MGT 351 – Test 1 Chapter 1 Managerial Functions: Planning is a process that managers use to identify and select appropriate goals and course of action. The three steps in the planning process are: (1) deciding which goals the organization will pursue, (2) deciding what courses of action to adopt to attain those goals, and (3) deciding how to allocate organizational resources to attain those goals. How well manager’s plan determines how effective and efficient their organization is-its performance level. The outcome of planning is strategy, a cluster of decisions concerning what organization goals to pursue, what actions to take, and how to use resources to achieve goals. A low-cost strategy is a way of obtaining customers by making decisions that allow the organization to produce its goods or services cheaply so that prices can be kept low. Differentiation is a strategy that results are different products for customers. Organization is a process that managers use to establish a structure of working relationships that allow organizational members to interact and cooperate to achieve organizational goals. In organizing, managers also lay out the lines of authority and responsibility between different individuals and groups. The outcome of organizing is the creation of an organizational structure. Leading is when managers not only articulate a clear vision for organizational members to follow but also energize and enable organizational members so that they understand the part they play in achieving organizational goals. Leadership depends on the use of power, influence, vision, persuasion, and communication skills to coordinate the behaviors of individuals and groups so that their activities and efforts are in harmony. Controlling is when managers evaluate how well an organization is achieving its goals and take action to maintain or improve performance. For example, managers monitor the performance of individuals, departments, and the organization, as a whole to see whether they are meeting desired performance standards. The outcome of the control process is the ability to measure performance accurately and regulate organizational efficiency and effectiveness. Then controlling function also allows managers to evaluate how well they themselves are performing the other three functions of management to take corrective actions. Levels of Management (bottom to top): First-Line Managers are mangers who are responsible for the daily supervision of non- managerial employees, they are often called supervisors. Middle Managers are managers who supervise first-line managers and are responsible for finding the best way to use resources to achieve organizational goals. Top Managers are managers who establish organizational goals, decides how departments should interact, and monitors the performance of the middle managers. They are responsible for the performance of all departments. They have cross-department responsibility. They establish organizational goals. The CSO is a company’s most important managers to whom all other top managers report. A central concern of the CEO is the creation of a smoothly functioning top- management team, a group composed of the CEO, COO, and the department heads most responsible for helping achieve organizational goals. Mintzberg Managerial Role: Henry Mintzberg reduced to 10 roles the thousands of specific tasks that managers need to perform as they plan, organize, lead, and control organizational resources. Mintzberg grouped the 10 roles into three broad categories: decisional, informational, and interpersonal. Managers often perform many of these roles from minute to minute while engaged in the more general functions of planning organizing, leading, or controlling. Decisional Roles are closely associated with the methods mangers use to plan strategy and utilize resources. IT helps a manager in the role of entrepreneur by providing more and better information to use in deciding which projects or programs to initiate and in investing resources to increase organizational performance. As a disturbance handler, IT gives a manager real-time information to manage the unexpected event of crisis that threatens the organization and to implement solutions quickly. Managers also act as a negotiator¸ reaching agreements with other managers or groups claiming the first right to resources, or with the organization and outside groups such as suppliers or customers. Informational Roles are closely associated with the tasks necessary to obtain and transmit information and so have obviously been dramatically impacted by IT. Managers monitor activities of consultants and organize and control them on a global level. Acting as a disseminator, IT allows the manager to quickly and effectively transmit information to employees to influence their work attitudes and behavior. It provides managers with much greater ability to act as a spokesman and promote the organization so that people inside and outside the organization respond positively to it. Interpersonal Roles are assumed by managers to provide direction and supervision for both employees and the organization as a whole. As a figurehead, the person who symbolizes an organization or a department, a CEO can use the Internet to inform employees and other interested parties. Managers are able to perform better as leaders because they have more and better quality information available to train, counsel, and mentor subordinates to help them reach their full potential. As a liaison, managers link and coordinate the activities of people and groups both inside and outside the organization. Managerial Skills Conceptual Skills are demonstrated in the ability to analyze and diagnose a situation and to distinguish between cause and effect. Top managers require the best conceptual skills because their primary responsibilities are planning and organizing. Formal education and training are very important in helping mangers develop conceptual skills. Human Skills include the ability to understand, alter, lead, and control the behavior of other individual and groups. The ability to communicate, to coordinate, and to motivate people, and to mold individuals into a cohesive team distinguishes effective from noneffective managers. Like conceptual skills, human skills can be learned through education and training, as well as developed through experience. Technical Skills are the job-specific knowledge and techniques required to perform and organizational role. Chapter 2 Scientific Management Frederick W. Taylor is best known for defining the techniques of scientific management, the systematic study of relationships between people and tasks for the purpose of redesigning the work process to increase efficiency. Taylor believed that if the amount of time and effort that each worker expends to produce a unit of output can be reduced by increasing specialization and the division of labor, the production process would become more efficient. Principles: 1. Study the way workers perform their tasks, gather all the informal job knowledge that workers possess, and experiment with ways of improving how tasks are performed. 2. Codify the new methods of performing tasks into written rules and standard operations. 3. Carefully select workers who possess skills and abilities that match the needs of the task, and train them to perform the tasks according to the established rules and procedures. 4. Establish a fair or acceptable level of performance for a task, and then develop a pay system that provides a reward for performance above the acceptable level. Theory of Bureaucracy: Max Weber wrote when Germany was undergoing its industrial revolution. To help Germany manage its growing industrial enterprises at the time when it was striving to become a world power, Weber developed the principle of bureaucracy-a formal system of organization and administration designed to ensure efficiency and effectiveness. Principles: 1. In a bureaucracy, a manger’s formal authority derives from the position he or she holds in the organization. Authority is the power to hold people accountable for their actions and to make decisions concerning the use of organizational resources. 2. In a bureaucracy, people should occupy positions because of their performance, not because of their social standing or personal contacts. 3. The extent of each position’s formal and task responsibilities, and its relationship to other positions in an organization, should be clearly specified. 4. Authority can be exercised effectively in organization when positions are arranged hierarchically, so employees know whom to report to and who reports to them. 5. Managers must create a well-0defined system of rules, stander operating procedures, and norms so that they can effectively control behavior within an organization. Rules are formal written instructions that specify actions to be taken under different circumstances to achieve specific goals. Standard operating procedures (SOPs) are specific sets of written instructions about how to perform a certain aspect of a task. Norms are unwritten, informal codes of conducts that prescribe how people should act in particular situations. Fayol Principles of Management: Henri Fayol identified 14 principles that he believed essential to increase the efficiency of the management process. Authority and Responsibility – Managers should have the right to give orders and the power to exhort subordinates for obedience. Unit of Command – A reporting relationship in which an employee receives orders form and reports to, only one superior. Line of Authority – The chain of command extending from the top to the bottom of an organization. It is important to allow middle and first-line managers in each department to interact with managers at similar levels in other departments. Centralization – The concentration of authority at the top of the managerial hierarchy. Fayol believed that authority should not be concentrated at the top of the chain of command. Theory X and Theory Y: According to the assumptions of Theory X, the average worker is lazy, dislikes work, and will try to do as little as possible. Moreover, workers have little ambition and wish to avoid responsibility. Thus, the manager’s task is to counteract worker’s natural tendencies to avoid work. To keep worker’s performance at a high level, the managers must supervise them closely and control their behavior by means of rewards and punishments. Managers who accept the assumptions of Theory X design and shape the work setting to maximize their control over worker’s behaviors and minimize worker’s control over the pace of work. In contrast, Theory Y assumes that workers are not inherently lazy, do not naturally dislike work, and, if given the opportunity, will do what is good for the organization. According to Theory Y, the characteristics of the work setting determine whether workers consider work to be a source of satisfaction or punishment; and managers do not need to closely control worker’s behavior to make them perform at a high level because workers exercise self-control when they are committed to organizational goals. It is the manager’s task to create a work setting that encourages commitment to organizational goals and provides opportunities for workers to be imaginative and to exercise initiative and self-direction. The Open-System View: Katz, Kahn, and Thompson viewed that organization as an open system – a system that takes in resources from its external environment and converts of transforms them into goods and services that are sent back to the environment, where they are bought by customers. The system just described is said to be open because the organization draws from and interacts with the external environment in order to survive; in other words he organization is open to its environment. A closed system, in contrast, is a self-contained system that is not affected by changes in its external environment. Organizations that operate as closed systems, that ignore the entropy, the tendency of a system to lose its ability to control itself and thus to dissolve and disintegrate. Synergy, the performance gains that result when individuals and departments coordinate their actions, is possible only in an organized system. Chapter 3 The Big Five Personality Traits: Personality traits are enduring tendencies to feel, think, and act in certain ways. We can think of an individual’s personality as being composed of five general traits or characteristics: extraversion, negative affectivity, agreeableness, conscientiousness, and openness to experience. o Extraversion is the tendency to experience positive emotions and moods and feel good about oneself and the rest of the world. Managers who are high on extraversion are called extraverts and if low they are called introverts. Being high on extraversion is good for a manager whose jobs entail especially high levels of social interaction. o Negative affectivity is the tendency to experience negative emotions and moods, feel distressed, and be critical of oneself and others. Managers high on this trait may often feel angry and dissatisfied and complain about their own and other’s lack of progress. o Agreeableness is the tendency to get along well with others. Managers who are high on the agreeable continuum are likable, tend to be affectionate, and care about other people. Being high on agreeableness may especially be important for managers whose responsibilities require them to develop god, close relationships with others. o Conscientiousness is the tendency to be careful, scrupulous, and persevering. Managers who are high on conscientiousness are organized and self-disciplined; those who are low on this trait might sometimes appear to lack direction and self-discipline. CEOs are often high on this trait. o Openness to experience is the tendency to be original, have broad interests, be open to a wide range of stimuli, be daring, and take risks. Managers who are high on this trait may be especially likely to take risks and be innovative in their planning and decision-making. Entrepreneurs who start their own business are high on this trait. Other Personality Traits: Internal locus of control is the tendency to locate responsibility for one’s fate within oneself. External locus of control is the tendency to locate responsibility for one’s fate within outside forces and to believe that one’s own behavior has little impact of outcome. Self-esteem is the degree to which individuals feel good about themselves and their capabilities. Need for achievement is the extent to which an individual has a strong desire to perform challenging tasks well and to meet personal standards for excellence. Need for affiliation is the extent to which an individual is concerned about establishing and marinating good interpersonal relations, being liked, and having other people get along. Need for power is the extent to which an individual desires to control of influence others. Values: Terminal value is a lifelong goal or objective that an individual seeks to achieve. Instrumental value is a mode of conduct that an individual seeks to follow. Norm is informal rules of conduct for behaviors that are considered important by most members of a group or organization. Value system is the terminal and instrumental values that are guiding principles in an individual’s life. Attitudes: Job satisfaction is the collection of feelings and beliefs that managers have abut their current jobs. Managers who are high in job satisfaction generally like their jobs, feel they are being treated fairly, and believe that their job have many desirable features or characteristics. Satisfied mangers may be more likely to go the extra mile for their organization or perform organizational citizenship behaviors (OCBs), behaviors that are not required of organizational efficiency, effectiveness, and gaining a competitive advantage. Also managers will be less like to quit. Organizational commitment is the collection of feelings and beliefs that mangers have about their organization as a whole. Managers who are committed to their organizations believe in what their organization are doing, are proud of what these organizations stand for, feel a high degree of loyalty toward their organizations. Ethics: Societal ethics are standards that govern how members of a society deal with each other in matters involving issues such as fairness, justice, poverty, and the rights of the individual. Societal ethics emanate from a society’s laws, customs, and practices, and the unwritten attitudes, values, and norms that influence how people interact with each other. Professional ethics are standards that govern how members of a profession, mangers, or workers make decisions when the way in which they should behave is not clear-cut. (i.e. medical ethics govern how doctors and nurses act). Individual ethics are personal values (both terminal and instrumental) and attitudes that govern how individuals interact with other people. Sources of individual ethics include the influence of one’s family, peers, and upbringing in general, and an individual’s personality and experience. Social responsibility refers to a manger’s duty or obligation to make decisions that nurture, protect, enhance, and promote the welfare and well being of stakeholders and society as a whole. Chapter 5 Element of the Task Environment: Suppliers are the individuals and companies that provide an organization with the input resources that it needs to produce goods and services. In return, the supplier receives compensation for those goods and services. An important aspect of a manager’s job is to ensure a reliable supply of input resources. Distributors are organizations that help other organizations sell their goods or services to customers. The decisions that mangers make about how to distribute products to customers can have important effects on organizational performance. Customers are the individuals and groups that buy the goods and services that an organization produces. Competitors are organizations that produce goods and services similar to a particular organization’s goods and services. They are one of the most important forces and organization confronts in its task environment. Industry life cycle are the changes that take place in an industry as it goes through the stages of birth, growth, shakeout, maturity, and decline. Birth is the stage of an industry that is characterized by competition among companies to develop the winning technology-the one that will allow them to provide the goods or services that customers want. The growth stage begins at the point when a product gains customer acceptance and an influx of consumers enters the market. Rapid growth in customer demand attracts many new organizations into the industry, increasing the level of competition, as happened in the Internet industry. The shakeout stage is near the end of the growth stage there is a marked change in an industry’s task environment because slowing customer demand for the industry’s product raises the level of competition in the industry. Because of this organizations often reduce their prices, and the result can be a price war, causing prices to rapidly fall. By the time an industry reaches maturity, most customers have bought the product and demand is growing slowly or is constant. The task environment is more stable because relationships between suppliers, distributors, and competitors are more predictable. Customers have developed brand loyalty for the products of certain companies, and managers have developed good working relationships with suppliers and distributors. In the final stage in the evolution, decline, customer demand for he industry’s product decreases. Falling demand usually leads to a situation in which organizations in the industry are making more of the product than the customers want to buy. The General Environment: Economic forces affect the general health and well being of a country or world region. They include interest rates, inflation, unemployment, and economic growth. Economic forces produce many opportunities and threats for managers. Technology is the combination of tools, machines, computers, and skills, information, and knowledge that managers use in the design, production, and distribution of goods and services. Technological forces are outcomes of changes in the technology that managers use to design, produce, or distribute goods and services. The overall pace of technological change has accelerated greatly in the last decade. Sociocultural forces are pressures emanating from the social structure of a country or society or from the national culture. Pressures from both sources can either constrain of facilitate the way organizations operate and managers behave. Social structure is the arrangement of relationships between individuals and groups in society. National culture is the set of values that a society considers important and the norms of behavior that are approved or sanctioned in that society. Demographic forces are outcomes of changes in, or changing attitudes toward, the characteristics of a population, such as age, gender, ethnic origin, race, sexual orientation, and social class. Like other forces in the general environment, demographic forces present managers with opportunities and threats and can have major implications for organizations. Political and legal forces are outcomes of change in laws and regulations. They result from political and legal developments within a society and significantly affect managers and organizations. Political processes shape a society’s laws. Laws constrain the operations of organizations and managers, and thus create both opportunities and threats. Global forces are outcomes of changes in international relationships; changes in nations’ economic, political, and legal system; and changes in technology. Chapter 7 Decision Making: Programmed decision making is a routine, virtually automatic process. Programmed decisions are decisions that have been made so many times in the past they managers have developed rules or guidelines to be applied when certain situations inevitably occur. Nonprogrammed decision-making is required for these nonroutine decisions. Nonprogrammed decisions are made in response to unusual or novel opportunities and threats. Nonprogrammed decision-making occurs when there are no ready-made decision rules that managers can apply to a situation. Intuition is a person’s ability to make sound decisions based on one’s past experience and immediate feelings about the information at hand. Judgment is a person’s ability to develop a sound opinion because of the way he or she evaluates the importance of the information available in particular context. The Administrative Model: Risk is present when managers know the possible outcomes or a particular course of action and can assign probabilities to them. Uncertainty is when the probabilities of alternative outcomes cannot be determined, and future outcomes are unknown. Mangers are working blind. The probability of a given outcome occurring is not known, and managers have little information to use in making a decision. Ambiguous information is information that is not clear-cut and can be interpreted in multiple and often conflicting ways. Satisficing is searching for and choosing an acceptable, or satisfactory, response to problems and opportunities, rather than trying to make the best decisions. Decision Making: Having already committed significant resources to a course of action, some mangers commit more resources to the project even if they receive feedback that the project is failing. Feeling of personal responsibility for a project apparently bias the analysis of decision makers and lead to this escalating commitment. They decide to increase their investments of time and money in a course of action and ignore evidence that it is illegal, unethical, uneconomical, or impractical. Often, the more appropriate decisions would be to cut losses and run. Group Decision Making: Groupthink is a pattern of faulty and biased decisions making that occurs in groups whose members strive for agreement among themselves at the expense of accurately assessing information relevant to a decision. When mangers are subject to groupthink, they collectively embark on a course of action without developing appropriate criteria to evaluate alternatives. Typically, a group rallies around one central manager, such as a CEO, and the course of action that manager supports. Organizational Learning and Creativity: Organizational learning is the process through which mangers seek to improve employee’s desire and ability to understand and manage the organization and its task environment so that employees can make decisions that continuously raise organizational effectiveness. How do managers go about a learning organization? Learning theorists Peter Senge identified five principles for creating a learning organization. 1. Develop personal mastery. 2. Build complex, challenging mental models. 3. Promote team learning. 4. Build shared vision. 5. Encourage systems thinking. Chapter 8 Planning: Planning is identifying and selecting appropriate goals and courses of action; one of the four principal functions of management. Essentially, planning is ascertaining where an organization is at the present time and deciding where it should be in the future and how to move forward. When managers plan, they must consider the future and forecast what may happen in order to take actions in the present and mobilize organizational resources to deal with future opportunities and threats. Planning is important for four main reasons: 1. Planning is a useful way of getting managers to participate in decision-making about the appropriate goals and strategies for an organization. 2. Planning is necessary to give the organization a sense of directions and purpose. 3. A plan helps coordinate mangers of the different functions and divisions of an organization to ensure that they all pull in the same direction. 4. A plan can be used as a device for controlling managers within an organization. SWOT Analysis: SWOT analysis is a planning exercise in which managers identify organizational strengths (S), and weaknesses (W), and environmental opportunities (O), and threats (T). Based on a SWOT analysis, managers at the different levels of the organization select the corporate-, business-, and functional-level strategies to best position the organization to achieve its mission and goals. Because SWOT analysis is the first step in strategy formulation at any level, we consider it first, before turning specifically to corporate-, business-, and functional-level strategies. The Five Forces Model: A well-known model that helps managers isolate particular forces in the external environment that are potential threats is Michael Porter’s five forces model. Managers should focus on these. 1. The level of rivalry among organizations in an industry. The more that companies compete against one another for customers the lower the level of industry profits. 2. The potential for entry into an industry. The easier it is for companies to enter an industry the more likely it is for industry prices and therefore profit to be lower. 3. The power of suppliers. If there are only a few suppliers of an important input, then suppliers can drive up the price of that input. 4. The power of customer. If only a few large customers are available to buy an industry’s output, they can bargain the drive down the price of that output. 5. The threat of substitute products. Often, the output of one industry is a substitute for the output of another industry. Diversification: Related diversification is the strategy of entering a new business or industry to create a competitive advantage in one ore more of an organization’s existing divisions or businesses. Synergy is obtained when the value created by two divisions cooperating is grater than the value that would be created if the two divisions operated separately. Unrelated diversification is when managers enter new industries or buy companies in new industries that are not related in any way to their current business of industries. One main reason for pursuing unrelated diversification is that, sometimes managers can buy a poorly performing company, transfer their management skills to that company, turn around its business, and increase its performance, all of which creates values. Vertical Integration is the corporate-level strategy through which an organization becomes involved in producing its own inputs (backward) or distributing and selling its own outputs (forward). Business-Level Strategies: Low-cost strategy is when managers try to drive down the organization’s costs below the costs of its rivals. Differentiation strategy is when mangers try to distinguish an organization’s products of competitors in dimensions such as product design, quality, or after-sales service. Focused low-cost strategy is when managers serve only one of a few segments of the overall market and aim to be the lowest-cost company serving that segment. Focused differentiation is when serving only one segment of the overall market and trying to be the most differentiated organization serving that segment.