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Management Quiz 2

Chapter Eight

According to scholar Edgar Schein, organizational culture, sometimes called corporate culture, is a system of shared beliefs and values that develops within an organization and guides the behavior of its members. (“Social glue”)

According to one common methodology known as the competing values framework, organizational cultures can be classified into four types: (1) clan, (2) adhocracy, (3) market, and (4) hierarchy.

1. Clan Culture: An Employee-Focused Culture Valuing Flexibility, Not Stability. A clan culture has an internal focus and values flexibility rather than stability and control. Like a family-type organization, it encourages collaboration among employees, striving to encourage cohesion through consensus and job satisfaction and to increase commitment through employee involvement. Southwest Airlines is a good example of a company with a clan culture.

2. Adhocracy Culture: A risk-taking culture valuing flexibility.An adhocracy culture has an external focus and values flexibility. This type of culture attempts to create innovative products by being adaptable, creative, and quick to respond to changes in the marketplace. W.L. Gore is an example of a company with an adhocracy culture.

3. Market Culture: A competitive culture valuing profits over employee satisfaction. A market culture has a strong external focus and values stability and control. Because market cultures are focused on the external environment and driven by competition and a strong desire to deliver results, customers, productivity, and profits take precedence over employee development and satisfaction. Merrill Lynch is an example of a company with a market culture.

4. Hierarchy Culture: A structured culture valuing stability & effectiveness. A hierarchy culture has an internal focus and values stability and control over flexibility. Companies with this kind of culture are apt to have a formalized, structured work environment aimed at achieving effectiveness through a variety of control mechanisms that measure efficiency, timeliness, and reliability in the creation and delivery of products. Dell computer is an example of a company with a hierarchical structure.

The Three Levels of Organizational Culture

Level 1: Observable Artifacts—Physical Manifestations of Culture. At the most visible level, organizational culture is expressed in observable artifacts—physical manifestations such as manner of dress, awards, myths, and stories about the company, rituals and ceremonies, and decorations, as well as visible behavior exhibited by managers and employees.+

Level 2: Espoused Values—explicitly stated values & norms. Espoused values are the explicitly stated values and norms preferred by an organization, as may be put forth by the firm’s founder of top managers. Although managers may hope the values they espouse will directly influence employee behavior, employees don’t always “walk the talk,” frequently being more influenced by enacted values, which represent the values and norms actually exhibited in the organization.

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Level 3: Basic Assumptions—Core values of the organization. Basic assumptions, which are not observable, represent the core values of an organization’s culture—those that are taken for granted and, as a result, are highly resistant to change.

How Employees Learn Culture: Symbols, Stories, Heroes, & Rites & Rituals

1. Symbols: A symbol is an object, act, quality, or event that conveys meaning to others. In an organization, symbols convey its most important values. For instance, 3M has a trophy known as the Gold Step award, which is presented every year to employees whose new products achieve significant revenue levels.

2. Stories: A story is a narrative based on true events, which is repeated—and sometimes embellished upon—to emphasize a particular value. Stories are oral histories that are told and retold by members about incidents in the organization’s history.

3. Heroes: A hero is a person whose accomplishments embody the values of the organization. The accomplishments of heroes, past and present, are put forth to motivate other employees to do the right thing. The Ritz-Carlton beach attendant is an example of one such hero.

4. Rites & Rituals. Rites and rituals are the activities and ceremonies, planned and unplanned, that celebrate important occasions and accomplishments in the organization’s life. Military units and sports teams have long known the value of ceremonies handing out decorations and awards, but many companies have rites and rituals as well.

The Importance of Culture (four functions)

Culture can powerfully shape an organization’s long-term success.

1. It gives members an organizational identity2. It facilitates collective commitment3. It promotes social-system stability4. It shapes behavior by helping employees make sense of their surroundings.

Cultures for Enhancing Economic Performance: Three Perspectives

1. The strength perspective: success results when a firm has a strong culture.The strength perspective assumes that the strength of a corporate culture is related to a firm’s long-term financial performance. A culture is said to be “strong” when employees adhere to the organization’s values because they believe in its purpose. A culture is said to be “weak” when employees are forced to adhere to the organization’s values through extensive procedures and bureaucracies.

2. The Fit Perspective: Success results when culture fits with the firm’s business context.The fit perspective assumes that an organization’s culture must align, or fit, with its business or strategic context. A “correct” fit is expected to foster higher financial performance.

3. The Adaptive Perspective: Success results when culture helps the firm adapt.The adaptive perspective assumes that the most effective cultures help organizations anticipate and adapt to environmental changes.

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Eleven Ways Cultures Become Embedded in Organizations

1. Formal Statements2. Slogans & Sayings3. Stores, Legends, & Myths4. Leader reactions to crises5. Role Modeling, Training, & Coaching6. Physical Design7. Rewards, Titles, Promotions, & Bonuses8. Organizational Goals and Performance Criteria9. Measurable & Controllable Activities10. Organizational Structure11. Organizational Systems & Procedures

According to Chester I. Barnard’s classic definition, an organization is a system of consciously coordinated activities or forces of two or more people.

The Organization: Three Types

1. For-profit organizations-These are formed to make money, or profits, by offering products or services.

2. Nonprofit organizations- These are formed to offer services to some clients, not to make profit (examples: hospitals, colleges)

3. Mutual-benefit organizations. These are voluntary collectives whose purpose is to advance members’ interests (examples: unions, trade associations).

The Organization Chart (Figure 8.2)

An organization chart is a box-and-lines illustration showing the formal lines of authority and the organization’s official positions or work specializations. Two kinds of formation that organization charts reveal about organizational structure are (1) the vertical hierarchy of authority—who reports to whom, and (2) the horizontal specialization—who specialized in what work.

Common Elements of Organizations: Four Proposed by Edgar Schein

1. Common Purpose: The Means for Unifying Members— The common purpose unifies employees or members and gives everyone an understanding of the organization’s reason for being.

2. Coordinated Effort: Working Together for Common Purpose— The common purpose is realized through coordinated effort, the coordination of individual efforts into a group or organization-wide effort.

3. Division of Labor: Work Specialization for Greater Efficiency—Division of labor, also known as work specialization, is the arrangement of having discrete parts of a task done by different people.

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4. Hierarchy of Authority: The Chain of Command—The hierarchy of authority, or chain of command, is a control mechanism for making sure the right people do the right things at the right time. Finally, a principle stressed by early management scholars was that of unity of command, in which an employee should report to no more than one manager in order to avoid conflicting priorities and demands.

Common Elements of Organizations: Three More That Most Authorities Agree On

5. Span of Control: narrow (or Tall) versus Wide (or Flat). The span of control, or span of management, refers to the number of people reporting directly to a given manager. There are two kinds of spans of control, narrow (or tall) and wide (or flat).

Narrow Span of Control- This means a manager has a limited number of people reporting—three vice presidents reporting to a president, for example, instead of nine vice presidents. An organization is said to be tall when there are many levels with narrow spans of control.

Wide Span of Control- This means a manager has several people reporting—an organization is said to be flat when there are only a few levels with wide spans of control.

6. Authority, Responsibility, & Delegation: Line versus Staff Positions.With authority goes accountability, responsibility, and the ability to delegate one’s authority.

Accountability- Authority refers to the rights inherent in a managerial position to make decisions, give orders, and utilize resources. (Authority is distinguished from power)Authority means accountability—managers must report and justify work results to the managers above them. Being accountable means you have the responsibility for performing assigned tasks.

Responsibility is the obligation you have to perform the tasks assigned to you.

Delegation is the process of assigning managerial authority and responsibility to managers and employees lower in the hierarchy. Regarding authority and responsibility, the organization chart distinguishes between two positions, line and staff. (Figure 8.3)

Line Position- Line managers have authority to make decisions and usually have people reporting to them. Examples: the president, vice-presidents, the director of personnel, and the head of accounting. Line positions are indicated on the organization chart by a sold line (usually a vertical line)

Staff Position- Staff personnel have authority functions; they provide advice, recommendations, and research to line managers (examples: specialists such as legal counsels and special advisors

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for mergers and acquisitions or strategic planning). Staff position are indicated on the organization chart by a dotted line (usually a horizontal line)

7. Centralization versus Decentralization of Authority

Centralized Authority- With centralized authority, important decisions are made by higher-level managers. Very small companies tend to be most centralized. An advantage in using centralized authority is that there is less duplication of work, because fewer employees perform the same task; rather, the task is often performed by a department of specialists. Another advantage of centralization is that procedures are uniform and thus easier to control; all purchasing, for example, may have to be put out to competitive bids. Ex: Kmart and McDonald’s

Decentralized Authority- With decentralized authority, important decisions are made by middle-level and supervisory-level managers. An advantage in having decentralized authority is that managers are encouraged to solve their own problems rather than to buck the decision to a higher level. In addition, decisions are made more quickly, which increases the organization’s flexibility and efficiency. Ex: General Motors and Harley-Davidson.

The Seven Types of Organizational Cultures (Many Figures)

1. The Simple Structure: For the Small Firm—An organization with a simple structure has authority centralized in a single person, a flat hierarchy, few rules, and low work specialization.

2. The Functional Structure: Grouping by Similar Work Specialties—In a functional structure, people with similar occupational specialties are put together in formal groups. (Figure 8.5 and Figure 8.6)

3. The Divisional Structure: Grouping by Similarity of Purpose—In a divisional structure, people with diverse occupational specialties are put together in formal groups by similar products or services, customers or clients, or geographic regions. (See Figure 8.6)

Product Divisions: Grouping by Similar Products or Services—Product divisions group activities around similar products or services. Customer Divisions: Grouping by Common Customers or Clients—Customer divisions tend to group activities around common customers or clients. Geographic Divisions: Grouping by Regional Location—Geographic divisions group activities around defined regional locations. This arrangement is frequently used by government agencies.

4. The Matrix Structure: A Grid of Functional & Divisional for Two Chains of Command—In a matrix structure, an organization combines functional and divisional chains of command in a grid so that there are two command structures—vertical and horizontal. The functional structure usually doesn’t change—it is the organization’s normal departments or divisions, such as Finance, Marketing, Production, and Research & Development.

5. The Team-Based Structure : Eliminating Functional Barriers to Solve Problems—In a team-based structure, teams or workgroups, either temporary or permanent, are used to improve horizontal

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relations and solve problems throughout the organization. When managers from different functional divisions are brought together in teams—known as cross-functional teams—to solve particular problems, the barriers between the divisions break down.

6. The Network Structure: Connecting a Central Core to Outside Firms by Computer ConnectionsThe organization has a central core that is linked to outside independent firms by computer connections, which are used to operate as if all were a single organization. Corporations using this structure are sometimes called virtual corporations or virtual organizations. Another term used is the hollow corporation or hollow organization, in which the company retains important core processes critical to its performance.

7. The Modular Structure: Outsourcing Pieces of a Product to Outside Firms—In a modular structure, a firm assembles product chunks or modules, provided by outside contractors.

The process of fitting the organization to its environment is called contingency design.

Five Factors Affecting an Organization’s Structure

1. The Environment: Mechanistic versus Organic Organizations—the Burns & Stalker ModelMcDonald’s is a hugely successful example of what British behavioral scientists Tom Burns and G.M. Stalker call a mechanistic organization, as opposed to an organic organization. (Table 8.1)

Mechanistic Organizations: When Rigidity & Uniformity Work Best—In a mechanistic organization, authority is centralized, tasks and rules are clearly specified, and employees are closely supervised.

Organic Organizations: When Looseness & Flexibility Work Best—In an organic organization, authority is decentralized, there are fewer rules and procedures, and networks of employees are encouraged to cooperate and respond quickly to unexpected tasks. Tom Peters and Robert Waterman called this kind of organization a “loose” structure. Organic organizations are sometimes termed “adhocracies” because they operate on an ad hoc basis, improvising as they go along.

2. The environment: Differentiation versus Integration—the Lawrence & Lorsch Model

Differentiation: When Forces Push the Organization Apart—Differentiation is the tendency of the parts of an organization to disperse and fragment. The more subunits into which an organization breaks down, the more highly differentiated it is.

Integration: When Forces Pull the Organization Together—Integration is the tendency of the parts of an organization to draw together to achieve a common purpose.

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3. Size: The Larger the Organization, the More Mechanistic

Organizational size is usually measured by the number of full-time employees. Large firms tend to be more mechanistic. Small organizations tend to be more informal, to have fewer rules and regulations, and to have less work specialization. Small firms tend to be more organic.

In the 1960’s, companies often favored a form of organization known as the conglomerate, in which a large company would do business in different, quite unrelated areas.

4. Technology: Small-Batch, Large-Batch, or Continuous-Process—the Woodward ModelTechnology consists of all the tools and ideas for transforming materials, data, or labor (inputs) into goods or services (outputs).

Joan Woodward classified firms according to three forms of technology in increasing levels of complexity: small-batch, large-batch, and continuous process.

Small- Batch Technology: Custom-Made Products Made by Organic Organizations—In small-batch technology, often the least complex technology, goods are custom-made to customer specifications in small quantities. Tend to be informal and flexible, that is organic.

Large-Batch Technology: Mass-Produced Products Made by Mechanized ORanizations—Large-batch technology is mass-production, assembly-line technology. Large volumes of finished products are made by combining easily available component parts. Large-batch organizations tend to have a higher level of specialization and to be more bureaucratic.

Continuous-Process: Highly Routinized Products Made by Organic Organizations—Continous-process technology is highly routinized technology in which machines do all the work. Examples of this kind of technology are found in petroleum refineries, vodka distilleries, nuclear power plants, and steel mills, in which human operators mainly read dials and repair machine breakdowns. Tend to be more organic than mechanistic—less rigid and formal.

5. Life Cycle: Four Stages in the Life of an Organization—The four-stage organizational life cycle has a natural sequence of stages: birth, youth, midlife, and maturity. In general, as an organization moves through these stages, it becomes not only larger but also more mechanistic, specialized, decentralized, and bureaucratic. Each stage offers different managerial challenges and different organizational design issues.

Stage 1. The Birth Stage—Nonbureaucratic—The birth stage is the nonbureaucratic stage, the stage in which the organization is created. Here there are no written rules and little if any supporting staff beyond perhaps a secretary.

Stage 2. The Youth Stage—Prebureaucratic—in the youth stage, the organization is in a prebureaucratic stage, a stage of growth and expansion.

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Stage 3. The Midlife Stage—Bureaucratic—in the midlife stage, the organization becomes bureaucratic, a period of growth evolving into stability.

Stage 4. The Maturity Stage—Very Bureaucratic—in the maturity stage, the organization becomes very bureaucratic, large and mechanistic. The danger at this point is lack of flexibility and innovation.

CHAPTER 9

Human Resource Management consists of the activities managers perform to plan for, attract, develop, and retain an effective workforce.

At many companies, human resources has become part of the strategic-planning process. Human capital, you’ll recall, is the economic or productive potential of employee knowledge and

actions. Social capital is the economic or productive potential of strong, trusting, and cooperative

relationships.

Strategic human resource planning consists of developing a systematic, comprehensive strategy for (a) understanding current employee needs and (b) predicting future employee needs.

Understanding Current Employee Needs

Job Analysis. The purpose of job analysis is to determine, by observation and analysis, the basic elements of a job.

Job description and job specification. Once the fundamentals of a job are understood, then you can write a job description, which summarizes what the holder of the ob does and how and why he or she does it. Next you can write a job specification, which describes the minimum qualifications a person must have to perform the job successfully.

Predicting Future Employee Needs

The staffing the organization might need. The likely sources for staffing. A device for organizing this kind of information is a human resource inventory, a report listing

your organization’s employees by name, education, training, languages, and other important information.

The Legal Requirements of Human Resource Management

1. Labor Relations: Legislation passed in 1935 (the Wagner Act) resulted in the National Labor Relations Board, which enforces procedures whereby employees may vote to have a union and for collective bargaining. Collective bargaining consists of negotiations between management and employees about disputes over compensation, benefits, working conditions, and job security. A 1947 law (the Taft-Hartley Act) allows the president of the united states to prevent or end a strike that threatens national security.

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2. Compensation & Benefits: The Social Security Act in 1935 established the U.S. retirement system. The passage of the Fair Labor Standards Act of 1938 established minimum living standards for workers engaged in interstate commerce, including provision of a federal minimum wage (currently $6.55 an hour, to increase to $7.25 on July 24, 2009) and a maximum workweek (now 40 hours, after which overtime must be paid), alone with banning products from child labor. Salaried executive, administrative, and professional employees are exempt from overtime rules.

3. Health & Safety: Beginning with the Occupational Safety and Health Act (OSHA) of 1970, there has grown a body of law requiring organizations to provide employees with nonhazardous working conditions.

4. Equal Employment Opportunity: The effort to reduce discrimination in employment based on racial, ethnic, and religious bigotry and gender stereotypes began with Tile VII of the Civil Rights Act of 1964. This established the Equal Employment Opportunity (EEO) Commission, whose job it is to enforce antidiscrimination and other employment-related laws.

*See Table 9.1

Three important concepts covered by EEO laws are discrimination, affirmative action, and sexual harassment.

1. Discrimination occurs when people are hired or promoted—or denied hiring or promotion—for reasons no relevant to the job, such as skin color or eye shape, gender, religion, national origin, and the like.

2. Affirmative action focuses on achieving equality of opportunity within an organization.3. Sexual Harassment consists of unwanted sexual attention that creates an adverse work

environment. (Two Types) Quid pro quo—tangible economic injury. In the quid pro quo type, the person to whom the

unwanted sexual attention is directed is put in the position of jeopardizing being hired for a job or obtaining job benefits or opportunities unless he or she implicitly or explicitly acquiesces.

Hostile environment—offensive work environment. In the hostile environment type, the person being sexually harassed doesn’t risk economic harm but experiences an offensive or intimidating work environment.

Table 9.2 (Guidelines for preventing sexual harassment)

Don’t do uninvited touching, hugging, or patting of someone’s body Don’t request or suggest sexual favors for rewards related to work or promotion Don’t make suggestive jokes of a sexual nature, demeaning remarks, slurs, or obscene gestures

or sounds. Don’t create sexual pictures or displays or written notes of a sexual nature. Don’t laugh at others’ sexually harassing words or behaviors.

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Recruiting is the process of locating and attracting qualified applicants for jobs open in the organization. The word “qualified” is important: You want to find people whose skills, abilities, and characteristics are best suited to your organization. Recruiting Is of two types: internal and external.

1. Internal recruiting means making people already employed by the organization aware of job openings. Indeed, most vacant positions in organizations are filled through internal recruitment, mainly through job posting, placing information about job vacancies and qualifications on bulletin boards, in newsletters, and on the organization’s intranet.

2. External recruiting means attracting job applicants from outside the organization. Notices of job vacancies are placed through newspapers, employment agencies, executive recruiting firms, union hiring halls, college job-placement offices, technical training schools, and word of mouth through professional associations.

See Table 9.3 (Internal and External Recruiting: Advantages and Disadvantages, Best External Recruiting Method, and Realistic Job Previews)

Selection: How to Choose the Best Person for the Job

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

Three types of selection tools are background information, interviewing, and employment tests.

1. Background Information: Application Forms, Resumes, & Reference Checks.Application forms and resumes provide basic background information about job applicants, such as citizenship, education, work history, and certifications. Lying about education is the most prevalent distortion. Another common fabrication includes creative attempts to cover gaps in employment history. References are also a problem. Many employers don’t give honest assessments of former employees, for two reasons: (1) They fear that if they say anything negative, they can be sued by the former employee. (2) They fear if they say anything positive, and the job candidate doesn’t pan out, they can be sued by the new employer.

2. Interviewing: Unstructured, Situational, & Behavioral-DescriptionInterviewing, the most commonly used employee-section technique, may take place face to face, by videoconferencing, or—as is increasingly the case—via the Internet.

Unstructured Interview. Like an ordinary conversation, an unstructured interview involves asking probing questions to find out what the applicant is like.

Structured interview type 1—the situational interview. The structured interview involves asking each applicant the same questions and comparing their responses to a standardized set of answers. In one type of structured interview, the situational interview, the interviewer focuses on hypothetical situations.

Structured Interview type 2—the behavioral-description interview—the interviewer explores what applicants have actually done in the past.

3. Employment Tests: Ability, Personality Performance, & Others

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Employment tests are legally considered of any procedure used in the employment selection decision process. The three most common employment tests are the following:

1. Ability Tests: Measure physical abilities, strength, and stamina, mechanical ability, mental abilities, and clerical abilities.

2. Performance Tests: Performance tests or skills tests measure performance on actual job tasks, as when computer programmers take a test on a particular programming language such as C++ or middle managers work on a small project. Some companies have an assessment center, in which management candidates participate in activities for a few days while being assessed by evaluators.

3. Personality tests: Measure such personality traits as adjustment, energy, sociability, independence, and need for achievement. One of the most famous tests, in existence for 60-plus years, is the 93-question Myers-Briggs Type Indicator.

Reliability- The degree to which a test measures the same thing consistently.

Validity- The test measures what it purports to measure and is free of bias.

Applying for a Job? Here are some mistakes to avoid.

1. Be prepared—very prepared2. Dress right & pay attention to your attitude3. Don’t get too personal with the interviewer4. Be aware that your background will be checked

Orientation: Helping the newcomer fit smoothly into the job and the organization.

Following orientation, the employee should emerge with information about three matters (much of which he or she may have acquired during the job application process):

The job routine The organization’s mission and operations The organization’s work rules and employee benefits

Employee Involvement which focuses on upgrading workers’ skills and knowledge is the business strategy that offers the highest returns.

The training process involves five steps—Assessment, Objectives, Selection, Implementation, Evaluation

Training—upgrading skills of technical and operational employees. Training, then, refers to education technical and operational employees in how to better do their current jobs.

Development—upgrading skills of professionals and managers. Development refers to educating professionals and managers in the skills they need to do their jobs in the future.

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On-The-Job training takes place in the work setting while employees are performing job-related tasks. Four major training methods are coaching, training positions, job rotation, and planned work activities. Off-the-ob training consists of classroom programs, videotapes, workbooks, and the like. Lots of off-the-job training consists of computer-assisted instruction (CAI), in which computers are used to provide additional help or to reduce instructional time.

Performance Management- The continuous cycle of improving job performance through goal setting, feedback and coaching, and rewards and positive reinforcement. The purpose of this is to focus employees on attaining goals that are tied to the organization’s strategic goals and vision, and to evaluate how successful they were in accomplishing those goals.

Performance appraisal consists of (1) assessing an employee’s performance and (2) providing him or her with feedback. Thus, this management has two purposes: First, performance appraisal helps employees understand how they are doing in relation to objectives and standards; here you must judge the employee. Second, it helps in their training and personal development; here you must counsel the employee. Appraisals are of two general types—objective and subjective.

1. Objective Appraisals, also called results appraisals, are based on facts and are often numerical. Two good reasons for having objective appraisals: They measure results and they are harder to challenge legally. MBO (four-step process)- (1)Managers and employees jointly set objectives for the employee. (2) Managers develop action plans, (3) managers and employees periodically review the employee’s performance, and (4) the manager makes a performance appraisal and rewards the employee according to the results.

2. Subjective appraisals- which are based on a manager’s perceptions of an employee’s (1)traits or (2) behaviors

Trait Appraisals are ratings of such subjective attributes as “attitude,” “initiative,” and “leadership.”

Behavioral appraisals measure specific, observable aspects of performance—being on time for work for instance. An example is the ‘behaviorally anchored rating scale (BARS),’ which rates employee graduations in performance according to scales of specific behaviors.

Most performance appraisals are done by managers. Among additional sources of information are co-workers and subordinates, customers and clients, and the employees themselves.

360-degree assessment or 360-degree feedback appraisal- in which employees are appraised not only by their managerial superiors but also by peers, subordinates, and sometimes clients, thus providing several perspectives.

In forced ranking performance review systems, all employees within a business unit are ranked against one another and grades are distributed along some sort of bell curve.

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The whole point of performance appraisal, of course, is to stimulate better job performance. To help increase employee performance, a manager can use two kinds of appraisals—formal and informal

1. Formal appraisals are conducted at specific times throughout the year and are based on performance measures that have been established in advance.

2. Informal appraisals are conducted on an unscheduled basis and consist of less rigorous indications of employee performance.

Compensation has three parts: (1) wages or salaries, (2) incentives, and (3) benefits.

Base pay consists of the basic wage or salary paid employees in exchange for doing their jobs.

Incentive examples: commissions, bonuses, profit-sharing plans, and stock options.

Benefits, or fringe benefits, are additional nonmonetary forms of compensation designed to enrich the lives of all employees in the organization, which are paid all or in part by the organization.

As a manager, you’ll have to manage employee replacement actions, as by promoting, transferring, demoting, laying off, or firing.

Promotion—moving an employee to a higher-level position. Three concerns are these—fairness, nondiscrimination, and others’ resentments.

Transfer is movement of an employee to a different job with similar responsibility. There are four principal reasons why employees might be transferred: (1) to solve organizational problems by using their skills at another location: (2) to broaden their experience in being assigned to a different position; (3) to retain their interest and motivation by being presented with a new challenge; or (4) to solve some employee problems.

Disciplining & Demotion—Poor performing employees may be given a warning or a reprimand and then disciplined. Alternatively, an employee may be demoted—that is, have his or her current responsibilities, pay, and perquisites taken away, as when a middle manager is demoted to a first-line manager.

Dismissals are of three sorts:

Layoffs: The phrase of being laid off tends to suggest that a person has been dismissed temporarily.

Downsizings: A downsizing is a permanent dismissal; there is no rehiring later.

Firings: Tends to mean that a person was dismissed permanently “for cause”: absenteeism, sloppy work habits, failure to perform satisfactorily, breaking the law, and the like.

CHAPTER TEN

Supertrends shaping the future of the business.

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1. The marketplace is becoming more segmented & moving toward more niche products.2. There are more competitors offering targeted products, requiring faster speed-to-market3. Some traditional companies may not survive radically innovative change4. China, India, & other offshore suppliers are changing the way we work5. Knowledge, not information, is becoming the new competitive advantage

Two types of Change: reactive versus proactive

1. Reactive change, making changes in response to problems or opportunities as they arise.2. Proactive change or planned change involves making carefully thought-out changes in

anticipation of possible or expected problems or opportunities.

The Forces for Change: Outside & Inside the Organization

*See figure 10.1

Areas in which Change is often needed: People, technology, structure, & strategy

1. Changing People—The changes may take the following forms: Perceptions, attitudes, performance, and skills.

2. Changing Technology—Technology is a major area of change for many organizations. Technology is not just computer technology; it is any machine or process that enables an organization to gain a competitive advantage in changing materials used to produce a finished product.

3. Changing Structure4. Changing Strategy

Organization development (OD) is a set of techniques for implementing planned change to make people and organizations more effective. OD focuses specifically on people in the change process. Often OD is put into practice by a person known as a change agent, a consultant with a background in behavioral sciences who can be a catalyst in helping organizations deal with old problems in new ways.

OD can be used to address the following three matters:

1. Managing conflict2. Revitalizing organizations3. Adapting to mergers

The OD Process

1. Diagnosis: What is the problem?2. Intervention: What shall we do about it?3. Evaluation: How well has the intervention worked?4. Feedback: How can the diagnosis be further refined?

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The effectiveness of OD—Research has found that OD is most apt to be successful under the following circumstances

1. Multiple Interventions—Goal setting, feedback, recognition and rewards, training, participation, and challenging job design have had good results in improving performance, and satisfaction.

2. Management Support—OD is more likely to succeed when top managers give the OD program their support and are truly committed to the change process and the desired goals of the change program.

3. Goals geared to both short & long-term results4. OD is affected by Culture

Innovation is the activity of creating new ideas and converting them into useful applications—specifically new goods and services.

Innovations may be of the following types:

Product versus Process Innovations—A product innovation is a change in the appearance or the performance of a product or a service or the creation of a new one. A process innovation is a change In the way a product or service is conceived, manufactured, or disseminated.

Incremental versus radical Innovations—Incremental Innovations-the creation of products, services, or technologies that modify existing ones. Radical innovations- the creation of products, services, or technologies that replace existing ones.

Four Characteristics of Innovation

1. Innovating is an uncertain business2. People closest to the innovation know the most about it, at least initially3. Innovation may be controversial4. Innovation can be complex because it may cross organizational boundaries

Organizations have to develop ways to make innovation happen. Three ways to do so are by providing (1) the right organizational culture, (2) the appropriate resources, and (3) the correct reward system.

How can you foster innovation: Three Steps

1. Recognize problems & opportunities & devise solutions Recognizing a problem—find a ‘better way.’ Problems, whether competitive threat or

employee turnover, tend to seize our attention. Sometimes problems lead to new business ideas.

Recognizing an opportunity. Recognition of opportunities may come from long-term employees who regularly expose themselves to new ideas.

2. Gain allies by communicating your vision3. Overcome employee resistance & empower & reward them to achieve progress.

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The degree to which employees fear change: from least threatening to most threatening

Least Threatening: Adaptive change. Adaptive change is reintroduction of a familiar practice—the implementation of a kind of change that has already been experienced within the same organization. This form of change is lowest in complexity, cost, and uncertainty. Because it is familiar, it is the least threatening to employees and thus will create the least resistance.

Somewhat Threatening: innovative Change. Innovative change is the introduction of a practice that is new to the organization. This form of change involves moderate complexity, cost, and uncertainty. It is therefore apt to trigger some fear and resistance among employees.

Very Threatening: Radically Innovative Change. Radically innovative change involves introducing a practice that is new to the industry. Because It is the most complex, costly, and uncertain, It will be felt as extremely threatening to managers’ confidence and employees job security and may well tear at the fabric of the organization.

Ten reasons employees resist change

Individual’s predisposition toward change Surprise and fear of the unknown Climate of mistrust Fear of failure Loss of status or job security Peer pressure Disruption of cultural traditions or group relationships Personality conflicts Lack of tact or poor timing Nonreinforcing reward systems

Kurt Lewin developed a model with three stages—unfreezing, changing, and refreezing—to explain how to initiate, manage, and stabilize planned change.

1. “Unfreezing”: Creating the motivation to change. In the unfreezing stage, managers try to instill in employees the motivation to change, encouraging them to let go of attitudes and behaviors that are resistant to innovation. For it to take place, employees need to become dissatisfied with the old ways of doing things. Managers also need to reduce the barriers to change during this stage.

2. “Changing”: Learning new ways of doing things. IN the changing stage, employees need to be given the tools for change: new information, new perspectives, and new models of behavior. Managers can help here by providing benchmarking results, role models, mentors, experts, and traning.

3. “Refreezing”: making the new ways normal. IN the refreezing stage, employees need to be helped to integrate the changed attitudes and behavior into their normal ways of doing things.

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Managers can assist by encouraging employees to exhibit the new change and then, through additional coaching and modeling, by reinforcing the employees in the desired change.

Benchmarking, a process by which a company compares its performance with that of high-performing organizations.

Kotter’s Eight steps for Leading Organizatonal Change (See table 10.2)

An expert in leadership and change management, John Kotter believes that, to be successful, organizational change needs to follow eight steps to avoid the eight common errors senior management usually commits.

Steps 1-4 represent unfreezing: establish a sense of urgency, create the guiding coalition, develop a vision and strategy, and communicate the change vision.

Steps 5-7 represent the changing stage: empower broad-based action, generate short-term wins, and consolidate gains and produce more change.

Step 8, corresponding to refreezing, is to anchor new approaches in the organization’s culture.

The value of Kotter’s steps is that they provide specific recommendations about behaviors that managers need to exhibit to successfully lead organization change. aa