Ch. 7: Business Management and Organization
cause-and-effect diagram (fishbone diagram)
(fishbone diagram) illustrates all of the contributing factors in the product design that might lead to a faulty production
the four types of management plans
strategic, tactical, contingency, operational strategic is top level, tactical and contingency is middle level, operational is first-line
decision-making sills
the ability to identify and analyze a challenge, examine the alternatives, choose and implement the best plan of action, and evaluate the results.
conceptual skills
the ability to think abstractly to picture an organization as a whole and understand its relationship to the remainder to the business community.
strategic plan
the main course of action created by top-level managers that sets the approach for achieving the long-term goals and objectives of an organization.
staff departments
the organization of a company into specific groups that interact with a focused product line or service. -shift to this when company grows -staff legal department may interact with a specific product line when support is needed for addressing regulatory issues; legal department doesn't have authority over all of product design and production issues but works with the product department on specific topics
controlling (monitoring)
the process by which managers measure performance and make sure the company's plans and strategies are being or have been properly carried out.
planning
the process of establishing goals and objectives and determining the best way to accomplish them.
organizing
the process of structuring the capital, personnel, raw materials, and other resources to carry out a company's plans in a way that best matches the nature of the work. -part of this is establishing an organization structure
management
the process of working with people and resources to accomplish the goals of an organization.
How do managers put their plans into action?
through organizing
What are the four functions of management?
planning, organizing, leading, and controlling/monitoring
departmentalization
refers to the decisions made to structure the company into smaller groups. -could be done by function or product, or by geography or type of customer served
span of control
refers to the number of functions, people, or things for which an individual or organization is responsible
objectives
short-term targets designed to help achieve goals.
organizational chart
shows how groups of employees fit into the larger organizational structure. -visual representation of several ideas that reflect structure of company
time management skills
skills that give people the ability to be effective and productive with their available time.
tactical plans
specifically determine the resources and the actions required to implement particular aspects of a strategic plan. -1 to 3 year view (as opposed to 5 with strategic) -eg: determining a company's annual budget
What is the highest level of planning in an organization?
strategic planning
What plan will be used if unforeseen events occur?
a contingency plan
horizontal organization
(flat organization) is flattened where the management layer is collapsed and the majority of employees are in working teams or groups. -power is distributed, with many people organized in teams or groups -may have some pyramidal aspects, like CEO and maybe middle managers, but remaining employees work in teams or groups
vertical organization
(tall organization) is organized by specific function, such as marketing, finance, purchasing, information technology, and human resources. -power belongs to a few, and most people are in positions in which they report to a supervisor
What characteristics must a company have to operate with a network structure?
-be highly flexible and innovative -be able to respond quickly to threats and opportunities
What are the basic tools managers use for monitoring quality?
-check sheet -control chart -histogram -Pareto chart -scatter plot -run chart -cause-and-effect diagram
What are some benefits of well-defined vision and mission statements?
-keeping management on track by ensuring strategies are consistent with the organization's goals -inspiring employees -giving investors insight into the values of the organization
What factors affect how an organization chooses to structure itself?
-number of employees -speed at which decisions need to be made -how vulnerable business is to rapid changes -collaborative nature of the work
What are the different levels of management?
-top managers (President, CEO, Executive Vice President) -middle managers (controller, sales manager, marketing manager, operations manager) -first-line managers (supervisor, department head)
How is power distributed in an organization?
-vertical (tall) organization -horizontal (flat) organization
stages of decision making
1. Identify problems or opportunities --> 2. Generate possible solution --> 3. Evaluate the potential solution --> 4. Choose and implement a plan of action --> 5. Evaluate the decision --> repeat
bits of advice for managers
1. Keep your cool. 2. Accept opportunities outside your comfort zone. 3. Put your employees first. 4. Earn loyalty from others. Give respect to others. 5. Be able to admit when you are wrong. 6. Never stop learning. 7. Your success comes when those around you are successful. 8. Encourage creative thinking. 9. Be the change you want to see in the workplace. 10. Listen first.
PDCA cycle
1. Plan 2. Do 3. Check 4. Act
What three questions does a strategic plan help to answer?
1. Where is the company going? 2. What should the company focus on? 3. How will the company achieve its goals?
Learning Objectives
7-1: (The Foundations of Management) Identify the levels of management and the skills managers need to be successful, and explain how the strategic plan, the corporate vision, and the mission statement are defined for a business. 7-2: (The Functions of Management: Planning) Discuss why managers need tactical plans, operational plans, and contingency plans. 7-3: (The Functions of Management: Organizing) Explain the significance of organizing, and detail how most companies are organized. 7-4: (The Functions of Management: Controlling) Detail how managers ensure that the business is on track and is moving forward.
What is an example of a strategic plan, a tactical plan, and an operational plan?
A paper supply company may have the strategic plan to sell more products to large offices on the East Coast. The tactical plan may be to determine how much money should be allocated to advertising in that area. Their operational plan might be to determine which employees will travel to advertise the product.
What are the pros and cons of horizontal organization?
Benefit that each team has more responsibility for the outcome of its work; less sense of competition for power and more push toward collaborative work. Each employee empowered to have responsibility and decision-making authority. Fewer layers means approvals from different divisions can be sought and received much faster. Deemed the model for the knowledge age. Previously only bosses had access to information, but today employees do, so more effective structure. Suitable for industries that require rapid responses to quick changes.
How can planning help companies weather unexpected events?
Contingency planning includes looking at how a company will communicate (internally and externally). Internally, employees need to be informed about how to continue their jobs. Externally, an organization must have a plan to deal with requests for information either from employees, families of employees, or media.
How is moving toward the corporate vision measured?
Control system forms a cycle: performance standards are set --> actual performance is measured and compared against standard --> adjustments are made --> perform corrective action --> reevaluate performance standards --> repeat.
SWOT analysis Walmart example
Internal Strengths: -powerful brand -reputation for value, convenience -wide range of products in one store Internal Weaknesses: -not as flexible as competitors who sell just one type of product (clothing) -global but still in only a few countries External Opportunities: -expand to new locations and new types of stores -take over or form alliances with other global retailers in Europe or China External Threats: -Intense price competition increasing -global retail exposes Walmart to political problems in the countries where it operates -being number 1 makes Walmart the target or competition
What happens after a SWOT analysis is completed?
Managers establish a set coals and objectives based on the information gathered from the SWOT analysis. SMARTER helps when designing and wording them.
Does every company have all three layers of management?
No, some have more and some have fewer. Usually, you'll find extra layers are middle managers.
Are mission statements only for businesses with a profit?
No; useful for not-for-profits, too. These ones are focused on outreach to the community or a specific public service rather than on investor return
What makes an effective mission statement?
Ones in which employees feel owner's passion because this has a positive impact; employees then incorporate goals and objectives of mission into daily work and pass on to customers and suppliers through words and actions.
What skills should a manager have?
conceptual, technical, time management, interpersonal, decision-making
What are the pros and cons of vertical organization?
Organized by specific functions, like marketing, finance, purchasing, IT, human resources, so levels of expertise within the functions are developed, and managers have direct authority and reporting responsibility for their area; integrating the functions and divisions not always easy because communication and decisions must travel up/down long chain-of-command lies-->difficulty responding quickly to changes in a market. Benefit that one person in charge and clear point of authority for decision making. In early 1990s, criticized as being overspecialized, fragmented, inflexible
What other tools are used to assess performance besides financial, production, and sales measures?
Quality (goods/services must meet and exceed customer expectations).
How is a strategic plan developed?
Reflects what is happening inside and outside an organization and shows how those conditions and changes will affect the organization in the future; those making one must pay attention to the capabilities and resources of an organization as well as changes in the environment.
What organizational structure works across multiple companies?
network organization
What are top managers focused on?
They develop the "big picture" for a company; outline long-term goals and strategic vision; create plans that will take company is desired direction; establish culture of organization and inspire employees to adopt the vision they have for the organization. In smaller corporations/start-ups, top managers may be responsible for planning and carrying out day-to-day tasks of company. Growth of business --> need to hire new layer of managers to distribute tasks.
What do managers do when examining internal strengths and weaknesses?
They must analyze a company's internal resources, including financial health, strength of employees, marketing, operations, and technological resources. -eg: strong in marketing department, weak in location
What do managers do when examining external threats and opportunities?
They must assess various external elements, like economic, political, and regulatory environments as well as social, demographic, macroeconomic, and technological factors that could affect the company; also analyze state of firm's industry and market as well as competitors. -eg: opportunity of awareness of global warming for alternative energy company, threat of recession for the energy company
Does a company's organization structure ever change?
Yes. Company may grow so large that product lines, geographic regions, or manufacturing process may become difficult to manage --> restructure from vertical organization to horizontal; managers usually try to reorganize by function (eg: structure organization into divisions of employees who work on just one product line, or teams to specialize in one geographic region or work through one manufacturing process). These divisions work like separate mini-companies; each division has own set of functional expertise, so separate managers are in charge of financing, marketing, etc for that division.
Pareto chart
a combination bar and line graph that shows different categories of problems and the total (cumulative) number of problems. -eg: breakdown of types of complaints leading to returned merchandise.
line organization
a complex of managerial relationships that includes both line organization and staff departments. -product manager may be responsible for the design and production of that item -easy to document in a single, clean organization chart
histogram
a graph that displays the count of the number of times a specific event occurs. -eg: number of times the smoothness of a tube produced was in the range of 5 to 10
run chart
a graph that displays the value of some data across a specific set of dates. -managers can identify problems that occur in a certain cycle (like once a month)
scatter plot
a graph that displays the values of two variables to see if there is a relationship between them. -eg: if more time in kiln creates tiles with higher smoothness value
control chart
a graph that shows the average and fluctuations of a process being monitored to determine whether it is behaving within the limits of proper functioning.
What helps define the purpose of a business?
a mission statement
contingency planning
a set of plans that ensures that an organization will run as smoothly as possible during an unexpected disruption. -eg: used if company's best-selling product is recalled due to a defect, or if it experiences more sales than it can produce -events may include loss of data center, buildings, or staff, or power outages
check sheet
a simple sheet recording the number of times certain product defects occur.
Six Sigma
a statistically based, proactive, long-term process designed to examine the overall business process and prevent problems. -business must not allow more than 3.4 defects per million opportunities -produce results that are consistent and repeatable, which means few defects and consistent high level of customer satisfaction
What helps define the direction of a business?
a vision
total quality management (TQM)
an integrated approach that focuses on quality from the beginning of the production process up through managerial involvement to detect and correct problems.
goals
broad, long-term accomplishments an organization wants to achieve within a certain time frame. -usually 5 years
network organization
collection of independent, mostly-single function firms that collaborate on a product or a service. -eg: Boeing uses to build its 787s; in past, company's airplanes were built mostly by Boeing employees, but today they rely on expertise of hundreds of manufacturers worldwide to independently manufacture components -companies include Nike, which only owns one manufacturing plant, Reebok, which designs and markets but does not produce any of its products.
top managers
corporate officers who are responsible for an organization as a whole. -chief executive officer (CEO)/president -chief financial officer (CFO) -chief operations officer (COO) -chief information officer (CIO)
mission statement
defines the core purpose of the organization (why it exists) and often describes its values, goals, and aspirations. -helps management stay focused and lets employees understand core values of company -reflects personality of company; may use scientific jargon to target certain audience, or reach larger audience by using direct statement
operational plan
determines the process by which tactical plans can be achieved. -first-line managers determine process that tactical plans can be achieved -depend on daily or weekly schedules and focus on specific departments or employees
interpersonal skills
enable managers to interact with other people to motivate them. -all managers need this at all levels
strategic planning process
establish corporate purpose (mission statement, values, goals) --> perform SWOT analysis (internal strengths and weaknesses, external opportunities and threats) --> formulate strategy (tactical planning) --> implement strategy (operational planning)
first-line managers
fill a supervisory role over those employees who carry out the day-to-day operations of a company.
SMARTER
goals should be Specific, Measurable, Acceptable (to those working to achieve the goals), Realistic, Timely, Extending (the capabilities of those working to achieve the goals), Rewarding to employees
inverted organization
has a structure where management is answerable to employees; management's role is to enable, encourage, and empower employees to do what they do best. -Nordstrom -most firms end up using this structure along with traditional vertical structure (so employees still have supervisors, but managers equally accountable to employees as supervisors)
matrix organization
has a type of management system in which people are pooled into groups by skills and then assigned to projects as needed. -engineer report to engineering supervisor but, after being assigned to a project, report to a project manager as well -useful when business is product-based because promotes resources sharing -shared authority and responsibility --> better coordination between managers and lead to better project results -two bosses can create conflicts, so only for specific settings
What is the more common organization structure today?
horizontal
vision
identifies what the business wants to be in the future. -should be made clear to all employees and stakeholders
technical skills
includes the abilities and knowledge that enable employees to carry out the specific tasks required of a job or a department.
line and staff organization
managers have direct control over the units and employees they supervise but have access to staff specialists for assistance.
middle managers
top managers for one division or a segment of an organization. -segments may be finance, marketing, sales, operations, information technology (IT) -team leaders may be responsible for cross-functional groups of employees who work on projects or other tasks of the organization
SWOT analysis
used to determine the strategic fit between an organization's internal and external capabilities; SWOT stands for Strengths, Weaknesses, Opportunities, and Threats
How is a tactical plan translated into instructions of employees?
using an operational plan
How do companies document the structure of an organization?
using an organization chart
How do managers decide how to execute a strategic plan?
using tactical plans