Chapter One

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Learning Objectives
Describe what management is, why management is important, what managers do, and how managers utilize organizational resources efficiently and effectively to achieve organizational goals Distinguish among planning, organizing, leading, and controlling (the four principal managerial tasks), and explain how managers ability to handle each one affects organizational performance Differentiate among three levels of management, and understand the tasks and responsibilities of managers at different levels in the organizational hierarchy

Managers and Managing

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3.

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Learning Objectives
4. Distinguish between three kinds of managerial skill, and explain why managers are divided into different departments to perform their tasks more efficiently and effectively. Discuss some major changes in management practices today that have occurred as a result of globalization and the use of advanced information technology (IT). Discuss the principal challenges managers face in todays increasingly competitive global environment

What is Management?
All managers work in organizations Organizations
collections of people who work together and coordinate their actions to achieve a wide variety of goals

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Question?
What is a person responsible for supervising the use of an organizations resources to meet its goals? A. Team leader B. Manager C. President D. Resource allocator

What is Management?
Managers
The people responsible for supervising the use of an organizations resources to meet its goals

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What is Management?
Management
The planning, organizing, leading, and controlling of human and other resources to achieve organizational goals effectively and efficiently

Efficiency and Effectiveness

Figure 1.1

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Organizational Performance
Efficiency
A measure of how well or how productively resources are used to achieve a goal

Why Study Management?

1. The more efficient and effective use of scarce resources that organizations make of those resources, the greater the relative well-being and prosperity of people in that society

Effectiveness
A measure of the appropriateness of the goals an organization is pursuing and the degree to which they are achieved.

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Why Study Management?

2. Helps people deal with their bosses and coworkers 3. Opens a path to a well-paying job and a satisfying career

Four Functions of Management

Figure 1.2
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Steps in the Planning Process

1. Deciding which goals the organization will pursue 2. Deciding what courses of action to adopt to attain those goals 3. Deciding how to allocate organizational resources

Organizing
Involves grouping people into departments according to the kinds of job-specific tasks they perform Managers lay out lines of authority and responsibility Decide how to coordinate organizational resources

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Organizing
Organizational structure
A formal system of task and reporting relationships that coordinates and motivates members so that they work together to achieve organizational goals

Leading
Leadership involves using power, personality, and influence, persuasion, and communication skills It revolves around encouraging all employees to perform at a high level Outcome of leadership is highly motivated and committed workforce

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Controlling
The outcome of the control process is the ability to measure performance accurately and regulate organizational efficiency and effectiveness Managers must decide which goals to measure

Decisional Roles
Roles associated with methods managers use in planning strategy and utilizing resources.
Entrepreneurdeciding which new projects or programs to initiate and to invest resources in. Disturbance handlermanaging an unexpected event or crisis. Resource allocatorassigning resources between functions and divisions, setting the budgets of lower managers. Negotiatorreaching agreements between other managers, unions, customers, or shareholders.

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Interpersonal Roles
Roles that managers assume to provide direction and supervision to both employees and the organization as a whole.
Figureheadsymbolizing the organizations mission and what it is seeking to achieve. Leadertraining, counseling, and mentoring high employee performance. Liaisonlinking and coordinating the activities of people and groups both inside and outside the organization.

Informational Roles
Roles associated with the tasks needed to obtain and transmit information in the process of managing the organization.
Monitoranalyzing information from both the internal and external environment. Disseminatortransmitting information to influence the attitudes and behavior of employees. Spokespersonusing information to positively influence the way people in and out of the organization respond to it.

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Areas of Managers
Department
A group of managers and employees who work together and possess similar skills or use the same knowledge, tools, or techniques

Levels of Management

Figure 1.3
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Levels of Management
First-line managers
responsible for the daily supervision of the nonmanagerial employees

Levels of Management
Top managers
responsible for the performance of all departments establish organizational goals decide how different departments should interact monitor how well middle managers utilize resources to achieve goals

Middle managers
responsible for finding the best way to organize human and other resources to achieve organizational goals

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Relative Amount of Time That Managers Spend on the Four Managerial Functions

Question?
What skill is the ability to understand, alter, lead, and control the behavior of other individuals and groups?
A. B. C. D. Conceptual Human Technical Managerial

Figure 1.4
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Managerial Skills
Conceptual skills
The ability to analyze and diagnose a situation and distinguish between cause and effect.

Core Competency
Core competency
Specific set of departmental skills, abilities, knowledge and experience that allows one organization to outperform its competitors Skills for a competitive advantage

Human skills
The ability to understand, alter, lead, and control the behavior of other individuals and groups.

Technical skills
Job-specific skills required to perform a particular type of work or occupation at a high level.

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Restructuring
Restructuring
Involves simplifying, shrinking, or downsizing an organizations operations to lower operating costs

Empowerment
Empowerment
Involves giving employees more authority and responsibility over the way they perform their work activities

Outsourcing
Contracting with another company, usually in a low cost country abroad, to perform a work activity the company previously performed itself

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Discussion Question
What is the biggest challenge for management in a Global Environment? A. Building a Competitive Advantage B. Maintaining Ethical Standards C. Managing a Diverse Workforce D. Global Crisis Management

Challenges for Management in a Global Environment

Rise of Global Organizations. Building a Competitive Advantage Maintaining Ethical Standards Managing a Diverse Workforce Utilizing Information Technology and Technologies Global Crisis Management

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Building Competitive Advantage

Competitive Advantage
ability of one organization to outperform other organizations because it produces desired goods or services more efficiently and effectively than its competitors

Building Blocks of Competitive Advantage

Figure 1.6

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Turnaround Management
Turnaround management
creation of a new vision for a struggling company using a new approach to planning and organizing to make better use of a companys resources to allow it to survive, and eventually prosper

Maintaining Ethical and Socially Responsible Standards

Managers are under considerable pressure to make the best use of resources Too much pressure may induce managers to behave unethically, and even illegally

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Managing a Diverse Workforce

To create a highly trained and motivated workforce managers must establish HRM procedures that are legal, fair and do not discriminate against organizational members

Global Crisis Management

May be the result of: Natural causes Manmade causes International terrorism Geopolitical conflicts

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Management in the Movies: Fast Times at Ridgemont High

What could Brad have done differently to make the situation better?

Video Case: Changing Times at Dyson

What strategy has James Dyson used to develop and sell products like his cyclonic vacuum cleaner? What leadership qualities does James Dyson exhibit?

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Chapter Two

Learning Objectives
1. Describe how the need to increase organizational efficiency and effectiveness has guided the evolution of management theory 2. Explain the principle of job specialization and division of labor, and tell why the study of person-task relationships is central to the pursuit of increased efficiency 3. Identify the principles of administration and organization that underlie effective organizations

The Evolution of Management Thought

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2-2

Learning Objectives
4. Trace the change in theories about how managers should behave to motivate and control employees 5. Explain the contributions of management science to the efficient use of organizational resources 6. Explain why the study of the external environment and its impact on an organization has become a central issue in management thought
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The Evolution of Management Theory

Figure 2.1

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Job Specialization and the Division of Labor

Adam Smith (18th century economist)
Observed that firms manufactured pins in one of two different ways:
- Craft-styleeach worker did all steps. - Productioneach worker specialized in one step.

Job Specialization and the Division of Labor

Job Specialization
process by which a division of labor occurs as different workers specialize in specific tasks over time

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F.W. Taylor and Scientific Management

Scientific Management
The systematic study of the relationships between people and tasks for the purpose of redesigning the work process to increase efficiency.

Four Principles of Scientific Management

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
Time-and-motion study

Codify the new methods of performing tasks into written rules and standard operating procedures Carefully select workers who possess skills and abilities that match the needs of the task, and train them to perform the task according to the established rules and procedures 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
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Problems with Scientific Management

Managers frequently implemented only the increased output side of Taylors plan.
Workers did not share in the increased output.

The Gilbreths
1. Break up and analyze every individual action necessary to perform a particular task into each of its component actions 2. Find better ways to perform each component action 3. Reorganize each of the component actions so that the action as a whole could be performed more efficiently-at less cost in time and effort

Specialized jobs became very boring, dull.

Workers ended up distrusting the Scientific Management method. Workers could purposely under-perform. Management responded with increased use of machines and conveyors belts.

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Administrative Management Theory

Administrative Management
The study of how to create an organizational structure that leads to high efficiency and effectiveness.

Administrative Management Theory

Max Weber
Developed the principles of bureaucracy as a formal system of organization and administration designed to ensure efficiency and effectiveness.

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Webers Principles of Bureaucracy

Question?
When a factory has a standard practice that each machine operator should leave his or her work station in a clean condition and ready for the next shift of workers, this is an example of:
A. B. C. D. An SOP. Bureaucracy. Job specialization. A rule.

Figure 2.2
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Rules, SOPs and Norms

Rules
formal written instructions that specify actions to be taken under different circumstances to achieve specific goals

Fayols Principles of Management

Division of Labor: allows for job specialization. Authority and Responsibility Unity of Command Line of Authority Centralization Unity of Direction Equity Order

Standard Operating Procedures (SOPs)

specific sets of written instructions about how to perform a certain aspect of a task

Norms
unwritten, informal codes of conduct that prescribe how people should act in particular situations

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Fayols Principles of Management

Initiative Discipline Remuneration of Personnel Stability of Tenure of Personnel Subordination of Individual Interest to the Common Interest Esprit de corps

Discussion Question?
Which of the following is the most important aspect of Fayols principles of management?
A. B. C. D. Division of Labor Unity of Command Remuneration of Personnel Esprit de corps

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Behavioral Management Theory

Behavioral Management
The study of how managers should personally behave to motivate employees and encourage them to perform at high levels and be committed to the achievement of organizational goals.

Behavioral Management
Mary Parker Follett
Concerned that Taylor ignored the human side of the organization
Suggested workers help in analyzing their jobs If workers have relevant knowledge of the task, then they should control the task

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The Hawthorne Studies

Studies of how characteristics of the work setting affected worker fatigue and performance at the Hawthorne Works of the Western Electric Company from 19241932.
Worker productivity was measured at various levels of light illumination.

The Hawthorne Studies

Human Relations Implications
Hawthorne effect workers attitudes toward their managers affect the level of workers performance

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The Hawthorne Studies

Human relations movement
advocates that supervisors be behaviorally trained to manage subordinates in ways that elicit their cooperation and increase their productivity

Implications of the Hawthorne Studies

Behavior of managers and workers in the work setting is as important in explaining the level of performance as the technical aspects of the task
Demonstrated the importance of understanding how the feelings, thoughts, and behavior of workgroup members and managers affect performance

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Question?
If a manager feels that his major job responsibility is "to counteract the natural tendencies of subordinates to avoid working hard," this manager is acting consistently with the principles of:
A. B. C. D. Contingency theory. Theory X. Theory Y. Theory Z.
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Theory X vs. Theory Y

Figure 2.3
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Management Science Theory

Management Science Theory
Contemporary approach to management that focuses on the use of rigorous quantitative techniques to help managers make maximum use of organizational resources to produce goods and services.

Management Science Theory

Quantitative management
utilizes mathematical techniques, like linear programming, modeling, simulation and chaos theory

Operations management
provides managers a set of techniques they can use to analyze any aspect of an organizations production system to increase efficiency

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Management Science Theory

Total quality management
focuses on analyzing an organizations input, conversion, and output activities to increase product quality

Organizational Environment Theory

Organizational Environment
The set of forces and conditions that operate beyond an organizations boundaries but affect a managers ability to acquire and utilize resources

Management information systems

help managers design systems that provide information that is vital for effective decision making

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The Open-Systems View

Open System
A system that takes resources for its external environment and transforms them into goods and services that are then sent back to that environment where they are bought by customers.

The Organization as an Open System

Figure 2.4
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The Open-Systems View

Input stage
organization acquires resources such as raw materials, money, and skilled workers to produce goods and services

Closed System
Closed system
A self-contained system that is not affected by changes in its external environment. Likely to experience entropy and lose its ability to control itself

Conversion stage
inputs are transformed into outputs of finished goods

Output stage
finished goods are released to the external environment

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The Organization as an Open System

Synergy
the performance gains that result from the combined actions of individuals and departments Possible only in an organized system

Contingency Theory
Contingency Theory
The idea that the organizational structures and control systems manager choose are contingent on characteristics of the external environment in which the organization operates. There is no one best way to organize

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Contingency Theory

Type of Structure
Mechanistic Structure Authority is centralized at the top. Emphasis is on strict discipline and order Employees are closely monitored and managed. Can be very efficient in a stable environment.

Figure 2.5

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Type of Structure
Organic Structure
Authority is decentralized throughout the organization. Departments are encouraged to take a crossdepartmental or functional perspective Works best when environment is unstable and rapidly changing

Management in the Movies

How are the workers viewed in Metropolis? How do the workers feel about going to work each day?

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Video Case: The Assembly Line

What downside do you think workers experienced after Taylor helped Ford introduce job specialization in his factory? Think of an example from the video. How does a moving assembly line fit into the beliefs of a Theory X manager, a designation given to Henry Ford?

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Chapter Six

Learning Objectives
1. Explain why the ability to perceive, interpret, and respond appropriately to the global environment is crucial for managerial success 2. Differentiate between the global task and global general environments 3. Identify the main forces in both the global task and general environments, and describe the challenges that each force presents to managers

Managing in the Global Environment

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6-2

Learning Objectives
4. Explain why the global environment is becoming more open and competitive and identify the forces behind the process of globalization that increases the opportunities, complexities, challenges, and threats that managers face 5. Discuss why national cultures differ and why it is important that managers be sensitive to the effects of falling trade barriers and regional trade associations on the political and social systems of nations around the world

Global Organizations
Global Organizations
Organizations that operate and compete not only domestically, but also globally Uncertain and unpredictable

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What Is the Global Environment?

Global Environment
Set of forces and conditions in the world outside the organizations boundaries that affect the way it operates and shape its behavior Changes over time Presents managers with opportunities and threats

Task Environment
Task Environment
Set of forces and conditions that originate with suppliers, distributors, customers, and competitors Affects an organizations ability to obtain inputs and dispose of its outputs Most immediate and direct effect on managers

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Forces in the Global Environment

Question?
Which part of the task environment provides an organization with the input resources that it needs to produce goods and services? A. Customers B. Suppliers C. Competitors D. Distributors
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Figure 6.1

The Task Environment

Suppliers
Individuals and organizations that provide an organization with the input resources that it needs to produce goods and services
Raw materials, component parts, labor (employees)

Global Outsourcing
Global Outsourcing
Organizations purchase inputs from other companies or produce inputs themselves throughout the world to lower production costs and improve the quality or design of their products

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The Task Environment

Distributors
Organizations that help other organizations sell their goods or services to customers
Powerful distributors can limit access to markets through its control of customers in those markets. Managers can counter the effects of distributors by seeking alternative distribution channels.

The Task Environment

Customers
Individuals and groups that buy goods and services that an organization produces
Identifying an organizations main customers and producing the goods and services they want is crucial to organizational and managerial success.

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The Task Environment

Competitors
Organizations that produce goods and services that are similar to a particular organizations goods and services
Rivalry between competitors is potentially the most threatening force that managers deal with

The Task Environment

Barriers to Entry
Factors that make it difficult and costly for the organization to enter a particular task environment or industry Economies of scale, brand loyalty, government regulations

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Barriers to Entry and Competition

The General Environment

Economic Forces
factors that affect the general health and wellbeing of a country or world region Interest rates, inflation, unemployment, economic growth

Figure 6.2

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The General Environment

Technology
Combination of tools, machines, computers, skills, information, and knowledge that managers use in the design, production, and distribution of goods and services

The General Environment

Technological Forces
Outcomes of changes in the technology that managers use to design, produce, or distribute goods and services

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The General Environment

Sociocultural Forces
Pressures emanating from the social structure of a country or society or from the national culture
Social structure: the arrangement of relationships between individuals and groups in society National culture: the set of values that a society considers important and the norms of behavior that are approved or sanctioned in that society.

The General Environment

Demographic Forces
Outcomes of change in, or changing attitudes toward, the characteristics of a population, such as age, gender, ethnic origin, race, sexual orientation, and social class

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The General Environment

Political and Legal Forces
Outcomes of changes in laws and regulations, deregulation of industries, the privatization of organizations, and increased emphasis on environmental protection
Increasingly nations are joining together into political unions that allow for the free exchange of resources and capital

The Global Environment

Figure 6.3
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Process of Globalization
Globalization
Set of specific and general forces that work together to integrate and connect economic, political, and social systems across countries, cultures, or geographical regions Result is that nations and peoples become increasingly interdependent

Discussion Question?
What is the principal form of capital that flows between countries? A. Human B. Political C. Resource D. Financial

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Process of Globalization
Four principal forms of capital that flow between countries are:
Human capital Financial capital Resource capital Political capital

Declining Barriers to Trade and Investment

Tariff
A tax that government imposes on imported or, occasionally, exported goods. Intended to protect domestic industry and jobs from foreign competition

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GATT and the Rise of Free Trade

Free-Trade Doctrine
The idea that if each country specializes in the production of the goods and services that it can produce most efficiently, this will make the best use of global resources and will result in lower prices

Declining Barriers of Distance and Culture

Distance
Markets were essentially closed because of the slowness of communications over long distances.

Culture
Language barriers and cultural practices made managing overseas businesses difficult

Changes in Distance and Communication

Improvement in transportation technology and fast, secure communications have greatly reduced the barriers of physical and cultural distances.
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Effects of Free Trade on Managers

Declining Trade Barriers
Opened enormous opportunities for managers to expand the market for their goods and services. Allowed managers to now both buy and sell goods and services globally. Increased intensity of global competition such that managers now have a more dynamic and exciting job of managing.
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Question?
What are ideas about what a society believes to be good, desirable and beautiful? A. Norms B. Needs C. Roles D. Values

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The Role of National Culture

Values
Ideas about what a society believes to be good, desirable and beautiful. Provide the basic underpinnings for notions of individual freedom, democracy, truth, justice, honesty, loyalty, love, sex, marriage, etc.

The Role of National Culture

Norms
Unwritten rules and codes of conduct that prescribe how people should act in particular situations.
Folkwaysroutine social conventions of daily life (e.g., dress codes and social manners) Moresbehavioral norms that are considered central to functioning of society and much more significant than folkways (e.g., theft and adultery), and they are often enacted into law.

Many differences in mores from one society to another

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Hofstedes Model of National Culture

Hofstedes Model of National Culture

Individualism
A worldview that values individual freedom and self-expression and adherence to the principle that people should be judged by their individual achievements rather their social background.

Collectivism
A worldview that values subordination of the individual to the goals of the group and adherence to the principle that people should be judged by their contribution to the group
Figure 6.4
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Hofstedes Model of National Culture

Power Distance
Degree to which societies accept the idea that inequalities in the power and well-being of their citizens are due to differences in individuals physical and intellectual capabilities and heritage

Hofstedes Model of National Culture

Achievement versus Nurturing Orientation
Achievement-oriented societies value assertiveness, performance, and success and are results-oriented. Nurturing-oriented cultures value quality of life, personal relationships, and service.

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Hofstedes Model of National Culture

Uncertainty Avoidance
Societies and people differ in their tolerance for uncertainty and risk. Low uncertainty avoidance cultures (e.g., U.S. and Hong Kong) value diversity and tolerate a wide range of opinions and beliefs. High uncertainty avoidance societies (e.g., Japan and France) are more rigid and expect high conformity in their citizens beliefs and norms of behavior.
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Hofstedes Model of National Culture

Long-term vs. Short-term Orientation
Cultures with a long-term orientation rest on values such as thrift and persistence in achieving goals Cultures with a short-term orientation are concerned with maintaining personal stability or happiness and living for the present

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Movie Example: Gung Ho

What decisions should the Assan Motors executives consider before opening a plant in the U.S.?

Video Case: The Delmar Dog Butler

What forces in the global environment are leading to outsourcing? What has outsourcing meant to countries like India? Do you think outsourcing is helping or hurting America?

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Chapter Four

Learning Objectives
1. Explain the relationship between ethics and the law 2. Differentiate between the claims of the different stakeholder groups that are affected by managers and their companies actions 3. Describe four rules that can be used to help companies and their managers act in ethical ways
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Ethics and Social Responsibility

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Copyright 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

Learning Objectives
4. Discuss why it is important for managers to behave ethically 5. Identify the four main sources of managerial ethics 6. Distinguish between the four main approaches toward social responsibility that a company can take

The Nature of Ethics

Ethical Dilemma
quandary people find themselves in when they have to decide if they should act in a way that might help another person even though doing so might go against their own self-interest

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The Nature of Ethics

Ethics
The inner-guiding moral principles, values, and beliefs that people use to analyze or interpret a situation and then decide what is the right or appropriate way to behave

Dealing with Ethical Issues

There are no absolute or indisputable rules or principles that can be developed to decide if an action is ethical or unethical

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Stakeholders and Ethics

Stakeholders
people and groups affected by the way a company and its managers behave supply a company with its productive resources and have a claim on its resources

Question?
Who has a claim on a companys resources? A. Employees B. Customers C. Suppliers D. Stakeholders

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Types of Company Stakeholders

Stockholders
Want to ensure that managers are behaving ethically and not risking investors capital by engaging in actions that could hurt the companys reputation Want to maximize their return on investment

Figure 4.1

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Managers
Responsible for using a companys financial capital and human resources to increase its performance Have the right to expect a good return or reward by investing their human capital to improve a companys performance Frequently juggle multiple interests

Employees
Companies can act ethically toward employees by creating an occupational structure that fairly and equitably rewards employees for their contributions

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Suppliers and Distributors

Suppliers expect to be paid fairly and promptly for their inputs Distributors expect to receive quality products at agreed-upon prices

Customers
Most critical stakeholder Company must work to increase efficiency and effectiveness in order to create loyal customers and attract new ones
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Whole Foods Approach to Ethical Business

Community, Society, and Nation

Community
Physical locations like towns or cities in which companies are located A community provides a company with the physical and social infrastructure that allows it to operate

Figure 4.2

A company contributes to the economy of the town or region through salaries, wages, and taxes
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Ethical Decision Making

Question?
Which ethical decision rule produces the greatest good for the greatest number? A. Utilitarian Rule B. Moral Rights Rule C. Justice Rule D. Practical Rule

Figure 4.3

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Practical Decision Model

1. Does my decision fall within the acceptable standards that apply in business today? 2. Am I willing to see the decision communicated to all people and groups affected by it? 3. Would the people with whom I have a significant personal relationship approve of the decision?

Why should managers behave ethically?

The relentless pursuit of self-interest can lead to a collective disaster when one or more people start to profit from being unethical because this encourages other people to act in the same way

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Effects of Ethical/Unethical Behavior

Trust

Trust and Reputation

willingness of one person or group to have faith or confidence in the goodwill of another person

Figure 4.4

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Trust and Reputation

Reputation
esteem or high repute that individuals or organizations gain when they behave ethically

Sources of Ethics

Figure 4.5

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Societal Ethics
Societal Ethics
Standards that govern how members of a society should deal with one another in matters involving issues such as fairness, justice, poverty, and the rights of the individual

Occupational Ethics
Occupational Ethics
Standards that govern how members of a profession, trade, or craft should conduct themselves when performing work-related activities Medical & legal ethics

People behave ethically because they have internalized certain values, beliefs, and norms

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Individual Ethics
Individual Ethics
Personal standards and values that determine how people view their responsibilities to other people and groups How they should act in situations when their own self-interests are at stake

Organizational Ethics
Organizational Ethics
Guiding practices and beliefs through which a particular company and its managers view their responsibility toward their stakeholders Top managers play a crucial role in determining a companys ethics

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Social Responsibility
Social Responsibility
Way a company views its duty or obligation to make decisions that protect, enhance, and promote the welfare and well-being of stakeholders and society as a whole

Approaches to Social Responsibility

Figure 4-6

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Approaches to Social Responsibility

Obstructionist approach
Companies choose not to behave in a social responsible way and behave unethically and illegality

Approaches to Social Responsibility

Defensive approach
companies and managers stay within the law and abide strictly with legal requirements but make no attempt to exercise social responsibility

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Approaches to Social Responsibility

Accommodative approach
Companies behave legally and ethically and try to balance the interests of different stakeholders against one another so that the claims of stockholders are seen in relation to the claims of other stakeholders

Approaches to Social Responsibility

Proactive approach
Companies actively embrace socially responsible behavior, going out of their way to learn about the needs of different stakeholder groups and utilizing organizational resources to promote the interests of all stakeholders

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Why Be Socially Responsible?

1. Demonstrating its social responsibility helps a company build a good reputation 2. If all companies in a society act socially, the quality of life as a whole increases

Role of Organizational Culture

Ethical values and norms help organizational members:
Resist self-interested action Realize they are part of something bigger than themselves

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Johnson & Johnson Credo

Ethics Ombudsman
Responsible for communicating ethical standards to all employees Designing systems to monitor employees conformity to those standards Teaching managers and employees at all levels of the organization how to appropriately respond to ethical dilemmas

Figure 4.7
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Movie Example: John Q

What should be the ethical standard in communicating job status changes and healthcare changes to employees?

Video Case: Whose Life is It Anyway? Do you think it is ethical for Scotts or other companies to fire employees who smoke, even if they only smoke outside of work? In implementing Scotts health initiatives, does Hagedorn put the interests of one group of stakeholders above those of another?

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Chapter Seven

Learning Objectives
1. Differentiate between programmed and non-programmed decisions, and explain why non-programmed decision making is a complex, uncertain process. 2. Describe the six steps that managers should take to make the best decisions and explain how cognitive biases can lead managers to make poor decisions.

Decision Making, Learning, Creativity and Entrepreneurship

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Copyright 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

7-2

Learning Objectives
3. Identify the advantages and disadvantages of group decision making, and describe techniques that can improve it. 4. Explain the role that organizational learning and creativity play in helping managers to improve their decisions. 5. Describe how managers can encourage and promote entrepreneurship to create a learning organization and differentiate between entrepreneurs and intrapreneurs
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The Nature of Managerial Decision Making

Decision Making
The process by which managers respond to opportunities and threats that confront them by analyzing options and making determinations about specific organizational goals and courses of action.

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Decision Making
Programmed Decision
Routine, virtually automatic process Decisions have been made so many times in the past that managers have developed rules or guidelines to be applied when certain situations inevitably occur

Decision Making
Non-Programmed Decisions
Non-routine decision made in response to unusual or novel opportunities and threats. The are no rules to follow since the decision is new.

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Decision Making
Intuition
feelings, beliefs, and hunches that come readily to mind, require little effort and information gathering and result in on-the-spot decisions

Question?
Which decision model assumes the decision maker can identify and evaluate all possible alternatives? A. Neo-classical B. Classical C. Administrative D. Practical

Reasoned judgment
decisions that take time and effort to make and result from careful information gathering, generation of alternatives, and evaluation of alternatives
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The Classical Model

Classical Model of Decision Making
A prescriptive model of decision making that assumes the decision maker can identify and evaluate all possible alternatives and their consequences and rationally choose the most appropriate course of action.

The Classical Model of Decision Making

Figure 7.1
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The Administrative Model

Administrative Model
An approach to decision making that explains why decision making is inherently uncertain and risky and why managers can rarely make decisions in the manner prescribed by the classical model

The Administrative Model

Bounded rationality
There is a large number of alternatives and available information can be so extensive that managers cannot consider it all. Decisions are limited by peoples cognitive limitations.

Incomplete information
Because of risk and uncertainty, ambiguity, and time constraints
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Causes of Incomplete Information

Risk
Present when managers know the possible outcomes of a particular course of action and can assign probabilities to them.

Causes of Incomplete Information

Ambiguous Information Information whose meaning is not clear allowing it to be interpreted in multiple or conflicting ways.
Young Woman or Old Woman

Uncertainty
Probabilities cannot be given for outcomes and the future is unknown.

Figure 7.3
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Causes of Incomplete Information

Time constraints and information costs
managers have neither the time nor money to search for all possible alternatives and evaluate potential consequences

Six Steps in Decision Making

Satisficing
Searching for and choosing an acceptable, or satisfactory response to problems and opportunities, rather than trying to make the best decision
Figure 7.4
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Discussion Question?
Which step in the decision making process is the most important? A. Generating alternatives B. Choosing an alternative C. Evaluating alternatives D. Learning from feedback

General Criteria for Evaluating Possible Courses of Action

Figure 7.5
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Feedback Procedure
1. Compare what actually happened to what was expected to happen as a result of the decision 2. Explore why any expectations for the decision were not met 3. Derive guidelines that will help in future decision making

Cognitive Biases and Decision Making Heuristics

Rules of thumb that simplify the process of making decisions. Decision makers use heuristics to deal with bounded rationality.
Systematic errors
errors that people make over and over and that result in poor decision making

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Sources of Cognitive Biases

Prior Hypothesis Bias
Allowing strong prior beliefs about a relationship between variables to influence decisions based on these beliefs even when evidence shows they are wrong.

Sources of Cognitive Biases

Illusion of Control
The tendency to overestimate ones own ability to control activities and events.

Escalating Commitment
Committing considerable resources to a project and then committing more even if evidence shows the project is failing.

Representativeness
The decision maker incorrectly generalizes a decision from a small sample or a single episode.
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Group Decision Making

Superior to individual making Choices less likely to fall victim to bias Able to draw on combined skills of group members Improve ability to generate feasible alternatives

Group Decision Making

Potential Disadvantages
Can take much longer than individuals to make decisions Can be difficult to get two or more managers to agree because of different interests and preferences Can be undermined by biases

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Group Decision Making

Groupthink
Pattern of faulty and biased decision making that occurs in groups whose members strive for agreement among themselves at the expense of accurately assessing information relevant to a decision

Devils Advocacy and Dialectical Inquiry

Figure 7.7
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Organizational Learning and Creativity Organizational learning

Managers seek to improve a employees desire and ability to understand and manage the organization and its task environment so as to raise effectiveness.

Question?
What is the ability of the decision maker to discover novel ideas leading to a feasible course of action? A. Originality B. Imagination C. Creativity D. Ingenuity

Learning organization
Managers try to maximize the peoples ability to behave creatively to maximize organizational learning.
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Organizational Learning and Creativity

Creativity
The ability of the decision maker to discover novel ideas leading to a feasible course of action.
A creative management staff and employees are the key to the learning organization.

Senges Principles for Creating a Learning Organization

Figure 7.8

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Building Group Creativity

Brainstorming
Managers meet face-to-face to generate and debate many alternatives.

Building Group Creativity

Nominal Group Technique
Provides a more structured way to generate alternatives in writing and gives each manager more time and opportunity to come up with potential solutions Useful when an issue is controversial and when different managers might be expected to champion different courses of action

Production Blocking
Occurs because group members cannot simultaneously make sense of all the alternatives being generated, think up additional alternatives, and remember what they were thinking
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Building Group Creativity

Delphi Technique
Written approach to creative problem solving. Group leader writes a statement of the problem to which managers respond Questionnaire is sent to managers to generate solutions Team of managers summarizes the responses and results are sent back to the participants Process is repeated until a consensus is reached
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Entrepreneurship
Entrepreneurs
Individuals who notice opportunities and take the responsibility for mobilizing the resources necessary to produce new and improved goods and services.

Social entrepreneurs
those who pursue initiatives and opportunities to address social problems and needs in order to improve society
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Entrepreneurship
Intrapreneurs
Individuals (managers, scientists, or researchers) who work inside an existing organization and notice an opportunity for product improvements and are responsible for managing the product development process.

Characteristics of Entrepreneurs
Open to experience: they are original thinkers and take risks. Internal locus of control: they take responsibility for their own actions. High self-esteem: they feel competent and capable. High need for achievement: they set high goals and enjoy working toward them.

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Entrepreneurship and Management

Frequently, founding entrepreneur lacks the skills, patience, and experience to engage in the difficult and challenging work of management

Intrapreneurship and Organizational Learning Product champions: taking ownership of a product from concept to market. Skunkworks: keeping a group of intrapreneurs separate from the rest of the firm. Rewards for innovation: linking innovation by workers to valued rewards.

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Movie Example: Family Man

How do Jack and Kate use the decision-making process to come to a conclusion? What criteria are used to make a decision?

Video Case: Laser Monks

Which aspect of LaserMonks formula quality products, competitive prices, or social entrepreneurshipwould increase the chance that you would buy from this company? Which entrepreneurial characteristics does Brother Bernard McCoy exhibit?

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