ITM summary.pdf

ITM Summary Table of contents Chapter 1.................................................................................................................................................. 3 The definition of management........................

ITM Summary Table of contents Chapter 1.................................................................................................................................................. 3 The definition of management............................................................................................................ 3 The four management functions......................................................................................................... 3 Management skills............................................................................................................................... 4 Chapter 2.................................................................................................................................................. 4 Management and organization............................................................................................................ 4 Classical perspective............................................................................................................................ 5 Humanistic perspective........................................................................................................................ 6 Recent historical trends....................................................................................................................... 6 Chapter 3.................................................................................................................................................. 7 External environment........................................................................................................................... 7 Organization-environment relationships............................................................................................. 7 Chapter 7.................................................................................................................................................. 8 Goal setting and planning overview..................................................................................................... 8 Goal setting in organizations................................................................................................................ 8 Operational planning............................................................................................................................ 9 Benefits and limitations of planning.................................................................................................. 10 Planning for a turbulent environment............................................................................................... 10 Chapter 8................................................................................................................................................ 11 What is strategic management?........................................................................................................ 11 Strategic management process.......................................................................................................... 11 Formulating corporate-level strategy................................................................................................ 12 Formulating business-level strategy.................................................................................................. 13 Formulation functional-level strategies............................................................................................. 14 Global strategy................................................................................................................................... 14 Strategy execution............................................................................................................................. 15 Chapter 4................................................................................................................................................ 15 Organizing the vertical structure....................................................................................................... 15 Departmentalization.......................................................................................................................... 19 Organizing for horizontal coordination.............................................................................................. 20 Factors shaping structure................................................................................................................... 21 1 Chapter 9................................................................................................................................................ 22 Types of decisions and problems....................................................................................................... 22 Decision-making models.................................................................................................................... 23 Decision-making steps........................................................................................................................ 24 Why do managers take poor decisions?............................................................................................ 26 Chapter 13.............................................................................................................................................. 27 Contemporary leadership.................................................................................................................. 27 From management to leadership...................................................................................................... 27 Behavioural approaches..................................................................................................................... 27 Contingency approaches.................................................................................................................... 29 Charismatic and transformational leadership................................................................................... 29 Power and influence.......................................................................................................................... 29 Chapter 14.............................................................................................................................................. 30 The strategic role of human resource management......................................................................... 30 The influence of globalization on HRM.............................................................................................. 31 Maintaining an effective workforce................................................................................................... 31 Content perspectives on motivation.................................................................................................. 31 Process perspectives on motivation.................................................................................................. 32 Reinforcement perspective on motivation........................................................................................ 33 2 Chapter 1 Introduction to management The definition of management Management = the attainment of organizational goals in an effective and efficient manner through planning, organizing, leading and controlling organizational resources. Effectiveness and efficiency Effectiveness = the degree to which organization achieves a stated goal. Efficiency = the use of minimal resources (raw materials, money and people) to produce the desired volume of output. Higher effectiveness comes with lower efficiency; higher efficiency comes with lower effectiveness. So companies have to make a choice for higher effectiveness at the cost of efficiency or higher efficiency at the cost of the effectiveness; a so called “trade off”. The four management functions Planning = identifying goals for future organizational performance and deciding on the tasks and use of resources needed to attain them. In other words, managerial planning defines where the organization wants to be in the future and how to get there. Organizing = following the planning and reflecting how the organization tries to accomplish the plan. This involves assigning tasks, grouping tasks into departments, delegating authority and allocating resources across the organization. Leading = the use of influence to motivate employees to achieve organizational goals. This means creating a shared culture and values, communicating goals to people throughout the organization and infusing employees with the desire to perform at a high level. Controlling = monitoring employees’ activities, determining whether the organization is moving towards its goals and making corrections as necessary. 3 Management skills Although some management theorists propose a long list of skills, the necessary skills for managing a department or an organization can be placed in three categories: conceptual, human and technical. Conceptual skills = the cognitive ability to see the organization as a whole system and the relationships among its parts. This involves knowing where one’s team fits into the total organization and know how the organization fits into the industry, the community and the broader business and social environment. Human skills = the ability to work with and through other people and to work effectively as a group member. This is demonstrated in the way a manager relates to other people, including the ability to motivate, facilitate, coordinate, lead, communicate and resolve conflicts. Technical skills = the understanding and proficiency in the performance of specific tasks. This includes mastery of the methods, techniques and equipment involved in specific functions such as engineering, manufacturing or finance. Chapter 2 The evolution of management thinking Management and organization There are three forces that have influenced organizations and the practice of management overtime. Social forces = refer to those aspects of a culture and influence relationships among people. What do people value? What do people need? What are the standards of behavior among people? These forces shape what is known as the social contract, which refers to the unwritten, common rules en perceptions about relationships among people and between employees and management. Political forces = refer to the influence of political and legal institutions on people and organizations. Economic forces = pertain to the availability, production and distribution of resources in a society. Governments, military agencies, churches, schools and business organizations in every society need resources to achieve their goals, and economic forces influence the allocation of scarce resources. 4 Classical perspective The classical perspective emerged during 19th and the early 20th century: - Rise of the large complex factory system “industrial revolution”. - Problems regarding managerial structure, including organizing the operations, training employees and labor dissatisfaction. - Need for new approaches to coordination and control. Scientific management Scientific management = emphasizes scientifically determined jobs and management practices as the way to improve efficiency and labor productivity. F. Taylor (Frederick Winslow Taylor) was a young engineer in the late 1800s and he proposed that workers ‘could be retooled like machines, their physical and mental gears recalibrated for better productivity’. Taylor insisted that improving productivity meant that management itself would have to change and, further, that the manner of change could be determined only y scientific study; hence, the label scientific management emerged. Bureaucratic organizations Bureaucratic organizations approach = a systematic approach developed in Europe that looked at the organization as a whole. It’s a subfield within the classical perspective. M. Weber (Max Weber) was a German theorist who introduced most of the concepts of bureaucratic organizations. During the late 1800s, many European organizations were managed on a personal, family-like basis. Employees were loyal to a single individual rather than to the organization or its mission. The dysfunctional consequence of this management practice was that the resources were used to realize individual desires rather than organizational goals. Weber envisioned organizations that would be managed on an impersonal, rational basis. Six characteristics of Weberian bureaucracy: 1. Division of labor, with clear definitions of authority and responsibility; 2. Positions organized in a hierarchy of authority; 3. Managers subject to rules and procedures that will ensure reliable predictable behavior; 4. Management separate from the ownership of the organization; 5. Administrative acts and decisions recorded in writing; 6. Personnel selected and promoted based on technical qualifications. 5 Humanistic perspective Humanistic perspective = the importance of understanding human behaviors, needs and attitudes in the workplace, as well as social interactions and group processes. There are three primary subfields based on the humanistic perspective: the human relations movement, the human resources perspective and the behavioral sciences approach. Human relations management Human relations movement = movement based on the idea that truly effective control comes from within the individual worker rather than from strict, authoritarian control. The early work on industrial psychology and personnel selection received little attention because of the prominence of scientific management. Then a series of studies at a Chicago electric company, which came to be known as the Hawthorne studies, changed that all. Recent historical trends The post-World War II period saw the rise of new concepts, along with a continued strong interest in the human aspect of managing, such as team and group dynamics and other ideas that relate to the humanistic perspective. Three new concepts that appeared were systems thinking, the contingency view and total quality management. Systems thinking = the ability to see both the distinct elements of a system or situation and the complex and changing interaction among those elements. Total quality management = management that focuses on managing the total organization to deliver better quality to customers. 6 Chapter 3 The organization and corporate culture External environment The external environment = includes all elements existing outside the boundary of the organization that have the potential to affect the organization. This environment includes competitors, resources, technology and economic conditions that will influence the organization. General environment The general environment = mostly affects organizations indirectly, including social, economic, legal-political, international, natural and technological factors that can influence all organizations with differing impacts. Task environment The task environment = is closer to the organization itself and includes the sectors that conduct day- to-day transactions with the organization and directly influence its basic operations and performance. Organization-environment relationships The reason for why organizations care so much about factors in the external environment is that the environment often creates great uncertainty for organization managers, and they must be willing and able to response by designing the organization to be adaptable to the environment. Environment uncertainty Uncertainty means that managers do not have sufficient information about environmental factors to understand and predict environmental needs and changes. Environmental characteristics that influence uncertainty are the number of factors that affect the organization and the extent to which those factors change. Adapting to the environment Environmental changes may evolve unexpectedly, such as shifting customer tastes for social media sites, or they may occur violently, such as the devastating Japanese earthquake and tsunami. The level of turbulence created by an environmental shift will determine the type of response that managers must make in order for the organization to survive. 7 Chapter 7 Managerial planning and goal setting Goal setting and planning overview A goal is 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. Levels of goals and plans 1. Planning starts with defining a formal mission that defines the basic purpose of the organization, especially for external audiences. 2. Strategic goals/plans get established by top managers, those reflect a commitment to both organizational efficiency and effectiveness. 3. Tactical goals/plans get established by middle managers that focus on the major actions the division must take to fulfill it part in the strategic plan set by top management. 4. Operational plans identify the specific procedures or processes needed at lower levels of the organization, such as individual departments and employees. Goal setting in organizations Goals are socially constructed, which means they are defined by an individual or group. Managers typically have different ideas about what goals should be, so they discuss and negotiate which goals to pursue. Organizational mission At the top of the foal hierarchy is the mission being the organization’s primary reason for existence. The mission describes the organization’s values, aspirations and its reason for being. A well-defined mission is the basis for development of all subsequent goals and plans. Without a mission clarity, goals and plans may be developed haphazardly and are unlikely to take the organization in the direction it needs to go. The formal missions statement is a broadly stated definition of purpose that distinguishes the organization from others of a familiar type. Too often they can be rhetoric and have low impact on employee behavior or how the organization really behaves with its public. The difference between the espoused values and the real values if made public can be very damaging to corporate reputations. 8 Goals and plans Strategic goals = 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. Strategic plans = define the action steps by which the company intends to attain strategic goals. The strategic plan is the blueprint that defines the organizational activities and resource allocations – in the form of cash, personnel, space and facilities. Tactical goals = 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. Tactical plans = designed to help execute the major strategic plans and to accomplish a specific part of the company’s strategy. Operational goals = precise and measurable goals, and the results expected from departments, work groups and individuals. Operational plans = the department manager’s tool for daily and weekly operations. Goals are stated in quantitative terms, and the department plan describes how goals will be achieved. Operational planning Managers use operational goals to direct employees and resources towards achieving specific outcomes than enable the organization to perform efficiently and effectively. One consideration is how to establish effective goals. Then managers use a number of planning approaches, including management by objectives (MBO), single-use plans and standing plans. Some companies use disaster planning so they are better prepared for dealing with crises that may arise in the future. Criteria for effective goals Research has identified certain factors that characterize effective goals: 1. Effective goals must be specific and measurable; 2. Effective goals must have a defined time period; 3. Effective goals must cover key result areas; 4. Effective goals must be challenging but realistic; 5. Effective goals must be linked to rewards. 9 Benefits and limitations of planning Benefits of planning: Goals and plans provide a source of motivation and commitment; Goals and plans guide resource allocation; Goals and plans are a guide to action; Goals and plans set a standard of performance. Limitations of planning: Goals and plans can create a false sense of certainty; Goals and plans may cause rigidity in a turbulent environment; Goals and plans can get in the way of intuition and creativity. Planning for a turbulent environment One way managers can gain benefits from planning and control its limitations is by using innovative planning approaches that are in tune with today’s turbulent environment. Three approaches that help brace the organization for unexpected events are contingency planning, building scenarios and crisis planning. Contingency planning, building scenarios and crisis planning Contingency plans = define company responses to be taken in case of emergencies, setbacks or unexpected conditions. To develop contingency plans, managers identify important factors in the environment, such as economic downturns, declining markets, increases in cost of supplies etc. Scenario building = involves looking at current trends and discontinuities and visualizing future possibilities. Rather than looking only at history and thinking about what could be. The events that cause the most damage to companies are those that no one even conceived of. Crisis planning = enables firms to cope with unexpected events that are so sudden and devastating that they have the potential to destroy the organization if managers aren’t prepared with a quick and appropriate response. 10  Chapter 8 Strategy formulation and execution What is strategic management? Strategic management = refers to the set of decisions and actions used to formulate and execute strategies that will provide a competitively superior fit between the organization and its environment so as to achieve organizational goals. Purpose of strategy 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. Levels of strategy 1. Corporate-level strategy = pertains to the organization as a whole and combination of business units and product lines that make up the corporate entity. 2. Business-level strategy = pertains to each business unit or product line. 3. Functional-level strategy = pertains to the major functions departments within the business unit. Strategic management process Scan External Identify Strategic Environment: Factors: -National -Opportunities -Global -Threats Execute Strategy via Changes in: Evaluate Current: Define New: Formulate Strategy: -Leadership/culture -Mission -Mission -Corporate -Structure -Goals SWOT -Goals -Business -Human resources -Strategies -Grand strategy -Functional -Communication systems Scan Internal Identify Strategic Environment: Factors: -Core competence -Strengths -Synergy -Weaknesses -Value creation 11 Strategy formulation versus execution Strategy formulation = includes assessing the external environment an internal problems to identify strategic issues, the integrating the results into goals and strategy. Strategy execution = the use of managerial and organizational tools to direct resources towards accomplishing strategic results. It is the administration and implementation of the strategic plan. SWOT analysis SWOT analysis = includes a careful assessment of strengths, weaknesses, opportunities and threats that affect organizational performance. Managers obtain external information about opportunities and threats from a variety of sources, including customers, government reports, professional journals, suppliers, bankers, critical friends or professional association meetings. Formulating corporate-level strategy Three approaches to understanding corporate-level strategy are portfolio strategy, the BCG matrix and diversification. Portfolio strategy Corporations like to have a balanced mix of business divisions called strategic business units (SBUs). And SBU has an unique business mission, product line, competitors and markets relative to other SBUs in to corporation. Some executives don’t like to become over-dependent on one business. Portfolio strategy = pertains to the mix of business units and product lines that fit together in a logical way to provide synergy and competitive advantage for the corporation. The BCG matrix BCG matrix = organizes businesses along two dimensions: business growth rate and market share. Business growth rate pertains to how rapidly the entire industry is increasing. Market share defines whether a business unit has a larger or smaller share than competitors. The combinations of high and low market share and high and low business growth provides four categories for a corporate portfolio. 1. Stars = rapid growth and expansion 2. Question Marks = new ventures. Risky – a few become stars, others are divested. 3. Cash Cows = milk to finance question marks and stars. 4. Dogs = no investment. Keep if some profit. Consider divestment. Diversification strategy 12  Diversification = the strategy of moving into new lines of business, as search leader Google did by purchasing YouTube and BlackBerry. The purpose of diversification is to expand the firm’s business operations to produce new kinds of valuable products and services. When the new business is related to the company’s existing business activities, the organization is implementing a strategy of related diversification. Unrelated diversification = occurs when an organization expands into a totally new line of business. Vertical integration = the company expands into businesses that either produce the supplies needed to make products and services or that distribute and sell those products and services to customers. Formulating business-level strategy Now we turn to strategy formulation within the SBU, in which the concern is how to compete. The competitive environment The competitive environment is different for different kinds of businesses. Most large companies have separate business lines and do an industry analysis for each line of business or SBU. Porter’s competitive strategies Broad Differentiation Cost Leadership Acts in a flexible, loosely knit way; strong Strong central authority; tight cost coordination among departments controls Strong capability in basic research Maintains standard operating Creative flair, thinks ‘out of the box’ procedures Strong marketing abilities Easy-to-use manufacturing Rewards employee innovation technologies Corporate reputation for quality or Highly efficient procurement and Strategic Target technological leadership distribution systems Close supervision; finite employee empowerment Focused Differentiation Focused Cost Leadership Uses characteristics of differentiation Uses characteristics of cost leadership strategy directed at particular target strategy directed at particular target customer customer Values flexibility and customer intimacy Frequent detailed control reports Pushes empowerment to employees with Measures cost of providing product or customer contact service and maintaining customer loyalty Narrow Distinctiveness Low Costs Source of Advantage - Differentiation strategy = involves an attempt to distinguish the firm’s products or services from others in the industry. - Cost leadership strategy = the organization aggressively seeks efficient facilities, pursues cost reductions and uses tight cost controls to produce products more efficiently than competitors. - Focus strategy = the organization concentrates on a specific regional market or buyer group 13 Formulation functional-level strategies Functional-level strategies are the action plans used by major departments to support the execution of business-level strategy. Major organizational functions include marketing, production, finance, human resources and research and development. Managers in these and other departments adopt strategies that are coordinated with business-level strategy to achieve the organization’s strategic goals. Global strategy 1. Globalization strategy =product design and adertising strategy are standardized throughout the world. 2. Multidomestic strategy = competition in each country us handled independently of industry competition in other countries. 3. Transnational strategy = seeks to achieve both global standardization and national responsiveness. A true transnational strategy is difficult to achieve though, because one goal requires close global coordination while the other requires local flexibility. 14 Strategy execution The final step in the strategic management process is strategy execution – how strategy is implemented or put into action. 1. Visible leadership = leadership is the ability to influence people and adopt the new behaviors needed for putting the strategy into action. 2. Clear roles and accountability = people need to understand how their individual actions can contribute to achieving the strategy. 3. Candid communication = manager openly and avidly promote their strategy ideas, but they also listen to others and encourage disagreement and debate. 4. Appropriate human resource practices = the organization’s human resources are its employees. The human resource function recruits, selects, trains, compensates, transfers, promotes and lays off employees to achieve strategic goals. Chapter 4 The dynamics of alternative organizational forms Organizing the vertical structure Organization structure = 1. The set if formal tasks assigned to individuals and departments; 2. Formal reporting relationships, including lines of authority, decision responsibility, number of hierarchical levels and span of manager’s control; 3. The design of systems to ensure effective coordination of employees across departments. Organization chart = the visual representation of an organization’s structure. Example organization chart; water bottling plant: 15  President Vice President Director Human Vice President Director Accounting Resources Production Marketing Information Benefits Maintenance Mountain Centre Administrator Supervisor Region Sales Financial Analyst Industrial Quality Control Midstate Sales Relations Manager Manager Chief Accountant Bottling Plan Western Sales Superintendent Accounts Bottling Payable Supervisors Payroll Clerk 16 Work specialization Work specialization / division of labor = the degree to which organizational tasks are subdivided into separate jobs (also shown in the organizational chart for a water bottling plant). Chain of command The chain of command = an unbroken line of authority that links all employees in an organization and shows to reports to whom. It is associated with two underlying principles: unity of command (= each employee is held accountable to only one supervisor) and the scalar principle (= refers to a clearly defined line of authority in the organization that includes all employees. The chain of command illustrates the authority structure of the organization. Authority = the formal and legitimate right of a manager to make decisions, issue orders and allocate resources to achieve organizationally desired outcomes. 1. Authority is vested in organizational positions, not people. Managers have authority because of the position they hold, and other people in the same position would have the same authority. 2. Authority flows down the vertical hierarchy. Positions at the top of the hierarchy are vested with more formal authority than the positions at the bottom. 3. Authority is accepted by subordinates. Although authority flows from the top down, subordinates comply because they believe that managers have a legitimate right to issue orders. The acceptance theory of authority = argues that a manager has authority only if subordinates choose to accept his or her commands. If subordinates refuse to obey because the order is outside their zone of acceptance, a manager’s authority disappears. Responsibility = the duty to perform the task or activity as assigned. Typically, managers are assigned authority commensurate with responsibility. Delegation = the process managers use to transfer authority and responsibility to positions below them in the hierarchy. Span of management The span of management / the span of control = the number of employees reporting to a supervisor. This characteristic if structure determines how closely a supervisor can monitor subordinates. Factors that are associated with less supervisor involvement and thus larger spans of control: Workers are stable and routine; Subordinates perform similar work tasks; Subordinates are concentrated in a single location; Subordinates are highly trained and need a little direction in performing tasks; Rules and procedures defining task activities are available; Support systems and personnel are available for the manager. 17  The average span of control used in an organization determines whether the structure is tall or flat. A tall structure has an overall narrow span and more hierarchical levels. A flat structure has a wider span, is horizontally dispersed and has fewer hierarchical levels. a. Example tall structure President Executive Vice President Executive Vice President Executive Vice President Vice President Staff Specialists Operating Managers Operating Managers Operating Managers Staff Specialists Staff Specialists Staff Specialists b. Example flat structure President Operating Managers Operating Managers Centralization and decentralization Centralization = decision authority is located near the top of the organization. Decentralization = decision authority is pushed downwards to lower organization levels. Factors that typically influence centralization versus decentralization: Greater change and uncertainty in the environment are usually associated with decentralization. The amount of centralization or decentralization should fit in the firm’s strategy. In times of crisis or risk of company failure, authority may be centralized at the top. 18 Departmentalization Departmentalization = the basis for grouping positions into departments and departments into the total organizations. Managers make choices about how to use the chain of command to group people together to perform their work. Five approaches to structural design reflect different uses of the chain of command in departmentalization: 1. Vertical functional approach / U-form Activities are grouped together by common functions from the bottom to the top of the organization. The functional structure is a strong vertical design. Information flows up and down the vertical hierarchy, Human Manu- Accounting and the chain of command converges at the top of Resouces facturing the organization. 2. Divisional approach / M-form Activities are grouped together based on similar organizational outputs. In a divisional structure, Product Product divisions are created as self-contained Division 1 Division 2 units, with separate functional departments for each division. Human Manu- Accounting Human Manu- Accounting resources facturing resources facturing 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. 3. The matrix: a plurality approach The matrix combines aspects of both functional and divisional structures simultaneously in the same part of the organization. The matrix structure evolved as a Human Manu- Accounting way to improve horizontal coordination and information resources facturing sharing. The success of the matrix depends on the abilities of Product Division 1 people in key matrix roles. Two-boss employees, those who report to two supervisors simultaneously, must resolve conflicting demands from the matrix bosses. Product Division 2 The top leader oversees both the product and the functional chains of command. His or her responsibility is to maintain a power balance between the two sides of the matrix. 19  4. Team approach The team approach gives managers a way to delegate authority, push responsibility to lower levels, and be more flexible and responsive in a complex and competitive global environment. cross-functional teams = consists of employees from various functional departments who are responsible to meet as a team and resolve mutual problems. Permanent teams = groups of employees who are organized in a way similar to a formal department. Each team brings together employees from all functional areas focused on a specific task or project. 5. Virtual network approach designer Manu- The firm subcontracts most of its major functions to facturer separate companies and coordinates their activities from a small headquarters organization. Central Hub The idea behind networks is that a company can concentrate on what it does best and contract out other activities to companies with distinctive competence in those specific areas, Humn which enables a company to do more with less. Resources Marketer Agency Organizing for horizontal coordination In general, the trend is toward breaking down barriers between departments, and many companies are moving towards horizontal structures based on work processes rather than departmental functions. The need for coordination As organizations grow and evolve, it needs systems to process information and enable communication among people in different departments and at different levels. Coordination = refers to the managerial task of adjusting and synchronizing the diverse activities among different individuals and departments. Collaboration = a joint effort between people from two or more departments to procedure 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. Coordination and collaboration 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. Re-engineering = refers to the radical redesign of business processes to achieve dramatic improvements in cost, quality, service and speed. Because the focus of re-engineering is on horizontal workflows rather than function, re-engineering generally leads to a shift away from a strong vertical structure to one emphasizing stronger horizontal coordination. 20  Factors shaping structure Some degree of vertical hierarchy is often needed to organize a large number of people effectively to accomplish complex tasks within a coherent framework. Without a vertical structure, oriole in large, global firm wouldn’t know what to do. However, in today’s environment, an organization’s vertical structure often needs to be balanced with strong horizontal mechanisms to achieve peak performance. Structure follows strategy and environment Differentiations strategy = the organization attempts to develop innovative products to the market. Cost leadership strategy = the organization strives for internal efficiency. The terms mechanic and organic can be used to explain structural responses to strategy and the environment. Goals of efficiency and a stable environment are associated with a mechanic system. This type of organization typically has a rigid, vertical centralized structure, with most decisions made at the top. The organization is highly specialized and characterized by rules, procedures and a clear hierarchy of authority. With goals of innovation and a rapidly changing environment, the organization tends to be much looser, free-flowing and adaptive, using an organic system. The structure is more horizontal, and decision-making authority is decentralized. People at lower levels have more responsibility and authority for solving problems, enabling the organization to be more fluid and adaptable to changes. Relationship of structural approach to strategy and the environment: Functional Functional with Interdepartmental Divisional Horizontal structure Task Forces, Integrators Structure Teams Strategic Goals: Differentiation, innovation, flexibility Strategic Goals Strategic Goals: Cost leadership, efficiency, stability Mechanistic Organic 21 Chapter 9 Managerial decision-making Types of decisions and problems Decision = a choice made from available alternatives. Decision-making = the process of identifying problems and opportunities and then resolving them. Programmed and non-programmed decisions Programmed decisions = involve situations that have occurred often enough to enable decision rules to be developed and applied in the future. They are made in response to recurring organizational problems. Non-programmed decisions = decisions which are made in response to situations that are unique, are weakly defined and largely unstructured, and have important consequences for the organization. Facing certainty and uncertainty Certainty = all the information the decision-maker needs is fully available. Managers have information on operating conditions, resource costs or constraints, and each course of action and possible outcome. Risk = a decision has clear-cut goals and that goof 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 versus failure. Uncertainty = managers know which goals they wish to achieve, but information about alternatives and future vents is incomplete. Factors that may affect a decision, such as price, production cost, volume or future interest rates, are difficult to analyze and predict. 22 Decision-making models The approach that managers use to make decisions usually falls into one of three types: the classical model, the administrative model or the political model. The ideal, rational model The classical model of decision-making = it is based on rational economic assumptions and managerial 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 organization’s best economic interests. Four assumptions underlying the classical model: The decision-maker operates to accomplish goals that are known of and agreed on. Problems are required to be precisely formulated and defined. The decision-maker strives for conditions of high certainty, gathering complete information. All alternatives and the positional results of each are calculated. Criteria for evaluating alternatives are known. The decision-maker selects the alternative that will maximize the economic return to the organization. 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. The classical model of decision-making is normative (= it defines how a decision-maker should make decisions. It does not so much describe how managers actually make decisions as it provides guidelines on how to reach an ideal outcome for the organization). How manager actually make decisions Administrative model / descriptive in nature = this approach to decision-making describes how manager actually make decisions in complex situations, rather than dictating how they should make decisions according to a theoretical ideal. This approach recognizes the human and environmental limitations that affect the degree to which managers can pursue a rational decision-making process. The political model The political model = decision-making approach 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. Managers often engage in coalition building for making complex organizational decisions. Coalition = and informal alliance among manager who support a specific goal. And coalition building is the process of forming alliances among managers. 23 Four basic assumptions of the political model: 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 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. Managers do not have the time, resources or mental capacity to comprehensively identify all the dimensions of the problem and process all relevant information. Managers interact with each other exchanging viewpoints to gather information and reduce ambiguity. Manager 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. Classical model Administrative model Political model Clear-cut problem and goals Vague problem and goals Pluralistic; conflicting goals Condition of certainty Condition of uncertainty Condition of uncertainty or ambiguity Full information about alternatives Limited information about Inconsistent viewpoints; ambiguous and their outcomes alternatives and their outcomes information Rational choice by individual for Satisfying choice for resolving Bargaining and discussion among maximizing outcomes problem using intuition coalition members Decision-making steps Whether a decision is programmed or non- programmed and regardless of manager’s choice of the classical, administrative or political models of decision-making, six steps are typically associated with effective decision processes. Recognition of decision requirement Managers confront a decision requirement in the form of either a problem or an opportunity. Problem: occurs when organizational accomplishment is less than established goals. Some aspect of performance is unsatisfactory. Opportunity: exists when managers see a potential accomplishment that significantly exceeds specified current goals. Managers see the possibility of enhancing performance beyond current levels. 24 Diagnosis and analysis of causes Diagnosis = the first stage in the decision-making process in which manager analyze underlying causal factors associated with the decision situation. Questions recommended to be asked to specify underlying causes: What is the state of disequilibrium affecting us? When did it occur? Where did it occur? How did it occur? To whom did it occur? What is the urgency of the problem? What is the interconnectedness of events? What result came from which activity? 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. Programmed decisions: feasible alternatives are easy to identify and in larger organizations they are usually available within the organization’s rules and procedures. Non-programmed decisions: 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. Selection of the desired alternative Once feasible alternatives are developed, one must be selected. 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 the organization and achieves the desired results using the fewest resources. Risk propensity = the willingness to undertake risk with the opportunity of gaining an increased payoff. Implementation of the chosen alternative The implementation stage = involves the use of managerial, administrative and persuasive abilities to ensure that the chosen alternative is carried out. The ultimate success of the chosen alternative depends on whether it can be translated into action. Sometimes an alternative never becomes reality because managers lack the resources or energy needed to make things happen. Implementation may require discussion with many people effected by the decision. 25 Evaluation and feedback Decision-makers gather information that informs 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. The decision taken may fail, thus generating a new analysis of the problem, evaluation of alternatives and selection of a new alternative. Feedback is the part of monitoring that assesses whether a new decision need to be made. Why do managers take poor decisions? Six biases that help managers make more enlightened choices: Being influenced by ignition impressions. When considering decisions, the mind often gives disproportionate weight to the early information it receives. These initial impressions, statistics or estimates, act as an anchor to our subsequent thoughts and judgments. Justifying past decisions. Many managers fall into the trap of making choices that justify their past decisions, even if those decisions no longer seem valid. Seeing what you want to see. People frequently look for information that supports their existing instinct or point of view and avoid information that contradicts it. Perpetuating the status quo. Managers may base decisions on what has worked in the past and fail to explore new options, dig for additional information or investigate new technologies. Being influenced by emotion. A study found that effective regulation of emotions was a characteristic of higher-performing traders. Lower-performing traders were less effective in managing and modulating their emotional responses. Overconfidence. Most people overestimate their ability to predict uncertain outcomes. 26 Chapter 13 Leadership Contemporary leadership The concept of what is appropriate leadership should evolve as the need of organizations change. A significant influence on leadership styles has been and will continue to be the turbulence and uncertainty of the environment. Servant leadership Servant leader = transcends self-interest to serve others, the organization and society. Authentic leadership Authentic leadership = refers to individuals who know and understand themselves, who espouse and act consistent with high-order ethical values, and who empower and inspire others with their openness and authenticity. From management to leadership There are many differences between management and leadership. Good management is essential in organizations, yet managers have to be leaders too, because distinctive qualities are associated with management and leadership that provide different strengths for the organization. Management organizes the production and supply of fish to people, whereas leadership teaches and motivates people to fish. Organizations need both type of skills. a primary distinction between management and leadership is that management promotes stability and order within the existing organizational structure and systems. Leadership, on the other hand, promotes vision and change. Behavioural approaches Two basic leadership behaviors identified as important for leadership are attention to tasks and attention to people. 27 Task versus people bias Task-oriented behavior and people-oriented behavior have been identified as applicatable to effective leadership in a variety of situations. Two major behaviors are consideration and initiating structure: Consideration = falls in the category of people-oriented behavior and is the extent to which the leader us mindful of subordinates, respects their ideas and feelings and establishes mutual trust. Initiating structure = the degree of task behavior; that is, the extent to which the leader is task oriented and directs subordinate work activities towards goal attainment. The leadership grid each axis on the grid is a nine-point scale, with 1 meaning low concern and 9 meaning high concern. Team management = (9,9) often is considered the most effective style and is recommended for leaders because organization members work together to accomplish tasks. Country club management = (1,9) occurs when primary emphasis is given to people rather than to work outputs. Authority-compliance management = (9,1) occurs when efficiency in operations is the dominant orientation. Middle-of-the-road management = (5,5) reflects a moderate amount of concern for both people and production. Impoverished management = (1,1) the absence of a management philosophy; managers exert little effort towards interpersonal relationships or work accomplishment. 28 Contingency approaches How can two people with widely different styles both be effective leaders? The answer lies in understanding contingency approaches to leadership, which explore how the organizational situation influences leader effectiveness. Charismatic and transformational leadership Some leadership approaches are more effective than others for bringing about high levels of commitment and enthusiasm. Transformational versus transactional leadership Transformational leaders = distinguished by their special ability to bring out innovation and change by recognizing follower’s needs and concerns, providing meaning, challenging people to look at old problems in new ways, and acting as role models for the new values and behaviors. Transformational leaders inspire followers not just to believe in the leader personally, but to believe in their own potential to imagine and create a better future for the organization. They create significant change in both followers and the organization. Transactional leaders = clarify the role and task requirements of subordinates, initiate structure, provide appropriate rewards and try to be considerate and meet the social needs of subordinates. The transactional leader’s ability to satisfy subordinates may improve productivity. They excel at management functions, are hardworking, tolerant and fair minded. Power and influence Power = the potential ability to influence the behavior of others Influence = the effect that a person’s actions have on the attitudes, values, believes or behavior of others. Position power Legitimate power, reward power and coercive power are all form of position power used by managers to change employee behavior. Legitimate power = power coming from a formal management position in an organization and the authority granted to it. Once a person has been selected as a supervisor, most employees understand that they are obligated to follow his or her direction with respect to work activities. Reward power = stems from the authority to bestow rewards on other people. Managers may have access to formal rewards such as pay increases or promotions. They also have their disposal rewards such as praise, attention and recognition. Coercive power = refers to the authority to punish or recommend punishment. Managers have coercive power when they have the right to fire or demote employees, criticize them or withhold pay increases. 29 Personal power Personal power most often comes from internal sources, such as an individual’s special knowledge or personal characteristics. Two types of personal power are expert power and referent power. Expert power = power resulting from a person’s special knowledge or skill regarding the tasks being performed. Referent power = comes from an individual’s personal characteristics that command other’s identification, respect and admiration so they wish to emulate that individual. Chapter 14 Managing human recourses The strategic role of human resource management The strategic approach to HRM recognizes three key elements: 1. All managers are human resource managers; 2. Employees are viewed as assets. Employees, not buildings and machinery, give a company its workforce; 3. HRM is a matching process, integrating the organization’s strategy and goals with the correct approach to managing the firm’s human capital. Current strategic issues of particular concern to managers include hiring and retaining the right people with the following competencies: Becoming more competitive on a global basis; Improving quality, innovation and customer service; Applying new information technologies for e-business. All these strategic decisions determine a company’s need for skills and employees. Company strategy Find the right people HRM planning HRM Environment Job analysis Legislation Forecasting Trends in society International events Recruiting Changing technology Selecting Maintain an Effective Workforce Manage talent Wages and salary Training Benefits Development Labor relations Appraisal Terminations 30 The influence of globalization on HRM An issue of significant concern for today’s organizations is competing on a global basis, which brings tremendous new challenges for HRM. Most companies are still in the early stages of developing effective HRM policies, structures and services that respond to the current reality of globalization. International human resource management (IHRM) = a subfield that specifically addresses the added complexity that results from coordination and managing diverse people on a global scale. Research in IHRM has revealed that, as the world becomes increasingly interconnected, some human resource practices and trends are converging. Maintaining an effective workforce How do managers maintain a workforce that has been recruited and rewarded and developed? Maintenance of the current workforce involves motivation, job design and occasional terminations. Motivation Motivation = refers to the forces either within or external to a person that arouse enthusiasm and persistence to pursue a certain course of action. Employee motivation affects productivity, and part of a manager’s job is to channel motivation towards the accomplishment of organizational goals. The study of motivation helps managers understand what prompts people to initiate action, what influences their choice of action and why they persist in that action over time. Content perspectives on motivation Hierarchy of needs theory = one of the early management theories proposed by Abraham Maslow. It proposes that people are motivated by multiple needs and that these needs exist in a hierarchical order. 31 Two-factor theory Hygiene factors = involves the presence or absence of job dissatisfier, such as working codintions, pay, company policies and interpersonal relationships. Motivatiors = focus on high-level needs and include achievement, recognition, responsibility and opportunity for growth. Process perspectives on motivation Process theories = explain how people select behavioral actions to meet their needs and determine whether their choices were successful. The most popular process theory is probably equity theory. Equity theory Equity theory = focuses on individuals’ perceptions of how fairly they are treated compared with others. Compared to this, if people perceive their compensation as equal to what other receive for similar contributions, they will believe that their treatment is fair and equitable. People evaluate equity by a ratio of inputs to outcomes. Inequity occurs when the input-to-outcome ratios are out of balance. The most common methods for reducing a perceived inequity are: Change inputs = a person may choose to increase or decrease his or her inputs to the organization; Change outcomes = a person may change his or her outcomes; Distort perceptions = research suggests that people may distort perceptions of equity if they are unable to change inputs or outcomes; Leave the job = people who feel inequitably treated may decide to leave their jobs rather than suffer the inequity of being under- or overpaid. 32 Goal-setting theory goal-setting theory = proposes that manager can increase motivation by setting specific, challenging goals that are accepted as valid by subordinates, then helping people track their progress towards goal achievement by providing timely feedback. Four key components of goal-setting theory: Goal specificity = the degree to which goals are concrete and unambiguous; In terms of foal difficulty = hard goals are more motivating that easy ones; Goal acceptance = employees have to ‘buy into ‘the foals and be committed to them; Feedback = people get information about how well they are doing in progressing towards goal achievement. Reinforcement perspective on motivation Reinforcement theory = looks at the relationship between behavior and its concequenses. It focuses on changing or modifying employees’ on-the-job behavior through the appropriate use of immediate rewards and punishments. Reinforcement Behavior modification = the set of techniques y which reinforcement theory is used to modify human behavior. The basic assumption underlying behavior modification is the law of effect Law of effect =states that behavior that s=is positively reinforced tends to be repeated, and behavior that is not reinforced tends not to be repeated. Reinforcement = anything that causes a certain behavior to be repeated or inhibited. Four types of reinforcement: 33