturalism.– Developing empathy in understanding the

perspective of others.– Having a willingness to communicate and discuss

diversity and multiculturalism issues.

Managing Diversity and Managing Diversity and Multiculturalism in Organizations Multiculturalism in Organizations

(cont’d)(cont’d)• Organizational Approaches

– Organizational Policies• Actively seek a diverse and varied workforce.

• Positive responses to diversity problems.

• Mission statement of commitment to diversity.

– Diversity and Multicultural Training• Training that enables organization members to function in

a diverse and multicultural environment

– Organizational Culture

• Organizational Approaches– Organizational Policies

• Actively seek a diverse and varied workforce.

• Positive responses to diversity problems.

• Mission statement of commitment to diversity.

– Diversity and Multicultural Training• Training that enables organization members to function in

a diverse and multicultural environment

– Organizational Culture

Toward The Multicultural Toward The Multicultural OrganizationOrganization

• Basic Characteristics– Pluralism in which every organizational group

works to understand every other group.– Full structural integration – Full integration of the informal network that

removes barriers to entry and participation in the organization.

– Absence of prejudice and discrimination.– No gap in organizational identification – Low levels of intergroup conflict.

• Basic Characteristics– Pluralism in which every organizational group

works to understand every other group.– Full structural integration – Full integration of the informal network that

removes barriers to entry and participation in the organization.

– Absence of prejudice and discrimination.– No gap in organizational identification – Low levels of intergroup conflict.

Basic Elements of Planning and Decision Making

Basic Elements of Planning and Decision Making

Sevenhapter

Decision Making and the Planning Decision Making and the Planning ProcessProcess

• The Planning Process• The Planning Process

Strategic goals Strategic plans

Tactical goals

Operational goals Operational plans

The organization’s mission

The Environmental Context

• Purpose • Premises • Values • Directions

Tactical plans

Organizational GoalsOrganizational Goals

• Purposes of Goals– Provide guidance and a unified direction for people

in the organization.– Have a strong affect on the quality of other

aspects of planning.– Serve as a source of motivation for employees of

the organization.

• Purposes of Goals– Provide guidance and a unified direction for people

in the organization.– Have a strong affect on the quality of other

aspects of planning.– Serve as a source of motivation for employees of

the organization.

Kinds of GoalsKinds of Goals

• By Level– Mission statement is a statement of an organization’s

fundamental purpose.– Strategic goals – Tactical goals are set by and for middle managers; their

focus is on how to operationalize actions to strategic goals.– Operational goals

• By Area– Goals set for the different functional areas of the

organization.

• By Time Frame– Goals may be set for long-term, intermediate-term, or short-

term time frames and for explicit time frames or open-ended.

• By Level– Mission statement is a statement of an organization’s

fundamental purpose.– Strategic goals – Tactical goals are set by and for middle managers; their

focus is on how to operationalize actions to strategic goals.– Operational goals

• By Area– Goals set for the different functional areas of the

organization.

• By Time Frame– Goals may be set for long-term, intermediate-term, or short-

term time frames and for explicit time frames or open-ended.

Responsibilities of Setting GoalsResponsibilities of Setting Goals

• Who Sets Goals?– All managers should be involved in the goal-setting process.– Managerial responsibility for goal setting should correspond

to the manager’s level in the organization.

• Managing Multiple Goals– Optimizing allows managers to balance and reconcile

inconsistent or conflicting goals.

• Who Sets Goals?– All managers should be involved in the goal-setting process.– Managerial responsibility for goal setting should correspond

to the manager’s level in the organization.

• Managing Multiple Goals– Optimizing allows managers to balance and reconcile

inconsistent or conflicting goals.

Kinds of Organizational PlansKinds of Organizational Plans

• Strategic Plans– A general plan outlining resource allocation, priorities, and

action steps to achieve strategic goals. The plans are set by and for top management.

• Tactical Plans

• Operational Plans

• Strategic Plans– A general plan outlining resource allocation, priorities, and

action steps to achieve strategic goals. The plans are set by and for top management.

• Tactical Plans

• Operational Plans

Time Frames for PlanningTime Frames for Planning

• The Time Dimension of Planning– is based on the principle of commitment. Planning must

provide sufficient time to fulfill the managerial commitments involved.

• Long-range Plans

• Intermediate Plans– usually cover from 1 to 5 years and parallel tactical plans.– are the principal focus of organizational planning efforts.

• Short-range Plans

• The Time Dimension of Planning– is based on the principle of commitment. Planning must

provide sufficient time to fulfill the managerial commitments involved.

• Long-range Plans

• Intermediate Plans– usually cover from 1 to 5 years and parallel tactical plans.– are the principal focus of organizational planning efforts.

• Short-range Plans

Responsibilities for PlanningResponsibilities for Planning

• Planning Staff– Planning staff personnel gather information, coordinate

planning activities, and take a broader view than individual managers.

• Planning Task Force– Created when the organization wants a special circumstance

addressed.

• Board of Directors– Establishes corporate mission and strategy.

• Chief Executive Officer– Usually serves as president or chair of the board of directors.

Has a major role in the planning process and implements the strategy.

• Planning Staff– Planning staff personnel gather information, coordinate

planning activities, and take a broader view than individual managers.

• Planning Task Force– Created when the organization wants a special circumstance

addressed.

• Board of Directors– Establishes corporate mission and strategy.

• Chief Executive Officer– Usually serves as president or chair of the board of directors.

Has a major role in the planning process and implements the strategy.

Responsibilities for Planning Responsibilities for Planning (cont’d)(cont’d)

• Executive Committee– Composed of top executives within the organization. Meet

regularly for input to the CEO and review strategic plans.

• Line Management– Persons with formal authority and responsibility for

management of the organization. Help to formulate strategy by providing information.

• Executive Committee– Composed of top executives within the organization. Meet

regularly for input to the CEO and review strategic plans.

• Line Management– Persons with formal authority and responsibility for

management of the organization. Help to formulate strategy by providing information.

Types of Operational PlansTypes of Operational Plans

Plan Description

Single-use plan Developed to carry out a course of action not likely to be repeated in the future

Program Single-use plan for a large set of activities

Project Single-use plan of less scope and complexity than a program

Standing plan Developed for activities that recur regularly over a pe-riod of time

Policy Standing plan specifying the organization’s general response to a designated problem or situation

Standard operating procedure Standing plan outlining steps to be followed in particu-lar circumstances

Rules and regulations Standing plans describing exactly how specific activi-ties are to be carried out

Barriers to Goal Setting and Barriers to Goal Setting and PlanningPlanning

• As part of managing the goal-setting and planning process, managers must understand the barriers that can disrupt them. Managers must also know how to overcome them.

• As part of managing the goal-setting and planning process, managers must understand the barriers that can disrupt them. Managers must also know how to overcome them.

Major Barriers Inappropriate goals Improper reward system Dynamic and complex environment Reluctance to establish goals Resistance to change Constraints

Overcoming the Barriers Understanding the purposes of goals and planning Communication and participation Consistency, revision, and updating Effective reward systems

Using Goals to Implement Plans:Using Goals to Implement Plans:The Effectiveness of Formal Goal The Effectiveness of Formal Goal

SettingSetting• Strengths (Success)

– Improved employee motivation

– Enhances communication

– Objective performance appraisals

– Focuses attention on appropriate goals

– Provides a systematic management philosophy

• Strengths (Success)– Improved employee

motivation

– Enhances communication

– Objective performance appraisals

– Focuses attention on appropriate goals

– Provides a systematic management philosophy

• Weaknesses (Failure)– Poor implementation of the

goal setting process

– Lack of top-management support for goal setting

– Delegation of the goal-setting process to lower levels

– Overemphasis on quantitative goals

– Too much paperwork and record keeping

• Weaknesses (Failure)– Poor implementation of the

goal setting process

– Lack of top-management support for goal setting

– Delegation of the goal-setting process to lower levels

– Overemphasis on quantitative goals

– Too much paperwork and record keeping

Managing Strategy and Strategic PlanningManaging Strategy and Strategic Planning

Eighthapter

The Nature of Strategic The Nature of Strategic ManagementManagement

• Strategy

• Strategic Management– A comprehensive and ongoing management process aimed

at formulating and implementing effective strategies which align the organization with its environment to achieve major organizational goals.

• Effective Strategies– Strategies that promote a superior alignment between the

organization and its environment and the achievement of its goals.

• Strategy

• Strategic Management– A comprehensive and ongoing management process aimed

at formulating and implementing effective strategies which align the organization with its environment to achieve major organizational goals.

• Effective Strategies– Strategies that promote a superior alignment between the

organization and its environment and the achievement of its goals.

Components of StrategyComponents of Strategy

• Distinctive Competence– Something an organization does exceptionally well.

• Scope– Range of markets in which an organization will compete.

• Resource Deployment– How an organization will distribute its resources across the

areas in which it competes.

• Distinctive Competence– Something an organization does exceptionally well.

• Scope– Range of markets in which an organization will compete.

• Resource Deployment– How an organization will distribute its resources across the

areas in which it competes.

Types of Strategic AlternativesTypes of Strategic Alternatives

• Business-level Strategy

• Corporate-level Strategy– The set of strategic alternatives that an organization chooses

from as it manages its operations simultaneously across several industries and several markets.

• Business-level Strategy

• Corporate-level Strategy– The set of strategic alternatives that an organization chooses

from as it manages its operations simultaneously across several industries and several markets.

Strategy FormulationStrategy Formulation and Implementation and Implementation

• Strategy Formulation– The set of processes involved in creating or determining the

organization’s strategies

• Strategy Implementation– The methods by which strategies are operationalized or

executed within the organization

• Deliberate Strategy– A plan, chosen and implemented to support specific goals,

that is the result of a rational, systematic, and planned process of strategy formulation and implementation.

• Emergent Strategy– A pattern of action that develops over time, in the absence of

goals or missions, or despite goals and missions.

• Strategy Formulation– The set of processes involved in creating or determining the

organization’s strategies

• Strategy Implementation– The methods by which strategies are operationalized or

executed within the organization

• Deliberate Strategy– A plan, chosen and implemented to support specific goals,

that is the result of a rational, systematic, and planned process of strategy formulation and implementation.

• Emergent Strategy– A pattern of action that develops over time, in the absence of

goals or missions, or despite goals and missions.

Using SWOT Analysis toUsing SWOT Analysis to Formulate Strategy Formulate Strategy

• Evaluating Organizational Strengths– Organizational strengths

• are skills and abilities enabling an organization to conceive of and implement strategies.

– Common organizational strengths

– Distinctive competencies• are useful for competitive advantage and superior performance.

– Imitation of distinctive competencies

• Evaluating Organizational Strengths– Organizational strengths

• are skills and abilities enabling an organization to conceive of and implement strategies.

– Common organizational strengths

– Distinctive competencies• are useful for competitive advantage and superior performance.

– Imitation of distinctive competencies

Using SWOT Analysis to Formulate Using SWOT Analysis to Formulate Strategy (cont’d)Strategy (cont’d)

• Evaluating Organizational Strengths (cont’d)– Sustained competitive advantage

• occurs when a distinctive competence cannot be easily duplicated.

– Strategic imitation is difficult when:• Distinctive competence is based on unique historical

circumstances.• The competence is based on a complex phenomenon, such as

organizational culture.

• Evaluating Organizational Strengths (cont’d)– Sustained competitive advantage

• occurs when a distinctive competence cannot be easily duplicated.

– Strategic imitation is difficult when:• Distinctive competence is based on unique historical

circumstances.• The competence is based on a complex phenomenon, such as

organizational culture.

Using SWOT Analysis to Formulate Using SWOT Analysis to Formulate Strategy (cont’d)Strategy (cont’d)

• Evaluating Organizational Weaknesses– Organizational weaknesses are skills and capabilities that do

not enable an organization to choose and implement strategies that support its mission.

– Weaknesses can be overcome

– Competitive disadvantage is a situation in which an organization fails to implement strategies being implemented by competitors.

• Evaluating Organizational Weaknesses– Organizational weaknesses are skills and capabilities that do

not enable an organization to choose and implement strategies that support its mission.

– Weaknesses can be overcome

– Competitive disadvantage is a situation in which an organization fails to implement strategies being implemented by competitors.

Using SWOT Analysis to Formulate Using SWOT Analysis to Formulate Strategy (cont’d)Strategy (cont’d)

• Evaluating an Organization’s Opportunities and Threats– Organizational opportunities are areas in the organization’s

environment that may generate high performance.– Organizational threats are areas in the organization’s

environment that make it difficult for the organization to achieve high performance.

• Evaluating an Organization’s Opportunities and Threats– Organizational opportunities are areas in the organization’s

environment that may generate high performance.– Organizational threats are areas in the organization’s

environment that make it difficult for the organization to achieve high performance.

Formulating Business-Level Formulating Business-Level StrategiesStrategies

• Porter’s Generic Strategies– Differentiation strategy

• An organization seeks to distinguish itself from competitors through the quality of its products or services.

– Overall cost leadership strategy

– Focus strategy• An organization concentrates on a specific regional market,

product line, or group of buyers.

• Porter’s Generic Strategies– Differentiation strategy

• An organization seeks to distinguish itself from competitors through the quality of its products or services.

– Overall cost leadership strategy

– Focus strategy• An organization concentrates on a specific regional market,

product line, or group of buyers.

The Miles and Snow TopologyThe Miles and Snow Topology

Strategy Type Definition Examples

Prospector Is innovative and growth oriented, searches for new markets and new growth opportunities, encourages risk taking

Amazon.com 3M Rubbermaid

Defender Protects current markets, main-tains stable growth, serves current customers

Bic eBay.com Mrs. Fields

Analyzer Maintains current markets and current customer satisfaction with moderate emphasis on innovation

Dupont IBM Yahoo

Reactor No clear strategy, reacts to changes in the environment, drifts with events

International Harvester (in the 1960s and 1970s) Joseph Schlitz Brewing Co. W. T. Grant

Implementing Business-Level Implementing Business-Level StrategiesStrategies

• Implementing Porter’s Generic Strategies– Differentiation Strategy

– Overall Cost Leadership Strategy• To support cost leadership, marketing and sales are likely to

focus on simple product attributes and how these product attributes meet customer needs in a low-cost and effective manner.

– Focus Strategy• This strategy is implemented via the same approaches used for

differentiation and cost leadership, depending on which one (differentiation or cost leadership) is the proper basis for competing in or for a specific market segment, product category, or group buyers.

• Implementing Porter’s Generic Strategies– Differentiation Strategy

– Overall Cost Leadership Strategy• To support cost leadership, marketing and sales are likely to

focus on simple product attributes and how these product attributes meet customer needs in a low-cost and effective manner.

– Focus Strategy• This strategy is implemented via the same approaches used for

differentiation and cost leadership, depending on which one (differentiation or cost leadership) is the proper basis for competing in or for a specific market segment, product category, or group buyers.

Implementing Business-LevelImplementing Business-LevelStrategies (cont’d)Strategies (cont’d)

• Implementing Miles and Snow’s Strategies– Prospector Strategy

• An organization using this strategy must encourage creativity to seek out new market opportunities and to take risks.

– Defender Strategy• To support this strategy, an organization will focus on

defending its current markets by lowering its costs and/or improving the performance of current products.

– Analyzer Strategy• Organizations using this strategy incorporate elements of both

the prospector and the defender strategies in an attempt to maintain current business and to be somewhat innovative.

• Implementing Miles and Snow’s Strategies– Prospector Strategy

• An organization using this strategy must encourage creativity to seek out new market opportunities and to take risks.

– Defender Strategy• To support this strategy, an organization will focus on

defending its current markets by lowering its costs and/or improving the performance of current products.

– Analyzer Strategy• Organizations using this strategy incorporate elements of both

the prospector and the defender strategies in an attempt to maintain current business and to be somewhat innovative.

Formulating Corporate-Level Formulating Corporate-Level StrategiesStrategies

• Strategic Business Units– Each business or group of businesses within an organization

engaged in serving the same markets, customers, or products.

• Diversification– The number of businesses an organization is engaged in and

the extent to which these businesses are related to one another

• Single Product Strategy

• Strategic Business Units– Each business or group of businesses within an organization

engaged in serving the same markets, customers, or products.

• Diversification– The number of businesses an organization is engaged in and

the extent to which these businesses are related to one another

• Single Product Strategy

Related DiversificationRelated Diversification

• Related Diversification– A strategy in which an organization operates in several

different businesses, industries, or markets that are somehow linked.

• Bases of Relatedness in ImplementingRelated Diversification

• Related Diversification– A strategy in which an organization operates in several

different businesses, industries, or markets that are somehow linked.

• Bases of Relatedness in ImplementingRelated Diversification

Basis of Relatedness Examples

Similar technology Phillips, Boeing, Westinghouse, Compaq

Common distribution and marketing skills RJR Nabisco, Phillip Morris, Procter & Gamble

Common name brand and reputation Disney, Universal

Common customers Merck, IBM, AMF-Head

Related Diversification (cont’d)Related Diversification (cont’d)

• Advantages of Related Diversification– Reduces organization’s dependence on any one of its

business activities and thus reduces economic risk.– Reduces overhead costs associated with managing any one

business through economies of scale and economies of scope.

– Allows an organization to exploit its strengths and capabilities in more than one business.

– Synergy exists among a set of businesses

• Advantages of Related Diversification– Reduces organization’s dependence on any one of its

business activities and thus reduces economic risk.– Reduces overhead costs associated with managing any one

business through economies of scale and economies of scope.

– Allows an organization to exploit its strengths and capabilities in more than one business.

– Synergy exists among a set of businesses

Formulating Corporate-LevelFormulating Corporate-LevelStrategies (cont’d)Strategies (cont’d)

• Unrelated Diversification– A strategy in which an organization operates multiple

businesses that are not logically associated with one another.

• Advantages– Stable corporate-level performance over time due to business

cycle differences among the multiple businesses.

• Disadvantages– Firms with unrelated strategies fail to exploit important

synergies, putting them at a competitive disadvantage to firms with related diversification strategies.

• Unrelated Diversification– A strategy in which an organization operates multiple

businesses that are not logically associated with one another.

• Advantages– Stable corporate-level performance over time due to business

cycle differences among the multiple businesses.

• Disadvantages– Firms with unrelated strategies fail to exploit important

synergies, putting them at a competitive disadvantage to firms with related diversification strategies.

Implementing Corporate-Level Implementing Corporate-Level StrategiesStrategies

• Becoming a Diversified Firm– Internal Development of New Products

– Replacement of Suppliers and Customers• Backward Vertical Integration

– Beginning a business that furnishes resources previously handled by a supplier.

• Forward Vertical Integration

• Becoming a Diversified Firm– Internal Development of New Products

– Replacement of Suppliers and Customers• Backward Vertical Integration

– Beginning a business that furnishes resources previously handled by a supplier.

• Forward Vertical Integration

Implementing Corporate-LevelImplementing Corporate-LevelStrategies (cont’d)Strategies (cont’d)

• Becoming a Diversified Firm– Merger and Acquisitions

• A merger is the purchase of one firm by another firm of approximately the same size.

• An acquisition – Purposes of Mergers and Acquisitions

• To acquire complementary products or services linked by a common technology and common customers.

• To create or exploit synergies that reduce the combined organizations’ costs of doing business to increase revenues.

• Becoming a Diversified Firm– Merger and Acquisitions

• A merger is the purchase of one firm by another firm of approximately the same size.

• An acquisition – Purposes of Mergers and Acquisitions

• To acquire complementary products or services linked by a common technology and common customers.

• To create or exploit synergies that reduce the combined organizations’ costs of doing business to increase revenues.

Managing DiversificationManaging Diversification

• Major Tools for Managing Diversification– Organization structure

• Detailed discussion of organization structure is contained inChapter 12.

– Portfolio management techniques• Methods that diversified organizations use to make decisions

about what businesses to engage in and how to manage these multiple businesses to maximize corporate performance.

– Two important portfolio management techniques are the BCG Matrix and the GE Business Screen.

• Major Tools for Managing Diversification– Organization structure

• Detailed discussion of organization structure is contained inChapter 12.

– Portfolio management techniques• Methods that diversified organizations use to make decisions

about what businesses to engage in and how to manage these multiple businesses to maximize corporate performance.

– Two important portfolio management techniques are the BCG Matrix and the GE Business Screen.

Managing Diversification (cont’d)Managing Diversification (cont’d)

• BCG Matrix– A method of evaluating businesses relative to the growth rate

of their market and the organization’s share of the market.– The matrix classifies the types of businesses that a

diversified organization can engage as:• “Dogs”—have small market shares and no growth prospects.• “Cash cows”• “Question marks”—have small market shares in quickly

growing markets.• “Stars”

• BCG Matrix– A method of evaluating businesses relative to the growth rate

of their market and the organization’s share of the market.– The matrix classifies the types of businesses that a

diversified organization can engage as:• “Dogs”—have small market shares and no growth prospects.• “Cash cows”• “Question marks”—have small market shares in quickly

growing markets.• “Stars”

Managing DiversificationManaging Diversification

• GE Business Screen– A method of evaluating business in a diversified portfolio

along two dimensions, each of which contains multiple factors

– In general, the more attractive the industry and the more competitive a business is, the more resources an organization should invest in that business.

• GE Business Screen– A method of evaluating business in a diversified portfolio

along two dimensions, each of which contains multiple factors

– In general, the more attractive the industry and the more competitive a business is, the more resources an organization should invest in that business.

International and Global International and Global StrategiesStrategies

• Sources of competitive advantage– Location efficiencies

• Allow companies to locate facilities wherever they can best obtain a cost or differentiation advantage.

– Economies of scale

.– Economies of scope

• Lower production costs per unit by sharing expenses across broader product lines.

• Sources of competitive advantage– Location efficiencies

• Allow companies to locate facilities wherever they can best obtain a cost or differentiation advantage.

– Economies of scale

.– Economies of scope

• Lower production costs per unit by sharing expenses across broader product lines.

Strategic Alternatives for Strategic Alternatives for International BusinessInternational Business

• Home replication strategy– Apply the distinctive competences they developed in their home

market to the foreign markets that they enter.

• Multidomestic strategy– Used by firms that manage a portfolio of international business

as relatively autonomous and independent units.

• Global strategy– Companies doing exactly the opposite of those using a

multidomestic strategy (they are standardizing across all countries).

• Transnational strategy– Pursue both centralization and decentralization at the same

time, using whichever approach makes more sense in the particular circumstance.

• Home replication strategy– Apply the distinctive competences they developed in their home

market to the foreign markets that they enter.

• Multidomestic strategy– Used by firms that manage a portfolio of international business

as relatively autonomous and independent units.

• Global strategy– Companies doing exactly the opposite of those using a

multidomestic strategy (they are standardizing across all countries).

• Transnational strategy– Pursue both centralization and decentralization at the same

time, using whichever approach makes more sense in the particular circumstance.

Managing Decision Making and Problem Solving

Managing Decision Making and Problem Solving

Ninehapter

The Nature of Decision MakingThe Nature of Decision Making

• Decision Making

• Decision-Making Process– The process of recognizing and defining the nature of a

decision situation, identifying alternatives, choosing the “best” alternative, and putting it into practice.

– An effective decision is one that optimizes some set of factors such as profits, sales, employee welfare, and market share.

– Managers make decisions about both problems and opportunities.

• Decision Making

• Decision-Making Process– The process of recognizing and defining the nature of a

decision situation, identifying alternatives, choosing the “best” alternative, and putting it into practice.

– An effective decision is one that optimizes some set of factors such as profits, sales, employee welfare, and market share.

– Managers make decisions about both problems and opportunities.

Types of DecisionsTypes of Decisions

• Programmed Decisions– A decision that is a fairly structured decision or recurs

with some frequency or both.

• Nonprogrammed decisions– A decision that is relatively unstructured and occurs much

less often a programmed decision.

• Programmed Decisions– A decision that is a fairly structured decision or recurs

with some frequency or both.

• Nonprogrammed decisions– A decision that is relatively unstructured and occurs much

less often a programmed decision.

Decision-Making ConditionsDecision-Making Conditions

• Decision Making Under Certainty– A condition in which the decision maker knows with

reasonable certainty what the alternatives are and what conditions are associated with each alternative.

• Decision Making Under Risk

• Decision Making Under Uncertainty– A condition in which the decision maker does not know all

the alternatives, the risks associated with each, or the consequences of each alternative.

• Decision Making Under Certainty– A condition in which the decision maker knows with

reasonable certainty what the alternatives are and what conditions are associated with each alternative.

• Decision Making Under Risk

• Decision Making Under Uncertainty– A condition in which the decision maker does not know all

the alternatives, the risks associated with each, or the consequences of each alternative.

Steps in the Rational Steps in the Rational Decision-Making ProcessDecision-Making Process

Step Detail Example

1. Recognizing and defining the decision situation

Some stimulus indicates that a decision must be made. The stimulus may be positive or negative.

A plant manager sees that employee turnover has in-creased by 5 percent.

2. Identifying alterna-tives

Both obvious and creative alternatives are desired. In general, the more important the decision, the more alterna-tives should be considered.

The plant manager can in-crease wages, increase bene-fits, or change hiring stan-dards.

3. Evaluating alterna-tives

Each alternative is evaluated to determine its feasibility, its satisfactoriness, and its consequences.

Increasing benefits may not be feasible. Increasing wages and changing hiring standards may satisfy all conditions.

Steps in the Rational Steps in the Rational Decision-Making Process (cont’d)Decision-Making Process (cont’d)

Step Detail Example

4. Selecting the best alternative

Consider all situational factors, and choose the alternative that best fits the manager’s situation.

Changing hiring standards will take an extended period of time to cut turnover, so increase wages.

5. Implementing the chosen alternative

The chosen alternative is implemented into the organizational system.

The plant manager may need permission from corporate headquarters. The human resource department establishes a new wage structure.

6. Following up and evaluating the results

At some time in the future, the manager should ascertain the extent to which the alternative chosen in step 4 and implemented in step 5 has worked.

The plant manager notes that, six months later, turnover has dropped to its previous level.

Factors that Prevent RationalityFactors that Prevent Rationality

• Lack of Consensus– there must be a general agreement of the definition of

problems, decisions and decision-making goals at the beginning

• Unclear Means-end Relations

• Noisy Environment

• Lack of Consensus– there must be a general agreement of the definition of

problems, decisions and decision-making goals at the beginning

• Unclear Means-end Relations

• Noisy Environment

Behavioral Aspects ofBehavioral Aspects ofDecision MakingDecision Making

• Bounded Rationality– The concept that decision makers are limited by their values

and unconscious reflexes, skills, and habits.

• Satisficing– The tendency to search for alternatives only until one is

found that meets some minimum standard of sufficiency to resolve the problem.

• Coalition

• Bounded Rationality– The concept that decision makers are limited by their values

and unconscious reflexes, skills, and habits.

• Satisficing– The tendency to search for alternatives only until one is

found that meets some minimum standard of sufficiency to resolve the problem.

• Coalition

Behavioral Aspects ofBehavioral Aspects ofDecision Making (cont’d)Decision Making (cont’d)

• Intuition– An innate belief about something without conscious

consideration.

• Escalation of Commitment– A decision maker is staying with a decision even when it

appears to be wrong.

• Risk Propensity– The extent to which a decision maker is willing to gamble

when making a decision.

• Intuition– An innate belief about something without conscious

consideration.

• Escalation of Commitment– A decision maker is staying with a decision even when it

appears to be wrong.

• Risk Propensity– The extent to which a decision maker is willing to gamble

when making a decision.

Behavioral Aspects ofBehavioral Aspects ofDecision Making (cont’d)Decision Making (cont’d)

• Risk Propensity– The extent to which a decision maker is willing to gamble

when making a decision.

• Ethics and Decision Making– Individual ethics (personal beliefs about right and wrong

behavior) combine with the organization’s ethics to create managerial ethics.

– Components of managerial ethics

• Risk Propensity– The extent to which a decision maker is willing to gamble

when making a decision.

• Ethics and Decision Making– Individual ethics (personal beliefs about right and wrong

behavior) combine with the organization’s ethics to create managerial ethics.

– Components of managerial ethics

Group and Team Decision MakingGroup and Team Decision Makingin Organizationsin Organizations

• Forms of Group Decision Making– Interacting groups or teams

• are the most common form of decision-making groups which consists of an existing group or newly formed team interacting and then making a decision.

– Delphi groups• are sometimes used for developing a consensus of expert

opinion from a panel of experts who individually contribute through a moderator.

– Nominal groups• are a structured technique designed to generate creative and

innovative ideas through the individual contributions of alternatives that are winnowed down through a series of rank-ordering of the alternatives to reach a decision.

• Forms of Group Decision Making– Interacting groups or teams

• are the most common form of decision-making groups which consists of an existing group or newly formed team interacting and then making a decision.

– Delphi groups• are sometimes used for developing a consensus of expert

opinion from a panel of experts who individually contribute through a moderator.

– Nominal groups• are a structured technique designed to generate creative and

innovative ideas through the individual contributions of alternatives that are winnowed down through a series of rank-ordering of the alternatives to reach a decision.

Advantages and Disadvantages ofAdvantages and Disadvantages ofGroup and Team Decision MakingGroup and Team Decision Making

Advantages Disadvantages

1. More information and knowledge are available.

2. More alternatives are likely to be generated.

3. More acceptance of the final decision is likely.

4. Enhanced communication of the decision may result.

5. Better decisions generally emerge.

1. The process takes longer than indi-vidual decision making, so it is cost-lier.

2. Compromise decisions resulting from indecisiveness may emerge.

3. One person may dominate the group.

4. Groupthink may occur.

Managing Group and Team Managing Group and Team Decision-Making ProcessesDecision-Making Processes

• Managers Can Promote the Effectiveness of Group and Team Decision Making– Being aware of the pros and cons of having a group or team

make a decision.– Setting deadlines for when decisions must be made.– Avoid problems with dominance by managing group

membership.– Have each group member individually critically evaluate all

alternatives.– As a manager, do not make your position known too early.– Appoint a group member to be a “devil’s advocate.”– Hold a follow-up meeting to recheck the decision.

• Managers Can Promote the Effectiveness of Group and Team Decision Making– Being aware of the pros and cons of having a group or team

make a decision.– Setting deadlines for when decisions must be made.– Avoid problems with dominance by managing group

membership.– Have each group member individually critically evaluate all

alternatives.– As a manager, do not make your position known too early.– Appoint a group member to be a “devil’s advocate.”– Hold a follow-up meeting to recheck the decision.

Basic Elements of OrganizingBasic Elements of Organizing

Elevenhapter

The Elements OrganizingThe Elements Organizing

• Organizing

• Organization Structure– The set of building blocks that can be used to configure an

organization.

• Organizing

• Organization Structure– The set of building blocks that can be used to configure an

organization.

Designing JobsDesigning Jobs

• Job Design– The determination of an individual’s work-related

responsibilities.

• Job Specialization (Division of Labor)– The degree to which the overall task of the organization is

broken down and divided into smaller component parts.– Benefits of Specialization

• Workers can become proficient at a task.• Transfer time between tasks is decreased.

– Limitations of Specialization

• Job Design– The determination of an individual’s work-related

responsibilities.

• Job Specialization (Division of Labor)– The degree to which the overall task of the organization is

broken down and divided into smaller component parts.– Benefits of Specialization

• Workers can become proficient at a task.• Transfer time between tasks is decreased.

– Limitations of Specialization

Adam Smith’s ExampleAdam Smith’s Exampleof Job Specializationof Job Specialization

Making a pin (nail) requires 18 tasks

1 worker doing all 18 tasks might make 20 pins (nails) a day.

20 workers = (20 x 20) = 400 pins______________________________

With specialization:

20 workers make 100,000 pins a day.1 worker = 5,000 pins

20 pins vs. 5,000 pins per worker

Alternatives to SpecializationAlternatives to Specialization

• Job Rotation– Systematically moving employees from one job to another in

an attempt to reduce employee boredom. Most frequent use today is as a training device for skills and flexibility.

• Job Enlargement– An increase in the total number of tasks workers perform.

• Job Enrichment– Increasing both the number of tasks the worker does and the

control the worker has over the job.

• Job Rotation– Systematically moving employees from one job to another in

an attempt to reduce employee boredom. Most frequent use today is as a training device for skills and flexibility.

• Job Enlargement– An increase in the total number of tasks workers perform.

• Job Enrichment– Increasing both the number of tasks the worker does and the

control the worker has over the job.

Alternatives to Specialization Alternatives to Specialization (cont’d)(cont’d)

• Job Characteristics Approach:– Core Dimensions

• Skill variety—the number of tasks a person does in a job.• Task identity • Task significance—the perceived importance of the task.• Autonomy• Feedback— the extent to which the worker knows how well the

job is being performed.– Growth-Need Strength

• The desire for some people to grow, develop, and expand their capabilities that is their response to the core dimensions.

• Work Teams– An alternative to job specialization that allows the entire

group to design the work system it will use to perform an interrelated set of tasks.

• Job Characteristics Approach:– Core Dimensions

• Skill variety—the number of tasks a person does in a job.• Task identity • Task significance—the perceived importance of the task.• Autonomy• Feedback— the extent to which the worker knows how well the

job is being performed.– Growth-Need Strength

• The desire for some people to grow, develop, and expand their capabilities that is their response to the core dimensions.

• Work Teams– An alternative to job specialization that allows the entire

group to design the work system it will use to perform an interrelated set of tasks.

Grouping Jobs: Grouping Jobs: DepartmentalizationDepartmentalization

• Departmentalization

• Rationale for Departmentalization– Organizational growth exceeds the owner-manager’s

capacity to personally supervise all of the organization. – Additional managers are employed and assigned

specific employees to supervise.

• Departmentalization

• Rationale for Departmentalization– Organizational growth exceeds the owner-manager’s

capacity to personally supervise all of the organization. – Additional managers are employed and assigned

specific employees to supervise.

Grouping Jobs: Grouping Jobs: Departmentalization (cont’d)Departmentalization (cont’d)

• Advantages– Each department can be

staffed by functional-area experts.

– Supervision is facilitated in that managers only need be familiar with a narrow set of skills.

• Advantages– Each department can be

staffed by functional-area experts.

– Supervision is facilitated in that managers only need be familiar with a narrow set of skills.

• Disadvantages– Decision making becomes

slow and bureaucratic.– Employees narrow their

focus to the department and lose sight of organizational goals/ issues.

• Disadvantages– Decision making becomes

slow and bureaucratic.– Employees narrow their

focus to the department and lose sight of organizational goals/ issues.

• Functional Departmentalization– Is the grouping of jobs involving the same or similar

activities.

• Functional Departmentalization– Is the grouping of jobs involving the same or similar

activities.

Product Departmentalization Product Departmentalization FormForm

• Advantages– All activities associated

with one product can be integrated and coordinated.

– Speed and effectiveness of decision making are enhanced.

• Advantages– All activities associated

with one product can be integrated and coordinated.

– Speed and effectiveness of decision making are enhanced.

• Disadvantages– Managers may focus on

their product to the exclusion of the rest of the organization.

– Administrative costs may increase due to each department having its own functional-area experts.

• Disadvantages– Managers may focus on

their product to the exclusion of the rest of the organization.

– Administrative costs may increase due to each department having its own functional-area experts.

• Product Departmentalization– The grouping of activities around products or product

groups.

• Product Departmentalization– The grouping of activities around products or product

groups.

Customer DepartmentalizationCustomer Departmentalization

• Customer Departmentalization– Grouping activities to respond to and interact with specific

customers and customer groups.

• Advantage

• Disadvantage– A large administrative staff is needed to integrate activities

of various departments.

• Customer Departmentalization– Grouping activities to respond to and interact with specific

customers and customer groups.

• Advantage

• Disadvantage– A large administrative staff is needed to integrate activities

of various departments.

Location DepartmentalizationLocation Departmentalization

• Location Departmentalization– The grouping of jobs on the basis of defined geographic

sites or areas.

• Advantage– Enables the organization to respond easily to unique

customer and environmental characteristics.

• Disadvantage– Large administrative staff may be needed to keep track of

units in scattered locations.

• Location Departmentalization– The grouping of jobs on the basis of defined geographic

sites or areas.

• Advantage– Enables the organization to respond easily to unique

customer and environmental characteristics.

• Disadvantage– Large administrative staff may be needed to keep track of

units in scattered locations.

DepartmentalizationDepartmentalization

• Other Forms of Departmentalization– Grouping activities by time

• Assigning responsibilities by a characteristic of the customer, product, or service (e.g., telemarketing calls from business listings).

• Other Considerations– Departments are often called by other names (e.g., divisions,

units, sections, and bureaus).– Organizations are likely to employ multiple bases of

departmentalization, depending on level.

• Other Forms of Departmentalization– Grouping activities by time

• Assigning responsibilities by a characteristic of the customer, product, or service (e.g., telemarketing calls from business listings).

• Other Considerations– Departments are often called by other names (e.g., divisions,

units, sections, and bureaus).– Organizations are likely to employ multiple bases of

departmentalization, depending on level.

Establishing Reporting Establishing Reporting RelationshipsRelationships

• Chain of Command– A clear and distinct line of authority among the positions in

an organization.– Unity of Command

– Scalar Principle• A clear and unbroken line of authority must extend from the

bottom to the top of the organization.

• Chain of Command– A clear and distinct line of authority among the positions in

an organization.– Unity of Command

– Scalar Principle• A clear and unbroken line of authority must extend from the

bottom to the top of the organization.

Establishing Reporting Relationships Establishing Reporting Relationships (cont’d)(cont’d)

• Narrow Versus Wide Spans– Span of Management

• The number of people who report to a particular manager.– A. V. Graicunas

• Subordinate interactions–Direct–Cross –Group –Formula for the number of interactions of all types:

» I = N(2N/2 + N - 1), where I is the total number of interactions and N is number of subordinates.

– Ralph Davis• Operative span for lower-level managers up to 30 workers.• Executive span for middle and top managers at 3 to 9.

• Narrow Versus Wide Spans– Span of Management

• The number of people who report to a particular manager.– A. V. Graicunas

• Subordinate interactions–Direct–Cross –Group –Formula for the number of interactions of all types:

» I = N(2N/2 + N - 1), where I is the total number of interactions and N is number of subordinates.

– Ralph Davis• Operative span for lower-level managers up to 30 workers.• Executive span for middle and top managers at 3 to 9.

Establishing Reporting Establishing Reporting Relationships:Relationships:

Tall versus Flat OrganizationsTall versus Flat Organizations• Tall Organizations

– Are more expensive because of the number of managers involved.

– Foster more communication problems because of the number of people through whom information must pass.

• Tall Organizations– Are more expensive

because of the number of managers involved.

– Foster more communication problems because of the number of people through whom information must pass.

• Flat Organizations– Lead to higher levels of

employee morale and productivity.

– Create more administrative responsibility for the relatively few managers.

• Flat Organizations– Lead to higher levels of

employee morale and productivity.

– Create more administrative responsibility for the relatively few managers.

Determining the Appropriate Span:Determining the Appropriate Span:Factors Influencing the Span of Factors Influencing the Span of

ManagementManagement1. Competence of supervisor and subordinates (the greater

the competence, the wider the potential span).

2. Physical dispersion of subordinates (the greater the disper-sion, the narrower the potential span).

3. Extent of nonsupervisory work in a manager’s job (the more nonsupervisory work, the narrower the potential span).

4. Degree of required interaction (the less required interaction, the wider the potential span).

5. Extent of standardized procedures (the more procedures, the wider the potential span).

6. Similarity of tasks being supervised (the more similar the tasks, the wider the potential span).

7. Frequency of new problems (the higher the frequency, the narrower the potential span).

8. Preferences of supervisors and subordinates.

Distributing AuthorityDistributing Authority

• Authority

• Delegation– The process by which managers assign a portion of their

total workload to others.

• Reasons for Delegation– To enable the manager to get more work done by utilizing the

skills and talents of subordinates.– To foster the development of subordinates by having them

participate in decision making and problem solving that allows them to learn about overall operations and improve their managerial skills.

• Authority

• Delegation– The process by which managers assign a portion of their

total workload to others.

• Reasons for Delegation– To enable the manager to get more work done by utilizing the

skills and talents of subordinates.– To foster the development of subordinates by having them

participate in decision making and problem solving that allows them to learn about overall operations and improve their managerial skills.

Problems in DelegationProblems in Delegation

• Manager– Reluctant to delegate.– Subordinate’s success

threatens superior’s advancement.

– Lack of trust in the subordinate to do well.

• Manager– Reluctant to delegate.– Subordinate’s success

threatens superior’s advancement.

– Lack of trust in the subordinate to do well.

• Subordinate– Reluctant to accept

delegation for fear of failure.

– Perceives no rewards for accepting additional responsibility.

• Subordinate– Reluctant to accept

delegation for fear of failure.

– Perceives no rewards for accepting additional responsibility.

Decentralization and Decentralization and CentralizationCentralization

• Decentralization– The process of systematically delegating power and

authority throughout the organization to middle- and lower-level managers.

• Centralization

• Factors Determining the Choice of Centralization– The complexity and uncertainty of the external environment.– The history of the organization.– The nature (cost and risk) of the decisions to be made.

• Decentralization– The process of systematically delegating power and

authority throughout the organization to middle- and lower-level managers.

• Centralization

• Factors Determining the Choice of Centralization– The complexity and uncertainty of the external environment.– The history of the organization.– The nature (cost and risk) of the decisions to be made.

Coordinating ActivitiesCoordinating Activities

• Coordination

• The Need for Coordination– Departments and work groups are interdependent; the

greater the interdependence, the greater the need for coordination.

• Coordination

• The Need for Coordination– Departments and work groups are interdependent; the

greater the interdependence, the greater the need for coordination.

Coordinating Activities:Coordinating Activities:Three Major Forms of Three Major Forms of

InterdependenceInterdependence• Pooled interdependence

– When units operate with little interaction; their output is simply pooled at the organizational level.

• Sequential interdependence– When the output of one unit becomes the input of another

unit in sequential fashion.

• Reciprocal interdependence

• Pooled interdependence– When units operate with little interaction; their output is

simply pooled at the organizational level.

• Sequential interdependence– When the output of one unit becomes the input of another

unit in sequential fashion.

• Reciprocal interdependence

Structural Coordination Structural Coordination TechniquesTechniques

• The Managerial Hierarchy– Placing one manager in charge of interdependent

departments or units.

• Rules and Procedures

• Liaison Roles– A manager coordinates interdependent units by acting

as a common point of contact, facilitating the flow of information.

• The Managerial Hierarchy– Placing one manager in charge of interdependent

departments or units.

• Rules and Procedures

• Liaison Roles– A manager coordinates interdependent units by acting

as a common point of contact, facilitating the flow of information.

Structural Coordination Structural Coordination Techniques (cont’d)Techniques (cont’d)

• Task Forces– Used with multiple units when coordination is complex

requiring more than one individual and the need for coordination is acute.

• Integrating Departments– Permanent organizational units that maintain internal

integration and coordination on an ongoing basis.

• Task Forces– Used with multiple units when coordination is complex

requiring more than one individual and the need for coordination is acute.

• Integrating Departments– Permanent organizational units that maintain internal

integration and coordination on an ongoing basis.

Differentiating Between PositionsDifferentiating Between Positions

• Line Positions– Positions in the direct chain of command that are

responsible for the achievement of an organization’s goals.– Have formal (legitimate) authority to direct the workforce.

• Staff Positions– Positions intended to provide expertise, advice, and support

to line positions.– Have functional authority to enforce compliance with

organizational policies and procedures.

• Administrative Intensity– The degree to which managerial positions are concentrated

in staff positions.

• Line Positions– Positions in the direct chain of command that are

responsible for the achievement of an organization’s goals.– Have formal (legitimate) authority to direct the workforce.

• Staff Positions– Positions intended to provide expertise, advice, and support

to line positions.– Have functional authority to enforce compliance with

organizational policies and procedures.

• Administrative Intensity– The degree to which managerial positions are concentrated

in staff positions.

Managing Organization Change and Innovation

Managing Organization Change and Innovation

Thirteenhapter

The Nature of Organization The Nature of Organization ChangeChange

• Organization Change– Any substantive modification to some part of the

organization (e.g., work schedules, machinery, employees).

• Forces for Change– External forces in the organization’s general and task

environments that force the organization to alter the way in which it competes.

– Internal forces inside the organization that cause it to change its structure and strategy; some internal forces are responses to external pressures.

• Planned Change• Reactive Change

• Organization Change– Any substantive modification to some part of the

organization (e.g., work schedules, machinery, employees).

• Forces for Change– External forces in the organization’s general and task

environments that force the organization to alter the way in which it competes.

– Internal forces inside the organization that cause it to change its structure and strategy; some internal forces are responses to external pressures.

• Planned Change• Reactive Change

Managing Change in Managing Change in OrganizationsOrganizations

• Steps in the Change Process (Lewin Model)– Unfreezing

– Implementing change

– Refreezing• Involves reinforcing and supporting the change so that it

becomes a permanent part of the system.

• Steps in the Change Process (Lewin Model)– Unfreezing

– Implementing change

– Refreezing• Involves reinforcing and supporting the change so that it

becomes a permanent part of the system.

Understanding Resistance to Understanding Resistance to ChangeChange

• People resist change because of:– Uncertainty – Threats to self-interests and power and influence.– Different perceptions– Feelings of loss in disrupted social networks, power,

security, and familiarity with existing procedures.

• Overcoming Resistance to Change– Encourage active participation in the change process.– Provide education and communication about the change

process.– Facilitate the change process

• People resist change because of:– Uncertainty – Threats to self-interests and power and influence.– Different perceptions– Feelings of loss in disrupted social networks, power,

security, and familiarity with existing procedures.

• Overcoming Resistance to Change– Encourage active participation in the change process.– Provide education and communication about the change

process.– Facilitate the change process

Reengineering in OrganizationsReengineering in Organizations

• Reengineering– The radical redesign of all aspects of a business to achieve

major gains in cost, service, or time.

• Need for Reengineering– Entropy is a normal process leading to system decline.

• Approaches to Reengineering– Recognizing the need for change and acting on it with a

sense of urgency.– Starting with a clean slate helps open up the process.

• Reengineering– The radical redesign of all aspects of a business to achieve

major gains in cost, service, or time.

• Need for Reengineering– Entropy is a normal process leading to system decline.

• Approaches to Reengineering– Recognizing the need for change and acting on it with a

sense of urgency.– Starting with a clean slate helps open up the process.

Organization Development (OD)Organization Development (OD)

• Organization Development– A planned, organization-wide effort, managed from the top,

that is intended to increase organizational effectiveness and health through interventions in the organization’s processes using behavioral science knowledge.

• OD Assumptions– Individuals will influence the organization and the

organization will influence the attitudes, perceptions, behaviors, and expectations of individuals.

• Organization Development– A planned, organization-wide effort, managed from the top,

that is intended to increase organizational effectiveness and health through interventions in the organization’s processes using behavioral science knowledge.

• OD Assumptions– Individuals will influence the organization and the

organization will influence the attitudes, perceptions, behaviors, and expectations of individuals.

Organization Development Organization Development TechniquesTechniques

• Diagnostic Activities• Team Building• Survey Feedback• Education• Intergroup Activities• Third-Party

Peacemaking

• Diagnostic Activities• Team Building• Survey Feedback• Education• Intergroup Activities• Third-Party

Peacemaking

• Technostructural Activities

• Process Consultation• Life and Career

Planning• Coaching and

Counseling• Planning and Goal

Setting

• Technostructural Activities

• Process Consultation• Life and Career

Planning• Coaching and

Counseling• Planning and Goal

Setting

Organizational InnovationOrganizational Innovation

• Innovation

• The Innovation Process

• Innovation

• The Innovation Process

DevelopmentOrganization evaluates, modifies,

and improves on a creative idea.

DeclineDemand for an innovation decreases,

and substitute innovations are

developed and applied.

ApplicationOrganization uses developed idea in

design, manufacturing, or delivery of

new products, services, or processes.

LaunchOrganization introduces new

products or services to the

marketplace.

GrowthDemand for new products or

services grows.

MaturityMost competing organizations

have access to the idea.

Forms of Organizational Forms of Organizational InnovationInnovation

• Radical Innovation– A new product, service, or technology developed by an

organization that completely replaces the existing product, service, or technology in an industry.

• Incremental Innovation– A new product, service, or technology that modifies an

existing one.– Incremental innovation does not significantly affect

competition in an industry.

• Radical Innovation– A new product, service, or technology developed by an

organization that completely replaces the existing product, service, or technology in an industry.

• Incremental Innovation– A new product, service, or technology that modifies an

existing one.– Incremental innovation does not significantly affect

competition in an industry.

Forms of Organizational Innovation Forms of Organizational Innovation (cont’d)(cont’d)

• Technical Versus Managerial Innovations– Technical innovation

• A change in the physical appearance or performance of a product or service, or the physical processes through which a product or service is manufactured.

– Managerial innovation

• Product Versus Process Innovations– Product innovation

• A change in the physical characteristics or performance of existing products or service or the creation of brand-new products or services.

– Process innovation

• Technical Versus Managerial Innovations– Technical innovation

• A change in the physical appearance or performance of a product or service, or the physical processes through which a product or service is manufactured.

– Managerial innovation

• Product Versus Process Innovations– Product innovation

• A change in the physical characteristics or performance of existing products or service or the creation of brand-new products or services.

– Process innovation

InnovationInnovation

• Reasons for Failing to Innovate– Lack of resources– Failure to recognize opportunities– Resistance to change

• Promoting Innovations in Organizations– Using the reward system– Having a supportive organizational culture– Intrapreneurship in larger organizations

• Inventors• Production champions

– Middle manager who learns about the project

– Helps overcome organization resistance and convinces others to take innovation seriously

• Sponsors

• Reasons for Failing to Innovate– Lack of resources– Failure to recognize opportunities– Resistance to change

• Promoting Innovations in Organizations– Using the reward system– Having a supportive organizational culture– Intrapreneurship in larger organizations

• Inventors• Production champions

– Middle manager who learns about the project

– Helps overcome organization resistance and convinces others to take innovation seriously

• Sponsors

Managing Human Resources in Organizations

Managing Human Resources in Organizations

Fourteenhapter

The Environmental Context ofThe Environmental Context ofHuman Resource ManagementHuman Resource Management

• Human Resource Management (HRM)– The set of organizational activities directed at attracting,

developing, and maintaining an effective work force.

• The Strategic Importance of HRM– HRM has become increasingly important as firms have come

to realize the value of their human resources in improving productivity.

– HRM is critical to the bottom-line performance of the firm.

• Human Resource Management (HRM)– The set of organizational activities directed at attracting,

developing, and maintaining an effective work force.

• The Strategic Importance of HRM– HRM has become increasingly important as firms have come

to realize the value of their human resources in improving productivity.

– HRM is critical to the bottom-line performance of the firm.

The Legal Environment of HRMThe Legal Environment of HRM

• Equal Employment Opportunity– Title VII of the Civil Rights Act of 1964

• Forbids discrimination in all areas of the employment relationship.

• Employers are not required to seek out and hire minorities but they must treat fairly all who apply.

– Adverse impact

– Equal Employment Opportunity Commission• Federal agency charged with enforcing Title VII as well as

several other employment-related laws.– Affirmative Action

• The commitment of employers to proactively seek out, assist in developing, and hire employees from groups that are underrepresented in the organization.

• Equal Employment Opportunity– Title VII of the Civil Rights Act of 1964

• Forbids discrimination in all areas of the employment relationship.

• Employers are not required to seek out and hire minorities but they must treat fairly all who apply.

– Adverse impact

– Equal Employment Opportunity Commission• Federal agency charged with enforcing Title VII as well as

several other employment-related laws.– Affirmative Action

• The commitment of employers to proactively seek out, assist in developing, and hire employees from groups that are underrepresented in the organization.

The Legal Environment of HRM The Legal Environment of HRM (cont’d)(cont’d)

• Equal Employment Opportunity (cont’d)– Pregnancy Discrimination Act

– Age Discrimination in Employment Act of 1967– Americans with Disabilities Act of 1990 (ADA)

• Forbids discrimination on the basis of disabilities and requires employers to provide reasonable accommodations for disabled employees.

– Civil Rights Act of 1991• Amended the original Civil Rights Act, making it easier to bring

discrimination lawsuits while also limiting punitive damages that can be awarded in those lawsuits.

• Equal Employment Opportunity (cont’d)– Pregnancy Discrimination Act

– Age Discrimination in Employment Act of 1967– Americans with Disabilities Act of 1990 (ADA)

• Forbids discrimination on the basis of disabilities and requires employers to provide reasonable accommodations for disabled employees.

– Civil Rights Act of 1991• Amended the original Civil Rights Act, making it easier to bring

discrimination lawsuits while also limiting punitive damages that can be awarded in those lawsuits.

The Legal Environment of HRM The Legal Environment of HRM (cont’d)(cont’d)

• Compensation and Benefits– Fair Labor Standards Act of 1938 (FLSA)

• Sets a minimum wage and requires overtime pay for work in excess of 40 hours per week for non-exempt employees.

• Salaried professional, executive, and administrative employees are exempt from the Act’s minimum wage and overtime provisions.

– Equal Pay Act of 1963• Requires men and women to be paid the same amount for doing

the same jobs; exceptions are permitted for seniority and merit pay.

– Employee Retirement Income Security Act of 1974 (ERISA)

– Family and Medical Leave Act of 1993 (FMLA)• Requires employers to provide up to 12 weeks of unpaid leave

for family and medical emergencies.

• Compensation and Benefits– Fair Labor Standards Act of 1938 (FLSA)

• Sets a minimum wage and requires overtime pay for work in excess of 40 hours per week for non-exempt employees.

• Salaried professional, executive, and administrative employees are exempt from the Act’s minimum wage and overtime provisions.

– Equal Pay Act of 1963• Requires men and women to be paid the same amount for doing

the same jobs; exceptions are permitted for seniority and merit pay.

– Employee Retirement Income Security Act of 1974 (ERISA)

– Family and Medical Leave Act of 1993 (FMLA)• Requires employers to provide up to 12 weeks of unpaid leave

for family and medical emergencies.

The Legal Environment of HRM The Legal Environment of HRM (cont’d)(cont’d)

• Labor Relations– National Labor Relations Act of 1935 (Wagner Act)

• NLRA set up procedures for employees to vote whether to have a union; if they vote for a union, management is required to bargain collectively with the union.

– National Labor Relations Board (NLRB)– Labor Management Relations Act of 1947 (Taft-Hartley Act)

• Amended the NLRA to limit the power of unions and increase management’s rights during organizing campaigns.

• Allows the U.S. president to prevent or end a strike that endangers national security.

• Labor Relations– National Labor Relations Act of 1935 (Wagner Act)

• NLRA set up procedures for employees to vote whether to have a union; if they vote for a union, management is required to bargain collectively with the union.

– National Labor Relations Board (NLRB)– Labor Management Relations Act of 1947 (Taft-Hartley Act)

• Amended the NLRA to limit the power of unions and increase management’s rights during organizing campaigns.

• Allows the U.S. president to prevent or end a strike that endangers national security.

The Legal Environment of HRM The Legal Environment of HRM (cont’d)(cont’d)

• Health and Safety– Occupational Safety and Health Act of 1970 (OSHA)

• Requires that employers:–Provide a place of employment that is free from hazards that

may cause death or serious physical harm.–Obey the safety and health standards established by

Occupational Safety and Health Administration (OSHA).

• Emerging Legal Issues

• Health and Safety– Occupational Safety and Health Act of 1970 (OSHA)

• Requires that employers:–Provide a place of employment that is free from hazards that

may cause death or serious physical harm.–Obey the safety and health standards established by

Occupational Safety and Health Administration (OSHA).

• Emerging Legal Issues

Change and HRMChange and HRM

• Temporary Workers– An increasing trend in organizations is to use more

temporary workers without the risk that the organization may have to eliminate their jobs.

• Dual-Career Families– Firms are increasingly having to make accommodations for

dual-career partners

• Temporary Workers– An increasing trend in organizations is to use more

temporary workers without the risk that the organization may have to eliminate their jobs.

• Dual-Career Families– Firms are increasingly having to make accommodations for

dual-career partners

Change and HRM (cont’d)Change and HRM (cont’d)

• Employment-at-Will– A traditional view of the workplace in which an organization

can fire an employee for any or no reason.– The new argument is that an organization should be able to

fire only people who are poor performers or who violate rules.

– Recent court cases have upheld the new argument in placing limits on an organization’s ability to terminate employees by requiring just cause for firing or dismissal as part of an organization-wide cutback.

• Employment-at-Will– A traditional view of the workplace in which an organization

can fire an employee for any or no reason.– The new argument is that an organization should be able to

fire only people who are poor performers or who violate rules.

– Recent court cases have upheld the new argument in placing limits on an organization’s ability to terminate employees by requiring just cause for firing or dismissal as part of an organization-wide cutback.

Attracting Human ResourcesAttracting Human Resources

• Job Analysis– A systematic analysis of jobs within an organization.

• Job Description—a listing of the job’s duties; its working conditions; and the tools, materials, and equipment use to perform the job.

• Job Specification

• Forecasting HR Demand and Supply– Replacement chart

• A list of managerial positions in the organization, the occupants, how long they will stay in the position, and who will replace them.

– Employee information system (skills inventory)• A database of employees’ education, skills, work experience,

and career expectations, usually computerized.

• Job Analysis– A systematic analysis of jobs within an organization.

• Job Description—a listing of the job’s duties; its working conditions; and the tools, materials, and equipment use to perform the job.

• Job Specification

• Forecasting HR Demand and Supply– Replacement chart

• A list of managerial positions in the organization, the occupants, how long they will stay in the position, and who will replace them.

– Employee information system (skills inventory)• A database of employees’ education, skills, work experience,

and career expectations, usually computerized.

Recruiting Human ResourcesRecruiting Human Resources

• Recruiting– The process of attracting qualified persons to apply for jobs

that are open.

• Internal Recruiting– Considering present employees as candidates for openings.

• External Recruiting– Attracting persons from outside the organization.– Realistic Job Preview (RJP) is considered a successful

method to ensure person-job fit.

• Recruiting– The process of attracting qualified persons to apply for jobs

that are open.

• Internal Recruiting– Considering present employees as candidates for openings.

• External Recruiting– Attracting persons from outside the organization.– Realistic Job Preview (RJP) is considered a successful

method to ensure person-job fit.

Selecting Human ResourcesSelecting Human Resources

• Validation: – The process of determining the extent to which a selection

device is really predictive of future job performance.• Predictive validation

• Content validation– The use of logic and job analysis to determine that selection

techniques measure the exact skills needed for job performance.

– Used to establish the job relatedness of a selection device

• Application Blanks– Used to gather information about work history, educational

background, and other job-related demographic data.– Must not ask for information unrelated to the job.

• Validation: – The process of determining the extent to which a selection

device is really predictive of future job performance.• Predictive validation

• Content validation– The use of logic and job analysis to determine that selection

techniques measure the exact skills needed for job performance.

– Used to establish the job relatedness of a selection device

• Application Blanks– Used to gather information about work history, educational

background, and other job-related demographic data.– Must not ask for information unrelated to the job.

Selecting Human Resources Selecting Human Resources (cont’d)(cont’d)

• Tests– Ability, skill, aptitude, or knowledge tests are usually the best

predictors of job success.– Must be validated, administered, and scored consistently.

• Interviews– Interviews can be poor predictors of job success due to

interviewer biases.

• Tests– Ability, skill, aptitude, or knowledge tests are usually the best

predictors of job success.– Must be validated, administered, and scored consistently.

• Interviews– Interviews can be poor predictors of job success due to

interviewer biases.

Selecting Human Resources Selecting Human Resources (cont’d)(cont’d)

• Assessment Centers– A popular method for selecting managers and are particularly

good for selecting current employees for promotion.– A content validation of major parts of the managerial job.

• Other Techniques– Polygraphs have declined in popularity due to passage of the

Polygraph Protection Act.– Employers now use physical exams, drug tests, and credit

checks to screen prospective employees.

• Assessment Centers– A popular method for selecting managers and are particularly

good for selecting current employees for promotion.– A content validation of major parts of the managerial job.

• Other Techniques– Polygraphs have declined in popularity due to passage of the

Polygraph Protection Act.– Employers now use physical exams, drug tests, and credit

checks to screen prospective employees.

Developing Human ResourcesDeveloping Human Resources

• Training and Development– Training

• Teaching operational or technical employees how to do the job for which they were hired.

– Development• Teaching managers and professionals the skills need for both

present and future jobs.

• Training and Development– Training

• Teaching operational or technical employees how to do the job for which they were hired.

– Development• Teaching managers and professionals the skills need for both

present and future jobs.

Developing Human Resources Developing Human Resources (cont’d)(cont’d)

• Training and Development– Assessing Training Needs

• Determining what needs exist is the first step in developing a training plan.

– Common Training Methods• Lectures • Role play and case studies • On-the-job and vestibule training

– Evaluation of Training• Training and development programs should always be evaluated.• Approaches include measuring relevant job performance criteria

before and after the training to determine the effect of training.

• Training and Development– Assessing Training Needs

• Determining what needs exist is the first step in developing a training plan.

– Common Training Methods• Lectures • Role play and case studies • On-the-job and vestibule training

– Evaluation of Training• Training and development programs should always be evaluated.• Approaches include measuring relevant job performance criteria

before and after the training to determine the effect of training.

Developing Human Resources Developing Human Resources (cont’d)(cont’d)

• Performance Appraisal– A formal assessment of how well employees do their jobs.– Reasons for performance appraisal

• Appraisal validates the selection process and the effects of training.

• Appraisal aids in making decisions about pay raises, promotions, and training.

• Provides feedback to employees to improve their performance and plan future careers.

• Performance Appraisal– A formal assessment of how well employees do their jobs.– Reasons for performance appraisal

• Appraisal validates the selection process and the effects of training.

• Appraisal aids in making decisions about pay raises, promotions, and training.

• Provides feedback to employees to improve their performance and plan future careers.

Developing Human Resources Developing Human Resources (cont’d)(cont’d)

• Performance Appraisal (cont’d)– Objective measures of performance

• Actual output (units produced), scrap rate, dollar volume of sales, and number of claims processed.

• Can become contaminated by outside factors resulting in “opportunity bias” where some have a better chance to perform than others.

• Special performance tests are a method in which each employee is assessed under standardized conditions.

• Performance Appraisal (cont’d)– Objective measures of performance

• Actual output (units produced), scrap rate, dollar volume of sales, and number of claims processed.

• Can become contaminated by outside factors resulting in “opportunity bias” where some have a better chance to perform than others.

• Special performance tests are a method in which each employee is assessed under standardized conditions.

Developing Human Resources Developing Human Resources (cont’d)(cont’d)

• Performance Appraisal (cont’d)– Judgmental Methods

• Ranking—compares employees directly with each other.–Difficult to do with large numbers of employees.–Employees are ranked only on overall performance.–Do not provide useful information for employee feedback.

• Rating—compares each employee with a fixed standard.–Graphic rating scales consist of job performance dimensions

to be rated on a standard scale.–Behaviorally-anchored rating scale (BARS) is a sophisticated

method in which supervisors construct a rating scale where each point on the scale is associated with behavioral anchors.

• Performance Appraisal (cont’d)– Judgmental Methods

• Ranking—compares employees directly with each other.–Difficult to do with large numbers of employees.–Employees are ranked only on overall performance.–Do not provide useful information for employee feedback.

• Rating—compares each employee with a fixed standard.–Graphic rating scales consist of job performance dimensions

to be rated on a standard scale.–Behaviorally-anchored rating scale (BARS) is a sophisticated

method in which supervisors construct a rating scale where each point on the scale is associated with behavioral anchors.

Developing Human Resources Developing Human Resources (cont’d)(cont’d)

• Performance Appraisal (Cont’d)– Performance Appraisal Errors

• Recency error—the tendency of the evaluator to base judgments on the subordinate’s most recent performance because it is the most easily recalled.

• Errors of leniency and strictness

• Halo error—allowing the assessment of the employee on one dimension to spread to that employee’s ratings on other dimensions.

• Performance Appraisal (Cont’d)– Performance Appraisal Errors

• Recency error—the tendency of the evaluator to base judgments on the subordinate’s most recent performance because it is the most easily recalled.

• Errors of leniency and strictness

• Halo error—allowing the assessment of the employee on one dimension to spread to that employee’s ratings on other dimensions.

Developing Human Resources Developing Human Resources (cont’d)(cont’d)

• Performance Feedback– Is best given in a private meeting between the employee and

immediate supervisor.– Discussion should focus on the facts– Properly training managers can help them conduct more

effective feedback interviews.– “360 degree” feedback, in which managers are evaluated by

everyone around them, provides a richer array of performance information on which to base an appraisal.

• Performance Feedback– Is best given in a private meeting between the employee and

immediate supervisor.– Discussion should focus on the facts– Properly training managers can help them conduct more

effective feedback interviews.– “360 degree” feedback, in which managers are evaluated by

everyone around them, provides a richer array of performance information on which to base an appraisal.

Maintaining Human ResourcesMaintaining Human Resources

• Determining Compensation– Compensation

• The financial remuneration given by the organization to its employees in exchange for their work.

• Wages• Salary • Incentives represent special compensation opportunities (e.g.,

sales commissions) that are usually tied to performance.– Purposes of Compensation

• Provide the means to maintain a reasonable standard of living.• Provide a tangible measure of the value of the individual to the

organization.

• Determining Compensation– Compensation

• The financial remuneration given by the organization to its employees in exchange for their work.

• Wages• Salary • Incentives represent special compensation opportunities (e.g.,

sales commissions) that are usually tied to performance.– Purposes of Compensation

• Provide the means to maintain a reasonable standard of living.• Provide a tangible measure of the value of the individual to the

organization.

Maintaining Human Resources Maintaining Human Resources (cont’d)(cont’d)

• Determining Compensation (cont’d)– Wage-Level Decision

• The wage-level decision is a management policy decision to pay above, at, or below the going rate for labor in an industry or geographic area.

• Factors that affect the wage-level decision• Area wage surveys can provide information about the

maximum, minimum, and average wages for a particular job in a labor market.

• Determining Compensation (cont’d)– Wage-Level Decision

• The wage-level decision is a management policy decision to pay above, at, or below the going rate for labor in an industry or geographic area.

• Factors that affect the wage-level decision• Area wage surveys can provide information about the

maximum, minimum, and average wages for a particular job in a labor market.

Maintaining Human Resources Maintaining Human Resources (cont’d)(cont’d)

• Determining Compensation (cont’d)– Wage-Structure

• Job evaluations are the basis for determining the worth of each job relative to other jobs in the organizational wage-structure.

• Wage surveys data and the wage structure are combined to set the actual wages for a job.

– Individual Wage Decisions• Factors such as seniority, initial qualifications, individual merit,

and labor market conditions influence wage decisions.

• Determining Compensation (cont’d)– Wage-Structure

• Job evaluations are the basis for determining the worth of each job relative to other jobs in the organizational wage-structure.

• Wage surveys data and the wage structure are combined to set the actual wages for a job.

– Individual Wage Decisions• Factors such as seniority, initial qualifications, individual merit,

and labor market conditions influence wage decisions.

Maintaining Human Resources Maintaining Human Resources (cont’d)(cont’d)

• Determining Benefits– Benefits

• Things of value other than compensation that an organization provides to its workers.

• The average company spends an amount equal to more than one-third of its cash payroll on employee benefits.

• A good benefit plan encourages employees to stay with the company and attracts new employees.

• Benefits do not necessarily stimulate high performance.– Managing Benefits Effectively

• Shop carefully for the best-cost providers.• Provide only the benefits that employees want.

• Determining Benefits– Benefits

• Things of value other than compensation that an organization provides to its workers.

• The average company spends an amount equal to more than one-third of its cash payroll on employee benefits.

• A good benefit plan encourages employees to stay with the company and attracts new employees.

• Benefits do not necessarily stimulate high performance.– Managing Benefits Effectively

• Shop carefully for the best-cost providers.• Provide only the benefits that employees want.

Maintaining Human Resources Maintaining Human Resources (cont’d)(cont’d)

• Determining Benefits (cont’d)– Types of Benefits

• Pay for time not worked • Insurance • Employee service benefits—Tuition reimbursement and

recreational opportunities.– Cafeteria Benefit Plans

• Flexible plans that provide basic coverage and allow employees to choose the additional benefits they want up to the cost limit set by the organization.

– Other Benefits• On-site childcare, mortgage assistance, and paid-leave

programs.

• Determining Benefits (cont’d)– Types of Benefits

• Pay for time not worked • Insurance • Employee service benefits—Tuition reimbursement and

recreational opportunities.– Cafeteria Benefit Plans

• Flexible plans that provide basic coverage and allow employees to choose the additional benefits they want up to the cost limit set by the organization.

– Other Benefits• On-site childcare, mortgage assistance, and paid-leave

programs.

Managing Labor RelationsManaging Labor Relations

• Labor Relations– The process of dealing with employees when they are

represented by a union.– Organizations prefer employees remain nonunion because

unions limit management’s freedom in many areas.– The best way to avoid unionization is to practice good

employee relations all the time

• Labor Relations– The process of dealing with employees when they are

represented by a union.– Organizations prefer employees remain nonunion because

unions limit management’s freedom in many areas.– The best way to avoid unionization is to practice good

employee relations all the time

Managing Labor Relations (cont’d)Managing Labor Relations (cont’d)

• Collective Bargaining– The contract contains agreements about wage, hours, and

working conditions and how management will treat employees.

• Grievance Procedure– The step-wise means by which a labor contract is enforced.– Grievances are filed on behalf of an employee by the union

when it believes employees have not been treated fairly under the contract.

• Collective Bargaining– The contract contains agreements about wage, hours, and

working conditions and how management will treat employees.

• Grievance Procedure– The step-wise means by which a labor contract is enforced.– Grievances are filed on behalf of an employee by the union

when it believes employees have not been treated fairly under the contract.

New Challenges in the New Challenges in the Changing WorkplaceChanging Workplace

• Managing Knowledge Workers– Knowledge workers

• Employees whose contributions to an organization are based on what they know (e.g., computer scientists, engineers, and physical scientists).

• They tend to work in high-technology areas and are experts in abstract knowledge areas.

• They like to work independently and identify strongly with their professions.

• Managing Knowledge Workers– Knowledge workers

• Employees whose contributions to an organization are based on what they know (e.g., computer scientists, engineers, and physical scientists).

• They tend to work in high-technology areas and are experts in abstract knowledge areas.

• They like to work independently and identify strongly with their professions.

New Challenges in the New Challenges in the Changing Workplace (cont’d)Changing Workplace (cont’d)

• Contingent and Temporary Workers– Trends in Contingent and Temporary Workers

• There have been dramatic and consistent increases in contingent workers. 10% of the U.S. workforce is either contingent or temporary.

– Managing Contingent Workers• Careful planning allows for integrating contingent workers into the

organization in a coordinated fashion for well-defined time periods.

• Understanding contingent workers and acknowledging their advantages and disadvantages.

• Decide early on how similarly contingent employees will be treated relative to permanent employees.

• Contingent and Temporary Workers– Trends in Contingent and Temporary Workers

• There have been dramatic and consistent increases in contingent workers. 10% of the U.S. workforce is either contingent or temporary.

– Managing Contingent Workers• Careful planning allows for integrating contingent workers into the

organization in a coordinated fashion for well-defined time periods.

• Understanding contingent workers and acknowledging their advantages and disadvantages.

• Decide early on how similarly contingent employees will be treated relative to permanent employees.

Basic Elementsof Individual Behavior in Organizations

Basic Elementsof Individual Behavior in Organizations

Fifteenhapter

Understanding IndividualsUnderstanding Individuals in Organizations in Organizations

• The Psychological Contract– The overall set of expectations held by an individual with

respect to what he or she will contribute to the organization and what the organization will provide in return.

• The Psychological Contract– The overall set of expectations held by an individual with

respect to what he or she will contribute to the organization and what the organization will provide in return.

Contributions fromthe Individual

• Effort• Ability• Loyalty• Skills• Time• Competencies

Inducements fromthe Organization

• Pay• Job security• Benefits• Career opportunities• Status• Promotion opportunities

Understanding IndividualsUnderstanding Individuals in Organizations (cont’d) in Organizations (cont’d)

• The Person-Job Fit– The extent to which the contributions made by the individual

match the inducement offered by the organization.• Each employee has a specific set of needs to be fulfilled and a

set of job-related behaviors to contribute.• The degree to which the organization can take advantage of

those behaviors and, in turn, fulfill an employee’s needs will determine the level of person-job fit.

– Reasons for poor person-job fit:• Adopting new technologies changes the skills needed by

employees.

• The Person-Job Fit– The extent to which the contributions made by the individual

match the inducement offered by the organization.• Each employee has a specific set of needs to be fulfilled and a

set of job-related behaviors to contribute.• The degree to which the organization can take advantage of

those behaviors and, in turn, fulfill an employee’s needs will determine the level of person-job fit.

– Reasons for poor person-job fit:• Adopting new technologies changes the skills needed by

employees.

Personality and Individual Personality and Individual BehaviorBehavior

• Personality– The relatively stable set of psychological and behavioral

attributes that distinguish one person from another.

• The “Big Five” personality Traits– Agreeableness – Conscientiousness—the number of goals on which a person

focuses.– Negative emotionality – Extraversion – Openness—a person’s rigidity of beliefs and range of

interests.

• Personality– The relatively stable set of psychological and behavioral

attributes that distinguish one person from another.

• The “Big Five” personality Traits– Agreeableness – Conscientiousness—the number of goals on which a person

focuses.– Negative emotionality – Extraversion – Openness—a person’s rigidity of beliefs and range of

interests.

Other Personality Traits at Work Other Personality Traits at Work

• Locus of Control– The extent to which people believe that their behavior has a

real effect on what happens to them.• Internal locus of control • External locus of control

• Self-Efficacy– A person’s belief about his or her capabilities to perform a

task. High self-efficacy individuals believe they can perform well while low self-efficacy individuals doubt their ability to perform.

• Locus of Control– The extent to which people believe that their behavior has a

real effect on what happens to them.• Internal locus of control • External locus of control

• Self-Efficacy– A person’s belief about his or her capabilities to perform a

task. High self-efficacy individuals believe they can perform well while low self-efficacy individuals doubt their ability to perform.

Other Personality Traits at Work Other Personality Traits at Work (cont’d)(cont’d)

• Authoritarianism– The extent to which an individual believes that power and

status differences are appropriate within hierarchical social organizations.

• Machiavellianism

• Self-Esteem– The extent to which a person believes she/he is a worthwhile

individual.

• Risk Propensity

• Authoritarianism– The extent to which an individual believes that power and

status differences are appropriate within hierarchical social organizations.

• Machiavellianism

• Self-Esteem– The extent to which a person believes she/he is a worthwhile

individual.

• Risk Propensity

Emotional IntelligenceEmotional Intelligence

• Five dimensions of EQ:• Self-awareness

• Managing emotions – a person’s capacity to ensure that feelings do not interfere

with getting things accomplished

• Motivating oneself

• Empathy – a person’s ability to understand how others are feeling

• Social skill

• Five dimensions of EQ:• Self-awareness

• Managing emotions – a person’s capacity to ensure that feelings do not interfere

with getting things accomplished

• Motivating oneself

• Empathy – a person’s ability to understand how others are feeling

• Social skill

Attitudes and Individual BehaviorAttitudes and Individual Behavior

• Attitudes– Complexes of beliefs and feelings that people have about

specific ideas, situations, or other people.

• The Three Components of Attitudes:– Affective component reflects the feelings and emotions an

individual has toward a situation.– Cognitive component – Intentional component is how a person expects to behave in

a given situation.

• Cognitive Dissonance– The conflict individuals experience among their own

attitudes.

• Attitudes– Complexes of beliefs and feelings that people have about

specific ideas, situations, or other people.

• The Three Components of Attitudes:– Affective component reflects the feelings and emotions an

individual has toward a situation.– Cognitive component – Intentional component is how a person expects to behave in

a given situation.

• Cognitive Dissonance– The conflict individuals experience among their own

attitudes.

Work-Related AttitudesWork-Related Attitudes

• Job Satisfaction or Dissatisfaction– An attitude that reflects the extent to which an individual is

gratified or fulfilled by his or her work.

• Job Satisfaction and Work Behaviors– Job satisfaction is influenced by personal, group, and

organizational factors.– Dissatisfied employees are absent from work more often,

may experience stress which disrupts coworkers, and may be continually looking for another job.

– High levels of job satisfaction do not necessarily lead to high job performance.

• Job Satisfaction or Dissatisfaction– An attitude that reflects the extent to which an individual is

gratified or fulfilled by his or her work.

• Job Satisfaction and Work Behaviors– Job satisfaction is influenced by personal, group, and

organizational factors.– Dissatisfied employees are absent from work more often,

may experience stress which disrupts coworkers, and may be continually looking for another job.

– High levels of job satisfaction do not necessarily lead to high job performance.

Work-Related Attitudes (cont’d)Work-Related Attitudes (cont’d)

• Organizational Commitment– An attitude that reflects an individual’s identification with and

attachment to an organization.

• Organizational Commitment and Work Behaviors– Employee commitment strengthens with an individual’s age,

years with the organization, sense of job security, and participation in decision making.

• Organizational Commitment– An attitude that reflects an individual’s identification with and

attachment to an organization.

• Organizational Commitment and Work Behaviors– Employee commitment strengthens with an individual’s age,

years with the organization, sense of job security, and participation in decision making.

Affect and Mood in OrganizationsAffect and Mood in Organizations

• Positive Affectivity

• Negative Affectivity– A tendency to be generally downbeat and pessimistic,

tend to see things in a negative way, and seem to be in a bad mood.

• Positive Affectivity

• Negative Affectivity– A tendency to be generally downbeat and pessimistic,

tend to see things in a negative way, and seem to be in a bad mood.

Perception and Individual Perception and Individual BehaviorBehavior

• Perception– The set of processes by which an individual becomes aware

of and interprets information.

• Selective Perception– The process of screening out information that we are

uncomfortable with or that contradicts our beliefs.

• Stereotyping– The process of categorizing or labeling people on the basis

of a single attribute (e.g., gender and race).

• Perception– The set of processes by which an individual becomes aware

of and interprets information.

• Selective Perception– The process of screening out information that we are

uncomfortable with or that contradicts our beliefs.

• Stereotyping– The process of categorizing or labeling people on the basis

of a single attribute (e.g., gender and race).

Perception and Perceptual Perception and Perceptual ProcessesProcesses

• Attribution– A mechanism through which we observe behavior and

attribute a cause to it.

• Ways in Which Attributions Are Formed:– Consensus

• The extent to which other people in the same situation behave the same way.

– Consistency– Distinctiveness

• Attribution– A mechanism through which we observe behavior and

attribute a cause to it.

• Ways in Which Attributions Are Formed:– Consensus

• The extent to which other people in the same situation behave the same way.

– Consistency– Distinctiveness

Stress and Individual BehaviorStress and Individual Behavior

• Stress– A person’s response to a strong stimulus (i.e., a stressor).

• General Adaptation Syndrome (GAS)– The general cycle of the stress process.– Stage 1 Alarm

• Panic, wondering how to cope, and a feeling of helplessness.– Stage 2 Resistance– Stage 3 Exhaustion

• Stress– A person’s response to a strong stimulus (i.e., a stressor).

• General Adaptation Syndrome (GAS)– The general cycle of the stress process.– Stage 1 Alarm

• Panic, wondering how to cope, and a feeling of helplessness.– Stage 2 Resistance– Stage 3 Exhaustion

Stress and Individual Behavior Stress and Individual Behavior (cont’d)(cont’d)

• Personality Types– Type A personality

• Extremely competitive (aggressive), devoted to work, have a strong sense of time urgency (impatient).

– Type B personality• Less competitive, less devoted to work, have a weaker sense

of time urgency.• Less likely to experience personal stress or to come into

conflict with other people.

• Personality Types– Type A personality

• Extremely competitive (aggressive), devoted to work, have a strong sense of time urgency (impatient).

– Type B personality• Less competitive, less devoted to work, have a weaker sense

of time urgency.• Less likely to experience personal stress or to come into

conflict with other people.

Causes and Consequences of Causes and Consequences of StressStress

• Causes of Work Stress• Causes of Work Stress

InterpersonalDemands• Group pressures

• Leadership styles

• Conflictingpersonalities

Task Demands• Quick decisions

• Critical decisions

• Incomplete informa-

tion for decisions

Physical Demands• Temperature extremes

• Poorly designed office

• Threats to health

Role Demands• Role ambiguity

• Role conflict

OrganizationalStressors

Causes and ConsequencesCauses and Consequences of Stress (cont’d) of Stress (cont’d)

• Consequences of Stress– Negative personal consequences

• Behavioral • Psychological—sleep disturbances, depression, family

problems.• Medical

– Negative work-related consequences• Poor quality work output and lower productivity.• Job dissatisfaction, low morale, and a lack of commitment.• Withdrawal through indifference and absenteeism.

– Burnout• A feeling of exhaustion that may develop when someone

experiences too much stress for an extended period of time.

• Consequences of Stress– Negative personal consequences

• Behavioral • Psychological—sleep disturbances, depression, family

problems.• Medical

– Negative work-related consequences• Poor quality work output and lower productivity.• Job dissatisfaction, low morale, and a lack of commitment.• Withdrawal through indifference and absenteeism.

– Burnout• A feeling of exhaustion that may develop when someone

experiences too much stress for an extended period of time.

Managing StressManaging Stress

• Stress Management Strategies for Individuals– Regular exercise

• reduces tension and stress, and improves self-confidence and feelings of optimism.

– Relaxation

– Time management• reduces stress by prioritizing activities to accomplish them in

their order of importance.– Support Groups

• Stress Management Strategies for Individuals– Regular exercise

• reduces tension and stress, and improves self-confidence and feelings of optimism.

– Relaxation

– Time management• reduces stress by prioritizing activities to accomplish them in

their order of importance.– Support Groups

Managing Stress (cont’d)Managing Stress (cont’d)

• Stress Management Strategies for Organizations– Organizations also bear the costs of stress-related claims. – Organizational wellness/stress management programs can

be used to promote healthful employee activities and derive the benefits of increased organizational productivity.

• Stress Management Strategies for Organizations– Organizations also bear the costs of stress-related claims. – Organizational wellness/stress management programs can

be used to promote healthful employee activities and derive the benefits of increased organizational productivity.

Creativity in OrganizationsCreativity in Organizations• Creativity

– The ability of an individual to generate new ideas or to conceive of new perspectives in existing ideas.

• The Creative Individual– Background experiences and creativity– Personal traits and creativity

• Creative persons have personal traits of openness, an attraction to complexity, high levels of energy, independence, autonomy, strong self-confidence, and a strong belief in their own creativity.

– Cognitive abilities and creativity• They are both divergent and convergent thinkers, a skill they

use to see differences and similarities in situations, phenomena, and events.

• Creativity– The ability of an individual to generate new ideas or to

conceive of new perspectives in existing ideas.

• The Creative Individual– Background experiences and creativity– Personal traits and creativity

• Creative persons have personal traits of openness, an attraction to complexity, high levels of energy, independence, autonomy, strong self-confidence, and a strong belief in their own creativity.

– Cognitive abilities and creativity• They are both divergent and convergent thinkers, a skill they

use to see differences and similarities in situations, phenomena, and events.

Creativity in Organizations, cont’dCreativity in Organizations, cont’d

Characteristics of Creative People

•Tolerance for ambiguity

•Not inhibited by conformity pressure

•Good verbal communicator

•Imaginative

•Reasonably intelligent

•Intrinsically motivated

•Willing to take risks and fail

Situations that

Enhance Creativity• Specific and difficult goals

• Time pressure

• Supportive culture

• Heterogeneity

Situations that

Enhance Creativity• Specific and difficult goals

• Time pressure

• Supportive culture

• Heterogeneity

The Creative ProcessThe Creative Process

• Preparation– Formal education and training is used to “get up to speed.”– Experiences on the job provide additional knowledge and

ideas.

• Incubation– A period of less intense conscious concentration during

which knowledge and ideas acquired, during preparation, mature and develop.

• Preparation– Formal education and training is used to “get up to speed.”– Experiences on the job provide additional knowledge and

ideas.

• Incubation– A period of less intense conscious concentration during

which knowledge and ideas acquired, during preparation, mature and develop.

The Creative Process (cont’d)The Creative Process (cont’d)

• Insight– A spontaneous breakthrough in which the creative person

achieves a new understanding of some problem or situation.

• Verification– Determines the validity or truthfulness of the insight.– Tests are conducted and prototypes are built to see if the

insight leads to the expected results.

• Enhancing Creativity in Organizations– Make creativity part of the organization’s culture.– Reward creativity; refrain from punishing creative failures.

• Insight– A spontaneous breakthrough in which the creative person

achieves a new understanding of some problem or situation.

• Verification– Determines the validity or truthfulness of the insight.– Tests are conducted and prototypes are built to see if the

insight leads to the expected results.

• Enhancing Creativity in Organizations– Make creativity part of the organization’s culture.– Reward creativity; refrain from punishing creative failures.

Types of Workplace BehaviorTypes of Workplace Behavior

• Workplace Behavior– A pattern of action by the members of an organization that

directly or indirectly influences organizational effectiveness.

• Performance Behaviors– The total set of work-related behaviors an organization

expects an individual to display.

• Withdrawal Behaviors– Absenteeism occurs when an individual does not show up

for work when expected for legitimate or feigned reasons.– Turnover occurs when individuals quit their jobs for work-

related or personal reasons.

• Workplace Behavior– A pattern of action by the members of an organization that

directly or indirectly influences organizational effectiveness.

• Performance Behaviors– The total set of work-related behaviors an organization

expects an individual to display.

• Withdrawal Behaviors– Absenteeism occurs when an individual does not show up

for work when expected for legitimate or feigned reasons.– Turnover occurs when individuals quit their jobs for work-

related or personal reasons.

Types of Workplace Behavior Types of Workplace Behavior (cont’d)(cont’d)

• Dysfunctional Behavior– The behaviors that detract from, rather than contribute to,

organizational performance.

• Organizational Citizenship– The behavior of individuals that makes a positive overall

contribution to the organization.– The determinants of organizational citizenship is a complex

mosaic of individual, social, and organizational variables.• The personality, attitudes, and needs of the individual.• The social context, or work group, in which the individual

works.

• Dysfunctional Behavior– The behaviors that detract from, rather than contribute to,

organizational performance.

• Organizational Citizenship– The behavior of individuals that makes a positive overall

contribution to the organization.– The determinants of organizational citizenship is a complex

mosaic of individual, social, and organizational variables.• The personality, attitudes, and needs of the individual.• The social context, or work group, in which the individual

works.

Managing Employee Motivation and Performance

Managing Employee Motivation and Performance

Sixteenhapter

The Nature of MotivationThe Nature of Motivation

• Motivation– The set of forces that cause people to behave in certain

ways.– The goal of managers is to maximize desired behaviors and

minimize undesirable behaviors.

• The Importance of Motivation in the Workplace– Determinants of Individual Performance

• Motivation • Ability • Work environment

• Motivation– The set of forces that cause people to behave in certain

ways.– The goal of managers is to maximize desired behaviors and

minimize undesirable behaviors.

• The Importance of Motivation in the Workplace– Determinants of Individual Performance

• Motivation • Ability • Work environment

Historical Perspectives on Historical Perspectives on MotivationMotivation

• The Traditional Approach– Frederick Taylor (Scientific Management)– Assumptions

• Work is inherently unpleasant.

• The Human Relations Approach– Emphasized the role of social processes in the workplace.– Assumptions

• Maintaining the appearance of employee participation is important.

• The Human Resource Approach– Assumptions

• Management’s job is to encourage participation and create a work environment that motivates employees.

• Employees want to and are able to make genuine contributions

• The Traditional Approach– Frederick Taylor (Scientific Management)– Assumptions

• Work is inherently unpleasant.

• The Human Relations Approach– Emphasized the role of social processes in the workplace.– Assumptions

• Maintaining the appearance of employee participation is important.

• The Human Resource Approach– Assumptions

• Management’s job is to encourage participation and create a work environment that motivates employees.

• Employees want to and are able to make genuine contributions

Content Perspectives on Content Perspectives on MotivationMotivation

• Content Perspectives– Approaches to motivation that try to answer the question,

“What factors in the workplace motivate people?”

• Content Perspectives of Motivation– Maslow’s Hierarchy of Needs– Aldefer’s ERG Theory– Herzberg’s Two-Factor Theory– McClelland’s Achievement, Power, and Affiliation Needs

• Content Perspectives– Approaches to motivation that try to answer the question,

“What factors in the workplace motivate people?”

• Content Perspectives of Motivation– Maslow’s Hierarchy of Needs– Aldefer’s ERG Theory– Herzberg’s Two-Factor Theory– McClelland’s Achievement, Power, and Affiliation Needs

Content Perspectives on Motivation Content Perspectives on Motivation (cont’d)(cont’d)

• The Need Hierarchy Approach– Maslow’s Hierarchy of Needs

• People must, in a hierarchical order, satisfy five groups of needs:–Physiological needs for basic survival and biological

function.–Security needs –Belongingness needs for love and affection.–Esteem needs for positive self-image/self-respect and

recognition and respect from others.–Self-actualization needs

– Weakness of Maslow’s theory• Five levels of need are not always present.

• The Need Hierarchy Approach– Maslow’s Hierarchy of Needs

• People must, in a hierarchical order, satisfy five groups of needs:–Physiological needs for basic survival and biological

function.–Security needs –Belongingness needs for love and affection.–Esteem needs for positive self-image/self-respect and

recognition and respect from others.–Self-actualization needs

– Weakness of Maslow’s theory• Five levels of need are not always present.

Content Perspectives on Motivation Content Perspectives on Motivation (cont’d)(cont’d)

• The ERG Theory (Alderfer)– People’s needs are grouped into three overlapping

categories—existence, relatedness, and growth.– Maslow’s hierarchy is collapsed into three levels:

• Existence needs• Relatedness needs • Growth needs

– ERG theory assumes that:• Multiple needs can be operative at one time (there is no

absolute hierarchy of needs).• If a need is unsatisfied, a person will regress to a lower-level

need and pursue that need (frustration-regression).

• The ERG Theory (Alderfer)– People’s needs are grouped into three overlapping

categories—existence, relatedness, and growth.– Maslow’s hierarchy is collapsed into three levels:

• Existence needs• Relatedness needs • Growth needs

– ERG theory assumes that:• Multiple needs can be operative at one time (there is no

absolute hierarchy of needs).• If a need is unsatisfied, a person will regress to a lower-level

need and pursue that need (frustration-regression).

Content Perspectives on Motivation Content Perspectives on Motivation (cont’d)(cont’d)

• The Two-Factor Theory (Herzberg)– People’s satisfaction and dissatisfaction are influenced by

two independent sets of factors—motivation factors and hygiene factors.

– Theory assumes that job satisfaction and job dissatisfaction are on two distinct continuums:• Motivational factors (work content) are on a continuum that

ranges from satisfaction to no satisfaction.• Hygiene factors (work environment) are on a separate

continuum that ranges from dissatisfaction to no dissatisfaction.• Motivation is a two-step process:

• The Two-Factor Theory (Herzberg)– People’s satisfaction and dissatisfaction are influenced by

two independent sets of factors—motivation factors and hygiene factors.

– Theory assumes that job satisfaction and job dissatisfaction are on two distinct continuums:• Motivational factors (work content) are on a continuum that

ranges from satisfaction to no satisfaction.• Hygiene factors (work environment) are on a separate

continuum that ranges from dissatisfaction to no dissatisfaction.• Motivation is a two-step process:

Content Perspectives on Motivation Content Perspectives on Motivation (cont’d)(cont’d)

• Individual Human Needs (McClelland)– The need for achievement

• The desire to accomplish a goal or task more effectively than in the past.

– The need for affiliation

– The need for power

• Individual Human Needs (McClelland)– The need for achievement

• The desire to accomplish a goal or task more effectively than in the past.

– The need for affiliation

– The need for power

Process Perspectives on Process Perspectives on MotivationMotivation

• Process Perspectives– Approaches to motivation that focus on why people choose

certain behavioral options to satisfy their needs and how they evaluate their satisfaction after they have attained their goals.

• Process Perspectives of Motivation– Expectancy Theory– Porter-Lawler Extension of Expectancy Theory– Equity Theory– Goal-Setting Theory

• Process Perspectives– Approaches to motivation that focus on why people choose

certain behavioral options to satisfy their needs and how they evaluate their satisfaction after they have attained their goals.

• Process Perspectives of Motivation– Expectancy Theory– Porter-Lawler Extension of Expectancy Theory– Equity Theory– Goal-Setting Theory

Process Perspectives on Motivation Process Perspectives on Motivation (cont’d)(cont’d)

• Expectancy Theory– Motivation depends on how much we want something and

how likely we are to get it.– Assumes that:

• Behavior is determined by a combination of personal and environmental forces.

• People make decisions about their own behavior in organizations.

• Motivation leads to effort, when combined with ability and environmental factors, that results in performance which, in turn, leads to various outcomes that have value (valence) to employees.

• Expectancy Theory– Motivation depends on how much we want something and

how likely we are to get it.– Assumes that:

• Behavior is determined by a combination of personal and environmental forces.

• People make decisions about their own behavior in organizations.

• Motivation leads to effort, when combined with ability and environmental factors, that results in performance which, in turn, leads to various outcomes that have value (valence) to employees.

Process Perspectives on Motivation Process Perspectives on Motivation (cont’d)(cont’d)

• Elements of Expectancy Theory– Effort-to-Performance Expectancy

• The employee’s perception of the probability that effort will lead to a high level of performance.

– Performance-to-Outcome Expectancy• The employee’s perception of the probability that performance

will lead to a specific outcome—the consequence or reward for behaviors in an organizational setting.

• Elements of Expectancy Theory– Effort-to-Performance Expectancy

• The employee’s perception of the probability that effort will lead to a high level of performance.

– Performance-to-Outcome Expectancy• The employee’s perception of the probability that performance

will lead to a specific outcome—the consequence or reward for behaviors in an organizational setting.

Process Perspectives on Motivation Process Perspectives on Motivation (cont’d)(cont’d)

• Elements of Expectancy Theory (cont’d)– Valence

• An index of how much an individual values a particular outcome.

• It is the attractiveness of the outcome to the individual.– For motivated behavior to occur:

• Both effort-to-performance expectancy and performance-to-outcome expectancy probabilities must be greater than zero.

• The sum of the valences must be greater than zero.

• Elements of Expectancy Theory (cont’d)– Valence

• An index of how much an individual values a particular outcome.

• It is the attractiveness of the outcome to the individual.– For motivated behavior to occur:

• Both effort-to-performance expectancy and performance-to-outcome expectancy probabilities must be greater than zero.

• The sum of the valences must be greater than zero.

Process Perspectives on Motivation Process Perspectives on Motivation (cont’d)(cont’d)

• The Porter-Lawler Extension of Expectancy Theory– Assumptions:

• If performance in an organization results in equitable and fair rewards, people will be more satisfied.

• High performance can lead to rewards and high satisfaction.– Types of rewards:

• Extrinsic rewards • Intrinsic rewards

• The Porter-Lawler Extension of Expectancy Theory– Assumptions:

• If performance in an organization results in equitable and fair rewards, people will be more satisfied.

• High performance can lead to rewards and high satisfaction.– Types of rewards:

• Extrinsic rewards • Intrinsic rewards

Process Perspectives on Motivation Process Perspectives on Motivation (cont’d)(cont’d)

• Equity Theory– People are motivated to seek social equity in the rewards

they receive for performance.– Equity is an individual’s belief that the treatment he or she

receives is fair relative to the treatment received by others. – Individuals view the value of rewards (outcomes) and inputs

of effort as ratios and make subjective comparisons of themselves to other people.

• Equity Theory– People are motivated to seek social equity in the rewards

they receive for performance.– Equity is an individual’s belief that the treatment he or she

receives is fair relative to the treatment received by others. – Individuals view the value of rewards (outcomes) and inputs

of effort as ratios and make subjective comparisons of themselves to other people.

outcomes (self)inputs (self)

=outcomes (other)

inputs (other)

Process Perspectives on Motivation Process Perspectives on Motivation (cont’d)(cont’d)

• Equity Theory (cont’d)– Conditions of and reactions to equity comparisons:

• Feeling equitably rewarded. • Feeling under-rewarded—try to reduce inequity.

– Change inputs by trying harder or slacking off.

– Change outcomes by demanding a raise.

– Distort the ratios by altering perceptions of self or of others.

• Feeling over-rewarded.– Increase or decrease inputs.–Distort ratios by rationalizing.

• Equity Theory (cont’d)– Conditions of and reactions to equity comparisons:

• Feeling equitably rewarded. • Feeling under-rewarded—try to reduce inequity.

– Change inputs by trying harder or slacking off.

– Change outcomes by demanding a raise.

– Distort the ratios by altering perceptions of self or of others.

• Feeling over-rewarded.– Increase or decrease inputs.–Distort ratios by rationalizing.

Process Perspectives on Motivation Process Perspectives on Motivation (cont’d)(cont’d)

• Goal-Setting Theory – Assumptions

• Behavior is a result of conscious goals and intentions.• Setting goals influence the behavior of people in organizations.

• Characteristics of Goals– Goal difficulty

• Extent to which a goal is challenging and requires effort.– Goal specificity

• Clarity and precision of the goal.– Acceptance

• The extent to which persons accept a goal as their own.– Commitment

• The extent to which an individual is personally interested in reaching a goal.

• Goal-Setting Theory – Assumptions

• Behavior is a result of conscious goals and intentions.• Setting goals influence the behavior of people in organizations.

• Characteristics of Goals– Goal difficulty

• Extent to which a goal is challenging and requires effort.– Goal specificity

• Clarity and precision of the goal.– Acceptance

• The extent to which persons accept a goal as their own.– Commitment

• The extent to which an individual is personally interested in reaching a goal.

Reinforcement PerspectivesReinforcement Perspectiveson Motivationon Motivation

• Reinforcement Theory– The role of rewards as they cause behavior to change or

remain the same over time.– Assumes that:

• Behavior that results in rewarding consequences is likely to be repeated, whereas behavior that results in punishing consequences is less likely to be repeated.

• Reinforcement Theory– The role of rewards as they cause behavior to change or

remain the same over time.– Assumes that:

• Behavior that results in rewarding consequences is likely to be repeated, whereas behavior that results in punishing consequences is less likely to be repeated.

Reinforcement Perspectives on Reinforcement Perspectives on Motivation (cont’d)Motivation (cont’d)

• Kinds of Reinforcement in Organizations– Positive reinforcement

• Strengthens behavior with rewards or positive outcomes after a desired behavior is performed.

– Avoidance

– Punishment• Weakens undesired behavior by using negative outcomes or

unpleasant consequences when the behavior is performed.– Extinction

• Kinds of Reinforcement in Organizations– Positive reinforcement

• Strengthens behavior with rewards or positive outcomes after a desired behavior is performed.

– Avoidance

– Punishment• Weakens undesired behavior by using negative outcomes or

unpleasant consequences when the behavior is performed.– Extinction

Reinforcement Perspectives on Reinforcement Perspectives on Motivation (cont’d)Motivation (cont’d)

• Providing Reinforcement in Organizations– Reinforcement schedules

• Fixed interval schedule—reinforcement applied at fixed time intervals, regardless of behavior.

• Variable interval • Fixed ratio —reinforcement applied after a fixed number of

behaviors, regardless of time.• Variable Ratio

– Behavior modification (OB mod)• A method for applying the basic elements of reinforcement

theory in an organizational setting.• Specific behaviors are tied to specific forms of reinforcement.

• Providing Reinforcement in Organizations– Reinforcement schedules

• Fixed interval schedule—reinforcement applied at fixed time intervals, regardless of behavior.

• Variable interval • Fixed ratio —reinforcement applied after a fixed number of

behaviors, regardless of time.• Variable Ratio

– Behavior modification (OB mod)• A method for applying the basic elements of reinforcement

theory in an organizational setting.• Specific behaviors are tied to specific forms of reinforcement.

Popular Motivational StrategiesPopular Motivational Strategies

• Empowerment and Participation– Empowerment

• The process of enabling workers to set their own work goals, make decisions, and solve problems within their sphere of influence.

– Participation• The process of giving employees a voice in making decisions

about their work.– Areas of Participation for Employees

• Making decisions about their jobs.• Decisions about administrative matters (e.g., work schedules).• Participating in decision making about broader issues of

product quality.

• Empowerment and Participation– Empowerment

• The process of enabling workers to set their own work goals, make decisions, and solve problems within their sphere of influence.

– Participation• The process of giving employees a voice in making decisions

about their work.– Areas of Participation for Employees

• Making decisions about their jobs.• Decisions about administrative matters (e.g., work schedules).• Participating in decision making about broader issues of

product quality.

Popular Motivational Strategies Popular Motivational Strategies (cont’d)(cont’d)

• Techniques and Issues in Empowerment– Using work teams

• Collections of employees empowered to plan, organize, direct, and control their work.

– Changing the overall method of organizing the firm by becoming more decentralized.

– Conditions necessary for empowerment:• Organization must be sincere about spreading power to lower

levels.• Organization must be committed to empowering workers.• Organization must be prepared to increase its commitment to

training.

• Techniques and Issues in Empowerment– Using work teams

• Collections of employees empowered to plan, organize, direct, and control their work.

– Changing the overall method of organizing the firm by becoming more decentralized.

– Conditions necessary for empowerment:• Organization must be sincere about spreading power to lower

levels.• Organization must be committed to empowering workers.• Organization must be prepared to increase its commitment to

training.

Popular Motivational Strategies Popular Motivational Strategies (cont’d)(cont’d)

• New Forms of Working Arrangements– Variable Work Schedules

• Compressed work schedule—Working a full forty-hour week in less than five days.

• Flexible work schedules (flextime) • Job sharing • Telecommuting—Allowing employees to spend part of their

time working off-site, usually at home, by using e-mail, the Internet, and other forms of information technology.

• New Forms of Working Arrangements– Variable Work Schedules

• Compressed work schedule—Working a full forty-hour week in less than five days.

• Flexible work schedules (flextime) • Job sharing • Telecommuting—Allowing employees to spend part of their

time working off-site, usually at home, by using e-mail, the Internet, and other forms of information technology.

Using Reward Systems toUsing Reward Systems toMotivate PerformanceMotivate Performance

• Reward System– The formal and informal mechanisms by which employee

performance is defined, evaluated, and rewarded.

• Effects of Organizational Rewards– Effect of Rewards on Attitudes

• job satisfaction is affected by employee satisfaction with intrinsic and extrinsic rewards.

– Effect of Rewards on Behaviors• Extrinsic rewards affect employee satisfaction and reduce

turnover.• Employees tend to work harder for rewards based on

performance.– Effect of Rewards on Motivation

• Employees will work harder when performance will be measured.

• Reward System– The formal and informal mechanisms by which employee

performance is defined, evaluated, and rewarded.

• Effects of Organizational Rewards– Effect of Rewards on Attitudes

• job satisfaction is affected by employee satisfaction with intrinsic and extrinsic rewards.

– Effect of Rewards on Behaviors• Extrinsic rewards affect employee satisfaction and reduce

turnover.• Employees tend to work harder for rewards based on

performance.– Effect of Rewards on Motivation

• Employees will work harder when performance will be measured.

Using Reward Systems toUsing Reward Systems toMotivate Performance (cont’d)Motivate Performance (cont’d)

• Designing Effective Rewards– Reward system must meet an individual’s needs.– Rewards should compare favorably with other organizations.– Distribution of rewards must be perceived to be equitable.– Reward system must recognize different needs.

• Designing Effective Rewards– Reward system must meet an individual’s needs.– Rewards should compare favorably with other organizations.– Distribution of rewards must be perceived to be equitable.– Reward system must recognize different needs.

Approaches to Rewarding Approaches to Rewarding EmployeesEmployees

• Merit system• A reward system whereby people get different pay raises at the

end of the year depending on their overall job performance.

• Incentive system• A reward system whereby people get different pay amounts at

each pay period in proportion to what they do.• Popular incentive systems:

–Piece-rate incentive plan –– Individual incentive plan – reward individual performance at

the time when high performance occurs.–Sales commissions – paid a percentage of sales over a

period of time.–Other types:

» Paying incentives based on both individual and group performance.

• Merit system• A reward system whereby people get different pay raises at the

end of the year depending on their overall job performance.

• Incentive system• A reward system whereby people get different pay amounts at

each pay period in proportion to what they do.• Popular incentive systems:

–Piece-rate incentive plan –– Individual incentive plan – reward individual performance at

the time when high performance occurs.–Sales commissions – paid a percentage of sales over a

period of time.–Other types:

» Paying incentives based on both individual and group performance.

Approaches to Rewarding Approaches to Rewarding Employees Employees (cont’d)(cont’d)

• Team and Group Incentive Reward Systems• Gain sharing is group based, and all members get bonus when

pre-determined levels are exceeded. Aligns employee and corporate interests.– Scanlon plan

• Profit sharing provides a varying annual bonus to employees based on corporate profits.

• Employee Stock Ownership Programs (ESOPs) gradually grant stock ownership of the firm to employees as a reward.

• Executive Compensation• Generally includes base salary, annual bonuses based on

performance, stock option plans, and other types of compensation

• Team and Group Incentive Reward Systems• Gain sharing is group based, and all members get bonus when

pre-determined levels are exceeded. Aligns employee and corporate interests.– Scanlon plan

• Profit sharing provides a varying annual bonus to employees based on corporate profits.

• Employee Stock Ownership Programs (ESOPs) gradually grant stock ownership of the firm to employees as a reward.

• Executive Compensation• Generally includes base salary, annual bonuses based on

performance, stock option plans, and other types of compensation

Managing Leadership and Influence Processes

Managing Leadership and Influence Processes

Seventeenhapter

The Nature of LeadershipThe Nature of Leadership

• The Meaning of Leadership– Process: what leaders actually do.

• Using noncoercive influence to shape the group’s or organization’s goals.

• Helping to define organizational culture. – Property: who leaders are.

• The set of characteristics attributed to individuals perceived to be leaders.

– Leaders• People who can influence the behaviors of others without

having to rely on force.• People who are accepted as leaders by others.

• The Meaning of Leadership– Process: what leaders actually do.

• Using noncoercive influence to shape the group’s or organization’s goals.

• Helping to define organizational culture. – Property: who leaders are.

• The set of characteristics attributed to individuals perceived to be leaders.

– Leaders• People who can influence the behaviors of others without

having to rely on force.• People who are accepted as leaders by others.

The Nature of Leadership (cont’d)The Nature of Leadership (cont’d)

• Power and Leadership– Power is the ability to affect the behavior of others.

• Legitimate power is granted through the organizational hierarchy.

• Reward power • Coercive power is the capability to force compliance by means

of psychological, emotional, or physical threat.• Referent power• Expert power is derived from the possession of information or

expertise.

• Power and Leadership– Power is the ability to affect the behavior of others.

• Legitimate power is granted through the organizational hierarchy.

• Reward power • Coercive power is the capability to force compliance by means

of psychological, emotional, or physical threat.• Referent power• Expert power is derived from the possession of information or

expertise.

The Nature of Leadership (cont’d)The Nature of Leadership (cont’d)

• Using Power– Legitimate request

• Compliance by a subordinate with a manager’s request because the organization has given the manager the right to make the request.

– Instrumental compliance– Coercion

• Threatening to fire, punish, or reprimand subordinates if they do not do something.

– Rational persuasion– Personal identification

• Using the referent power of a superior’s desired behaviors to shape the behavior of a subordinate.

– Inspirational appeal– Information distortion

• Withholding or distorting information (which may create an unethical situation) to influence subordinates’ behavior

• Using Power– Legitimate request

• Compliance by a subordinate with a manager’s request because the organization has given the manager the right to make the request.

– Instrumental compliance– Coercion

• Threatening to fire, punish, or reprimand subordinates if they do not do something.

– Rational persuasion– Personal identification

• Using the referent power of a superior’s desired behaviors to shape the behavior of a subordinate.

– Inspirational appeal– Information distortion

• Withholding or distorting information (which may create an unethical situation) to influence subordinates’ behavior

The Search for Leadership TraitsThe Search for Leadership Traits

• Traits Approach to Leadership– Assumed that a basic set of personal traits that differentiated

leaders from nonleaders could be used to identify leaders and as a tool for predicting who would become leaders.

– The trait approach was unsuccessful in establishing empirical relationships between traits and persons regarded as leaders.

– Hundreds of studies boil down to five common traits…

• Traits Approach to Leadership– Assumed that a basic set of personal traits that differentiated

leaders from nonleaders could be used to identify leaders and as a tool for predicting who would become leaders.

– The trait approach was unsuccessful in establishing empirical relationships between traits and persons regarded as leaders.

– Hundreds of studies boil down to five common traits…

Leadership BehaviorsLeadership Behaviors

• Michigan Studies (Rensis Likert)– Identified two forms of leader behavior

• Job-centered behavior—managers who pay close attention to subordinates’ work, explain work procedures, and are keenly interested in performance.

• Employee-centered behavior • These two forms of leader behaviors were considered to be at

opposite ends of the same continuum and similar to (respectively) Likert’s System 1 and System 4 of organizational design.

• Michigan Studies (Rensis Likert)– Identified two forms of leader behavior

• Job-centered behavior—managers who pay close attention to subordinates’ work, explain work procedures, and are keenly interested in performance.

• Employee-centered behavior • These two forms of leader behaviors were considered to be at

opposite ends of the same continuum and similar to (respectively) Likert’s System 1 and System 4 of organizational design.

Leadership Behaviors (cont’d)Leadership Behaviors (cont’d)

• Ohio State Studies– The studies did not interpret leader behavior as being one-

dimensional as did the Michigan studies.– Identified two basic leadership styles that can be exhibited

simultaneously:• Initiating-structure behavior • Consideration behavior—the leader shows concern for

subordinates and attempts to establish a friendly and supportive climate.

• Ohio State Studies– The studies did not interpret leader behavior as being one-

dimensional as did the Michigan studies.– Identified two basic leadership styles that can be exhibited

simultaneously:• Initiating-structure behavior • Consideration behavior—the leader shows concern for

subordinates and attempts to establish a friendly and supportive climate.

Leadership Behaviors (cont’d)Leadership Behaviors (cont’d)

• Ohio State Studies (cont’d)– Initial assumption of the research was that leaders who

exhibit high levels of both behaviors would be most effective leaders. Subsequent research indicated that:• Employees of supervisors ranked highly on initiating structure

were high performers, although they expressed low levels of satisfaction and had higher absenteeism.

• Employees of supervisors ranked highly on consideration had low- performance ratings, but they had high levels of satisfaction and had less absenteeism.

• Other situational variables were making consistent leader behavior predictions difficult.

• Ohio State Studies (cont’d)– Initial assumption of the research was that leaders who

exhibit high levels of both behaviors would be most effective leaders. Subsequent research indicated that:• Employees of supervisors ranked highly on initiating structure

were high performers, although they expressed low levels of satisfaction and had higher absenteeism.

• Employees of supervisors ranked highly on consideration had low- performance ratings, but they had high levels of satisfaction and had less absenteeism.

• Other situational variables were making consistent leader behavior predictions difficult.

Situational Approaches to Situational Approaches to LeadershipLeadership

• Situational Models of Leader Behavior– Assume that:

• Appropriate leader behavior varies from one situation to another.• Key situational factors that are interacting to determine

appropriate leader behavior can be identified.

• Leadership Continuum (Tannenbaum and Schmidt)– Variables influencing the decision-making continuum:

• Leader’s characteristics • Subordinates’ characteristics—independence needs, readiness

for responsibility, tolerance of ambiguity, interest in the problem, understanding goals, knowledge, experience, and expectations.

• Situational Characteristics

• Situational Models of Leader Behavior– Assume that:

• Appropriate leader behavior varies from one situation to another.• Key situational factors that are interacting to determine

appropriate leader behavior can be identified.

• Leadership Continuum (Tannenbaum and Schmidt)– Variables influencing the decision-making continuum:

• Leader’s characteristics • Subordinates’ characteristics—independence needs, readiness

for responsibility, tolerance of ambiguity, interest in the problem, understanding goals, knowledge, experience, and expectations.

• Situational Characteristics

Situational Approaches to Leadership Situational Approaches to Leadership (cont’d)(cont’d)

• Least-Preferred Coworker Theory (Fiedler)– The appropriate style of leadership varies with situational

favorableness (from the leader’s viewpoint).– Least preferred coworker (LPC)

• The measuring scale that asks leaders to describe the person with whom they are least able to work well.

• High LPC scale scores indicate a relationship orientation; low LPC scores indicate a task orientation on the part of the leader.

– Contingency variables determining situational favorableness:• Leader-member relations—the nature of the relationship

between the leader and the work group. • Task structure • Position Power—the power vested in the leader’s position.

• Least-Preferred Coworker Theory (Fiedler)– The appropriate style of leadership varies with situational

favorableness (from the leader’s viewpoint).– Least preferred coworker (LPC)

• The measuring scale that asks leaders to describe the person with whom they are least able to work well.

• High LPC scale scores indicate a relationship orientation; low LPC scores indicate a task orientation on the part of the leader.

– Contingency variables determining situational favorableness:• Leader-member relations—the nature of the relationship

between the leader and the work group. • Task structure • Position Power—the power vested in the leader’s position.

Situational Approaches to Leadership Situational Approaches to Leadership (cont’d)(cont’d)

• Path-Goal Theory (Evans and House)– The primary functions of a leader are to make valued

or desired rewards available in the workplace and to clarify for the subordinate the kinds of behavior that will lead to goal accomplishment or rewards.

– Leader Behaviors:• Directive leader behavior—letting subordinates know what is

expected of them, giving guidance and direction, and scheduling work.

• Supportive leader behavior • Participative leader behavior—consulting with subordinates,

soliciting suggestions, and allowing participation in decision making.

• Achievement-oriented leader behavior—setting challenging goals, expecting subordinates to perform at high levels, encouraging and showing confidence in subordinates.

• Path-Goal Theory (Evans and House)– The primary functions of a leader are to make valued

or desired rewards available in the workplace and to clarify for the subordinate the kinds of behavior that will lead to goal accomplishment or rewards.

– Leader Behaviors:• Directive leader behavior—letting subordinates know what is

expected of them, giving guidance and direction, and scheduling work.

• Supportive leader behavior • Participative leader behavior—consulting with subordinates,

soliciting suggestions, and allowing participation in decision making.

• Achievement-oriented leader behavior—setting challenging goals, expecting subordinates to perform at high levels, encouraging and showing confidence in subordinates.

The Path-Goal TheoryThe Path-Goal Theory

• Situational Factors:• Situational Factors:WorkSituation

Follower lacks self-confidence

Supportive

Achievement-oriented

Participative

Directive

LeadershipStyle

Impact onFollowers

Expected Results

Lack of jobchallenge

Improperprocedures and poor decisions

Ambiguous job

Increases self-confidence to complete task

Encourages setting high but attainable goals

Clarifies followerneed for makingsuggestions andinvolvement

Clarifies path toget rewards

Increased effort. job satisfaction, and performance; fewer grievances

Improved performance and greater job satisfaction

Improved performance and greater satisfaction; less turnover

Improved performance and job satisfaction

Path Goal Theory to Leadership Path Goal Theory to Leadership (cont’d)(cont’d)

• The Path-Goal Framework• The Path-Goal Framework

Subordinates’personalcharacteristics

• Perceived ability• Locus of control

Leader behaviors

• Directive• Supportive• Participative• Achievement-

oriented

Environmentalcharacteristics

• Task structure• Work group

Subordinates’ motivation to perform

Situational Approaches to Leadership Situational Approaches to Leadership (cont’d)(cont’d)

• Vroom Decision Tree Approach– Attempts to prescribe a leadership style appropriate to a

given situation.– Basic Premises

• The degree to which subordinates should be encouraged to participate in decision making depends on the characteristics of the situation.

• No one decision-making process is best for all situations.• After evaluating the different problem attributes, a leader can

choose a decision path on one of two decision trees that determines the decision style and specifies the amount of employee participation.– Decision significance

– Decision Timeliness

• Vroom Decision Tree Approach– Attempts to prescribe a leadership style appropriate to a

given situation.– Basic Premises

• The degree to which subordinates should be encouraged to participate in decision making depends on the characteristics of the situation.

• No one decision-making process is best for all situations.• After evaluating the different problem attributes, a leader can

choose a decision path on one of two decision trees that determines the decision style and specifies the amount of employee participation.– Decision significance

– Decision Timeliness

Situational Approaches to Leadership Situational Approaches to Leadership (cont’d)(cont’d)

• Vroom Decision Tree Approach (cont’d)– Decision-Making Styles

• Decide • Consult (individually) - manager presents program to group

members individually, obtains their suggestions, then makes the decision.

• Consult (group) • Facilitate—manager presents the problem to the group,

defines the problem and its boundaries, and then facilitates group member discussion as they make the decision.

• Delegate

• Vroom Decision Tree Approach (cont’d)– Decision-Making Styles

• Decide • Consult (individually) - manager presents program to group

members individually, obtains their suggestions, then makes the decision.

• Consult (group) • Facilitate—manager presents the problem to the group,

defines the problem and its boundaries, and then facilitates group member discussion as they make the decision.

• Delegate

Situational Approaches to Leadership Situational Approaches to Leadership (cont’d)(cont’d)

• The Leader-Member Exchange (LMX) Approach– Stresses the importance of variable relationships between

supervisors and each of their subordinates.– Leaders form unique independent relationships (“vertical

dyads”) with each subordinate in which the subordinate becomes a member of the leader’s out-group or in-group.

• The Leader-Member Exchange (LMX) Approach– Stresses the importance of variable relationships between

supervisors and each of their subordinates.– Leaders form unique independent relationships (“vertical

dyads”) with each subordinate in which the subordinate becomes a member of the leader’s out-group or in-group.

Leader

Subordinate1

Subordinate2

Subordinate3

Subordinate4

Subordinate5

Out-Group In-Group

Related Perspectives on Related Perspectives on LeadershipLeadership

• Substitutes for Leadership– A concept that identifies situations in which leader behavior

is neutralized or replaced by characteristics of subordinates, the task, and the organization.

• Substitutes for Leadership– A concept that identifies situations in which leader behavior

is neutralized or replaced by characteristics of subordinates, the task, and the organization.

Characteristics that Substitute for Leadership

Subordinate Task Organization

Ability

Experience

Need for independence

Professional orientation

Indifference towards

organizational goals

Routineness

The availability of feedback

Intrinsic satisfaction

Formalization

Group cohesion

Inflexibility

A rigid reward structure

Related Perspectives on Related Perspectives on Leadership (cont’d)Leadership (cont’d)

• Charismatic Leadership (House)– Charisma, an interpersonal attraction that inspires support

and acceptance, is an individual characteristic of a leader.– Charismatic persons are more successful than

noncharismatic persons.– Charismatic leaders are self-confident, have a firm conviction

in their belief and ideals, and possess a strong need to influence people.

• Charismatic Leadership (House)– Charisma, an interpersonal attraction that inspires support

and acceptance, is an individual characteristic of a leader.– Charismatic persons are more successful than

noncharismatic persons.– Charismatic leaders are self-confident, have a firm conviction

in their belief and ideals, and possess a strong need to influence people.

Related Perspectives on Related Perspectives on Leadership (cont’d)Leadership (cont’d)

• Charismatic Leadership (cont’d)– Charismatic leaders in organizations must be able to:

• envision the future, set high expectations, and model behaviors consistent with expectations.

• energize others through a demonstration of excitement, personal confidence, and patterns of success.

• enable others by supporting them, by empathizing with them.

• Charismatic Leadership (cont’d)– Charismatic leaders in organizations must be able to:

• envision the future, set high expectations, and model behaviors consistent with expectations.

• energize others through a demonstration of excitement, personal confidence, and patterns of success.

• enable others by supporting them, by empathizing with them.

Related Perspectives on Related Perspectives on Leadership (cont’d)Leadership (cont’d)

• Transformational Leadership– Leadership that goes beyond ordinary expectations, by

transmitting a sense of mission, stimulating learning, and inspiring new ways of thinking.

– Seven keys to successful leadership

• Transformational Leadership– Leadership that goes beyond ordinary expectations, by

transmitting a sense of mission, stimulating learning, and inspiring new ways of thinking.

– Seven keys to successful leadership

Political Behavior in OrganizationsPolitical Behavior in Organizations

• Political Behavior– The activities carried out for the specific purpose of

acquiring, developing, and using power and other resources to obtain one’s preferred outcomes.

– Common Political Behaviors• Inducement—offering to give something to someone else in

return for that person’s support.• Persuasion • Creation of an obligation—providing support for another

person’s position that obliges that person to return the favor at a future date.

• Coercion • Impression management—making a direct and intentional

effort to enhance one’s image in the eyes of others.

• Political Behavior– The activities carried out for the specific purpose of

acquiring, developing, and using power and other resources to obtain one’s preferred outcomes.

– Common Political Behaviors• Inducement—offering to give something to someone else in

return for that person’s support.• Persuasion • Creation of an obligation—providing support for another

person’s position that obliges that person to return the favor at a future date.

• Coercion • Impression management—making a direct and intentional

effort to enhance one’s image in the eyes of others.

Political Behavior in Organizations Political Behavior in Organizations (cont’d)(cont’d)

• Managing Political Behavior– Be aware that even if actions are not politically motivated,

others may assume that they are.– Reduce the likelihood of subordinates engaging in political

behavior by providing them with autonomy, responsibility, challenge, and feedback.

– Avoid using power to avoid charges of political motivation.

• Managing Political Behavior– Be aware that even if actions are not politically motivated,

others may assume that they are.– Reduce the likelihood of subordinates engaging in political

behavior by providing them with autonomy, responsibility, challenge, and feedback.

– Avoid using power to avoid charges of political motivation.

Managing Work Groups and TeamsManaging Work Groups and Teams

Nineteenhapter

Groups and Teams in Groups and Teams in OrganizationsOrganizations

• Group– Two or more people who interact regularly to accomplish a

common purpose or goal.

• Functional Group– A permanent group created to accomplish a number of

organizational purposes with an indefinite time horizon.

• Informal or Interest Group

• Task Group– A group created by the organization to accomplish a

relatively narrow range of purposes within a stated time horizon.

• Group– Two or more people who interact regularly to accomplish a

common purpose or goal.

• Functional Group– A permanent group created to accomplish a number of

organizational purposes with an indefinite time horizon.

• Informal or Interest Group

• Task Group– A group created by the organization to accomplish a

relatively narrow range of purposes within a stated time horizon.

Groups and Teams inGroups and Teams inOrganizations (cont’d)Organizations (cont’d)

• Team– A group of workers who function as a unit, often with little or

no supervision, to carry out work-related tasks, functions, and activities.

– Sometimes are called self-managed teams, cross-functional teams, or high performance teams.

– Benefits of teams• Give more responsibility for task performance to the workers

who do the tasks.• Enable the organization to shed its bureaucracy and to promote

flexibility and responsiveness.

• Team– A group of workers who function as a unit, often with little or

no supervision, to carry out work-related tasks, functions, and activities.

– Sometimes are called self-managed teams, cross-functional teams, or high performance teams.

– Benefits of teams• Give more responsibility for task performance to the workers

who do the tasks.• Enable the organization to shed its bureaucracy and to promote

flexibility and responsiveness.

Groups and Teams inGroups and Teams inOrganizations (cont’d)Organizations (cont’d)

• Why People Join Groups and Teams– Interpersonal attraction – Group activities—activities of the group appeal to them.– Group goals – Need satisfaction—fulfills an individual’s need for affiliation.– Instrumental benefits

• Why People Join Groups and Teams– Interpersonal attraction – Group activities—activities of the group appeal to them.– Group goals – Need satisfaction—fulfills an individual’s need for affiliation.– Instrumental benefits

Groups and Teams inGroups and Teams inOrganizations (cont’d)Organizations (cont’d)

• Types of Teams• Types of Teams

Problem-solving team Most popular team type; comprises knowledge workers who gather to solve a problem and then disband.

Management team Consists mainly of managers from various functional areas who coordinate the work among other teams.

Work team Are responsible for the daily work of the organization; when empowered, they are self-managed teams.

Virtual team A new type of team that interacts by computer; member enters and leaves the network as needed and may take turns serving as leader.

Quality circle Declining in popularity, quality circles, comprising of workers and supervisors, meet intermittently to discuss workplace problems.

Groups and Teams inGroups and Teams inOrganizations (cont’d)Organizations (cont’d)

• Stages of Group and Team Development– Forming

– Storming• Defensiveness, intragroup competition, and the formation of

factions; arguing among members, even when they agree.– Norming

– Performing • The ability of the group/team to prevent or work through

problems.

• Stages of Group and Team Development– Forming

– Storming• Defensiveness, intragroup competition, and the formation of

factions; arguing among members, even when they agree.– Norming

– Performing • The ability of the group/team to prevent or work through

problems.

Characteristics of Groups and Characteristics of Groups and TeamsTeams

• Role– The part an individual plays in helping the group reach its

goals.• Task-specialist role • Socioemotional role—providing social and emotional support to

others on the team.

• Role Structures– The set of defined roles and interrelationships among those

roles that the group or team members define and accept.– Are the result of role episodes in which the expected role is

translated and defined into the enacted role.– Role ambiguity

• Role– The part an individual plays in helping the group reach its

goals.• Task-specialist role • Socioemotional role—providing social and emotional support to

others on the team.

• Role Structures– The set of defined roles and interrelationships among those

roles that the group or team members define and accept.– Are the result of role episodes in which the expected role is

translated and defined into the enacted role.– Role ambiguity

Characteristics of GroupsCharacteristics of Groupsand Teams (cont’d)and Teams (cont’d)

• The Development of a Role– The first two stages of role development are group processes

as the group members let the individuals know what is expected of them.

– The other two parts are individual processes as the new group members perceive and enact their roles.

• The Development of a Role– The first two stages of role development are group processes

as the group members let the individuals know what is expected of them.

– The other two parts are individual processes as the new group members perceive and enact their roles.

Expected

role

Sent

role

Perceived

role

Enacted

role

Characteristics of GroupsCharacteristics of Groupsand Teams (cont’d)and Teams (cont’d)

• Role Structures– Role ambiguity—occurs when the sent role is unclear.– Role conflict—occurs when the messages and cues

comprising the sent role are clear but contradictory or mutually exclusive.• Interrole conflict• Intrarole conflict is caused by conflicting demands from

different sources.• Intrasender conflict • Person-role conflict is the discrepancy between role

requirements and an individual’s values, attitudes, and needs.– Role overload—occurs when role expectations exceed an

individual’s capacities.

• Role Structures– Role ambiguity—occurs when the sent role is unclear.– Role conflict—occurs when the messages and cues

comprising the sent role are clear but contradictory or mutually exclusive.• Interrole conflict• Intrarole conflict is caused by conflicting demands from

different sources.• Intrasender conflict • Person-role conflict is the discrepancy between role

requirements and an individual’s values, attitudes, and needs.– Role overload—occurs when role expectations exceed an

individual’s capacities.

Characteristics of GroupsCharacteristics of Groupsand Teams (cont’d)and Teams (cont’d)

• Behavioral Norms– Norms are standards of behavior that a group accepts and

expects of its members.– Norms define the boundaries between acceptable and

unacceptable behavior.• Norm generalization• Norm variation

• Behavioral Norms– Norms are standards of behavior that a group accepts and

expects of its members.– Norms define the boundaries between acceptable and

unacceptable behavior.• Norm generalization• Norm variation

Characteristics of GroupsCharacteristics of Groupsand Teams (cont’d)and Teams (cont’d)

• Behavioral Norms (cont’d)– Norm conformity—individuals conform as response to:

• Group or team pressure to conform to group behavior.• Individual traits that reflect their propensity to conform.• The influence of situational factors (e.g., group size and

unanimity).– Individual responses to norm conformity:

• Adopt the norms of the group.• Try to obey the “spirit” of the norms while retaining individuality.

– Socialization• Norm conformity that occurs when a person makes the

transition from being an outsider to being and insider in the organization.

• Behavioral Norms (cont’d)– Norm conformity—individuals conform as response to:

• Group or team pressure to conform to group behavior.• Individual traits that reflect their propensity to conform.• The influence of situational factors (e.g., group size and

unanimity).– Individual responses to norm conformity:

• Adopt the norms of the group.• Try to obey the “spirit” of the norms while retaining individuality.

– Socialization• Norm conformity that occurs when a person makes the

transition from being an outsider to being and insider in the organization.

Characteristics of GroupsCharacteristics of Groupsand Teams (cont’d)and Teams (cont’d)

• Cohesiveness– The extent to which members are loyal and committed to the

group; the degree of mutual attractiveness within the group.

• Factors That Influence Group Cohesiveness

• Cohesiveness– The extent to which members are loyal and committed to the

group; the degree of mutual attractiveness within the group.

• Factors That Influence Group Cohesiveness

Factors That Increase Cohesiveness

Factors That Reduce Cohesiveness

Intergroup competition

Personal attraction

Favorable evaluation

Agreement on goals

Interaction

Group size

Disagreement on goals

Intragroup competition

Domination

Unpleasant experiences

Characteristics of GroupsCharacteristics of Groupsand Teams (cont’d)and Teams (cont’d)

•Consequences of Cohesiveness–The interaction between cohesiveness and performance norms

• The best situation is high cohesivenesscombined with high performance

•Consequences of Cohesiveness–The interaction between cohesiveness and performance norms

• The best situation is high cohesivenesscombined with high performance

Cohesiveness

Lowperformance

Lowestperformance

High

Low

Low High

Highperformance

Moderateperformance

Per

form

ance

no

rms

Characteristics of GroupsCharacteristics of Groupsand Teams (cont’d)and Teams (cont’d)

•Formal and Informal Leadership– Informal leader

• A person who engages in leadership activities but whose right to do so has not been formally recognized by the organization or group.

• An informal leader, ideally, may also be the formal leader for the group or he may supplement the formal leader in fulfilling leadership roles.

–Formal leader• A person who has been elected or designated to engage in

leadership activities by the group members or who has been formally appointed or recognized by the organization as the leader for the group.

•Formal and Informal Leadership– Informal leader

• A person who engages in leadership activities but whose right to do so has not been formally recognized by the organization or group.

• An informal leader, ideally, may also be the formal leader for the group or he may supplement the formal leader in fulfilling leadership roles.

–Formal leader• A person who has been elected or designated to engage in

leadership activities by the group members or who has been formally appointed or recognized by the organization as the leader for the group.

Interpersonal and Intergroup Interpersonal and Intergroup ConflictConflict

• The Nature of Conflict– Conflict

– There is an optimal level of conflict in an organization:• Too little conflict and the organization becomes complacent

and apathetic, and lacking in innovation and underperforms.• Too much conflict creates a dysfunctional organization where

hostility and non-cooperation predominate, and suffers from low performance.

• The Nature of Conflict– Conflict

– There is an optimal level of conflict in an organization:• Too little conflict and the organization becomes complacent

and apathetic, and lacking in innovation and underperforms.• Too much conflict creates a dysfunctional organization where

hostility and non-cooperation predominate, and suffers from low performance.

Interpersonal and Intergroup Interpersonal and Intergroup Conflict (cont’d)Conflict (cont’d)

• Interpersonal Conflict– Personality clash

– Differing beliefs or perceptions

• Intergroup Conflict– Interdependence

– Different goals

– Competition for scarce resources

• Interpersonal Conflict– Personality clash

– Differing beliefs or perceptions

• Intergroup Conflict– Interdependence

– Different goals

– Competition for scarce resources

• Conflict Between Organization and the Environment– Conflict with competition

– Conflict with consumer groups

• Conflict Between Organization and the Environment– Conflict with competition

– Conflict with consumer groups

Causes of Conflict

Managing Conflict in Managing Conflict in OrganizationsOrganizations

• Ways for Managing Conflict• Ways for Managing Conflict

Stimulating conflict Increase competition among individual teams Hire outsiders to shake things up Change established procedures

Controlling conflict Expand resource base Enhance coordination of interdependence Set supraordinate goals Match personalities and work habits of employee

Resolving and eliminating conflict Avoid conflict Convince conflicting parties to compromise Bring conflicting parties together to confront and negotiate conflict

Basic Elements of ControlBasic Elements of Control

Twentyhapter

The Nature of Control in The Nature of Control in OrganizationsOrganizations

• Control– The regulation of organizational activities so that some

targeted element of performance remains within acceptable limits.

– Control provides a mechanism for adjusting performance to keep organizations moving in the right direction.

• Control– The regulation of organizational activities so that some

targeted element of performance remains within acceptable limits.

– Control provides a mechanism for adjusting performance to keep organizations moving in the right direction.

The Nature of Control inThe Nature of Control inOrganizations (cont’d)Organizations (cont’d)

• The Purpose of Control– Control is one of the four basic management functions. The

control function, in turn, has four basic purposes.

• The Purpose of Control– Control is one of the four basic management functions. The

control function, in turn, has four basic purposes.

Adapt to environmental change Limit the accumulation of error

Control helps the organization

Cope with organizational complexity Minimize costs

The Nature of Control inThe Nature of Control inOrganizations (cont’d)Organizations (cont’d)

• Types of Controls– Areas of Control

• Physical resources—inventory management, quality control, and equipment control.

• Human resources • Information resources—sales and marketing forecasts,

environmental analysis, public relations, production scheduling, and economic forecasting.

• Financial resources

• Types of Controls– Areas of Control

• Physical resources—inventory management, quality control, and equipment control.

• Human resources • Information resources—sales and marketing forecasts,

environmental analysis, public relations, production scheduling, and economic forecasting.

• Financial resources

The Nature of Control inThe Nature of Control inOrganizations (cont’d)Organizations (cont’d)

• Types of Controls (cont’d)– Levels of Control

– Responsibilities for Control• Controller—a position in organizations that helps line

managers with their control activities.

• Types of Controls (cont’d)– Levels of Control

– Responsibilities for Control• Controller—a position in organizations that helps line

managers with their control activities.

Strategiccontrol

Structuralcontrol

Operationscontrol

Financialcontrol

The Nature of Control inThe Nature of Control inOrganizations (cont’d)Organizations (cont’d)

• Steps in the Control Process – Establish Standards

• Control standard—a target against which subsequent performance will be compared.

– Measure Performance• Performance measurement is a constant, ongoing process.• Performance measures must be valid indicators (e.g., sales,

costs, units produced) of performance.– Compare Performance Against Standards

• Define what is a permissible deviation from the performance standard.

– Determine the Need for Corrective Action• Maintain the status quo (do nothing).• Change the standard if it was set too high or too low.

• Steps in the Control Process – Establish Standards

• Control standard—a target against which subsequent performance will be compared.

– Measure Performance• Performance measurement is a constant, ongoing process.• Performance measures must be valid indicators (e.g., sales,

costs, units produced) of performance.– Compare Performance Against Standards

• Define what is a permissible deviation from the performance standard.

– Determine the Need for Corrective Action• Maintain the status quo (do nothing).• Change the standard if it was set too high or too low.

Financial ControlFinancial Control

• Financial Control– Control of financial resources (i.e., revenues, shareholder

investment) as they flow into the organization, are held by the organization (i.e., working capital, retained earnings), and flow out of the organization (i.e., payment of expenses).

– Budgetary Control• Budgets may be established at any organizational level.• Budgets are typically for one year or less.• Budgets may be expressed in financial terms, units of output,

or other quantifiable factors.• Budgets serve four purposes

• Financial Control– Control of financial resources (i.e., revenues, shareholder

investment) as they flow into the organization, are held by the organization (i.e., working capital, retained earnings), and flow out of the organization (i.e., payment of expenses).

– Budgetary Control• Budgets may be established at any organizational level.• Budgets are typically for one year or less.• Budgets may be expressed in financial terms, units of output,

or other quantifiable factors.• Budgets serve four purposes

Financial Control (cont’d)Financial Control (cont’d)• Types of Budgets• Types of Budgets

Type of Budget What Budget Shows

Financial budget Sources and uses of cash

Cash-flow or cash budget All sources of cash income and cash expenditures in monthly, weekly, or daily periods

Capital-expenditures budget Costs of major assets such as a new plant, machinery, or land

Balance-sheet budget Forecast of the organization’s assets and liabilities in the event that all other budgets are met

*See page 664, table 20.1

Financial Control (cont’d)Financial Control (cont’d)• Types of Budgets (cont’d)• Types of Budgets (cont’d)

Type of Budget What Budget Shows

Operating budget Planned operations in financial terms

Sales or revenue budget Income the organization expects to receive from normal operations

Expense budget Anticipated expenses for the organization during the coming time period

Profit budget Anticipated differences between sales or revenues and expenses

Nonmonetary budget Planned operations in nonfinancial terms

Labor budget Hours of direct labor available for use

Space budget Square feet or meters of space available for various functions

Production budget Number of units to be produced during the coming time period

*See page 664, table 20.1

Financial Control (cont’d)Financial Control (cont’d)

Strengths–Budgets facilitate effective

operational controls.–Budgets facilitate

coordination and communication between departments.

–Budgets establish records of organizational performance, which can enhance planning.

Strengths–Budgets facilitate effective

operational controls.–Budgets facilitate

coordination and communication between departments.

–Budgets establish records of organizational performance, which can enhance planning.

Weaknesses–Budgets can hamper

operations if applied too rigidly.

–Budgets can be time consuming to develop.

–Budgets can limit innovation and change.

Weaknesses–Budgets can hamper

operations if applied too rigidly.

–Budgets can be time consuming to develop.

–Budgets can limit innovation and change.

Strengths and Weaknesses of Budgeting

Other Tools of Financial ControlOther Tools of Financial Control

• Financial Statements – Financial statement is a profile of some aspect of an

organization’s financial circumstances.– Balance sheet

• A listing of assets (current and fixed), liabilities (short- and long-term), and stockholders’ equity at a specific point in time (typically, year-ending) that summarizes the financial condition of the organization.

– Income statement• Summary of financial performance over a period of time,

usually one year.

• Financial Statements – Financial statement is a profile of some aspect of an

organization’s financial circumstances.– Balance sheet

• A listing of assets (current and fixed), liabilities (short- and long-term), and stockholders’ equity at a specific point in time (typically, year-ending) that summarizes the financial condition of the organization.

– Income statement• Summary of financial performance over a period of time,

usually one year.

Other Tools of Financial Control Other Tools of Financial Control (cont’d)(cont’d)

• Ratio Analysis– The calculation of of one or more financial ratios to assess

some aspect of the organization’s financial health.

• Financial Audits– Audit—an independent appraisal of an organization’s

accounting, financial, and operational systems.• External audits—financial appraisals conducted by experts

who are not employees of the organization to verify to external parties that the organization’s financial and accounting procedures are legal and proper.

• Internal audits—appraisals conducted by employees of the organization to determine the accuracy, efficiency, and appropriateness of financial and accounting procedures.

• Ratio Analysis– The calculation of of one or more financial ratios to assess

some aspect of the organization’s financial health.

• Financial Audits– Audit—an independent appraisal of an organization’s

accounting, financial, and operational systems.• External audits—financial appraisals conducted by experts

who are not employees of the organization to verify to external parties that the organization’s financial and accounting procedures are legal and proper.

• Internal audits—appraisals conducted by employees of the organization to determine the accuracy, efficiency, and appropriateness of financial and accounting procedures.

Structural ControlStructural Control

• Bureaucratic Control– A form of organizational control characterized by formal and

mechanistic structural arrangements.

• Clan Control– An approach to organizational control characterized by

informal and organic structural arrangements.

• Bureaucratic Control– A form of organizational control characterized by formal and

mechanistic structural arrangements.

• Clan Control– An approach to organizational control characterized by

informal and organic structural arrangements.

Structural Control (cont’d)Structural Control (cont’d)

• Organizational Control• Organizational Control

Dimension

Employee complianceGoal of control approach

Strict rules, formal controls,rigid hierarchy

Directed toward minimum levels of acceptable performance

Tall structure, top-down influence

Directed at individualperformance

Limited and formal

Employee commitment

Group norms, culture, self-control

Directed toward enhancedperformance above andbeyond the minimum

Flat structure, shared influence

Directed at group performance

Extended and informal

Performance expectations

Degree of formality

Organization design

Reward system

Participation

Bureaucratic Control Clan Control

Strategic ControlStrategic Control

• Integrating Strategy and Control– Strategic control

• Control aimed at ensuring that the organization is maintaining an effective alignment with its environment and moving toward achieving its strategic plan.

• Focuses on structure, leadership, technology, human resources, and informational and operational systems.

• Focuses on the extent to which implemented strategy achieves the organization’s goals.

– International Strategic Control• Focuses on whether to manage the global organization from a

centralized or decentralized perspective.

• Integrating Strategy and Control– Strategic control

• Control aimed at ensuring that the organization is maintaining an effective alignment with its environment and moving toward achieving its strategic plan.

• Focuses on structure, leadership, technology, human resources, and informational and operational systems.

• Focuses on the extent to which implemented strategy achieves the organization’s goals.

– International Strategic Control• Focuses on whether to manage the global organization from a

centralized or decentralized perspective.

Managing Control in Managing Control in OrganizationsOrganizations

• Characteristics of Effective Control– Integration with Planning– Flexibility

• The control system must be flexible enough to accommodate change.

– Accuracy– Timeliness

• A control system should provide information as often as necessary.

– Objectivity

• Characteristics of Effective Control– Integration with Planning– Flexibility

• The control system must be flexible enough to accommodate change.

– Accuracy– Timeliness

• A control system should provide information as often as necessary.

– Objectivity

Managing Control inManaging Control inOrganizations (cont’d)Organizations (cont’d)

• Resistance to Control– Overcontrol

• Trying to control too many details becomes problematic when control affects employee behavior and employees perceive control attempts as unreasonable.

– Inappropriate Focus

– Rewards for Inefficiency• Rewarding operational efficiency can lead employees to

behave in ways that are not in the best interests of the organization.

– Too much accountability

• Resistance to Control– Overcontrol

• Trying to control too many details becomes problematic when control affects employee behavior and employees perceive control attempts as unreasonable.

– Inappropriate Focus

– Rewards for Inefficiency• Rewarding operational efficiency can lead employees to

behave in ways that are not in the best interests of the organization.

– Too much accountability

Overcoming Resistance to ControlOvercoming Resistance to Control

• Resistance to control can be overcome by:– Designing effective controls that are properly integrated with

organizational planning and aligned with organizational goals and standards.

– Creating controls that are flexible, accurate, timely, and objective.

– Encouraging employee participation in the planning and implementing of control systems.

– Developing a system of checks and balances in the control systems through the use of multiple standards and information systems that allow the organization to verify the accuracy of performance indicators.

• Resistance to control can be overcome by:– Designing effective controls that are properly integrated with

organizational planning and aligned with organizational goals and standards.

– Creating controls that are flexible, accurate, timely, and objective.

– Encouraging employee participation in the planning and implementing of control systems.

– Developing a system of checks and balances in the control systems through the use of multiple standards and information systems that allow the organization to verify the accuracy of performance indicators.

Managing Operations, Quality, and Productivity

Managing Operations, Quality, and Productivity

Twenty-Onehapter

The Nature of Operations The Nature of Operations ManagementManagement

• Operations Management– The set of managerial activities used by an organization to

transform resource inputs into products, services, or both.

• The Importance of Operations– Efficient and effective management of operations is

necessary for competitiveness and overall organization performance.

• Operations Management– The set of managerial activities used by an organization to

transform resource inputs into products, services, or both.

• The Importance of Operations– Efficient and effective management of operations is

necessary for competitiveness and overall organization performance.

The Nature of Operations The Nature of Operations Management (cont’d)Management (cont’d)

• Manufacturing and Production– Manufacturing - A form of business that combines and

transforms resource inputs into tangible outcomes that are then sold to others.

• Service Operations– Service organization

• The Role of Operations in Organizational Strategy– Operations management has a direct impact on

competitiveness, quality, productivity, and effectiveness.– Operations management and organizational strategy have

reciprocal effects on each other.– Strategic goals cannot be met if there are deficiencies and

insufficiencies in operations resources.

• Manufacturing and Production– Manufacturing - A form of business that combines and

transforms resource inputs into tangible outcomes that are then sold to others.

• Service Operations– Service organization

• The Role of Operations in Organizational Strategy– Operations management has a direct impact on

competitiveness, quality, productivity, and effectiveness.– Operations management and organizational strategy have

reciprocal effects on each other.– Strategic goals cannot be met if there are deficiencies and

insufficiencies in operations resources.

Designing Operations SystemsDesigning Operations Systems

• Determining Product-Service Mix– Involves deciding how many and what kinds of products to

offer in the marketplace.

• Capacity Decisions– Involve choosing the amount of products, services, or both

that can be produced by an organization.– High-risk decisions due to uncertainty about future product

demand and the significant costs of additional, possibly excess, capacity.

• Determining Product-Service Mix– Involves deciding how many and what kinds of products to

offer in the marketplace.

• Capacity Decisions– Involve choosing the amount of products, services, or both

that can be produced by an organization.– High-risk decisions due to uncertainty about future product

demand and the significant costs of additional, possibly excess, capacity.

Designing Operations Systems Designing Operations Systems (cont’d)(cont’d)

• Facilities Decisions– Facilities—the physical locations where products or services are

created, stored, and distributed.• Location

– Layout—the physical configuration of facilities, the arrangement of equipment within facilities, or both.

• Product layout—facilities arranged around the product; used when large quantities of a single product are needed.

• Process layout • Fixed position layout—facilities arranged around a single work

area; used for the manufacture of large and complex products.• Cellular layout

• Facilities Decisions– Facilities—the physical locations where products or services are

created, stored, and distributed.• Location

– Layout—the physical configuration of facilities, the arrangement of equipment within facilities, or both.

• Product layout—facilities arranged around the product; used when large quantities of a single product are needed.

• Process layout • Fixed position layout—facilities arranged around a single work

area; used for the manufacture of large and complex products.• Cellular layout

Organizational TechnologiesOrganizational Technologies

• Manufacturing Technology– Technology—the set of processes and systems used by

organizations to convert resources into products or services.– Automation—the process of designing work so that it can be

completely or almost completely performed by machines.• Computer-assisted manufacturing (CAM)

• Computer-aided design (CAD)—the use of computers to design and complete products and to simulate performance so that prototypes need not be constructed.

• Flexible manufacturing systems—the use of robotic systems and computers to coordinate and integrate automated production and material handling facilities.

• Manufacturing Technology– Technology—the set of processes and systems used by

organizations to convert resources into products or services.– Automation—the process of designing work so that it can be

completely or almost completely performed by machines.• Computer-assisted manufacturing (CAM)

• Computer-aided design (CAD)—the use of computers to design and complete products and to simulate performance so that prototypes need not be constructed.

• Flexible manufacturing systems—the use of robotic systems and computers to coordinate and integrate automated production and material handling facilities.

Organizational Technologies Organizational Technologies (cont’d)(cont’d)

• Manufacturing Technology (cont’d)– Robotics—the science and technology of the construction,

maintenance, and use of robots.

• Service Technology– Services are rapidly moving toward automated systems

and procedures (e.g., automated teller machines).

• Manufacturing Technology (cont’d)– Robotics—the science and technology of the construction,

maintenance, and use of robots.

• Service Technology– Services are rapidly moving toward automated systems

and procedures (e.g., automated teller machines).

Implementing Operations Systems Implementing Operations Systems Through Supply Chain ManagementThrough Supply Chain Management

• Supply Chain Management– The process of managing operations control, resource and

inventory acquisition and purchasing, and thus improving overall efficiency and effectiveness.

• Operations Management as Control– Operations management can be used as a control by

coordinating it with other organizational functions to insure that the system focuses on the elements that are most crucial to goal attainment.

• Supply Chain Management– The process of managing operations control, resource and

inventory acquisition and purchasing, and thus improving overall efficiency and effectiveness.

• Operations Management as Control– Operations management can be used as a control by

coordinating it with other organizational functions to insure that the system focuses on the elements that are most crucial to goal attainment.

Implementing Operations Systems Implementing Operations Systems Through Supply Chain Management Through Supply Chain Management

(cont’d)(cont’d)

• Purchasing Management– Controlling the buying of the materials and resources is at the

heart of effective supply chain management.

• Inventory Management– Inventory control (Materials Control)– Just-in-time (JIT) method

• An inventory system than has necessary materials arriving as soon as they are needed (just in time) so that the production process is not interrupted.

• Purchasing Management– Controlling the buying of the materials and resources is at the

heart of effective supply chain management.

• Inventory Management– Inventory control (Materials Control)– Just-in-time (JIT) method

• An inventory system than has necessary materials arriving as soon as they are needed (just in time) so that the production process is not interrupted.

Implementing Operations Systems Implementing Operations Systems Through Supply Chain Management Through Supply Chain Management

(cont’d)(cont’d)• Inventory Management (cont’d)

– Inventory Types, Purposes, and Sources

• Inventory Management (cont’d)– Inventory Types, Purposes, and Sources

Type Purpose Source of Control

Raw materials Provide the materials needed to make the product

Purchasing models and systems

Work-in-process Enables overall production to be divided into stages of manageable size

Shop-floor control systems

Finished goods Provide ready supply of products on customer demand and enable long, efficient production runs

High-level production scheduling systems in conjunction with marketing

In-transit (pipeline)

Distributes products to customers

Transportation and distribution control systems

Managing Total QualityManaging Total Quality

• Quality– The totality of features and characteristics of a product or

service that bear on its ability to satisfy stated or implied needs.

– Quality is both a relative and absolute concept.

• Quality– The totality of features and characteristics of a product or

service that bear on its ability to satisfy stated or implied needs.

– Quality is both a relative and absolute concept.

Managing Total Quality (cont’d)Managing Total Quality (cont’d)

• The Importance of Quality– Malcolm Baldrige Award

• Named after a former secretary of commerce, this prestigious award is given to firms that achieve major quality improvements.

– Competition– Productivity

• Quality enhancement programs decrease the number of defects, reduce resources dedicated to rework, and reduces the need for inspectors as employees become responsible for quality.

– Costs• Improved quality reduces costs from customer returns, warranty,

and lawsuits for faulty products, and lost sales to future customers.

• The Importance of Quality– Malcolm Baldrige Award

• Named after a former secretary of commerce, this prestigious award is given to firms that achieve major quality improvements.

– Competition– Productivity

• Quality enhancement programs decrease the number of defects, reduce resources dedicated to rework, and reduces the need for inspectors as employees become responsible for quality.

– Costs• Improved quality reduces costs from customer returns, warranty,

and lawsuits for faulty products, and lost sales to future customers.

Managing Total Quality (cont’d)Managing Total Quality (cont’d)

• Eight Dimensions of Quality• Eight Dimensions of Quality

1. Performance. A product’s primary operating characteristic. Examples are automobile acceleration and a television’s picture clarity.

2. Features. Supplements to a product’s basic functioning characteristics, such as power windows on a car.

3. Reliability. A probability of not malfunctioning during a specified period.

4. Conformance. The degree to which a product’s design and operating characteristics meet established standards.

5. Durability. A measure of product life.

6. Serviceability. The speed and ease of repair.

7. Aesthetics. How a product looks, feels, tastes, and smells.

8. Perceived quality. As seen by a customer.

Managing Total Quality (cont’d)Managing Total Quality (cont’d)

• Total Quality Management (TQM)– A strategic commitment by top management to change its

whole approach to business and to make quality a guiding factor in everything the organization does.

• Total Quality Management (TQM)– A strategic commitment by top management to change its

whole approach to business and to make quality a guiding factor in everything the organization does.

Strategic commitment

Quality improvements

Employeeinvolvement

Materials MethodsTechnology

Managing Total Quality (cont’d)Managing Total Quality (cont’d)

• TQM Tools and Techniques– Benchmarking

• the process of learning how and what other firms do in an exceptionally high-quality manner.

– Outsourcing – Speed

• the time needed by the organization to get something accomplished.

– ISO 9000 • a set of quality standards created by the International

Organization for Standardization by which firms can be certified.

– Statistical Quality Control (SQC)

• TQM Tools and Techniques– Benchmarking

• the process of learning how and what other firms do in an exceptionally high-quality manner.

– Outsourcing – Speed

• the time needed by the organization to get something accomplished.

– ISO 9000 • a set of quality standards created by the International

Organization for Standardization by which firms can be certified.

– Statistical Quality Control (SQC)

Managing Total Quality (cont’d)Managing Total Quality (cont’d)

• Guidelines for increasing the speed of operations:– Start from scratch– Minimize the number of approvals needed to do something– Use work teams as a basis for organization– Integrate speed with the organization’s culture

• Guidelines for increasing the speed of operations:– Start from scratch– Minimize the number of approvals needed to do something– Use work teams as a basis for organization– Integrate speed with the organization’s culture

Managing ProductivityManaging Productivity

• Productivity– An economic measure of efficiency that summarizes the value

of outputs relative to the value of the resources used to produce them.

• Levels of Productivity– The unit of analysis used to calculate or define productivity.

• Aggregate productivity • Industry productivity—the total productivity of all the firms in an

industry.• Company productivity • Unit productivity • Individual productivity—the productivity attained by a single

person.

• Productivity– An economic measure of efficiency that summarizes the value

of outputs relative to the value of the resources used to produce them.

• Levels of Productivity– The unit of analysis used to calculate or define productivity.

• Aggregate productivity • Industry productivity—the total productivity of all the firms in an

industry.• Company productivity • Unit productivity • Individual productivity—the productivity attained by a single

person.

Managing Productivity (cont’d)Managing Productivity (cont’d)

• Total factor productivity– An overall indicator of how

well an organization uses all of its resources (i.e., labor, capital, materials, and energy) to create all of its products and services.

• Total factor productivity– An overall indicator of how

well an organization uses all of its resources (i.e., labor, capital, materials, and energy) to create all of its products and services.

• Labor productivity– A partial productivity ratio

that uses only one category of resource (labor) to gage the organization’s productivity in utilizing that resource.

• Labor productivity– A partial productivity ratio

that uses only one category of resource (labor) to gage the organization’s productivity in utilizing that resource.

Productivity = Outputs Inputs

Forms of Productivity

LaborProductivity

Outputs Direct Labor

=

Managing Productivity (cont’d)Managing Productivity (cont’d)

• The Importance of Productivity– Productivity is a primary determinant of an organization’s

level of profitability and its ability to survive.

• Productivity Trends– The United States has the highest level of productivity in the

world, although the gap is closing as other countries become more productive.

– Manufacturing productivity growth continues to exceed that of the service sector.

• The Importance of Productivity– Productivity is a primary determinant of an organization’s

level of profitability and its ability to survive.

• Productivity Trends– The United States has the highest level of productivity in the

world, although the gap is closing as other countries become more productive.

– Manufacturing productivity growth continues to exceed that of the service sector.

Managing Productivity (cont’d)Managing Productivity (cont’d)

• Improving Productivity– Improving Operations

• Spending more resources on research and development helps identify new products, new uses for existing products, and new methods for making products.

– Increasing Employee Involvement• Increased employee participation can increase quality and

productivity.• Cross-training of employees allows the firm to function with

fewer workers.

• Improving Productivity– Improving Operations

• Spending more resources on research and development helps identify new products, new uses for existing products, and new methods for making products.

– Increasing Employee Involvement• Increased employee participation can increase quality and

productivity.• Cross-training of employees allows the firm to function with

fewer workers.