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Modern Management Concepts and Skills 12th Edition

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Modern Management Concepts and Skills 12th Edition

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  • MODERN MANAGEMENTC O N C E P T S A N D S K I L L S

    Steinmetz Professor of ManagementRoy E. Crummer Graduate School of Business

    Rollins College

    Deans Council of 100 ScholarsW. P. Carey School of Business

    Arizona State University

    PRENTICE HALL Boston Columbus Indianapolis New York San Francisco Upper Saddle River AmsterdamCape Town Dubai London Madrid Milan Munich Paris Montral Toronto Delhi

    Mexico City So Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo

    T w e l f t h E d i t i o n

    Samuel C. Certo S. Trevis Certo

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  • Editorial Director: Sally YaganEditor in Chief: Eric SvendsenAcquisitions Editor: Kim NorbutaEditorial Project Manager: Claudia FernandesDirector of Editorial Services: Ashley SantoraEditorial Assistant: Carter AndersonDirector of Marketing: Patrice Lumumba JonesMarketing Manager: Nikki Ayana JonesMarketing Assistant: Ian GoldSenior Managing Editor: Judy LealeSr. Production Project Manager/Supervisor:

    Lynn Savino WendelSenior Operations Supervisor: Arnold VilaCreative Director: Christy Mahon

    Credits and acknowledgments borrowed from other sources and reproduced, with permission, in this textbook appear on theappropriate page within text (or on page 568).

    Copyright 2012, 2009, 2006, 2003, 2000 Pearson Education, Inc., publishing as Prentice Hall, One Lake Street,Upper Saddle River, New Jersey 07458. All rights reserved. Manufactured in the United States of America.This publicationis protected by Copyright, and permission should be obtained from the publisher prior to any prohibited reproduction, storagein a retrieval system, or transmission in any form or by any means, electronic, mechanical, photocopying, recording, or likewise.To obtain permission(s) to use material from this work, please submit a written request to Pearson Education, Inc., PermissionsDepartment, One Lake Street, Upper Saddle River, New Jersey 07458.

    Many of the designations by manufacturers and seller to distinguish their products are claimed as trademarks.Where those designations appear in this book, and the publisher was aware of a trademark claim, the designations have been printed ininitial caps or all caps.

    Library of Congress Cataloging-in-Publication DataCerto, Samuel C.

    Modern management: concepts and skills/Samuel C. Certo, S.Trevis Certo.12th ed.p. cm.

    Includes bibliographical references and index.ISBN 978-0-13-217631-6

    1. Management. 2. Industrial management. 3. Social responsibility of business.4.Technological innovations. I. Certo, S.Trevis. II.Title.

    HD31.C4125 2012658dc22

    2010034070

    10 9 8 7 6 5 4 3 2 1

    Samuel C. CertoTo Mimi: My compass for right living

    S. Trevis CertoTo the Certos in the desert: Melissa, Skylar,

    Lexie, and Landon

    ISBN 10: 0-13-217631-9ISBN 13: 978-0-13-217631-6

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  • Contents

    Preface xAbout the Authors xxi

    PART 1 Introduction to ModernManagement 2

    Chapter 1 Introducing Modern Management:Concepts and Skills 2

    CHALLENGE CASE: Universal Opens Harry PotterTheme Park 3

    Exploring Your Management Skill 4

    The Importance of Management 4The Management Task 5 How Managers Do It: Did Home Depot Overpay its

    CEO? 6The Role of Management 6Defining Management 7The Management Process: Management Functions 7Management Process and Goal Attainment 8Management and Organizational Resources 9 How Managers Do It: Achieving Effectiveness at

    Telstra Corporation 10The Universality of Management 11

    The Theory of Characteristics 11

    Management Skill: The Key to ManagementSuccess 11

    Defining Management Skill 11Management Skill: A Classic View 11 How Managers Do It: Honing Cultural Skills at

    Dean Foster Associates 12Management Skill: A Contemporary View 12Management Skill: A Focus of This Book 13 Class Discussion Highlight: Modern Research and

    Management Skill 15Management Careers 15

    A Definition of Career 15Career Stages, Life Stages, and Performance 16Promoting Your Own Career 17Special Career Issues 18CHALLENGE CASE SUMMARY 20

    Management Skill Activities 21

    Chapter 2 Managing: History and CurrentThinking 26

    CHALLENGE CASE: Handling Competitors at Burger King 27

    Exploring Your Management Skill 28

    The Classical Approach 28Lower-Level Management Analysis 28 How Managers Do It: Getting Efficient at Pace

    Productivity 30

    iii

    Comprehensive Analysis of Management 32Limitations of the Classical Approach 33

    The Behavioral Approach 34The Hawthorne Studies 34Recognizing the Human Variable 35The Human Relations Movement 35 How Managers Do It: Building a People

    Environment at SAS 35 Class Discussion Highlight: Modern Research and

    Comprehensive Management Skill 36

    The Management Science Approach 36The Beginning of the Management ScienceApproach 36Management Science Today 37Characteristics of Management ScienceApplications 37

    The Contingency Approach 38The System Approach 38

    Types of Systems 38Systems and Wholeness 39The Management System 39 How Managers Do It: Tracking Customer Opinion

    with ReviewPro 40Information for Management System Analysis 40

    Learning Organization: A New Approach? 41CHALLENGE CASE SUMMARY 42

    Management Skill Activities 43

    PART 2 Modern Management Challenges 50Chapter 3 Corporate Social Responsibility, Ethics,

    and Sustainability 50CHALLENGE CASE: Verizons Commitment to SocialResponsibility 51

    Exploring Your Management Skill 52

    Fundamentals of Social Responsibility 52 How Managers Do It: Managing Responsibility at Arch

    Chemicals 52The Davis Model of Corporate SocialResponsibility 53Areas of Corporate Social Responsibility: GoingGreen 54Varying Opinions on Social Responsibility 54 Research Highlight: Does Social Responsibility Help

    a Companys Bottom Line? 55Conclusions About the Performance of SocialResponsibility Activities by Business 56

    Social Responsiveness 57Determining Whether a Social Responsibility Exists 58Social Responsiveness and Decision Making 58Approaches to Meeting Social Responsibilities 58

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  • Social Responsibility Activities and ManagementFunctions 60

    Planning Social Responsibility Activities 60Organizing Social Responsibility Activities 60Influencing Individuals Performing Social ResponsibilityActivities 61Controlling Social Responsibility Activities 61 How Managers Do It: Responding Responsibly to

    Stakeholders at Volcom, Inc. 62Business Ethics 62

    A Definition of Ethics 63Why Ethics Is a Vital Part of Management Practices 63A Code of Ethics 64Creating an Ethical Workplace 66Following the Law: SarbanesOxley ReformStandards 67

    Sustainability 68Defining Sustainability 68Defining a Sustainable Organization 69 How Managers Do It: Building a Sustainable

    Organization at PepsiCo 69Why Sustainability? 69Steps for Achieving Sustainability 70CHALLENGE CASE SUMMARY 72

    Management Skill Activities 74

    Chapter 4 Management and Diversity 80CHALLENGE CASE: Siemens Focuses on GlobalDiversity 81

    Exploring Your Management Skill 82

    Defining Diversity 82The Social Implications of Diversity 82

    Advantages of Diversity in Organizations 83Gaining and Keeping Market Share 83 How Managers Do It: Profiting Through Diversity at

    Safeway 83Cost Savings 83Increased Productivity and Innovation 84Better-Quality Management 84

    Challenges That Managers Face in Working withDiverse Populations 85

    Changing Demographics 85Ethnocentrism and Other Negative Dynamics 86 How Managers Do It: Legal Outreach Feeds the

    Diversity Pipeline 87Negative Dynamics and Specific Groups 87 How Managers Do It: Minorities and Diversity at

    Morgan Stanley 88

    Strategies For Promoting Diversity inOrganizations 90

    Promoting Diversity Through Hudson InstituteStrategies 90Promoting Diversity Through Equal Employment andAffirmative Action 91Promoting Diversity Through OrganizationalCommitment 92Promoting Diversity Through Pluralism 93

    Class Discussion Highlight: Modern Research andDiversity Skill 94

    The Role of the Manager 96Planning 96Organizing 96Influencing 96Controlling 97Management Development and Diversity Training 97CHALLENGE CASE SUMMARY 100

    Management Skill Activities 101

    Chapter 5 Managing in the Global Arena 108CHALLENGE CASE: Wal-Mart Facing Global Problems inJapan 109

    Exploring Your Management Skill 110

    Managing Across the Globe: Why? 110Fundamentals of International Management 110 How Managers Do It: Going Global at JP Morgan

    Chase 111Categorizing Organizations by InternationalInvolvement 112

    Domestic Organizations 112International Organizations 113Multinational Organizations: The MultinationalCorporation 113Defining the Multinational Corporation 113 How Managers Do It: Building Global Market

    Share at BRK Electronics 114Complexities of Managing the MultinationalCorporation 114Risk and the Multinational Corporation 116The Workforce of Multinational Corporations 116 Class Discussion Highlight: Modern Research and

    Global Management Skill 118Management Functions and MultinationalCorporations 118

    Planning in Multinational Corporations 119Organizing Multinational Corporations 122Influencing People in Multinational Corporations 124Controlling Multinational Corporations 126 How Managers Do It: Controlling Costs

    at Kimberly-Clark 126Transnational Organizations 127

    International Management: Special Issues 127Maintaining Ethics in International Management 127Preparing Expatriates for Foreign Assignments 128CHALLENGE CASE SUMMARY 129

    Management Skill Activities 130

    Chapter 6 Management andEntrepreneurship 138

    CHALLENGE CASE: Google Entrepreneurs Win Big 139Exploring Your Management Skill 140

    Fundamentals of Entrepreneurship 140 Class Discussion Highlight: Modern Research and

    Entrepreneurship Skill 141

    iv Contents

  • Opportunities 142Types of Opportunities 142Opportunity Identification 143 How Managers Do It: Identifying Opportunities at

    Miller Farm 143Opportunity Evaluation 144Opportunity Exploitation 145 How Managers Do It: Exploiting Opportunities at

    Advantage Fitness Products 145Financing Exploitation 146

    Corporate Entrepreneurship 147Social Entrepreneurship 148 How Managers Do It: Helping Third-World

    Entrepreneurs at Grameen Bank 148How Do Commercial and Social EntrepreneurshipDiffer? 149Success Factors in Social Entrepreneurship 150CHALLENGE CASE SUMMARY 150

    Management Skill Activities 151

    PART 3 Planning 158Chapter 7 Principles of Planning 158

    CHALLENGE CASE: Quality Bicycle Products Plans for theFuture 159

    Exploring Your Management Skill 160

    General Characteristics of Planning 160Defining Planning 160Purposes of Planning 160 How Managers Do It: Affirmative Planning at

    Whole Foods Market 161Planning: Advantages and PotentialDisadvantages 161Primacy of Planning 161 Class Discussion Highlight: Modern Research and

    Planning Skill 162

    Steps in the Planning Process 162 How Managers Do It: Planning to Give Back to

    Communities at Target Corporation 164The Planning Subsystem 164

    Organizational Objectives: PlanningsFoundation 165

    Definition of Organizational Objectives 165

    Areas for Organizational Objectives 167

    Working with Organizational Objectives 167

    How Managers Do It: Going Back to the Basicsat MySpace 168

    Guidelines for Establishing Quality Objectives 169

    Management by Objectives (MBO) 169Factors Necessary for a Successful MBO Program 170

    MBO Programs: Advantages and Disadvantages 170

    Planning and the Chief Executive 171Final Responsibility 171

    Planning Assistance 171

    Contents v

    The Planner 171Qualifications of Planners 172

    Evaluation of Planners 172

    CHALLENGE CASE SUMMARY 173

    Management Skill Activities 174

    Chapter 8 Making Decisions 180CHALLENGE CASE: Making Difficult Decisions at NBCUniversal 181

    Exploring Your Management Skill 182

    Fundamentals of Decisions 182Definition of a Decision 182Types of Decisions 182The Responsibility for Making OrganizationalDecisions 183 How Managers Do It: Making Business Decisions at

    Green Queens 184Elements of the Decision Situation 185 How Managers Do It: Trusting Employees to Make

    Decisions at ShopRite 186The Rational Decision-Making Process 186Identifying an Existing Problem 187 How Managers Do It: Addressingand

    EliminatingBarriers at Molson 187Listing Alternative Solutions 188Selecting the Most Beneficial Alternative 188 Class Discussion Highlight: Modern Research and

    Decision-Making Skill 189Implementing the Chosen Alternative 189Gathering Problem-Related Feedback 190

    Bounded Rationality 190Decision Making and Intuition 190

    Decision-Making Heuristics and Biases 190Decision-Making Conditions: Risk andUncertainty 190

    Decision-Making Tools 191Probability Theory 192

    Decision Trees 192

    Group Decision Making 193Advantages and Disadvantages of Using Groups toMake Decisions 193

    Processes for Making Group Decisions 194

    Evaluating Group Decision-Making Processes 195

    CHALLENGE CASE SUMMARY 196

    Management Skill Activities 197

    Chapter 9 Strategic Planning: Strategies, Tactics,and Competitive Dynamics 202

    CHALLENGE CASE: Samsung Plans for the Future 203Exploring Your Management Skill 204

    Strategic Planning 204Fundamentals of Strategic Planning 204

    Strategic Management 205

    How Managers Do It: Achieving Global Efficienciesat Kraft 208

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  • Class Discussion Highlight: Modern Research andPlanning Skill 210

    How Managers Do It: Pursuing Growth byAcquisition at Black & Decker 215

    Tactical Planning 216Comparing and Coordinating Strategic and TacticalPlanning 216

    Competitive Dynamics 217 How Managers Do It: Competing for Smartphone

    Bandwidth at HP 217CHALLENGE CASE SUMMARY 219

    Management Skill Activities 220

    Chapter 10 Plans and Planning Tools 226CHALLENGE CASE: Microsoft Plans for SmallBusinesses 227

    Exploring Your Management Skill 228

    Plans: A Definition 228Dimensions of Plans 228

    How Managers Do It: Planning for Expansion atNationwide Childrens Hospital 228

    Types of Plans 229

    How Managers Do It: Creating Sustainability Policyat H&M 230

    Class Discussion Highlight: Modern Research andPlanning Skill 231

    Why Plans Fail 232

    Planning Areas: Input Planning 232

    How Managers Do It: Overcoming CulturalObstacles in HR Planning at Raba 234

    Planning Tools 235Forecasting 235

    Scheduling 239

    CHALLENGE CASE SUMMARY 242

    Management Skill Activities 243

    PART 4 Organizing 248Chapter 11 Fundamentals of Organizing 248

    CHALLENGE CASE: Sony Organizes for Success 249Exploring Your Management Skill 250

    Definitions of Organizing and Organizing Skill 250

    The Importance of Organizing 250 How Managers Do It: Developing Managers at

    General Electric 251The Organizing Process 251

    Classical Organizing Theory 252Webers Bureaucratic Model 253 How Managers Do It: Eliminating Bureaucracy at

    General Motors 253Division of Labor 253Structure 254 How Managers Do It: Restructuring at

    EnergySolutions 261

    vi Contents

    Class Discussion Highlight: Research forDeveloping Organizing Skill 263

    CHALLENGE CASE SUMMARY 265

    Management Skill Activities 266

    Chapter 12 Responsibility, Authority, andDelegation 272

    CHALLENGE CASE: Toyota to Delegate Authority 273Exploring Your Management Skill 274

    Responsibility 274 How Managers Do It: Accepting Responsibility for

    Actions at Goldman Sachs 274The Job Description 274Dividing Job Activities 275Clarifying Job Activities of Managers 276

    Authority 277Authority on the Job 277Acceptance of Authority 278Types of Authority 278 How Managers Do It: Exercising Functional

    Authority at Kroger Company 280Accountability 281

    Delegation 281Steps in the Delegation Process 281Obstacles to the Delegation Process 282Eliminating Obstacles to the Delegation Process 282Centralization and Decentralization 283 Class Discussion Highlight: Modern Research and

    Responsibility and Delegation Skill 283 How Managers Do It: Reaping the Benefits of

    Decentralization at Johnson & Johnson 284CHALLENGE CASE SUMMARY 286

    Management Skill Activities 288

    Chapter 13 Human Resource Management 294

    CHALLENGE CASE: Cisco Recruits the Best Minds in China 295

    Exploring Your Management Skill 296

    Defining Appropriate Human Resources 296Steps in Providing Human Resources 296

    Recruitment 296 How Managers Do It: Recruiting at the Invest in

    America Alliance 301Selection 302Training 304 How Managers Do It: Investing in Training

    Programs at South Coast Health System 305Performance Appraisal 307 Class Discussion Highlight: Modern Research and

    Human Resources Skill 308 How Managers Do It: Using a New Performance

    Appraisal System at Aetna 309CHALLENGE CASE SUMMARY 310

    Management Skill Activities 311

  • Chapter 14 Organizational Change: Stress,Conflict, and Virtuality 318

    CHALLENGE CASE: Wrigley Continues to Change 319Exploring Your Management Skill 320

    Fundamentals of Changing an Organization 320Defining Changing an Organization 320Change Versus Stability 321

    Factors to Consider When Changing anOrganization 321

    The Change Agent 322Determining What Should Be Changed 322 How Managers Do It: Making Technological

    Change at University Health System 323The Kind of Change to Make 323 How Managers Do It: Implementing People

    Change at Caterpillar, Inc. 324Individuals Affected By the Change 326 Class Discussion Highlight: Modern Research and

    Organizational Change Skill 327Evaluation of the Change 328

    Change and Stress 328Defining Stress 329The Importance of Studying Stress 329Managing Stress in Organizations 329

    Change and Conflict 331Defining Conflict 331Strategies for Settling Conflict 332

    Virtuality 333Defining a Virtual Organization 334Degrees of Virtuality 334The Virtual Office 334 How Managers Do It: Managing a Virtual Office at

    OnSite Consulting 335CHALLENGE CASE SUMMARY 336

    Management Skill Activities 337

    Contents vii

    How Managers Do It: Increasing Listening atMcDonalds 360

    CHALLENGE CASE SUMMARY 361

    Management Skill Activities 362

    Chapter 16 Leadership 368CHALLENGE CASE: Iwata Faces Many Different Issues atNintendo 369

    Exploring Your Management Skill 370

    Defining Leadership 370Leader Versus Manager 370

    The Trait Approach to Leadership 371The Situational Approach to Leadership: A Focus onLeader Behavior 372

    Leadership Situations and Decisions 372 Class Discussion Highlight: Modern Research and

    Leadership Skill 377Leadership Behaviors 377

    Leadership Today 384Transformational Leadership 384 How Managers Do It: Ben & Jerrys as

    Transformational Leaders 384Coaching 385Superleadership 385Servant Leadership 387 How Managers Do It: Servant Leadership at

    Zappos.com 387Entrepreneurial Leadership 388 How Managers Do It: Developing Entrepreneurial

    Leaders at Disney 388CHALLENGE CASE SUMMARY 389

    Management Skill Activities 391

    Chapter 17 Motivation 398CHALLENGE CASE: Motivation Savvy Management atBristol-Myers Squibb Ensures Cutting-Edge InternetPresence 399

    Exploring Your Management Skill 400

    The Motivation Process 400Defining Motivation 400Process Theories of Motivation 400 Class Discussion Highlight: Modern Research and

    Motivation Skill 401 How Managers Do It: Addressing Pay Inequity at

    American Airlines 403Content Theories of Motivation: Human Needs 404 How Managers Do It: Achievement Motivation at

    C. Crane 406Motivating Organization Members 407

    The Importance of Motivating OrganizationMembers 407Strategies for Motivating Organization Members 407 How Managers Do It: Distributing Incentives at

    Comarco 414CHALLENGE CASE SUMMARY 415

    Management Skill Activities 416

    PART 5 Influencing 344Chapter 15 Influencing and Communication 344

    CHALLENGE CASE: Jetstar Airways Soars onCommunication 345

    Exploring Your Management Skill 346

    Fundamentals of Influencing 346Defining Influencing 346

    The Influencing Subsystem 346

    Emotional Intelligence 348

    Communication 350Interpersonal Communication 350

    How Managers Do It: Dealing with IncreasingNeeds For Information at the White House 351

    Interpersonal Communication in Organizations 356

    How Managers Do It: Podcasts EnhanceDownward Communication at Ericsson 356

    Class Discussion Highlight: Modern Research andCommunication Skill 358

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  • Chapter 18 Groups and Teams 424CHALLENGE CASE: Teamwork Spreads at Xerox 425Exploring Your Management Skill 426

    Groups 426Kinds of Groups in Organizations 426

    Formal Groups 426

    How Managers Do It: Committee for Recruitmentat Red Robin Gourmet Burgers 428

    Informal Groups 431

    Managing Work Groups 432Determining Group Existence 432

    Understanding the Evolution of Informal Groups 433

    Teams 435Groups Versus Teams 435

    How Managers Do It: Buidling a Team atRenaissance Executive Forums 435

    Types of Teams in Organizations 436

    Stages of Team Development 437Team Effectiveness 438

    Class Discussion Highlight: Modern Research andTeam Skill 440

    Trust and Effective Teams 440 How Managers Do It: Building Trust at

    Burberry 440CHALLENGE CASE SUMMARY 441

    Management Skill Activities 443

    Chapter 19 Managing Organization Culture 450CHALLENGE CASE: BPs Attempt to Establish a SafetyCulture Failed 451

    Exploring Your Management Skill 452

    Fundamentals of Organization Culture 452Defining Organization Culture 452The Importance of Organization Culture 453

    Functions of Organization Culture 453 How Managers Do It: Amending the Code of

    Conduct at Tocquigny 453Types of Organization Culture 454Building a High-Performance OrganizationCulture 456 Class Discussion Highlight: Modern Research and

    Organization Culture Skill 459Keeping Organization Culture Alive and Well 459

    Establishing a Vision of Organization Culture 459 How Managers Do It: Modifying Innovative

    Cultural at 3M 461Building and Maintaining Organization CultureThrough Artifacts 462Integrating New Employees into the OrganizationCulture 464 How Managers Do It: Recruiting for the Best Fit at

    Jones Day 466Maintaining the Health of Organization Culture 466CHALLENGE CASE SUMMARY 467

    Management Skill Activities 468

    viii Contents

    Chapter 20 Encouraging Creativity andInnovation 476

    CHALLENGE CASE: Fostering Creativity and Innovation atHormel Foods 477

    Exploring Your Management Skill 478

    Creativity 478Defining Creativity 478Importance of Creativity in Organizations 478Creativity in Individuals 478 How Managers Do It: Promoting Creativity at

    Activision 479Increasing Creativity in Organizations 480 How Managers Do It: Supporting Employee

    Creativity at Coca-Cola Company 482Innovation 483

    Defining Innovation 483 How Managers Do It: Innovating for Success at

    Amazon 483Linking Innovation and Creativity 484 Class Discussion Highlight: Modern Research and

    Creativity and Innovation Skill 485The Innovation Process 485

    Catalyst for Creativity and Innovation: Total QualityManagement 487

    Essentials of Total Quality Management (TQM) 488Creative Ideas Based on TQM Expertise 493CHALLENGE CASE SUMMARY 494

    Management Skill Activities 495

    PART 6 Controlling 500Chapter 21 Controlling, Information, and

    Technology 500

    CHALLENGE CASE: Sperry Van Ness: Harnessing Technologyfor Business Success 501

    Exploring Your Management Skill 502

    The Fundamentals of Controlling 502Defining Control 502Defining Controlling 502 How Managers Do It: Establishing Standards at

    General Electric 505 How Managers Do It: Using Technology to Support

    Planning at Stein Mart 507Power and Control 507

    A Definition of Power 507Total Power of a Manager 508Steps for Increasing Total Power 508Making Controlling Successful 509

    Essentials of Information 509Factors Influencing the Value of Information 510Evaluating Information 512

    Information Technology 513The Information System (IS) 513

    Describing the IS 514Managing Information Systems 516

  • Contents ix

    How Managers Do It: Scaling Data Systems forNew Users at Sage 516

    Class Discussion Highlight: Modern Research andControlling Skill 518

    CHALLENGE CASE SUMMARY 519

    Management Skill Activities 520

    Chapter 22 Production and Control 526CHALLENGE CASE: Delta Attempts to BoostProductivity 527

    Exploring Your Management Skill 528

    Production 528Defining Production 528Productivity 528 How Managers Do It: Boosting Productivity

    Through Smart Grid Technology at DukeEnergy 529

    Quality and Productivity 529 How Managers Do It: Balancing Quality and Low

    Prices at Wal-Mart 531Automation 532Strategies, Systems, and Processes 533

    Operations Management 533Defining Operations Management 533Operations Management Considerations 534 How Managers Do It: Filling the Pipeline at

    Chrysler 538

    Operations Control 538Just-in-Time Inventory Control 539Maintenance Control 540Cost Control 540Budgetary Control 540Ratio Analysis 542Materials Control 542 Class Discussion Highlight: Does Quality Control

    Matter? 543Selected Operations Control Tools 544

    Using Control Tools to Control Organizations 544Inspection 544Management by Exception 544Management by Objectives 545Break-Even Analysis 545Other Broad Operations Control Tools 548CHALLENGE CASE SUMMARY 549

    Management Skill Activities 550

    Exploring Your Management Skill Answers 556Glossary 557Photo Credits 568Name Index 569Subject Index 573

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  • Preface

    Managers of today continue to face new opportunities and challenges. These opportunities include muchpublicized tasks like Floridas Universal Studios opening a new Harry Potter attraction and Apple encour-aging technology innovation beyond the iPad and the iPhone. At the same time, other companies faceintense challenges, such as BPs task of cleaning up an oil well leak in the Gulf of Mexico. Perhaps becausethese opportunities and challenges are so daunting, managers today arguably have the ability to earn higherfinancial rewards than at any other time in history.

    This 12th edition of the Modern Management Learning Package, this text plus its ancillaries, continues arecognized and distinctive tradition in management education that has extended more than 30 years. As inall previous editions, this current edition of the Modern Management Learning Package has focused on a singleobjective: maximizing student learning of critical management concepts.All revisions reflect instructor andstudent feedback regarding ways to refashion the package to further enhance student learning. Starting withthe text, the following sections explain each major component of this revision.

    New to This EditionProfessors and students need and deserve textbooks that are modern. In this context, modern involvesadding the latest concepts and empirical research as well as including the most recent examples of manage-ment in the business world. Modern also refers to how the text material is presentedthe pedagogy usedto help students learn the concepts.This edition of the Modern Management Learning Package, this text and itsancillaries, is undoubtedly modern in terms of both management concepts and pedagogy. Overall, thispackage includes:

    Substantial revision of Chapter 3 Social Responsibility, Ethics, and Sustainability. We have added newcoverage on sustainability.

    Substantial revision of Chapter 9 Strategic Planning: Strategies,Tactics, and Competitive Dynamics.New coverage of competitive dynamics has been added.

    Half of the chapter-introductory Challenge Cases are new to this edition. Half of the chapter-ending Concluding Cases are new to this edition. We have added a new How Managers Do It feature. Each chapter includes at least three such features. Approximately half of the Research Highlights are new to this edition. A new Key Terms section has been added at the end of each chapter. Sequencing of pedagogical features like Target Skill, Learning Objectives, and Exploring Your

    Management Skill has been improved in all chapters to enhance student learning. Half of the VideoNet Exercises are new to this edition.

    More detail on each of these new features is integrated within the following discussion.

    Text: Theory OverviewDecisions about which concepts to include in this revision were difficult. Such decisions were heavily influ-enced not only by colleague and student feedback, but also by information from accrediting agencies suchas The Association to Advance Collegiate Schools of Business (AACSB), professional manager associationssuch as the American Management Association (AMA), and academic organizations like the Academy ofManagement.

    Overall, management theory in this edition is divided into the following six main sections:Introduction to Management, Modern Management Challenges, Planning, Organizing, Influencing, andControlling.The following sections discuss the changes we made in this edition to continue the tradition ofstressing the modern in Modern Management.

    Part One: Introduction to Modern ManagementThis section contains the foundation concepts necessary to obtain a worthwhile understanding of management.

    Chapter 1, Introducing Modern Management: Concepts and Skills This chapter exposes students towhat management is and gives insights about how to build their careers.This chapter also pinpoints

    x

  • management skills emphasized throughout the book and sets the stage for learning managementconcepts and developing related skills. Given high student interest, the chapter-opening case on HarryPotter and Universal Studios has been extensively revised.Also, new management compensation datahas been added to give students a realistic view of recent management pay levels.A new extendedexample of achieving efficiency and effectiveness at Telstra,Australias largest telecommunicationscompany, was added to help students see the relevance of chapter concepts.A new experiential exer-cise was added at the end of the chapter to help students gain insight on gauging the progress of acareer.A new VideoNet Exercise exploring management roles at azTeen Magazine was also added.

    Chapter 2, Managing: History and Current Thinking This chapter presents several fundamental,but different, ways managers can perceive their jobs.The work of management pioneers likeFrederick W.Taylor, Frank and Lillian Gilbreth, and Henry L. Gantt is highlighted. Students aregiven insights into how to combine the work of management pioneers into a more comprehensiveview of management. New discussion on the impact of Taylors work on unions and product qualityhas been added. More depth on the work of the Gilbreths has also been added. A new extendedillustration of how to build human relations into an organization is based on events at SAS, theworlds largest privately held software company. Another illustration of how to track customeropinions focuses on ReviewPro, software that allows management to track and organize opinions ofhotel customers. A new experiential exercise was added to help students better understand theimpact of a time study job on career development. A new concluding case on present-day chal-lenges at the New York Times has been added. A new VideoNet Exercise exploring the rewards andchallenges of being a manager at Campus MovieFest was also added.

    Part Two: Modern Management ChallengesThis section helps students focus on understanding major challenges that modern managers face. Detail oneach chapter in this section follows.

    Chapter 3, Corporate Social Responsibility, Ethics, and Sustainability This chapter discusses theresponsibilities managers have to society and how business ethics applies to modern management.Major revision to this chapter is the addition of a new topic: sustainability.This chapter defines sustain-ability and a sustainable organization and discusses the triple bottom line, reasons why organizationsshould become sustainable, and steps to follow for building sustainable organizations.A new introduc-tory Challenge Case on Verizon, a new Research Highlight on the impact of social responsibility onthe organizations bottom line, and a new example of how PepsiCo builds sustainability have all beenadded to maximize chapter newness and freshness.A new career experiential exercise encouragesstudents to explore how communicating about social responsibility activities can impact careers.

    Chapter 4, Management and Diversity This chapter defines diversity, explains the advantages ofpromoting diversity in organizations, outlines ways in which managers can promote it, and discussessome key challenges and dilemmas managers face in attempting to build a diverse workforce. A newChallenge Case on Siemens and global diversity has been added. Other new additions for this editioninclude coverage of Muslims in American society, an extended example of diversity in the legal pro-fession, discussion of how Morgan Stanley highlights diversity information, and about how WalgreensCompany actively hires workers with disabilities. A new experiential exercise focuses on gender biasand a womans career. A new VideoNet Exercise on diversity in organizations was also added.

    Chapter 5, Managing in the Global Arena This chapter covers domestic versus international,multinational, and transnational organizations.The chapter also emphasizes expatriates, repatria-tion, and international market agreements.The introductory Challenge Case on Wal-Mart andJapan has been updated. New discussion regarding JP Morgans attempts to target business inBrazil, China, and India has also been added. A new illustration of Kimberly-Clark controllingglobal operational costs also appears. Students will also see newly updated information regardingU.S. investment abroadwhere investment in the United States has been originating and whereU.S. investment in foreign countries has been focused. A new experiential exercise focuseson raising students sensitivity to the types of topics they must study to build a global career. Anew chapter-ending case on Jardens global reach has also been added.

    Chapter 6, Management and Entrepreneurship This chapter focuses on the discovery, evaluation,and exploitation of business opportunities.We have added extensive examples describing entrepre-neurial efforts in the agricultural, financial, and health and fitness industries.The Challenge Case on

    Preface xi

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  • Google has been updated to reflect some of the companys latest efforts.We have also included anew Research Highlight reviewing the primary reasons why entrepreneurs start new businesses.Thechapter includes a new chapter-ending case on Heritage Auction Galleries, an entrepreneurial firmthat sells collectibles all over the world. Finally, the chapter includes a new VideoNet exercise basedon Boston Boxing and Fitness.

    Part Three: PlanningThis section elaborates on planning as a primary management function.

    Chapter 7, Principles of Planning This chapter details the primary concepts involved with planning.The chapter includes a new Challenge Case detailing the planning efforts at Quality Bicycle Products.The chapter also includes new examples illustrating the role of planning in a diverse set of companiesincluding Target, ConocoPhillips, and MySpace.The chapter concludes with a new VideoNet exerciseillustrating how managers plan at Kaneva.

    Chapter 8, Making Decisions This chapter details the primary concepts involved with decisionmaking.The chapter begins with a new Challenge Case summarizing the decision that NBC execu-tives made to replace Conan OBrien with Jay Leno as host of The Tonight Show.We also includeda new Research Highlight examining how timely information improves decision making.We incorpo-rate new content discussing the role of hubris and overconfidence in understanding executive deci-sion making. Finally, the chapter includes new examples illustrating the role of decision making inthe recycling and retailing industries.

    Chapter 9, Strategic Planning: Strategies,Tactics, and Competitive Dynamics This chapter was exten-sively revised to include the latest research on strategic planning. In addition to the chapters existingcoverage of strategies and tactics, this chapter now includes an in-depth discussion of competitivedynamics.This new section on competitive dynamics helps students understand how and why firms actand react when competing with their rivals. Specifically, we introduce the framework suggesting that afirms awareness, motivation, and capabilities influence its competitive actions.We introduce an exam-ple of the rivalry between Amazon.com and Barnes & Noble to illustrate how these concepts influencecompetitive actions.The chapter includes a new Challenge Case detailing the role of strategic planningin understanding the success of Samsung Electronics.The chapter concludes with a new VideoNetExercise on Nom Nom.

    Chapter 10, Plans and Planning Tools This chapter details the fundamental tools that help improveplanning success.This chapter includes a new Challenge Case on Microsoft to help students betterunderstand how planning tools can improve organizational effectiveness.We also included a diverseset of examples to illustrate how planning tools assist both non-profit organizations (e.g., NationwideChildrens Hospital) as well as more prominent companies such as H&M and Apple.The chapterconcludes with a new VideoNet Exercise that describes how employees at Triple Rock Brewingemploy planning tools.

    Part Four: OrganizingThis section discusses organizing activities as a major management function.

    Chapter 11, Fundamentals of Organizing This chapter details the key concepts involved with organi-zation.The chapter includes new examples illustrating the importance of organization for companiessuch as General Electric, General Motors, and EnergySolutions.We also included in this chapter a newResearch Highlight examining how organizational structure influences the ability of companies tomass customize their products for customers.This example also provides a discussion of the distinc-tions between organic versus mechanistic organizational structures.The chapter concludes with a newchapter-ending case describing the challenges involved with 3Ms organizational structure.

    Chapter 12, Responsibility,Authority, and Delegation This chapter details the importance of responsi-bility, authority, and delegation in managerial effectiveness.The chapter begins with a new ChallengeCase summarizing the roles of responsibility, authority, and delegation in understanding the qualitychallenges that recently troubled Toyota.The chapter also includes new examples illustrating how theseimportant concepts influenced managerial effectiveness at Goldman Sachs and Johnson & Johnson.

    Chapter 13, Human Resource Management This chapter covers the primary concepts involved inunderstanding effective human resource management. New examples have been added to illustratea variety of issues in human resource management. For instance, new examples highlight the

    xii Preface

  • Preface xiii

    practices Intel uses to recruit new employees as well as the tactics used by Health South when lay-ing off employees.We also included a new Research Highlight illustrating how the timing of a joboffer (i.e., how soon after an interview a job offer was made to a candidate) influences the likeli-hood that a candidate accepts the offer.This chapter concludes with a new chapter-ending casedescribing how Raising Canes employed social media to attract and hire new employees.

    Chapter 14, Organizational Change: Stress, Conflict, and Virtuality This chapter emphasizes waysin which managers change organizations and the stress-related issues that can accompany such action.Coverage also emphasizes building alternative work situations, communicating successfully in virtualoffices, and handling change-related conflict. New extended examples of organizational change focuson changing a data technology system at University Health Systems, people change at Caterpillar, andidentifying workplace bullying. New coverage has also been added on storytelling as a technique forinitiating change. A new experiential exercise allows students to explore the role of change in careermanagement. A new chapter-ending case focuses on change at P&G. A new VideoNet Exerciseexploring change at homestarrunner.com was also added.

    Part Five: InfluencingThis section discusses ways managers should deal with people. Reflecting the spirit of AACSB guidelines,encouraging thorough coverage of human factors in business curriculum, the influencing section is quitecomprehensive.

    Chapter 15, Influencing and Communication This chapter introduces the topic of managing people,defines interpersonal communication, and presents organizational communication as the primaryvehicle managers use to interact with people.A new introductory Challenge Case was added. Inaddition, more coverage of emotional intelligence has been added. New extended examples on com-munication strategy at the White House and the use of podcasts for communication at Ericsson havealso been newly added. New emphasis in this chapter explores informal communication during aneconomic downturn and the relationship between trust in a manager and the managers credibility asa communicator.The new experiential exercise for this chapter focuses on the relationship between amanagers personal communication philosophy and his or her career.The end-of-chapter VideoNetExercise focuses on communication at Zifty.com.

    Chapter 16, Leadership This chapter highlights more traditional concepts, such as the Vroom-Yetton-Jago leadership model, the pathgoal theory of leadership, and the life-cycle theory of leadership.Coverage also includes more recently developed and evolving concepts such as servant leadership, trans-formational leadership, coaching, super-leadership, and entrepreneurial leadership.The new introductoryChallenge Case for this chapter is on Sotoru Iwata, the president of Nintendo. New research coveragefocuses on the relationship between leader traits and charismatic leadership, and leader flexibility andquick wins. New extended examples feature transformational leadership at Ben & Jerrys and servantleadership at Zappos.com.We also added a new Research Highlight examining the role of transforma-tional leadership in understanding group performance.The new career experiential exercise for thischapter helps students explore the role of leadership opportunities within an organization and choosingto take a job within that organization.The newly designed concluding case is Oprah Leads an Empire.

    Chapter 17, Motivation This chapter defines motivation, describes the motivation process, and providesuseful strategies managers can use in attempting to motivate organization members. Both content andprocess theories of motivation are discussed in detail. New extended examples of how American Airlinesaddresses pay inequity, how entrepreneur Bob Crane handles achievement motivation, and distributingincentives at Comarco are all included to help students see how chapter concepts can impact real man-agers. Research findings related to Theory XTheory Y, the relationship between job satisfaction andeconomic recession, the findings of others that are seemingly consistent with Herzbergs ideas, job rota-tion, and communicating about incentive programs have been added to enrich chapter content.This chap-ter includes a new Research Highlight examining how goal-setting may influence the motivationandperformanceof individuals.The new career experiential exercise helps students explore the relationshipbetween punishment and career development.The new case for this chapter is Motivation at United Way.

    Chapter 18, Groups and Teams This chapter emphasizes managing clusters of people as a means ofaccomplishing organizational goals. Coverage focuses on managing teams. Coverage also focuses ongroups versus teams, virtual teams, problem solving, self-managed and cross-functional teams, stages ofteam development, empowerment, the effectiveness of self-managed teams, and factors contributing toteam effectiveness. An extended example of how committees function focuses on the committee for

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  • xiv Preface

    recruitment at Red Robin Gourmet Burgers. Another such example focuses on building teams atRenaissance Executive Forums. New coverage discusses groupthink, the relationship between trust andteam effectiveness, and integrating informal groups within formal organization structure.We also addeda new Research Highlight that discusses how personality type may influence the extent to which anindividual is able to influence group decision making.The new career-oriented experiential exercise forthis chapter helps students explore the location of a first job and its impact on their careers.The newlydesigned concluding case for this chapter focuses on team building at Best Buy.

    Chapter 19, Managing Organization Culture The chapter opens with an extensively revised case onBP that focuses on an oil leak in the Gulf of Mexico and the companys attempt to establish an organiza-tion culture emphasizing safety. Major topics include defining organization culture, the importance ofculture, and building a high-performance organization culture. Special discussion focuses on cultural arti-facts: organizational values, myths, sagas, language, symbols, ceremonies, and rewards. New contentincludes comments on the difficulty in defining a particular culture, what beekeeping can teach us aboutbuilding values within an organization, and the impact of economic turbulence on organizational social-ization. New extended examples illustrate issues related to changing a code of conduct at Tocquigny andrecruiting within a law firm to provide new employees who fit the organization culture.We also includeda new Research Highlight discussing how aspects of organizational culture influence employee turnover.The new career experiential exercise for this chapter emphasizes the impact of organization culture onjob choice.The new concluding case designed for this chapter explores organization culture and Cintas.

    Chapter 20, Encouraging Creativity and Innovation The chapter details new research on creativityand innovation and updates the efforts of the most innovative companies in America.The chapteralso includes a new example illustrating the importance of creativity for Activision, a video gamedeveloper.We also added a new example illustrating how Amazon.com continues to innovate andchange its overall business model. A new Research Highlight in this chapter highlights the importantlink between creativity and innovation in entrepreneurial firms.The chapter concludes with a newcase describing the importance of innovation for Inventables.

    Part Six: ControllingThis section presents control as a major management function. Major topics include fundamentals of con-trol, controlling production, and information technology.

    Chapter 21, Controlling, Information, and Technology The chapter opens with a new Challenge Casediscussing how Sperry Van Ness, a commercial real estate brokerage, employs controlling, information,and technology to improve operational efficiency and effectiveness.To better understand these con-cepts, we also include new examples illustrating how companies like Stein Mart and Sage use the latestinformation technologies to improve operations.We also include the most recent research available toexpand our discussion of power in the organizational context.The chapter concludes with a newVideoNet Exercise demonstrating how Platinum Autobody uses information technology.

    Chapter 22, Production and Control We updated the Challenge Case in this chapter to reflect thecontrol issues that surround Deltas recent merger with Northwest.We also included examplesillustrating how Duke Energy, Chrysler, and Dominos implement controls to improve operationaleffectiveness.The chapter concludes with a new VideoNet Exercise illustrating the roles of produc-tion and control at Sound in Motion.We also included a new chapter-ending case to highlight howMichaels on East uses various controls to reduce costs.

    Modern Management 12th edition: The SkillsFrom a pedagogy standpoint, the 12th edition of Modern Management continues its unique focus in themarketplace of developing students management skills across all of the primary management functions. Eachchapter opens by identifying a specific management skill on which the chapter focuses. The remainder ofthe chapter contains a number of purposefully placed features designed to help students develop that skill.

    This focus on skill development is consistent with the Association to Advance Collegiate Schools ofBusiness (AACSB), which provides higher education professionals with sound standards for maintaining excel-lence in management education.AACSB standards indicate that excellence in modern management educationis achieved when students acquire both knowledge about management concepts and skill in applying thatknowledge.According to these standards, management educators must help students understand and appre-ciate both the why of management as well as the how of management.

  • Preface xv

    The following sections discuss pedagogical features in this text that help students learn managementtheory and how to apply it.

    1. Chapter Target Skill: Each chapter opens by identifying and defining the target management skillemphasized in that chapter. By focusing on this target skill early in the chapter, students immediatelyhave a context for learning chapter concepts.As an example of a chapter target skill, see the definition ofcorporate social responsibility skill on page 50.

    2. Learning Objectives: For each chapter, a list of learning objectives follows the Chapter Target Skill.Theseobjectives flow from the chapter target skills to help students further focus on learning critical chapter con-cepts. See page 2 for an example of how a chapter target skill and learning objectives work together to helpstudents focus their learning on how to make decisions.

    3. Challenge Case: Each chapter opens with an introductory Challenge Case.The purpose of a ChallengeCase is to introduce students to real challenges faced by real managers and to demonstrate the usefulnessof chapter concepts and related management skills in meeting those challenges. Each case summarizes aset of issues for a manager within a company and asks students how they would resolve the issues. Overhalf the cases in this edition are new or updated. New cases in this edition focus on companies such asBest Buy, United Way, and Harpo Productions.Turn to page 451 to see this editions new introductoryChallenge Case on BP.

    4. How Managers Do It: New to this edition, each chapter contains two or three features calledHow Managers Do It. This feature shows students concrete steps practicing managers have actuallytaken that are consistent with chapter concepts.This feature focuses on companies such as 3M,Zappos, and Caterpillar. For a sample of this feature, see Committee for Recruitment at Red RobinGourmet Burgers on page 428.

    5. Research and Class Discussion Highlights: Each chapter includes a Research Highlight orClass Discussion Highlight that focuses on recent research related to chapter content.These high-lights include specific questions to help students better understand the implications of recent man-agement research on chapter content and management skills.These questions are designed primarilyfor in-class discussion but could be used for out-of-class study. Half of the highlights are new to thisedition. New highlights cover such topics as organizational culture, recruiting tactics, and team deci-sion making. For a sample of this feature, see Modern Research and Human Resources Skill:TheTiming of Job Offers on page 308.

    6. You and Your Career: Each chapter contains an Experiential Exercise that helps students understandthe relationship between the targeted skill of the chapter and the development of their own careers.This feature includes a number of questions designed to help students appreciate the importance ofmanaging their own careers.To see a sample You and Your Career exercise turn to page 23.

    7. Challenge Case Summary: Each chapter ends with a Challenge Case Summary.This sectionprovides extensive narrative on how chapter concepts relate to issues in the chapter-openingChallenge Case.To better understand this pedagogical feature, see the Challenge Case Summary forthe BP introductory case on page 467.

    8. Management Skill Activities: Each chapter ends with a rich array of learning activities that helpsstudents better understand management concepts and develop skills in applying those concepts.Specific activities are listed and explained below.A. Understanding Management Concepts: This section helps students review and understand

    chapter concepts.1. Know Key Terms is a section in which key terms in a chapter are listed along with page

    numbers on which they are discussed. For an example Know Key Terms section, see keyterms in the Strategic Planning chapter on page 220.

    2. Know How Management Concepts Relate is a section containing essay questions relatedto chapter material.These questions help students focus on the interrelationships of chapterconcepts and how they relate to the management process. For the Influencing andCommunication chapter, see a sample Know How Management Concepts Relate on page 362.

    B. Developing Management Skills: This chapter-ending section contains many activities thatfocus on helping students develop skills related to chapter content.1. Exploring Your Management Skill: Part 1. This exercise starts the Developing

    Management Skill section of each chapter.Taken before studying the chapter, Part 1 is atrue-false, multiple-choice test (self-scored or electronically-scored) that helps students toassess their level of expertise in a chapter target skill before studying the chapter.The questionsfocus on how a manager in a Challenge Case might apply chapter content to organizational

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  • issues. For an example of Exploring Your Management Skill: Part 1, check out page 266 inthe Fundamentals of Organizing chapter.

    2. Exploring Your Management Skill: Part 2. This exercise is actually repeating the sameExploring Your Management Skill: Part 1 test after studying the chapter. Students retake thetest in Part 2 to see the impact of studying and to assess their learning as encouraged inAACSB guidelines on assurance of learning. For an example of Exploring Your ManagementSkill: Part 2, check out page 267 in the Fundamentals of Organizing chapter.

    3. Your Management Skills Portfolio. An activity at the end of each chapter is speciallydesigned to allow students to demonstrate management skill learned in that chapter.Instructors may choose to have students turn in hard or electronic copies of thisassignment. In addition, instructors may ask students to present their completedportfolios in class. If completed online, a student can accumulate this evidence and print a portfolio covering as many chapters as desired, to help win a job during anemployment interview. See Delegating Basketball Duties at Texas A&M on page 289 as an example of a Your Management Skills Portfolio.

    4. Experiential Exercises. Each chapter concludes with two types of experiential exercises.Type one is specially designed to help students develop knowledge and skill related to chaptercontent. For an example of this type of experiential exercise, see Analyzing Study Results onpage 419 of the Motivation chapter.

    Type two is an exercise that focuses on helping students use chapter content to bettermanage their own careers.These exercises are called You and Your Career. A sample of thistype of experiential exercise, can be found on page 154 of the Management andEntrepreneurship chapter.

    5. Cases. Each chapter concludes with two cases.The first concluding case is based on thechapters introductory Challenge Case. Students are given a series of discussion questionsthat stimulate further discussion of the Challenge Case. Page 448 contains an example ofsuch questions related to Teamwork Spreads at Xerox, the Challenge Case for the Groupsand Teams chapter.

    The second concluding case is specifically designed to illustrate real-life management issuesand the steps necessary to face those issues. Half of these specially designed cases are new to thisedition.An example of this type of case, new to this edition, is Best Buys Extreme TeamBuilding on page 448 of the Groups and Teams chapter.

    6. VideoNet Exercises. Each chapter ends with a unique learning tool called a VideoNet Exercise.This exercise begins with students watching a video of an actual company and discussing chaptercontent as it relates to the company featured in the video. Next, students enrich what theyvelearned by completing an Internet activityan online exploration of the company featured in thevideo. Half of the VideoNet Exercises are new to this edition. For a sample VideoNet exercise, seeProduction and Control: Sound in Motion on page 553 of the Production and Control chapter.

    Modern Management: The Student Learning ProcessStudents often ask professors to suggest the best way to study to maximize learning. By using the componentsof Modern Management in a conscientious and systematic fashion, students can build their knowledge aboutmanagement concepts and their skill to apply it.Although the components of Modern Management are flexibleand can be used for many different study processes, one suggested study process is discussed below.

    As shown in Figure 1, students can start chapter study by experiencing Exploring Your ManagementSkill: Part 1.This activity will introduce students to concepts and skills emphasized in the chapter and helpthem assess how much they know in these areas before studying the chapter.

    Once students have been introduced via Exploring Your Management Skill: Part 1, they can startlearning management concepts.They learn concepts by reading and studying the chapter and checking theirprogress in meeting the learning objectives stated at the beginning of the chapter as well as being able toanswer essay questions at the end of the chapter. By checking their learning progress, students can pinpointareas in which further study is needed before moving forward.

    Once students are satisfied that they have learned chapter content, they can experience Exploring YourManagement Skill: Part 2. This exercise will reemphasize the knowledge and skills focus in the chapter andgive students feedback about how much theyve learned in the chapter. If students are not satisfied withtheir feedback, they can restudy material to improve.

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  • Preface xvii

    REFLECT ONKNOWLEDGE

    ANDSKILLS

    REFLECT ONKNOWLEDGE

    ANDSKILLS

    LEARNCONCEPTS

    LEARN SKILLS

    Exploring YourManagement Skill:

    Part 1

    Read a chapter

    Have you metchapter learning

    objectives?

    Yes

    Yes

    No

    No

    Can you answerthe essay questionsat end of chapter?

    Exploring YourManagement Skill:

    Part 2

    Perform assignedskills activities

    Cases

    1. Target management skill2. Challenge Case Summary

    Review:

    ManagementSkills

    Portfolio

    VideoNetExercises

    ExperientialExercises

    FIGURE 1A systematic method formaximizing learning when studyingModern Management

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  • xviii Preface

    When students are satisfied with this feedback, they can focus more on learning management skillsrelated to chapter content. Students focus on learning how to apply management concepts by performingapplication exercises assigned by professors and referring to chapter content as often as necessary to fur-ther clarify concepts and how to apply them. Students might also work on exercises independently and dowork not assigned by the professor. Application exercises can include the Management Skills Portfolio,Experiential Exercises, Cases, and VideoNet Exercises.

    Instructor/Student SupplementsThe Modern Management Web SiteNew to This EditionThe Modern Management author Web site (www.twocertos.com) is new to this edition and a unique featurefor principles of management textbooks.This site provides professors using Modern Management with a richarray of content aimed at making the text as close to real-time as possible. Content on the site includes fea-tures like experiential exercises, videos, podcasts, and research updates. By integrating this content withthe text, professors can deliver courses that are content appropriate and current. The Modern ManagementWeb site is maintained by the authors of the text, who personally choose and include the content that bestcomplements and continuously updates text content.

    Because instructors around the world teach courses and concepts at different times, the authors designedthis site so instructors can quickly identify and use relevant content when they need it.The site allows instruc-tors to search the entries by either chapter or content type.This design allows instructors to access contentavailable for each teaching topic quickly and easily as needs arise.

    Instructor Resource CenterAt the Instructor Resource Center, www.pearsonhighered.com/irc, instructors can access a variety of print,digital, and presentation resources available with this text in downloadable format. Registration is simple andgives you immediate access to new titles and new editions. As a registered faculty member, you can down-load resource files and receive immediate access to and instructions for installing course management con-tent on your campus server. In case you ever need assistance, our dedicated technical support team is readyto help with the media supplements that accompany this text.Visit http://247.pearsoned.com for answersto frequently asked questions and toll-free user support phone numbers.

    The following supplements are available for download to adopting instructors:

    Instructors Manual Test Item File TestGen (test-generating program) PowerPoint Slides

    Videos on DVDVideo segments that illustrate the most pertinent topics in management today andhighlight relevant issues that, demonstrate how people lead, manage, and work effectively. Contact yourPearson representative for the DVD.

    CourseSmart eTextbookCourseSmart is an exciting new choice for students looking to savemoney. As an alternative to purchasing the printed textbook, students can purchase an electronic ver-sion of the same content. With a CourseSmart eTextbook, students can search the text, make notesonline, print out reading assignments that incorporate lecture notes, and bookmark important pas-sages for later review. For more information, or to purchase access to the CourseSmart eTextbook,visit www.coursesmart.com.

    MyManagementLab (www.mymanagementlab.com) is aneasy-to-use online tool that personalizes course content

    and provides robust assessment and reporting to measure individual and class performance. All of theresources that students need for course success are in one placeflexible and easily adapted for your stu-dents course experience. Some of the resources include an eText version of all chapters, quizzes, videoclips, simulations, assessments, and PowerPoint presentations that engage your students while helping themstudy independently.

  • Preface xix

    AcknowledgmentsThe overwhelming success of Modern Management has now continued for three decades. The ModernManagement Learning Package, this book and its ancillaries, has become a generally accepted academic stan-dard for high-quality learning materials in colleges and universities throughout the world.These materialshave been published in special country editions, serving the special needs of management students incountries like Canada and India. Modern Management has also been published in foreign languages includingPortuguese and Spanish and is commonly used in professional management training programs.

    Obviously, we have received much personal satisfaction and professional recognition for the success ofthis text over the years. In truth, however, much of the credit for this success continues to rightfully belongto many of our respected colleagues. Many key ideas for text development and improvement have comefrom others. Were grateful for the opportunity to recognize the contributions of these individuals andextend to them our warmest personal gratitude for their professional insights and encouragement through-out the life of this project.

    For this edition, several colleagues made valuable contributions through numerous activities likereviewing manuscript and providing unsolicited ideas for improvement.These individuals offered differentviewpoints that required us to constructively question our work. Thoughtful comments, concern for stu-dent learning, and insights regarding instructional implications of the written word characterized the high-quality feedback we received.These individuals are:

    Helen Davis, Jefferson CommunityCollegeDowntown Louisville

    E. Gordon DeMeritt, Shepherd University

    Theresa Freihoefer, Central OregonCommunity College

    George Gannage,West Central TechnicalCollege

    Wayne Gawlik, Joliet Jr. College

    Ashley Geisewite, Southwest TennesseeCommunity College

    Jon Matthews, Central Carolina CommunityCollege

    Robert Morris, Florida State College ofJacksonville

    Paul Robillard, Bristol Community College

    Gisela Salas,Webster University, BarryUniversity, St. Leo University, University ofthe Rockies

    Duanne Schecter, Muskegon CommunityCollege

    M. Smas, Kent State University

    Paul Thacker, Macomb Community College

    Bob Waris, University of Missouri Kansas City

    Many colleagues have made significant contributions to previous editions of this project that are stillimpacting this 12th edition. A list of such respected colleagues includes:

    Don Aleksy, Illinois Valley College

    Karen Barr, Penn State University

    Dan Baugher, Pace University

    Wayne Blue, Allegany College of Maryland

    Elise A. Brazier, Northeast Texas CommunityCollege

    Michael Carrell, Morehead State University

    Lon Doty, San Jose State University

    Megan Endres, Eastern Michigan University

    Joyce Ezrow, Anne Arundel CommunityCollege

    William Brent Felstead, College of the Desert

    Robert Freeland, Columbia SouthernUniversity

    Adelina Gnanlet, California State University

    Joseph Goldman, University of Minnesota

    Heidi Helgren, Delta College

    Jo Ann Hunter, Community College ofAllegheny County

    Steven E. Huntley, Florida CommunityCollege at Jacksonville

    Robert E. Kemper, Northern ArizonaUniversity

    Toni Carol Kind, Binghamton University

    Dennis L. Kovach, Community College ofAllegheny County

    Loren Kuzuhara, University of Wisconsin

    Gosia Langa, University of Maryland

    Theresa Lant, New York University

    Maurice Manner, Marymount College

    Michelle Meyer, Joliet Junior College

    Marcia Miller, George Mason University

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  • xx Preface

    Jennifer Morton, Ivy Tech Community College

    Rhonda Palladi, Georgia State University

    Donald Petkus, Indiana University

    James I. Phillips, Northeastern StateUniversity

    Richard Ratliff, Shari Tarnutzer, and theircolleagues, Utah State University

    Johnny Shull, Central Carolina CommunityCollege

    Denise M. Simmons, Northern VirginiaCommunity College

    Joe Simon, Casper College

    Randi L. Sims, Nova Southern University

    Gregory Sinclair, San Francisco StateUniversity

    L. Allen Slade, Covenant College

    Charles I. Stubbart, Southern IllinoisUniversity Carbondale

    Dr. Peter Szende, Boston University

    Tom Tao, Lehigh University

    Don Tobias, Cornell University

    Larry Waldorf, Boise State University

    Gloria Walker, Florida Community College atJacksonville

    Cindy W.Walter,Antelope Valley College

    In addition, several colleagues have worked diligently on developing text ancillaries of only the high-est quality. Such colleagues worked tirelessly to provide instructional aids to all of us and we thank them fortheir time and efforts. For this edition, we also thank Steve Stovall for his work on the end of chapter casesand Patricia Lanier for her work on the VideoNet exercises.

    We will always owe Professor Lee A. Graf, Professor Emeritus, Illinois State University, a huge debtof gratitude for helping to build the success of Modern Management throughout the early years of this proj-ect. Dr. Grafs countless significant contributions in many different areas have certainly been instrumentalin building the reputation and widespread acceptance of the Modern Management Learning Package. Moreimportant than our professional relationship, Dr. Graf is our friend.

    Members of our Prentice Hall family deserve personal and sincere recognition. Our book team hasbeen nothing but the best: Sally Yagan, Editorial Director; Kim Norbuta, Acquisitions Editor; ClaudiaFernandes, Editorial Project Manager; Carter Anderson, Editorial Assistant; Lynn Savino, ProductionProject Manager; Judy Leale, Senior Managing Editor; and Nikki Jones, Marketing Manager. Needless tosay, without our Prentice Hall colleagues, there would be no Modern Management.

    Sam Certo would like to give special recognition to Craig McAllaster, Dean of the Crummer GraduateSchool of Business at Rollins College and Charles Chuck Steinmetz, entrepreneur extraordinaire. Personaland professional support demonstrated by these individuals over the years has helped to ensure the inten-sity, growth, and excitement necessary to maintain a vigorous, long-term writing schedule. Probablyunknown to them, McAllaster and Steinmetz have been invaluable in the completion of this text.

    Last and arguably most importantly, Sam Certo would like to thank his wife, Mimi, for her continual sup-port throughout this revision. She constantly made personal sacrifices beyond the call of duty in support ofthe completion of this project. Thank you! Brian, Sarah and Andrew, Matthew and Lizzie, and Trevis andMelissa, continually but unknowingly help to build my confidence and focus.Thank you! To Skylar, Lexie, andLandon, a very special thanks.You guys always help Pop to remember that adult things arent always asimportant as adults make them out to be.

    Trevis Certo: I would like to thank my colleagues at Arizona State University for their continued sup-port. I would also like to thank my wife Melissa for her patience with my writing schedule. I would alsolike to thank Skylar, Lexie, and Landon for humbling me every day. Finally, and most importantly, I wouldlike to thank God for blessing me with a beautiful and healthy family.

    Samuel C. Certo

    S. Trevis Certo

  • About the Authors

    Dr. Samuel C. Certo is presently the Steinmetz Professor of Management at the Roy E.Crummer Graduate School of Business at Rollins College. Over his career, Dr. Certo has receivedmany prestigious awards including the Award for Innovative Teaching from the Southern BusinessAssociation, the Instructional Innovation Award granted by the Decision Sciences Institute, and theCharles A.Welsh Memorial Award for outstanding teaching.

    Dr. Certo has written several successful textbooks including Modern Management, StrategicManagement: Concepts and Applications, and Supervision: Concepts and Applications. His textbooks havebeen translated into several foreign languages for distribution throughout the world. Having receivedsix different teaching awards in the last four years alone, Dr. Certo constantly focuses on crafting allof his books to facilitate both the instructional and student learning processes. Dr. Certos numerouspublications include articles in such journals as Academy of Management Review,The Journal of ChangeManagement, Business Horizons,The Journal of Experiential Learning and Simulation, and Training.

    A past chairperson of the Management Education and Development Division of the Academy ofManagement, he has been honored by that groups Excellence of Leadership Award. Dr. Certo hasalso served as president of the Association for Business Simulation and Experiential Learning, as asso-ciate editor for Simulation & Games, and as a review board member of the Academy of ManagementReview. His consulting experience has been extensive with notable experience on boards of directorsin both private and public companies.

    Dr. S. Trevis Certo is an associate professor and a Deans Council of 100 Scholar in the W. P.Carey School of Business at Arizona State University. Dr. Certo holds a Ph.D. in strategic manage-ment from the Kelley School of Business at Indiana University. His research focuses on corporategovernance, top management teams, initial public offerings (IPOs), and research methodology. Dr.Certos research has appeared in the Academy of Management Journal, Academy of Management Review,Strategic Management Journal, Journal of Management, California Management Review, Journal of BusinessVenturing, Entrepreneurship Theory and Practice, Business Ethics Quarterly, Journal of Business Ethics, BusinessHorizons, Journal of Developmental Entrepreneurship, and Across the Board. Dr. Certos research has alsobeen featured in publications such as BusinessWeek, New York Times,Wall Street Journal,Washington Post,and Money magazine.

    Dr. Certo is a member of the Academy of Management and the Strategic Management Societyand serves on the editorial review boards of the Academy of Management Journal, Journal of Management,Entrepreneurship Theory and Practice, Journal of Management and Governance, and Business Horizons. Priorto joining the faculty at Arizona State, he taught undergraduate, MBA, EMBA, and Ph.D. courses instrategic management, research methodology, and international business at Indiana University,TexasA&M University,Tulane University, and Wuhan University (China).

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  • o b j e c t i v e s

    TO HELP BUILD MY MANAGEMENT SKILL, WHEN STUDUDYING THIS CHAPTER, I WILL ATTEMPT TO ACQUIRE:To help build my management skill,

    when studying this chapter, I willattempt to acquire:

    1. An understanding of theimportance of management tosociety and individuals

    2. An understanding of the role of management

    3. An ability to dene managementin several different ways

    4. An ability to list and dene thebasic functions of management

    5. Working denitions of managerialeffectiveness and managerialefciency

    6. An understanding of basicmanagement skills and theirrelative importance to managers

    7. An understanding of theuniversality of management

    8. Knowledge of skills that helpmanagers become successful

    9. Insights concerning whatmanagement careers are and howthey evolve

    PART 1:INTRODUCTION

    TO MODERN MANAGEMENT

    2

    chapter

    1Introducing Modern

    Management

    CONCEPTS AND SKILLS

    Target Skill

    management skill: the ability to work with peopleand other organizational resources to accomplishorganizational goals

  • CHALLENGE CASEUNIVERSAL OPENS HARRY POTTERTHEME PARK

    AFTER MONTHS OF MEDIA SPECULATION and thenadditional months in development, UniversalStudios debuted its latest theme park, TheWizarding World of Harry Potter. The park openedin June 2010 at the Universal Orlando Resort inFlorida, in what Universal calls a theme park withina theme park.1

    The new park, developed as a partnershipbetween Warner Bros. Entertainment Inc. andUniversal Orlando Resort, creates the worlds firstfully immersive Harry Potterthemed environmentbased on the best-selling books by J. K. Rowlingand wildly successful feature lms from Warner Bros.The author worked with a creative team to makesure the park resembles her work.2

    Pressure to build an attraction that istrue to the Harry Potter brand was intense,as Universals chairperson, Tom Williams,noted. However, early visitors to the parkclaim it has successfully captured the smells,sounds, and texture of Hogwarts Castle andthe Forbidden Forest. Universal reportedlyworked closely with Warner Bros. to ensurethat marketing for the new park (launched inthe form of advertising during the 2010 SuperBowl) aligned closely with the global HarryPotter brand. The 20-acre facility includesmeticulously re-created versions of HogwartsCastle and other settings from the series, alongwith amusements, dining, and shopping. Ridesinclude Harry Potter and the Forbidden Journey,Flight of the Hippogriff, and a pair of high-speedroller coasters known as Dragon Challenge.3

    The power of the Harry Potter brand is impres-sive. Rowling has sold more than 400 million HarryPotter books in more than 63 languages, and themovies have generated billions of dollars in rev-enues.4 An estimated 8 out of 10 people alreadyrecognize the Harry Potter name, which is also animportant draw for park visitors.5

    Industry observers say the Harry Potter themepark is an attempt by Universal to better competewith Walt Disney World, the leading attraction inOrlando with more than 45 million visitors in a recentyearas compared with Universals Orlando park g-ures of just over 11 million during the same period.6

    Going from concept to the reality of operating aprotable enterprise, however, is a formidable chal-lenge that rests squarely in the hands of manage-ment. Management must avoid classic mistakessuch as recruiting the wrong employees, not creat-ing a motivating work environment, and failing tokeep the parks many systems operating properly.Competent managers will meet the challenge,whereas incompetent management will not. Onlytime will tell.

    Bringing a massive project like a new HarryPotter theme park to life requires many types ofmanagement skills at all levels of the organization.

    3

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  • 4 P A R T 1 Introduction to Modern Management

    EXPLORING YOUR MANAGEMENT SKILL

    THE MODERN MANAGEMENT CHALLENGEThe Challenge Case illustrates just a few of the challenges thatface Universal Orlando management at its new Harry Pottertheme park. The remaining material in this chapter explains thebasic concepts of modern management and helps to developthe corresponding management skill you will need to meet

    such challenges throughout your career. After studying chapterconcepts, read the Challenge Case Summary at the end of thechapter to help you to relate chapter content to meeting themanagement challenges at The Wizarding World of HarryPotter.

    SR. MANAGEMENTDEVELOPMENT

    SPECIALISTWe are a major metropolitan service employer of over 5,000 employees seek-ing a person to join our management development staff. Prospective candi-dates will be degreed with 5 to 8 years experience in the design, implementa-tion, and evaluation of developmental programs for first-line and mid-level management personnel. Additionally, candidates must demonstrate excep-tional oral and written communications ability and be skilled in performance analysis, programmed instruction, and the design and implementation of rein-forcement systems. If you meet these qualifications, please send your rsum, including salary history and requirements to:

    Box RS-653

    AVIATION FBOMANAGER NEEDED

    Southeast Florida operation catering to corporate aviation. No maintenance or aircraft salesjust fuel and the best service. Must be experienced. Salary plus benefits commensurate with qualifications. Submit complete rsum to:

    Box LJO688

    DIVISION CREDIT MANAGERMajor mfg. corporation seeks an experienced credit manager to handle the credit and collection function of its Midwest division (Chicago area). Interpersonal skills are important, as is the ability to communicate effectively with senior management. Send rsum with current compensation to:

    Box NM-43

    ACCOUNTING MANAGERGrowth opportunity. Michigan Ave. location. Acctg. degree, capable of supervision. Responsibilities include G/L, financial statements, inventory control, knowledge of systems design for computer applications. Send rsum, incl. salary history to:

    Box RJM-999

    BRANCH MGR$30,500. Perceptive pro with track record in administration and lending has high visibility with respected firm.

    Box PH-165An Equal Opportunity Employer

    An Equal Opportunity Employer

    FIGURE 1.1The variety of managementpositions available

    You can explore your level of management skill before study-ing the chapter by completing the exercise Exploring YourManagement Skill: Part 1 on page 21 and after studying this

    chapter by completing the exercise Exploring YourManagement Skill: Part 2 on page 22.

    THE IMPORTANCE OF MANAGEMENTManagers inuence all phases of modern organizations. Plant managers run manufacturing oper-ations that produce the clothes we wear, the food we eat, and the automobiles we drive. Salesmanagers maintain a salesforce that markets goods. Personnel managers provide organizationswith a competent and productive workforce. The jobs available section in the classied adver-tisements of any major newspaper describes many different types of management activities andconrms the importance of management (see Figure 1.1).

  • C H A P T E R 1 Introducing Modern Management 5

    TABLE 1.1 The 10 Highest Compensated CEOs, 2009

    Ranking CEO Name Company Name Paid ($ millions)

    1 Lawrence J. Ellison Oracle $556.98

    2 Ray R. Irani Occidental Petroleum 222.64

    3 John B. Hess Hess 154.58

    4 Michael D. Watford Ultra Petroleum 116.93

    5 Michael G. Papa EOG Resources 90.47

    6 William R. Berkley Berkley 87.48

    7 Matthew K. Rose Burlington Santa Fe 68.62

    8 Paul J. Evanson Allegheny Energy 67.26

    9 Hugh Grant Monsanto 64.60

    10 Robert W. Lane Deere & Co. 61.30

    Source: CEO Compensation, Forbes, April 22, 2009, http://www.forbes.com.

    THE MANAGEMENT TASKIn addition to understanding the significance of managerial work to themselves and societyand its related benefits, prospective managers need to know what the management taskentails. The sections that follow introduce the basics of the management task through discus-sions of the role and definition of management, the management process as it pertains tomanagement functions and organizational goal attainment, and the need to manage organiza-tional resources effectively and efficiently.

    Our society could neither exist as we know it today nor improve without a steady streamof managers to guide its organizations. Peter Drucker emphasized this point when he statedthat effective management is probably the main resource of developed countries and themost needed resource of developing ones.7 In short, all societies desperately need goodmanagers.

    Management is important to society as a whole as well as vital to many individuals who earntheir livings as managers. Government statistics show that management positions have increasedfrom approximately 10 percent to 18 percent of all jobs since 1950. Managers come from vary-ing backgrounds and have diverse educational specialties. Many people who originally trained tobe accountants, teachers, nanciers, or even writers eventually make their livelihoods as man-agers. Although in the short term, the demand for managers varies somewhat, in the long term,managerial positions can yield high salaries, status, interesting work, personal growth, and intensefeelings of accomplishment.

    Over the years, Forbes magazine has become well known for its periodic rankings of totalcompensation paid to top managers in the United States. Based on the 2009 Forbes compensationstudy, Table 1.1 shows the names of the 10 most highly paid chief executives, the company theyworked for, and how much they earned. In the study, total compensation includes factors such assalary, bonuses, and stock options.

    An inspection of the list of highest paid executives in Table 1.1 reveals that the executives areall men. Based on the results of a recent survey at the Wall Street Journal, Figure 1.2 illustrates abroad salary gap between men and women.According to Figure 1.2, while women and men makeup roughly the same proportion of the workforce, men hold a disproportionate number of higherpaying jobs. In addition, a recent study by the American Association of University Women indi-cated that the discrepancy between the pay of men versus women is a national phenomenon andis not isolated to a particular state or region.8

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  • 6 P A R T 1 Introduction to Modern Management

    60%

    50%

    40%

    30%

    20%

    10%

    0%

    % of the workforce % earning

    $75,000 or more

    % earning$50,000$75,000

    Men

    Men Men

    53%

    16% 20%

    47%

    6% 12%

    FIGURE 1.2The salary gap between genders

    Some evidence suggests that societal concern about management compensation goes wellbeyond one manager at one company.11 A recent Senate Commerce Committee meeting, forexample, focused on justifying lavish pay programs for managers at companies such as TycoInternational and American Airlines, whose companies were in nancial trouble and laying offemployees. Senators seemed unied in questioning the logic that justies the average chief exec-utive officer salary being more than 400 times higher than a production workers wages. ThisSenate Committee meeting should be an important signal that managers who do not exercisejudicious self-control about their salaries may face future legislative control.

    The Role of Management

    Essentially, the role of managers is to guide organizations toward goal accomplishment.All organ-izations exist for certain purposes or goals, and managers are responsible for combining and usingorganizational resources to ensure that their organizations achieve their purposes. Managementmoves an organization toward its purposes or goals by assigning activities organization membersperform. If the activities are designed effectively, the production of each individual worker willcontribute to the attainment of organizational goals. Management strives to encourage individualactivity that will lead to reaching organizational goals and to discourage individual activity thatwill hinder the accomplishment of those goals. Because the process of management emphasizesthe achievement of goals, managers must keep organizational goals in mind at all times.12

    Pedictably, concerns that certain managers are paid too much have beenraised. For example, consider the notable criticism in recent yearsregarding the high salary paid to Robert R. Nardelli, former CEO of

    Home Depot.9 Disapproval of the excessive compensation paid toNardelli surfaced in the popular press as well as in statements bystockholders. An article in the Wall Street Journal, for example,questioned whether Nardelli was worth the amount hereceived.10 Nardelli had been paid $63.5 million during a five-

    year period at Home Depot, while company shares lost 6 percent of theirvalue. In the end, as with any manager, Nardellis compensation should bedetermined by how much value he adds to the company. The more valuehe adds, the more compensation he deserves. As a result of the growingcriticism about Nardellis compensation and Nardellis resistance to modifyhis compensation level, he was red.

    how managers do it

    Did Home Depot Overpay Its CEO?

  • C H A P T E R 1 Introducing Modern Management 7

    Dening Management

    Students of management should be aware that the term management can be,