MGMT 301 Test 1

Strategic Management

What managers do to develop an organization's strategies

Nonmanagerial Employees

Work directly on tasks Not responsible for overseeing others' work

The Sharing Economy

Airbnb, Uber, Zipcar, and SnapGoods are just a few examples of a fast-growing phenomenon called the sharing economy, in which asset owners share with other individuals through peer-to-peer service, for a set fee, their underutilized physical assets or their knowledge, expertise, skills, or time.

Organization

A deliberate arrangement of people brought together to accomplish a specific purpose

Diversity

is visible in age, gender, race, physical attributes, styles of dress, and personality type.

Steps in the Strategic Management Process

The strategic management process, seen here in Exhibit 5-2, is a six-step process that encompasses: Strategy planning Implementation Evaluation Even the best strategies fail if management doesn't implement or evaluate them properly. Now let's look at each of these six steps independently

Functional Strategy

Those strategies used by an organization's various functional departments (marketing, operations, finance/accounting, human resources, and so forth) to support the competitive strategy.

Managers

Direct and oversee the activities of others May have work duties not related to overseeing others

Decision Criteria

Price Model Size Manufacturer Options Repair record

The Legal Environment

See cHart -Civil Rights Act and Title Vii

Ethics Training

An increasing number of organizations are setting up seminars, workshops, and ethics training programs to encourage ethical behavior. However, such training raises the question, "Can ethics be taught?" Critics maintain that people establish their individual value systems when they're young, so later training is pointless. However, proponents note studies that show that: It's never too late to learn values. Teaching ethical problem solving increases: - Instances of better ethical behaviors; - Individuals' level of moral development; and - Awareness of ethical issues in business.

Environment and Structure

Environment is a constraint on managerial discretion. Environment also has a major effect on an organization's structure: — Stable environment: Mechanistic structure — Dynamic/uncertain environment: Organic structure It helps explain why so many managers today have restructured their organizations to be lean, fast, and flexible.

Global Leadership and Organizational Behavior Effectiveness (GLOBE)

Geert Hofstede's widely-referenced framework on cultural variations has provided insight into much of what we know about cultural differences among countries. A more recent research program—called Global Leadership and Organizational Behavior Effectiveness (or GLOBE)—continues the ongoing cross-cultural investigation of leadership and national culture. GLOBE's findings both extend Hofstede's research and confirm the validity of his original dimensions.

Common Characteristics of Organizations

Goals People Structure

How Does Organizational Culture Affect Managers

Organizational culture affects managers in two primary ways: Through its effect on what employees do and how they behave, and Through its effect on what managers do as they plan, organize, lead, and control. Ambrosia Humphrey, vice-president of talent at Hootsunite, describes how the power of organizational culture affects her as a manager. She says that a top priority for her is to nurture and nourish the company's culture by continually creating employee experiences that reflect transparency, one of the company's important values.

Effectiveness

means "doing the right things" by doing those work tasks that help the organization reach its goals.

Deming and Juran

Japan

Four Functions Approach

1. Planning includes defining goals, establishing strategy, and developing plans to coordinate activities. 2. Organizing includes determining which tasks need to be done and by whom, how tasks are to be grouped, who reports to whom, and who will make decisions. 3. Leading includes motivating employees, selecting the most effective communication channel, and resolving conflicts. 4. Controlling includes monitoring performance, comparing it with goals, and correcting any significant deviations.

Strategy and Structure

Based on the work of Alfred Chandler. It believes goals are an important part of an organization's strategies and that structure should facilitate goal achievement. Simple strategy means simple structure and elaborate strategy means more complex structure. Certain structural designs work best with different organizational strategies. Passionate pursuit of innovation is associated with an organic structure, while a passionate pursuit of cost control is associated with a mechanistic organization.

Creativity

Creativity allows the decision maker to appraise and understand a problem more fully, "see" problems others can't see, and identify all viable alternatives. Most people have the capacity to be at least moderately creative, so individuals and organizations can stimulate employee creativity by adhering to the creativity model, which proposes that individual creativity essentially requires expertise, creative-thinking skills, and intrinsic task motivation.

Developing Alternatives

decision maker lists the alternatives that could resolve the problem. The decision maker only lists the alternatives and does not attempt to appraise them in this step. Let's assume that our subject has identified 12 cars as viable choices: Jeep Compass, Ford Focus, Hyundai Elantra, Ford Fiesta SES, Volkswagen Golf, Toyota Prius, Mazda 3 MT, Kia Soul, BMW 335, Nissan Cube, Toyota Camry, and Honda Fit Sport MT.

Nonprogrammed:

repetitive decisions that can be handled using a routine approach.

What Determines Ethical Behavior

Whether a manager or employee acts ethically or unethically depends on several factors: Morality Values Experience The organization's culture Ethical issue being faced. Ambiguity over what is ethical can be a problem for managers.

Affirmative Action

Trying to balance the "shoulds and should nots" of these laws often falls within the realm of affirmative action programs, which ensure that decisions and practices enhance the employment, upgrading, and retention of members of protected groups, such as minorities and females. Although these regulations have significantly helped to reduce employment discrimination and unfair employment practices, they have also reduced management's control over HR decisions.

Centralization and Decentralization

When organizing, managers need to ask, "At what level are decisions made?" Centralization is the degree to which decision making takes place at upper levels of the organization. Decentralization is the degree to which lower-level managers provide input or actually make decisions. Traditionally, organizations were structured in a pyramid, with power and authority concentrated near the top. Today's organizations are more complex and responsive to dynamic changes in their environments, so many managers believe that decisions need to be made by those individuals closest to the problems. Notice, however, that decentralization doesn't imply that top-level managers no longer make decisions.

Intuitive decision making

involves making decisions on the basis of experience, feelings, and accumulated judgment, which can complement both rational and bounded rational decision making. Researchers have identified five different aspects of intuition, described here in Exhibit 4-7. Managers make decisions based on: Past experiences Feelings and emotions Skills, knowledge, and training Data from the subconscious Ethical values or culture

Line and Staff Authority

As organizations get larger and more complex, line managers find that they do not have the time, expertise, or resources to get their jobs done effectively. In response, they create staff authority functions to support, assist, advise, and generally reduce some of their informational burdens. For example, if a hospital administrator cannot effectively purchase all the supplies the hospital needs, the administrator creates a purchasing department, which is a staff department. Exhibit 6-4, seen here, illustrates how line and staff authority relate.

Sustainability

From a business perspective, sustainability has been defined as a company's ability to achieve its business goals and increase long-term shareholder value by integrating economic, environmental, and social opportunities into its business strategies. The idea of practicing sustainability affects many aspects of business, from the creation of products and services to their use and subsequent disposal by consumers. Following sustainability practices is one way in which organizations can show their commitment to being responsible. In today's world where many individuals have diminishing respect for businesses, few organizations can afford the bad press or potential economic ramifications of being seen as socially irresponsible.

Why Is Innovation Important

Innovation means doing things differently, exploring new territory, and taking risks. In today's challenging environment, innovation is critical and managers need to understand what, when, where, how, and why innovation can be fostered and encouraged throughout an organization. Managers need to be personally innovative and to encourage their employees to be innovative.

Project Structure

Instead of a matrix structure, many organizations are using a project structure, in which employees continuously work on projects. Unlike the matrix, a project structure has no formal departments to which employees return at the completion of a project. Instead, employees take their specific skills, abilities, and experiences to other projects. Additionally, all work in project structures is performed by teams of employees.

Economic Inequality

Most survey respondents believed that it is either a major problem (57 percent) or a minor problem (23 percent). Why has this issue become so sensitive? Those who worked hard and were rewarded because of their hard work or creativity have long been admired. In the United States, that gap between the rich and the rest has been much wider than in other developed nations for decades and was accepted as part of our country's values and way of doing things. As economic growth has languished and sputtered, and as people's belief that anyone could grab hold of an opportunity and have a decent shot at prosperity has wavered, social discontent over growing income gaps has increased. The bottom line is that business leaders need to recognize how societal attitudes in the economic context may also create constraints as they make decisions and manage their businesses.

Elements of Organizational Structure

Organizing is the management function that creates the organization's structure. When managers develop or change the organization's structure, they're engaging in organization design, which is the process of making decisions about how specialized jobs should be, the rules to guide employees' behaviors, and the level at which decisions will be made. Organizing and organizational structure have undergone much change in the 80 years since the basic concepts of organization design were formulated by management writers such as Henri Fayol and Max Weber. Let's now look at the six basic elements of organizational structure: Work specialization Departmentalization Authority and responsibility Span of control Centralization versus decentralization Formalization

What is Planning

Planning establishes the basis for all the other things managers do as they organize, lead, and control. Planning is deciding on the organization's objectives or goals and getting the job done by establishing an overall strategy for achieving those goals and developing a comprehensive hierarchy of plans to integrate and coordinate activities. Planning can be informal or formal. Smaller businesses often use informal planning where little is verbalized or written down and the planning is general and lacks continuity. Formal planning, however, defines specific goals that are to be met in a specific time period. They are written down and made available to organization members. Then managers develop specific plans that clearly define what the organization will do to move from where it is to where it wants to be.

Step 1: Identify Mission, Goals and Strategies

STEP 1 of the strategic management process is to identify the organization's current mission, goals, and strategies. The mission is a statement of the organization's purpose. Defining the mission forces managers to identify what the organization is in business to do. For instance, the mission of Avon is "To be the company that best understands and satisfies the product, service, and self-fulfillment needs of women on a global level." The mission of the National Heart Foundation of Australia is to "reduce suffering and death from heart, stroke, and blood vessel disease in Australia." The components of a mission statement, seen here in Exhibit 5-3, includes target customers, markets, and goals and strategies, and each should be assessed to see if managers should change any of them

Strategies Managers Use

Strategies need to be formulated for the three organizational levels: corporate, business, and functional, as seen here in Exhibit 5-4. A corporate strategy is an organizational strategy that specifies what businesses a company is in—or wants to be in—and what it wants to do with those businesses. The second part of corporate strategy is when top managers decide what to do with those businesses. The three main types of corporate strategies are growth, stability, and renewal.

What Is the Economy Like Today?

The economic crisis that gripped the United States and other countries in 2008 appears to finally be over, though growth and productivity in Europe is still behind that of the United States. Global trade is also sluggish, prompting some analysts to ask whether the world is becoming less connected. With an unemployment rate of just 5.5 percent, U.S. employment is up, but much of that is related to low-wage jobs. Further complicating the picture is the fact that some seven million Americans are trapped in part-time jobs, unable to find full-time positions. Moreover, just 64 percent of Americans still believe that the so-called American dream that hard work leads to success and riches is real.

Recruiting Applicants

There are multiple sources of applicants, as seen here in Exhibit 7-3. The source used should reflect the local labor market, the type or level of position, and the size of the organization. Most studies show that the best applicants come from employee referrals. Because the recommenders know both the job and the person being recommended, and want to protect their reputation, they tend to only refer well-qualified applicants. However, managers shouldn't always opt for the employee-referred applicant when such referrals may not increase the diversity and mix of employees.

Dimensions of Culture

These seven dimensions shown in Exhibit 2-4: • Range from low (not typical of the culture) to high (especially typical of the culture). • Provide a composite picture of the organization's culture. • May emphasize one cultural dimension more than the others, essentially shaping the organization's personality and the way organizational members work. —Apple's focus is product innovation (innovation and risk taking). The company "lives and breathes" new product development and employees' work behaviors support that goal. —Southwest Airlines has made its employees a central part of its culture (people orientation) and shows this through the way it treats them.

Team leaders

are a special category of lower-level managers that have become more common as organizations have moved to using employee work teams to do work. They typically report to a first-line manager.

First-line Managers

are responsible for directing the day-to-day activities of nonmanagerial employees. Titles include: supervisor, shift manager, or unit coordinator.

Current Organizational Design Challenges

As managers seek organizational designs that best support and facilitate employees to work efficiently and effectively, they face such challenges as: Keeping employees connected. Managing global structural issues. Building a learning organization. Designing flexible work arrangements. Keeping widely dispersed and mobile employees connected to the organization and more productive is a major structural design challenge. In the last decade, technology has provided a variety of solutions to connecting remote employees, such as: Handheld devices to log into corporate databases and company intranets. Videoconferencing. Key fobs with changing encryption codes that let employees access email and company data from any computer. Cell phones that switch seamlessly between cellular networks and corporate Wi-Fi connections. There are also global differences in organizational structures. Researchers have concluded that the structures and strategies of organizations worldwide are similar, although the behavior within them maintains a cultural uniqueness. This means that managers need to think about the cultural implications of certain design elements. For instance, one study showed that formalization—rules and bureaucratic mechanisms—may be more important in less economically developed countries but less important in more economically developed countries where employees may have higher levels of professional education and skills.

How Does Culture Affect What Managers Do

Because an organization's culture constrains what they can and cannot do and how they manage, it's particularly relevant to managers. Such constraints are rarely explicit. They're not written down. It's unlikely they'll even be spoken. But they're there, and all managers quickly learn what to do and not do in their organization. For instance, you won't find the following values written down, but each comes from a real organization: Look busy even if you're not. • If you take risks and fail around here, you'll pay dearly for it. • Before you make a decision, run it by your boss so that he or she is never surprised. • We make our product only as good as the competition forces us to. • What made us successful in the past will make us successful in the future. • If you want to get to the top here, you have to be a team player.

Reliability and Validity

If a test is reliable, any individual's score should remain fairly stable over time, assuming that the characteristic being measured is also stable. To be effective predictors, selection devices must possess an acceptable level of consistency. Any selection device that a manager uses must also demonstrate validity. Federal law prohibits managers from using any selection device that cannot be shown to be directly related to successful job performance. This constraint applies to entrance tests, too. Managers must be able to demonstrate that, once on the job, individuals with high scores on such a test outperform individuals with low scores. Consequently, the burden is on the organization to verify that any selection device it uses to differentiate applicants is related to job performance.

Management Roles Approach

In the late 1960s, Henry Mintzberg dispelled long-held notions that managers were reflective thinkers who carefully processed information before making decisions. His empirical study of 5 chief executives showed that managers perform ten different but highly interrelated roles. He categorized these actions around the following three general categories: 1.Interpersonal relationships: Figurehead, leader, and liaison. 2. Informational transfer: Monitor, disseminator, and spokesperson. 3. Decision-making: Entrepreneur, disturbance handler, resource allocator, and negotiator.

Approaches to Planning

Organization plans can best be understood by looking at who does the planning. In the traditional approach, planning is done entirely by top-level managers who often are assisted by a formal planning department, which is a group of planning specialists whose sole responsibility is to help write the various organizational plans. Then the plans flow down through other organizational levels and are tailored to the particular needs of each level. Although this approach makes managerial planning thorough, systematic, and coordinated, too often the focus is on developing "the plan" which is later not implemented. Another planning approach involves the input of organizational members at the various levels and in the various work units who participate in developing the plans to meet their specific needs.

Strong cultures:

The more employees accept the organization's key values and the greater their commitment to those values, the stronger the culture is. Most organizations have moderate to strong cultures; that is, there is relatively high agreement on what's important, what defines "good" employee behavior, what it takes to get ahead, and so forth. The stronger a culture becomes, the more it affects what employees do and the way managers plan, organize, lead, and control.

Top Managers

are those at or near the top of an organization who make decisions about the direction of the organization and establish policies and philosophies that affect all organizational members. Titles include: president, vice president, chancellor, managing director, or chief executive officer.

Be "Global

Organizations are considered global if they exchange goods and services with consumers in other countries. Capital globalization is the most common approach to being global. Many organizations are considered global because they use managerial and technical employee talent from other countries. One factor that affects talent globalization is immigration laws and regulations. Managers must be alert to changes in those laws. An organization can be considered global if it uses financial sources and resources outside its home country, which is known as financial globalization. As might be expected, the global economic slowdown severely affected the availability of financial resources globally.

Size and Structure

There is considerable evidence that size (number of employees) affects structure; the magic number seems to be 2,000 employees. LARGE organizations (> 2,000 employees)—mechanistic. When an organization reaches this number, size is less influential; adding more employees has little impact as structure is already fairly mechanistic. Adding a significant number of new employees to a smaller organization that has a more organic structure will force it to become more mechanistic.

Specialization

Work specialization is the division of work activities into separate job tasks. At the Wilson Sporting Goods factory in Ada, Ohio, workers making NFL footballs specialize in job tasks—such as molding, stitching and sewing, and lacing—to increase work output. When first introduced, specialization almost always generated higher productivity. But at some point, the human diseconomies—boredom, fatigue, stress, low productivity, poor quality, increased absenteeism, and high turnover—exceed the economic advantages, as seen here in Exhibit 6-1. Most managers today see work specialization as an important organizing mechanism because it helps employees to be more efficient. However, managers also have to recognize its limitations.

MNC (multinational corporation)

MNC: Any type of international company that maintains operations in multiple countries. Three types are: 1. Multidomestic corporation: Management and other decisions are decentralized to the local country in which it is operating. Relies on local employees to manage the business, tailors strategies to each country's unique characteristics, and is used by many consumer product companies. 2. Transnational (borderless) organization: An MNC where artificial geographical boundaries are eliminated. Country of origin or where business is conducted becomes irrelevant; increases efficiency and effectiveness in a competitive global marketplace. 3. Global corporation: An MNC in which management and other decisions are centralized in the home country. World market is treated as an integrated whole; focus is on control and global efficiency.

Issues with Performance Evaluation Systems

Performance evaluation systems may be outdated due to downsizing, because supervisors may have more employees to manage, making it difficult to have extensive knowledge of each one's performance. They also might be outdated due to the popularity of project teams and employee involvement. In such structures, others (not managers) may be better able to make accurate assessments. There are several reasons why an employee's performance might not be up to par, and each has its own action. In the case of a job mismatch (hiring error), the individual can be reassigned to a better-matched job. If the employee has received inadequate training, training should be provided. An employee may also display a discipline problem, and lack the desire to do the job. In such a case, try employee counseling, a process designed to help employees overcome performance-related problems; attempt to uncover why employee has lost his/her desire or ability to work productively and find ways to fix the problem. Alternately, disciplinary/punitive action (verbal and written warnings, suspension, and even

Orientation

An orientation process introduces new hires to the organization. The major goals are to: Reduce the initial anxiety all new employees feel as they begin a new job. Familiarize new employees with the job, the work unit, and the organization as a whole. Facilitate the outsider-insider transition. Job orientation expands on the information the employee obtained during the recruitment and selection stages, clarifies the new employee's specific duties and responsibilities as well as how his or her performance will be evaluated, and corrects any unrealistic expectations new employees might hold about the job. Orientation is the time to correct any unrealistic expectations new employees might hold about the job. Work unit orientation familiarizes an employee with the goals of the work unit, makes clear how his or her job contributes to the unit's goals, and provides an introduction to his or her coworkers. Organization orientation informs the new employee about the organization's goals, history, philosophy, procedures, and rules. This information includes relevant HR policies such as work hours, pay procedures, overtime requirements, and benefits, and often a tour of the organization's physical facilities. Managers are responsible for making the integration of a new employee into the organization as smooth and anxiety-free as possible.

A Learning Organization

Another challenge facing managers is how to build a learning organization, which is an organizational mindset or philosophy that has significant design implications. In a learning organization, employees continually acquire and share new knowledge and apply that knowledge when making decisions or performing their work. Some theorists say this may be the only sustainable source of competitive advantage. As we see in Exhibit 6-12, the important characteristics of a learning organization revolve around organizational design, information sharing, leadership, and culture. Leadership plays an important role as an organization moves toward becoming a learning organization. Leaders should facilitate the creation of a shared vision for the organization's future and keep organizational members working toward that vision. They should also support and encourage the collaborative environment that's critical to learning. Finally, the organizational culture is an important aspect of a learning organization, where everyone agrees on a shared vision and recognizes the inherent relationships among the organization's processes, activities, functions, and external environment. Organizational culture also fosters a strong sense of community, caring, and trust.

Boundaryless Organizations

Another contemporary organizational design is the boundaryless organization, which is an organization with a design that is not imposed by a predefined structure. Former GE chairman Jack Welch coined the term "boundaryless" because he wanted to eliminate vertical and horizontal boundaries within GE and break down external barriers between the company and its customers and suppliers. In fact, many of today's most successful organizations find that they operate most effectively by remaining flexible and unstructured. There are two types of boundaries: Internal boundaries are the horizontal ones imposed by work specialization and departmentalization, and the vertical ones that separate employees into organizational levels and hierarchies. External boundaries are those that separate the organization from its customers, suppliers, and other stakeholders. To minimize or eliminate these boundaries, managers might use virtual or network structural designs. A virtual organization consists of a small core of full-time employees and outside specialists temporarily hired as needed. By relying on freelancers, an organization enjoys a network of talent without unnecessary overhead and structural complexity. A network organization (or modular organization) uses its own employees to do some work activities and networks of outside suppliers to provide other needed product components or work processes. For example, at Penske Truck Leasing, dozens of business processes—such as securing permits and titles, entering data from drivers' logs, and processing data for tax filings and accounting—have been outsourced to Mexico and India

Unity of Command

But this structure begs the question, "How many bosses does an employee report to?" Traditionally, the unity of command structure, in which each employee reports to only one manager, was the norm. In instances when the unity of command had to be violated, a clear separation of activities and a supervisor responsible for each was always explicitly designated. Today, advances in technology allow employees access to company information and communication company-wide without going through the formal chain of command.

How Do Groups Make Decisions

Decisions are often made by groups representing the people who will be most affected by those decisions. Committees Task forces Review panels Work teams

Departmentalization

Early management writers argued that common work activities needed to be grouped together to get them done in a coordinated and integrated way. How jobs are grouped together is called departmentalization. There are five common forms of departmentalization (as seen in Exhibit 6-2), although an organization may use its own unique method. Functional departmentalization, or grouping activities by function—such as engineering, accounting, information systems, and human resources—is one of the most popular ways of organizing the workplace. Its major advantage is that it achieves economies of scale by placing people with common skills and specializations into common units. Product departmentalization groups employees based on a corporation's major product areas. Each product is under the authority of a senior manager who is a specialist in, and is responsible for, everything related to his or her product line. The advantage of product grouping is that it increases accountability for product performance because all activities related to a specific product are under the direction of a single manager. 3. Employees can also be grouped by the type of customer an organization seeks to reach. For example, the sales activities in an office supply firm can be divided into three departments that serve retail, wholesale, and government customers, respectively. The assumption underlying customer departmentalization is that customers in each department have a common set of problems and needs that can best be met by specialists. 4. Another way to departmentalize is on the basis of geography or territory, which is called geographic departmentalization. The sales function might have western, southern, midwestern, and eastern regions. 5. Process departmentalization groups activities on the basis of work or customer flow. Examples of process departmentalization can be found in many states' motor vehicle offices and in health care clinics. Units are organized around common skills needed to complete a certain process. It is interesting to note that some companies, such as Black & Decker, organize their divisions along functional lines, their manufacturing units around processes, their sales around geographic regions, and their sales regions around customer groupings. Still other organizations use cross-functional teams, which are teams comprised of individuals from various departments who tackle complex tasks in which diverse skills are needed. Note also that today's competitive environment has refocused the attention of management on its customers, so many organizations are placing greater emphasis on customer departmentalization.

Identifying and Selecting Employees

Every organization needs competent, talented people to do whatever work is necessary for doing what the organization is in business to do, so the first phase of the HRM process involves three tasks: Employment planning Recruitment and downsizing Selection Employment planning is the process by which managers ensure that they have the right number and kinds of people in the right places at the right times; people who are capable of effectively and efficiently completing those tasks that will help the organization achieve its overall goals. This process translates the organization's mission and goals into an HR plan that allows the organization to achieve those goals by: Assessing current and future human resource needs. Developing a plan to meet those needs.

Technology and Structure

Every organization uses some form of technology to convert its inputs into outputs. For example: Your smartphone or tablet: standardized assembly line. Your resume: custom design and print. Your bottle of ibuprofen: continuous flow of production process.

Power Versus Authority

Exhibit 6-5 depicts the difference between authority and power. The boxes in Part A portray authority. Each horizontal grouping represents a functional area in which the authority applies. The influence one holds in the organization is defined by the vertical dimension in the structure. The higher one is in the organization, the greater one's authority. Power, on the other hand, is a three-dimensional concept (as shown by the cone in Part B of Exhibit 6-5). It includes not only the functional and hierarchical dimensions but also a third dimension called centrality. Power is made up of both one's vertical position and one's distance from the organization's power core or center. If the cone in Exhibit 6-5 were an organization, the center of the cone would be the power core. The closer one is to the power core, the more influence one has on decisions. In fact, the existence of a power core is the only difference between A and B in Exhibit 6-5. The top of the cone corresponds to the top of the hierarchy, the middle of the cone to the middle of the hierarchy, and so on. Similarly, the functional groups in A become wedges in the cone. Each wedge represents a functional area. The cone analogy acknowledges two facts: The higher one moves in an organization (an increase in authority), the closer one moves to the power core; and It's not necessary to have authority to wield power because one can move horizontally inward toward the power core without moving up. For instance, as gatekeepers for their bosses, assistants often are powerful in a company even though they have little authority.

HRM Process and Influences

Exhibit 7-1 introduces the 8 important HRM activities. The first three activities in the HRM process address employment planning: adding staff through recruitment, reducing staff through downsizing, and the selection process. Once you select competent people, you need to help them adapt to the organization and ensure that their job skills and knowledge are kept current—which is accomplished by the next two activities in the HRM process: orientation and training. The last steps in the HRM process identify performance goals, correct performance problems if necessary, and help employees sustain a high level of performance over their entire work lives. The activities involved include performance appraisal, compensation and benefits. Notice that the entire process in Exhibit 7-1 is influenced by the external environment. Many of the factors introduced in Chapter 2 directly affect all management practices, but their effect is felt most in managing the organization's human resources because whatever happens to an organization ultimately influences what happens to its employees.

Traditional Goal Setting

Goals provide the direction for all management decisions and actions, and form the criterion against which actual accomplishments are measured. Everything members of the organization do should be oriented toward achieving goals, which can be set either through a process of traditional goal setting or by using management by objectives. In traditional goal setting, goals set by top managers flow down through the organization and become subgoals for each organizational area, as seen in Exhibit 5-5, and are passed down to each succeeding organizational level. Then, at some later time, performance is evaluated to determine whether the assigned goals have been achieved. A problem with traditional goal setting is that when top managers define the organization's goals in broad terms—such as achieving "sufficient" profits—these ambiguous goals have to be stated more specifically as they flow down through the organization. Managers at each level define the goals and apply their own interpretations and biases as they make them more specific. When the hierarchy of organizational goals is clearly defined, it forms an integrated network of goals, or a means-ends chain. Higher-level goals (or ends) are linked to lower-level goals, which serve as the means for their accomplishment.

Differences in HRM Laws

HRM laws vary greatly among countries, so you need to know the laws and regulations that apply in your locale. For example, Canadian HRM laws closely parallel those in the United States but Canada grants a larger degree of power for lawmaking to the individual provinces. As an example, discrimination on the basis of language is not prohibited anywhere in Canada—except in Quebec. Once heavily unionized, unionization rates have been declining in Mexico. One hiring law gives employers 28 days to evaluate a new employee's work performance, after which the employee is granted job security and termination is both difficult and quite expensive. In Australia, discrimination laws were not enacted until the 1980s and generally apply to women (who need improved opportunities). Labor and industrial relations laws were overhauled in 1997 with the goal of increasing productivity and reducing union power. The Workplace Relations Bill gives employers greater flexibility to negotiate directly with employees on pay, hours, and benefits and also simplifies federal regulation of labor-management relations. German legislation requires companies to practice representative participation, the goal of which is to redistribute power within the organization, putting labor on a more equal footing with the interests of management and stockholders. The two most common forms of representative participation are work councils and board representatives. Work councils link employees with management. They are groups of nominated or elected employees who must be consulted when management makes decisions involving personnel. Board representatives are employees who sit on a company's board of directors and represent the interest of the firm's employees.

Models of Organizational Design

How an organization is structured depends on contingency variables such as strategy, size, technology, and environment. Let's take a look at the two generic organization structure models shown here. The mechanistic organization (or bureaucracy) - Rigid and tightly controlled structure that combines traditional aspects of all six elements of organization structure. Combines traditional aspects of all six elements of organization structure: high specialization, rigid departmentalization, clear chain of command, narrow spans of control leading to taller structure, centralization, and high formalization. In contrast, the organic organization - Highly adaptive and flexible structure, which allows it to change rapidly as required. Collaboration (both vertical and horizontal), adaptable duties, few rules, informal communication, decentralized decision authority, and wider spans of control leading to flatter structures.

Workforce Diversity

Improving workforce diversity requires managers to widen their recruiting net and turn to nontraditional recruitment sources such as women's job networks, over-50 clubs, urban job banks, and disabled people's training centers. After a diverse set of applicants exists, selection must be non-discriminatory, applicants should be made comfortable with the organization's culture, and management should express its desire to accommodate their needs. Many organizations provide special workshops to raise diversity consciousness among current employees, as well as programs for new employees that focus on diversity issues. Some companies also have special mentoring programs to deal with the reality that lower-level female and minority managers have few role models with whom to identify.

Traditional Organizational Designs

In making structural decisions, managers can choose either a traditional or contemporary design. Within traditional organizational design, there are three structures: simple, functional, and divisional, all of which tend to be mechanistic in nature. Here in Exhibit 6-9 we see a summary of the strengths and weaknesses of each. Since most companies start as entrepreneurial ventures, they use a simple structure, which is an organizational design with low departmentalization, wide spans of control, authority centralized in a single person, and little formalization. The simple structure is most widely used in smaller businesses and it's fast, flexible, inexpensive to maintain, and has clear accountability. However, as an organization grows, there are few policies to guide operations, which creates information overload at the top and slows decision making. As more employees are added, most small businesses tend to become more specialized and formalized. Rules and regulations are introduced, work becomes specialized, departments are created, levels of management are added, and the organization becomes increasingly bureaucratic. Two of the most popular bureaucratic design options grew out of functional and product departmentalization. They are called the functional and divisional structures.

Sexual Harassment

It's estimated that sexual harassment is the single largest financial risk facing companies today and results in millions of dollars lost in absenteeism, low productivity, and turnover. Sexual harassment can occur between members of the opposite or of the same sex, and between employees of the organization or between employee and nonemployee. In 1993, the Equal Employment Opportunity Commission cited three situations in in which verbal or physical conduct toward an individual is considered sexual harassment: It creates an intimidating, offensive, or hostile environment. It unreasonably interferes with an individual's work. It adversely affects an employee's employment opportunities. Whether something is offensive depends on the people in the organization and the environment in which they work. We all must be attuned to what makes fellow employees uncomfortable—and ask if we don't know. If an incident occurs, the courts will want to know: (1) Did the organization know about, or should the organization have known about, the alleged behavior?; and (2) What did the managers do to stop it? Organizations and managers must educate all employees on sexual harassment matters, have mechanisms available to monitor employees, and refrain from taking action against a harasser until a thorough investigation has been conducted and the results reviewed by an independent and objective individual.

Conducting Employee Assessments

Managers conduct an employee assessment by first reviewing the current human resource status through generating a human resource inventory, which generally lists the name, education, training, prior employment, languages spoken, capabilities, and specialized skills of each employee in the organization. Another part of the assessment is job analysis, a process in which workflows are analyzed and the skills and behaviors necessary to perform jobs are identified. The job analysis helps determine the kinds of skills, knowledge, and attitudes needed to successfully perform each job. This information is then used to develop or revise job descriptions and job specifications. A job description is a written statement that describes what a job holder does, how it's done, and why it's done. It typically includes job content, job environment, and conditions of employment. The job specification states the minimum qualifications that a person must possess to perform a given job successfully. It identifies the knowledge, skills, and attitudes needed to do the job effectively. The job description and job specification are important documents as managers begin recruiting and selecting. They focus the manager's attention on the list of necessary qualifications, assist in determining whether candidates are qualified, and help ensure that the hiring process does not discriminate.

Types of Plans

Managers need plans to help them clarify and specify how goals will be met. As we see here in Exhibit 5-7, strategic plans are usually long-term, directional, and single-use, while tactical plans are short-term, specific, and standing. Now let's look at each type of plan and what it means: Breadth involves strategic plans, which are those that apply to an entire organization and encompass the organization's overall goals, versus tactical plans (also referred to as operational plans), which specify the details of how the overall goals are to be achieved. Time frame refers to the number of months or years used to define short-term and long-term plans. Specificity refers to whether a plan is specific or more general. Due to current environmental uncertainty, managers must be flexible in responding to unexpected changes, so they're more likely to use directional plans that set general guidelines. Managers who engage in planning must weigh the flexibility of directional plans against the clarity that specific plans offer. Frequency of use describes whether plans are ongoing or used only once. Standing plans are ongoing plans that provide guidance for activities performed repeatedly, whereas single-use plans are one-time plans specifically designed to meet the needs of a unique situation.

Selection Devices: Tests

Managers use a number of selection devices to reduce accept and reject errors. The best-known include written tests, performance-simulation tests, and interviews. Evidence shows that tests of intellectual ability, spatial and mechanical ability, perceptual accuracy, and motor ability are moderately valid predictors for many semiskilled and unskilled operative jobs in industrial organizations. However, an enduring criticism of written tests is that intelligence and other tested characteristics may not necessarily be good indicators of an applicant's job performance. This criticism has led to an increased use of performance-simulation tests, which are made up of actual job behaviors. The best-known performance-simulation tests are work sampling (a miniature replica of the job) and assessment centers (which simulate real problems one may face on the job). The former is suited to persons applying for routine jobs; the latter to managerial personnel. Because its content is essentially identical to job content, performance simulation should be a better predictor of short-term job performance than written tests and should minimize potential employment discrimination allegations. Additionally, well-constructed performance-simulation tests are valid.

Span of Control

Next comes the question of how many employees a manager efficiently and effectively can supervise. Increasingly, contingency variables are influencing this span. For example, the more training and experience employees have, the less direct supervision they need. Other contingency variables include similarity of employee tasks, the complexity of those tasks, the physical proximity of employees, the degree to which standardized procedures are in place, the sophistication of the organization's management information system, the strength of the organization's value system, and the manager's preferred managing style.

Matrix and Project Structures

Other popular contemporary designs are the matrix and project structures. In the matrix structure, specialists from different functional departments work together to complete an assigned project. When it is accomplished, they return to their functional departments. Another unique aspect of the matrix structure is that it creates a dual chain of command since employees have two managers who share authority: their functional area manager and their product or project manager. As shown here in Exhibit 6-11, the project manager has authority over the functional members who are part of his or her project team in areas related to the project's goals. However, any decisions about promotions, salary recommendations, and annual reviews typically remain the functional manager's responsibility. To work effectively, both managers have to communicate regularly, coordinate work demands, and resolve conflicts together. The primary strength of the matrix is that it can facilitate coordination of multiple complex and interdependent projects while still retaining the economies that result from keeping functional specialists grouped together. The major disadvantages of the matrix are the confusion it creates and its propensity to foster power struggles. Dispensing with the chain of command and unity of command principles significantly increases confusion over who reports to whom, which triggers power struggles.

Compensating Employees

The goal of compensation administration is to design a cost-effective pay structure that attempts to ensure that pay levels will be perceived as fair by all employees. Essentially, the higher the knowledge, skills, and abilities (KSAs)—and the greater the authority and responsibility—the higher the pay. Factors that influence the compensation and benefit packages that different employees receive are summarized here in Exhibit 7-9. Skill-based pay systems reward employees for the job skills and competencies they demonstrate, and research shows that these systems tend to be more successful in manufacturing organizations and in organizations pursuing technical innovations. Many other organizations use variable pay systems, in which an individual's compensation is contingent on performance. 90 percent of U.S. organizations use variable pay plans. When an organization designs its overall compensation package, it has to take into account employee benefits, which are nonfinancial rewards designed to enrich employees' lives. Most organizations are legally required to provide Social Security and workers and unemployment compensation, but organizations may also provide benefits such as paid time off from work, life and disability insurance, retirement programs, and health insurance.

Developing Plans

The process of plan development is influenced by three contingency factors and by the kind of planning approach followed. Three contingency factors that affect the choice of plans are: Organizational level. Degree of environmental uncertainty. Length of future commitments. Exhibit 5-8, shown here, illustrates the relationship between a manager's level in the organization and the type of planning that a manger does. For the most part, lower-level managers do operational (or tactical) planning while upper-level managers do strategic planning. The second contingency factor is environmental uncertainty. When uncertainty is high, plans should be specific but flexible. Managers must be prepared to change or amend plans as they're implemented. The third contingency factor relates to the time frame of plans. The commitment concept says that plans should extend far enough to meet commitments made when the plans were developed. But planning for too long or too short a time period is inefficient and ineffective. For example, when organizations increase their computing capabilities, many have found their "power-hungry computer" generated so much heat that the electric bills have skyrocketed because of the increased need for air conditioning. This illustrates the commitment concept: When organizations expand their computing technology, they're "committed" to whatever future expenses are generated by that plan.

Human Resource Management

The quality of an organization is, to a large degree, determined by the quality of the people it employs. Staffing and HRM decisions and actions are critical to ensuring that the organization hires and keeps the right people. Getting that done is what human resource management (HRM) is all about.

Strong Cultures Can

The stronger an organization's culture, the less managers need to be concerned with developing formal rules and regulations. Instead, those guides will be internalized in employees when they accept the organization's culture. If, on the other hand, an organization's culture is weak—if no dominant shared values are present— its effect on employee behavior is less clear.

Managing Downsizing

Today's managers face downsizing, workforce diversity, sexual harassment, workplace spirituality, and HR costs. Downsizing is the planned elimination of jobs from an organization. When an organization has too many employees—which may happen when it's faced with an economic crisis, declining market share, overly aggressive growth, or when it's been poorly managed—one option for improving profits is to eliminate excess workers. A negative consequence is layoff-survivor sickness, a set of attitudes, perceptions, and behaviors of employees who survive involuntary staff reductions. Symptoms include job insecurity, perceptions of unfairness, guilt, depression, stress from increased workload, fear of change, loss of loyalty and commitment, reduced effort, and an unwillingness to do anything beyond the required minimum. Exhibit 7-10 summarizes some ways that managers can reduce the trauma associated with downsizing.

Types of Authority Relationships

When organizing work, managers need to clarify who reports to whom, which is known as the chain of command—that is, the line of authority extending from upper to lower organizational levels. Authority refers to the rights inherent in a managerial position to give orders and expect those orders to be obeyed. Authority is a major concept discussed by the early management writers, who viewed it as the glue that held an organization together. Each management position had specific inherent rights associated with the position's rank or title. When managers delegate authority, they must allocate commensurate responsibility. That is, when employees are given rights they also assume a corresponding obligation to perform and be held accountable for their performance. Early management writers distinguished between two forms of authority: line authority and staff authority. Line authority entitles a manager to direct the work of an employee according to the chain of command, which is shown here in Exhibit 6-3. In the chain of command, every manager is subject to the direction of his or her superior. Sometimes the term "line" is used to differentiate line managers from staff managers. In this context, line refers to managers whose organizational function contributes directly to the achievement of organizational objectives. Whether a manager's function is classified as line or staff depends on the organization's objectives.

Management

is the process of getting things done effectively and efficiently, with and through people.

Efficiency

means doing a task correctly ("doing things right") and getting the most output from the least amount of inputs. It's not enough, however, just to be efficient. Managers are also concerned with completing

Culture is

1. Culture is perceived. It's not something that can be physically touched or seen, but employees perceive it on the basis of what they experience within the organization. 2. Culture is descriptive. It's concerned with how members perceive or describe the culture, not with whether they like it. 3. Culture is shared. Even though individuals may have different backgrounds or work at different organizational levels, they tend to describe the organization's culture in similar terms.

Design thinking

More organizations are beginning to recognize how design thinking can benefit them. Apple's approach: "We try to develop products that seem somehow inevitable. That leave you with the sense that that's the only possible solution that makes sense." The design thinking approach begins with the first step of identifying problems. Design thinking says that managers should look at problem identification collaboratively and integratively with the goal of gaining a deep understanding of the situation. They should look not only at the rational aspects, but also at the emotional elements. Then invariably, of course, design thinking would influence how managers identify and evaluate alternatives. Design thinking means opening up your perspective and gaining insights by using observation and inquiry skills, and not relying simply on rational analysis.

Problem

a discrepancy between an existing and a desired state of affairs.

Rational Model

choices that are consistent and value-maximizing within specified constraints. Rationality is not a very realistic approach.

Hawthrone Studies

he Hawthorne effect (also referred to as the observer effect[1]) is a type of reactivity in which individuals modify an aspect of their behavior in response to their awareness of being observed.[2][3] The original research at the Hawthorne Works in Cicero, Illinois, on lighting changes and work structure changes such as working hours and break times was originally interpreted by Elton Mayo and others to mean that paying attention to overall worker needs would improve productivity. Later interpretations such as that done by Landsberger suggested that the novelty of being research subjects and the increased attention from such could lead to temporary increases in workers' productivity. This interpretation was dubbed "the Hawthorne effect".

Stakeholders

The nature of stakeholder relationships is another way in which the environment influences managers. The more obvious and secure these relationships, the more influence managers will have over organizational outcomes. Stakeholders are any constituencies in an organization's environment that are affected by that organization's decisions and actions. These groups have a stake in, or are significantly influenced by, what the organization does. In turn, these groups can influence the organization. For example, think of the groups that might be affected by the decisions and actions of Starbucks—coffee bean farmers, employees, specialty coffee competitors, local communities, and so forth. Some of these stakeholders also, in turn, may impact decisions and actions of Starbucks' managers.

Effective Interviewing

The interview is the most universal selection device, along with the application form. Interviews can be reliable and valid selection tools when structured, well organized, and limited to relevant questioning. Research shows that potential biases can creep into interviews if they're not well structured and standardized. The following are highlights from this research: The interviewer tends to hold a stereotype of what represents a good applicant. The interviewer tends to favor applicants who share his or her own attitudes. The order in which applicants are interviewed will influence evaluations. The order in which information is elicited during the interview will influence evaluations. Managers can make interviews more valid and reliable by reviewing the job description and job specification to help assess the applicant; preparing a structured set of questions to ask all applicants for the job; reviewing an applicant's résumé before meeting him or her; asking questions and listening carefully to the applicant's answers; and writing an evaluation of the applicant while the interview is still fresh. In behavioral or situation interview, applicants are observed not only for what they say but also for how they behave. Applicants are presented with situations and are asked to "deal" with the situation. Research shows that these behavioral interviews are nearly eight times more effective for predicting successful job

Contemporary Issues

Two issues currently affecting planning are: Planning effectively in dynamic environments, and How managers can use environmental scanning, especially competitive intelligence. In today's changing and uncertain environment, managers should develop plans that are specific but flexible. Managers need to recognize that planning is an ongoing process and that plans serve as a road map—although the destination may change due to dynamic market conditions. The flexibility to change direction is particularly important as plans are implemented. Even when the environment is highly uncertain, it's important to continue formal planning to improve organizational performance. Persistence and practice in planning contributes to significant performance improvement. In dynamic environments, making a flatter hierarchy means lower organizational levels can set goals and develop plans because organizations have little time for goals and plans to flow down from the top. Managers should teach their employees how to set goals and to plan, and then trust them to do it. A manager's analysis of the external environment may be improved by environmental scanning, which involves screening large amounts of information to detect emerging trends. One of the fastest-growing forms of environmental scanning is competitive intelligence, which is accurate information about competitors that allows managers to anticipate competitors' actions rather than merely react to them. Much of the competitor-related information managers need to make crucial strategic decisions is available and accessible to the public. In other words, competitive intelligence isn't organizational espionage. Advertisements, promotional materials, press releases, reports filed with government agencies, annual reports, want ads, newspaper reports, information on the Internet, and industry studies are readily accessible sources of information. Managers do need to be careful about the way information, especially competitive intelligence, is gathered to prevent any concerns about whether it's legal or ethical. Competitive intelligence becomes illegal corporate spying when it involves the theft of proprietary materials or trade secrets by any means.

Middle Managers

fall between the lowest and highest levels of the organization. They often manage other managers and sometimes nonmanagerial employees, and are responsible for translating the goals set by top managers into specific detailed tasks that lower-level managers oversee. Titles include: agency head, unit chief, division manager, or project leader.

Encouraging Ethical Behavior

Managers can do a number of things if they're serious about encouraging ethical behavior: hire employees with high ethical standards, establish codes of ethics, lead by example, link job goals and performance appraisal, provide ethics training, and implement protective mechanisms for employees who face ethical dilemmas. Three ways in which managers can encourage ethical behavior and create a comprehensive ethics program include: Establishing a code of ethics Providing ethical leadership Offering ethics training A code of ethics should be specific enough to guide organizational members in what they're supposed to do, yet loose enough to allow for freedom of judgment. The effectiveness of such codes depends heavily on whether management supports them and ingrains them into the corporate culture, and on how individuals who break the codes are treated. If management considers the codes to be important, regularly reaffirms their content, follows the rules themselves, and publicly reprimands rule breakers, ethics codes can be a strong foundation for an effective corporate ethics program.

Types of Decisions

what does a manager do if an auto mechanic damages a customer's rim while changing a tire? Because the company probably has a standardized method for handling this type of problem, it's considered a programmed decision, which tends to rely heavily on previous solutions—such as replacing the rim at the company's expense. Managers can use three guides for making programmed decisions: Procedures Rules Policies A procedure is a series of interrelated sequential steps that a manager can use when responding to a well-structured problem. A rule is an explicit statement that tells a manager what can or cannot be done. A policy is a guideline for making decisions.

What Skills Do Managers Need?

Another way to describe what managers do is by looking at the skills they need for managing. Management researcher Robert L. Katz and others describe four critical skills: 1. Conceptual skills: Analyzing and diagnosing complex situations to see how things fit together and to facilitate making good decisions. 2. Interpersonal skills: Working well with other people both individually and in groups by communicating, motivating, mentoring, and delegating. 3. Technical skills: Job-specific knowledge, expertise, and techniques needed to perform work tasks. (For top-level managers − knowledge of the industry and a general understanding of the organization's processes and products; For middle- and lower-level managers − specialized knowledge required in the areas where they work—finance, human resources, marketing, computer systems, manufacturing, information technology). 4. Political skills: Building a power base and establishing the right connections so they can get needed resources for their groups.

Stability and Renewal Strategies

During times of economic uncertainty, many companies choose a stability strategy in which the organization continues to do what it is currently doing, such as serving the same clients by offering the same product or service, maintaining market share, and sustaining the organization's current business operations. When an organization is in trouble, however, managers need strategies called renewal strategies, which address declining performance. There are two main types of renewal strategies: A retrenchment strategy is a short-run strategy used for minor performance problems. This strategy helps it stabilize operations, revitalize organizational resources and capabilities, and prepare to compete once again. When an organization's problems are more serious, they need to use the turnaround strategy. While managers cut costs and restructure organizational operations in either renewal strategy, these measures are more extensive than in a retrenchment strategy. In both renewal strategies, managers can (1) cut costs and (2) restructure organizational operations but actions are more extensive in turnaround strategy.

National Borders

If management concepts were transferable across countries, they would apply universally in all parts of the world. However, research shows that while concepts transfer easily among many English-speaking countries, management concepts will likely need to be modified when dealing with India, China, Chile, or other countries with economic, political, social, or cultural environments that differ from those of the so-called free-market democracies.

Types of Problems

In a structured problem, the goal of the decision maker is clear, the problem familiar, and information about the problem easily defined and complete. Examples include a customer who wants to return an online purchase or a TV news team that has to respond to a fast-breaking event. These situations are called structured problems because they align closely with the assumptions that underlie perfect rationality. However, many situations that managers face are unstructured problems—that is, situations that are new or unusual and for which information is ambiguous or incomplete. Entering a new market segment or deciding to invest in an unproven technology are examples of unstructured problems.

Adapting to a Changing Workforce

Managers are adapting to changes taking place in the workforce with such diversity initiatives as work-life balance programs, contingent jobs, and recognition of generational differences. Due to 24/7 global business and technological access and dual-career families, many organizations now offer family-friendly benefits that provide flexible scheduling options, on-site child care, flextime, job sharing, telecommuting, part-time employment, and more. The labor force has begun shifting away from traditional full-time jobs toward a contingent workforce of part-time, temporary, and contract workers who are hired on an as-needed basis. Supervising and motivating such independent contractors has its own set of challenges and expectations for managers. Generational differences present challenges ranging from appearance to technology and management style, which can be accommodated by flexibility. For example, Gen Y employees want bosses who are open-minded; experts in their field, even if they aren't tech savvy; organized; and want teachers who respect their need for work-life balance, provide constant feedback, communicate in compelling ways, and provide stimulating learning.

Importance of Social Media

More than a billion people use social media platforms like Facebook, Twitter, YouTube, LinkedIn, etc. Managers need to understand and manage the power of social media, because employees use them for both personal and work purposes. More and more businesses are turning to social media not just as a way to connect with customers but also as a way to manage their human resources and tap into their innovation and talent. But it's not without its perils. Managers need to remember that social media is a tool that needs to be managed to be beneficial.

Being an Ethical Leader

Of critical importance is ethical leadership, which sets the tone for employee behavior. Managers must be good ethical role models both in words and, more importantly, in actions, which send even stronger signals to employees. Therefore, if managers take company resources for their personal use, inflate their expense accounts, or give favored treatment to friends, they imply that such behavior is acceptable from all employees. When an employee does something unethical, managers must punish the offender and make the outcome visible to everyone in the organization. Here we see suggestions for being an ethical leader: • Be a good role model by being ethical and honest. • Tell the truth always. • Don't hide or manipulate information. • Be willing to admit your failures. • Share your personal values by regularly communicating them to employees. • Stress the organization's or team's important shared values. • Use the reward system to hold everyone accountable to the values.

Common Errors

Overconfidence occurs when decision makers think they know more than they do or hold unrealistically positive views of themselves and their performance. Immediate gratification describes decision makers who want immediate rewards but want to avoid immediate costs. For these individuals, decision choices that provide quick payoffs are more appealing than those with payoffs in the future. The anchoring effect describes when decision makers fixate on initial information—such as first impressions, ideas, prices, and estimates—and then fail to adequately adjust for subsequent information. Selective perception occurs when decision makers organize and interpret events based on their biased perceptions, which influence the information they pay attention to, the problems they identify, and the alternatives they develop. Confirmation bias describes decision makers who seek out information that reaffirms their past choices and who discount information that contradicts past judgments. Such people tend to accept, at face value, information that confirms their preconceived views and are critical and skeptical of information that challenges these views. The framing bias occurs when decision makers select and highlight certain aspects of a situation while excluding others. By drawing attention to specific aspects of a situation and highlighting them, they downplay or omit other aspects, distort what they see, and create incorrect reference points. The availability bias occurs when decision makers focus on events that are the most recent and vivid in their memory. As a result, their ability to recall events objectively results in distorted judgments and probability estimates. Representation bias describes how decision makers assess the likelihood of an event based on how closely it resembles other events and then draw analogies and see identical situations where they don't necessarily exist. The randomness bias describes when decision makers try to create meaning out of random events. The sunk costs error occurs when decision makers forget that current choices can't correct the past. They incorrectly fixate on past expenditures of time, money, or effort rather than on future consequences when they assess choices. Decision makers exhibiting self-serving bias take credit for their successes and blame failures on outside factors. Finally, the hindsight bias is the tendency for decision makers to falsely believe that they would have accurately predicted the outcome of an event once that outcome is actually known.

Types of Workplace Diversity

People in a workforce are similar to and different from one another in terms of gender, age, race, sexual orientation, ethnicity, cultural background, and physical abilities and disabilities. For example: Age of the population is shifting critically in the workforce. With many baby boomers still employed and active, managers must ensure that those employees do not face discrimination. Gender diversity issues are still prevalent as women and men now each make up almost half of the workforce, especially with regards to gender pay gap, career start and progress, and misconceptions about women's performance as compared with men's. Race is the biological heritage (including physical characteristics such as one's skin color and associated traits) that people use to identify themselves. Ethnicity refers to social traits, such as one's cultural background or allegiance, that are shared by a human population. Disabilities/abilities includes adherence to the 1990 Disabilities Act (ADA), which prohibits discrimination against persons with disabilities and requires employers to make reasonable accommodations so their workplaces are accessible to people with physical or mental disabilities. Title VII of the Civil Rights Act prohibits discrimination on the basis of religion, race or ethnicity, country of origin, and gender. In accommodating religious diversity, managers need to recognize and be aware of different religions, their beliefs, religious holidays, and more. Next let's look at sexual orientation and gender identity. The acronym GLBT refers to gay, lesbian, bisexual, and transgender people. U.S. federal law does not prohibit discrimination against employees on the basis of sexual orientation, although many states and municipalities do. In Europe, the Employment Equality Directive required all European Union member states to introduce legislation making it unlawful to discriminate on grounds of sexual orientation, but much more needs to be done. Managers need to look at how best to meet the needs of their GLBT employees and respond to employees' concerns while creating a safe and productive work environment for all. Other types of diversity include issues arising from socioeconomic backgrounds, team members from different functional areas or organizational units, physical attractiveness, obesity, job seniority, or intellectual abilities. Managers need to ensure that all employees are treated fairly and given the opportunity and support to do their jobs to the best of their abilities.

The Importance of Strategic Management

Strategic management is important to avoid weakening one's position due to poor economic conditions and myriad external and interval variables. Two strategies that helped clothing chain retailer Buckle Inc. were its location strategy of not placing the majority of its 400-plus stores in states falling on hard times and a differentiation strategy of offering customer perks, such as custom pants fittings and free hemming of its jeans. Reasons why strategic management is so important include: It can make a difference in how well an organization performs. Research has found a generally positive relationship between strategic planning and performance. It prepares managers in organizations of all types and sizes to cope with continually changing situations and to examine relevant factors in planning future actions. Each part of an organization needs to work together to achieve the organization's goals; strategic management helps accomplish this. For example, with more than 2.1 million employees worldwide working in various departments, functional areas, and stores, Walmart uses strategic management to help coordinate and focus employees' efforts on what's most important. Strategic management isn't just for business organizations. Organizations such as government agencies, hospitals, educational institutions, and social agencies also need strategic management. For example, the skyrocketing costs of a college education, competition from for-profit companies offering alternative educational environments, cuts to state budgets, and cutbacks in federal aid for students and research have led many university administrators to assess their colleges' aspirations and identify a market niche in which they can survive and prosper.

GLOBE: Dimensions of Cultural Difference

The GLOBE research team, using data from more than 17,000 managers in 62 societies around the world, has identified nine dimensions in which national cultures differ: Assertiveness is the extent to which a society encourages people to be tough, confrontational, assertive, and competitive versus modest and tender. (The United States ranks high; Egypt ranks moderate; and Sweden ranks low.) Future orientation indicates the extent to which a society encourages and rewards future-oriented behavior such as planning, investing in the future, and delaying gratification. (Canada ranks high; Slovenia ranks moderate; and Russia ranks low.) Gender differentiation captures the extent to which a society maximizes gender role differences. (South Korea ranks high; Italy ranks moderate; and Denmark ranks low.) Uncertainty avoidance is a society's reliance on social norms and procedures to alleviate the unpredictability of future events. (Germany ranks high; Israel ranks moderate; and Hungary ranks low.) Power distance is the degree to which members of a society expect power to be unequally distributed. (Thailand ranks high; England ranks moderate; and South Africa ranks low.) Individualism and collectivism is the degree to which individuals are encouraged to integrate into groups within organizations and society. (Greece is highly individualistic; Hong Kong is moderately individualistic; and Singapore is collective.) In-group collectivism encompasses the extent to which members of a society take pride in their membership in small groups such as their family and circle of close friends and the organizations by which they are employed. (China ranks high; Qatar ranks moderate; and New Zealand ranks low.) Performance orientation refers to the degree to which a society encourages and rewards group members for performance improvement and excellence. (Taiwan is high; Spain is moderate; and Greece is low.) Humane orientation is the degree to which a society encourages and rewards individuals for being fair, altruistic, generous, caring, and kind to others. (Indonesia ranks high; Hong Kong ranks moderate; and France ranks low.)

Components of the External Environment

The economic component encompasses factors such as interest rates, inflation, changes in disposable income, stock market fluctuations, and business cycle stages. The demographic component includes trends in population characteristics such as age, race, gender, education level, geographic location, income, and family composition. The technological component focuses on scientific and industrial innovations. The sociocultural component is concerned with societal and cultural factors such as values, attitudes, trends, traditions, lifestyles, beliefs, tastes, and patterns of behavior. The political/legal component looks at federal, state, and local laws, as well as other countries' laws and global laws. It also includes a country's political conditions and stability. The global component encompasses issues associated with globalization and a world economy.

Decision-Making Conditions

The ideal situation for making decisions is one of certainty, which is a situation where a manager can make accurate decisions because the outcome of every alternative is known. However, a far more common situation is one of risk, in which the decision maker is able to estimate the likelihood of certain outcomes based on data from past personal experiences or secondary information that lets the manager assign probabilities to different alternatives. Uncertainty means that the decision maker is not certain about the outcomes and can't even make reasonable probability estimates. The choice of alternatives is influenced by the limited amount of information and by the psychological orientation of the decision maker

"Ready-aim-fire" versus "Ready-fire-aim"

The link between values such as these and managerial behavior is fairly straightforward. Take, for example, a so-called "ready-aim-fire" culture. In such an organization, managers will study and analyze proposed projects endlessly before committing to them. However, in a "ready-fire-aim" culture, managers take action and then analyze what has been done. If an organization's culture supports the belief that profits can be increased by cost cutting and that the company's best interests are served by achieving slow but steady increases in quarterly earnings, managers are unlikely to pursue programs that are innovative, risky, long-term, or expansionary. In an organization whose culture conveys a basic distrust of employees, managers are more likely to use an authoritarian leadership style than a democratic one. The culture establishes for managers appropriate and expected behavior.

When Are Groups Most Effective?

Whether groups are more effective than individuals depends on the criteria used for defining effectiveness, such as accuracy, speed, creativity, and acceptance. Individuals are faster at decision making. Groups tend to be more accurate, make better decisions, be more creative, and be more effective in terms of acceptance of the final solution. With few exceptions, group decision making consumes more work hours than individual decision making does. Ultimately, primary consideration must be given to assessing whether increases in effectiveness outweigh the losses in efficiency.

Decision making

can be viewed as an eight-step process that involves identifying a problem, selecting an alternative, and evaluating the decision's effectiveness. This process can be used for making both individual and group decisions, and decisions that range from planning your spring break to complex planning for NASA. Here we see the eight steps.

Taylorism

cientific management is a theory of management that analyzes and synthesizes workflows. Its main objective is improving economic efficiency, especially labor productivity. It was one of the earliest attempts to apply science to the engineering of processes and to management. Scientific management is sometimes known as Taylorism after its founder, Frederick Winslow Taylor.[1] Taylor began the theory's development in the United States during the 1880s and '90s within manufacturing industries, especially steel. Its peak of influence came in the 1910s;[2] In 1913 Vladimir Lenin wrote that the "most widely discussed topic today in Europe, and to some extent in Russia, is the 'system' of the American engineer, Frederick Taylor"; Lenin decried it initially as a "'scientific' system of sweating" more work from laborers.[3] Taylor died in 1915 and by the 1920s, scientific management was still influential but had entered into competition and syncretism with opposing or complementary ideas. Although scientific management as a distinct theory or school of thought was obsolete by the 1930s, most of its themes are still important parts of industrial engineering and management today. These include analysis; synthesis; logic; rationality; empiricism; work ethic; efficiency and elimination of waste; standardization of best practices; disdain for tradition preserved merely for its own sake or to protect the social status of particular workers with particular skill sets; the transformation of craft production into mass production; and knowledge transfer between workers and from workers into tools, processes, and documentation.

Workforce diversity

diversity is defined as the ways in which people in an organization are different from and similar to one another. Diversity has been one of the foremost business topics over the last two decades, along with such modern business disciplines as quality, leadership, and ethics. Based in civil rights legislation and social justice, the word "diversity" has traditionally been associated with fair hiring practices and the prevention of discrimination and inequality. Today, diversity focuses on both the differences and similarities of employees, which reinforces the belief that managers and organizations should view employees as having qualities in common as well as differences, and find ways to develop strong relationships with and engage their entire workforce.

Bounded Rationality

most decisions that managers make don't fit the assumptions of perfect rationality, a more realistic approach to describing how managers make decisions is the concept of bounded rationality. This means that managers make decisions rationally but are limited (or bounded) by their ability to process information. Because they can't possibly analyze all information on all alternatives, managers satisfice, rather than maximize. That is, they accept solutions that are "good enough." Remember that decision making is also influenced by the organization's culture, internal politics, power considerations, and escalation of commitment, which is an increased commitment to a previous decision despite evidence that it may have been wrong.

Does it pay to Plan?

Does it pay to plan? In a nutshell, yes. First, the data generally support the position that organizations should have formal plans and that these plans generally translate into higher profits, higher return on assets, and other positive financial results. Second, the quality of the planning process and appropriate implementation of the plan probably contribute more to high performance than the extent of planning does. Finally, in organizations in which formal planning did not lead to higher performance, the constraints of the environment—such as governmental regulations and unforeseen economic challenges—reduced the impact of planning on the organization's performance.

Changing Workplaces + Changing Workforce

Managers today are dealing with changing workplaces, a changing workforce, global economic and political uncertainties, and changing technology. Distributed labor companies are changing the face of temporary work. Some 30-45 percent of the world's work force works from home or are virtual employees. More and more businesses are relying on apps and mobile-enhanced Websites to run their businesses. Managers everywhere are likely to have to manage in changing circumstances, which means that how managers manage is changing. We will now look at four specific changes that are increasingly important to organizations and managers everywhere: customers, innovation, social media, and sustainability.

External Environment

One of the biggest mistakes managers make today is failing to adapt to the changing world. No successful organization, or its managers, can operate without understanding and dealing with the dynamic environment—external and internal—that surrounds it. The term external environment refers to factors, forces, situations, and events outside the organization that affect its performance. For example, a volcanic eruption in Iceland in 2010 prevented delivery of auto parts that led to a shutdown at a BMW plant in South Carolina and a Nissan Motors facility in Japan.

Importance of Sustainability

Another twenty-first century challenge is managing in a sustainable way. This means not just managing efficiently and effectively, but also responding strategically to environmental and societal challenges. Sustainability can be defined as meeting the needs of people today without compromising the ability of future generations to meet their own needs. From a business perspective, sustainability refers to a company's ability to achieve its business goals and increase long-term shareholder value by integrating economic, environmental, and social opportunities into its business strategies.

Analyzing Alternatives

Once the alternatives have been identified, the decision maker moves to Step 5—that is, critically analyzing each alternative by appraising it against the criteria. The strengths and weaknesses of each alternative become evident when compared with the criteria and weights established in Steps 2 and 3. Here in Exhibit 4-3 we see the assessed values that the subject put on each of her 12 alternatives after having test-driven each car. Some assessments can be achieved objectively, such as the best purchase price from local dealers and the frequency of repair data as reported by owners in consumer magazine reports. However, the assessment of how the car handles is clearly a personal judgment. Most decisions contain judgments and these judgments are reflected in which criteria is chosen in Step 2, the weights given to those criteria, and the evaluation of alternatives. Exhibit 4-3 shows only an assessment of the 12 alternatives against the decision criteria; it does not reflect the weighting done in Step 3. If one choice had scored 10 on every criterion, you wouldn't need to consider the weights. Similarly, if the weights were all equal—that is, all the criteria were equally important to you—each alternative would be evaluated merely by summing up the appropriate lines in Exhibit 4-3. For instance, the Ford Fiesta SES would have a score of 38, and the Toyota Camry a score of 43.

Why Are Customers Important

Organizations depend on their customers to exist in the marketplace. Until recently, customer focus was thought to be the responsibility of marketing, but organizations are now discovering that employee attitudes and behaviors play a big role in customer satisfaction. Managers are recognizing that delivering consistent high-quality customer service is essential for survival and success in today's competitive environment. They recognize that employees are an integral part of creating a customer-responsive organization where employees are friendly, courteous, accessible, knowledgeable, prompt in responding to customer needs, and willing to do what's necessary to please the customer.

Profit vs. Not-for-profit

The most important difference between the two is how performance is measured. Profit, or the "bottom line," is an unambiguous measure of a business organization's effectiveness. Not-for-profit organizations don't have such a universal measure, making performance measurement more difficult. But even not-for-profit organizations need to make money to continue operating.

Parochialism

is a narrow focus in which managers see things only through their own eyes and from their own perspectives—not recognizing that countries have different values, morals, customs, political and economic systems, and laws—which can affect how a business is managed. The most important differences for managers to understand relate to a country's social context or culture. For example, status is perceived differently in different countries. In France, status is often the result of factors important to the organization, such as seniority, education, and the like. In the United States, status is more a function of what individuals have accomplished personally.

Criticisms of Formal Planning

Although it makes sense for an organization to establish goals and direction, critics have challenged some of the basic assumptions of planning. Planning may create rigidity with goals and a timetable that are set under the assumption that the environment won't change. Managers need to remain flexible and not be tied to a course of action simply because it's the plan. Formal plans cannot replace intuition and creativity. Planning should enhance and support intuition and creativity, not replace it. Planning focuses managers' attention on today's competition, not on tomorrow's survival. Formal planning tends to focus on how best to capitalize on existing business opportunities instead of ways to reinvent the industry. Instead of focusing on today, managers should plan with an eye to untapped opportunities. Formal planning reinforces success, which may lead to failure. It's difficult to shift from the comfort of what works to the uncertainty of the unknown. However, managers may need to face that unknown and do things in new ways to be even more successful.

Assessing Environmental Uncertainty

Another constraint posed by external environments is the amount of uncertainty that exists, which can affect organizational outcomes. Environmental uncertainty refers to the degree of change and complexity in an organization's environment. This matrix shows these two aspects. The first dimension of uncertainty is the degree of unpredictable change; that is, a stable environment experiences minimal change and a dynamic environment experiences frequent change. For example, a stable environment might have no new competitors, few technological breakthroughs by current competitors, little pressure from groups trying to influence the organization, and so on. The other dimension of uncertainty describes the degree of environmental complexity, which looks at the number of components in an organization's environment and the knowledge that the organization has about those components. Therefore, an organization with few competitors, customers, suppliers, or government agencies to deal with, or an organization that needs little information about its environment, has a less complex and more certain, stable environment, as seen in Cell 1. So how does the concept of environmental uncertainty influence managers? As illustrated here, each of the four cells represents different combinations of degree of complexity and degree of change. Cell 1 (a stable-simple environment) represents the lowest level of environmental uncertainty and Cell 4 (a dynamic and complex environment) represents the highest level of environmental uncertainty. Not surprisingly, managers have the greatest influence on organizational outcomes in Cell 1 and the least influence in Cell 4. Because uncertainty is a threat to an organization's effectiveness, managers try to minimize it. Most industries today face more dynamic change, and consequently, their environments are more uncertain.

Managerial Decisions Influenced by Culture

As shown here in Exhibit 2-5, a manager's decisions are influenced by the culture in which he or she operates. An organization's culture, especially a strong one, influences and constrains the way managers plan, organize, lead, and control. For example, the culture influences managerial planning about the degree of risk that plans should contain, whether plans should be developed by individuals or teams, or the amount of environmental scanning in which management will engage. With organizing activities, culture influences how much autonomy should be designed into employees' jobs, whether tasks should be done by individuals or in teams, and the degree to which department managers interact with each other. When it comes to leading, organization culture helps determine the degree to which managers try to increase employee job satisfaction, appropriate leadership styles, and whether all disagreements—even constructive ones—should be eliminated. Finally, the culture influences managers' controlling activities: for example, whether they impose external controls or to allow employees to control their own actions, which criteria should be emphasized in employee performance evaluations, and the repercussions for exceeding one's budget.

Big Data:

the vast amounts of quantifiable information that can be analyzed by highly sophisticated data processing. With this type of data at hand, decision makers have very powerful tools to help them make decisions. However, experts caution that collecting and analyzing data for data's sake is wasted effort. Goals are needed collecting and using this type of information. As one individual said, "Big data is a descendant of Taylor's 'scientific management' of more than century ago." While Taylor used a stopwatch to time and monitor a worker's every movement, big data is using math modeling, predictive algorithms, and artificial intelligence software to measure and monitor people and machines like never before. But managers need to really examine and evaluate how big data might contribute to their decision making before jumping in with both feet—benefits of capturing the perspectives and strengths that a diverse workforce offers.

Competitive Strategy

A competitive strategy is a strategy for how an organization will compete in its business. For a small organization in only one line of business or a large organization with little product or market diversification, the competitive strategy describes how the organization will compete in its primary market. For organizations in multiple businesses, each business has its own competitive strategy that defines its competitive advantage, the products or services it will offer, the customers it wants to reach, and so on. When an organization engages in several different businesses, those single businesses that are independent and formulate their own competitive strategies are often called strategic business units (SBUs).

allocate weights

A simple approach is to give the most important criterion a weight of 10 and then assign weights to the rest of the criteria against that standard to indicate their degree of importance. Thus, a criterion that you gave a 5 is only half as important as the highest-rated criterion.

Contemporary Organizational Design

Because managers find that the traditional designs often aren't responsive enough to today's increasingly dynamic and complex environment, they find creative, more organic ways to structure and organize work. As we see summarized here in Exhibit 6-10: In team-based structures, the entire organization is made up of work teams that do the organization's work. Matrix and project structures assign specialists from different functional departments to work on projects led by a project manager. Boundaryless structures are organizations with designs that are not defined by, or limited to, the horizontal, vertical, or external boundaries imposed by a predefined structure.

Competitive Advantage

Developing an effective competitive strategy requires an understanding of the organization's competitive advantage, which is whatever sets it apart from the competition. That distinctive edge comes from the organization's core competencies. Competitive advantage also can come from the company's resources—something that the organization has that its competitors don't. Cost leadership strategy Differentiation strategy Focus strategy—involves a cost advantage (or "cost focus") Stuck in the middle Use strategic management to get a sustainable competitive advantage

How Do Authority and Power Differ?

Early management writers assumed that the rights inherent in one's position in an organization were the sole source of influence and that the higher a manager's position in the organization, the more influence he or she had. Today, however, management recognizes that you don't have to be a manager to have power. Authority and power are often considered the same thing, but they're not. Authority is a right and its legitimacy is based on an authority figure's position in the organization. Power, on the other hand, refers to an individual's capacity to influence decisions.

Providing Skills and Knowledge

Employee training is a learning experience that seeks a relatively permanent change in employees by improving their ability to perform on the job. Training may involve what employees know, how they work, or their attitudes toward their jobs, coworkers, managers, and the organization. The questions in Exhibit 7-6 suggest the kinds of signals that can warn a manager when training may be necessary. Indications that job performance is declining include decreases in production numbers, lower quality, more accidents, and higher scrap or rejection rates, which might suggest that worker skills need to be fine-tuned—given that the decline is not related to lack of effort. Managers must also recognize that training may be required as a result of job redesign or a technological breakthrough

Formalization

Formalization refers to how standardized an organization's jobs are and the extent to which employee behavior is guided by rules and procedures. In highly formalized organizations, there are explicit job descriptions, numerous organizational rules, and clearly defined procedures covering work processes. Although some formalization is necessary for consistency and control, today many organizations rely less on strict rules and standardization to guide and regulate employee behavior than they did in the past. Employees are given the latitude, for example, to accommodate a customer dropping off a roll of film to develop a half-hour after the store's cutoff time. With low formalization, the employee could calculate that she can develop the film before store closing and thus, demonstrate good customer service and bring in revenue. Of course, there will always be organizational rules that are important for employees to follow—and these rules should be explained so employees understand why it's important to adhere to them

Closing the Deal

Interviewers who only expose an organization's positive characteristics are likely to have a workforce that is dissatisfied and prone to high turnover. During the hiring process, every job applicant acquires a set of expectations about the company and job for which he or she is interviewing. When the information is inflated, mismatched applicants don't self-eliminate and new hires are apt to become disillusioned, less committed, mistrustful, and to resign earlier. To increase job satisfaction among employees and reduce turnover, managers should consider a realistic job preview (RJP), which includes both positive and negative information about the job and the company. For managers, realistic job previews offer a major insight into the HRM process: It's just as important to retain good people as it is to hire them in the first place.

Strategic Weapons

In today's intensely competitive and chaotic marketplace, organizations are looking for whatever "weapons" they can use to do what they're in business to do and to achieve their goals. We think six strategic "weapons" are important in today's environment: customer service, employee skills and loyalty, innovation, quality, social media, and big data. We've covered customer service in previous chapters and now we'll look at quality, social media, and big data. Many organizations employ quality practices to build competitive advantage and attract and hold a loyal customer base. If implemented properly, quality is a way for an organization to create a sustainable competitive advantage. If a business is able to continuously improve the quality and reliability of its products, it may have a competitive advantage that can't be taken away. Incremental improvement is something that becomes an integrated part of an organization's operations and can develop into a considerable advantage. To promote quality, managers in diverse industries—such as health care, education, and financial services—are discovering the benefits of benchmarking, which is the search for the best practices among competitors and noncompetitors that lead to their superior performance. Successful social media strategies should (1) help people—inside and outside the organization—connect; and (2) reduce costs or increase revenue possibilities or both. As managers look at how to strategically use social media, it's important to have goals and a plan. Big data can be an effective counterpart to the information exchange generated through social media. All the enormous amounts of data collected about customers, partners, employees, markets, and other quantifiables can be used to respond to the needs of these same stakeholders. With big data, managers can measure and know more about their businesses and "translate that knowledge into improved decision making and performance." Case in point: When Walmart began looking at its enormous database, it noticed that when a hurricane was forecasted, not only did sales of flashlights and batteries increase, but so did sales of Pop-Tarts. Now, when a hurricane is threatening, stores stock Pop-Tarts with other emergency storm supplies at the front entrance. This helps them better serve customers and drive sales.

Management by Objectives

Instead of using traditional goal setting, many organizations use management by objectives (MBO), a process of setting mutually agreed-upon goals and using those goals to evaluate employee performance. A manager using this approach would sit down with each member of his or her team to set goals and periodically review whether progress is being made toward achieving those goals. MBO programs have the four elements listed on the slide. MBO uses goals to both make sure employees are doing what they're supposed to be doing and to motivate them. Studies show that actual MBO programs can increase employee performance and organizational productivity, and that goal setting can effectively motivate employees.

Team Structure

Larry Page and Sergey Brin, co-founders of Google, have created a corporate structure that "tackles most big projects in small, tightly focused teams." In this team structure, employee empowerment is crucial because there is no line of managerial authority from top to bottom. Instead, employee teams design and work in the way they think is best, but are held responsible for all work performance results in their respective areas. In large organizations, the team structure complements what is typically a functional or divisional structure to allow the organization to have the efficiency of a bureaucracy with the flexibility of teams. For instance, companies such as Amazon, Boeing, Hewlett-Packard, and Xerox extensively use employee teams to improve productivity. Note that employees must be trained to work on teams, receive cross-functional skills training, and be compensated accordingly. Without a properly implemented team-based pay plan, many of the benefits of a team structure could be lost.

Steps in Goal Setting

Managers should follow six steps when setting goals: Review the organization's mission and the employees' key job tasks. Goals should reflect the mission, and managers need to clearly define what they want employees to accomplish as they do their tasks. Evaluate available resources. Goals should be challenging but realistic with regards to available resources. Determine the goals individually or with input from others. The goals reflect desired outcomes and should be congruent with the organizational mission and goals in other organizational areas. These goals should be measurable, specific, and include a time frame for accomplishment. Make sure goals are well-written and then communicate them to all who need to know. Build in feedback mechanisms to assess goal progress. If goals aren't being met, change them as needed. Link rewards to goal attainment. Once the goals have been established, written down, and communicated, managers are ready to develop plans for pursuing them.

Employee Training Methods

Most training takes place on the job because it's simple and usually costs less, but many other training methods are available. The more popular on-the-job and off-the-job training methods are summarized here in Exhibit 7-7. Managers ensure that training is working by evaluating the results. That typically means that several managers, representatives from HRM, and a group of workers who have recently completed a training program are asked for their opinions. These reactions are not necessarily valid, so training must also be evaluated in terms of how much the participants learned; how well they are using their new skills on the job; and whether the training program achieved its desired results.

Organizational Stakeholders

Note that these stakeholders include both internal and external groups because both groups can affect what an organization does and how it operates. Managers benefit from good management of stakeholder relationships because stronger relationships can improve the predictability of environmental changes, lead to more successful innovations, foster a greater degree of trust among stakeholders, and increase organizational flexibility to reduce the impact of change.

Setting Goals and Developing Plans

Planning involves two important aspects: goals, which are objectives, and plans, which are desired outcomes or targets. Plans guide managers' decisions and form the criteria against which work results are measured. They usually include resource allocations, budgets, schedules, and other necessary actions to accomplish multiple goals. Most company's goals can be classified as either strategic or financial. Financial goals are related to the financial performance of the organization, while strategic goals are related to all other areas of an organization's performance. Stated goals are official statements of an organization's goals, which it wants its stakeholders to believe. But if you want to know an organization's real goals—those goals an organization actually pursues—observe what organizational members are doing. Actions define priorities.

Types of Power

Researchers French and Raven have identified five types, or bases, of power: coercive, reward, legitimate, expert, and referent. These types are summarized here in Exhibit 6-6. What kind of power does an employee with years of institutional knowledge have? What kind of authority does a prison board have?

Retaining Competent Employees

Retaining employees, especially competent, high-performing employees, is essential. Two HRM activities that play a role in this are managing employee performance and developing an appropriate compensation and benefits program. A performance management system establishes performance standards that are used to evaluate employee performance. Here in Exhibit 7-8 we see specific appraisal techniques for evaluating an employee's performance. (a) through (f) are ways to evaluate employee performance against a set of established standards or absolute criteria, but (g), a multi-person comparison, is a way to compare one person's performance with that of one or more individuals and is a relative, not absolute, measuring device. The three most popular forms of multi-person evaluations are: Group-order ranking: evaluator places employees into a particular classification, e.g. top fifth. The number of employees in each classification must be as equal as possible. Individual ranking: evaluator lists employees in order from highest to lowest performance levels. The difference between the first and second employee is the same as between any two other employees. Paired comparison: each employee is compared with every other employee in the comparison group and rated as either superior or weaker. This is an arduous task when assessing large numbers of employees.

Organizational Culture

Shared values, principles, traditions, and ways of doing things that influence the way an organization's members act.

Controlling HR Costs

Since 2002, health care costs have risen, hitting $3.2 trillion in 2013, and in 2014 rising 5 percent over the previous year. The new federal health care mandates are expected to add to those costs. As a result, some organizations are instituting wellness programs and initiatives aimed at reducing obesity and smoking and promoting fitness through incentives. Employee pension plans are the other area where organizations are looking to control costs. Pension commitments have become such an enormous burden that most companies can no longer afford them. Obviously, the pension issue is one that directly affects HR decisions when organizations want to attract talented, capable employees by offering them desirable benefits.

Flexible Work Arrangements

Thanks to technology, work can now be done anywhere and anytime. As organizations adapt their structural designs to these new realities, we see more of them adopting flexible working arrangements that exploit the power of technology and give them the flexibility to deploy employees when and where needed. Some different types of flexible work arrangements including telecommuting; compressed workweeks, flextime, and job sharing; and contingent workforce. Telecommuting is a work arrangement in which employees work at home and are linked to the workplace by computer. This arrangement saves the organization overhead and allows employees to save on commuting expenses and time. In this arrangement, managers might be concerned about supervising the productivity of remote employees, keeping employees connected socially, and the security of business information. Organizations sometimes find that they need to restructure work using other flexible work arrangements, such as a compressed workweek in which employees work more hours per day but fewer days per week. The most common arrangement is four 10-hour days. Another alternative is flextime (also known as flexible work hours), which is a scheduling system in which employees are required to work a specific number of hours a week but are free to vary those hours within certain limits. Another type of job scheduling is called job sharing, which is the practice of having two or more people split a full-time job. Organizations might offer job sharing to professionals who want to work but don't want the demands of a full-time position. Many companies use job sharing during economic downturns to avoid employee layoffs. The labor force has already begun shifting away from traditional full-time jobs towards contingent workers—temporary, freelance, or contract workers whose employment is contingent upon demand for their services. In today's economy, many organizations have responded by converting full-time permanent jobs into contingent jobs. It's predicted that by the end of the next decade the number of contingent employees will grow from 30 percent to about 40 percent of the workforce. No matter what structural design managers choose for their organizations, the design should help employees do their work in the best, most efficient, and most effective way they can.

Determining Future Employment Needs

The organization's strategic direction determines future human resource needs. Demand for employees comes from the demand for the organization's products or services. Generally, managers attempt to establish the number and mix of people needed to reach that revenue by estimating total revenue. One exception is when there is a scarce supply of qualified candidates. This could limit the number of products produced or services provided - which decreases the amount of incoming revenue. After assessing both current capabilities and future needs, managers can estimate shortages—both in number and in kind—and highlight areas in which the organization is overstaffed. Then they can develop a plan that matches these estimates and projects future employee needs and availability. Once managers know their current staffing levels they can respond. If job openings exist, they can begin recruitment - that is, the process of locating, identifying, and attracting capable applicants. In contrast, if employment planning indicates a surplus, managers may want to reduce the labor supply and initiate downsizing or restructuring activities.

Selecting Job Applicants

The selection process seeks to predict which applicants will be successful if hired. Any selection decision can result in the four possible outcomes shown in Exhibit 7-5. A decision is correct when: The applicant who was hired proved to be successful on the job, or When the applicant who was not hired would not have been able to do the job. When we reject applicants who would have performed successfully (called reject errors) or if we hired applicants who performed poorly (called accept errors). Reject errors mean increased selection costs because more applicants have to be screened but can also open the organization to charges of employment discrimination. Accept errors cost the organization in wasted training, the costs generated or profits forgone because of the employee's incompetence, severance, and the additional recruiting and selection screening. The major intent of any selection activity is to reduce the probability of making reject errors and accept errors while increasing the probability of making correct decisions. We do this by using reliable and valid selection procedures.

Group Decision Making

Decisions can be made by individuals or by groups—each approach has its own set of strengths and neither is ideal for all situations. Advantages: • More complete information. • Diversity of experiences and perspectives brought to the decision process. • More alternatives generated due to greater quantity and diversity of information, especially when group members represent different specialties. • Increased acceptance of a solution by having people who will be affected by a certain solution and who will help implement it participate in the decision. Increased legitimacy because the group decision-making process is consistent with democratic ideals, and decisions made by groups may be perceived as more legitimate than those made by a single person, which can appear autocratic and arbitrary. Disadvantages: • Time-consuming—assembling the group, getting decisions made. • Minority domination can unduly influence final decision because group members are never perfectly equal—they differ in rank, experience, knowledge about the problem, influence on other members, verbal skills, assertiveness, etc. • Ambiguous responsibility. Group members share responsibility BUT who is actually responsible for final outcome? Individual Decision—it's clear. Group decision—it's not. • Pressures to conform: groupthink, a form of conformity in which group members withhold deviant, minority, or unpopular views in order to give the appearance of agreement.

Good Stakeholder Relationships

Good stakeholder relationships can lead to desirable organizational outcomes such as improved predictability of environmental changes, more successful innovations, greater degree of trust among stakeholders, and greater organizational flexibility to reduce the impact of change. Stakeholder management can affect organizational performance. Management researchers who have looked at this issue are finding that managers of high performing companies tend to consider the interests of all major stakeholder groups as they make decisions. Another reason for managing external stakeholder relationships is that it's the "right" thing to do. Because an organization depends on these external groups as sources of inputs (resources) and as outlets for outputs (goods and services), managers should consider the interests of stakeholders as they make decisions. We'll address this issue in more detail in the next chapter when we look at corporate social responsibility.

Reasons for Planning

Managers should plan for at least four reasons, as seen here in Exhibit 5-1. Planning establishes coordinated effort. It gives direction to both managers and nonmanagerial employees so each knows what he or she must contribute— individually and as a group—to reach the organization's goals. Planning stimulates intra- and inter-department coordination of activities, which fosters teamwork and cooperation. Planning reduces uncertainty. It forces managers to look ahead, anticipate change, consider the impact of change, and develop appropriate responses. It also clarifies the consequences of the actions managers might take in response to change. Planning reduces overlapping and wasteful activities. Coordination before the fact is likely to uncover waste and redundancy. Finally, planning establishes the goals or standards that facilitate managerial control. To ensure that the plans are carried out and the goals are met.

National culture

Research shows that decision-making practices differ from country to country and two examples of decision variables that reflect a country's national cultural environment are: The way decisions are made, whether by group or team members, participatively, or autocratically by an individual manager, and The degree of risk a decision maker is willing to take. Decision making in Japan, for example, is group-oriented and values conformity and cooperation. Japanese consensus-forming group decisions, called ringisei, reflect managerial decisions that take a long-term perspective rather than focusing on short-term profits, as is often the practice in the United States. Managers who deal with employees from diverse cultures need to recognize common and accepted behavior when asking them to make decisions. Those who accommodate the diversity in decision-making philosophies and practices can reap the benefits of capturing the perspectives and strengths that a diverse workforce offers.

Different Views of Ethics

To better understand what's involved in managerial ethics, let's look at three different perspectives on how managers make ethical decisions. The utilitarian view of ethics says that ethical decisions are made solely on the basis of their outcomes or consequences. The goal of utilitarianism is to provide the greatest good for the greatest number of people. In the rights view of ethics, individuals are concerned with respecting and protecting individual liberties and privileges such as the right of free consent, the right to privacy, and the right of free speech. Under this view, making ethical decisions is simple because the goal is to avoid interfering with the rights of others who might be affected by the decision. Lastly, under the theory of justice view of ethics, an individual is equitable, fair, and impartial in making decisions. For instance, such a manager would pay individuals of similar skill, performance, or responsibility level the same wage and wouldn't base that decision on gender, personality, or favoritism.

How Do Organizations Go Global?

When organizations go global, they often use different approaches, as we see here. Managers who want to enter a global market with minimal investment usually start with global sourcing (also called global outsourcing), which means purchasing materials or labor from the cheapest source in order to maintain a competitive edge. For instance, Massachusetts General Hospital uses radiologists in India to interpret CT scans. Moving beyond global sourcing involves more investment and risk for the organization. Exporting and importing entail less investment and risk than other steps in globalization. - Exporting an organization's products involves making products domestically and selling them abroad. - Importing involves acquiring products made abroad and selling them domestically. Managers may also choose licensing or franchising to further their global penetration. Both licensing and franchising involve one organization giving another organization the right to use its brand name, technology, or product specifications in return for a lump sum payment or a fee that is usually based on sales. - Licensing is most often used by manufacturing organizations that make or sell another company's products. For example, Anheuser-Busch licenses the right to brew and market Budweiser beer to foreign brewers such as Labatt in Canada and Kirin in Japan. - Franchising is primarily used by service organizations that want to use another company's name and operating methods, such as KFC and Dunkin' Donuts. With experience in international markets, managers may next make a more direct investment through a global strategic alliance, which is a partnership between an organization and a foreign company partner created to share resources and knowledge in developing new products or building production facilities. Honda Motor and General Electric, for example, teamed up to produce a new jet engine. - A joint venture is a type of strategic alliance in which the partners form a separate, independent organization for a business purpose. For example, Hewlett-Packard has initiated joint ventures with various global suppliers to develop different components for its computer equipment. Managers may also directly invest in a foreign country by setting up a foreign subsidiary as a separate and independent facility or office. For example, United Plastics Group built three injection-molding facilities in China to become a global supplier to its global accounts.

Demographics

Demographics refers to the characteristics of a population used for purposes of social studies. It has a significant impact on how managers manage and include such factors as age, income, sex, race, education level, ethnic makeup, employment status, geographic location, and more. Age is a particularly important demographic for managers because the workplace often encompasses different age groups. Baby Boomers are those individuals born between 1946 and 1964. The sheer number of people in that cohort means they've had a significant impact on every aspect of the external environment (from the educational system to entertainment/lifestyle choices to the Social Security system and so forth) as they've gone through various life cycle stages. Gen X is used to describe those individuals born between 1965 and 1977. It followed the baby boom and is one of the smaller age cohorts. Gen Y (or the "Millennials") encompasses those individuals born between 1978 and 1994. From technology to clothing styles to work attitudes, Gen Y is impacting organizational workplaces. Then, there is Gen Z—the youngest identified age group, basically teens and middle-schoolers. This group has always been digitally connected - their primary means of social interaction is online. Demographic age cohorts are important to our study of management because large numbers of people at certain stages in the life cycle can constrain decisions and actions taken by businesses, governments, educational institutions, and other organizations. Studying demographics involves looking at current statistics and future trends. For instance, recent analysis of birth rates shows that more than 80 percent of babies being born worldwide are from Africa and Asia. And here's an interesting fact: India has one of the world's youngest populations - by 2020, the median age will be 29. And by 2050, it's predicted that China will have more people age 65 and older than the rest of the world combined.

Ethics

Ethics commonly refers to a set of rules or principles that defines right and wrong conduct. While most people recognize that something illegal is also unethical, what about questionable "legal" areas or strict organizational policies? Suppose you managed an employee who worked all weekend on a rush project. You told the employee to take two days off sometime later and mark the days as "sick days" because your company had a clear policy that overtime would not be compensated for any reason. Would that be wrong? As a manager, how will you

Groupthink

Groupthink hinders decision making and can jeopardize the quality of the decision by: • Undermining critical thinking in the group. • Affecting a group's ability to objectively appraise alternatives. • Deterring individuals from critically appraising unusual, minority, or unpopular views. How does groupthink occur? • Group members rationalize resistance to assumptions. • Members directly pressure those who express doubts or question the majority's views and arguments. • Members who have doubts or differing points of view avoid deviating from what appears to be group consensus. • An illusion of unanimity prevails. Full agreement is assumed if no one speaks up. How can groupthink be minimized? • Encourage cohesiveness. • Foster open discussion. • Have an impartial leader who seeks input from all members.

Global village

It's like being in an emergency room doing triage" , said Hewlett-Packard's senior vice president after the tsunami hit Japan. Normally, the global flow of goods routinely adapts, day in and day out, to all kinds of glitches and setbacks. However, when a major disaster strikes like the earthquake in Japan, the fragility of the global supply chain becomes more apparent. Although the world is still a global village, how managers do business in that global village is changing. To be effective in this boundaryless world, managers need to adapt to this changed environment, as well as continue to foster an understanding of cultures, systems, and techniques that are different from their own.

Formulating, Implementing, and Evaluating Results

STEP 4 is formulating strategies. As managers formulate strategies, they should consider the realities of the external environment and their available resources and capabilities to design strategies that will help their organization achieve its goals. Managers typically formulate three main types of strategies: corporate, business, and functional. We'll describe each shortly. STEP 5 involves implementing strategies. Once strategies are formulated, they must be implemented. No matter how effectively an organization has planned its strategies, performance will suffer if the strategies aren't implemented properly. STEP 6 is evaluating results. This is the final step in the strategic management process, where managers ask, "How effective have the strategies been at helping the organization reach its goals? What adjustments are necessary?"

Social Responsibility

Social responsibility refers to a business's intention, beyond its legal and economic obligations, to do the right things and act in ways that are good for society. Social responsibility adds an ethical imperative to do those things that make society better and to avoid those things that could make it worse. Social obligations are activities a business engages in to meet certain economic and legal responsibilities. It does the minimum that the law requires and only pursues social goals to the extent that they contribute to its economic goals.

How Does External Environment Affect Managers

There are three ways that the external environment affects managers: Its impact on jobs and employment. The amount of environmental uncertainty. The nature of stakeholder relationships. As external environmental conditions change, managers face the impact of these changes on jobs and employment. Economists predict that about one quarter of the 8.4 million U.S. jobs eliminated during the most recent economic downturn won't be reinstated. Such readjustments create challenges for managers who must balance work demands with having enough people with the right skills to do the organization's work. Changes in external conditions not only affect the types of jobs available but they also affect how the jobs are created and managed. For example, many employers use flexible work arrangements and contract freelancers or temporary workers.

Improving Group Decision Making

Brainstorming is an idea-generating process that encourages any and all alternatives while withholding any criticism of those alternatives. The group leader states the problem clearly and members then "freewheel" as many alternatives as they can in a given time and all alternatives are recorded for later discussion. The nominal group technique helps groups arrive at a preferred solution. It restricts discussion during the decision-making process: Group members gather but are required to operate independently. They secretly list general problem areas or potential solutions to problems. The electronic meeting blends nominal group technique with computer technology. Numerous people sit around a table with a computer terminal. Issues are presented to the participants, who anonymously type their responses onto their computer screens that are displayed on a projection screen. The major advantages of electronic meetings are anonymity, honesty, speed, and cost effectiveness. Discussions do not digress and many participants can "talk" at once without interrupting the others. The videoconference is a variant, linking media and people from different locations, increasing the efficiency with which decisions are made.

External and Internal Analyses

In STEP 2, managers conduct an external analysis so they can: Know what the competition is doing, how pending legislation might affect the organization, and how stable the local labor supply is in locations where it operates. Examine all components of the environment—that is, economic, demographic, political/legal, sociocultural, technological, and global—to see the trends and changes. Pinpoint opportunities that the organization can exploit and threats that it must counteract. In STEP 3, managers conduct an internal analysis, which provides critical information about an organization's specific resources and capabilities. An organization's resources are its assets—financial, physical, human, and intangible—that it uses to develop, manufacture, and deliver products to its customers. In comparison to assets, its capabilities are its skills and abilities in doing the work activities needed in its business. The major value-creating capabilities of the organization are known as its core competencies. Both resources and core competencies determine the organization's competitive weapons. After completing an internal analysis, managers should be able to identify organizational strengths and weaknesses. Any activities the organization does well or any unique resources that it has are called strengths. Weaknesses are activities the organization doesn't do well or resources it needs but doesn't possess. The combined external and internal analyses are called the SWOT analysis because, together, they are an analysis of the organization's strengths, weaknesses, opportunities, and threats. After completing the SWOT analysis, managers are ready to formulate appropriate strategies that: (1) Exploit an organization's strengths and external opportunities, and (2) Buffer or protect the organization from external threats.

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Structured problems are handled with programmed decision making. Unstructured problems require nonprogrammed decision making. Lower-level managers usually confront familiar and repetitive problems and typically rely on programmed decisions, such as standard operating procedures. As managers move up the organizational hierarchy, problems are likely to become less structured. However, few managerial decisions are either fully programmed or fully nonprogrammed. This means that few programmed decisions eliminate individual judgment completely and even the most unusual situation requiring a nonprogrammed decision can often be helped by programmed routines. Note that programmed decision making facilitates organizational efficiency and minimizes the need for managers with sound judgment and experience, who come at considerable cost.