chapter 6 and 11 - unit 6 test

Among other criticisms of MBO, one was that it seemed disconnected from a firm's strategy. One of Balanced Scorecard's innovations is

Explicit attention to vision and strategy in setting goals and objectives.

Less Is More

Fewer are better. Concentrate on measuring the vital few key variables rather than the trivial many.

The Balanced Scorecard perspectives should be linked

For example, increased training for employees (learning and growth) can lead to enhanced operations or processes (internal), which leads to more satisfied customers through either improved delivery time and/or lower prices (customers), which finally leads to higher financial performance for the organization (financial).

The Balanced Scorecard Is an ideal vehicle

For integrating CSR concerns with the organization's mission, vision, and strategy.

Customer and Product

Fostering loyalty by investing in customer relationship management, and product and service innovation that focuses on technologies and systems, which use financial, natural, and social resources in an efficient, effective, and economic manner over the long term.

Base Objectives on Facts

Measures need to have targets or objectives established that are based on research rather than arbitrary numbers

Don't Just Measure the Past

Measures should be a mix of past, present, and future to ensure the organization is concerned with all three perspectives.

Take Stakeholders Into Account

Measures should be based around the needs of customers, shareholders, and other key stakeholders.

Adapt

Measures should be changed or at least adjusted as the environment and your strategy changes.

Tie Measures to Drivers of Success

Measures should be linked to the factors needed for success—key business drivers.

Cascade Goals Into Objectives

Measures should start at the top and flow down to all levels of employees in the organization.

Financial

Meeting shareholders' demands for sound financial returns, long-term economic growth, open communication, and transparent financial accounting.

Planning typically starts

With a vision and a mission

KPMG surveyed and documented the top 10 motivators driving corporations to engage in CSR for competitive reasons, which are:

· Economic considerations · Ethical considerations · Innovation and learning · Employee motivation · Risk management or risk reduction · Access to capital or increased shareholder value · Reputation or brand · Market position or share · Strengthened supplier relationships · Cost savings

Goals and objectives are an essential part of planning as they serve to:

- Gauge and report performance - Improve performance - Align effort - Manage accountabilities

What are the three general failings that we can see across organizations related to measurement?

(1) First, many organizations still emphasize historic financial goals and objectives; (2) financial outcomes are often short term in nature, so they omit other key factors that might be important to the longer-term viability of the organization; (3) goals and objectives, even when they cover more than short-term financial metrics, are often not tied to strategy and ultimately to vision and mission

Objectives typically must

(1) be related directly to the goal; (2) be clear, concise, and understandable; (3) be stated in terms of results; (4) begin with an action verb; (5) specify a date for accomplishment; and (6) be measurable.

MBO is about setting goals and then breaking these down into more specific objectives or key results. MBO involves:

(1) setting company-wide goals derived from corporate strategy, (2) determining team- and department-level goals, (3) collaboratively setting individual-level goals that are aligned with corporate strategy, (4) developing an action plan, and (5) periodically reviewing performance and revising goals

Goals

- Are outcome statements that define what an organization is trying to accomplish, both programmatically and organizationally. - Are usually a collection of related programs, a reflection of major actions of the organization, and provide rallying points for managers.

Measures or measurements

- Are the actual metrics used to gauge performance on objectives - Are a fundamental requirement and an integral part of strategic planning and of principles of management more generally

Objectives

- Are very precise, time-based, measurable actions that support the completion of a goal.

Creative decision making is a vital part of

- Being an effective decision maker. This is the generation of new, imaginative ideas. - While creativity is the first step in the innovation process, creativity and innovation are not the same thing. Innovation begins with creative ideas, but it also involves realistic planning and follow-through.

Performance Measurement Systems

- Both MBO and the Balanced Scorecard fit in the larger collection of tools called??? - outline "the process through which companies ensure that employees are working towards organizational goals" - Are more than the performance review because reviews typically are the final event in an entire year of activity.

Performance reviews help managers

- Feel more honest in their relationships with their subordinates and feel better about themselves in their supervisory roles. - Subordinates are assured clear understanding of what goals and objectives are expected from them, - Their own personal strengths and areas for development, and - A solid sense of their relationship with their supervisor.

Unless the organization consists of only a single person, there are typically many working parts in terms of:

- Functional areas like accounting and marketing will need to have goals and objectives that, if measured and tracked, help show if and how those functions are contributing to the organization's goals and objectives. - Product and service areas will likely have goals and objectives. Goals and objectives can also be set for the way that functions and product or service areas interact.

The Balanced Scorecard

- Is a framework designed to translate an organization's mission and vision statements and overall business strategy into specific, quantifiable goals and objectives and to monitor the organization's performance in terms of achieving these goals. - Comprehensive approach that analyzes an organization's overall performance in four ways, so that future performance can be predicted and proper actions taken to create the desired future. - Is a focused set of key financial and non-financial indicators. These indicators include leading, pacing, and lagging measures

Corporate Social Responsibility (CSR)

- Is about how companies manage their business processes to produce an overall positive effect on society. - Dow Jones Sustainability Index created a commonly accepted definition: "a business approach that creates long-term shareholder value by embracing opportunities and managing risks deriving from economic, environmental and social developments"

When the components of the Balanced Scorecard are applied to you as an individual, you might see the pieces of the scorecard labeled as

- Personal goals and key roles - Personal objectives - Personal performance measures - Personal improvement activities

Goals and Objectives

- Provide the foundation for measurement - Planning, organizing, leading, and controlling stages all must address goals and objectives (key referent point) - Must also change with the times and, wherever possible, be anchored in facts or fact-finding and learning. - Can provide a form of control since they create a feedback opportunity regarding how well or how poorly the organization executes its strategy. - Are also a basis for reward systems and can align interests and accountability within and across business units.

The intuitive decision-making model

- Refers to arriving at decisions without conscious reasoning - This model argues that, in a given situation, experts making decisions scan the environment for cues to recognize patterns - Once a pattern is recognized, they can play a potential course of action through to its outcome based on their prior experience (training, experience, and knowledge)

Decision making can also be classified into three categories based on the level at which they occur:

- Strategic decisions - Tactical decisions - Operational decisions

The performance plan will contain the

- The section on goals or objectives. - It also should include a section that identifies the organization's expectations of employee competencies. The set of expectations will involve a range of competencies applicable to employees based on their level in the organization. --These competencies include expectations of how employees deal with problems, how proactive they are with respect to changing work, and how they interact with internal and external customers.

Illumination or the insight moment

- When the solution to the problem becomes apparent to the person, usually when it is least expected. - This is the "eureka" moment similar to what happened to the ancient Greek inventor Archimedes, who found a solution to the problem he was working on while he was taking a bath.

Programmed decisions

- You probably do not spend much time on these straightforward decisions. - These are decisions that occur frequently enough that we develop an automated response to them.

Eight Characteristics of Appropriate Goals and Objectives:

1) Less is more 2) Tie measures to drivers 3) Don't just measure the past 4) Take stakeholders into account 5) Cascade goals into objectives 6) Simplify 7) Adapt 8) Base objectives on facts

The five steps to creative decision making are similar to the previous decision-making models in some keys ways

1) Problem identification (all of the models include this step), 2) Immersion, 3) Incubation occurs, 4) Illumination or the insight moment, 5). Verification and application

Dow Jones Sustainability Index looks at competence in five areas:

1) Strategy: 2) Financial: 3) Customer and Product: 4) Governance and Stakeholder: 5) Human:

Balanced Scorecard shares a few common features spelling out goals and objectives for the subareas:

1) The customer area looks at customer satisfaction and retention. 2) Learning and growth explore the effectiveness of management in terms of measures of employee satisfaction and retention and information system performance 3) The internal area looks at production and innovation, measuring performance in terms of maximizing profit from current products and following indicators for future productivity. 4) Financial performance, the most traditionally used performance indicator, includes assessments of measures such as operating costs and return-on-investment.

The Balanced Scorecard relies on four processes to bind short-term activities to long-term objectives:

1) Translating the vision. 2) Communicating and linking. 3) Business planning. 4) Feedback and learning.

Groupthink is characterized by eight symptoms that include:

1. Illusion of invulnerability - shared by most or all of the group members that creates excessive optimism and encourages them to take extreme risks. 2. Collective rationalizations - where members downplay negative information or warnings that might cause them to reconsider their assumptions. 3. An unquestioned belief in the group's inherent morality - that may incline members to ignore ethical or moral consequences of their actions. 4. Stereotyped views of out-groups - are seen when groups discount rivals' abilities to make effective responses. 5. Direct pressure - on any member who expresses strong arguments against any of the group's stereotypes, illusions, or commitments. 6. Self-censorship - when members of the group minimize their own doubts and counterarguments. 7. Illusions of unanimity - based on self-censorship and direct pressure on the group; the lack of dissent is viewed as unanimity. 8. The emergence of self-appointed mindguards - where one or more members protect the group from information that runs counter to the group's assumptions and course of action.

The complete MBO system aims to get managers and empowered employees

Acting to implement and achieve their plans, which automatically achieves the organization's goals.

Tactical decisions

Are decisions about how things will get done.

Operational decisions

Are decisions that employees make each day to run the organization.

CSR and the Balanced Scorecard

Because the latter is a recognized and established management tool, it is well positioned to support a knowledge-building effort to help organizations make their, respectively, values and visions a reality.

Translating the vision.

By relying on measurement, the scorecard forces managers to come to agreement on the metrics they will use to translate their lofty visions into everyday realities.

Feedback and learning.

By supplying a mechanism for strategic feedback and review, the Balanced Scorecard helps an organization foster a kind of learning often missing in companies: the ability to reflect on inferences and adjust theories about cause-and-effect relationships.

Non-programmed decisions

Decisions that are unique and important require conscious thinking, information gathering, and careful consideration of alternatives

Avoiding performance issues ultimately

Decreases morale, - Decreases credibility of management, - Decreases the organization's overall effectiveness, - Wastes more of management's time to do what isn't being done properly.

Rational decision-making model and steps

Describes a series of steps that decision makers should consider if their goal is to maximize the quality of their outcomes. Step 1: identify the problem, Step 2: establish decision criteria Step 3: weigh decision criteria Step 4: generate alternatives Step 5: evaluate the alternatives Step 6: choose the best alternative Step 7: implement the decision Step 8: evaluate the decision

Incubation occurs

During this stage, the individual sets the problem aside and does not think about it for a while. At this time, the brain is actually working on the problem unconsciously.

CSR reporting measures an organization's

Economic, social, and environmental performance and impacts.

Unrealistic or ignored

Goals and objectives become less useful when they are

Mission statements

Have stated goals — what the organization aspires to be for its stakeholders.

Strategy

Integrating long-term economic, environmental, and social aspects in their business strategies while maintaining global competitiveness and brand reputation.

A performance evaluation

Is a constructive process to acknowledge an employee's performance. Goals and objectives are a critical component of effective ______

Goal setting

Is a primary function of leadership, along with holding others accountable for their respective goals and objectives.

Management by Objectives (MBO)

Is a systematic and organized approach that allows management to focus on achievable goals and to attain the best possible results from available resources.

Satisfice

Is an important part of the bounded rationality approach and refers to accepting the first alternative that meets your minimum criteria.

Immersion

Is the step in which the decision maker thinks about the problem consciously and gathers information. A key to success in creative decision making is having or acquiring expertise in the area being studied.

Problem identification (all of the models include this step)

Is the step in which the need for problem solving becomes apparent. If you do not recognize that you have a problem, it is impossible to solve it.

groupthink

Is the tendency to avoid critical evaluation of ideas the group favors.

Nominal Group Technique (NGT)

It was developed to help with group decision making by ensuring that all members participate fully. It is not a technique to be used at all meetings routinely. Rather, it is used to structure group meetings when members are grappling with problem solving or idea generation.

Balanced Scorecard and other performance management systems come into play with

Linking employee goals to company-wide goals is a powerful idea that benefits organizations.

The broader principle behind MBO is to

Make sure that everybody within the organization has a clear understanding of the organization's goals, as well as awareness of their own roles and responsibilities in achieving objectives that will help to attain those goals.

Human

Managing human resources to maintain workforce capabilities and employee satisfaction through best-in-class organizational learning and knowledge management practices and remuneration and benefit programs.

The example evaluation form needs to have a set of

Measurable goals and objectives spelled out for each area. Some of these, such as attendance, are more easy to describe and quantify than others, such as knowledge. Moreover, research suggests that individual and organizational performance increase 16% when an evaluation system based on specific goals and objectives is implemented

Business planning.

Most companies have separate procedures (and sometimes units) for strategic planning and budgeting. Little wonder, then, that typical long-term planning is, in the words of one executive, where "the rubber meets the sky." The discipline of creating a Balanced Scorecard forces companies to integrate the two functions, thereby ensuring that financial budgets indeed support strategic goals. After agreeing on performance measures for the four scorecard perspectives, companies identify the most influential "drivers" of the desired outcomes and then set milestones for gauging the progress they make with these drivers.

Simplify

Multiple indices can be combined into a single index to give a better overall assessment of performance.

MBO includes:

Ongoing tracking and feedback in the process to reach objectives.

The intuitive decision-making model key point is that

Only one choice is considered at a time. Novices are not able to make effective decisions this way because they do not have enough prior experience to draw upon.

Wildstorming

Refers to a variation of brainstorming, where the group focuses on ideas that are impossible and then imagines what would need to happen to make them possible

Social loafing

Refers to groups suffer from, or some members having the tendency to put forth less effort while working within a group.

Decision making

Refers to making choices among alternative courses of action — which may also include inaction. While it can be argued that management is considered as ___, half of the decisions made by managers within organizations fail

Analysis paralysis

Refers to the availability of too much information that results in more and more time being spent on gathering information and thinking about it, but no decisions actually get made.

Idea quotas

Research shows that the quantity of ideas actually leads to better idea quality in the end, so setting _____ where the group must reach a set number of ideas before they are done, is recommended to avoid process loss and to maximize the effectiveness of brainstorming.

What is the relationship between satisficing and rational decision making?

Satisficing is similar to rational decision making, but it differs in that rather than choosing the best choice and maximizing the potential outcome, the decision maker saves time and effort by accepting the first alternative that meets the minimum threshold.

Strategic decisions

Set the course of organization.

Governance and Stakeholder

Setting the highest standards of corporate governance and stakeholder engagement, including corporate codes of conduct and public reporting.

A vision statement usually describes

Some broad set of goals—what the organization aspires to look like in the future.

Balanced Scorecard breaks broad goals down

Successively into objectives, measures, and tactical activities.

Bounded rationality model

This decision making model recognizes the limitations of our decision-making processes. According to this model, individuals knowingly limit their options to a manageable set and choose the best alternative without conducting an exhaustive search for alternatives.

Overconfidence bias

This occurs when individuals overestimate their ability to predict future events.

Verification and application

This stage happens when the decision maker consciously verifies the feasibility of the solution and implements the decision.

Decision Rule

The automated response we use to make programmed decisions is called

A unique aspect of brainstorming is that the more people that are included in brainstorming,

The better the decision outcome will be because the variety of backgrounds and approaches give the group more to draw from.

Performance plan.

The manager and employee discuss the employee's goals or objectives for the year, which will form the basis for ongoing discussion recorded in a document called the

Triple Bottom Line (TBL)

The measurement of CSR's three dimensions of economic, social, and environmental performance and impacts is commonly called the

MBO was first outlined by Peter Drucker in 1954 in The Practice of Management. One of Drucker's core ideas in MBO was where managers should focus their time and energy. According to Drucker, effective MBO managers focus on:

The result, not the activity

MBO aims to increase organizational performance by aligning

The subordinate objectives throughout the organization with the overall goals that management has set.

Communicating and linking.

When a scorecard is disseminated up and down the organizational chart, strategy becomes a tool available to everyone. As the high-level scorecard cascades down to individual business units, overarching strategic objectives and measures are translated into objectives and measures appropriate to each particular group. Tying these targets to individual performance and compensation systems yields "personal scorecards." Thus, individual employees understand how their own productivity supports the overall strategy.

Leadership (Leading)

• Challenge teams so that they are engaged but not overwhelmed. • Let people decide how to achieve goals, rather than telling them what goals to achieve. • Support and celebrate creativity even when it leads to a mistake. But set up processes to learn from mistakes as well. • Model creative behavior.

Team Composition (Organizing/Leading)

• Diversify your team to give them more inputs to build on and more opportunities to create functional conflict while avoiding personal conflict. • Change group membership to stimulate new ideas and new interaction patterns. • Leaderless teams can allow teams freedom to create without trying to please anyone up front.

Team Process (Leading)

• Engage in brainstorming to generate ideas—remember to set a high goal for the number of ideas the group should come up with, encourage wild ideas, and take brainwriting breaks. • Use the nominal group technique in person or electronically to avoid some common group process pitfalls. Consider anonymous feedback as well. • Use analogies to envision problems and solutions.

Researchers focus on three factors to evaluate the level of creativity in the decision-making process:

• Fluency - refers to the number of ideas a person is able to generate. • Flexibility - refers to how different the ideas are from one another. If you are able to generate several distinct solutions to a problem, your decision-making process is high on flexibility. • Originality - refers to an idea's uniqueness.

Culture (Organizing)

• Institute organizational memory so that individuals do not spend time on routine tasks. • Build a physical space conducive to creativity that is playful and humorous—this is a place where ideas can thrive. • Incorporate creative behavior into the performance appraisal process.

Hindsight bias

• Is the opposite of overconfidence bias, as it occurs when looking backward in time where mistakes made seem obvious after they have already occurred. • In other words, after a surprising event occurred, many individuals are likely to think that they already knew this was going to happen.

Escalation of commitment

• Occurs when individuals continue on a failing course of action after information reveals this may be a poor path to follow. • It is sometimes called sunk costs fallacy because the continuation is often based on the idea that one has already invested in this course of action. • Demonstrates how individuals' desire for consistency, or to avoid admitting a mistake, can cause them to continue to invest in a decision that is not prudent.

Brainstorming

• One popular way to generate ideas is to use ___. • As a group process of generated ideas that follows a set of guidelines that include no criticism of ideas during the brainstorming process, the idea that no suggestion is too crazy, and building on other ideas

Anchoring

• Refers to the tendency for individuals to rely too heavily on a single piece of information. • Job seekers often fall into this trap by focusing on a desired salary while ignoring other aspects of the job offer such as additional benefits, fit with the job, and working environment. • Shows the importance of the way problems or alternatives are presented in influencing one's decision

Framing bias

• Refers to the tendency of decision makers to be influenced by the way that a situation or problem is presented. • Shows the importance of the way problems or alternatives are presented in influencing one's decision