CH.

1: MANAGING & THE MANAGER’S JOB

Organization: a group of people working together in a structured and
coordinated fashion to achieve a set of goals.
All organizations use four basic kinds of resources (inputs from the
environment) :
1- Human resources: managerial talent, labor.
2- Financial resources: the capital used by the organization to finance both
ongoing and long-term operations.
3- Physical resources: raw materials, office and productive facilities, and
equipment.
4- Information: useable data needed to make effective decisions.
* Managers are responsible for combining and coordinating these various
resources to achieve the organization’s goals.
Basic managerial activities:
1- Planning and decision making 2- Organizing
3- Leading 4- Controlling
Management: a set of activities (planning, decision making, organizing,
leading, and controlling) directed at an organization’s resources (human,
financial, physical, information) with the aim of achieving organizational
goals in efficient and effective manner.
Efficient: using resources wisely and in a cost-effective way.
Effective: making the right decisions and successfully implementing them.
Manager: someone whose primary responsibility is to carry out the
management process.
or : someone who plans and makes decisions, organizes, leads, and controls
human, financial, physical, and information resources.
* The functions of management do not usually occur in a tidy, step-by-step
fashion. A manager is engaged in several different activities simultaneously.

Planning and Decisions Making: Determining courses of action

Planning: setting an organization’s goals and deciding how best to achieve
them.
Decision making: a part of the planning process, involves selecting a course
of action from a set of alternatives.

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Planning and decision making help maintain managerial effectiveness by
serving as guides for future activities and know how to allocate their time and
resources.
Organizing: Coordinating activities and resources
Organizing involves determining how activities and resources are to be
grouped.
Leading: Motivating and managing people
Leading is the set of processes used to get members of the organization to
work together to advance the interest of the organization.
Controlling: Monitoring and evaluating activities
Controlling is monitoring the organization’s progress toward its goals.

Kinds of Managers:
 Managing at different levels of the organization
 Managing in different areas of the organization

Managing at Different Levels of the Organization

Levels of management: the differentiation of managers into three basic
levels- top, middle, and first-line.
Top Managers
• Titles found in this group include: president, vice president, and chief
executive officer (CEO).
• Create the organization’s goals, overall strategy, and operating policies.
• Represent the organization to the external environment by meeting with
government officials, executives of other organizations, … etc
• Make decisions about such activities as acquiring other companies,
investing in R&D, entering or abandoning various markets, and
building new plants.
• Work long hours and spend most of their time in meeting or on the
phone.
Middle Managers
• The largest group of managers in most organizations.
• Common middle-management titles include: plant manager, operations
manager, and division head.
• Primarily responsible for implementing the policies and plans
developed by top managers and for supervising and coordinating the
activities of lower-level managers.

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• For example, they handle inventory management, quality control
equipment failures, and minor union problems.
• Coordinates the work of supervisors.
• They are necessary to bridge the upper and lower levels of the
organization and to implement the strategies developed at the top.
First-Line Managers
• Supervise and coordinate the activities of operating employees.
• Common titles for first-line managers are: supervisor, coordinators, and
office manager.
• They oversee day-to-day operations, hire operating employees to staff
them, and handle other routine administrative duties.
• They spend a large proportion of their time supervising the work of
subordinates.

Managing at Different Areas of the Organization

Areas of management: managers can be differentiated into marketing,
financial, operating, human resource, administration, and other areas.
Marketing Managers
• Getting consumers and clients to buy the organization’s products or
services.
• Areas that are related to the marketing function: new product
development, promotion, and distribution.
Financial Managers
• Dealing primarily with an organization’s financial resources.
• Responsible for activities such as accounting, cash management, and
investments.
• In some businesses, such as banking and insurance, financial managers
are found in large numbers.
Operations Managers
• Creating and managing the systems that create an organization’s
products and services.
• Responsibilities of operations manager include production control,
inventory, control, quality control, plant lay out, and site selection.

Human Resources Manager

• Responsible for hiring and developing, recruiting and selecting
employees, training and development, designing compensation and

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benefits system, formulating performance appraisal systems, and
discharging low-performing and problems employees.
Administrative Managers
• Administrative (general) manages are not associated with any particular
management specialty.
• They tend to be generalist and they have basic familiarity with all
functional areas of management rather than specialized training in any
one area.
• Example of an administrative management position is a hospital
administrator.
Other Kinds of Managers
• Public relations manager: deal with the public and media to protect and
enhance the image of the organization.
• Research and development (R&D) managers: coordinate the activities
of scientists and engineers working on scientific projects.
• International operations manager: specialized to coordinates the
international operations.

Managerial Roles
• Interpersonal Roles
The roles of figurehead, leader, and liaison, all of which involve dealing
with other people.
- Figurehead: doing activities that are more ceremonial and symbolic.
(taking visitors to dinner, attending ribbon-cutting ceremonies)
- Leader: hiring, training, motivating, and encouraging employees to
improve productivity. The leader also shows subordinates how to
complete tasks and how to perform under pressure.
- Liaison: serving as a coordinator or link between people, groups, or
organizations. (coordinating activities of two project groups).
• Informational Roles
The roles of monitor, disseminator, and spokesperson, all of which involve
the processing of information.
- Monitor: seeking information that may be of value, scanning the industry
reports, and attempting to be as well informed as possible.
- Disseminator: transmitting relevant information back to others in work
place and sending memos outlining new organizational initiatives.

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- Spokesperson: relays information to people outside the unit or outside the
organization in a formal sense.
• Decisional Roles
The roles of entrepreneur, disturbance handler, resource allocator, and
negotiator, all of which primarily to making decisions.
- Entrepreneur: developing new ideas for innovation.
- Disturbance handler: resolving conflicts between two subordinates and
handling such problems as strikes, copyright infringements, or
problems in public relations.
- Resource Allocator: deciding how resources are distributed and with whom
he/she will work most closely. Reviewing and revising budget
requests .
- Negotiator: negotiating with other groups or organizations as a
representative of the company. Negotiations may also be internal to
the organization, for example the manager may mediate a dispute
between two subordinates or negotiate with other department.

Managerial Skills
 Technical Skills
- The skills necessary to accomplish or understand the specific kind of
work being done in an organization.
- They are especially important for first-line managers because they spend
much of their time training subordinates and answering questions about
work problems.
 Interpersonal Skills
- The ability to communicate with, understand, and motivate both
individuals and groups.
- They enable the manager to work with suppliers, customers, investors,
and others outside the organization.

 Conceptual Skills
- The manager’s ability to think in the abstract way.
- Managers need the mental capacity to view the organization in a
holistic manner.

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- The conceptual skills allow the managers to think strategically to see
the big picture and to make board-based decisions.
 Diagnostic Skills
- The manager’s ability to visualize the most appropriate response to a
situation.
- Manager can diagnose and analyze a problem in the organization by
studying its symptoms and then developing solutions.
 Communication Skills
- The manager’s abilities both to convey ideas and information
effectively to others and to receive ideas and information effectively
from others.
- These skills enable a manager to transmit ideas to subordinates so that
they know what is expected, and to keep higher-level managers
informed about what is going on.
- They help the manager listen to what others say and to understand the
real meaning behind letters or reports.
 Decision-Making Skills
- The manager’s ability to recognize and define problems and
opportunities correctly and then to select an appropriate course of
action to solve problems and capitalize on opportunities.
- No manager makes right decision all the time, but effective managers
make good decisions most of the time. And when they do make bad
decision, they recognize their mistake quickly and make good decision
to recover as little cost as possible.
 Time-Management Skills
The manager’s ability to prioritize work, to work efficiently, and to
delegate appropriately.

The Science of Management

Many management problems can be approached in ways that are rational,
logical, objective, and systematic.
They can gather data, facts, and objective information. They can use
quantitative models and decision-making techniques to arrive at correct
decision.
Managers need to take scientific approach to solving problems whenever
possible, especially when they are dealing with routine and straightforward
issues.

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The Art of Management
Managers must often make decisions and solve problems on the basis of
intuition, experience, instinct, and personal insight.
Relying heavily on conceptual, communication, interpersonal, and time-
management skills, a manager may have to decide between multiple courses
of action that look equally attractive.
* Manager must blend an element of intuition and personal insight with hard
data and objective facts.

The Scope of Management

Any group of two or more persons working together to achieve a goal and
having human, material, financial, or informational resources at its disposal
requires the practice of management.

Managing in Profit-Seeking Organizations

Large Businesses
Examples of large businesses include:
* Industrial firms * Communication companies
* Service organizations * Insurance companies
* Transportation companies * Commercial banks
Small and Start-Up Businesses
- Small businesses play an important role in the country’s economy.
- Effective management is more important in a small business than in a large
one.
- Large business can easily recover from losing several thousands dollars on
an incorrect decision, while a small business may ill afford even much
smaller loss.
International Businesses
- International management is not confined to profit-seeking organizations.
- Examples of international organizations are sports federations, embassies,
and the Roman Catholic Church.
- The military was one of the first multinational organizations.

Managing in not-for-Profit Organizations

Government Organizations
- Government organizations and agencies are often regarded as a separate
specialty: public administration.

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- Government organizations include: The Federal Trade Commission, the
Environmental Protection Agency, and all branches of military.
Educational Organizations
Public and private schools, colleges, and universities all stand to benefit
from the efficient use of resources.
Healthcare Facilities
Managing healthcare facilities such as clinics, hospitals, and HOMs
(healthcare maintenance organizations) is now considered a separate field of
management.
Management in Nontraditional Settings
Management is also required in nontraditional settings to meet established
goals. Management is practiced in religious organizations, terrorist groups,
organized crime, street gangs, and households.

CH.2: TRADITIONAL AND CONTEMPORARY

ISSEUS AND CHALLENGES
 The Classical Management Perspective

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Classical management perspective: consists of two distinct branches-
scientific management and administrative management.
 Scientific Management
During the first few years of the 20th century:
1- Business was expanding and capital was available
2- Labor was short in supply
3- Managers began to search for ways to use existing labor more efficiently
4- Experts focused on ways to improve the performance of individual
workers
5- Their work led to the development of scientific management
Scientific management: concerned with improving the performance of
individuals workers.
Scientific management principles (steps):
Develop a 1 Scientifically 2 Supervise 3 4
science for each select employees employees to make Continue to plan
element of the and then train sure they follow the the work, but use
job to replace them to do the job predescribed workers to get the
old rule-of-thumb as described in methods for job done
methods step 1 performing their
jobs

Some of the earliest advocates of scientific management included:

• Fredrik W. Taylor (1856-1915)
- During his work at the Midvale Steel Company he observed what he
called soldiering (employees deliberately working at a pace slower than
their capabilities).
- He determined what each worker should be producing and then he
designed the most efficient way of doing each part of the overall task.
- He implemented a piecework system (increasing the pay of each worker
who met and exceeded the target level of output set for his job).
- Taylor worked as consultant for several companies, where he studied
and redesigned the jobs, introduced rest periods to reduce fatigue, and
implemented a piecework system. The results were higher quality and
quantity of output and improved morale.
- During these experiences he formulated the ideas that he called
scientific management.
• Frank Gilberth (1868-1924) & Lillian Gilberth (1878-1972)
- Frank Gilberth studied the work of bricklayers and developed several
procedures of doing the job more efficiently. For example, he specified
standard materials and techniques. The results were reduction from
physical movements and increase in output.

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- Lillian Gilberth helped shape the field of industrial psychology, and
made substantive contributions to the field of personal management.
- Working individually and together the Gilberhts developed numerous
techniques and strategies for eliminating inefficiency.
• Henry Grant (1861-1919)
- He developed other techniques for improving worker output. One called
Grant Chart, which is essentially means of scheduling work and can be
generated for each worker for a complex project as a hole.
- Grant also refined Taylor’s ideas about piecework system.
• Harrington Emerson (1853-1931)
He was a strong advocate of specialized management roles in
organizations, believing that job specialization was as relevant to
managerial work as it was to operating jobs.

 Administrative Management
Where scientific management deals with the jobs of individual employees,
administrative management focuses on managing the total organization.
The primary contributors to administrative management were:
• Henri Fayol (1841-1925)
- Fayol was administrative management’s most articulate spokesperson.
- He was unknown until his most important work, General and Industrial
Management, was translated into English.
- He attempted to systemize the practice of management to provide guidance
and direction to other managers.
- He was the first to identify the specific managerial functions of planning,
organizing, leading, and controlling, and believed that these functions
reflect the core of the management process.
• Lyndall Urwick (1891-1983)
- After a career as a British army officer, Urwick became a noted
management theorist and consultant.
- Urwick integrated scientific management with the work of Fayol and other
administrative management.
- He advanced modern thinking about the functions of planning, organizing,
and controlling.
- He developed a list of guidelines for improving managerial effectiveness.
- Urwick is noted not so much for his own contributions as for his synthesis
and integration of the work of others.

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• Max Weber (1864-1920)
- Weber was a German sociologist, and his most important work was not
translated into English until 1974, and therefore, his contributions were not
recognized until some years have passed.
- Weber’s work on bureaucracy laid the foundation for contemporary
organization theory.
- The concept of bureaucracy is based on a rational set of guidelines for
structuring organizations in the most efficient manner.
• Chester Barnard (1886-1961)
- Chester Barnard is a former president of New Jersey Bell Telephone
Company.
- He made notable contributions to management in his book The Functions
of the Executive, which proposes a major theory about the acceptance of
authority.
- The theory suggests that subordinates weigh the legitimacy of a
supervisor’s directives and then decide whether to accept them. An order is
accepted if the subordinate understands it, is able to comply with it, and
views it as appropriate.
- The importance of Barnard’s work enhanced with his experience as a top
manager.

The contributions of the classical management perspective:

- Laid the foundation for later developments in management theory
- Identified important management processes, functions, and skills that are
still recognized today.
- Focused attention on management as a valid subject of scientific inquiry
The limitations of the classical management perspective:
- More appropriate for stable and simple organizations than for today’s
dynamic and complex organizations.
- Often prescribed universal procedures that are not appropriate in some
settings.
- Even though some writers were concerned with the human element, many
viewed employees as tools rather resources.
 The Behavioral Management Perspective
Behavioral management perspective: emphasizes individual attitudes and
behaviors and group processes and recognizes the importance of behavioral
processes in the work place.

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 The behavioral management perspective was stimulated by a number of
writers and theoretical movements. One of those movements was
industrial psychology (the practice of applying psychological concepts to
industrial settings).
 Hugo Munsterberg (1863-1916):
- A noted German psychologist, recognized as the father of industrial
psychology.
- He established a psychological laboratory and his book, Psychology and
Industrial Efficiency, was translated into English in 1913.
- He suggested that psychology could make valuable contributions to
managers in the areas of employees selection and motivation.
 Mary Follet:
- She worked during the scientific management era but quickly came to
recognize the human element in the workplace.
- Her work anticipated the behavioral management perspective and she
appreciated the need to understand the role of behavior in organizations.

 The Hawthorne Studies

- The lighting experiment
- A piecework incentive pay plan
- Interviewing program
* for more about The Hawthorne Studies, see the book page 45

 The Human Relations Movement

• The human relations management proposed that workers respond
primarily to the social context of the workplace, including social
conditioning, group norms, , and interpersonal dynamics.
• The basic assumption of the human relations movement was that the
manager’s concern for workers would lead to increased satisfaction,
which would in return result in improved performance.
• Two writers helped advance the human relations movement:

o Abraham Maslow
Maslow advanced a theory suggesting that people are motivated by a
hierarchy of needs, including monetary incentives and social acceptance.
Maslow’s hierarchy perhaps the best known human relations theory.
o Douglas McGregor

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McGregor’s theory X and theory Y model best represents the essence of
the human relations movement. According to McGregor, theory X and
theory Y reflect two extreme belief sets that different managers have
about their workers.
Theory X: a relatively negative view of workers consistent with the views
of scientific management.
Theory Y: a positive view of workers, it represents the assumptions that
human relations advocates make.
Theory Y was a more appropriate philosophy for managers to adhere to.
* Theory X and theory Y assumptions: see the book page 46

 The Emergence of Organizational Behavior

 Contemporary theorists have noted that many assertions of the human
relations were simplistic and inadequate description of work behavior.
 Current behavioral perspectives on management, know as
organizational behavior (contemporary field focusing on behavioral
perspectives in management), acknowledge that human behavior in
organizations in much more complex than the human relations
realized.
 The field of organizational behavior draws from a broad base of
psychology, sociology, anthropology, economics, and medicine.
 Organizational behavior takes a holistic view of behavior and
addresses individual, groups, and organizations processes.
These processes are major elements in contemporary management
theory.
Important topics in this field include job satisfaction, stress,
motivation, leadership, group dynamics, organizational politics,
international conflict, and the structure of the organization.

The contributions of the behavioral management perspective:

- Provided important insights into motivation, group dynamic, and other
interpersonal processes in organizations.
- Focused managerial attention on these same processes.
- Challenged the view that employees are tools and furthered the belief that
employees are valuable resources.
The limitations of the behavioral management perspective:

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- The complexity of individual behavior makes prediction of that behavior
difficult.
- Many behavior concepts have not yet been put to use because some
managers are reluctant to adopt them.
- Contemporary research findings by behavior scientists are often not
communicated to practicing managers in an understand form.

 The Quantitative Management Perspective

Quantitative management perspective: applies quantitative techniques to
management.
The quantitative management perspective focuses on:
- economic effectiveness - mathematical models
- decision making - the use of computers
There are two branches of the quantitative approach:
1- management science 2- operations management

 Management Science
Management science focuses specifically on the development of
mathematical models.
A mathematical model is a simplified representation of a system, process,
or relationship.
At its most basic level, management science focuses in models,
equations, and similar representations of reality.
Examples:
- Managers at Detroit Edison use mathematical models to determine how
best to route repair crews during blackouts.
- A bank uses models to figure out how many tellers need to be on duty at
each location at various times.

 Operations Management
Operations management is concerned with helping the organization
produce its products or services more efficiently .
Operations management is less mathematical and statistically sophisticated
than management science and we can be applied more directly to managerial
situations.
Indeed, we can think of it as a form applied management science.
Examples:

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- an organization uses operations management techniques to manage their
inventories.
- linear programming helped an air line company plan its flight schedules.
- Other operations management techniques include queuing theory,
breakeven analysis, and simulation.

The contributions of the quantitative management perspective:

- Developed sophisticated quantitative techniques to assist in decision
making.
- Application of models has increased our awareness and understanding of
complex organizational processes and situations.
- Has been very useful in the planning and the controlling processes.
The limitations of the quantitative management perspective:
- Cannot fully explain or predict the behavior of people in organizations.
- Mathematical sophistication may come at the expense of other important
skills.
- Models may require unrealistic or unfounded assumptions.

 Integrating Perspectives for Managers

 The Systems Perspective
System: an interrelated set of elements functioning as a whole.
By viewing an organization as a system, we can identify four basic
elements:
1- Inputs:
material, human, financial, and information resources the organization
gets from its environment.
2- Transformation process:
through technological and managerial processes, inputs are transformed
into outputs.
3- Outputs:
Products, services, or both, profits, losses, or both, employees behavior,
and information.

4- Feedback:
The environment reacts to the outputs provided and provides feedback to
the system.
Open system: an organizational system that interacts with its environment.

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Closed system: an organizational system that does not interact with its
environment.
* Although organizations are open systems, some make the mistake of
ignoring their environment and behaving as though their environment is
not important.
Subsystem: a system within a broader system.
For example: the marketing, production, and finance functions are system in
their own right but are also subsystems within the overall organization.
* Because they are interdependent, a change in one subsystem can affect
other subsystems.
Synergy: two or more subsystems working together may be more successful
than when working alone.
Synergy is an important concept for managers because emphasizes the
importance of working together in a cooperative and coordinated fashion.
Entropy: a normal process leading to system decline.
When an organization does not monitor feedback form its environment and
make appropriate adjustments, it may fail.
A primary objective of management, from a systems perspective, is to re-
energize to organization continually to avoid entropy.

 The Contingency Perspective

Universal perspective: attempts (the classical, behavioral, quantitative
approaches) to identify the one best way to do something.
Contingency perspective: suggests that universal perspectives cannot be
applied to organizations because each organization is unique.
Instead, the contingency perspective suggests that appropriate managerial
behavior in a given situation depends on, or contingent on, unique
elements in that situation.

 An Integrating Framework

Systems Approach Contingency Perspective

• Recognition of internal • Recognition of the situational
interdependencies. nature of management.
• Recognition of environmental • Repose to particular
influences. characteristics of situation.
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Classical Behavioral Quantitative
management Management Management
Perspective Perspective Perspective
Methods for Insights for moti- Techniques for
enhancing efficiency vating performance improving decision
and facilitating and understanding making, resource
planning, organizing, individual behavior, allocation, and
and controlling. groups and teams operations.
and leadership.

Effective and efficient management

Applying the integrating framework to solve some problems:

o Declining productivity
Looking to scientific management (perhaps jobs are inefficiently
designed or workers improperly trained), organizational behavior (worker
motivation may be low or group norms may be limiting output), or
operations management (facilities may be improperly laid out or
materials shortages may be resulting form poor inventory management).
o Planning a new warehouse
Consider what type of management structure to create (classical
management perspective), what kinds of leaders and work-group
arrangements to develop (behavioral management perspective), and how
to develop a network model for designing and operating the facility itself
(quantitative perspective).
o Employee turnover is too high
Consider an incentive system (classical perspective), plan a motivational
enhancement program (behavioral perspective), or use mathematical
model (quantitative perspective) to discover the turnover costs may
actually be lower than the cost of making any changes at all.

 Contemporary Management Issues and Challenges

 Contemporary Applied Perspectives
• The trend toward the field of organizational behavior and practice of
management has first became noticeable in the early 1980s with the

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success of books such as William Ouchi’s Theory Z , Thomas Peters
and Robert Waterman’s In Search of Excellent, Terrence Deal and
Allan Kennedy’s Corporate Cultures.
• Biographies of executives like Lee Iacoca and Donald Trump received
widespread attention.
• Among the most popular applied authors today are Peter Seng (The
Fifth Discipline), Stephen Covey (The Seven Habits of Highly
Effective People), Tom Peters (Liberation Management), Michel
Porter (The Competitive Advantage of Nations), and Michel Hammer
(Beyond Reengineering).

 Contemporary Management Challenges

• Employee retention (labor shortage)
- Companies in high-technology markets are finding that they must
offer lavish benefits and high salaries to attract talented and
motivated employees.
- The abundance of attractive lower-skills job.
• Diversity
- Diversity refers to differences among people. Most managers focus
on age, gender, ethnicity, and physical abilities.
- Increase diversity means new challenges and new opportunities.
• The new work-force
The work-force today is changing. The values, goals, and ideals of
each succeeding generation differ from those of their parents.
• Organization change
An organization that fails to monitor its environment and to keep
pace with that environment is doomed to failure.
• Ethics and social responsibilities
- Ethics: business scandals became common.
- Social responsibility: increasing the consideration of the effects of
organizational decisions on the environment.
- Increasing business responsibility for pollution and social problems.
• The importance of quality
Quality is an important issue for several reasons. First, more and more
organizations are using quality as a basis for competition. Second,
improving quality tends to increase productivity because making

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higher-quality products results in less waste and rework. Third,
enhancing quality lowers costs.
• The continued shift toward a service economy
The service sector of the economy has been much more important.
Service technology involves the use of tangible and intangible
resources to create intangible services. There are many fundamental
differences between managing in a manufacturing and a service
organization.
• Globalization
Managing in global economy poses many different challenges and
opportunities. The behavioral process vary widely across cultural and
national boundaries. Values, symbols, and beliefs differ sharply
among cultures.

CH.3: THE ENVIRONMENT OF

ORGANIZATIONS & MANAGERS

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The external environment: everything outside the organization’s
boundaries that might affect it.
There are two separate external environment: the general environment and
the task environment.
Because the impact of the general environment is often vague, imprecise,
and long-term, most organizations focus their attention on their task
environment.
The internal environment: the conditions and forces within an
organization.

The External Environment

 The General Environment
- The general environment is the set of broad dimensions and forces in an
organization’s surroundings that creates its overall context.
- The general environment of most organizations has economic,
technological, sociocultural, political-legal, and international dimensions.
- Each of these dimensions embodies conditions and events that influence
the organization in important ways.
o The Economic Dimension
- The economic dimension is the overall health and vitality of the economic
system in which the organization operates.
- Important economic factors for business are general economic growth,
inflation, interest rate, and unemployment.
- The economic dimension is also important to nonbusiness organizations as
well. For example, during weak economic conditions, funding for state
university may drop and hospitals ate affected by the availability of
government grants and the number of low-income patients the must treat
for free.
o The Technological Dimension
- The technological dimension is the methods available for converting
resources into products.
- Although technology is applied within the organization, the forms and
availability of that technology come from the general environment.
- While some people associate technology with manufacturing firms, it is
also relevant in the service sector.
- The rapid advancement of the internet into all areas of business is also a
reflection of the technological dimension.

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o The Sociocultural Dimension
- The sociocultural dimension includes the customs, mores, values, and
demographic characteristics of the society in which the organization
functions.
- Sociocultural dimension processes are important because they determine
the products, services, and standards of conduct that the society is likely to
value.
- Sociocultural factors influence how workers in a society feel about their
jobs ad organizations.
- The shape of the market, the ethics of political influence, and attitudes in
workforce are only few if the many ways in which culture can affect an
organization.
o The Political-Legal Dimension
- The political-legal dimension refers to the government regulation of
business and the general relationship between business and government.
- It is important for three basic reasons:
1- The legal system partially defines what the an organization can and
cannot do.
2- Pro- or antibusiness sentiment influences business activity ( during
probusiness sentiment, firms find it easier to compete and have fewer
concerns about antitrust issues. While during antibusiness sentiment
firms find their competitive strategies more restricted).
3- Political stability has ramifications about planning. No business wants
to set up shop in another country unless trade relationships with that
country are relatively stable.
o The International Dimension
- The international dimension is the extent to which an organization is
involved in or affected by business in other countries.
- Multinational firms affect and are affected by international conditions and
markets. Even firms that do business in one country may face foreign
competition at home.
- The international dimension also has implication for non-for-profit
organizations.
- As a result for advance in transportation and information technology,
almost no part of the world is cut off from the rest. As a result, every
organization us affected by its international dimension of its environment.

McDonald’s general environment:

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Technological
International Dimension Dimension
• Restaurants in 115 • Improved information
countries technology
• About two-thirds of • More efficient
sales from outside operating systems
the U.S

State
s
Political-Legal
Dimension McDonald’ Economic
• Government s Dimension
food standards • Strong economic
• Local zoning growth
climate • Low unemploy-
• General posture ment
toward business • Low inflation
regulation
Sociocultural Dimension
• Demographic shifts in
Internal environment number of single adults
and dual-income families
Task environment • Growing concerns about
External environment
health and nutrition
General environment

 The Task Environment

- The task environment consists of specific external organizations or group
that influence an organization.
- The task environment includes competitors, customers, suppliers,
regulators, and strategic allies.
- Although the task environment is also quite complex, it provides useful
information more readily than does the general environment because the
manage can identify environmental factors of specific interest to the
organization.
o Competitors
- An organization’s competitors are other organization that compete with it
for resources.
- The most obvious resources that competitors vie for are customers dollars.
- Competition also occurs between substitute products. For example, Ford
competes with Yamaha (motorcycles) and Schwinn (bicycles) for your
transportation dollars.
- Competition is not limited to business firms. Universities compete with
trade schools, the military, and external labor market to attract good
students.

22
- Organizations may compete for different kinds of resources besides
consumer dollars. Fro example, two totally unrelated organizations may
compete for acquire a loan from a bank that has only limited funds to lend.
o Customers
- Customers are whoever pay money to acquire an organization’s products or
services.
- Customers need not to be individuals. Hospitals, schools, government
agencies, wholesalers, retailers, and manufactures are organizations that
may be major customers of another organizations.
- Dealing with customers has become complex in recent years. New products
and services, new methods of marketing, and more discriminating
customers have all added uncertainty to how businesses relate to their
customers.
- Companies face especially critical differences among customers as they
expand internationally.
o Suppliers
- Suppliers are organizations that provide resources for other organizations.
- Common wisdom in the U.S used to be that a business should try to avoid
depending exclusively on particular suppliers. A firm that buys all of a
certain resource from one supplier may be crippled if the supplier goes our
of business or is faced with a strike.
- Avoiding depending on one supplier can also help maintain a competitive
relationship among suppliers, keeping costs down.
- Japanese firms have a history of building major ties with only one or two
major suppliers. This enables them to work together more smoothly for
their mutual benefit and makes the supplier more responsive to customer’s
needs.
o Regulators
- Regulators are units that have the potential to control, legislate, or
influence an organization’s policies and practices.
- There are two important kinds of regulators. Regulatory agencies and
interest group.
- Regulatory agency: an agency created by the government to protect the
public from certain business practices or to protect organizations from one
another.
Examples are the Environmental Protection Agency (EPA), the Securities
and Exchange Commission (SEC), and the Food and Drug Administration
(FDA).

23
- Many of these agencies play important roles in protecting rights of
individuals.
- Managers complain that there is too much government regulations.
- The regulatory agencies in other countries is more stringent.
- Interest group: a group organized by its members to attempt to influence
organizations.
Examples are the National organization for Women (NOW) and Mothers
Against Drunk Driving (MADD).
- Although interest groups lack the official power of government agencies,
they can exert considerable influence by using the media to call attention to
their positions.

McDonald’s task environment:

Competitors
• Burger King
• Wendy’s
• Subway
Regulators • Dairy Queen
• Food and Drug
Administration Customers
• Securities and • Individual
Exchange consumers
Commission
• Institutional
• Environmental McDonald customers
Protection
’s
Agency

Suppliers
Strategic Partners
• Coca-Cola
• Wal-Mart • Wholesale food
• Disney processors
• Foreign partners • Packaging
manufacturers

Internal environment
Task environment

o Strategic Partners
- Strategic partners or allies are two or more organizations that work
together in joint ventures or other partners.
- strategic partnerships help companies get from other companies the
expertise they lack.

24
- They also help spread risk and open new market opportunities. Indeed,
most strategic partners are among internationally firms.

The Internal Environment

The internal environment of an organization consist of its owners, board of
directors, employees, and t he physical work environment.
o Owners
- Owner: someone who has legal property rights to a business.
- Owners can be:
• A single individual who establishes and runs a small business
• Partners who jointly own the business
• Individual investors who buy stock in a corporation
• Other organizations
o Board of Directors
- Board of Directors: governing body elected by stockholders and charged
with overseeing the general management of the firm to ensure that it is
being run in a way that best serves the stockholders’ interests.
- Some boards are passive. They perform a general oversight function but
seldom get actively involved in how the company is really being run.
But this trend is changing as more and more boards are more carefully
scrutinizing the firms they oversee.
o Employees
- An organizations’ employees are a major element of its internal
environment.
- An interest for managers is the changing nature of the workforce as it
becomes more diverse un the demographic composition (gender, ethnicity,
age …).
- Workers are calling for more job ownership, while the number of
employees who have no loyalty is growing.
- A trend in many firms is the increased reliance on temporary workers.
- The power of labor unions has been increased.

o Physical Work Environment

- The physical working environment refers to the location, building and
office layout of organization.
- Some firms have their facilities in downtown skyscrapers, while others
locate in suburban or rural settings.

25
- Newer facilities have more open arrangement where people work in large
rooms, moving between different tables to interact with different people on
different projects.

Organization-Environment Relationship
 How Environments Affect Organizations
Three basic perspectives can be used to describe how environments affect
organizations: environment change and complexity, competitive forces, and
environmental turbulence.
o Environment Change and Complexity
James D. Thompson recognized the importance of the organization’s
environment. He suggests that the environment can be described along two
dimensions:
(1) the degree of change: the extent to which the environment is relatively
stable or dynamic.
(2) The degree of homogeneity: the extent to which the environment is
relatively simple (few elements, little segmentation) or relatively
complex (many elements, much segmentation).
These two dimensions interact to determine the level of uncertainty face by
the organization.
Uncertainty: a driving force caused by change and complexity that
influences many organizational decisions.
There 4 levels of uncertainty:
1- Least uncertainty:
e.g. RR cars: stable change (a few changes in the style) and simple
homogeneity (no segmentation in the target market).
2- Moderate uncertainty:
e.g. Adams clothing: dynamic change (fashion changes, prices, new
fabrics, styles) and simple homogeneity (a few segments).

Simple

D
The degree of homogeneity and eg
re Least Moderate
the degree of change combine to e uncertainty uncertainty
create uncertainty for organizations. of
H
For example, a simple and stable o
environment creates the lest uncer m
tainty,
26 and a complex and dynamic og en
Moderate Most
environ-ment creates the most eit uncertainty uncertainty
uncertainty. y
Complex
Degree of Change
Stable Dynamic

3- Moderate uncertainty:
e.g. Ford, GM, Chrysler: stable change (slow changes in the style, but
still the basic features are still the same, 4 wheels, a steering, windows
etc) and complex homogeneity (target market is highly segmented).
4- Most uncertainty:
e.g. Zara clothing : dynamic change (fashion changes, prices, new
fabrics, styles) and complex homogeneity (highly segmented).
o Competitive Forces
Michel E. Porter suggests that managers view the environment of their
organization in terms of five competitive forces:
1- The threat of new entrants
- It is the extent to which new competitors can easily enter a market or
market segment.
- The threat of new entrants is fairly high in small businesses market
(Bahraini bread market) while it is low in large businesses market
(Bahrain telecommunication market).
- The arrival of the Internet has reduced the costs and other barriers of
entry in many market segments, so the threat of new entrants has
increased for many firms.
2- Competitive rivalry
It is the nature of competitive relationship between dominant firms in the
industry.
Form example, in the soft drink industry, Coca-Cola and Pepsi often
engage in intense price wars, comparative advertising, and new product
introductions.
3- The threat of substitute products
It is the extent to which alternative products or services may supplant or
diminish the need for existing products or services.
For example, the advent of personal computers has reduced the demand
for calculators and typewriters.

27
4- The power of buyers
It is the extent to which buyers of the products or services in an industry
have the ability to influence the suppliers.
The buyers will be powerful and have considerable influence over the
price they are willing to pay if they are limited.
5- The power of suppliers
It is the extent to which suppliers have the ability to influence potential
buyers.
o Environmental Turbulence
Environmental change or turbulence. Occasionally with no warnings.
The most common form of organizational turbulence is a crisis.
Examples:
• 11 September
• crash of Gulf Air flight in Bahrain
• Bahraini Saudi Bank crisis

 How Organizations Adapt to Their Environments

The six basic mechanisms through which the organizations adapt to their
environment:
1- Information management
2- Strategic response
3- Mergers, Acquisitions, and Alliances
4- Organizations design and flexibility
5- Direct influence of the environment
6- Social responsibility
o Information management
Information management is especially important when forming an initial
understanding of the environment and when monitoring the environment for
signs of change.
Techniques for managing information:

- Boundary Spanner
An employee (such as a sales person representative or a purchasing agent)
who spend much of his/her time in contact with others outside the
organization.
- Environmental Scanning

28
The process of actively monitoring the environment through activities such
as observation and reading.
- Information System
Electronic systems established to gather and organize relevant information
for managers and to assist in most permanent to each manager’s needs.
o Strategic response
- Options include maintaining the status quo, altering strategy a bit, or
adopting an entirely new strategy.
- If the market that a company currently serves is growing rapidly (or
shrinking and does not provide reasonable possibilities for growth), the
firm might decide to invest more heavily (or decide to cut back).
o Mergers, Acquisitions, and Alliances
- Mergers
Two or more firms combine to form a new firm . example,
DaimlerChrysler.
- Acquisition
One firm buys another , sometimes against its will (usually called a hostile
takeover).
- Alliances
A firm undertake a new venture with another firm.
This strategy makes it easier to the firm to enter into new markets or
expanding its presence in a current market.
o Organizations design and flexibility
On the base of flexibility, there are two structural designs:
• Mechanistic Organizational Design
- It is characterized by formal and rigid rules and relationships,
regulations, and standard operating procedures.
- It is used by firms that operate in an environment with relatively low
levels of uncertainty.
• Organic Design
- more flexible , few standard operating procedures, and allowing
managers considerable direction and flexibility over decisions.
- It is used by firms that face a great deal of uncertainty.
o Direct influence of the environment
Many organizations are able to influence their environment directly in many
ways. For example, a firm can influence:
• Suppliers
- by signing long-term contracts with fixed prices.

29
- become its own supplier.
• Customers
- by creating new uses for a product
- by convincing them that they need something new
• Regulators
- by lobbying (sending a company or industry representative to influence
relevant agencies, groups, and committees) and bargaining.

The Environment and Organization Effectiveness

 Models of Organizational Effectiveness
o The System Resource Approach (Input)
This approach focuses on the extent to which the organization can
acquire the resources it needs.
A firm that can get raw materials during a shortage is effective form this
perspective.
o The Internal Processes Approach (Transformation)
It deals with the internal mechanisms of the organization and focuses on
minimizing strain, integrating individuals and the organization, and
conducting smooth and efficient operations.
An organization that focuses on maintaining employee satisfaction and
morale and being efficient subscribes to this view.
o The Goal Approach (Output)
It focuses on the degree to which an organization obtain its goals.
When a firm establishes a goal and then achieves it, the goal approach
maintains that the organization is effective.
o The strategic Constituencies Approach (Feedback)
It focuses on the group that have a stake in the organization.
Effectiveness is the extent to which the organization satisfies the
demands and expectations of all these groups.

CH.7: BASIC ELEMETS OF

PLANNING & DECISION MAKING
• Decision making is the cornerstone of planning, and the catalyst that
drives the planning process.

30
• The planning process is a generic activity. All organizations engage in
planning activities, but no two organizations plan exactly the same
fashion.
• All planning occurs within an environmental context. Therefore,
understanding the environment in essentially the first step in planning.
• Managers establish the organization’s mission, which outlines the
purpose, premises, values, and directions of the organization.
• Managers develop several different types of goals and plans (strategic,
tactical, and operational).

 Organizational Goals
Purposes of Goals
 Goals provide guidance and a unified direction for people in the
organization.
Goals can help everyone understand where the organization is going and
why getting there is important.
 Goal-setting practices strongly affect other aspects of planning.
Effective goal setting promotes good planning, and good planning
facilitates future goal setting.
 Goals can serve as source of motivation to employees of the organization.
Goals that are specific and moderately difficult can motivate people to
work harder, especially if attaining the goal is likely to result in rewards.
 Goals provide an effective mechanism for evaluation and control.
This means that performance can be assessed in the future in terms of
how successfully today’s goals are accomplished.

Kinds of Goals
Goals vary by level, area, and time frame.
 Level
The four basic levels of goals are the mission and strategic, tactical, and
operational goals.
o Mission: a statement of an organization’s fundamental purpose that
sets a business apart from other firms of its type.
o Strategic Goals: goals set by and for top management of the
organization. They focus on broad, general issues.

31
o Tactical Goals: goals set by and for middle managers of the
organization. Their focus is on how to operationalize actions
necessary to achieve the strategic goals.
o Operational Goals: goals set by and for lower-level managers.
Their concern is with shorter-term issues associated with tactical
goals.
 Area
Organizations set also goals for different areas (marketing, finance,
operations, human resources, and administration).
 Time Frame
o There are three time frames: long-term, intermediate, term, and long-
term.
o Some goals have an explicit time frame (i.e., open 10 branches during
the next five years) and others have an open-ended time horizon (i.e.,
maintain ten percent annual growth).
o The meaning of different time frames varies by level. For example, at
the strategic level, long-term means ten years or longer, while it
means two or three years in the operational level.

Responsibilities for Setting Goals

- All managers should be involved in the goals-setting process.
- The mission and strategic goals are generally determined by the board of
directors and top managers.
- Top and middle managers work together to establish tactical goals.
- Middle and lower-level managers are jointly responsible for operational
goals.
- Many managers also set individual goals for them selves.

Managing Multiple Goals

Organizations set many different kinds of goals and sometimes experience
conflicts or contradictions.
To address such problems, managers must understand the concept of
optimizing (balancing and reconciling possible conflicts among goals).
Because goals may conflict with one another, the manager must look for
inconsistencies and decide whether to purse one goal to the exclusion of
another or to find a midrange target between the extremes.

 Organizational Planning

32
Kinds of Organizational Plans
 Strategic Plans
- A strategic plan is a general plan outlining decisions of resource allocation,
priorities, and action steps necessary to reach strategic goals.
- Set by the board of directors and top management, and generally have
extended time horizon.
- They address questions of scope, resource deployment, competitive
advantage, and synergy.
 Tactical Plans
- A tactical plan aimed at achieving tactical goals and developed to
implement specific parts of a strategic plan.
- Involve upper and middle management and, compared with strategic plans,
have shorter time horizon and a more specific and concrete focus.
- Concerned more with accomplishing tasks than with deciding what to do.
 Operational Plans
- An operational plan focuses on carrying out tactical plans to achieve
operational goals.
- Developed by middle and lower-level management.
- Have a short-term focus and relatively narrow in scope, and each one deals
with a small set of activities.

Time Frames for Planning

 Long-Range Plans
- Cover many years, perhaps even decades. Common long-range plans are
for five years or more.
- The time span for long-range planning varies from one organization to
another.
- Managers of organizations in complex environments need a longer time
horizon than do organizations in less dynamics environments.
The complexity of their environment makes long-range planning difficult,
therefore, they must monitor their environment for possible changes.

 Intermediate Plans
- Usually cover periods from one to five years and especially important for
middle and first-line managers.
- Less tentative and subject to change than long-range plans.
- They generally parallel tactical plans.

33
- For many organizations intermediate planning has become the central
focus of planning activities.
 Short-Range plans
- Cover a span of one year or less and affect the manager’s day-to-day
activities.
- There are two kinds of short-range plans: action plan and reaction plan.
- An action plan used to operationalize any other kind of plan.
- A reaction plan designed to allow the company to react to n unforeseen
circumstance.

Responsibilities for Planning

The larger an organization becomes, the more the primary planning activities
become associated with groups of managers rather than with individual
managers.
 Planning Staff
Some large organizations might use a professional planning staff for a
variety of reasons:
- Reduce to workload of individual managers
- Help coordinate the planning activities of individual workers
- Bring to a particular problem many different tools and techniques
- Take a broader view than individual managers
- Go beyond pet projects and particular departments
 Planning Task Force
- Organizations sometimes use a planning task force to help develop plan.
- A task force often comprise line managers with a special interest in the
relevant area of planning. It may also have members from the planning
staff if the organization have one.
- A planning task force is most created when the organization wants to
address a special circumstance.
 Board of Directors
- The board of directors establishes the corporate mission and strategy.
- In some companies the board takes an active role in the planning process.
- In other companies the board selects a competent chief executive and
delegates planning to that individual.
 Chief Executive Officer
- The CEO is usually the president or the chair f the board of directors.

34
- The single most important individual in any organization’s planning
process.
- Plays a major role in the complete planning process and is responsible for
implementing the strategy.
- The board and CEO assume direct roles in planning.
 Executive Committee
- Composed of the top executives in the organization working together as a
group.
- Committee members usually meet regularly to provide input to the CEO
and to review the various strategic plan that develop from this input.
- Members of the executive committee are frequently assigned to various
staff committees, subcommittees, and task forces to concentrate on specific
projects or problems.
 Line Management
- Line managers are those persons with formal authority and responsibility
for the management of the organization.
- They play an important role in the planning process for two reasons:
1) they are a valuable source of inside information for other managers as
plans are formulated and implemented.
2) the line managers at the middle and lower levels of the organization
usually must execute the plans developed by top management.
- Line management identifies, analyzes, and recommends program
alternatives, develops budgets and submits them for approval, and finally
sets the plans n motion.

Contingency Planning
It is the determination of alternative courses of action to be taken if an
intended plan of action in unexpectedly disrupted or rendered inappropriate.
Contingency planning come into play at four action points:
1) Develop the basic plans, including strategic, tactical, and operational
plans and taking in consideration various contingency events.
2) The plan that management choose is put into effect. The most important
contingency events are also identified.
3) Specify certain indicators that suggest a contingency event is about to
take place and develop contingency plans for each possible event.
Monitor contingency event indicators and implement contingency plan if
necessary.

35
or 4) mark the successful completion of either the original or a
contingency plan.
* Contingency planning is becoming more important for most organizations
and especially for those operating in complex and dynamic environments.

 Tactical Planning
Developing Tactical Plans
 Recognize that tactical planning must address a number of tactical goals
derived from a broader strategic goal.
 Tactical plans flow from and must be consistent with a strategic plan.
 Tactics must specify resources and time frames. Tactical plan must
specify precisely what activities will be undertaken to achieve the
strategic goal.
 Tactical planning requires the use of human resources. Managers must be
in a position to receive information from others in and outside the
organization , process that information, and then pass it on to others who
might make use of it.
Executing Tactical Plans
 The success of tactical plan depends on the way it is carried out.
 Successful implementation depends on:
- astute use of resources
- effective decision making
- insightful steps to ensure that the right things are done at the right time
and the right ways
 proper execution depends on several important factors:
- evaluate every possible course of action in light of its goal.
- Assure that each decision maker has the information and resources
necessary to get the job done.
- Monitor horizontal and vertical communication and integration of
activities to minimize conflict and inconsistent activities.
- Monitor ongoing activities to make sure that they are achieving the
desired results.

 Operational Planning
There are two basic forms of operational plans: single-use plans and
standing plans.

36
Single-Use Plans
A plan developed to carry out a course of action that is not likely to be
repeated in the future.
The two most common forms of single-use plans are programs and projects.
o Programs
- Single-use plan for a large set of activities.
- It might consist of identifying procedures for introducing a new
product line, opening a new facility, or changing the organization’s
mission.
o Projects
- A single-use plan of less scope and complexity than a program.
- It may be a part of a broader program. Or it may be a self-contained
single-use plan.
- Projects are used to introduce a new product within an existing product
line or to add a new benefit option to an existing salary package.
Example:
Black & Decker bought General Electric’s small appliances business. 150
GE products converted to B&D, each product required 140 steps for
conversion.
The total conversion of the product line was a program, and the conversion
of each of the 150 products was a separate project in its own right.

Standing Plans
A plan that developed for activities that recur regularly over a period of
time.
Standing plans can enhance efficiency by routinizing decision making.
There are three kinds of standing plans: policies, standard operating
procedures, and rules and regulations.
o Policies
- A policy is s standing plan that specifies the organization’s general
response to a designated problem or a situation.
- As a general guide for action, a policy is the most general form of
standing plan.
- Policy is likely to describe how exceptions are to be handled.
o Standard Operating Procedures (SOP)
SOP is a standing plan that outlines the steps to be followed in particular
circumstances. It is more specific than a policy.

37
o Rules & Regulations
- Rules and regulations the narrowest of the standing plans and describe
exactly how specific activities are to be carried out.
- Rather than guiding decision making, rules and regulations take the
place of decision making in various situations.
- Rules and regulation can become problematic if they are excessive or
enforced too rigidly.
Example:
A university admissions office might establish a standing plan for accepting
applicants.
 Policy: reject all applications that are less than 70%
 Standard Operating Procedure:
i. set up a file for the applicant
ii. add transcripts and letters of reference to the file
iii. give the file to the appropriate admissions director
 Rules & Regulations: if the applicant does not reply on the offer within 4
weeks then the application is rejected.
Rules & regulations and SOPs are similar in many ways. They are both
relatively narrow in scope, and each can serve as a substitute for decision
making.
SOP describes a sequence of activities, whereas rules and regulations focus
on one activity.

 Managing Goal-Setting and Planning Processes

Barriers to Goal Setting and Planning
o Inappropriate Goals
Inappropriate goals come in many forms:
- At the expense of other area: paying large dividend at the expense of
R&D.
- Unattainable: achieving 50% increase in sales.
- Place too much emphasis on qualitative measure of success: employees
satisfaction and development.

o Improper Reward System

- People may inadvertently be rewarded for poor goal-setting behavior or
be unrewarded or eve punished for proper goal-setting behavior.

38
- If an organization places too much emphasis on short-term performance
and results, managers may ignore long-term issues as they set goals and
formulate plans to achieve higher profits in the short-term.
o Dynamic and Complex Environment
The nature of the organization’s environment is also a barrier to effective
goal setting and planning. Rapid change, technological innovation, and
intense competition can each increase the difficulty of an organization
accurately assessing future opportunities.
o Reluctance to Establish Goals
Some managers are reluctance to establish goals because of:
- Lack of confidence
- Fear of failure
- Avoidance of accountability
o Resistance to Change
Planning essentially involves changing something about the organization,
while people tend to resist change.
o Constraints
- Lack of resources
- Government restrictions
- Strong competition
- Time constrains

Overcoming The Barriers

o Understanding The Purposes of Goals and Planning
Managers should understand that:
- The are limits to the effectiveness of setting goals and making plans
- Planning is not a panacea that will solve all of an organization’s
problems, nor is it an iron-clad procedure to be followed at any cost
- Effective goals and planning do not necessary ensure success,
adjustments and exceptions are to be expected over time.
o Communication and Participation
- Goals and plans must be communicated to others in the organization.
- People responsible for achieving goals and implementing plans must
have a voice in developing them from the outset.
- People are usually more committed to plan that they have helped shape.

39
- Even when an organization uses a planning staff, managers from a
variety of levels in the organization must be involved in the planning
process.
o Consistency, Revision, and Updating
- Goals should be consistent both horizontally (across the organization,
from one department to the next) and vertically (up and down the
organization. Strategic, tactical, and operational goals must agree with
one another).
- Because goals setting and planning are dynamic processes, they must
also be revised and updated regularly.
o Effective Reward System
- People should be rewarded both for establishing effective goals and
plans and for successfully achieving them.
- Because failure sometimes results from factors outside the manager’s
control, people should be assured that failure to reach a goal will not
necessary bring punitive consequences.

Using Goals to Implement Plans

Formal goal-setting programs is a method used for managing the goal-
setting and planning processes concurrently to ensure that both are done
effectively.
This approach called management by objectives (MBO).

The Nature and Purpose of Formal Goal Setting:

To give subordinates a voice in the goal-setting and planning processes and
to clarify for them exactly what they are expected to accomplish in a given
time span.

The Formal Goal-Setting Process

40
* see the book page 218

Starting Establishment Communicat-

Collaborative
the formal of organiza- ing organiza- Evaluation
goal setting Periodic
goal-setting tional goals tional goals review
and planning
program and plans and plans

Meeting

Verifiable
goals and
clear plans

Counseling

Resources

The Effectiveness of Formal Goal Setting:

• Improves employee motivation by:
- clarifying exactly what is expected
- allowing the employee a voice in determining expectations
- basing rewards on the achievements of these expectations
• Enhances communication through the process of discussion and
collaboration.
• Focuses attention on appropriate goals and plans, helps identify superior
managerial talent for future promotion, and provides a systematic
management philosophy.
• Facilitates control.
Goal setting occasionally fails because of:
- poor implementation
- lack of top-management support
- overemphasis quantitative goals and plans

CH.9: MANAGING DECISION

41
MAKING AND PROBLEM SLOVING

 The Nature of Decision Making

Decision Making Defined
Decision making: the act of choosing one alternative from among a set of
alternatives.
Decision-making process: recognizing and defining the nature of decision
situation, identifying alternatives, choosing the “best” alternative, and
putting it into practice.
• Effective decision making requires that the decision maker understand the
situation driving the decision.
• An effective decision might be the one that optimizes some set of factors
such as profit, sales, employee welfare, and market share.
• An effective decision making may also be one that minimizes loss,
expenses, or employee turnover.
• Managers make decisions about both problems and opportunities.
• It may take a long time before a manager can know if the right decision
was made.

Types of Decisions
Programmed Decision:
- A decision that is fairly structured or recurs with some frequency (or both).
- Examples: basic operating systems, procedures, and standard
organizational transactions.
Nonprogrammed Decision
- A decision that is relatively unstructured and occurs much less often than a
programmed decision.
- Managers that faced with such decisions must treat each one as unique,
requiring enormous amounts of time, energy, and resources.
- Intuition and experience are major factors in nonprogrammed decisions.
- Examples: decisions about new facilities, new products, labor contracts,
legal issues.

Decision-Making Conditions
Decision Making Under Certainty

42
- State of Certainty: a condition in which the decision maker knows with
reasonable certainty what the alternatives are and what conditions are
associated with each alternative.
- Little ambiguity and relatively low chance of making bad decision.
- The complexity and turbulence of contemporary business world make the
conditions of true certainty are rare.
Decision Making Under Risk
- State of Risk: a condition in which the availability of each alternative and
its potential payoffs and costs are all associated with probability estimates.
- The state of risk is more common decision-making condition.
- When making decision under a state of risk, managers must accurately
determine the probabilities associated with each alternative.
- Past experiences, relevant information, and the advice of others are needed
when making a decision.
- Moderate ambiguity and chances of a bad decision.
The decision
maker faces
conditions of...

Certainty Risk Uncertainty

Level of ambiguity and chances of making a bad

decision
Lower Moderate Higher

Decision Making Under Uncertainty

- State of Uncertainty: a condition in which the decision maker does not
know all the alternatives, the risks associated with each, or the likely
consequences of each alternative.
- Most of the major decision making in contemporary organizations is done
under a state of uncertainty.
- Uncertainty stems from the complexity and dynamism of contemporary
organizations and their environments.
- The emergence of the Internet as a significant force in today’s competitive
environment has increased uncertainty.
- Managers must acquire as much relevant information as possible and
approach situation from a logical and rational perspective.
- Intuition, judgment, and experience play major roles.

 Rational Perspective on Decision Making

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The Classical Perspectives on Decision Making
Classical decision model: a perspective approach to decision making that
tells managers how they should make decisions. It assumes that managers
are logical and rational and that they make decisions that are in the best
interest of the organization.
The decision making process by the classical model:
1- decision makers have complete and perfect
information about the decision situation
and possible alternatives decision best
2- they can effectively eliminate uncertainty to serves the
achieve a decision condition of certainty interest of
3- they evaluate all aspects of the decision the organization
situation logically and rationally

Steps in Rational Decision Making

1- recognizing and defining the decision situation
2- identifying alternatives
3- evaluating alternatives
4- selecting the best alternative
5- implementing the chosen alternative
6- following up and evaluating the results
• Recognizing and Defining the Decision Situation
- Recognizing that the decision is necessary.
- There must be some stimulus to initiate the process.
- The stimulus may occur without any prior warning.
- The stimulus of a decision may be either positive (how to invest surplus
funds) or negative (trim budget because of cost overruns).
- Complete understanding of the problem, its causes, and its relationship to
other factors.
- This understanding comes from careful analysis and thoughtful
consideration.
• Identifying Alternatives
- Developing both obvious, standard alternatives and creative, innovative
alternatives.
- The more important the decision, the more attention is directed toward
developing alternatives.
- Various constraints that often limit managers’ alternatives: legal
restrictions, moral and ethical norms, authority constraints; or constraints

44
imposed by the power and authority of the manager, available technology,
economic consideration, and unofficial social norms.
• Evaluating Alternatives
- evaluate each alternative in term of its feasibility, its satisfactoriness, its
consequences.
- Feasibility: whether an alternative within the realm of probability and
practicality.
Alternatives may not be feasible because of legal barriers, and limited
resources may make other alternatives impractical.
- Satisfactoriness: how well the alternative satisfies the conditions of the
decision situation.
- Consequences: to what extent will a particular alternative influence other
parts of the organization.
• Selecting the Best Alternative
Choosing the best alternative is the real crux of decision making. This can be
done by three ways:
- Choosing the alternative with the highest combined level of feasibility,
satisfactoriness, and affordable consequences.
- Optimization: because a decision is likely to affect several individual or
units, any feasible alternative will probably not maximize all of the
relevant goals.
- Finding multiple acceptable alternatives. Selecting just one alternative and
rejecting all the other might not be necessary.
• Implementing the Chosen Alternative
- In some decision situations, implementation is fairly easy, while it is more
difficult in others.
- Operational plans are useful in implementing alternatives.
- Managers must consider people’s resistance to change when implementing
decisions. The reasons for such resistance include insecurity,
inconvenience, and fear of unknown.
- Managers should anticipate potential resistance at various stages of the
implementation process.
- Even when all alternatives have been evaluated as precisely as possible and
the consequences of each alternative have been weighted, unanticipated
consequences are still likely.

• Following Up and Evaluating the Results

45
- Managers should make sure that the chosen alternative has served its
original purpose.
- If an implemented alternative appears not to be working, the manager can
respond in several ways:
o adopt another previously identified alternative
o begin the process all over again if the situation was not correctly defined
o the original alternative is appropriate but has not yet had time to work or
should be implemented in a different way
- Failure to evaluate decision effectiveness may have serious consequences

 Behavioral Aspects of Decision Making

The Administrative Model
The administrative model describes how decisions are made, and holds that
managers:
1- have incomplete and imperfect information decision may or may
2- are constrained by bounded rationality serve the best interest
3- tend to satisfice when making decision of the organization
Bounded Rationally: a concept suggesting that decision makers are limited
by their values and unconscious reflexes, skills and habits. They are also
limited by less than complete information and knowledge.
It also suggests that, although people try to be rational decision makers, their
rationality has limits.
Satisficing: a concept suggests that decision makers tend to search for
alternatives only until one is found that meets some minimum standard of
sufficiency.
People satisfice for a variety of reasons:
- Managers may ignore their own motives and not continue to search after a
minimally accepted alternative is identified.
- The decision maker may be unable to weigh and evaluate large number of
alternatives and criteria
- Subjective and personal often intervene in decision situation
Because of the inherent imperfection of information, bounded rationally, and
satisficing, the decision made by a manager may or may not be in the best
interest of the organization.

Political Forces in Decision Making

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One major element of politics, coalitions, is especially relevant to decision
making.
Coalitions:
- An informal alliance of individuals or groups formed to achieve a
common goal.
- This common goal is often a preferred decision alternative. For example,
coalitions of stockholders frequently band together to force a board of
directors to make a certain decision.
- The impact of coalitions can be either positive (help managers get the
organization on a path toward effectiveness and profitability) or negative
(strangle well-conceived strategies and decisions).
- Managers must recognize when to use coalitions and how to assess
whether coalitions are acting in the best interest of the organization.
Intuition
- Intuition is an belief about something without conscious consideration.
- Managers sometimes decide to do something because it “feels right”.
This feeling is based on years of experience and practice in making
decisions.
- An inner sense may help managers make an occasional decision without
going through a full-blown rational sequence of steps.
- All managers, especially inexperienced ones should be careful not rely on
intuition too heavily.
Escalation of Commitment
- Escalation of Commitment: a decision maker’s staying with a decision
even when it appears to be wrong.
- Example: when people buy stock in a company, they sometimes refuse to
sell it even after repeated drops in price.
- On the one hand, managers must guard against sticking with an incorrect
decision too long. To do so can bring about financial decline.
On the other hand, managers should not bail out of a seemingly incorrect
decision too soon.
Risk Propensity and Decision Making
- Risk Propensity: the extent to which a decision makes is willing to gamble
when making a decision.
- Some managers are cautious about every decision they make. They try to
adhere to their rational model.

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Such managers are more likely to avoid mistakes, and they infrequently
make decisions that lead to big losses.
- Other managers are extremely aggressive in making decisions and are
willing to take risks. They rely heavily on intuition, reach decisions
quickly, and often risk big investment on their decisions.
These managers are more likely to incur great losses.
Ethics and Decision Making
Ethics are personal beliefs about right and wrong behavior. Ethics are clearly
related to decision making in a number of ways.
Example:
After a careful analysis a manager realizes that her company could save
money by closing her department. But to recommend this course of action
would result in the loss of several jobs, including her own.
Her own ethical standards will clearly shape how she proceeds.

 Group and Team Decision Making on Organizations

Forms of Group and Team Decision Making
o Interacting Groups or Teams
- The most common form of decision-making groups.
- Either an existing group (functional department, regular work teams, or
standing committees) or newly designated group (ad hoc committees,
task forces, or newly constituted work teams) is asked to make a
decision.
- The group or team members talk among themselves, argue, agree, form
internal coalition, and after some period of deliberation they make their
decision.
- Advantage: interactions between people often spark new ideas and
promote understanding
- Disadvantage: political processes can play too big a role.
o Delphi Groups
- A form of group decision making in which a group of solicits input
from a panel of experts who contribute individually, their opinions are
combined and, in effect, averaged.
- The time, expense, and logistics of the Delphi technique rule out its use
for routine, everyday decisions.

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o Nominal Groups
- Unlike the Delphi method, where group members do not see each other,
nominal group members are brought together.
- The members represent a group in name only, they don’t not talk to one
another freely like the members of interacting groups.
- Nominal groups are used most often to generate creative and innovative
alternatives or ideas.
- Steps in conducting a nominal group:
1. the manager assembles a group of knowledgeable people and
outlines the problem to them
2. the group members are asked to write down as many alternatives as
they can think of
3. the members take turns stating their ideas
4. discussion is limited to simple clarification
5. after all alternatives have been listed, more open discussion take
place
6. group members vote by rank-ordering the various alternatives
7. the highest ranking alternative represent the decision of the group

Advantages of Group and Team Decision Making

• More information and knowledge are available. A group or team
represent a broader range of education, experience, and perspective.
• Groups and teams can identify and evaluate more alternatives than can
one person.
• More acceptance of the final decision is likely.
• Enhanced communication of the decision.
• Group may make better decisions than do individuals.

Disadvantages of Group and Team Decision Making

• The process takes additional time and the greater expense entailed. The
increased time stems form interaction and discussion among group
members.
• Undesirable compromise decisions resulting form indecisiveness may
emerge.
• One person may dominates the group to the point where others cannot
make a fill contribution. This dominance may stem from a desire for
power or from naturally dominant personality.
The problem is that what appears to emerge as a group decision may
actually be the decision of one person.

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• Groupthink (a situation occurs when a group desire for consensus and
cohesiveness overwhelms the goal of reaching the best possible decision)
may occur.
Under the influence of groupthink, the group may arrive at decisions that
are not in the best interest of either the group or the organization, but the
members are more concerned about avoiding conflict among themselves.

Managing Group and Team Decision-Making Processes

Managers can do several things to help promote the effectiveness of group
and team decision making:
- Time and cost can be managed by setting a deadline by which the
decision must be made final.
- Dominance can be at least avoided if a special group is formed just
to make the decision.
An astute manager should know who in the organization may try to
dominate and can either avoid putting that person in the group or put
several strong willed people together.
- To avoid groupthink, each member of the group or team should
critically evaluate all alternatives. So that members present divergent
viewpoints, the leader should not make his/her own position know
too early.

50
CH:11 BASIC ELEMENTS OF ORGANIZING
 The Elements of Organizing
Organizing: deciding how best to group organizational activities and
resources.
Organization Structure: the set of elements than can be used to configure
an organization.
There are six basic building blocks that managers can use in
constructing an organization:
designing jobs, grouping jobs, establishing reporting relationships between
jobs, distributing authority among jobs, coordinating activities between jobs,
and differentiating between positions.

 Designing Jobs
- Job Design: the determination of an individual’s work-related
responsibilities.
- Specify what resources are to be operated, how they are to be
operated, and what performance standards are expected.
- Involve defining areas of decision-making responsibility, identifying
goals and expectations, and establishing appropriate indicators of
success.
Job Specialization
- The degree to which the overall task of the organization is broken down
and divided into smaller component parts.
- Adam Smith: an eighteenth century economist , his concepts division of
labor, from which job specialization evolved. He described how a pin
factory used division of labor to improve productivity.
- Job specialization is a normal extension of organizational growth.
Benefits and Limitations of Specialization
Benefits:
• Workers performing small, simple tasks will become very proficient at
that task.
• Transfer time between tasks decreases.
• The more narrowly defined a job is, the easier it is to develop specialized
equipment to assist with that job.
• When an employee who performs a highly specialized job is absent, the
manager is able to train someone new at relatively low cost.

51
Limitations:
• Workers who perform highly specialized jobs may become bored and
dissatisfied.
The job may be so specialized that of offers no challenge or stimulation.
Boredom and monotony set in, absenteeism rises, and the quality of the
of may suffer.
• The anticipated benefits of specialization do not always occur.
Although some degree of specialization is necessary, it should not be
extremes because of the possible negative sequences.

Alternatives to Specialization
To counter the problems associated with specialization, managers have
sought other approaches to job design.
 Job Rotation
- Systematically moving employees from one job to another.
- The jobs do not change but ,instead, workers move from job to job. For
this reason, job rotation has not been very successful in enhancing
employee motivation or satisfaction.
- Jobs that are amenable to rotation tend to be relatively standard and
routine. Workers who are rotated to a new job may be more satisfied at
first, but satisfaction soon wanes.
- Job rotation us most often used today as a training device to improve
worker skills and flexibility.
 Job Enlargement
- Increasing the total number of tasks workers perform.
- developed on the assumption that doing the same basic task over and over
is the primary cause of worker dissatisfaction.
- all workers perform a wide variety of tasks, which reduces the level of job
dissatisfaction.
- although job enlargement does have some positive consequences, they are
often offset by several disadvantages:
1) training costs rise
2) unions have argued that pay should increase because the worker is
doing more tasks
3) in many cases the work remains boring and routine

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 Job Enrichment
- Increasing both the number of tasks the worker does and the control the
worker has over the job.
- It assumes that increasing the range and variety of tasks is not sufficient by
itself to improve employee motivation.
- To implement job enlargement:
1- managers remove some controls from the job
2- delegate more authority to employees
3- structure the work in complete, natural units
- Assign new and challenging tasks continually, thereby increasing
employees’ opportunity for growth and advancement.
- Disadvantages: work systems should be analyzed before enrichment but
this analysis seldom happens, and managers rarely ask for employee
preferences when enriching jobs.

 Job Characteristics Approach

- Suggests that jobs should be diagnosed and improved along five core
dimensions, talking into account both the work system and employee
preferences.
- The five core dimension:
1- skill variety: the number of tasks a person does in a job
2- task identity: the extent to which the worker does a complete or
identifiable portion of the total job
3- task significance: the perceived importance of the task
4- autonomy: the degree for control the worker has over how the work is
performed
5- feedback: the extent to which the worker knows how well the job is
being performed
- The higher a job rates in those dimensions, the more employees will
experience various psychological tastes.
- Experiencing these tastes leads to: high motivation, high-quality
performance, high satisfaction, and low absenteeism and turnover.
- Growth-need strength: a variable affect how the model works the different
people.
 Work Teams
- An arrangement that allows an entire group to design the work system it
will use to perform in interrelated set to tasks.

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- The group decides how jobs will be allocated. For example, the work team
assigns specific tasks to members, monitors and controls its own
performance, and has autonomy over work scheduling.

 Grouping Jobs: Departmentalization

Departmentalization: the process if grouping jobs to some logical
arrangement.
Rationale for Departmentalization
In small organizations the owner-manager can personally oversee everyone
who works there. As an organization grows, personally supervising all the
employees becomes more and more difficult for the owner-manager.
Jobs are grouped according to some plan. The logic embodied in such plan is
the basis for all departmentalization.
Common Bases for Departmentalization
The four mist common bases of departmentalization are: function, product,
customer, and location.
Functional Departmentalization
• Grouping jobs involving the same or similar activities.
• The most common base of departmentalization, especially among smaller
organizations.
• Three primary advantages:
- each department can be staffed by experts in that functional area.
- supervision facilitated because an individual manager needs to be
familiar with only a relatively narrow set of skills.
- coordinating activities inside each department is easier.
• As an organization begins to grow in size, several disadvantages may
emerge:
- decision making tend to be slower and more bureaucratic
- employees may begin to concentrate on too narrowly on their own units
and lose sight of the total organizational system.
- accountability and performance become increasingly difficult to
monitor.
Product Departmentalization
• Grouping activities around product or product groups.
• Most larger businesses adopt this form of departmentalization for
grouping activities at the business or corporate level.
• Advantages:

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- all activities associated with one product or product group can be easily
integrated and coordinated.
- the speed and effectiveness of decision making are enhanced.
- the performance of individual products or product groups can be
assessed more easily and objectively.
• Disadvantages:
- managers in each department may focus on their own product or
product group to the exclusion of the rest of the organization.
- administrative costs rise because each department must have its own
functional specialists for tasks like marketing research and analysis.
Customer Departmentalization
• grouping activities to respond to and interact with specific customers or
customer needs.
• The basic advantage of this approach is that the organization can use
skilled specialists to deal with unique customers or customer groups.
• A large administrative staff is required to integrate the activities of the
various departments.
Location Departmentalization
• Grouping jobs on the basis of defined geographic sites or areas.
• The defined sites or areas may range in size from a hemisphere to only a
few blocks of a large city.
• Transportation, companies, and police departments all use location
departmentalization.
• Advantage: enables the organization to respond easily to unique customer
and environmental characteristics in the various regions.
• Disadvantage: a large number administrative staff may be required if the
organization must keep track of units in scattered locations.

Other Forms of Departmentalization

• Time:
Time is the framework for many organizational activities. Organizations
that use time as a basis for grouping jobs include some hospitals and
many airlines.
Example: operate on three shifts, each shift has a superintendent and its
own functional activities.
• Sequence:
Example: UOB students must register in sequence: 2000 on Monday,
2001 on Tuesday, 2002 on Wednesday.
Other Considerations

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• Departments are often called something entirely different: divisions,
units, sections, and bureaus. The higher we look in an organization, the
more likely we are to find departments referred to division.
• Almost any organization is likely to employ multiple bases of
departmentalization, depending on level.

 Establishing Reporting Relationship

Chain of Command
• Chain of command: clear and distinct lines of authority among all
positions in an organizations.
• The chain of command has tow components:
1) Unity of command: suggests that each person within an organization
must have a clear reporting relationship to one and only one boss.
2) Scalar principle: suggests that there must be a clear and unbroken line
of authority that extends from the lowest to the highest position in the
organization.

Narrow Versus Wide Spans

Span of management (control): the number of people who report to each
manager.
Managers and researchers sought to determine the optimal span of
management. Should it be relatively narrow (with few subordinates per
manager) or relatively wide (with many subordinates) ?
o A. V. Graicunas
- Noted that a manager must deal with three kinds of interactions with and
among subordinates: direct (the manager’s one-to-one relationship with
each subordinate), cross (among the subordinates themselves), and group
(between groups of subordinates).
- His idea demonstrate how complex the relationships become when more
subordinates are added. The important point is that each additional
subordinate adds more complexity that the previous one did.
o Ralph C. Davis
He described two kinds of spans:
1- Operative span: for lower-level managers and should be approach thirty
subordinates
2- Executive span: for middle and top managers and should be limited to
between three and nine subordinates

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o Lyndall F. Urwick
He suggested that an executive span should never exceed six subordinates.

Tall Versus Flat Organizations

What differences does it make whether the organization is tall or flat ?
Narrow span of management:
- Higher level of employee morale and productivity.
- More expensive (because of the larger number of managers involved) and
that it fosters more communication problems (because of the increased
number of people through whom information must pass).
Wide span of management:
- Managers having more administrative responsibility (because there are
fewer managers).
- More supervisory responsibility (because there are more subordinates
reporting to each manager). If these additional responsibilities become
excessive, the flat organization may suffer.
Determining the Appropriate Span
Factors that influence the span of management:
1- competence of supervisors and subordinates (the greater the competence,
the wider the potential span)
2- physical dispersion of subordinates (the greater the dispersion, the
narrower the potential span)
3- extent of nonsupervisory work in manager’s job (the more
nonsupervisory work, the narrower the potential span)
4- degree of required interaction (the less required interaction, the wider the
potential span)
5- extent of standardize procedures (the more procedures, the wider the
potential span)
6- similarity of tasks being supervised (the more similar the tasks, the wider
the potential span)
7- frequency of new problems (the higher the frequency, the narrower the
potential span)
8- preference of supervisors and subordinates

 Distributing Authority

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Authority: power that has been legitimized by the organization.
Distributing authority is a normal outgrowth of increasing organizational
size.
Two specific issues that managers must address when distributing authority
are delegation and decentralization.
The Delegation Process
Delegation: the process by which managers assign a portion of their total
workload to others.
or: the establishment of a pattern of authority between a superior and one or
more subordinates.
Reasons for Delegation
• Enables the manager to get more work done. Subordinates help ease the
manager’s burden by doing major portions of the organization’s work.
• Helps develop subordinates. By participating in decision making and
problem solving, subordinates learn about overall operations and improve
their managerial skills.
Parts of the Delegation Process
1- The manager assigns responsibility, or gives the subordinate a job to do.
The assigned responsibility might range from telling a subordinate to
prepare a repost to placing the person in charge of a task.
2- The individual is given the authority to do the job. The manager may give
the subordinate the power to requisition needed information.
3- The manager establishes the subordinate’s accountability (the
subordinate’s acceptance of an obligation to carry out the task assigned
by the manager)
• The three parts (steps) of the delegation process do not occur
mechanically.
• The major part of a good working relationship between a manager and a
subordinate may be implied rather than stated.
• The manager may know, without being told, that he/she has the necessary
authority to do the job and is accountable to the boss for finishing the job
as agreed.

Problems in Delegation
• Manager may be reluctant to delegate.

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• Managers may worry that subordinates will do too well and pose a threat
to their own advancement.
• Managers may not rust the subordinate to do the job well.
Similarly:
• Subordinates are reluctant to accept delegation.
• Subordinates may be afraid that failure will result in a reprimand.
• Subordinates may also perceive that there are no rewards for accepting
additional responsibility.
There are no quick fixes for these problems:
o Subordinates must understand their own responsibility, authority, and
accountability.
o Managers must come to recognize the value of effective delegation.
o With the passage of time, subordinates should develop their skills and
abilities to the point where they can make substantial contribution to the
organization.
o Managers should recognize that a subordinate’s satisfactory performance
is not a threat to their own career but an accomplishment by both the
subordinate who did the job and the manager who trained the subor-
dinate.

Decentralization and Centralization

Decentralization: the process of systematically delegating power and
authority throughout the organization to middle and lower level managers.
Centralization: the process of systematically retaining power and authority
in the hands of higher level managers.
Decentralized organization: the one in which decision-making power and
authority are delegated as far down the chain of command as possible.
Centralized organization: the one in which decision-making power and
authority are retained at the higher levels of management.
What factors determine an organization’s position on the decentralization-
centralization continuum?
1) The organization’s external environment: the greater is the complexity
and uncertainty of the environment, the greater is the tendency to
decentralize.
2) The history of the organization: firms have a tendency to do what they
have done in the past.

59
3) The nature of the decision being made: the costlier and riskier the
decision, the more pressure there is to centralize.
4) The abilities of lower-level management: if the lower-level managers do
not have the ability to make high-quality decisions, there is likely to be a
high level of centralization.

 Coordinating Activities
Coordination: the process of linking the activities of the various
departments of the organization.
The Need to Coordination
The primary reason for coordination is that departments and work groups are
interdependent (they depend on each other for information and resources to
perform their respective activities).
The greater the interdependence between departments, the more
coordination the organization requires.
There are three major forms of interdependence:
o Pooled interdependence
- Units operate with little interaction, their output is simply pooled at the
organizational level.
- The lowest level of interdependence.
- The units are interdependence to the extent that the final success or
failure of one unit affects the others, but they do not generally interact
on a day-to-day basis.
- Example: Gap clothing stores. Each store is considered a department by
the parent corporation. Each has its own budget, staff, and so forth.
o Sequential interdependence
- The output of one unit becomes the input of another in a sequential
fashion.
- The moderate level of interdependence.
- Example: Nissan. One plant assembles engines and then ships them to a
final assembly site at another plan where the cars are completed.
o Reciprocal interdependence
- Activities flow both ways between units.
- The most complex form.
- If any unit does not do its job properly, the others will all be affected.
- Example: a hotel. The reservations department, front-desk check-in, and
housekeeping are all reciprocally interdependent. The reservations

60
department has to provide front-desk employees with information about
how many guests to expect each day, and housekeeping needs to know
which rooms require priority cleaning.

Structural Coordination Techniques

Some of the most useful devices for maintaining coordination among
interdependent units are the managerial hierarchy, rules and procedures,
liaison roles, task forces, and integrating departments.
• The Managerial Hierarchy
Organization that uses the hierarchy to achieve coordination places one
manager in charge of interdependent departments or units.
• Rules and Procedures
Routine coordination activities can be handled via rules and standard
procedures.
• Liaison Roles
A manager in a liaison role coordinates interdependent units by acting as a
common point of contact.
This individual may not have any formal authority over the groups but
instead simply facilitates the flow of information between units.
• Task Forces
- Created when the need for coordination is acute.
- When interdependence is complex and several units are involved, a single
liaison person may not be sufficient. Instead, a task force might be
assembled by drawing one representative for each group.
- The coordination function is thus spread across several individuals, each of
whom has special information about one of the groups involved.
- When the project is completed, task force members return to their original
positions.
• Integrating Departments
- occasionally used for coordination.
- Similar to task force but is more permanent.
- Has some permanent members as well as members who are assigned
temporarily form units that are particularly in need of coordination.
- Usually has more authority than a task forced and may even be given some
budgetary control by the organization.
In general:

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• When interdependence is pooled or simply sequential, the managerial
hierarchy or rules and procedures are often sufficient.
• When more complex forms of sequential interdependence or simpler
forms of reciprocal interdependence exists, liaisons or tasks forces or
integrating departments are needed.
• When reciprocal interdependence us complex, task forces or integrating
departments are needed.

 Differentiating Between Positions

Line position: a position in the direct chain of command that is responsible
for the achievement of an organization’s goals.
Staff position: a position intended to provide expertise, advice, and support
for line positions,
Differences Between Line and Staff
 Purpose
Line managers work directly toward organizational goals, whereas staff
managers advise and assist.
 Authority
Line authority is formal or legitimate authority created by the organizational
hierarchy.
Staff authority is less concrete and may take a variety of forms:
o Advise authority
Line manager can choose whether to seek or to avoid input from the staff,
even when advice is sought, the manager might still choose to ignore it.
o Compulsory advise authority
Line manager must listen to the advice but can choose to heed it or ignore
it.
o Functional authority
Formal or legitimate authority over activities related to the staff
member’s specialty. Perhaps it is most important form of staff authority.
o Conferring functional authority
The most effective way to use staff positions because the organization
can take advantage of specialized expertise while also maintaining chain
of command.

Administrative Intensity

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Administrative intensity is the degree to which managerial positions are
concentrated in staff positions.
An organization with high administrative intensity is one with many staff
positions relative to the number of line positions, low administrative
intensity reflects relatively more line positions.
Organizations would like to devote most of their human resource investment
on line managers because they contribute to the organization’s basic goals.
A surplus of staff positions represents a drain on an organization’s cash and
inefficient use of resources.

CH.16: MANAGING EMPLOYEE

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MOTIVATION AND PERFORMANCE
 The Nature of Motivation
Motivation: the set of forces that cause people to behave in certain ways.
The Importance of Motivation in the Workplace
• Individual performance is determined by three things: motivation (the
desire to do the job), ability (the capability to do the job), and the work
environment (the resources needed to do the job).
• If an employee lacks ability, the manager can provide training or replace
the worker. If there is a resource problem, the manager can correct it. But
if motivation is the problem, the task for the manager is more
challenging.
• Individual behavior is a complex phenomenon, thus motivation is
important because of its significance as a determinant of performance and
because of its intangible character.

The Motivation Framework:

1) Need 2) Search for 3) Choice

or ways of
behavior to
deficiency to satisfy need
satisfy need

5) Determination of
future needs and 4) Evaluation
search/choice for of
need satisfaction
satisfaction

Example:
1) A worker feels that she is underpaid, she experiences a need for more
income.
2) Working harder to try to earn a raise or seeking a new job.
3) Chooses to work harder and put in more hours for a reasonable period of
time.
4) Evaluate her success.
5) If her hard work resulted in a pay raise, she will continue to work hard.
But if no raise has been provided, she is likely to try another option.

Historical Perspectives on Motivation

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The Traditional Approach
- This approach is represented best by the work of Fredrik Taylor, who
believed that managers knew more about the job being performed than
did workers, and he assumed that economic gains was the primary thing
that motivated everyone.
- This approach also assumes that work is inherently unpleasant for most
people and that money they earn is more important to employees than the
nature of the work they are performing.
- People could be expected to perform any kind of job if they were paid
enough.
- This approach took a narrow view of the role of monetary compensation
and also failed to consider other motivational factors.
The Human Relations Approach
- Emphasized the role of social processes in the workplace.
- Their basic assumptions were that employees want to feel useful and
important, that employees have strong social needs, and that these needs
are more important than money in motivating employees.
- This approach advises managers to make workers feel important and
allow them a modicum of self-direction and self-control in carrying out
routine activities.
- The illusion of involvement and importance are expected to satisfy
worker’s basic social needs and result in higher motivation to perform.
The Human Resource Approach
- It assumes that the contribution and participation of individuals are
valuable to both, the individuals themselves and the organizations.
- It also assumes that people want to contribute and are able to make
genuine contributions.
- Management’s tasks are to encourage participation and to create a work
environment that makes full use of the human recourses available.

 Content Perspectives on Motivation

Content perspectives: approaches to motivation that try to answer the
question, “What factors in the workplace motivate people?”
The Need Hierarchy Approach
Need hierarchies assume that people have different needs that can be
arranged in a hierarchy of importance. The two best know are Maslow’s
hierarchy of needs and the ERG theory.
i. Maslow’s Hierarchy of Needs

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Suggests that people must satisfy five groups of needs in the following
order: physiological, security, belongingness, esteem, and self actualization.
NEEDS
General Examples Organizational Examples

Self- Challenging
Achievement actualization job

Job
Status Esteem
title

Friends
Friendship Belongingness
at work

Pension
Stability Security
plan

Base
Food Physiology
salary

o Physiological Needs
Things like food, sex, and air that represent basic issues of survival and
biological function. In organizations, these needs are adequate wages and
the work environment itself (restrooms, adequate lighting, comfortable
temperatures, and ventilation).
o Security Needs
The need for a secure physical and emotional environment. examples
include the desire for housing and clothing. In the workplace these needs
can be satisfied by job continuity, a grievance system, and an adequate
insurance and retirement benefits package.
o Belongingness Needs
Relate to social processes. They include the need for love and affection
and the need to be accepted by one’s peers. These need are satisfied on
the job by friendships. Managers can help satisfy these needs by allowing
social interaction and by making employees feel like a part pf a team.
o Esteems Needs
Comprise two different sets of needs: the need for a positive self-image
and self-respect and the need for recognition and respect from others. A
manager can address these needs by providing a variety of extrinsic
symbols of accomplishment such as job titles, comfortable offices, and

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similar rewards. At a more intrinsic level, the manager can provide
challenging job assignment and opportunities for the employee.
o Self-Actualization Needs
The need of realizing one’s potential for continued growth and individual
development. Perhaps they are the most difficult for a manager to
address. These needs must be entirely from within the individual. But a
manger can help promoting a culture wherein self-actualization is
possible. Fro example, a manager could give employees a chance to
participate in making decisions about their work and opportunity to learn
and use new information, skills, and capabilities.
Maslow’s concept of the need hierarchy has a certain intuitive logic and has
been accepted by many managers.
But research has reveled certain shortcomings and defects in the theory:
- the five levels of needs are not always present
- the order of the levels is not always the same as postulated by Maslow
- people from different cultures are likely to have different need categories
and hierarchies

ii. The ERG Theory

• Suggests that people’s needs are grouped into three possibly overlapping
categories: existence, relatedness, and growth.
• This theory collapses the need hierarchy developed by Maslow into its
three levels:
- Existence needs: the physiological and security needs.
- Relatedness needs: how people relate to their social environment. In
Maslow’s hierarchy they would encompass both the need to belong and
earn esteem of others.
- Growth needs: the highest level in the ERG schema, include the needs
for self-esteem and self-actualization.
• There are two main differences between Maslow’s hierarchy and the
ERG theory:
- The ERG theory suggests that more than one level of need can cause
motivation as the same time.
- The ERG theory has what has been called a frustration-regression
element. Thus, if needs remain unsatisfied, the individual will become
frustrated- regress to a lower level, and begin to pursue those needs
again.
The Two-Factor Theory

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• Developed by Fredrick Herzberg.
• Suggests that people’s satisfaction and dissatisfaction are influenced by
two independent sets of factors: motivation factors and hygiene factors.
• Motivational Factors: factors that influence the satisfaction continuum
and they are related specifically to the work content.
• Hygiene Factors: factors that presumed to cause dissatisfaction and they
are related to the work environment.
• The traditional view of job satisfaction: assumed that satisfaction and
dissatisfaction are at opposite ends of a single continuum. People might
be satisfied, dissatisfied, or somewhere in between.
• The two-factor theory by Herzberg: identified two different dimensions
altogether. One ranging from satisfaction to no satisfaction and the other
ranging from dissatisfaction to no dissatisfaction.

Motivation Factors: Hygiene Factors:

• Achievement • Supervisors
• Recognition • Working conditions
• The work itself • Interpersonal relations
• Responsibility • Pay and security
· Advancement and growth · Company policies and administration

Satisfaction No satisfaction Dissatisfaction No dissatisfaction

• Herzberg argues that there are two stages in the process of motivating
employees:
1) Managers must ensure that the hygiene factors are not deficient.
At this stage managers do not stimulate motivation ensure that
employees are “not dissatisfied”.
2) Giving employees the opportunity to experience motivation factors.
The result is predicted to be a high level of satisfaction and
motivation.
• He also argues that jobs should be redesigned to provide higher levels of
the motivation factors.
• The criticisms (limitations):
- The findings in Herzberg’s initial interviews are subject to different
explanations.
- His sample was not representative of the general population.

Individual Human Needs

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The three most important individual needs are achievement, affiliation, and
power.
o Need for Achievement:
The desire to accomplish a goal or task more effectively than in the past.
People with high need of achievement have a desire to assume personal
responsibility, a tendency to set moderately difficult goals, a desire for
specific and immediate feedback, and a preoccupation with their task.
o Need for Affiliation:
The desire for human companionship and acceptance.
People with strong need for affiliation are likely to prefer a job that entails a
lot of social interaction and offers opportunities to make friends.
o Need for Power:
The desire to be influential in a group and control one’s environment.
People with strong need for power are likely to superior performers, have
good attendance records, and occupy supervisory positions.

 Process Perspectives on Motivation

Process perspectives: approaches to motivation that focus on why people
choose certain behavioral options to satisfy their needs and how they
evaluate their satisfaction after they have attained these goals.
Expectancy Theory
• Suggests that motivation depends on two things: how much we want
something and how likely we think we are to get it.
• It rests on four basic assumptions:
1) behavior is determined by a combination of forces in the individual
and in the environment.
2) people make decisions about their own behavior in organizations.
3) different people have different types of needs, desires, and goals.
4) people make choices from among alternative plans of behavior
based on their perceptions of the extent to which a given behavior
will lead to desired outcomes.

• The expectancy model of motivation:

Outcome Valence

Environment Outcome Valence

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Motivation Effort Performance Outcome Valence

Ability Outcome Valence

suggests that motivation leads to effort, combined with employee ability and
environmental factors, result in performance. Performance, in turn, leads to
various outcomes, each of which has an associated value called valence.

Effort-to-Performance Expectancy
The individual’s perception of the probability that his/her effort will lead to
high performance.
- when the individual believes that effort will lead to high performance,
expectancy will be strong (a probability close to 1.00).
- when the individual believes that effort and performance are unrelated, the
effort-to-performance expectancy is very weak (a probability close to
0.00).
- when the individual believes that effort is somewhat but not strongly
related to performance carries with a moderate expectancy (a probability
somewhere between 0.00 and 1.00).

Performance-to-Outcome Expectancy
The individual’s perception that her/his performance will lead to specific
outcome.
- when the individual believes that performance will lead to high outcome
(for example: a pay raise), the performance-to-outcome expectancy is high
(a probability close to 1.00).
- when the individual believes that high performance may lead to a pay
raise, he has a moderate expectancy (a probability between 1.00 and 0.00).
- when the individual believes that performance has no relationship with
rewards, he has low performance-to-outcome expectancy (a probability
close to 0.00).

Outcomes and Valences

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Outcomes: consequences of behaviors in an organizational setting, usually
rewards.
Example: outcomes for a high performer may be bigger pay raises, faster
promotions, and more praise from the boss.
Valence: an index of how much an individual values a particular outcome, it
is the attractiveness of the outcome to the individual.
If:
- the individual wants the outcome: the valence is positive
- the individual does not want the outcome: the valence is negative
- the individual is indifferent to the outcome: the valence is zero
For motivated behavior to occur, three conditions must be met:
1- The effort-to-performance expectancy must be greater than zero (the
individual must believe that if effort is expanded, high performance will
result).
2- The performance-to-outcome expectancy must be greater than zero (the
individual must believe that if high performance is achieved, certain
outcomes will follow).
3- The sum of the valences for the outcome must be greater than zero.
One or more outcomes may have negative valences, but they offset by
greater absolute value of the positive valences of other outcomes.

The porter-Lawler Extension

The human relations assumed that employee satisfaction causes high
performance.
Porter and Lawler suggest that there may be a relationship between
satisfaction and performance, but that it goes in the opposite direction, that is
high performance may lead to high satisfaction.
Performance may result in rewards for an individual. Some of these rewards
are extrinsic (such as pay and promotions), others are intrinsic (such as self-
esteem and accomplishment). The individual evaluate the equity of the
rewards relative to the effort expanded and the level of performance
attained. If the rewards are perceived to be equitable, the individual is
satisfied.

Equity Theory

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Suggests that people are motivated to seek social equity in the rewards they
receive for performance.
Equity: an individual’s belief that the treatment he/she receives is fair
relative to the treatment received by others.
 Outcomes from the job include: par, recognition, promotions, social
relationships, and intrinsic rewards.
 Inputs to the job include: time, experience, effort, education, and loyalty.
The equity theory suggests that people view their outcomes and inputs as a
ratio and then compare it to the ratio of someone else. The process of
comparison looks like this:
Outcomes (self) = Outcomes (other)
Inputs (self) Inputs (other)
 Both the formula and the ratios and the comparison between them are
very subjective and are based on individual perceptions.
 As a result of comparison, three conditions may result: the individual
may feel equitably rewarded, underrewarded, or overrewarded.

Goal-Setting Theory
The goal-setting theory of motivation assumes that behavior is a result of
conscious goals and intentions.
Two specific goal characteristics –goals difficulty and goal specificity- are
expected to shape performance.
o Goal Difficulty
- It is the extent to which a goal is challenging and requires effort.
- If people work to achieve goals, it is reasonable to assume they will work
harder to achieve more difficult goals.
- Goal must not be difficult that is unattainable.
o Goal Specificity
- It is the clarity and precision of the goal.
- Some goals, such as those involving costs, output, profitability, and
growth, are readily amenable to specificity.
- Other goals, such as improving employee job satisfaction, morale,
company image and reputation, ethics and socially responsible behavior,
may be much harder to state in specific terms.

The Expanded Goal-Setting Theory of Motivation:

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• Suggests that goal-directed effort is a function of four goal attributes:
difficulty and specificity (as already discussed), and acceptance (the
extent to which a person accepts a goal as his/her own) and commitment
(the extent to which a person is personally interested in reaching the
goal).
• Factors that can foster goal acceptance and commitment include:
participating in the goal-setting process, making goals challenging but
realistic, and behaving that goal achievement will lead to valued rewards.
• The goal-directed effort, organizational support, and individual abilities
and traits determine actual performance.
• Organizational support is whatever the organization does to help
performance. Positive support might mean making available adequate
personnel and a sufficient supply of raw materials, negative support
might mean failing to fix damaged equipment.
• Individual abilities and traits are the skills and other personal
characteristics necessary for doing the job.
• As a result of performance, a person receives various intrinsic and
extrinsic rewards, which in turn influence satisfaction.

Goal Goal Organizational Intrinsic

difficulty acceptance support Rewards

Goal-Directed Performance Satisfaction

Effort

Goal Goal Individual Extrinsic

specificity commitment abilities Rewards
and traits

 Reinforcement Perspectives on Motivation

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Reinforcement theory: approach to motivation that explains the role of
rewards as they cause behavior to change or remain the same over time.
It argues that behavior results in rewarding consequences is likely to be
repeated, whereas behavior that results in punishing consequences is less
likely to be repeated.

Kinds of Reinforcement in Organizations

o Positive Reinforcement
- Strengthening behavior with rewards or positive outcomes after a
desired behavior is performed.
- Positive reinforcers in organizations include pay rises, promotions, and
rewards.
o Avoidance
- Strengthening behavior by avoiding unpleasant consequences that
would result if the behavior were not performed.
- Example: an employee may come to work on time to avoid a
reprimand.
o Punishment
- Weaken undesired behavior by using negative outcomes or unpleasant
consequences when the behavior is performed.
- The logic is that the unpleasant consequence will reduce the likelihood
that the undesired behavior will performed again.
- Because of the counterproductive side effects of punishment, it is often
advisable to use other kinds of reinforcement if possible.
o Extinction
- Weaken undesired behavior by simply ignoring or not reinforcing that
behavior.
- Especially used with behaviors that have previously been rewarded.
- Example: when an employee tells jokes and the boss laughs, the
laughter reinforces the behavior and the employee may continue telling
jokes. By simply ignoring this behavior and not reinforcing it, the boss
can cause the behavior to become extinct.

Providing Reinforcement in Organizations

There are various strategies possible for providing reinforcement.

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o Fixed-Interval Schedules
- Providing reinforcement at fixed intervals of time, regardless of
behavior.
- Provides the least incentive for good work because employees know
they will rewarded regularly regardless of their behavior.
- Example: regular monthly pay checks.
o Variable-Interval Schedules
- Also uses time as a basis for reinforcement.
- Providing reinforcement at varying intervals of time.
- Example: occasional visits by the supervisor.
- When the employees do not know when the boss will drop by, they tend
to maintain a reasonably high level of effort all the time.
o Fixed-Ratio Schedules
- Providing reinforcement after a fixed number of behaviors, regardless
of the time that elapses between behaviors.
- It results in high level of effort.
- Example: a bonus for every fifth sale.
- Motivation will be high because each sale gets the person closer to the
next bonus.
o Variable-Ratio Schedules
- Providing reinforcement after varying numbers of behaviors are
performed.
- It is the most powerful schedule in terms of maintaining desired
behaviors.
- The employee is motivated to increase the frequency of the desired
behavior because each performance increases the probability of
receiving a reward.
- It is difficult to use for formal rewards because it would be too
complicated to keep track of who rewarded and when.
- Example: the use of compliments by a supervisor on an irregular basis.
Behavior modification or OB Mod:
Method for applying the basic elements of reinforcement theory in an
organizational setting.
It starts by specifying behaviors to be increased or decreased. These target
behaviors are then tied to specific forms of reinforcement.
CH.17: MANAGING LEADERSHIP
AND INFLUENCE PROCESSES

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 The Nature of Leadership
The Meaning of Leadership
Leadership:
- As a process: the use of noncoercive influence to shape the group’s or
organization’s goals, motivate behavior toward the achievement of those
goals, and help define group or organization culture.
- As a property: the set of characteristics attributed to individuals who are
perceived to be leaders.
Leaders: people who can influence the behaviors of others without having
to rely on force; those accepted by others as leaders.

Leadership Versus Management

- Leadership and management are related, but they are not the same.
- Leadership is necessary to create change, and management is necessary to
achieve orderly results.
- Management in conjunction with leadership can produce orderly change,
and leadership in conjunction with management can keep the organization
properly aligned with its environment.

Power and Leadership

Power: the ability to affect the behavior of others.
In organizational settings, there are five kinds of power: legitimate, reward,
coercive, referent, and expert.
o Legitimate Power
- Power granted through the organizational hierarchy. It is the power
accorded people occupying particular positions as defined by the
organization.
- All managers have legitimate power over their subordinates.
- A manager can assign tasks to a subordinate, and a subordinate who
refuses to do them can be reprimanded or even fired.
- The legitimate power does not make someone a leader. Some
subordinates follow only strict orders. If they asked to do something not
in their job, they refuse or do a poor job.
- The manager of such employees is exercising authority but not
leadership.
o Reward Power

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- The power to give or withhold rewards, such as salary increases,
bonuses, promotion recommendations, praise, and interesting job
assignments.
- The greater the number of rewards a manager controls and the more
important the rewards are to subordinates, the greater is the manager’s
reward power.
- If the subordinate sees as valuable only the formal organizational
rewards provided by the manager, then he/she is not a leader.
- If the subordinate wants and appreciates the manager’s informal
rewards, then the manager is exercising leadership.
o Coercive Power
- The power to force compliance by means of psychological, emotional.
or physical threat.
- It was relatively common in the past, but in today’s organizations
coercion is limited to verbal and written reprimands, disciplinary
layoffs, fines, demotion, and termination.
- Some managers use verbal coercion abuse, humiliation, and
psychological coercion in an attempt to manipulate subordinates.
- The more punitive the elements under a manager’s control and the more
important they are to subordinates, the more coercive power the
manager possesses.
- The more a manager uses coercive power, the more likely he is to
provoke resentment and hostility and the less likely he is to be a leader.
o Referent Power
- The personal power that accrues to someone based on identification,
imitation, loyalty, or charisma.
- Followers may react favorably because they identify in some way with
a leader, who may be like them in personality, background, or attitudes.
- Followers might choose to imitate a leader with referent power by
wearing the same kinds of clothes, working the same hours, or
espousing the same management philosophy.
- Referent power may take the form of charisma (an intangible attribute
of the leader that inspires loyalty and enthusiasm).

o Expert Power
- The personal power that accrues to someone based on the information
or expertise that they possess.

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- A manager who knows how to interact with an eccentric but important
customers and scientist who is capable of achieving an important
technical breakthrough that no other company has demand of, both have
expert power over anyone who needs that information.
- The more important the information and the fewer the people who have
access to it, the greater is the degree of expert power.
- People who are both leaders and managers tend to have a lot of expert
power.

Using Power
A manager or leader can use power in several methods:
• The Legitimate Request
- It is based on the legitimate power.
- The manager requests that the subordinate comply because the
subordinate recognizes that the organization has given the manager the
right to make the request.
- Most day-to-day interactions between manager and subordinate are of
this type.
• Instrumental Compliance
- it is based in the reinforcement theory of motivation.
- A subordinate complies to get the reward the manager controls.
- Example: a manager asks a subordinate to work extra hours on the
weekend, which is outside the range of his normal duties. The
subordinate complies and as a result reaps a bonus from the manager.
The next time the subordinate is asked to perform a similar activity, he
will recognize that compliance will be instrumental in his getting more
reward.
• Coercion
Used by a manager when he suggests or implies that the subordinate will
be punished, fired, or reprimanded if he does not do something.
• Rational Persuasion
- the manager can convince the subordinate that compliance is in the
subordinate’s best interest.
- It is like reward power but except that the manager does not really
control the reward.
• Personal Identification

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- The manager recognizes that he has referent power over a subordinate
and can shape the behavior of that subordinate by engaging in desired
behaviors.
- The manager consciously becomes a model for the subordinate and
exploits personal identification.
• Inspirational Appeal
- A manager induce a subordinate to do something consistent with a set
of higher ideals or values.
- Referent power plays a role in determining the extent to which an
inspirational appeal is successful because its effectiveness depends at
least in part on the persuasive abilities of the leader.
- Example: a plea for loyalty.
• Information Distortion
- The manager withhold or distort information to influence subordinate’s
behavior.
- This use of power is dangerous. It may be unethical, and if the
subordinates find out that the manager has deliberately misled them,
they will lose their confidence and trust in that manager’s leadership.
- Example: a manager allow everyone to participate in choosing a new
group member, but finds one individual whom she really prefers, she
withhold some of the applicants so that the desired member is selected.

 The Search of Leadership Traits

The trait approach to leadership assumed that some basic trait or set of traits
differentiated leaders from nonleaders.

 Leadership Behaviors
The leadership-behavior approach to leadership assumed that the behavior of
effective leaders was somehow different from the behavior of nonleaders.
Michigan Studies
A research at the University of Michigan, led by Rensis Likert. Based on
extensive interviews with both leaders and (managers) and followers
(subordinates), this research identified two basic forms of leader behavior:
job centered and employee centered.
Job centered leader behavior: The behavior of leaders who pay close
attention to the job and work procedures involved with that job.

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Employee centered leader behavior: The behavior of leaders who develop
cohesive work groups and ensure employee satisfaction.
Likert argued that employee-centered leader behavior is more effective.

Ohio State Studies

The extensive questionnaire surveys conducted during Ohio State studies
suggested that there are two basic leader behaviors or styles: initiating-
structure behavior and consideration behavior.
Initiating-structure behavior: The behavior of leaders who define the
leader-subordinate role so that everyone knows what is expected,
establishing formal lines of communication, and determine how tasks will be
performed.
Consideration behavior: The behavior of leaders who concern for
subordinates and attempt to establish a warm, friendly, and supportive
climate.
The behaviors identified at Ohio State are similar to those described at
Michigan, but there are important differences. One major difference is that
the Ohio State researchers did not interpret leader behavior as being one-
dimensional. Each behavior was assumed to be independent of the other,
which means, a leader could exhibit varying levels of initiating structure and
at the same time varying levels of consideration.

Managerial Grid
The managerial grid provides a means for evaluating leadership styles and
then training managers to move toward an ideal style of behavior.
Concern of production: the part of the Managerial Grid that deals with the
job and production aspects of leader behavior.
Concern of people: the part of the Managerial Grid that deals with the
people aspects of leader behavior.
There are five extremes of managerial behavior:
o The 1,1 Manager (Impoverished Management)
Exhibits minimal concern of both production and people.
o The 9,1 Manager (Authority-Obedience)
Highly concerned about production but exhibits little concern for people.
o The 1,9 Manager (Country Club Management)
It has the exact opposite concerns from the 9,1.

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o The 5,5 Manager (Organization Management)
Maintains adequate concern for both people and production.
o The 9,9 Manager (Team Management)
Exhibits maximum concern for both people and production.
High

9 1,9 9,9
Team Management
Country Club Management Work accomplishment is
8 Thoughtful attention to the from committed people;
C needs of people for satisfying interdependence through
O relationships leads to a a “common stake” in
7 organization purpose
N comfortable, friendly
C organization atmosphere leads to relationships
E 6 and work tempo. of trust and respect.
R
N Middle of the Road 5,5
5 Management
O Adequate organization performance is
F 4 possible through balancing the necessity
to get out work with maintaining morale
P of people at a satisfactory level. Authority-Compliance
E 3
Efficiency in operations
O
results from arranging
P 2 Impoverished Management conditions of work in
L Exertion of minimum effort such a way that
E
1 1,1 to get required work done human elements 9,1
is appropriate to sustain interfere to a
organization membership. minimum degree.
0
Low 1 2 3 4 5 6 7 8 9
Low CONCERN OF PRODUCTION High

According to this approach, the ideal style of managerial behavior is 9,9.

 Situational Approaches to Leadership

Situational models assume that appropriate leader behavior or style varies
from one situation to another and depends on situational factors.
The goal of a situational theory is to identify key situational factors and to
specify how they interact to determine appropriate level behavior.

Tannenbaum and Schmidt’s Leadership Model

- An important model laid the foundation for the major situational theories.
- It was developed by Robert Tannenbaum and Warren Schmidt, and
proposed a continuum of leadership behavior.
- Besides “ boss-centered” behavior and “subordinate-centered” behavior,
they identified several intermediate behaviors that a manager might
consider.

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- The continuum of behavior moves from the one extreme of having the
manager make the decision alone to the other extreme of having the
employees make the decision with minimal guidance.
- Each point of the continuum is influenced by characteristics of the
manager, subordinates, and the situation.
- Managerial characteristics include the manager’s value system, confidence
in subordinates, personal inclinations, and feelings of security.
- Subordinate characteristics include the subordinate’s need for
independence, readiness to assume responsibility, tolerance for ambiguity,
interest in the problem, and experience.
- Situational characteristics include the type of the organization, group
effectiveness, the problem itself, and time pressures.

Boss-centered leadership

Use of Authority
by Manager
Area of Freedom
for Subordinates

Subordinate-centered leadership

Manager makes Manager presents Manager presents Manager

decision and ideas and invites problem, gets permits
announces it questions suggestions, subordinates to
makes decision function within
limits defined by
Manager Manager presents Manager defines superior
“sells” tentative decision to make
decision subject to change decision
Limits, asks
group

LPC Theory
- LPC theory: a theory of leadership suggests that the appropriate style of
leadership varies with situational favorableness.
- developed by Fred Fiedler and was the first true situational theory of
leadership.
- Fiedler identified two styles of leadership: task-oriented and relationship
oriented.
- He measures leader style by mean of a questionnaire called the least
preferred coworker (LPC) (the measuring scale that asks leaders to
describe the person with whom he/she is able to work least well).

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- To use the measure, a manager or leader fills in a set of sixteen scales
anchored at each end by a positive or negative adjective. A high total score
is assumed to reflect a relationship and a low score is assumed to reflect a
task orientation on the part of the leader.
- Researchers disagree about the validity of the LPC measure.

Favorableness of the Situation:

The underlying assumption of situational models of leadership is that
appropriate leader behavior varies from one situation to another. According
to Fiedler, the key situational factor is the favorableness of the situation from
the leader’s point of view. This factor is determined by:
o Leader-Members Relationship
It is the nature of the relationship between the leader and the work group. If
the leader and the group have high degree of mutual trust, respect, and
confidence, and if they like one another, relations are good. If there is little
trust, respect, or confidence, and if they do not like each other, relations are
poor. Good relations are more favorable.
o Task Structure
It is the degree to which the group’s tasks is well defined. The task is
structured when is it routine, easily understood, and unambiguous and when
the group has standard procedures. An unstructured task is nonroutine,
ambiguous, complex, and with no standard procedures. High structured task
is more favorable for the leader.
o Position Power
Is the power vested in the leader’s position. If the leader has the power to
assign work and to reward an punish employees, position power is strong.
But if the leader must get job assignments approved by someone else and
does not administer rewards and punishment, position power is weak. Strong
position power is preferable.

Favorableness and Leader Style:

Fiedler and his associates conducted numerous studies linking the
favorableness of various situations to leader style and the effectiveness of
the group.
When the situation is most and least favorable, Fiedler has found that a task-
oriented leader is most effective. When the situation is only moderately
favorable, a relationship-oriented leader is predicted to be most effective.

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Contingency Factors Situations

Leader-member relations Good Bad

Task structure High Low High Low

Position power Strong Weak Strong Weak Strong Weak Strong Weak

Favorableness Most favorable Moderately favorable Most unfavorable

of Situation

Appropriate Relationship-oriented
Task-oriented Task-oriented
Leader Behavior

Flexibility of Leader Style:

Fiedler argued that leader style is essentially fixed and cannot be changed:
leaders cannot change their behavior to fit a particular situation because it is
linked to their particular personality traits. Thus, when a leader’s style and
the situation do not match, the situation should be changed to fit the leader’s
style.
Example: when leader-member relations are good, task structure is low, and
position power is weak, the leader style most likely to be effective is
relationship-oriented. If the leader is task-oriented, a mismatch exists.
According to Fiedler, the leader can make the elements of the situation more
congruent by structuring the task and increasing power.
Fiedler contingency theory has been attacked on the grounds that:
- it is not always supported by research
- his findings are subject to interpretations
- the LPC measure lacks validity
- his assumption about the inflexibility of leader behavior are unrealistic

Path-Goal Theory
A theory of leadership suggests that the primary functions of a leader are to
make valued or desired rewards available in the workplace and to clarify for
the subordinate the kinds of behavior that will lead to goal accomplishment
and valued rewards.
Leader Behavior:
The path-goal theory identifies four kinds of leader behavior:

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o Directive leader behavior:
letting the subordinates know what is expected of them, giving guidance
and direction, and scheduling work.
o Supportive leader behavior:
being friendly and approachable, showing concern of subordinate
welfare, and treating subordinates as equal.
o Participative leader behavior:
consulting subordinates, soliciting suggestions, and allowing
participation in decision making.
o Achievement-oriented leader behavior:
setting challenging goals, expecting subordinates to perform at high
levels, encouraging subordinates, and showing confidence in
subordinates’ abilities.
In contrast to Fiedler’s theory, path-goal theory assumes that leaders can
change their style or behavior to meet the demands of a particular situation.

Situational Factors:
Path-goal theory focuses on the situational factors of the personal
characteristics of subordinates and environmental characteristics of the
workplace.
• Personal characteristics:
- The subordinates’ perception of their own ability
If people perceive that they are lacking in ability, they may prefer
directive leadership to help them understand path-goal relationships
better.
If they perceive themselves to have a lot of ability, employees may
resent directive leadership.
- The subordinate’s locus of control
Locus of control is a personality trait. People who have an internal
locus of control believe that what happens to them is a function of their
own efforts and behavior. Those who have an external locus of control
assume that fate, luck, or “the system” determines what happens to
them.
A person with an internal locus of control may prefer participative
leadership. Whereas person with an external locus of control may prefer
directive leadership.

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• Environmental characteristics:
- The task structure
When structure is high, directive leadership is less effective than when
structure is low. Subordinates do not usually need their boss to tell them
continually how to do an extremely routine job.
- The formal authority system
The higher the degree of formality, the less directive is the leader
behavior that will be accepted by subordinates.
- The nature of the work group
When the work group provides the employee with social support and
satisfaction, supportive leader behavior is less critical. When social
support and satisfaction cannot be derived from the group, the worker
may look to the leader for his support.

Subordinates” Leader behaviors Environmental

personal • Directive characteristics
characteristics • Supportive • Task structure
• Perceived ability • Participative • Work group
• Locus of control • Achievement-
• oriented

Subordinates’ motivation to perform

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CH. 20: BASIC ELEMENTS OF CONTROL
 The Nature of Control in Organizations
Control: the regulation of organizational activities so that some targeted
element of performance remains within acceptable limits.
Without this regulation, organizations have no indication of how well they
perform in relation to their goals.
 Control keeps the organization moving in the proper direction.
 It compares where the organization is in terms of performance to where it
is supposed to be.
 Control provides an organization with a mechanism for adjusting its
course if performance falls outside acceptable boundaries.
 An organization without effective control procedures is not likely to
reach its goals, or if it does reach them, to know that it has.

The Purpose of Control

• Adapting to Environmental Change
- In today’s complex and turbulent business environment, all
organizations must contend with change.
- Between the time a goal is established and the time it is reached, many
events in the organization and its environment can disrupt movement
toward the goal, or even to change the goal itself.
- A properly designed control system can help managers anticipate,
monitor, and respond to changing circumstances.
- Improperly designed system can result in organizational performance
that falls far below acceptable levels.
• Limiting the Accumulation of Error
- Small mistakes and errors do not often inflict serious damage to the
financial health of an organization.
- Over time, small errors may accumulate and become very serious.
- Example: Fleetwood Enterprises, a large manufacture of recreational
vehicles, has suffered because its managers did not adequately address
several small accounting and production problems years ago. These
small problems have now grown into large ones, and the firm is
struggling with how to correct them.

• Coping with Organizational Complexity

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A business that produces many products from myriad raw materials and
has a large market area, a complicated organization design, and many
competitors needs a sophisticated system to maintain adequate control.
• Minimizing Costs
When it is participated effectively, control can help reduce costs and
boost output.
Effective control system can eliminate waste, lower labor costs, and
improve output per unit of input.

Types of Control
Organizations practice control in several different areas and at different
levels, and the responsibility for managing control is widespread.
Areas of Control
Most organizations define areas of control in terms of the four basic types of
resources they use: physical, human, information, and financial resources.
- Control of physical resources includes inventory management (stocking
neither too few nor too many units in inventory), quality control
(maintaining appropriate levels of output quality), and equipment control
(supplying the necessary facilities and machinery).
- Control of human resources includes selection and placement, training and
development, performance appraisal, and compensation.
- Control of information resources includes sales and marketing forecasting,
environmental analysis, public relations, production scheduling, and
economic forecasting.
- Control of financial resources involves managing the organization’s debt
so that it does not become excessive, ensuring that the firm always has
enough cash on hand to meet its obligations but that it does not have
excess cash in checking account, and that receivables are collected.

* The control of financial resources is the most important area because

financial resources are related to the control of all the other resources in
an organization: too much inventory leads to storage costs, poor selection
of personnel leads to termination and rehiring expenses, inaccurate sales
forecasts lead to disruptions in cash flows and other financial effects.

Levels of Control

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Control can also be broken down by level within the organizational system.
o Operations Control: focuses on the processes the organization uses to
transform resources into products or services.
Example: quality control.
o Financial Control: concerned with the organization’s financial resources.
Example: monitoring receivables to make sure customers are paying their
bills on time.
o Structural Control: concerned with how the elements of the
organization’s structure are serving their intended purposes.
Example: monitoring the administrative ratio to make sure staff expenses
do not become excessive.
o Strategic Control: focuses on how effectively the organization’s
corporate, business, and functional strategies are succeeding in helping
the organization meet its goals.
Example: if a corporation has been unsuccessful in implementing its
strategy of related diversification, its managers need to identify the
reasons and either change the strategy or renew their efforts to implement
it.

Responsibilities of Control
o Managers
- Managers have been responsible for overseeing the wide array of
control systems and concerns in organizations.
- They decide which types of control the organization will use
- They implement control systems and take actions based on the
information provided by control systems.
o Controller
- The controller is a specialized managerial position that helps line
managers with their control activities.
- Responsible for coordinating the organization’s overall control system
and for gathering and assimilating relevant information.
- Businesses that use an H-form or M-form organization design have
several controllers: one for the corporation and one for each division.
- The job of controller is especially important in organizations where
control systems are complex.

o Operating employees

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- Many organization are beginning to use operating employees to help
maintain effective control.
- Employees participation is often used as a vehicle for allowing
operating employees an opportunity to help facilitate organizational
effectiveness.

Steps in Control Process

1. Establish Standards
A control standard is a target against which subsequent performance will
be compared.
Aspects of establishing standards:
- Standards established for control purposes should be expressed in
measurable terms.
- Control standards should be consistent with the organization’s goals.
- Control standards can be as narrow or as broad as the level of activity to
which they apply and must follow logically from organizational goals
and objectives.
- Standards must identify performance indicators (measures of
performance that provide information directly relevant to what is being
controlled).
2. Measure Performance
- Performance measurement is a constant, ongoing activity for most
organizations.
- For control to be effective, performance measures must be valid.
- Sales figures measure sales performance, and production performance
may be expressed in terms of unit cost, product quality or quantity.
Employee performance is measured in terms of quality or quantity of
output.
- For many jobs measuring performance is not so straightforward.
- Valid performance measurement is difficult to obtain and vital in
maintaining effective control.
3. Compare Performance Against Standards
- Performance may be higher than, lower than, or identical to the
standard.
- In some cases comparison is easy. The standard is clear and it is simple
to determine whether this standard has been met.
- Sometimes comparison is less clear-cut. If performance is lower than
expected, the question is, How much deviation from standards can be
allowed before taking remedial action?

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- The timetable for comparing performance to standards depends on
various factors, including the importance and complexity of what is
being controlled.
- For longer-run and higher-level standards, comparison may be
appropriate annually. In other circumstances, more frequent comparison
is necessary.
4. Determine Need for Corrective Action
- Decision regarding corrective actions draw heavily on manager’s
analytic and diagnostic skills.
- After comparing performance against control standards, one of three
actions in appropriate: maintain the status quo (do nothing), correct the
deviation, or change the standard.
- Maintain the status quo is preferable when performance matches the
standard, but it is more likely that some action will be needed to correct
a deviation from the standard.
- Sometimes, performance that is higher than expected may cause
problems for organizations.
- Changing an established standard is necessary if it was set too high or
too low at the outset. This requirement is apparent if large number of
employees routinely beat that standard by a wide margin or if no
employees never meet the standard.
- Standards that seemed perfectly appropriate when they were established
may need to be adjusted because circumstances have since changed.

 Operations Control
Operations control is concerned with the processes the organization uses to
transform resources into products or services.
The three forms of operations control –preliminary, screening, and
postaction- occur at different points in relation to the transformation
processes used by the organization.
Preliminary Control
Preliminary control concentrates on the resources (financial, material,
human, and information) that the organization brings in from the
environment. It attempts to monitor the quality and quantity of these
resources before they enter the organization and become part of the system.
Screening Control
- Focuses on meeting standards for product/service quality or quantity
during the actual transformation process itself.

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- Screening control relies heavily on feedback process.
- The periodic quality checks provide feedback to workers so they know
what corrective action to take.
- Because they are useful in identifying the cause of problems, screening
controls tend to be used more often than other forms of control.
- Screening controls are an effective way to promote employee participation
and catch problems early in the overall transformation process.

Feedback

Inputs Transformation Outputs

Preliminary Control Screening Control Postaction Control

Focus is on inputs Focus is on how Focus is on outputs
to the organizational inputs are being from the organiza-
system transformed into tional system
outputs

Postaction Control
- Monitors the outputs or results of the organization after the transformation
process is complete.
- Although postaction control alone may not be as effective as preliminary
or screening control, it can provide management with information for
future planning. For example, if a quality check of finished goods indicates
an unacceptably high defective rate, the production manager knows that he
must identify the causes and take steps to eliminate them.
- Postaction control also provide a basis for rewarding employees. For
example, recognizing that an employee has exceeded personal sales goals
by a wide margin, may alert the manager that a bonus is in order.

 Structural Control
The two major forms of structural control, bureaucratic control and clan
control, represent opposite ends of a continuum.
Bureaucratic Control:
A form of organizational control characterized by formal and mechanistic
structural arrangements.
Clan Control:
An approach to organizational control characterized by informal and organic
structural arrangements.

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Bureaucratic Control Dimension Clan Control

Goal of control approach

Employee compliance Employee commitment

Strict rules, formal Degree of formality Group norms, culture,

controls, rigid hierarchy self-control

Directed toward minimum Performance expectations Directed toward enhanced

levels of acceptable
performance above and
performance
beyond the minimum
Organization design
Tall structure, top-down Flat structure, shared
influence influence
Reward system
Directed at individual Directed at group
performance performance

Limited and formal Participation Extended and

informal

 Strategic Control
Integrating Strategy and Control
Strategic control: control aimed at ensuring that the organization is
maintaining an effective alignment with its environment and moving toward
its strategic goals.
- Strategic control generally focuses on five aspects of organizations:
structure, leadership, technology, human resources, and information and
operational control system.
- Strategic control focuses on the extent to which implemented strategy
achieves the organization’s strategic goals.
- If one or more avenues of implementation are inhibiting the attainment of
goals, that avenue should be changed. Consequently, the firm might find it
necessary to alter its structure, replace key leaders, adopt new technology,
modify its human resources, or change its information and operational
control systems.

International Strategic Control

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- Because of both their relatively large size and the increased complexity
associated with international business, global organizations must take a
pronounced strategic view of their control systems.
- Global organizations can manage control from a centralized or
decentralized perspective.
• The Centralized System:
- Each organizational unit around the world is responsible for frequently
reporting the results of its performance to headquarters.
- Managers from the home office often visit foreign branches to observe
firsthand how the units are functioning.
• The Decentralized System:
- Branches are required to report less frequently and in less detail. For
example, each unit may submit summary performance statement on a
quarterly basis and provide full statements only once a year.
- Visits form the home office are less frequent and less concerned with
monitoring and assessing performance.

 Managing Control in Organizations

To use the control process, managers must recognize the characteristics of
effective control and understand how to identify and overcome occasional
resistance to control.
Characteristics of Effective Control
o Integration with Planning
- Control should be linked with planning. The more explicit and precise
this link, the more effective the control system.
- The best way to integrate planning and control is to account for control
as plans develop.
- As goals are set during the planning process, attention should be paid to
developing standards that will reflect how well the plan is realized.
o Flexibility
The control system must be flexible enough to accommodate change.
For example, if an organization whose diverse product line requires
seventy-five different raw materials, the company’s inventory control
system must be able to manage and monitor current levels of inventory
for all seventy-five materials. When a change in product line changes the
number of raw materials needed, the control system should be flexible
enough to handle the revised requirements.

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o Accuracy
Managers make a large number of decisions based on inaccurate
information. Production managers may hide costs to meet their targets.
Human resource managers may overestimate their minority recruiting
prospects to meet effective action goals. In each case the information
other managers receive is inaccurate, and the results of inaccurate
information may be quite dramatic.
o Timeliness
- Timeliness does not necessarily mean quickness. Rather, it describes a
control system that provides information as often as is necessary.
- For example, retail organizations need sales results daily so that they
can manage cash flow and adjust advertising and promotion. In
contrast, they may require information about physical inventory only
quarterly.
- In general, the more uncertain and unstable the circumstances, the more
frequently measurement is needed.
o Objectivity
The control system should provide information that is as objective as
possible. For example, consider two plant managers who asked to submit
report. One manager notes that morale at his plant is “okay”, that
grievances are “about where they should be”, and that turnover is “under
control”. The other reports that absenteeism is running at 4 percent, that
sixteen grievances have been field this year, and that turnover is 12
percent. The second will almost be more useful that the first.

Resistance to Control
Many employees resist control, especially if they feel overcontrolled, if they
think control is inappropriately focused or that it rewards inefficiency, or if
they are uncomfortable with accountability.
Overcontrol
-Organizations try to control too many details. This situation becomes
problematic when the control affects employee behavior directly.
- An organization that instructs its employees when to come to work, where
to park, when to have morning coffee, and when to leave exerts
considerable control over people’s daily activities, and may meet with
more resistance.

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- Many organizations attempt to control not only these but other aspects of
work behavior as well. Some companies have no policies governing these
activities, some attempt to limit it, and some attempt to forbid altogether.
Inappropriate Focus
- The control system may be too narrow or it may focus too much on
quantifiable variables and leave no room for analysis or interpretation.
- A sales standard that encourages high-pressure tactics to maximize short-
run sales may do so at the expense of goodwill from long-term customers.
Such a standard in too narrow.
- A university reward system that encourages faculty members to publish
large numbers of articles but fails to consider the quality of the work is
also inappropriately focused.
Rewards for Inefficiency
Imagine two operating departments that are approaching the end of the year.
Department 1 expects to have $500 of its budget left over, department 2 is
already $300 in the red. As a result, department 1 is likely to have its budget
cut for the next year, and department 2 is likely to get a budget increase.
Thus, department 1 is punished for being efficient and department 2 is
rewarded for being inefficient. People resist the intent of this control and
behave in ways that turn counter to the organization’s original intent.
Too Much Accountability
- Effective controls allow managers to determine whether or not employees
discharge their responsibilities successfully.
- If standards are properly set and performance accurately measured,
managers know when problems arise and which departments and
individuals are responsible.
- People who do not want to be accountable for their mistakes or who do not
want to work as hard as their boss therefore might like to resist control.

Overcoming Resistance to Control

If control systems are properly integrated with organizational planning and if
the controls are flexible, accurate, timely, and objective, the organization
will be less likely to overcontrol, to focus on inappropriate standards, or to
reward inefficiency.
Two other ways to overcome resistance are encouraging participation and
developing verification procedures.

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Encouraging Employee Participation
When employees are involved with planning and implementing the control
system, they are less likely to resist it.
Develop Verification Procedures
- Multiple standards and information systems provide checks and balances
in control and allow the organization to verify the accuracy of performance
indicators.
- Suppose that an employee who was fired for excessive absences argues
that he was not absent “for a long time”. An effective human resource
control system should have records that support the termination.
- Resistance to control declines because these verification procedures protect
both employees and management.

http://college.hmco.com/business/griffin/management/7e/students/index.html

good luck
Wiaam M.

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