1. Managers and Managing

2. 1-3
Management Key Concepts
• Organizations: People working together and
coordinating their actions to achieve specific
goals.
• Goal: A desired future condition that the
organization seeks to achieve.
• Management: The process of using
organizational resources to achieve the
organization’s goals by...
– Planning, Organizing, Leading, and Controlling

3. 1-4
Additional Key Concepts
• Resources are organizational assets and
include:
• People,
• Machinery,
• Raw materials,
• Information, skills,
• Financial capital.
• Managers are the people responsible for
supervising the use of an organization’s
resources to meet its goals.

4. 1-6
Organizational Performance
• Measures how efficiently and effectively
managers use resources to satisfy customers
and achieve goals.
– Efficiency: Achievement of the ends with least
amount of resources.
– Effectiveness:. Achievement of objectives.

5. 1-8
Four Functions of Management
Planning
Choose Goals
Controlling Organizing
Monitor & measure Working together
Leading
Coordinate

6. 1-9
Planning
Planning is the process used by managers to
identify and select appropriate goals and
courses of action for an organization.
3 steps to good planning :
1. Which goals should be pursued?
2. How should the goal be attained?
3. How should resources be allocated?
– The planning function determines how
effective and efficient the organization is and
determines the strategy of the organization.

7. 1-10
Organizing
• In organizing, managers create the structure of
working relationships between organizational
members that best allows them to work together
and achieve goals.
• Managers will group people into departments
according to the tasks performed.
– Managers will also lay out lines of authority and
responsibility for members.
• An organizational structure is the outcome of
organizing. This structure coordinates and
motivates employees so that they work together to
achieve goals.

8. 1-11
Leading
• In leading, managers determine direction,
state a clear vision for employees to follow,
and help employees understand the role they
play in attaining goals.
• Leadership involves a manager using power,
influence, vision, persuasion, and
communication skills.
• The outcome of the leading function is a high
level of motivation and commitment from
employees to the organization.

9. 1-12
Controlling
• In controlling, managers evaluate how well the
organization is achieving its goals and takes
corrective action to improve performance.
• Managers will monitor individuals, departments,
and the organization to determine if desired
performance has been reached.
– Managers will also take action to increase
performance as required.
• The outcome of the controlling function is the
accurate measurement of performance and
regulation of efficiency and effectiveness.

10. 1-13
Management Levels
 Organizations often have 3 levels of managers:
First-line Managers: responsible for day-to-day
operation. They supervise the people performing
the activities required to make the good or
service.
Middle Managers: Supervise first-line managers.
They are also responsible to find the best way to
use departmental resources to achieve goals.
Top Managers: Responsible for the performance of
all departments and have cross-departmental
responsibility. They establish organizational goals
and monitor middle managers.

11. 1-21
Managerial Skills
There are three skill sets that managers need
to perform effectively.
1. Conceptual skills: the ability to analyze and
diagnose a situation and find the cause and effect.
2. Human skills: the ability to understand, alter, lead,
and control people’s behavior.
3. Technical skills: the job-specific knowledge
required to perform a task. Common examples
include marketing, accounting, and manufacturing.
All three skills are enhanced through formal
training, reading, and practice.

12. 1-22
Skill Type Needed by Manager Level
Top
Managers
Middle
Managers
Line
Managers
Conceptual Human Technical

13. 1-23
Management Challenges
• Increasing number of global organizations.
• Building competitive advantage through
superior efficiency, quality, innovation, and
responsiveness.
• Increasing performance while remaining
ethical managers.
• Managing an increasingly diverse work force.
• Using new technologies.

14. The Evolution of Management
Theory

15. Scientific Management theory
 Modern management began in the late
19th century.
 Organizations were seeking ways to better
satisfy customer needs.
 Machinery was changing the way goods
were produced.
 Managers had to increase the efficiency of
the worker-task mix.

16. Job specialization
• Adam Smith, 18th century economist, found
firms manufactured pins in two ways:
– Craft -- each worker did all steps.
– Factory -- each worker specialized in one step.
• Smith found that the factory method had
much higher productivity.
– Each worker became very skilled at one, specific
task.
• Breaking down the total job allowed for the
division of labor.

17. Evolution of Management Theory
Org. Environment
Management Science
Behavioral Management
Administrative Management
Scientific Management
1940 2000

18. Scientific Management
• Defined by Frederick Taylor, late 1800’s.
• The systematic study of the relationships
between people and tasks to redesign the
work for higher efficiency.
– Taylor sought to reduce the time a worker spent
on each task by optimizing the way the task was
done.

19. The 4 Principles
 Four Principles to increase efficiency:
1. Study the way the job is performed now &
determine new ways to do it.
▪ Gather detailed, time and motion information.
▪ Try different methods to see which is best.
2. Codify the new method into rules.
▪ Teach to all workers.
3. Select workers whose skills match the rules set
in Step 2.
4. Establish a fair level of performance and pay
for higher performance.
▪ Workers should benefit from higher output.

20. Problems of Scientific Management
• Managers often implemented only the
increased output side of Taylor’s plan.
– They did not allow workers to share in increased
output.
– Specialized jobs became very boring, dull.
– Workers ended up distrusting Scientific
Management.
• Workers could purposely “under-perform”
• Management responded with increased use
of machines.

21. The Gilbreths
• Frank and Lillian Gilbreth refined Taylor’s
methods.
– Made many improvements to time and motion
studies.
• Time and motion studies:
– 1. Break down each action into components.
– 2. Find better ways to perform it.
– 3. Reorganize each action to be more efficient.
• Gilbreths also studied fatigue problems,
lighting, heating and other worker issues.

22. Administrative Management
 Seeks to create an organization that leads to
both efficiency and effectiveness.
 Max Weber developed the concept of
bureaucracy.
 A formal system of organization and
administration to ensure effectiveness and
efficiency.
 Weber developed the Five principles shown in
Figure 2.2.

23. Bureaucratic Principles
Figure 2.2
Written rules
System of task A Bureaucracy Hierarchy of
relationships should have authority
Fair evaluation
and reward

24. Key points of Bureaucracy
Authority is the power to hold people accountable
for their actions.
Positions in the firm should be held based on
performance not social contacts.
Position duties are clearly identified. People should
know what is expected of them.
Lines of authority should be clearly identified.
Workers know who reports to who.
Rules, Standard Operating Procedures (SOPs), &
Norms used to determine how the firm operates.
• Sometimes, these lead to “red-tape” and other
problems.

25. Fayol’s Principles
• Henri Fayol, developed a set of 14 principles:
1. Division of Labor: allows for job specialization.
• Fayol noted firms can have too much specialization leading
to poor quality and worker involvement.
2. Authority and Responsibility: Fayol included both formal
and informal authority resulting from special expertise.
3. Unity of Command: Employees should have only one
boss.
4. Line of Authority: a clear chain from top to bottom of the
firm.
5. Centralization: the degree to which authority rests at the
very top.

26. Fayol’s Principles
6. Unity of Direction: One plan of action to guide the
organization.
7. Equity: Treat all employees fairly in justice and
respect.
8. Order: Each employee is put where they have the
most value.
9. Initiative: Encourage innovation.
10. Discipline: obedient, applied, respectful employees
needed.

27. Fayol’s Principles
11. Remuneration of Personnel: The payment system
contributes to success.
12. Stability of Tenure: Long-term employment is
important.
13. General interest over individual interest: The
organization takes precedence over the individual.
14. Esprit de corps: Share enthusiasm or devotion to the
organization.

28. Behavioral Management
• Focuses on the way a manager should
personally manage to motivate employees.
• Mary Parker Follett: an influential leader in
early managerial theory.
– Suggested workers help in analyzing their jobs
for improvements.
– The worker knows the best way to improve the
job.
– If workers have the knowledge of the task, then
they should control the task.

29. The Hawthorne Studies
• Study of worker efficiency at the Hawthorne
Works of the Western Electric Co. during
1924-1932.
– Worker productivity was measured at various
levels of light illumination.
– Researchers found that regardless of whether
the light levels were raised or lowered,
productivity rose.
• Actually, it appears that the workers
enjoyed the attention they received as part
of the study and were more productive.

30. Theory X and Y
• Douglas McGregor proposed the two different
sets of worker assumptions.
 Theory X: Assumes the average worker is lazy,
dislikes work and will do as little as possible.
• Managers must closely supervise and control
through reward and punishment.
 Theory Y:Assumes workers are not lazy, want to
do a good job and the job itself will determine if
the worker likes the work.
• Managers should allow the worker great latitude,
and create an organization to stimulate the worker.

31. Theory X v. Theory Y
Figure 2.3
Theory X Theory Y
Employee is lazy Employee is not
lazy
Managers must
closely supervise Must create work
setting to build
Create strict rules initiative
& defined rewards
Provide authority
to workers

32. Theory Z
• William Ouchi researched the cultural
differences between Japan and USA.
– USA culture emphasizes the individual, and managers
tend to feel workers follow the Theory X model.
– Japan culture expects worker committed to the
organization first and thus behave differently than USA
workers.
• Theory Z combines parts of both the USA and
Japan structure.
– Managers stress long-term employment, work-group,
and organizational focus.

33. Management Science
• Uses rigorous quantitative techniques to
maximize resources.
Quantitative management: utilizes linear
programming, modeling, simulation systems.
Operations management: techniques to analyze all
aspects of the production system.
Total Quality Management (TQM): focuses on
improved quality.
Management Information Systems (MIS): provides
information about the organization.

34. Organization-Environment Theory
• Considers relationships inside and outside the
organization.
– The environment consists of forces, conditions,
and influences outside the organization.
• Systems theory considers the impact of stages:
Input: acquire external resources.
Conversion: inputs are processed into goods and
services.
Output: finished goods are released into the
environment.

35. Systems Considerations
• An open system interacts with the
environment. A closed system is self-
contained.
– Closed systems often undergo entropy and lose
the ability to control itself, and fails.
• Synergy: performance gains of the whole
surpass the components.
– Synergy is only possible in a coordinated system.

36. The Organization as an Open System
Figure 2.4
Input Stage Conversion Output
Stage Stage
Raw
Materials Machines Goods
Human skills Services
Sales of outputs
Firm can then buy inputs

37. Contingency Theory
• Assumes there is no one best way to manage.
– The environment impacts the organization and
managers must be flexible to react to
environmental changes.
– The way the organization is designed, control
systems selected, depend on the environment.
• Technological environments change rapidly,
so must managers.

38. Structures
• Mechanistic: Authority is centralized at the
top. (Theory X)
– Employees closely monitored and managed.
– Very efficient in a stable environment.
• Organic: Authority is decentralized
throughout employees. (Theory Y)
– Much looser control than mechanistic.
– Managers can react quickly to changing
environment.

39. DECISION MAKING-The
Manager as a
Decision Maker

40. Managerial Decision Making
• Decision making: the process by which
managers respond to opportunities and threats
by analyzing options, and making decisions
about goals and courses of action.
• Decisions in response to opportunities
• Decisions in response to threats

41. Types of Decision Making
• Programmed Decisions: routine, almost
automatic process.
• Non-programmed Decisions: unusual
situations that have not been often
addressed.
– No rules to follow since the decision is new.

42. The Classical Model
Figure 6.1
List alternatives Assumes all information
& consequences is available to manager
Assumes manager can
process information
Rank each alternative
from low to high
Assumes manager knows
the best future course of
the organization
Select best
alternative

43. The Administrative Model
• Administrative Model of decision making:
Challenged the classical assumptions
Bounded rationality: There is a large number of
alternatives and information is vast so that
managers cannot consider it all.
– Decisions are limited by people’s cognitive abilities.
Incomplete information: most managers do not
see all alternatives and decide based on
incomplete information.

44. Incomplete Information Factors
– Risk: managers know a given outcome can fail or
succeed and probabilities can be assigned.
– Uncertainty: probabilities cannot be given for
outcomes and the future is unknown.
– Ambiguous information: information whose
meaning is not clear.
• Information can be interpreted in different ways.

45. Incomplete Information Factors
• Time constraints and Information costs
• Satisfying: Managers explore a limited number
of options and choose an acceptable decision
rather than the optimum decision.

46. Decision Making Steps
Figure 6.4 Recognize need for
a decision
Frame the problem
Generate & assess alternatives
Choose among alternatives
Implement chosen
alternative
Learn from feedback

47. Cognitive Biases
•Suggests decision makers use heuristics to
deal with bounded rationality.
– A heuristic is a rule of thumb to deal with
complex situations.
– If the heuristic is wrong, however, then poor
decisions result from its use.
•Systematic errors can result from use of an
incorrect heuristic.
– These errors will appear over and over since the
rule used to make decision is flawed.

48. Types of Cognitive Biases
Figure 6.6
Prior Hypothesis
Representativeness Cognitive
Biases
Illusion of Control
Escalating Commitment

49. Types of Cognitive Biases
Prior hypothesis bias: manager allows strong prior
beliefs about a relationship between variables and
makes decisions based on these beliefs even when
evidence shows they are wrong.
Representativeness: decision maker incorrectly
generalizes a decision from a small sample or one
incident.
Illusion of control: manager over-estimates their ability
to control events.
Escalating commitment: manager has already
committed considerable resource to project and then
commits more even after feedback indicates problems.

50. Improved Group Decision Making
• Devil’s Advocacy: one member of the group acts
as the devil’s advocate and critiques the way the
group identified alternatives.
– Points out problems with the alternative selection.
• Dialectical inquiry: two different groups are
assigned to the problem and each group
evaluates the other group’s alternatives.
– Top managers then hear each group present their
alternatives and each group can critique the other.
• Promote diversity: by increasing the diversity in
a group, a wider set of alternatives may be
considered.

51. Devil’s Advocacy v. Dialectic Inquiry
Figure 6.7
Devil’s Advocacy Dialectic Inquiry
Presentation of
Alter. 1 Alter. 2
alternative
Critique of Debate the two
alternative alternatives
Reassess Reassess
alternative alternatives
accept, modify, reject accept 1 or 2, combine

52. Creating a Learning Organization
– Personal Mastery: managers empower employees
and allow them to create and explore.
– Mental Models: challenge employees to find new,
better methods to perform a task.
– Team Learning: is more important than individual
learning since most decisions are made in groups.
– Build a Shared Vision: a people share a common
mental model of the firm to evaluate opportunities.
– Systems Thinking: know that actions in one area of
the firm impacts all others.

53. Building Group Creativity
• Brainstorming: managers meet face-to-face to
generate and debate many alternatives.
• Group members are not allowed to evaluate alternatives
until all alternatives are listed.
• Be creative and radical in stating alternatives.
• When all are listed, then the pros and cons of each are
discussed and a short list created.
• Production blocking is a potential problem with
brainstorming.
• Members cannot absorb all information being presented
during the session and can forget their own alternatives.

54. Building Group Creativity
• Nominal Group Technique: Provides a more
structured way to generate alternatives in
writing.
• Avoids the production blocking problem.
• Similar to brainstorming except that each member is
given time to first write down all alternatives he or she
would suggest.
• Alternatives are then read aloud without discussion until
all have been listed.
• Then discussion occurs and alternatives are ranked.

55. Building Group Creativity
• Delphi Technique: provides for a written format
without having all managers meet face-to-face.
• Problem is distributed in written form to managers who
then generate written alternatives.
• Responses are received and summarized by top
managers.
• These results are sent back to participants for feedback,
and ranking.
• The process continues until consensus is reached.
– Delphi allows distant managers to participate.

56. PLANNING-The
Manager as a
Planner and Strategist

57. The Planning Process
Planning is the process used by managers to
identify and select goals and courses of action
for the organization.
•The organizational plan that results from the
planning process details the goals to be
attained.
•The pattern of decisions managers take to
reach these goals is the organization’s strategy.

58. Three Stages of the Planning Process
Figure 7.1
Determining the Organization’s
mission and goals
(Define the business)
Strategy formulation
(Analyze current situation &
develop strategies)
Strategy Implementation
(Allocate resources & responsibilities
to achieve strategies)

59. Planning Process Stages
• Organizational mission: defined in the mission
statement which is a broad declaration of the
overriding purpose.
– The mission statement identifies product,
customers and how the firm differs from
competitors.
• Formulating strategy: managers analyze current
situation and develop strategies needed to
achieve the mission.
• Implementing strategy: managers must decide
how to allocate resources between groups to
ensure the strategy is achieved.

60. Levels of Planning
Figure 7.2 Corporate- Business- Functional
level Plan level Plan level Plan
Goal Corporate Divisional Functional
Setting mission & goals goals goals
Strategy Corporate- Business- Functional-
Formulation level strategy level strategy level strategy
Design of Design of Design of
Corporate Business-unit Functional
Strategy
Structure Structure Structure
Implementation Control
Control Control

61. Planning at General Electric
Figure 7.3
CEO
Corporate
Level
Corporate Office
Business
Level
GE GE GE GE NBC
Aircraft Lighting Motors Plastics
Functional
Level
Manufacturing Accounting
Marketing R&D

62. Planning Levels
 Corporate-level: decisions by top managers.
 Considers on which businesses or markets to be in.
 Provides a framework for all other planning.
 Business-level: details divisional long-term
goals and structure.
 Identifies how this business meets corporate goals.
 Shows how the business will compete in market.
 Functional-level: actions taken by managers in
departments of manufacturing, marketing, etc.
 These plans state exactly how business-level
strategies are accomplished.

63. Characteristics of Plans
• Time horizon: refers to how far in the future
the plan applies.
– Long-term plans are usually 5 years or more.
– Intermediate-term plans are 1 to 5 years.
• Corporate and business level plans specify long and
intermediate term.
– Short-term plans are less than 1 year.
• Functional plans focus on short to intermediate term.
• Most firms have a rolling planning cycle to
amend plans constantly.

64. Types of Plans
• Standing plans: for programmed decisions.
– Managers develop policies, rules, and standard
operating procedures (SOP).
• Policies are general guides to action.
• Rules are a specific guide to action.
• Single-use plans: developed for a one-time,
nonprogrammed issue. Usually consist of
programs and projects.
– Programs: integrated plans achieving specific goals.
– Project: specific action plans to complete programs.

65. Why Planning is Important
Planning determines where the organization is
now and where it will be in the future. Good
planning provides:
– Participation: all managers are involved in setting
future goals.
– Sense of direction & purpose: Planning sets goals
and strategies for all managers.
– Coordination: Plans provide all parts of the firm
with understanding about how their systems fit
with the whole.
– Control: Plans specify who is in charge of
accomplishing a goal.

66. Scenario Planning
• Scenario Planning: generates several forecasts
of different future conditions and analyzes
how to effectively respond to them.
– Planning seeks to prepare for the future, but the
future is unknown.
– By generating multiple possible “futures” we can
see how our plans might work in each.
• Allows the firm to prepare for possible surprises.
– Scenario planning is a learning tool to improve
planning results.

67. Determining Mission and Goals
• This is the first step of the planning process and
is accomplished by:
A. Define the business: seeks to identify our customer
and the needs we can and should satisfy.
• This also pinpoints competitors.
B. Establishing major goals: states who will compete
in the business.
• Should stretch the organization to new heights.
• Goals must also be realistic and have a time period in
which they are achieved.

68. Strategy Formulation
• Managers analyze the current situation to
develop strategies achieving the mission.
• SWOT analysis: a planning to identify:
– Organizational Strengths and Weaknesses.
• Strengths: manufacturing ability, marketing skills.
• Weaknesses: high labor turnover, weak financials.
– Environmental Opportunities and Threats.
• Opportunities: new markets.
• Threats: economic recession, competitors

69. Planning & Strategy Formulation
Figure 7.5
Corporate-level strategy
develop a plan of action
maximizing long-run value
SWOT analysis
identifies strengths & Business-level strategy
weaknesses inside the a plan of action to take
firm and opportunities advantage of opportunities
& threats in the and minimize threats
environment.
Functional-level strategy
a plan of action improving
department’s ability to
create value

70. The Five Forces Model
Potential
for Entry
Power of Rivalry Power of
Buyer Among Supplier
Organizations
Substitute
Products

71. The Five Forces
1. Level of Rivalry in an industry: how intense is the
current competition with competitors?
Increased competition results in lower profits.
2. Potential for entry: how easy is it for new firms to enter
the industry?
Easy entry leads to lower prices and profits.
3. Power of Suppliers: If there are only a few suppliers of
important items, supply costs rise.
4. Power of Buyers: If there are only a few, large buyers,
they can bargain down prices.
5. Substitutes: More available substitutes tend to drive
down prices and profits.

72. Corporate-Level Strategies
• Concentrate in single business: McDonalds
focuses in the fast food business.
– Can become very strong, but can be risky.
• Diversification: Organization moves into new
businesses and services.
Related diversification: firm diversifies in similar areas
to build upon existing divisions.
Synergy: two divisions work together to obtain more than
the sum of each separately.
Unrelated diversification: buy business in new areas.
• Build a portfolio of unrelated firms to reduce risk or
trouble in one industry. Very hard to manage.

73. International Strategy
• To what extent do we customize products
and marketing for different national
conditions?
– Global strategy: a single, standard product and
marketing approach is used in all countries.
• Standardization provides for lower cost.
• Ignore national differences that others can address.
– Mulitdomestic strategy: products and marketing
are customized for each country of operation.
• Customization provides for higher costs.
• Embraces national differences and depends on them
for success.

74. Vertical Integration
• When the firm is doing well, managers can add
more value by producing its own inputs or
distributing its products.
– BACKWARD vertical integration: the firm produces
its own inputs.
• McDonalds grows its own potatoes.
• Can lower the cost of supplies.
– FORWARD vertical integration: the firm distributes
its outputs or products.
• McDonalds owns the final restaurant.
• Firm can lower costs and ensure final quality.

75. Vertical Value Chain
Figure 7.6
Raw
Materials
Intermediate
Manufacturing
Assembly
Distribution
Customer
Backward Forward

76. Business-level Strategies
Table 7.2
market segments
Many Low-Cost Differentiation
Number of
Few Focused Focused
Low-Cost Differentiated
Low Cost Differentiation
Strategy

77. Business Strategies
– Low-cost: gain a competitive advantage by driving
down organizational costs.
• Managers manufacture at lower cost, reduce waste.
• Lower costs than competition mean lower prices.
– Differentiation: gain a competitive advantage by
making your products different from competitors.
• Differentiation must be valued by the customer.
• Successful differentiation allows you to charge more for
a product.
– Stuck in the middle: It is difficult to simultaneously
become differentiated and low cost.

78. Business Strategies
• Firms also choose to serve the entire market or
focus on a few segments.
– Focused low-cost: try to serve one segment of the
market but be the lowest cost in that segment.
• Cott Company seeks to achieve this in large retail chains.
– Focused differentiated: Firm again seeks to focus
on one market segment but is the most
differentiated in that segment.
• BMW provides a good example.

79. Functional-level Strategies
• Seeks to have each department add value
to a good or service.
• Marketing, service, production all add value
to a good or service.
– Value is added in two ways:
1. lower the operational costs of providing the value
in products.
2. add new value to the product by differentiating.
– Functional strategies must fit with business
level strategies.

80. Goals for successful functional strategies:
1. Attain superior efficiency: the measure of
outputs for a given unit of input.
2. Attain superior quality: products that
reliably do the job they were designed for.
3. Attain superior innovation: new, novel
features about the product or process.
4. Attain superior responsiveness to
customers: Know the customer needs and
fill them.

81. Organizational
Structure

82. Designing Organizational Structure
• Organizing: the process by which managers
establish working relationships among
employees to achieve goals.
– Organizational Structure: formal system of task &
reporting relationships showing how workers use
resources.
– Organizational design: managers make specific
choices resulting in a given organizational structure.
• Successful organizational design depends on
the organization’s unique situation.

83. Factors Affecting Organizational Design
Figure 8.1
Environment
Determine design
Strategy or organizational Technology
structure
Human
Resources

84. Determinants of Structure
 The environment: The quicker the environment
changes, the more problems face managers.
• Structure must be more flexible when environmental
change is rapid.
– Usually need to decentralize authority.
 Strategy: Different strategies require the use of
different structures.
• A differentiation strategy needs a flexible structure,
low cost may need a more formal structure.
• Increased vertical integration or diversification also
requires a more flexible structure.

85. Determinants of Structure
 Technology: The combination of skills, knowledge,
tools, equipment, computers and machines used in the
organization.
▪ More complex technology makes it harder for managers to
regulate the organization. Technology can be measured by:
▪ Task Variety: new problems a manager encounters.
▪ Task Analyzability: programmed solutions available to a
manager to solve problems.
▪ High task variety and low analyzability present many unique
problems to managers.
▪ Flexible structure works best in these conditions.
▪ Low task variety and high analyzability allow managers to
rely on established procedures.

86. Determinants of Structure
 Human Resources: the final factor affecting
organizational structure.
▪ Higher skilled workers who need to work in teams
usually need a more flexible structure.
▪ Higher skilled workers often have professional norms
Managers must take into account all four
factors (environment, strategy, technology
and human resources) when designing the
structure of the organization.

87. Job Design
 Job Design: group tasks into specific jobs.
▪ Results in a division of labor between workers that is
effective and efficient.
 Job simplification: reduction of the tasks each
worker performs.
▪ Too much and boredom results.
 Job enlargement: increase tasks for a given job to
reduce boredom.
 Job enrichment: increases the degree of
responsibility a worker has over a job.
▪ can lead to increased worker involvement.

88. Job Characteristics Model
 Jobs have five characteristics describing extent of:
– Skill variety: employee uses a wide range of skills
– Task identity: worker involved in all tasks of job from
beginning to end of the production process
– Task significance: worker feels the task is meaningful to
organization.
– Autonomy: employee has freedom to schedule tasks and carry
them out.
– Feedback: worker gets direct information about how well the
job is done.
 Theseaffect the motivation, satisfaction and
performance of employees.

89. Grouping Jobs into Functions
• Once tasks are grouped into jobs, managers must
decide how to group jobs together.
– Function: people working together with similar skills,
tools or techniques to perform their jobs.
• Functional structure consists of departments such as
marketing, production, and finance.
– Workers can learn from others doing similar tasks.
Pros – Easy for managers to monitor and evaluate workers.
– Hard for one department to communicate with others.
Cons – Managers can become preoccupied with their department and forget
the firm

90. Divisional Structures
• A division is a collection of functions working
together to produce a product.
• Divisions create smaller, manageable parts of a firm.
Divisions develop a business-level strategy to compete.
A division has marketing, finance, and other functions.
Functional managers report to divisional managers who then report
to corporate management.
– Product structure: divisions created according to the
type of product or service.
– Geographic structure: divisions based on the area of
a country or world served.
– Market structure: divisions based on the types of
customers served.

91. Product Structure
Figure 8.4a
CEO
Corporation
Corporate
Managers
Washing Machine Lighting Television
Division Division Division

92. Geographic Structure
Figure 8.4 b
CEO
Corporation
Corporate
Managers
Northern Western Southern Eastern
Region Region Region Region

93. Market Structure
Figure 8.4c
CEO
Corporation
Corporate
Managers
Large Business Small Business Educational Individual
Customers Customers Institutions Customers

94. Global Structures
• When managers find different problems or
demands across the globe, global solutions are
needed.
– Global geographic structure: different divisions
serve each world region.
• For customer needs that vary between regions.
– Global product structure: Customers in different
regions buy similar products so firms keep most
functional work at home and set up a division to
market product abroad.

95. Matrix & Product Teams
– Matrix structure: managers group people by
function and product teams simultaneously.
• Results in a complex network of reporting relationships.
• Very flexible and can respond rapidly to change.
• Each employee has two bosses which can cause
problems.
– Functional manager gives different directions than
product manager and employee cannot satisfy both.
– Product Team Structure: no 2-way reporting and
the members are permanently assigned to the team
and empowered to bring a product to market.

96. Matrix Structure
Figure 8.7a
CEO
Func.
Managers
Sales Design Production
Product
Team Managers
team A
Product
team B
Product Team
Product
team C
= two boss employee

97. Product Team Structure
Figure 8.7b
CEO
Func.
Managers
Sales Design Production
Manufacturing Manufacturing Manufacturing
= Product Team Manager = Team member

98. Hybrid Structures
• Many large organizations have divisional
structures where each manager can select the
best structure for that particular division.
– One division may use a functional structure, one
geographic, and so on.
• This ability to break a large organization into
many smaller ones makes it much easier to
manage.

99. Coordinating Functions
•To ensure sufficient coordination between
functions, managers delegate authority.
– Authority: the power vested in the manager to
make decisions and use resources.
– Hierarchy of authority: describes the relative
authority each manager has from top to bottom.
• Span of Control: refers to the number of workers a
manager manages.
• Line authority: managers in the direct chain of command
for production of goods or services. Example: Sales
• Staff authority: managers in positions that give advice to
line managers. Example: Legal

100. Tall & Flat Organizations
– Tall structures have many levels of authority
relative to the organization’s size.
• As levels in the hierarchy increase, communication gets
difficult.
• The extra levels result in more time being taken to
implement decisions.
• Communications can also become garbled as it is
repeated through the firm.
– Flat structures have few levels but wide spans of
control.
• Results in quick communications but can lead to
overworked managers.

101. Minimum Chain of Command
– Managers should carefully evaluate:
• Do they have the right number of middle managers?
• Can the structure be altered to reduce levels?
• Centralized v. Decentralized
– Decentralized operations puts more authority at
lower levels and leads to flat organizations.
• Workers must be able to reach decisions.
• Divisions and functions can begin to lose sight of
organizational goals and focus only on their small area.

102. Integrating Mechanisms
– Direct contact: get managers from different divisions
or functions together to solve mutual problems.
– Liaison Roles: one manager in each area is responsible
for communication with other areas.
– Task Forces: temporary committees formed across
divisions to solve a specific problem.
– Cross-functional teams: works much like a permanent
task force that deals with recurring problems.
– Matrix structure: already contains many integrating
mechanisms.

103. Strategic Alliances
• Strategic alliance: a formal agreement
committing two or more firms to exchange
resources to produce a good.
• Network Structure: a whole series of strategic
alliances.
– Created between suppliers, manufacturers, and
distributors.
• Toyota and Honda use many such alliances.
– Network structures allow firms to bring resources
together in a boundary-less organization.

104. Organizational
Control and Culture

105. Organizational Control
• Managers must monitor & evaluate:
– Are we efficiently converting inputs into outputs?
• Must accurately measure units of inputs and outputs.
– Is product quality improving?
• Are we competitive with other firms?
– Are employees responsive to customers?
• customer service is increasingly important.
– Are our managers innovative in outlook?
• Does the control system encourage risk-taking?

106. Control Systems
Formal, target-setting, monitoring, evaluation and
feedback systems to provide managers with
information to determine if strategy and structure are
working effectively and efficiently.
• A good control system should:
–be flexible so managers can respond as needed.
–provide accurate information about the organization.
–provide information in a timely manner.

107. Three Types of Control
Figure 9.1
Conversion
Inputs Outputs
Process
Feedforward Concurrent Feedback
Control Control Control
(anticipate (manage problems (manage problems
problems) as they occur) after they occur)

108. Control Types
 Feedforward: use in the input stage of the process.
▪ Managers anticipate problems before they arise.
▪ Managers can give rigorous specifications to suppliers to
avoid quality
 Concurrent: gives immediate feedback on how inputs
are converted into outputs.
▪ Allows managers to correct problems as they arise.
▪ Managers can see that a machine is becoming out of
alignment and fix it.
 Feedback: provides after the fact information managers
can use in the future.
▪ Customer reaction to products are used to take
corrective action in the future.

109. Control Process Steps
Figure 9.2
1. Establish standards of performance, goals, or
targets against which performance is evaluated.
2.
Measure actual performance
3. Compare actual performance
against chosen standards
4. Evaluate results and take corrective action
when the standard is not being achieved.

110. The Control Process
1. Establish standards, goals, or targets against which
performance is to be evaluated.
▪ Standards must be consistent with strategy, for a low cost
strategy, standards should focus closely on cost.
▪ Managers at each level need to set their own standards.
2. Measure actual performance: managers can measure
outputs resulting from worker behavior or they can
measure the behavior themselves.
▪ The more non-routine the task, the harder to measure.
▪ Managers then measure the behavior (come to work on
time) not the output.

111. The Control Process
3. Compare actual performance against chosen
standards.
▪ Managers must decide if performance actually deviates.
▪ Often, several problems combine creating low
performance.
4. Evaluate result and take corrective action.
▪ Perhaps the standards have been set too high.
▪ Workers may need additional training, or
equipment.
▪ This step is often hard since the environment is constantly
changing.

112. The Goal-Setting Process
Figure 9.4
Corporate level managers set goals for
individual decisions to allow organization
to achieve corporate goals.
Divisional managers set goals for
each function to allow the division
to achieve its goals.
Functional managers set goals for
each worker to allow the function
to achieve its goals.

113. 3 Organizational Control Systems
Figure 9.3
Financial Measures or performance
Output
Goals
Control
Operating budgets
Direct supervision
Behavior
Management by Objective (MBO)
Control
Rules & Standard Operating Procedures
Values
Culture or Clan
Norms
Control
Socialization

114. Output Control Systems
– Financial Controls are objective and allow comparison
to other firms.
• Profit ratios--measures how efficiently managers convert
resources into profits.
– Return on Investment (ROI) is the most common.
• Liquidity ratios -- measure how well managers protect
resources to meet short term debt.
– Current & quick ratios.
• Leverage ratios -- show how much debt is used to finance
operations.
– Debt-to-asset & times-covered ratios.
• Activity ratios -- measures how managers create value from
assets.
– Inventory turnover, days sales outstanding.

115. Output Control Systems
– Organizational Goals: after corporate financial goals
are set, each division is given specific goals that must
be met to attain the overall goals.
• Goals and thus output controls, will be set for each area of
the firm.
– Goals are specific & difficult (not impossible) to achieve.
– Goal setting is a management skill developed over time.
– Operating budgets: a blueprint showing how
managers can use resources.
• Managers are evaluated by how well they meet goals and
stay in budget.
– Each division is often evaluated on its own budgets for cost, revenue
or profit.

116. Output Control Problems
– Managers must create output standards that
motivate at all levels.
– Be careful of creating short-term goals that
motivate managers to forget the future.
• It is easy to cut costs by dropping R&D now but it leads to
future disaster.
– If standards are too high, workers may follow
unethical behavior to attain them.
• Increase sales regardless of issues. This can be done by
skipping safe production steps.

117. Management by Objectives
– Management by Objectives (MBO): evaluates
workers by attainment of specific objectives.
• Goals are set at each level of the firm.
• Goal setting is participatory with manager AND worker.
• Reviews held looking at progress toward goals.
– Pay raises and promotions are tied to goal attainment.
• Teams are also measured in this way with goals and
performance measured for the team.

118. Bureaucratic Control
– Control through a system of rules and standard
operating procedures (SOPs) that shape the
behavior of divisions, functions, and individuals.
• Rules and SOPs tell the worker what to do.
• Standardized actions so outcomes are predictable.
• Still need output control to correct mistakes.
– Problems of Bureaucratic Control:
• Rules easier to make than delete. Leads to “red tape”
• Firm can become too standardized and not flexible.
• Best used for routine problems.

119. Organizational Culture & Clan Control
– Organizational culture is a collection of values,
norms, & behavior shared by workers that control
the way workers interact with each other.
– Clan Control: control through the development of
an internal system of values and norms.
• Both culture and clan control accept the norms and
values as their own and then work within them.
– Examples include dress styles, work hours, pride in work.
• These methods provide control where output and
behavioral control does not work.
• Strong culture and clan control help worker to focus on
the organization and enhance its performance.

120. Values and Norms
– Organizational values and norms inform workers
about what goals they should peruse and how they
should behave to reach these goals.
• Some organizations work hard to create a culture that
encourages and rewards risk taking.
– Microsoft, Oracle seek innovation.
• Others, create an environment of caution.
– Oil refineries, nuclear power plants must focus on caution.

121. Creating Strong Organizational Culture
Figure 9.5
Values of Founder
Socialization Process
Organizational
Culture
Ceremonies & Rites
Stories & Language

122. The Manager
as a Person

123. Personality Traits
 Personality Traits: Characteristics that influence
how people think, feel and behave on and off the
job.
▪ Include tendencies to be enthusiastic, demanding, easy-
going, nervous, etc.
▪ Each trait can be viewed on a continuum, from low to
high.
 There is no “wrong” trait, but rather managers have
a complex mix of traits.

124. The Big Five Traits:
Figure 11.1
I
Low Extroversion High
II
Low Negative Affectivity High
III
Low Agreeableness High
IV
Low Conscientiousness High
V
Low Openness to Experience High

125. The Big Five
Extroversion: people are positive and feel good about
themselves and the world.
– Managers high on this trait are sociable, friendly.
Negative Affectivity: people experience negative
moods, are critical, and distressed.
– Managers are often critical and feel angry with others and
themselves.
Agreeableness: people like to get along with others.
– Managers are likable, and care about others.
Conscientiousness: people tend to be careful,
persevering.
Openness to Experience: people are original, with broad
interests.

126. Traits and Managers
– Successful managers vary widely on the “Big Five”.
• It is important to understand these traits since it helps
explain a manager’s approach to planning, leading,
organizing, etc.
– Managers should also be aware of their own style and try to
tone down problem areas.
– Internal Locus of Control: People believe they are
responsible for their fate.
– See their actions are important to achieving goals.
– External Locus of Control: People believe outside
forces are responsible for their fate.
– Their actions make little difference in achieving outcomes.
• Managers need an Internal Locus of Control!

127. Other Traits
 Self-Esteem: Captures the degree to which people feel
good about themselves and abilities.
▪ High self-esteem causes people to feel they are competent, and
capable.
▪ Low self-esteem people have poor opinions of themselves and
abilities.
 Need for Achievement: extent to which people have a
desire to perform challenging tasks and meet personal
standards.
 Need for Affiliation: the extent to which people want to
build interpersonal relationships and being liked.
 Need for Power: indexes the desire to control or
influence others.

128. Values
– Values: describe what managers try to achieve
through work and how to behave.
• These are personal convictions about life-long goals
(terminal values) and modes of conduct (instrumental
values).
• A person’s value system reflects how important their
values are as a guiding principle in life.
• Terminal values important to managers include:
– Sense of Accomplishment, equality, self-respect.
• Instrumental values include:
– hard-working, broadminded, capable.

129. Terminal and Instrumental Values
Figure 11.3
INSTRUMENTAL
TERMINAL VALUES VALUES
Prosperous life Ambitious
Exciting life Broadminded
Sense of Accomplishment Capable
A world at peace Cheerful
Salvation Clean
Self-respect Helpful
Pleasure Honest
Wisdom Obedient
True friendship Loving
Equality Responsible

130. Attitudes
– Attitudes: collection of feelings about something.
• Job Satisfaction: feelings about a worker’s job.
– Satisfaction tends to rise as manager moves up in the organization.
– Organizational Citizenship Behaviors: actions not required of
managers but which help advance the firm. Managers with high
satisfaction perform these “extra mile” tasks.
– Organizational Commitment: beliefs held by people toward the
organization as a whole.
– Committed managers are loyal and proud of the firm.
– Commitment can differ around the world.

131. Moods
– Moods: encompass how a manager feels while
managing.
• Positive moods provide excitement, elation and
enthusiasm.
• Negative moods lead to fear, stress, nervousness.
– Moods can depend on a person's basic outlook as well as on
current situations.
– Managers need to realize how they feel affects how
they treat others and how others respond to them.
• Workers prefer to make suggestions to mangers who are
in “a good mood”.

132. Perceptions
– Perception is the process through which people
select, organize and interpret input.
• Manager’s decisions are based on their perception.
– Managers need to ensure perceptions are accurate.
• Managers are all different and so are their perceptions of
a situation.
– Perceptions depend on satisfaction, moods, and so forth.
– A manager’s past experience can influence their
outlook on a new project.
• Good managers try not to prejudge new ideas based on
the past.

133. Career Development
– Career: sum total of the work-related experiences
through a person’s life.
• Linear career: person moves through a sequence of jobs
of higher levels.
– Can build different experience in different positions.
• Steady State career: worker chooses to keep the same
kind of job over much of a career.
– Become highly skilled in a given area.
• Spiral Career: worker holds fundamentally different jobs
that still build on each other.
– Worker gains wide experience yet skills continue to build.

134. Career Stages
Figure 11.7
Preparation
for Work
Organization
Entry
Early Mid-
career
Mid-
career
Late
Career

135. Career Stages:
– Preparation for Work: decide on kind of career,
determine qualifications needed.
– Organizational entry: find a “first” job.
– Managers usually start in a functional area first.
– Early career: establishes person in the firm and
begins achievement.
– Worker learns firm’s values and duties.
– Also begins to achieve noteworthy results in the job.
– Worker tries to stand out as a good performer.
• Mentors (experienced manager who shows you the
ropes) are valuable during this stage.

136. Stages, cont.
– Mid-career: usually have been in workforce 20-35
years.
– Usually provides major accomplishments.
• Career plateaus can occur as chances for further
promotion dwindle.
– Plateau managers can still enjoy a fruitful career.
– Late career: continues as long as the manager
works and is active.
• Many managers choose to stay active well past normal
retirement.

137. Career Management
Managers need to consider both personal career
management as well as the careers of other
workers in the firm.
• Ethical practice: managers need to ensure worker
promotions are based on outcomes, not friendships.
– This means all workers are treated equally.
• Accommodation of other demands: Workers have many
things in their lives besides work. Managers need to
consider these issues as well.
– The dual career couple is the norm.
– Workers have family commitments.

138. Stress
Results when people face important opportunity
or threats they are uncertain can be handled.
– Managers almost always face stress.
• Physiological issues: stress can result in sleep problems,
headaches, and other issues.
– Long-term levels of stress can result in heart attack, and high
blood pressure.
– Different people experience stress differently.
• Psychological issues: stress can result in bad moods,
anger, nervousness.
– Can result in lower work output and frustration.
• Behavioral issues: stress can actually enhance job
performance as well as impair it.

139. Stress & Performance
Figure 11.8
High
Performance
Level of
Low
Low High
Positive Stress Negative Stress
Level of Stress

140. Motivation

141. Motivation
 Defined as the psychological forces within a
person that determine:
1) direction of behavior in an organization;
2) the effort or how hard people work;
3) the persistence displayed in meeting goals.
 Intrinsic Motivation: behavior performed for its
own sake.
▪ Motivation comes from performing the work.
 Extrinsic Motivation: behavior performed to
acquire rewards.
▪ Motivation source is the consequence of an action.

142. Motivation Equation
Figure 12.1
Inputs from Outcomes
Organizational Performance received by
members members
Time
Contribute to Pay
Effort
organization Job Security
Education
efficiency, Benefits
Experience
effectiveness Vacation
Skills
and Autonomy
Knowledge
attain goals Responsibility
Work Behav.

143. Expectancy Theory
Developed by Victor Vroom and is a very popular
theory of work motivation.
• Vroom suggests that motivation will be high
when workers feel:
– High levels of effort lead to high performance.
– High performance will lead to the attainment of
desire outcomes.
• Consists of three areas:
– Expectancy, Instrumentality, & Valence.

144. Expectancy, Instrumentality, & Valence
Figure 12.2
Effort Performance Outcomes
Expectancy:
Instrumentality Valence:
Person’s
perception that How desired
perception that
performance are the outcomes
their effort will
results in from a
result in
outcomes job
performance

145. Expectancy, Instrumentality, & Valence
 Expectancy is the perception that effort (input) will
result in a level of performance.
▪ You will work hard if it leads to high performance.
▪ You would be less willing to work hard if you knew that the best
you would get on a paper was a D regardless of how hard you
tried.
▪ Instrumentality: Performance leads to outcomes.
▪ Workers are only motivated if they think performance
leads to an outcome.
▪ Managers should link performance to outcomes.
 Valence: How desirable each outcome is to a
person.
▪ Managers should determine the outcomes workers want
most.

146. High Motivation:
• According to the Expectancy Theory, high
motivation results from high levels of
Expectancy, Instrumentality, & Valence.
– If just one value is low, motivation will be low.
– This means that even if desired outcomes are
closely link to performance, the worker must feel
the task is possible to achieve for high motivation to
result.
– Managers need to consider this relationship to build
a high performance firm.

147. Expectancy Theory
Figure 12.3
High Expectancy High High Valence
Instrumentality
(Worker desires the
(Worker knows that
(Worker perceives that outcomes resulting
if they try, they can
high performance from high
perform)
leads to outcomes) performance)
High
Motivation

148. Need Theory
People are motivated to obtain outcomes at work to
satisfy their needs.
• A need is a requirement for survival.
• To motivate a person:
1)Managers must determine what needs worker wants satisfied.
2)Ensure that a person receives the outcomes when performing
well.
– Several needs theories exist.
• Maslow’s Hierarchy of Needs.
• Alderfer’s ERG.

149. Hierarchy of Needs
Need Level Description Examples
Table 12.1
Self- Realize one’s Use abilities
Actualization full potential to the fullest
Feel good Promotions
Esteem
about oneself & recognition
Social Interpersonal
Belongingness
interaction, love relations, parties
Job security,
Safety Security, stability
health insurance
Food, water, Basic pay level
Physiological
shelter to buy items
Lower level needs must be satisfied before higher needs are addressed.

150. Alderfer’s ERG
Table 12.2
Need Level Description Examples
Highest
Self-development, Worker continually
Growth
creative work improves skills
Interpersonal Good relations,
Relatedness
relations, feelings feedback
Lowest
Food, water, Basic pay level
Existence
shelter to buy items
After lower level needs satisfied, person seeks higher needs. When
unable to satisfy higher needs, lower needs motivation is raised.

151. Motivation-Hygiene Theory
Focuses on outcomes that can lead to high
motivation, job satisfaction, & those that can
prevent dissatisfaction.
• Motivator needs: related to nature of the work and how
challenging it is.
– Outcomes are autonomy, responsibility, interesting work.
• Hygiene needs: relate to the physical & psychological
context of the work.
– Refers to a good work environment, pay, job security.
– When hygiene needs not met, workers are dissatisfied. Note:
when met, they will NOT lead to higher motivation, just will
prevent low motivation.

152. Equity Theory
– Considers worker’s perceptions of the fairness of
work outcomes in proportion to their inputs.
• Adams notes it is the relative rather than the absolute level
of outcomes a person receives.
– The Outcome/input ratio is compared by worker with another
person called a referent.
– The referent is perceived as similar to the worker.
• Equity exists when a person perceives their outcome/input
ratio to be equal to the referent’s ratio.
– If the referent receives more outcomes, they should also give more
inputs to achieve equity.

153. Equity Theory
Figure 12.3
Condition Person Referent Example
Worker contributes
Outcomes = Outcomes more inputs but also
Equity
Inputs Inputs gets more outputs
than referent
Worker contributes
Underpayment Outcomes < Outcomes more inputs but also
Equity Inputs Inputs gets the same outputs
as referent
Worker contributes
Overpayment Outcomes > Outcomes same inputs but also
Equity Inputs Inputs gets more outputs
than referent

154. Inequity
• Inequity exists when worker’s outcome/input ratio is not
equal to referent.
– Underpayment inequity: ratio is less than the referent. Worker
feels they are not getting the outcomes they should given inputs.
– Overpayment inequity: ratio is higher than the referent. Worker
feels they are getting more outcomes then they should given
inputs.
• Restoring Equity: Inequity creates tension in workers to
restore equity.
In underpayment, workers reduce input levels to correct.
Overpayment, worker can change the referent to adjust.
• If inequity persists, worker will often leave the firm.

155. Goal Setting Theory
– Focus worker’s inputs in the direction of high
performance & achievement of organizational
goals.
• Goal is what a worker tries to accomplish.
– Goals must be specific and difficult for high performance results.
– Workers put in high effort to achieve such goals.
• Workers must accept and be committed to them.
– Feedback on goal attainment also is important.
– Goals point out what is important to the firm.
• Managers should encourage workers to develop action
plans to attain goals.

156. Learning Theory
– Focuses on the linkage between performance and
outcomes in the motivation equation shown in
Figure 12.1.
– Learning: permanent change in person’s knowledge or behavior
resulting from practice or experience.
– Operant Conditioning: people learn to do things
leading to desired outcomes and avoid doing things
with adverse outcomes.
• Motivation can be increased by linking specific behaviors
with specific outcomes.
– Managers can use four tools of conditioning to motivate high
performance.

157. Social Learning Theory
• Vicarious Learning: or observational learning, occurs
when a person is motivated to learn by watching
someone else work and be rewarded.
– People are motivated to imitate models who are highly
competent, expert and receive attractive reinforcers.
• Self- reinforcers: desired outcomes a person can give
themselves.
– Person can reward themselves for success.
• Self-efficacy: refers to a person’s belief about their
ability to perform a behavior successfully.
– People will only be motivated if they think they have the
ability to accomplish the task.

158. Pay and Motivation
– Pay can help motivate workers.
Expectancy: pay is an instrumentality (and outcome), must
be high for motivation to be high.
Need Theory: pay is used to satisfy many needs.
Equity Theory: pay is given in relation to inputs.
Goal Setting Theory: pay linked to goal attainment.
Learning Theory: outcomes (pay), is distributed upon
performance of functional behaviors.
– Pay should be based on performance, many firms
do this with a Merit Pay Plan.

159. Merit Pay
– Can be based on individual, group or organization
performance.
• Individual Plan: used when individual performance
(sales) is accurately measured.
• Group Plan: use when group works closely together and
is measured as a group.
• Organization Plan: When group or individual outcomes
not easily measured.
– Bonus has a higher impact on motivation since
– Salary level not related to current performance.
– Other items( base salary, cost of living, seniority).
– Salary rarely goes down and usually changes little.

160. Leadership

161. Leadership
Leadership is the process where a person
exerts influence over others and inspires,
motivates and directs their activities to
achieve goals.
Effective leadership increases the firm’s
ability to meet new challenges.
 Leader: The person exerting the influence.
▪ Personal Leadership Style: the ways leaders choose to
influence others.
▪ Some leaders delegate and support subordinates, others are very
authoritarian.
▪ Managers at all levels have their own leadership style.

162. Sources of Power
Figure 13.1
Reward
Power
Legitimate Coercive
Power Power
Enable managers to be
leaders & influence
subordinates to
achieve goals
Expert Referent
Power Power

163. Sources of Power
• Used to affect other’s behavior and get them to
act in given ways.
– Legitimate Power: manager’s authority resulting by
their management position in the firm.
• Can be power to hire/fire workers, assign work.
– Reward Power: based on the manager’s ability to
give or withhold rewards.
• Pay raises, bonuses, verbal praise.
• Effective managers use reward power to signal
employees they are doing a good job.

164. Sources of Power
– Coercive Power: based in ability to punish others.
• Ranges from verbal reprimand to pay cuts to firing.
• Can have serious negative side effects.
– Expert Power: based on special skills of leader.
• First & middle managers have most expert power.
• Often found in technical ability.
– Referent Power: results from personal
characteristics of the leader which earn worker’s
respect, loyalty and admiration.
• Usually held by likable managers who are concerned
about their workers.

165. Empowerment
 Process of giving workers at all levels
authority to make decisions and the
responsibility for their outcomes.
Empowerment helps managers:
Get workers involved in the decisions.
 Increase worker commitment and motivation.
 To focus on other issues.
 Effective managers usually empower
substantial authority to workers.

166. Leadership Models
– Trait Model: sought to identify personal characteristics responsible for
effective leadership.
Research shows that traits do appear to be connected to effective
leadership.
–Many “traits” are the result of skills and knowledge.
–Not all effective leaders possess all these traits.
– Behavioral Model: Identifies types of
behavior.
Consideration: leaders show care toward workers.
–Employee-centered.
Initiating Structure: managers take steps to make sure work is done.
–Done by assigning work, setting goals, etc.
–Job-oriented.

167. Contingency Models
Fiedler’s Model: effective leadership is contingent
on both the characteristics of the leader and
the situation.
– Leader style: the enduring, characteristic approach
to leadership a manager uses.
• Relationship-oriented: concerned with developing good
relations with workers.
• Task-oriented: concerned that workers perform so the
job gets done.

168. Fiedler’s Model
– Situation characteristic: how favorable a given
situation is for leading to occur.
• Leader-member relations: determines how much
workers like and trust their leader.
• Task structure: extent to which workers tasks are clear-
cut.
– Clear issues make a situation favorable for leadership.
• Position Power: amount of legitimate, reward, & coercive
power a leader has due to their position.
– When positional power is strong, leadership opportunity
becomes more favorable.

169. Fiedler’s Contingency Model
Figure 13.3
Leader-
Member
Relations GOOD POOR
Task
HIGH LO W HIGH LOW
Structure
Position S W S W S W S W
Power
Kinds of 1
I II III IV V VI VII VIII
Leadership Very Very
Situations Favorable Unfavorable
Relationship-oriented managers most effective in IV, V, VI, VII.
Task-oriented managers most effective in I, II, III or VIII.

170. House’s Path-Goal Model
– Model suggests that effective leaders motivate
workers to achieve by:
1) Clearly identifying the outcomes workers are trying to
achieve.
2) Reward workers for high-performance and attainment.
3) Clarifying the paths to the attainment of the goals.
• Path-Goal is a contingency model since it proposes the
steps managers should take to motivate their workers.
– Based on Expectancy Theory.

171. Steps to Path-Goal
1) Determine the outcomes your subordinates are
trying to obtain.
• Can range from pay to job security or interesting work.
– Once outcomes determined, manager needs to be sure they
have the reward power to provide these.
2) Reward subordinates for high-performance and
goal attainment with the desired outcomes.
3) Clarify the paths to goal attainment for workers,
remove obstacles to performance, and express
confidence in worker’s ability.

172. Motivating with Path-goal
– Path-goal identifies four behaviors leaders can use:
1) Directive behaviors: set goals, assign tasks, show how to
do things.
2) Supportive behavior: look out for the worker’s best
interest.
3) Participative behavior: give subordinates a say in
matters that affect them.
4) Achievement-oriented behavior: Setting very
challenging goals, believing in worker’s abilities.
– Which behavior should be used depends on the
worker and the tasks.

173. Leader-Substitute Model
– Leadership substitute: acts in the place of a leader
and makes leadership unnecessary. Possible
substitutes can be found:
• Characteristics of Subordinates: their skills, experience,
motivation.
• Characteristics of context: the extent to which work is
interesting and fun.
• Worker empowerment or Self-managed work teams
reduce leadership needs.
– Managers need to be aware that they do not always
need to directly exert influence over workers.

174. Transformational Leadership
– Started with von Pierer, CEO of Siemens, and allows
dramatic improvements in management
effectiveness.
– Transformational managers:
• Make subordinates aware of how important their jobs
are by providing feedback to the worker.
• Make subordinates aware of their own need for personal
growth and development.
– Empowerment of workers, added training help.
• Motivate workers to work for the good of the
organization, not just themselves.

175. Transformational Leaders
– Transformational leaders are charismatic and have a
vision of how good things can be.
• They are excited and clearly communicate this to
subordinates.
– Transformational leaders openly share information
with workers.
• Everyone is aware of problems and the need for change.
• Empowers workers to help with solutions.
– Transformational leaders engage in development of
workers.
• Manager works hard to help them build skills.

176. Transactional Leadership
• Involves managers using the reward and
coercive power to encourage high
performance.
• Managers who push subordinates to change
but do not seem to change themselves are
transactional.
• The transactional manager does not have
the “vision” of the Transformational leader.

177. Communication

178. Importance of Good Communication
• Good Communication allows a firm to
– Learn new skills and technologies.
– Become more responsive to customers.
– Improve Quality of their product or service.
– Foster innovation
• Effective communication is needed by all
Managers.

179. The Communication Process
– Communication consists of two phases:
1. Transmission phase: information is shared by 2 or more
people.
2. Feedback phase: a common understanding is assured.
– Starts with the Sender who wants to share
information.
• Sender must decide on a message to share
• Sender also puts the message into symbols or language,
a process called encoding.
Noise: anything harming the communication
process.

180. The Communication Process
Figure 15.1
Transmission Phase
Message Encoding Medium Decoding
NOISE Receiver
Sender
(now sender)
Decoding Medium Encoding Message
Feedback Phase

181. The Communication Process
– Messages are transmitted over a medium to a
receiver.
• Medium: pathway the message is transmitted on (phone,
letter).
• Receiver: person getting the message.
– Receiver next decodes the message.
• Decoding allows the receiver to understand the message.
• This is a critical point, can lead to mis-understanding.
– Feedback is started by receiver and states that the
message is understood or that it must be re-sent.

182. Communication Issues
– Encoding of messages can be done verbally or
non-verbally
• Verbal: spoken or written communication.
• Nonverbal: facial gestures, body language, dress.
– Sender and receiver communicate based on their
perception.
• Subjective perception can lead to biases and
stereotypes that hurt communication.
• Effective Managers avoid communicating based on a
pre-set belief.

183. Dangers of Ineffective Communication
– Managers spend most of their time communicating
so both they and the subordinates must be effective
communicators. To be effective:
– Select an appropriate medium for each message.
– There is no one “best” medium.
• Consider information richness: the amount of
information a medium can carry.
– Medium with high richness can carry much information to aid
understanding.
• Is there a need for a paper/electronic trail to provide
documentation?

184. Information Richness and Media Type
Figure 15.2
High
Richness
Face-to-face
communication
Verbal communication
electronically
transmitted
Verbal communication
electronically
transmitted
Impersonal written
commun-
Low ication
Richness

185. Communication Media
Face-to-Face: highest information richness.
▪ Can take advantage of verbal and nonverbal signals.
▪ Provides for instant feedback.
▪ Management by wandering around takes advantage of this with
informal talks to workers.
▪ Video Conferences: provide much of this richness.
▪ Reduce travel costs and meeting times.
Verbal Communication electronically transmitted:
has next highest richness.
▪ Phone conversations, but no visual nonverbal cues.
▪ Do have tone of voice, sender’s emphasis and quick feedback.

186. Communication Media
Personally Addressed Written Communication: lower
richness than the verbal forms, but still is directed at a
given person.
▪ Personal addressing helps ensure receiver reads it.
▪ Letters and e-mail are common forms.
▪ Cannot provide instant feedback to sender but can get feedback
later.
▪ Excellent for complex messages needing follow-up.
Impersonal Written Communication: lowest richness.
▪ Good for messages to many receivers. Little feedback is
expected.
▪ Newsletters, reports are examples.

187. E-Mail Trends
– E-mail use is growing rapidly in large firms, and
there are even special e-mail etiquette:
• Words in all CAPITALS are seen as “screaming” at the
receiver.
• Punctuate your messages for easy reading and don’t
ramble on.
• Pay attention to spelling and treat like a written letter.
– E-mail has allowed telecommuting, where workers
can work from home and be in touch with e-mail.

188. Communication Networks
Networks show information flows in an organization.
• Wheel Network: information flow to and from one
central member.
• Chain Network: members communicate with people
next to them in sequence.
– Wheel and Chain networks provide for little interaction.
• Circle Network: members communicate with others
close to them in terms of expertise, office location, etc.
• All-Channel Network: found in teams, with high levels of
communications between each member and all others.

189. Communication Networks in Groups & Teams
Figure 15.3
Wheel Network
Chain Network
All Channel Network
Circle Network

190. Organization Communication Networks
Organization chart depicts formal reporting channels.
• Communication is informal and flows around issues,
goals, and projects.
• Vertical Communication: goes up and down the
corporate hierarchy.
• Horizontal Communication: between employees of the
same level.
– Informal communications can span levels and departments.
• Grapevine: informal network carrying unofficial
information through the firm.

191. Organizational Communications Network
Figure 15.4
Formal
Communication
Informal
Communication

192. Technological Advances
 Internet: global system of computer networks
Many firms use it to communicate with suppliers.
 World Wide Web (WWW): provides multimedia
access to the Internet.
 Intranets: use the same information concepts as the
Internet, but keep the network inside the firm.
 Groupware: software designed to let workers share
information and improve communication.
Best for team oriented support.

193. Communication Skills for Managers as
Senders
 Send clear and complete messages.
 Encode messages in symbols the receiver understands.
 Select a medium appropriate for the message AND
monitored by the receiver.
 Avoid filtering (holding back information) and distortion
as the message passes through other workers.
 Ensure a feedback mechanism is included in the
message.
 Provide accurate information to avoid rumors.

194. Communication Skills for Managers as
Receivers
• Pay Attention to what is sent as a message.
• Be a good listener: don’t interrupt.
– Ask questions to clarify your understanding.
• Be empathetic: try to understand what the sender
feels.
• Understand linguistic styles: different people speak
differently.
– Speed, tone, pausing all impact communication.
– This is particularly true across cultures.
– Managers should expect and plan for this.