Management and Concepts Notes (Module 5) PDF

MANAGEMENT, CONCEPTS, THEORIES, AND PRINCIPLES INTRODUCTION TO MANAGEMENT - Play Ten Managerial Roles (Henry Mintzberg) WHY LEARN ABOUT MANAGEMENT? 1. Entrepreneur Role – proactively and voluntarily - Develop skills to become a ma...

MANAGEMENT, CONCEPTS, THEORIES, AND PRINCIPLES INTRODUCTION TO MANAGEMENT - Play Ten Managerial Roles (Henry Mintzberg) WHY LEARN ABOUT MANAGEMENT? 1. Entrepreneur Role – proactively and voluntarily - Develop skills to become a manager initiating, designing, or encouraging change and - Enable to improve working relationships with bosses innovation - Promote understanding of the role of managers in 2. Negotiator Role – making incremental changes society related to plans and resources - Improve ability to create value and to capture value 3. Disseminator Role – transmitting to members of - Nurture self-understanding one’s organizational unit information that has been - Helps enhance organizational performance gathered from internal or external sources THE WHAT OF MANAGEMENT: KEY DEFINITIONS 4. Resources Allocator Role – distributing all types Management – process of planning, organizing, leading, of resources (time, funds, equipment, human and controlling human and other resources towards the resources) effective achievement of organizational goals 5. Liaison Role – building and maintaining a good Organization – goal-directed, deliberately-structured structure of information contacts beyond the group of people working together provide working together boundaries of a manager’s specific work unit to provide specific good and services 6. Leader Role – communicating with subordinates, What Do Managers Do including motivation and coaching - Perform Four Management Function (Henri Fayol) 7. Spokesperson Role – transmitting decisions and 1. Planning – deciding on an organization’s goals and other information up, down, and across an strategies, and identifying the appropriate organization’s hierarchy, and/or to the general organizational resources that are required to public achieve them 8. Figurehead Role – representing an organizational 2. Organizing – ensuring that tasks have been unit in a symbolic or ceremonial capacity assigned and a structure of organizational 9. Monitor Role – acquiring internal and external relationships has been created that facilitates information about issues that can affect the meeting organizational goals organization 3. Leading – relating with other member in the 10. Crisis Handler Role – taking corrective action organizational unit so that their work efforts when things are not going as planned contribute to the achievement of organizational THE WHY OF MANAGEMENT goals Financial Bottom Line (TBL) Management 4. Controlling – ensuring that the actions of - Focus on maximizing organizations’ financial organizational members are consistent with its performance values and standards - The dominant approach in the past history  MANAGEMENT, CONCEPTS, THEORIES, AND PRINCIPLES - Consequential utilitarian moral point of view, where an - Developing a business case that justifies/documents action’s rightness (and limiting its wrongness) is how a proposed new organizational initiative will measured by its effect on the net overall happiness for enhance an organization’s financial well-being everyone involved ▪ Over 90% of large corporations report on triple ▪ “Net happiness” is often measure via financial bottom line wealth created - Shortcomings of TBL management – limited to - The idea of an invisible hand which suggests that the improving socio-ecological well-being only when it good of a community is assured when every individual serves to enhance financial well-being is permitted to pursue their own self-interests Social and Ecological Thought (SET) Management - The idea of invisible hand which suggests that the good - Focus on socio-ecological well-being ahead of of a community is assured when every individual is maximizing financial permitted to pursue their own self-interests - Poised to become dominant approach in the future, ▪ Assumes every is self-interested and materialistic especially among millennials - Shortcomings of FBL management – prone to create - A virtue ethics moral point of view, which focuses on negative social and ecological externalities how happiness is achieved by practicing virtues in (externalities refer to negative and positive effects an community organization has on society, but which are not reflected - Importance on creating positive socio-ecological in the organization’s financial statements) externalities (rather than only reducing negative Triple Bottom Line (TBL) Management externalities) - Focus on maximizing financial performance via - Managers focus on optimizing social and ecological sustainable development well-being, while ensuring organizations remain - Dominant approach over past twenty years financially viable (i.e., SET management does not - An enlightened consequential utilitarian moral point of focus on maximizing financial well-being) view, which recognizes that firms can increase their - Shortcomings of TBL management – does not financial well-being via reducing negative social and maximize financial well-being in the short-term ecological externalities (however, management if it enables humankind to - Sustainable development means “meeting the needs avoid extinction, then SET may be seen as the most of the present generation without compromising the financially viable approach in the long-term) ability of of future generations to meet their needs” (i.e., the focus is on reducing negative, rather than enhancing positive, externalities)  MANAGEMENT, CONCEPTS, THEORIES, AND PRINCIPLES Depicting the Three Approaches (A) Why Learn Three Approaches to Management - Increases critical thinking skills – key to difference between education vs. training - Improve ethical thinking skills – no approach to management is value-neutral. Learning multiple approaches compels and enables you to think about your own values, and how you will put them into practice during your career - Has benefits like becoming multilingual – enhances cultural empathy, open-mindedness, tolerance of ambiguity, and improves understanding of the particular approach to management you prefer ENTREPRENURIAL MANAGEMENT Entrepreneur – someone who conceives of new or improved goods and/or services and exhibits the initiative to develop that idea by making plans and mobilizing the necessary resources to convert idea into reality  MANAGEMENT, CONCEPTS, THEORIES, AND PRINCIPLES Three Top Reasons Why People Become FIVE ERAS OF PRE-CONTEMPORARY MANAGEMENT Entrepreneurs - Pre-humankind (13.7 billion BCE) – humankind in 7 1. Desire for better work/autonomy – to be able to be minutes old on cosmic calendar (Earth doesn’t need my own boss and manage my workplace using my us) Sun, carbon, and phytoplankton are key to our preferred approach existence 2. To make the world a better place (SET Jan 1 Big Bang: The origin of the universe management) – to make positive difference for others, Sept 14 Planet Earth is formed and/or the environment Sept 25 First life on Earth 3. To make money (FBL management) – most Dec 21 First animals on Earth entrepreneurs do not even mention this when asked Dec 25-30 Dinosaurs on Earth why they become entrepreneurs Dec 31, 11:53 pm First homo sapiens (200,00) years Types of Entrepreneurs ago) Dec 31, 11:59:30 pm Invention of agriculture (shift from nomadic lifestyle) Dec 31, 11:59:53 pm Aristotle, Roman empire, birth of Jesus - Hunting and Gathering (40,000 BCE) – for vast majority of our existence, we were nomadic people (with little understanding of/opportunity for individualism and materialism) - First agricultural revolution (10,000 BCE) – domesticating plants and animals stopped nomadic lifestyle, created need for social institutions likes management a) Advent of Money (1,500 BCE) – money can be used to: a) facilitate transfer of goods and services (“natural”) SHORT HISTORY OF MANAGEMENT b) make more money (“unnatural”) (dysfunctional for THEORY AND PRACTICE SET management) - The idea of management has been socially - Capitalism and Industrial Revolution constructed over time Capitalism – economic system based on rewarding Social Construction of Reality – occurs when something entrepreneurs for profitably combining resources in is perceived to be an objective reality and people allow it way that create valued goods and services (capitalism to shape their actions  MANAGEMENT, CONCEPTS, THEORIES, AND PRINCIPLES replaced alternative economic systems, e.g., based on 2. Leading Era (1930-1950) reciprocity, redistribution, or householding - Mary Follett argued that authority should not always ▪ Helped to usher in emphasis on materialism and belong to the person who formally holds the position of individualism manager, but rather that power should be fluid and flow ▪ Contributed to increasing size and power of to workers whose knowledge and experience makes corporations them best suited for a particular task or situation Taken together, by 1910 these eras had resulted in - Lillian Gilbreth (1878-1972) studied ways to reduce job socially constructing the following principles: stress, championed the idea that workers should have 1. Natural resources are subservient to humankind (e.g., standard workdays, promoted child-labor laws and the idea of private property) … unlike the first protection from unsafe work conditions 99.9999999999999999% of the history of the cosmos - Hawthorne effect suggests that giving workers special 2. It is praiseworthy to use money to make money … treatment increases their productivity (Elton Mayo and unlike the first 98% of human history Fritz Roethlisberger) 3. It is natural for humans to be materialistic and - Theory X managers assume that people are inherently individualistic … unlike first 99.8% of human history lazy, dislike work, will avoid working hard unless forced 4. Capitalism is the best way to organize economic to do so, and prefer to be directed rather than accept activity … unlike first 99.8% of human history responsibility for getting their work done 5. Powerful corporations who make the most money and - In contrast, Theory Y managers assume that work is as make the most stuff is good for society … unlike first natural as play, that people are inherently motivated to 99.9% of human history work, and that people will feel unfulfilled if they do not SIX ERAS OF CONTEMPORARY MANAGEMENT have the opportunity to work and thereby contribute to THOUGHT society (Douglas McGregor) 1. Organizing Era (1910-1930) 3. Planning Era (1950-1970) Scientific Management – focuses on determining the - Management science uses the tools of mathematics, best way to perform specific jobs via designing the best statistics, and other quantitative techniques to inform ways to perform a job, selecting people with the required management planning, decision-making, and problem abilities, training them to improve their efficiency, and solving developing reward systems that will optimize productivity - The (open and/or closed) systems approach Bureaucratic Organizing – emphasizes the design and recognizes that the elements that comprise and affect management of organizations on an impersonal rational organizations are inter-related in complex ways— basis via methods like clearly defined lines of authority and where each element may be both a determinant and a responsibility, keeping formal records, and rule-based consequence of different elements—and offers decision-making conceptual tools to understand and address complex  MANAGEMENT, CONCEPTS, THEORIES, AND PRINCIPLES problems that cannot be solved by intuition, 5. Triple Bottom Line Era (1990-2010) straightforward mathematics, or simple experience - Win-win-win for profits-planet-people - Bounded Rationality – to the tendency for managers - Two key triggers helped usher in the TBL era: to make sub-optimal decisions because they lack 1. an urgent science-based call for change (IPCC on complete information and have limited cognitive ability climate change) to process information 2. a vision for what change looks like (WCED on - Contingency Theory – suggests that the best way to sustainable development) manage a specific organization depends on, and is - Natural Resource Based View describes how profits determined by, identifying the optimal fit between its can be enhanced by reducing costs associated with structure, culture, environment, technology, and negative social and ecological externalities strategy - Stakeholder theory points to importance of looking - Strategic Choice Theory – based on their values and beyond shareholders beliefs, members of an organization’s dominant - Corporate social responsibility refers to managers’ coalition make three complementary strategic obligations to act in ways that enhance societal well- decisions regarding the organization’s: performance being even if there are no direct benefits to the firm’s standards, domain, and structure financial well-being by doing so 4. Controlling Era (1970-1990) - Creating “shared valued” can increase competitive - Scripts are learned guidelines or procedures that help advantage/profits people interpret and respond to what is happening 6. Social and Ecological Thought Era (2010 onwards) around them - Three events helped to usher in the SET era: - Institutionalization is evident when certain practices or 1. 2008 global financial crisis (showed problems of rules have become “valued” in and of themselves (even profit-maximization) though they may no longer optimize financial well- 2. growing recognition of impact of humankind on being for the organization or for society) planet - Self-fulfilling prophecies shape and control people’s 3. Widening gap between rich (1%) and poor (99%) actions by channeling behavior in a scripted direction (Occupy Wall St) rather than in alternative (possibly more positive) - Prompted management research and theory in areas directions ▪ place-based organizing - Emphasized on the symbolic role of management and ▪ sustainable intra- and entrepreneurship how the essence of leadership was to create the ▪ the ancient wisdom of Indigenous peoples and from “meaning” that guides, inspires and motivates spiritual traditions organizational members and engages their values ▪ insights from quantum physics ▪ compassion and the ethic of care  MANAGEMENT, CONCEPTS, THEORIES, AND PRINCIPLES ENTREPRENEURSHIP Step 2: Test the Idea THE IMPORTANCE OF ENTREPRENEURSHIP - Test and develop your ideas with a variety of Job and Innovations stakeholders - Over past 40 years, new organizations created 3 - Elevator pitch (30 to 60 seconds, focused, clear, and million job per year, while existing business reduced 1 compelling) million jobs per year in USA - FBL approach – focuses on financial aspects, - Entrepreneurs create 50% of all (and 95% of all radical) including market size, price, costs innovations - TBL approach – builds on FBL approach, but Small Business highlights negative externalities that can be profitably - Some entrepreneurs start small businesses, and some addressed small businesses may be entrepreneurial - SET approach – like to consult with widest array of - In Canada, 98% of all businesses have < employees stakeholders, and most welcoming of input to co- - Small businesses have better working conditions/job develop idea satisfaction Step 3: Develop a Plan (forethought, milestones, Family Business legitimacy) - Some entrepreneurs start family businesses, and Element Content Summary Executive summary of the whole plan, some family businesses may be entrepreneurial highlighting key points and exciting the - Advantages: motivated, attract customers, trust (lower reader agency costs) Description of the Opportunity being pursue, target - Disadvantages: business may place stress on family new venture customers, size of market, mission and relationships, issues relate to nepotism vision, business strategy, legal form FOUR STEPS OF ENTREPRENEURIAL PROCESS Description of product Key features of products/services, Step 1: Identify and Opportunity and competitors analysis of competition (competing and - Selecting a promising entrepreneurial idea for further substitute, products/services, competitive advantage, SWOT development; associated with having an analysis, stakeholder maps) entrepreneurial mindset Management Top Management Team; organization Trends: large-scale, ongoing Personal experience structure and systems patterns Staffing Details about employees – numbers, Unexpected events Industry changes required skills, recruiting, training, Gaps: demands and needs that are not being met in the best compensation way Marketing Total and served available market, target market; marketing plan, selling approach, customer, retention methods, distribution, pricing  MANAGEMENT, CONCEPTS, THEORIES, AND PRINCIPLES Operations Location, facilities, equipment, Step 4: Take Action methods, quality control, inventory - Entrepreneurial Qualities - conscientiousness, open to management, suppliers, purchasing new experiences, self-efficacy, leadership and Finances Financial requirements, sources, communication skills, experience, education, and projected revenues and costs, break- even analysis, cash flow gender (women have as much potential, but are less Timeline and Goals and milestones, achievements likely to get funding) Contingency Plans by dates, insurance, liability - FBL and TBL approaches – often hinge on attracting considerations traditional sources of funding, and involves establishing traditional legal forms (e.g., corporation) - SET approach – often hinges on attracting alternative sources of funding (e.g., crowdfunding), and involves establishing alternative legal forms (e.g., benefit corporation) FORMULATING STRATEGY FOUR STEP STRATEGIC MANAGEMENT PROCESS 1. Establish Organization’s Mission and Vision Mission Statement – on-going purpose of organization Ideas Example of What Mission Statement Might Say Products, services offered Banking services, games apps, fresh vegetables - FBL approach – potential FBL investors and financial Customers served University students, seniors, institutions will be especially interested in the financial Millennials, basketball fans components and projections Self-concept Identify distinctive competency or - SET approach – because many mainstream investors competitive edge, such as: safest, and financial institutions may still be skeptical about a fastest TBL new venture, they will be especially interested in Survival/growth/profitability Stable, rapid, cautious the financial components and the business case targets Employees Go-getters, diverse, engineers, - TBL approach – because SET ventures tend to long-term, treated with dignity involve a greater variety of stakeholders and Market and regions of Local community, city, region, performance measures, it is especially important to operation national, global "learn on the go"  MANAGEMENT, CONCEPTS, THEORIES, AND PRINCIPLES Philosophy and values Customer is always right, Resources – are assets, capabilities, processes, shareholder is #1, TBL, social attributes, and information that are controlled by an justice organization and that enable it to formulate and Technology used High-tech, low-tech, affordable implement a strategy Public image Socially responsible, local Three Types of Internal Resources Vision Statement – what organization is striving to 1. Physical Resources – material assets an become organization owns or has access to, such as its Hallmark Example/Description Future-oriented By 2030 we will be… factories and equipment, its financial assets (e.g., Inspiring/Idealistic We will be the world leader, most admired... cash), its real estate, and its inventory Challenging Grow tenfold, reduce GHG emissions by 2. Human Resources – specific competencies held 90% for 2018 levels by an organization’s members Brief Preferably no more than 30 words 3. Intangible Resources – an organization’s Clear Can be understood without re-reading structures and systems Stable Does not need to be changed or update Four Characteristics of Strategic Resources annually 1. Valuable Resources – managers can use to neutralize threats or to exploit opportunities to meet FBL, TBL, SET Approaches to Step 1 (mission & vision) their organization’s mission in light of conditions in FBL TBL SET the external environment Emphasis in Acquisitive Mostly Sustenance the content of economics acquisitive economics 2. Rare Resources – those that few other statements economics organizations have Strategic Competitive Mostly Collaborative 3. Inimitable Resources – cannot be copied or orientation energy competitive strategy developed by other organizations, or it is costly or strategy difficult to do so Nature of Top-down; top Mostly top- Broad 4. Non-substitutable Resources – cannot be easily process; key management down; key participation; substituted by other resources participants team stakeholders many stakeholders 2. Analyze Strengths and Weaknesses Strengths – refer to valuable or unique reasons that an organization has or any activities that it does particularly well Weaknesses – refer to a lack of specific resources or abilities that an organization needs in order for it to do well  MANAGEMENT, CONCEPTS, THEORIES, AND PRINCIPLES VRIN and Three Approaches to Management 3. Substitutes – products or services that are similar VRIN FBL TBL (Natural SET (Radical or that meet the same needs of a customer, but (Conventional RBV) RBV) come from a different industry RBV) 4. Threat of New Entrants – extent to which Valuable Improve Improve Improve financial well- financial and socio- conditions make it easy for other organizations to being other well- ecological enter or compete in a particular industry being well-being 5. Intensity or Rivalry – extent or strength of Rare Achieve Achieve TBL- Help others competition among the organization in an industry competitive based improve Five Forces FBL TBL SET advantage competitive socio- Supplier Seek to TBL Seek to advantage ecological Power have low approach is optimize well-being dependence similar to interdependent Inimitable Exclusivity/ TBL-based Responsibility on suppliers FBL relationships competitive competitive to teach Buyer Power Seek to approach, with other advantage advantage others have low unless there organizations Non- Shareholder’s Shareholder’s Opportunity dependence are that enhance substitutable financial financial to enhance on buyers opportunities positive socio- to establish ecological security security shareholder’s relationships externalities financial Substitutes Prefer to with other Welcome security have few organizations socio- 3. Analyze Opportunities and Threats substitutes that enhance ecological well- Opportunities – conditions in the external profits while being environment that have the potential to help managers reducing enhancing meet or exceed organizational goals negative substitute New Seek to socio- Reduce Threats – conditions in the external environment that ecological Entrants create entry barriers that have the potential to prevent managers from meeting barriers externalities impede socio- organizational goals ecological well- Industry – refer to all organizations that are active in being the same sector of social, political, and/or economic Rivalry Seek to Optimize reduce collaboration activity competition that aids socio- Components of the Five Forced Model (Michael Porter) ecological well- 1. Supplier Power – describes how much influence being suppliers have over an organization 2. Customer Power – describes how much much influence customers have over an organization  MANAGEMENT, CONCEPTS, THEORIES, AND PRINCIPLES Example of the Five Forces Model in Practice services with products or externalities, often unique features services with socio- by adding value to that cost less for ecological features resources that the firm to provide that cost less for a were previously than the extra price firm to provide than under-appreciated which customers the extra price or wasted are willing to pay which customers for the features are willing to pay for them Dual strategy – Dual TBL strategy Compounder combining both a – combining TBL strategy – cost leader and a cost leader and simultaneously differentiation TBL differentiation following both a strategy minimizer and a transformer strategy 4. Choose and Develop Strategy (at Organization Strategic Tools for Diversified Organizations Level) Related Diversification – expanding an organization’s Generic Business Level Strategies – combination of activity in industries that are related to its current activities goals, actions, and plans used by an organization in a - Horizontal Integration – is evident when an specific industry to accomplish its mission organization’s services or product lines are FBL TBL SET expanded or offered in new markets Cost leadership TBL cost Minimizer - Vertical Integration – occurs when an organization strategy – having leadership strategy – lower financial strategy – having minimizing produces its own inputs (upward integration) or costs than rivals for lower financial negative socio- sells its own outputs (download integration) similar products, costs than its rivals ecological Unrelated Diversification – occurs when an organization thus contributing to thanks to externalities while grows by investing in or establishing Strategic Business higher profit reductions in its ensuring that the Units (SBUs) in unrelated industries margins and/or a ecological and/or firm remains - Industry – to all organizations that are active in the higher market social negative financially viable same sector of social, political, and/or economic share (via lower externalities, thus prices) contributing to activity firm’s financial well- - Portfolio Matrices – used by managers of being conglomerate, diversified organizations that have Differentiation TBL Transformer SBUs in unrelated industries strategy – offering differentiation strategy – creating products or strategy – offering positive  MANAGEMENT, CONCEPTS, THEORIES, AND PRINCIPLES BCG Portfolio Matrix EIGHTEEN TYPES OF ORGANIZATION BASED ON THEIR MISSION TBL/SET Portfolio Matrix IMPLEMENTING STRATEGY FOUR STEPS OF STRATEGY IMPLEMENTATION 1. Development Operational Goals - Operational Goals – refer to outcomes to be achieved by an organizational department, workgroup, or individual member 5 Characteristics of SMART Goals (FBL) Characteristic Description Specific Precise regarding what is to be accomplished Measurable can be assessed objectively Achievable Is within reach, yet also challenging Result-based Has clear, demonstrable outcomes Time-specific Has clear time by which it is to be accomplished  MANAGEMENT, CONCEPTS, THEORIES, AND PRINCIPLES 5 Characteristics of SMART Goals (SET) Characteristic Description Significant Challenging and engaging Meaningful Has meaning beyond maximizing productivity Agreed-upon Members participate in developing their own goals Relevant Linked to important issues for stakeholders Timely Appropriate for time and situation 2. Develop Operational Plans - Operational Plans – specify what activities will be used to meet a goal, when they should be accomplished (considering existing commitments and constraints), and how the required resources will be acquired - Checklist of making a plan 1. Describe what steps and actions are necessary to meet your goal(s) - Standing Plans – operational plans for activities that 2. Identify factors that may make it difficult to put your are performed repeatedly plan into action - Standard Operating Procedures – outline specific 3. Identify resources needed (e.g. material, time) to steps that must be taken when performing recurring perform the activities tasks 4. Ensure the required resources are available (or - Policies – provide guidelines for making decisions and acquired if necessary) taking action in various situations 5. Determine the order, timing, and milestones for - Rules and Regulations – prescribed pattern of behavior each action performed that guide work tasks - Contingency Plans – describe in advance how managers will respond to possible future events that could disrupt existing plans - Crises – events that have a major effect on the ability of an organization’s member to carry on their daily tasks. Managers can: ▪ Do preventive work to avoid or minimize the effect of a crisis.  MANAGEMENT, CONCEPTS, THEORIES, AND PRINCIPLES ▪ Prepare for a crisis by assembling information and defining responsibilities and procedures that will be helpful in a time of crisis. ▪ Contain the crisis by making timely responses - Compared to FBL and TBL management, a SET approach tends to ▪ Involve the most stakeholders in making plans ▪ Have more emergent and complex plans (due to taking into account social and ecological factors) 3. Implement and Monitor Goals and Plans Strategy Formulation and Implementation, with Focus on Were the plans followed? Strategic Learning Yes No Were Yes Q #1: Planned Q #2: Accidental the success Success goals No Q #3: Planning Q #4: Bungled met? Failure Attempt 4. Learning from Strategy in Action - Strategy Learning – refers to using insights from an organization’s actual strategy to improve its intended strategy - Content School – emphasizes the rational-analytic, top down, and linear aspects of strategy formulation - Process School – emphasizes that strategy formulation and implementation are ongoing and iterative, where one aspect influences the other - Structuration Theory – explains how organizations are created, maintained, and changed by the interplay between their structures and the actions of their members  MANAGEMENT, CONCEPTS, THEORIES, AND PRINCIPLES Relationship Between Socially Constructed, Versus Constructing, Reality ENTREPRENURIAL IMPLICATIONS Stakeholders Maps