Management
Elements of competitive advantage
1, Target customers 2 achieve synergy 3. create value 4. exploit core competence
Differentiation- Broad strategic target. Source of Advantage- Distinctiveness
1. Acts in a flexible, loosely knit way; strong coordination among departments. 2. Strong capability in basic research 3. Creative flair, thinks outside the box 4. Strong marketing abilities 5.Rewards employee innovation 6.Corporate reputation for quality or technological leadership.
Characteristics of effective goals
1. Are specific and measurable 2. Have a defined period of time 3. Cover key result areas 4. Are challenging but realistic 5. Are linked to rewards.
Why do managers make bad decisions
1. Being influence by initial impressions 2. Justifying past decisions. 3. Seeing what you want to see 4. Perpetuating the status quo 5. Being influenced by emotions. 6. Overconfidence
The Administrative Model relies on assumptions different from those of the classical model and focuses on organizational factors that influence individual decisions.
1. Decision goals often are vague, conflicting, and lack consensus among managers. Managers often are unaware of problems or opportunities that exist in the organization. 2. Rational procedures are not always used, and, when they are, they are confined to a simplistic view of the problem that does not capture the complexity of real organizational events. 3.Managers' searches for alternatives are limited because of human, information, and resource constraints. 4. Most managers settle for a satisficing rather than a maximizing solution, partly because they have limited information and partly because they have only vague criteria for what constitutes a maximizing solution.
The organizational planning process
1. Develop the plan- define mission, vision. Set goals. 2. Translate the plan- define tactical plans and objectives, develop strategy map, define contingency plans and scenarios, identify intelligence teams. 3. Plan Operations- define operational goals and plans, select measures and targets, set stretch goals, crisis planning. 4. Execute the plan- Use; management by objectives, performance dashboards, single use plans, decentralized responsibility. 5. Monitor and Learn- hold planning reviews. hold operational reviews
Negative effects of planning
1. Goals and plans can create a false sense of certainty 2. Goals and plans may cause rigidity in a turbulent environment. 3. Goals and plans can get in the way of intuition and creativity.
Positive effects of planning
1. Goals and plans provide a source of motivation and commitment. 2. Goals and plans guide resource allocation. 3. Goals and plans are a guide to action. 4. Goals and plans set a standard of performance.
Factors that typically influence Centralization VS. Decentralization
1. Greater change and uncertainty in the environment are usually associated with decentralization. 2. The amount of centralization or decentralization should fit the firms strategy. 3. In times of crisis or risk of company failure, authority may be centralized at the top.
How to create a strategy
1. Managers build flexibility into strategic plans. 2. strategy is built actively and interactively strategic partnerships are key components of strategy. 4. strategy comes to life with creative execution.
The Political Model begins with 4 assumptions
1. Organizations are made up of groups with diverse interests, goals, and values. Managers disagree about problem priorities and may not understand or share the goals and interests of other managers. 2. Information is ambiguous and incomplete. The attempt to be rational is limited by the complexity of many problems, as well as personal and organizational constraints. 3. Managers do not have the time, resources, or mental capacity to identify all dimensions of a problem and process all relevant information. Managers talk to each other and exchange viewpoints to gather information and reduce ambiguity. 4. Managers engage in the push and pull of debate to decide goals and discuss alternatives. Decisions are the result of bargaining and discussion among coalition members.
6 Steps in the Managerial Decision-Making process
1. Recognition of Ddecision Rrequirement 2. Diagnosis and Analysis of Causes 3.Development of Alternatives 4. Selection of Desired Alternative 5. Implementation of Chosen Alternative 6. Evaluation and feedback.
MBO Process
1. Set goals- corporate strategic goals, department goals, individual goals. 2. Develop action plans 3. Review progress and take corrective action 4. Appraise Overall Performance
Cost Leadership- Broad strategic target Source Of Advantage- Low Costs
1. Strong central authority; tight cost controls 2. Maintains standard operating procedures 3. Easy-to-use manufacturing technologies 4. Highly efficient procurement and distribution systems 5. Close supervision; finite employee empowerment
3 steps to being an effective coalition manager
1. Talk to costumers and other managers. 2. Adress conflicts. 3. Break down barriers and promote cross silo cooperation.
The Four Assumptions underlying this model are as follows
1. The decision maker operates to accomplish goals that are known and agreed on. Problems are precisely formulated and defined 2. The decision maker strives for conditions of certainty, gathering complete information. All alternatives and the potential results of each are calculated. 3. Criteria for evaluating alternatives are known. The decision maker selects the alternative that will maximize the economic return to the organization. 4. The decision maker is rational and uses logic to assign values, order preferences,evaluate alternatives, and make the decision that will maximize the attainment of organizational goals.
Focused Cost Leadership - Narrow Strategic Target Source of Advantage - Low Costs
1. Uses characteristics of cost leadership strategy directed at particular target customer 2. Frequent detailed control reports 3. Measures cost of providing product or service and maintaining customer loyalty
Focused Differentiation - Narrow Strategic Target Source of Advantage - Distinctevness
1. Uses characteristics of differentiation strategy directed at particular target customer 2. Values flexibility and customer intimacy 3. Pushes empowerment to employees with customer contact
MBO benefits
1. focuses manager and employee efforts on activities that will lead to goal attainment 2. Can improve performance at all company levels. 3. Improves employee motivation. 4. Aligns individual and department goals with company goals.
Essential stages of crisis planning
1. prevention- build relationships, detect signals from the environment. 2. preparation- designate crisis management team and spokesperson, create detailed crisis management plan, set up effective communications system
Problems
A Problem occurs when organizational accomplishment is less than established goals.
A plan
A blueprint for a goal achievement and specifies the necessary resource allocations, schedules, tasks, and other actions. Goals specify future ends; plans specify today's means.
A Decision
A choice made from available alternatives.
The Political Model takes into consideration that many decisions require debate, discussion, and coalition building
A coalition is an informal alliance among managers who support a specific goal or solution
The matrix can be highly effective in a complex, rapidly changing environment in which the organization needs to be flexible, innovative, and adaptable. The conflict and frequent meetings generated by the matrix allow new issues to be raised and resolved. The matrix structure makes efficient use of human resources because specialists can be transferred from one division to another. A major problem with the matrix is the confusion and frustration caused by the dual chain of command. Matrix bosses and two-boss employees have difficulty with the dual reporting relationships. The matrix structure also can generate high conflict because it pits divisional against functional goals in a domestic structure, or product line versus country goals in a global structure. Rivalry between the two sides of the matrix can be exceedingly difficult for two-boss employees to manage. This problem leads to the third disadvantage: time lost to meetings and discussions devoted to resolving this conflict. Often the matrix structure leads to more discussion than action because different goals and points of view are being addressed. Managers may spend a great deal of time coordinating meetings and assignments, which takes time away from core work activities.
A cross-functional team is a group of employees from various functional departments that meet as a team to resolve mutual problems. Cross-functional teams can provide needed horizontal coordination to complement an existing divisional or functional structure. A frequent use of cross-functional teams is for change projects, such as new product or service innovation. Team members typically still report to their functional departments, but they also report to the team, one member of whom may be the leader.
Evidence-based decision making is founded on a commitment to examining potential biases,seeking and examining evidence with rigor, and making informed and intelligent decisions based on the best available facts and evidence.
A devil's advocate is a person who is assigned the role of challenging the assumptions and assertions made by the group to prevent premature consensus.
A tall structure is characterized by an overall narrow span of management and a relatively large number of hierarchical levels.
A flat structure is characterized by an overall broad span of management and relatively few hierarchical levels.
The success of the matrix structure depends on the abilities of people in key matrix roles. Two-boss employees, those who report to two supervisors simultaneously, must resolve conflicting demands from the matrix bosses. They must work with senior managers to reach joint decisions. They need excellent human relations skills with which to confront managers and resolve conflicts.
A matrix boss is a functional or product supervisor responsible for one side of the matrix. In a matrix structure, the top leader oversees both the product and the functional chains of command and is responsible for the entire matrix.
Factors Shaping Structure Strategic Needs - environment, strategy, goals. Operational Needs - technology, work processes
A mechanistic, vertical structure is appropriate for a cost leadership strategy, which typically occurs in a stable environment.
The Dog
A poor performer. It has only a small share of a slow-growth market. The dog provides little profit for the corporation and may be targeted for divestment or liquidation if turnaround is not possible.
ambidextrous approach An ambidextrous approach means incorporating structures and processes that are appropriate for both the creative impulse and the systematic implementation of innovations.
A product change is a change in the organization's product or service outputs.
skunkworks A skunkworks is one variation of a new-venture team, a separate small, informal, highly autonomous, and often secretive group that focuses on breakthrough ideas for a business.
A related idea is the new-venture fund, which provides resources from which individuals and groups can draw to develop new ideas, products, or businesses.
Re-engineering refers to the radical redesign of business processes to achieve dramatic improvements in cost, quality, service, and speed. Because the focus of reengineering is on horizontal workflows rather than function, reengineering generally leads to a shift away from a strong vertical structure to one emphasizing stronger horizontal coordination.
A task force is a temporary team or committee designed to solve a problem involving several departments. A cross-functional team furthers horizontal coordination because participants from several departments meet regularly to solve ongoing problems of common interest
A permanent team is a group of employees from all functional areas permanently assigned to focus on a specific task or activity. Emphasis is on horizontal communication and information sharing because representatives from all functions are coordinating their work and skills to complete a specific organizational task. Authority is pushed down to lower levels, and front-line employees are often given the freedom to make decisions and take action on their own. Team members may share or rotate team leadership.
A team-based structure is one in which the entire organization is made up of horizontal teams that coordinate their activities and work directly with customers to accomplish organizational goals.
Responsibility is the flip side of the authority coin; it refers to the duty to perform the task or activity that one has been assigned.
Accountability means that people with authority and responsibility are subject to reporting and justifying task outcomes to those above them in the chain of command
Escalating commitment is the tendency for managers and organizations to invest time and money in a solution even when there is strong evidence that it is not appropriate
After-action review A technique adopted from the U.S. Army the after-action review is a disciplined procedure whereby managers review the results of decisions to evaluate what worked, what didn't, and how to do things better.
Certainty
All the information the decision maker needs is fully available. Few decisions are certain in the real world, most contain certainty or risk.
Ambiguity and Conflict
Ambiguity is by far the most difficult decision situation. Ambiguity means that the goals to be achieved or the problem to be solved is unclear, alternatives are difficult to define, and information about outcomes is unavailable. Ambiguity is what students would feel if an instructor created student groups and told each group to complete a project, but gave the group no topic, direction, or guidelines whatsoever. In some situations, managers involved in a decision create ambiguously because they see things differently and disagree about what they want. Managers in different departments often have different priorities and goals for the decision, which can lead to conflicts over decision alternatives.
A Coalition
An informal alliance among managers who support a specific goal.
Oppurtunity
An opportunity exists when managers see potential accomplishment that exceeds specified current goals.
Contingency factors of strategic goals, environment, and technology influence the correct structural approach.
An organic, horizontal approach is needed for a differentiation strategy and when the organization needs flexibility to cope with an uncertain environment.
The scalar principle refers to a clearly defined line of authority in the organization that includes all employees. Authority and responsibility for different tasks should be distinct. All individuals in the organization should know to whom they report as well as the successive management levels all the way to the top.
Authority is the formal and legitimate right of a manager to make decisions, issue orders, and allocate resources to achieve organizationally desired outcomes. Authority is distinguished by three characteristics: 1. Authority is vested in organizational positions, not people. 2. Authority flows down the vertical hierarchy. 3. Authority is accepted by subordinates.
Managers confront a decision requirement in the form of either a problem or an opportunity,
Awareness of a problem or opportunity is the first step in the decision-making sequence and requires surveillance of the internal and external environment for issues that merit executive attention
Bounded rationality
Bounded rationality means that people have limits, or boundaries, on how rational they can be.
The administrative model is descriptive, an approach that describes how managers actually make decisions, rather than how they should make decisions according to a theoretical model.
Bounded rationality means that people have the time and the cognitive ability to process only a limited amount of information on which to base decisions.
Having too many hierarchical levels and narrow spans of control is a common structural problem for organizations.
Centralization means that decision authority is located near top organization levels.
change agent The change agent is an OD specialist who performs a systematic diagnosis of the organization and identifies work-related problems by gathering and analyzing data through personal interviews, questionnaires, and observations of meetings.
Changing, the second stage of organization development, occurs when individuals experiment with new behavior and learn new skills to be used in the workplace. This process is sometimes known as intervention, during which the change agent implements a specific plan for training managers and employees.
Classical Model Characteristics
Clear-cut problem and goals. Condition of certainty. Full information about alternatives and their outcomes. Rational choice by individual for maximizing outsome
idea incubator An idea incubator is an organizational program that provides a safe harbor where employees can generate and develop ideas without interference from company bureaucracy or politics.
Companies that successfully innovate usually have the following characteristics: People in research and marketing actively work with customers to understand their needs and develop solutions. Technical specialists are aware of recent developments and make effective use of new technology. A shared new product development process that is advocated and supported by top management cuts across organizational functions and units. Members from key departments—research, manufacturing, marketing—cooperate in the development of the new product or service. Each project is guided by a core cross-functional team from beginning to end.
One reason for the growing use of teams and networks is that many managers recognize the limits of traditional vertical organization structures in a fast-shifting environment. In general, the trend is toward breaking down barriers between departments, and many companies are moving toward horizontal structures based on work processes rather than departmental functions.
Coordination refers to the managerial task of adjusting and synchronizing the diverse activities among different individuals and departments.
Crisis planning
Crisis planning enables an organization to cope with sudden, unexpected events that have the potential to destroy the organization if managers aren't prepared with a quick and appropriate response.
People change People change concerns just a few employees, such as sending a handful of middle managers to a training course to improve their leadership skills.
Culture change Culture change pertains to the organization as a whole, such as when a company shifts its basic mind-set.
Evaluation and Feedback Stage
Decision makers gather information that tells them how well the decision was implemented and whether it was effective in achieving its goals. Feedback is important because decision making is an ongoing process. Decision making is not completed when a manager or board of directors votes yes or no. Feedback provides decision makers with information that can precipitate a new decision cycle. . The decision may fail, thus generating a new analysis of the problem, evaluation of alternatives, and selection of a new alternative. Many big problems are solved by trying several alternatives in sequence, each providing modest improvement. Feedback is the part of the monitoring that assesses whether a new decision needs to be made.
Target customers
Defines the customers and which of their needs are to be served by the company.
Planning
Determining the organizations goals and defining the means to achieve them. helps managers think about the future instead of day-to-day.
Diagnosis
Diagnosis is the step in the decision-making process in which managers analyze underlying causal factors associated with the decision situation,
Four Major Decision Styles
Directive Analytical Conceptual Behavioral
Force-field analysis is a technique for determining which forces drive a proposed change and which forces restrain it.
Driving forces can be thought of as problems or opportunities that provide motivation for change within the organization Restraining forces are the various barriers to change, such as a lack of resources, resistance from middle managers, or inadequate employee skills.
Brainstorming uses a face-to-face interactive group to spontaneously suggest a wide range of alternatives for decision making
Electronic Brainstorming, sometimes called brain writing, brings people together in an interactive group over a computer network.
One primary difference between programmed and non-programmed decisions relates to the degree of certainty or uncertainty that managers deal with in making the decision.
Every decision situation can be organized on a scale according to the availability of information and the possibility of failure. The four positions on the scale are certainty, risk, uncertainty, and ambiguity.
The Cash Cow
Exists in a mature, slow-growth industry but is a dominant business in the industry, with a large market share. Because heavy investments in advertising and plant expansion are no longer required, the corporation earns a positive cash flow. It can milk the cash cow to invest in other riskier businesses.
The question mark
Exists in a new, rapidly growing industry, but has only a small market share. The question mark business is risky; it could be a star or it could fail. the corporation can invest the cash earned from cash cows in question marks with the goal of nurturing them into future stars.
Departmentalization Another fundamental characteristic of organization structure is departmentalization, which is the basis for grouping positions into departments and departments into the total organization.
Five approaches to structural design reflect different uses of the chain of command in departmentalization. The functional, divisional, and matrix are traditional approaches that rely on the chain of command to define departmental groupings and reporting relationships along the hierarchy. Two innovative approaches are the use of teams and virtual networks, which have emerged to meet changing organizational needs in a turbulent global environment.
Work Specialization, sometimes called division of labor, is the degree to which organizational tasks are subdivided into separate jobs.
Fundamental characteristics of vertical organization structure include work specialization, chain of command, span of management, and centralization and decentralization.
Point-counterpoint is a way to encourage constructive conflict by breaking a decision-making group into two sub-groups and assigns them different, often competing responsibilities.
Group-think refers to the tendency of people in groups to suppress contrary opinions. Avoid it
The Star
Has a large market share in a rapidly growing industry. It is important because it has additional growth potentia, and profits should be plowed into this business as investment for future growth and profits. The star is visible and attractive and will generate profits and a positive cash flow even as the industry matures and market growth slows.
Implementation Stage
Implementation involves using managerial, administrative, and persuasive abilities to translate the chosen alternative into action.
An alternative for assigning divisional responsibility is to group company activities by geographic region or customer group.
In a geographic-based structure, all functions in a specific country or region report to the same division manager. The structure focuses company activities on local market conditions. Competitive advantage may come from the production or sale of a product or service adapted to a given country or region.
Disruptive innovation refers to innovations in products, services, or processes that radically change competition in an industry, such as the advent of streaming video or e-books.
In addition, Western firms are increasingly using an approach referred to as trickle-up innovation or reverse innovation. Rather than innovating in affluent countries and transferring products to emerging markets, companies such as General Electric (GE), John Deere, Nestlé, Procter & Gamble (P&G), and Xerox are creating innovative low-cost products for emerging markets and then quickly and inexpensively repackaging them for sale in developed countries
Decentralization means that decision authority is pushed down to lower organization levels.
In the United States and Canada, the trend over the past thirty years has been toward greater decentralization of organizations. Decentralization is believed to relieve the burden on top managers, make greater use of employees' skills and abilities, ensure that decisions are made close to the action by well-informed people, and permit more rapid response to external changes.
Service technology is characterized by intangible outputs and direct contact between employees and customers.
Intangible output. The output of a service firm is intangible. Services are perishable and, unlike physical products, cannot be stored in inventory. The service is either consumed immediately or lost forever. Manufactured products are produced at one point in time and can be stored until sold at another time
Satisficing means choosing the first alternative that satisfies minimal decision criteria, regardless of whether better solutions are presumed to exist.
Intuition is an aspect of administrative decision making that refers to a quick comprehension of a decision situation based on past experience but without conscious thought.
Intuition
Intuition represents a quick apprehension of a decision situation based on past experience but without conscious thought. Intuitive decision making is not arbitrary or irrational because it is based on years of practice and hands on experience.
Delegation is the process managers use to transfer authority and responsibility to positions below them in the hierarchy
Line departments perform tasks that reflect the organization's primary goal and mission. EX. Make and sell product Staff departments include all those that provide specialized skills in support of line departments. Include marketing, labor relations, research, accounting, and human resources.
Non-programmed Decisions
Made in response to situations that are unique, are poorly defined and largely unstructured, and have important consequences for the organization.
The Directive Style is used by people who prefer simple, clear-cut solutions to problems. Managers who use this style often make decisions quickly because they do not like to deal with a lot of information and may consider only on or two alternatives. People who prefer the directive style generally are efficient and rational and prefer to rely on existing rules or procedures for mkaing decisions.
Managers with the analytical style like to consider complex solutions based on as much data as they can gather. These individuals carefully consider alternatives and often base their decisions on objective, rational data from management control systems and other sources. They search for the best possible decision based on the information available.
Different quadrants(classes of items )have different business growth rates and market shares.
Michael E. Porter studied a number of business organizations and proposed that business-level strategies are the result of understanding competitive forces in the company's environment. Porter suggests that a company can adopt one of three strategies; differentiation, cost leadership, or focus.
Tactical goals and plans
Middle managers.
Technical complexity The difference among the three manufacturing technologies is called technical complexity. Technical complexity is the degree to which machinery is involved in the production to the exclusion of people.
Note that centralization is high for mass production technology and low for small-batch and continuous process. Unlike small-batch and continuous process production, standardized mass-production machinery requires centralized decision making and well-defined rules and procedures. The administrative ratio and the percentage of indirect labor required also increase with technological complexity. Because the production process is nonroutine, closer supervision is needed. More indirect labor in the form of maintenance people is required because of the machinery's complexity; thus, the indirect/direct labor ratio is high. Span of control for first-line supervisors is greatest for mass production. On an assembly line, jobs are so routinized that a supervisor can handle an average of forty-eight employees. The number of employees per supervisor in small-batch and continuous process production is lower because closer supervision is needed. Overall, small-batch and continuous process firms have somewhat loose, flexible structures (organic), and mass production firms have tight vertical structures (mechanistic).
OD can help managers address at least three types of current problems; Mergers/acquisitions. Organizational decline/revitalization. Conflict management.
OD Activities Team building Team building is an OD intervention that enhances cohesiveness by helping groups of people learn to work together as a team. Survey feedback With survey feedback, OD change agents survey employees to gather their opinions regarding corporate values, leadership, participation, cohesiveness, and other aspects of the organization, then meet with small groups to share the results and brainstorm solutions to problems identified by the results. large-group intervention Large-group intervention is an OD approach that brings together people from different parts of the organization (and often including outside stakeholders) to discuss problems or opportunities and plan for change.Fastest growing OD activity
For a programmed decision, feasible alternatives are easy to identify and in fact usually are already available within the organization's rules and procedures. Non-programmed decisions, however, require developing new courses of action that will meet the company's needs. For decisions made under conditions of high uncertainty, managers may develop only one or two custom solutions that will satisfice for handling the problem. However, studies find that limiting the search for alternatives is a primary cause of decision failure in organizations.
Once feasible alternatives are developed, one must be selected. At this stage, managers try to select the most promising of several alternative courses of action. The best alternative solution is one which best fits the overall goals and values of the organization and achieves the desired results using the fewest resources. Managers want to select the choice with the least amount of risk and uncertainty. Because some risk is inherent for most non-programmed decisions, managers try to gauge the prospects for success. They might rely on their intuition and experience to estimate whether a given course of action is likely to succeed. Basing choices on overall goals and values can also guide the selection of alternatives.
Direct contact with customers. Employees and customers interact directly to provide and purchase the service. Production and consumption are simultaneous. Service firm employees have direct contact with customers. In a manufacturing firm, technical employees are separated from customers, and hence no direct interactions occur.
One distinct feature of service technology that directly influences structure is the need for employees to be close to the customer. Service firms tend to be flexible, informal, and decentralized. Horizontal communication is high because employees must share information and resources to serve customers and solve problems. Services also are dispersed; hence each unit is often small and located geographically close to customers.
Organization Structure is defined as; 1. The set of formal tasks assigned to individuals and departments 2. Formal reporting relationships,including lines of authority, decision responsibility, number of hierarchical levels, and span of managers control 3. The design of systems to ensure effective coordination of employees across departments
Organization Chart - the characteristics of vertical structure are portrayed in the organizational chart which is the visual representation of an organizations structure.
Training is one of the most frequently used approaches to changing people's mind-sets. A company might offer training programs to large blocks of employees on subjects
Organization development (OD) Organization development (OD) is a planned, systematic process of change that uses behavioral science knowledge and techniques to improve an organization's health and effectiveness through its ability to adapt to the environment, improve internal relationships, and increase learning and problem-solving capabilities.
The administrative model of decision making is based on the work of Herbert A. Simon. Simon proposed two concepts that were instrumental in shaping the administrative model: Bounded Rationality and Satisficing
Organizations are incredibly complex, and managers have the time and ability to process only a limited amount of information with which to make decisions.Because managers do not have the time or cognitive ability to process complete information about complex decisions, they must Satisfice.
The most recent approach to departmentalization extends the idea of horizontal coordination and collaboration beyond the boundaries of the organization. In a variety of industries, vertically integrated, hierarchical organizations are giving way to loosely interconnected groups of companies with permeable boundaries.
Outsourcing, which means farming out certain activities, such as manufacturing or credit processing, has become a significant trend.
In an organization with a high level of relational coordination, people share information freely across departmental boundaries, and people interact on a continuous basis to share knowledge and solve problems. Coordination is carried out through a web of ongoing positive relationships rather than because of formal coordination roles or mechanisms. Employees coordinate directly with each other across units.
People are given freedom from strict work rules so they have the flexibility to interact and contribute wherever they are needed, and rewards are based on team efforts and accomplishments. Front-line supervisors typically have smaller spans of control so they can develop close working relationships with subordinates and coach and mentor employees.
A need for change is a disparity between existing and desired performance levels.
People resist change for several reasons, and understanding them can help managers implement change more effectively. Self-Interest Lack of Understanding and Trust Uncertainty Different Assessments and Goals
Political Model Characteristics
Pluralistic;conflicting goals Condition of uncertainty or ambiguity Inconsistent viewpoints; ambiguous information Bargaining and discussion among coalition members
Whereas programmed decisions can be made in situations involving certainty, many situations that managers deal with every day involve at least some degree of uncertainty and require non-programmed decision making.
Possibility of Failure from Low to High. Certainty Risk Uncertainty Ambiguity
In today's fast-paced business environment, intuition plays an increasingly important role in decision making. Numerous studies have found that effective managers use a combination of rational analysis and intuition in making complex decisions under time pressure.
Psychologists and neuro-scientists have studied how people make good decisions using their intuition under extreme time pressure and uncertainty.
A project manager is a person who is responsible for coordinating the activities of several departments for the completion of a specific project.
Relational coordination refers to "frequent, timely, problem-solving communication carried out through [employee] relationships of shared goals, shared knowledge, and mutual respect."
Risk
Risk means that a decision has clear-cut goals and that good information is available, but the future outcomes associated with each alternative are subject to some chance of loss or failure. However, enough information is available to estimate the probability of a successful outcome vs failure.
Risk Propensity
Risk propensity is the willingness to undertake risk with the opportunity of gaining an increased payoff.
SWOT analysis
SWOT analysis includes a careful assessment of strengths, weaknesses, opportunities, and threats that affect organizational performance.
Satisficing
Satisficing means that decision makers choose the first solution alternative that satisfies minimal decision criteria. Rather than pursuing all alternatives to identify the single solution that will maximize economic returns, managers will opt for the first solution that appears to solve the problem, even if better solutions are presumed to exist. The decision maker cannot justify the time and expense of obtaining complete information.
Abbreviated scenario thinking
Scenarios are like stories that offer alternative vivid pictures of what the future will be like and how managers will respond. Typically, 2 to 5 scenarios are developed for each set of factors, ranging from the most optimistic to the most pessimistic view.
Good intuitive decision making is based on an ability to recognize patterns at lightning speed. When people have a depth of experience and knowledge in a particular area, the right decision often comes quickly and effortlessly as a recognition of information that has been largely forgotten by the conscious mind. For example, firefighters make decisions by recognizing what is typical or abnormal about a fire, based on their experience. This ability can also be seen among soldiers in Iraq, who have been responsible for stopping many roadside bomb attacks based on gut feelings. High-tech gear designed to detect improvised explosive devices, or IEDs, is merely a supplement rather than a replacement for the ability of the human brain to sense danger and act on it. Soldiers with experience in Iraq subconsciously know when something doesn't look or feel right. It might be a rock that wasn't there yesterday, a piece of concrete that looks too symmetrical, odd patterns of behavior, or just a different feeling of tension in the air.
Similarly, in the business world, managers continuously perceive and process information that they may not consciously be aware of, and their base of knowledge and experience helps them make decisions that may be characterized by uncertainty and ambiguity. However, intuitive decisions don't always work out, and managers should take care to apply intuition under the right circumstances and in the right way, rather than considering it a magical technique for making all important decisions Managers may walk a fine line between two extremes: on the one hand, making arbitrary decisions without careful study, and on the other, relying obsessively on rational analysis. One is not better than the other, and managers need to take a balanced approach by considering both rationality and intuition as important components of effective decision making.
Socially constructed-
Something defined by and individual or group.
Line authority means that people in management positions have formal authority to direct and control immediate subordinates.
Staff authority includes the right to advise, recommend, and counsel in the staff specialists' area of expertise. Staff authority is a communication relationship; staff specialists advise managers in technical areas.
Open innovation Open innovation extends the search for and commercialization of innovative ideas beyond the boundaries of the organization.
Successful product and service innovation depends on cooperation, both within the organization and with customers and others outside the organization.
The Administrative Model
The Administrative Model recognizes the human and environmental limitations that affect the degree to which managers can pursue a rational decision-making process. In difficult situations, such as those characterized by non-programmed decisions, uncertainty, and ambiguity, managers are typically unable to make economically rational decisions even if they want to.
BCG matrix
The BCG matrix (named for the Boston Consulting Group, which developed it. Organizes businesses along two dimensions - business growth rate and market share.
People who tend to the conceptual style also like to consider a broad amount of information. However, they are more socially oriented than those with an analytical style and like to talk to others about the problem and possible alternatives for solving it. Managers using a conceptual style consider many broad alternatives, rely on information from both people and systems and like to solve problems creatively.
The Behavioral Style is often the style adopted by managers having deep concern for others as individuals. Managers using this style like to talk to people one-on-one, understand their feelings about the problem, and consider the effect of a given decision on them. People with a behavioral style usually are concerned with the personal development of others and may make decisions that help others achieve their goals.
The Classical Model
The Classical Model of decision making is based on rational economic assumptions and manager beliefs about what ideal decision making should be. This model has arisen within the management literature because managers are expected to make decisions that are economically sensible and in the organizations best economic interests.
Software programs based on the classical model are being applied to programmed decisions such as how to schedule airline crews or how to process insurance claims more efficiently.
The administrative model includes the concepts of bounded rationality and satisficing and describes how managers make decisions in situations that are characterized by uncertainty and ambiguity.
The Administrative Model
The administrative model is descriptive, an approach that describes how managers actually make decisions according to a theoretical model.
The ideal rational approach to decision making called the classical model, is based on the assumption that managers should make logical decisions that are economically sensible and in the organizations best economic interest
The classical model is normative, meaning that it defines how a manager should make logical decisions and provides guidelines for reaching an ideal outcome.
Normative
The classical model of decision making is considered to be normative, which means it defines how a decision maker SHOULD make decisions.
Advantage and Disadvantage of Functional Structure They have the expertise and skills to handle almost any issue related to information technology for the organization. Large, functionally based departments enhance the development of in-depth skills because people work on a variety of related problems and are associated with other experts within their own department. Because the chain of command converges at the top, the functional structure also offers a way to centralize decision making and provide unified direction from top managers. The primary disadvantages reflect barriers that exist across departments. Because people are separated into distinct departments, communication and coordination across functions are often poor, causing a slow response to environmental changes. Innovation and change require involvement of several departments. Another problem is that decisions involving more than one department may pile up at the top of the organization and be delayed
The divisional structure groups employees and departments based on similar organizational outputs (products or services), such that each division has a mix of functional skills and tasks. With a divisional structure, also called an M-form (multidivisional) or a decentralized form, separate divisions can be organized with responsibility for individual products, services, product groups, major projects or programs, divisions, businesses, or profit centers. The divisional structure is also sometimes called a product structure, program structure, or self-contained unit structure. Each of these terms means essentially the same thing: Diverse departments are brought together to produce a single organizational output, whether it is a product, a program, or service to a single customer.
Refreezing, the third stage of organization development, occurs when individuals acquire new attitudes or values and are rewarded for them by the organization. The impact of new behaviors is evaluated and reinforced.
The final step to be managed in the change process is implementation.
The span of management (span of control) is the number of employees reporting to a supervisor.
The following list describes the factors that are associated with less supervisor involvement and thus larger spans of control: Work performed by subordinates is stable and routine. Subordinates perform similar work tasks. Subordinates are concentrated in a single location. Subordinates are highly trained and need little direction in performing tasks. Rules and procedures defining task activities are available. Support systems and personnel are available for the manager. Little time is required in non-supervisory activities, such as coordination with other departments or planning. Managers' personal preferences and styles favor a large span.
Functional Structure ( U-form(unitary structure), activities are grouped together by common function from the bottom to the top of the organization. The functional structure groups positions into departments based on similar skills, expertise, work activities, and resource use. A functional structure can be thought of as departmentalization by organizational resources because each type of functional activity—accounting, human resources, engineering, and manufacturing—represents specific resources for performing the organization's task. People, facilities, and other resources representing a common function are grouped into a single department.
The functional structure is a strong vertical design. Information flows up and down the vertical hierarchy, and the chain of command converges at the top of the organization.
The classical model is most useful when applied to programmed decisions and to decisions characterized by certainty or risk because relevant information is available and probabilities can be calculated. For example, new analytical software programs automate many programmed decisions, such as freezing the account of a customer who has failed to make payments, determining the cell phone service plan that is most appropriate for a particular customer, or sorting insurance claims so that cases are handled most efficiently.
The growth of quantitative decision techniques that use computers has expanded the use of the classical approach. The New York City Police Department uses computerized mapping and analysis of arrest patterns, paydays, sporting events, concerts, rainfall, holidays, and other variables to predict likely "hot spots" and decide where to assign officers. Retailers like Target, Walmart, and Kohl's make decisions about what items to stock and how to price them based on analysis of sales, economic and demographic data, and so forth.
Company found that when managers incorporate thoughtful analysis into decision making, they get better results. Studying the responses of more than executives regarding how their companies made a specific decision, McKinsey concluded that techniques such as detailed analysis, risk assessment, financial models, and considering comparable situations typically contribute to better financial and operational outcomes
The ideal, rational approach of the classical model is often unattainable by real people in real organizations, but the model has value because it helps decision makers be more rational and not rely entirely on personal preference in making decisions. Indeed, a global survey by McKinsey & Company found that when managers incorporate thoughtful analysis into decision making, they get better results. Studying the responses of more than executives regarding how their companies made a specific decision, McKinsey concluded that techniques such as detailed analysis, risk assessment, financial models, and considering comparable situations typically contribute to better financial and operational outcomes.
Divisional Advantages and Disadvantages By dividing employees and resources along divisional lines, the organization will be flexible and responsive to change because each unit is small and tuned in to its environment. By having employees working on a single product line, the concern for customers' needs is high. Coordination across functional departments is better because employees are grouped together in a single location and committed to one product line. Great coordination exists within divisions; however, coordination across divisions is often poor. Problems occurred at Hewlett-Packard (HP), for example, when autonomous divisions went in opposite directions. The software produced in one division did not fit the hardware produced in another. Thus, the divisional structure was realigned to establish adequate coordination across divisions. Another major disadvantage is duplication of resources and the high cost of running separate divisions. Instead of a single research department in which all research people use a single facility, each division may have its own research facility. The organization loses efficiency and economies of scale. In addition, the small size of departments within each division may result in a lack of technical specialization, expertise, and training.
The matrix approach uses both functional and divisional chains of command simultaneously, in the same part of the organization. The matrix structure evolved as a way to improve horizontal coordination and information sharing. One unique feature of the matrix is that it has dual lines of authority. the functional hierarchy of authority runs vertically, and the divisional hierarchy of authority runs horizontally. The vertical structure provides traditional control within functional departments, and the horizontal structure provides coordination across departments. The U.S. operation of Starbucks, for example, uses geographic divisions for Western/Pacific, Northwest/Mountain, Southeast/Plains, and Northeast/Atlantic. Functional departments including finance, marketing, and so forth are centralized and operate as their own vertical units, as well as supporting the horizontal divisions. Footnote The matrix structure therefore supports a formal chain of command for both functional (vertical) and divisional (horizontal) relationships. As a result of this dual structure, some employees actually report to two supervisors simultaneously.
The mission
The mission describes the organizations values, aspirations, and reason for being. A well-defined mission is the basis for development of all subsequent goals and plans. Top of the goal hierarchy.
Virtual Network Advantages and Disadvantages The biggest advantages to a virtual network approach are flexibility and competitiveness on a global scale. The extreme flexibility of a network approach is illustrated by recent anti-government protests and the overthrow of leaders in Tunisia and Egypt, for instance. A far-flung collection of groups that share a similar mission and goals but are free to act on their own joined together to mastermind the "Arab Spring" uprisings, much in the same way terrorist groups have masterminded attacks against the United States and other countries. "Attack any single part of it, and the rest carries on largely untouched," wrote one journalist about the terrorist network. "It cannot be decapitated, because the insurgency, for the most part, has no head."
The modular approach is one in which a manufacturing company uses outside suppliers to provide large chunks of a product such as an automobile, which are then assembled into a final product by a few employees.
Development of Alternatives
The next stage is to generate possible alternative solutions that will respond to the needs of the situation and correct the underlying causes.
With a virtual network structure, the organization subcontracts most of its major functions to separate companies and coordinates their activities from a small headquarters organization.
The organization may be viewed as a central hub surrounded by a network of outside specialists, sometimes spread all over the world, Rather than being housed under one roof, services such as accounting, design, manufacturing, and distribution are outsourced to separate organizations that are connected electronically to the central office Networked computer systems, collaborative software, and the Internet enable organizations to exchange data and information so rapidly and smoothly that a loosely connected network of suppliers, manufacturers, assemblers, and distributors can look and act like one seamless company.
In a divisional structure, divisions are created as self-contained units, with separate functional departments for each division. each functional department resource needed to produce the product is assigned to each division. Whereas in a functional structure, all R&D engineers are grouped together and work on all products, in a divisional structure, separate R&D departments are created within each division. Each department is smaller and focuses on a single product line or customer segment. Departments are duplicated across product lines.
The primary difference between divisional and functional structures is that in a divisional structure, the chain of command from each function converges lower in the hierarchy. In a divisional structure, differences of opinion among R&D, marketing, manufacturing, and finance would be resolved at the divisional level rather than by the president. Thus, the divisional structure encourages decentralization. Decision making is pushed down at least one level in the hierarchy, freeing the president and other top managers for strategic planning.
Coalition Building
The process of forming alliances among managers.
Operational goals
The results expected from departments, work groups, and individuals. They are precise and measurable.
The Political Model
The third model of decision making is useful for making non-programmed decisions when conditions are uncertain, information is limited, and there are manager conflicts about what goals to pursue or what course of action to take. Most organizational decisions involve many managers who are pursuing different goals and they have to talk with one another to share information and reach an agreement. Managers often engage in coalition building for making complex organizational decisions.
The dual lines of authority make the matrix unique. To see how the matrix works, consider the global matrix structure.
The two lines of authority are geographic and product. The geographic boss in Germany coordinates all subsidiaries in Germany, and the plastics products boss coordinates the manufacturing and sale of plastics products around the world. Managers of local subsidiary companies in Germany would report to two superiors, both the country boss and the product boss. The dual authority structure violates the unity-of-command concept described earlier in this chapter, but that is necessary to give equal emphasis to both functional and divisional lines of authority. Dual lines of authority can be confusing, but after managers learn to use this structure, the matrix provides excellent coordination simultaneously for each geographic region and each product line.
Organizational change Organizational change is defined as the adoption of a new idea or behavior by an organization. Sometimes change and innovation are spurred by forces outside the organization, such as when a powerful customer demands annual price cuts, when a key supplier goes out of business, or when new government regulations go into effect.
These types of outside forces compel managers to look for greater efficiencies in operations and other changes to keep their organizations profitable. Other times, managers within the company want to initiate major changes, such as forming employee-participation teams, introducing new products, or instituting new training systems, but they don't know how to make the changes successful.
technology change A technology change is a change in the organization's production process—how the organization does its work. Technology changes are designed to make the production of a product or service more efficient.
Three critical innovation strategies for changing products and technologies are ; Exploration- involves designing the organization to encourage creativity and the initiation of new ideas. Cooperation - creating conditions and systems to facilitate internal and external coordination and knowledge sharing. innovation roles means that managers put in place processes and structures to ensure that new ideas are carried forward for acceptance and implementation.
Uncertainty
Uncertainty means that managers know which goals they wish to achieve, but information about alternatives and future events is incomplete. Factors that may affect a decision, such as price, production costs, volume, or future interest rates, are difficult to analyze and predict. Managers may have to make assumptions from which to forge the decision even though it will be wrong if the assumptions are incorrect. Former U.S. Treasury Secretary Robert Rubin defined uncertainty as a situation in which even a good decision might produce a bad outcome. Managers face uncertainty every day. Many problems have no clear-cut solution, but managers rely on creativity, judgement, intuition, and experience to craft a response.
The chain of command is an unbroken line of authority that links all employees in an organization and shows who reports to whom.
Unity of command means that each employee is held accountable to only one supervisor.
Administrative Model Characteristics
Vague problem and goals Condition of uncertainty Limited information about alternatives and their outcomes Satisficing choice for resolving problem using intuition
Wicked Decision Problem
Wicked decisions are associated with conflicts over goals and decision alternatives, rapidly changing circumstances, fuzzy information, unclear links among decision elements, and the inability to evaluate whether a proposed solution will work. For wicked problems, there often is no right answer.
The team approach breaks down barriers across departments and improves coordination and cooperation. Team members know one another's problems and compromise rather than blindly pursue their own goals. The team concept also enables the organization to adapt more quickly to customer requests and environmental changes and speeds decision making because decisions need not go to the top of the hierarchy for approval. Another big advantage is the morale boost. Employees are typically enthusiastic about their involvement in bigger projects rather than narrow departmental tasks. At video games company Ubisoft, for example, each studio is set up so that teams of employees and managers work collaboratively to develop new games. Employees don't make a lot of money, but they're motivated by the freedom they have to propose new ideas and put them into action.Footnote
Yet the team approach has disadvantages as well. Employees may be enthusiastic about team participation, but they may also experience conflicts and dual loyalties. A cross-functional team may make different work demands on members than do their department managers, and members who participate in more than one team must resolve these conflicts. A large amount of time is devoted to meetings, thus increasing coordination time. Unless the organization truly needs teams to coordinate complex projects and adapt to the environment, it will lose production efficiency with them. Finally, the team approach may cause too much decentralization. Senior department managers who traditionally made decisions might feel left out when a team moves ahead on its own. Team members often do not see the big picture of the corporation and may make decisions that are good for their group but bad for the organization as a whole.
A goal
a desired future circumstance or condition that the organization attempts to realize, goals are important because organizations exist for a purpose and goals define and state that purpose
Mission statement
a formal, broadly stated definition of purpose that distinguishes the organization from others of a similar type. often describes the company's basic business activities and purpose as well as the values that guide the company.
Management by objectives (MBO)
a method whereby managers and employees define goals for every department, project, and person and use them to monitor subsequent preformance.
tactical goals
after strategic goals are formulated, the next step is to define tactical goals, which are the results that major divisions and departments within the organization intend to achieve. These goals apply to middle management and describe what major subunits must do for the organization to achieve its overall goals.
Scenario building-
an extension of contingency planning is a forecasting technique known as scenario building
Tactical plans
are designed to help execute the major strategic plans and to accomplish a specific part of the company's strategy. Tactical plans typically have a shorter time horizon that strategic plans , over the next year or so. Tactical goals help top managers implement their overall strategic plan. Normally it is the middle managers job to take the broad strategic plan and identify specific tactical groups.
Single use plans
are developed to achieve a set of goals that are not likely to be repeated in the future. typically include programs and projects.
Standing plans
are ongoing plans that provide guidance for tasks or situations that occur repeatedly within the organization. policies, rules and procedures.
Creativity is the generation of novel ideas that may meet perceived needs or respond to opportunities for the organization.
bottom-up approach Innovative companies use a bottom-up approach, which means encouraging the flow of ideas from lower levels and making sure they get heard and acted upon by top executives.
The combinations of high and low market share and high and low business growth provide four categories for a corporate portfolio.
business growth rate/Market share Star - High/High rapid growth and expansion. Question Marks- High/Low- new ventures. Risky-a few become stars, others are divested. Cash Cows- Low/High-Milk to finance question marks and stars. Dogs-Low/Low No investment. Keep if some profit. Consider divestment.
Contingency plans-
define company responses to be taken in the case of emergencies, setbacks, or unexpected conditions.
Strategic plans
define the action steps by which the company intends to attain strategic resources. The strategic plan is the blueprint that defines the organizational activities and resource allocations required for meeting specific targets.
Market share
defines whether a business unit has a larger or smaller share than competitors
management by means (MBM)
focuses attention on the methods and processes used to achieve goals. based on the idea that when managers pursue their activities in the correct way positive outcomes will result.
Crowdsourcing, an open innovation approach used by Fiat, Oscar de la Renta, and many other companies, taps into ideas from around the world and lets thousands or hundreds of thousands of people participate in the innovation process, usually via the Internet.
idea champion The formal definition of an idea champion is a person who sees the need for and champions productive change within the organization.
Weaknesses
internal characteristics that might inhibit or restrict the organizations performance
horizontal linkage model Using a horizontal linkage model means that several departments, such as marketing, research, and manufacturing, work closely together to develop new products.
internal coordination Innovation often requires internal coordination because it takes the combined expertise of a number of different team players, each with their own areas of specialization, to come up with a single creative, yet realistic, solution.
Programmed Decisions
involve situations that have occurred often enough to enable decision rules to be developed and applied in the future. Programmed decisions are made in response to recurring organizational problems.
Coalition management
involves building an alliance of people who support a manager's goals and can influence other people to accept and work toward them.
Organizational success
managers in all types of organizations, including businesses, nonprofit organizations, and government agencies, have to think about how the organization fits in the environment.
Technology includes the knowledge, tools, techniques, and activities used to transform organizational inputs into outputs. Technology includes machinery, employee skills, and work procedures. A useful way to think about technology is as "production activities." The production activities may be to produce Web site content, steel castings, television programs, or computer software.
manufacturing firms could be categorized according to three basic types of production technology: Small-batch production firms produce goods in batches of one or a few products designed to customer specification. Mass production technology is distinguished by standardized production runs. A large volume of products is produced, and all customers receive the same product. continuous process production In continuous process production, the entire workflow is mechanized in a sophisticated and complex form of production technology. Because the process runs continuously, it has no starting and stopping.
Descriptive
meaning that it describes how managers actually make decisions in complex situations rather than dictating how they should make decisions according to a theoretical ideal.
Four Roles in Organizational Change The inventor comes up with a new idea and understands its technical value but has neither the ability nor the interest to promote it for acceptance within the organization. The champion believes in the idea, confronts the organizational realities of costs and benefits, and gains the political and financial support needed to bring it to reality. The sponsor is a high-level manager who approves the idea, protects the idea, and removes major organizational barriers to acceptance. The critic counterbalances the zeal of the champion by challenging the concept and providing a reality test against hard-nosed criteria. The critic prevents people in the other roles from adopting a bad idea.
new-venture team A new-venture team is a unit separate from the rest of the organization that is responsible for developing and initiating a major innovation. New-venture teams give free rein to members' creativity because their separate facilities and location unleash people from the restrictions imposed by organizational rules and procedures.
Collaboration means a joint effort between people from two or more departments to produce outcomes that meet a common goal or shared purpose and that are typically greater than what any of the individuals or departments could achieve working alone.
ollaboration and coordination within business organizations is just as important. Without coordination, a company's left hand will not act in concert with the right hand, causing problems and conflicts. Coordination is required regardless of whether the organization has a functional, divisional, or team structure. Employees identify with their immediate department or team, taking its interest to heart, and they may not want to compromise and collaborate with other units for the good of the organization as a whole.
Business growth rate
pertains to how rapidly the entire industry is increasing.
decentralized planning-
planning involving everyone in an organization. planning experts work with managers in major divisions or departments to develop their own goals and plans.
Strengths
positive internal characteristics that the organization can exploit to achieve its strategic performance goals.
Stretch goals-
reasonable but highly ambitious goals that are so clear, compelling, and imaginative that they fire up employees and engender excellence. Stretch goals are typically so far beyond the current levels that people have to be innovative to find ways to reach them.
Competitive advantage
refers to what sets the organization apart from others and provides it with a distinctive edge for meeting customer or client needs in the marketplace.
Strategic goals and plans
reflect a commitment to both organizational efficiency and effectiveness. top managers.
Core competence
something that the organization does especially well in comparison to its competitors.
Strategic goals
sometimes called official goals, are broad statements describing where the organization wants to be in the future. These goals pertain to the organization as a whole rather than to specific divisions or departments.
Thinking strategically
taking a long term view and seeing the big picture.
strategic decay
the fact that the value of even the most brilliant strategy declines over time.
strategy
the plan of action that describes resource allocation and activities for dealing with the environment, achieving a competitive advantage, and attaining the organizations goals.
Decision Making
the process of identifying problems and opportunities and then resolving them
Strategic management
the set of decisions and actions used to formulate and executive strategies that will provide a competitively superior fit between the organization and its environment so as to achieve organizational goals.
strategy execution
the stage of strategic management that involves the use of managerial and organizational tools to direct resources toward achieving strategic outsomes.
The theory underlying OD proposes three distinct stages for achieving behavioral and attitudinal change: (1) unfreezing, (2) changing, and (3) refreezing.
unfreezing The first stage of the theory of organizational development, unfreezing, makes people throughout the organization aware of problems and the need for change.
