Chapter Six

Understanding the Management Process

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Learning Objectives
Define management Describe the four basic management functions: planning, organizing, leading/motivating, and controlling Distinguish between various kinds of managers, with regard to level and area of management Identify key management skills and managerial roles Discuss different types of leadership Analyze the steps in the managerial decisionmaking process
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Learning Objectives
Describe how organizations benefit from total quality management Summarize the criteria for becoming a successful manager today

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CEO Pay Compared to Average Worker Pay

600 500 CEO Pay 400 Times Worker 300 Pay 200 100 0 1980 1990 2000 2006
Source: 2007 Trends in CEO Pay, http://www.aflcio.org/corporatewatch/paywatch/pay/index.cfm, accessed 2/8/09.

http://money.cnn.com/2009/08/14/news/companies/highest_paid_ceos/

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What Is Management?
The process of coordinating people and other resources to achieve the goals of an organization
Material resources
The tangible physical resources an organization uses

Human resources
The people who staff the organization and use the other resources to achieve the goals of the organization

Financial resources
The funds the organization uses to meet its obligations to investors and creditors

Information resources
The information about internal and external business environmental conditions that the firm uses to its competitive advantage
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The Four Main Resources of Management

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Basic Management Functions

The Management Process

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Planning
Planning
Establishing organizational goals and deciding how to accomplish them

Mission
A statement of the basic purpose that makes an organization different from others

Strategic planning
The process of establishing an organizations major goals and objectives and allocating the resources to achieve them
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Planning
Establishing goals and objectives
Goals/Objectives
An end result that the organization is expected to achieve over a period of time Long-term versus short-term

Properly set goals are

Set at every level in the organization Consistent (supportive) with each other Optimized (balanced) to reduce conflicts between goals
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Organizing the Enterprise

Organizing
The grouping of resources and activities to accomplish some end result in an efficient and effective manner

Leading and motivating

Leading
Influencing people to work toward a common goal

Motivating
Providing reasons for people to work in the best interests of the organization

Directing
The combined processes of leading and motivating

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Controlling Ongoing Activities

Controlling
Evaluating and regulating ongoing activities to ensure that goals are achieved

Control function

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Kinds of Managers
Levels of management
Top managerguides and controls the overall fortunes of the organization; responsible for the performance of all departments Middle managerimplements the strategy and major policies developed by top management; responsible for finding the best way(s) to organize human and other resources to achieve organizational goals First-line managercoordinates and supervises the activities of operating (nonmanagerial) employees

The coordinated effort of all three levels of managers is required to implement the goals of any company
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Areas of Management Specialization

Financial managers
Responsible for the organizations financial resources

Operations managers
Manage the systems that convert resources into goods and services

Marketing managers
Responsible for facilitating the exchange of products between the organization and its customers or clients

Human resources managers

Manage the organizations human resources programs

Administrative managers (general managers)

Not associated with any specific functional area; provide overall administrative guidance and leadership
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Areas of Management Specialization

Other areas may have to be added depending on the nature of the firm and the industry

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What Makes Effective Managers?

Key management skills
Technical skill
A special skill needed to accomplish a specialized activity

Conceptual skill
The ability to think in abstract terms

Interpersonal skill
The ability to deal effectively with other people

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What Makes Effective Managers?

Managerial roles
Decisional roles
Involve various aspects of management decision making
Entrepreneur, disturbance handler, resource allocator, negotiator

Interpersonal roles
The manager deals with people
Figurehead, liaison, leader

Informational roles
A manager either gathers or provides information
Monitor, disseminator, spokesperson
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Rules for Leaders

Audit your company cultures Stay informedinformed people dont fear change Beware of aspirational accounting (e.g. Enron) Empower your people turn them loose Prevent erosion of human assets Be generous with what you know
Source: 25 Rules for Leaders, 2006, Fast Company, http://www.fastcompany.com/articles/2002/05/rtsd_quotes.html

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Class Exercise
For each skill, provide an example of how a manager could use it in a real-world situation.
Technical skill Conceptual skill

Interpersonal skill
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Leadership
The ability to influence others

Formal leadership
Legitimate power of position is the basis for authority

Informal leadership
Not recognized formally by the organization authority

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Styles of Leadership
Authoritarian
Holds all authority and responsibility, with communication usually moving from top to bottom

Laissez-faire
Gives authority to employees and allows subordinates to work as they choose with a minimum of interference; communication flows horizontally among group members

Democratic
Holds final responsibility but also delegates authority to others, who help determine work assignments; communication is active upward and downward
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Debate Issue: Should Managers Use the Authoritarian Leadership Style?

YES
Some employees need the close supervision that authoritarian leaders provide. When authoritarian leadership is used, communication moves from top (supervisor) to bottom (employees). An authoritarian leader assigns workers to specific tasks and expects precise results, so workers know exactly what is expected.

NO
Workers resent the close supervision that results from the authoritarian leadership style. The democratic and laissez-faire leadership styles allow workers to communicate with the supervisor and other members of their group. Authoritarian leaders stifle the workers creativity and their ability to solve problems.

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Which Leadership Style Is Best?

Matching style to the situation Effective leadership depends on
Interaction among the employees Characteristics of the work situation The managers personality

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CEOs Top Concerns

40% 35% 30% 25% 20% 15% 10% 5% 0% Sustained Top-Line Growth Profit Growth Consistent Adaptability Consumer Execution of to Change Retention Stratey

Source: Data from The Conference Board 2006; Challenge survey of 658 CEOs and chairmen. 6 | 23

Managerial Decision Making

The act of choosing one alternative from among a set of alternatives Major steps in the managerial decisionmaking process

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Managerial Decision Making

Identifying the problem or opportunity
Problem
The discrepancy between an actual condition and a desired condition

Opportunity
A positive problem

Problem-solving impediments
Preconceptions about the problem Focusing on unimportant matters while overlooking significant issues Analyzing symptoms rather than causes Failing to look ahead
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Managerial Decision-Making Process

Generating alternatives
Brainstorming
Encouraging participants to come up with new ideas

Blast! then refine

Reevaluating objectives, modifying them if necessary, and devising a new solution

Selecting an alternative
Satisficing
Choosing an alternative that is not the best possible solution, but one that adequately solves the problem
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Managerial Decision-Making Process

Implementing and evaluating the solution
Requires time, planning, preparation of personnel, and evaluation of the results An effective decision removes the difference between the actual condition and the desired condition If a problem still exists, managers may
Decide to give the chosen alternative more time Adopt a different alternative Start the process all 6 over | 27 again

Managing Total Quality

Total Quality Management (TQM)
The coordination of efforts directed at
Improving customer satisfaction Increasing employee participation Strengthening supplier partnerships Facilitating an organizational atmosphere of continuous quality improvement

Issues crucial to TQM

Top management commitment Coordination of efforts
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What It Takes to Become a Successful Manager

Personal skills
Oral communication Written communication Computer skills Critical thinking

Education and experience

A solid academic background Practical work experience
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Chapter Quiz
1. People in an organization are what type of resources? a) Material b) Informational c) Inventory d) Human e) Financial 2. In executing their functions, managers must first a) organize activities. b) establish goals. c) motivate employees. d) evaluate activities. e) select employees.
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Chapter Quiz
3. Roles such as entrepreneur, disturbance handler, and resource allocator are types of _______ roles. a) interpersonal b) informational c) decisional d) leadership e) ownership 4. One type of leadership style is a) laissez-faire. b) CEO. c) entrepreneur. d) negotiator. e) bureaucratic.
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Chapter Quiz
5. All of the following are reasons for a greater focus on quality by U.S. firms except a) competition from foreign firms. b) customers that are more demanding. c) unpredictability on Wall Street. d) poorer financial performance. e) reduced market share.

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Answers to Chapter Quiz

1. People in an organization are what type of resources? a) Material b) Informational c) Inventory d) Human (Correct) e) Financial 2. In executing their functions, managers must first a) organize activities. b) establish goals. (Correct) c) motivate employees. d) evaluate activities. e) select employees.
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Answers to Chapter Quiz

3. Roles such as entrepreneur, disturbance handler, and resource allocator are types of _____________roles. a) interpersonal b) informational c) decisional (Correct) d) leadership e) ownership 4. One type of leadership style is a) laissez-faire. (Correct) b) CEO. c) entrepreneur. d) negotiator. e) bureaucratic.
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Answers to Chapter Quiz

5. All of the following are reasons for a greater focus on quality by U.S. firms except a) competition from foreign firms. b) customers that are more demanding. c) unpredictability on Wall Street. (Correct) d) poorer financial performance. e) reduced market share.

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