Kelley School of Business - I-Core Management Midterm

Why do they say most competitive advantages are temporary?

General process: 1) Profit attracts competition 2) Competition erodes profit 3) firm tries something new and makes profit *and the cycle repeats...

What is an FTE? How do you calculate it?

"Full Time Equivalent," or the number of 40 hr/week work units available in your department. Calculate Current Workforce: # of FTEs 1 40 hr worker = 1 FTE part time employees = % FTE based on hrs they supply

Describe the Thwart Correlation Analysis

"Thwart" = preventing someone from accomplishing something. Essentially, the thwart correlation analysis shows that sometimes there is a curvilinear relationship between 2 variables. In other words, as one variable increases, so does the other, but only up to a certain point. Then, at that point, it isn't always the best option to pursue the highest value of one of the variables. In the textbook, they gave the example of performance and anxiety. All the way up until "moderate" anxiety levels, performance continued to increase, although once it started getting to "high" levels, performance started declining.

What are the 5 steps of the strategic management process?

*in relation to the 3 strategy steps 1) Mission/Vision (firm makes theory) 2) External and Internal Analysis (firm tests theory) 3) Strategic Choice (firm tests theory) 4) Strategy Implementation (firm tests theory) 5) Competitive Advantage (goal for firm = C.A.)

How do you measure how much labor you will need in the future?

+ or - %change in work anticipated to (and from) current number of FTE's. Ex: You anticipate a 12% increase in work next year. Current FTE's + 12 = # FTE's needed to do work next year

What are the 2 defenses against discrimination?

-Job Relatedness/Bona Fide Occupational Qualification (BFOQ) or Business Necessity -Seniority

What is a strategy? What are the 3 steps of establishing it?

-a firms theory about how to make money STEPS: 1) Firm develops theory 2) Firm terms theory 3) Success = Having a Competitive Advantage

Sam's Club has been in Bloomington for over 20 years. Last year, Bloomington just got a Costco. Sam's Club executives know that Costco typically pays their employees more. What external factor are they being attuned to?

-anticipated action of competitors

What is discrimination? What is the difference between disparage treatment and adverse impact?

-discrimination: making decisions or distinctions among people *disparage treatment: treating someone differently because of protected class status *adverse impact: same standard is applied to all, but that standard affects a protected class more negatively

What are the big five personality factors?

-emotional stability -extroversion -openness to experience -agreeableness (optimistic outlook) -conscientiousness (do you do what you say you're gonna do?)

What should the mission statement's purpose be for employees and executive?

-it should help guide employee decision making and determine strategic choices

What are the (2) desirable characteristics of a recruiter?

-positive signaling > good reputation for organization -relate to recruits value systems > closer to recruiter age and situation

What is title 7 of the civil rights act of 1964?

-prohibits employers from basing employment decisions on an applicant's race, color, religion, gender, or national origin -employment decisions: "compensation, terms, conditions, or privileges of employment"

Name some typical evaluative methods (7 total)

-skill/ability test -integrity test -job simulation/work sample -knowledge test -cognitive ability test -personality test -structured interviews

Describe the big 4 accounting firm recruiting pyramid

-they get entry-level candidates from the external labor market -they promote upwards for management positions like: seniors, managers, and partners -they use the "up or out" talent philosophy - basically you either get promoted or fired/leave

How do you measure how much labor you will have in the future?

-use historic turnover rates and/or account for trends that could change rates (employee retention programs, unemployment rate, external demand, competition)

What are the 3 types of competitive advantages?

1) Competitive Parity: have normal returns, meet expectations *occurs when people are doing the same thing in industry (i.e. Uber and Lyft) 2) Competitive Advantage: above normal returns, exceeds expectations 3) Sustained Competitive Advantage: making more profit than competitors for a sustained period of time (4+ years)

What two things does a good mission statement contain?

1) Concrete language 2) Discusses the why => Making money alone isn't sustainable in the long-run

(3) types of validation?

1) Content Related: measure assesses job-related behaviors -ex: having a candidate who will be working with excel a lot do a VLOOKUP function 2) Construct Related: measure assesses what it claims to measure -is the test measuring what it's actually supposed to? 3) Criterion Related: measure's scores predict job success -does this allow us to predict how someone will do on the job?

1) What does the job characteristics model look like? 2) Why is it used? 3) What does it tell us? 4) What 2 things are required for it to be effective?

1) Core Job Characteristics > Critical Psychological States > Personal and Work Outcomes 2) Proper job design can increase motivation, work performance, and job satisfaction; Firms use the model to design jobs that are satisfying to the company AND the person - reducing turnover and making them more $. 3) It tells us that certain characteristics lead to critical psychological states that have positive personal and work outcomes. 4) It requires: -strong growth need of employees (desire to move forward, ambition) -talent and skill (if they don't have the basic requirements, they will not be able to effectively complete tasks)

What are the 2 categories for strategy under Porter's Competitive Strategies? Are these mutually exclusive?

1) Cost Leadership: profit=lower costs 2) Differentiation: what makes the company unique *not mutually exclusive; it's a spectrum - most companies fall somewhere in the middle

(7) stages of the employment life cycle?

1) Define the work - Job Analysis 2) Source and recruit 3) select 4) orient and train 5) manage performance 6) engage and retain 7) separate *and it goes on. Most people don't have the same job their whole life!

What are the 2 types of compensation? give examples for each

1) Direct Pay: -base pay -incentive pay (bonuses, commission, profit sharing, stock options, tips) 2) Indirect Pay: -legally required: SS, unemployment insurance, workers comp., family and medical leave, some health insurance -optional: PTO, disability insurance, life insurance

When forecasting labor needs, what external factors should be considered? (4)

1) Economic Indicators -seasonal fluctuations -interest rate/economic conditions -legal changes 2) Availability of your desired talent 3) trends affecting your industry 4) anticipated action of competitors

(3) facets of a job analysis? (define the work - stage 1 of employment life cycle)

1) Identifying needed work - what does the org. do? 2) combining work into jobs - how will work be divided? 3) specifying qualifications for the job - what kind of employees can perform this work?

When is culture a liability? (5)

1) Institutionalization - focuses on relationships above company goals Ex: church greeters talk with members already in church community instead of reaching out and making new members feel welcome. 2) Barriers to change 3) Barriers to mergers and acquisitions 4) dysfunctions (supports bad behavior) 5) barriers to diversity - discourages change and diversity

If a company chooses to differentiate, what should they prioritize? What type of product are they creating? What type of workers should they hire? How do they view paying those workers?

1) They should prioritize resources on *branding* Ex: Louboutin/red bottoms 2) They are creating a product that is perceived by the market to be valuable by promoting brand individuality. 3) They see salary as an *investment* and should hire workers that are: -innovative -experts -experienced

What are the (4) methods used to design work? describe the pros and cons of each.

1) Job Rotation/Cross Training: Employees do a variety of different jobs across the firm. PROS: -increases motivation -help employees see work contributions -learn from industry rivals and norms *works well if you're in a time crunch CONS: -work disruptions (asking for help) -supervisor time (time away from normal duties) -reduced efficiency 2) Relational Job Design: Connecting people with those that benefit from their work Ex: open kitchen concept at restaurants so chefs can see people enjoying meals, foster care check writers seeing picture of child being helped in system PROS: -increases motivation CONS: -none 3) Alternative Work Arrangements: Giving employees flexibility to decide when/how they work. Examples: -flextime -job sharing -telecommuting (remote positions) PROS: -gives employees autonomy > work motivation CONS: -Yahoo tried to go completely remote and realized employees couldn't get a sense of culture and barely developed relationships with coworkers 4) Employee Involvement: Allowing Employees to help make decisions TYPES: -Participative Management (Direct) > self-managed work teams make decisions together -Representative Participation (Indirect) > workers represent a group of people (ex: unions)

What 2 factors help decide what to pay someone?

1) Job Structure - pay based on job's value to company and focus on "compensable factors" (how the job makes the company $) 2) Individual/Personal Structure - pay based on the employee's individual value to the company

What are the 3 options for deciding whether to out-pay competitors? How do these options compare in terms of: -attracting new employees -retaining current employees -controlling labor costs -enhancing employee satisfaction

1) Lead - pay above industry average -advantage for attracting new employees -advantage for retaining employees -mixed for controlling labor costs -advantage for employee satisfaction 2) Meet - pay at industry average -neutral for attracting new employees, retention, controlling labor costs, and enhancing satisfaction 3) Lag - pay under industry average -disadvantage for attracting new employees -mixed for retaining employees -advantage from controlling labor costs -disadvantage for employee satisfaction

What are the (3) critical psychological states?

1) Meaningfulness of Work 2) Personal Responsibility 3) Knowledge of Outcomes

What (4) measurements do recruiters use to measure their success?

1) New Hire Performance - are they who they said they were? 2) New Hire Satisfaction - did they give a realistic job preview? 3) Manager Satisfaction - did they find good applicants? 4) New Hire Time to Productivity - how long it takes them to start being an asset to the company

Open vs targeted labor recruiting - advantages of each, and when are they best used?

1) Open - anybody can apply (fliers, online posts, etc.) -diverse set of applicants, lowers cost/applicant -best when: large number of applicants are required, pre-entry KSAO's aren't important 2) Targeted - seeking out specific segments (career fairs) -narrows pool of applicants, more personal approach -best when: you need specific skills, hiring for high-level positions

What 3 things make resources hard to imitate?

1) Patent Protections *BUT, your company must do its own research to uphold it and collect compensation 2) Brand Identity *brand's have unique value when consumers associate their brand with being high quality, great service, low pricing, etc. 3) Social Systems and Company Culture *a huge advantage when the firm is internally strong and has people that are hard to imitate and a great company culture (ex: Chic Fil A)

What (2) traits do useful measures have?

1) Reliable: results can be trusted - measuring correctly 2) Valid: results translate to reality - measuring the right thing

What 2 things does the resource-based view (internal analysis) assume?

1) Resource Heterogeneity: Even if two firms appear the same on paper, they are never identical. 2) Resource Immobility: You cannot just move resources from one firm to another and expect the same result.

What are the 3 categories of selection tools?

1) Screening Tools: narrow down the applicant pool -resumes/cover letters -job applications -unstructured interviews 2) Evaluative Tools: Examine remaining applicants to determine who to hire 3) Contingent Tools: Final Check before employment -background check -drug testing

Why are realistic job previews important?

1) Self-Selection and Commitment to Choice: If people know the work is going to be challenging, they are better prepared for it 2) Vaccination: Alert employees of a bad thing that could potentially happen, so they can be prepared for it.

What are the (4) types of organizational structures? What are the pros and cons of each?

1) Specialization: to what degree are activities subdivided into separate jobs? Do you need broad or deep knowledge? PROS: -efficient, can accomplish a lot -everyone gets part done quickly w/ high quality CONS: -can only specialize for so long > less productive overtime -human diseconomies > humans get bored doing same thing 2) Formalization: how consistent is product, processes, and documentation to ensure standardization? PROS: -consistency CONS: -there's no good way to police mistakes -not a lot of options when something goes wrong 3) Professionalism: How conservative do your customers expect you to be? PROS: -helps prove legitimacy -creates trust CONS: -"White Coat Syndrome" > not good communication between customer and professional 4) Centralization: Who makes the decisions for the company? PROS: -consistency -cost savings CONS: -hurts customers (delays service via slow decision making) -if anything goes wrong, must ask for help.

What (4) ways is culture transmitted?

1) Stories 2) Rituals 3) Symbols 4) Language

What are the (3) ways to recruit from the internal labor market? What are the pros and cons of each?

1) Succession Management and Talent Inventories PROS: -know company -proven strong performers CONS: -overtraining -can increase turnover if people don't get promoted over someone else and get mad 2) General Employee Development (training) PROS: -employees have more collective knowledge CONS: -overtraining > might not use skills -inefficient 3) Internal Job Postings PROS: -more movement in organization -reduce turnover by interesting people that might have otherwise left CONS: -lots of training -no efficiencies gained vs. outside hiring

Measurement errors can be (2) things - describe each.

1) Systematic: you know the data is wrong and you know why. 2 types: -deficiency: you don't have all the data -contamination: something gets added and contaminates data 2) Random: you don't know why the data is wrong -only accounts for about 2% of the time

(Internal Analysis) What 4 things help chose what a company's most important resources are?

1) Valuable: Does it contribute to success in some way? 2) Rare: Does the market associate our firm with this product or service? 3) Inimitable: Can this product/service be easily copied? 4) Exploitable: Can we compete alone for a while, or is this product/service easy for other companies to pursue? Follow the VRIO Outcomes: *If yes, keep going. If no, the following will be the outcomes: Valuable: competitive disadvantage Rare: competitive parity Inimitable: temporary competitive advantage organized: Yes= sustained competitive advantage No= unused competitive advantage

What are the (4) steps in the forecasting process?

1) What is my current workforce? 2) How much labor will I need next year? 3) How much labor will I have next year? 4) Hire or release workers

(2) ways to measure reliability?

1) Written Tests -test and re-test (see if scores are consistent) -alternate or parallel form (ask same questions but in a different way) -internal consistency (ask same question multiple times and see if they were answered in same way) *verifies if people actually took test 2) Interviews and Personal Evaluations -inter-rater agreement (do the raters agree? train recruiters to use the same selection process)

What are the (4) personal and work outcomes?

1) internal motivation 2) high quality work 3) high work satisfaction 4) low absenteeism and turnover

When forecasting labor needs, what internal factors should be considered? (2)

1) projected growth of business -new or expanded products/services -technological advancements or changes 2) planned promotions/succession plannings -can workers be promoted to move up, or should you hire from the external labor market?

(6) tests that determine if selection method is good?

1) reliability 2) validity 3) applicant reactions 4) usability - is it something that they could actually implement? 5) Selection Ratio - must be balanced; if you're using a selection tool, it should be letting in just the right % of people to the next round 6) Legally Defensible - are there any liabilities to doing this?

What are the (5) core job characteristics?

1) skill variety - having multiple skills 2) task identity - sense of contribution 3) task significance - feeling like work is meaningful 4) autonomy - eliminates control 5) feedback - gauging what they did well and what they can improve (personnel development)

What are the four types of cultures? What are the four factors that separate them?

4 factors: flexibility, stability, internal, external 1) Clan: internally-focused with flexibility -emphasis on collaboration, teams, cooperation -strong employee commitment -ex: Southwest Airlines 2) Adhocracy: externally-focused with flexibility -relative to market and flexible to change -focus on competitors and market demands -emphasis on innovation -dynamic and entrepreneurial -ex: Apple and the MP3 litigation 3) Hierarchical: focus on internal efficiency -many rules and regulations -emphasis on consistency, rules, and control -ex: Walmart 4) Market: reactive to market, consistency is key -high focus on efficiency and productivity to be competitive -competition and market-focused -ex: 3M and reverse-engineering

Power Co has average turnover rates of 18%. Given the current low unemployment rates, they believe it'll be 5% higher than average next year. They currently have 42.75 FTE's - how many will be available next year?

42.75 - 23 (18+5) = 19.75 will be available

Aldi allows their stocking team in one of their Indiana stores to decide how they want to organize the store. What type of design method is this?

> Employee Involvement - specifically, participative management

(VRIO): If a resource is valuable, but not rare, what is this called?

A competitive parity

A construction company has the following workforce: -20 engineers at 30 hours/week -15 engineers at 20 hours/week -30 engineers at 10 hours/week How many FTE's do they have?

ANSWER: 30 FTE's (20 x .75) = 15 (15 x .50) = 7.5 (30 x .25) =7.5

What is a mission/vision?

Addresses the firms purpose, what the firm wants to be, and who the key stakeholders are/how they are served.

After the MP3 was released, the company dealt with a lot of litigation that slowed down their business. Apple held off on releasing the Ipod immediately with the MP3 and instead waiting for them to work out their quirks and learn from them to dominate the market. What type of culture is this?

Adhocracy > reactive to market, flexible to change

Southwest has a philosophy of "do it for luv." Essentially, they de-centralize their decision making to allow employees to help customers. They compete for talent by offering stock options to their pilots, and focus on having the best customer service of all airlines. What type of culture do they have?

Clan

If a company chooses low cost leadership, what type of employees should they look for and how do they view paying employees a salary?

Company goal: reduce internal costs (salaries viewed as cost) Employees should be: -low cost -obedient -work hard and efficient *best doing one thing

Complementary vs. Supplementary Fit?

Complementary Fit: -usually used with skills; what UNIQUE thing you can bring to the team. Supplementary Fit: -usually with values; do you have something we already have? (usually culture)

Typing tests are intended to measure how quickly someone can type. However, research shows that a good vocabulary also accounts for quicker typing speeds. What type of validation problem does this concern?

Construct-Related

You have connectivity issues and every application of the day is submitted incomplete. What type of measurement error is this?

Deficiency - you know WHY the data is wrong (connectivity issue) and you are missing information

Walmart became an industry leader for their complex, inimitable supply chain processes. They focus on being low cost and offering the largest variety of goods in-store to remain the best in the business. They stick to specific rules and procedures to ensure consistency across all their stores. What type of culture is this?

Hierarchical > internal: focus on internal efficiency (supply chain) and stability: stick to strict procedures and processes

What is the most common type of contamination?

Human bias -happens inherently in selection process

(VRIO): If a resource is valuable and rare, but imitable?

Invest in it while it's still making money for you. *This is seen as a temporary competitive advantage*

(VRIO): If a resource is valuable but not rare, what should be done?

Keep the resource but don't invest heavily in it; Other firms are going to join the competition soon. This is seen as a *competitive disadvantage*

Disney Theme Parks refers to all of its employees as "cast members" to remind them to preserve the customer experience. Which way of transmitting culture does this relate to?

Language

3M competes by waiting until other competitors release products within their industry and reverse engineer the product to make a better overall product. They have a very standard process of funneling the test product down every department in the company to ensure success. What type of culture is this?

Market

How do you measure how much work 1 FTE does annually?

NOTE: work can be defined by # units, customers, or sales volume Work done by one FTE= Amount of work / Number of FTEs

How do you calculate yield ratios?

New hires / applicants thus, if the number is high > effective source

What is the most important KSAO?

Personality

How does culture develop? (4 stages)

Philosophy of Organization's Founders > Selection and Promotion Criteria for Employees > Top Management's Continued Reinforcement of Value > Company Structure

Predictive Data vs Criterion Data - what are they and why are they important to each other?

Predictive data: information that predicts a person's ability to succeed in a job - results from selection tests (interview skills, personality, GPA) Criterion data: data that shows how well that person actually performs when they begin the job (performance evaluations) -important to match data from interview process and correlate it with high job performance to find potentially good candidates

What is the American Disabilities in Employment Act?

Prohibits discrimination against people 40 years of age or older Also protects people with disabilities that can do the job with/without "reasonable accommodation"

What are the (4) options for reducing employee surplus? Describe the pros and cons. What are the (4) options for handling employee shortages? Describe the pros and cons

REDUCING SURPLUS- 1) Downsizing (laying off) -fast results -high suffering > can lead to bad reputation + litigation 2) Pay reductions -fast results -high suffering 3) Hiring Freeze/Attrition -slow results -low suffering 4) Early Retirement -slow results -low suffering REDUCING SHORTAGE- 1) Overtime -fast results -high ability to change later 2) Temp. Employees -fast results -high ability to change later 3) Outsourcing -fast results -high ability to change later 4) New Hires -moderately-fast results -hard to change later

What are extra/optional benefits used for?

Recruiting tools to make people want to work at their companies!

One company sees another company's supply chain is doing very well, so they decide to poach their employees by paying more. However, when the employees come to the new firm, they aren't performing as well as they were at their previous company. Which part of the resource-based view of the internal analysis does this address?

Resource Immobility

Describe statistical significance vs. practical significance

Statistical Significance - correlation is likely not due to measurement error Practical Significance - correlation makes a real difference in our work Example for context: 99% of top performers at a company have green eyes. This is statistical significance, but it is not practical significance b/c green eyes have no significance in doing good work.

TDRS vs. KSAOs

TDRs: essentially the job description -about the work -tasks, duties, responsibilities KSAOs: essentially the skills needed for the job -about the person -knowledge, skill/ability, other characteristics NOTE: Sometimes knowledge and skill overlap, but not always. Ex: playing piano (skill) and reading sheet music (knowledge)

Cultural Iceberg Model

TOP -WHAT WE SEE *artifacts *behaviors, systems, processes, policies -WHAT WE SAY *espoused values *ideals, goals, values, aspirations -WHAT WE BELIEVE *basic assumptions *underlying assumptions - what they believe that influences 2 above BOTTOM

In 1984, Disney's theme parks generated about 77% of their profits, while consumer products and filmed entertainment only generated about 22% and 1%, respectively. Now, Disney has focused on character development/making movies and has diversified into retail stores, hotels, licensing, and television networks. Why would they do this?

Theme parks did not give them a sustained competitive advantage, it was too easy for competitors to do, so they worked on entering new markets.

Why are more companies turning to technology for measurements?

To eliminate human error

(VRIO): If a resource is valuable, rare, inimitable, but not organized? What if it is organized?

Unused Competitive Advantage - not organized Sustainable Competitive Advantage -organized

What is the controversy around the NFL Combine? What is the take-away?

Validation Controversy Content-Related: doesn't completely mirror what NFL players do (for the 40-yd dash, they aren't in uniforms and aren't holding football) Construct-Related: you only need to catch ball once in a game, and they make them catch and turn multiple times; is this really measuring their ability to catch a ball? Criterion-Related: does performance at combine really predict top NFL performers? Isn't always the case TAKEAWAY: There are trade-offs. They decided it was the best they could do under the circumstances.

When is culture an asset? (2)

When it... 1) supports strategy 2) rewards appropriate behaviors

What are shared values and how do they relate to culture?

culture=values that shape behavior *what is done, not said

What is r? what is it's context in Management?

r is the variable used to measure correlation, or the relationship between two variables; important b/c managers want a relatively-high correlation between the predictive data they use and the criterion data.

When you're searching for labor you can go to two places:

the internal labor market and external labor market