Exploring Management, 4th Edition Solution Manual

Exploring Management, 4th Edition By Schermerhorn

Schermerhorn Exploring Management 4th edition

Instructor’s Manual

Chapter 1 The Management Process Everyone Becomes a Manager Someday Chapter 1 Overview Each Chapter contains several inset features designed to assist the student reader in applying the concepts to relevant examples. Management Live illustrates how popular movies demonstrate management concepts in the chapter. Role Models features a management professional that illustrates key chapter concepts in a novel, visionary or inspirational way. Explore Yourself refers students to self assessment activities relevant to concepts in the chapter. Ethics Check profiles examples of ethical issues in management. Manager's Library features books that illustrate current events or trends relevant to chapter concepts. Facts to Consider introduces research or trends that may be used for class discussion in the classroom or online for distance learning.

Chapter one provides a thorough review of what it means to be a manager in today’s knowledgebased workplace, where intellectual capital has become the ultimate foundation. Managers are indispensable to organizations and they bring together many resources to best meet the goals of the organization. The chapter begins with a discussion of the different job titles and levels of managers -- those who support and facilitate the work efforts of others in organizations.

Accountability as a cornerstone of managerial performance, along with how effective managers help others achieve high performance and satisfaction is discussed. The various ways managers meet multiple and changing expectations in a changing workplace environment is reviewed.

Next is an overview of what managers do, and the various skills they must possess to do an effective job. Often intense and demanding, the role of a manager includes the following four functions: planning (setting performance objectives), organizing (assigning tasks and allocating resources), leading (inspiring others to achieve goals), and controlling (measuring work performance and taking corrective action, if necessary). In addition, the way managers use a variety of technical, human, and conceptual skills is discussed.

Lastly, the chapter covers important changes in today’s workplace – those creating both tremendous opportunity and uncertainty. Changes are due to the impact of important trends regarding worker talent, technology, globalization, ethical standards, workforce diversity, and careers. Continuing diversity as a social priority is discussed, along with the importance of intellectual capital and self-management skills for managers.

Chapter 1 Takeaway Questions: • • •

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Takeaway 1.1 What Does it Mean to Be a Manager?

Takeaway 1.2 What Do Managers Do, and What Skills Do They Use? Takeaway 1.3 What Are Some Important Career Issues the New Workplace?

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Chapter 1 Objectives: • • • • • • • • • • • • • • • • • • • • • • •

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Describe the different types, levels, and job titles of managers within an organization.

Explain how a manager supervises, supports, and activates the work efforts of others to achieve performance goals.

Understand the oversight or governance by a company’s board of directors.

Explain the importance of accountability as a cornerstone of management performance.

Understand how managers help others achieve high performance and satisfaction.

Describe how the work of managers has changed and how they must work in a changing environment.

Understand the role of managers in the upside-down pyramid of an organization.

Explain the intensity and demands of managerial work.

Understand the four functions of the management process as planning, organizing, leading, directing and controlling.

Understand planning as the process of setting objectives and determining what should be done to accomplish them.

Understand organizing as the process of assigning tasks, allocating resources, and coordinating work activities.

Understand leading as the process of arousing people’s enthusiasm to work hard and inspire their efforts to fulfill plans and accomplish objectives.

Understand controlling as the process of measuring work performance, comparing results to objectives and taking corrective action as needed.

Understand the importance of information, interpersonal, and decisional roles enacted by managers.

Explain how busy managers pursue action agendas to help identify clear priorities Understand the importance for managers to network and maintain and build positive relationships with others.

Distinguish between the variety of technical, human, and conceptual skills needed for a manager to be effective and how their importance varies across levels.

Discuss the importance of emotional intelligence for managers as it relates to selfmanagement and managing relationships.

Explain current issues in today’s workplace, including the impact of globalization and the worldwide interdependence of resource flows on managers.

Explain the troublesome nature of how ethics and corporate governance have failed and what managers can do about this.

Explain the diversity of workers within an organization in terms of age, gender, ethnicity, religion, able-bodiedness and so on.

Understand the importance of intellectual capital and knowledge workers as a critical asset to an organization.

Explain the essential nature of self-management skills and intellectual capital for managers.

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Chapter 1 Lecture Outline: •

Takeaway 1.1: What Does it Mean to Be a Manager? o Organizations have different types and levels of managers o Accountability is a cornerstone of management performance o Effective managers help others achieve high performance and satisfaction o Managers must meet multiple and changing expectations

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Takeaway 1.2: What Do Managers Do, and What Skills Do They Use? o Managerial work is often intense and demanding o Managers plan, organize, lead and control o Managers enact informational, interpersonal, and decisional roles. o Managers pursue action agendas and engage in networking o Managers use a variety of technical, human, and conceptual skills o Managers can and should learn from experience

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Takeaway 1.3: What Are Some Important Career Issues the New Workplace? o Globalization and job migration are changing the world of work o Failures of ethics and corporate governance are troublesome o Diversity and discrimination are continuing social priorities o Intellectual capital and self-management skills are essential for career success

Chapter 1 Supporting Materials: Figures • Figure 1.1: What Are the Typical Job Titles and Levels of Management in Organization?

• Figure 1.2: How Do Mindsets Change when the Organization is Viewed as an UpsideDown Pyramid?

• Figure 1.3: What Four Functions Make Up the Management Process?

• Figure 1.4: What Are Three Essential Managerial Skills, And How Does Their Importance Vary Across Levels?

Thematic Boxes and More • Management Live: Self-Management and Slumdog Millionaire • Find Inspiration: Working Mother Looks for the Best • Role Models: Ursula Burns Leads Xerox with Confidence and a Strategic Eye • Table 1.1: Six “Must-Have” Managerial Skills • Ethics Check: Watch out for Bad Apples at Farmers’ Markets • Facts to Consider: Employment Contradictions in Workforce Diversity • Manager’s Library: Delivering Happiness: A Path to Profits, Passion, and Purpose by Tony Hseih • Explore Yourself: Self-Management

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Applications • •

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TestPrep 1 Multiple-Choice Questions Skill Building Portfolio o Self-Assessment: Personal Career Readiness o Class Exercise: My Best Manager o Team Project: Managing Millennials Case Snapshot: Trader Joe’s: Managing Less with More Sidebar: Planning Tops Chobani’s Recipe for Success Hot Topic: Pro and Con Debate: Time to turn the workplace into a fun place?

Chapter Outline Takeaway Question 1.1 What Does it Mean to Be a Manager?

Quest Managers are required to meet multiple and changing workplace expectations and directly supervise, support and help the work efforts of others to achieve performance. Managers also support and facilitate the work efforts of others so that they can achieve high levels of job satisfaction and performance within an organization. There are various types and levels of managers. It is important to understand the concept of accountability as a cornerstone of management. These concepts allow the student to understand the nature of the work of a manager within an organization.

ion 3.1 •

Managers are persons who directly supervise, support, and help activate work efforts to achieve the performance goals of individuals, teams, or even an organization as a whole.

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Organizations have different types and levels of managers Figure 1.1 depicts an organization as a series of “layers,” each of which represents different levels of work and managerial responsibilities. The traditional organization is structured as a pyramid. The top manager, typically a CEO, president, or executive director, reports to a board of directors in a business or to a board of trustees in a nonprofit organization. Middle managers report to top managers, and first-line managers or team leaders report to middle managers. ✓ First-line manager is someone who leads a small group of people who perform nonmanagerial duties (hotel receptionists, for example). ➢ Common titles are department head, team leader, supervisor ✓ Middle Managers are persons in charge of relatively large departments or divisions consisting of several smaller work units or teams. ➢ Usually supervise several first-line managers ➢ Examples are clinic directors in hospitals, plant managers, and regional sales managers in businesses ➢ Common titles include branch manager or plant manager. ✓ Top managers are responsible for the performance of the organization as a whole.

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➢ Examples of top manager titles are Chief Executive Officer (CEO), Chief Operating Officer (COO), chief financial officer (CFO), president and vice president. ➢ Expected to be alert to trends in the external environment, recognize problems and opportunities, and to lead the organization to long-term success ➢ The most effective top managers are strategic thinkers, can communicate well, and keep organization members focused on important objectives ✓ Boards of Directors ➢ Responsible for Corporate Governance and the active oversight of the affairs of the organization and the performance of its top management ➢ The CEO or President typically reports to the Board of Directors, responsible for the hiring, firing and compensation of senior executives. ➢ In non-profit organizations, this may be called the Board of Trustees. ➢ Members of a board of directors are elected by stockholders to represent their ownership interests. ✓ Governance ➢ Oversight of top management by a board of directors or board of trustees.

DISCUSSION TOPIC To illustrate the differences among different levels management, ask students to identify people they know who have been or are now managers. Have these students describe the nature of the work done by the managers they know. Then have the students analyze these descriptions and classify them according to top managers, middle managers, and team leaders and supervisors.

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Accountability is a cornerstone of managerial performance ✓ Describes the requirement of one person to answer to a higher authority for performance achieved in his or her area of work responsibility • Accountability flows upward in organizations • Managers are also dependent on others to do the required work.

• Find Inspiration: Working Mother Looks for the Best The complexities of work-life balance continue to challenge women in their dual roles as a mother and workplace employee. Working Mother magazine, as its name implies, helps women integrate their “professional lives, their family lives and their inner lives.”

Challenges women face with quality of work life includes not just workplace performance, but quality of life outside the workplace. The magazine’s annual “100 Best Companies for Working Mothers” is an important tool for managers.

Effective managers strive for both performance and satisfaction ✓ Quality of work life (QWL), integral to managers being a success, is the overall quality of human experiences in the workplace. ✓ QWL includes respect and valued employees, fair pay, safe working conditions, learning and growth opportunities, and pride in the workplace.

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Managers today often referred to as “coaches” or “coordinators” See Figure 1.2–an upside-down pyramid depicting a new mindset for managers acting as coaches; the organization exists to serve its customers. This view puts customers at the top, being served by non-managerial workers, who are supported by team leaders and higher level managers.

1.1 Questions for discussion suggested answers 1) Other than at work, in what situations do you expect to be a manager during your lifetime?

Each of us will be “managers” in several ways beyond work lives: managing our job or career; volunteer organizations; households and families; sports teams; daily priorities; finances and personal goals.

2) Why should a manager be concerned about the quality of work life in an organization?

Quality of work life connects directly to employee satisfaction and productivity and customer satisfaction. If employee morale is poor and/or if employees are not viewed as individuals with unique goals and concerns, this will impact current sales and profitability; it will also impact retention and morale, and the costs associated with replacing experienced employees are quite high.

3) In what ways does the upside-down pyramid view of organizations offer advantages over the traditional view of the top-down pyramid?

The upside down view emphasizes the importance of customers and employees who serve or interact directly with those customers. That pyramid view of an organization mirrors reality better than the notion of the traditional view of a top-down pyramid which suggests that CEOs singlehandedly drive success.

Takeaway Question 1.2 What Do Managers Do, and What Skills Do They Use?

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Managerial work is often intense and demanding. ✓ Henry Mintzberg describes daily managerial work in this manner in his classic book, The Nature of Managerial Work ✓ The manager can never be free to forget the job, and there is always the nagging suspicion of “something else” to do. ➢ In addition to the long hours, Mintzberg described a day spent at an intense pace at fragmented and varied tasks, using many types of communication media, working largely through relationships.

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Managers plan, organize, lead and control.

Four functions in the management process are shown in Figure 1.3 The management process consists of four functions: planning, organizing, leading, and controlling. Planning sets the direction as performance objectives. Organizing arranges people and tasks to do the work. Leading inspires others to work hard. Controlling measures performance to make sure that plans and objectives are accomplished.

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• • • •

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The Management Process - planning, organizing, leading and controlling.

All managers in any organization are responsible for doing each of these functions well Planning is the process of setting performance objectives and determining what actions should be taken to accomplish them Organizing is the process of assigning tasks, allocating resources, and coordinating work activities (or the activities of individuals and groups).

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Role Models: Ursula Burns Leads Xerox with Confidence and a Strategic Eye Determined and willing to take risks, Ursula Burns, CEO of Xerox, started as a mechanical engineering intern and worked her way up to the top position through “hard work and high performance.” She assumed the CEO position at a time when company sales and profits were declining at the company known for its office copiers and printers.

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Leading is the process of arousing people’s enthusiasm to work hard and inspiring their efforts to fulfill plans and accomplish objectives.

Controlling is the process of measuring work performance, comparing results to objectives, and taking corrective action as needed.

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DISCUSSION TOPIC Divide students into discussion groups of five to six members. Have each group select a different campus organization to analyze. Each group should explore how the chosen campus organization exhibits planning, organizing, leading, and controlling.

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Managers enact informational, interpersonal, and decisional roles. ✓ The four management functions are not performed one at a time or step-by-step. ➢ Mintzberg identified three sets of roles that he believed all good managers enact successfully Through these roles, the manager fulfills the four management functions ✓ Informational roles focus on the giving, receiving, and analyzing of information. ✓ Interpersonal roles reflect interaction with people inside and outside the work unit. ✓ Decisional roles involve using information to make decisions to solve problems or address opportunities.

DISCUSSION TOPIC

Have students draw on their work, educational, athletic team, or other extracurricular experiences to identify examples of how people in managerial and leadership positions enact the various interpersonal, informational, and decisional roles.

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Managers are busy people that pursue action agendas and engage in networking ✓ A manager’s typical workday includes: ➢ Long Hours .

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➢ ➢ ➢ ➢

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Intense Pace Fragmented and varied tasks Lots of communication Filled with interpersonal relationships

✓ Agenda setting is used by managers to develop and identify clear action priorities; in the beginning, these agendas may be incomplete and loosely connected ✓ Networking is the building, maintenance, and use of positive relationships with other people, ideally those who may be useful someday ➢ Networks create the opportunity through which many agenda items can be fulfilled ✓ Most managers maintain extensive networks not only with their own organization, but also with customers, suppliers, and community representatives. ✓ Social Capital is the capacity to attract support and help from others to get things done •

Managers use a variety of technical, human, and conceptual skills. ➢ See Figure 1.4, which shows the relative importance of each skill by level of managerial responsibility. All managers need essential technical, human, and conceptual skills. At lower levels of management, the technical skills are more important than conceptual skills, but at higher levels of management, the conceptual skills become more important than technical skills. Because managerial work is so heavily interpersonal, human skills are equally important across all management levels. ➢ See the inset summarizing the five foundations of Emotional intelligence ✓ A Technical skill is the ability to use a special proficiency or expertise to perform particular tasks ➢ Examples are accountants, engineers, and systems analysts ➢ Technical skills are very important at career entry levels ✓ A Human skill is the ability to work well with others ➢ High self awareness, capacity for empathy, trusting, and enthusiasm with others ➢ Emotional Intelligence (EI) (described by Daniel Goleman) is the ability to manage ourselves and our relationships effectively.

▪ Five Foundations of Emotional Intelligence • Self-Awareness • Self-Regulation • Motivation • Empathy • Social Skills ➢ A manager with good human skills is also likely to be high in emotional intelligence ✓ A Conceptual skill is the ability to think critically and analytically; the capacity to break down problems into smaller parts, see the relations between the parts and recognize the implications of any one problem for others

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➢ Conceptual skills actually grow in importance as one moves up to higher management responsibilities DISCUSSION TOPIC Have students discuss the roles that technical skills, human skills, and conceptual skills play in their professors’ performance of their jobs. Then have the students think of their own educational pursuits as a job. What roles do technical skills, human skills, and conceptual skills play in the students’ performance of their jobs?

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Managers can and should learn from experience. ✓ Lifelong learning - the process of continuously learning from our daily experiences and opportunities Table 1.1 presents Six "Must-Have" Managerial skills. ➢ Teamwork ➢ Self-Management ➢ Leadership ➢ Critical Thinking ➢ Professionalism ➢ Communication

1.2 Questions for discussion suggested answers 1) Is Mintzberg’s view of the intense and demanding nature of work realistic, and if so, why would you want to do it?

The world is becoming more complex and more globally connected through technology.

In order to compete, organizations and individuals can no longer partition their lives into 40 hour work weeks from “8-5.” The paradox of improving the speed of communications is that it makes our lives less separable from our “jobs.” Having a smartphone and laptop means 24/7/365 availability. Students may consider the types of communication they used 5 to 10 years ago (land lines, cell-phones, instant messaging) and the ones they use now (texting, Facebook, Twitter) and the increased amount of time spent communicating. Are they ready for their personal and professional lives to merge as the communication needs of both increase?

Even though such a world may entail more stress and long hours, it also provides more flexibility, freedom, and mobility. Moreover, in order to compete, one must accept such consequences or another person somewhere in the world that is more willing to do so, may take your position.

2) If Katz’s model of how different levels of management use essential skills is accurate, what are its career implications for you?

The Katz model indicates that in order to obtain a good entry-level position, it is imperative that my interpersonal skills and technical skills be outstanding. Human or

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interpersonal skills will remain high throughout my career, but it is important to acquire a strategic or “big picture” view of the organization, competitors, and customers early to distinguish myself and ascend to the “top.”

3) Why is emotional intelligence an important component of one’s human skills?

We all know someone who has or had “great potential” but who has somehow not been able to translate that potential into actuality because of personal issues, including poor discipline, bad time management, losing one’s temper, and many other reasons.

Developing emotional intelligence and self-awareness enables us to eliminate obstacles and create opportunities.

Takeaway Question 1.3 What Are Some Important Career Issues in the New Workplace?

1.3 What Are Some Important Career Issues the New Workplace?

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Globalization and job migration are changing the world of work. ✓ “Borderless world” (Kenichi Ohmae) – disappearance of national boundaries ✓ Trend for companies to operate and have employees in multiple countries • Global sourcing is hiring workers and contracting for supplies and services in other countries.

• Global outsourcing can create savings and efficiency gains through manufacturing or providing service with lower labor costs in some countries ✓ Globalization is the worldwide interdependence of resource flows, product markets, and business competition ✓ Job Migration occurs when global outsourcing shifts jobs from one country to another. ➢ The U.S. is a net loser at present ➢ Countries such as China, India and the Philippines are net gainers ✓ Not limited to unskilled labor; engineers, accountants, health professionals and scientists are as low as one-fifth the cost of an equivalent U.S. worker ✓ Reshoring moves jobs back from foreign to domestic locations. ✓ Politicians and policymakers debate solutions to the high costs of job migrationprotection or patience and time for eventual strengthening of the national economy Failures of ethics and corporate governance are troublesome. ✓ Recent sensational ethical failures ➢ Bernard Madoff convicted of $65 billion dollar fraudulent Ponzi scheme ➢ Wide and huge impact on personal savings, investments ➢ How would you recover from a major loss? ✓ Ethics ➢ Ethics is a Code of moral principles that sets standards of conduct for what is “good” and “right” as opposed to “bad” and “wrong” ➢ Despite workplace scandals, the world of work still includes a lot of good o High value on personal integrity and ethical leadership o Concerns for natural environment, safety, protection of human rights o Many organizations declare their values 1-10

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➢ Ethics Check feature on page 21 introduces an ethical dilemma that is inspired by an actual situation occurring at farmers’ markets across the United States ✓ Corporate Governance ➢ Corporate Governance is the active oversight of management decisions, corporate strategy, and financial reporting by a company’s board of directors. ➢ Typical board of directors are responsible for hiring, firing and compensation of senior executives ➢ Individual Board members are accountable, including consequences for failures of responsibility such as fines Ethics Check: Watch Out For Bad Apples at Farmers’ Markets The number of farmers’ markets (a place where goods are sold directly by farmers to consumers), has more than doubled over the last 8 years. Questionable claims are being made about the “local” nature of the produce being sold, along with the use of pesticides. The “You Decide” questions ask students about decisions they would make if managing a “producer only” farmers market and the management functions they might employ to let shoppers know their growers were direct-selling their own crops that they raised (without pesticides) within a specific radius.

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Diversity and discrimination are continuing social priorities. ✓ Workplace diversity describes the composition of a workforce in terms of differences among the members, such as gender, age, race ethnicity, religion, sexual orientation, and able-bodiedness. ➢ Diversity trends of changing demographics are well recognized ➢ Minorities now constitute more than 43 percent of the U.S. population, and the proportion is growing ➢ The U.S. Census Bureau predicts that within 20 years, whites will constitute less than 50% of the population while the combined populations of African Americans, Native Americans, Asians and Hispanics will be the new majority. ➢ Hispanics are the fastest growing community and by 2060, will represent almost one-third of the population. ➢ The U.S. population is also aging. By 2030, more than 20% of the U.S. population will be over 65 or older and by 2056 the 65+ year-olds will outnumber the under18-year-olds. ➢ The proportion of the population that is working age will decline from 62.7% today to 56.9% by 2060. ✓ U.S. laws strictly prohibit the use of demographic characteristics when employers make decisions on hiring, promotion, and firing. ➢ Laws are one thing, actions another. ➢ The glass ceiling effect occurs when an invisible barrier or “ceiling” prevents members of diverse populations from advancing to high levels of responsibility in organizations ✓ Diversity bias still exists

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➢ Prejudice is the holding of negative, irrational attitudes toward those who are different from us – take as an example, lingering prejudice against working mothers. ➢ Discrimination is when prejudice becomes active; when organizations treat minority members unfairly and deny them full membership benefits ✓ Scholar Judith Rosener says discrimination comes at high cost in “undervalued and underutilized” human capital ✓ Many call diversity a “business imperative,” meaning that today’s increasingly diverse and multicultural workforce should be an asset that creates opportunities for performance gains.

Employment Contradictions in Workforce Diversity: The nonprofit group Catalyst claims that as companies weather an economy in crisis, many admit to needing talented business leaders, many of whom are women. However, the following contradictions in workplace diversity still exist: • • • • • • • •

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Women earn some 60% of college degrees, hold 50.6% of managerial jobs, and hold 15.7% of board seats at Fortune 500 companies; women of color hold 3.2% of board seats, and only 4% of firms have two women of color on their boards.

The median compensation of female CEOs in North American firms is 85% that of males; in the largest firms it is 61%.

For each $1 earned by male managers, female managers earn 79 cents; female managers in finance earn 58.8 cents for each $1 earned by male managers.

For each $1 earned by men, African-American women earn 64 cents and Hispanic women earn 52 cents.

African Americans are 11.5% of the workforce and hold 8.3% of managerial and professional jobs.

Asian Americans are 4.7% of the workforce and hold 6.3% of managerial and professional jobs.

Hispanics are 11.1% of the workforce and hold 5% of managerial jobs.

Intellectual capital and self-management skills are essential for career success. ✓ Competency represents our talents or job-relevant capabilities; commitment represents our willingness to work hard in applying them to important tasks. Both are essential. ✓ The future will be more of a free agent economy (similar to professional athletes); many people will be changing jobs more often and working on flexible contracts with a shifting mix of employers over time. ✓ Shamrock Organization is an analogy used by British scholar and consultant Charles to describe three types of workers, each depicted by a the leaves of a shamrock: ➢ Core - full-time workers with critical skills and standard career paths ➢ Independent Contractors - workers with short- and long term-contracts; specialized skills and talents supporting the core workers ➢ Part-time temporary - workers hired as the needs of the business grows and let go when business fails ✓ Intellectual capital is the collective brainpower or shared workforce of an organization’s workforce.

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➢ Can be viewed as formula with two components: Intellectual Capital = Competency x Commitment DISCUSSION TOPIC Conduct a brainstorming session with students to identify recent examples of each of the preceding characteristics of 21st century work environments (i.e., talent, technology, globalization, ethics, diversity, and careers). After generating a sufficient number of examples, focus class discussion on the implications of these examples for managerial activities.

Manager's Library: Delivering Happiness: A Path to Profits, Passion and Purpose Tony Hsieh (pronounced "Shay") has an interesting story to tell. At age 24, he sold a company he founded to Microsoft for $265 million. He went on to start Zappos, an online apparel retailer that he sold to Amazon for $1.2 billion. Still actively involved in Zappos as CEO, his management style is to create a culture where employees and customers are treated like friends.

Reflect and React questions probe students' views of work and play, friends and coworkers and discovery. ✓ Knowledge workers are persons whose minds and intelligence, not just their physical capabilities, are critical assets to employers ➢ Futurist Daniel Pink describes a conceptual age we are moving into where intellectual capital will rest with people who are both “high concept”- creative and good with ideas, and “high touch”- joyful and good with relationships. The future will belong to those of us with “whole mind” competencies - combining left-brain analytical and right-brain intuitive thinking. ✓ Self Management involves showing emotional intelligence, initiative and accepting responsibility for one's own actions and consequences. It is the ability to understand oneself, exercise initiative, accept responsibility, and learn from experience. ✓ Career success requires continuous learning and capacity for self-management. ➢ Today’s college graduates must be prepared to work as all three types of workers - a portfolio of skills will be required that is both current and attractive to a potential employer ✓ Personal “brand” - a unique and timely package of skills and capabilities of real value to a potential employer ➢ Management consultant Tom Peters advises your brand should be “remarkable, measurable, distinguished and distinctive” relative to the competition. How does the brand called “you” stack up? ✓ Explore Yourself ➢ Self-Management ➢ When it comes to doing well as a student and in a career, a lot rests on how well you know yourself and what you do with this knowledge. Self-management involves acting with a strong sense of self-awareness, something that helps us build on strengths, overcome weaknesses, and avoid viewing ourselves more favorably than is justified. It is an important career skill.

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➢ Get to know yourself better by taking the self-assessment on Personal Career Readiness and completing other activities in the Skill Building portfolio.

1.3 Questions for discussion suggested answers 1) How are current concerns about ethics in business, globalization, and changing careers addressed in your courses and curriculum?

Most textbooks and courses in Introduction to Business, Management, and Accounting include a separate chapter on Ethics, and the instructors spend considerable time on this topic. Additionally, Ethics may be an entire required course in the graduation track curriculum to obtain a business degree. Globalization is covered in most texts and courses as examples that apply to the chapter concepts. Changing careers may be the least effectively covered of the three concerns. Is that true in your curriculum? How do students feel about their preparation to meet challenges of the future?

2) Is it possible for members of minority groups to avoid being hurt by prejudice, discrimination, and the glass ceiling effect in their careers?

Avoiding the “hurt” may involve two aspects: 1) the personal feelings that are normal from a reaction to the glass ceiling effect; and 2) protecting oneself against being discriminated against in a culture that allows “glass ceilings.”As the name implies, it is never easy-if at all possible – to discern if a glass ceiling exists in a particular culture.

The best evidence, though, is to objectively examine and investigate how many minorities are in senior management. If an organization is quite large and is devoid of minority senior executives, that organization’s culture deserves further scrutiny before you accept a position. It is also a reasonable area to explore during the interview process. If one is a victim of glass ceiling discrimination, the matter should be brought to the attention of appropriate agencies and within the company itself. But if the discrimination is subtle and hard to “pin down” it is better to recognize that and not to invest valuable years in such an organization.

3) In what ways can the capacity for self-management help you to prosper in a free-agent economy?

Self management is perhaps the most valuable area/trait for personal growth for one’s career. Change is occurring at an increasing rate and the “life” of many companies and organizations may be shorter due to fierce competition. Each individual can build their resume through “Chapters” or chunks of skills with what is likely to be many employers for most people today. Self-discipline and self-awareness are essential in such a climate.

Globalization and technology advances mean that each person may be more of a “free agent” than was the case in prior generations.

Teaching Notes: In this section, ideas, exercises, and assignments are provided to assist you in integrating the concepts in Exploring Management 4e for your students, especially the special features of the text.

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Management Live: Self Management Slumdog Millionaire Slumdog Millionaire profiles the discipline, confidence, determination and self-management skills of an orphan growing up in the slums of Mumbai, India. His determination to rise above his beginnings is an inspirational example for management students to discuss, particularly as it applies to the concepts in self-management in action.

Learning Activity: Ask students to come up with other examples of movies that involve a determined character who finds success.

Facts to Consider: Employment Contradictions in Workforce Diversity The nonprofit group Catalyst claims that as companies weather an economy in crisis, many admit to needing talented business leaders, many of whom are women. However, the following contradictions in workplace diversity still exist: • • • • • • •

Women earn some 60% of college degrees, hold 50.6% of managerial jobs, and hold 15.7% of board seats at Fortune 500 companies; women of color hold 3.2% of board seats, and only 4% of firms have two women of color on their boards.

The median compensation of female CEOs in North American firms is 85% that of males; in the largest firms it is 61%.

For each $1 earned by male managers, female managers earn 79 cents; female managers in finance earn 58.8 cents for each $1 earned by male managers.

For each $1 earned by men, African-American women earn 64 cents and Hispanic women earn 52 cents.

African Americans are 11.5% of the workforce and hold 8.3% of managerial and professional jobs.

Asian Americans are 4.7% of the workforce and hold 6.3% of managerial and professional jobs.

Hispanics are 11.1% of the workforce and hold 5% of managerial jobs.

Ask students to brainstorm about other contradictions in diversity they’ve spotted. Have students to come up with at least one or two and compare examples in a large group.

Ask students if these statistics fit with their experience and the implications, if any, for their own career aspirations. As students if there are any other contradictions to workplace diversity witnessed, and if so, how can they be explained?

Role Models: Ursula Burns Leads Xerox with Confidence and a Strategic Eye Determined and willing to take risks, Ursula Burns, CEO of Xerox, started as a mechanical engineering intern and worked her way up to the top position through “hard work and high performance.” She assumed the CEO position at a time when company sales and profits were declining at the company known for its office copiers and printers.

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Questions for class discussion (or an assignment): • Burns is the first African American woman to lead a Fortune 500 company and the second woman to head Xerox at a time when women CEOs of Fortune 500 firms are rare. What might Xerox do differently in developing management talent than other large firms?

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Which of the issues and concerns complicating the new workplace as listed in Chapter 1 seem to be most relevant to the challenges facing Xerox? How might Xerox face these challenges in the future?

Find Inspiration: Working Mother Looks for the Best The complexities of work-life balance continue to challenge women in their dual roles as a mother and workplace employee. Working Mother magazine, as its name implies, helps women integrate their “professional lives, their family lives and their inner lives.” Challenges women face with quality of work life includes not just workplace performance, but quality of life outside the workplace. The magazine’s annual “100 Best Companies for Working Mothers” is an important tool for managers.

Manager’s Library: Delivering Happiness: A Path to Profits, Passion, and Purpose by Tony Hseih Tony Hsieh (pronounced "Shay") has an interesting story to tell. At age 24, he sold a company he founded to Microsoft for $265 million. He went on to start Zappos, an online apparel retailer that he sold to Amazon for $1.2 billion. Still actively involved in Zappos as CEO, his management style is to create a culture where employees and customers are treated like friends.

Reflect and React questions probe students' views of work and play, friends and coworkers and discovery.

Ethics Check: Watch out for Bad Apples at Farmers’ Markets The number of farmers’ markets (a place where goods are sold directly by farmers to consumers), has more than doubled over the last 8 years. Questionable claims are being made about the “local” nature of the produce being sold, along with the use of pesticides. The “You Decide” questions ask students about decisions they would make if managing a “producer only” farmers market and the management functions they might employ to let shoppers know their growers were direct-selling their own crops that they raised (without pesticides) within a specific radius.

Explore Yourself: Self-Management When it comes to doing well as a student and in a career, a lot rests on how well you know yourself and what you do with this knowledge. Self-management involves acting with a strong

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sense of self-awareness, something that helps us build on strengths, overcome weaknesses, and avoid viewing ourselves more favorably than is justified. It is an important career skill.

Get to know yourself better by taking the self-assessment on Personal Career Readiness and completing other activities in the Skill Building portfolio.

Hot Topic: Pro and Con Debate: Time to turn the workplace into a fun place?

“Goofing off” time is considered valuable time at the online retailer Zappos.com. Employees are encouraged to take breaks and have fun, all while on the payroll. The company even has a “cultural evangelist” whose job it is to make sure the organizational culture stays both happy and productive. Ask students whether an employer should consider building “fun” into the workplace. Are organizations like Zappos ahead of the curve with many others to follow? Or is having fun at work just a workplace fad?

Career Situations: What Would You Do? When people are promoted to become managers they often end up supervising friends and colleagues. Put yourself in this situation. As a new manager of a team full of friends, what can and should you do to quickly earn the respect of others and build a smoothly functioning work team?

It’s time now to take a first interview for your “dream” job. The interviewer is sitting across the table from you. She smiles, looks you in the eye, and says: “You have a very nice academic record, and we’re impressed with your extracurricular activities. Now tell me, exactly what can you do for us that will add value to the organization right from day one?” How do you respond in a way that clearly shows you are “job ready” with strong technical, human, and conceptual skills?

One result of globalization is that many people now work domestically for foreign employers that have set up businesses in their local communities. How about you? Does it make any difference if you receive a job offer from a foreign employer such as Haier—a Chinese firm that makes popular home appliances—or a domestic employer? What are the “pluses and minuses” of working at home for a foreign employer? Could the pluses outweigh the minuses for you?

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Skill Building Portfolio: Terms to Define: Accountability Agenda Setting Board of directors Conceptual Skill Controlling Corporate governance Discrimination Effective Manager Emotional Intelligence Ethics First Line Manager Free-agent economy Glass ceiling effect Global sourcing Globalization Governance Human Skill Intellectual capital Intellectual capital equation

Job migration Knowledge workers Leading Lifelong Learning Management Process Manager Middle Managers Networking Organizing Planning Prejudice Quality of Work life Reshoring Self-management Shamrock organization Social Capital Top Managers Technical Skill Upside-down Pyramid Workforce diversity

TestPrep 1: Multiple-Choice Questions Multiple Choice 1. If a sales department supervisor is held accountable by a middle manager for the department’s performance, on who is the department supervisor dependent in making this performance possible? (a) Board of directors (b) Top management (c) Customers or clients (d) Department sales persons 2. The management function of ________ is being activated when a bookstore manager measures daily sales in the magazine section and compares them with daily sales targets. (a) planning (b) agenda setting (d) delegating (c) controlling

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3. The process of building and maintaining good working relationships with others who may someday help a manager implement his or her work agendas is called ________________. (a) governance (b) networking (c) emotional intelligence (d) entrepreneurship 4. According to Robert Katz, __________ skills are more likely to be emphasized by top managers than by first-line managers. (a) human (b) conceptual (c) informational (d) technical

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5. An effective manager is someone who helps others to achieve high levels of both _________ and ___________. (a) pay; satisfaction (b) performance; satisfaction (c) performance; pay (d) pay; quality work life 6. ________________ is the active oversight by boards of directors of top management decisions in such areas as corporate strategy and financial reporting. (a) Value chain analysis (b) Productivity (c) Outsourcing (d) Corporate governance 7. When a manager denies promotion to a qualified worker simply because of personally disliking her because she is Hispanic, this is an example of ______________. (b) accountability (a) discrimination (c) self-management (d) a free-agent economy 8. A company buys cloth in one country, has designs made in another country, has the garments sewn in another country, and sells the finished product in yet other countries. This firm is actively engaging in the practice of _________ ___________. (a) job migration (b) performance effectiveness (c) value creation (d) global sourcing 9. The intellectual capital equation states: Intellectual Capital = __________ x Commitment. (a) Diversity (b) Confidence (c) Competency (d) Communication

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10. If the direction in managerial work today is away from command and control, what is it toward? (a) Coaching and facilitating (b) Telling and selling (c) Pushing and pulling (d) Carrot and stick 11. The manager’s role in the “upside-down pyramid” view of organizations is best described as providing _________so that operating workers can directly serve ____________. (a) direction; top management (b) leadership; organizational goals (c) support; customers (d) agendas; networking 12. When a team leader clarifies desired work targets and deadlines for a work team, he or she is fulfilling the management function of ___________. (a) planning (b) delegating (c) controlling (d) supervising 13. The research of Mintzberg and others concludes that most managers _____________. (a) work at a leisurely pace (b) have blocks of private time for planning (c) always live with the pressures of performance responsibility (d) have the advantages of short workweeks 14. Emotional intelligence helps us to manage ourselves and our relationships effectively. Someone that is high in emotional intelligence will have the capacity to _________ _________, an ability to think before acting and to control potentially disruptive emotions and actions. (a) set agendas

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(b) show motivation (c) self-regulate (d) act as a leader 15. Which of the following is a responsibility that is most associated with the work of a CEO, or chief executive officer, of a large company?

(a) aligning the company with changes in the external environment (b) reviewing annual pay raises for all employees (c) monitoring short-term performance of lower level task forces and committees (d) conducting hiring interviews for new college graduates

Short Response 16. What is the difference between prejudice and workplace discrimination?

Prejudice involves holding a negative stereotype or irrational attitude toward a person who is different from one’s self. Discrimination occurs when such prejudice leads to decisions that adversely affect the other person in his or her job, in advancement opportunities at work, or in his or her personal life.

17. How is the emergence of a free-agent economy changing career and work opportunities?

The “free agent economy” is one in which there is a lot of job-hopping and people work for several different employers over a career, rather than just one. This relates not only to the preferences of the individuals but also to the nature of organizational employment practices.

As more organizations reduce the hiring of full-time workers in favor of more part-timers and independent contractors, this creates fewer long-term job opportunities for potential employees. Thus they become “free agents” who sell their services to different employers on a part-time and contract basis.

18. In what ways will the job of a top manager typically differ from that of a first-line manager?

You will typically find that top managers are more oriented toward the external environment than the first-level or lower-level managers. This means that top managers must be alert to trends, problems, and opportunities that can affect the performance of the organization as a whole. The first-line or lower manager is most concerned with the performance of his or her immediate work unit and managing the people and resources of the unit on an operational day-to-day basis. Top management is likely to be more strategic and long term in orientation.

19. How does planning differ from controlling in the management process?

Planning sets the objectives or targets, that one hopes to accomplish. Controlling measures actual results against the planning objectives or targets, and makes any corrections necessary to better accomplish them. Thus, planning and controlling work together in the management process, with planning setting the stage for controlling.

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Integration and Application Questions: 20. Suppose you have been hired as the new supervisor of an audit team for a national accounting firm. With four years of auditing experience, you feel technically well prepared.

However, it is your first formal appointment as a manager. The team has 12 members of diverse demographic and cultural backgrounds, and varying work experience. The workload is intense, and there is a lot of performance pressure.

Questions: To be considered effective as a manager, what goals will you set for yourself in the new job? What skills will be important to you, and why, as you seek success as the audit team supervisor?

I consider myself “effective” as a manager if I can help my work unit achieve high performance and the persons in it to achieve job satisfaction. In terms of skills and personal development, the framework of essential management skills offered by Katz is a useful starting point. At the first level of management, technical skills are important, and I would feel capable in this respect. However, I would expect to learn and refine these skills even more through my work experiences. Human skills, the ability to work well with other people, will also be very important. Given the diversity anticipated for this team, I will need good human skills, and I will have to keep improving my capabilities in this area. One area of consideration here is emotional intelligence, or my ability to understand how my emotions and those of others influence work relationships. I will also have a leadership responsibility to help others on the team develop and utilize these skills so that the team itself can function effectively. Finally, I would expect opportunities to develop my conceptual or analytical skills in anticipation of higher-level appointments. In terms of personal development I should recognize that the conceptual skills will increase in importance relative to the technical skills as I move upward in management responsibility, while the human skills are consistently important.

Self-Assessment 1: Personal Career Readiness The assessment suggested is Personal Career Readiness in the Skill-Building Portfolio.

Students may be required to complete it prior to class so their results can be discussed as an introduction to chapter 1, or as a short break in your class presentation. Interpretation is in the Skill-Building Portfolio.

Instructions Use this scale to rate yourself on the following list of personal characteristics.

S Strong, I am very confident with this one.

G Good, but I still have room to grow.

W Weak, I really need work on this one.

U Unsure, I just don’t know. _____ 1. Resistance to stress: The ability to get work done even under stressful conditions _____ 2. Tolerance for uncertainty: The ability to get work done even under ambiguous and uncertain conditions

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_____ 3. Social objectivity: The ability to act free of racial, ethnic, gender, and other prejudices or biases _____ 4. Inner work standards: The ability to personally set and work to high performance standards _____ 5. Stamina: The ability to sustain long work hours _____ 6. Adaptability: The ability to be flexible and adapt to changes _____ 7. Self-confidence: The ability to be consistently decisive and display one’s personal presence _____ 8. Self-objectivity: The ability to evaluate personal strengths and weaknesses and to understand one’s motives and skills relative to a job _____ 9. Introspection: The ability to learn from experience, awareness, and self-study _____10. Entrepreneurism: The ability to address problems and take advantage of opportunities for constructive change Scoring Give yourself 1 point for each S and 1/2 point for each G. Do not give yourself points for W or U responses. Total your points and enter the result here: _______.

Interpretation This assessment offers a self-described profile of your management foundations. Are you a perfect 10 or something less? There shouldn’t be too many 10s around. Also ask someone else to assess you on this instrument. You may be surprised at the results, but the insights are well worth thinking about. The items on the list are skills and personal characteristics that should be nurtured now and throughout your career.

If students are realistic and honest with themselves and/or obtain feedback from another person’s assessment of their career readiness, this exercise can be used to motivate students to apply the theory and concepts learned from this course directly to their personal growth, which will increase their managerial competence.

Class Exercise 1: My Best Manager Preparation Working alone, make a list of the behavioral attributes that describe the “best” manager you have ever had. This could be someone you worked for in a full-time or part-time job, summer job, volunteer job, student organization, or elsewhere. If you have trouble identifying an actual manager, make a list of behavioral attributes of the manager you would most like to work for in your next job.

Instructions Form into teams as assigned by your instructor, or work with a nearby classmate. Share your list of attributes and listen to the lists of others. Be sure to ask questions and make comments on items of special interest. Work together in your team to create a master list that combines the unique attributes of the “best” managers experienced by members of your group. Have a

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spokesperson share that list with the rest of the class for further discussion.

Team Project 1: Managing Millenials What should Baby Boomers know about members of the Millennial generation to best manage them in the workplace?

Instructions • Gather insights regarding the work and career preferences, values, and expectations of members of these different generational subcultures—specifically, Baby Boomers, Generation Xers, and Millennials.

• Analyze the points of potential difference between Baby Boomers and Millennials. What advice can you give to a Baby Boomer manager on how to best deal with a Millennial worker?

What advice can you give the Millennial on how to best deal with a Baby Boomer boss?

• Analyze the points of potential difference between Baby Boomers and Generation Xers. What advice can you give to a Baby Boomer manager on how to best deal with a Generation X worker?

What advice can you give the Generation Xer on how to best deal with a Baby Boomer boss?

• Analyze the points of potential difference between Millennials and Generation Xers. What advice can you give to a Generation X manager on how to best deal with a Millennial worker?

What advice can you give the Millennial on how to best deal with a Generation X boss?

Cases for Critical Thinking Trader Joe’s: Managing Less With More Sidebar: Planning Tops Chobani’s Recipe For Success Trader Joe’s is a model of a how a company effectively performs the management functions of planning, organizing, leader, and controlling. How did this retail grocer grow to $8.5 + billion in sales and attract an obsessive and diverse cult following of foodies? Much has to do with its unique corporate culture, which affects everything from how the company meticulously plans its store locations, to how it manages its employees and purchasing and branding strategies.

Encourage students to check out the Trader Joe’s website at www.traderjoes.com.

1. DISCUSSION Review the six “must have” managerial skills in Table 1.1. How does each become important to the management and culture of Trader Joe’s? Are any of these more critical than others to implementing an “upside-down pyramid” management approach? ✓ Teamwork: The culture at Trader Joe’s encourages teamwork and building consensus.

Employees are cheerful and enthusiastic, and the culture is one of customer focus. ✓ Self-Management: At the top of its pyramid, behind customers, are nonmanagerial (crew members) who interact with customers to provide a unique experience. Trader Joe’s aggressively courts friendly, customer-oriented employees by writing job descriptions highlighting desired soft skills (“ambitious and adventurous, enjoy smiling and have a strong

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✓

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sense of values”), as much as actual retail experience. Crew members are given the go-ahead to open up a bag of goodies for customer sampling and taste tests.

Leadership: Mates and captains are able to influence crew members and support them to perform tasks to meet goals. Mentoring is a crucial part of Trader Joe’s environment (captains and mates coach supervisors). Rather than given orders, crew members (nonmanagerial employees) are coached. Store managers (mates and captains), hired only from within the company, are highly compensated, partly because they know the Trader Joe’s culture and system inside and out. Leadership at Trader Joe’s is focused on customer involvement among store employees. Team members are treated with respect and dignity. Managers and supervisors are promoted from within. Future leaders enroll in training programs such as Trader Joe’s University. This fosters loyalty necessary to run stores.

Critical Thinking: The management approach at Trader Joe’s is premised upon making decisions to please customers. The company is customer-focused, yet laid back. Because profit margins for each product are not shared with team members, product decisions are based solely upon the wants and needs of customers. With fewer products, the company’s focus is on quality (i.e. “Less is More”). Customers trade value for selection. Managers gather and analyze information for problem solving to decide which products to carry and which not to carry. A promote from within policy insures that managers have been immersed in the company’s culture, which allows for predicting and meeting ever changing customer needs.

Professionalism: Trader Joe’s employees are empowered and trained to make a strong positive impression upon customers. Management instills confidence by providing strong product knowledge. A strong connection to its customer base through product knowledge and customer involvement is key to training crew members.

Communication: Trader Joe’s University (its formal training program), focuses on management, leadership, and communication skills. In place of a public address system, Trader Joe’s managers use a bell system to communicate various messages. The shopping experience is entertaining and customer feedback and communication helps determine product choices.

Employees go out of their way to engage customers, and in an unassuming way, tout the store’s unique products.

All are critical, though some may argue that because of Trader Joe’s team-based formula for success, that teamwork and leadership may deserve just a bit more attention.

2. DISCUSSION Hamdi Ulukaya achieved his entrepreneurial dream to sell Greek-style yogurt in America. Could he have achieved this success without the commitment to planning and collaboration suggested in the case? What, if anything, seems to be a management lesson worth remembering by other aspiring entrepreneurs?

Hamdi Ulukaya may not have been able to achieve his current level of success without his commitment to years of meticulous planning with the right people. To do this, Ulukaya brought in an expert yogurt maker from his home country of Turkey. Eighteen months later, the Chobani Greek yogurt recipe was conceived. Ulukaya values the act of planning and collaborating with valued employees well in advance. “You are less likely to launch a premature business ridden with flaws,” he says.

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A lesson to aspiring entrepreneurs is to remember that “the people portion [of any business] comes first.” Without its people, Ulukaya admits that “anyone can make a good product, but it is the people that count.” The small business attitude means finding a way to make things work – which is what Ulukaya has done in a defunct Kraft foods plant.

3. PROBLEM SOLVING Mates and captains are the managers at a Trader Joe’s. Suppose you were being hired as a “mate” right from college. How could you make your efforts with planning, organizing, leading, and controlling fit well with the Trader Joe’s culture?

How mates and captains rely on the four functions of management: Planning: Planning is the process of setting performance objectives and actions taken to accomplish them. There are numerous references to their commitment to customer satisfaction, unique, quality products, cost savings and “relentless pursuit of value” (“Every penny we save is a penny you save”). Their simple four-part philosophy and approach to stocking guides purchasing plans.

Organizing: Organizing involves arranging resources to efficiently accomplish organizational goals. Compensation at Trader Joe’s is high for the industry. This usually allows employers to hire better qualified employees even in a tight labor market, reducing training and turnover expenses. Their training programs (Trader Joe’s University) help develop employee potential to support their promote-from-within policy.

Leading: Leading inspires people to achieve established performance levels. One responsibility of leadership that Trader Joe’s takes seriously is establishing a strong culture. Employees and customers alike are drawn to the chain’s “charming blend of low prices, tasty treats and laidback but enthusiastic customer service”. Not only is the attitude casual, employee dress and store décor are a nautical and tropical theme. The company hires employees to fit the culture with desired soft skills such as “ambitious, adventurous, enjoy smiling and have a strong sense of values”.

Controlling: Controlling measures performance to ensure the desired results. Control, hand in hand with planning, measures the success of the plan by measuring results. Store size, inventory control, product choices, and aggressive cost cutting are meticulously measured and adjusted.

4. FURTHER RESEARCH Study recent news reports to find additional information on Trader Joe’s management and organization practices. Look for comparisons with its competitors and try to identify whether Trader Joe’s has the right management approach and business model for continued success. Are there any internal weaknesses or external competitors, or industry forces that might create future challenges?

Comparisons with competitors: Customer loyalty Unique products Low prices for high quality products

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Friendly employees and consummate customer service Strong presence in the United States Over 80% of products bear the company’s house brand (private label) Smaller stores – fewer square feet Laser-like customer focus to predict changing customer needs Organic food products Internal weaknesses: Lack of variety – not a “one-stop” shopping destination Not all products are competitively priced External competitors or industry forces that might create future challenges: Whole Foods’ low prices and 365 Private label brand Competitive organic product industry Saturated grocery industry Product recalls (chicken salad and onion and chicken with basmati rice) Trader Joe’s must compete with specialty grocers and large supermarkets

Additional Exercises for Chapter 1: Emotional Intelligence Exercise Chapter 1 includes an inset listing five foundations of Emotional Intelligence on page 16.

Break the class into teams of three or four and ask each group to collectively discuss these five facets.

Ask them to list well known managers or celebrities who seem to possess some or all of the facets, and provide examples to share with the class. Also ask them to provide examples of the failure of well known managers or celebrities who lack one or more of the five facets.

Upon completion by all teams, have each team (a volunteer from the team) discuss their examples. This will allow the class to learn collaboratively and recognize the values of EI. Conceptual Skill Exercise Chapter 1 includes a review of conceptual skills. This exercise is designed to have teams use conceptual skills to create ideas for a new business in the community Organize the class into teams of three or four students each. Ask each team to “create” a concept for a new business in the local community that serves a need or want they have observed (they should be prepared to support/explain this perceived need or want). They should be told that they can assume that they have the needed financing for a local business. It is useful to share with them an example such as the Geek Squad or a Starbucks, both of which first started as local companies in one community.

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Allow teams about 45 minutes for this exercise. The teams should report to the class their “concept” as well as a “name” for the business that is communicative and “catchy” (again, Geek Squad is an example, or perhaps Stub Hub, the on-line ticket broker.)

The Instructor should summarize the concepts and names. Then the Instructor may want to pick “winners” of the “best concept” and “best name” based on his or her discretion and share the reasons with the class.

Students enjoy this exercise and it allows them to see how valuable conceptual skills are. It adds interest and excitement to assign “bonus points” to teams that win, either as extra credit toward their grade or added points (example 3-5 points) on their upcoming test/exam.

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Chapter 2 Management Learning Great Things Grow From Strong Foundations Chapter 2 Overview Each Chapter contains several inset features designed to assist the student reader in applying the concepts to relevant examples. Management Live illustrates how popular movies demonstrate management concepts in the chapter. Role Models features a management professional that illustrates key chapter concepts in a novel, visionary or inspirational way. Explore Yourself refers students to self assessment activities relevant to concepts in the chapter. Ethics Check profiles examples of ethical issues in management. Manager's Library features books that illustrate current events or trends relevant to chapter concepts. Facts to Consider introduces research or trends that may be used for class discussion in the classroom or online for distance learning.

This chapter outlines the contributions of management theorists or “thought leaders” of their time, who made great contributions to the evolution of management. Great contributions were made to the development of classical management approaches, behavioral management approaches and modern management thinking. Some of the theories and ideas are discussed in greater detail throughout the chapter. Despite many organizational changes over the decades, many of the lessons provide great value for managers today.

The lessons of classical management include Frederick Taylor’s scientific management approaches, Weber’s bureaucratic organization, and Fayol’s administrative principles. The scientific management approach sought to improve productivity by identifying a job’s basic steps and motions. During the late 19th century, Weber’s insights provided for an “ideal bureaucracy” or bureaucratic model for organizations to solve what he viewed as poor performance. Fayol hoped to understand successful managers by identifying their roles and duties.

Next, behavioral management approaches are described. During the 1920s, the contributions of behavioral management approaches focused attention on the human side of organizations as communities of cooperative action and “employee ownership.” Self-actualizing and social, Maslow’s described a hierarchy of human needs, relevant within the organization. McGregor’s Theory X and Theory Y created managerial assumptions about workers and their level of motivation. Agryris’s ideas simply suggested that workers treated like adults will be happy and more productive.

Last, modern management approaches are described. They include human approaches and advanced quantitative techniques and analysis (mathematic techniques) as tools to solve complex problems. Another key ingredient to modern management thinking is the concept that organizations are complex networks of open systems (which explains an organization’s customer focus), interacting with their environment. Contingency thinking is an adaptive approach, based upon the situation, to solving problems in place of a “one size fits all” approach. Quality management is focused on the continuous improvement of quality in both production and service

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industries. Evidence-based management, as its name suggests, is most effective when managers can separate fads from fact and conjecture from informed insight.

Chapter 2 Takeaway Questions: • • •

Takeaway 2.1 What are the Lessons of the Classical Management Approaches?

Takeaway 2.2 What Are the Contributions of the Behavioral Management Approaches?

Takeaway 2.3 What are the Foundations of Modern Management Thinking?

Chapter 2 Objectives: • • • • • • • • • • • • • • • •

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To explain the underlying assumptions of the classical management approaches: scientific management, bureaucratic organizations, and administrative principles.

To explain the principles of Frederick Taylor’s scientific management approach To understand the premise of Weber’s bureaucratic organization and the characteristics of what he believed to be an ideal bureaucracy.

To define Fayol’s administrative principles and duties of management.

To understand the contributions of the behavioral management approaches Explain how Follett’s ideas advocated for social responsibility, respect for workers, and cooperation throughout an organization.

To explain the influence of the Hawthorne studies on modern management approaches.

To understand the relevancy and application of Maslow’s hierarchy of needs within an organization.

Distinguish between Theory X and Theory Y assumptions and expectations by managers, and why Theory Y assumptions may be more appropriate.

To explain Agyris’s concern that traditional organizational practices are inconsistent with the needs and capabilities of mature adults.

To describe how managers solve complex problems by using analytics or mathematical tools to conduct quantitative and statistical analyses.

To understand operations management or how organizations produce goods and services efficiently and effectively.

To explain within today’s organizations, the complex networks of open-systems and subsystems that interact with their environment to obtain resources.

To explain contingency thinking as a way to identify practices that best fit with the unique demands of different situations.

To explain the importance of continuous improvement and quality management as part of an organization’s ongoing management objectives.

To describe the application of evidence-based management by making decisions on hard facts and what really works.

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Chapter 2 Lecture Outline: •

Takeaway 2.1: What are the Lessons of the Classical Management Approaches? o Taylor’s scientific management sought efficiency in job performance. o Weber’s bureaucratic organization is supposed to be efficient and fair. o Fayol’s administrative principles describe managerial duties and practices.

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Takeaway 2.2: What Are the Contributions of the Behavioral Management Approaches? o Follett viewed organizations as communities of cooperative action. o The Hawthorne studies focused attention on the human side of organizations. o Maslow described a hierarchy of human needs with self-actualization at the top o McGregor believed managerial assumptions create self-fulfilling prophecies. o Agyris suggests that workers treated as adults will be more productive.

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Takeaway 2.3: What are the Foundations of the Modern Management Thinking? o Managers use quantitative analysis and tools to solve complex problems. o Organizations are open systems that interact with their environments. o Contingency thinking holds that there is no one best way to manage. o Quality management focuses attention on continuous improvement. o Evidence-based management seeks hard facts about what really works.

Chapter 2 Supporting Materials: Figures • Figure 2.1: Who Are the Major Contributors to the Behavioral or Human Resource Approaches to Management Thinking?

• Figure 2.2: How does Maslow’s Hierarchy of Human Needs Operate?

• Figure 2.3: How Do Organizations as Open Systems Interact with Their External Environments?

• Figure 2.4: How Do Organizations Operate as Complex Networks of Subsystems?

Thematic Boxes and More • Management Live: Learning Style and Mr. Holland’s Opus • Find Inspiration: “Life is Good” Means Business • Role Models: Oprah Winfrey Multitasks to Make a Difference in Others’ Lives • Table 2.1: Characteristics of an Ideal Bureaucracy • Ethics Check: Cyberslackers Find Company Time Great for Internet Surfing • Facts to Consider: Generations Differ When Rating Their Bosses • Manager’s Library: Outliers by Malcolm Gladwell • Explore Yourself: Learning Style • Tips to Remember: Scientific Management Lessons for Today’s Managers

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Applications TestPrep 2 Multiple-Choice Questions • Skill Building Portfolio o Self-Assessment: Managerial Assumptions o Class Exercise: Evidence-Based Management Quiz o Team Project: Management in Popular Culture • Case Snapshot: Zara International – Fast Fashion’s Style Maker • Sidebar: Uniqlo Change-Driven Manager Crafts Uniqlo’s Success • Hot Topic: Good Idea or Not? Raising Expectations and Getting Better Feedback

Chapter Outline Takeaway Question 2.1: What are the Lessons of the Classical Management Approaches?

Taylor’s scientific management sought efficiency in job performance ✓ Major branches in the classical approaches to management are illustrated ✓ 1911 book by Frederick Taylor The Principles of Scientific Management • Identify basic steps and motions of jobs and determine the most efficient ways of doing them • Four principles of scientific management: o Develop a science for each job o Hire workers with the right abilities o Train and motivate workers o Support workers by planning and assisting their work according to science • Still in use today (example is UPS calibrated productivity standards).

• See “Tips to Remember” Scientific Lessons for Today’s Managers o Make results-based compensation a performance incentive. o Carefully design jobs with efficient work methods. o Train workers to perform jobs to the best of their abilities o Train supervisors to support workers to best perform their jobs.

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Weber’s bureaucratic organization is supposed to be efficient and fair ✓ Late-19th century German intellectual insights have made a significant impact on management and sociology of organizations ➢ Bureaucracy type of organization could be highly efficient and very fair ➢ Relies on logic, order, and legitimate authority ➢ Government agencies or large colleges may be examples ➢ Table 2.1 lists characteristics of an ideal bureaucracy ➢ Clear Division of Labor Jobs are well defined, and workers become highly skilled at performing them. ➢ Clear Hierarchy of Authority and responsibility are well defined, and each position reports to a higher-level one. ➢ Formal Rules and Procedures Written guidelines describe expected behavior and decisions in jobs; written files are kept for the historical record.

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➢ Impersonality Rules and procedures are impartially and uniformly applied; no one gets preferential treatment. ➢ Careers Based on Merit Workers are selected and promoted on ability and performance; managers are career employees of the organization.

DISCUSSION TOPIC Modern management theory does not consider bureaucracy to be appropriate or inappropriate for all situations; instead, the bureaucratic structure is recommended for simple and stable environments, while more flexible structures are suggested for dynamic and complex environments. Ask students to explain why a bureaucratic organization would be an inappropriate structure for organizations operating in very dynamic and complex environments.

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Facts to Consider: Generations Differ When Rating Their Bosses ✓ Would it surprise you that Millennials (born 1982–1996) have somewhat different views of their bosses than their Generation X and Baby Boomer co-workers? Check out these data from a Kenexa survey that asked 11,000 respondents to rate their managers’ performance. ➢ ➢ ➢ ➢

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Overall performance positive—Boomers 55%, Gen Xers 59%, Millennials 68% People management positive—Boomers 50%, Gen Xers 53%, Millennials 62% Work management positive—Boomers 52%, Gen Xers 55%, Millennials 63% Keeping commitments positive—Boomers 59%, Gen Xers 60%, Millennials 65% Outstanding leader—Boomers 39%, Gen Xers 43%, Millennials 51%

Fayol’s Administrative principles describe managerial duties and practices ✓ Henri Fayol published Administration Industrielle et Générale, outlining his views on proper management of organizations. ✓ Fayol’s five “rules” or “duties” closely resemble the four functions used in management today: Foresight, Organization, Command, Coordination and Control. ✓ Scalar chain principle: the chain of command and communication is clear and unbroken from the bottom (line workers) to the top (top managers) of the organization. ✓ Unity of command principle: workers should only have one boss.

Ethics Check: Cyberslackers Find Company Time Great for Internet Surfing Lost productivity due to cyberslacking is a real problem. Does revoking personal internet use sound realistic? Most companies are aware that employees will send a few personal emails and partake in some online shopping. Questions for students: what solutions do you propose for “cyberslackers” who abuse the internet at work for personal usage? Would you consider working for a company who openly monitored employee internet usage, allowing limiting personal internet use to breaks to lunch hours, or did not allow such usage at work (including smart phones)?

DISCUSSION TOPIC One way to introduce this chapter is to ask students, “Why do we bother to study management history?” Students are quick to point out that we can learn from the experiences of others, and

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can capitalize on their successes and avoid their mistakes. After all, those who are “ignorant of history are doomed to repeat it.”

2.1 Questions for discussion suggested answers 1) How did Taylor and Weber differ in the approaches they took to improving the performance of organizations?

Taylor focused on individual tasks and efficiency, assigning very narrow and repetitive jobs for speed. Weber, meanwhile, focused more on the overall organizational approach, rewards and rules.

2) Should Weber’s concept of the bureaucratic organization be scrapped, or does it still have potential value today?

Weber’s concepts still have value but perhaps not in isolation as a sole management philosophy. Every one of his tenets is used today by most companies, with the exception of such a clear division of labor-as companies have learned that flexibility and job enrichment are more satisfying and can improve performance.

3) What are the risks of accepting the “lessons of experience” offered by successful executives such as Fayol?

The risk is that executives may have a narrow or short-sighted view that is out of touch with employee’s behaviors and motivations.

Takeaway Question 2.2: What Are the Contributions of the Behavioral Management Approaches?

During the 1920s, the contributions of behavioral management approaches focused attention on the human side of organizations as communities of cooperative action and “employee ownership.” Self-actualizing and social, Maslow’s described a hierarchy of human needs, relevant within the organization. McGregor’s Theory X and Theory Y created managerial assumptions about workers and their level of motivation. Agryris’s ideas simply suggested that workers treated like adults will be happy and more productive.

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See Figure 2.1: Who Are the Major Contributors to the Behavioral or Human Resource Approaches to Management Thinking?

• Find Inspiration: “Life is Good” Means Business Life is Good began with two brothers with good instincts, creativity, and positive views on life.

As they grew what started as a t-shirt company, they learned valuable business and management lessons to keep getting better.

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Follett viewed organizations as communities of cooperative action ✓ Mary Parker Follett believed that a groups or a sense of community were important aspects of organizations. ➢ Managers should foster cooperation with workers without domination

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➢ Follett suggested that employee ownership would create feelings of collective responsibility ➢ Emphasis was placed on making profits while considering the public good, a predecessor of corporate social responsibility.

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The Hawthorne studies focused attention on the human side of organizations ✓ Elton Mayo of Harvard University commenced a study in 1924 at the Western Electric Company to determine how economic incentives and physical conditions of the workplace affected the output of workers ➢ No direct relationship was found ➢ Instead, workers responded to increased attention by their managers ➢ Hawthorne effect – the tendency to live up to expectations; a person’s performance will be affected by the way they are treated by their managers ➢ Groups can have a strong negative, as well as positive, influence on the behavior of their members DISCUSSION TOPIC

To the Hawthorne researchers’ surprise, the workers in the Bank Wiring Room established an informal group norm regarding the quantity of output that was below the standard set by management. Output was restricted despite a group incentive plan that rewarded each worker on the basis of the total output of the group. Group members enforced this output restriction norm by using disciplinary devices such as sarcasm, ridicule, ostracizing co-workers, and “binging.”

For fun, ask the students if they know what “binging” means; chances are they won’t. Then find a volunteer for a demonstration. Pretend that you are going to “bing” the student by punching him or her in the arm but stop short before making contact. This amuses the class while demonstrating the lengths that groups will go to in enforcing norms. Wrap up the demonstration by noting the contribution of the Hawthorne Studies in revealing these subtle group processes.

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Maslow described a hierarchy of human needs with self-actualization at the top ✓ Human need is a physical or psychological deficiency that a person feels compelled to satisfy ✓ Maslow described five levels of human needs that affect behavior (see Figure 2.2) ➢ Lower-level needs: physiological, safety, and social ➢ Higher order needs: esteem and self-actualization ✓ Progression principle - a need at any level becomes activated only after the next-lowerlevel need is satisfied ✓ Deficit principle – a satisfied need doesn’t motivate behavior; people act to satisfy needs for which a satisfaction “deficit” exists ✓ Only at the highest level, self actualization, do both the deficit and progression principles cease to exist

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Mc Gregor believed managerial assumptions create self-fulfilling prophesies ✓ Douglas McGregor wrote the classic book The Human Side of Enterprise

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✓ Theory X – set of negative assumptions about workers; they dislike work, lack ambition, resist change, and prefer to follow rather than lead ✓ Theory Y – set of positive assumptions about workers; they like work, are capable of self direction and control, responsible and creative ✓ Theory X managers likely to be “command and control” managers ✓ Theory Y managers likely to be “participative” managers ✓ Self fulfilling prophecy –workers respond to the way they are treated DISCUSSION TOPIC Once you have presented the assumptions held by Theory X and Theory Y managers, ask students to think about supervisors they worked for and to indicate if the supervisors seemed to make Theory X or Theory Y assumptions about their subordinates. Then ask: “How did these supervisors treat their employees?” “Do you consider them to be good or bad managers?”

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Explore Yourself: Learning Style ✓ Each of us has a preferred learning style, a set of ways through which we like to learn by receiving, processing, and recalling new information.

Get to know yourself better by taking the self-assessment on Managerial Assumptions and completing the other activities in the Exploring Management Skill-Building Portfolio.

• Argyris suggests that workers treated as adults will be more productive ✓ Chris Argyris wrote the book Personality and Organization ✓ Many organizations treat workers like children, which is counterproductive ✓ Networks create the opportunity through which many agenda items can be fulfilled Most managers maintain extensive networks not only with their own organization, but also with customers, suppliers, and community representatives 2.2 Questions for discussion suggested answers 1. How did insights from the Hawthorne studies redirect thinking from the classical management approaches and toward something quite different?

Hawthorne’s work shifted the focus from a scientific perspective to a more humanistic view. Employees were no longer viewed simply as “machines” or a part of the assembly line, but as humans affected by motivation, reward systems, and attention.

2. If Maslow’s hierarchy of needs theory is correct, how can a manager use it to become more effective?

An effective manager needs to understand that each employee has unique needs and that one blanket approach will not suffice for all employees. Knowing each employee’s needs enables managers to tailor their development, rewards, and management to each person for higher performance.

3. Where and how do McGregor’s notions of Theory X and Theory Y overlap with Argyris’s

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ideas regarding adult personalities?

Fundamentally, Argyris’ theory says to treat people like adults-with respect, trust and genuine caring. This is also what Theory Y in McGregor’s theory effectively would suggest.

Takeaway Question 2.3: What Are the Foundations of Modern Management Thinking?

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Managers use quantitative analysis and tools to solve complex problems ✓ Analytics is the analysis of data to solve problems and make sound decisions ✓ Management science and operations research are used interchangeably to describe mathematical techniques used for management problem solving and planning. ✓ Gantt charts illustrate the interrelationships between complex tasks on a large project such as developing a shopping center or new building on a college campus. The margin feature on page 46 illustrates a Gantt chart for a building project such as a home. ✓ Operations management is the study of how to improve operations to deliver goods and services with the most efficient and effective use of resources.

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Organizations are open systems that interact with their environments ✓ Open systems obtain resources from the external environment; perform work activities to transform resources into goods or services for the external environment (Figure 2.3). ✓ Customer-driven organizations focus goals and energy on satisfying needs of customers and clients. ✓ Subsystems or smaller components include activities that individually and collectively support the work of the larger system. Figure 2.4 illustrates the relationship.

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Figure 2.3 How Do Organizations as Open Systems Interact with Their External Environments?

As open systems, organizations continually interact with their external environments to obtain resource inputs, transform those inputs through work activities into goods and services, and deliver finished products to their customers. Feedback from customers indicates how well they are doing.

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Figure 2.4 How Do Organizations Operate as Complex Networks of Subsystems?

Externally, organizations interact with suppliers and customers in their environments.

Internally, many different subsystems must interact and work well together so that highquality inputs are transformed into products satisfying customers’ needs. Common subsystems of a business include purchasing, information technology, operations management, marketing and sales, distribution, human resources, and accounting and finance.

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Contingency thinking recognizes there is no one best way to manage Contingency thinking - belief that the way one manages depends on organizational complexities and demands of situations

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Role Models: Oprah Winfrey Multitasks to Make a Difference in Others’ Lives Self actualization needs include using one’s abilities to their fullest and most creative extent. Oprah has never taken her fame for granted, and it is through her fame that she has been able to satisfy the importance she places upon “the principle of giving.” The beneficiaries of Oprah’s benevolence are causes related to education, women and children. Through her generosity, Oprah Winfrey, cable network owner, former talk show host, philanthropist, writer, actress and media mogul, has profoundly touched many lives.

Questions for discussion: has overcoming her own disadvantaged youth been an impetus for becoming a benefactor for others? What specific needs would you say Oprah has satisfied through her work? If you study Maslow’s hierarchy of needs with selfactualization at the top, how would you describe the way Oprah has satisfied her higherorder needs?

Quality management focuses attention on continuous improvement W. Edwards Deming assisted Japanese industry in the 1950s with quality control techniques that included: tally defects, analyze and trace them to the source, make corrections and keep a record of what happened afterward, using statistics.

• Total Quality Management or TQM grew out of Deming’s work. TQM links strategic objectives and applies them to all aspects of an organization’s activities.

• Continuous Improvement is the goal of always looking for new ways to improve performance.

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Manager’s Library: Outliers: The Story of Success by Malcolm Gladwell Author Malcolm Gladwell's books (The Tipping Point, Blink, Outliers) all provide interesting reading and provocative thinking that are very applicable to the way we manage people and resources. This Manager's Library feature introduces concepts from Outliers that try to explain factors that lead some to greatness such as IQ, practice, positive attitude, assertiveness and social savvy. Gladwell concludes that success is something that most of us can achieve under the right circumstances. Reflect and React discussion Evidence-based management seeks hard facts about what really works ✓ Evidence-based management is the process of using data from a large number of organizations to determine facts about effective management practices that can be validated by research. ✓ Decision makers are encouraged to challenge conventional wisdom regarding “what works” (example: merit pay encourages better performance) and encourage others to do the same. Decisions should be made with clear evidence that the solution or practice will achieve the desired result. ✓ High-performance organization achieves excellence in a work environment that provides a high "quality of work life." ✓ Evidence-based management makes good decisions by examining what works and making sure data used is relevant and sound.

2.3 Questions for discussion suggested answers

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1. Can you use the concepts of open system and subsystem to describe the operations of an organization in your community?

Municipal governments and colleges are often organized and also function as Open Systems and Subsystems. For example, the zoning department and tax assessment departments are separate departments (or divisions in larger cities) yet both are somewhat related to property matters as the larger “system” and both are subsystems of the entire city structure. Colleges, similarly, have departments such as Financial Aid, Cashier’s Office, and Registrar, all which have some role in handling Finances in most colleges. In that case, each is a “subsystem” while Finance would be a “system.” The Department of Business or English would be another example of separate “subsystems” within the educational/teaching “system” of the college or university.

2. In addition to the choice of organization structures, in what other areas of management decision making do you think contingency thinking plays a role?

An effective manager should have a contingency plan for such areas as weather-related or crisisrelated matters such as plant closings to ensure timely resumption (and security and access for such areas as Information Systems) continuity of operations with minor or no interruptions of customer service.

Tornado drills and/or fire drills are routine drills performed in “normal” times but are also examples of necessary and important employee safety contingency plans. Finally, having a sound risk management and insurance program is an integral part of any company’s management today.

3. Does evidence-based management allow for managers to learn from their own experiences as well as the experiences of others?

Managers who use their own experience need to make sure their perspective on the previous experience is accurate before using it to make decisions regarding future events. For example, "fundamental attribution error" is the tendency to over emphasize internal controllable factors and under emphasize external and uncontrollable factors when reviewing the mistakes of others, yet doing just the opposite when reviewing our own mistakes. Good two-way communication with colleagues and others would help make sure the perspective is accurate.

Teaching Notes: In this section, ideas, exercises, and assignments are provided to assist you in integrating the concepts in Exploring Management 4e for your students, especially the special features of the text.

Management Live: Learning Style and Mr. Holland’s Opus The movie, Mr. Holland’s Opus, is about a music teacher (played by Richard Dreyfus), who learns the unique lesson of adapting the way he teaches music to the unique learning styles of his diverse students. Each student has a preferred learning style. The lessons of the movie make

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good examples of several concepts in chapter 2 including contingency thinking and learning style as students review the Explore Yourself feature and take the Managerial Assumptions selfassessment in the Skill-Building Portfolio. Ask students how in touch they are with their learning style.

Facts to Consider: Generations Differ When Rating Their Bosses Statistics on how Baby Boomers, GenX and Millenials rate their managers seem to indicate the older generations don't rate the performance of their managers as highly as younger workers.

Thought questions probe possible reasons that younger workers seem to view their managers more positively. This makes a good illustration for understanding contingency management concepts in the chapter.

Role Models: Oprah Winfrey Multitasks to Make a Difference in Others’ Lives Maslow’s hierarchy of human needs suggests the importance of self-actualization and the potential for people to satisfy important needs through their work. Self actualization needs include using one’s abilities to their fullest and most creative extent. Oprah has never taken her fame for granted, and it is through her fame that she has been able to satisfy the importance she places upon “the principle of giving.” The beneficiaries of Oprah’s benevolence are causes related to education, women and children. Through her generosity, Oprah Winfrey, cable network owner, former talk show host, philanthropist, writer, actress and media mogul, has profoundly touched many lives.

Questions for class discussion (or an assignment): • Has overcoming her own disadvantaged youth been an impetus for becoming a benefactor for others? What specific needs would you say Oprah has satisfied through her work? If you study Maslow’s hierarchy of needs with self-actualization at the top, how would you describe the way Oprah has satisfied her higher-order needs?

Find Inspiration: “Life is Good” Means Business Life is Good began with two brothers who possessed good instincts, creativity, and positive views on life. As they grew what began as a t-shirt company, they learned valuable business and management lessons as they progressed.

Question: Are you a student of history? Do you use past experiences to improve the future?

Manager’s Library: Outliers by Malcolm Gladwell Author Malcolm Gladwell's books (The Tipping Point, Blink, Outliers) all provide interesting reading and provocative thinking that are very applicable to the way we manage people and resources. This Manager's Library feature introduces concepts from Outliers that try to explain factors that lead some to greatness such as IQ, practice, positive attitude, assertiveness and social savvy. Gladwell concludes that success is something that most of us can achieve under the right circumstances. Reflect and React discussion questions probe students' thoughts on their views of success in life and education .

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Ethics Check: Cyberslackers Find Company Time Great for Internet Surfing Lost productivity due to cyberslacking is a real problem. Does revoking personal internet use sound realistic? Most companies are aware that employees will send a few personal emails and partake in some online shopping.

Questions for class discussion (or an assignment): What solution do you propose for “cyberslackers” who abuse the internet at work for personal usage? Would you consider working for a company who openly monitored employee internet usage, allowed limiting personal internet use to breaks or lunch hours, or did not allow such usage at work (including Smart Phones)? If you managed a company, what solutions would you put in place to eliminate cyberslacking? If you knew your personal emails were accessible for all to see, would this change your behavior?

Explore Yourself: Learning Styles Learning style goes beyond how we prefer to learn, receive, process and recall new information, although students will explore their personal preferences as they complete the Managerial Assumptions in the Skill-Building Portfolio as suggested in the Explore Yourself feature. As students determine and reveal their preferences, an interesting class discussion on how this influences the results of their management style, contingency management and which of the management philosophies in chapter two they most closely resemble.

The assessment tool is intended to help students reflect on their own management style or current orientation. Ask students to maintain their scores and reflections throughout the course and write a summary of the areas they want to strengthen, or change, as they develop as managers or employees. This may be a comprehensive special project near the end of the quarter/semester.

Hot Topic: Good Idea or Not? Raising Expectations and Getting Better Feedback The feature poses the following question: Does a glass of wine taste better if you have never heard of the vintage or if you have previously read a positive review of it? You guessed right if you said the wine tastes better after reading a positive review. This traces to issues of perception and expectations. We end up perceiving things as we expect them to be. Behavioral psychologist Dan Ariely cautions that it’s okay to overhype, but advises not to go overboard when communicating high expectations to get positive feedback.

Career Situation: What Would You Do? •

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It’s summer job time and you’ve found something that just might work—handling customer service inquiries at a local Internet provider. The regular full-time employees are paid by the hour. Summer hires like you fill in when they go on vacation. You will be paid by the call, $0.75 for each customer that you handle. How will this pay plan affect your behavior as a customer service representative? Is this pay plan a good choice for the Internet provider to use for its summer hires? How will things go when you are working side-by-side with full timers?

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As a manager in a small local firm, you've been told that because of an uncertain economy workers can't be given any pay raises this year. You have some really hardworking and high-performing people on your team, and you were counting on giving them solid raises. What can you do? Can insights from Maslow’s hierarchy of needs help you solve this dilemma? Is it possible to find ways other than pay to reward team members for high performance and keep them motivated?

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You’ve just come up with a great idea for improving productivity and morale in a shop that silk-screens T-shirts for college bookstores. You r idea is to allow 40+ employees to work for 10-hour days if they want instead of the normal five-day/40-hour week. With the added time off, you reason, they’ll be happier and more productive while working.

But your boss isn’t so sure. “Show me some evidence,” she says. Can you design a research study that can be done in the shop to show whether or not your proposal is a good one?

Skill Building Portfolio: Terms to Define: Operations management Analytics Operations research Bureaucracy Progression principle Contingency thinking Scalar chain principle Continuous improvement Scientific management Deficit principle Self-fulfilling prophecies Evidence-based management Subsystem Hawthorne effect Theory X Management science Theory Y Motion study Total quality management Need Unity of command principle Open system

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TestPrep 2 Multiple-Choice Questions 1. A management consultant who advises managers to carefully study jobs, train workers to do them with efficient motions, and tie pay to job performance is using ideas from ____________________________ . (a) scientific management (b) contingency thinking (c) Henri Fayol (d) Theory Y 2. The Hawthorne studies were important in management history because they raised awareness about the influence of ____________________on productivity. (a) organization structures (b) human factors (c) physical work conditions (d) pay and rewards 3. If Douglas McGregor heard an instructor complaining that her students were lazy and irresponsible, he would say these assumptions________________________ . (a) violated scientific management ideas (b)focused too much on needs (c) would create a negative self-fulfilling prophecy (d)showed contingency thinking 4. If your local bank or credit union is a complex system, then the loan-processing department of the bank would be considered a ____________________ . (b) closed system (a) subsystem (c) learning organization (d) bureaucracy 5. When a manager puts Dante´ in a customer relations job because he has strong social needs and gives Sherrill lots of daily praise because she has strong ego needs, he is displaying _________________________ . (a) systems thinking (b)Theory X (c) contingency thinking (d)administrative principles 6. Which of the following is one of the characteristics of Weber’s ideal bureaucracy? (a) few rules and procedures (b) impersonality (c) promotion by privilege not by merit (d)ambiguous hierarchy of authority 7. Which principle states that a person should only receive orders from one boss in an organization? (a) scalar (b) contingency (c) Hawthorne (d) unity of command 8. One of the conclusions from the Hawthorne studies was that _______________________ .

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(a) motion studies could improve performance (b)groups can sometimes restrict the productivity of their members (c) people respond well to monetary incentives (d)supervisors should avoid close relations with their subordinates 9. If an organization was performing poorly, what would Henri Fayol most likely advise as a way to improve things? (a) teach managers to better plan, organize, lead, and control (b)give workers better technology (c) promote only the best workers to management (d)find ways to improve total quality management 10. When a worker is a responsible parent, makes car payments, and is active in local organizations, how might Argyris explain her poor work performance? (a)She isn’t treated as an adult at work. (b)Managers are using Theory Y assumptions. (c) Organizational subsystems are inefficient. (d)She doesn’t have the right work skills.

11. ________________ management assumes people are complex, with widely varying needs. (a) Classical (b) Neoclassical (c) Behavioral (d) Modern 12. The big interest today in _____________ refers to the management practice of using mathematics and computing power to examine “big data” for insights on business. (a) continuous improvement (b)Theory X (c) analytics (d)total quality management 13. The highest level in Maslow’s hierarchy is _______________________________. (a) safety (b) esteem (c) self-actualization (d) physiological 14. If an organization is considered an open system, work activities that turn resources into outputs are part of the ______________________ process. (a) input (b) transformation (c) output (d) feedback 15. When managers make decisions based on solid facts and information, this is known as _________________________________ . (a) continuous improvement (b)evidence-based management (c) Theory Y (d) Theory X

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Short-Response Questions: 16. Give an example of how principles of scientific management can apply in organizations today.

You can see scientific management principles operating everywhere, from UPS delivery, to fast-food restaurants, to order-fulfillment centers. In each case the workers are trained to perform highly specified job tasks that are carefully engineered to be the most efficient.

Their supervisors try to keep the process and workers well supported. In some cases the workers may be paid on the basis of how much work they accomplish in a time period, such as a day or week. The basic principles are to study the job, identify the most efficient job tasks and train the workers, and then support and reward the workers for doing them well.

17. How do the deficit and progression principles operate in Maslow’s hierarchy?

According to the deficit principle, a satisfied need is not a motivator of behavior. The social need, for example, will motivate only if it is deprived or in deficit. According to the progression principle, people move step by step up Maslow’s hierarchy as they strive to satisfy their needs. For example, esteem need becomes activated only after the social need is satisfied. Maslow also suggests, however, that the progression principle stops operating at the level of self-actualization; the more this need is satisfied, the stronger it gets.

18. Compare the Hawthorne effect with McGregor’s notion of self-fulfilling prophecies.

The Hawthorne effect occurs when people singled out for special attention tend to perform as expected. An example would be giving a student a lot of personal attention in class with the result that he or she ends up studying harder and performing better. This is really the same thing as McGregor’s notion of the self-fulfilling prophesy with the exception that he identified how it works to both the positive and the negative. When managers, for example, have positive assumptions about people, they tend to treat them well and the people respond in ways that reinforce the original positive thinking. This is a form of the Hawthorne effect.

McGregor also pointed out that negative self-fulfilling prophesies result when managers hold negative assumptions about people and behave accordingly.

19. Explain by example several ways a manager might use contingency thinking in the management process.

Contingency thinking takes an “if–then” approach to situations. It seeks to modify or adapt management approaches to fit the needs of each situation. An example would be to give more customer contact responsibility to workers who want to satisfy social needs at work, while giving more supervisory responsibilities to those who want to satisfy their esteem or ego needs.

Integration and Application Question 20. Enrique Temoltzin is the new manager of a college bookstore. He wants to do a good job and decides to operate the store on Weber’s concept of bureaucracy.

Question: Is bureaucracy the best approach here? What are its potential advantages and disadvantages? How could Enrique use contingency thinking in this situation?

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A bureaucracy operates with a strict hierarchy of authority, promotion based on competency and performance, formal rules and procedures, and written documentation. Enrique can do all of these things in his store. However, he must be careful to meet the needs of the workers and not to make the mistake identified by Argyris—failing to treat them as mature adults. While remaining well organized, the store manager has room to help workers meet higher order esteem and self-fulfillment needs, as well as to exercise autonomy under Theory Y assumptions. Enrique must also be alert to the dysfunctions of bureaucracy that appear when changes are needed or when unique problems are posed or when customers want to be treated personally. The demands of these situations are difficult for traditional bureaucracies to handle, due to the fact that they are set up to handle routine work efficiently and impersonally, with an emphasis on rules, procedures, and authority.

Self-Assessment 2: Managerial Assumptions The assessment suggested is Managerial Assumptions in the Skill-Building Portfolio. Students may be required to complete it prior to class so their results can be discussed as an introduction to chapter 2, or as a short break in your class presentation. Interpretation is in the Skill-Building Portfolio.

Instructions Use the space in the left margin to write “Yes” if you agree with the statement or “No” if you disagree with it. Force yourself to take a “yes” or “no” position for every statement.

1. Are good pay and a secure job enough to satisfy most workers?

2. Should a manager help and coach subordinates in their work?

3. Do most people like real responsibility in their jobs?

4. Are most people afraid to learn new things in their jobs?

5. Should managers let subordinates control the quality of their work?

6. Do most people dislike work?

7. Are most people creative?

8. Should a manager closely supervise and direct the work of subordinates?

9. Do most people tend to resist change?

10. Do most people work only as hard as they have to?

11. Should workers be allowed to set their own job goals?

12. Are most people happiest off the job?

13. Do most workers really care about the organization they work for?

14. Should a manager help subordinates advance and grow in their jobs?

Scoring Count the number of “yes” responses to items 1, 4, 6, 8, 9, 10, 12; write that number here as [X = _____________].

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Count the number of “yes” responses to items 2, 3, 5, 7, 11, 13, 14; write that score here as [Y = _____________].

Interpretation This assessment examines your orientation toward Douglas McGregor’s Theory X (your “X” score) and Theory Y (your “Y” score) assumptions. Consider how your X/Y assumptions might influence how you behave toward other people at work. What self-fulfilling prophecies are you likely to create?

Class Exercise 2: Evidence-Based Management Quiz Instructions 1. For each of the following questions, answer T (true) if you believe the statement is backed by solid research evidence or F (false) if you do not believe it is an evidence-based statement.

1. Intelligence is a better predictor of job performance than having a conscientious personality.

2. Screening job candidates for values results in higher job performance than screening for intelligence.

3. A highly intelligent person will have a hard time performing well in a low-skill job.

4. “Integrity tests” are good predictors of whether employees will steal, be absent, or take advantage of their employers in other ways.

5. Goal setting is more likely to result in improved performance than is participation in decision making.

6. Errors in performance appraisals can be reduced through proper training.

7. People behave in ways that show pay is more important to them than what they indicate on surveys.

2. Share your answers with others in your assigned group. Discuss the reasons members chose the answers they did; arrive at a final answer to each question for the group as a whole.

3. Compare your results with these answers “from the evidence.”

4. Engage in a class discussion of how “commonsense” answers can sometimes differ from answers provided by “evidence.” Ask: What are the implications of this discussion for management practice?

Team Project 2: Management in Popular Culture You’ll notice that the chapter openers in this book bring in movies and television shows from popular culture. Lots of them have situations and themes that deal with things like leadership, team dynamics, attitudes, personalities—all the major topics of this textbook. The point is: Management learning is everywhere; we just have to look for it.

Question What management insights are available in various elements of our popular culture and reflected in our everyday living?

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Listen to music. Pick out themes that reflect important management concepts and theories.

Put them together in a multimedia report that presents your music choices and describes their messages about management and working today.

Watch television. Look again for the management themes. In a report, describe what popular television programs have to say about management and working. Also consider TV advertisements. How do they use and present workplace themes to help communicate their messages?

Read the comics looking for management themes. Compare and contrast management and working in two or three popular comic strips.

Read a best-selling novel. Find examples of management and work themes in the novel.

Report on what the author’s characters and their experiences say about people at work.

Create your own alternative to the above suggestions Share results with your class and instructor

Cases for Critical Thinking Zara International – Fast Fashion’s Style Maker Sidebar : Uniqlo Change-Driven Manager Crafts Uniqlo’s Success The case profiles Zara – a story of great supply chain prowess. In this world of “hot today, gauche tomorrow,” no company does fast fashion better than Zara. Shoppers in 79 countries, and counting, are fans of Zara’s knack for bringing the latest styles from sketchbook to clothing rack at lightning speed and reasonable prices. Low prices and a rapid response to fashion trends give Zara a top ranking among global clothing vendors. Now that Zara has shown the world how to do “fast fashion” so well, won’t others find it easy to copy their success story?

Case discussion questions and suggested answers: 1. DISCUSSION In what ways are elements of the behavioral or human resource approaches to management evident at Zara International? Provide specific examples.

Classical management finds the best way to produce a product or service so both workers and employers benefit from increased efficiencies. Zara seems to have embraced the efficiencies found in Weber's bureaucratic form of organizations. The rapid response to fashion trends require efficient design, production, distribution and inventory management. All departments must clearly know their purpose with a clear division of labor, levels of authority are clearly defined, rules and procedures facilitate the fast turnaround necessary to get fresh fashions in the store within days of design.

Fayol's administrative principles are in evidence in Zara's clear foresight or plan of action, organization allows fast mobilization of resources, command is evident in the vision and leadership of its founder and Chairman, Amancio Ortega Gaona. Across its 80,000 workers, coordination requires close communication and efficient operations, and control is seen in their ambitious goals for growth.

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2. DISCUSSION One of Zara’s major competencies is producing goods and services efficiently and effectively. In what ways does this competency require great strength with the quantitative management approaches, including operations management?

Operations management involves production of goods and services and how they can be improved. Zara seems to have perfected the process of spotting fashion trends and bringing them to their retail stores in record time. They accomplish this by utilizing just-in-time inventory management and production practices along with distribution centers that processes orders within 24 hours..

3. PROBLEM SOLVING How would you describe CEO Tadashi Yanai’s management style? Does he tend more toward Theory X or more toward Theory Y? Looking toward the future of the company as an expanding global player in a cutthroat industry, should Yanai expect his sons to follow a similar style to achieve success? Or, will the challenges of competition require a change in management style at the top?

Before answering the question, let’s take a look the organizational benefits of Tadashi Yanai’s current Theory Y viewpoint. Yanai is a manager who sees value in the details. He believes that managers should look at the day-to-day details and that unless they do so, they’re not truly managers. He also sees the value of a hands-on management approach with empowered, creative, enthusiastic and dedicated employees. He assumes the best of his people and doesn’t believe in delegating work to subordinates to perform administrative work. Instead, he hires dedicated, detail-oriented managers and remains in the trenches with them to see what works and what doesn’t. The positive Theory Y assumptions have indeed created a self fulfilling prophecy of responsible and creative employees willing to work, capable of self-control and self-direction. It is not unreasonable to say that because of Yanai’s Theory Y assumptions, that Uniqlo employees act with initiative, responsibility and high performance – which has clearly contributed to the company’s growth.

As a Theory X thinker, Yanai would be likely to act in more of a directive “command-andcontrol” way, giving his managers little say over their work. Because of this type of treatment, his employees might be less motivated and empowered to make decisions. With such negative assumptions, Yanai would probably not have the time to exercise his current attention to detail and hands-on management style. If he held Theory X assumptions by expecting his employees to dislike work, lack ambition, act irresponsibly, resist change, and prefer to follow rather than lead, the company’s creativity and growth prospects might look very different. As a result, Uniqlo managers might be more passive, dependent, and reluctant to do only what they are told. In the case of Tadashi Yanai and the competitive retail landscape, it appears that a Theory Y orientation is working for Uniqlo. It is also more appropriate and consistent with human potential.

4. FURTHER RESEARCH Zara, intent on making small batches in facilities located close to its distribution headquarters

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and rarely marking items down, is remarkably different than Uniqlo. Uniqlo produces garments on a steady basis year-round without “chasing every trendlet.” It keeps its factory costs reined in by booking in advance. Gather the latest information about Zara and Uniqlo and discuss the differences in their supply chain management approaches, and the implications of these differences for their future success.

Supply Chain Comparison of Zara and Uniqlo: Zara Chases trends and reacts to increased demand by moving an item from factory floor to store shelves in a few weeks. Cutting edge fashion at affordable prices.

Produces small batches in facilities close to distribution headquarters in Spain.

Fast response global supply, production and retail network. Rarely markdowns or discounts (small batches are produced rather than large volume which can stay on store shelves).

Unique product design systems, order administration, production, distribution and retailing.

Demand for a product dictates production and delivery. In just 15 days after a product is designed, it is delivered to stores worldwide.

Moves an item from factory floor to store shelves in a few weeks

Uniqlo High quality clothing at reasonable prices with a nofads approach. Does not chase trends. Budget friendly without feeling cheap.

Produces high volume garments and goods on a steady basis year round. This volume translates to lower prices on raw materials and fibers.

Sells wardrobe essentials (underwear, for example), which provides for more stable demand.

Books factory time in advance to keep costs down Uniqlo has 70 partner factories in China and 70% of its product is made in China. Can adjust production to reflect sales trends.

Specialty store retailer of private label apparel incorporates the entire clothes-making process from procurement of materials, product planning, development and manufacture through distribution and retail to inventory management.

Predictive planning for manufacturing, so there are rarely markdowns.

The implications for their future success remain to be seen. In a recession, the Uniqlo model of selling basics may bode well. On the other hand, the “fast fashion,” trend chasing, low prices found at Zara remains a differentiator. The speed and agility of the Zara supply chain further strengthens the company’s prospects for growth.

Additional Exercises for Chapter 2: Bureaucracy Exercise Chapter 2 describes Max Weber’s characteristics of an ideal bureaucracy. Break the class into teams of three or four and ask each group to collectively discuss these five characteristics.

Ask them to list organizations that, in their view, have many (or all) of these characteristics.

What organizations, if any, seem to be best suited for such a style/type of organization?

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Students then should discuss the benefits and disadvantages of the organizations they have discussed. Some examples would be state or federal governmental agencies (license tags, passports, etc.), state colleges, large banks, the military etc.

Allow teams about 45 minutes for this exercise. The teams will then report to the class the summaries of their conclusions.

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CHAPTER 3 Ethics and Social Responsibility Character doesn’t stay at home when we go to work Chapter 3 Overview Each Chapter contains several inset features designed to assist the student reader in applying the concepts to relevant examples. Management Live illustrates how popular movies demonstrate management concepts in the chapter. Role Models features a management professional that illustrates key chapter concepts in a novel, visionary or inspirational way. Explore Yourself refers students to self assessment activities relevant to concepts in the chapter. Ethics Check profiles examples of ethical issues in management. Manager's Library features books that illustrate current events or trends relevant to chapter concepts. Facts to Consider introduces research or trends that may be used for class discussion in the classroom or online for distance learning.

Chapter three provides a thorough review of ethics and corporate social responsibility. The chapter begins with a discussion of the importance of ethics and its practice in the workplace.

Emphasis is placed upon the role of a manager to inspire high standards of ethical conduct by setting a precedent as a role model. Various approaches to what is considered ethical are explored. How ethical dilemmas occur at work and how people tend to rationalize unethical behavior is discussed. As personal influencers of ethical decision making, Lawrence Kohlberg’s levels of moral development are reviewed. Discussed are various approaches to maintaining high ethical conduct within an organization, which include: ethics training, protecting whistleblowers, and company codes of ethical conduct.

Another main chapter topic reviews the importance of the ways an organization can serve society, also known as corporate social responsibility or CSR. Classical and socioeconomic, the two views for and against CSR, are compared and contrasted. Some of the questions posed include: Does an organization have an obligation to give back to society? Is its sole existence to make a profit and satisfy its numerous stakeholders? Triple bottom line, which measures a company in ways beyond just its financial results, is described. And finally, the importance of sustainability, sustainable development and the movement of social entrepreneurs, those who take business risk for a social mission and not just financial gain is discussed. Sustainable business and sustainable development are described as ways organizations preserve and protect the environment for future generations.

Chapter 3 Takeaway Questions: • • •

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Takeaway 3.1: How do ethics and ethical behavior play out in the workplace?

Takeaway 3.2: How can we maintain high standards of ethical conduct?

Takeaway 3.3: What should we know about the social responsibilities of organizations?

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Chapter 3 Objectives: • • • •

Define ethics and ethical behavior.

Distinguish between terminal values and instrumental values.

Understand alternative approaches to moral reasoning.

Explain that what is considered ethical varies among cultures and moral reasoning approaches.

Understand the contrasting positions of cultural relativism and moral absolutism.

Explain how ethical dilemmas can arise as tests which challenge personal ethical beliefs, values and standards.

Understand how an ethical dilemma is a situation which requires a course of action that, although offering potential benefits, may be considered unethical.

Explain the tendency for people to rationalize their questionable behavior of an unethical act to make it somehow seem acceptable and how ethical decision making is influenced by personal character.

Compare and contrast Kohlberg’s three levels of moral development.

Explain how managers can act as positive ethics role models to inspire ethical conduct and how problems are more manageable with solid ethical frameworks.

Distinguish between an immoral, amoral, and moral manager.

Understand the role of training in ethical decision making to improve ethical conduct.

Explain why whistleblowers expose organizational misdeeds.

Understand how an organization’s formal code of ethic set standards for ethical conduct and states the values and principles members are expected to display.

Describe stakeholders and their “stake” or interest in how well an organization performs.

Define Corporate Social Responsibility or CSR and its importance as an obligation of an organization.

Discuss the concept of triple bottom line and the importance of measuring more than just profit.

Compare and contrast the classical and socioeconomic views of corporate social responsibility.

Discuss the goals of social entrepreneurs as it relates to making a profit and finding new ways to solve social problems.

Discuss the ways a social responsibility audit is used to assess an organization’s performance.

Discuss the importance of sustainability and sustainable development and why it is a priority for many businesses.

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Chapter 3 Lecture Outline: •

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Takeaway 3.1: How do ethics and ethical behavior play out in the workplace? o Ethical Behavior is values driven. o What is considered ethical varies among moral reasoning approaches. o What is considered ethical can vary across cultures.

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o Ethical dilemmas arise as tests of personal ethics and values. o People tend to rationalize unethical behaviors.

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Takeaway 3.2: How can we maintain high standards of ethical conduct? o Personal character and moral development influence ethical conduct. o Managers as positive role models can inspire ethical conduct. o Training in ethical decision making can improve ethical conduct. o Protection of whistleblowers can encourage ethical conduct. o Formal codes of ethics set standards for ethical conduct.

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Takeaway 3.3: What should we know about the social responsibilities of organizations? o Social responsibility is an organization’s obligation to best serve society. o Scholars argue cases for and against corporate social responsibility. o Shared value integrates corporate social responsibility into business strategy. o Social businesses and social entrepreneurs are driven by social responsibility. o Social responsibility audits measure the social performance of organizations. o Sustainability is an important social responsibility goal.

Chapter 3 Supporting Materials: Figures • Figure 3.1: How Do Alternative Moral Reasoning Approaches View Ethical Behavior?

• Figure 3.2: How Do Cultural Relativism and Moral Absolutism Influence International Business Ethics?

• Figure 3.3: What Are the Stages in Kohlberg’s Three Levels of Moral Development?

• Figure 3.4: Who Are the Stakeholders of Organizations?

Thematic Boxes • Management Live: Individual character and Avatar • Facts to Consider: Behavior of Managers is Key to an Ethical Workplace • Excerpts from the Universal Declaration of Human Rights, United Nations • Table 3.1: Common Examples of Unethical Behavior at Work • Explore Yourself: More on individual character • Tips to Remember: Checklist for Dealing with Ethical Dilemmas • Role Models: Gary Hirshberg Goes for Triple Bottom Line at Stonyfield Farm • Manager’s Library: Conspicuous Capitalism: Liberating the Heroic Spirit of Business by John Mackey and Raj Sisodia • Ethics Check: Signing on to a Green Supply Chain Applications TestPrep 3 Multiple-Choice Questions • Skill Building Portfolio o Self-Assessment: Terminal Values Survey

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o Class Exercise: Confronting Ethical Dilemmas o Team Project: Organizational Commitment to Sustainability Case Snapshot: Patagonia—Leading a Green Revolution Sidebar on Billionaires and the Growing Business of Philanthrocapitalism Hot Topic: Good Idea or Not? Sustainability ranks low among chief executive challenges

DISCUSSION TOPIC You can start the discussion of this chapter by asking students to identify examples of ethical and unethical business practices that they have read about, heard about, personally witnessed or experienced. Ask the students how these practices seem to have been viewed by the public at large. Also, have the students discuss how these practices seem to have affected the organization and relevant stakeholders in both the short term and the long term.

To bring ethical and unethical behavior closer to home, discuss students’ behavior within the college/university context. Topics may include cheating, adherence to campus regulations, plagiarism, maintenance of the physical environment, or unauthorized use of materials or equipment.

Chapter Outline Takeaway Question 3.1 How Do Ethics and Ethical Behavior Play Out in the Workplace?

Question 3.1 Pick up any business newspaper and the headlines profile business scandals, financial failures, criminal charges, exploitation and greed. It can seem pervasive. This leaves us just a tad bit jaded about executive leadership in our society. This is why it is more important than ever to understand the moral and social implications of behavior in and by organizations. We begin with a discussion of ethics and ethical behavior.

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Ethics is a code of moral principles that sets standards of good or bad, or right or wrong, in our conduct.

Ethical Behavior is “right” or “good” in the context of a governing moral code which help people make moral choices among alternative courses of actions. Ethical behavior can always be described as what is “good” or “right.”

Ethical behavior is values driven. ✓ Values are the underlying beliefs and judgments regarding what is right or desirable and that influence individual attitudes and behaviors. Psychologist Milton Rokeach distinguishes between terminal and instrumental values: ➢ Terminal values are preferences about desired end states ➢ Instrumental values concern the means for accomplishing these ends ➢ These values tend to be enduring for an individual but may vary considerably from one person to the next, which explains why different people respond quite differently to the same situation.

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Facts to Consider: Behavior of Managers is Key to an Ethical Workplace A survey conducted for Deloitte & Touche USA includes the following findings: • Forty-two percent of workers say the behavior of their managers is a major influence • The most common unethical acts by managers include verbal, sexual, and racial harassment, misuse of company property, and giving preferential treatment.

• Ninety-one percent of workers are more likely to behave ethically when they have work-life balance.

• Top reasons for unethical behavior are lack of personal integrity and lack of job satisfaction.

• Ask students if there are surprises in these data and whether they agree that this emphasis on manager behavior is justified as they key to ethical behavior in the workplace. What do students think is acceptable and unacceptable workplace behaviors?

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What is considered ethical varies among moral reasoning approaches. ✓ Figure 3.1 summarizes the four philosophical views of ethical behavior ✓ Utilitarian view considers ethical behavior to be that which delivers the greatest good to the greatest number of people ➢ An example in the recent recession would be the companies that cut jobs and closed divisions in order to help the organization survive for the remaining employees and their communities (rather than lose all jobs to business failure). ✓ Individualism view is focuses on the long-term advancement of self-interests ➢ Unethical behavior may pay off in the short-term, but in the long-term it catches up and the consequences can be devastating. Cheating on a test can lead to a short term gain, but if caught, you run the risk of the long term loss of being expelled. ✓ Justice view considers a behavior to be ethical when people are treated impartially and fairly, according to legal rules and standards ➢ Procedural justice involves the fair administration of policies and rules ➢ Distributive justice involves the allocation of outcomes without regard to individual characteristics such as gender, race, ethnicity or age ➢ Interactional justice focuses on the treatment of everyone with dignity and respect ➢ Commutative justice focuses on the fairness of exchanges or transactions and involves all parties to a transaction entering it freely with all relevant and available information. ✓ Moral-rights view considers behavior to be ethical when it respects and protects the fundamental rights of people. See the margin for: ➢ Excerpts from the Universal Declaration of Human Rights of the United Nations. ➢ Students may have examples of people who are deprived of basic human rights such as child labor, repression of free speech or practice of religion.

DISCUSSION TOPIC Ask students for examples of each of the above views of ethical behavior. These can be either hypothetical examples, from current events or situations they have encountered in their own

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lives. Ask them to indicate which view they think is the most useful in business, and why. Also ask them to indicate which view they think is the most useful in their personal lives, and why.

Compare and contrast the two sets of answers, exploring the nature and reasons for any differences in the two sets.

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What is considered ethical can vary across cultures. ✓ Cultural relativism suggests that there is no one right way to behave and that ethical behavior is determined by its cultural context. The classic rule of “when in Rome, do as the Romans do” reflects this position -- the values and practices of the local setting determine what is right or wrong. ✓ Moral absolutism is the belief that ethical standards apply universally among all cultures and that universal values transcend cultures in determining what is right or wrong. ✓ Ethical imperialism is externally imposing one’s own ethical standards on others ✓ Figure 3.2 contrasts the influence on international business ethics of two diametrically opposed extremes of cultural relativism and moral absolutism.

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Ethical dilemmas arise as tests of personal ethics and values. ✓ An Ethical dilemma is a situation requiring a decision about a course of action that, although offering potential benefits, may be considered unethical. Ethical dilemmas arise as tests of personal ethics and values. ➢ May be no clear consensus on what is “right” or “wrong” ➢ See Table 3.1 inset of common examples of unethical behavior at work, which include: ➢ Discrimination or denying people a promotion due to reasons not relevant to job performance (i.e., race, religion, gender, age). ➢ Sexual Harassment or making a co-worker feel uncomfortable through comments, actions or requesting sexual favors ➢ Conflict of interest or taking bribes, kickbacks or gifts in return for making favorable decisions ➢ Customer confidence or giving someone privileged information regarding the activities of a customer ➢ Using organizational resources for one’s personal benefit ➢ Managers responding to a Harvard Business Review survey said many of their dilemmas arise out of conflicts with superiors, customers, and subordinates. The most frequent involve dishonesty in advertising and in communications with top management, clients, and government agencies. ➢ Holding people accountable for unrealistically high performance goals are high on the list of bad boss behaviors which creates undue pressure. ➢ When people feel extreme performance pressures, they can act incorrectly and engage in questionable practices to meet these expectations

DISCUSSION TOPIC

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A good way to get students thinking about ethical dilemmas and to generate a lively discussion is to ask students how they would respond to the following three dilemmas. The range of student responses is likely to be quite broad. Next, you can present the results of the Harvard Business Review survey from which they were taken.

Case 1: foreign payment. A governmental official of a foreign nation asks you to pay a $200,000 consulting fee. In return for the money, the official promises special assistance in obtaining a $100 million contract that would produce at least a $5 million profit for your company. The contract will probably go to a foreign competitor if not won by you. Survey results: 42% of the responding managers would refuse to pay; 22% would pay, but consider it unethical; 36% would pay and consider it ethical in a foreign context.

Case 2: competitor’s employee. You learn that a competitor has made an important scientific discovery. It will substantially reduce, but not eliminate, your profit for about a year. There is a possibility of hiring one of the competitor’s employees who knows the details of the discovery.

Survey results: 50% would probably hire the person; 50% would not.

Case 3: expense account. You learn that a manager in your company who earns $50,000 a year has been padding his expense account by about $1,500 a year. Survey results: 89% feel padding is okay if superiors know about it; 9% feel it is unacceptable regardless of the circumstances.

(Source: Brenner, S.N., and Mollander, E.A. “Is the Ethics of Business Changing?” Harvard Business Review, January-February 1977, Volume 55, p. 60.)

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People have tendencies to rationalize unethical behaviors. ✓ Even though most of us consider ourselves as “good” people, when we do something that might be “wrong,” or unethical, the common response is to rationalize the questionable behavior. Common ways to rationalize unethical behavior: ➢ It’s not really illegal ➢ It’s in everyone’s best interests ➢ No one will ever know about it ➢ The organization will stand behind them

Explore Yourself: More on Individual Character This feature offers students a chance to determine their personal values system by taking the Terminal Values Assessment (goals individuals would like to achieve in their lifetimes) in the Skill-Building Portfolio. The assessment tool is intended to help students reflect on their values.

Examples include: family security, freedom, mature love, pleasure, happiness, self-respect, wisdom, an exciting life, a world at peace, and so on.

3.1 Questions for discussion suggested answers 1) For a manager, is any one of the moral reasoning approaches better than the others?

Students may debate the merits of all approaches. Ask them to give examples of where each may be appropriate such as “the justice view is the view that seems most fitting for a CEO with a diverse workforce.” The instructor may also consider assigning different

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approaches to small groups of students and ask them to come up with an example that would advocate one approach as the best for the situation.

2) Will a belief in cultural relativism create inevitable ethics problems for international business executives?

Cultural relativism in all likelihood will cause problems, since, as the name implies, there is no “clear” boundary of what is right and wrong. Given a profit motivation, the temptation would be great to make decisions that could possibly result in unethical behavior.

3) Are ethical dilemmas always problems, or can they be opportunities?

Ethical dilemmas can be opportunities. This is particularly true if it is a learning opportunity for the organization. An example might be when one company learns of proprietary information about a competitor through a supplier. By choosing not to exploit such a secret and use it, the manager or decision maker is sending a very strong message and setting a tone for the entire organization.

Takeaway Question 3.2 How Can We Maintain High Standards of Ethical Conduct?

Although there is a tendency to read about and focus on the bad behavior within organizations, we shouldn’t forget that good does exist in a good many of them. There are organizations whose managers set the bar very high when it comes to ethics and codes of conduct expected for all employees. And there are a variety of methods used to encourage consistent ethical behavior.

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Personal character and moral development influence ethical decision making. ✓ Ethical frameworks are well-thought-out personal rules and strategies for ethical decision-making ✓ Organization and action contexts influence workplace ethics ✓ Conditions in the external environment also influence organizations and their members (includes laws and regulations, and social norms and values) ✓ Lawrence Kohlberg describes three levels of moral development through which individuals progress (see Figure 3.3). ➢ Preconventional or Self-Centered Behavior - the individual focuses on selfinterests, avoiding harm and making deals for gain. ➢ Conventional or Social-Centered Behavior - attention becomes more socialcentered and the individual tries to be consistent and meet obligations to peers. ➢ Postconventional or Principle-Centered Behavior - principle-centered behavior results in the individual living up to societal expectations and personal principles.

DISCUSSION TOPIC Ask small groups of students to identify an ethical dilemma that commonly occurs for students as they pursue their educations. Each group should focus on a different dilemma. Then have each group discuss how their dilemma should be handled, given the checklist for making ethical decisions.

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Managers as positive role models may inspire ethical conduct.

• The way top managers approach ethics issues can have a powerful effect on what happens in their organizations ➢ Policies that set high ethics standards ➢ Set a personal example of the behavior you expect, “Walk the talk”. ➢ Margin graphic illustrates three ways managers may choose to behave: • Immoral managers choose to behave ethically • Amoral managers disregard the ethics of an act or decision, but do so unintentionally by failing to consider the ethical consequences of his or her actions • Moral managers make ethical behavior a personal goal

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Training in ethical decision making may improve ethical conduct.

• Ethics training helps employees understand and best deal with ethical aspects of decision making. Ethics training helps employees understand and best deal with ethical aspects of decision making. More and more college students majoring in business are required to take ethics courses as a required part of their curriculum.

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Tips to Remember: When faced with ethical dilemmas, there are tips to Remember, which include: ✓ Recognize the ethical dilemma ✓ Get the facts ✓ Identify your options ✓ Test each option ✓ Decide which option to follow ✓ Ask the spotlight questions below to double-check your decision ✓ Take action

✓ Remember to never underestimate the risk of internet exposure. Hardly a day goes by without reading about a public official humiliated and damaged by photos or something posted online.

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Spotlight Questions: ➢ How would I feel if my family found out about my decision? ➢ How would I feel if my decision is reported in the local newspaper or posted on the internet? ➢ What would a person I know who has the strongest character and best ethical judgment say about my decision?

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Protection of whistleblowers can encourage ethical conduct. ✓ Whistleblowers are people who expose organizational misdeeds in order to preserve ethical standards and protect against wasteful, harmful, or illegal acts ✓ The very nature of organizations as power structures creates potential barriers to whistleblowing

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➢ Strict chain of command can make it hard to bypass the boss if he or she is doing something wrong ➢ Strong work group identities can discourage whistle-blowing and encourage loyalty and self-censorship ➢ Conditions of ambiguous priorities can make it difficult to distinguish right from wrong DISCUSSION TOPIC Ask students to describe what they would do if they happened to be in a situation where they could become whistleblowers. Then share the following practical tips for whistleblowers: 1. Do make sure you really understand what is happening and that your allegation is absolutely correct.

2. Do not assume the law automatically protects you.

3. Do talk to an attorney to ensure that your rights will be protected and proper procedures are followed.

4. Do not talk first to the media.

5. Do keep accurate records to document your case; keep copies outside of your office.

6. Do not act in anticipation of a big financial windfall if you end up being fired.

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Formal codes of ethics set standards for ethical conduct. ✓ Codes of ethics formally state the values and ethical principles that members are expected to display ➢ Some require employees to read and agree as a condition of employment ➢ Can be very specific guidelines on how to behave in situations ➢ Increasingly common ➢ Statements in a code of ethics are related to discrimination, working conditions, freedom of association, and so on.

3.2 Questions for discussion suggested answers 1) Is it right for organizations to require ethics training of employees?

It is not only right for a company to require ethics training; it is the responsible action that every company should take. It also reduces a company’s exposure even if an employee does commit an ethics violation. For instance, it increases the defense that the company does not have a climate for acceptance of sexual harassment if training can be demonstrated to have occurred. Most importantly, it explicitly sets out the ethics rules, and lets employees know that they are important enough to pay workers to attend.

2) Should whistleblowers have complete protection under the law?

Whistleblowers are entitled to complete protection and are protected by law and policies.

They are taking a high risk for actions that may jeopardize their careers or may even threaten their personal safety. The benefits to society for avoidance of situations such as Enron far outweigh any undesired or unintended costs of added federal or state protective laws and regulations.

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3) Should all managers be evaluated on how well they serve as ethical role models?

Yes - there is perhaps no better way to reinforce the importance of ethics than rewarding (or penalizing) managers for their ethical conduct. As a manager, modeling ethical behavior will replicate the behavior so crucial within an organization.

Takeaway Question 3.3 What Should We Know About the Social Responsibilities of Organizations?

Organizations are becoming increasingly aware that they do not exist separate from society.

Corporate social responsibility and triple bottom line are concepts which many students already have become familiar with through daily interactions as consumers making purchases at both large and small companies.

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Stakeholders, all of whom have varying interests, are affected in some way by how an organization performs and conducts business. Stakeholders, the individuals, groups and other organizations, have a direct “stake” or interest in an organization and its performance.

Figure 3.4 lists stakeholders as: ➢ ➢ ➢ ➢ ➢ ➢ ➢ ➢

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Customers Suppliers Competitors Regulators Investors/Owners Employees Future Generations Labor Unions

➢ Stockholders ➢ Federal, State, local governments ➢ Educational Institutions ➢ Public-Interest Groups ➢ Financial Institutions ➢ Legal Institutions

Social responsibility is an organization’s obligation to best serve society. ✓ Corporate Social Responsibility (CSR) advocates organizational behavior that serves its own mission and interests by acting in a way that serves the best interests of all stakeholders, including society as a whole. ✓ Triple bottom line is a concept that evaluates organizational performance on financial, social and environmental criteria rather than just financial. ✓ Three Ps of Organizational Performance are: ➢ Profit ➢ People ➢ Planet

Role Models: Gary Hirshberg Goes for Triple Bottom Line at Stonyfield Farm Gary Hirshberg has built a company that is the largest producer of organic yogurt in the world.

Like many other companies that hold corporate social responsibility as a core value, his company focuses on the Triple Bottom Line as a measure of success rather than a purely financial bottom

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line. Questions probe students' thoughts on how focusing on people and planet in addition to profit can lead to success and whether this type of focus can be effective only when starting a business from scratch •

Scholars argue cases for and against social responsibility. ✓ In academic and public policy circles, there is much debate over corporate social responsibility or CSR. The classical view takes a stand against making CSR a business priority, whereas the socioeconomic view advocates for it. ✓ One of the problems with the pro and con CSR debate is that it pits the interests of shareholders and owners against other stakeholders in a win-lose fashion. ✓ Classical view of CSR – “The business of business is business” meaning that the goal of business is to produce profits for the owners or stockholders and that management’s only responsibility in running a business is to maximize profits and shareholder value. Milton Friedman advocated, along with many others, that society’s best interests are served by managers who strive for profits without expanding the business mission to include social causes. ✓ Socioeconomic view of CSR – Business must focus on all stakeholders including society at large and that management of any organization should be concerned for the broader social welfare, not just corporate profits. This may lead to improved financial performance as a positive perception of the business leads to a “virtuous circle”. ✓ A virtuous circle is a best-case scenario where corporate social responsibility leads to improved financial performance that leads to greater social responsibility.

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Shared value integrates corporate social responsibility into business strategy ✓ Shared value approaches business decisions with understanding that economic gains and social progress are interconnected. This approach integrates corporate social responsibility into business strategy. ➢ Advocated by Michael Porter and Mark Kramer, they believe that executives can and should make business decisions with full understanding that economic gains and social progress are interconnected.

Find Inspiration: “Business Education Must Reframe the ‘Winner Takes All’ Mentality.”

Carolyn Woo, former dean of the Mendoza College of Business at the University of Notre Dame and now President and CEO of nonprofit Catholic Relief Services, believes that business can be a force for the better or worse in society. Furthermore, she urges business students to abandon the “winner takes all” mentality. Business decisions in the shared value model are made so that economic value is created by pursing social value. This way, business advantage is found by aligning practices and strategies with social contributions. An example of a business decision with the shared value model is Nestles. The company locally sources and supports rural businesses near its factories, while reducing distribution costs and ensuring supplies of highquality products. Ask students to describe recent examples or situations from their experiences that would fit in the ‘best” and “worst” categories.

Manager's Library:

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John Mackey (CEO, Founder of Whole Foods) and Raj Sisodia (Bentley College marketing professor), in their book Conscious Capitalism: Liberating the Heroic Spirit of Business (Harvard Business Review Press, 2013), argue that business and capitalism are fundamentally good. But, they also add that it’s the job of business leaders to make sure things turn out that way. The concept behind the acclaim is “conscious capitalism” defined by the authors as capitalism pursued by leaders who understand that business can create lots of value for society, act ethically, and help people and communities gain prosperity.

“Reflect and React” questions probe students’ views on the concept of conscious capitalism and how business can do good for society.

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Social business and social entrepreneurship point the way in social responsibility. ✓ Social business has as its foundation the goal of addressing a social problem, yet may still return a profit. ✓ Social entrepreneurs are people who take business risk with the goal of finding novel ways to solve pressing social problems at home and abroad.

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Social responsibility audits measure the social performance of organizations. ✓ A social responsibility audit measures and reports on an organization’s performance in various areas of corporate social responsibility. ➢ Criteria for evaluating socially responsible practices include, but are not limited to: ➢ Economic ➢ Legal ➢ Ethical ➢ Discretionary •

Sustainability is an important social responsibility goal. ➢ Sustainability is a goal that addresses the rights of present and future generations as co-stakeholders of present-day natural resources. ➢ Sustainable business is where firms operate in ways that both meet the needs of customers and protect or advance the well-being of our natural environment. ➢ Sustainable development describes the practices that make use of environmental resources to support societal needs today while also preserving and protecting the environment for future use for future generations. ➢ Environmental Capital or Natural Capital, an increasingly popular and useful term in conversations about sustainable development, is the available natural resources ➢ Atmosphere, land, water, air, minerals ➢ ISO 14001 is a global quality standard for organizations that have objectives for sustainable business practices. ➢ Human Sustainability socially responsible organizations must consider the effect of management practices on employees.

DISCUSSION TOPIC

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Discuss ways in which businesses can protect the environment and save money at the same time, such as grocery stores selling low-priced canvas bags to replace paper or plastic ones; coffee shops encouraging patrons to bring in their own cups; and fast food restaurants providing recycling bins so customers can sort their trash. Ask students for other examples.

3.3 Questions for discussion suggested answers 1. Choose an organization in your community. What questions would you ask to complete an audit of its social responsibility practices?

The social audit would include criteria to assess the organization’s performance in terms of the impact a wide range of stakeholder groups. Criteria would include Economic Responsibility, Legal Responsibility, Ethical Responsibility and Discretionary Responsibility. This would be an interesting small group activity, requiring all groups to audit different organizations. Other criteria might include: ✓ Environment: byproducts used, emissions to air and water through manufacturing, waste produced, energy consumed, protecting and restoring the environment. ✓ Community: charitable corporate investment and giving, community investments, employee activities and volunteer hours, customer diversity and inclusion, ✓ Workplace: employee health and safety, low turnover, employee satisfaction, employee diversity, employee training and learning, ✓ providing customers value, providing sound quality goods and services ✓ Marketplace: reach in disadvantaged areas, supply chain efficiency, customer satisfaction surveys ✓ Respecting and promoting ethics, transparency, human rights, and accountability.

2. Is the logic of the virtuous circle a convincing argument in favor of corporate social responsibility?

Responses will differ along the same arguments as the classical view of CSR and socioeconomic view of CSR. Students may have read research that supports the view that socially responsible companies are more profitable over time than those that hold a more classical view. Others may have research that supports the classical view. Ask them to compare with examples.

3. Should government play a stronger role in making sure organizations commit to sustainable development?

Recent corporate governance failures of AIG and other financial institutions may tip student opinion to favor more government involvement. The reporting requirements and regulations added by the Sarbanes – Oxley Act do not appear to have prevented behavior students perceive to be unethical. The question needs to be asked: “can any amount of regulation prevent unethical behavior of amoral or immoral behavior of managers such as Bernard Madoff?”

Teaching Notes:

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In this section, ideas, exercises, and assignments are provided to assist you in integrating the concepts in Exploring Management 4e for your students, especially the special features of the text.

Management Live: Individual Character and Avatar Avatar, a film by James Cameron, is a cross-cultural journey that opens a window to sustainable development and personal integrity. In the film, cultures clash over resources and individuals are forced to confront their ethics and values. Even though the native culture and way of life may be destroyed without the Unobtainium, in exchange for corrective surgery, greedy Parker Selfridge grants paraplegic Jake Sully corrective for a deal to infiltrate the land of Pandora, rich with valuable Unobtainium.

Have students pay special attention to Jake’s personal journey with ethical dilemmas. It’s a reminder that individual character isn’t just something we think about on occasion.

Facts to Consider : Behavior of Managers is Key to an Ethical Workplace A survey conducted for Deloitte & Touche USA includes the following findings: • Forty-two percent of workers say the behavior of their managers is a major influence • The most common unethical acts by managers include verbal, sexual, and racial harassment, misuse of company property, and giving preferential treatment.

• Ninety-one percent of workers are more likely to behave ethically when they have work-life balance.

• Top reasons for unethical behavior are lack of personal integrity and lack of job satisfaction.

• Ask students if there are surprises in these data and whether they agree that this emphasis on manager behavior is justified as they key to ethical behavior in the workplace. What do students think is acceptable and unacceptable workplace behaviors?

Role Models: Gary Hirshberg of Stonyfield Farm Gary Hirshberg has built a company that is the largest producer of organic yogurt in the world.

Like many other companies that hold corporate social responsibility as a core value, his company focuses on the Triple Bottom Line as a measure of success rather than a purely financial bottom line.

What's the Lesson Here? Questions probe students' thoughts on how focusing on people and planet in addition to profit can lead to success and whether this type of focus can be effective only when starting a business from scratch

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Find Inspiration: “Business Education Must Reframe the ‘Winner Takes All’ Mentality.”

Carolyn Woo, former dean of the Mendoza College of Business at the University of Notre Dame and now President and CEO of nonprofit Catholic Relief Services, believes that business can be a force for the better or worse in society. Furthermore, she urges business students to abandon the “winner takes all” mentality. Business decisions in the shared value model are made so that economic value is created by pursing social value. This way, business advantage is found by aligning practices and strategies with social contributions. An example of a business decision with the shared value model is Nestles. The company locally sources and supports rural businesses near its factories, while reducing distribution costs and ensuring supplies of highquality products.

Manager’s Library: Conscious Capitalism: Liberating the Heroic Spirit of Business by John Mackey and Raj Sisodia John Mackey (CEO, Founder of Whole Foods) and Raj Sisodia (Bentley College marketing professor), in their book Conscious Capitalism: Liberating the Heroic Spirit of Business (Harvard Business Review Press, 2013), argue that business and capitalism are fundamentally good. But, they also add that it’s the job of business leaders to make sure things turn out that way. The concept behind the acclaim is “conscious capitalism” defined by the authors as capitalism pursued by leaders who understand that business can create lots of value for society, act ethically, and help people and communities gain prosperity.

Reflect and React questions probe students’ views on the concept of conscious capitalism and how business can do good for society.

Ethics Check: Signing on to a Green Supply Chain The Ethics Check feature explores "cradle to grave" manufacturing, a sustainability concept that involves for planning on how a manufactured product will be disposed of or recycled at the end of its useful life without creating unnecessary waste or pollution.

In addition to the “You Decide” questions that examine sustainable manufacturing and product disposal, consider asking students if sustainability and "cradle to grave" concepts can be applied to higher education. How can they re-imagine college and the goods used in education so that there is minimal waste in the process? Selling used textbooks and recycling waste paper is a start. Food service and out-of-date electronics may push their creativity a little harder.

Hot Topic: Sustainability Ranks Low Among Chief Executive Challenges

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A global poll of 729 business leaders asked them to rank the top ten challenges facing them in the year ahead. Can you guess what the top four concerns were? In order, they were 1) human capital, 2) operational excellence, 3) innovation, and 4) customer relationships. The bottom three challenges were 8) corporate brand and reputation, 9) sustainability, and 10) trust in business. Questions to discuss: Should the fact that global businesses rank the challenge of sustainability at the bottom of its list be of concern? Is sustainability going to continue getting the attention it deserves? The questions seek answers as to whether the issues of sustainability, reputation, and trust are getting the attention they deserve.

Career Situation: What Would You Do? Today’s classroom could be a mirror image of tomorrow’s work place. You have just seen one of your classmates snap a cell phone photo of the essay question on an exam.

The instructor has missed this, and you’re not sure if anyone else observed what just happened. You know that the instructor is giving the exam to another section of the course starting next class period. Do you let this pass, perhaps telling yourself that it isn’t all that important? If you can’t let it pass, what action would you take?

It’s debate time, and you’ve been given the task of defending corporate social responsibility.

Make a list of all possible arguments for making CSR an important goal for any organization. For each item on the list, find a good current example that confirms its importance based on real events. In what order of priority will you present your arguments in the debate? And, what arguments “against” CSR will you be prepared to defend against?

Students’ answers will vary based upon their personal views and individual experiences.

Skill Building Portfolio: Terms to Define: Amoral manager Audit Classical view of CSR Code of ethics Commutative justice Corporate social responsibility Cultural relativism

development

Ethics training

Distributive justice

Immoral manager

Environmental capital or natural capital

Individualism view Instrumental values

Ethical behavior Interactional justice Ethical dilemmas ISO 14001 Ethical frameworks Justice view Ethical imperialism Moral absolutism Ethics

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Moral manager

Socioeconomic view of CSR

Moral rights view

Spotlight questions

Procedural justice

Stakeholders

Shared value

Sustainability

Social business

Sustainable

Social entrepreneurs

Sustainable business

Social responsibility

Terminal values

Three Ps of organizational performance Triple bottom line Utilitarian view Values Virtuous circle Whistleblowers

TestPrep 3: Multiple-Choice Questions 1. A business owner makes a decision to reduce a plant’s workforce by 10% in order to cut costs and be able to save jobs for the other 90% of employees. This decision could be justified as ethical using the _________ approach to moral reasoning. (b) individualism (a) utilitarian (c) justice (d) moral rights 2. If a manager fails to enforce a late-to-work policy for all workers—that is, by allowing some favored employees to arrive late without penalties—this would be considered a violation of _________. (a) human rights (b) personal values (d) cultural relativism (c) distributive justice 3. According to research on ethics in the workplace, _________ is/are often a major and frequent source of pressures that create ethical dilemmas for people in their jobs. (a) declining morals in society (b) long work hours (c) low pay (d) requests or demands from bosses 4. Someone who exposes the ethical misdeeds of others in an organization is usually called a/an _________. (b) ethics advocate (a) whistleblower (c) ombudsman (d) stakeholder 5. Two employees are talking about ethics in their workplaces.

Jay says that ethics training and codes of ethical conduct are worthless; Maura says they are the only ways to ensure ethical behavior by all employees. Who is right and why? (a) Jay—no one really cares about ethics at work. (b) Maura—only the organization can influence ethical behavior. (c) Neither Jay nor Maura—training and codes can encourage but never guarantee ethical behavior. (d) Neither Jay nor Maura—only the threat of legal punishment will make people act ethically.

6. Which ethical position has been criticized as a source of “ethical imperialism”? (a) individualism (b) absolutism (c) utilitarianism (d) relativism

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If a manager takes a lot of time explaining to a subordinate why he did not get a promotion and sincerely listens to his concerns, this is an example of an attempt to act ethically according to _________ justice. (a) utilitarian (b) commutative (c) interactional (d) universal

8. At what Kohlberg calls the _________ level of moral development, an individual can be expected to act consistent with peers, meet obligations, and follow rules of social conduct. (a) postconventional (b) conventional (c) preconventional (d) nonconventional 9. In respect to the link between bad management and ethical behavior, research shows that _________. (a) managers who set unrealistic goals can cause unethical behavior (b) most whistleblowers just want more pay (c) only top managers really serve as ethics role models (d) a good code of ethics makes up for any management deficiencies 10. A person’s desires for a comfortable life and family security represent _________ values, while his or her desires to be honest and hard working represent _________ values. (a) terminal; instrumental (b) instrumental; terminal (c) universal; individual (d) individual; universal 11. A proponent of the classical view of corporate social responsibility would most likely agree with which of these statements? (a) Social responsibility improves the public image of business. (b) The primary responsibility of business is to maximize profits. (c) By acting responsibly, businesses avoid government

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regulation. (d) Businesses should do good while they are doing business.

12. The triple bottom line of organizational performance would include measures of financial, social, and _________ performance. (a) philanthropic (b) environmental (c) legal (d) economic 13. An amoral manager _________. (a) always acts in consideration of ethical issues (b) chooses to behave unethically (c) makes ethics a personal goal (d) acts unethically but does so unintentionally

measure the highest level of commitment to socially responsible practices? (a) legal—obeying the law (b) economic—earning a profit (c) discretionary—contributing to community (d) ethical—doing what is right 15. What organizational stakeholder would get priority attention if a corporate board is having a serious discussion regarding how the firm could fulfill its obligations in respect to sustainable development? (a) owners or investors (b) customers (c) suppliers (d) future generations

14. In a social responsibility audit of a business firm, positive behaviors meeting which of the following criteria would

Short-Response Questions: 16. How does distributive justice differ from procedural justice?

Distributive justice means that everyone is treated the same, that there is no discrimination based on things like age, gender, or sexual orientation. An example would be a man and a woman who both apply for the same job. A manager violates distribute justice if he interviews only the man and not the woman as well, or vice versa. Procedural justice means that rules and procedures are fairly followed. For example, a manager violates distributive justice if he or she punishes one person for coming to work late while ignoring late behavior by another person with whom he or she regularly plays golf.

17. What are the three Spotlight Questions that people can use for double-checking the ethics of a decision?

The “spotlight questions” for double-checking the ethics of a decision are: “How would I feel if my family finds out?” “How would I feel if this were published in a local newspaper or on the internet?” “What would the person you know or know of who has the strongest character and best ethical judgment do in this situation?”

18. If someone commits an unethical act, how can he or she rationalize it to make it seem right?

The rationalizations include believing that (1) the behavior is not really illegal, (2) the behavior is really in everyone’s best interests, (3) no one will find out, and (4) the organization will protect you.

19. What is the virtuous circle of corporate social responsibility?

The “virtuous circle” concept of social responsibility holds that social responsibility practices do not hurt the bottom line and often help it; when socially responsible actions result in improved financial performance, this encourages more of the same actions in the future – a virtuous circle being created.

Integration and Application Questions: 20. A small outdoor clothing company in the U.S. has just received an attractive proposal from a business in Tanzania to manufacture the work gloves that it sells. Accepting the offer from the

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Tanzanian firm would allow for substantial cost savings compared to the current supplier.

However, the American firm’s manager has recently read reports that some businesses in Tanzania are forcing people to work in unsafe conditions in order to keep their costs down.

The manager is now seeking your help in clarifying the ethical aspects of this opportunity.

Questions: How would you describe to this manager his or her alternatives in terms of cultural relativism and moral absolutism? What would you identify as the major issues and concerns in terms of the cultural relativism position versus the absolutist position?

Finally, what action would you recommend in this situation, and why?

Answer: If the manager adopts a position of cultural relativism, there will be no perceived problem in working with the Tanzanian firm. The justification would be that as long as it is operating legally in Tanzania that makes everything okay. The absolutist position would hold that the contract should not be taken because the factory conditions are unacceptable at home and therefore are unacceptable anywhere. The cultural relativism position can be criticized because it makes it easy to do business in places where people are not treated well; the absolutist position can be criticized as trying to impose one’s values on people in a different cultural context.

Self-Assessment 3: Terminal Values Survey 1. Read the following list of things people value. Think about each value in terms of its importance as a guiding principle in your life.

A comfortable life

Family security

Pleasure

An exciting life

Freedom

Salvation

A sense of accomplishment

Happiness

Self-respect

A world at peace

Inner harmony

Social recognition

A world of beauty

Mature love

True friendship

Equality

National security

Wisdom

2. Circle six of these 18 values to indicate that they are most important to you. If you can, rankorder these most important values by writing a number above them—with “1” the most important value in my life, and so on through “6.”

3. Underline the six of these 18 values that are least important to you.

Interpretation Terminal values reflect a person’s preferences concerning the ends to be achieved. They are the goals individuals would like to achieve in their lifetimes. As you look at the items you have selected as most and least important, what major differences exist among the items in the two sets? Think about this and then answer the following questions.

A) What does your selection of most and least important values say about you as a person?

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B) What does your selection of most and least important values suggest about the type of work and career that might be best for you?

C) Which values among your most and least important selections might cause problems for you in the future—at work and/or in your personal life? What problems might they cause, and why?

How might you prepare now to best deal with these problems in the future?

D) How might your choices of most and least important values turn out to be major strengths or assets for you—at work and/or in your personal life, and why?

Teaching Notes: This feature offers students a chance to determine their personal values system by taking the Terminal Values Assessment (goals individuals would like to achieve in their lifetimes) in the Skill-Building Portfolio. The assessment tool is intended to help students reflect on their values.

Examples include: family security, freedom, mature love, pleasure, happiness, self-respect, wisdom, an exciting life, a world at lease, and so on.

Ask students to maintain their scores and reflections throughout the course and write a summary of the areas they want to strengthen, or change, as they develop as managers or employees.

This may be a comprehensive special project near the end of the quarter/semester.

Class Exercise 3: Confronting Ethical Dilemmas Preparation Read and indicate your response to each of the following situations.

1. Ron Jones, vice president of a large construction firm, receives in the mail a large envelope marked “personal.” It contains a competitor’s cost data for a project that both firms will be bidding on shortly. The data are accompanied by a note from one of Ron’s subordinates saying: “This is the real thing!” Ron knows that the data could be a major advantage to his firm in preparing a bid that can win the contract. What should he do?

2. Kay Smith is one of your top-performing team members. She has shared with you her desire to apply for promotion to a new position just announced in a different division of the company.

This will be tough on you because recent budget cuts mean you will be unable to replace anyone who leaves, at least for quite some time. Kay knows this and, in all fairness, has asked your permission before she submits an application. It is rumored that the son of a good friend of your boss is going to apply for the job. Although his credentials are less impressive than Kay’s, the likelihood is that he will get the job if she doesn’t apply.

What will you do?

3. Marty José got caught in a bind. She was pleased to represent her fi rm as head of the local community development committee. In fact, her supervisor’s boss once held this position and told her in a hallway conversation, “Do your best and give them every support possible.” Going along with this, Marty agreed to pick up the bill (several hundred dollars) for a dinner meeting with local civic and business leaders. Shortly thereafter, her supervisor informed everyone that the entertainment budget was being eliminated in a

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cost-saving effort. Marty, not wanting to renege on supporting the community development committee, was able to charge the dinner bill to an advertising budget. Eventually, an internal auditor discovered the charge and reported it to you, the personnel director. Marty is scheduled to meet with you in a few minutes. What will you do?

Instructions Working alone, make the requested decisions in each of these incidents. Think carefully about your justification for the decision. Meet in a group assigned by your instructor. Share your decisions and justifications in each case with other group members. Listen to theirs. Try to reach a group consensus on what to do in each situation and why. Be prepared to share the group decisions, and any dissenting views, in general class discussion.

Teaching Note: This is an extremely useful exercise for exposing students to the kinds of ethical dilemmas that they can expect to experience in their careers. As such, it provides them with an opportunity to consider how they will respond to such dilemmas. During in-class discussions of these dilemmas, allow all students to discuss their anticipated responses. There will likely be considerable variability in their answers, with some students selecting much more “ethical” responses than others. During your discussion, emphasize the long-term advantages of selecting highly ethical responses (e.g., maintaining one’s integrity, demonstrating to others that you can be trusted, and having a clear conscience), since these advantages may not be immediately apparent to all members of the class. Finally, instruct students to use the following checklist for making ethical decisions to evaluate their initial responses to each of these dilemmas. Doing so should prove to be beneficial in separating unethical from ethical responses to these dilemmas.

A Quick Check for Dealing with Ethical Dilemmas Step 1. Recognize the ethical dilemma.

Step 2. Get the facts and identify your options.

Step 3. Test each option: Is it legal? Is it right? Whom does it affect? Who benefits? Who gets hurt?

Step 4. Decide which option to follow.

Step 5. Double-check with the spotlight questions: “How will I feel if my family finds out about my decision?”

“How will I feel if my decision is reported in the local newspaper or posted on the Internet?

Step 6. Take action.

Team Project 3: Organizational Commitment to Sustainability Instructions In your assigned work teams do the following.

1. Agree on a definition of “sustainability” that should fit the operations of any organization.

2. Brainstorm audit criteria that can be used to create a Commitment to Sustainability Scorecard (CSS) that can be used to assess the sustainability practices of an organization.

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3. Formalize your list of criteria, and then create a formal CSS worksheet that can be used to conduct an actual audit. Be sure that an organization being audited would not only receive scores on individual dimensions or categories of sustainability performance but also receive a total overall “Sustainability Score” that can be compared with results for other organizations.

4. Present and defend your CSS to the class at large.

5. Use feedback received from the class presentation to revise your CSS to be used in an actual organizational sustainability audit.

6. Use your CSS to conduct a sustainability audit for a local organization.

Instructor’s Note: When asked to perform original research with an actual organization, students sometimes struggle with gaining access. Remind them that their workplaces, internship sites, friends and relatives can often facilitate making contact at prospective sites which illustrates the value of having and using effective networks.

Step #3 is an excellent opportunity for helping students to understand how to set measurable criteria for evaluation. These are an important part of the critical thinking process.

Cases for Critical Thinking Patagonia: Leading a Green Revolution / Sidebar on Philanthrocapitalism The case for this chapter is Patagonia: Leading a Green Revolution. The sidebar case is Philanthrocapitalim. Instructors may consider suggesting students visit Patagonia's website at www.patagonia.com for further preparation as they prepare case answers. Question #2 will focus on the sidebar case. Students may want to consider visiting the Bill and Melinda Gates Foundation website at www.gatesfoundation.org.

Case discussion questions and suggested answers: 1. Discussion Patagonia has a history of putting sustainability ahead of profits. But it also has to face up to everyday business realities and the need for operating capital. How do you think the company decides which products to offer so that the outcomes will be both business practical and environmentally friendly? And, with Chouinard such an important influence on company ideals and values, what can be done now to ensure that his positive impact is still felt long after he leaves the company?

The company decides which products to offer by evaluating its environmental and social footprint. The Footprint Chronicles on the Patagonia website is an online interactive world map that pinpoints key suppliers in every textile mill and factory in its supply chain. It also features videos of how each product is made. Interestingly, on Black Friday, the notorious biggest shopping day of the year after Thanksgiving, the company purchased a full page ad in The New York Times featuring one of their best selling fleece jackets with the caption, “Don’t Buy This Jacket.” The advertisement, part of Patagonia’s “Common Threads Initiative,”

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suggests that people think about the environmental impact (what they refer to as the potential of “environmental bankruptcy”), of their consumption patterns. The ad copy states that each garment the company makes takes something from the planet that can’t be given back. In addition to that, each garment made emits several times its weight in greenhouse gases, scrap, and copious amounts of freshwater.

To assure that Patagonia’s culture of sustainability remains intact long after Chouinard’s departure requires an ongoing commitment to his deeply held belief system, company culture and sustainable business model. With a continued commitment to Chouinard’s philosophy to innovate and improve side-by-side with sustainable business practices, his influence on the company will continue to live on.

2. Discussion Philanthrocapitalism is here to stay. Is it reasonable to assume that someone’s capacity to solve social problems increases with the amount of their personal wealth? What are the possible downsides as today’s business billionaires tackle societal ills?

It is not necessarily reasonable to assume that someone’s capacity to solve problems increases with their personal wealth. Philanthropists such as Bill Gates and Warren Buffet have improved the lives of many by solving problems related to global health, global development, and education. Critics argue whether business thinking, methods and culture may be “repurposed” to be effective outside that world. Furthermore, they argue that lessons taken from the pages of business books cannot be easily applied to societal issues. Some students may argue that the risks as today’s business billionaires tackle societal ills is that is gives wealthy individuals way too much influence of allocation of funds, thus creating a tension between “participatory citizenship and elitism.”

Problem Solving Let’s suppose Yvon Chouinard comes to you, a new employee, and asks for a proposal on a timely and “forward looking” sustainability agenda for the firm. In other words, he wants a program that can drive Patagonia’s future and not just celebrate its past. What would you include in this agenda and why?

Ideas may include: • Sponsoring sustainable food products (Chouinard has started a sustainable salmon fishing operation).

• Sustainable eco-friendly travel and volunteer adventure tours that include choosing from a variety of volunteer projects in different countries where Patagonia’s products are made.

• Packaging alternatives to reduce the use of fossil fuel and to save resources • Best practices consulting services (as they have done at Wal-Mart) to include evaluation of fibers and manufacturing practices and more effective supply chain management practices.

• Chouinard's book, "The Responsible Company," offers many profit-making ideas without inflicting undue societal harm. He has even started his own sustainable salmon fishery.

• Encourage students to check out Patagonia’s website showcasing its Footprint Chronicles, which demonstrates the transparency of Patagonia’s sustainability efforts and even indicates

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the metrics of a products’ carbon footprint in its supply chain from manufacture through delivery.

Further Research Could ethics lose out to greed even in a company with the idealism of Patagonia? See if you can find examples of decisions that forced people in the firm to make difficult choices between ethics and profitability. Look for examples of decisions made at other companies that may have resulted in different ethics versus profitability choices. Try to explain through the examples what makes the difference between organizations where ethics and social responsibility are part of core values and those where they are more superficial issues. Could ethics lose out to greed even in a company with the idealism of Patagonia? See if you can find examples of decisions that forced people in the firm to make difficult choices between ethics and profitability. Analyze the decisions and their outcomes. Look for examples of decisions made at other companies that may have resulted in different ethics vs. profitability choices. Try to explain through the examples what makes the difference between organizations where ethics and social responsibility are part of the fabric and those where they are more superficial issues.

Examples of difficult choices between ethics and profitability: • Like many companies in the early 2000s, Patagonia also made the choice to lower its labor costs by working with more factories. This resulted in doing business with more factories than they could handle, and the conditions in each factory, once something the company prided itself upon, were not closely monitored. The decision to reduce expenses also cost the company reduced product quality and fewer on-time deliveries. Customers became irate and the company lost profit due to an increased number of returns.

Other companies who made ethics vs. profitability choices: • In the midst of obesity and diabetes reported at epidemic proportions, fast food companies and processed and packaged food giants make a conscious effort to get people hooked on foods that are convenient and inexpensive. Most of the products contain large amounts of salt, sugar, and fat – all which make the food items tastier.

• Pharmaceutical companies pouring research and development dollars into drugs sold to those able to afford the medication. Keep in mind the number of people in less developed countries who are victims of diseases and too poor to afford medication. Though in need, they’re less likely to be a focus of large pharmaceutical companies.

• Manufacturing companies engaged in product and production processes which cause harm (pollution and habitat destruction) to members of a community. British Petroleum’s public safety record had been questioned long before the Deepwater Horizon oil rig exploded on the Gulf of Mexico in April 2010.

• Health insurance companies achieving profitable results as a result of what the industry touts euphemistically as "medical management," code for denying claims and coverage for doctor-ordered care.

• The treatment of workers in overseas manufacturing plants, most of whom are producing products for U.S. companies to sell at a hefty profit.

The difference between organizations that practice ethics and social responsibility compared to those that do so superficially, is:

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In today’s business climate, consumers expect transparency and better business practices.

In addition, businesses are in an excellent position to create long-term and sustainable change. Customer and employee engagement can also increase when a company has something, other than profits, good to talk about, which in turn, raises awareness about issues of concern.

A company’s sustainability efforts can also increase innovation.

Companies who practice CSR superficially cannot hide from consumers and other special interest groups.

Word spreads quickly through social media outlets and online about companies who do not “practice what they preach.”

Additional Exercises for Chapter 3: Ethics Exercise Break the class into teams of three or four and ask each group to take a survey within their group, summarize their findings and discuss the implications.

Note: The questions listed below should be phrased if they know “anyone” who has ever done the behavior described, and not to disclose whether they themselves have. This will allow for more open discussion while providing personal privacy.

Here are ten questions (you may write these on the board, post on a message board, or use handout surveys) to discuss and summarize results (ask them to provide a specific tally count for each question) within each group: “Have you ever known anyone (this may include yourself) who …

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Worked in a restaurant or bar and did not report all tips earned to the IRS? Paid money to a babysitter for child care but did not report it to the IRS? Painted, built decks, or did other types of contracting work, and did not report all income to the IRS? Cheated on an exam?

Took supplies such as copy paper, pens, etc. from work?

Using work time, surfed the World Wide Web for personal use or to pass time?

Called in sick when not sick for a “free” day off?

Lied on an expense report (exaggerated actual meal cost etc.)?

Stole from a warehouse or retail store that they worked in?

Has witnessed an ethical issue by another at work or school and did not report it to the teacher, authorities or the manager etc.?

Students then should discuss these questions and discuss how “serious “each is perceived to be.

Are some very accepted in our society? If so, why is that?

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Is it a big “leap” from these behaviors to CEO “scandals “such as the Enron fraud case? As individuals get promoted, does ethical behavior improve, stay the same, or worsen?

Allow teams about 20-30 minutes for this exercise. The teams will then report to the class the summaries of their conclusions.

Take the students tally and summarize the total tally by questions. The results will provoke further questions and discussion.

Least-Preferred Co-worker Scale Instructions Think of all the different people with whom you have ever worked⎯in jobs, in social clubs, in student projects, or whatever. Next think of the one person with whom you could work least well⎯that is, the person with whom you had the most difficulty getting a job done. This is the one person⎯a peer, boss, or subordinate⎯with whom you would least want to work. Describe this person by circling numbers at the appropriate points on each of the following pairs of bipolar adjectives. Work rapidly.

There are no right or wrong answers.

Pleasant Friendly Rejecting Tense Distant Cold Supportive Boring Quarrelsome Gloomy Open Backbiting Untrustworthy Considerate Nasty Agreeable Insincere Kind

8 7 6 5 4 3 2 1 8 7 6 5 4 3 2 1 1 2 3 4 5 6 7 8 1 2 3 4 5 6 7 8 1 2 3 4 5 6 7 8 1 2 3 4 5 6 7 8 8 7 6 5 4 3 2 1 1 2 3 4 5 6 7 8 1 2 3 4 5 6 7 8 1 2 3 4 5 6 7 8 8 7 6 5 4 3 2 1 1 2 3 4 5 6 7 8 1 2 3 4 5 6 7 8 8 7 6 5 4 3 2 1 1 2 3 4 5 6 7 8 8 7 6 5 4 3 2 1 1 2 3 4 5 6 7 8 8 7 6 5 4 3 2 1

Unpleasant Unfriendly Accepting Relaxed Close Warm Hostile Interesting Harmonious Cheerful Guarded Loyal Trustworthy Inconsiderate Nice Disagreeable Sincere Unkind

Scoring This is called the “least-preferred coworker scale” (LPC). Compute your LPC score by totaling all the numbers you circled; enter that score here [LPC = ____ ].

Interpretation The LPC scale is used by Fred Fiedler to identify a person’s dominant leadership style (see Module 16). Fiedler believes that this style is a relatively fixed part of one’s personality and is therefore difficult to change. This leads Fiedler to his contingency views, which suggest that the key to leadership

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success is finding (or creating) good “matches” between style and situation. If your score is 73 or above, Fiedler considers you a “relationship-motivated” leader; if your score is 64 and below, he considers you a “task-motivated” leader. If your score is 65-72, Fiedler leaves it up to you to determine which leadership style is most like yours.

(Source: Fiedler, F.E., and Chemers, M.M. Improving Leadership Effectiveness: The Leader Match Concept, 2nd ed. New York: John Wiley & Sons, 1984. Used by permission.)

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CHAPTER 4 Managers as Decision Makers There Is No Substitute for a Good Decision Chapter 4 Overview Each Chapter contains several inset features designed to assist the student reader in applying the concepts to relevant examples. Management Live illustrates how popular movies demonstrate management concepts in the chapter. Role Models features a management professional that illustrates key chapter concepts in a novel, visionary or inspirational way. Explore Yourself refers students to self assessment activities relevant to concepts in the chapter. Ethics Check profiles examples of ethical issues in management. Manager's Library features books that illustrate current events or trends relevant to chapter concepts. Facts to Consider introduces research or trends that may be used for class discussion in the classroom or online for distance learning.

The role of a manager and the way decisions are made and problems solved has changed dramatically with available technology, information, and analytics. As new technologies continue to enter the workplace, innovations in learning, problem solving, and decision making are being realized. The chapter begins with a discussion of the importance of information competency for successful problem solving. How managers approach and deal with problems is discussed next. Some managers avoid problems, while others solve them, and some managers, to be proactive, seek out problems. Systematic and intuitive thinking is discussed, along with cognitive styles of decision making. Making decisions under varying conditions of certainty, risk and uncertainty is explained.

Attention is given to the different ways managers deal with problems along with the different types of problems (structured and routine) which occur. Depending upon the type of problem, managers will use either programmed or nonprogrammed decisions. A detailed discussion of the five steps in the decision-making process is covered.

The chapter concludes with a description of current issues in managerial decision making. They include how creativity, when unlocked, can encourage better decision making. The advantages and disadvantages of group decision making is discussed along with judgmental heuristics and other biases and decision making traps that can cause errors in decision making. Last, managers must be prepared to make decisions during a crisis.

Chapter 4 Takeaway Questions: • • •

Takeaway 4.1 How do Managers Use Information to Solve Problems?

Takeaway 4.2 What Are Five Steps in the Decision-Making Process?

Takeaway 4.3 What Are Some Current Issues in Managerial Decision Making?

Chapter 4 Objectives:

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The objectives of Chapter 4 may be summarized as: • •

To review how managers deal with problems posing threats and offering opportunities To understand the importance of information competency to make decisions to solve problems.

To compare and contrast performance threats or deficiencies and opportunities of a better future.

To explain how and why some managers: avoid problems, solve problems, or seek out problems.

To explain and examine the types of decisions (programmed and non-programmed) managers make when solving problems.

To explain the way managers display systematic and intuitive thinking in problem-solving.

To decipher between the cognitive styles used by managers to process information for decision making.

To explain the conditions under which managers make decisions, to include: certainty, risk, and uncertainty.

To identify the five steps in the decision-making process.

To understand the importance of ethical reasoning at all steps in decision making.

To explain how creativity, a novel idea, or new approach can be used to better decision making.

To identify characteristics of creative people.

To explain the advantages (information, knowledge, and expertise) and disadvantages (time consuming and more difficult to reach a final decision) of making decisions in groups.

To explain heuristics and why well-intentioned people make decision errors when information and time is limited.

To explain and examine the impact of making decisions within a crisis context.

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Chapter 4 Lecture Outline

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Takeaway 4.1: How do Managers Use Information to Solve Problems? o Managers use technological, information, and analytical competencies to solve problems. o Managers deal with problems posing threats and offering opportunities. o Managers can be problem avoiders, problem solvers, or problem seekers. o Managers make programmed and nonprogrammed decisions when solving problems. o Managers can use both systematic and intuitive thinking. o Managers use different cognitive styles to process information for decision making. o Managers make decisions under conditions of certainty, risk and uncertainty.

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Takeaway 4.2: What Are Five Steps in the Decision-Making Process? o Step 1 is to identify and define the problem. o Step 2 is to generate and evaluate alternative courses of action.

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Step 3 is to decide on a preferred course of action.

Step 4 is to implement the decision.

Step 5 is to evaluate results.

Ethical reasoning is important at all steps in decision making.

Takeaway 4.3: What Are Some Current Issues in Managerial Decision Making? o Creativity can be unlocked and encouraged for better decision making. o Group decision making has both advantages and disadvantages. o Judgmental heuristics and other biases and traps may cause decision-making errors. o Managers must be prepared for crisis decision making.

Chapter 4 Supporting Materials: Figures • Figure 4.1: In What Ways Do Managers Serve as Information Nerve Centers in Organizations?

• Figure 4.2: What are Differences Between Certain, Risk, and Uncertain Decision-Making Styles?

• Figure 4.3: What are the Five Steps in the Decision Making Process?

• Figure 4.4: How Does the Classical Model of Managerial Decision Making Differ from the Behavioral Model?

Thematic Boxes and More • Management Live: Self Confidence and Red Eye • Role Models: Indra Nooyi Leads Pepsico Through Uncertainty and Risk • Ethics Check: Left to Die on Mt. Everest • Facts to Consider: American Workers Talk about Their Biggest Fears • Manager’s Library: The Shallows: What the Internet is Doing to Our Brains by Nicholas Carr • Explore Yourself: Self-confidence • Tips to Remember: Six Rules for Crisis Management • Table 4.1 Potential Advantages and Disadvantages of Group Decision Making Applications • •

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TestPrep 4 Multiple-Choice Questions Skill Building Portfolio o Self-Assessment 4: Intuitive Ability o Class Exercise 4: Lost at Sea o Team Project 4: Crisis Management Realities Case Snapshot: Amazon.com – Keeping the Fire Hot Sidebar case: Netflix CEO Makes and Remakes Decision Hot Topic: Good Idea or Not? Yahoo! bans telecommuting – good or bad decision?

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Chapter Outline Takeaway Question 4.1 How Do Managers Use Information to Solve Problems?

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Managers use technological, informational, and analytical competencies to solve problems ✓ Problem-solving - the process of identifying a discrepancy between an actual and desired state of affairs and then taking action to resolve it ✓ Knowledge workers - definition of "persons whose value to organizations rests with their intellectual, not physical, capabilities" is very appropriate for managers • Information competency - the ability to locate, retrieve, evaluate, organize, and analyze information to make decisions that solve problems Figure 4.1: In What Ways Do Managers Serve as Information Nerve Centers in Organizations? Managers sit at the center of complex networks of information flows; they serve as information-processing hubs or nerve centers. Each of the management functions – planning, organizing, leading, and controlling – requires the gathering use, and transfer of information in these networks. Managers must have the information competencies needed to perform well in these roles.

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Managers deal with problems posing threats and offering opportunities ✓ Performance threat - an actual or potential performance deficiency or the most obvious problem-solving situation for managers ➢ Examples include Hurricane Katrina, sub-prime mortgage crisis, General Motors and Chrysler bankruptcies ✓ Performance opportunity - a situation that offers the possibility of a better future.

Problem solving often involves, or should involve, chances to deal with a performance opportunity.

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Managers can be problem avoiders, problem solvers, or problem seekers ✓ Problem avoiders - managers who ignore information that would signal the presence of a performance threat or opportunity ✓ Problem solvers - managers who make decisions and try to solve problems when required; reactive ✓ Problem seekers - managers who look for problems to solve or opportunities to explore; information gatherers; proactive

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Managers make programmed and non-programmed decisions when solving problems ✓ Decision - a choice among possible alternative course of action ✓ Programmed decisions - can use preplanned solutions based on the lessons of past experience; best for structured problems, frequently are the subject of policies and procedures that promote continuity and uniformity in management decisions ✓ Non-programmed decisions - for unusual situations full of ambiguities and information deficiencies; novel solutions crafted to meet the unique demands

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✓ Learning Activity - Students may be asked to determine whether Capt. Sullenberger's emergency landing in the Hudson River provides an example of a programmed or non-programmed decision •

Managers can use both systematic and intuitive thinking ✓ Systematic thinking - a person who approaches problems in a rational, step-by-step, and analytical fashion ✓ Intuitive thinking - a person who is more flexible and spontaneous than the systematic thinker; the person may also be quite creative

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Managers use different cognitive styles to process information for decision making ✓ Sensation Thinkers - impersonal and realistic in problem solving, prefer facts, certainty and control ✓ Intuitive Thinkers - idealistic and intellectual, comfortable with abstract and unstructured situations, impersonal manner and low attention to details ✓ Intuitive Feelers - take a broad and global view of issues, insightful, short on details, flexible with a high priority on relationships ✓ Sensation Feelers - analytical but place relationships as a high priority, realistic and factual, good communicators and sensitive to feelings and values of others ✓ Learning Activity - Students may take a few minutes to classify a manager or professor with whom they have worked into one of the categories. Students may discuss their reasoning in small or large groups.

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Managers make decisions under conditions of certainty, risk, and uncertainty ✓ Certain environment - an ideal situation where factual information exists for the possible alternative courses of action and their consequences (a student loan cost is an example; you know the interest rate, the time periods etc.) ✓ Risk environment - information and facts are incomplete ➢ Alternative courses of action can be assigned probabilities (chances of occurring) ✓ Uncertain environment - the most difficult condition; facts are few and information is poor ✓ See Figure 4.2 What Are the Differences Between Certain, Risk, and Uncertain Decision Making Environments? Managers rarely face a problem where they can know all the facts, identify all alternatives and their consequences, and chart a clear course of action. Such certainty is more often than not replaced by problem environments involving risk and uncertainty. Risk is where alternatives are known but their consequences can be described in terms of probabilities. Uncertainty is where all alternatives are not known and their consequences are highly speculative.

4.1 Questions for discussion suggested answers 1) Can a manager be justified for acting as a problem avoider in certain situations?

A manager needs to be able to prioritize, including whether a problem is worth involvement or attention. For example, an employee who is having personal issues that

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may be affecting work may not merit attention unless such behavior continues for some time and is affecting performance.

2) Would an organization be better off with mostly systematic or mostly intuitive thinkers?

Neither is innately “better” than the other; both systematic and intuitive workers have important roles in organizations. It is important, however, to match employee thinking patterns with job requirements. Intuitive workers may not perform well in such welldefined and structured jobs as, say, tax accounting. Systematic workers may perform poorly in jobs that require creativity. Customer Service positions would probably be best handled by a Sensation Feeler decision making style.

3) Is it possible to develop programmed decisions for use in conditions of risk and uncertainty?

Yes, pilots in high-risk or critical situations such as Capt. Sullenberger have extensive training that allows them to face unique situations with a background of similar procedures for programmed situations. Fire, tornado and earthquake drills for schools are examples.

Takeaway Question 4.2 What Are The Steps in the Decision-Making Process?

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Figure 4.3 What Are Five Steps in the Decision-Making Process?

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Step 1 is to identify and define the problem ✓ Common mistakes in identifying problems ➢ Identifying the problem too broadly ➢ Dealing with symptoms rather than problems ➢ Choosing the wrong problem ✓ Stage of information gathering, processing and deliberation ✓ Stage where goals are clarified to specify exactly what a decision should accomplish

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Step 2 is to generate and evaluate alternative courses of action ✓ Criteria for evaluating alternatives ➢ Cost benefit analysis - compares what an alternative will cost with its expected ➢ Timeliness - how long until we see results? ➢ Acceptability - will stakeholders accept the alternative? ➢ Ethical soundness - does it fit our ethical requirements

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Step 3 is to decide on a preferred course of action ✓ Classical and behavioral models of decision-making - see Figure 4.4 for a comparison. ✓ Classical decision model - views the manager as acting rationally and in a fully informed manner; he or she makes an optimizing decision (that gives the absolute best solution to the problem)

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✓ Behavioral decision model - assumes that people act only in terms of their perceptions, which are frequently imperfect; he or she makes a satisficing decision by choosing the first solution that appears satisfactory to them •

Figure 4.4 How Does the Classical Model of Managerial Decision Making Differ from the Behavioral Model?

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Manager’s Library: Manager’s Library: The Shallows: What the Internet is Doing to Our Brains by Nicholas Carr Reflect and React: Do you think time spent on the Internet makes you more or less smart?

How can Internet distractions be managed? Do you think linear thinking may be developed within or beyond the Net? Is the internet a web of distraction or a new world of opportunity that is still evolving?

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Step 4 is to implement the decision ✓ Lack of participation error-when managers don’t include in the decision-making process those persons whose support is necessary for implementation

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Step 5 is to evaluate results • This is a form of control • Gathering data to measure performance results against initial goals; examining both positive and negative outcomes; may involve redoing steps in the decision-making process

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Ethical reasoning is important at all steps in decision making • Conduct an "ethics double check" • Ethical criteria ➢ utility - does the decision satisfy all stakeholders? ➢ rights - does the decision respect rights and duties of all? ➢ justice - does the decision administer justice? ➢ caring - is the decision consistent with responsibility to care?

• Spotlight questions ➢ How would I feel if my family found out about this decision? ➢ How would I feel if this decision was published in the local newspaper or posted on the Internet? ➢ What would the person I know who has the strongest character and best ethical judgment say about my decision?

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Ethics Check: Left to Die on Mt. Everest The case, a true story, poses an ethical dilemma of climbers who, at 28,000 feet have to decide whether to help a fellow climber (not on their team), suffering from oxygen deficiency. Most on the way up just look and continue their climbs. YOU DECIDE: Who’s right and who’s wrong here?

4.2 Questions for discussion suggested answers

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1) Do the steps in the decision-making process have to be followed in order?

Yes, the steps are intended to be sequential, but if evaluation of results (step 5) is unsatisfactory, the process begins again with re-defining the problem (step 1).

2) Do you see any problems or pitfalls for managers using the behavioral decision model?

Absolutely. Perceptions are frequently imperfect. Mangers may be certain that they understand the problem or stakeholders, but not have correct information. Some managers may “shoot from the hip” and make decisions too fast based on poor information or “instinct.” The consequences may be costly. Involving additional stakeholder groups may prevent a "lack of participation error" that would correct the faulty perception.

3) Is use of the spotlight questions sufficient to ensure an ethical decision?

The ethics double-check depend upon the decision maker to have several basic concepts. A clear understanding of all relevant stakeholders, applicable rights and duties, justice and the ability to care are all necessary for the decision maker to make correct answers to the four ethical questions.

The spotlight questions require the decision maker to feel a responsibility to a family or community that would make value judgments on the morality of the decision and its consequences.

If a decision maker lacked the ability to understand these criteria or lacked a value system that would cause guilt or embarrassment, he or she could answer the questions incorrectly and make an unethical decision. This might particularly be true if the decision maker were in an unfamiliar country or culture and did not adequately understand the relevant rights or duties or did not have any expectation that family or a home community would find out about or understand the decision. The spotlight questions might also present a problem if the organization was large enough that the decision maker was confident that the decision would be attributed to the organization and no one would find out who was responsible.

Takeaway Question 4.3 What Are Some Current Issues in Managerial Decision Making?

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Creativity can be unlocked and encouraged from better decision making • Creativity -generation of a novel idea or unique approach that solves a problem • Big-C creativity – when extraordinary things are done by exceptional people (Steve Jobs/Mark Zuckerberg) • Little-C creativity – when average people come up with unique ways to deal with daily events and situations.

• Personal Creativity Drivers build creativity in the workplace (see page 103) ➢ task expertise - creativity is an expansion of an existing skill ➢ task motivation - drive to work hard to resolve a problem ➢ creativity skills - "right brain" thinking such as imagination, intuition, holistic processing and the ability to make random associations.

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DISCUSSION TOPIC Students may do extended research by taking one of many online quizzes that assess tendencies to right or left brain thinking. Author Daniel Pink explores the impact of right brain thinking and careers in the future in the book "A Whole New Mind".

Students may read the book and report on Pink's findings or present one of the many online videos of Daniel Pink discussing the subject.

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Explore Yourself: Self-confidence Students are encouraged to take the Cognitive Style self assessment in the Skill Building Portfolio to gain insight into the way they gather and process and information, a key competency in developing decision-making skills.

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Group decision-making has both advantages and disadvantages ✓ Advantages (See Table 4.1 on page 104) ➢ more information ➢ more alternatives ➢ increased understanding ➢ greater commitment ✓ Disadvantages ➢ conformity with social pressures ➢ domination by a few members ➢ time delays

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Judgmental heuristics and other biases may cause decision-making errors ✓ Availability heuristic - using easily available information to assess the situation without further research, although it may be incomplete, irrelevant or wrong ✓ Representativeness heuristic - assessing a situation based on a stereotype without regard for unique circumstances ✓ Anchoring and adjustment heuristic - adjusting a previous decision or action without regard for the correctness of the previous decision. ✓ Framing error - when mangers evaluate and resolve a problem in the context in which they perceive it ✓ Confirmation error - decision maker only notices or accepts information that confirms the decision recently made ✓ Escalating commitment - tendency to increase effort and perhaps apply more resources to pursue a course of action that signals indicate is not working; an inability to call it quits ➢ how to avoid wasting resources on an escalating commitment to a bad decision: - set advance limits on resources - make up your own mind rather than follow others - ask why you are continuing the course of action consider saving the resources or costs for another purpose

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Facts to Consider: American Workers Talk About Their Biggest Fears The job market is getting better, and fewer Americans are losing their jobs. A Harris interactive survey still uncovered worker fears and concerns, as follows: • Low wages • Wrong career • Unreasonable workload • Other factors • Are these concerns beyond a worker’s control, or could better decisions, past and present, result in better feelings about one’s work?

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See “Tips for Avoiding the Escalation Trap”

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Managers must be prepared for crisis decision-making ✓ Crisis - an unexpected problem that can lead to disaster if not handled quickly and appropriately ✓ Manager mistakes - a common error in a crisis is for managers to become isolated and limit the sources of information when in fact they should do exactly the opposite.

This is a time when heuristics are attractive and can lead to poor judgment. Seek many sources of information before taking action. ✓ Crisis Management Programs train managers in how to handle crisis situations ✓ Tips to Remember list six rules for managing a crisis: o Figure out what is going on o Remember that speed matters o Remember that slow counts, too o Respect the danger of the unfamiliar o Value the skeptic o Be ready to “fight fire with fire”

4.3 Questions for discussion answers 1) How can you avoid being hurt by the anchoring and adjustment heuristic in your annual pay raises?

If the company for which you work uses an “anchor and adjustment” system, there are a couple ways to mitigate the possible negative consequences: • Perform at a high level and the “adjustment” portion should, in most organizations, grow at a very steep rate. Over time, you may outperform the market.

• Gather convincing evidence that the compensation which you receive is below that which you could earn at comparable positions in other companies. This method requires god interpersonal skills, but managers do not want to lose great employees.

If your performance is at a high level, you will have a concerned listener in your manager. Arm him or her with “ammunition” regarding competitive compensation.

2) What are some real-world examples of how escalating commitment is affecting decision making in business, government, or people’s personal affairs?

Here are several real-world examples of escalating commitment:

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You win several hundred dollars gambling in Las Vegas, a total of $800 “net.”

Then you begin to lose and eventually are down by $200 below the initial sum you brought with you, say $500. Rather than walk out the door with the $300 you have left, you continue to play to “get back to” the initial $500.

One world leader presents objective evidence that indicates that a war is not being waged successfully. In discussing this, the other party notes that “we have already invested many lives and millions of dollars already” and we cannot exit because of those factors.

You invest $1000 in the stock market by buying one company’s shares. After the stock price increases in value several months in a row, it drops substantially and the news is bad (liability issues, ethics, losses etc.) You decide to “sell” but want to wait until you get back to what you initially invested, $1000 rather than “cut your losses.”

3) Is it really possible to turn a crisis into an opportunity, and, if so, how?

A crisis can be turned into an opportunity in a number of ways.

• The way a manager handles a crisis can be an opportunity to demonstrate the integrity of the company. For example, Johnson & Johnson handled a crisis extremely well when they were a victim of product tampering in 1984. Extra Strength Tylenol was contaminated with cyanide, killing seven people in the Chicago area. Johnson & Johnson acted swiftly to remove the product from the market and took effective steps to warn consumers about the danger. Their swift response was seen as responsible and ethical. Within a year, Tylenol had regained much of its pre-crisis market share and Johnson & Johnson was seen as an example of corporate responsibility.

• US Airways saw a similar effect following the 2009 ditching of a disabled aircraft in the Hudson River. The actions of Captain Sullenberger and his crew were seen as heroic, and US Airways received praise.

• Another way a crisis can be turned into an opportunity is to evaluate all actions after the crisis has passed to turn it into a learning experience for future experience. US Airways and other airlines have used the lessons learned from the experience to determine ways to reduce the bird strikes that were responsible for damaging the aircraft and make water landings safer and survivable.

Teaching Notes: In this section, ideas, exercises, and assignments are provided to assist you in integrating the concepts in Exploring Management for your students, especially the special features of the text.

Management Live: Self-confidence and Red Eye Just when you think you have everything covered and it's safe to leave the office, you get that phone call from your frantic assistant about everything that's going wrong and they need your help RIGHT NOW! You and a few of your students will be able to identify with this common scenario which is similar to the one described in the movie Red Eye in the Management Live feature for chapter 4.

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This situation is a good springboard for a lively student discussion of all of the things that have gone wrong in their work experience. A list of these experiences can be classified as Programmed, Non-Programmed and Crisis situations as discussion of decision principles in chapter 4 continues.

Facts to Consider: American Workers Talk about Their Biggest Fears •

The Facts to Consider inset provides information from an Harris interactive survey, which despite a better economy, uncovered worker fears and concerns, as follows: • Low wages • Wrong career • Unreasonable workload • Other factors (irritating co-workers and commuting)

When you look at these data, do you sense that all of these concerns are beyond a worker’s control? Or, could better decisions – past and present—result in better feelings about one’s work? Do some people perceive they are trapped in bad jobs while working to support themselves and their families, but really have more options than they are willing to admit or go after? When does a past decision become a trap that makes it hard for someone to move on to better things?

Role Models: Indra Nooyi Leads PepsiCo Through Uncertainty and Risk In the Role Models feature “Indra Nooyi Brings Style and a Strategic Vision to Pepsi.” Pepsico CEO Indra Nooyi is profiled as having a unique business sense, strong work ethic along with "heart and a sense of humor".

• Nooyi is only the 12th woman to head a Fortune 500 firm. Ask students to discuss whether men and women have different approaches to decision making.

• Assign students a research project investigate the decisions by Pepsico to sell Taco Bell, Pizza Hut and KFC; the merger with Quaker Oats and purchase of Tropicana. Do these decisions seem to have been examples of management as a problem avoider, problem solver or problem seeker?

• Which situation would best describe the environment under which the decisions were made, certainty, risk or uncertainty?

• Evaluate Nooyi's comment about assuming others have positive intent, ending with "Maybe they are saying something to me that I am not hearing?" What can students learn about her decision-making style from that comment?

Manager’s Library: The Shallows: What the Internet is Doing to our Brains by Nicholas Carr Has the internet changed our brains? It's certainly changed the way we teach. Asking students if the internet has changed brains might be a problem since few may remember a world without the internet that has brought the world to their fingertips with the click of a hyperlink.

The question for mangers is how does the availability of the internet on our desks and on our phones or other wireless devices change the way we work, gather information, manage others and get distracted.

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Ethics Check: Left to Die on Mt. Everest This true story of life and death on Mt. Everest poses some interesting ethical questions. The questions in the "You Decide" section probe student thoughts about their views of ethics that may not be of life-or-death proportions, but still define their character.

Explore Yourself: Self-confidence Students are encouraged to take the Cognitive Style self assessment in the Skill Building Portfolio to gain insight into the way they gather and process and information, a key competency in developing decision-making skills.

Career Situation: What Would You Do? •

Even though some problems in organizations seem to “pop up” unexpectedly, many of them can be anticipated. Examples are an employee who calls in sick at the last minute, a customer who is unhappy with a product or service and wants a refund, and even a boss who ask you to do something that isn’t job relevant. How might you anticipate handling such situations as a decision maker?

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You are under a lot of pressure because the problem situation involves social loafing and poor performance by one of your team members. You have come up with a reason to remove her from the team. But, you feel very uneasy knowing that your intention fails all three of the recommended spotlight questions. What do you do now?

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You have finally caught the attention of senior management. Top executives asked you to chair a task force to develop a creative new product that can breathe new life into an existing product line. First, you need to select the members of the task force. What criteria will you use to choose members who are most likely to bring high levels of creativity to this team?

Skill Building Portfolio: Terms to Define: Analytic competency Anchoring and adjustment heuristic Availability heuristic Behavioral decision model Big-C creativity Certain environment

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Classical decision model Cognitive styles Confirmation error Cost-benefit analysis Creativity Crisis Decision Decision-making process Escalating commitment Framing error Information competency Intuitive thinking Knowledge workers Lack-of-participation error Little-C creativity Nonprogrammed decision Optimizing decision Performance opportunity Performance threat Problem solving Programmed decision Representativeness heuristic Risk environment Satisficing decision Spotlight questions Systematic thinking Technological competency Uncertain environment

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TestPrep 4: Multiple-Choice Questions Multiple-Choice Questions 1. A manager who is reactive and works hard to address problems after they occur is described as a _____________. (a) problem seeker (b) problem solver (c) rational thinker (d) strategic opportunist 2. A problem is a discrepancy between a/an _____________ situation and a desired situation. (a) unexpected (b) risk (c) actual (d) uncertain 3. If a manager approaches problems in a rational and analytical way, trying to solve them in step-by-step fashion. He or she is well described as a/an _____________. (a) systematic thinker (b) intuitive thinker (c) problem seeker (d) behavioral decision maker 4. The first step in the decision-making process is to _____________. (a) generate a list of alternatives (b) assess the costs and benefits of each alternative (c) identify and define the problem (d) perform the ethics double-check 5. When the members of a special task force are asked to develop a proposal for increasing the international sales of a new product, this problem most likely requires _____________ decisions. (a) routine (c) crisis

(b) programmed (d) nonprogrammed

6. Costs, benefits, timeliness, and _____________ are among the recommended criteria for evaluating alternative courses of action in the decision-making process. (a) ethical soundness (b) past history (c) availability .

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(d) simplicity 7. The _____________ decision model views managers as making optimizing decisions, whereas the _____________ decision model views them as making satisficing decisions. (a) behavioral; judgmental heuristics (b) classical; behavioral (c) judgmental heuristics; ethical (d) crisis; routine 8. One of the reasons why certainty is the most favorable environment for problem solving is that it can be addressed through _____________ decisions. (a) satisficing (b) optimizing (c) programmed (d) intuitive 9. A common mistake by managers facing crisis situations is _____________. (a) trying to get too much information before responding (b) relying too much on group decision making (c) isolating themselves to make the decision alone (d) forgetting to use their crisis management plan 10. In which decision environment does a manager deal with probabilities regarding possible courses of action and their consequences? (a) risk (b) certainty (c) uncertainty (d) optimal 11. You go to your boss and ask for a pay raise. She says: “Well, let’s take a look first at what you are making now.” The risk you face in this situation is that your boss’s decision will be biased because of ______________. (a) a framing error (b) escalating commitment (c) anchoring and adjustment (d) strategic opportunism 12. Which decision-making error is most associated with the old adage: “If you don’t succeed, try and try again”? (a) satisficing (b) escalating commitment .

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(c) confirmation (d) too late to fail 13. When a manager makes a decision about someone’s annual pay raise only after looking at the person’s current salary, the risk is that the decision will be biased because of _____________ . (a) a framing error (b) escalating commitment (c) anchoring and adjustment (d) strategic opportunism 14. Personal creativity drivers include creativity skills, task expertise, and _____________. (a) strategic opportunism (b) management support (c) organizational culture (d) task motivation 15. The last step in the decision-making process is to _____________. (a) choose a preferred alternative (b) evaluate results (c) find and define the problem (d) generate alternatives

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Short-Response Questions: 16. How does an optimizing decision differ from a satisficing decision?

An optimizing decision represents the absolute “best” choice of alternatives. It is selected from a set of all known alternatives. A satisficing decision selects the first alternative that offers a “satisfactory” choice, not necessarily the absolute best choice.

It is selected from a limited or incomplete set of alternatives.

17. What is the difference between a risk environment and an uncertain environment in decision making?

A risk environment is one in which things are not known for sure—all of the possible decision alternatives, all of the possible consequences for each alternative—but they can be estimated as probabilities. For example, if I take a new job with a new employer, I can’t know for certain that it will turn out as I expect, but I could be 80% sure that I’d like the new responsibilities, or only 60% sure that I might get promoted within a year. In an uncertain environment, things are so speculative that it is hard to even assign such probabilities.

18. How can you tell from people’s behavior if they tend to be systematic or intuitive in problem solving?

A manager using systematic thinking is going to approach problem solving in a logical and rational fashion. The tendency will be to proceed in a linear step-by-step manner, handling one issue at a time. A manager using intuitive thinking will be more spontaneous and open in problem solving. He or she may jump from one stage in the process to the other and deal with many different things at once.

19. What is escalating commitment and how can it be avoided?

Escalating commitment is the tendency of people to keep investing in a previously chosen course of action, continuing to pursue it, even though it is not working. This is a human tendency to try and make things work by trying harder, investing more time, effort, resources, etc. In other words, I have decided in the past to pursue this major in college; I can’t be wrong, can I? The feedback from my grades and course satisfaction suggests it isn’t working, but I’m doing it now so I just need to make it work, right? I’ll just stick with it and see if things eventually turn out okay. In this example, I am making a decision to continue with the major that is most likely an example of escalating commitment.

Integration and Application Questions: 20. With the goals of both expanding your resumé and gaining valuable experience, you have joined a new mentoring program between your university and a local high school. One of the first activities is for you and your teammates to offer “learning modules” to a class of sophomores. You have volunteered to give a presentation and engage them in some learning activities on the topic: “Individual versus group decision making: Is one better than the other?”

Question: What will you say and do, and why? .

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This is what I would say. On the question of whether a group decision is best or an individual decision is best, the appropriate answer is probably: It all depends on the situation. Sometimes one is preferable to the other; each has its potential advantages and disadvantages. If you are in a situation where the problem being addressed is unclear, the information needed to solve it is uncertain, and you don’t have a lot of personal expertise, the group approach to decision making is probably best. Group decisions offer advantages like bringing more information and ideas to bear on a problem; they often allow for more creativity; and they tend to build commitments among participants to work hard to implement any decisions reached. On the other hand, groups can be dominated by one or more members, and they can take a lot of time making decisions. Thus, when time is short, the individual decision is sometimes a better choice. However, it is important that you, as this individual, are confident that you have the information needed to solve the problem or can get it before making your decision.

Self-Assessment 4: Intuitive Ability Instructions Answer each of the following questions.

1. Do you prefer to: (a) be given a problem and left free to do it? (b) get clear instructions on how to solve a problem before starting?

2. Do you prefer to work with colleagues who are: (a) realistic? (b) imaginative?

3. Do you most admire: (a) creative people? (b) careful people?

4. Do your friends tend to be: (a) serious and hardworking? (b) exciting and emotional?

5. When you ask for advice on a problem, do you: (a) seldom or never get upset if your basic assumptions are questioned? (b) often get upset with such questions?

6. When you start your day, do you: (a) seldom make or follow a specific plan? (b) usually make and follow a plan?

7. When working with numbers, do you make factual errors: (a) seldom or never? (b) often?

8. Do you: (a) seldom daydream and really not enjoy it? (b) often daydream and enjoy it?

9. When working on a problem, do you: (a) prefer to follow instructions or rules? (b) often enjoy bypassing instructions or rules?

10. When trying to put something together, do you prefer: (a) step-by-step assembly instructions? (b) a picture of the assembled item?

11. Do you find that people who irritate you most appear to be: (a) disorganized? (b) organized?

12. When an unexpected crisis comes up, do you: (a) feel anxious? (b) feel excited by the challenge?

Scoring Total the a responses for 1, 3, 5, 6, 11; [A = ___________].

Total the b responses for 2, 4, 7, 8, 9, 10, 12; [B = ___________].

Your intuitive score is A 1 B. The highest score is 12.

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Class Exercise 4: Lost at Sea Consider This Situation You are adrift on a private yacht in the South Pacific when a fire of unknown origin destroys the yacht and most of its contents. You and a small group of survivors are now in a large raft with oars.

Your location is unclear, but you estimate that you are about 1,000 miles south-southwest of the nearest land. One person has just found in her pockets five $1 bills and a packet of matches.

Everyone else’s pockets are empty. The items below are available to you on the raft.

Sextant

Individual ranking _______________

Team ranking ____________

Expert ranking ____________

Shaving mirror

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5 gallons water

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Mosquito netting

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1 survival meal

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Maps of Pacific Ocean

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Floatable seat cushion

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2 gallons oil-gas mix

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Small transistor radio

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Shark repellent

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20 square feet black plastic _______________

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1 quart 20-proof rum

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15 feet nylon rope

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24 chocolate bars

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Fishing kit

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Instructions 1. Working alone, rank the 15 items in order of their importance to your survival (1 is most important and 15 is least important).

2. Working in an assigned group, arrive at a “team” ranking of the 15 items. Appoint one person as team spokesperson to report your team ranking to the class.

3. Do not write in column 3 until your instructor provides the “expert” ranking.

Team Project 4: Crisis Management Realities Question What types of crises do business leaders face and how do they deal with them?

Instructions • Identify three crisis events from the recent local, national, and international business news.

• Read at least three different news reports on each crisis, trying to learn as much as possible about its specifics, how it was dealt with, what the results were, and the aftermath of the crisis.

• For each crisis, use a balance sheet approach to list sources or causes of the conflict and management responses to it. Analyze the lists to see if there are any differences based on the nature of the crisis faced in each situation. Also look for any patterns in the responses to them by the business executives.

• Score each crisis (from 1 = low to 5 = high) in terms of how successfully it was handled. Be sure to identify the criteria that you use to describe “success” in handling a crisis situation. Make a master list of “Done Rights” and “Done Wrongs” in crisis management.

• Summarize the results of your study into a report on “Realities of Crisis Management.”

Critical Thinking Cases: Amazon.com – Keeping The Fire Hot Sidebar: Netflix CEO Makes and Remakes Decision The case for this chapter is “Amazon.com – Keeping the Fire Hot.” The sidebar case is Netflix.

Amazon.com is not only the e-commerce company to beat, but it also keeps changing as it grows. No one is ever sure what will come next under the guidance of founder and CEO Jeff Bezos. Seeming not to worry about current earnings per share, Bezos keeps investing to make his company stronger and harder to catch. Its millions of square feet of distribution fulfillment space keep growing domestically and around the globe.

Students have probably visited Amazon.com as a customer. Encourage them to visit the website again from the perspective of evaluating the decision making process of the company.

Case discussion questions and suggested answers: 1. DISCUSSION Bezos once said: “Amazon may break even or even lose money on the sale of its devices.”

The company expects to recoup the money later through the sale of products, with a further boost from its annual $79 Prime fast-shipping membership. In what ways does this strategy .

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show Bezos as a systematic and intuitive thinker?

Systematic thinkers approach problems in a rational, step-by-step, analytical way.

Problems are broken down into smaller components. Students may suggest that Amazon breaks down potential markets in the same way. Music and video have been digital download products for some time, and digital books are a logical extension of the technology.

Intuitive thinking is flexible, spontaneous and creative. Bezos is quoted as saying “you have to rely on experienced executives who’ve honed their instincts and are able to make good judgments." This seems to indicate his preference for creative thinking. If Bezos is okay with losing money on the sale of devices, this may suggest more flexible and long term intuitive thinking. After all, Amazon’s free content spurs sales and reinforces customer loyalty. Giving anything away for free requires some intuition. Unafraid to fail, Bezos seems comfortable with abstraction and limited structure when making decisions.

His approach to building shareholder value by “lowering product prices” over “increasing margins,” is another example of his intuitive thinking.

2. DISCUSSION Would you describe the digital entertainment market as certain, risky, or uncertain for Amazon’s decision makers? Discuss.

Students will have a wide variety of views, depending on what they know about and how they view the digital entertainment market in general. The market has seen revolutionary changes since its infancy (remember the CD?). Once upon a time, competitors in the digital entertainment market would have been described as uncertain when it was in its infancy, but the technology is becoming familiar and the competitors are maturing, so it would probably be described as a risk environment because the outcomes of decision choices can be predicted with probabilities and percentages. The ability to share and deliver content is the issue at the forefront of digital entertainment, and depending upon whether you’re a player in the creation, delivery, or distribution, risk factors will vary.

This can be tied into Chapter 4 concepts by discussing whether their views are examples of Amazon as a problem avoider, problem solver or problem seeker.

Problem seeker seems the most appropriate because Amazon, and Jeff Bezos in particular, is proactive, forward thinking and looks for problems to solve or opportunities to explore.

3. PROBLEM SOLVING How would you describe Netflix CEO’s “bad” decision and how he handled the aftermath? Could he be a role model for others in crisis situations? What three lessons can this example provide to help you handle future crises?

Answers will vary, but some will agree that Reed Hastings could surely serve as a role model for others in crisis situations. Reed Hastings was forthright and honest in the way he handled the aftermath of his poor decision. He apologized for his .

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communications shortcoming and poor “public relations decision”. He even made a YouTube video apologizing and further justifying why he thinks DVD and streaming should be separate. In a talk given to entrepreneurs, Hastings is quoted as saying, “You have to keep trying. You can't be afraid to make mistakes. Every entrepreneur is about creating change." In spite of his apology, the price increase was kept in place.

4. FURTHER RESEARCH What are the latest initiatives coming out of Amazon? How do they stack up in relation to actual or potential competition? How have the Kiva and Zappos acquisitions worked out? Is Bezos making the right decisions as he guides the firm through today’s many business and management challenges?

Latest initiatives coming out of Amazon.com: • • • •

AmazonFresh grocery business delivery is launched and tested in Los Angeles, CA Amazon and Viacom Announce Multi-Year Video Licensing Agreement; Adds a Selection of TV Shows Available Exclusively on Prime Instant Video Amazon Appstore for Android open in nearly 200 countries worldwide Amazon and IBM are battling over a contract with the Department of Defense for cloud services.

Additional Exercises for Chapter 4: Assign teams to develop a decision-making process for buying a used car for, say, $7,000. This should include a consensus ranking of the top 5 criteria they would use and evaluate in their selection. Where would they look for the cars? How many cars or models would they examine before they would feel comfortable making their decision? What are the benefits of looking at more cars? What are the disadvantages, if any? Were they able to optimize or satisfice?

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CHAPTER 5 Plans and Planning Techniques Get There Faster with Objectives Chapter 5 Overview Each Chapter contains several inset features designed to assist the student reader in applying the concepts to relevant examples. Management Live illustrates how popular movies demonstrate management concepts in the chapter. Role Models features a management professional that illustrates key chapter concepts in a novel, visionary or inspirational way.

Explore Yourself refers students to self assessment activities relevant to concepts in the chapter. Ethics Check profiles examples of ethical issues in management. Manager's Library features books that illustrate current events or trends relevant to chapter concepts. Facts to Consider introduces research or trends that may be used for class discussion in the classroom or online for distance learning.

Chapter Five provides a review of the guidelines and importance of planning, planning techniques and tools. Through planning, the focus of this chapter, managers can make decisions that will facilitate goal accomplishment. Planning sets the stage for the subsequent management functions of organizing, leading, and controlling. The Chapter begins with a definition of planning and a review of its benefits and the various types of plans used by most organizations. The distinction between policies and procedures is explained. A variety of specific types of planning support tools or specific types of planning are reviewed. They include: forecasting, contingency, budgets, project and scenario planning.

Next, the chapter discusses the types of plans that managers use; these include short-range and long-range plans; followed by strategic and operational plans. In addition, the chapter describes the importance of providing members with day-to-day guidance on policies and procedures, also plans. Additional planning tools and techniques are discussed. They include budgets, which are plans that commit resources to activities.

The chapter then shifts to a discussion of useful planning tools and techniques, including forecasting, contingency planning, scenario planning, and benchmarking.

The chapter ends with a discussion of how participatory planning includes those people whose ideas and inputs can benefit the plans and whose support is needed for implementation. Goal setting helps align plans by identifying clear and quantifiable goals within an organization. The five criteria for great goals are: specific, timely, measurable, challenging, and attainable.

Chapter 5 Takeaway Questions: Takeaway 5.1 How and Why do Managers Use the Planning Process?

Takeaway 5.2 What Types of Plans do Managers Use? Takeaway 5.3 What are some Useful Planning Tools and Techniques?

Chapter 5 Objectives: .

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To define planning as essential to staying one step ahead.

To understand planning as one of the four functions of management.

To explain the planning process of setting objectives and identifying how to achieve them.

To explain how planning improves focus and action orientation.

To explain how planning improves time management.

To explain the steps in the planning process.

To classify types of planning by time horizons, and their level of detail and use.

To explain the use of strategic plans for the entire organization or operation.

To explain policies and procedures as plans.

To understand that a budget is a plan and powerful tool that commits resources to a project, activity, or program.

To provide various planning tools and techniques, such as forecasting, contingency and scenario planning, and benchmarking.

To explain forecasting as a way to predict what is will happen in the future.

To describe how contingency plans identify alternative courses of action to meet the needs of changing circumstances.

To explain scenario planning as a way to identify several alternative future scenarios.

To explain how benchmarking as a planning technique can make use of external comparisons to better evaluate current performance.

To understand how participatory planning benefits an organization by increasing creativity and information available.

To understand how goal setting helps align plans and activities throughout an organization.

Chapter 5 Lecture Outline:

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Takeaway 5.1 How and Why do Managers Use the Planning Process? o Planning is one of the four functions of management o Planning is the process of setting objectives and identifying how to achieve them o Planning improves focus and action orientation o Planning improves coordination and control o Planning improves time management

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Takeaway 5.2 What Types of Plans do Managers Use? o Managers use short-range and long-range plans o Managers use strategic and operational plans o Organizational policies and procedures are plans o Budgets are plans that commit resources to activities

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Takeaway 5.3 What are some Useful Planning Tools and Techniques? o Forecasting tries to predict the future o Contingency planning creates backup plans for when things go wrong o Scenario planning crafts plans for alternative future conditions o Benchmarking identifies best practices used by others o Participatory planning improves implementation capacities o Goal setting helps align plans and activities throughout an organization 5-2

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Chapter 5 Supporting Materials: Figures • Figure 5.1: Why Does Planning Play a Central Role in the Management Process?

• Figure 5.2: How Might a Hierarchy of Objectives Guide a Quality Management Program in a Manufacturing Firm?

• Figure 5.3: How do Participation and Involvement Help Build Commitment to Plans?

Thematic Boxes and More • Management Live: Time Management and 27 Dresses • Role Models: Don Thompson Keeps the Focus for Career Success • Ethics Check: E-Waste Graveyards Offer Easy Way Out • Facts to Consider: Policies on Office Romances Vary Widely • Manager’s Library: Analytics at Work: Smarter Decisions, Better Results by Thomas Davenport, et al.

• Explore Yourself: More on Time Management • Table 5.1 Steps in the Planning Process Applications • •

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TestPrep 5 Multiple-Choice Questions Skill Building Portfolio o Self-Assessment 5: Time Management Profile o Class Exercise 5: The Future Workplace o Team Project 5: Personal Career Planning Case Snapshot: Nordstrom – “High Touch” with “High Tech” Sidebar case: Contingency Planning and Global Supply Chain Management Hot Topic: Pro and Con Debate? Keep Your Career Plan Light and Focused, Or Loosen Up?

Chapter Outline Takeaway 5.1 How and Why Do Managers Use the Planning Process?

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Planning is one of the four functions of management ✓ Planning – is a process of setting goals and objectives, and determining how to best accomplish them ✓ Planning comes first among the four functions; it sets the stage for every other function (Figure 5.1 illustrates the four functions).

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Planning is the process of setting objectives and identifying how to achieve them ✓ See Table 5.1 which explains the 5 steps in the planning process ✓ Step 1 - Define objectives - the specific results or desired goals one hopes to achieve ➢ Stretch goals - performance targets that require extra hard work and stretch to reach ✓ Step 2 - Determine where you stand vis-à-vis objectives - where are you now, and how far do you need to go to accomplish the objectives 5-3

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✓ Step 3 - Develop premises regarding future conditions - what could possibly happen? ✓ Step 4 - Make a plan. ➢ Plan - a list of actions that must be taken in order to pursue the alternative and accomplish the objectives ✓ Step 5 - Implement the plan and evaluate results - take action and decide if it was the correct one to take.

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Manager’s Library: Analytics at Work: Smarter Decisions, Better Results by Thomas Davenport, et al.

In this book, the authors argue that organizations can improve their strategies by making better use of available information to guide decisions. A key point is that organizations have vast amount of data but often fail to leverage it for competitive gain.

Reflect and React: Choose a business and describe the analytics it might use to plan improvements in a process such as customer relationship management.

For example, how might it determine which products are most popular, most profitable, or trending toward less popular? How might it optimize inventory levels or hire better workers? And by the way, do you also agree that better analytics can help improve personal planning?

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Planning improves focus and action orientation ✓ See the inset graphic for the benefits of good planning ➢ Action oriented ➢ Priority oriented ➢ Advantage oriented ➢ Change oriented ➢ Planning helps avoid the complacency trap of becoming inactive or stuck due to current successes or failures.

Planning improves coordination and control ✓ Planning provides a link with control, setting a goal with which to measure success. ✓ Hierarchy of objectives - lower level objectives help to accomplish higher ones ✓ Figure 5.2 illustrates the hierarchy with an example of a quality management program in a manufacturing firm.

• Mission and Purpose • Top Management Objective • Senior Management Objective • Middle Management Objective • Lower Management Objective

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Good Planning Makes Us…. ✓ Action oriented ✓ Priority oriented ✓ Advantage oriented ✓ Change oriented

Planning improves time management ➢ Helps make choices that allocate time among competing demands 5-4

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➢ See Tips to Remember - Do's and Don'ts for Managing Your Time • Set priorities for what really needs to get done • Work on the most important things first • Leave details for later, or delegate them to others • Say “No!” to requests that divert attention from your priorities • Take charge of your schedule; don’t let others control what you do and when • Stick with your choices; not everything deserves immediate attention.

DISCUSSION TOPIC Many students often juggle classes, study time, part-time work, and extracurricular activities, along with other commitments. Doing this requires the use of time management skills. To generate discussion, ask students how they manage their time so as to deal with their various commitments.

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Explore Yourself: Time Management Time Management is the focus of the self assessment suggested in this Explore Yourself feature. Following the self-assessment, encourage students to make a plan for managing their time better. This is probably good advice for busy professors too.

DISCUSSION Challenge students to describe the planning steps as they would follow them to achieve a personal goal such as earning an “A” on the next management exam, graduating on time or getting a job.

5.1 Questions for discussion suggested answers 1) Should all employees plan, or just managers?

All employees need to plan effectively. This skill will enable higher job performance and illustrates to supervisors that an employee is ready for promotion to positions where planning will become increasingly important.

2) Which step in the planning process do you think is the hardest to accomplish?

Deciding where to go (or objectives) is the most difficult. Once those are determined, the other steps are much easier to perform. Deciding on objectives is perhaps the most unstructured area in planning.

3) How could better planning help in your personal career development?

Individuals should prepare a strategic plan for themselves and their career. What objectives do I want to accomplish? When do I want to achieve each objective?

What resources will I need? What tactics such as training or degrees will I need?

Which types of experiences will I need to gain to advance and how will I gain that experience?

Takeaway 5.2 What types of plans do managers use? .

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Managers use short-range and long-range plans ✓ Short-range plans - usually cover a year or less ✓ Long-range plans - look ahead three or more years into the future ✓ Elliot Jacques, researcher, found that very few people have the capacity to think long-term; most of us work comfortably with only three month time spans DISCUSSION TOPIC

To generate discussion, ask students to identify their short-, intermediate-, and long-range career plans. Many students will be able to quickly identify and distinguish between these types of plans. For example, some students may express a long-term career objective of owning their own business. Their intermediate-range plans for achieving this goal may include obtaining a college degree and then working in a large corporation for a number of years to “learn the ropes” of a particular industry. Their short-range plans will most likely include detailed plans for completing this course as well as other relevant courses.

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Managers use strategic and operational plans ✓ Strategic plans - set broad, comprehensive, and longer-term action directions ✓ Vision - organization's purpose and hopes for the future ✓ Tactical or Operational plans - define what each functional work unit needs to do to implement strategic plans in specific terms. Examples of functional plans include: ➢ Production plans - methods and technology needed by people in their work ➢ Financial plans - deal with money required to support various operations ➢ Facilities plans - deal with facilities and work layouts ➢ Marketing plans - deal with the requirements of selling and distributing goods or services ➢ Human resource plans - deal with the recruitment, selection, and placement of people into various jobs

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Organizational policies and procedures are plans ✓ A policy communicates broad guidelines for taking action and making decisions in specific circumstances ✓ Procedures or rules describe exactly what actions to take in specific situations

Role Models: Don Thompson Keeps the Focus for Career Success In the Role Models feature, “Don Thompson Keeps McDonald's on Focus,” McDonald's USA President Don Thompson is profiled as a young executive with an unusual career path that lead him from an engineering career at Northrop Grumman to McDonald's. This is a good case study illustrating how important it is to keep flexible in pursuing career goals.

Suggested questions for further discussion: • Thompson became discouraged when he failed to win a coveted award. Is this a good reason for changing career plans?

• Why do you think his move to operations provided the attention necessary for advancement?

• What evidence do you see that Thompson puts a high priority on participatory planning?

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•

Facts to Consider: Policies on Office Romances Vary Widely Do you know anyone who has been involved in an office relationship? What are your thoughts? Is this an area that employers should be regulating, or should office romance be left to the best judgments of those involved?

•

Budgets are plans that commit resources to activities ✓ A budget is a plan that commits resources to activities, programs, or projects ➢ A fixed budget allocates a set amount of resources for a specific purpose ➢ A flexible budget allocates resources that vary in proportion with various levels of activity ➢ A zero-based budget allocates resources as if each budget was brand new

5.2 Questions for Discussion Suggested Answers 1) Is there any need for long-range plans in today’s fast-moving environment?

Yes, long-range planning is very important, especially in complex industries, such as the automotive, defense, aerospace, and pharmaceutical industries, where product development cycles are lengthy.

2) What types of policies do you believe are essential for any organization?

Companies need to have policies for human resources, safety and health, environmental compliance, ethics, and perhaps company intellectual property.

3) Are there any possible disadvantages to zero-based budgeting?

Yes, zero-based budgeting has the disadvantage of requiring more time in preparation and justification of expenses and programs. Using existing budgets as a “base-line” allows for easier incremental changes.

Takeaway 5.3 What are some useful planning tools and techniques?

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Forecasting tries to predict the future ✓ Forecasting is the process of predicting what will happen in the future ➢ Qualitative forecasting relies on expert opinions ➢ Quantitative forecasting relies on mathematical models and/or statistical analysis

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Contingency planning creates back-up plans for when things go wrong ✓ Contingency planning identifies alternative courses of action to take when things go wrong. The recession, tsunami in Japan and resulting Fukshima nuclear plant disaster, BP Deepwater Horizon oil spill, Joplin Missouri tornado and recent devastating floods have caused many organizations to realize the importance of contingency plans.

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Scenario planning crafts plans for alternative future conditions ✓ Scenario planning identifies alternative future scenarios and makes plans to deal with each ✓ Shell uses scenario planning to tackle such issues as climate change, sustainable development, fossil-fuel alternatives, human rights, and biodiversity.

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DISCUSSION TOPIC To reinforce the ideas of contingency planning and scenario planning, ask the students to consider what might happen in their own lives during the next five years. Have them develop the parameters of different personal scenarios and describe how they would deal with these different scenarios. This could be used as an out-of-class written assignment.

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Benchmarking identifies best practices used by others ✓ Benchmarking uses external comparisons to gain insights for planning ✓ Best practices are methods that lead to superior performance

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Ethics Check: E-Waste Graveyards Offer Easy Way Out Who doesn't have an out-dated piece of electronic equipment sitting around? This feature explores the issue of responsibility for making sure harmful toxins don't become part of our environment due to improper disposal of e-waste. In addition to the You Decide discussion questions in the feature, students may want to explore how your college disposes of e-waste and evaluate the ethical considerations.

•

Participatory planning improves implementation capacities ✓ Participatory planning includes the people whose ideas and inputs can benefit the plans and whose support will be needed for implementation ✓ Figure 5.3 depicts how participation helps build commitment to plans ➢ Any plan needs the efforts and support of many people to make it work. ➢ It is easier and more likely to get this commitment when the people responsible for implementation have had the opportunity to participate in developing the plans. ➢ When managers use participatory planning and allow others to become involved in the planning process, it leads to better plans, a deeper understanding of the plans, and a strengthened commitment in fully implementing the plans.

✓ Goal setting helps align plans and activities throughout an organization ✓ Goal setting can make a difference in how well plans are implemented ✓ Suggestions for creating "great goals" that result in successful plans are illustrated ➢ Specific ➢ Timely ➢ Measurable ➢ Challenging ➢ Attainable 5.3 Questions for Discussion Suggested Answers 1) If forecasting is going to be imperfect, why bother with it?

Forecasting, even if imperfect, still provides directional guidance in most cases. It is better than “randomness” or the lack of total direction.

2) Shouldn’t all planning provide for contingency plans?

Some plans involve decisions that are so inconsequential or low in cost or importance that a contingency plan is not worth the effort in time it would require. For instance, it .

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would not make sense to have a contingency plan for grocery shopping if your favorite tissue brand is out-of-stock.

3) Are stretch goals a good fit for today’s generation of college students when they enter the workplace?

Stretch goals are performance targets that require extra hard work and stretch to reach. Given the uncertain state of the economy and job market, stretch goals might be not only a good fit but mandatory for career success. Stretch goals also seem to fit well with the characteristics of millenials.

Teaching Notes In this section, ideas, exercises, and assignments are provided to assist you in integrating the concepts in Exploring Management for your students, especially the special features of the text.

Management Live: Time Management and 27 Dresses The heroine in 27 Dresses certainly seems to be a compulsive planner who thrives on organization and time management. Students probably have many examples of friends or colleagues who are on either extreme of the planning continuum. This can lead to a good opening discussion on how effective the results of either fastidious planning or total lack of planning have been in those personal and work situations.

Facts to Consider: Policies on Office Romances Vary Widely The Facts to Consider feature provides information on romance between co-workers as a concern of business. Statistics on the types of policies that organizations have about office romance are included. These questions may be used in class or online for discussion in addition to the questions listed in the "Your Thoughts" section: • What would be the benefit of developing a policy on employees becoming romantically involved?

• Could there be any disadvantages of having such a policy?

• Should the policy apply at all levels of the organization? Why or why not?

Role Models: Don Thompson Keeps the Focus for Career Success In the Role Models feature, “Don Thompson Keeps McDonald's on Focus,” McDonald's USA President Don Thompson is profiled as a young executive with an unusual career path that lead him from an engineering career at Northrop Grumman to McDonald's. This is a good case study illustrating how important it is to keep flexible in pursuing career goals.

Suggested questions for further discussion: • Thompson became discouraged when he failed to win a coveted award. Is this a good reason for changing career plans?

• Why do you think his move to operations provided the attention necessary for advancement?

• What evidence do you see that Thompson puts a high priority on participatory planning? .

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• Manager's Library: Analytics at Work: Smarter Decisions, Better Results Thomas Davenport, et al.

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It's hard to argue the premise of Analytics at Work: organizations can improve strategic decisions by making better use of available information when following decision-making procedures. That sounds like good advice in our personal lives too, but many of us find that we do the same thing that large organizations do, fail to adequately use the large amounts of information available to us.

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Face the fact, those gut feelings could be misleading you. In this book, the authors argue that organizations can improve their strategies by making better use of available information to guide decisions. A key point is that organizations have vast amount of data but often fail to leverage it for competitive gain.

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Reflect and React: Choose a business and describe the analytics it might use to plan improvements in a process such as customer relationship management. For example, how might it determine which products are most popular, most profitable, or trending toward less popular? How might it optimize inventory levels or hire better workers?

And by the way, do you also agree that better analytics can help improve personal planning?

Ethics Check: E-Waste Graveyards Offer Easy Way Out Who doesn't have an out-dated piece of electronic equipment sitting around? This feature explores the issue of responsibility for making sure harmful toxins don't become part of our environment due to improper disposal of e-waste. In addition to the You Decide discussion questions in the feature, students may want to explore how your college disposes of e-waste and evaluate the ethical considerations.

“You Decide” presents the issue of how some countries, profitable hosts for e-waste, may turn a blind eye when it comes to environmental and human costs. Some countries even argue that e-waste contributes to a country’s development. The question of whose responsibility it is to deal with the adverse consequences of e-waste disposal is asked.

Explore Yourself: Time Management Time Management is the focus of the self assessment suggested in this Explore Yourself feature. Following the self-assessment, encourage students to make a plan for managing their time better. This is probably good advice for busy professors too.

Hot Topic: Pro and Con Debate? Keep Your Career Plan Light and Focused, Or Loosen Up? This feature begs the question of whether too much (or too little) career planning is okay.

Two different executives give career advice. After students read each executive’s planning advice (one a tight career planner and the other far more loose), they will be able to discuss whether they relate to “tight career planning” or loose career planning. Those in favor of tight career planning may say that it gives them a sense of direction and that it is highly motivating. Opponents argue that if you are too tightly focused, you will miss unique .

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Schermerhorn Exploring Management 4th Edition opportunities.

Career Situation: What Would You Do? •

Someone you really care about wants you to take a step forward in time management.

She asks you to make a list of all the things you plan to do tomorrow and identify which ones are (A) most important—top priority, (B) important—not top priority, and (C) least important—low priority. Next, she says to double-check your Bs -- asking if any really should be As or Cs and your As – to see if any should be Bs or Cs? So do it, and see how things turn out. Can an exercise like this help you take charge of your time and get the really important things done first?

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One of the persons under your supervision has contacted you about a “possible” sexual harassment complaint against a co-worker. But, she says the organization’s procedures are not clear. You decide they’re not clear and take the matter to your boss. He tells you to draft a set of procedures that can be taken to top management for approval. What procedures will you recommend so that future sexual harassment complaints can be dealt with in a fair manner?

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As CEO you’ve decided to hire a consulting firm to help write a strategic plan for your organization. The plan is important, but you are worried about getting “buy-in” from all members, not just those at the top. What guidelines will you give the consultants so that they come up with a solid strategic plan that has strong commitments to its implementation by all members of your organization?

Skill Building Portfolio: Terms to Define: Benchmarking

Objectives

Best practices

Operational (tactical) plan

Budget

Participatory planning

Complacency trap

Plan

Contingency planning

Planning

Forecasting

Policy

Functional plan

Procedure

Hierarchy of objectives

Scenario planning

Long-range plan

Short-range plan

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Schermerhorn Exploring Management 4th Edition Strategic plan

Vision

Stretch goals

Zero-based budget

TestPrep 5 Multiple Choice Questions: Multiple-Choice Questions 1. Planning is best described as the process of ______ and ._________ (a) developing premises about the future; evaluating them (b) measuring results; taking corrective action (c) measuring past performance; targeting future performance (d) setting objectives; deciding how to accomplish them 2. The benefits of planning often include .__________ (a) improved focus (b) less need for controlling (c) more accurate forecasts (d) increased business profits 3. The first step in the planning process is to .__________ (a) decide how to get where you want to go (b) define your objectives (c) identify possible future conditions or scenarios (d) act quickly to take advantage of opportunities 4. As a first step to help implement her firm’s strategic plans, the CEO of a business firm would most likely want marketing, manufacturing, and finance executives to develop clear and appropriate ________________. (a) means–ends chains (b) operational plans (c) flexible budgets (d) project management 5. ______________planning identifies alternative courses of action that can .

be taken if problems occur with the original plan. (a) Benchmark (b) Participatory (c) Staff (d) Contingency 6. Having a clear sexual harassment policy won’t help an organization much unless it is accompanied by clear __________ that let all members know for sure how it will be implemented. (a) contingencies (b) benchmarks (c) procedures (d) budgets 7. When a manager is asked to justify a new budget proposal on the basis of projected activities rather than as an incremental adjustment to the prior year’s budget, this is an example of .______________. (a) zero-based budgeting (b) strategic planning (c) operational planning (d) contingency planning 8. One of the expected benefits of participatory planning is ._______________ (a) faster planning (b) less need for forecasting (c) greater attention to contingencies (d) more commitment to implementation 9. When managers use benchmarking in the planning process, they usually try to ._________________ 5-12

Schermerhorn Exploring Management 4th Edition (a) set up flexible budgets (b) identify best practices used by others (c) find the most accurate forecasts that are available (d) use expert staff planners to set objectives 10. In a hierarchy of objectives, plans at lower levels are supposed to act as _______________ for accomplishing higher-level plans. (a) means (b) ends (c) scenarios (d) benchmarks 11. If a team leader wants to tap the advantages of participatory planning, what type of decision-making method should he or she use? (a) Authority (b) Quantitative (c) Group (d) Zero-based

Instructor’s Manual of the following characteristics? (a) Easy enough so that no one fails to reach them (b) Realistic and possible to achieve, while still challenging (c) Open ended, with no clear end point identified (d) No set timetable or due dates 15. The planning process isn’t complete until .______________ (a) future conditions have been identified (b) stretch goals have been set (c) plans are implemented and results evaluated (d) budgets commit resources to plans

12. From a time management perspective, which manager is likely to be in best control of his or her time? One who .________________ (a) tries to never say “no” to requests from others (b) works on the most important things first (c) immediately responds to instant messages (d) always has “an open office door” 13. A marketing plan in a business firm would most likely deal with ._______________ (a) production methods and technologies (b) money and capital investments (c) facilities and workforce recruiting (d) sales and product distribution 14. The best goals or objectives for planning purposes would have which .

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Short-Response Questions 16. List the five steps in the planning process, and give examples of each.

The five steps in the formal planning process are (1) define your objectives, (2) determine where you stand relative to objectives, (3) develop premises about future conditions, (4) identify and choose among action alternatives to accomplish objectives, and (5) implement action plans and evaluate results.

17. How does planning facilitate controlling?

Planning facilitates controlling because the planning process sets the objectives and standards that become the basis for the control process. If you don’t have objectives and standards, you have nothing to compare actual performance with; consequently, control lacks purpose and specificity.

18. What is the difference between contingency planning and scenario planning?

Contingency planning essentially makes available optional plans that can be quickly implemented if things go wrong with the original plan. Scenario planning is a longerterm form of contingency planning that tries to project several future scenarios that might develop over time and to associate each scenario with plans for best dealing with it.

19. Why is participation good for the planning process?

Participation is good for the planning process, in part because it brings to the process a lot more information, diverse viewpoints, and potential alternatives than would otherwise be available if just one person or a select group of top managers are doing the planning. Furthermore and very importantly, through participation in the planning process, people develop an understanding of the final plans and the logic used to arrive at them, and they develop personal commitments to trying to follow through and work hard to make implementation of the plans successful.

Integration and Application Question 20. My friends Curt and Rich own a local bookstore. They are very interested in making plans for improving the store and better dealing with competition from the other bookstores that serve college students in our town. I once heard Curt saying to Rich: “We should be benchmarking what some of the successful coffee shops, restaurants, and novelty stores are doing.” Rich replied: “I don’t see why; we should only be interested in bookstores. Why don’t we study the local competition and even look at what the best bookstores are doing in the big cities?”

Questions: Who is right, Curt or Rich? If you were hired as a planning consultant to them, what would you suggest as the best way to utilize benchmarking as a planning technique to improve their bookstore? And, how would you use the planning process to help Curt and Rich come to a point of agreement on the best way forward for their bookstore? .

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Benchmarking is the use of external standards to help evaluate one’s own situation and develop ideas and directions for improvement. Curt and Rich are both right to a certain extent about its potential value for them. Rich is right in suggesting that there is much to learn by looking at what other bookstores are doing really well. The bookstore owner/manager might visit other bookstores in other towns that are known for their success. By observing and studying the operations of those stores and then comparing his store to them, the owner/manager can develop plans for future action.

Curt is also right in suggesting that there is much to be learned potentially from looking outside the bookstore business. They should look at things like inventory management, customer service, and facilities in other settings—not just bookstores; they should also look outside their town as well as within it.

Self-Assessment 5: Time Management Profile Instructions Indicate Y (yes) or N (no) for each item. Be frank; let your responses describe an accurate picture of how you tend to respond to these kinds of situations.

1. When confronted with several items of similar urgency and importance, I tend to do the easiest one first.

2. I do the most important things during that part of the day when I know I perform best.

3. Most of the time I don’t do things someone else can do; I delegate this type of work to others.

4. Even though meetings without a clear and useful purpose upset me, I put up with them.

5. I skim documents before reading them and don’t complete any that offer a low return on my time investment.

6. I don’t worry much if I don’t accomplish at least one significant task each day.

7. I save the most trivial tasks for that time of day when my creative energy is lowest.

8. My workspace is neat and organized.

9. My office door is always “open”; I never work in complete privacy.

10. I schedule my time completely from start to finish every workday.

11. I don’t like “to-do” lists, preferring to respond to daily events as they occur.

12. I “block” a certain amount of time each day or week to be dedicated to high-priority activities.

Class Exercise 5: The Future Workplace Instructions Form groups as assigned by the instructor. Brainstorm to develop a master list of the major characteristics you expect to find in the workplace in the year 2020. Use this list as background for completing the following tasks: 1. Write a one-paragraph description of what the typical “Workplace 2020” manager’s workday .

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will be like.

2. Draw a “picture” representing what the “Workplace 2020” organization will look like.

3. Summarize in list form what you consider to be the major planning implications of your future workplace scenario for management students today. That is, explain what this means in terms of using academic and extracurricular activities to best prepare for success in this future scenario.

4. Choose a spokesperson to share your results with the class as a whole and explain their implications for the class members.

Team Project 5: Personal Career Planning Instructions 1. Complete the following activities and bring the results to class. Your work should be in a written form suitable for grading.

Activity 1: Strengths and Weaknesses Inventory Different occupations require special talents, abilities, and skills. Each of us, you included, has a repertoire of existing strengths and weaknesses that are “raw materials” we presently offer a potential employer. Actions can (and should!) be taken over time to further develop current strengths and to turn weaknesses into strengths. Make a list identifying your most important strengths and weaknesses in relation to the career direction you are likely to pursue upon graduation. Place a * next to each item you consider most important to focus on for continued personal development.

Activity 2: Five-Year Career Objectives Make a list of three career objectives that you hope to accomplish within five years of graduation. Be sure they are appropriate given your list of personal strengths and weaknesses.

Activity 3: Five-Year Career Action Plans Write a specific action plan for accomplishing each of the five objectives. State exactly what you will do, and by when, in order to meet each objective. If you will need special support or assistance, identify what it is and state how you will obtain it. An outside observer should be able to read your action plan for each objective and end up feeling confident that he or she knows exactly what you are going to do and why.

2. In class, form into groups as assigned by the instructor. Share your career-planning analysis with the group and listen to those of others. Participate in a discussion that examines any common patterns and major differences among group members. Take advantage of any opportunities to gather feedback and advice from others. Have one group member be prepared to summarize the group discussion for the class as a whole.

Cases for Critical Thinking Nordstrom – “High Touch with High Tech” Sidebar: Contingency Planning and Global Supply Chain Management The case for this chapter is Nordstrom: “High Tech” and “High Touch.” How has Nordstrom managed to stay fashionable and profitable in an economy of recession-weary consumers? The sidebar, “Contingency Planning and Global Supply Management,” discusses the automobile .

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industry’s reliance on parts from Japan during tsunami, and the necessity of contingency planning efforts when disaster strikes. Instructors may consider directing students to take a look at Nordstrom's website at www.nordstom.com as they prepare to answer case questions.

Case discussion questions and suggested answers: 1. DISCUSSION How might a firm as large as Nordstrom apply the concept of participatory planning to areas like product purchasing and floor displays?

Participatory planning includes people in all steps of a process such as purchasing who have ideas that can benefit the plan. At Nordstrom, everyone from consumers through Nordstrom buyers is involved in some way either directly or indirectly, in the product purchasing process.

Customers provide input on products they purchase and what will be displayed on the floor.

Front-line sales people provide valuable input about customer preferences. Information technology professionals and inventory management system data provides important information about sales, markdowns, inventory turnover, and transfers. Nordstrom Rack sales, data and employees can provide information about the items they receive that do and do not sell even at reduced prices.

Merchants, suppliers and vendors participate as well. Nordstrom works with many different merchants, suppliers and vendors to bring a variety of quality products to consumers. By meeting with a multitude of different vendors, the company makes sound purchasing and floor display decisions with cutting edge product knowledge of trends.

2. DISCUSSION What objectives and measures could Nordstrom use to assess the success of its Web-based inventory integration?

Nordstrom may want to use an inventory turnover ratio benchmark to assess its web-based inventory system. This ratio shows how many times per year inventory is sold and replaced. Wal-Mart is able to sell its inventory 12 times a year, on average. Costco, due to the nature of its business (sells in bulk amounts at deep discounts), turns over its inventory, on average, 13.8 times annually.

Other benchmarks: Sales, including same-store sales Inventory turnover per period Excess Inventory Merchandise selection Product Mix Customer experience Website and mobile experience (online) .

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Fulfillment Delivery Fashion rewards (loyalty) programs(whose members shop more frequently and spend more) Return policy profit margins per item or product category Point-of-sale checkout and checkout times Nordstrom serves as a benchmark for many retailers hopeful of duplicating the mystique of the Nordstrom customer shopping experience. In addition to its web-based inventory system, Nordstrom may compare itself with its closest competitors on a variety of other factors. These may include: business segments, product offerings, unique selling points, geographic coverage, financial performance, and business strategies.

3. PROBLEM SOLVING How can global firms prepare to deal with inevitable problems in their global supply chains?

What alternatives to JIT are there? If Toyota and Nissan, for example, were willing to give up some of the cost efficiencies and savings from JIT, would a reduction in the practice be justifiable?

This answer will vary depending upon opinions of the alternatives stated below.

Emergency parts on-hand will lessen disruptions, but there is truly no way to completely avoid disruptions when a natural disaster strikes. Because the supply chain has moved to the other side of the world, risk has dramatically increased.

What other alternatives are there? a. Make your own parts (vertical integration) b. Stock up on parts that come from a single supplier or a dominant supplier. c. Rely on more suppliers (the trend has shifted to the reliance on fewer suppliers), even if it means higher prices and volume discounts sacrificed d. Move the supply chain back – or keep it local – or at least domestic.

4. Return production to the economy purchasing the input If Toyota and Nissan were willing to give up some of the cost efficiencies and savings from JIT, suggest ways to prepare for future crises: Ways to prepare for future crises include some of the items outlined above. With interest rates far lower, and the cost of money less, the financial benefit of just-in-time inventory is not as great as it once was when interest rates were at, say 5. FURTHER RESEARCH Nordstrom reports expansion strategies in a number of different areas. Research one of its strategies, and project it into the future. What changes, revisions, or updates would you plan for the company? What stretch goals come to mind?

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Expansion Strategies: Expansion into Canada to increase market share (Nordstrom and Nordstrom Rack stores) Store to open in Manhattan (New York City) E-Commerce -- expanded merchandise selection Purchase of HauteLook online private sale website, Jeffrey Boutiques, Treasure&Bond philanthropic store Enhance merchandise selection Connect with existing and new customers

Suggested Team Exercise for Chapter 5 Assign teams to develop a strategic plan and an operational plan for a residential interior painting service that they are planning to launch in the local market, or an improved food service for your college. When their plans are complete, they may be required to contact local painting contractors or food service distributors and determine how feasible their plans really are.

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CHAPTER 6 Controls and Control Systems What gets measured happens Chapter 6 Overview Each Chapter contains several inset features designed to assist the student reader in applying the concepts to relevant examples. Management Live illustrates how popular movies demonstrate management concepts in the chapter. Role Models features a management professional that illustrates key chapter concepts in a novel, visionary or inspirational way. Explore Yourself refers students to self assessment activities relevant to concepts in the chapter. Ethics Check profiles examples of ethical issues in management. Manager's Library features books that illustrate current events or trends relevant to chapter concepts. Facts to Consider introduces research or trends that may be used for class discussion in the classroom or online for distance learning.

Chapter Six provides a comprehensive discussion of Controls and Control Systems, including how and why managers use the control process, the types of controls used and some useful tools and techniques.

The chapter begins with a definition of control, one of the four management functions, as measuring performance and taking action to ensure desired results. The four steps of the control process are described as: 1) setting objectives and standards, 2) measuring actual performance, 3) comparing results with objectives and standards, and 4) taking corrective action, as needed. In other words, the controlling process sees that the right things happen, in the right way, and at the right time. Things aren’t going as planned? A brief discussion of how control can help get things back on track ends this topic.

Managers use a variety of controls, including feedforward, concurrent, and feedback controls. In addition, internal and external controls are used. Last, management by objectives is a way to integrate planning and control. Feedforward (preliminary) controls are put in place before work begins, while concurrent controls focus on what is happening during the work process, and feedback controls (post-action), take place after a job or project is complete. Internal and external controls are used for self-control and to structure situations so that things happen as planned. A way to integrate planning and controlling is by managing by objectives, also called MBO. MBO is a structured process between a supervisor and subordinate to jointly set, and subsequently review, agreed upon performance objectives.

Finally, system-wide organizational controls and project management are reviewed. They include quality control, purchasing and inventory control, breakeven analysis (financial control), financial ratios, and the balanced scorecard. Making quality an everyday performance objective in any industry, whether it is manufacturing, production, or service-related, is crucial. Maybe you know someone who is a project manager – or as a student, you’re a project manager of sorts.

Project management, is the overall planning, supervising and control of projects. Controlling inventory, which can be costly, can reduce costs, and keeping a close eye on revenues and costs .

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(and where they meet), is what breakeven analysis is all about. Ratios measure key financial performance, and you’ll find them in any company annual report. Similar to an academic report card, a balanced scorecard for any organization is useful for measuring an organization’s health across numerous areas – financial performance, customer satisfaction, and internal processes, to name a few.

Chapter 6 Takeaway Questions • • •

Takeaway 6.1 How and Why do Managers Use the Control Process?

Takeaway 6.2 What Types of Controls are Used By Managers?

Takeaway 6.3 What Are Some Useful Control Tools and Techniques?

Chapter 6 Objectives • • • • • • • • • • • • • • • • • • •

To define and explain control, one of the four management functions.

To explain the four steps of the control process.

To understand the first step, setting objectives and standards, of the control process.

To understand the second step, measuring actual performance, of the control process.

To explain the value of the third step, comparing results with objectives and standards.

To understand if and when corrective action is needed, the fourth step of the control process.

To explain the three types of controls managers use.

To explain the importance of preliminary or feedforward controls before work begins.

To explain the importance of concurrent controls while work is occurring.

To explain the importance of post-action feedback controls which take place after a job is complete.

To understand internal and external controls.

To understand the structured process between a supervisor and a subordinate of Management by Objectives or MBO. To identify useful control tools and techniques used by organizations.

Explain the importance of ongoing quality control.

To explain how Gantt charts and CPM/PERT analysis assist in project management.

To understand what a project is, and the role of a project manager.

To explore purchasing, inventory and quality control systems.

To review the computation, use and benefits of breakeven analysis.

To explain the purpose of financial ratios and balanced scorecards.

Chapter 6 Lecture Outline •

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Takeaway 6.1 How and Why do Managers Use the Control Process? o Controlling is one of the four functions of management o Step 1 -- Control begins with objectives and standards o Step 2 -- Control measures actual performance o Step 3 -- Control compares results with objectives and standards 6-2

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o Step 4 -- Control takes corrective action as needed •

Takeaway 6.2 What Types of Controls are Used By Managers? o Managers use feedforward, concurrent and feedback controls o Managers use both internal and external controls o Management by objectives integrates planning and coordinating

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Takeaway 6.3 What Are Some Useful Control Tools and Techniques? o Quality control is a foundation of modern management o Gantt charts and CPM/PERT are used in project management and control o Inventory controls help save costs o Breakeven analysis shows where revenues will equal costs o Financial ratios measure key areas of financial performance o Balanced scorecards help top managers exercise strategic control

Chapter 6 Supporting Materials Figures • Figure 6.1: Why is Controlling so Important in the Management Process?

• Figure 6.2: What Are the Four Steps in the Control Process?

• Figure 6.3: What Are the Differences Between Feedforward, Concurrent, and Feedback Controls?

• Figure 6.4: How Does Managing by Objectives Help to Integrate Planning and Controlling?

• Figure 6.5: How Do Managers Use Breakeven Analysis to Make Informed What-If Decisions?

Thematic Boxes and More • Management Live: Resiliency and Forest Gump • Role Models: Bill Gates Calls for Better Measurement to Fix Global Problems • Ethics Check: Global Privacy and Censorship Worries • Facts to Consider: Distractions can be Goal Killers • Manager’s Library: Lean In: Women, Work and the Will to Lead by Sheryl Sandberg • Explore Yourself: Resiliency • Tips to Remember: How to Write a Good Performance Objective • Find Inspiration: Finding Quality at Whole Foods Market Applications • TestPrep 6 Multiple-Choice Questions • Skill Building Portfolio o Self-Assessment 6: Internal/External Control o Class Exercise 6: Stakeholder Maps o Team Project 6: After Meeting/Project Review

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Case Snapshot: Chipotle – Control Keeps Everything Fresh Sidebar case: Mint.com Makes Personal Financial Management Easy Hot Topic: Pro and Con Debate Should parents pay for children’s grades?

Chapter Outline Takeaway 6.1 How and Why do Managers Use the Control Process?

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Controlling is one of the four functions of management ✓ Controlling is the process of measuring performance and taking action to ensure desired results ✓ How does control fit in with the other management functions? ➢ Planning sets the directions ➢ Organizing arranges the people and resources ➢ Leading inspires people toward their best efforts ➢ Controlling sees to it that the right things happen ✓ An after-action review, a program pioneered by the United States army, identifies lessons learned in a completed project, task force, or special operation

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Step 1 -- Control begins with objectives and standards ✓ An output standard measures performance results (outcomes or work) in terms of quantity, quality, cost, or time ✓ An input standard to measure work efforts that go into a performance task ✓ Figure 6.1 lists why controlling is so important in the management process ➢ Controlling measures performance ➢ How well are you doing? ➢ What actions will ensure desired results? ➢ Do results meet expectations? ➢ Controlling sets a strong foundation for performance DISCUSSION Ask the students to provide examples of when they have exercised self-control. Seek to determine the extent to which the students’ self-management was preceded and facilitated by some form of objective setting ✓ Figure 6.2 The Steps in the Control Process ➢ Set performance objectives and standards ➢ Measure actual performance ➢ Compare actual performance with objectives and standards ➢ Take corrective action as needed ➢ These steps apply equally as well to personal careers

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✓ Facts to Consider: Distractions can be Goal Killers ➢ This feature covers the issue of how prone people are to allowing distractions eat away at precious time. Distractions cause wasted time and unmet goals. eBay’s director of learning at organizational development calls the situation an “epidemic.” Some facts to consider: • Office workers get distracted as often as once every 3 minutes and it takes an average of 23 minutes to refocus after a major interruption.

• Handling up to 100 electronic messages can kill up to one-half a workday.

• Facilitators of disruptions include open-plan office spaces, use of multiple electronic devices, and constant checking of social media and message windows.

• YOUR THOUGHTS: How prone are you to letting distractions consume your time? Does this problem apply to your personal affairs and relationship, not just work? It’s interesting that some employers are trying to step in and set policies that might minimize the negative impact of distractions, particularly electronic ones. Where’s the self-control? Aren’t there things we can all do to protect our time and keep our work and goals on track?

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Role Models: Bill Gates Calls for Better Measurement to Fix Global Problems Philanthropist Bill Gates is quoted as saying: “I have been struck by how important measurement is to improving the human condition. You can achieve incredible progress if you set a clear goal and find a measure that will drive progress toward that goal.” In making his case for “extraordinary measures,” Bill Gates is offering society a pathway to progress through big goals and big accomplishments. What’s the Lesson Here? This opens up discussion about whether students would dismiss Gates’s call to action as the musings of a wealthy man or whether, by learning and listening, his call for better measurement is valid. Can better measurement apply to organizations that you work for or are familiar with?

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Step 2 -- Control measures actual performance ✓ Accurate and timely measurement is essential to spot differences between what is really taking place and what was originally planned.

DISCUSSION To help students understand the role of control as measurement, ask them to identify how they use control in their personal lives by setting objectives and measuring performance. Examples may include using a scale to calculate weight loss, keeping track of their grades to keep a certain grade point, keeping to a personal budget or looking for a car with a minimum gas mileage rating.

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Step 3 -- Control compares results with objectives and standards ✓ Need for action = Desired performance-Actual performance 6-5

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✓ Engineering comparisons - carefully calculated and predetermined standards ✓ Historical comparisons - past experiences as a basis to measure • Step 4 -- Control takes corrective action as needed Management by exception - the practice of giving attention to situations that show the greatest need for action Explore Yourself: Resiliency The control process can be thought of as a way to help organizations best use their resources and systems to achieve productivity. In many ways, our personal lives are similar, yet much depends upon our capacity for resiliency. Resiliency is the ability to call on inner strength and keep moving forward even when things are tough.

DISCUSSION TOPIC Before you formally present the steps in the control process, you may want to solicit student input by asking them to identify some examples of controls that are used in organizations. You can simply record these controls on the chalkboard or overhead projector as they are offered.

Students typically provide many examples ranging from a minimum GPA requirement to liquor laws to shoplifting guards. You can then use one or more of the examples provided to illustrate the control process presented below. For instance, using the example of the minimum GPA requirement, you could point out that this requirement is a standard against which actual student performance is compared. When students’ GPAs fall below this standard, they are placed on academic probation and counseled to improve their performance. If they remain below the standard, they are suspended from the program. Through this process, the quality of students who graduate from a program is maintained. Students who do exceptionally well are also singled out for special attention in the form of awards and honors. An example such as this can make the control process more tangible to students.

Encourage students to take the self-assessment on Internal/External Control and other activities in the Skill Building Portfolio.

6.1 Questions for Discussion Suggested Answers 1) What performance standards should guide a hospital emergency room or fire department?

Standards for an emergency room might include: time from admission to procedure; mortality rates; patients successfully treated per evening; litigation expense; national or community ratings.

Standards for a fire department might include response time to leave station from dispatch call; saved buildings; lives lost; fireman injuries and/or deaths.

2) Can one control performance equally well with input standards and output standards?

Yes, and example would be conformance standards-does the item meet customer requirements. This would be true for both incoming raw materials and outgoing finished goods. .

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3) What are the possible downsides to management by exception?

Management by exception presumes that the “norm” or the “baseline” is satisfactory, and therefore may lessen opportunities for all units or departments to continuously improve. Managers must also be observant of problem situations on items of any level of priority so they may be corrected, and opportunity situations on any level should provide lessons to improve future performance.

Takeaway 6.2 What Types of Controls are Used By Managers?

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Managers use feedforward, concurrent and feedback controls ✓ Organizations are open systems that interact with their environment with a cycle of input, throughput and output that is controlled by management. ✓ Figure 6.3 depicts three types of managerial controls ➢ Feedforward controls - (preliminary controls) take place before work begins/prevent problems before they occur; proactive ➢ Concurrent controls - (steering controls) focus on what happens during the work process ➢ Feedback controls - (post action controls) take place after completing an action DISCUSSION Students may be asked to consider the areas they identified earlier for control in their personal lives and determine how they use feedforward, concurrent and feedback controls to accomplish their objectives.

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Find Inspiration: Finding Quality at Whole Foods Markets Whole Foods market caps the salaries of top executives at 19 times the average worker pay every year. While this may still seem like a huge disparity, top executives are paid over 400 times that of average worker pay. “It helps us keep faith with one another,” says CEO Walter Robb. While this may seem like an interesting metric or control, Whole Foods firmly believes that “employees are everything,” and one of the company’s core values is team member happiness and fulfillment. ✓ Manager’s Library: Lean In: Women, Work and the Will to Lead by Sheryl Sandberg First-time author and Facebook COO, Sheryl Sandberg, gained a flurry of media attention with her book, Lean In: Women, Work and the Will to Lead. For women, likeability and success do not always go hand in hand and gender bias is deeply ingrained in our culture, according to Sandberg. Sandberg gives a little advice to women in the workplace: “take charge.” She believes women do too much “leaning back,” (taking a back seat and “leaving before they’ve left,” and not enough “leaning in.” Can women take charge of their careers simply by what Sandberg calls leaning in?

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Managers use both internal and external controls ✓ Internal control - managers encourage workers to use self discipline to keep focused in achieving goals at work. ✓ External control - systems established by management to directly control work processes ➢ Bureaucratic control - policies, procedures, job descriptions, budgets and supervision all keep behavior in line with organizational objectives ➢ Clan control - organizational culture influences employee behavior ➢ Market control - market competition forces organizations to adjust products, pricing and other practices to maintain a competitive advantage

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Management by objectives integrates planning and controlling ✓ Management by objectives (MBO) is a process of joint objective setting between a superior and subordinate ➢ Important to state as specifically and quantitatively as possible ➢ Measurable end product ➢ Verifiable work activities ➢ Figure 6.4 depicts the MBO process ✓ Improvement objectives - specific performance improvement is stated so it can be measured ✓ Personal development objectives are for employee development or personal growth ✓ Learning Activity - After reviewing "Tips to Remember - How to write a good performance objective", directs students to write a Personal Development Objective.

This may be implemented as a group activity in face to face or online classes as students get into small groups and share goals and do peer review to determine if they fulfill the steps in “Tips to Remember.”

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Tips to Remember: How to Write a Good Performance Objective o Clarify the target o Make it measurable o Define the timetable o Avoid the impossible (be realistic) o Add challenge o Don’t overcomplicate

6.2 Questions for Discussion Suggested Answers 1) How does bureaucratic control differ from clan control?

Bureaucratic control is a formal system of policies, procedures and supervision established by management to directly control employees. Clan control is an informal control of employee behavior that is reinforced by employees to maintain organizational culture. New employees are taught the culture or "the way we do things around here" and reinforce appropriate behavior and discourage inappropriate behavior.

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2) What is Douglas McGregor’s main point regarding internal control?

McGregor's Theory Y type manager would feel that people are willing to use internal controls or self discipline in their work, but they are more likely to do this when they have some participation in setting performance objectives.

3) Can MBO work when there are problems in the relationship between a team leader and a team member?

MBO probably would fail if there is a relationship problem between a team leader and a team member. Mutual support and trust is a key aspect of success in a team as well as for MBO to work well. If MBO is administered well, it may improve team leader and team member relations.

Takeaway 6.3 What Are Some Useful Control Tools and Techniques?

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Quality control is a foundation of modern management - the work of W. Edwards Deming is the foundation of the quality movement so important to modern management. ✓ Total quality management - process of emphasizing quality as an objective and striving for zero defects in products or services. ✓ Continuous improvement - constantly looking for ways to improve performance ✓ Control charts - graphical representation of performance that indicate trends. These trends can be used to identify whether performance is "in control". Students who have taken statistics courses will recognize the control limits in control charts. ✓ Six Sigma - quality standard that tolerates no more than 3.4 defects per million units produced.

DISCUSSION Students may apply the concepts of total quality management, continuous improvement and control charts to academic performance in a management class. How are academic performance indicators and student effort similar to quality control in industry?

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Gantt charts and CPM/PERT are used in project management and control. ✓ Project management - area of management that is responsible for planning and control of a project such as an event, product development or building project. Project managers are responsible for completing an activity on time and on budget. ✓ Gantt chart - graphic depiction of the scheduling necessary to complete tasks on time for project completion. ✓ CPM/PERT - charts depict a critical path in a project. A critical path is a sequence of events that can slow down completion of a project if delayed.

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Inventory controls help save costs - and make sure that inventory is adequate for current demand but not so large that there is expensive surplus inventory. ✓ Economic order quantity - automatic order of a pre-determined amount of inventory when inventory falls to a certain level. Examples include college bookstores and supermarkets.

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✓ Just-in-time scheduling (JIT) - inventory arrives exactly when it is needed for production or sale.

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Breakeven analysis shows where revenues will equal costs ✓ Breakeven point - revenue equals costs. When revenue exceeds this point a product or service will earn a profit. ➢ Breakeven Point = Fixed Costs ÷ (Price - Variable Costs) ➢ Figure 6.5 illustrates the concept graphically ✓ Breakeven analysis - determines breakeven point when costs change.

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Financial ratios measure key areas of financial performance ✓ Financial ratios - calculations that track financial success of the organization. ➢ Liquidity - ability to meet short term financial obligations (pay bills) ➢ Leverage - measures use of debt ➢ Asset management - measures how well inventory is managed ➢ Profitability - determines if the firm is producing a return on the owner's investment Balanced scorecard – help top managers exercise strategic control ✓ Financial Performance ✓ Customer Satisfaction ✓ Internal Process Improvement ✓ Innovation and Learning

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Ethics Check: Global Privacy and Censorship Worries Are companies like Yahoo!, Microsoft, and Google violating human rights in China by complying with government requests for censorship? Are corporate values and policies compromised in the quest for profits? Amnesty International thinks so.

YOU DECIDE: Do company executives have any choice but to comply with the requests of governments? Are there times when profits should be sacrificed for principles?

Questions for Discussion Suggested Answers 1. Can a firm such as Wal-Mart ever go too far in controlling its inventory costs?

If control results in shortages of inventory, demand might drop as customers determine that the organization rarely has the items that are advertised or are in high demand. Good inventory management manages inventory costs so they are held to a minimum but do not result in shortages.

2. Is the concept of total quality management out of date?

Students will likely agree that it is not out of date, particularly if they have used a defective product or had a vehicle recalled. This would be an opportunity to ask them why total quality management is still so important. Why after 50 years of understanding the importance of quality production do we still have defective products?

3. Does the “balanced scorecard” as described in this chapter measure the right things?

Balanced scorecards build on financial analysis to measure organizational performance in .

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other financial measures, customer satisfaction, internal process improvement and innovation and learning.

Teaching Notes In this section, ideas, exercises, and assignments are provided to assist you in integrating the concepts in Exploring Management for your students, especially the special features of the text.

Management Live: Resiliency and Forrest Gump Forrest Gump is one of the most loved and certainly most quoted movies in recent memory. It's full of management analogies too. The Management Live feature illustrates Forrest's resiliency in the face of adversity and asks students how well they bounce back in difficult situations. A fun discussion could evolve by asking students to list the quotable lines they remember in the movie and how well they apply to management situations.

Facts to Consider: Distractions Can Be Goal Killers How prone are you to allowing distractions eat away at your precious time? Distractions cause wasted time and unmet goals. eBay’s director of learning at organizational development calls the situation an “epidemic.” Some of the facts to consider include: • • •

Office workers get distracted as often as once every 3 minutes and it takes an average of 23 minutes to refocus after a major interruption.

Handling up to 100 electronic messages can kill up to one-half a workday.

Facilitators of disruptions include open-plan office spaces use of multiple electronic devices, and constant checking of social media and message windows.

YOUR THOUGHTS: How prone are you to letting distractions consume your time? Does this problem apply to your personal affairs and relationship, not just work? It’s interesting that some employers are trying to step in and set policies that might minimize the negative impact of distractions, particularly electronic ones. Where’s the self-control? Aren’t there things we can all do to protect our time and keep our work and goals on track?

Role Models: Bill Gates Calls for Better Measurement to Fix Global Problems Philanthropist Bill Gates is quoted as saying: “I have been struck by how important measurement is to improving the human condition. You can achieve incredible progress if you set a clear goal and find a measure that will drive progress toward that goal.” In making his case for “extraordinary measures,” Bill Gates is offering society a pathway to progress through big goals and big accomplishments.

What’s the Lesson Here? This opens up discussion about whether students would dismiss Gates’s call to action as the musings of a wealthy man or whether, by learning and listening, his call for better measurement is valid. Can better measurement apply to organizations that you work for or are familiar with? .

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Find Inspiration: Finding Quality at Whole Foods Market Whole Foods market caps the salaries of top executives at 19 times the average worker pay every year. While this may still seem like a huge disparity, top executives are paid over 400 times that of average worker pay. “It helps us keep faith with one another,” says CEO Walter Robb. While this may seem like an interesting metric or control, Whole Foods firmly believes that “employees are everything,” and one of the company’s core values is team member happiness and fulfillment.

Manager's Library: Lean In: Women, Work and the Will to Lead by Sheryl Sandberg First-time author and Facebook COO, Sheryl Sandberg, has gained a flurry of media attention with her book, Lean In: Women, Work and the Will to Lead. Gender bias stereotypes in the workplace are alive and well, and deeply ingrained in our culture. For women, likeability and success do not always go hand in hand. In her book, Sandberg gives a little advice to women in the workplace: “Take charge.” She believes women do too much “leaning back,” (taking a back seat and “leaving before they’ve left,” and not enough “leaning in.” Can women take charge of their careers simply by what Sandberg calls leaning in?

Ethics Check: Global Privacy and Censorship Worries The feature discusses the topic of global privacy and censorship. Are companies like Yahoo!, Microsoft, and Google violating human rights in China by complying with government requests for censorship? Are corporate values and policies compromised in the quest for profits? Amnesty International thinks so. Questions to discuss with students: Do company executives have any choice but to comply with the requests of governments? Are there times when profits should be sacrificed for principles?

Explore Yourself: Resiliency The control process can be thought of as a way to help organizations best use their resources and systems to achieve productivity. In many ways, our personal lives are similar, yet much depends upon our capacity for resiliency. Resiliency is the ability to call on inner strength and keep moving forward even when things are tough.

Encourage students to take the self-assessment on Internal/External Control and other activities in the Skill Building Portfolio, consider asking students how their view of the influence of internal control or external control will impact their behavior as a manager or as a student.

The tendency toward internal or external control can be very enlightening. After taking the Internal/External Control self-assessment in the Skill-Building Portfolio,

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Hot Topic: Pro and Con Debate Should parents pay for children’s grades?

This feature explores the topic of paying for grades. Is paying for grades the correct things to do?

Does it improve parental control over children’s study habits? Those who support paying for grades say it improves performance and “gets the kids’ attention.” Is performance for pay okay at such a young age? Opponents are concerned that the motivation comes from financial gain rather than love of learning. Ask students what their thoughts are when it comes to making money for good grades. Discuss the subject of extrinsic and intrinsic rewards. Is parenting similar to managing people in the workplace?

Career Situation: What Would You Do? •

A work colleague comes to you and confides that she feels “adrift in her career” and “just can’t get enthused about what she’s doing anymore.” Your take is that this might be a case of self-management and personal control. How will you explain to her that using the steps in the management control process might help her in better understanding and correcting her situation?

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You have a highly talented work team whose past performance has been outstanding.

Recently, though, team members are starting to act like the workday is mainly a social occasion. Getting the work done seems less important than having a good time; performance is on the decline. How can you use external controls in a positive way to restore team performance to high levels?

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You’ve had three years of solid work experience after earning your undergraduate degree. A lot of your friends are talking about going to graduate school and they’re pushing you to take time out to earn an MBA degree. There are potential costs and benefits if you go for the MBA. How can breakeven analysis help you make the decision to: (1) go or not go, (2) go full time or part time, and (3) even where to go?

Skill Building Portfolio Terms to Define: After-action review

Bureaucratic control

Balance sheet Clan control Balanced scorecard Concurrent control Breakeven analysis Continuous improvement Breakeven point Control chart .

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Controlling CPM/PERT Critical path Economic order quantity External control Feedback control Feedforward control Gantt chart Improvement objectives Income statement Input standards Internal control (self-control) Inventory control Just-in-time scheduling (JIT) Management by exception Managing by objectives Market control Output standards Personal development objectives Project Project management Six Sigma Total quality management (TQM)

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TestPrep 6: Multiple-Choice Questions (d) breakeven analysis

1. After objectives and standards are set, what step comes next in the control process? (a) Measure results. (b) Take corrective action. (c) Compare results with objectives. (d) Modify standards to fit circumstances.

6. The ____________ chart graphically displays the scheduling of tasks required to complete the project. (a) exception (b) Taylor (c) Gantt (d) after-action

2. When a soccer coach tells her players at the end of a losing game, “You did good in staying with the game plan,” she is using a/an ____________ as a measure of performance. (a) input standard (b) output standard (c) historical comparison (d) relative comparison

7. When MBO is done right, who does the review of a team member’s performance accomplishments? (a) the team member (b) the team leader (c) both the team member and team leader (d) the team leader, the team member, and a lawyer

3. When an automobile manufacturer is careful to purchase only the highestquality components for use in production, this is an example of an attempt to ensure high performance through ____________ control. (a) concurrent (b) statistical (c) inventory (d) feedforward

8. A good performance objective is written in such a way that it ____________. (a) has a flexible timetable (b) is general and not too specific (c) is impossible to accomplish (d) can be easily measured

4. Management by exception means ____________. (a) managing only when necessary (b) focusing attention where the need for action is greatest (c) the same thing as concurrent control (d) the same thing as just-in-time delivery 5. A total quality management program is most likely to be associated with ____________. (a) EOQ (b) continuous improvement (c) return on equity .

9. A team leader is not living up to the concept of MBO if he or she ____________. (a) sets performance objectives for subordinates (b) stays in touch and tries to support subordinates in their work (c) jointly reviews performance results with subordinates (d) keeps a written record of subordinates’ performance objectives 10. If an organization’s top management establishes a target of increasing new hires of minority and female candidates by 15% in the next six months, this is an example of a/an ____________ standard for control purposes. (a) input 6-15

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(b) output (c) management by exception (d) concurrent

(c) current ratio (d) inventory turnover ratio

11. When a supervisor works alongside of an employee corrects him or her immediately when a mistake is made, this is an example of ____________ control. (a) feedforward (b) external (c) concurrent (d) preliminary 12. When one team member advises another team member that “your behavior is crossing the line in terms of our expectations for workplace civility,” she is exercising a form of ________ control over the other’s inappropriate behaviors (a) clan (b) market (c) internal (d) preliminary 13. In CPM/PERT, “CPM” stands for ____________. (a) critical path method (b) control planning management (c) control plan map (d) current planning matrix 14. In a CPM/PERT analysis, the focus is on ____________ and the event ____________ that link them together with the finished project. (a) costs; budgets (b) activities; sequences (c) timetables; budgets (d) goals; costs 15. Among the financial ratios often used for control purposes, Current Assets/Current Liabilities is known as the ____________. (a) debt ratio (b) net margin .

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Integration and Application Question

20. Put yourself in the position of a management consultant who specializes in MBO. The local Small Business Enterprise Association has asked you to be the speaker for its luncheon next week. The president of the association says that the group would like to learn more about the topic: “How to Use Management by Objectives for Better Planning and Control.”

Questions: Your speech will last 15 to 20 minutes. What is the outline for your speech?

How will you explain the potential benefits of MBO to this group of small business owners?

Short-Response Questions: 16. What type of control is being exercised in the U.S. Army’s after-action review?

The Army’s “after-action review” takes place after an action or activity has been completed.

This makes it a form of “feedback” control. The primary purpose is to critique the action/activity and try to learn from it so that similar things in the future can be done better and so that the people involved can be best trained.

17. How could clan control be used in a TQM program?

One way to use clan control in a TQM context would be to set up small teams or task forces called “Quality Circles” that bring together persons from various parts of the work place with a common commitment to quality improvements. You can ask these teams or QCs to meet regularly to discuss quality results and options, and to try and maintain a continuous improvement momentum in their work areas. The members should ideally get special quality training. They should also be expected to actively serve as quality champions in their own work areas to implement continuous quality improvements and come up with ideas for new ones.

18. How can a just-in-time system reduce inventory costs?

The just-in-time inventory approach reduces the carrying costs of inventories. It does this by trying to have materials arrive at a work station just in time to be used. When this concept works perfectly, there are no inventory carrying costs. However, even if it is imperfect and some inventory ends up being stockpiled, it should still be less than that which would otherwise be the case. But as the recent tsunami and nuclear disaster in Japan showed, firms that are too reliant on JIT in their supply chains must prepare for the risk of disruptions when crises and natural disasters occur.

19. What four questions could be used to set up a balanced scorecard for a small business?

The four questions to ask when developing a balanced scorecard are: (1) Financial Performance—To improve financially, how should we appear to our shareholders? (2) Customer Satisfaction—To achieve our vision, how should we appear to our customers? (3) Internal Process Improvement—To satisfy our customers and shareholders, at what internal business processes should we excel? (4) Innovation and Learning—To achieve our vision, how will we sustain our ability to change and improve? .

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Integration and Application Questions: Integration and Application Question 20. Put yourself in the position of a management consultant who specializes in MBO. The local Small Business Enterprise Association has asked you to be the speaker for its luncheon next week. The president of the association says that the group would like to learn more about the topic: “How to Use Management by Objectives for Better Planning and Control.”

Questions: Your speech will last 15 to 20 minutes. What is the outline for your speech?

How will you explain the potential benefits of MBO to this group of small business owners?

I would begin the speech by describing MBO as an integrated planning and control approach. I would also clarify that the key elements in MBO are objectives and participation. Any objectives should be clear, measurable, and time defined. In addition, these objectives should be set with the full involvement and participation of the employees; they should not be set by the manager and then told to the employees. Given this, I would describe how each business manager should jointly set objectives with each of his or her employees and jointly review progress toward their accomplishment. I would suggest that the employees should work on the required activities while staying in communication with their managers. The managers, in turn, should provide any needed support or assistance to their employees. This whole process could be formally recycled at least twice per year.

Self-Assessment 6: Internal/External Control Instructions Circle either a or b to indicate the item you most agree with in each pair of the following statements.

1. (a) Promotions are earned through hard work and persistence. (b) Making a lot of money is largely a matter of breaks.

2.(a) Many times the reactions of teachers seem haphazard to me. (b) In my experience I have noticed that there is usually a direct connection between how hard I study and the grades I get.

3.(a) The number of divorces indicates that more and more people are not trying to make their marriages work. (b) Marriage is largely a gamble.

4.(a) It is silly to think that one can really change another person’s basic attitudes. (b) When I am right, I can convince others.

5.(a) Getting promoted is really a matter of being a little luckier than the next guy. (b) In our society, an individual’s future earning power is dependent on his or her ability.

6.(a) If one knows how to deal with people, they are really quite easily led. (b) I have little influence over the way other people behave.

7.(a) In my case, the grades I make are the results of my own efforts; luck has little or nothing to do with it. (b) Sometimes I feel that I have little to do with the grades I get. .

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8.(a) People such as I can change the course of world affairs if we make ourselves heard. (b) It is only wishful thinking to believe that one can really influence what happens in society at large.

9. (a) Much of what happens to me is probably a matter of chance. (b) I am the master of my fate.

10.(a) Getting along with people is a skill that must be practiced. (b) It is almost impossible to figure out how to please some people.

Scoring Give yourself 1 point for 1b, 2a, 3a, 4b, 5b, 6a, 7a, 8a, 9b, 10a. Total scores of: 8–10 = high internal locus of control, 6–7 = moderate internal locus of control, 5 = mixed locus of control, 3–4 = moderate external locus of control, 0–2 = high external locus of control.

Interpretation This instrument offers an impression of your tendency toward an internal locus of control or external locus of control. Persons with a high internal locus of control tend to believe they have control over their own destinies. They may be most responsive to opportunities for greater selfcontrol in the workplace. Persons with a high external locus of control tend to believe that what happens to them is largely in the hands of external people or forces. They may be less comfortable with self-control and more responsive to external controls in the workplace.

Class Exercise 6: Stakeholder Maps Preparation Review the discussion of organizational stakeholders in the textbook. (1) Make a list of the stakeholders that would apply to all organizations—for example, local communities, employees, and customers. What others would you add to this starter listing? (2) Choose one organization that you are familiar with from each list below. (3) Draw a map of key stakeholders for each organization. (4) For each stakeholder indicate its major interest in the organization. (5) For each organization make a list of possible conflicts among stakeholders that the top manager should recognize.

Nonprofit Government Business Elementary school Local mayor’s office Convenience store Community hospital State police Movie theater Church U.S. Senator National retailer University Internal Revenue Service Local pizza shop United Way Homeland Security agency Urgent care medical clinic Instructions In groups assigned by your instructor, choose one organization from each list. Create “master” stakeholder maps for each organization, along with statements of stakeholder interests and lists of potential stakeholder conflicts. Assume the position of top manager for each organization.

Prepare a “stakeholder management plan” that represents the high-priority issues the manager should be addressing with respect to the stakeholders. Make a presentation to the class for each of your organizations and engage in discussion about the importance and complexity of stakeholder analysis. .

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Team Project 6: After Meeting/Project Review Instructions 1. Complete the following assessment after participating in a meeting or a group project.

1. How satisfied are you with the outcome of the meeting project?

Not at all satisfied 1 2 3 4 5 6 7 Totally satisfied 2. How do you think other members of the meeting/project group would rate you in terms of your influence on what took place?

No influence 1 2 3 4 5 6 7 Very high influence In your opinion, how ethical was any decision that was reached?

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Highly unethical 1 2 3 4 5 6 7 Highly ethical 4. To what extent did you feel “pushed into” going along with the decision?

Not pushed into it at all 1 2 3 4 5 6 7 Very pushed into it 5. How committed are you to the agreements reached?

Not at all committed 1 2 3 4 5 6 7 Highly committed 6. Did you understand what was expected of you as a member of the meeting or project group?

Not at all clear 1 2 3 4 5 6 7 Perfectly clear 7. Were participants in the meeting/project group discussion listening to each other?

Never 1 2 3 4 5 6 7 Always 8. Were participants in the meeting/project group discussion honest and open in communicating with one another?

Never 1 2 3 4 5 6 7 Always 9. Was the meeting/project completed efficiently?

Not at all 1 2 3 4 5 6 7 Very much 10. Was the outcome of the meeting/project something that you felt proud to be a part of?

Not at all 1 2 3 4 5 6 7 Very much 2. Make sure that everyone in your group completed this assessment for the same team project.

3. Each person in the group should then take the “mirror test.” They should ask: (a) What are my thoughts about my team and my contributions to the team, now that the project is finished? (b) What could I do in future situations to end up with a “perfect” score after a meeting or after a project review?

4. Share results of both the assessment and mirror test with one another. Discuss their implications: (a) for the future success of the group on another project and (b) for the members as they go forward to work with other groups on other projects in the future.

5. Be prepared to share your team project results with the class as a whole.

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Cases for Critical Thinking Chipotle – Control Keeps Everything Fresh Sidebar: Mint.com Makes Personal Financial Management Easy If controlling is the process of measuring performance and taking action to ensure desired results, your next meal from Chipotle’s should be a good one. Since its humble beginnings in Denver, Colorado, Chipotle has implemented the control process with fervor, catapulting the company to where it is today. Nothing is left to chance, and everything counts. The case explores the various ways Chipotle uses the control function to keep producing its delicious burritos in a high performance culture.

Case discussion questions and suggested answers: 1. DISCUSSION How did CEO Steve Ells use the control process to move Chipotle forward with success? Explain your answer by using at least three examples based on the case. a. Financial Ratios (measuring actual performance): Same-store or comparable store sales is one way Chipotle determines profitability for each of its stores from year-to-year. Same-store sales refers to the difference in revenue generated by a Chipotle store over a certain period, compared to an identical past period. This metric is usually expressed as a percentage b. Employee Turnover: The rate at which Chipotle as a company, or each store, gains or loses employees. c. Ells measured burrito sales of his first store and used break even analysis.

He knew he needed to sell 107 burritos per day to break even. d. Projections (budgeting): After one month in business, Steve Ells was selling in excess of 1,000 burritos a day, which far exceeded his projections. Projections are used in the control process. e. Quality Control: Steve Ells takes pride in serving products using only high-quality, natural, fresh, sustainable ingredients. Finding and sourcing the very best ingredients raised with respect for the animal (without the use of antibiotics or added hormones), the environment, and the farmers(supporting family farmers). f. External Control: Chipotle has established systems to control long lunch and dinner lines. Controls are utilized to measure number of customers served per hour and customer wait times. g. Bureaucratic control: policies, procedures, job descriptions, budgets and supervision within each of its stores. h. Balanced Scorecard: Its motto, “Food with Integrity,” translates to very high customer satisfaction and food quality standards. i. Continuous Improvement: When Ells realized the quality and sales of items containing pork needed a change, he began to purchase all naturally raised meats. He wound up with a product that tasted better to customers.

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2. DISCUSSION A balanced scorecard helps top managers exercise strategic control. The scorecard includes customer satisfaction and internal process improvement. Discuss how Chipotle might score on both.

Customer satisfaction: Chipotle would probably score high on customer satisfaction. The company is very focused on the customer experience. They provide each customer with individual attention and “build one burrito at a time.”

• Friendly people to take care of each customer. Focused people culture.

• Food is prepared and cooked using classical methods in front of the customer.

• Distinctive interior design •

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Internal Process Improvement: Internal process improvement: New process improvement asks: “How well do our activities and processes directly increase value provided to our customers and clients?”

Chipotle is focused on internal processes, which begin with sourcing high quality, natural, sustainable, and fresh ingredients.

Departure from automated cooking techniques and microwaves of fast food restaurants to classic cooking methods, including marinating and grilling meats, hand cut produce and herbs, fresh salsa and guacamole, and rice cooked in small batches throughout the day. Kitchens resemble a high-end restaurant rather than a fast food restaurant.

Close relationships with suppliers.

Integrated information systems to manage the flow of information between its restaurants and corporate offices.

Improving restaurant throughput is a key initiative Pay-for-performance philosophy for managers

3. PROBLEM SOLVING Could Mint.com help you? Are you in control of your personal finances? What are your financial objectives? Can you show how a combination of internal and external controls could help you achieve them?

This answer will vary. Some students are in control of their personal finances, while others are not.

Internal controls to help achieve financial objectives might include: self-discipline when it comes to spending and budgeting.

External controls: tracking spending and focusing on monthly budgets. Income taxes, required insurance, and so on.

4. FURTHER RESEARCH Go online to find and analyze Chipotle's most recent annual report. Check and critique the company's recent financial performance.

Review reports from three competitors -- e.g., Rubio, Baja Fresh, Qdoba, or .

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Moe's Southwest Grill. How are they doing, and what threats, if any, do they post to Chipotle? How about product extensions? Could the Chipotle model be copied with Indian or Caribbean food for example?

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Chipotle’s most recent financial performance: Chipotle has 1,400 stores, which is more than its four competitors (listed below) combined. Restaurant margins are among the highest in the industry at 27.1%. In the “competition” section of its most recent annual report, it reads: “We compete with national and regional fast-casual, quick-service and casual dining restaurants. Our competition also includes a variety of locally owned restaurants and the deli sections and in-store cafes of several major grocery store chains. The number, size and strength of competitors vary by region, market and even restaurant. Competitors to our restaurants compete based on a number of factors, including taste, quality, speed of service, price and value, name recognition, location, menu variety, customer service and the ambience and condition of the competitor. Unlike us, a number of our competitors grow through franchising. We believe we’re well-positioned to continue to grow our market position in existing and new markets given current consumer trends, including increasing awareness and concern among consumers about what they eat and how it is prepared and the increasing prevalence of the fast-casual segment. Some of our competitors have formats that might resemble ours. We believe, however, that Chipotle has become one of the most recognized fast-casual restaurants and that we are known for our focus on preparing food using a variety of fresh ingredients in an open restaurant kitchen to create delicious food, as well as our commitment to ‘Food With Integrity,’ which we think represents a significant competitive advantage in the segment in which we operate.”

Rubio: known as a fast casual “Fresh Mex” or “New Mex,” there are close to 200 locations. Rubio’s is known for its delicious fish tacos.

Baja Fresh: fast-casual “Tex Mex” restaurants emphasizing fresh ingredients and a self-serve salsa bar. Over 250 locations.

Qdoba Mexican Grill’s slogan is “Food for People Who Love Food.” The company plans to grow through franchising. All food is prepared fresh and by hand. To date, there are fewer than 50 locations.

Moe’s Southwest Grill has over 500 locations. Many of the items on the Moe’s menu draw their names from pop culture. "Art Vandalay" and "Close Talker" (both from the television series Seinfeld).

Threats to Chipotle: While Chipotle outnumbers its competitors, the trend of “Fresh Mex” or “New Mex,” using fresh ingredients (think: Chevys), has created increased competition in the “fast-casual” segment. Chipotle is focused on quality, sustainability and other environmentally friendly practices. Local sourcing is done whenever possible. The company believes that animals should be fed a diet similar to what they would eat naturally – and they make these values known. They also source sour cream and cheese from dairy cows given access to pasture. While this does not eliminate competition, this philosophy (along with continuing to refine cooking techniques), does differentiate them.

Could the model be copied with Indian or Caribbean food? Yes. The format of 6-23

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sustainability raised ingredients cooked using classic methods in front of the customer and served in an interactive format could certainly be duplicated. In fact, Chipotle has opened an Asian themed restaurant called ChopHouse Southeast Asian kitchen using the fundamental principles on which Chipotle restaurants are based.

Suggested Team Exercise for Chapter 6 Break the class into pairs and be sure that at least one student has a calculator in each pair.

Calculate the breakeven costs for this hamburger restaurant: The selling price for each hamburger is $ 2.00 each The average cost per burger is Meat Paper Condiments Bread Labor

.60 .10 .15 .20 .20

In addition, the cost per year for rent, insurance, property taxes, and utilities which are on all the time is $75,000.

A) How many hamburgers does the restaurant need to sell to break-even?

B) How many do they need to sell to make a profit of $150,000 a year?

Calculations: a) Unit costs are $1.25 per burger obtained by adding the costs above.

Therefore, BEP = Fixed Costs/Price per Unit -Variable Cost per Unit = $75,000/ ($2.00-$1.25) = 100,000 burgers b) The goal is to make a profit of $150,000 after covering all costs. Since we already know the BEP is 100,000 burgers and we know that we make $.75 per burger, then the restaurant needs to “cover” the goal of the $ 150,000 by selling an added 200,000 burgers.

So the total is the 200,000 needed to break-even PLUS the added 150,000 burgers needed to make a profit of $ 150,000 annually.

OR 350,000 TOTAL burgers will generate a profit of $150,000.

Proof: 200,000 burgers X a profit of $.75 each per burger = $150,000 annually

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CHAPTER 7 Strategy and Strategic Management Insights and hard work deliver results Chapter 7 Overview Each Chapter contains several inset features designed to assist the student reader in applying the concepts to relevant examples. Management Live illustrates how popular movies demonstrate management concepts in the chapter. Role Models features a management professional that illustrates key chapter concepts in a novel, visionary or inspirational way.

Explore Yourself refers students to self assessment activities relevant to concepts in the chapter. Ethics Check profiles examples of ethical issues in management. Manager's Library features books that illustrate current events or trends relevant to chapter concepts. Facts to Consider introduces research or trends that may be used for class discussion in the classroom or online for distance learning.

Chapter Seven provides a definition of strategy and a review of strategic management and insights. The chapter explores various levels of strategies, including those for growth, in use at most organizations. Considerable attention is then devoted to both corporate-level and business-level strategy formulation. Divestiture and restructuring strategies, used primarily when an organization runs into difficulties, are reviewed. A brief discussion of firms pursuing global strategies, cooperative and partnership strategies, and e-business strategies follows.

This chapter focuses on strategic management and the role that strategy plays in achieving competitive advantage and maximum organizational performance. The chapter begins by defining the key terms and concepts in strategic management and describing the strategic management process. Emphasis is placed on strategy formulation and strategy implementation. The importance of strategic management for gaining a competitive advantage is also discussed. This is followed by a discussion of the different levels of strategies used by an organization. Considerable attention is then devoted to both corporatelevel and business-level strategy formulation. The chapter’s focus then shifts to the process of strategy implementation, with emphasis being placed on common strategic planning failures that hinder strategy implementation and the importance and role of strategic leadership.

Next is a review of how managers formulate and implement strategies to accomplish longterm goals and competitive advantage. The steps of the strategic management process are defined, along with an explanation of strategy formulation as the basis of organization’s mission and objectives. A SWOT analysis, tool to analyze company and industry strategy and competitiveness, details an organization’s internal strengths and weaknesses and external opportunities and threats is explored further.

Porter’s competitive strategies model and tools to understand the competition position of a company and challenges within its industry are reviewed. Last is a discussion of strategic leadership to ensure strategy implementation and control.

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Chapter 7 Takeaway Questions • •

Takeaway 7.1 What Types of Strategies Are Used by Organizations?

Takeaway 7.2 How Do Managers Formulate and Implement Strategies?

Chapter 7 Objectives • • • • • • • • • • • • • • • •

To define and explain strategy as a comprehensive plan to achieve competitive advantage.

To categorize and explain corporate, business, and functional strategies used within organizations.

To understand how organizations expand and the types of growth strategies utilized.

To explain strategies organizations employ when they run into performance difficulties.

To explain the importance of global growth opportunities and ways organizations can pursue globalization strategies for further growth.

To explain how cooperative strategies and further cooperation among organizations create new areas of mutual interest.

To explain how companies use the internet or e-business strategies for competitive advantage.

To decipher between web-based business models.

To explain how an organization’s mission and objectives becomes a basis for its strategy formulation.

To define and explore how a SWOT analysis is used to examine an organization’s strengths and weaknesses as a basis for developing strategies.

To review Michael Porter’s models as useful tools in understanding the competitive position of a company and the challenges within an industry.

To explain Porter’s competitive strategies model.

To understand how companies operating multiple businesses selling many different products utilize a portfolio planning strategic approach.

To explain the Boston Consulting Group or BCG Matrix.

To explain the importance of strategic leadership and how to implement strategies.

To list the responsibilities of a strategic leader.

Chapter 7 Lecture Outline:

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Takeaway 7.1 What Types of Strategies Are Used By Organizations? o Strategy is a comprehensive plan for achieving competitive advantage o Organizations use corporate, business, and functional strategies o Growth strategies focus on expansion. o Restructuring and divestiture strategies focus on consolidation o Global strategies focus on international business initiatives o Cooperative strategies focus on alliances and partnerships o E-business strategies focus on using the Internet for business success.

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Takeaway 7.2 How Do Managers Formulate and Implement Strategies? o The strategic management process formulates and implements strategies o Strategy formulation begins with the organization’s mission and objectives 7-2

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SWOT analysis identifies strengths, weaknesses, opportunities, and threats Porter’s five forces model examines industry attractiveness Porter’s competitive strategies model identifies business or product strategies.

Portfolio planning examines strategies across multiple businesses or products Strategic leadership ensures strategy implementation and control

Chapter 7 Supporting Materials Figures • Figure 7.1: What Are the Steps in the Strategic Management Process?

• Figure 7.2: What Does SWOT Analysis Try to Discover?

• Figure 7.3: What Is Porter’s Five Forces Model of Industry Attractiveness?

• Figure 7.4: What are Strategic Options in Porter’s Competitive Strategies Model?

• Figure 7.5: Why is the BCG Matrix Useful in Strategic Planning?

Thematic Boxes and More • Management Live: Critical Thinking and Tron: Legacy • Role Models: Wendy Kopp Tackles the Culture of Low Achievement • Ethics Check: Life and Death at an Outsourcing Factory • Facts to Consider: Disposable Workers Are Indispensible to Business Profits • Manager’s Library: Rebooting Work Transform How Your Work in the Age of Entrepreneurship by Maynard Webb • Explore Yourself: Critical Thinking • Tips to Remember: Key Operating Objectives of Organizations • Find Inspiration: Climbing High With Patagonia, Inc. • Table 7.1 Web-Based Business Models Applications • TestPrep 7 Multiple-Choice Questions • Skill Building Portfolio o Self-Assessment 7: Handling Facts and Inferences o Class Exercise 7: Strategic Scenarios o Team Project 7: Contrasting Strategies o Hot Topic: Pro and Con Debate: How about a “double Irish” with a “Dutch sandwich”?

• Case Snapshot: Dunkin’ Donuts – Growth Feeds a Sweet Tooth • Sidebar case: Jamba Juice Blends for Fruitful Growth

Chapter Outline: Takeaway 7.1: What Types of Strategies Are Used by Organizations?

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Strategy is a comprehensive plan for achieving competitive advantage ✓ A strategy is a comprehensive action plan that identifies long-term direction for an organization and guides resource utilization to accomplish its goals ✓ “Best guess” about what to do to be successful in the face of rivalry and changing conditions ✓ Strategic intent is a unifying target or goal 7-3

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✓ Competitive advantage is an “edge” or method of operations that allows an organization to outperform rivals ➢ Sustainable Competitive Advantage is a way of operating that is difficult to imitate Organizations use corporate, business and functional strategies ✓ Corporate strategy provides direction and guides resource allocations as a whole ✓ Business strategy provides direction and guides resource allocations for an individual unit or division within a larger enterprise ✓ Functional strategy guides activities to implement strategies at a detail or specific operations level ➢ Such as Marketing, Finance, Manufacturing, Marketing, and Human Resources Growth strategies focus on expansion ✓ Growth strategies are those designed to increase the size of current operations ➢ Concentration strategies focus on an existing business area ➢ Diversification strategies focus on entering new business areas o Related – similar or complementary business areas o Unrelated – entirely new business areas o Vertical integration - acquire suppliers (backward) or customers (forward) • Role Models: Wendy KoppTackles the Culture of Low Achievement In an undergraduate thesis at Princeton University, Wendy Kopp, founder of Teach for America, proposed the creation of her nonprofit. Her strategy included “eliminating education inequities,” by providing excellent education for kids in low-income communities. Her goal: to help children growing up in poverty beat the culture of low achievement. In “What’s the Lesson Here,” students can discuss Kopp’s vision for social change and the lessons for organizations on the link between vision and strategy. Lastly, the question of how a leader of a business can gain high levels of employee commitment to a strategy.

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Restructuring and divestiture strategies focus on consolidation ✓ A retrenchment strategy seeks to correct weaknesses by making radical changes to current ways of operating ➢ Liquidation – when a business closes and sells is assets to pay creditors ✓ A restructuring strategy seeks to correct weaknesses by reducing the scale or mix of operations ➢ Chapter 11 bankruptcy - protects an organization from creditors as it reorganizes in an attempt to restore solvency. ✓ Downsizing seeks to decrease the size of operations ✓ Divestiture sells off parts of the organization to refocus attention on core business areas

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Explore Yourself: Critical Thinking Critical thinking is a “must-have” for success in strategic management. It enables you to perceive problems, hone in on their more essential aspects, gather and interpret useful information, and make good decisions in complex conditions. Unfortunately, critical thinking can become blurred without the luxury of full information for analysis, common in today’s work environment with its many uncertainties.

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Encourage students to take the self-assessment on “Handling Facts and Interferences” in the Skill Building Portfolio. Consider asking students about whether they are able to distinguish “facts” from “interferences” when answering questions.

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Global strategies focus on international business initiatives ✓ Globalization strategy adopts standardized products and advertising for worldwide use ➢ Gillette razors ✓ Multidomestic strategy customizes products and advertising to meet local cultural needs ➢ Proctor & Gamble consumer products ✓ Transnational strategy seeks efficiencies of global operations with attention to local markets ➢ Ford, Sony

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Ethics Check: Life and Death at an Outsourcing Factory ➢ The sight of netting outside the dormitories of Foxconn factories is sobering when you learn that it was installed to prevent suicides of workers who lose hope and jump off the dormitory roof. What responsibility do employers have to make sure workers not only have safe working conditions, but work that has meaning with a sense of accomplishment and hope of a better future? What responsibility do U.S companies such as Apple, Dell and HP have to make sure Foxconn remedies conditions that lead workers to suicide? How about us as consumers? Do we have a responsibility? Would you alter your consumption habits?

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Cooperation Strategies focus on alliances and partnerships ✓ Strategic alliances - two or more organizations create a partnership to pursue an area of mutual interest or strengthen competitive advantage. ➢ Airlines often create strategic alliances with foreign airlines to facilitate easier foreign travel ticketing for travelers and create a competitive advantage for the airlines. ➢ Supplier alliances - suppliers have preferred relationships with others in the supply chain to facilitate smooth flow of supplies. ➢ Distribution alliances - firms cooperate for product/service sales and distribution. ✓ Co-opetition - competitors share information or technology with the intent of creating a larger market for both ✓ IBM and Red Hat cooperate on some aspects of Linux development •

E-business strategies focus on using the internet to gain competitive advantage ➢ B2B – business to business; uses web portals and IT to link organizations vertically in supply chains ✓ B2C – business to customers; uses web portals and IT to link organizations with customers ✓ Social media strategy -social media is used to engage customers and other external groups ✓ Crowdsourcing - social media strategy that becomes an interactive idea exchange with customers.

Table 7.1 summarizes the types of web-based business models

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✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓

Advertising model Brokerage model Community model Freemium model Infomediary model Merchant model Referral model Subscription model

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Manager’s Library: Rebooting Work: Transform How You Work in the Age of Entrepreneurship by Maynard Webb The book is a practical guide to navigating the new era of what many call the “entrepreneurial workplace.” Described is the decline of age-old faceto-face workplace mentoring relationships between senior managers and their juniors. Reasons include technology, shorter, more temporary work contracts, flatter organizations resulting in fewer middle-level managers.

Although mentoring has gone by the wayside, the author’s message is to find and access mentors on your own.

The “Reflect and React: questions ask: Does the notion of entrepreneurial workplace seem to describe the career settings ahead for you? How about the mentoring strategy? If you don’t have a mentor, and your employer isn’t helpful in finding you one, how can you get yourself one? Can mentoring work as well online as face-to-face?

7.1 Questions for discussion Suggested Answers 1) With things changing so fast today, is it really possible for a business to achieve “sustainable” competitive advantage?

It is much more difficult to sustain an advantage today, with the speed of change and technology. However, companies can create a sustainable culture than allows a sustainable advantage through ongoing commitments to innovation and continuous improvement. Examples are Apple, 3M, Proctor and Gamble, Toyota, and many other companies.

2) Why is growth such a popular business strategy?

Growth is popular because so many owners and investors desire growth in their returns on capital. Additionally, American culture in particular is growth-oriented compared to other cultures.

3) Is it good news or bad news for investors when a business announces that it is restructuring?

Usually restructuring plans are treated as “good news” for investors. The reason for this is that such plans are usually developed when a company is experiencing financial difficulties or sales are slowing, etc. The restructuring plan sends a signal to the market and investors that management is addressing issues and has a plan in place for improving results.

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Takeaway 7.2 How Do Managers Formulate and Implement Strategies?

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The strategic management process formulates and implements strategies ✓ Strategic management is the process of formulating and implementing strategies to accomplish long-term goals and sustain competitive advantage ✓ Strategy formulation is the process of creating strategies ✓ Strategy implementation is the process of putting strategies into action

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See Figure 7.1 for a description of the steps in the management process ✓ Review current situation ✓ Analyze organization and external environment ✓ Develop new strategies ✓ Implement strategies ✓ Evaluate results

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Strategy formulation begins with the organization's mission and objectives ✓ Mission is the organization’s reason for existence or purpose ✓ Operating objectives are specific short-term results that organizations try to achieve

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SWOT analysis examines strengths, weaknesses, opportunities, and threats ✓ SWOT analysis is a tool used in strategic planning to determine the current status of the organization ➢ Internal assessment of the organizational strengths and weaknesses ➢ External assessment of environmental opportunities and threats ✓ See Figure 7.2 for a depiction of SWOT analysis ➢ Internal Assessment of the Organization includes its: strengths and weaknesses ➢ External assessment of the organization includes its: weaknesses, opportunities, and threats ✓ Core competency is a special strength that gives and organization a competitive advantage

DISCUSSION TOPIC To prompt a lively discussion, engage the students in a SWOT analysis of your college or university. They will typically have a lot of opinions ⎯ some quite insightful ⎯ about the strengths and weakness of the institution. They are likely to be less well informed about the opportunities and threats that exist in your institution’s external environment.

This activity provides students with a real-life application of SWOT analysis that will help them to better understand how to use this analytical tool.

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Tips to Remember : Key Operating Objectives of Organizations • Profits • Cost efficiency • Market share • Product quality

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Talented workforce Innovation Social responsibility Sustainability

Porter’s five forces model examines industry attractiveness ✓ Figure 7.3 illustrates the five forces model which include competitors, new entrants, suppliers, customers and substitutes ➢ Bargaining power of suppliers ➢ Bargaining power of customers ➢ Threat of new entrants to industry ➢ Threat of substitute products ✓ Unattractive industry – intense rivalry, easy entry, substitute products, powerful suppliers and customers ✓ Attractive industry – low rivalry, barriers to entry, few or no substitute products, weak supplier and customer power

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Porter’s competitive strategies model examines business or product strategies ✓ A differentiation strategy seeks competitive advantage seeks competitive advantage through uniqueness ✓ A cost leadership strategy seeks competitive advantage through operating with lower costs than competitors ✓ A focused differentiation strategy seeks competitive advantage through concentration on one special market segment and offering a unique product to that segment’s customers ✓ A focused cost leadership strategy seeks competitive advantage through concentration on one special market segment and being the low cost provider to that market segment’s customers ✓ See Figure 7.4 for a depiction of competitive strategies model in the soft drink industry ✓ What is the market scope – broad or narrow? ✓ What is the expected source of competitive advantage – lower price or product uniqueness? ✓ The four combinations of answers result in: ➢ Differentiation ➢ Cost leadership ➢ Focused differentiation ➢ Focused cost leadership strategies

DISCUSSION TOPIC If you used the Discussion Topic regarding a SWOT analysis of your college or university, you can continue with that scenario in this Discussion Topic. Have the students discuss which of Porter’s generic strategies that your college or university uses. Make sure that the students fully explain their reasoning.

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Portfolio planning examines strategies across multiple businesses or products ✓ Useful for companies that operates a variety of businesses

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✓ BCG matrix analysis is a planning tool for such companies ✓ See Figure 7.5 for a depiction of the BCG matrix approach ➢ Stars - high market share in high growth markets ➢ Cash cows - high market share in low growth markets ➢ Question marks - low market share in high growth markets ➢ Dogs - low market share in low growth markets •

Find Inspiration: Climbing High with Patagonia, Inc. ✓ Patagonia is a strategic success story anchored to its mission of: “building the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis.” Patagonia is one of the first companies to file papers to become a benefit corporation, which means that its policies will always “create a material positive impact on society and the environment.”

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Strategic leadership ensures strategy implementation and control ✓ Requires good organization structures and cultures, and the right staffing ✓ Strategic leadership - the capability to inspire people to successfully engage in a process of continuous change, performance enhancement, and implementation of organizational strategies ✓ Strategic control - responsibility of top managers to keep in touch with strategy, how well it is being implemented and if it needs to be changed to be more effective in accomplishing the mission ✓ A strategic leader has to: ➢ Be a guardian of trade-offs ➢ Create a sense of urgency ➢ Make sure that everyone understands the strategy ➢ Be a teacher ➢ Be a great communicator

DISCUSSION TOPIC Ask students to pick an industry and find examples of companies that seem to be using strategic control as opposed to those who are not. Discuss these in light of the corporate bailouts being sought by corporations vs. those who are not. ✓ Facts to Consider: Disposable Workers Are Indispensible to Business Profits ➢ Northwestern University economist, Robert Gordon, proclaims that we are now in the era of disposable workers. Businesses seem enamored with the idea of hiring less full-timers and more part-time or temporary workers that can be added and let go according to demand, or on a “pay-as-needed approach.” The “Your Thoughts” section poses questions about whether the switch to more disposable workers is a good long-term strategy for businesses and other organizations and the downsides to remaining employees. Discuss with students how this trend may impact them and whether it is something they have factored into their career plan. ✓ Strategic Leadership Responsibilities: ➢ A strategic leader has to be the guardian of trade-offs ➢ A strategic leader needs to create a sense of urgency ➢ A strategic leader must make sure that everyone understands the strategy ➢ A strategic leader must be a teacher .

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7.2 Questions for discussion Suggested Answers 1) Can an organization have a good strategy but a poor sense of mission?

Yes, a strategy answers the question “how” we will succeed; the mission says “what” the purpose of the organization is. If a company has a poorly written mission statement that allows for a “jack of all trades” business definition, the company may attempt to become a conglomerate and fail, or perform with mediocrity, even though the strategies in each separate business/ market may be sound. On the other hand, a company may see its mission as very narrowly defined and miss out on opportunities for growth or adaptation.

2) Would a monopoly receive a perfect score for industry attractiveness in Porter’s five forces model?

Monopolies would be very close and may receive a perfect score. The only area where this may be less than perfect is the power of suppliers. Even a monopoly must rely on suppliers. Unless the monopoly happens to also be the sole customer for the supplier’s products (unlikely for most resources), then that aspect would make the “score” less than perfect.

3) Does the BCG Matrix oversimplify a complex strategic management problem?

Yes, the BCG matrix oversimplifies strategic positions and strategic planning. It offers a “formula” approach and may lead to abandoning a business that may yield very high returns if management attention is focused on the business in question.

Very few companies use the BCG matrix; it was popular in the 1970’s when conglomerates were in vogue.

Teaching Notes In this section, ideas, exercises, and assignments are provided to assist you in integrating the concepts in Exploring Management for your students, especially the special features of the text.

Management Live: Critical Thinking and Tron: Legacy Tron: Legacy creates a virtual world within a video game with few instructions. You don't have to wander very far off that premise to draw a strong parallel between a lawless cyberworld and the global environment managers operate in today. Managers need strong strategic skills to compete in a confusing global economy with the goal of survival.

Critical thinking is mentioned as the most important skill, allowing us to accumulate relevant information, prioritize goals, and develop strategies for success. Students can gain critical thinking skills through case studies provided in the book, but only if they go beyond finding the right vocabulary. They need to thoroughly apply the concepts and develop a winning strategy.

Facts to Consider: Disposable Workers Are Becoming Indispensible to Business Profits Northwestern University economist, Robert Gordon, proclaims that we are now in the era of disposable workers. Businesses seem enamored with the idea of hiring less full-timers and .

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more part-time or temporary workers that can be added and let go according to demand, or on a “pay-as-needed approach.” The “Your Thoughts” section poses questions about whether the switch to more disposable workers is a good long-term strategy for businesses and other organizations and the downsides to remaining employees. Discuss with students how this trend may impact them and whether it is something they have factored into their career plan.

Role Models: Wendy Kopp Tackles the Culture of Low Achievement In an undergraduate thesis at Princeton University, Wendy Kopp, founder of Teach for America, proposed the creation of her nonprofit. Her strategy included “eliminating education inequities,” by providing excellent education for kids in low-income communities.

Her goal: to help children growing up in poverty beat the culture of low achievement.

In “What’s the Lesson Here,” students can discuss Kopp’s vision for social change and the lessons for organizations on the link between vision and strategy. Lastly, the question of how a leader of a business can gain high levels of employee commitment to a strategy.

Find Inspiration: Climbing High with Patagonia Patagonia is a strategic success story anchored to its mission of: “building the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis.” Patagonia is one of the first companies to file papers to become a benefit corporation, which means that its policies will always “create a material positive impact on society and the environment.”

Manager's Library: Rebooting Work: Transform How You Work in the Age of Entrepreneurship by Maynard Webb The book is a practical guide to navigating the new era of what many call the “entrepreneurial workplace.” Described is the decline of age-old face-to-face workplace mentoring relationships between senior managers and their juniors. Reasons include technology, shorter, more temporary work contracts, flatter organizations resulting in fewer middle-level managers. Although mentoring has gone by the wayside, the author’s message is to find and access mentors on your own.

The “Reflect and React: questions ask: Does the notion of entrepreneurial workplace seem to describe the career settings ahead for you? How about the mentoring strategy? If you don’t have a mentor, and your employer isn’t helpful in finding you

Ethics Check: Life and Death at an Outsourcing Factory The sight of netting outside the dormitories of Foxconn factories is sobering when you learn that it was installed to prevent suicides of workers who lose hope and jump off the dormitory roof. What responsibility do employers have to make sure workers not only have safe working conditions, but work that has meaning with a sense of accomplishment and hope of a better future? What responsibility do U.S companies such as Apple, Dell and HP have to make sure Foxconn remedies conditions that lead workers to suicide? How about us as consumers? Do we have a responsibility? Would you alter your consumption habits?

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one, how can you get yourself one? Can mentoring work as well online as face-to-face?

Explore Yourself: Critical Thinking Critical thinking is a “must-have” for success in strategic management. It enables you to perceive problems, hone in on their more essential aspects, gather and interpret useful information, and make good decisions in complex conditions. Unfortunately, critical thinking can become blurred without the luxury of full information for analysis, common in today’s work environment with its many uncertainties.

The assessment for this Chapter is entitled “Facts and inferences”. The assessment tool is intended to help students assess their ability to distinguish facts from inferences, an important trait for a manager participating in the planning process.

For extended learning, students may discuss how perception of facts and inferences influence strategic management. For example, what role does personal perception of facts influence the establishment of mission or a SWOT analysis?

Hot Topic: Pro and Con Debate: How about a “double Irish” with a “Dutch sandwich”?

No, it’s not a drink and a sandwich we’re talking about. It’s a global business strategy used to reduce corporate income taxes in America. Ireland offers corporations that put offices and plants there a 12.5% corporate tax rate. That compares with the standards 40% rate due at home. If you set up two Irish companies and arrange to funnel foreign earnings through them – the double Irish move – you pay the lesser tax bill. When it comes to managing a global business, it requires crucial knowledge of tax laws, which vary widely from country to country. Ask students if they would be able to execute a double Irish with a Dutch sandwich.

Career Situation: What Would You Do? A neighborhood business association has this set of members: coffee shop, bookstore, drugstore, dress shop, hardware store, and bicycle shop. The owners of these businesses are interested in how they might “cooperate” for better success. As a business consultant to the association, what would you propose as possible strategic alliances that would join sets of these businesses together for mutual gain?

For some years now, you’ve owned a small specialty bookshop in a college town. You sell some textbooks but mainly cater to a broader customer base. The store always stocks the latest fiction, nonfiction, and children’s books. Recent numbers show a steep decline in sales, including books that would normally be considered best sellers. You suspect this is because of the growing popularity of e-books and e-readers such as the Amazon Kindle and Barnes & Noble Nook. Some of your friends say it’s time to close up because your market is dying. Is it hopeless or is there a business strategy that might save you?

Skill Building Portfolio Terms to Define: .

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B2B business strategy

Restructuring

B2C business strategy

Retrenchment strategy

BCG Matrix

Social media strategy

Business strategy

Strategic alliance

Chapter 11 bankruptcy

Strategic control

Competitive advantage

Strategic intent

Concentration

Strategic leadership

Co-opetition

Strategic management

Core competencies

Strategy

Corporate strategy

Strategy formulation

Cost leadership strategy

Strategy implementation

Crowdsourcing

Sustainable competitive advantage

Differentiation strategy

SWOT analysis

Diversification

Transnational firm

Divestiture

Vertical integration

Downsizing E-business strategy Focused cost leadership strategy Focused differentiation strategy Functional strategy Globalization strategy Growth strategy Liquidation Mission Operating objectives .

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TestPrep 7: Multiple-Choice Questions 1. Which is the best question to ask when starting the strategic management process? (a)“What is our mission?” (b)“How well are we currently doing?” (c) “How can we get where we want to be?” (d)“Why aren’t we doing better?”

2. The ability of a firm to consistently outperform its rivals is called ___________ (a) vertical integration (b)competitive advantage (c) strategic intent (d)core competency 3. General Electric is a complex conglomerate that owns many firms operating in very different industries. The strategies pursued for each of these units within GE would best be called __________level strategies. (a) corporate (b)business (c) functional (d)transnational 4. An organization that is downsizing by cutting staff to reduce costs can be described as pursuing a _________strategy. (a) liquidation (b)divestiture (c) retrenchment (d)stability 5. When you buy music downloads online, the firm selling them to you is engaging in which type of e-business strategy? (a)B2C (b)B2B (c) infomediary (d)crowdsourcing 6. The alliances that link together firms in supply chain management relationships are examples of how businesses try to use ____________strategies. (a) B2C (b)growth (c) cooperation (d)concentration 7. Among the global strategies that international businesses might pursue, the _________strategy most directly tries to tailor products to fit local needs and cultures in .

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different countries. (a) concentration (b)globalization (c) transnational (d)multidomestic 8. If Google’s top management were to announce that the firm was going to buy Federal Express, this would indicate a growth strategy of .____________ (a)diversification (b)concentration (c) horizontal integration (d)vertical integration 9. ___________are special strengths that an organization has or does exceptionally well and that help it outperform competitors. (a)Core competencies (b)Strategies (c) Alliances (d)Operating objectives 10. A ________in the BCG Matrix would have a high market share in a low-growth market. (a) dog (b)cash cow (c) question mark (d)star 11. In Porter’s five forces model, which of the following conditions is most favorable from the standpoint of industry attractiveness? (a) many competitive rivals (b)many substitute products (c) low bargaining power of suppliers (d)few barriers to entry 12. The two questions asked by Porter to identify the correct competitive strategy for a business or product line are: 1—What is the market scope?

2—What is the __________ ? (a) market share (b)source of competitive advantage (c) core competency (d)industry attractiveness 13. When Coke and Pepsi spend millions on ads trying to convince customers that their products are unique, they are pursuing a ______________strategy. (a) transnational .

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(b)concentration (c) diversification (d)differentiation 14. A firm that wants to compete with rivals by selling a very-low priced product in a broad market would need to successfully implement a ________________ strategy. (a) retrenchment (b) differentiation (c) cost leadership (d) diversification 15. In addition to focusing on strategy implementation and strategic control, the responsibility for strategic leadership of an organization involves success with _________________. (a)motivating a disposable workforce (b)the process of continuous change (c) Chapter 11 bankruptcy (d)growth by liquidation

Short-Response Questions: 16. What is the difference between corporate strategy and functional strategy?

A corporate strategy sets long-term direction for an enterprise as a whole. Functional strategies set directions so that business functions such as marketing and manufacturing support the overall corporate strategy. A corporate strategy sets long-term direction for an enterprise as a whole. Functional strategies set directions so that business functions such as marketing and manufacturing support the overall corporate strategy.

17. Why is a cost leadership strategy so important when one wants to sell products at lower prices than competitors?

If you want to sell at lower prices than competitors and still make a profit, you have to have lower operating costs (profit 3 revenues 5 costs). Also, you have to be able to operate at lower costs in ways that are hard for your competitors to copy. This is the point of a cost leadership strategy—always seeking ways to lower costs and operate with greater efficiency than anyone else.

18. What strategy should be pursued for a “question mark” in the BCG Matrix, and why?

A question mark in the BCG matrix has a low market share in a high growth industry.

This means that there is a lot of upside potential, but for now it is uncertain whether or not you will be able to capitalize on it. Thus, hard thinking is required. If you are confident, the recommended strategy is growth; if you aren’t, it would be retrenchment, to allow resources to be deployed into more promising opportunities. .

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19. What is strategic leadership?

Strategic leadership is the ability to enthuse people to participate in continuous change, performance enhancement, and the implementation of organizational strategies. The special qualities of the successful strategic leader include the ability to make tradeoffs, create a sense of urgency, communicate the strategy, and engage others in continuous learning about the strategy and its performance responsibilities.

Integration and Application Questions: Integration and Application Question 20. Kim Harris owns and operates a small retail store, selling the outdoor clothing of an American manufacturer to a predominantly college-student market. Lately, a large department store outside of town has started selling similar but lower-priced clothing manufactured in China, Thailand, and Bangladesh. Kim is starting to lose business to this store. She has asked your instructor to have a student team analyze the situation and propose some strategic alternatives to best deal with this threat. You are on the team.

Questions: Why would a SWOT analysis be helpful in addressing Kim’s strategic management problem? How could Porter’s competitive strategies model be helpful as well?

A SWOT analysis is useful during strategic planning. It involves the analysis of organizational strengths and weaknesses, and of environmental opportunities and threats.

Such a SWOT analysis in this case would help frame Kim’s thinking about the current and future positioning of her store, particularly in respect to possible core competencies and competitive opportunities and threats. Then she can use Porter’s competitive strategy model for further strategic refinements. This involves the possible use of three alternative strategies: differentiation, cost leadership, and focus. In this situation, the larger department store seems better positioned to follow the cost leadership strategy. This means that Kim may want to consider the other two alternatives. A differentiation strategy would involve trying to distinguish Kim’s products from those of the larger store. This might involve a “made in America” theme or an emphasis on leather or canvas or some other type of clothing material. A focus strategy might specifically target college students and try to respond to their tastes and needs rather than those of the larger community population.

This might involve special orders and other types of individualized service for the college student market.

Self-Assessment 7: Handling Facts and Inferences Instructions 1. Read the following report.

A well-liked college instructor had just completed making up the final examination and had turned off the lights in the office. Just then a tall, broad figure with dark glasses appeared and demanded the examination. The professor opened the drawer.

Everything in the drawer was picked up, and the individual ran down the corridor. The .

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president was notified immediately.

2. Indicate whether you think the following observations are true (T), false (F), or doubtful in that it may be either true or false (?). Judge each observation in order. Do not reread the observations after you have indicated your judgment, and do not change any of your answers.

1. The thief was tall, broad, and wore dark glasses.

2. The professor turned off the lights.

3. A tall figure demanded the examination.

4. The examination was picked up by someone.

5. The examination was picked up by the professor.

6. A tall, broad figure appeared after the professor turned off the lights in the office.

7. The man who opened the drawer was the professor.

8. The professor ran down the corridor.

9. The drawer was never actually opened.

10. Three persons are referred to in this report.

Scoring The correct answers in reverse order (starting with 10) are: ?, F, ?, ?, T, ?, ?, T, T, ?.

Interpretation To begin, ask yourself if there was a difference between your answers and the correct ones. If so, why? Why do you think people, individually or in groups, may answer these questions incorrectly? Good planning depends on good decision making by the people doing the planning. Being able to distinguish “facts” and understand one’s “inferences” are important steps toward improving the planning process. Involving others to help do the same can frequently assist in this process.

Class Exercise 7: Strategic Scenarios Preparation In today’s turbulent economic climate, it is no longer safe to assume that an organization that was highly successful yesterday will continue to be so tomorrow—or that it will even be in existence. Changing times exact the best from strategic planners. Think about the situations currently facing the following well-known organizations. Think, too, about the futures they may face.

McDonald’s Ford Sony Apple Computer Nordstrom United Airlines Yahoo!

National Public Radio AT&T Ann Taylor The New York Times Federal Express Instructions Form into groups as assigned by your instructor. Choose one or more organizations from the prior list (or as assigned) and answer the following questions for the organization: 1. What in the future might seriously threaten the success, perhaps the very existence, of this organization? As a group, develop at least three such future scenarios. .

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2. Estimate the probability (0 to 100%) of each future scenario occurring.

3. Develop a strategy for each scenario that will enable the organization to successfully deal with it.

4. Thoroughly discuss these questions within the group and arrive at your best possible consensus answers. Be prepared to share and defend your answers in general class discussion.

Team Project 7: Contrasting Strategies Starbucks is the dominant name among coffee kiosks—how does Dunkin Donuts compete?

Google has become the world’s search engine of choice—can Bing ever catch up? Does it make a difference to you whether you shop for books at Amazon or Barnes & Noble, or buy gasoline from BP, Shell, or the local convenience store?

Question How do organizations in the same industry fare when they pursue somewhat or very different strategies?

Instructions 1. Look up recent news reports and analyst summaries for each of the following organizations: Coach and Kate Spade . . . Southwest Airlines and Delta Airlines . . . New York Times and USA Today . . . UnderArmour and Lululemon . . . National Public Radio and Sirius Satellite Radio. . . Coca-Cola and PepsiCo 2. Use this information to write a short description of the strategies that each seems to be following in the quest for performance success.

3. Compare the strategies for each organizational pair, with the goal of identifying whether or not one organization has a strategic advantage in the industry.

4. Try to identify other pairs of organizations and do similar strategic comparisons for them.

5. Prepare a summary report highlighting (a) the strategy comparisons and (b) those organizations whose strategies seem best positioned for competitive advantage.

Cases for Critical Thinking Dunkin Donuts – Growth Feeds a Sweet Tooth Sidebar: Jamba Juice Blends for Fruitful Growth Long before Starbucks was even a glimmer in anyone’s entrepreneurial mind, Dunkin’ Donuts was a well-known chain of coffee shops in the Northeast. Today, Dunkin’ Donuts is a global player quickly expanding its food and coffee menus to ride the wave of fresh trends appealing to a generation of more health-conscious customers. It’s a highly competitive industry and change is constantly on its menu. With Starbucks rethinking its positioning strategy and McDonald’s offering a great tasting coffee at a reasonable price, Dunkin’ Donuts is hoping that careful strategic planning will keep its customers “Runnin on Dunkin.”

Case discussion questions and suggested answers:

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1. DISCUSSION What does a Porter’s Five Forces analysis reveal about the industry in which Dunkin’ Donuts and Starbucks compete? What are the strategic implications for Dunkin’ Donuts?

Porter's Five Forces model analyzes factors that influence a specific industry to help managers understand its competitive factors. An analysis of the factors would seem to indicate that the industry is very competitive and competitive advantages can be very quickly copied. The Five Factors as they apply to Dunkin’ Donuts and Starbucks might include: •

• • • •

New entrants - Dunkin’ and Starbucks sell breakfast beverages and pastries in an effort to expand its breakfast menu. Competition includes expansion by similar regional companies like Caribou Coffee and McDonald’s whose offerings include premium coffee.

Customers - the bargaining power of buyers is very influential to the industry. The current recession has resulted in the closing of hundreds of Starbucks locations, while relatively few of the franchised Dunkin’ Donuts have closed.

Substitute products - the large number of substitute beverages and breakfast alternatives makes this a huge factor in the industry.

Suppliers - occasionally the supply of coffee beans is limited, driving up the cost of the beverage.

Industry competition - Starbucks and other regional coffee shops; convenience stores like 7-Eleven and Circle K; fast food restaurants like McDonald’s and Burger King.

2. DISCUSSION: Discuss the pros and cons of Jamba Juice’s expansion strategy and how it compares to that of Dunkin’ Donuts. What similarities are there between the two companies in terms of their growth strategies? Discuss.

Pros of Jamba’s expansion strategy: • • •

•

•

.

The company has expanded beyond just a maker of smoothies to a active/healthy lifestyle brand.

It has refocused on franchising, consumer packaged goods (CPG), and Jamba GO stations at various venues, to facilitate further expansion.

Expanded menu items: Its product variety includes whole fruit smoothies, squeezed juices, hot oatmeal, breakfast wraps, bistro sandwiches, mini-wraps, California Flatbreads, frozen yogurt, and various baked goods and snacks. The company has also expanded its menu to include vegan and vegetarian options.

Jamba’s presence in various venues: JambaGo Express is a smoothie concept created to facilitate the company’s brand presence into venues where healthier, quick serve options are part of the menu offering. This includes K-12 schools, universities, college campuses, convenience stores and delis.

Franchise business model (an asset light business model) was a clever way to raise cash. It was far less capital intensive. It also improved the company’s balance sheet.

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• • •

Although the revenue from franchising is far lower, it represents pure profit. Jamba has executed a remarkable transformation from many ailing company-owned stores to a successful franchise business model.

Jamba has licensed its Jamba brand name to sell consumer packaged goods (CPG) online and through retail channels such as grocery, mass, club, and convenience stores.

Expansion of product offering with Talbott’s Teas Tennis pro Venus Williams is currently a company spokesperson (and franchisor) – she advocates for active and healthy lifestyles.

Cons of Jamba’s expansion strategy: • • • • • •

Jamba’s profitability is still volatile.

In 2012, the company marked its first year of profitability after going public in 2006.

Despite its comeback, there are still far more cash-rich formidable competitors.

The consumer packaged goods industry is intensely competitive.

Threats from cash-flushed competitors like McDonald’s, Wendy’s or YUM have targeted the smoothie industry and can easily take sales away.

As the company continues to sell more food items, it becomes more susceptible to swings in commodity prices.

How Jamba’s expansion strategy compares to that of Dunkin’ Donuts: • The use of other people’s money (franchisors) to expand and grow means less of a capital investment, expanded menu items, retail presence.

3. PROBLEM SOLVING: Gather information to build an up-to-date SWOT analysis for Dunkin’ Donuts. If you were the CEO of the firm, what would you consider to be the strategic management implications of this SWOT analysis, and why?

Strengths Brand Recognition Customer Loyalty

Large variety of flavors of donuts and baked items Known for its coffee

Weaknesses Conflict with franchise owners DD is nowhere near the level of penetration in developing countries as compared to others Low barrier to entry for competitors Perception of nonexistent healthy choices

Opportunities Low calorie menu items

Threats Competition from others

Healthier choices on menu

Healthier lifestyles and eating patterns (avoidance of high calorie/sugary foods) Increased awareness of healthy food choices Childhood diseases on the rise (diabetes and obesity) Competition from local pastry and coffee shops

Loyalty program

Online marketing to increase customer basis Social media to increase customer base Expansion outside the United States (emerging markets) Product expansion

Years of

Coffee consumption on

Number of locations

.

Competition from McDonald’s and Starbucks (coffee and donuts) Price of coffee beans

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experience/longevity Major sports team association (Red Sox)

Advertising and marketing programs and strategies Reputation for high quality, superior grade of coffee Largest seller of coffee by the cup

the rise in Asia, along with income levels Recessionary spending on “comfort foods” and less expensive snacks compared to other storebought items Growth through franchising

Awareness of Fair Trade policies for coffee bean purchases.

Increased raw material costs and coffee costs

Continued store growth

The strategic management implications of this SWOT analysis Review current situation would include developing and implementing new strategies and evaluate results.

4. FURTHER RESEARCH Research the latest moves by Starbucks and other Dunkin’ Donuts’ competitors. What is each doing that seems similar to and different from the approach of the other? Can you say that Dunkin’ is on the right track? Is it carving out new market share? Or, is it going to be more of a copycat player in the industry?

Latest news for: Starbucks: • Starbucks recently introduced several new sandwiches and salads on its menu to increase sales in the U.S. in the slower afternoon and evening hours.

• With McDonald’s and Burger King offering specialty coffees, one way for Starbucks to increase its revenue is by offering food items.

• Starbucks announced that it will include calorie information on menu boards at all company-operated and licensed U.S. Starbucks.

• Opened first store in New Delhi, India and entered Vietnamese market.

• Expansion of company’s loyalty and rewards program • Industry-first innovation that will enable customers to earn rewards for grocery channel purchases that can be redeemed in Stabucks retail stores.

• Expansion of mobile payment platform • Launch of new nonprofit corporation with a $1 million seed grant to introduce job skills, leadership and apprenticeship programs to young people across the company’s • Expansion of mobile payments platform, which is generating over three million U.S. mobile payments per week.

• Schultz’s recognition of Starbucks 15-year business partnership with Mohammed Alshaya, Executive Chairman, M.H. Alshaya Co., including comments about how bringing specialty coffee to the Middle East serves as a model for the company’s future expansion initiatives.

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Dunkin’ Donuts: In summary, Dunkin’ Donuts is expanding its menu to include a few new “better-for-you” breakfast items and a few new “all-day menu items.” Also new is a frozen version of hot chocolate. In addition, the company is interested in expanding into non-traditional venues such as schools and universities. Its DDSmart menu has healthy items for those interested in a healthier lifestyle. The company recently shifted to eggs from cage-free hens in an effort to eliminate gestation crates from its supply chain.

• • • • • • • • •

The introduction of two new chicken sandwiches (barbeque chicken and bacon-ranch chicken) on its menu is a step in the brand’s commitment to all-day menu items. is a significant step in the brand’s commitment to all-day menu items.

Dunkin’ Donuts recently unveiled the Hot Chocolate Coolatta®, the newest addition to its lineup of Coolatta frozen beverages.

Adds turkey sausage breakfast sandwich to its item to permanent menu Chicken salad and tuna salad wraps are added to Dunkin’ Donuts menu New angus steak and egg sandwich and wake-up wrap added to menu Dunkin’ Donuts is interested in expanding into non-traditional venues including colleges and universities, casinos, military bases, supermarkets, airports and travel centers.

The company uses Social Media (Twitter Sweepstakes and Instagram) to introduce new products and promotions. They also have an app that provides coupons to loyal customers.

DDSmart with better-for-you breakfast option menu is for healthy items such as oatmeal.

Dunkin' Donuts Announces Shift to Eggs from Cage-Free Hens and Commitment to Eliminate Gestation Crates from its Supply Chain.

What is similar?

• Focus on new and all-day menu items • Healthy menu choices (calorie counts on Starbucks menus) • Commitment to social responsibility and sustainable business practices What is different?

Starbucks is a more hip and trendy place to get a cup of coffee, while Dunkin’ Donuts fancies itself as a welcome place for any ordinary-Joe or Josephine. Dunkin’ Donuts is a place to grab a reasonably priced quick or to go reasonably price cup or coffee while Starbucks is a more expensive product with a higher quality reputation. In other words, Dunkin’ is more the layman’s coffee and the feel of a fast food restaurant, while Starbucks, with its comfortable atmosphere and seating, appeals to a higher socioeconomic demographic.

Is Dunkin’ on the right track?

Is it carving out new market share?

Yes, from some of its recent news items noted above, it appears to be targeting, in addition to its morning coffee and donut eaters, those interested in healthy food choices along and all-day menu items. .

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Will it be a copycat player?

It depends. Dunkin’ Donuts has carved out a different target customer than Starbucks -- one more focused on convenience and price.

Suggested Team Exercise for Chapter 7 Break the class into pairs or small (no more than four students) teams.

Assign each team an industry (pick industries that students can relate to such as chocolate candy; automobiles; clothing; shoes; fast food; beer; cell phones; computers, etc.)

Have each pair or team identify (and explain if needed): The company or product using a cost leadership strategy (example Chery from China) The company or product using a differentiation strategy (example Scion) The company or product using a focused cost leadership strategy (example Focus) The company or product using a focused differentiation strategy (example Porsche)

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CHAPTER 8 Organization Structures It’s all about working together Chapter 8 Overview Each Chapter contains several inset features designed to assist the student reader in applying the concepts to relevant examples. Management Live illustrates how popular movies demonstrate management concepts in the chapter. Role Models features a management professional that illustrates key chapter concepts in a novel, visionary or inspirational way. Explore Yourself refers students to self assessment activities relevant to concepts in the chapter. Ethics Check profiles examples of ethical issues in management. Manager's Library features books that illustrate current events or trends relevant to chapter concepts. Facts to Consider introduces research or trends that may be used for class discussion in the classroom or online for distance learning.

The chapter begins with a definition of organizing, one of the management functions, and its importance to the other management functions. Organizing is the process of arranging people and other resources to work together so that goals can be carried out. Organizing involves dividing up the work to be done (division of labor) and coordinating results to achieve a common purpose. This chapter introduces students to the fundamentals of organizing, including the alternative structural forms employed by modern organizations.

The chapter discusses the two primary organizational structures -- formal and informal. There is a lot to be learned from an organizational chart with regard to an organization’s formal structure.

A discussion of an organization’s informal structure, and its good and bad points, is also reviewed.

Common organizational structures are discussed. They include: functional, divisional, and matrix organizations. Potential advantages of functional structures are reviewed. Some recent developments, including team structures, network structures, and virtual organizations are examined.

The chapter concludes with trends in organization design or put another way, the choices managers make to configure their organizations to best meet the problems and opportunities posed by their environments. Other trends include flatter organizations (with fewer layers of management), delegating, empowering workers, decentralization, and staff reduction. Last, the topic of alternative work schedules and the importance of flexibility to attract the best workers is discussed.

Chapter 8 Takeaway Questions: Takeaway 8.1 What Is Organizing as a Managerial Responsibility?

Takeaway 8.2 What Are the Most Common Types of Organization Structures?

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Takeaway 8.3 What Are the Trends in Organizational Design?

Chapter 8 Objectives: • • • • • • • • • • • • • • • •

To understand organizing, one of the management functions, as a responsibility.

To explain how organization charts describe the formal structure of an organization.

To explain how organizations operate within the more spontaneous relationships of informal structures.

To identify the positive and negatives aspects of informal organizational structures.

To explain how a tool known as social network analysis is a way of identifying the informal structures and their embedded social relationships within an organization.

To list the common types of organizational structures, including functional, divisional, matrix, team and network.

To explain a functional organizational structure.

To explain a divisional organizational structure.

To explain a matrix organizational structure.

To explain how team structures may utilize permanent and temporary teams.

To explain how network organizational structures utilize strategic alliances and outsourcing to dramatically reduce the need for full-time staff.

To explain how a virtual organization utilizes information technologies to operate a constantly shifting network of alliances.

To decipher why organizations are becoming flatter with fewer levels of management.

To understand the benefits of decentralization in terms of where and how decisions are made within an organization.

To explain why organizations are increasing delegation and employee empowerment.

To explain the benefits to employees when organizations use alternative work schedules.

Chapter 8 Lecture Outline: Takeaway 8.1 What Is Organizing as a Managerial Responsibility?

• Organizing is one of the management functions.

• Organization charts describe the formal structures of organizations.

• Organizations also operate with informal structures.

• Informal structures have good points and bad points.

Takeaway 8.2 What Are the Most Common Types of Organization Structures?

• Functional structures group together people using similar skills.

• Divisional structures group together people by products, customers, or locations.

• Matrix structures combine the functional and divisional structures.

• Team structures use many permanent and temporary teams.

• Network structures extensively use strategic alliances and outsourcing. .

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Takeaway 8.3 What Are the Trends in Organizational Design?

• Organizations are becoming flatter, with fewer levels of management.

• Organizations are increasing decentralization.

• Organizations are increasing delegation and empowerment.

• Organizations are becoming more horizontal and adaptive.

• Organizations are using more alternative work schedules.

Chapter 8 Supporting Materials: Figures • Figure 8.1 What Is the Importance of Organizing in the Management Process?

• Figure 8.2 What Does a Typical Functional Organization Structure Look Like?

• Figure 8.3 What Are Some Ways Organizations Use Divisional Structures?

• Figure 8.4 How Does a Matrix Structure Combine Functional and Divisional Structures?

• Figure 8.5 How Do Team Structures Capture the Benefits of Cross-Functional Teams?

• Figure 8.6 How Do Network Structures Take Advantage of Strategic Alliances and Outsourcing?

• Figure 8.7 What Are the Major Differences Between Mechanistic and Organic Organization Designs?

Thematic Boxes and More • Management Live: Empowerment and Patch Adams • Role Models: Alan Mulally Hits the Mark by Restructuring Ford • Ethics Check: Flattened into Exhaustion • Facts to Consider: Bosses May be Overestimating Their Managing Skills • Manager’s Library: The Truth About Middle Managers: Heroes, Villains, and the Reinvention of Middle Management by Paul Osterman • Explore Yourself: Empowerment • Find Inspiration: Lots to Learn at Build-A-Bear • Table 8.1 What You Can Learn from an Organization Chart Applications • TestPrep 8 Multiple-Choice Questions • Skill Building Portfolio o Self-Assessment 8: Empowering Others o Class Exercise 8: Organizational Metaphors o Team Project 8: Network “U” • Case Snapshot: Law Firms Try the Case for New Structures • Sidebar case: Goodbye Office, Hello Unassigned Desks and Storage Lockers • Hot Topic: Good Idea or Not? Crowdsourcing Evaluations as a Way to Flatten Organizational Structures

Chapter Outline Takeaway Question 8.1: .

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What is Organizing as Managerial Responsibility?

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Organizing is one of the management functions ✓ Organizing arranges people and resources to work toward a goal ✓ Figure 8.1 What Is the Importance of Organizing in the Management Process?

Organizing is one of the four management functions. It is the process of arranging people and resources to create structures so that they work well together in accomplishing goals. Key organizing decisions made by managers include those that divide up the work to be done, staff jobs with talented people, position resources for best utilization, and coordinate activities.

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Organization charts describe the formal structures of organizations ✓ Organization structure is a formal arrangement that links the various parts of an organization to another ✓ Organization chart is a diagram of positions and reporting relationships within an organization ➢ Division of labor - people and groups performing different jobs, ideally ones for which they are skilled ➢ Formal structure - the “official” structure, the way things are supposed to operate ➢ See Table 8.1 for a full listing of what can be learned from an organization chart ➢ Division of Work ➢ Supervisory Responsibilities ➢ Communication channels ➢ Major subunits ➢ Levels of management DISCUSSION TOPIC

To introduce this chapter, describe for the students the organization structure that exists at your college/university. Focus on why the college/university is organized as it is and what is accomplished through this organization form. Also, give attention to both the formal and informal structures of the organization. ➢ Finding Inspiration: Maxine Clark started Build-a-Bear Workshop, Inc. with a simple concept of producing and creating a personality and look all your own for believe it or not, a stuffed animal. It begins first with picking a bear or other type of stuffed animal, stuffing it, clothing it, and then naming it. This hands-on, creative process did phenomenally well until a “bear” of an economy struck. Nowadays, Clark is trying to figure out that what was successful a few years back may not work today. It’s time for her to “re-build” a new “animal.” The question asked is: When you think about it, isn’t this the situation most organization structures face at different points in time? .

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Organizations also operate with informal structures ✓ Informal structure - a “shadow” organization made up of unofficial but often critical working relationships between members. ✓ Social network analysis identifies the informal structure by discovering who employees communicate with and ask for help.

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Informal structures have good points and bad points ✓ Good points include employees assisting each other, providing emotional and social support, building friendships and helping the organization adapt to change. ✓ Bad points include eavesdropping, gossip, rumors, breeding resistance to change and providing distractions.

DISCUSSION TOPIC

Ask students to provide examples of informal organizational structures that they have encountered. Discuss how these informal structures helped or hindered the operation of the organization’s formal structure.

8.1 Questions for discussion suggested answers 1) Why is organizing such an important management function?

Organization is important because typically it enhances the opportunity for both efficiency and effectiveness in organizations. Organizing usually results in the most efficient use of financial and human resources.

2) If organization charts are imperfect, why bother with them?

Even imperfect organization charts provide some sense of direction, responsibilities, and accountabilities. An analogy can be made to taking a trip without a map or a compass.

3) Could an organization consistently perform well without the help of its informal structure?

It’s difficult to tell, since as a practical matter, every organization is going to have informal structure. Informal structures can provide enhanced communication and ideas and working relationships between sub-groups in organizations.

Takeaway Question 8.2: What Are the Most Common Types of Organization Structures?

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Functional structures group together people using similar skills ✓ Departmentalization – division of labor whose parts are well coordinated ✓ See Figure 8.2 for a depiction of typical functional structures Figure 8.2 What Does a Typical Functional Organization Structure Look Like?

Functional structures are common in organizations of all types and sizes. In a typical business you might have vice presidents or senior managers heading the traditional

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functions of accounting, human resources, finance, manufacturing, marketing, and sales.

In a bank, they may head such functions as loans, investments, and trusts. In a hospital, managers or administrators are usually in charge of functions such as nursing, clinics, and patient services. ✓ A functional structure groups people together into formal work units based on their similar skills and performing similar tasks. Example: Marketing, Finance, Production and Human Resources. ✓ Work well in smaller organizations and stable organizations ✓ Sharing of expertise within departments ✓ Functional chimneys (or functional silos) – when performance suffers due to a lack of communication, coordination, and problem solving across functions ✓ See inset for the advantages of functional structures

DISCUSSION TOPIC Ask students to think about how the curriculum at their college/university addresses the different functions of business. Are marketing, finance, production, and human resource management, for instance, taught as stand-alone courses, or are they taught in some integrated fashion? As standalone courses, what does this convey to students about the functional chimneys of business?

What does any integrated format convey about tearing down these functional chimneys?

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Divisional structures group together people by products, customers, or locations ✓ See inset for advantages of divisional structures ✓ A divisional structure groups people together into formal work units based on their working on the same product, in the same area, or with similar customers. Figure 8.3 illustrates the concept. ✓ Figure 8.3 What Are Some Ways Organizations Use Divisional Structures?

In products structures, divisions are based on the product or service provided, such as consumer products and industrial products. In geographic structures, divisions are based on geography or territories, such as an Asia–Pacific division and a North American division. In customer structures, divisions are based on customers or clients served, such as graduate students and undergraduate students in a university. ➢ Product - groups jobs and activities devoted to a single product or service ➢ Geographical - groups jobs and activities in the same location or region ➢ Customer - groups jobs and activities that serve the same customers or clients

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Matrix structures combine the functional and divisional structures ✓ Sets up permanent teams that operate across functions to support specific products, projects, or programs ✓ Workers belong to at least two formal groups (a functional and a project group) and have two bosses ✓ Figure 8.4 How Does a Matrix Structure Combine Functional and Divisional

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Structures?

A matrix structure is designed to combine the best of the functional and divisional forms. In a typical matrix, the normal functions create a traditional vertical structure, with heads of marketing and manufacturing, and so on. Then a new horizontal structure is added to create cross-functional integration. This is done using teams that are staffed by members from the functions.

DISCUSSION TOPIC Ask students to consider the project teams on which they most likely have worked in one or more of their courses. Have them describe the challenges they have encountered in responding to the expectations of both the project team leader and the course instructor. Relate their descriptions to the preceding discussion of the advantages and disadvantages of matrix structures. ✓ Cross-functional teams are teams whose members come together from different functional departments, to work on a common task. ✓ See inset for advantages of Matrix structures •

Team structures use many permanent and temporary teams ✓ Team structures use permanent and temporary cross-functional teams to improve lateral relations and solve problems, projects, and for day-to-day tasks ✓ Figure 8.5 How Do Team Structures Capture the Benefits of Cross-Functional Teams?

Team structures make extensive use of teams to improve organizations through better communication and problem solving across functions. Some teams are temporary, such as a project team that convenes to create a new product and then disbands when finished. Other teams are more permanent. They bring together members from different functions to work together on standing issues and common problems, such as quality control, diversity management, labor-management relations, or health care benefits. ✓ See inset for advantages of team structures

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Network structures extensively use strategic alliances and outsourcing ✓ A network structure links a central core with “networks” of relationships with outside contractors and partners that supply essential services ✓ May lower costs, increase speed, and offers flexibility ✓ A strategic alliance – cooperation with other firms to pursue business activities of mutual interest ➢ Outsourcing alliances – contract to purchase important services from another organization 8-7

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➢ Supplier alliances – link businesses in preferred supplier-customer relationships that guarantee a smooth and timely flow of quality supplies among the partners ➢ Potential advantages include: lower costs due to fewer full-time employees, better access to expertise through specialized alliance partners and contractors, and easy to grow or shrink with market conditions. ➢ Figure 8.6 How Do Network Structures Take Advantage of Strategic Alliances and Outsourcing?

Organizations using network structures replace some full-time positions and functions with services provided by alliance partners and outsourcing contractors. In these structures, “core” employees perform essential operations at the center of a “network” that links them with a shifting mix of outside partners and contractors. The example in this figure shows that a small group of people can run a mail-order business in this manner. A lot of network activities are made easy and cost efficient by using the latest information technologies. ✓ A virtual organization – uses information technologies to operate a constantly shifting network of alliances ✓ Manager's Library: The Truth About Middle Managers: Heroes, Villains, and the Reinvention of Middle Management by Paul Osterman Author Paul Osterman paints a bleak picture of middle managers in The Truth About Middle Managers as he explains how their role has changed as organizations restructure to meet the challenges of the economy and competition. Fewer employees, less autonomy and empowerment, less job security and greedy, self-serving top management are just a few of the challenges Osterman found in his research. Yet he also found that middle managers really enjoy their work and tend to be highly committed to jobs that involve decision-making and employee interaction.

In addition to the Reflect and React questions, students may want to discuss t heir thoughts on their own view of a management career.

DISCUSSION TOPIC Ask the students if any of them have taken an online course that utilized a discussion board and perhaps required students to work together in some fashion over the Internet. Have them provide some details about these experiences and then relate the discussion to the concepts of virtual organizations.

8.2 Questions for discussion suggested answers 1) Why use functional structures if they are prone to functional chimneys problems?

Despite their disadvantages, most companies use functional organizations because they offer opportunities for career development; mentoring; resource leveraging within the function; and improved communication within the function.

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2) Could a matrix structure improve performance for an organization familiar to you?

Matrix organizations are ideal for law firms, consulting firms, accounting firms, landscaping and construction companies, or other project-based organizations where skills can be leveraged over multiple projects.

3) How can the disadvantages of group decision making hurt team structures?

Group decision making can hurt teams if : 1) the dominant members are incompetent, uncooperative or simply unwilling to work hard; 2) the team lacks technical expertise required to perform the tasks; the expert or competent team members are passive and do not fully participate or offer suggestions. Teams often suffer from “the lowest common denominator” syndrome, where the “weakest link” becomes the norm.

Takeaway Question 8.3: What Are the Trends in Organizational Design?

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Organizations are becoming flatter, with fewer levels of management ✓ Organizational design is the process of aligning the structure of the organization to best accomplish the organizational mission and respond to the challenges of the external environment. ✓ Span of control is the number of people reporting to an individual manager. ➢ Narrow - managers supervise a small number of people ➢ Wide - managers supervise a larger number of people ➢ Flatter organizational structures mean span of control is wider ➢ Inset illustrates the concept • •

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Ethics Check: Flattened into Exhaustion (page 198) Many issues in this hypothetical situation are far too familiar in corporate life as organizations trim staff and create leaner structures. Doing more with less, being evaluated on "face time" rather than productivity, difficulty balancing family and work life all take a toll on workers as it has on "Overworked in Cincinnati."

The “You Decide” questions probe the ethical issues that arise as management practices in flatter structures and out-of-touch upper management. Ask students to complete the questions as a take-home assignment or discussion for online classes.

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Organizations are increasing decentralization ✓ Centralization - top management keeps strong control over decision-making ✓ Decentralization - top management allows decision-making responsibility to be distributed throughout the organization to those who are best qualified. ✓ Technology makes it easier for top management to decentralize much decisionmaking responsibility yet stay informed about day-to-day performance results.

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Role Models: Alan Mulally Hits the Mark by Restructuring Ford (page 199) The Role Models feature for Chapter 8 explains how Alan Mulally went from being an executive at Boeing to the CEO at Ford Motor Company. Mulally is credited with restructuring Ford prior to the recession and putting it in a position to weather the economy better than most other automakers.

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Suggested questions for further student discussion: It takes a lot of confidence to come in from outside an industry and lead an organization with vision and a clear strategy. Mulally seems to be doing a good job of blending a strong central authority with decentralized action. He’s got support from the board and has built his own top management team.

Question: How will you act when taking over a new position someday?

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Organizations are increasing delegation and empowerment ✓ Delegation is the process of entrusting work to others by giving them the right to make decisions and take action; involves deciding what work you should do yourself and what work you should allow others to accomplish ✓ Steps in delegation ➢ Assign responsibility ➢ Grant authority ➢ Create accountability ✓ Empowerment is the process of giving people the freedom to contribute ideas, make decisions, show initiative, and to do their jobs in the best possible ways

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Explore Yourself: Empowerment is a proven way to motivate and develop employees, yet most students would say that in their work experience, empowerment is lacking. Will they choose to empower employees as they move into their own management careers? The Empowering Others self-assessment in the Skill-Building Portfolio helps them determine their views on empowerment. Following the assessment, discussion may center on how they can improve their empowerment skills.

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Organizations are becoming more horizontal and adaptive ✓ A bureaucracy emphasizes formal authority, rules, order, fairness, and efficiency ✓ Mechanistic designs are bureaucratic, using a centralized and vertical structure ✓ Organic designs are adaptable using a decentralized and horizontal structure ✓ Based on work of Burns and Stalker ✓ Figure 8.7 What Are the Major Differences Between Mechanistic and Organic Organizations Designs?

Some indicators of a more organic design are decentralization, few rules and procedures, wider spans of control, sharing of tasks, use of teams and task forces, and informal or personal approaches to coordination. This organic design is most associated with success in dynamic and changing environments. The more mechanistic design has mainly bureaucratic features and is more likely to have difficulty in change environments but to be successful in more stable ones.

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Facts to Consider: Bosses May be Overestimating Their Managing Skills ✓ It seems like the managers surveyed in this study have pretty good opinions of themselves and their abilities to manage and lead. The manager in the preceding Ethics Check was probably one of the respondents. The discussion questions in the “Your Thoughts?” section can be used in small group/large group discussion or in an online class discussion.

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Organizations are using more alternative work schedules ✓ Compressed workweek - full time work is completed in less than five days. For example, a 4-10 work week means that employees work four 10 hours days and have an extra day off each week. Other compressed schedules are spread over two weeks. ✓ Flexible working hours or flextime offer employees a choice of starting and ending times each day, while still working an entire work day. ✓ Job sharing - splits a job between two or more people who divide the responsibilities and schedule ✓ Telecommuting - using technology like the internet and videoconferencing to work outside the office

8.3 Questions for discussion suggested answers 1) Is “empowerment” just a buzzword, or is it something that can really make a difference in organizations today?

Organizations are increasing delegation and empowerment. The reductions in staff and levels of management have been enormous. Much of the “shifting” of decisions and responsibilities that had previously been performed by upper levels of management has already been redistributed. The opportunities for added delegation and empowerment are significant.

2) Knowing your personality, will you fit in better with an organization that has a mechanistic or an organic design?

This answer will vary by student. Probe their responses to make them identify aspects of their personality that makes their choice of organizational design a good fit. The self assessment "Organizational Design Preference" may be used before the activity or after the discussion. Students should report if their scores differed from their expressed preference.

3) How can alternative work schedules work to the benefit of both organizations and their members?

Alternative work schedules lead to greater job satisfaction and often increase productivity. Employees are able to achieve work-life balance. Turnover is reduced and recruiting top talent is easier.

Teaching Notes In this section, ideas, exercises, and assignments are provided to assist you in integrating the concepts in Exploring Management for your students, especially the special features of the text.

Management Live: Empowerment and Patch Adams Fighting bureaucracy probably isn't the first thing that comes to mind when you think of the classic movie Patch Adams starring Robin Williams. He certainly didn't fit the traditional .

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stereotype of a doctor, did he? Thinking past his entertaining bedside manner, his struggles with established medical bureaucracy certainly creates a lot of drama in the story.

Many of us find that it's hard to pursue excellence in the face of an entrenched bureaucracy.

Faculty and students may find this true in the education system and students will probably have many examples of organizational structure that doesn't seem to support empowerment or excellence. These examples will provide many teachable moments in discussion of chapter 8.

Facts to Consider: Bosses May be Overestimating Their Managing Skills It seems like the managers surveyed in this study have pretty good opinions of themselves and their abilities to manage and lead. The manager in the preceding Ethics Check was probably one of the respondents. The discussion questions in the Your Thoughts? section can be used in small group/large group discussion or in an online class discussion.

Role Models: Alan Mulally Hits the Mark by Restructuring Ford The Role Models feature for Chapter 8 explains how Alan Mulally went from being an executive at Boeing to the CEO at Ford Motor Company. Mulally is credited with re-structuring Ford prior to the recession and putting it in a position to weather the economy better than most other automakers.

Suggested questions for further discussion: • It takes a lot of confidence to come in from outside an industry and lead an organization with vision and a clear strategy.

• Mulally seems to be doing a good job of blending a strong central authority with decentralized action.

• He’s got support from the board and has built his own top management team.

• How will you act when taking over a new position someday?

Find Inspiration: Organizing is Like Creating a Work of Art Maxine Clark started Build-a-Bear Workshop, Inc. with a simple concept of picking a bear, or other type of stuffed animal, stuff it, clothe it, name it, and create for it a personality of your own choosing. This hands-on, creative process did phenomenally well until a tough economy became a big “bear.” Nowadays, Clark is trying to figure out that what was successful a few years back isn’t going to work today. It’s time for her to re-build a new bear. When you think about it, isn’t this the situation most organization structures fact at different points in time?

Manager's Library: The Truth About Middle Managers: Heroes, Villains, and the Reinvention of Middle Management by Paul Osterman Author Paul Osterman paints a bleak picture of middle managers in The Truth About Middle Managers as he explains how their role has changed as organizations restructure to meet the challenges of the economy and competition. Fewer employees, less autonomy and .

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empowerment, less job security and greedy, self-serving top management are just a few of the challenges Osterman found in his research. Yet he also found that middle managers really enjoy their work and tend to be highly committed to jobs that involve decision-making and employee interaction.

In addition to the Reflect and React questions, students may want to discuss their thoughts on their own view of a management career.

Ethics Check: Flattened into Exhaustion Many issues in this hypothetical situation are far too familiar in corporate life as organizations trim staff and create leaner structures. Doing more with less, being evaluated on "face time" rather than productivity, difficulty balancing family and work life all take a toll on workers as it has on "Overworked in Cincinnati."

The “You Decide” questions probe the ethical issues that arise as management practices in flatter structures and out-of-touch upper management. Ask students to complete the questions as a takehome assignment or discussion for online classes.

Explore Yourself: Empowerment Empowerment is a proven way to motivate and develop employees, yet most students would say that in their work experience, empowerment is lacking. Will they choose to empower employees as they move into their own management careers? The Empowering Others self-assessment in the Skill-Building Portfolio helps them determine their views on empowerment.

Following the assessment, discussion may center on how they can improve their empowerment skills.

Hot Topic: Good Idea or Not? Crowdsourcing Evaluations as a Way to Flatten Organizational Structures Conducting annual performance reviews used to be one of the most important tasks of a manager. Today, technology offers ways to make reviews more timely while also flattening structures and reducing administrative costs. As more performance reviews are being conducted online, some are questioning the need for a manager. Has crowdsourcing replaced the traditional manager and become the feedback medium of choice? Or will people end up evaluating others whose jobs they don’t know enough about? Are online reviews good replacements for that annual sit-down with your manager?

Career Situation: What Would You Do? •

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As the new manager of a branch bank location, you will be supervising 22 employees, most of whom have worked together for a number of years. How will you identify the informal structure of the branch? How will you try to use this structure to help establish yourself as an effective manager in the new situation?

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The typical university business school is organized on a functional basis, with departments such as accounting, finance, information systems, management, and marketing all reporting to a dean. Practice your consulting skills. How would you redesign things to increase communication and collaboration across departments, as well as improve curriculum integration across all areas of study?

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As the owner of a small computer repair and services business you would like to allow employees more flexibility in their work schedules. But you also need consistency of coverage to handle drop-in customers as well as at-home service calls. There are also times when customers need what they consider to be “emergency” help outside normal 8 a.m. to 5 p.m. office hours. A meeting with the employees is scheduled for next week.

How can you work with them to develop a staffing plan that includes flexible work options that meet their needs as well as yours?

Skill Building Portfolio: Terms to Define: Bureaucracy

Functional chimneys, or functional silos, problem

Centralization Functional structure Compressed workweek Geographic structure Co-working center Cross-functional teams Customer structure Decentralization Delegation Departmentalization

Informal structure Job sharing Matrix structure Mechanistic design Network structure Organic design

Division of labor Divisional structure

Organization chart

Empowerment

Organization structure

Flexible working hours

Organizational design

Formal structure

Organizing

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Product structure

Span of control

Social network analysis

Team structure

Shadow organization

Telecommuting Virtual organization

Test Prep 8 Multiple-Choice Questions 1. The main purpose of organizing as a management function is to ____________. (a) make sure that results match plans (b) arrange people and resources to accomplish work (c) create enthusiasm for the needed work (d) link strategies with operational plans 2. An organization chart is most useful for ____________. (a) mapping informal structures (b) eliminating functional chimneys (c) showing designated supervisory relationships (d) describing the shadow organization 3. Rumors and resistance to change are potential disadvantages often associated with ____________. (a) virtual organizations (b) informal structures (c) functional chimneys (d) cross-functional teams 4. When an organization chart shows that vice presidents of marketing, finance, manufacturing, and purchasing all report to the president, top management is using a ____________ structure. (a) functional (b) matrix (c) network (d) product 5. The “two-boss” system of reporting relationships is both a potential source of problems and one of the key aspects of ____________ structures. (a) functional (b) matrix (c) network (d) product 6. A manufacturing business with a functional structure has recently acquired two other businesses with very different product lines. The president of the combined company might consider using a ____________ structure to allow a better focus on the unique needs of each product area. (a) virtual (b) team .

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(c) divisional (d) network 7. An organization using a ____________ structure should expect that more problems will be solved at lower levels and that top managers will have more time free to engage in strategic thinking. (a) virtual (b) matrix (c) functional (d) product 8. The functional chimneys problem occurs when people in different functions ____________. (a) fail to communicate with one another (b) try to help each other work with customers (c) spend too much time coordinating decisions (d) focus on products rather than functions 9. An organization that employs just a few “core” or essential full-time employees and outsources a lot of the remaining work shows signs of using a ____________ structure. (a) functional (b) divisional (c) network (d) team 10. A “tall” organization will likely have ____________ spans of control than a “flat” organization with the same number of members. (a) wider (b) narrower (c) more ambiguous (d) less centralized 11. If a student in one of your course groups -volunteers to gather information for a case analysis and the other members tell him to go ahead and choose the information sources he -believes are most important, the group is giving this student ____________ to fulfill the -agreed-upon task. (a) responsibility (b) accountability (c) authority (d) values 12. The bureaucratic organization described by Max Weber is similar to the ____________ organization described by Burns and Stalker. (a) adaptive (b) mechanistic (c) organic (d) horizontal 13. Which organization would likely be a good fit for a dynamic and changing external environment? (a) vertical (b) centralized (c) organic (d) mechanistic 14. Workers following a compressed workweek schedule most often work 40 hours in ____________ days. (a) 3 ½ (b) 4 (c) 5 (d) a flexible schedule of 15. Which alternative work schedule is identified by Working Mother magazine as being used by all -companies on its list of “100 Best Employers for Working Moms”? (a) telecommuting (b) job sharing .

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(d) part-time

Short-Response Questions 16. Why should an organization chart be trusted “only so far”?

An organization chart depicts the formal structure of the organization. This is the official picture of the way things are supposed to be. However, the likelihood is that an organization chart quickly becomes out of date in today’s dynamic environments. So one issue is whether or not the chart one is viewing actually depicts the current official structure. Second, there is a lot more to the way things work in organizations than what is shown in the organization chart. People are involved in a variety of informal networks that create an informal structure. It operates as a shadow lying above or behind the formal structure and also influences operations. Both the formal structure and informal structure must be understood; at best, an organization chart helps with understanding the formal one.

17. In what ways can informal structures be good for organizations?

There are two major ways that informal structures can be good for organizations. First, they can help get work done efficiently and well. When people know one another in informal relationships, they can and often do use these relationships as part of their jobs.

Sometimes an informal contact makes it a lot easier to get something done or learn how to do something than the formal linkages displayed on an organization chart. Second, being part of informal groups is an important source of potential need satisfaction. Being in an informal network or group can satisfy needs in ways that one’s job can’t sometimes and can add considerably to the potential satisfactions of the work experience.

18. How does a matrix structure combine functional and divisional forms?

The matrix structure is organized in a traditional functional fashion in the vertical dimension. For example, a business might have marketing, human resources, finance, and manufacturing functions. On the horizontal dimension, however, it is organized divisionally in a product or project fashion, with a manager heading up each special product or project. Members from the functional departments are assigned to permanent cross-functional teams for each product or project. They report vertically to their functional bosses and horizontally to their product/project bosses. This two-boss system is the heart of the matrix organization.

19. Why is an organic design likely to be quicker and more flexible in adapting to changes than a mechanistic design?

An organic design tends to be quicker and more flexible because it is very strong in lateral communication and empowerment. People at all levels are talking to one another and interacting as they gather and process information and solve problems. They don’t wait for the vertical structure and “bosses” to do these things for them. This means that as the .

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environment changes they are more likely to be on top of things quickly. It also means that when problems are complex and difficult to solve, they will work with multiple people in various parts of the organization to best deal with them.

Integration and Application Question 20. Imagine you are a consultant to your university or college president. The assignment is: Make this organization more efficient without sacrificing its educational goals. Although the president doesn’t realize it, you are a specialist in network structures. You are going to suggest building a network organization, and your ideas are going to be radical and provocative. Questions: What would be the core of the network—is it the faculty members, who teach the various courses, or is it the administration, which provides the infrastructure that students and faculty use in the learning experience? What might be outsourced—grounds and facilities maintenance, food services, security, recreation programs, even registration? What types of alliances might prove beneficial—student recruiting, faculty, even facilities?

A network structure often involves one organization “contracting out” aspects of its operations to other organizations that specialize in them. The example used in the text was of a company that contracted out its mailroom services. Through the formation of networks of contracts, the organization is reduced to a core of essential employees whose expertise is concentrated in the primary business areas. The contracts are monitored and maintained in the network to allow the overall operations of the organization to continue even though they are not directly accomplished by full-time employees. There are many possibilities for doing something similar in a university. In one model, the core staff would be the faculty. They would be supported by a few administrators who managed contracts with outsourcing firms for things such as facilities maintenance, mail, technology support, lawns maintenance, food services, housing services, and even things like development, registrar, and student affairs. Another model would have the administrators forming a small core staff who contract out for the above and, in addition, for faculty who would be hired “as needed” and on contracts for specific assignments.

Self-Assessment 8: Empowering Others Instructions Think of times when you have been in charge of a group—this could be a full-time or part-time work situation, a student work group, or whatever. Complete the following questionnaire by recording how you feel about each statement according to this scale.

1 = Strongly disagree 2 = Disagree 3 = Neutral 4 = Agree 5 = Strongly agree When in charge of a team, I find that 1. Most of the time other people are too inexperienced to do things, so I prefer to do them myself.

2. It often takes more time to explain things to others than to just do them myself.

3. Mistakes made by others are costly, so I don’t assign much work to them.

4. Some things simply should not be delegated to others.

5. I often get quicker action by doing a job myself.

6. Many people are good only at very specific tasks, so they can’t be assigned additional .

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responsibilities.

8. Many people are too busy to take on additional work.

8. Most people just aren’t ready to handle additional responsibilities.

9. In my position, I should be entitled to make my own decisions.

Scoring Total your responses and enter the score here [___________].

Interpretation This instrument gives an impression of your willingness to delegate. Possible scores range from 9 to 45. The lower your score, the more willing you appear to be to delegate to others.

Willingness to delegate is an important managerial characteristic: It is how you—as a manager—can empower others and give them opportunities to assume responsibility and exercise self-control in their work. With the growing importance of horizontal organizations and empowerment in the new workplace, your willingness to delegate is worth thinking about seriously.

Class Exercise 8: Organizational Metaphors Instructions 1. Start by answering the following questions using this scale: 5 = strongly agree 4 = agree somewhat 3 = undecided 2 = disagree somewhat 1= strongly disagree I prefer to work in an organization where: 1. Goals are defined by those in higher levels.

2. Work methods and procedures are specified.

3. Top management makes important decisions.

4. My loyalty counts as much as my ability to do the job.

5. Clear lines of authority and responsibility are established.

6. Top management is decisive and firm.

8. My career is pretty well planned out for me.

8. I can specialize.

9. My length of service is almost as important as my level of performance.

10. Management is able to provide the information I need to do my job well.

11. A chain of command is well established.

12. Rules and procedures are adhered to equally by everyone.

13. People accept the authority of a leader’s position.

14. People are loyal to their boss.

15. People do as they have been instructed.

16. People clear things with their boss before going over his or her head.

2. Total your scores for all questions. Enter the score here [__________].

3. Interpretation. This assessment measures your preference for working in an organization designed along “organic” or “mechanistic” lines. The higher your score (above 64), the more .

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comfortable you are with a mechanistic design; the lower your score (below 48), the more comfortable you are with an organic design. Scores between 48 and 64 can go either way.

4. Form into groups and compare scores and organizational design preferences. Discuss areas of similarity and difference. Prepare a report to the class that summarizes the organizational design preferences within your group and also highlights arguments for and against organic and mechanistic organizations as places to work.

Team Project 8: Network “U” Instructions Form into groups as assigned by the instructor. In the group do the following: 1. Discuss the concept of the network organization structure as described in the textbook.

2. Create a network organization structure for your college or university. Identify the “core staffing” and what will be outsourced. Identify how outsourcing will be managed.

3. Draw a diagram depicting the various elements in your Network “U.” 4. Identify why Network “U” will be able to meet two major goals: (a) create high levels of student learning and (b) operate with cost efficiency.

5. Present and justify your design for Network “U” to the class.

Cases for Critical Thinking Law Firms Try the Case for New Structures Sidebar Case: Goodbye Office, Hello Unsassigned Desks and Storage Lockers The traditional organization structure of a large or mid-sized law firm has remained unchanged for years. It was a clear, tight, and even intimidating pyramid with all-powerful partners sitting at the top. In good economic times a new attorney’s goal was clear – climb the ladder, become a partner, and enjoy the rewards. As times have changed and the economy corrected, many law firms have had to adjust as well. Potential clients now have alternatives to pay-by-the-hour brick and mortar firms. Online law offerings have gained legitimacy. Quality services at more predictable and sometimes flat-rate prices are proliferating. Welcome to the new future of some law firms.

Case discussion questions and suggested answers: 1. DISCUSSION What are the potential benefits, if any, to the traditional way law firms were structured?

Can a case be made that instead of looking for new and radically different structures, it might be better to focus on getting the best out of the existing one? Explain.

Potential benefits to the traditional way law firms were structured: o Big partner payouts (partners are joint owners of the firm) o The more hours billed, the more profit the partners make o The law firms, owned by the partners, and supported by the work of associates.

Partners are paid handsomely while jobs were created for associates (who help to increase profitability). .

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o Most of the large law firms are “leveraged” up (leverage refers to the ratio of partners to associates), to do big deals. o In good economic times when demand for deals is high, this translates to lots of work for associates (and support staff). o This structure works particularly well when demand for deals is high.

However, when revenues fall, it can be difficult to sustain the associates and support staff, which makes this structure vulnerable to economic downturns.

A case can be made for getting the best out of the existing structure, however, in a recession, with a traditional structure designed to have many associates supporting partners, newer and more cost effective structures are inevitably created.

2. DISCUSSION How would you compare the advantages and disadvantages of the new open and officeless environments – for the employees, and for the organizations? Would an open office setting fit well with you and your work preferences? How about an organization’s culture, does an open office approach change things?

Advantages to employees Greater creativity, collaboration, and idea exchange.

Great concept for those (social-types) more concerned about being around and learning from creative people than the size of their desk.

Open, collaborative environments create a less hierarchical corporate structure and feel.

Advantageous for workers more concerned about flexible work hours, telecommuting and collaboration.

This type of environment allows workers to know what is going on – greater .

Advantages to organization With the price of commercial real estate (office space), this is a way to increase a company’s bottomline while maximizing office space.

Research suggests that physical proximity is a “predictor” of the impact of collaboration.

Works well for employees who don’t spend lots of time in the office (insurance adjustors, for example).

Creates flexibility for redesign and/or rearrangement. Easily reconfigured with growth.

Disadvantages to employees Many employees report that overhearing conversations is not only distracting, but also intrusive.

Disadvantages to organization Some argue reduced productivity in an open office environment.

Some may feel the status symbol of an office is lost. Workers who have had a private office taken away from them in favor of this concept may feel ripped off.

Research shows that workers in an open office environment take more sick days than those with private offices.

According to a research study, productivity is impacted by sound, temperature, office layout, air quality and lighting. Temperature and sound matter the most. The most irritating noises were conversations, ringing phones and machines.

Some workers value a private office and feel they must work in solitude to be more productive.

Older workers report to not liking the noise of an open office environment.

Too much socializing among employees and productivity can suffer.

No private space for a private or personal phone call.

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transparency.

Employees can also be arranged into departmental groups or ‘pods’ allowing an easier flow of information and supervision by managers.

3. PROBLEM SOLVING If a law firm is struggling to do well, would it be helpful for a consultant to come in and analyze the informal structure? What might be learned that could help in coming up with a new structure that better suits the firm’s current needs? How could such an analysis be done?

Yes, evaluating an organization’s informal structure would involve looking at how work really gets done. Networks and the resulting informal relationships will reveal how work and processes of innovation take place. Today, social networks provide a rich source of information, knowledge and expertise. Evaluating the roles of informal ties within an organization allows for an environment conducive to sharing, collaboration and learning. This translates to greater innovation. To develop trust, some argue the need for face-to-face, on-site and spontaneous communication. When evaluating an organization’s informal structure, it is interesting to understand the company’s telecommuting policy and how much face-to-face interaction actually occurs.

What might be learned to come up with a new structure that better suits the firm’s current needs? Types of information that can be shared. Greater trust and mutual understanding increases collaboration and information sharing among employees – especially sensitive or confidential information. Student answers will vary as to how they would go about conducting an information organization analysis. This could be conducted through observation, analysis of systems, and face-to-face or online interviews and surveys of the internal functions of the organization.

4. FURTHER RESEARCH Check out the Axiom Legal website. Study its services and current approach to staffing and client services. Does Axiom seem to have the right structure for the moment? When you look at the legal services industry overall, is Axiom faring well versus competitors?

Is it setting a new model for law firms to adopt in the future, or is it already behind the curve as technology keeps developing and the economy keeps changing?

Services and approach to staffing and client services: • Cost effective way to do commodities work • High end temp services to corporate blue chip corporate clients • Axiom targets graduates of top-tier law schools and refugees from top firms who may have grown tired of billing 2200 hours a year, but who don’t want to .

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take a full-time in-house job or abandon legal practice entirely.

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Its website reads: “Like a law firm, we provide high-performance teams with partner-level leaders, are there when our clients need us and go away when they don’t. But unlike the traditional firm, we have zero unnecessary overhead and that’s good for everyone.

• •

Clients include: Hewlett-Packard Co., Kraft Foods Inc., and Vodafone Group plc Axiom “is attempting to pave a middle ground between legal process outsourcers and law firms (both traditional and alternative) by providing solutions to legal challenges that may rise above mere document review tasks but don’t require the bench strength and extensive talent infrastructure (read: cost) of a Big Law firm.”

Yes, Axiom seems to have the right structure (and infrastructure) to deliver costeffective, flat rate legal services. As the economy continues to change (for better or worse), this type of structure might also continue to adapt and evolve. It is setting a new model for law firms to adopt in the future.

How is Axiom doing compared to competitors?

Other nontraditional providers of legal services include Clearspire Service Co., Silicon Valley-based Virtual Law Partners, Outside GC, LLC, in Boston and Phillips & Reiter, PLLC, in Houston. All emphasize cost-reducing work-at-home attorney staffs, technology infrastructures to efficiently manage work flow, and fixed-fee pricing.

Suggested Team Exercise for Chapter 8: This exercise will only work in classrooms in the same physical setting (not distance learning).

Break the class into teams of five.

Supply each team with • one stapler (with ample supply of staples) • one small “post it” type note pad • a red pen • a supply of paper clips.

Tell the class that each team is a “company.” Their product is a “FoleyO.” The “FoleyO” manufacturing process is as follows: Note: The instructor or Professor should have one example or “prototype” to show each team as an example of the completed “product”. This will also be provided to a class “inspector” (one for the entire class who will not be on any team but will get equal credit, if any given, for this exercise) as a template for “quality control.” Products that match the “prototype” will count as “good” production or “finished products.” All other will count as “rejects” or “scrap” production. .

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1) Pull one sheet off the “post it” pad 2) Fold the sheet exactly in half 3) Staple the folded sides together by putting a staple at the very middle and top of the folded page-the staple must be horizontal or parallel to the paper 4) One student per team is the “signer” who looks at the product which has gone through steps 1-3 above and must sign his or her initials legibly as a type of “logo.”

5) Paper clips should be used for each set of 10 pages that have gone through steps 1-4 above.

The instructor should tell the teams to meet and decide how they will organize their production.

They may shuffle chairs etc. or face each other as they wish. (Note: students may decide to “combine” steps-one student may do two tasks, but do not offer this suggestion unless someone asks the question. This is effectively comparable to downsizing for efficiencies, etc.)

Allow 15 minutes from the “start” time and call off the last minute by 15 second increments.

When time has expired, each team should take their finished production to the inspector. The instructor should count each piece of abandoned paper by each team as a scrap product. These should be added to those rejected by the inspector as not meeting quality standards. a) Count the accepted (approved by the inspector) products b) Count the rejected products from above c) Multiply the Number of rejected products by 2 as a penalty for low quality production d) Subtract the total in “c’ from the total in “a” This is the net “good” production e) Rank the teams You may wish to make this game more realistic by adding incentives (similar to piecework) for the top or winning team (maybe an added 5 points each on a future test or exam). This creates a high level of class energy and interest.

Then, the teams should assess what went “right” and “wrong” on their teams. Did they match skills to jobs? Did they combine jobs? Did they change physical arrangements? Was speed (efficiency) more important than quality (effectiveness)?

Finally, a combined class discussion will reinforce the values of organization (as well as planning).

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CHAPTER 9 Organizational Culture, Innovation, and Change Adaptability and Values Set the Tone Chapter 9 Overview Each Chapter contains several inset features designed to assist the student reader in applying the concepts to relevant examples. Management Live illustrates how popular movies demonstrate management concepts in the chapter. Role Models features a management professional that illustrates key chapter concepts in a novel, visionary or inspirational way. Explore Yourself refers students to self assessment activities relevant to concepts in the chapter. Ethics Check profiles examples of ethical issues in management. Manager's Library features books that illustrate current events or trends relevant to chapter concepts. Facts to Consider introduces research or trends that may be used for class discussion in the classroom or online for distance learning.

The chapter beings by essentially defining an organization’s culture as its unique “personality.”

Examples are given to illustrate how an organization’s culture shapes behavior and influences the performance of its members. The various components of an organization’s culture are explained as visible or observable, and they include heroes, rites, rituals, stories, and symbols.

The chapter provides an explanation of an organization’s core culture, which consists of its core values. The importance of a value-based management team to support a strong organizational culture is discussed.

Next, the topic of innovation and how organizations approach and support innovation is discussed. The various forms of innovation (process, product and business model) within an organization are reviewed. Also included are the important topics of sustainability and green innovation and social innovations as a way of solving society’s problems. Commercializing innovation is discussed as a way to increase profits and sales. The chapter discusses the concept of disruptive innovation, or the creation of an innovative product or service that replaces prior practices and competitors (e.g. online video streaming replacing CDs rentals from a video store).

The last part of the chapter discusses how managers lead the process of organizational change.

Transformational change or large scale changes within an organization is discussed and described along with incremental, or more gradual change. Guidelines of how to lead transformational change is described. The three phases of planned change are identified and improvising as a critical force to the planned change process is discussed. The chapter provides a review of strategies used by managers to move people and systems toward change, including: force-coercion, rational persuasion, and shared power change. The characteristics of change leaders and how they deal with resistance to change is discussed, along with the various reasons people resist change.

Chapter 9 Takeaway Questions: Takeaway 9.1: What is the Nature of Organizational Culture? .

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Takeaway 9.2: How Do Organizations Support and Achieve Innovation?

Takeaway 9.3: How Do Managers Lead the Processes of Organizational Change?

Chapter 9 Objectives: • • • • • • • • • • • • • • • • • • • • • • • • • •

To explain and understand what is meant by the culture of organizations, how they distinguish organizations from one another, and how they give members a sense of collective identity.

To explain how organizational culture develops within an organization, and how it guides the behavior of its members.

To explain how organizational culture shapes behavior and influences performance of its members.

To give examples of a strong and positive organizational culture.

To explain how cultures are reinforced through socialization.

To understand that not all organizational cultures are alike.

To explain the main components of organizational culture .

To define observable culture as part of an organization’s daily life To explain a deeper level of organizational culture, or core culture.

To explain how managers practice value-based management.

To understand workplace spirituality and its link to value-based management.

To define innovation and how the development of new ideas is put into practice.

To decipher between the three forms of product innovation.

To explain product and business model innovations To understand and give examples of how green innovations support the goals of sustainability.

To understand and give examples of how social innovation seeks solutions to important societal problems.

To explain how commercializing innovation turns new ideas into actual products, services, or processes, or processes – that generate profits through more sales.

To explain and provide examples of how disruptive innovation uses new technology to displace existing practices.

To give examples of how innovating organizations share common characteristics.

To explain the difference between how organizations pursue transformational and incremental changes.

To explain the steps of how to lead transformational change within an organization.

To define unfreezing, changing, and refreezing as the three phases of planned change.

To explain how the role of improvising can be critical to the planned change process.

To explain how managers use strategies of force-coercion, rational persuasion, and shared power change.

To understand and give examples of how change leaders identify and deal positively with resistance to change.

To give examples of why people may resist change.

Chapter 9 Lecture Outline: .

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Takeaway 9.1: What is the Nature of Organizational Culture? o Organizational culture is the personality of the organization. o Organizational culture shapes behavior and influences performance. o Not all organizational cultures are alike. o The observable culture is what you see and hear as an employee or customer. o The core culture is found in the underlying values of the organization. o Value-based management supports a strong organizational culture.

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Takeaway 9.2: How Do Organizations Support and Achieve Innovation? o Organizations pursue process, product, and business model innovations. o Green innovations pursue and support the goals of sustainability o Social innovations seek solutions to important societal problems. o Commercializing innovation turns new ideas into salable products. o Disruptive innovation uses new technologies to displace existing practices. o Innovative organizations share many common characteristics.

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Takeaway 9.3: How Do Managers Lead the Processes of Organizational Change? o Organizations pursue both transformational and incremental changes. o Three phases of planned change are unfreezing, changing, and refreezing o The change process is dynamic and improvising is often essential. o Managers use force-coercion, rational persuasion, and shared power change strategies. o Change leaders identify and deal positively with resistance to change.

Chapter 9 Supporting Materials: Figures • Figure 9.1 What are the Main Components of Organizational Culture?

• Figure 9.2 How Do Organizations Commercialize Innovation?

• Figure 9.3 What are the Change Leader Responsibilities in Lewin’s Three Phases of Planned Change?

• Figure 9.4 What Happens When a Change Leader Uses Different Types of Change Strategies?

Thematic Boxes and More • Management Live: Tolerance for Ambiguity and The Terminal • Role Models: Tom Szaky Puts Eco-capitalism to Work at TerraCycle • Ethics Check: Facebook Follies versus corporate culture • Facts to Consider: Organization Cultures Face up to Work-Life Trends • Manager’s Library: Change by Design: How Design Thinking Transforms Organizations and Inspires Innovation by Tim Brown • Explore Yourself: More on Tolerance for Ambiguity • Find Inspiration: Healthy Living Sets the Tone at Clif Bar • Tips to Remember: SCORES – How to Read an Organization’s Culture • Table 9.1 Why People May Resist Change .

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Applications • TestPrep 9 Multiple-Choice Questions • Skill Building Portfolio o Self-Assessment 9: Tolerance for Ambiguity o Class Exercise 9: Force-Field Analysis o Team Project 9: Organizational Culture Walk • Case Snapshot: LinkedIn – Networking for Career Opportunities • Sidebar case: Gamers Welcome • Hot Topic: Good Idea or Not? “Move over old timer, time to make room for GenY.”

Chapter Outline: Takeaway Question 9.1: What is the Nature of Organizational Culture?

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Organizational culture is the personality of the organization ✓ Organizational culture is the system of shared beliefs and values that develops within an organization and guides the behavior of its members.

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Find Inspiration: Healthy Living Sets the Tone at Clif Bar When Gary Erickson decided during a long bike ride that he simply couldn’t eat another one of the competitor’s energy bars, he went back to experiment in his mother’s kitchen. The result: Clif Bar. Erickson’s company holds a strong commitment to what it calls the “5 aspirations: sustaining our planet…..community….people….business….brands” Clif’s core values are evident not only in the firm’s healthy organic foods and philanthropy, but also in the quality of working life offered to employees. The culture is unique. Question: Why can’t more of us find jobs in places like this?

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Organizational culture shapes behavior and influences performance ✓ Strong cultures - cultures which are clear, well-defined, and widely shared among members ✓ Socialization - new members learn how what is expected by the culture: how to act, dress, common terminology, work ethic, customer service orientation etc.

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Not all organization cultures are alike ✓ Understanding an organization’s culture can be a real asset to employees and job hunters alike. ✓ No one wants to end up in a situation with a bad cultural fit. ✓ Managers offer ideas for reading organizational cultures by asking questions about such things as innovation and risk taking, teamwork, people orientation, and emphasis on outcomes. ✓ There are four different culture types: ➢ Hierarchical ➢ Rational 9-4

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➢ Entrepreneurial ➢ Team

DISCUSSION TOPIC A discussion of the shared beliefs and values that describe your college or university can be an effective method for getting students to think about organizational culture. Make sure the discussion examines who within your college/university community shares these values, and how these values influence the behavior of different members of your college/university community. By focusing on who shares these values you can explore whether or not your college/university has a strong culture. Alternatively, you can consider the possibility that there might be two or more subcultures operating within the organization.

•

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SEE FIGURE 9.1 What Are the Main Components of Organizational Culture?

With a bit of effort, one can easily identify the organizational culture. The most visible part is the observable culture. It is shown in the stories, rituals, heroes, and symbols that are part of the everyday life of the organization. The deeper, below-the-surface part is the core culture. It consists of the values that influence the beliefs, attitudes, and work practices among organizational members.

The observable culture is what you see and hear as an employee or customer • Includes how people dress at work, arrange their offices, speak to and behave toward one another, and talk about and treat their customers. It is found in stories, heroes, rituals, and symbols.

DISCUSSION TOPIC Ask students to individually indentify the elements of observable culture (stories, heroes, rituals, and symbols) of an organization they are familiar with such as an employer or your college. Ask them to share their thoughts in a small group and have the small groups report to the class.

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Core culture is found in the underlying values of the organization ✓ Core Values are beliefs and values shared by members of the organization ➢ Examples include performance excellence, innovation, social responsibility worker involvement, customer service and teamwork. ➢ Frequently included in mission statements

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Value-based management supports a strong organizational culture ✓ Workplace spirituality includes practices that create meaning and community. It does not necessarily include religion. ✓ Common elements are meaningful work, respect for diversity, work-life balance, ethical behavior ✓ Symbolic leaders communicate culture and values through symbolic language and behavior. Common examples are Mary Kay Ash and Herb Kelleher.

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Again, Facebook provides a teachable moment for managers. Several examples show employees getting caught making Facebook updates that aren't very career-smart. The You Decide questions probe the ethical issues of personal freedom of speech and the employer's right to use public information in personnel decisions. Questions for further discussion: As you discuss the issues, remind students to look at the issue as an employer as well as employee and see if their position changes. Is there an ethical boundary that travels from work into one’s public communications that needs to be respected? What are the ethics here – on the employee’s and the employer’s side?

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Facts to Consider: Organization Cultures Face up to Work-Life Trends (page 214) ✓ You can tell a lot about an organization's culture by the way they handle employee work-life conflict. Facts to Consider points to a number of different facts which have to do with workers (68%) who feel they don’t have enough time for spouses and partners, those who don’t feel they have enough time for their children (74%), and those who are caring for elderly or relatives (35%). ✓ Are you prepared to succeed in a work setting that doesn’t respect these facts? Or, are you preparing right now to always find and be attractive to employers that do?

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Tips to Remember ✓ Scores – How to Read an Organization’s Culture ✓ S - How tight or loose is the structure? ✓ C - Are decisions change oriented or driven by the status quo? ✓ O - What outcomes or results are most highly valued? ✓ R - What is the climate for risk taking, innovation? ✓ E - How widespread is empowerment, working involvement? ✓ S – What is the competitive style, internal and external? ✓ Sample values in Spiritual Organizational Cultures ✓ Meaningful purpose ✓ Trust and Respect ✓ Honesty and openness ✓ Personal growth and development ✓ Worker-friendly practices ✓ Ethics and social responsibility

DISCUSSION TOPIC The public ethical collapse of Enron in late 2001 was soon followed by numerous reports of other organizations’ ethical failures, large and small. In many instances, these ethical failures were eventually attributed to (a) organizational cultures that did not genuinely value ethical behavior and/or (b) leaders at the top of the organizational hierarchy who did not serve as an effective role model of ethical behavior. This is certainly the case with Enron. Discuss with the students their perceptions/knowledge of what happened at Enron, and the lessons/ insights that they have personally drawn from Enron’s ethical collapse.

9.1 Questions for discussion suggested answers .

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1) Can an organization achieve success with a good organizational design but a weak organizational culture?

Companies with strong cultures are much more likely to outperform companies without that advantage, whether organizational design is strong or weak. Culture affects processes, motivation and execution in a direct fashion. A weak culture will adversely impact performance.

2)

When you are in your local bank or any other retail establishment as a customer, what do you see and hear around you that identifies its observable culture?

Bank employees dress somewhat formally - often wearing suits or blazers, have shorter and no facial hair, less stylish or trendy dress, behave more rigidly, and are unlikely to make decisions that are not “their job.”

3) What core values would you choose if you were creating a new organization and wanted to establish a strong performance-oriented culture?

I would select the following core values: customer above all; employee freedom to fail, but with accountability for results; an ethical culture; number one or two in market share; pride in developing future managers; and continuous process improvement; strong work ethic combined with a strong play ethic; sense of humor and a positive attitude.

Takeaway Question 9.2: How Do Organizations Support and Achieve Innovation?

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Organizations pursue process, product and business model innovations ✓ Innovation is the process of taking a new idea and putting it into practice ✓ Process innovations result in an improved process such as faster processing of online product purchases or banking transactions ✓ Product innovations result in new or improved goods or services such as the Amazon Kindle or Barnes and Noble Nook readers, or textbook rentals. ✓ Business model innovations result in new ways to expand existing businesses such as the University of Phoenix developing a completely online college, or your college developing an online degree program.

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Green innovations pursue and support the goals of sustainability ✓ Green or sustainable innovation is the process of turning ideas into innovations or business models that are earth-friendly or reduce the organization's carbon footprint. ✓ Examples include wind and solar farms, recycling, carbon offsets, developing products that use little or no energy from fossil fuels.

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Role Models: Tom Szaky Puts Eco-capitalism to Work at Terra Cycle In the Role Models feature, entrepreneur Tom Szaky explains the process he went

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through to establish his firm "TerraCycle." His experience is a good starter for discussions on innovation and culture. Suggested questions for further discussion: What types of decisions did Tom Szaky make when he moved into the entrepreneurial world of eco-capitalism? We talk about the planet, sustainability, and social values. But how often do we turn decisions into positive actions? Is there a bit of Tom Szaky in you?

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Social innovations seek solutions to important societal problems ✓ Social entrepreneurship seeks new and unique ways to solve the world's social problems. ✓ Examples include the Grameen Bank making micro loans in Bangladesh; One Acre Fund lending money for helping farmers in Kenya; One Laptop Per Child distributing computers where little or no education is available; or Heifer International providing livestock to families around the world.

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Commercializing innovation turns ideas into products, services or processes that the organization can use to produce profits.

▪ Idea creation ▪ Initial experimentation ▪ Feasibility determination ▪ Final application Reverse innovation or trickle-up innovation takes products created for small or emerging markets and moves them into larger distribution.

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FIGURE 9.2 How Do Organizations Commercialize Innovation?

In business it is the process of commercializing innovation that turns new ideas into actual products, services, or processes that can increase profits through greater sales or reduced costs. This requires management encouragement and support for idea creation (invention and the act of discovery), experimentation and feasibility determination, and final application (actually putting the tested idea into use).

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Disruptive innovation uses new technology to displace existing practices ✓ At time the innovation process is so successful that disruptive innovation occurs. ✓ Harvard Scholar Clay Christensen defines it as “the creation of an innovative product or service that starts out small scale and then moves ‘up market’ to where it is so widely used that it displaces prior practices and competitors.” ✓ Steve Jobs’s leadership at Apple is an example of harnessing technology and innovating – continuously and disruptively. ✓ Jeff Bezos of Amazon.com is called the “ultimate disruptor” by Fortune magazine because he put electronic books on a Kindle and put the Kindle in our purses and on our nightstands.

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Innovative organizations share many common characteristics ✓ Innovative organizations incorporate innovation into the core values and culture of the organization. Common characteristics include: ▪ Strategy supports innovation ▪ Culture values innovation 9-8

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▪ Structure supports innovation ▪ Management supports innovation ▪ Staffing supports innovation ✓ Skunkworks is a term for special units whose goal is innovation and operate outside the normal structure.

9.2 Questions for discussion suggested answers 1) Are there any potential downsides to making organizational commitments to green innovation?

A traditional view of business social responsibility is that the organization's mission is to create a return for the owners or investors. If social responsibility is not one of the core values of the organization or part of its mission, investors might become upset. Many organizations have social responsibility as a core value and would value green innovation as an important way to create sustainability and competitive advantage.

2) What are the biggest trouble points in a large organization that might prevent a great idea from becoming a commercialized innovation?

Many factors might reduce support for innovation. Management may not support new ideas; management may slow the process allowing competitors to reach the market faster; there may be a lack of focus on customer needs; a culture that does not value innovation; a structure that makes innovation difficult; or a lack of visionary staff.

3) What difference does a leader make in terms of how innovative an organization becomes?

Organizational leaders play a huge role. Leaders set the culture and core values that would support innovation. Top managers must tolerate criticism and differences in opinion, eliminate barriers to innovation and willingness to fail.

Takeaway Question 9.3 : How Do Managers Lead the Processes of Organizational Change?

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Organizations pursue both transformational and incremental changes ✓ Change leaders take leadership responsibility for changing the existing pattern of behavior. ✓ Inset illustration shows the differences between change leaders and status quo leaders. ✓ Transformational change results in a major and comprehensive redirection of the organization ✓ Incremental change tweaks and nudges existing systems and practices to better align them How to Lead Transformational Change: ➢ Establish a sense of urgency for change. ➢ Form a powerful coalition to lead the change ➢ Create and communicate a change vision. ➢ Empower others to move change forward 9-9

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➢ Celebrate short-term wins, and recognize those who help. ➢ Build on success; align people and systems with new ways. ➢ Stay with it: keep the message consistent: champion the vision •

Three phases of planned change are unfreezing, changing, and refreezing ✓ Kurt Lewin described planned change as a process with three phases • Unfreezing - preparing a system for change • Changing - making actual changes in the system • Refreezing - stabilizing the system after change

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FIGURE 9.3 What Are the Change Leader’s Responsibilities in Lewin’s Three Phases of Planned Change?

Kurt Lewin identified three phases of the planned change process. The first is unfreezing, the phase where people open up and become receptive to the possibility of change. The second is changing, where the actual change happens and the new ways of doing things are put into place. Third is refreezing, the phase where changes are stabilized to become part of ongoing routines. Lewin believed that change agents often neglect unfreezing and move too quickly into the changing phase, thus setting the stage for change failures. They may also neglect refreezing, with the result that any achieved change has only temporary effects.

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The change process is dynamic and improvising is often essential ➢ Change is dynamic and uncertain, and not a linear, step-by-step process with clear beginning and end points. ➢ Change leaders often deal with the change phases simultaneously and even incompletely. ➢ The sheer complexity of organizations creates a need for improvisational change where adjustments are continually made as changes are being implemented.

DISCUSSION TOPIC

Have the students identify something they believe should be changed about the way your college or university operates. Then have them analyze how this change could be managed using the three-phase model of planned change for guidance.

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Managers use force-coercion, rational persuasion, and shared power change strategies ✓ Force-Coercion uses the primary power bases of legitimacy, rewards, and punishments as the primary inducements to change; most useful as a unfreezing strategy ✓ Direct forcing - direct and unilateral command that change takes place ✓ Political maneuvering - works indirectly to gain special advantage over other person in making the change ✓ Rational persuasion - bring about change through persuasion backed by special knowledge, information, facts, and rational argument

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✓ Shared power - encourages people in a collaborative process of identifying values, assumptions, and goals from which support for change will naturally emerge •

FIGURE 9.4 What Happens When a Change Leader Uses Different Types of Change Strategies?

Force-coercion strategies use authority, offers of rewards, and threats of punishment to push change forward. The likely results are, at best, temporary compliance. Rational persuasion strategies use information, facts, and logic to present a persuasive case in support of change. The likely outcomes are compliance with reasonable commitment.

Shared power strategies engage others and allow them to participate in the change process, from initial planning through implementation. The high involvement tends to build more internalization and greater commitments to change.

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Manager’s Library: Change by Design: How Design Thinking Transforms Organizations and Inspires Innovation by Tim Brown Change By Design examines innovation, design, creativity and change. Author Tim Brown’s view of design is that it should be human centered and focus on needs.

Innovation isn't just from the minds of geniuses, it comes from an examination of our needs.

Reflect and React questions ask students to describe products or services that provide you with an emotional experience rather than a functional utility. How can these feelings be evoked in other products or services? Describe circumstances where members of your organization interact with externalities – customers, technologies, or broader society.

How can their observations yield innovations? And by the way, do you agree slowing down to speed up enables creative thinking?

• Explore Yourself: Tolerance for Ambiguity The assessment for this Chapter is entitled "Tolerance for Ambiguity.” Your tolerance for ambiguity is a good predictor of how you like to work and deal with change. Some organizations are structured and directive, where others are the opposite. Some of us embrace change, where others resist it.

The assessment tool is intended to help students assess their ability to accept ambiguity or uncertainty. After determining their scores, you may ask students how innovative they are likely to be as a manager and what type of organizational culture would be a good fit for them.

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Change leaders identify and deal positively with resistance to change ✓ See Table 9.1 for a summary of why people may resist change ➢ Fear of the unknown ➢ Disrupted habits ➢ Loss of confidence ➢ Loss of control ➢ Poor timing ➢ Work overload ➢ Loss of face 9-11

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➢ Lack of purpose ✓ Positive resistance tactics: ▪ Education and communication ▪ Participation and involvement ▪ Facilitation and support ▪ Negotiation and agreement ✓ Negative resistance tactics: ▪ Manipulation and cooptation ▪ Explicit and implicit coercion 9.3 Questions for discussion suggested answers 1) When is it better to pursue incremental rather than transformational change?

Not all changes are radical enough to be considered transformational. Incremental change faces mangers on a daily basis as changes are required in existing practices, procedures and policies.

2) Can the refreezing phase of planned change ever be completed in today’s dynamic environment?

It may not be possible to “refreeze” change in a rapidly-changing environment.

Lewin's three phase change process assumes a stable external environment. Few organizations enjoy the luxury of a predictable environment, particularly in challenging economic times such as a recession. Change in many organizations is indeed an ongoing daily part of the culture. Examples would be companies such as GE, Apple, Google, E-Bay, etc.

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Should managers avoid the force-coercion change strategy altogether?

No, force-coercion may be needed in situations where the very survival of the company is at stake (GM) or if all other efforts have failed to convince a firmly entrenched opposition to a new process or policy.

Teaching Notes In this section, ideas, exercises, and assignments are provided to assist you in integrating the concepts in Exploring Management for your students, especially the special features of the text.

Management Live: Tolerance for Ambiguity and The Terminal Viktor Navorski (Tom Hanks) shows an amazing ability to adapt and tolerate ambiguity in the movie The Terminal as an airline passenger who is stuck in a terminal after his home country government is overthrown while he is on an international flight. The Explore Yourself feature probes this issue further as students take a self assessment on their Tolerance for Ambiguity.

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Facts to Consider: Organization Cultures Face up to Work-Life Trends You can tell a lot about an organization's culture by the way they handle employee work-life conflict. Facts to Consider points to a number of different facts which have to do with workers (68%) who feel they don’t have enough time for spouses and partners, those who don’t feel they have enough time for their children (74%), and those who are caring for elderly or relatives (35%).

Are you prepared to succeed in a work setting that doesn’t respect these facts? Or, are you preparing right now to always find and be attractive to employers that do?

Role Models: Tom Szaky Puts Eco-capitalism to Work at TerraCycle In the Role Models feature, entrepreneur Tom Szaky explains the process he went through to establish his firm "TerraCycle." His experience is a good starter for discussions on innovation and culture. Suggested questions for further discussion: • What types of decisions did Tom Szaky make when he moved into the entrepreneurial world of eco-capitalism?

• We talk about the planet, sustainability, and social values. But how often do we turn decisions into positive actions?

• Is there a bit of Tom Szaky in you?

Find Inspiration: Healthy Living Sets the Tone at Clif Bar When Gary Erickson decided during a long bike ride that he simply couldn’t eat another one of the competitor’s energy bars, he went back to experiment in his mother’s kitchen. The result: Clif Bar. Erickson’s company holds a strong commitment to what it calls the “5 aspirations: sustaining our planet…..community….people….business….brands” Clif’s core values are evident not only in the firm’s healthy organic foods and philanthropy, but also in the quality of working life offered to employees. The culture is unique. Why can’t more of us find jobs in places like this?

Manager's Library: Change by Design: How Design Thinking Transforms Organizations and Inspires Innovation By Tim Brown Change By Design examines innovation, design, creativity and change. Author Tim Brown’s view of design is that it should be human centered and focus on needs. Innovation isn't just from the minds of geniuses, it comes from an examination of our needs.

Reflect and React questions ask students to describe products or services that provide you with an emotional experience rather than a functional utility. How can these feelings be evoked in other products or services? Describe circumstances where members of your organization interact with externalities – customers, technologies, or broader society. How can their observations yield innovations? And by the way, do you agree slowing down to speed up enables creative thinking?

Ethics Check: Facebook Follies Versus corporate culture Again, Facebook provides a teachable moment for managers. Several examples show employees getting caught making Facebook updates that aren't very career-smart. The You Decide questions .

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probe the ethical issues of personal freedom of speech and the employer's right to use public information in personnel decisions. Questions for further discussion: As you discuss the issues, remind students to look at the issue as an employer as well as employee and see if their position changes.

• Is there an ethical boundary that travels from work into one’s public communications that needs to be respected?

• What are the ethics here – on the employee’s and the employer’s side?

Explore Yourself: Tolerance for Ambiguity The assessment for this Chapter is entitled "Tolerance for Ambiguity.” Your tolerance for ambiguity is a good predictor of how you like to work and deal with change. Some organizations are structured and directive, where others are the opposite. Some of us embrace change, where others resist it.

The assessment tool is intended to help students assess their ability to accept ambiguity or uncertainty. After determining their scores, you may ask students how innovative they are likely to be as a manager and what type of organizational culture would be a good fit for them.

Hot Topic: Good Idea or Not? “Move over old timer, time to make room for GenY.” Employers find a lot to like in the skills of Generation Y members – the Millennials – and what they bring to the workplace. No problem with technology – they’re natives always on the cusp of things. No problem with collaboration – they’ve grown up with teamwork and social media. No problem either with motivation – they’re task oriented and career focused.

Continue reading the situation and in the Final Take questions, address the question of whether Gen Y’s deserve special treatment. If and when they get it, is it fair that it comes at the expense of more senior co-workers? Just how do you blend the needs and interests of a new generation of workers with others who have been around awhile – perhaps quite awhile? Who gains and who loses when the new generation pushes employers to rethink the nature of the employment contract?

Career Situation: What Would You Do?

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You have two really nice job offers and will soon have to choose between them. They are both in the same industry, but you wonder which employer would be the “best fit” for you. Make a list of the key aspects of the cultures of these organizations that you would investigate to help make your job choice. Why are these aspects of organizational culture most relevant to you as a person?

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Take a look around your present organization, be it school or workplace. What three ideas can you come up with right away for possible innovations? How would your ideas, if implemented, benefit both the organization and society at large? What are the potential obstacles to getting your ideas implemented? What steps could you take as an “innovation champion” to turn your ideas into real practices?

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Times are tough at your organization, and, as the director of human resources, you have a problem. The company’s senior executives have decided that 10% of the payroll has to be cut immediately. Instead of laying off people, you would like to have everyone cut back their work hours by 10%. This would cut the payroll but let everyone keep their jobs.

You’ve heard this idea isn’t popular with all the workers. Some are already grumbling that it’s a “bad idea” and the company is just looking for excuses to “cut wages.” How can you best handle this situation as a change leader?

Suggested Team Exercise for Chapter 9 Break the class into teams and have the teams perform the following discussion task.

Identify a sports team at the college or professional level that exemplifies strong culture. Identify the key elements (symbols, heroes, stories, and rituals) of the observable culture of the team that you select.

Terms to Define Business model innovation

Product innovations

Change leader

Rational persuasion strategy

Changing

Refreezing

Commercializing innovation

Reverse innovation

Core culture

Shared power strategy

Core values

Skunkworks

Disruptive innovation

Social business innovation

Force-coercion strategy

Social innovation

Green innovation

Social entrepreneurship

Improvisational change

Socialization

Incremental change

Strong cultures

Innovation

Sustainable innovation

Observable culture

Symbolic leader

Organizational culture

Transformational change

Process innovations

Unfreezing

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Value-based management

Workplace spirituality

Multiple-Choice Questions 1. Stories told about an organization’s past accomplishments and heroes such as company founders are all part of what is called the __________ culture. (a) observable (b) underground (c) functional (d) core 2. Planned and spontaneous ceremonies and celebrations of work achievements illustrate how the use of __________ helps build strong corporate cultures. (a) rewards (b) structures (c) rites and rituals (d) core values 3. An organization with a strong culture is most likely to have __________. (a) a tight, bureaucratic structure (b) a loose, flexible design (c) a small staff size (d) clearly communicated mission 4. Honesty, social responsibility, and customer service are examples of __________ that can become foundations for an organization’s core culture. (a) rites and rituals (b) values (c) subsystems (d) ideas 5. Product innovations create new goods or services for customers, while __________ innovations create new ways of doing things in the organization. (a) content (b) process (c) quality (d) task 6. The Kindle e-reader by Amazon and the iPad by Apple are examples of __________ innovations. (a) business model (b) social (c) product (d) process .

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7. Movie downloads by subscription (Netflix) and advertising revenues from Internet searches (Google) are examples of __________ innovations. (a) business model (b) social (c) product (d) process 9. Green innovation is most associated with the concept of __________. (a) observable culture (b) core culture (c) sustainability (d) skunkworks 9. The innovation process isn’t really successful in an organization until a new idea is __________. (a) tested as a prototype (b) proven to be financially feasible (c) put into practice (d) discovered or invented 10. The basic role of a skunkworks is to __________. (a) add more bureaucratic structure to the innovation process (b) provide special free space in which people work together to achieve innovation (c) make sure that any innovation occurs according to preset plans (d) give people free time in their jobs to be personally creative 11. __________ change results in a major change of direction for an organization, while __________ makes small adjustments to current ways of doing things. (a) Frame breaking; radical (b) Frame bending; incremental (c) Transformational; frame breaking (d) Transformational; incremental 12. A manager using a force-coercion strategy is most likely relying on the power of __________ to bring about planned change. (a) expertise (b) reference (c) legitimacy (d) information 13. The most participative of the planned change strategies is __________. (a) negotiation and agreement (b) rational persuasion (c) shared power .

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(d) education and communication 14. When a change leader tries to deal with resistance by trying to covertly influence others, offering only selective information and/or structuring events in favor of the desired change, this is an example of __________. (a) rational persuasion (b) manipulation and cooptation (c) negotiation (d) facilitation 15. The responses most likely to be associated with use of a force-coercion change strategy are best described as __________. (a) internalized commitment (b) temporary compliance (c) passive cooptation (d) active resistance

Short-Response Questions: 16. What core values might be found in high-performance organizational cultures?

The core values that might be found in high-performance organizational cultures include such things as emphasize performance excellence, innovation, social responsibility, integrity, worker involvement, customer service, and teamwork.

17. What is the difference between process, product, and business model innovation?

First, process innovations result in better ways of doing things. Second, product innovations result in the creation of new or improved goods and services. Third, business model innovations result in new ways of making money for the firm.

19. How do a manager’s responsibilities for change leadership vary among Lewin’s three phases of planned change?

Lewin’s three phases of planned change are unfreezing, changing, and refreezing. In terms of the change leadership challenges, the major differences in attention would be as follows: unfreezing—preparing a system for change; changing—moving or creating change in a system; and refreezing—stabilizing and reinforcing change once it has occurred.

19. What are the possible differences in outcomes for managers using force-coercion and shared power change strategies?

In general, managers can expect that others will be more committed and loyal to changes that are brought about through shared power strategies. Rational persuasion strategies can also create enduring effects if they are accepted. Force-coercion strategies tend to have temporary effects only.

Integration and Application Questions: 20. One of the common experiences of new college graduates in their first jobs is that they

often “spot things that need to be changed.” They are full of new ideas, and they are ready .

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and quick to challenge existing ways of doing things. They are enthusiastic and well intentioned. But more often than most probably expect, their new bosses turn out to be skeptical, not too interested, or even irritated; co-workers who have been in place for some time may feel and act the same.

Questions: What is the new employee to do? One option is to just forget it and take an “I’ll just do my job” approach. Let’s reject that. So then, how can you be an effective change leader in your next new job? How can you use change strategies and deal with resistance from your boss and co-workers in a manner that builds your reputation as someone with good ideas for positive change?

In any change situation, it is important to remember that successful planned change occurs only when all three phases of change—unfreezing, changing, and refreezing—have been taken care of. Thus, I would not rush into the changing phase. Rather, I would work with the people involved to develop a felt need for change based on their ideas and inputs as well as mine. Then I would proceed by supporting the changes and helping to stabilize them into everyday routines. I would also be sensitive to any resistance and respect that resistance as a signal that something important is being threatened. By listening to resistance, I would be in a position to better modify the change to achieve a better fit with the people and the situation. Finally, I would want to take maximum advantage of the shared power strategy, supported by rational persuasion, and with limited use of forcecoercion (if it is used at all). By doing all of this, I would like my staff to feel empowered and committed to constructive improvement through planned change. Throughout all of this I would strive to perform to the best of my ability and gain trust and credibility with everyone else; in this way I would be a positive role model for change.

Self-Assessment 9: Tolerance for Ambiguity Instructions Rate each of the following items on this seven-point scale. strongly agree 1 2 3 4 5 6 7 strongly disagree _______ 1. An expert who doesn’t come up with a definite answer probably doesn’t know too much. _______ 2. There is really no such thing as a problem that can’t be solved. _______ 3. I would like to live in a foreign country for a while. _______ 4. People who fit their lives to a schedule probably miss the joy of living. _______ 5. A good job is one where what is to be done and how it is to be done are always clear. _______ 6. In the long run it is possible to get more done by tackling small, simple problems rather than large, complicated ones. _______ 7. It is more fun to tackle a complicated problem than it is to solve a simple one. _______ 9. Often the most interesting and stimulating people are those who don’t mind being different and original. .

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_______ 9. What we are used to is always preferable to what is unfamiliar. _______ 10. A person who leads an even, regular life in which few surprises or unexpected happenings arise really has a lot to be grateful for. _______ 11. People who insist upon a yes or no answer just don’t know how complicated things really are. _______ 12. Many of our most important decisions are based on insufficient information. _______ 13. I like parties where I know most of the people more than ones where most of the people are complete strangers. _______ 14. The sooner we all acquire ideals, the better. _______ 15. Teachers or supervisors who hand out vague assignments give a chance for one to show initiative and originality. _______ 16. A good teacher is one who makes you wonder about your way of looking at things.

Scoring To obtain a score, first reverse your scores for items 3, 4, 7, 8, 11, 12, 15, and 16 (i.e., a rating of 1 = 7, 2 = 6, 3 = 5, etc.).

Next add up your scores for all 16 items. The higher your total, the higher your indicated tolerance for ambiguity.

Class Exercise 9: Force-Field Analysis Instructions 1. Form into your class discussion groups and review this model of force-field analysis—the consideration of forces driving in support of a planned change and forces resisting the change.

2. Use force-field analysis and make lists of driving and resisting forces for one of the following situations: (a) Because of rapid advances in Web-based computer technologies, the possibility exists that the course you are presently taking could be, in part, offered online. This would mean a reduction in the number of required class sessions but an increase in students’ responsibility for completing learning activities and assignments through computer mediation. The dean wants all faculty to put at least part of their courses online. (b) A new owner has just taken over a small walk-in-and-buy-by-the-slice pizza shop in a college town. There are presently eight employees, three of whom are full-time and five of whom are part-time. The shop is open seven days a week from 10:30 a.m. to midnight. The new owner believes there is a market niche available for late-night pizza and would like to stay open each night until 4 a.m. She wants to make the change as soon as possible. (c) A situation assigned by the instructor.

3. Choose the three driving forces that are most significant for the proposed change. For each force, develop ideas on how it could be further increased or mobilized in support of the change.

4. Choose the three resisting forces that are most significant for the proposed change. For each force, develop ideas on how it could be reduced or turned into a driving force.

5. Be prepared to participate in a class discussion led by your instructor. .

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Team Project 9: Organizational Culture Walk What organizational cultures do we encounter and deal with every day, and what are their implications for employees, customers, and organizational performance?

Instructions 1. In your team make two lists. List A should identify the things that represent the core cultures of organizations. List B should identify the things that represent the observable cultures of organizations. For each item on the two lists, identify one or more indicators that you might use to describe this aspect of the culture for an actual organization.

2. Take an organizational culture walk through a major shopping area of your local community.

Choose at least three business establishments. Visit each as customers. As you approach, put your “organizational culture senses” to work. Start gathering data on your Lists A and B. Keep gathering it while you are at the business and right through your departure. Take good notes and gather your thoughts together after leaving. Do this for each of the three organizations you choose.

3. Analyze and compare your data to identify the major cultural attributes of the three organizations and how they influence customers and organizational performance.

4. Use your results to make some general observations and report on the relationship between organizational cultures and performance as well as among organizational cultures, employee motivation, and customer satisfaction.

Cases for Critical Thinking: LinkedIn -- Networking for Career Opportunities Sidebar: Gamers Welcome With a lot of uncertainty and insecurity about the future, this case profiles the essential networking tool of today – LinkedIn. The employed and unemployed can benefit from time spent actively networking with LinkedIn, an online networking and job website. It has created a solution not only for recruiters in search of candidates, but also for job candidates in full search mode – or, for that matter, anyone wanting to make a great career connection. If you’re looking for a job, have a job, or want a better one, create a profile on LinkedIn today!

Case discussion questions and suggested answers:

1. DISCUSSION What type of corporate culture would you expect to find at LinkedIn? If you were to visit the firm’s headquarters, what do you think you would see and hear around you as the observable culture? How about core values, what would you expect to be high on LinkedIn’s list of priority values? Why? • .

The type of actual culture found at LinkedIn: Relaxed work environment (observable culture or OC) 9-21

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Casual dress (OC) Employees actively collaborating and taking ownership of projects. (OC) Lots of white boards and couches for collaborative meetings (OC) Fully stocked kitchens (OC) Recreation and Relaxation: game areas, gym, bike trail Food trucks on Fridays. (OC) Employees are smart and passionate about the company’s vision.

The company even has its own band.

Heroes: In 2002, founder Reid Hoffman gathered employees from SocialNet and Paypal to work on an idea he had. His mission was to connect the world’s professionals to make them more productive.

Core Values: Its mission statement: “Our vision at LinkedIn is to create economic opportunity for every professional in the world.”

High on LinkedIn’s list of priority values can be told by reading its mission statement: Our mission is to connect the world's professionals to make them more productive and successful.

• Relationships and trust form the foundation of our business, and they are key to our corporate culture.

• We operate on the basis of responsiveness, openness, honesty and trust with our members, business partners, employees and stockholders.

• Our employees are encouraged to demand excellence, take intelligent risks, and to "act like an owner."

• These core values are shared regularly with employees on a worldwide basis, and this open communication in an environment of trust guides the decision-making of our employees and of the Company.

2. DISCUSSION How has innovation by LinkedIn transformed the playing field for recruiters and hiring managers…. and for job candidates? Is this an example of a disruptive innovation? Why or why not? What value can LinkedIn offer you?

Technology has played an increasingly larger, if not dominant, role in recruitment.

Before LinkedIn, there were “headhunters,” or recruiters who had immense networks(formed from phone conversations and meetings), of individuals. One of the oldest forms of recruitment was also newspaper advertisements. A company would advertise open jobs in the “Jobs Wanted” section of the newspaper. Employee referrals were another tool used by companies to find qualified, like-minded individuals. Job and temp agencies were utilized frequently.

Along came automated online job applications. This allowed companies and recruiters to quickly scan through volumes of resumes and cover letters. Today, LinkedIn, Facebook, and Twitter are “eRecruiting” sites. LinkedIn allows employers and recruiters as well to tap into a database of job seekers, essentially serving as a matchmaker of sorts. The traditional employee database has been redefined with new .

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technologies like LinkedIn. Most company recruiters use LinkedIn as a way to find qualified candidates. Yes, this is an example of disruptive innovation in the field of recruitment. Research, networking and referrals can now be accomplished with the click of a mouse on LinkedIn. Yes, LinkedIn is an example of disruptive technology.

3. PROBLEM SOLVING Consider yourself a gamer. Also consider yourself the go-to “idea person” for friends that head two local organizations – a fire department and a public library. Both complain about morale problems and ask for advice on creating a positive organizational culture.

They want to know how your interest in gaming can be used to improve staff morale and performance. What will you suggest and why?

Answers will vary, but first it will be important to determine the desired behavior. One website on implementing a gamification plan suggests identifying behaviors to be reinforced and the motivations that will sustain those behaviors. Some employees are motivated with badges and rewards for learning and training. This instills a sense of accomplishment. Awards can be shared on Facebook, LinkedIn, and Twitter.

Gamification can be used as a way to get teams or departments within an organization to collaborate and build rapport. There can also be competitions between departments.

To improve performance, gamification can be used to bring real world situations into a gaming environment. A “what would you do?” or “how would you solve this?” type of approach may improve results. There are a wide variety of gamification solutions to produce a wide variety of results. As a fire department or public library, there are ways to tailor the online games to specific nuances of each. For example, there may be exercises to on how to search for a book, or how to respond to a specific type of emergency (or fire).

4. FURTHER RESEARCH There’s lots of public information available on LinkedIn, from its founding story to current performance. Study the company’s history and current directions. Find out how it is handling competition. Check current statements to identify values, goals, and accomplishments. Then prepare a summary report. Is this still the lead innovator and company to beat in the industry? Or, is LinkedIn’s time starting to pass, and alternatives from Facebook, Google, Twitter, and others will be hot choices for the future?

This answer will vary. LinkedIn is handling competition by adding valuable services and features to its site. It has completely reconfigured and redesigned its site to include news (LinkedIn today), endorsements, groups, company pages, LinkedIn job seeker Premium (more tools for the job seeker), and more.

Is LinkedIn’s time starting to pass? Not necessarily, but that doesn’t mean that there isn’t competition from other sites like Monster.com, Facebook and Twitter.

Suggested Team Exercise for Chapter 9 Break the class into teams and have the teams perform the following discussion task. .

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Identify a sports team at the college or professional level that exemplifies strong culture. Identify the key elements (symbols, heroes, stories, and rituals) of the observable culture of the team that you select.

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CHAPTER 10 Human Resource Management Nurturing Turns Potential into Performance Chapter 10 Overview Each Chapter contains several inset features designed to assist the student reader in applying the concepts to relevant examples. Management Live illustrates how popular movies demonstrate management concepts in the chapter. Role Models features a management professional that illustrates key chapter concepts in a novel, visionary or inspirational way. Explore Yourself refers students to self assessment activities relevant to concepts in the chapter. Ethics Check profiles examples of ethical issues in management. Manager's Library features books that illustrate current events or trends relevant to chapter concepts. Facts to Consider introduces research or trends that may be used for class discussion in the classroom or online for distance learning.

Chapter Ten reviews human resource management and its importance within the context of an organization. The primary responsibilities of the human resource function are detailed including recruiting, selection, socialization, training and career planning and development. Next, the laws and government legislation which protect against employment discrimination are covered and discussed. Equal employment opportunity, job discrimination and affirmative action are reviewed with an emphasis on the simple fact that laws cannot guarantee against discrimination.

The employee value proposition is discussed as the exchange of value between what the organization offers the employee in return for his or her work contribution. The recruitment practices to attract qualified applicants are discussed, along with selection decisions and socialization and orientation strategies. A review of the importance of training to continue to develop employee skills is discussed, along with various techniques of reviewing performance or performance appraisal. Retention and career development strategies are discussed and the importance of diligence in career planning is reviewed.

The last section focuses on issues in human resource management, which include the increased need for flexibility and work-life balance at work, the use of more independent contractors and part-time employees, compensation plans which influence recruitment and retention, the importance of fringe benefits to attract qualified employees, and the issue of labor relations and collective bargaining.

Chapter 10 Takeaway Questions: Takeaway 10.1 What are the purpose and legal context of human resource management?

Takeaway 10.2 What are the Essential Human Resource Management Practices?

Takeaway 10.3 What are Current Issues in Human Resource Management?

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Chapter 10 Objectives: • • • • • • • • • • • • • • • • • • • • • • • • • •

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To define human resource management and the human resource management process.

To define the three major responsibilities of human resource management.

To understand what it means to attract, maintain, and develop a quality workforce.

To explain how high performing organizations thrive on strong foundations of human capital.

To understand the many career opportunities in human resource management.

To identify the U.S. laws against employment discrimination.

To review the impact of the legal environment on the employment and human resource management process To differentiate between job discrimination, equal employment opportunity, and affirmative action.

To understand that laws cannot guarantee against discrimination.

To explain issues of workplace privacy that today’s college graduates should be prepared to face.

To understand essential human resource management practices of recruitment, selection, socialization, and orientation.

To list the steps in the recruitment process and how recruitment efforts attract qualified job employees.

To explain how decisions are made during the selection process to hire qualified applicants.

To explain reliability and validity in employment testing.

To explain how socialization and orientation integrate new employees into the organization.

To understand the importance of training and continually developing the skills and capabilities of employees.

To describe coaching and mentoring as training practices.

To define performance appraisal and explain the strengths and weaknesses of various appraisal methods To understand career development and the process of managing how a person grows and progresses from one point in a career to the next.

To understand the significance of the demands for flexibility and work-life balance in today’s workplace.

To explain why organizations rely on more independent contractors and part-time workers.

To understand how compensation plans influence employment recruitment and selection.

To explain what fringe benefits are and their importance to the employee compensation package.

To understand how labor relations and collective bargaining are closely governed by law.

To define the terms “labor union,” “labor contract,” and “collective bargaining” To compare the adversarial and cooperative approaches to labor-management relations.

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Chapter 10 Lecture Outline: Takeaway 10.1 What are the Purpose and Legal Context of Human Resource Management?

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Human resource management attracts, develops, and maintains a talented workforce.

Strategic human resource management aligns human capital with organizational strategies.

Government legislation protects against employment discrimination.

Laws can’t guarantee that employment discrimination will never happen.

Takeaway 10.2 What are the Essential Human Resource Management Practices?

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The employee value proposition aligns people and organizations.

Recruitment attracts qualified job applicants.

Selection makes decisions to hire qualified job applicants.

Socialization and orientation integrate new hires into an organization.

Training continually develops employee skills and capabilities.

Performance management reviews and rewards accomplishments.

Retention and career development provide career paths.

Takeaway 10.3 What are Current Issues in Human Resource Management?

• • • • •

Today’s lifestyles increase demands for flexibility and work-life balance.

Organizations use more independent contractors and part-time workers.

Compensation plans influence employee recruitment and retention.

Fringe benefits are an important part of employee compensation packages.

Labor relations and collective bargaining are closely governed by law.

Chapter 10 Supporting Materials: Figures • Figure 10.1 What Does a Behaviorally Anchored Rating Scale Look Like?

• Figure 10.2 What Happens When Labor Relations Management Becomes Adversarial?

Thematic Boxes and More • Management Live: Professionalism and Iron Man 2 • Role Models: Family Values Lead CEO Dave Goldberg to Survey Monkey • Ethics Check: CEO gets $96.1 million page package • Facts to Consider: Human Resource Executives Worry about Performance Measurement • Manager’s Library: Fast Future: How the Millennial Generation is Shaping our World

by David Burstein • Explore Yourself: Professionalism • Tips to Remember: Steps to Success in Telephone and Online Interviews • Table 10.1 A Sample of U.S. Laws against Employment Discrimination

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Applications • TestPrep 10 Multiple-Choice Questions • Skill Building Portfolio o Self-Assessment 10: Performance Appraisal Assumptions o Class Exercise 10: Upward Appraisal o Team Project 10: The Future of Labor Unions • Case Snapshot: Silicon Valley’s “Chief Executive Mom” • Sidebar case: New Workplace Perks – Free Lunch followed by a Nap • Hot Topic: Good Idea or Not? Teammates may know you best. Should they pay you as well?

Chapter Outline Takeaway Question 10.1: What are the Purpose and Legal Context of Human Resource Management?

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Human resource management attracts, develops, and maintains a talented workforce • Human Resource Management (HRM) ensures that an organization is always staffed with the best people available so that it gets important jobs done in the best possible ways. Three major responsibilities of HRM include: 1. Attracting a quality workforce 2. Developing a quality workforce 3. Maintaining a quality workforce

DISCUSSION TOPIC Ask the students to describe what they expect from an employee-employer relationship. What do they expect to provide to an employer? What do they expect the employer to provide? Relate their stated expectations to the concept of a social contract.

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Strategic human resource management aligns human capital with organizational strategies. ➢ Human capital is the value of workers that have skills, knowledge, innovation, creativity, energy and commitment to offer to the organization. ➢ Strategic human resource management aligns people and their jobs in the most effective way to achieve the organization's strategic plan, purpose and mission.

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Government legislation is supposed to protect workers against employment discrimination • Job discrimination - occurs when an organization denies employment or a job assignment or an advancement opportunity for reasons that are not performance relevant.

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Pay—The Equal Pay Act of 1963 requires equal pay for women and men doing equal work. It describes equal work in terms of skills, responsibilities, and working conditions.

Age—The Age Discrimination in Employment Act of 1967 as amended in 1978 and 1986 protects workers against mandatory retirement ages. Age discrimination occurs when a qualified individual is adversely affected by a job action that replaces him or her with a younger worker.

Pregnancy—The Pregnancy Discrimination Act of 1978 protects female workers from discrimination because of pregnancy. A pregnant employee is protected against termination or adverse job action because of the pregnancy and is entitled to reasonable time off work.

Disabilities—The Americans with Disabilities Act of 1990 as amended in 2008 prevents discrimination against people with disabilities. The law requires employment decisions be based on a person’s abilities and what he or she can do.

• Family matters—The Family and Medical Leave Act of 1993 protects workers who take unpaid

leaves for family matters from losing their jobs or employment status. Workers are allowed up to 12 weeks of leave for childbirth, adoption, personal illness, or illness of a family member.

DISCUSSION TOPIC Ask the students if they have either witnessed or personally encountered any of the forms of discrimination described above. Without having them inappropriately reveal details, seek a general description of what happened and how it was handled by the organization.

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Equal employment opportunity (EEO) – the right to employment without regard to sex, race, color, national origin, or ➢ Title VII of the Civil Rights Act of 1964, amended by the Equal Employment opportunity Act of 1972 and the Civil Rights Act (EEOA) of 1991 protect these rights ➢ Intent is that employment should be based only on ability and job performance ➢ Generally applies to organizations that employ 15 or more people ✓ Affirmative action – is an effort to give employment preference to women and minority group members ➢ Affirmative action plans - designed to ensure that an organization’s workforce represents women and minorities in proportion to their labor market availability ➢ Reverse discrimination - claims of discrimination by majority populations ➢ Bona fide occupational qualifications - criteria for employment that an organization can clearly demonstrate as relating to a person’s capacity to perform a job Laws can't guarantee that employment discrimination will never happen ✓ Workplace privacy- the right to privacy while at work.

• Pay discrimination - women earn approximately 77% of men in the U.S. The struggle for equal pay continues. ➢ Lilly Ledbetter Fair Pay Act became law in 2009 allowing workers to file discrimination claims longer than previously allowed.

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✓ Age Discrimination - Workers 40 and over are protected from employers making any employment decision based on age. Claims are on the increase as the recession has left older workers unemployed longer than younger workers.

10.1 Questions for discussion suggested answers 1) How might the forces of globalization affect human resource management in the future?

Globalization will likely require that Human Resources: • Be at least bi-lingual with departmental language skills mirroring those of the countries of employment • Put a higher reliance on local interviewing and internet testing and screening • Develop a higher need for technology skills among human resource professionals • Maintain awareness and understanding of cultural differences between countries • Be able to understand employment laws and employee protections in other countries 2) Are current laws protecting American workers against discrimination in employment sufficient, or do we need additional ones?

Discriminatory practices still exist in spite of current laws, so new laws are frequently needed to protect against the discriminatory practices that slip past current laws. The Lilly Ledbetter Fair Pay Act modified the length of time workers have to file claims for pay discrimination in light of pay secrecy practices. The Genetic Information Nondiscrimination Act (GINA) was passed to respond to new technology that led to employers discriminating against workers with a genetic predisposition to illnesses such as carpal tunnel, heart disease, breast cancer, Alzheimer's Disease and many others.

3) What employee-rights issues and concerns would you add to those discussed here?

Hiring of illegal workers is a major concern; many jobs are being lost to individuals who have broken the law and come into the U.S. across borders. It is clear and wellknown that many employers are “winking” at the laws. Students and Americans who would be able to work in those jobs do not have the opportunity because enforcement is so low, and employers continue the practice because such workers will work for much lower wages and with no or few benefits. Virtually every poll shows that a significant majority of Americans want the laws enforced that already exist, including large penalties and even imprisonment for those who flaunt the law. Some estimates are that as many as 30 million workers are in the United States illegally.

Takeaway Question 10.2: What Are the Essential Human Resource Management Practices?

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The employee value proposition aligns people and organizations.

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✓ Person-job fit is the match between an individual's skills, interests and abilities to the requirements of the position ✓ Person Organization fit is the match between the person and the culture of the organization.

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Recruitment attracts qualified job applicants ✓ Recruitment - what organizations do to attract a qualified pool of applicants to an organization ✓ Realistic job preview - gives a candidate both the good points and bad points of the job and the organization

ENACTMENT A good way to introduce the discussion of the recruitment process presented above is to see if any of your students are currently engaged in a job search. You can then ask students who respond affirmatively to describe their experiences with the recruiting process. This discussion typically helps students to see more clearly the relevance of recruiting from both a management perspective and their own personal perspectives as job candidates. ✓ Tips to Remember ➢ Steps to Success in Telephone and Online Interviews ➢ Prepare ahead—Learn everything you can about the organization; with this employer in mind, list your relevant strengths and capabilities. ➢ Practice answers to common questions—What value can you add to our organization on day one? Why do you want this job? What are your career goals? ➢ Take the call in private—Be in a quiet room, with privacy, without interruptions; set aside enough time to talk as long as the interviewer wants. ➢ Dress professionally—Don’t be casual; dressing right increases confidence and helps set your interview tone. ➢ Practice your interview voice—What you say and how you sound affects the first impression you make; it often helps to stand up while talking; use correct telephone etiquette and don’t answer other calls. ➢ Have your questions ready—Don’t be caught hesitating; intersperse your best questions throughout the interview; don’t be “smart” or “pushy,” but show insight and interest. ➢ Check your social persona—Review your social media postings. Be prepared to answer questions about your online presence. ➢ Ask what happens next—Ask how to follow up and what additional •

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Selection makes decisions to hire qualified job applicants ✓ Selection - involves choosing to hire from the pool the persons who offer the greatest performance potential ✓ Reliability - means that a selection device or test provides a consistent measurement, returning the same results over time ✓ Validity - means that the test or selection device score is a good predictor of future job performance 10-7

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✓ Assessment centers - evaluates a person’s job potential by observing his or her performance in experiential activities designed to simulate daily work ✓ Work sampling - working on the actual job while observers grade your performance DISCUSSION TOPIC Ask your students if they have ever been evaluated at an assessment center. Students with work experience or students, who are currently seeking employment, may have direct experience with this selection tool. If so, ask them to describe their experiences for the rest of the class.

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Socialization and orientation integrate new employees into the organization ✓ Socialization - the process of influencing the expectations, behavior, and attitudes of a new employee in a desirable way ✓ Orientation - a set of activities designed to familiarize new employees with their jobs, co-workers, and key values, policies, and other aspects of the organization as a whole

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Training continually develops employee skills and capabilities ✓ Coaching - an experienced person provides performance advice to someone else ✓ Mentoring - a new or early career employee is assigned as a protégé to someone senior in their area of expertise, perhaps a high level manager ✓ Reverse mentoring - younger employees serve as a mentor to senior executives, frequently providing expertise on technology and social media

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Performance management reviews and rewards accomplishments ✓ Performance appraisal -a process of formally assessing and providing feedback on someone’s work accomplishments ✓ Graphic rating scale - a checklist or scorecard for rating an employee on preselected personal traits or performance characteristic such as work quality, attendance, and punctuality ✓ Behaviorally anchored rating scale (BARS) - describes actual behaviors that exemplify various levels of performance achievement in a job ✓ See Figure 10.1 for a depiction of a Behaviorally anchored rating scale ✓ Critical incident technique – keeps an actual log of a person’s effective and ineffective job behaviors ✓ 360 º feedback - gathers inputs from the many people that work and depend on the person being appraised (boss, subordinates, peer, and others) ✓ Multi-person comparison - rate people relative to each other • Figure 10.1 What Does a Behaviorally Anchored Rating Scale Look Like?

A behaviorally anchored rating scale (BARS) uses actual descriptions of positive and negative job behaviors to anchor rating points. In this example of how a customer service representative handles a merchandise return, various alternative behaviors are clearly identified. Consistent and documented rude or disrespectful behavior toward customers by a salesperson would earn a rating of “extremely poor.” This specificity makes the BARS more reliable and valid.

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Facts to Consider: Human Resource Executives Worry about Performance Measurement The feature discusses a survey of human resource executives published in the Wall Street Journal which reports that they aren’t pleased with the way managers in their organizations do performance reviews. Some are so concerned that they suggest dropping them altogether. Some of the survey findings are interesting, to say the least. Some things to discuss with students include the hot topic of performance measurement for “merit pay” and “performance accountability.” Based on the students’ experience, what should be done about it? Is it really possible to have a -performance measurement system that is respected by all—employers and workers alike.

Retention and career development provide career paths and options ✓ Career development - the process of managing how a person grows and progresses in responsibility from one point in a career to the next ✓ Career planning - the process of systematically matching career goals and individual capabilities with opportunities for their fulfillment

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Explore Yourself: Professionalism – this returns to the issue of professionalism in the Management Live feature on Iron Man 2. Can learning HR skills through student organizations build professionalism? Much of the benefit comes through the interaction with HR professionals that comes with membership. Students are also encouraged to take the Performance Appraisal Assumptions self-assessment in the Skill-Building Portfolio.

The assessment tool is intended to help students determine whether students, as managers or potential future managers, are more prone to regard appraisals as evaluation or development tools.

Manager’s Library: Fast Future: How the Millennial Generation is Shaping our Word by David Burstein ✓ Millennials draw their fair share of criticism, living with labels like “spoiled,” “entitled,” and “impatient.” Yet, they are having an impact on business, technology, politics, and beyond. They are also at the forefront of social action focused on causes and issues ranging from climate crisis to education and poverty to immigration and marriage equality. However, they hold attitudes about work and life that can be quite different than those of their parents. Many, including those who manage them, are trying to understand just who these ambitious young people are and what matters most to them. ✓ Reflect and React Questions: Does Burstein’s view of the Millennial generation seen accurate? What else could you add to his story line? Why Millennials are often judged and labeled a bit harshly by older generations? Many millennials seem to reject having a tradition career. They seem more interested in creating, adapting, and moving in and out of different career options. Does this apply to you?

10.2 Questions for discussion suggested answers 1) Is it realistic to expect that you can get a realistic job preview during the interview process? .

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The more successful the company, the more likely that job previews will be realistic.

Successful companies recognize that they are attractive to recruits and need not portray the job opportunity unrealistically. For less successful companies and small companies, human nature combined with competition from more attractive employers makes realistic job interviews less likely.

2) If a new employer doesn’t formally assign someone to be your coach or mentor, what should you do?

Most companies do not assign a coach or mentor; this typically occurs through networking or spontaneous contacts in the course of working. A new employee should take the time to understand the organization and its culture then identify persons who would seem to be possible coaches. Often, coaches or mentors are not even aware they are doing “coaching” or “mentoring” yet the benefits still can occur.

3) What are some of the possible downsides to receiving 360 º feedback?

The biggest “downside” to 360 º feedback is the danger that a disgruntled subordinate or peer who is competing for promotion will “sabotage” the rating by deliberately underrating or rating poorly the employee. The manager to whom the person reports needs to be cognizant of such possibilities and look at the holistic results of the ratings.

Takeaway Question 10.3 What Are Current Issues in Human Resource Management?

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Today's lifestyles increase demands for flexibility and work-life balance ✓ Work-life balance involves balancing career demands with personal and family needs Organizations are relying more on independent contractors and part-time workers ✓ Independent contractors are not employees. They are hired on temporary contracts. ✓ Contingency workers are sometimes called permatemps. They work regular or parttime hours on a long term basis without the guarantee of a permanent job.

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Role Models: Family values lead CEO Dave Goldberg to Survey Monkey In an article entitled, “Hard Choices,” Dave Goldberg, CEO of Survey Monkey and husband of Facebook COO, Sheryl Sandberg, tells BusinessWeek that when his wife joined Facebook, knowing that her job would have some travel, he decided to pass up a number of other opportunities so that at least one parent could be at home with their two children. Matching career demands with personal and family needs is what work-life balance is about. The “What’s the Lesson Here?” questions ask: Employers have become increasingly aware that “balance” is important to today’s employees. Goldberg and Sandberg have found ways to balance things as senior executives. But, what can a regular worker and dual-career couple do? Is asking for flexibility and respect for family life something to hide or be ashamed of in today’s competitive work environment? What will your priorities be when it comes to the work- life balancing act?

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✓ Merit pay - ties compensation to performance. High performing employees receive larger pay increases. ✓ Bonus pay - provides one-time payments to employees in recognition of contribution or performance ✓ Profit sharing - distributes a portion of profits to employees as a reward and incentive ✓ Gain sharing - distributes a portion of savings when costs are reduced ✓ Stock options - the right to purchase shares of company stock at a fixed price in the future. They're a good deal if the stock price goes up.

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Ethics Check: CEO Gets $96.1 Million Pay Package Oracle CEO Larry Ellison is the person behind this pay package! Is CEO pay way out of whack, asks Richard Trumka, president of the AFL-CIO, the largest federation of trade unions in the United States. CEOs of the largest firms made an average of $12 million in 2012, while the average worker in a firm earned just $34,645.

The “You Decide” feature poses the following questions: Can you justify the super pay earned by CEOs like Larry Ellison? Is it right that CEO pay is so much higher in proportion to that earned by workers in general?

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Fringe benefits are an important part of employee compensation packages ✓ Fringe benefits - non monetary compensation such as health insurance and retirement plans ✓ Family friendly benefits - help employees achieve better work-life balance.

Examples include childcare and flextime ✓ Flexible benefits - allow employees to personalize benefits within a set allowance ✓ Employee assistance programs - help employees cope with personal stresses and problems

DISCUSSION TOPIC Ask the students to identify the features that they would look for in a family-friendly company.

Why do they consider these features to be important?

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Labor relations and collective bargaining are closely governed by law • Labor unions - organizations to which employees belong and that deal with employers on the workers’ behalf; a collective “voice” for their members for added power • Labor contracts – a formal agreement between a union and an employer which typically specify the rights and obligations of employees and management with respect to wages, work hours, work rules, seniority, hiring, grievances, and other conditions of work • Collective bargaining - the process that brings management and union representatives together in negotiating, administering and interpreting labor contracts • Two-tier wage systems- pay new hires less than workers already doing the same jobs with more seniority 10-11

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See Figure 10.2 for a depiction of what happens when labor-management relations become adversarial

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See Figure 10.2 What Happens When Labor-Management Relations Become Adversarial?

When union and management representatives meet in collective bargaining, it would be nice if things were always cooperative. Unfortunately, they sometimes turn adversarial, and each side has weapons at its disposal to make things hard for the other. Unions can resort to strikes, boycotts, and picketing. Management can use lockouts, strike-breakers, and court injunctions to force strikers back to work.

Although each side can find justifications in defense of using such tactics, they can also come with high price tags in terms of lost worker earnings and company profits.

10.3 Questions for discussion suggested answers 1. Are we giving too much attention these days to the issues of work-life balance?

No. The issue of work-life balance becomes a real concern as employees increasingly feel that there is little "down time" when they are connected to work nearly 24/7 via smart phones and the Internet. Globalization has increased business dependence on 24/7 availability for many businesses. Separation of personal and work life becomes a real concern when employees find it difficult to "unplug".

2. Can a good argument be made that merit pay just doesn’t work?

Many things must go right for merit pay to work. Systems can become quite complicated, so it must be clearly explained to and understood by employees. The system of performance appraisal must be seen as valid and fair by employees. The amount of money offered must provide an incentive. Employees must see the pay as a valid incentive with clear criteria that fairly rewards those who deserve it. Failure of any of these will reduce its effectiveness.

3. Given economic trends, is it likely that unions will gain in future popularity?

Unions are gaining popularity, but not in traditional occupations. The unions seeing increasing membership are those in the service industries such as public service and the hospitality industry.

Teaching Notes In this section, ideas, exercises, and assignments are provided to assist you in integrating the concepts in Exploring Management for your students, especially the special features of the text.

Management Live: Professionalism and Iron Man 2 Professionalism is certainly a prerequisite for success in many careers, especially management, yet pop culture abounds with examples of the counterculture slob that prevails in spite of unprofessional and even rude behavior. Iron Man 2 hero Tony Stark (Robert Downey Jr.) is another example of a wildly unprofessional millionaire industrialist who is called to task by his .

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assistant when she takes over as CEO. It's her influence that has kept the company together, after all.

Students will probably be happy to provide examples of unprofessionalism among the ranks of management they have worked for. Younger workers often seem to have the most poorly trained managers. What have they learned from these examples of rude or unprofessional managers?

How can students learn professionalism that will assist them in their management careers?

Student organizations such as your local student SHRM Chapter, Management Club or other business student organization.

Facts to Consider: Human Resource Professionals Worry about Performance Measurement The feature discusses a survey of human resource executives published in the Wall Street Journal which reports that they aren’t pleased with the way managers in their organizations do performance reviews. Some are so concerned that they suggest dropping them altogether. Some of the survey findings are interesting, to say the least. Some things to discuss with students include the hot topic of performance measurement for “merit pay” and “performance accountability.” Based on the students’ experience, what should be done about it? Is it really possible to have a -performance measurement system that is respected by all—employers and workers alike.

Role Models: Family values lead CEO Dave Goldberg to Survey Monkey In an article entitled, “Hard Choices,” Dave Goldberg, CEO of Survey Monkey and husband of Facebook COO, Sheryl Sandberg, tells BusinessWeek that when his wife joined Facebook, knowing that her job would have some travel, he decided to pass up a number of other opportunities so that at least one parent could be at home with their two children. Matching career demands with personal and family needs is what work-life balance is about.

The “What’s the Lesson Here?” questions ask: Employers have become increasingly aware that “balance” is important to today’s employees. Goldberg and Sandberg have found ways to balance things as senior executives. But, what can a regular worker and dual-career couple do? Is asking for flexibility and respect for family life something to hide or be ashamed of in today’s competitive work environment? What will your priorities be when it comes to the work- life balancing act?

Manager's Library: Fast Future: How the Millennial Generation is Shaping our World by David Burstein •

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Manager’s Library: Fast Future: How the Millennial Generation is Shaping our Word by David Burstein This feature previews the fair share of criticism that millennials draw with labels like “spoiled,” “entitled,” and “impatient.” Yet, they are having an impact on business, technology, politics, and beyond. They are also at the forefront of social action focused on causes and issues ranging from climate crisis to education and poverty to immigration and marriage equality. However, they hold attitudes about work and life that can be quite 10-13

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different than those of their parents. Many, including those who manage them, are trying to understand just who these ambitious young people are and what matters most to them.

Reflect and React Questions: Does Burstein’s view of the Millennial generation seen accurate? What else could you add to his story line? Why Millennials are often judged and labeled a bit harshly by older generations? Many millennials seem to reject having a tradition career. They seem more interested in creating, adapting, and moving in and out of different career options. Does this apply to you?

Ethics Check: CEO gets $96.1 million page package Ethics Check: CEO Gets $96.1 Million Pay Package Oracle CEO Larry Ellison is the person behind this pay package! Is CEO pay way out of whack, asks Richard Trumka, president of the AFL-CIO, the largest federation of trade unions in the United States. CEOs of the largest firms made an average of $12 million in 2012, while the average worker in a firm earned just $34,645. The “You Decide” feature poses the following questions: Can you justify the super pay earned by CEOs like Larry Ellison? Is it right that CEO pay is so much higher in proportion to that earned by workers in general?

Explore Yourself: Professionalism This Explore Yourself returns to the issue of professionalism in the Management Live feature on Iron Man 2. Can learning HR skills through student organizations build professionalism? Much of the benefit comes through the interaction with HR professionals that comes with membership.

Students are also encouraged to take the Performance Appraisal Assumptions self-assessment in the Skill-Building Portfolio. The assessment tool is intended to help students determine whether students, as managers or potential future managers, are more prone to regard appraisals as evaluation or development tools.

Hot Topic: Good Idea or Not? Teammates may know you best. Should they pay you as well?

Today’s crowdsourcing mindset may be extending to who will be recognized at bonus time.

Traditionally, managers and team leaders have made final pay raise decisions, but in one instance, a pool of 1,200 stock options were distributed among teammates by the teammates themselves. The bonus decision was given to the team rather than to management – and the practice of “let me reward people that management may not always recognize” may be gaining traction at more democratic firms.

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If you were appointed to a student committee asked to investigate gender equity in sports on your campus, what would you propose the committee look at? Based on your understanding of campus affairs, what changes would you suggest in athletic funding and administration to improve gender equity?

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After taking a new job as head of retail merchandising at a department store, you are disappointed to find that the sales clerks are evaluated on a graphic rating scale. It uses a simple list of traits to gauge their performance. You want to propose an alternative and better approach that will make performance reviews really valuable. Your boss says: “Give me a plan.” Exactly what will you present as your proposal, and how will you present it to the salesclerks as well as the boss?

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You have become aware of a drive to organize the faculty of your institution and have them represented by a union. The student leaders on campus are holding a forum to gather opinions on the pros and cons of a unionized faculty. Because you represent a student organization in your college, you are asked to participate in the forum. What will you say, and why?

Terms to Define 360O feedback

Employee privacy

Affirmative action

Employee value proposition (EVP)

Age discrimination

Equal employment opportunity (EEO)

Assessment center

Family-friendly benefits

Behaviorally anchored rating scale (BARS)

Flexible benefits

Bona fide -occupational -qualifications

Fringe benefits

Bonus pay

Gain sharing

Career development

Graphic rating scale

Career planning

Human capital

Coaching

Human resource management (HRM)

Collective bargaining

Independent contractors

Comparable worth

Job discrimination

Contingency workers

Labor contract

Critical-incident technique

Labor union

Employee assistance program

Mentoring

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Merit pay

Recruitment

Multiperson comparison

Reliability

Orientation

Reverse mentoring

Pay discrimination

Selection

Performance appraisal

Socialization

Performance review

Stock options

Person-job fit

Strategic human resource management

Person-organization fit

Two-tier wage systems

Pregnancy discrimination

Validity

Profit sharing

Work sampling

Realistic job preview

Work-life balance

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Multiple-Choice Questions 1. Human resource management is the process of ____________, developing, and maintaining a high-quality workforce. (b) compensating (a) attracting (c) appraising (d) selecting 2. A ____________ is a criterion that organizations can legally justify for use in screening job candidates. (a) job description (b) bona fide occupational qualification (c) realistic job preview (d) BARS 3. ____________ programs are designed to ensure equal employment opportunities for groups historically underrepresented in the workforce. (a) Realistic recruiting (b) Mentoring (c) Affirmative action (d) Coaching 4. Which of the following questions can an interviewer legally ask a job candidate during a telephone interview? (a) Are you pregnant or planning to soon start a family? (b) What skills do you have that would help you do this job really well? (c) Will you be able to work at least ten years before hitting the retirement age? (d) Do you get financial support from a spouse or companion who is also a wage earner?

5. An employment test that yields different results over time when taken by the same person lacks ____________. (a) validity (b) reliability (c) realism (d) behavioral anchors 6. Which phrase is most consistent with a recruiter offering a job candidate a realistic job preview? (a) “There are just no downsides to this job.” (b) “No organization is as good as this one.” (c) There just aren’t any negatives.” (d) “Let me tell you what you might not like once you start work.”

7. Socialization of newcomers occurs during the ____________ step of the staffing process. (a) orientation (b) recruiting (c) selection (d) advertising 8. The assessment center approach to employee selection relies heavily on ____________ to evaluate a candidate’s job skills. (a) intelligence tests (b) simulations and experiential exercises (c) 360º feedback (d) formal one-on-one interviews .

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9. The selection technique known as ______________ asks a job candidate to actually perform on the job for a period of time while being observed by a recruiter. (a) mentoring (b) work sampling (c) job coaching (d) critical incident testing 10. The ____________ purpose of performance -appraisal is being addressed when a manager describes training options that might help an employee improve future performance. (a) development (b) evaluation (c) judgmental (d) legal 11. When a team leader must rate 10% of team members as “superior,” 80% as “good,” and 10% as “unacceptable,” this is an example of the ____________ approach to performance appraisal. (a) graphic (b) critical-incident (c) behaviorally anchored rating scale (d) forced distribution 12. What is one of the reasons why employers are hiring more part-time or contingency workers? (a) It’s hard to get people to work full-time anymore. (b) Part-timers are known to work much harder than full-timers. (c) Full-time employees don’t have up-to-date job skills. (d) It’s easy to hire part-timers when you need them, and let them go when you don’t.

13. Whereas bonus plans pay employees for special accomplishments, gain-sharing plans reward them for ____________. (a) helping to increase social responsibility (b) regular attendance (c) positive work attitudes (d) suggestions that lead to cost reductions 14. An employee with family problems that are starting to interfere with work would be pleased to learn that his employer had a(n) ____________ plan. (a) employee assistance (b) cafeteria benefits (c) comparable worth (d) collective bargaining 15. When representatives of management and a labor union meet and negotiate the terms of a new labor contract, this process is known as ____________. (a) boycotting (b) collective bargaining (c) picketing (d) wage negotiating

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Short-Response Questions: 16. Why is orientation important in the HRM process?

Orientation activities introduce a new employee to the organization and the work environment. This is a time when the individual may develop key attitudes and when performance expectations will also be established. Good orientation communicates positive attitudes and expectations and reinforces the desired organizational culture. It formally introduces the individual to important policies and procedures that everyone is expected to follow.

17. How does mentoring work as an on-the-job training approach?

Mentoring is when a senior and experienced individual adopts a newcomer or more junior person with the goal of helping him or her develop into a successful worker. The mentor may or may not be the individual’s immediate supervisor. The mentor meets with the individual and discusses problems, shares advice, and generally supports the individual’s attempts to grow and perform. Mentors are considered very useful for persons newly appointed to management positions.

18. When is an employment test or a performance appraisal method reliable?

Any performance assessment approach should be both valid and reliable. To be valid it must measure accurately what it claims to measure—whether that is some aspect of job performance or personal behavior. To be reliable it must deliver the same results consistently—whether applied by different raters to the same person or when measuring the same person over time. Valid and reliable assessments are free from bias and as objective as possible.

19. How do the graphic rating scale and the BARS differ as performance appraisal methods?

The graphic rating scale simply asks a supervisor to rate an employee on an established set of criteria, such as quantity of work or attitude toward work. This leaves much room for subjectivity and debate. The behaviorally anchored rating scale asks the supervisor to rate the employee on specific behaviors that had been identified as positively or negatively affecting performance in a given job. This is a more specific appraisal approach and leaves less room for debate and disagreement.

Integration and Application Questions: 20. Sy Smith is not doing well in his job. The problems began to appear shortly after Sy’s job

changed from a manual to a computer-based operation. He has tried hard but is just not doing well in learning how to use the computer to meet performance expectations. He is 45 years old and has been with the company for 18 years. Sy has been a great worker in the past and is both popular and influential among his peers. Along with his performance -problems, you have also noticed that Sy is starting to sometimes “badmouth” the firm. Questions: As Sy’s manager, what options would you consider in terms of dealing with the issue of his retention in the job and in the company? What could you do by way of career development for Sy, and why?

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As Sy’s supervisor, you face a difficult but perhaps expected human resource management problem. Not only is Sy influential as an informal leader, he also has considerable experience on the job and in the company. Even though he is experiencing performance problems using the new computer system, there is no indication that he doesn’t want to work hard and continue to perform for the company. Although retirement is an option, Sy may also be transferred, promoted, or simply terminated. The latter response seems unjustified and may cause legal problems. Transferring Sy, with his agreement, to another position could be a positive move; promoting Sy to a supervisory position in which his experience and networks would be useful is another possibility. The key in this situation seems to be moving Sy out so that a computer-literate person can take over the job, while continuing to utilize Sy in a job that better fits his talents. Transfer and/or promotion should be actively considered both in his and in the company’s best interests.

Self-Assessment 10: Performance Appraisal Assumptions Instructions In each of the following pairs of statements, check the one that best reflects your assumptions about performance evaluation.

1. (a) a formal process that is done annually (b) an informal process done continuously 2. (a) a process that is planned for subordinates (b) a process that is planned with subordinates 3. (a) a required organizational procedure (b) a process done regardless of requirements 4. (a) a time to evaluate subordinates’ performance (b) a time for subordinates to evaluate their manager 5. (a) a time to clarify standards (b) a time to clarify the subordinate’s career needs 6. (a) a time to confront poor performance (b) a time to express appreciation 7. (a) an opportunity to clarify issues and provide direction and control (b) an opportunity to increase enthusiasm and commitment 8. (a) only as good as the organization’s forms (b) only as good as the manager’s coaching skills Interpretation In general, the a responses show more emphasis on the evaluation function of performance appraisal. This largely puts the supervisor in the role of documenting a subordinate’s performance for control and administrative purposes. The b responses show a stronger emphasis on the counseling or development function. Here, the supervisor is concerned with helping the subordinate do better and with learning from the subordinate what he or she needs to be able to do better.

Class Exercise 10: Upward Appraisal .

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Instructions Form into work groups as assigned by the instructor. The instructor will then leave the room. As a group, complete the following tasks: 1. Within each group create a master list of comments, problems, issues, and concerns about the course experience to date that members would like to communicate to the instructor.

2. Select one person from the group to act as a spokesperson who will give your feedback to the instructor when he or she returns to the classroom.

3. Before the instructor returns, the spokespersons from each group should meet to decide how the room should be physically arranged (placement of tables, chairs, etc.) for the feedback session. This arrangement should allow the spokespersons and instructor to communicate while they are being observed by other class members.

4. While the spokespersons are meeting, members remaining in the groups should discuss what they expect to observe during the feedback session.

5. The classroom should be rearranged. The instructor should be invited in.

6. Spokespersons should deliver feedback to the instructor while observers make notes.

7. After the feedback session is complete, the instructor will call on observers for comments, ask the spokespersons for their reactions, and engage the class in general discussion about the exercise and its implications.

Team Project 10: The Future of Labor Unions Question What is the future for labor unions in America?

Instructions 1. Perform library research to identify trends in labor union membership in the United States.

2. Analyze the trends to identify where unions are gaining and losing strength; develop possible explanations.

3. Consider talking with members of labor unions in your community to gather their viewpoints.

4. Consider examining data on labor union trends in other countries.

5. Prepare a report that uses the results of your research to answer the project question.

Cases for Critical Thinking: Silicon Valley’s “Chief Executive Mom” Sidebar: New Workplace Perks – Free Lunch Followed by a Nap Before becoming CEO of Yahoo!, Marissa Mayer was best known for her senior role at Google, where she spent 13 years. Her move to Yahoo! had a compensation packaged valued at over $100 million over five years. The company had struggled through a series of CEOs, and she came in with high expectations of turning the once-internet sweetheart around. Is Mayer Yahoo’s last-chance savior? Is her status as a mom drawing more attention than might otherwise be given to a CEO-male counterpart?

Case discussion questions and suggested answers: .

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1. DISCUSSION Yahoo! pays Marissa Mayer a base salary of $1 million a year, cash performance bonuses, stock grants, and other retention and equity awards should she stay. The total is valued between $70 and $120 million. Does this compensation package ensure high performance for the firm? Should lower level employees be celebrating her pay package, or be concerned about disparities between it and their own? Just what difference does it make how much a CEO gets paid? Explain.

The question of whether Mayer’s compensation ensures high performance can be answered based upon the system in the U.S. in which CEOs earn exponentially more than lower level employees. Like star athletes and celebrities, making it to the top comes with it exorbitant financial rewards.

To answer the question of whether Mayer’s compensation ensure s high performance: yes and no. Yes because her compensation is tied to corporate profits and the company’s stock price. The better the company does and the higher its price per share, the more Mayer makes. Some may answer “no” from the standpoint that no matter how much a CEO is paid, there are external factors which can impede performance. Even though Yahoo’s stock has risen with Mayer at the helm, the company’s profitability is still lackluster . CEO pay continues to soar and salaries are pushed to new highs when stock prices ri se. At the same time, employees (who are shareholders) also benefit.

While the system doles out generous rewards to CEOs, there are some pretty severe penalties (think: job loss) when performance is not up to par.

And it can happen quickly. Mayer can lose her job in a moment’s notice if Yahoo begins to sputter -- or if she doesn’t deliver results that shareholders expect during her tenure (high risk – high return). While workers may express disdain over CEO pay, it is important to remember that many benefit financially from the very same highly paid leader. So, from the standpoint of a true win -win situation, some (though, not all), lower level employees may find a CEO’s exorbitant pay difficult to argue when they benefit.

2. DISCUSSION Has there ever been a time when you wished to take a nap at work? If so, where did you go, and did others know about it? Were you violating policy?

What is your take on legitimating naps in the workplace? What is high on your list of desperate-to-have employee “perks?”

This answer will vary. Many employees have taken naps in their cars or in an area designated for naps. It seems as if most students, unless it is disruptive (think: snoring), will support naps in the workplace. If a nap increases productivity, most will argue in favor. Because the lines between .

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work and home have become blurred (some workers “live” at work and eat breakfast, lunch, and dinner there ), naps make even more sense when working long hours. Possible answers for high on one’s list of perks: free food, smartphones, bring your pet to work, massages, gym or fitness facility, paid time off, complimentary house cleaning, sabbaticals, company paid time off to volunteer.

3. PROBLEM SOLVING As an executive just hired to overhaul human resource policies and practices at your new firm, how would you deal with the issue of pregnancy? Will you advocate anything special for new mothers? How about new fathers? Make a list of actions you would like to take and the programs you would like to implement. For each item, jot notes on how you will justify your proposals to the top executive team.

Perks are at the heart of helping employees achieve a reasonable work -life balance. Perks are intended to make life simpler for new parents working long hours while handling personal responsibilities outside of work.

Unique and creative perks are being used by some firms to lure (and keep) quality candidates. Advocating for new mothers and/or fathers may include some of the perks already in place at technology firms: • • •

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Yahoo: working parents are offered up to 16 weeks’ paid leave for new mothers, roughly doubling what most mothers got in the past. A rare perk, paid paternity leave, if offered to new fathers as well.

New fathers, as well as mothers who have children through adoption, foster care or surrogacy, get eight weeks’ paid leave.

Among some of the other new benefits: New parents will receive $500 to spend on household expenses, such as laundry, house -cleaning, food or childcare, as well as Yahoo-branded baby gear, a spokeswoman says.

(Employees with new pets also get freebies, such as dog collars emblazoned with the Yahoo logo.)

The firm also offers an eight-week unpaid sabbatical, for every five years of tenure with the company.

Yahoo! provides $5,000 toward adopting a child.

Google offers 18 to 22 weeks of paid leave for mothers and seven weeks for fathers, adoptive parents, or surrogacy.

There is subsidized child care at Google -run facilities nearby.

Facebook offers four months’ paid leave for both parents, including same sex couples and adoptive parents.

Google offers $4,000 in baby cash.

Yahoo! has begun giving gifts to employees’ new cats and dogs

Possible actions and how they would be justified: Action Fairly distribute worklo ad

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Program Workload distribution plan

Justification Overworked workers experience burnout. This

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High levels of team work

Teamwork plan

High levels of employee empowerment

Empowerment as a company value

Helping employees wo rk smarter rather than harder by giving them adequate resources And of course, telecommuting, flextime, and job sharing.

Smarter work practices and adequate resources.

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lowers morale.

Teams and individuals within team s support one another.

Empowerment means that faster, more expedited decisions can be made at individual levels.

More productivity and less burnout/animosity over workload.

4. FURTHER RESEARCH Research current news related to Marissa Mayer and Yahoo! How is the company doing and how has it evolved since Mayer was appointed CEO? Does her performance justify her pay package? What major human resource management decisions has she made, and have they been good or bad for the employees? Based on what you find, would you consider Yahoo! a bench mark for great human resource management? Why or why not?

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During the first year, Yahoo’s stock has soared over 70% since Mayer took over.

Tumblr purchase for $1.1 billion Ban on telecommuting Yahoo revenue increased only so slightly (2%) during Mayer’s first year.

Board member resigns Acquisitions to bring aboard talented engineers to build the next generation of Yahoo products for mobile devices Core advertising business remains sluggish Competition remains intense with rivals Google and Facebook Yahoo’s gain can be attributed to its investment in Alibaba (Chinese ecommerce company) and Yahoo Japan.

Suggested Team Exercise for Chapter 10 Break the class into teams and have the teams perform the following discussion tasks: • “Identify five questions that you might ask during an interview process to help obtain a realistic view of what the company is ‘really like’? “ As a group, reflect and discuss how your present or past employers (including part-time work) have provided performance appraisal information to you. Summarize your discussion to include the typical frequency, honesty, and value of the process. Also share any very poor or outstanding

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examples of how a “boss” helped you improve as an employee.

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CHAPTER 11 Leadership

A Leader Lives in Each of Us Chapter 11 Overview Each Chapter contains several inset features designed to assist the student reader in applying the concepts to relevant examples. Management Live illustrates how popular movies demonstrate management concepts in the chapter. Role Models features a management professional that illustrates key chapter concepts in a novel, visionary or inspirational way. Explore Yourself refers students to self assessment activities relevant to concepts in the chapter. Ethics Check profiles examples of ethical issues in management. Manager's Library features books that illustrate current events or trends relevant to chapter concepts. Facts to Consider introduces research or trends that may be used for class discussion in the classroom or online for distance learning.

Chapter Eleven reviews Leadership and its importance to the successful performance of any organization. The Chapter also looks at traits and styles of effective leadership, as well as varying theories regarding contingency leadership.

The chapter begins with a definition of leadership, the process of inspiring others to work hard to accomplish important tasks. As such, the leading function is an essential component of effective management. This chapter focuses on the leading function and various theories of leadership. It begins by exploring the nature of leadership, in general, and visionary leadership, in particular.

Next, the chapter examines the roles that sources of position power and personal power play in the leadership process. The chapter also explores how power can be turned into influence, how power relates to ethics, and how leaders can empower followers.

The chapter continues with a discussion of the trait, behavioral, and contingency approaches to leadership. Under the contingency approach, particular attention is devoted to the managerial implications of Fiedler’s contingency model, the Hersey-Blanchard situational leadership model, House’s path-goal theory, the leader-member exchange theory, and the Vroom-Jago leaderparticipation model. Next, the chapter focuses on charismatic and transformational leadership.

Finally, the chapter explores current issues in leadership theory and practice, including transformational leadership, emotionally intelligent leadership, interactive leadership, moral leadership, and servant leadership.

Chapter 11 Takeaway Questions: Takeaway 11.1 What Are the Foundations for Effective Leadership?

Takeaway 11.2 What Can We Learn from the Contingency Leadership Theories?

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Takeaway 11.3 What Are Current Issues and Directions in Leadership Development?

Chapter 11 Objectives: • • • • • • • • • • • • • • • • • • • • • •

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To understand leadership, the process of inspiring others, as one of the four functions of management.

Leaders are expected to stay focused on long-term goals even while dealing with problems and pressures in the short term.

To explain power as the ability to get someone else to do something you want done and the ability to make things happen the way you want them to.

To understand the two sources of managerial power, which include the position, being “the manager,” and the power of the person, who you are and what your presence means in a situation.

To decipher the different types of power to include reward power, coercive power, and legitimate power.

To explain how leaders use personal power, expert power, and referent power to achieve influence.

To explain traits and personal characteristics shared by effective leaders.

To decipher between various leadership styles, including autocratic, human relations, democratic leadership, and laissez faire.

To understand contingency leadership theories.

To explain how Fiedler’s contingency model matches leadership styles with situational differences.

To explain how the least-preferred co-worker scale (LPC) is used to classify leadership styles as either task motivated or relationship motivated.

To explain how the Hersey-Blanchard situational leadership model matches leadership styles with the maturity of followers.

To decipher between the possible combinations of task and relationship behaviors resulting in four leadership styles.

To explain House’s path-goal theory and a leader’s effectiveness when they help followers along paths through which they can achieve both work goals and personal goals.

To decipher between the four leadership styles in House’s Path-Goal Theory.

To understand how leaders treat in-group and out-group followers as part of the concept of LMX or leader-member exchange theory.

To explain how managers lead through their use of decision-making methods.

To understand the leadership implications of the Vroom-Jargo leader-participation model.

To explain some of the current issues and directions in leadership development.

To understand the importance of the role of personality and emotional intelligence (EI) in transformational leadership and the ability to understand emotions in yourself and others.

To explain the importance of listening, communicating and participating or interactive leadership.

To explain the importance of leadership with ethical standards and building trust from a foundation of personal integrity.

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To explain how leaders view leadership as a responsibility rather than a task, and the notion of servant leadership.

Chapter 11 Lecture Outline: Takeaway 11.1 What Are the Foundations for Effective Leadership?

• Leadership is one of the four functions of management.

• Leaders use position power to achieve influence.

• Leaders use personal power to achieve influence.

• Leaders bring vision to leadership situations.

• Leaders display different traits in the quest for leadership effectiveness.

• Leaders display different styles in the quest for leadership effectiveness.

Takeaway 11.2 What Can We Learn from the Contingency Leadership Theories?

• Fiedler’s contingency model matches leadership styles with situational differences.

• The Hersey-Blanchard situational leadership model matches leadership styles with the maturity of followers.

• House’s path-goal theory matches leadership styles with task and follower characteristics.

• Leader-member exchange theory describes how leaders treat in-group and out-group followers.

• The Vroom-Jago model describes a leader’s choice of alternative decision-making methods.

Takeaway 11.3 What Are Current Issues and Directions in Leadership Development?

• Transformational leadership inspires enthusiasm and great performance • Emotionally intelligent leadership handles emotions and relationships well • Interactive leadership emphasizes communication and participation • Moral leadership builds trust from a foundation of personal integrity • Servant leadership is follower centered and empowering

Chapter 11 Supporting Materials: Figures Figure 11.1 Why Is Leading So Important in the Management Process?

Figure 11.2 What Are the Classic Leadership Styles?

Figure 11.3 What Are the Best Matches of Leadership Style and Situation According to Fiedler’s Contingency Model?

Figure 11.4 What Are the Leadership Implications of the Hersey-Blanchard Situational Leadership Model?

Figure 11.5 What Are the Leadership Implications of the Vroom-Jago Leader-Participation Model?

Thematic Boxes and More • Management Live: Integrity and Love Happens • Role Models: Lorraine Monroe’s Leadership Turns Vision Into Inspiration .

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• • • • • •

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Ethics Check: When the Boss Asks too Much Facts to Consider: Workers Report Shortcomings of Leaders and Top Managers Manager’s Library: Power: Why some People Have It and Others Don’t by Jeffrey Pfeffer Find Inspiration: Kraft Foods Feeds its Sweet Tooth Explore Yourself: Integrity Table 11.1 Traits Often Shared by Effective Leaders

Applications • TestPrep 11 Multiple-Choice Questions • Skill Building Portfolio o Self-Assessment 11: Least Preferred Co-Worker Scale o Class Exercise 11: Leading by Participation o Team Project 11: Leadership Believe-It-Or-Not • Case Snapshot: Apple, Inc. – After the Torch Was Passed • Sidebar case: Women, Leadership, and the “Double-Bind” • Hot Topic: When the Boss Says “Do It,” Consider Saying “No!”

Chapter Outline: Takeaway Question 11.1: What Are the Foundations for Effective Leadership?

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Leadership is one of the four functions of management ✓ Leading builds the commitments and enthusiasm for people to apply their talents to turn plans into action

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Figure 11.1 Why is Leading so Important in the Management Process?

Leading is one of the four management functions. It is the process of inspiring others to work hard to accomplish important tasks. Managers who are effective leaders act in ways that create high levels of enthusiasm among people to use their talents fully to accomplish tasks and pursue important plans and goals.

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Leaders use position power to achieve influence ✓ Power is the ability to get someone else to do something that you want done; the ability to make things happen the way you want them to. ✓ Position power - the power of a position, and includes coercion. Rewards, and legitimacy ➢ Reward power - the capability to offer something of value as a means of influencing the behavior of other people ➢ Coercive power - the capability to punish or withhold positive outcomes as a means of influencing the behavior of other people ➢ Legitimate power - the capability to influence through authority; the right by virtue of one’s status as a manager, or the person in charge, to exercise control over persons in subordinate positions

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Manager’s Library: Power: Why some People Have It and Others Don’t by Jeffrey Pfeffer.

The Manager's Library feature for this chapter looks at the book Power: Why Some People Have it and Others Don’t by Jeffrey Pfeffer. Pfeffer says that research shows that a person’s organizational power correlates positively with career success, job performance, salary, and even one’s life span. Student questions probe their thoughts their personal experience and perceptions of leaders. Students are asked to think about the formal and informal hierarchies they belong to. How are members selected and dismissed? How are members’ tasks assigned? How are decisions made and by whom?

Are those in power perceived positively, negatively, intelligent, or weak?

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Leaders use personal power to achieve influence Personal power - who you are and what your presence means in a situation ➢ Expert power - the capability to influence the behavior of other people because of special knowledge and skills ➢ Referent power - the capability to influence the behavior of other people because they admire and want to identify positively with you.

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Role Models: Lorraine Monroe’s Leadership Turns Vision Into Inspiration • Dr. Lorraine Monroe is featured as an example of a visionary leader with questions that focus on how students can use Dr. Monroe's example to develop leadership skills.

Dr. Lorraine Monroe founded the Frederick Douglass Academy, a public school in Harlem, where she grew up. Monroe sees leadership as vision driven and follower centered. She believes leaders must always start at the “heart of the matter” and that “the job of a good leader is to articulate a vision that others are inspired to follow.”

She believes in making sure all workers know that they are valued and that their advice is welcome. She also believes that workers and managers should always try to support one another. The “What’s the Lesson Here” questions include: Is visionary leadership something that works only at the very top of organizations? Should the leader of a work team also have a vision? Where in the Monroe doctrine can follower-centered leadership help you succeed as a leader?

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Leaders bring vision to leadership situations ✓ Vision is a clear sense of the future ✓ Visionary leadership - is the ability to communicate a clear sense of the future and how to accomplish the vision

DISCUSSION TOPIC Ask the students if they have encountered any leaders who have had a truly significant effect on their lives. Have the students describe what these leaders did to have this impact and how they were affected. Then, to the extent possible, relate this discussion to visionary leadership. At this point, ask students to describe the types of power these leaders used and the impacts that were achieved.

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Leaders display different traits in the quest for leadership effectiveness ✓ Research shows that physical characteristics make no difference .

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✓ Research has shown that people want leaders who are honest, competent, forwardlooking, inspiring, and credible ✓ Table 11.1 explains more traits shared by effective leaders ✓ Learning Activity - ask students to individually list the three most important characteristics they want in a leader. Next, put them in groups of three and have them compile their lists and come to a consensus on the top three. Ask them if they displayed any of the highly rated characteristics in their group interaction.

DISCUSSION TOPIC A way to demonstrate to students the objectives as well as the shortcomings of the trait approach to leadership is to ask them to identify the traits of effective leaders. Ask a generic question such as “What are the traits of effective leaders?” and then record their responses. Alternatively, you could provide more direction and distinguish between physical and personality traits by asking, “What do leaders look like?” and “What personality characteristics do leaders typically possess?” If you use the former approach, you may want to record separately the physical and personality traits the students identify.

Once a reasonable number of traits are listed, review them and cross out the physical traits such as tall, strong, and good-looking, which have not been substantiated by research. Also note that while the leadership traits of drive, desire to lead, motivation, honesty and integrity, selfconfidence, intelligence, knowledge, and flexibility are seen as desirable, researchers have not found a definitive, universal profile of leadership traits.

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Table 11.1 Traits Often Shared by Effective Leaders ✓ Drive ✓ Self-confidence ✓ Creativity ✓ Cognitive ability ✓ Business knowledge ✓ Motivation ✓ Flexibility ✓ Honesty and Integrity

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Leaders display different styles in the quest for leadership effectiveness ✓ Leadership style is the pattern of behaviors a leader exhibits ✓ Autocratic leaders hold on to authority and act in a unilateral "command and control" fashion ✓ Human relations leaders emphasize a high concern for people over task completion ✓ Democratic leaders encourage participation with a strong emphasis on both task and people ✓ Laissez-faire leaders show little concern for people or tasks and do just enough to not get fired

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Figure 11.2 What Are the Classic Leadership Styles?

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task is described as “laissez-faire” and very ineffective. The leader high in concern for task but low in concern for people is “autocratic” and focused on performance. The leader high in concern for people and low in concern for task has a “human relations” style that focuses mainly on people and relationships. The “democratic” leader is high in concern for both people and task. This person is often highly successful as a true team manager who is able to engage people to accomplish common goals.

11.1 Questions for discussion suggested answers 1) When, if ever, is a leader justified in using coercive power?

Coercive power may be needed in situations where there is a threat of danger to the manager, the employee themselves, or other employees. It may also be needed when an employee has lost emotional control or an open confrontation develops in the workplace. Finally, a crisis situation may require coercion if someone is reticent or unable to function because of fear.

2) How can a young college graduate gain personal power when moving into a new job as team leader?

Personal power is acquired as people understand the leader as a person and what he or she has to offer. Likeable personal characteristics are a good way to start to acquire referent power which is the ability to influence others because they admire or want to positively emulate the leader. Another type of personal power is acquiring influence because of special knowledge or skills. Special computer, technical or other related skills that help a new employee gain recognition would be an example of expert power.

Reverse mentoring mentioned in the previous chapter would be an example.

3) Why might a leader with a human relations style have difficulty getting things done in an organization?

Human relations leaders may have problems if the workers were not well trained, the job was not clearly defined, they didn't value high performance or were a little too immature to understand how important their task was. A good example might be managing young workers in a fast food restaurant.

Takeaway Question 11.2: What Can We Learn from Contingency Leadership Theories?

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Contingency leadership perspective suggests that successful leadership varies by the circumstances, task, the leader and the people.

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Fiedler’s contingency model matches leadership styles with situational differences ✓ Least Preferred Co-Worker Scale (LPC) - instrument used to classify leadership styles as either task or relationship motivated ✓ The Least Preferred Co-worker Scale is the Self Assessment for this chapter on in the Skill-Building Portfolio ✓ See Figure 11.3 for a depiction of Fiedler’s contingency model 11-7

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Figure 11.3 illustrates the following concept: What Are the Best Matches of Leadership Style and Situation According to Fiedler’s Contingency Model? ✓ Fiedler believes that leadership success requires the right style-situation match. He classifies leadership styles as either task motivated or relationship motivated, and views them as strongly rooted in our individual personalities. He describes situations according to the leader’s position power, quality of leader-member relations, and amount of task structure. In situations that are most favorable and unfavorable for leaders, his research shows the task-motivated style as the best fit. In more intermediate situations, the relationship-motivated style provides the best fit.

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The Hersey-Blanchard situational leadership model matches leadership styles with the maturity of the followers ✓ Hersey-Blanchard situational leadership model suggests that successful leaders adjust their styles based on the maturity of followers and their readiness to perform the task at hand ✓ Leadership styles can be adjusted based on the amount of "Task Behavior" or guidance required and "Relationship Behavior" or support required ➢ Delegating - low task, low relationship ➢ Participating - low task, high relationship ➢ Selling - high task, high relationship ➢ Telling - high task, low relationship

DICUSSION TOPIC Hersey and Blanchard’s four levels of follower readiness can be compared to student classifications on a high school or college sports team. Freshmen are essentially low readiness subordinates who require a telling style of leadership. Sophomores are willing to assume more responsibility, but lack some of the skills; they respond well to a selling style. Juniors are able to handle more responsibility, but may lack confidence; they respond well to a participating style.

Finally, since seniors are able, willing, and confident, they respond best to the delegating style. ✓ Figure 11.4 illustrates the concept What Are the Leadership Implications of the Hersey-Blanchard Situational Leadership Model?

The Hersey-Blanchard situational leadership model suggests that successful leaders adjust their styles based on the maturity of followers or how willing and able they are to perform in a given situation. The four style-follower matches are: delegating style for able and willing followers; participating style for able but unwilling followers; selling style for unable but willing followers; and telling style for unable and unwilling followers.

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House’s path-goal theory matches leadership styles with task and follower characteristics ✓ Path-goal theory suggests that leaders are effective when they help followers move along paths to achieve both work and personal goals ✓ Four leadership styles 11-8

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➢ Directive leader ➢ Supportive leader ➢ Achievement oriented leader ➢ Participative leader ✓ See inset box for an explanation of the 4 path-goal leadership styles •

Leader-member exchange theory describes how leaders treat in-group and outgroup followers ✓ Leader-member exchange (LMX) recognizes that in most leadership situations, the leader does not treat everyone the same ✓ In-groups are considered the best performers and receive special high-exchange relationships with the leader ✓ Out-groups have low-exchange relationships with the leader and are often excluded from some information and privileges

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The Vroom-Jago model describes a leader's choice of alternative decision-making methods • Authority decision - is made by the leader and communicated to the group • Consultative decision - is made by a leader after receiving input from the group • Group decision - is made by the group themselves •

Figure 11.5 illustrates the criteria involved in determining which of these is the best match for the situation.

Figure 11.5: What Are the Leadership Implications of the Vroom-Jago Leader-Participation Model? ➢ Decision quality ➢ Decision acceptance ➢ Decision time ➢ The leader-participation model suggests that leaders are effective when they use the appropriate decision method to solve a problem situation. Three criteria govern the choice among possible authority, consultative, and team or group decisions: ➢ (1) decision quality—based on who has the information needed for problem solving; ➢ (2) decision acceptance—based on the importance of follower acceptance of the decision to its eventual implementation; and ➢ (3) decision time—based on the time available to make and implement the decision.

11.2 Questions for discussion suggested answers 1) What are the potential career development lessons of Fiedler’s contingency leadership model?

Fiedler's contingency leadership model indicates that leadership success depends on a match between the leadership style of the leader, task structure, and the amount of position power the leader has. For career development, managers should understand .

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their personal leadership style tendencies (take Self-Assessment 11: Least Preferred Co-Worker Scale in the Skill-Building Portfolio) and understand how they must adjust to accommodate the workers, amount of task structure and how much control the manger has in the situation. Figure 11.3 illustrates the adjustments that must be made to be effective.

2) What are the implications of follower maturity for leaders trying to follow the HerseyBlanchard situational leadership model?

The Hersey-Blanchard situational leadership model suggests that successful leaders must know the maturity level or "readiness" of those they lead and adjust leadership style. There are four basic types of leadership to choose from based on the maturity or readiness of the employees. Delegating style works well with employees with a high degree of readiness, Selling works well with moderate to high readiness, Participative works with low to moderate readiness and telling works best with a low degree of follower readiness.

3) Is it wrong for a team leader to allow the formation of in-groups and out-groups in his or her relationships with team members?

It would be better to put everyone in the in-group, allowing everyone equal access to information, assignments and privileges. Equity theory suggests that those in the outgroup would be less motivated and productive if they feel that their efforts do not receive the same rewards as the in-group.

Takeaway Question 11.3: What are Current Issues and Directions in Leadership Development?

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Transformational leadership inspires enthusiasm and extraordinary performance ✓ Charismatic leadership - the ability to inspire others in exceptional ways ✓ Transactional leadership - somewhat “mechanical” in style; directs through tasks, rewards, and structures ✓ Transformational leadership - the ability by leaders to use their personalities to inspire followers, to strive for extraordinary performance accomplishments

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Qualities of Transformational Leaders ✓ Vision ✓ Charisma ✓ Symbolism ✓ Empowerment ✓ Intellectual Stimulation ✓ Integrity

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Emotionally intelligent leadership handles emotions and relationships well ✓ Emotional intelligence (EI) - an ability to understand emotions in oneself and others, and use this understanding to handle one’s relationships effectively ➢ Self awareness - the ability to understand our own moods and emotions

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➢ Social awareness - the ability to empathize, to understand the emotions of others, and to use this understanding to better deal with them ➢ Self-management is the ability to think before acting and to be in control of otherwise disruptive impulses ➢ Relationship management is the ability to establish rapport with other in ways that build good relationships and influence their emotions in positive ways DISCUSSION TOPIC Have the students spend eight to ten minutes of class time writing a brief self-assessment essay regarding the extent to which they perceive themselves as having developed each the above components of emotional intelligence. Have the students who are willing to do so contribute their examples as you discuss the components of emotional intelligence.

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Find Inspiration: Kraft Foods Feeds its Sweet Tooth ✓ This example of Irene Rosenfeld is designed to get you thinking about your leadership qualities and looking at the leadership models that abound in your experiences. Just who is the leader in you? What can you do to keep that leader growing and confident in the days and years ahead?

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Interactive leadership emphasizes communication, listening, and participation ✓ Gender similarities hypothesis holds that males and females are very similar to one another in terms of psychological properties ✓ Interactive leadership style - democratic, participative, and inclusive, often approaching problems and decisions through teamwork ➢ - often associated with female leadership

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Facts to Consider: Workers Report Shortcomings of Leaders and Top Managers ✓ Harris Interactive periodically conducts surveys of workers’ attitudes toward their jobs and employers. The results for “leaders” and “top managers” reveal lots of shortcomings: ✓ • 37% believe their top managers display integrity and morality. ✓ • 39% believe leaders most often act in the best interest of organization. ✓ • 22% see leaders as ready to admit mistakes. ✓ • 46% believe their organizations give them freedom to do their jobs. ✓ • 25% of women and 16% of men believe their organizations pick the best people for leadership. ✓ • 33% of managers are perceived by followers as “strong leaders.”

Questions to discuss with students: How do the leaders you have experienced stack up— ”strong or weak,” “moral or immoral”? What makes the most difference in the ways leaders are viewed in the eyes of followers?

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Moral leadership builds trust from a foundation of personal integrity ✓ Ethical leadership - leaders who practice high ethical standards, build ethical cultures, and who both help and require others to behave ethically in their work

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✓ Integrity - honest, credible, and consistent behavior that puts sound values into action and earns the trust of followers •

Ethics Check: When the Boss Asks Too Much ✓ How far will you go outside your understanding of your job responsibilities to make the boss happy? The concept of the "Zone of Indifference" is explored. Questions direct students to determine where to draw the line. ✓ Additional questions to explore are how far the Zone of Indifference extends in a classroom setting. How far will they go at the professor's request? Pass out papers?

Run an errand? Help with research? Wash your car?

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Servant leadership is follower centered and empowering ✓ Servant leadership - based firmly on a commitment to serving others, to helping people use their talents to full potential while working together for organizations that benefit society ✓ Other-centered rather than self-centered; followers more important than the leader ✓ Empowerment - the process through which leaders give people job freedom and help them gain power to achieve influence within the organization

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Explore Yourself: Integrity in leadership is explored and Peter Drucker's concept of "Old Fashioned Leadership" is introduced. Students are directed to take the "Least Preferred Co-workers Scale" in the Skill Building Portfolio.

11.3 Questions for discussion suggested answers 1) Should all managers be expected to excel at transformational leadership?

No, most managers will not be able to excel at transformational leadership. This style requires a high degree of personal charisma and an ability to communicate vision which not all individuals possess. Additionally, it requires a high ability to make important and often difficult decisions with high consequences. This is also a rare trait.

2) Do women lead differently than men?

The gender similarities hypothesis suggests that they have similar psychological properties and both are capable of effective leadership. That being said, our perceptions of men and women as leaders have been the focus of several studies. Some results include these facts: women tend to be less directive; more participative; strong on motivating others, emotional intelligence, persuasion, communication, mentoring others; and supportive of high quality work.

3) Is servant leadership inevitably moral leadership?

Moral leadership involves integrity and ethical leadership, and putting values into action. Servant leadership means that leaders view leadership as a responsibility and value followers highly. Servant leadership seems to be a way one would demonstrate moral leadership.

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Teaching Notes In this section, ideas, exercises, and assignments are provided to assist you in integrating the concepts in Exploring Management for your students, especially the special features of the text.

Management Live: Integrity and Love Happens This movie helps remind us about the importance of integrity—being honest, credible, and consistent while living up to personal values. And it moves us to think more about leadership.

Real leaders have lots of integrity. It helps them as they try to help others achieve their full potential. Real leaders are also humble, willing to serve others more than be in the spotlight.

Ask students how often they think about integrity when it comes to leadership? When news media cover leaders, do their reports indicate integrity or its absence? What does this say about the status of leadership integrity in our society?

Facts to Consider: Workers Report Shortcomings of Leaders and Top Managers Statistics on how workers view the integrity of organizations and their leaders. Questions probe students' views of the morality of leaders.

Harris Interactive periodically conducts surveys of workers’ attitudes toward their jobs and employers. The results for “leaders” and “top managers” reveal lots of shortcomings: • 37% believe their top managers display integrity and morality.

• 39% believe leaders most often act in the best interest of organization.

• 22% see leaders as ready to admit mistakes.

• 46% believe their organizations give them freedom to do their jobs.

• 25% of women and 16% of men believe their organizations pick the best people for leadership.

• 33% of managers are perceived by followers as “strong leaders.”

YOUR THOUGHTS? How do the leaders you have experienced stack up—”strong or weak,” “moral or immoral”?

What makes the most difference in the ways leaders are viewed in the eyes of followers?

Role Models: Lorraine Monroe’s Leadership Turns Vision Into Inspiration Dr. Lorraine Monroe is featured as an example of a visionary leader with questions that focus on how students can use Dr. Monroe's example to develop leadership skills. Dr. Lorraine Monroe founded the Frederick Douglass Academy, a public school in Harlem, where she grew up.

Monroe sees leadership as vision driven and follower centered. She believes leaders must always start at the “heart of the matter” and that “the job of a good leader is to articulate a vision that others are inspired to follow.” She believes in making sure all workers know that they are valued and that their advice is welcome. She also believes that workers and managers should always try to support one another. The “What’s the Lesson Here” questions include: Is visionary leadership something that works only at the very top of organizations? Should the leader of a

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work team also have a vision? Where in the Monroe doctrine can follower-centered leadership help you succeed as a leader?

Find Inspiration: Kraft Foods Feeds its Sweet Tooth This example of Irene Rosenfeld is designed to get you thinking about your leadership qualities and looking at the leadership models that abound in your experiences. Questions to discuss: Just who is the leader in you? What can you do to keep that leader growing and confident in the days and years ahead?

Manager's Library: Power: Why Some People Have it and Others Don’t by Jeffrey Pfeffer The Manager's Library feature for this chapter looks at the book Power: Why Some People Have it and Others Don’t by Jeffrey Pfeffer. Pfeffer says that research shows that a person’s organizational power correlates positively with career success, job performance, salary, and even one’s life span. Student questions probe their thoughts their personal experience and perceptions of leaders. Students are asked to think about the formal and informal hierarchies they belong to.

How are members selected and dismissed? How are members’ tasks assigned? How are decisions made and by whom? Are those in power perceived positively, negatively, intelligent, or weak?

Ethics Check: When the Boss Asks Too Much How far will you go outside your understanding of your job responsibilities to make the boss happy? The concept of the "Zone of Indifference" is explored. Questions direct students to determine where to draw the line.

Additional questions to explore are how far the Zone of Indifference extends in a classroom setting. How far will they go at the professor's request? Pass out papers? Run an errand? Help with research? Wash your car?

✓ Explore Yourself: Integrity in Leadership Integrity in leadership is explored and Peter Drucker's concept of "Old Fashioned Leadership" is introduced. Students are directed to take the "Least Preferred Co-workers Scale" in the Skill Building Portfolio.

Hot Topic: When the Boss Says “Do It,” Consider Saying “No!” Perhaps saying yes to an authority figure isn’t always the right thing to do. Sooner or later, someone in authority is going to ask us to do something that seems odd or incorrect or just plain suspicious. Discuss what happens when we comply when asked to do something wrong. Will the blame be shared? What does management literature say about tendencies to obey, how to doublecheck decisions to make sure our obedience is justified and what about the price of .

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disobedience?

Career Situation: Good Idea or Not? What Would You Do? •

Some might say it was bad luck. Others will tell you it’s life and you’ d better get used to it. You’ve just gotten a new boss, and within the first week it was clear to everyone that she is as “autocratic” as can be. The previous boss was very “democratic,” and so is the next-higher-level manager, with whom you’ve always had a good working relationship.

Is there anything you and your co-workers can do to remedy this situation without causing anyone, including the new boss, to lose their jobs?

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You’ve just been hired as a visual effects artist by a top movie studio. But the team you are joining has already been together for about two months. There’s obviously an ingroup when it comes to team leader and team member relationships. This job is important to you; the movie is going to be great résumé material. But you’re worried about the leadership dynamics and your role as a newcomer to the team. What can you do to get on board as soon as possible and be valued as a team member?

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Okay, so it’s important to be “interactive” in leadership. By personality, though, you tend to be a bit withdrawn. In fact, if you could do things by yourself, that’s the way you would behave. Yet here you are taking over as a manager as the first upward career step in your present place of employment. How do you master the challenge of succeeding with interactive leadership in the new role?

Terms to Define Authority decision Autocratic leader Charismatic leader Coercive power Consultative decision

Interactive leadership Laissez-faire leader Leadership Leadership style Legitimate power

Contingency leadership perspective Democratic leader Emotional intelligence (EI)

Moral leadership Moral overconfidence Power

Emotional intelligence quotient (EQ) Empowerment Expert power Gender similarities hypothesis Group decision Human relations leader Integrity

Referent power Reward power Servant leadership Substitutes for leadership Transactional leadership Transformational leadership Vision

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Visionary leadership

Multiple-Choice Questions 1. When managers use offers of rewards and threats of punishments to try to get others to do what they want them to do, they are using which type of power? (a) formal authority (b) position (c) referent (d) personal 2. When a manager says, “Because I am the boss, you must do what I ask,” what power base is being put into play? (a) reward (b) legitimate (c) moral (d) referent 3. The personal traits that are now considered important for managerial success include ._____________ (a) self-confidence (b) gender (c) age (d) personality 4. In the research on leader behaviors, which style of leadership describes the preferred “highhigh” combination? (a) transformational (b) transactional (c) laissez-faire (d) democratic 5. In Fiedler’s contingency model, both highly favorable and highly unfavorable leadership situations are best dealt with by a _____________motivated leadership style. (a) task (b) vision (c) ethics (d) relationship 6. Which leadership theorist argues that one’s leadership style is strongly anchored in personality and therefore very difficult to change? (a) Daniel Goleman (b) Peter Drucker (c) Fred Fiedler .

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(d) Robert House 7. Vision, charisma, integrity, and symbolism are all attributes typically associated with _____________leaders. (a) people-oriented (b) democratic (c) transformational (d) transactional 8. In terms of leadership behaviors, someone who focuses on doing a very good job of planning work tasks, setting performance standards, and monitoring results would be described as _______________ (a) task oriented (b) servant oriented (c) achievement oriented (d) transformational 9. In the discussion of gender and leadership, it was pointed out that some perceive women as having tendencies toward ,______________ a style that seems a good fit with developments in the new workplace. (a) interactive leadership (b) use of position power (c) command-and-control (d) transactional leadership 10. In House’s path-goal theory, a leader who sets challenging goals for others would be described as using the __________leadership style. (a) autocratic (b) achievement-oriented (c) transformational (d) directive 11. Someone who communicates a clear sense of the future and the actions needed to get there is considered a ______________leader. (a) task-oriented (b) people-oriented (c) transactional (d) visionary 12. Managerial Power = _____________ Power x _____________ Power. (a) Reward; Punishment (b) Reward; Expert (c) Legitimate; Position (d) Position; Personal 13. The interactive leadership style is characterized .

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by ____________________ . (a) inclusion and information sharing (b) use of rewards and punishments (c) command-and-control behavior (d) emphasis on position power 14. A leader whose actions indicate an attitude of “do as you want and don’t bother me” would be described as having a(n) _____________ leadership style. (a) autocratic (b) country club (c) democratic (d) laissez-faire 15. The critical contingency variable in the Hersey-Blanchard situational model of leadership is _________________. (a) follower maturity (b) LPC (c) task structure (d) emotional intelligence

Short-Response Questions: 16. Why are both position power and personal power essential in management?

Position power is based on reward, coercion or punishment, and legitimacy or formal authority. Managers, however, need to have more power than that made available to them by the position alone. Thus, they have to develop personal power through expertise and reference. This personal power is essential in helping managers get things done beyond the scope of their position power alone.

17. Use Fiedler’s terms to list the characteristics of situations that would be extremely favorable and extremely unfavorable to a leader.

Leadership situations are described by Fiedler according to: Position power—how much power the leader has in terms of rewards, punishments, and legitimacy; leader-member relations—the quality of relationships between the leader and followers; task structure— the degree to which the task is clear and well defined, or open ended and more ambiguous. Highly favorable situations are high in position power, have good leadermember relations, and have structured tasks; highly unfavorable situations are low in position power, have poor leader-member relations, and have unstructured tasks.

18. Describe the situations in which House’s path-goal theory would expect (a) a participative leadership style and (b) a directive leadership style to work best.

According to House’s path-goal theory, the following combinations are consistent with .

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successful leadership. Participative leadership works well, for example, when performance incentives are low and people need to find other sources of need satisfaction. Through participation the leader gains knowledge that can help identify important needs and possible ways of satisfying them other than through the available performance incentives. Directive leadership works well, for example, when people aren’t clear about their jobs or goals. In these cases the leader can step in and provide direction that channels their efforts toward desired activities and outcomes.

19. How do you sum up in two or three sentences the notion of servant leadership?

Servant leadership is basically other-centered and not self-centered. A servant leader is concerned with helping others to perform well so that the organization or group can ultimately do good things for society. The person who accepts the responsibilities of servant leadership is good at empowering others so that they can use their talents while acting independently to do their jobs in the best possible ways.

Integration and Application Questions: 20. When Marcel Henry took over as leader of a new product development team, he was both excited and apprehensive. “I wonder,” he said to himself on the first day in his new assignment, “if I can meet the challenges of leadership.” Later that day, Marcel shares this concern with you during a coffee break.

Question: How would you describe to Marcel the personal implications of current thinking on transformational and moral leadership and how they might be applied to his handling of this team setting?

In his new position, Marcel must understand that the transactional aspects of leadership are not sufficient enough to guarantee him long-term leadership effectiveness. He must move beyond the effective use of task-oriented and people-oriented behaviors—the “transactional” side of leadership, and demonstrate through his behavior and personal qualities the capacity to inspire others and lead with moral integrity—the “transformational” side. A transformational leader develops a unique relationship with followers in which they become enthusiastic, highly loyal, and high achievers. Marcel needs to work very hard to develop positive relationships with the team members. But he must add to this a moral and ethical dimension. He must emphasize in those relationships high aspirations for performance accomplishments, enthusiasm, ethical behavior, integrity and honesty in all dealings, and a clear vision of the future. By working hard with this agenda and by allowing his personality to positively express itself in the team setting, Marcel should make continuous progress as an effective and moral leader.

Self-Assessment 11: Least Preferred Co-Worker Scale Instructions Think of all the different people with whom you have ever worked—in jobs, in social clubs, in student projects, or whatever. Next, think of the one person with whom you could work .

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least well—that is, the person with whom you had the most difficulty getting a job done. This is the one person—a peer, boss, or subordinate—with whom you would least want to work.

Describe this person by circling numbers at the appropriate points on each of the following pairs of bipolar adjectives. Work rapidly. There is no right or wrong answer.

Pleasant Friendly Rejecting Tense Distant Cold Supportive Boring Quarrelsome Gloomy Open Backbiting Untrustworthy Considerate Nasty Agreeable Insincere Kind

8 8 1 1 1 1 8 1 1 1 8 1 1 8 1 8 1 8

7 7 2 2 2 2 7 2 2 2 7 2 2 7 2 7 2 7

6 6 3 3 3 3 6 3 3 3 6 3 3 6 3 6 3 6

5 5 4 4 4 4 5 4 4 4 5 4 4 5 4 5 4 5

4 4 5 5 5 5 4 5 5 5 4 5 5 4 5 4 5 4

3 3 6 6 6 6 3 6 6 6 3 6 6 3 6 3 6 3

2 2 7 7 7 7 2 7 7 7 2 7 7 2 7 2 7 2

1 1 8 8 8 8 1 8 8 8 1 8 8 1 8 1 8 1

Unpleasant Unfriendly Accepting Relaxed Close Warm Hostile Interesting Harmonious Cheerful Guarded Loyal Trustworthy Inconsiderate Nice Disagreeable Sincere Unkind

Scoring This is called the “least-preferred co-worker scale” (LPC). Compute your LPC score by totaling all the numbers you circled; enter that score here [LPC = ___________].

Interpretation The LPC scale is used by Fred Fiedler to identify a person’s dominant leadership style. Fiedler believes that this style is a relatively fixed part of one’s personality and is therefore difficult to change. This leads Fiedler to his contingency views, which suggest that the key to leadership success is finding (or creating) good “matches” between style and situation.

If your score is 73 or above on the LPC scale, Fiedler considers you a “relationship motivated” leader; if it is 64 or below on the scale, he considers you a “task-motivated” leader. If your score is between 65 and 72, Fiedler leaves it up to you to determine which leadership style is most accurate.

Class Exercise 11: Leading by Participation Procedure 1. For the 10 situations described here, decide which of the three styles you would use for that unique situation. Place the letter A, P, or L on the line before each situation’s number.

A—authority; make the decision alone without additional inputs .

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P—consultative; make the decision based on group inputs L—group; allow the group to which you belong to make the decision Decision Situations ______ 1. You have developed a new work procedure that will increase productivity. Your boss likes the idea and wants you to try it within a few weeks. You view your employees as fairly capable and believe that they will be receptive to the change. ______ 2. Your main product has new competition in the industry. Your organization’s revenues have been dropping. You have been told to lay off three of your ten employees in two weeks.

You have been the supervisor for over one year. Normally, your employees are very capable. ______ 3. Your department has been facing a problem for several months. Many solutions have been tried and have failed. You finally thought of a solution, but you are not sure of the possible consequences of the change required or its acceptance by the highly capable employees. ______ 4. Flextime has become popular in your organization. Some departments let each employee start and end work whenever they choose. However, because of the cooperative effort of your employees, they must all work the same eight hours. You are not sure of the level of interest in changing the hours. Your employees are a very capable group and like to make decisions. ______ 5. The technology in your industry is changing faster than the members of your organization can keep up. Top management hired a consultant who has given the recommended decision. You have two weeks to make your decision. Your employees are capable, and they enjoy participating in the decision-making process. ______ 6. Your boss called you on the telephone to tell you that someone has requested an order for your department’s product with a very short delivery date. She asked that you call her back with the decision about taking the order in 15 minutes. Looking over the work schedule, you realize that it will be very difficult to deliver the order on time. Your employees will have to push hard to make it. They are cooperative, capable, and enjoy being involved in decision making. ______ 7. A change has been handed down from top management. How you implement it is your decision. The change takes effect in one month. It will personally affect everyone in your department. The acceptance of the department members is critical to the success of the change.

Your employees are usually not too interested in being involved in making decisions. ______ 8. You believe that productivity in your department could be increased. You have thought of some ways that may work, but you’re not sure of them. Your employees are very experienced; almost all of them have been in the department longer than you have. ______ 9. Top management has decided to make a change that will affect all your employees.

You know that they will be upset because it will cause them hardship. One or two may even quit.

The change goes into effect in 30 days. Your employees are very capable. ______10. A customer has offered you a contract for your product with a quick delivery date.

The offer is open for two days. Meeting the contract deadline would require employees to work nights and weekends for six weeks. You cannot require them to work overtime. Filling this profitable contract could help get you the raise you want and feel you deserve. However, if you take the contract and don’t deliver on time, it will hurt your chances of getting a big raise. Your employees are very capable.

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2. Form groups as assigned by your instructor. Share and compare your choices for each decision situation. Reconcile any differences, and be prepared to defend your decision preferences in general class discussion.

Team Project 11: Leadership Believe-It-Or-Not You would think leaders would spend lots of time talking with the people who make products and deliver services, trying to understand problems and asking for advice. But Business Week reports a survey that shows quite the opposite. Persons with a high school education or less are asked for advice by only 24% of their bosses; for those with a college degree, the number jumps to 54%.

Question What stories do your friends, acquaintances, family members, and you tell about their bosses that are truly hard to believe?

Instructions 1. Listen to others and ask others to talk about the leaders they have had or presently do have.

What strange-but-true stories are they telling?

2. Create a journal that can be shared with class members that summarizes, role-plays, or otherwise communicates the real-life experiences of people whose bosses sometimes behave in ways that are hard to believe.

3. For each of the situations in your report, try to explain the boss’s behaviors.

4. Also for each of the situations, assume that you observed or heard about it as the boss’s supervisor. Describe how you would “coach” or “counsel” the boss in order to turn the situation into a “learning moment” for positive leadership development.

Cases for Critical Thinking: Apple, Inc. – After the Torch was Passed Sidebar: Women, Leadership, and the “Double-Bind” The case examines the track record of Apple CEO Tim Cook since the loss of CEO Steve Jobs.

Is Jobs irreplaceable as CEO of Apple? What has been the company’s track record since the death of Jobs? Can Cook adequately fill the shoes of the late iconic Steve Jobs?

Case discussion questions and suggested answers: 1. DISCUSSION If leading builds commitments and enthusiasm for people to apply their talents to put an organization’s plans into action, what special qualities of Steve Jobs seem to have contributed to his leadership success as Apple’s CEO? Jobs was clearly able to build commitment and enthusiasm from his team by applying their talent to put plans into action. His special qualities, identified by Walter Isaacson, author of the Steve Jobs biography, include: a. Focus: Jobs insisted on focusing on a few great products. .

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b. Simplify: Jobs’s instinct was to simplify things by “zeroing in on their essence and eliminating unnecessary components.” c. Take Responsibility End to End: all aspects of the customer/user experience were closely tied. d. When behind, leapfrog: Jobs fell behind when it came to music. That is when he created an integrated systems of the iTune store, the iPod, and iTunes. e. Put products before profits f. Don’t be a slave to focus groups: Jobs insisted on using intuition. g. Stay hungry, stay foolish. Be playful.

2. DISCUSSION Suppose the successor to Steve Jobs was not Tim Cook, but Tamara Cook. Would the leadership challenge have been any different? What might make it hard or easy for a female leader to take over from a very successful male predecessor?

In an interview with the Dalai Lama, when the question of a female successor is posed, he states: "I think [it would be] good because you see, biologically, female[s] have more potential to develop affection or love to other [sic]," the Dalai Lama told Newman. "Some scientists, they tested two person, one male, one female looking at one sort of movie. Female [was] more sensitive: response is much stronger. So therefore…now we are 21st century…female have more potential so should take more active role regarding promotion of human compassion [all sic]."

What might make it difficult to take over a male predecessor is being compared not only in terms of leadership style, but also dealing with gender stereotypes and double standards. For example, when Marissa Mayer announced a ban on telecommuting, there was an outcry. When Hubert Joly, a middle-aged CEO of Best Buy did the same, there was not a peep (and employees complied). The difference lies in what some call a double standard. That is what makes it difficult for a female to take over a from a successful (or not) male predecessor.

3. PROBLEM SOLVING There is always a tendency to compare a successor, such as Tim Cook, to a predecessor, like Steve Jobs. This happens at all levels and in all types of organizations when there is a leadership transition. How important are the leadership styles of the successor and predecessor to the latter’s eventual success or failure? Should the styles of each be the same or different, or does it depend on the situation? If you were taking over from someone who has successfully led a team for quite a while, how would you address this issue of leadership styles, and what would you do in the first weeks to make sure that your tenure as team leader would be a good one?

How important are the leadership styles of the successor and predecessor to successor’s eventual success or failure? This answer will vary. Some may say the styles should be similar, and others will disagree.

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Should the styles of each be the same or different, or does it depend on the situation? It truly depends upon the situation. In a crisis situation, it may be beneficial if the leadership style of the successor is different – hence, more effective and resultsoriented. There are so many different types of leadership (and personality) styles that it is difficult to say that leaders should be the same (or different) in order to be effective.

It truly depends on so many external factors impacting the company along with the political, social, economic, and legal environment.

If you were taking over from someone who has successfully led a team for quite a while, how would you address this issue of leadership styles and what would you do in the first weeks to make sure that your tenure as team leader would be a good one?

This answer will vary.

4. FURTHER RESEARCH There’s a lot to the Apple story and how Tim Cook fared as he took over the helm. Dig into the news and see what the latest reports are saying. How has Cook done? What changes has he made? Does it appear that Cook had what it would take to move Jobs’s great legacy forward in a dynamic industry environment of copycatting and competition?

How can you account for Cook’s success and failures at this point?

How has Cook done? Most industry experts give Cook a B+ and reserve judgment until product innovation can be assessed. Lower gross margins are a concern.

What changes has he made? How can you account for Cook’s success and failures at this point?

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Under Tim Cook, to date, Apple became the most valuable company in history with a market capitalization of $627 billion.

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A human rights group applauded Cook’s effort to improve labor conditions in Chinese factories (Foxconn) where many Apple products are made. Asked the D.C.-based Fair Labor Association to independently audit Foxconn's and other's component manufacturing facilities.

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Tim Cook CEO started a program in which Apple matches dollar-for-dollar any charitable employee donation made to a nonprofit, up to $10,000.

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Apple admitted that they made a mistake and rescinded layoffs and cuts in employee hours in retail stores. They also apologized over a product warranty issue.

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Successful release of iPhone 5.

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Company dividend paid in March 2012.

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Considering manufacturing back in the U.S.

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iPad and iPhone are still significant sales drivers

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Suggested Team Exercise for Chapter 11 Break the class into teams and have the teams perform the following discussion tasks: •

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Ask students to individually list the three most important characteristics they want in a leader. Next, put them in groups of three and have them compile their lists and come to a consensus on the top three. Ask them if they displayed any of the highly rated characteristics in their group interaction.

Could an outstanding leader in one organization move into an entirely different organization and still be an outstanding leader? For example, could a great football coach with evident leadership abilities be hired as a CEO of a large company such as General Motors and be equally successful? How important I expertise? Can you provide any “real-life” examples of the “transferability” or “portability” of leadership?

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CHAPTER 12 Individual Behavior There’s Beauty in Individual Differences Chapter 12 Overview Each Chapter contains several inset features designed to assist the student reader in applying the concepts to relevant examples. Management Live illustrates how popular movies demonstrate management concepts in the chapter. Role Models features a management professional that illustrates key chapter concepts in a novel, visionary or inspirational way.

Explore Yourself refers students to self assessment activities relevant to concepts in the chapter. Ethics Check profiles examples of ethical issues in management. Manager's Library features books that illustrate current events or trends relevant to chapter concepts. Facts to Consider introduces research or trends that may be used for class discussion in the classroom or online for distance learning.

Chapter Twelve begins with a discussion of perception, the process through which people receive and interpret information from the environment. A review of common perceptual distortions include: stereotypes, halo effects, selective perception, and projections. The act of selective perception and its dangers is reviewed. Examples are given of attribution errors, or the tendency to blame others when something goes wrong. A discussion of impression management or how others perceive us is covered.

Next is a discussion of personality and a review of how personalities influence behavior.

Various personality assessments are discussed, one of which is The Myers-Briggs, containing four dimensions. The “Big Five” personality traits describing work-related individual differences are outlined and identified. They include extraversion, agreeableness, conscientiousness, emotional stability, and openness to experience. A few other personality traits like locus of control, authoritarianism, Machiavellianism, self-monitoring, and Type A are discussed. The chapter explores the topic of stress, its consequences, and how it can be managed in the workplace.

Finally, the influence of attitudes, emotions and moods on individual behavior is discussed.

The chapter reviews the three components of attitude, a predisposition to act in a certain way toward people and environmental factors. Presented is the topic of job satisfaction, and the factors which influence the attitude people hold about many things in the workplace. They include job tasks, quality of supervision, co-workers, opportunities, pay, work conditions, and security. The complexity of the relationship between job satisfaction and work performance is examined. Once again, the topic of emotional intelligence is addressed as an important human skill and leadership capability for managers to have. The difference between emotion, a strong feeling directed toward someone or something and a mood, positive or negative feelings or states of mind which can be persistent influences on one’s behavior is explained.

Constructive and destructive stresses are covered along with some tactics for managing stress.

Chapter 12 Takeaway Questions: Takeaway 12.1 How Do Perceptions Influence Individual Behavior?

Takeaway 12.2 How Do Personalities Influence -Individual Behavior? .

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Takeaway 12.3 How Do Attitudes, Emotions, and Moods Influence Individual Behavior?

Chapter 12 Objectives: • • • • • • • • • • • • • • • • • • • •

To define perception and its influence on behavior.

To list common perceptual distortions which can obscure individual differences in the workplace.

To explain the halo effect.

To define selective perception.

To explain the concept of attribution and attribution error, or the process of developing explanations for events and their perceived causes.

To explore how impression management influences how others perceive us.

To explain how self-serving bias transfers blame from oneself.

To list the Big Five Personality factors.

To explain the Myers-Brigg Type Indicator (MBTI) and how it identifies personality types.

To define additional personality dimensions of work significance.

To explain how stress accompanies extraordinary demands, constraints or opportunities.

To understand how people with a Type A personality create stress from continued feelings of impatience and pressure.

To explain the impact of various levels of stress on individuals.

To define attitude as a predisposition to act in a certain way toward people and environmental factors.

To explain cognitive dissonance or what happens when attitude is inconsistent with behavior.

To describe job satisfaction and the various factors which influence the attitude people hold about things in the workplace such as co-workers, the job, and other aspects of the work setting.

To describe how job satisfaction influences various behaviors in the workplace.

To describe the complex relationship between job satisfaction and job performance.

To define emotions and how they influence behavior.

To define moods and their pervasiveness and influence on one’s behavior.

Chapter 12 Lecture Outline: Takeaway 12.1 How Do Perceptions Influence -Individual Behavior?

• Perception filters information received from our environment.

• Perceptual distortions can obscure individual differences.

• Perception can cause attribution errors as we explain events and problems.

• Impression management is a way of influencing how others perceive us.

Takeaway 12.2 How Do Personalities Influence -Individual Behavior?

• The Myers-Briggs Type Indicator is a popular approach to personality assessment.

• The Big Five personality traits describe work-related individual differences. .

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• Personalities vary on personal conception and emotional adjustment traits.

• People with Type A personalities tend to stress themselves.

• Stress has consequences for work performance and personal health.

• Stress can be managed by good decisions and personal wellness.

Takeaway 12.3 How Do Attitudes, Emotions, and Moods Influence -Individual Behavior?

• Attitudes predispose people to act in certain ways.

• Job satisfaction is a positive attitude toward one’s job and work experiences.

• Job satisfaction influences work behavior.

• Job satisfaction has a complex relationship with job performance.

• Emotions and moods are positive and negative states of mind that influence behavior.

Chapter 12 Supporting Materials: Figures Figure 12.1 How Does Perception Influence Communication?

Thematic Boxes and More • Management Live: Ambition and The Social Network • Role Models: Richard Branson Leads With Personality and Flamboyance • Ethics Check: Is Personality Testing in Your Future?

• Facts to Consider: Survey Shows Dissatisfaction and Pessimism in Lower Economic Classes • Manager’s Library: Women Count: A Guide to Changing the World by Susan Bulkeley Butler • Find Inspiration: Spanx Has Lots of Snap • Explore Yourself: Ambition • Tips to Remember: Type-A Personalities Bring Stress On Themselves • Table 12.1 How to Identify the Big Five Personality Traits Applications • TestPrep 12 Multiple-Choice Questions • Skill Building Portfolio o Self-Assessment 12: Stress Test o Class Exercise 12: Job Satisfaction Preferences o Team Project 12: Difficult Personalities • Case Snapshot: Business in Trouble – Pass the Buck on Blame • Sidebar case: The New Leadership IQ – Empathy, Self-Awareness, and Social Skills • Hot Topic: Good Idea or Not? Some employers provide time for yoga and meditation

Chapter Outline: Takeaway Question 12.1: How do Perceptions Influence Individual Behavior?

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Perception is the process through which people receive and interpret information from the environment

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See Figure 12.1 for a depiction of the effects of perception on communication How Does Perception Influence Communication?

Perception is the process of receiving and interpreting information from our environment. It acts as a screen or filter through which we interpret messages in the communication process. And perceptions influence how we behave in response to information received. Because people often perceive the same things quite differently, perception is an important issue in respect to individual behavior at work. Perceptual distortions in the form of stereotypes, halo effects, projection, and selective perception can lead to inaccurate assumptions regarding other people and events.

Perceptual distortions can obscure individual differences Common perceptual distortions: • • • •

Stereotypes occur when a person identifies someone with a group or category, and then use the attributes associated with the group or category to describe the individual Halo effect occurs when we use one characteristic of a person or situation to form an overall impression Selective perception is the tendency to single out for attention those aspects of a situation or person that reinforce or appear consistent with one’s existing beliefs, values, or needs Projection occurs when we assign our personal attributes to other individuals

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Manager’s Library: Women Count: A Guide to Changing the World by Susan Bulkeley Butler Seventy percent of women with children work and forty percent of them are the primary wage earner for their families. In Women Count, author Susan Bulkeley Butler asserts that women have behavioral advantages over men for management careers including being more compassionate, less ego-driven, better listeners, take fewer risks and have a tendency to be consensus builders. In spite of these attributes, women are only 3% of Fortune 500 CEOs. Reflect and React questions focus on the challenges of being a woman in management and ways to increase representation in upper management.

Perception can cause attribution errors as we explain events and problems • Attribution is developing explanations or assigning causes for events • Fundamental attribution error tendency when something goes wrong for another person, we assume that internal forces were primarily to blame and lessen the role of external forces. In short, "it was their own fault."

• Self-serving bias is the tendency for people to blame their personal failures or problems on external causes and underestimate the role of personal responsibility.

In short "it wasn't MY fault!"

Impression management is a way of influencing how others perceive us

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Impression management – the systematic attempt to influence how others perceive us

Role Models: It's hard to discuss Sir Richard Branson without using words like flamboyant, creative, ambitious and unique. This feature profiles his road to success and his big personality. In addition to the questions in What's the Lesson Here?

Consider asking students to evaluate Branson's personality according to the Big Five Personality Traits and the Myers-Briggs Type Indicator. The “What’s the Lesson Here?” questions ask whether actions speak louder than impressions and if you’re not at the top, should you be more worried about the impression you give and how it might affect your career?

12.1 Questions for discussion suggested answers How do advertising firms use stereotypes to influence consumer behavior?

1)

Advertising uses stereotypes to help promote the appeal or products or services. Stereotypes help target products to the appropriate market such as men or women.

Are there times when a self-serving bias is actually helpful?

2)

There are not many situations where having self-serving bias is constructive; it can lead to poor decisions and deflect needed improvement in personal skills. The exception to this may be in entry level positions at a very early stage when it may instill confidence until one arms himself or herself with stronger skills.

3) Does the notion of impression management contradict the idea of personal -integrity?

There is no conflict between trying to look your best or promote or market yourself with personal integrity. A conflict could occur if you did so at the expense of another person to gain an “edge.”

Takeaway Question 12.2: How Do Personalities Influence Individual Behavior?

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Personality is the combination of characteristics that makes us unique.

The Myers-Briggs Type indicator is a popular approach to personality assessment • Myers-Briggs type indicator - based on work of psychologist Carl Jung • Four main dimensions of personality ➢ Extraversion/Introversion - how we relate to others ➢ Sensation/Intuition - how we gather information ➢ Thinking/Feeling - how we evaluate information ➢ Judging/Perceiving how we react to the outside world Ethics Check: Is Personality Testing in Your Future?

The Ethics Check feature begins with a sample letter inviting a student/applicant for a second interview that includes a round of personality tests. You Decide questions probe students’ opinions about whether they would consider this to be an invasion of privacy and if the results could be discriminatory if they don't specifically apply to the job.

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Further discussion topics for students could involve what personality traits they consider relevant to a management position, using Myers-Briggs Type Indicator.

What are the ethical issues associated with the use of personality testing? In which In which situations might the use of personality tests be an invasion of privacy? Also, suppose that the specific personality test being used is not predictive of employee performance on the job. Could its use be termed unethical?

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The Big Five personality traits describe work-related individual differences ✓ See table 12.1 for how to identify the Big Five personality traits: ✓ Extroversion, extraversion, agreeableness, conscientiousness, emotional stability, and openness

DISCUSSION TOPIC Have students describe themselves in terms of the Big Five personality traits. Also have them describe how their personality profile (in terms of these traits) seems to influence their behavior. You may wish to do this as an outside homework assignment.

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Personalities vary on personal conception and self-monitoring traits.

Additional personality traits that can influence how people behave and work together include: ✓ Locus of control - belief in the amount of control a person has over personal destiny ➢ Internal- belief in personal control over success or failure, self confident ➢ External - belief that what happens is beyond personal control. Fate, luck and chance are strong influence. Less self confident. ✓ Authoritarianism - degree to which a person respects authority and accepts status differences. ✓ Machiavellianism -emotionally detached and uses power and political behavior to manipulate others ➢ Hi-Mach - exploitative, believes the ends justify the means even if questionable ethical behavior is necessary ➢ Low-Mach - allows other to exert power over them ✓ Self-monitoring - open to feedback and able to adjust as circumstances change

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People with Type A personalities tend to stress themselves • Stress is a state of tension experienced by individuals facing extraordinary demands, constraints or opportunities • Type A personality describes someone that is high in achievement orientation, impatience, and perfectionism • Stressors - sources of stress

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Stress has consequences for work performance and personal health • Constructive stress is a positive influence on effort, creativity and diligence in work • Destructive stress is dysfunctional when it is or seems to be so intense or long lasting that it overloads and breaks down a person’s physical and mental systems • Job burnout is a sense of physical and mental exhaustion that can be incapacitating both personally and professionally 12-6

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Workplace rage - overly aggressive behavior toward co-workers, bosses, or customers Personal wellness - the pursuit of a personal health-promotion program

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Stress Can Be Managed by Good Decisions and Personal Wellness ➢ Manage stress from reaching excessive levels. This means first identifying stressors – work-related and personal. ➢ Take action to avoid or minimize the negative consequences of stress. ➢ Action should be taken for those showing stress symptoms in the workplace. ➢ Actions can include: temporary changes in work schedules, reduced performance expectations, longer deadlines, and even the suggestion to take some time off. Studies show that after some time off results in greater job satisfaction and better work-life balance. ➢ Personal wellness – there is no substitute for personal wellness. Take responsibility for your own personal and mental health.

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Find Inspiration: Spanx Has Lots of Snap Creative, outgoing, passionate, driven, persistent, and ambitious—these adjectives and more describe Sara Blakely and her personality. They can also go a long way in explaining how and why she was successful with Spanx, a panty hose for women which shapes. The question posed is: Any manager needs to understand people, both others and themselves. When you look in the mirror, what and whom do you see?

12.2 Questions for discussion suggested answers 1) Which personality trait would you add to the Big Five to make it the Big “Six”?

I would add “effort.” Individuals vary significantly in their individual effort and energy expended at work. This may range from “driven” and “committed” to “lazy” at the opposite extreme.

2) What are the advantages and disadvantages of having people of different MBTI types working on the same team?

Diversity brings creativity to problem solving. Organizations need creative, outgoing, reflective, thoughtful, detail oriented and intuitive people to avoid "group think" and represent many points of view.

3) Can you be an effective manager and not have a Type A personality?

Yes. Although many entrepreneurs and managers share type A characteristics there is a strong need for managers with strong people skills that do not necessarily need to be as driven and focused as a type A manager.

Takeaway Question 12.3: How do Attitudes, Emotions, and Moods Influence Individual Behavior? o Attitudes predispose people to act in certain ways ✓ An attitude is a predisposition to act in a certain way toward people and environmental factors

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Cognitive dissonance is the discomfort we feel in situations where our attitude is inconsistent with our behavior See the margin figure for the three components of individual attitudes: cognition, affect, and behavior.

Job satisfaction is a positive attitude toward one’s job and work experiences • Job satisfaction is the degree to which an individual feels positive or negative about various aspects of his job and work experiences • Components of job satisfaction are the job itself, quality of supervision, coworkers, pay, work conditions, and security •

Facts to Consider: Survey Shows Dissatisfaction and Pessimism in Lower Economic Classes This feature concludes that more Americans are self-identifying as members of the lower or lower-middle classes. Research data shows 32% of adults defining themselves in this economic category, an increase of 7% between 2008 and 2012.

The largest proportion of them, 39% is under the age of 30. Questions to discuss with students: Are these data consistent with what you hear in conversations with family and friends? How do you believe the current economy affects job satisfaction and satisfaction with life overall? What’s the mood among your friends who are seeking jobs?

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Job satisfaction influences work behavior ✓ Withdrawal behaviors - such as absenteeism and turnover indicate employees are not satisfied with jobs ✓ Organizational citizenship behaviors - such as going the extra mile and willingness to do more than required ✓ Employee engagement - sense of belonging and connection with work and employer.

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Job satisfaction has a complex relationship with job performance • Modest link between job satisfaction and performance and vice versa • The margin graphic illustrates the relationship between job satisfaction and performance

DISCUSSION TOPIC Ask those students who have been gainfully employed to describe what they found to be satisfying about their jobs. Also ask them to discuss how those things affected their work behavior.

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Emotions and moods are positive and negative states of mind that influence behavior • Emotional Intelligence (EI) - ability to understand and manage emotions • Emotions - strong feelings directed toward someone or something • Moods - generalized positive and negative feelings or state of mind • Mood contagion - influence of one's positive or negative moods onto others.

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People are different; our styles vary in the way we work, relate to others, and even in how we view ourselves. One of the differences you might observe when interacting with other people is in ambition, or the desire to succeed and reach for high goals. In our earlier discussion of Sir Richard Branson, he was described as ambitious. Ask students if they see themselves as ambitious? Do they have the drive to be successful as Sir Richard? Ambitious individuals have a high tolerance for stress. Students can evaluate their own stress tolerance by taking the stress test in the Skill-Building portfolio. Get to know yourself better by taking the Stress Test self-assessment and completing the other activities in the Exploring Management Skill-Building Portfolio.

12.3 Questions for discussion suggested answers 1) Is cognitive dissonance a good or bad influence on us?

Cognitive dissonance can be both a good or negative influence on us. It may be easier to display a positive attitude even though our internal feelings are not satisfactory or happy. In that case, communications may lack candor. In other cases, most of us encounter aspects of our jobs or responsibilities that we disdain on occasion. Displaying a “different” positive attitude may be incongruent, but may be more effective if we conclude that it is simply not “a big deal.”

2) How can a manager deal with someone who has high job satisfaction but is a low performer?

If a worker is satisfied but is performing at a low level, the best way to deal with such an employee is to discuss the performance with that employee. Then challenges and specific goals and deadlines for improved performance should be detailed and communicated clearly.

3) What are the lessons of mood contagion for how a new team leader should -behave?

It's an old saying that attitudes are contagious. Mood contagion certainly backs that up. A new supervisor should demonstrate the moods or attitudes that he or she would like to see mirrored back by employees.

Teaching Notes In this section, ideas, exercises, and assignments are provided to assist you in integrating the concepts in Exploring Management for your students, especially the special features of the text.

Management Live: Ambition and The Social Network The Social Network is a wildly successful but mostly fictional account of Mark Zuckerberg and how Facebook came to be. Zuckerberg is certainly an interesting personality and serves as a great example of ambition. Appearing at a time when social media seem to rule the online world, Sony’s movie The Social Network made $23 million on opening weekend. It’s based on Facebook’s visionary and controversial founder Mark Zuckerberg, played by Jesse Eisenberg.

Although Zuckerberg calls it pure “fiction,” the movie raises ethical questions about his .

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actions while developing the initial website, refining it, and eventually turning it into a global company valued at over $50 billion.

Facts to Consider: Survey shows Dissatisfaction and Pessimism in Lower Economic Classes This feature concludes that more Americans are self-identifying as members of the lower or lower-middle classes. Research data shows 32% of adults defining themselves in this economic category, an increase of 7% between 2008 and 2012. The largest proportion of them, 39% is under the age of 30. Questions to discuss with students: Are these data consistent with what you hear in conversations with family and friends? How do you believe the current economy affects job satisfaction and satisfaction with life overall? What’s the mood among your friends who are seeking jobs?

Role Models: Richard Branson Leads with Personality and Flamboyance It's hard to discuss Sir Richard Branson without using words like flamboyant, creative, ambitious and unique. This feature profiles his road to success and his big personality. In addition to the questions in What's the Lesson Here? Consider asking students to evaluate Branson's personality according to the Big Five Personality Traits and the Myers-Briggs Type Indicator. The “What’s the Lesson Here?” questions ask whether actions speak louder than impressions and if you’re not at the top, should you be more worried about the impression you give and how it might affect your career?

Find Inspiration: Spanx Has A lot of Snap Creative, outgoing, passionate, driven, persistent, and ambitious—these adjectives and more describe Sara Blakely and her personality. They can also go a long way in explaining how and why she was successful with Spanx. Any manager needs to understand people, both others and themselves. When you look in the mirror, what and whom do you see?

Manager's Library: Women Count: A Guide to Changing the World by Susan Bulkeley Butler Seventy percent of women with children work and forty percent of them are the primary wage earner for their families. In Women Count, author Susan Bulkeley Butler asserts that women have behavioral advantages over men for management careers including being more compassionate, less ego-driven, better listeners, take fewer risks and have a tendency to be consensus builders. In spite of these attributes, women are only 3% of Fortune 500 CEOs. “Reflect and React” questions focus on the challenges of being a woman in management and ways to increase representation in upper management.

Ethics Check: Is Personality Testing in Your Future?

The Ethics Check feature begins with a sample letter inviting a student/applicant for a second interview that includes a round of personality tests. The “You Decide” questions probe

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students’ opinions about whether they would consider this to be an invasion of privacy and if the results could be discriminatory if they don't specifically apply to the job.

Further discussion topics for students could involve what personality traits they consider relevant to a management position, using Myers-Briggs Type Indicator. What are the ethical issues associated with the use of personality testing? In which situations might the use of personality tests be an invasion of privacy? Also, suppose that the specific personality test being used is not predictive of employee performance on the job. Could its use be termed unethical?

Explore Yourself: Ambition People are different; our styles vary in the way we work, relate to others, and even in how we view ourselves. One of the differences you might observe when interacting with other people is in ambition, or the desire to succeed and reach for high goals. In our earlier discussion of Sir Richard Branson, he was described as ambitious. Do your students see themselves as ambitious? Do they have the drive to be successful as Sir Richard? Ambitious individuals have a high tolerance for stress. Students can evaluate their own stress tolerance by taking the stress test in the Skill-Building portfolio. Ambition is one of those traits that can certainly have a big impact on individual behavior. It is evident in how we act and what we try to achieve at work, at home, and in leisure pursuits. It comes out in personality as competitiveness and desire to be the best at something. The more we understand ambition in our lives, and the more we understand how personality traits influence our behavior, the more successful we’re likely to be in accomplishing our goals and helping others do the same.

Get to know yourself better by taking the Stress Test self-assessment and completing the other activities in the Exploring Management Skill-Building Portfolio.

Hot Topic: Good Idea or Not? Some employers provide time for yoga and meditation Management scholars and consultants are paying a lot of attention to employee wellness.

Gone are the days when the only investment employers make in training is on “hand skills.”

It’s a whole new world out there. General Mills calls its Mindful Leadership Program one where meditation and yoga are encouraged and facilitated. Over 80% of participants say it helps them be more productive, improves their decision making, and makes them better listeners. The “Final Take” questions ask: Is General Mills on to something that other employers, large and small alike, should be copying? Or is this just a luxury approach that few employers can afford and few employees really want to bother with?. Should this be part of any wellness program? Just how far should organizations go in trying to encourage people to join in these types of activities?

Career Situation: What Would You Do? •

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While standing in line at the office coffee machine, you overhear the person in front of you saying this to his friend: “I’m really tired of having to deal with the old-timers here.

It’s time for them to call it quits. There’s no way they can keep up the pace and handle all the new technology we’re getting these days.” You can listen and forget, or you can listen and act. What would you do or say here, and why?

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You’ve noticed that one of your co-workers is always rushing, always uptight, and constantly criticizing herself while on the job. She never takes time for coffee when the rest of you do, and even at lunch it’s hard to get her to stay and just talk for awhile.

Your guess is that she’s fighting stress from some source or sources other than the nature of the job itself. How can you help her out?

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Your team leader has just told you that some of your teammates have complained to him that you have been in a really bad mood lately and it is rubbing off on the others.

They like you and point out that this isn’t characteristic of you at all. They don’t know what to do about it. Can they do anything to help? Is there anything your team leader might do? What is your responsibility here, and how can you best handle the situation?

Terms to Define Agreeableness Attitude Attribution Authoritarianism Cognitive dissonance Conscientiousness Constructive stress Destructive stress Emotion Emotional intelligence Emotional stability Employee engagement Extraversion Flameout Fundamental attribution error Halo effect Impression management Job burnout Job satisfaction

Locus of control Machiavellianism Mood Mood contagion Openness Organizational citizenship behaviors Perception Personal wellness Personality Projection Selective perception Self-monitoring Self-serving bias Stereotype Stress Type A personality Withdrawal behaviors Workplace rage

Multiple-Choice Questions Multiple-Choice Questions

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1. Among the Big Five personality traits, __________indicates someone who tends to be responsible, dependable, and careful in respect to tasks. (a) authoritarian (b) agreeable (c) conscientious (d) emotionally stable 2. A person with a/an _________personality would most likely act unemotional and manipulative when trying to influence others to achieve personal goals. (a) extroverted (b) sensation-thinking (c) self-monitoring (d) Machiavellian 3. When a person tends to believe that he or she has little influence over things that happen in life, this indicates a/an _________personality. (a) low emotional stability (b) external locus of control (c) high self-monitoring (d) intuitive-thinker 4. How is a person with an authoritarian personality expected to act? (a) Strong tendency to obey orders. (b) Challenges the authority of others. (c) Tries to play down status differences. (d) Always flexible in personal behavior.

5. A new team leader who designs jobs for persons on her work team mainly “because I would prefer to work the new way rather than the old,” is committing a perceptual error known as _________ (a) the halo effect (b) stereotyping (c) impression management (d) projection 6. If a manager allows one characteristic of a person—say, a pleasant personality—to bias performance ratings of that individual overall, the manager is falling prey to a perceptual distortion known as _________ (a) the halo effect (b) impression management (c) stereotyping (d) projection 7. Use of special dress, manners, gestures, and vocabulary words when meeting a prospective employer in a job interview are all examples of how people use _________in daily life. (a) the halo effect (b) impression management (c) introversion (d) mood contagion 8. _________is a form of attribution error that involves blaming the environment for problems that we may have caused ourselves. (a) Self-serving bias (b) Fundamental attribution error (c) Projection .

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(d) Self-monitoring 9. _________is a form of attribution error that involves blaming others for problems that they may not have caused for themselves. (a) Self-serving bias (b) Fundamental attribution error (c) Projection (d) Self-monitoring 10. The _________component of an attitude is what indicates a person’s belief about something, while the _________component indicates a specific positive or negative feeling about it. (a) cognitive; affective (b) emotional; affective (c) cognitive; attributional (d) behavioral; attributional 11. The term for the discomfort someone feels when his or her behavior turns is inconsistent with a previously expressed attitude is _________ (a) alienation (b) cognitive dissonance (c) job dissatisfaction (d) job burnout 12. Job satisfaction is known from research to be a strong predictor of _________ (a) job performance (b) job burnout (c) conscientiousness (d) absenteeism 13. A person who is always willing to volunteer for extra work or to help someone else with his or her work is acting consistent with strong _________ (a) job performance (b) self-serving bias (c) emotional intelligence (d) organizational citizenship 14. A/an _________represents a rather intense but short-lived feeling about a person or a situation, whereas a/an _________describes a more generalized positive or negative state of mind. (a) stressor; role ambiguity (b) external locus of control; internal locus of -control (c) self-serving bias; halo effect (d) emotion; mood 15. Which statement about the job satisfaction–job performance relationship is most true based on research? (a) A happy worker will be a productive worker. (b) A productive worker will be a happy worker. (c) A productive worker well rewarded for performance will be a happy worker. (d) There is no relationship between being happy and being productive in a job.

Short-Response Questions: 16. What is the most positive profile of Big Five personality traits in terms of positive impact on .

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work behavior?

All of the Big Five personality traits are relevant to the workplace. To give some basic examples, consider the following. Extroversion suggests whether or not a person will reach out to relate and work well with others. Agreeableness suggests whether or not a person is open to the ideas of others and willing to go along with group decisions. Conscientiousness suggests whether someone can be depended on to meet commitments and perform agreedupon tasks. Emotional stability suggests whether or not someone will be relaxed and secure, or uptight and tense, in work situations. Openness suggests whether someone will be open to new ideas or resistant to change.

17. What is the relationship between personality and stress?

The Type A personality is characteristic of people who bring stress on themselves by virtue of personal characteristics. These tend to be compulsive individuals who are uncomfortable waiting for things to happen, who try to do many things at once, and who generally move fast and have difficulty slowing down. Type A personalities can be stressful for both the individuals and the people around them. Managers must be aware of Type A personality tendencies in their own behavior and among others with whom they work.

Ideally, this awareness will help the manager take precautionary steps to best manage the stress caused by this personality type.

18. How does the halo effect differ from selective perception?

The halo effect occurs when a single attribute of a person, such as the way he or she dresses, is used to evaluate or form an overall impression of the person. Selective perception occurs when someone focuses in a situation on those aspects that reinforce or are most consistent with his or her existing values, beliefs, or experiences.

19. If you were going to develop a job satisfaction survey, exactly what would you try to measure?

Job satisfaction is an attitude that reflects how people feel about their jobs, work settings, and the people with whom they work. A typical job satisfaction survey might ask people to respond to questions about their pay, co-worker relationships, quality of supervisor, nature of the work setting, and the type of work they are asked to do. These questions might be framed with a scale ranging from “very satisfied” to “not satisfied at all” for each question or job satisfaction dimension.

Integration and Application Questions: 20. When Scott Tweedy picked up a magazine article on “How to Manage Health Care Workers,” he was pleased to find some apparent advice. Scott was concerned about poor performance by several of the respiratory therapists in his clinic. The author of the article said that the “best way to improve performance is to make your workers happy.” Well, Scott was happy upon reading this and made a pledge to himself to start doing a much better job of “making the therapists happy in the future.” .

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Questions: Is Scott on the right track? Should he charge ahead as planned, or should he be concerned about this advice? What do we know about the relationship between job satisfaction and performance, and how can this understanding be used by Scott in this situation?

Scott needs to be careful. Although there is modest research support for the relationship between job satisfaction and performance, there is no guarantee that simply doing things to make people happier at work will cause them to be higher performers. Scott needs to take a broader perspective on this issue and his responsibilities as a manager. He should be interested in job satisfaction for his therapists and do everything he can to help them to experience it. But he should also be performance oriented and understand that performance is achieved through a combination of skills, support, and motivation. He should be helping the therapists to achieve and maintain high levels of job competency. He should also work with them to find out what obstacles they are facing and what support they need—things that perhaps he can deal with in their behalf. All of this relates as well to research indications that performance can be a source of job satisfaction. And finally, Scott should make sure that the therapists believe they are being properly rewarded for their work since rewards are shown by research to have an influence on both job satisfaction and job performance.

Self-Assessment 12: Stress Test Instructions Complete the following questionnaire. Circle the number that best represents your tendency to behave on each bipolar dimension.

Am casual about appointments1 2 3 4 5 6 7 8 Am never late for appointments Am not competitive 1 2 3 4 5 6 7 8 Am very competitive Never feel rushed 1 2 3 4 5 6 7 8 Always feel rushed Take things one at a time 1 2 3 4 5 6 7 8 Try to do many things at once Do things slowly 1 2 3 4 5 6 7 8 Do things fast Express feelings 1 2 3 4 5 6 7 8 “Sit on” feelings Have many interests 1 2 3 4 5 6 7 8 Have few interests but work Scoring Total the numbers circled for all items, and multiply this by 3; enter the result here [___________].

Points Personality Type 120+ A+ 106-119 A 100-105 A90-99 B+ below 90 B

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Class Exercise 12: Job Satisfaction Preferences Preparation Rank the following items from 1 = least important to 9 = most important to your future job satisfaction.

My job will be satisfying when: 1. It is respected by other people.

2. It encourages continued development of knowledge and skills.

3. It provides job security.

4. It provides a feeling of accomplishment.

5. It provides the opportunity to earn a high income.

6. It is intellectually stimulating.

7. It rewards good performance with recognition.

8. It provides comfortable working conditions.

9. It permits advancement to high administrative responsibility.

Instructions Form into groups as designated by your instructor. Within each group, the men should develop a consensus ranking of the items as they think women ranked them. The reasons for the rankings should be shared and discussed so they are clear to everyone. The women in the group should not participate in this ranking task. They should listen to the discussion and be prepared to comment later in class discussions. A spokesperson for the men in the group should share the group’s rankings with the class.

Optional Instructions Form into groups consisting entirely of men or women. Each group should meet and decide which of the work values members of the opposite sex will rank first. Do this again for the work value ranked last. The reasons should be discussed, along with the reasons why each of the other values probably was not ranked first—or last. A spokesperson for each group should share group results with the rest of the class.

Team Project 12: Difficult Personalities Question What personalities cause the most problems when people work together in teams, and what can be done to best deal with them?

Instructions 1. Do a survey of friends, family, co-workers, and even the public-at-large to get answers to these questions: a. When you work in a team, what personalities do you have the most difficulty dealing with? .

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b. How do these personalities affect you, and how do they affect the team as a whole? c. In your experience and for each of the “difficult personalities” that you have described, what have you found to be the best way of dealing with them? d. How would you describe your personality, and are there any circumstances or situations in which you believe others could consider your personality “difficult” to deal with? e. Do you engage in any self-management when it comes to your personality and how it fits when you are part of a team?

2. Gather the results of your survey, organize them for analysis, and then analyze them to see what patterns and insights your study has uncovered.

3. Prepare a report to share your study with the rest of your class.

Cases for Critical Thinking: Business in Trouble – Pass the Buck on Blame Sidebar: The New Leadership IQ – Empathy, Self Awareness, and Social Skills The case profiles the concept of self-serving bias in the case of business failure. Why did Borders fail? When burger Giant McDonald’s makes a blunder, who is to blame? If a CEO gets fired, was it her fault? The case addresses how executives address a company’s failure, everpresent, when things go awry. It is common to deny responsibility and blame organizational and personal problems on external causes “beyond control.” After all, there is a lot to be learned from admitting fault, right?

Case discussion questions and suggested answers: 1. DISCUSSION This case opened with the example of Borders and questioned the placement of blame for its performance failures. It may be easy to criticize executives for self-serving bias in such situations. But, how do you draw the line between blaming the environment correctly and incorrectly for problems, even the most devastating ones? What case can you make that what happened to Borders was really out of top management control?

How do you draw the line between blaming the environment correctly and incorrectly for problems, even the most devastating ones? It is difficult to draw a distinct line. There remains ambiguity and some grey area. It is complex, and therefore difficult to draw a distinct line, when evaluating the many internal and external environmental factors impacting a company’s results.

Is what happened to Borders really out of top management control? If so, the entire retail book industry (including Barnes and Noble) would have fallen flat. The argument critics have made against Borders is that Barnes and Noble, a formidable competitor to Border’s, has survived despite similar environmental factors. These include: increased online book sales, digital downloads, and the Great Recession. What can be clearly .

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delineated from the external factors is the fact that Border’s quick growth, a result of decisions made by management, saddled the company with exorbitant levels of debt. In addition, the lack of a cohesive top management team for any length of time didn’t help matters.

2. DISCUSSION Emotions are everywhere, including the workplace. No doubt leaders should be good at dealing with emotions. But, can a concern for emotions reach the point where it gets in the way of making timely and performance-driven decisions? Are there any limits on emotional intelligence as an executive or team leader skill?

Can a concern for emotions reach the point where it gets in the way of making timely and performance-driven decisions? Yes, over concern for emotions can reach a point where it can impede decisions, and thus, results. Staying focused on goals, strategies and execution and implementation is paramount. Having said that, a leader should not be completely unemotional. However, there does remain a balance between concern for emotions and making sound and rational decisions.

Are there any limits on emotional intelligence as an executive or team leader skill?

Emotional intelligence, like personal growth and transformation can be unlimited. As human beings, in both personal and professional roles, we continue to learn and grow through life’s experiences. We learn from mistakes and experience is our greatest teacher.

Removing the dark cloud of feelings, sometimes arising from “a place of the unknown” can bring about more effective results for most leaders. We have all lived to regret something said in the heat of the moment. As emotions rise, intelligence can fall.

3. PROBLEM SOLVING Fast food, sugary drinks…they’re under attack these days. But should the companies that make and sell them be blamed for societal problems with obesity and unhealthy habits?

What about those who choose to consumer them? Are lawsuits like the one filed against McDonald’s justified? If you were CEO of McDonald’s, Wendy’s Coca Cola, or PepsiCo, what would worry you about such issues? What steps could you take to manage perceptions of your company while still meeting customer demands for tasty drinks and fast foods?

This answer will vary. Some blame fast food companies for getting kids hooked on unhealthy food through marketing gimmicks like toys, on-site play areas, and clowns like Ronald McDonald. The American Academy of Pediatrics is quoted as saying: “Advertising directed toward children is inherently deceptive and exploits children under eight years of age."

McSpellit Club is one example of marketing to small school children. McDonald’s rewards children with free Chicken McNuggets, burgers, and fries for academic success. At one school, McDonald’s painted a mural on the walls and installed a mini.

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McDonald’s where students could redeem award coupons.

CEOs of fast food companies should be very worried about the epidemic of childhood obesity (and Diabetes). Many fast food companies now provide healthy choices on menus. Education and easily accessible nutritional information (nearby brochures) for food items is now included. Some fast food companies have campaigns encouraging kids to stay active and to “get out and play. These programs are all intended to create healthier choices and of course, to manage perceptions.

McDonald’s has created more “mix and match” options (with healthier choices) with its Happy Meals.

Morgan Spurlock’s documentary, Supersize Me, highlighted the obesity epidemic by interviewing experts and subjecting himself to a 30-day McDonald’s-only diet. He gained 24 pounds over 30 days.

4. FURTHER RESEARCH Research examples of three recently failed companies – large or small – and examine their causes and reasons for failure. Look for quotes from company executives that might explain why the company failed. Check what outside observers and former employees have to say. How is self-serving bias at play in each situation and on the parts of the different observers? What lessons can be learned here on managing perceptions for better decision making?

Failures: Company Ritz Camera Centers

Kodak

THQ (video game developer)

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Why? Chief Restructuring Officer Marc Weinsweig cited the 2008 ongoing recession caused Ritz's 2008 holiday sales to be "materially lower" than a year earlier.

Retail and online film developing competition As the company became more successful, complacency grew. The company never took action to combat technology and competitive challenges.

Kids games and licensed titles were no longer sure bets. Attributed to overall industry changes. CEO Jason Rubin is quoted: Unfortunately, the mistakes that were made long before I joined, like the incredible losses attached to uDraw, massive wasted capital in the unpublished MMO that was cancelled, sticking with children's and casual titles far after mobile and tablets had killed the business, bad, late, or otherwise inferior titles like Homefront, and a generally haphazard and inefficient approach to deal making, left the

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company with too much negative hanging on its books.”

Lost touch with its greatest asset, its people.

An “outrageously obsolete infrastructure and a dysfunctional supply chain.” “dated business plan geared toward the rural south of 20 years ago.” The chain began in the South. major retailers like Wal-Mart entered the video-selling business. Heavily weighted with debt.

Netflix.

Suggested Team Exercise for Chapter 12 Break the class into teams and have the teams discuss various techniques or methods that individuals in the team have found to be successful in dealing with stress. Each team should develop a list of “tactics to deal with stress” based on their team discussions. After the teams have had sufficient time to develop their lists, have each team report and share their ideas with the rest of the class.

Additional team exercise: Break the class into teams and ask the teams to consider each of the flowing communication scenarios and to discuss and summarize their answers to each scenario: 1. You are the CEO of a company and, because of very poor sales due to the recent recession, have determined that you need to terminate 10% of your workforce as a cost control measure. How would you communicate this message to all employees in a large company with multiple locations?

2. You need to advise an employee who works in customer service that he or she is too abrasive with customers based on surveys that you have received. Where and how would you communicate this issue?

3. You are the Manager of Employee Benefits and want to communicate a change in the car mileage reimbursement rate from $.55 a mile to $.50 a mile for use of employees’ personal automobiles for company business. How would you do this?

4. You are the CEO of a pharmaceutical company and have just learned that the Food and Drug Administration has approved one of your drugs for use in cancer treatment. You need to advise your immediate executive staff. However this is very sensitive information. How would you do this?

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CHAPTER 13 Motivation Respect Unlocks Human Potential Chapter 13 Overview Each Chapter contains several inset features designed to assist the student reader in applying the concepts to relevant examples. Management Live illustrates how popular movies demonstrate management concepts in the chapter. Role Models features a management professional that illustrates key chapter concepts in a novel, visionary or inspirational way. Explore Yourself refers students to self assessment activities relevant to concepts in the chapter. Ethics Check profiles examples of ethical issues in management. Manager's Library features books that illustrate current events or trends relevant to chapter concepts. Facts to Consider introduces research or trends that may be used for class discussion in the classroom or online for distance learning.

Chapter Thirteen reviews motivation and the various theories that researchers have developed regarding this topic. Each theory is explored, including potential benefits and limitations or challenges. The theories are organized into human needs, thought processes and decisions, and reinforcement and their impact on motivation.

The chapter begins by describing and examining in detail the major theories of work motivation.

Next, the chapter explains the content motivation by looking at Maslow’s hierarchy of needs theory, Alderfer’s ERG theory, Herzberg’s two-factor theory, and McClelland’s acquired-needs theory. The cognitively-based process theories of motivation of equity theory, expectancy theory, goal-setting theory, and self-efficacy theory are explored next. Reinforcement theory, which uses environmental consequences to explain motivation, follows. The chapter goes on to a discussion of job design and how it can motivate workers, through simplification, rotation, enlargement, and enrichment.

Chapter 13 Takeaway Questions: Takeaway 13.1 How Do Human Needs Influence Motivation to Work?

Takeaway 13.2 How Do Thoughts and Decisions Affect Motivation to Work?

Takeaway 13.3 How Does Reinforcement Influence Motivation to Work?

Chapter 13 Objectives: • • • • .

Define motivation and needs Describe work practices that satisfy higher-order and lower-order needs in Maslow’s hierarchy Contrast Maslow’s hierarchy with ERG theory Describe work practices that influence hygiene factors and satisfier factors in Herzberg’s 13-1

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two-factor theory • Explain McClelland’s needs for achievement, affiliation, and power • Describe work conditions that satisfy a person with a high need for achievement • Explain the roles of social comparison, over-reward inequity and under-reward inequity, in Adams’s equity theory • Contrast equity sensitivity for: benevolents, sensitives, and entitleds • Define expectancy, instrumentality, and valence • Explain Vrooms’s expectancy theory equation.

• Explain Locke’s goal-setting theory • Describe self-efficacy and explain four ways to increase it • Explain the law of effect and operant conditioning • Illustrate how positive reinforcement, negative reinforcement, punishment, and extinction influence work behavior • Explain the reinforcement technique of shaping • Describe how managers can use the laws of immediate and contingent reinforcement • List guidelines for positive reinforcement and punishment

Chapter 13 Lecture Outline: Takeaway 13.1 How Do Human Needs Influence Motivation to Work?

• Maslow described a hierarchy of needs topped by self-actualization.

• Alderfer’s ERG theory deals with existence, relatedness, and growth needs.

• McClelland identified acquired needs for achievement, power, and affiliation.

• Herzberg’s two-factor theory focuses on higher-order need satisfaction.

• The core characteristics model integrates motivation and job design.

Takeaway 13.2 How Do Thoughts and Decisions Affect Motivation to Work?

• Equity theory explains how social comparisons motivate individual behavior.

• Expectancy theory considers Motivation = Expectancy x Instrumentality x Valence.

• Goal-setting theory shows that well-chosen and well-set goals can be motivating.

Takeaway 13.3 How Does Reinforcement Influence Motivation to Work?

• Operant conditioning influences behavior by controlling its consequences.

• Positive reinforcement connects desirable behavior with pleasant -consequences.

• Punishment connects undesirable behavior with unpleasant consequences.

Chapter 13 Supporting Materials: Figures Figure 13.1 What Are the Opportunities for Need Satisfaction in Maslow’s Hierarchy?

Figure 13.2 What Are the Motivational Implications of Job Content and Job Context in Herzberg’s Two-Factor Theory?

Figure 13.3 How Do Core Characteristics Influence -Motivation Through Job Design?

Figure 13.4 How Can Managers Use the Insights of the Expectancy Theory of Motivation? .

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Figure 13.5 How Can Managers Use Reinforcement Strategies to Influence Work Behavior?

Thematic Boxes and More • Management Live: Engagement and The Incredibles • Role Models: Social Entrepreneur Finds Rewards from Helping Those in Need • Ethics Check: Information Goldmine is an Equity Dilemma • Facts to Consider: Europe Turns to Quotas to Increase Female Board Members • Manager’s Library: Drive: The Surprising Truth About What Motivate Us By Daniel H. Pink • Find Inspiration: HopeLabFights Disease with Fun • Explore Yourself: More on Engagement • Tips to Remember: How to Make Goal Setting Work for You • Table 13.1 Guidelines for Positive Reinforcement and Punishment Applications • TestPrep 13 Multiple-Choice Questions • Skill Building Portfolio o Self-Assessment 13: Two-Factor Profile o Class Exercise 13: Why We Work o Team Project 13: CEO Pay • Case Snapshot: Salesforce.com – Instant Praise, Instant Criticism • Sidebar case: Digging in to a Free Lunch

Chapter Outline: Takeaway Question 13.1: How Do Human Needs Influence Motivation to Work?

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Motivation forces within the individual that account for the level, direction and persistence of effort expended at work.

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Maslow described a hierarchy of needs topped by self-actualization ✓ Abraham Maslow’s developed the theory of hierarchy of needs.

See Figure 13.1 What Are the Opportunities for Need Satisfaction in Maslow’s Hierarchy?

For higher-order need satisfaction, people realize self-actualization by doing creative and challenging work and participating in important decisions; they boost self-esteem through promotions and praise, and by having responsibility for an important job. For lower-order need satisfaction, people meet social needs through positive relationships with coworkers, supervisors, and customers; they achieve safety needs in healthy working conditions and a secure job with good pay and benefits; and they realize physiological needs by having reasonable work hours and comfortable work spaces.

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Lower order needs are physiological, safety, and social concerns Higher order needs are esteem and self-actualization Deficit principle states that a satisfied need is not a motivator of behavior Progression principle states that people try to satisfy lower level needs first, then move step-by-step up the hierarchy DISCUSSION TOPIC

You can generate discussion by asking students to identify the types of rewards that could be used to satisfy the various needs. Also have the students identify whether the rewards they cited are intrinsic or extrinsic, and discuss how the different need levels are related to these types of rewards.

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Alderfer’s ERG theory focuses on existence, relatedness, and growth needs ✓ Clayton Alderfer developed the ERG theory which collapses Maslow’s five needs into three: ➢ Existence (desires for physiological and material well-being) ➢ Relatedness (desires for satisfying interpersonal relationships) ➢ Growth (desires for continued psychological growth and development) ➢ Frustration-regression principle says that an already satisfied lower level need can be reactivated when a higher level need cannot be satisfied.

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McClelland identified acquired needs for achievement, power, and affiliation ✓ David McClelland and colleagues identified three basic acquired needs that are central to understanding motivation: ➢ Need for achievement is the desire to do something better or more efficiently ➢ Need for power is the desire to control other people ➢ Need for affiliation is the desire to establish and maintain friendly and warm relations with other people ✓ There are also two types of power need: ✓ The need for personal power is exploitative and involves manipulation for the pure sake of personal gratification ✓ The need for social power involves the use of power in a socially responsible way, one that is directed toward group or organizational objectives rather than personal ones.

DISCUSSION TOPIC McClelland uses a Thematic Apperception Test (TAT) to measure the strengths of the needs for achievement, power, and affiliation. The Thematic Apperception Test (TAT) is based on need interpretations of descriptions of various stimulus situations. To help students understand how this works, describe the following scenario: In one case, McClelland tested three executives using a photograph that showed a man sitting down and looking at family photos arranged on his work desk. One executive wrote of an engineer who was daydreaming about a family outing scheduled for the next day (need for .

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affiliation). Another described a designer who had picked up an idea for a new gadget from remarks made by his family (need for power). The third saw an engineer who was intently working on a bridge-stress problem that he seemed sure to solve because of his confident look (need for achievement). ✓ Inset: Work Preferences of High Need Achievers ➢ Individual Responsibilities ➢ Challenging but achievable goals ➢ Performance feedback •

Find Inspiration: HopeLab Fights Disease with Fun HopeLab is the brainchild of Pam Omidvar, an immunology researcher and gaming enthusiast who saw the possible link between games and fighting disease. While many teens play video games just for fun, teens with cancer can now play ones that can help them beat the disease. Picture a teenager who has a tough time keeping up with cancer medication schedules. Now imagine him playing the video game called Re-Mission and maneuvering a nanobot called Roxxi through the body of a cancer patient to destroy cancer cells.

Ask students to think about what creative approaches to motivation might be used to improve lives in other ways as well. ✓ Inset: Two Types of Power Need ➢ Need for Personal Power ➢ Need for Social Power

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Herzberg’s two-factor theory focuses on higher-order need satisfaction ✓ The Explore Yourself feature directs students to take the Two Factor Assessment in the Skill-building Portfolio. After the assessment, consider these discussion questions: ➢ How well does your current or a recent job provide for satisfier or hygiene factors as described by Herzberg? If students do not have jobs they can relate to, have them consider their educational experience in your class or college. ➢ How does this affect your motivation? ➢ How can these factors be modified to increase motivation and commitment? ✓ Figure 13.2 illustrates Herzberg’s two-factor theory.

What Are the Motivational Implications of Job Content and Job Context in Herzberg’s Two-Factor Theory ✓ Scholars criticize this theory because of its research foundations. However, Herzberg makes an interesting and useful distinction between the motivational implications of job content and job context. He believes that you can’t increase job satisfaction and motivation by improving hygiene factors in the job context, for example, by increasing wages. This only reduces levels of dissatisfaction. Instead, he argues in favor of improving satisfier factors in the job content, things like responsibility and recognition. In the two-factor theory, such changes are pathways to higher job satisfaction and motivation.

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Satisfier factors (motivator factors) are part of job content; sense of achievement, feelings of recognition, a sense of responsibility, the opportunity for advancement, and feelings of personal growth ➢ Hygiene factors (“turn off workers”; dissatisfier factors) are part of job context; working conditions, interpersonal conditions, interpersonal relations, organizational policies and administration, technical quality of supervision, and base wage or salary ✓ Job satisfaction cannot be increased by improving the hygiene factors; you will only get less dissatisfaction. You can only improve job satisfaction by improving the satisfier factors ✓ Job enrichment involves building into a job more opportunities for people to manage themselves and exercise self-control over their work. Job enrichment increases job satisfaction according to Herzberg DISCUSSION TOPIC For those students who have held jobs, ask them to identify work situations where they experienced satisfaction and work situations where they experienced dissatisfaction. For those students who have not held any jobs have them identify educational situations where they have experienced satisfaction or dissatisfaction. Have the students share their examples while you record them on the chalkboard or a flipchart. After all the examples have been recorded, have the class compare the satisfying and dissatisfying situations to Herzberg’s hygiene factors and satisfier factors.

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The core characteristics model integrates motivation and job design ✓ Job design is the allocation of specific work tasks to individuals and groups ✓ Job enrichment increases the content of a job by adding opportunities for satisfying higher order needs (Maslow) by adding opportunities for planning and controlling work. ✓ Figure 13.3 How Do Core Characteristics Influence Motivation Through Job Design? ✓ Five "core" job characteristics include" ➢ Skill variety ➢ Task identity ➢ Task significance ➢ Autonomy ➢ Feedback from the job itself ➢ Jobs that are high in these characteristics provide job holders with experienced meaningfulness and responsibility as well as knowledge of results. Under the right contingency conditions—high growth need strength and satisfaction with job context—these critical psychological states are motivational and set the stage for positive job outcomes.

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There’s a lot of attention being given these days to the levels of engagement displayed by people at work. Differences in job engagement are evident in a variety of ways. This chapter discusses how to create engagement through motivation tools.

Ask students to take a look around the classroom. What do you see and what would you predict for the future of your classmates based on the engagement they now show as students? Who might you want to hire for an important job someday, and who would you pass on?

13.1 Questions for discussion suggested answers 1) Was Maslow right in suggesting we each have tendencies toward self--actualization?

Yes, most humans want to be fulfilled doing whatever it is they are most skilled at and that makes them most happy. Very few are able to ever reach that pinnacle-but it is nevertheless a goal for most of us.

2) Is high need for achievement always good for managers?

The need for achievement is a mostly positive force and can result in a healthy drive for meaningful accomplishment as well as contributions to society. Taken to extremes or used unethically, it can result in undesirable, even dangerous behavior. Ruthless dictators or dishonest CEOs or corrupt politicians are examples of drive combined with a lack of ethics that has negative consequences. For most individuals with ethics, excessive drive can lead to an unhealthy balance between career and personal life/family happiness.

3) Why can’t job enrichment work for everyone?

Not everyone approaches work with the maturity or intellect necessary to desire more responsibility or self control in work. Young part-time workers and temporary workers among others may desire job simplification rather than job enrichment.

Takeaway Question 13.2: How Do Thoughts and Decisions Affect Motivation at Work?

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Equity theory explains how social comparisons motivate individual behavior ✓ J. Stacy Adams developed this theory. The inset figure illustrates the concept ✓ Equity Theory says that employees continually compare their situations to others; any perceived inequities in those comparisons will motivate them to engage in behaviors which correct the inequities ✓ Perceived negative inequity creates a sense of anger; and causes employees to try and restore perceived equity to the situation, such as by reducing current work efforts to compensate for the missing rewards or by even quitting the job ✓ Perceived positive inequity is associated with a sense of guilt; and the individual restores perceived equity by increasing the quantity or quality of work, taking on more difficult assignments or working overtime

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DISCUSSION TOPIC Ask students to think about a job they have held or currently hold. Next, ask them if they feel they were rewarded fairly. Many are likely to say that they were not paid enough, or that the work was not challenging enough. From here on, you can use these students’ experiences as examples of people who have experienced negative inequity. Be sure to ask them how they responded to the inequity. In nearly all cases, students will indicate that they exhibited one of the responses to perceived inequity that are listed below.

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Ethics Check: Information Goldmine is an Equity Dilemma What would you do in a situation where you found a document left behind with a list of performance evaluations, pay, and bonuses for 80 of your co-workers? Upon examining the document more closely, what would you do if you discovered that your hard work and long hours were not yielding you the same pay as new hires being brought on at a higher pay rate? Would you hit “print” and make 80 copies to place in each person’s mailbox? Or would you leave them stacked in a couple of convenient locations? Would either of these be ethical?

Ask student how the equity theory explains a worker’s anger and depression upon finding out she earned less that workers she perceived as not working as hard as she does?

If she enjoyed her job before she learned of the pay inequity, why did she lose motivation over the salary discrepancy? Does this disprove Herzberg's two-factor theory?

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Expectancy theory considers motivation = expectancy x instrumentality x valence ✓ Developed by Victor Vroom. The inset figure illustrates the concept. ✓ Motivation = Expectancy X Instrumentality X Valence ✓ Expectancy is a persons’ belief that working hard will result in achieving a desired level of task performance ✓ Instrumentality is a persons’ belief that successful performance will lead to rewards ✓ Valence is the value a person assigns to the possible rewards and other work-related outcomes

See Figure 13.4 How Can Managers Use the Insights of the Expectancy Theory of Motivation?

This summarizes the management implications of expectancy theory. Managers should act in ways that maximize expectancies, instrumentalities, and valences for others. To maximize expectancy, they need to hire capable workers, train and develop them continuously, and communicate goals and confidence in their skills. To maximize instrumentality, managers must clarify and stand by performance-reward linkages. Finally, to maximize valence, they need to understand individual needs and try to tie work outcomes to important sources of need satisfaction.

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Goal-setting theory says that well chosen and well set goals can be motivating ✓ Developed by Edwin Locke ✓ Goal-setting theory says that task goals can be highly motivating, but only if they are the right goals and if they are set in the proper way ✓ MBO can be a good example 13-8

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DISCUSSION TOPIC A useful way to help students understand the multiplier effect of expectancy theory is to relate it to their own academic experiences. Ask students to think about their motivation in their various classes. Do they believe that if they work hard, they will be able to achieve a high level of performance (expectancy)? If they succeed in performing well, do they expect to be rewarded with a high grade (instrumentality)? Finally, do they value a high grade (valence)? If the answer to any of these questions is “no,” their motivation will suffer.

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Tips to Remember: How to Make Goal Setting Work for You ✓ Set specific goals—avoid more generally stated ones, such as “Do your best.” ✓ Set challenging goals—when realistic and attainable, they motivate better than easy ones. ✓ Build commitments—people work harder for goals they accept and believe in. ✓ Clarify priorities—expectations should be clear on which goals to pursue first. ✓ Provide good feedback—people need to know how well they are doing.

Reward results—give reinforcement; don’t let accomplishments pass unnoticed.

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Facts to Consider: Europe Turns to Quotas to Increase Female Board Members In the US and Europe, women lag behind men in upper level management positions and on corporate boards. In fact, Thailand leads the world with 45% of senior management positions being held by women as compared with only 15% in the U.S. The feature takes a look at how the problem is being faced in Great Britain and France.

Your Thoughts questions probe reasons for the discrepancy. When it comes to getting women their fair shares of board seats, is current underrepresentation a “pipeline” problem—just not enough qualified women available for these senior positions at this point in time? Or, is it a “discrimination” problem—men at the top of headhunting firms and corporations still aren’t ready to open the doors to female candidates? And when it comes to correcting the problem, is it enough to keep the data in front of the decision makers and hope for change? Or, are quotas like the one used in France the way to go?

13.2 Questions for discussion suggested answers 1) Is it against human nature to work harder as a result of perceived positive -inequity?

People are as different as snowflakes and their motives are equally complex. Some may see positive inequity figure that they deserve it and choose not to work any harder.

Others will feel real guilt and work harder because they want to appear to earn the rewards of the positive inequity. Ask students what they would do if they felt a grade on a paper or case was overly generous. Would they work harder next time or not? Does it make a difference if others know the grade.

2) Can a person with low expectancy ever be motivated to work hard at a task?

Expectancy is the belief that hard work will result in achieving a desired level of task performance. Low expectancy would indicate that a worker wouldn't believe that working hard would achieve the expected level of performance. This would likely create a worker that put forth a half-hearted effort because he or she didn't believe that working any harder would help. This may be pretty common for new employees .

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learning a complex task, or someone learning to play an instrument or learning a new sport like snowboarding. In most of these cases, it takes a manager, teacher or coach to help develop expectancy in the discouraged newcomer.

3) Will goal-setting theory work if the goals are fixed and only the means for achieving them are open for discussion?

It's very common to have goals established without input from workers. Deciding how to best accomplish the goals may be empowering and motivational.

Takeaway Question 13.3: How does reinforcement influence motivation to work?

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Operant conditioning influences behavior by controlling its consequences ✓ Law of effect says that people generally repeat behavior that results in a pleasant outcome and avoid behavior that results in an unpleasant outcome ✓ Operant conditioning is the process of is the process of applying the law of effect to influence behavior by manipulating its consequences ✓ Positive reinforcement strengthens or increases the frequency of desirable behavior by making a pleasant consequence contingent on its occurrence ✓ Negative reinforcement strengthens or increases the frequency of desirable behavior by making the avoidance of an unpleasant consequence contingent on its occurrence ✓ Punishment decreases the frequency of or eliminates undesirable behavior by making an unpleasant consequence contingent on its occurrence ✓ Extinction decreases the frequency of or eliminates undesirable behavior by making the removal of a pleasant consequence contingent on its occurrence See Figure 13.5 How Can Managers Use Reinforcement Strategies to Influence Work Behavior?

To strengthen quality work, a supervisor might use positive reinforcement by praising the individual or negative reinforcement by no longer complaining to him about poor-quality work.

To discourage poor-quality work, a supervisor might use extinction (withholding things that are positively reinforcing, such as outcomes) or punishment (associating the poor-quality work with unpleasant results for the individual).

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Role Models: Social Entrepreneur Finds Rewards from Helping Those in Need Have you ever associated having a pair of shoes with access to education? In 2006, while traveling through Argentina, Blake Mycoskie witnessed firsthand the suffering endured by children without shoes. These children, more susceptible to cuts, scrapes, sores and even infections from soil-transmitted diseases, he was “instantly struck with the desire – the responsibility – to do more.” What’s the Lesson Here questions ask how Mycoskie’s motivation to run a successful business that allows him to help the needy can be explained through reinforcement principles and the role of extrinsic and intrinsic rewards in his story of successful social entrepreneurship? Do intrinsic and extrinsic rewards conflict or compliment with one another?

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✓ Law of contingent reinforcement states: for a reward to have maximum reinforcing value, it must be delivered only if the desired behavior is exhibited ✓ Law of immediate reinforcement states: the more immediate a reward after the desired behavior is exhibited, the greater the reinforcing value of the reward. Table 13.1 list guidelines for using these laws in the workplace. ✓ Shaping is the creation of a new behavior by the positive reinforcement of successive approximations to it ✓ Continuous reinforcement schedule administers a reward each time a desired behavior occurs ✓ Intermittent reinforcement schedule rewards behavior only periodically ✓ Generally, continuous reinforcement will elicit a desired behavior more quickly than intermittent reinforcement ➢ Behavior acquired under an intermittent schedule will be more permanent than will behavior acquired under a continuous schedule ✓ Table 13.1 Guidelines for Positive Reinforcement and Punishment ➢ Positive Reinforcement: Clearly identify desired work behaviors, maintain a diverse inventory of rewards, inform everyone what must be done to get rewards, recognize individual differences when allocating rewards, follow the laws of immediate and contingent reinforcement ➢ Punishment: Tell the person what is being done wrong, tell the person what is being done right, make sure the punishment matches the behavior, administer the punishment in private, follow the laws of immediate and contingent reinforcement.

DISCUSSION TOPIC Tampa Electric uses punishment in an interesting way. The company gives an oral reminder to employees who come in late, mistreat a colleague, or do a sloppy job. Next comes a written reminder. Then a paid day off is scheduled –– it’s called a “decision-making leave day.” After this day off employees must agree orally or in writing that they will be on their best behavior for the next year. This is an all-or-nothing chance to reform; employees who don’t shape up are terminated. Since the process is documented, it’s perfectly legal.

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Punishment connects undesirable behavior with unpleasant consequences ✓ Punishment tries to eliminate undesirable behavior by making an unpleasant consequence contingent with its occurrence. ✓ To punish an employee, for example, a manager may deny a valued reward – such as verbal praise or merit pay, or deliver an unpleasant outcome – such as a verbal reprimand or a pay reduction. ✓ All too often, punishment is done too frequently and poorly. ✓ Table 13.1 provides advice on how to best handle punishment when necessary.

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DISCUSSION TOPIC An excellent way to introduce the material on reinforcement theory is to conduct a “shaping exercise.” This exercise involves the following steps: 1.

Solicit a volunteer from the class to serve as an employee.

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Ask the volunteer if he or she has ever seen or heard of the “shaping exercise” before; if he/she has, find a new volunteer.

Explain to the class that the volunteer will be the employee and the class will serve as a composite manager/supervisor. The manager will try to shape the employee’s behavior by yelling hot, hot whenever the employee engages in a behavior that approximates the desired response. Conversely, whenever the employee engages in a behavior that does not resemble the desired behavior, the manager will say cold, cold.

Ask the volunteer to leave the room for a few minutes.

Tell the class that they want the employee to walk backwards.

Ask the employee to step back into the room.

Run the exercise.

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You will find that the class is usually able to shape the desired response with remarkable speed.

The class usually enjoys this exercise, and it provides an excellent lead-in to the discussion of the law of effect and shaping, since hot, hot was as a positive outcome which increased the desired response, while cold, cold served as a negative outcome which effectively decreased undesirable responses.

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Manager’s Library: Drive: The Surprising Truth About What Motivates Us By Daniel Pink Author Daniel Pink makes some very interesting points about how we are motivated as workers in Drive. His findings that managers will find more success in motivating workers by appealing to intrinsic motivation by making work more interesting and creative and appealing to supervise their own work. This is a great application of Herzberg's two-factor theory of motivation.

Several good videos of Pink discussing his findings are online including a humorous and relevant talk on www.ted.com under “Pink on Motivation.”

13.3 Questions for discussion suggested answers 1) Is operant conditioning a manipulative way to influence human behavior?

One of the concerns that many people have regarding operant conditioning is that it is, in fact, a manipulative methodology. Nevertheless, in certain situations, especially short-term in nature, it is an effective technique.

2) When is punishment justifiable as a reinforcement strategy?

Punishment is appropriate when an employee has performed poorly, endangered others, committed a crime, or other serious offenses or incidents. Progressive discipline policies apply punishment for unacceptable behavior in the workplace. .

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3) Is it possible for a manager, or parent, to only use positive reinforcement?

It is not likely that a manager or parent will only be able to use positive reinforcement.

Humans will make mistakes and not always operate at perfectly or even at a high level.

Teaching Notes In this section, ideas, exercises, and assignments are provided to assist you in integrating the concepts in Exploring Management for your students, especially the special features of the text.

Management Live: Engagement and The Incredibles Mr. Incredible (voiced by Craig T. Nelson) is no longer allowed to be a superhero. In his new life, he is Bob Parr, an ordinary claims adjuster for Insuricare. He works in a cubicle in a massive office complex. Parr hates his job because it is monotonous and because it doesn’t use his special skills. And, because his boss prohibits him from helping truly needy customers. When Gilbert Huph (voiced by Wallace Shawn) calls Parr into his office for a lecture and threatens to fire him, it pushes Parr to the breaking point.

Many of us see ourselves as Mr. Incredible. Capable of greatness if our superpowers were only recognized and utilized. The big difference is that Mr. Incredible actually does have superpowers. The rest of us need to work with our mortal abilities and hopefully find a manager who knows how to motivate us to great feats.

Turning back to our roles as managers, how will we find ways to motivate our own employees and keep them engaged? Their superpowers and attitudes are all different. How will we know what motivates them?

Facts to Consider: Europe Turns to Quotas to Increase Female Board Members In the US and Europe, women lag behind men in upper level management positions and on corporate boards. In fact, Thailand leads the world with 45% of senior management positions being held by women as compared with only 15% in the U.S. The feature takes a look at how the problem is being faced in Great Britain and France. Your Thoughts questions probe reasons for the discrepancy. When it comes to getting women their fair shares of board seats, is current underrepresentation a “pipeline” problem—just not enough qualified women available for these senior positions at this point in time? Or, is it a “discrimination” problem—men at the top of headhunting firms and corporations still aren’t ready to open the doors to female candidates?

And when it comes to correcting the problem, is it enough to keep the data in front of the decision makers and hope for change? Or, are quotas like the one used in France the way to go?

Role Models: Social Entrepreneur Gets Rewards from Helping Those in Need Have you ever associated having a pair of shoes with access to education? In 2006, while traveling through Argentina, Blake Mycoskie witnessed firsthand the suffering endured by children without shoes. These children, more susceptible to cuts, scrapes, sores and even .

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infections from soil-transmitted diseases, he was “instantly struck with the desire – the responsibility – to do more.” What’s the Lesson Here questions ask how Mycoskie’s motivation to run a successful business that allows him to help the needy can be explained through reinforcement principles and the role of extrinsic and intrinsic rewards in his story of successful social entrepreneurship? Do intrinsic and extrinsic rewards conflict or compliment with one another?

Find Inspiration: HopeLab Fights Disease with Fun While many teens play video games just for fun, teens with cancer can now play ones that can help them beat the disease. Picture a teenager who has a tough time keeping up with cancer medication schedules. Now imagine him playing the video game called Re-Mission and maneuvering a nanobot called Roxxi through the body of a cancer patient to destroy cancer cells.

And, then think about an article in the medical journal Pediatrics that says teen patients who play the game at least one hour a week do a better job sticking to their medication schedules.

HopeLab is the brainchild of Pam Omidvar, an immunology researcher and gaming enthusiast who saw the possible link between games and fighting disease. HopeLab received the Social Enterprise Award of the Year from Fast Company magazine. Ask students to think about what creative approaches to motivation might be used to improve lives in other ways as well.

Manager's Library: Drive: The Surprising Truth About What Motivates Us By Daniel H. Pink Author Daniel Pink makes some very interesting points about how we are motivated as workers in Drive. His findings that managers will find more success in motivating workers by appealing to intrinsic motivation by making work more interesting and creative and appealing to supervise their own work. This is a great application of Herzberg's two-factor theory of motivation.

Several good videos of Pink discussing his findings are online including a humorous and relevant talk on www.ted.com http://www.ted.com/talks/lang/eng/dan_pink_on_motivation.html

Ethics Check: Information Goldmine is an Equity Dilemma In this Ethics Check feature, a worker opens a huge can of perceived inequity worms when she finds a list of confidential co-worker salaries in a photocopier. The You Decide questions focus on the ethics of sharing the information, but the application to chapter 13 don't stop there.

Consider discussing: How does Equity Theory explain the worker's anger and depression upon finding out she earned less that workers she perceived as not working as hard as she does?

If she enjoyed her job before she learned of the pay inequity, why did she lose motivation over the salary discrepancy. Does this disprove Herzberg's two-factor theory?

Explore Yourself: Engagement

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There’s a lot of attention being given these days to the levels of engagement displayed by people at work. Differences in job engagement are evident in a variety of ways. Is someone enthusiastic or lethargic, diligent or lazy, willing to do more than expected or at best willing to do only what is expected? Managers want high engagement by members of their work units and teams, and the ideas of this chapter offer many insights on how to create engagement by using the different theories of motivation.

Ask students to take a look around the classroom. What do you see and what would you predict for the future of your classmates based on the engagement they now show as students? Who might you want to hire for an important job someday, and who would you pass on?

The assessment for this Chapter is entitled “Two Factor Profile” The assessment tool is intended to help students determine the relative importance students place on motivation (satisfier) factors or hygiene (dissatisfier) factors in the workplace. Once students have completed the assessment, refer them back to Herzberg's two-factor theory and have them list the factors in the appropriate category in order of importance. Group or class discussion of results will follow.

Career Situation: What Would You Do? •

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Two student workers are being considered for promotions at a campus recreation center that you manage. One works really well with people and seems to thrive on teamwork and social interaction. The other tackles tough jobs with enthusiasm and always wants to do her best, while preferring to do things alone rather than with others. The center’s staff is expanding and you have the flexibility to design jobs to best fit each student. What jobs would you create for them, and why?

It’s apparent that something is wrong with Kate. Her great performance as a Web designer got her promoted to team leader for Web Design Services. But you notice that she now appears anxious, stressed, and generally unhappy in the new assignment. This is quite a contrast from the highly motivated and happy Kate you knew in her old job. What might be wrong here, and what can you, as her supervisor, do to help fix it?

You can predict with great confidence that when Jason comes to a meeting of your student team, he will spend most of his time cracking jokes, telling stories, and otherwise entertaining other team members. He doesn’t do any real work. In fact, his behavior makes it hard for the team to accomplish much in its meetings. But Jason’s also a talented guy. How can you put reinforcement theory to work here and turn Jason the mischief maker into a solid team contributor?

Tips to Remember: How to Make Goal Setting Work for You • Set specific goals—avoid more generally stated ones, such as “Do your best.”

• Set challenging goals—when realistic and attainable, they motivate better than easy ones.

• Build commitments—people work harder for goals they accept and believe in.

• Clarify priorities—expectations should be clear on which goals to pursue first. .

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• Provide good feedback—people need to know how well they are doing.

• Reward results – give reinforcement; don’t let accomplishments pass unnoticed.

Terms to Define Existence needs

Negative -reinforcement

Expectancy

Operant conditioning

Extinction

Perceived negative inequity

Growth needs

Perceived positive inequity

Higher-order needs

Positive reinforcement

Hygiene factors

Punishment

Instrumentality

Relatedness needs

Job design

Satisfier factors

Job enrichment

Self-efficacy

Law of contingent reinforcement

Shaping

Law of effect

Valence

Law of immediate reinforcement Lower-order needs Motivation Need Need for achievement Need for affiliation Need for power

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Multiple-Choice Questions Multiple-Choice Questions 1. Maslow’s progression principle stops working at the level of _____________needs. (a) growth (b) self-actualization (c) achievement (d) self-esteem 2. Lower-order needs in Maslow’s hierarchy correspond to _____________needs in ERG theory. (a) growth (b) affiliation (c) existence (d) achievement 3. A worker high in need for _____________power in McClelland’s theory tries to use power for the good of the organization. (a) position (b) expert (c) personal (d) social 4. In the _____________theory of motivation, an individual who feels underrewarded relative to a co-worker might be expected to reduce his or her work efforts in the future. (a) ERG (b) acquired needs (c) two-factor (d) equity 5. Which of the following is a correct match? (a) McClelland–ERG theory (b) Skinner–reinforcement theory (c) Vroom–equity theory (d) Locke–expectancy theory 6. In Herzberg’s two-factor theory, base pay is considered a/an _____________factor. (a) hygiene (b) satisfier (c) equity (d) higher-order 7. The expectancy theory of motivation says that Motivation = Expectancy  Instrumentality  _____________ (a) Rewards (b) Valence (c) Equity (d) Growth 8. When a team member shows strong ego needs in Maslow’s hierarchy, the team leader should find ways to link this person’s work with _____________ (a) compensation tied to team performance (b) individual praise and recognition (c) social interaction with other team members (d) challenging individual performance goals 9. When someone has a high and positive “expectancy” in expectancy theory of motivation, this means that the person _____________ (a) believes he can achieve performance -expectations (b) highly values the rewards being offered (c) sees a performance–reward link (d) believes rewards are equitable .

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10. The law of _____________states that behavior followed by a positive consequence is likely to be repeated, whereas behavior followed by an undesirable consequence is not likely to be repeated. (a) reinforcement (b) contingency (c) goal setting (d) effect 11. When a job allows a person to do a complete unit of work, it is high on which core characteristic? (a) task identity (b) task significance (c) task autonomy (d) feedback 12. _____________is a positive reinforcement strategy that rewards successive approximations to a desirable behavior. (a) Extinction (b) Negative reinforcement (c) Shaping (d) Merit pay 13. The purpose of negative reinforcement as an operant conditioning technique is to _____________. (a) punish bad behavior (b) discourage bad behavior (c) encourage desirable behavior (d) cancel the effects of shaping 14. The premise of reinforcement theory is that: (a) behavior is a function of environment (b) motivation comes from positive expectancy (c) higher-order needs stimulate hard work (d) rewards considered unfair are de-motivators 15. Both Barry and Marissa are highly motivated students. Knowing this, an instructor can expect them to be _____________ in the management course. (a) hard working (b) high performing (c) highly satisfied (d) highly dissatisfied

Short-Response Questions: 16. What preferences does a person high in the need for achievement bring to the workplace?

People high in need for achievement will prefer work settings and jobs in which they have: (1) challenging but achievable goals, (2) individual responsibility, and (3) performance feedback.

17. How can a team leader use goal-setting theory in working with individual team members?

One way for a team leader to use goal-setting principles in working with team members is to engage them in a process of joint goal-setting and performance review. In an earlier chapter on planning and controlling, this type of approach was described as “management by objectives.” It is really a good application of goal-setting theory. Participation of both team leader and team member in goal setting offers an opportunity to choose goals to .

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which the member will respond and which also will serve the team and organization as a whole. Furthermore, through goal setting, the team leader and team member can identify performance standards or targets. Progress toward these targets can be positively reinforced by the team leader. This type of approach harnesses the power of goal-setting theory by putting the team leader and team member together in a process where specific, challenging, and measureable goals can be set, and the team member can feel that he or she has helped set them.

18. What are three ways a worker might react to perceived negative inequity over a pay raise?

When perceived inequity exists an individual might (1) quit the job, (2) speak with the boss to try and increase rewards to the point where the inequity no longer exists, or (3) decide to reduce effort to the level that seems consistent with the rewards being received.

19. How can shaping be used to encourage desirable work behaviors?

Shaping encourages the formation of desirable work behaviors by rewarding successive approximations to those behaviors. In this sense, the behavior doesn’t have to be perfect to be rewarded—it just has to be moving in the right direction. Over time and with a change of reinforcement scheduling from continuous to intermittent, such rewards can end up drawing forth the desired behavior.

Integration and Application Questions: 20. I overheard a conversation between two Executive MBA students. One was telling the other: “My firm just contracted with Musak to have mood music piped into the offices at various times of the workday.” The other replied: “That’s a waste of money; there should be better things to do if the firm is really interested in increasing motivation and performance.” Question: Is the second student right or wrong, and why?

The use of Muzak would be considered improvement in a hygiene factor under Herzberg’s two-factor theory. Thus it would not be a source of greater work motivation and performance. Herzberg suggests that job content factors are the satisfiers or motivators. Based in the job itself, they represent such things as responsibility, sense of achievement, and feelings of growth. Job context factors are considered sources of dissatisfaction. They are found in the job environment and include such things as base pay, technical quality of supervision, and working conditions. Whereas improvements in job context such as introduction of Muzak make people less dissatisfied, improvements in job content are considered necessary to motivate them to high-performance levels.

Self-Assessment 13: Two-Factor Profile Instructions On each of the following dimensions, distribute a total of 10 points between the two options. For example: .

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Summer weather (7) (__) 1. Very responsible job 2. Recognition for work accomplishments workers 3. Advancement opportunities at work (__) 4. Opportunities to grow and learn on the job (__) 5. A job that I can do well employer (__) 6. A prestigious or high-status job

(3) (__) (__)

Winter weather Job security (__) Good relations with co-

(__) (__) (__)

A boss who knows his/her job well (__) Good working conditions Supportive rules, policies of

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A high base wage or salary

Scoring Summarize your total score for all items in the left-hand column and write it here. MF = ___________.

Summarize your total score for all items in the right-hand column and write it here. HF = ___________.

Interpretation The MF score indicates the relative importance that you place on the motivating, or satisfier, factors in Herzberg’s two-factor theory. This shows how important job content is to you. The HF score indicates the relative importance that you place on hygiene, or dissatisfier, factors in Herzberg’s two-factor theory. This shows how important job context is to you.

Class Exercise 13: Why We Work Preparation Read this “ancient story.”

In days of old, a wandering youth happened upon a group of men working in a quarry.

Stopping by the first man, he said: “What are you doing?” The worker grimaced and groaned as he replied: “I am trying to shape this stone, and it is backbreaking work.”

Moving to the next man, the youth repeated the question. This man showed little emotion as he answered: “I am shaping a stone for a building.” Moving to the third man, our traveler heard him singing as he worked. “What are you doing?” asked the youth. “I am helping to build a cathedral,” the man proudly replied.

Instructions In groups assigned by your instructor, discuss this short story. (1) Ask and answer the question: “What are the motivation and job design lessons of this ancient story?” (2) Have members of the group role-play each of the stonecutters as they are answering this additional question: “Why are you working?” Have someone in the group be prepared to report and share the group’s responses with the class as a whole.

Team Project 13: CEO Pay Question .

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What is happening in the area of executive compensation and what do you think about it?

Instructions 1. Check the latest reports on CEO pay. Get the facts and prepare a brief report as if you were writing a short, informative article for Fortune magazine. The title of your article should be “Status Report: Where We Stand Today on CEO Pay.” 2. Address the equity issue: Are CEOs paid too much, especially relative to the pay of average workers?

3. Address the pay-for-performance issue: Do corporate CEOs get paid for performance or for something else? What do the researchers say? What do the business periodicals say? Find some examples to explain and defend your answers to these questions.

4. Address the social responsibility issue: Should CEOs accept pay that is many times the amounts that workers receive?

5. Take a position: Should a limit be set on CEO pay? If not, why not? If yes, what type of limit should be set? Who, if anyone, should set these limits—the government, company boards of directors, or someone else?

Cases for Critical Thinking: Salesforce.com – Instant Praise. Instant Criticism Sidebar: Digging in to a Free Lunch Instead of waiting a year for a performance review, how would you like to know where you stand and always get immediate feedback about how you’re doing? Some human resource professionals call the annual performance review a “little more than a dysfunctional pretense.”

Enter Salesforce Rypple, a software solution which allows online questions to be posed to peers and managers, including: “What did you think of my presentation?” or “What can be done better?” Would more instantaneous feedback provide instant gratification? Or not?

Case discussion questions and suggested answers: 1. DISCUSSION What is your position on the annual performance review – past its “sell by” date, or just in need of some modest revisions? Even if real-time reviews are available using software like Salesforce Rypple, is there a need for a good annual performance review? In other words, does the annual review offer something that realtime review can’t?

An academic review showed that two-thirds of 600 employees interviewed say the appraisal has zero or even negative effects on performance after the feedback is administered. In essence, critics argue that the performance review does not provide motivation for employees – very few are motivated by criticism -- even when it is labeled “constructive.” Most employees find the review anxiety-provoking, stressful, demeaning, and one-sided. Many find themselves scared and surprised during the process. Add to that, a performance review that neatly fits into a box on a form. Most companies conduct this type of review.

The annual review can motivate some employees to evaluate their tenure with the .

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company and whether, after many (or not so many) years, things still “fit.” Of course, evaluating compensation, job progression, and career advancement is always part of the employee’s “internal” annual review. For some, the review is a time of reflection and its “motivational consequences” may propel a new job search. For those ready for new challenges that the company is unable to provide, it may be the time to begin a new job search. Some employees see the rewards of a flexible work schedule and adequate work-life balance as enough of a reward. The review can bring up a number of different emotions, so it is as much a review by the employee of the company as much as it is the company reviewing an employee.

Advocates of the annual performance review argue that some performance reviews, when done correctly, can motivate. After all, what are goals without the control process? Focusing on future plans and goals can inspire and motivate employees.

Having specific targets, coaching and providing feedback and keeping employees engaged can have positive motivational consequences. Motivation happens when performance is reviewed on an ongoing, daily basis – this may be what Culbert refers to as “doing something stupid more often.” Some purport to ongoing feedback as a means of increasing motivation and effectiveness.

2. DISCUSSION In addition to having a healthy an d free lunch as an employment perk, what other unique incentives and motivators are of interest to today’s high -talent college graduates? Other than a good salary, what incentives might cause you to choose one job offer over another? What’s on your list of top “must have” perks, and why?

Other unique incentives include: • • • • • • • • • • • • •

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Paid leave for working parents Paid leave for new father House cleaning In-house laundry Free food (some companies serve breakfast, lunch, and dinner) Lactation Rooms (this is now required by law) Benefits for adoptive parents Subsidized childcare Bring your pet to work Smartphone Paid time off to volunteer Unlimited vacation (Netflix) On-site concierge (Johnson & Johnson)

• • • •

No dress code (Netflix) Free child and doggie daycare (Genentech) Free transportation to work On-site pub and free beer (MillerCoors)

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3. PROBLEM SOLVING You’ve just taken a new job in human resource management and the organization’s president gave you this high -priority task: Give us a plan that can make performance reviews motivating to the recipients and their bosses alike. “I’m tired,” she says, “of hearing everyone complain that annual reviews are demotivating. We need to review performance. Surely there are ways that we can make ours more valuable.” As you sit down to think about this assignment, make a few notes on what you believe the major issues are and the types of things you might recommend. Use insights from motivation theories to justify what’s on your list.

Is it possible to take the subjectivity out of performance reviews so that they become more acceptable and motivational for recipients?

According to Culbertson, the notion of objectivity is absurd. Research shows that most employees who switch bosses end up with a dramatically different evaluation from a new boss. To remove the subjective annual performance review, Culbertson recommends what he calls a straight -talk “performance preview,” which is an ongoing discussion which takes place every time a boss and subordinate don’t agree that they are working well together. Instead of criticizing a subordinate, it is the responsibility of the boss to figure out how to work with an “imperfect” employee. According to Culbertson, “Previews are problem -solving, not problem-creating, discussions about how “we as teammates” are going to work together even more effectively and efficiently than we've done in the past. They feature descriptive conversations about how each person is inclined to operate, using past events for illustrative purposes, and how we worked well or did not work well individually and together.” This takes away the subjectivity which can oftentimes create cynicism, and what Culbertson called “cover your-butt” activities, which reduce productivity because of the time and effort they take.

Another way to get rid of the subjectivity of performance reviews is to conduct a 360 degree performance review (discussed in chapter 10). With this sort of review, feedback is provided by a variety of individuals with whom the employee interacts, rather than just one, usually a boss.

A manager could use a number of the motivational theories discussed in the chapter to build a better approach to performance reviews. They include: • • •

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Maslow’s Hierarchy of Needs: Understanding an employee’s lower order needs and higher order needs Alderfer’s ERG Theory: Understand the existence, relatedness and growth needs of each employee.

Herzberg’s Two-Factor Theory: Understanding the importance of hygiene factors such as Security, status, relationship with subordinates, personal life, salary, work conditions, relationship with supervisor and company policy and 13-23

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administration and motivational factors such as Growth prospectus job advancement, responsibility, challenges, recognition and achievements.

4. FURTHER RESEARCH

How about the real -time and Web-based approach to performance reviews offered by software such as Salesforce Rypple? Do some research and identify the latest developments with it and others like it. Is this online approach to performance assessment the right pathway to a more motivated workforce? What does the evidence say about benefits ? What downsides are users reporting? Overall, what’s the current verdict on Salesforce Rypple and similar products --good for bosses, good for employers, good for employees?

Latest developments: Cloud-based human resource management systems have grown in popularity. Competitors to Salesforce Rypple include SuccessFactors (purchased by SAP), Workday, Taleo, Ultimate Software, and Cornerstone OnDemand.

Is this online approach to performance assessment the right pathway to a more motivated workforce? Hard to say. Some of its advantages include: time savings (which reduces the cost to the organization), increased workflow efficiency (necessary parties can see online), goals (company, department, individual) can be accurately aligned and set, progress meeting goals can be tracked more closely and on an ongoing basis. Ad-hoc reporting capabilities, a central repository and better company-wide tracking capabilities.

Disadvantages include: removal of personal interaction and a face-to-face meeting – it may be difficult to come up with a career plan online. Costly mistakes with online only review (room to misinterpret and inconsistent messages). Does automating always streamline?

What downsides might it have for employees who are in the digital immigrant rather than digital native category? The same downsides digital immigrants face with all other tasks which require the use of technology. It might also bring to light the true “digital immigrants.”

Verdict at this point in time: Answers will vary. Its success may very well depend upon the culture of the workplace.

Suggested Team Exercise for Chapter 13 Break the class into teams and have the teams to consider and develop responses to each of the following questions: 1. Can ‘fear’ motivate? Have you ever played a sport or been in a class where fear improved your performance?

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2. You are a manager of a local fast food operation (such as Domino’s Pizza). You recognize that most of your employees are working to earn money for college or working only until they can find another job. (Turnover is very high in the fast food industry).

Your boss, a regional manager, has given you authority to design programs to reduce turnover and help lengthen employee stays. What ideas would you submit and why?

3. You have just been hired as manager of a department in a new company. After watching employee performance after your first six months, you are surprised that one of your best supervisors, a female, is making $40,000 for the same position that a male counterpart (who is also performing his job well) with similar experience and skills, is making $50,000. Neither presumably knows what the other makes since pay is confidential (but you aren’t certain that employees don’t share such information). How would you handle this issue?

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CHAPTER 14 Teams and -Teamwork Two Heads Really Can Be Better Than One Chapter 14 Overview Each Chapter contains several inset features designed to assist the student reader in applying the concepts to relevant examples. Management Live illustrates how popular movies demonstrate management concepts in the chapter. Role Models features a management professional that illustrates key chapter concepts in a novel, visionary or inspirational way. Explore Yourself refers students to self assessment activities relevant to concepts in the chapter. Ethics Check profiles examples of ethical issues in management. Manager's Library features books that illustrate current events or trends relevant to chapter concepts. Facts to Consider introduces research or trends that may be used for class discussion in the classroom or online for distance learning.

Chapter Fourteen covers the topic of teams and their importance within organizations. They various types of teams are explored. The benefits as well as the potential pitfalls of teams are reviewed. Finally, ways to improve team effectiveness are examined, along with the variables that impact team performance.

The initial portion of the chapter describes the importance of understanding teams and teamwork, including the benefits of teams to an organization and its members, some of the common performance problems found with teams, how organizations are networks of teams and informal groups, increasingly common virtual teams in organizations, and self-managing teams.

The focus of the chapter subsequently shifts to the topic of building blocks of successful teamwork. Topics include having the right members on a team to accomplish tasks, the importance of the right setting and size, the processes needed for effectiveness, the impact of norms or standards of conduct and cohesiveness on teams, the importance of task and maintenance roles, and how communication networks certainly make or break team performance. The five stages of team development are reviewed along with the concept of distributed leadership.

The chapter concludes by examining the collaborative approach to improving group process and performance, various team strategies for decision making, the potential pitfalls of groupthink, how conflict occurs, and the tendencies toward cooperativeness and assertiveness which create various conflict management styles.

Chapter 14 Takeaway Questions: Takeaway 14.1 Why Is It Important to Understand Teams and Teamwork?

Takeaway 14.2 What Are the Building Blocks of Successful Teamwork?

Takeaway 14.3 How Can Managers Create and Lead High-Performance Teams? .

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Chapter 14 Objectives: • • • • • • • • • • • • • • • • • • • • • • • •

Define team and teamwork Explain teamwork pros and cons Describe common performance problems of teams Discuss how organizations are networks of formal teams and informal teams Describe the benefits of information work groups Differentiate a committee from a task force Explain the benefits of cross-functional teams Explain the potential advantages and disadvantages of virtual teams Explain how self-managing teams are changing organizations Identify inputs that influence group effectiveness Discuss how membership diversity influences team effectiveness Explain how resources, the physical setting, the nature of the task, and the size of the team effect productivity Explain the team effectiveness equation List five stages of group development and how teams move through each stage Explain how norms and cohesiveness influence team performance Differentiate between task, maintenance, and disruptive activities Define group norm and list ways to build positive group norms Describe use of decentralized and centralized communication networks and their impact on team performance.

Describe the planned activities in team building Illustrate decision making methods of teams to include authority rule, minority rule, majority rule, consensus, and unanimity.

Discuss groupthink and identify its symptoms and impact on decisions List advantages and disadvantages of group decision making Discuss the importance of dealing with conflicts and interpersonal relationships within a team.

List five conflict management styles

Chapter 14 Lecture Outline: Takeaway 14.1 Why Is It Important to Understand Teams and Teamwork?

• Teams offer synergy and other benefits to organizations and their members.

• Teams often suffer from common performance problems.

• Organizations are networks of formal teams and informal groups.

• Organizations use committees, task forces, and cross-functional teams.

• Virtual teams are increasingly common in organizations.

• Self-managing teams are a form of job enrichment for groups.

Takeaway 14.2 What Are the Building Blocks of Successful Teamwork?

• Teams need the right members for the tasks to be accomplished.

• Teams need the right setting and size to be effective. .

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Teams need the right processes to be effective.

Teams move through different stages of development.

Team performance is affected by task and maintenance roles.

Team performance is affected by communication networks.

Takeaway 14.3 How Can Managers Create and Lead High-Performance Teams?

• Team building helps team members learn to better work together.

• Team performance is affected by use of decision-making methods.

• Team performance suffers when groupthink leads to bad decisions.

• Team performance benefits from good conflict management.

Chapter 14 Supporting Materials: Figures Figure 14.1 What Are the Management Implications of Self-Managing Teams?

Figure 14.2 What Are the Foundations of Team Effectiveness?

Figure 14.3 What Are the Criteria for Assessing the Process Maturity of a Team?

Figure 14.4 How Do Norms and Cohesiveness Influence Team -Performance?

Figure 14.5 What Communication Networks Are Used in Teams?

Figure 14.6 What Are the Five Common Styles of Conflict Management?

Thematic Boxes and More • Management Live: Team Contributions and Lost • Role Models: Amazon’s Jeff Bezos Bets on Two-Pizza Teams • Ethics Check: Danger! Social Loafing May Be Closer Than You Think • Facts to Consider: Unproductive Meetings are Major Time Wasters • Manager’s Library: Crowdsourcing: Why the Power of the Cloud is Driving the Future of Business by Jeff Howe • Find Inspiration: Fast Lanes for NASCAR Teams • Explore Yourself: More on Team Contributions • Tips to Remember: Steps to Successful Virtual Teams • Table 14.1 Symptoms of Groupthink Applications • TestPrep 14 Multiple-Choice Questions • Skill Building Portfolio o Self-Assessment 14: Team Leader Skills o Class Exercise 14: Understanding Team Dynamics o Team Project 14: Superstars on the Team • Case Snapshot: Teamwork the Natural Way • Sidebar case: Decision Making at the Federal Reserve • Hot Topic: Pro and Con Debate: Can Disharmony Build a Better Team?

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Chapter Outline: Takeaway Question 14.1: Why Is It Important to Understand Teams and Teamwork?

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Teams offer synergy and other benefits to organizations and their members ✓ A team is a collection of people with complementary skills who work together to accomplish shared goals while holding each other mutually accountable for performance results. ✓ Teamwork is people working together to accomplish a shared goal. ✓ Synergy is the creation of a whole that exceeds the sum of its parts.

DISCUSSION TOPIC

A good way to introduce teamwork pros and cons is to ask students how they feel about participating in teams. You will usually receive both highly positive and highly negative opinions. Students who have been members of successful athletic, social, extracurricular, classbased, and/or work teams will likely have quite positive attitudes. Those with less favorable experiences, such as students who have encountered nonproductive teams in their classes, will likely be more skeptical of the utility of teams. For these students, the quip “A camel is a horse designed by a committee!” may ring true. Point out that despite their potential drawbacks, teams are an essential organizational resource that all organizational members ⎯ but especially managers and leaders ⎯ must understand in order to tap the full potential of teams.

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Teams often suffer from common performance problems ✓ Social loafing is the presence of “free-riders” who slack off and allow other team members to do the work ✓ To prevent social loafing: ➢ Make task assignments more interesting ➢ Keep group size small ✓ Other problems can be personality conflicts, differences in work styles, ambiguous agendas, or members who can’t or won’t do group work.

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Ethics Check: Danger! Social Loafing May Be Closer Than You think Three scenarios with common themes of individual behavior in teams are presented that will provide fertile ground for student comments and discussion about their personal experience in teams.

The “You Decide” questions probe students' views of social loafing in a team environment: Whether you call it social loafing, free-riding, or just plain old slacking off, the issue is the same. What right do some people have to sit back in team situations and let other people do all or most of the work? Is this ethical? Does everyone in a group have an ethical obligation to do his or her fair share of the work? And when it comes to John, does the fact that he is going to be honest with the other committee members make any difference? Isn’t he still going to be a loafer that gets credit with the boss for serving on the committee? Would it be more ethical for him to decline becoming a part of this

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committee?

Organizations are networks of formal teams and informal groups ✓ A formal team is officially designated for a specific organizational purpose ▪ Department ▪ Work units ▪ Teams ✓ An informal group, an informal structure of an organization, comes from natural or spontaneous relationships among people.

▪ Interest groups ▪ Friendship groups ▪ Support groups DISCUSSION TOPIC

To get students involved in discussing various types of organizational teams, ask them to identify the different types of teams to which they have belonged while working for an organization or during their educational career or both. These examples can be related to the different types of teams that are discussed below. This exercise helps students relate to the material and recognize its relevance to their own experiences.

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Facts to Consider: Unproductive Meets Are Major Time Wasters Statistics from a worldwide survey of workers' views on meetings, productivity and communication and their answers don't speak very well for managers who hold lots of meetings. Your Thoughts questions ask students to examine their personal experience with meetings and their personal behavior.

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Organizations use committees, task forces, and cross-functional teams ✓ A committee brings together people outside of their daily job assignments to work in a small team for a specific purpose; the task agenda is specific and ongoing ✓ Project teams or task forces bring together people from various parts of the organization to work on common problems ✓ Cross-functional team has members from different functional units ✓ Employee-involvement team has members who meet on a regular basis to apply their expertise to continuous improvement ✓ Quality circle is a group of workers that meets regularly to discuss and plan specific ways to improve work quality

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Virtual teams are increasingly common in organizations ✓ The virtual team is a group of people who work together and solve problems through computer-mediated rather than face to face interactions

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Tips to Remember: Steps to Successful Virtual Teams: • Select team members high in initiative and capable of self-starting.

• Select members who will join and engage the team with positive attitudes.

• Select members known for working hard to meet team goals.

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• Begin with social messaging that allows members to exchange information about one another to personalize the process.

• Assign clear goals and roles so that members can focus while working alone and also know what others are doing.

• Gather regular feedback from members about how they think the team is doing and how it might do better.

• Provide regular feedback to team members about team accomplishments.

• Make sure the team has the best virtual meeting •

Self-managing teams are a form of job enrichment for groups ✓ Self-managing teams - have authority to make decisions about how they share and complete their work. ✓ Figure 14.1 illustrates the concept of the management implications of self-managing teams: Members of self-managing teams make decisions together on team membership, task plans and job assignments, training and performance evaluations, and quality control.

Because they essentially manage themselves in these ways, they no longer need a traditional supervisor or department head. Instead, the team leader performs this role with the support of team members. The team leader and team as a whole report to the next higher level of management and are held accountable for performance results.

14.1 Questions for discussion suggested answers 1) Do committees and task forces work better when they are given short -deadlines?

Teams can perform well under shorter deadlines, as long as the deadlines are realistic.

Most teams seem to plan and organize better under some targeted deadline that produces modest pressure to get things done and goals accomplished. Exceptions would be for complex projects such as systems integration, construction or surgery where rushing may contribute to mental judgment errors; or creative teams that need for freedom.

2) Are there some things that should be done only by face-to-face teams, not virtual ones?

Interviews and important customer sales or service visits are examples of situations that are more effective when done face-to-face. This allows for improved personal interaction, as well as reading body language. Face to face allows for more "channel richness".

3) Why do people in teams often tolerate social loafers?

Most people do not want to confront others-it is not a comfortable feeling for many people. This is particularly true if the parties are likely to have ongoing contact at work or other daily interactions.

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Takeaway Question 14.2: What Are the Building Blocks of Successful Teamwork?

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An effective team should be accomplishing three output goals – task performance, member satisfaction, and viability for future action Membership composition is the mix of abilities, skills, backgrounds, and experiences of the members Inputs that affect team performance ➢ Team size - teams larger than 6-7 members can be difficult to manage ➢ Nature of the task - complex tasks require more information exchange and interaction than simple ones ➢ Organizational setting - the key issue is support in information, resources, technology, rewards, and even physical space

✓ See Figure 14.2 for a depiction of the foundations of team effectiveness: An effective team achieves high levels of task performance and member satisfaction and remains viable for the future. The foundations of effectiveness begin with inputs—things such as membership composition, nature of the task, resources and support in the organizational setting, and team size. The foundations of effectiveness further rest with team process—how well the members utilize their talents and other inputs to create the desired outputs. Key process factors on any team include the stages of development, norms and cohesion, task and maintenance activities, communication, and decision making.

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Teams need the right members for the tasks to be accomplished ✓ Team diversity counts in team membership. It represents the mix of skills, experiences, backgrounds, and personalities among team members. ✓ It is easier to manage relationships among members of homogeneous teams – those whose members have similar characteristics. ✓ It is more difficult to manage relationships among members of heteterogeneous teams – those whose members are quite dissimilar from one another.

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Teams need the right setting and size to be effective ✓ Organizational setting influences team outputs. ✓ Team size also makes a difference. ✓ The number of potential interactions increases exponentially as teams increase in size.

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Teams need the right processes to be effective ✓ Team Effectiveness = Quality of Inputs + (Process Gains – Process Losses) ✓ The process of any team is called group dynamics, which include how members get to know one another, develop expectations and loyalty, communicate, handle conflicts, and make decisions. ✓ Team IQ – “the ability for teams to perform well,” according to scholar and consultant, Daniel Goleman. ✓ “Champion” teams, according to Goleman, excel because their members know how to use their talents in cooperation with others and are able to handle occasional 14-7

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disharmony and interpersonal conflicts.

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Role Models: Amazon’s Jeff Bezos Bets on Two-Pizza Teams Jeff Bezos, founder of Amazon.com has the philosophy that teams should be small enough that they can be fed by two pizzas. If two pizzas aren't enough, the team is too big. Bezos has many other thoughts on corporate culture and teamwork, and many of them are captured on videos that students can find online. Consider encouraging students to come up with a relevant video to share with the class as part of your discussion of teamwork.

Teams move through different stages of development ✓ Forming stage-initial task orientation and interpersonal testing ✓ Storming stage-period of high emotionality and conflict ✓ Norming stage-members begin to coordinate their efforts as a working unit and tend to operate with shared rules of conduct ✓ Performing stage-team is more focused, organized, and well functioning ✓ Adjourning stage-members prepare to achieve closure and disband, ideally with a sense that they have accomplished important goals DISCUSSION TOPIC

Ask students to describe their experiences with different teams within the context of stages of team development. What happened for them at each stage? How do the students’ experiences compare to the ideas presented above? Did anyone have an experience wherein the team seemed to get stuck at one particular stage ⎯ say, the storming stage? What happened, and what insights does it provide? ✓ Figure 14.3 illustrates criteria for assessing the maturity of a team: What Are the Criteria for Assessing the Process Maturity of a Team?

Teams vary greatly in the degree of maturity they achieve and demonstrate in day-today behavior. These criteria are helpful for assessing the development and maturity of a team as it moves through various phases—from forming to storming to norming to performing. We would expect that teams would start to show strong positives on these criteria as members gain experience with one another in the norming stage of team development. We would expect teams to have consistently strong positive scores in the performing stage.

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Teams performance is affected by norms and cohesiveness • Norms are behaviors expected of team members; rules or standards that guide behaviors • Performance Norm is the amount of effort expected by team members.

• Cohesiveness is the degree to which members are attracted to and motivated to remain on a team •

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teams can reach their performance potential. But experience proves time and time again that teams often underperform or, at least, lose time and effectiveness as members struggle with a variety of process difficulties.

Take a good, hard look at the teams that you participate in. While so doing, make a realistic self-assessment of your team contributions as well as those of other members. Ask: How can the insights of this chapter help me build team skills so that I can help turn teamwork potential into real team achievements?

Get to know yourself better by taking the self-assessment on Team Leader Skills and completing the other activities in the Exploring Management SkillBuilding Portfolio.

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Figure 14.4 depicts how norms and cohesiveness impact team performance Group norms are expected behaviors for team members; cohesiveness is the strength of attraction members feel toward the team. When cohesiveness is high, conformity to norms is high. Positive performance norms in a highly cohesive group create a desirable situation, with high-performance outcomes likely. However, negative performance norms in a highly cohesive group can be troublesome; conformity by members to the negative norms creates low-performance outcomes.

DISCUSSION TOPIC

Ask students to provide examples of both positive and negative performance norms that they have encountered on the different teams where they were members. Discuss how these norms influenced the members’ behavior.

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Team performance is affected by task and maintenance roles ✓ Task activities contribute directly to the team’s purpose.

• Maintenance activities support the emotional side of teams as an ongoing social system.

• Distributed leadership makes every member continually responsible for recognizing and taking actions when task or maintenance activities are needed.

• Disruptive behaviors such as aggressiveness, excessive joking and non-participation cause problems and limit effectiveness.

DISCUSSION TOPIC

Ask students to describe examples of task activities, maintenance activities, and disruptive or dysfunctional activities that they have encountered in their group experiences.

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Team performance is affected by use of communication networks • Decentralized communication networks - all members communicate directly with each other.

• Centralized communication networks - when members divide up the work and then simply coordinate the final results.

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Restricted communication networks exist when subgroups fail to adequately communicate with one another, become antagonistic and restrict communication.

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See Figure 14.5 for a depiction of the communication networks: Members of teams communicate and interact together in different ways. A decentralized structure is where all members communicate with one another. It works best when tasks are complex and the need for information sharing is high. When tasks are simple and easily broken down into small parts, a centralized structure works well. It coordinates members’ communications through one central point. A restricted communication network sometimes forms when subgroups break off to do separate work or due to member alienation. Any lack of communication between the subgroups can create performance problems.

14.2 Questions for discussion suggested answers 1. What happens if a team can’t get past the storming stage?

Teams that cannot get past the storming stage usually complete the work quickly (and consequently, poorly), just to get “it over with.” Some teams may dissolve altogether.

2. What can a manager do to build positive performance norms on a work team?

• Act as a positive role model.

• Reinforce the desired behaviors with rewards.

• Control results by performance reviews and regular feedback.

• Train and orient new members to adopt desired behaviors.

• Recruit and select new members who exhibit the desired behaviors.

• Hold regular meetings to discuss progress and ways of improving.

• Use team decision-making methods to reach agreement.

3. Why would a manager ever want to reduce the cohesion of a work group?

Sometimes, employees can be so cohesive they “protect” each other and resist change that may seem to adversely affect another member of the group. They may also, intentionally or unintentionally, shield the manager from “bad news” and by so doing, lose opportunities for improvement. Groupthink is more likely to occur in cohesive teams.

Takeaway Question 14.3: How Can Managers Create and Lead High-Performance Teams?

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Team building helps team members learn to better work together ✓ Team building is a set of collaborative activities to analyze how well a team functions and make constructive changes to increase team effectiveness ✓ Decision making is a process of selecting a course of action from alternatives ✓ Consensus means that after thorough discussion, most team members encourage one decision alternative and the other members agree to support it

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Find Inspiration: Fast Lanes for NASCAR Teams When a NASCAR driver pulls in for a pit stop, the pit crew must jump in to perform multiple tasks flawlessly and in perfect order and unison. A second gained or lost can be crucial to a NASCAR driver’s performance. “You can’t win a race with a 12-second stop, but you can lose it with an 18-second stop,” says pit crew coach Trent Cherry.

NASCAR pit crews don’t just get together and “wing it” on race days. Members are carefully selected for their skills and attitudes. Teams practice, practice, and practice.

And, the pit crew leader doesn’t hesitate to make changes when things aren’t going well.

Is this a model for teams everywhere?

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Team performance is affected by use of decision-making methods ✓ Best teams don’t limit themselves to just one decision-making method. ✓ In decision by lack of response, one idea after another is suggested without any discussion taking place. ✓ In decision by minority rule, the leader, manager, committee head, or some other authority figures makes a decision for the team. ✓ Decision by majority rule is one of the most common way teams make decisions when early signs of disagreement arise. It is consistent with democratic methods. ✓ Decision by consensus – teams are often encouraged to try for decision by consensus.

This is where the full discussion leads to most members favoring one alternative, with other members agreeing to support it. ✓ Decision by unanimity means all team members agree on the course of action to take.

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Teams performance suffers when groupthink leads to bad decisions ✓ Groupthink is the tendency for members of highly cohesive groups to lose their critical evaluative capabilities

Table 14.1 lists symptoms of groupthink: ✓ Illusions of invulnerability—Members assume that the team is too good for criticism or is beyond attack. ✓ Rationalizing unpleasant and disconfirming data—Members refuse to accept contradictory data or to thoroughly consider alternatives. ✓ Belief in inherent group morality—Members act as though the group is inherently right and above reproach. ✓ Stereotyping competitors as weak, evil, and stupid—Members refuse to look realistically at other groups. ✓ Applying direct pressure to deviants to conform to group wishes—Members refuse to tolerate anyone who suggests the team may be wrong. ✓ Self-censorship by members—Members refuse to communicate personal concerns to the whole team. ✓ Illusions of unanimity—Members accept consensus prematurely, without testing its completeness. ✓ Mind guarding—Members protect the team from hearing disturbing ideas or outside .

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viewpoints.

DISCUSSION TOPIC Ask the students whether they have ever been in a group that succumbed to groupthink. If so, have them describe what happened and relate it to the symptoms of groupthink.

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Team performance benefits from good conflict management ✓ Conflicts can occur over substantive or emotional issues ✓ A conflict is a disagreement among people. ✓ Substantive conflict - involves disagreements over such things as goals and tasks, the allocation of resources, rewards, policies and procedures, and job assignments ✓ Emotional conflict - involves disagreements from feelings of anger, distrust, dislike, fear, and resentment, as well as relationship problems. ✓ Avoidance is when everyone withdraws and pretends that conflict doesn’t really exist, hoping that it will go away. ✓ Accommodation plays down differences and highlights similarities and areas of agreement. ➢ Both accommodation and avoidance create lose-lose conflict, where no one achieves his or her true desires. ✓ Competition is when one party wins through superior skill or outright domination. ✓ Compromise occurs through trade-offs. ✓ Both compromise and competition are forms of win-lose conflict, where each party strives to gain something at the other party’s expense. ✓ Figure 14.6 illustrates the five common styles of conflict management and how they relate to cooperation and assertiveness. In conflict situations, a combination of cooperative and aggressive behaviors results in five possible conflict management styles. Competition occurs when aggression dominates our behavior, and accommodation occurs when cooperation dominates. Avoidance occurs with both low aggression and cooperation, whereas compromise occurs with moderate amounts of both. When both cooperation and aggression are high, true collaboration and problem solving are more likely to occur. ✓ Collaboration tries to find and address the problem and reconcile the real differences underlying a conflict. ➢ Collaboration is the most effective conflict resolution style and is a form of winwin conflict that tries to resolve things to the mutual benefit of all conflicting parties. ✓ Conflict Resolution removes the reasons for the conflict.

Manager’s Library: Crowdsourcing: Why the Power of the Cloud is Driving the Future of Business by Jeff Howe Author Jeff Howe examines the power of the internet to create virtual teams of thousands to influence everything from top news stories to micro loans to entrepreneurs in his book, Crowdsourcing. Questions to discuss with students may include: How do you use

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crowdsourcing in everyday life? What work and career applications do you see for it?

Should contributors to crowdsourcing be paid? Should members of the crowd remain anonymous or be identified? Should a crowd be led or guided? And, is there any risk of groupthink in crowdsourcing? Reflect and React questions probe students' thoughts on the uses, ethics and leadership of crowdsourcing.

See figure 14.6 to explore the five common styles of conflict management, as follows: In conflict situations, a combination of cooperative and aggressive behaviors results in five possible conflict management styles. Competition occurs when aggression dominates our behavior, and accommodation occurs when cooperation dominates. Avoidance occurs with both low aggression and cooperation, whereas compromise occurs with moderate amounts of both. When both cooperation and aggression are high, true collaboration and problem solving are more likely to occur.

14.3 Questions for discussion suggested answers 1) How does consensus differ from unanimity in group decision making?

Unanimity involves everyone agreeing to a course of action. Consensus means that everyone has participated in the discussion, but not all agree on a first choice of action.

The minority agrees to support the choice of the majority.

2) Is groupthink found only in highly cohesive teams, or could it exist in pre--cohesive ones?

Groupthink exists in highly cohesive teams out of a desire for unanimity. Pre-cohesive teams may arrive at a unanimous solution because some group members are not committed enough to honestly contribute (social loafing).

3) When is it better to avoid conflict rather than directly engage in it?

When a problem is minor with few or no consequences, it is likely “not worth it.” This is particularly true when it involves a person who may be experiencing personal issues such as divorce, a death in the family, or serious illness. Another reason to avoid a conflict may be if more information will be available at a future point that may resolve the issue.

Teaching Notes In this section, ideas, exercises, and assignments are provided to assist you in integrating the concepts in Exploring Management for your students, especially the special features of the text.

Management Live: Team Contributions and Lost In the television show Lost, a group of strangers survive a plane crash on a seemingly deserted island and learn the benefits of working as a team. Fans of the show will probably agree that the cast never really completed the stages of team development, in fact, it could probably be argued that they never made it past the storming or norming stage in the interest of good TV drama. .

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Students are directed to examine a recent team experience and assess the existence of teamwork.

These examples will provide many discussion topics as you progress through the chapter.

Pick a recent team experience of yours. Make a good realistic assessment of the teamwork that took place—the good parts and the rough spots. What could you have contributed that would have helped the team? This chapter has lots of ideas on teamwork and team success. As you read on, make becoming a strong team contributor a personal development goal.

Facts to Consider: Unproductive Meetings are Major Time Wasters Statistics from a worldwide survey of workers' views on meetings, productivity and communication and their answers don't speak very well for managers who hold lots of meetings. Your Thoughts questions ask students to examine their personal experience with meetings and their personal behavior.

A survey of some 38,000 workers around the world links low productivity with bad meetings, poor communication, and unclear goals.

• 69% of meetings attended are considered ineffective.

• 32% of workers complain about team communication.

• 31% complain about unclear objectives and priorities.

Do these data match your experiences with team meetings? Given the common complaints about meetings, what can a team leader do to improve them? Think about the recent meetings you have attended. In what ways were the best meetings different from the worst ones? Did your behavior play a significant role in both these cases?

Role Models: Amazon’s Jeff Bezos Bets on Two-Pizza Teams Jeff Bezos, founder of Amazon.com has the philosophy that teams should be small enough that they can be fed by two pizzas. If two pizzas aren't enough, the team is too big. Bezos has many other thoughts on corporate culture and teamwork, and many of them are captured on videos that students can find online. Consider encouraging students to come up with a relevant video to share with the class as part of your discussion of teamwork.

Find Inspiration: Fast Lanes for NASCAR Teams ✓ ✓ When a NASCAR driver pulls in for a pit stop, the pit crew must jump in to perform multiple tasks flawlessly and in perfect order and unison. A second gained or lost can be crucial to a NASCAR driver’s performance. “You can’t win a race with a 12-second stop, but you can lose it with an 18-second stop,” says pit crew coach Trent Cherry. ✓ ✓ NASCAR pit crews don’t just get together and “wing it” on race days. Members are carefully selected for their skills and attitudes. Teams practice, practice, and practice.

And, the pit crew leader doesn’t hesitate to make changes when things aren’t going well. Is this a model for teams everywhere? .

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Manager's Library: Crowdsourcing: Why the Power of the Cloud is Driving the Future of Business by Jeff Howe Author Jeff Howe examines the power of the internet to create virtual teams of thousands to influence everything from top news stories to micro loans to entrepreneurs in his book, Crowdsourcing. Questions to discuss with students may include: How do you use crowdsourcing in everyday life? What work and career applications do you see for it? Should contributors to crowdsourcing be paid? Should members of the crowd remain anonymous or be identified?

Should a crowd be led or guided? And, is there any risk of groupthink in crowdsourcing?

Reflect and React questions probe students' thoughts on the uses, ethics and leadership of crowdsourcing.

Ethics Check: Danger! Social Loafing May Be Closer Than You Think Three scenarios with common themes of individual behavior in teams are presented that will provide fertile ground for student comments and discussion about their personal experience in teams.

The “You Decide” questions probe students' views of social loafing in a team environment: Whether you call it social loafing, free-riding, or just plain old slacking off, the issue is the same.

What right do some people have to sit back in team situations and let other people do all or most of the work? Is this ethical? Does everyone in a group have an ethical obligation to do his or her fair share of the work? And when it comes to John, does the fact that he is going to be honest with the other committee members make any difference? Isn’t he still going to be a loafer that gets credit with the boss for serving on the committee? Would it be more ethical for him to decline becoming a part of this committee?

• Explore Yourself: More on Team Contributions

We need to be able to contribute as team members in many different ways so that our teams can reach their performance potential. But experience proves time and time again that teams often underperform or, at least, lose time and effectiveness as members struggle with a variety of process difficulties.

Take a good, hard look at the teams that you participate in. While so doing, make a realistic self-assessment of your team contributions as well as those of other members. Ask: How can the insights of this chapter help me build team skills so that I can help turn teamwork potential into real team achievements?

Get to know yourself better by taking the self-assessment on Team Leader Skills and completing the other activities in the Exploring Management Skill-Building Portfolio.

Hot Topic: Pro and Con Debate: Can Disharmony Build a Better Team?

Have you ever heard a sports metaphor used at school or in the workplace? In his book, There .

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is an I in team: What Elite Athletes and Coaches Really Know About High Performance by Mark de Rond, the topic of teamwork is explored. Even if superstars bring conflict to a team setting, the result may well be added creativity and a performance boost. Given what we know about teams and your students’ personal experiences with them, should we be finding ways to accommodate the superstar on a team… or avoid them?

Career Situation: What Would You Do? •

It’s time for the first meeting of the task force that you have been assigned to lead.

This is a big opportunity for you, since it’s the first time your boss has given you this level of responsibility. There are seven members of the team, all of whom are your peers and co-workers. The task is to develop a proposal for increased use of flexible work schedules and telecommuting in the organization. What will your agenda be for the first meeting, and what opening statement will you make?

•

For quite some time now, you’ve been watching the performance of your work team slowly deteriorate. Although everyone seems to like one another, the “numbers” in terms of measured daily accomplishments have now fallen to an unacceptable level.

It’s time to act. What will you look at to identify likely problem issues? What steps might you take to get this team back on track and improve its overall effectiveness?

•

The members of the executive compensation committee that you are chairing show a high level of cohesiveness. It’s obvious that they enjoy being part of the committee and are proud to be on the organization’s board of directors. But the committee is about to approve extraordinarily high bonuses for the CEO and five other senior executives. This is occurring at a time when executive pay is getting lots of criticism from the press, unions, and the public at large. What can you do to make sure groupthink doesn’t cause this committee to make a bad decision?

Tips to Remember: Steps to Successful Virtual Teams Select team members high in initiative and capable of self-starting.

• Select members who will join and engage the team with positive attitudes.

• Select members known for working hard to meet team goals.

• Begin with social messaging that allows members to -exchange information about one another to personalize the process.

• Assign clear goals and roles so that members can focus while working alone and also know what others are doing.

• Gather regular feedback from members about how they think the team is doing and how it might do better.

• Provide regular feedback to team members about team -accomplishments.

• Make sure the team has the best technology.

Pro and Con Debate: Can Disharmony Build a Better Team? .

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Are there any downsides to virtual teams? Yes, for sure. They often occur for the same reasons as in other groups. Social loafing can still occur, goals may be unclear, meeting requests may be too frequent. Members of virtual teams can also have difficulties establishing good working relationships. The lack of face-to-face interaction limits the role of emotions and nonverbal cues in the communication, and may depersonalize member relations.22 Yet as more people gain experience, teams working in virtual space rather than face-to-face are proving their performance potential. In fact, they’re becoming a way of organizational life.

Terms to Define Accommodation

Employee involvement team

Avoidance

Formal team

Centralized communication network

Groupthink

Cohesiveness

Heterogeneous teams

Collaboration

Homogeneous teams

Committee

Informal group

Competition

Maintenance activity

Compromise

Norm

Conflict

Performance norm

Conflict resolution

Project team

Consensus

Quality circle

Cross-functional team

Restricted communication network

Decentralized communication network

Self-managing team

Decision making

Social loafing

Disruptive behaviors

Substantive conflict

Distributed leadership

Synergy

Effective team

Task activity

Emotional conflict

Task force

.

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Team Team building Team diversity Team effectiveness equation Team IQ Team process Teamwork Virtual team

.

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Multiple-Choice Questions 1. __________occurs when a group of people is able to achieve more than its members could by working individually. (a) Distributed leadership (b) Consensus (c) Team viability (d) Synergy 2. One of the recommended strategies for dealing with a group member who engages in social loafing is to __________. (a) redefine tasks to make individual contributions more visible (b) ask another member to encourage this person to work harder (c) give the person extra rewards and hope he or she will feel guilty (d) just forget about it 3. An effective team is defined as one that achieves high levels of task performance, high member satisfaction, and __________. (a) resource efficiency (b) team viability (c) group consensus (d) creativity 4. In the open-systems model of teams, the __________.is an important input factor. (a) communication network (b) decision-making method (c) performance norm (d) diversity of membership 5. A basic rule of team dynamics might be stated this way: The greater the __________.in a team, the greater the conformity to norms. (a) membership diversity (b) cohesiveness (c) task clarity (d) competition among members 6. The team effectiveness equation states the -following: Team Effectiveness = Quality of Inputs  (__________.– Process Losses). (a) Process Gains (b) Leadership Impact (c) Membership Ability (d) Problem Complexity 7. Members of a team become more motivated and better able to deal with conflict during the __________.stage of team -development. (a) forming (b) norming (c) performing (d) adjourning 8. A team member who does a good job at summarizing discussion, offering new ideas, and Chapter 14

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clarifying points made by others is providing leadership by contributing __________.activities to the group process. (a) required (b) task (c) disruptive (d) maintenance 9. A team performing very creative and unstructured tasks is most likely to succeed using __________. (a) a decentralized communication network (b) decisions by majority rule (c) decisions by minority rule (d) more task than maintenance activities 10. One way for a manager to build positive norms within a team is to __________. (a) act as a positive role model (b) increase group size (c) introduce groupthink (d) isolate the team 11. The best way to try to increase the cohesiveness of a team would be to __________. (a) start competition with other groups (b) add more members (c) reduce isolation from other groups (d) increase the diversity of members 12. A __________.decision is one in which all -members agree on the course of action to be taken. (a) consensus (b) unanimous (c) majority (d) synergy 13. Groupthink is most likely to occur in teams that are __________. (a) large in size (b) diverse in membership (c) high performing (d) highly cohesive 14. When people are highly cooperative but not very assertive in a conflict situation, the likelihood is that they will be using which conflict management style? (a) avoidance (b) authoritative (c) accommodation (d) collaboration 15. The interpersonal conflict management style with the greatest potential for true conflict resolution is __________. (a) compromise (b) competition (c) avoidance (d) collaboration

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Short-Response Questions: 16. What are the major differences among a task force, an employee involvement group, and a self-managing team?

In a task force, members are brought together to work on a specific assignment. The task force usually disbands when the assignment is finished. In an employee involvement group, perhaps a quality circle, members are brought together to work on an issue or task over time. They meet regularly and always deal with the same issue/task. In a selfmanaging team, the members of a formal work group provide self-direction. They plan, organize, and evaluate their work, share tasks, and help one another develop skills; they may even make hiring decisions. A true self-managing team does not need the traditional “boss” or supervisor, since the team as a whole takes on the supervisory responsibilities.

17. How can a manager influence team performance by modifying group inputs?

Input factors can have a major impact on group effectiveness. In order to best prepare a group to perform effectively, a manager should make sure that the right people are put in the group (maximize available talents and abilities), that these people are capable of working well together (membership characteristics should promote good relationships), that the tasks are clear, and that the group has the resources and environment needed to perform up to expectations.

18. How do cohesiveness and performance norms together influence team performance?

A team’s performance can be analyzed according to the interaction between cohesiveness and performance norms. In a highly cohesive group, members tend to conform to group norms. Thus, when the performance norm is positive and cohesion is high, we can expect everyone to work hard to support the norm—high performance is likely. By the same token, high cohesion and a low performance norm will act similarly—low performance is likely. With other combinations of norms and cohesion, the performance results will be more mixed.

19. What are two symptoms of groupthink and two possible remedies for them?

The book lists several symptoms of groupthink along with various strategies for avoiding groupthink. For example, a group whose members censure themselves to refrain from contributing “contrary” or “different” opinions and/or whose members keep talking about outsiders as “weak” or the “enemy” may be suffering from groupthink. This may be avoided or corrected, for example, by asking someone to be the “devil’s advocate” for a meeting and by inviting in an outside observer to help gather different viewpoints.

Integration and Application Questions: 20. Valeria Martinez has just been appointed manager of a production team operating the 11 p.m. to 7 a.m. shift in a large manufacturing firm. An experienced manager, Valeria is pleased that Chapter 14

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the team members seem to really like and get along well with one another, but she notices that they also appear to be restricting their task outputs to the minimum acceptable levels.

Question: How might Valeria improve this situation?

Valeria is faced with a highly cohesive group whose members conform to a negative or low-performance norm. This is a difficult situation that is ideally resolved by changing the performance norm. In order to gain the group’s commitment to a high-performance norm, Valeria should act as a positive role model for the norm. She must communicate the norm clearly and positively to the group. She should not assume that everyone knows what she expects of them. She may also talk to the informal leader and gain his or her commitment to the norm. She might carefully reward high-performance behaviors within the group.

She may introduce new members with high-performance records and commitments. And she might hold group meetings in which performance standards and expectations are discussed, with an emphasis on committing to new high-performance directions. If attempts to introduce a high-performance norm fail, Valeria may have to take steps to reduce group cohesiveness so that individual members can pursue higher-performance results without feeling bound by group pressures to restrict their performance.

Self-Assessment 14: Team Leader Skills Instructions Consider your experiences in groups and work teams. Ask: “What skills do I bring to team leadership situations?” Then complete the following inventory by rating yourself on each item using this scale.

1 = Almost never 2 = Seldom 3 = Sometimes 4 = Usually 5 = Almost always _______ 1. I facilitate communications with and among team members between team meetings. _______ 2. I provide feedback/coaching to individual team members on their performance. _______ 3. I encourage creative and out-of-the-box thinking. _______ 4. I continue to clarify stakeholder needs/expectations. _______ 5. I keep team members’ responsibilities and activities focused within the team’s objectives and goals. _______ 6. I organize and run effective and productive team meetings. _______ 7. I demonstrate integrity and personal commitment. _______ 8. I have excellent persuasive and influence skills. _______ 9. I respect and leverage the team’s cross-functional diversity. _______10. I recognize and reward individual contributions to team performance. _______11. I use the appropriate decision-making style for specific issues. _______12. I facilitate and encourage border management with the team’s key stakeholders. _______13. I ensure that the team meets its team commitments. _______14. I bring team issues and problems to the team’s attention and focus on constructive problem solving.

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_______15. I provide a clear vision and direction for the team.

Scoring and Interpretation Add your scores for the items listed next to each dimension below to get an indication of your potential strengths and weaknesses on seven dimensions of team leadership. The higher the score, the more confident you are on the particular skill and leadership capability. When considering the score, ask yourself if others would rate you the same way.

1, 9 2, 10 3, 11 4, 12 5, 13 6, 14 7, 8, 15

Building the team Developing people Team problem solving/decision making Stakeholder relations Team performance Team process Providing personal leadership

Class Exercise 14: Understanding Team Dynamics Preparation Think about your course work team, a team you are involved with in another campus activity, or any other team situation suggested by your instructor. Use this scale to indicate how often each of the following statements accurately reflects your experience in the group.

1 = always 2 = frequently 3 = sometimes 4 = never 1. My ideas get a fair hearing.

2. I am encouraged to offer innovative ideas and take risks.

3. Diverse opinions within the group are encouraged.

4. I have all the responsibility I want.

5. There is a lot of favoritism shown in the group.

6. Members trust one another to do their assigned work.

7. The group sets high standards of performance excellence.

8. People share and change jobs a lot in the group.

9. You can make mistakes and learn from them in this group.

10. This group has good operating rules.

Instructions Form groups as assigned by your instructor. Ideally, this will be the group you have just rated. Have all group members share their ratings, and then make one master rating for the group as a whole.

Circle the items for which there are the biggest differences of opinion. Discuss those items and try to find out why they exist. In general, the better a group scores on this instrument, the higher its creative potential. If everyone has rated the same group, make a list of the five most important things members can do to improve its operations in the future. Nominate a spokesperson to summarize the group discussion for the class as a whole.

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Team Project 14: Superstars on the Team During a period of reflection following a down cycle for his teams, Sasho Cirovski, head coach of the University of Maryland’s men’s soccer, came to a realization. “I was recruiting talent,” he said. “I wasn’t doing a very good job of recruiting leaders.” With a change of strategy, his teams moved back to top-ranked national competition.

Question What do you do with a “superstar” on your team?

Instructions 1. Everywhere you look—in entertainment, in sports, and in business—a lot of attention these days goes to the superstars. What is the record of teams and groups with superstars? Do they really outperform the rest?

2. What is the real impact of a superstar’s presence on a team or in the workplace? What do they add? What do they cost? Consider the potential cost of having a superstar on a team in the equation Benefits – Cost = Value. What is the bottom line of having a superstar on the team?

3. Interview the athletic coaches on your campus. Ask them the previous questions about superstars. Compare and contrast their answers. Interview players from various teams. Ask them the same questions.

4. Develop a set of guidelines for creating team effectiveness in a situation where a superstar is present. Be thorough and practical.

Cases for Critical Thinking: Teamwork the Natural Way Sidebar: Decision Making at the Federal Reserve The culture of Whole Foods Market, included in Fortune magazine’s annual list of the “100 Best Companies to Work For” every year since the list began, epitomizes decentralized teamwork.

Company values identify the team, not the hierarchy, as the “defining unit of activity.” Each Whole Foods store has an average of ten self-managed teams. Within the team members work together to accomplish a shared goal, and the same holds true across teams. Goals are not only clearly defined; they are also celebrated when reached. A team member in Chicago is quoted as saying: “Without our people, we are just four walls and food.”

Case discussion questions and suggested answers: 1. DISCUSSION What seems to be the prevailing performance norm at Whole Foods Market? How is it conveyed to team members? What, if anything, seems to make it stick? What other norms might support and encourage high-performance work by members of Whole Foods teams?

The prevailing performance norm at Whole Foods market is one where members, part of a highly cohesive group, conform to group norms. Because the performance norm is positive and cohesion is high, everyone in the group supports the norm. Other combinations of norms and Chapter 14

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cohesion will produce mixed performance results. The performance norm at Whole Foods is a result of its strong culture, which includes a clear set of values and norms that guide its operations.

The performance oriented culture at Whole Foods includes high employee involvement and engagement, strong internal communication, risk taking on a healthy level, and innovation.

Team members are committed to a high performance norm, which is communicated clearly through meetings, standards, and company directive. Team members are expected to contribute to the norm which has been set. The performance norm is conveyed to team members through role models, performance reviews and ongoing feedback, regular meetings and ongoing communication, team decision making methods, and positive role models.

Other norms that might support and encourage high-performance by members of Whole Foods teams: team size, agreements on team goals, interaction among members, rewarding team outcomes (rather than individual performance), introducing competition with other teams, and so on.

2. DISCUSSION The Federal Reserve is a complex and important institution in the U.S. government. Is it an appropriate place for leaders to seek consensus-style decisions given all the complications of economic recession and turmoil around the world? Or, should other decisionmaking methods come into play?

Answers will vary. Bernanke believes that disagreement is a good thing because it creates new ideas and forces people to look at all sides of an equation. Consensus style decision making means that teams are often encouraged to make decision by consensus where most members favor one alternative, with other members agreeing to support it. Given the complications of the economic recession and turmoil around the world, it might be difficult for the following other decision making methods to be utilized: decision by lack of response, decision by minority rule, decision by majority rule, or decision by unanimity. Some students may argue that decision by consensus may result in groupthink.

3. PROBLEM SOLVING What risk is there that teams at Whole Foods might find themselves in groupthink? Are the conditions ripe for it, or do the culture and practices of the firm make this an unlikely outcome? If you were on one of the teams, how might you suggest dealing with a recommendation by a member to start stocking a so-called hot new product—carbonated carrot juice?

There is always a risk of groupthink in a team environment. It truly depends upon the situation and dynamic of the team itself. There are additional external factors which can also impact the team’s ability to make decisions. These include: financial and political pressures, technology, sociocultural trends, and so on. However, the culture and practices at Whole Foods lessens this outcome. Since the team at Whole Foods evaluates its alternatives and competitors, this is less likely to occur. Also, higher ups do not express opinions when assigning a problem or issue to a group to solve.

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Making it okay to disagree in an environment where conflict stays healthy, avoiding a nocriticism culture, seeking input from outside experts, and encouraging group members to raise concerns are crucial elements to avoid groupthink.

4. FURTHER RESEARCH Check out some of Whole Foods competitors. How do they operate . . . how are they structured . . . how do they use teams . . . what’s the culture? Does Whole Foods have much to fear? Is there anything Whole Foods executives could learn from others to further improve their existing practices? How is Whole Foods' commitment to teams and decentralization holding up in face of competition?

How they Operate Competitor Kroger’s

Trader Joe's

Sprouts Farmers Market

The Fresh Market

Regular supermarket with a focus on low price. Excellent supply chain management.

Savvy, private, unique products at value pricing.

Tagline: “Healthy Living for Less.”

They sell farm-fresh produce and natural, organic and mainstream foods at remarkably low prices, in a nontraditional farmers market-type setting.

Fast growing market currently about the same size as Sprouts. Focus on communities with higher than average incomes and place a higher than average emphasis on food quality and customer service; are less driven by price.

How they're structured Large corporate structure

Teams?

Culture?

Corporate structure.

Large supermarket corporate chain

Teams are paramount. Flat organizational structure.

Yes. The company prides itself on teamwork and collaboration.

Privately held, secretive, and a collaborative and quirky work environment (see case from chapter 1).

Privately held.

Corporate Structure.

Publicly held.

Corporate Structure.

A fraction of the size of Whole Foods.

Does Whole Foods have much to fear? It depends. Many traditional retail grocers and supermarkets are catching on to the success of Whole Foods. Now mainstream, Whole Foods was at one time considered a specialty grocery retailer and "niche segment" of natural and Chapter 14

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organic grocery items. Competitors offer organic, artisan, and healthy alternatives (and at lower prices). Whole Foods may be concerned with gas prices (which results not only in a dent in consumer spending, but also higher shipping prices for its products). With WalMart and Target quickly adding and promoting its floor space for groceries, the retail grocery competition continues to mount.

Is there anything executes can learn from others…..? Executives may be able to learn the importance of pricing in a down economy. For example, Whole Foods has long been nicknamed, "whole paycheck," because of the price of many of their products, which come as a premium to regular products. In an economic downturn, some people may not have the money to continue (or ever start) shopping at Whole Foods. As a result, to increase traffic, Whole Foods has continued to improve what it calls its "value positioning," by promoting its lower priced private label 365 brand. Whole Foods continues to battle its reputation as an overpriced gourmet grocer.

Having said that, the growth of Whole Foods has been fueled by wealthy consumers, not hit as hard with the economic downturn, and with the purchasing power to afford what most others (those who shop at traditional retail grocers), consider premium pricing.

The company's commitment to teams and decentralization appears to be holding up in face of competition. The company continues to subscribe to shared decision making and what Mackey calls, "the power of the group mind." Rather than focusing on one person in charge, Mackey insists that the team matters and that the team is in charge.

Additional Exercises for Chapter 14 Break the class into teams and have the teams to consider and develop responses to each of the following questions: 1. Today online learning is growing at a very fast rate. What type of courses do you think are best suited for online learning? Which courses are least suited for online learning?

Explain your reasoning for each answer.

2. What are the limitations of online learning as contrasted with traditional “classroom learning”? What are the advantages of it?

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CHAPTER 15 Communication Listening is the Key to Understanding Chapter 15 Overview Each Chapter contains several inset features designed to assist the student reader in applying the concepts to relevant examples. Management Live illustrates how popular movies demonstrate management concepts in the chapter. Role Models features a management professional that illustrates key chapter concepts in a novel, visionary or inspirational way. Explore Yourself refers students to self assessment activities relevant to concepts in the chapter. Ethics Check profiles examples of ethical issues in management. Manager's Library features books that illustrate current events or trends relevant to chapter concepts. Facts to Consider introduces research or trends that may be used for class discussion in the classroom or online for distance learning.

Communication is at the heart of the managerial process and it should be thought of as the glue that binds together the four functions of planning, organizing, leading and controlling.

This chapter begins by examining the concept of social capital and how communication by managers centers primarily around building social capital, the support and help from others to get things done. Next, the process of interpersonal communication, distinguishing between effective and efficient communication, and exploring the roles of persuasion and credibility in communication are discussed. Next, various communication barriers are described in detail, including information filtering, poor choice of channels, poor written or oral expression, failure to recognize nonverbal signals, and physical distractions, along with cross-cultural challenges.

Specific means of improving communication are then presented, including transparency and openness, interactive management, use of electronic media, active listening, constructive feedback, and space design.

Chapter 15 Takeaway Questions: Takeaway 15.1 What Is Communication, and When Is It Effective?

Takeaway 15.2 What Are the Major Barriers to Effective Communication?

Takeaway 15.3 How Can We Improve Communication with People at Work?

Chapter 15 Objectives: • • • • .

Explain how communication helps people build social capital Discuss the major elements in the process of interpersonal communication.

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Explain the role of credibility in persuasive communication List the major barriers to effective communication and common sources of noise Explain the importance of communication channels or the choice of a pathway to carry a message.

Discuss the importance of effectively written and oral expression to communicate.

Explain how the use of nonverbal signals can work for us or against us when communicating.

Describe how status differences make it difficult to communicate effectively.

List common physical distractions which make it difficult to communicate effectively.

List ways to improve workplace communication.

Define the concept of active listening, how it facilitates communication, and how it helps people say what they really mean.

Discuss the guidelines and importance of timely, specific, and relevant constructive feedback when communicating.

Explain the influence of office layouts and how they can be designed to encourage interaction and communication among workers.

Explain how transparency and openness improves communication Discuss how appropriate online behavior can facilitate better communication.

Explain how ethnocentrism affects cross-cultural communication and creates intercultural difficulties.

Chapter 15 Lecture Outline: Takeaway 15.1 What Is Communication, and When Is It Effective?

• Communication helps people build social capital.

• Communication is a process of sending and receiving messages with meanings attached.

• Communication is effective when the receiver understands the sender’s messages.

• Communication is efficient when it is delivered at low cost to the sender.

• Communication is persuasive when the receiver acts as the sender intends.

Takeaway 15.2 What Are the Major Barriers to Effective Communication?

• Poor use of channels makes it hard to communicate effectively.

• Poor written or oral expression makes it hard to communicate effectively.

• Failure to spot nonverbal signals makes it hard to communicate effectively.

• Status differences make it hard to communicate effectively.

• Physical distractions make it hard to communicate effectively.

Takeaway 15.3 How Can We Improve Communication with People at Work?

• Active listening helps people say what they really mean.

• Constructive feedback is specific, timely, and relevant.

• Office spaces can be designed to encourage interaction and communication.

• Transparency and openness ensure that accurate information is shared.

• Appropriate online behavior can facilitate better communication.

• Sensitivity and etiquette can improve cross-cultural communication. .

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Chapter 15 Supporting Materials: Figures Figure 15.1 What Are the Major Elements in the Process of Interpersonal Communication?

Figure 15.2 How Does Noise Interfere with the Communication Process?

Thematic Boxes and More • Management Live: Communication/Networking and The Devil Wears Prada • Role Models: The Limited’s Linda Heasley gives others reasons to work with her • Ethics Check: Blogging is easy, but bloggers beware • Facts to Consider: Employees should worry about electronic monitoring • Manager’s Library: Collaboration: How Leaders Avoid the Traps, Build Common • Ground, and Reap Big Results by Morten Hansen • Find Inspiration: Jay-Z Raps to a Business Empire • Explore Yourself: Communication and Networking • Tips to Remember: How to Give Constructive Feedback • Table 15.1 Essential Ingredients of Successful Presentations Applications • TestPrep 15 Multiple-Choice Questions • Skill Building Portfolio o Self-Assessment 15: Feedback and Assertiveness o Class Exercise 15: Communication and Teamwork Dilemmas o Team Project 15: How Words Count • Case Snapshot: Twitter – Rewriting Communication • Sidebar case: Yammer Makes Microblogging Corporate • Hot Topic: Good Idea or Not? Gain Influence by Tapping the Science of Persuading

Chapter Outline: Takeaway Question 15.1: What Is Communication, and When Is It Effective?

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Communication helps people build social capital ✓ Social capital is the capacity to attract support and help from others to get things done. This relates to who you know and how well you relate to them. ✓ In work networks ✓ The American Management Association asked members to rate the communication skills of their managers. Only 21% rated them “high.”

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Communication is a process of sending and receiving messages with meanings attached ✓ Communication is the interpersonal process of sending and receiving symbols with messages attached to them ✓ Involves a sender encoding an intended message into meaningful symbols, both verbal and nonverbal; he or she sends the message through a communication channel to a receiver; the receiver then decodes or interprets the meaning; when present, 15-3

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feedback reverses the process and conveys the receiver’s response back to the sender ✓ See Figure 15.1 for a depiction of the communication process ➢ The communication process begins when a sender encodes an intended meaning into a message. This message is then transmitted through a channel to a receiver. The receiver next decodes the message into perceived meaning.

Finally, the receiver may transmit feedback back to the sender. The communication process is effective when the perceived meaning of the receiver is the same as the intended meaning of the sender.

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Communication is effective when the receiver understands the sender’s message ✓ Messages aren't always interpreted by the receiver in the way the sender intended. ✓ Effective communication takes place when the receiver fully understands the message in the way the sender intended.

DISCUSSION TOPIC

One way to enhance the discussion of the communication process is to focus on the lecture mode of teaching. As the teacher/lecturer, you are occupying the role of sender, whereas the students are receivers. To communicate with students, you use a variety of symbols including spoken and written words, gestures, transparencies, PowerPoint slides, etc. to send them messages. As receivers, the students decode these messages into perceived meanings, which may or may not be the same as the intended meanings.

Continuing with this example, you can introduce the concepts of effective and efficient communication by noting that while you can communicate quite “efficiently” with students through straight lectures, their involvement and feedback is needed to insure “effective” communication. Finally, you can preview the discussion of communication barriers by asking students to identify sources of “noise” which sometimes interfere with the effectiveness of lectures. An added benefit of this discussion is that instructors may obtain some useful feedback on their lecturing styles.

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Communication is efficient when it is delivered at low cost to the sender ✓ Efficient communication is when communication occurs at minimum cost in terms of resources expended ✓ Cost includes time, expense and convenience

Role Models: The Limited’s Linda Heasley Gives Others Reasons to Work With Her Although they both work in fashion, the fictional Miranda in the Devil Wears Prada and the very real Linda Heasley, CEO of The Limited couldn't be more different. In addition to the questions listed in What's the Lesson Here? Consider asking students: How does Heasley encourage effective and efficient communication?

How does Heasley seem to reduce "noise" that enters the communication process?

• Communication is persuasive when the receiver acts as the sender intends ✓ Persuasive communication is getting someone else to accept, support, and act consistent with the sender’s message .

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✓ Credible communication-trust, respect, and integrity in the eyes of others •

Explore Yourself: Communication and Networking ✓ Communication and networking skills are valuable tools for career success as we've discussed. This Explore Yourself feature suggests that students take the Feedback and Assertiveness assessment in the Skill-Building Portfolio. Discussion may follow on the value of these abilities to communication and networking.

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Find Inspiration: Jay-Z Raps to a Business Empire ✓ “This guy from out in the projects who didn’t graduate from high school is now living this sort of life,” Jay-Z says about himself. “And this is how he got there.” His lyrics don’t always tell an easy story or recommend a solution. But they do make the case for how communication, other talents, and positive goals can help create career success.

Ask students to discuss whether it was luck that moved Jay-Z toward fame and fortune or something else? Raw talent alone isn’t enough to succeed in any business.

Success happens when talent is partnered with insight, intuition, and an ability to make the right decisions. Did Jay-Z make the connections and uses his communication skills to great business advantage? If so, how?

15.1 Questions for discussion suggested answers 1) Why do recruiters place so much emphasis on the communications skills of job candidates?

It would be hard to find a job that does not include "effective communication skills among the requirements. The ability to communicate information and ideas is essential to success in the workplace. This may be particularly true in situations where distance is a factor and face-to-face communication is minimal such as telecommuters or online communication 2)

Can you describe a work situation where it’s okay to accept less communication effectiveness to gain communication efficiency?

Twitter would be a good example of a communication that isn't very effective because it limits the number of characters allowed, but is very efficient because it can be sent quickly and can be accessed immediately. If more information is necessary, a more effective medium can be used such as calling the sender on the phone, speaking in person or sending an e-mail.

3) What can a manager do to gain the credibility needed for truly persuasive communication?

Credibility takes place when a sender has the trust and respect of the receiver. Students will have many ideas about how to earn trust and respect. At the foundation of most responses will be the fact that a track record of honest and sincere communication builds trust and respect and eventually, credibility.

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Takeaway Question 15.2: What Are the Major Barriers to Effective Communication?

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Figure 15.2 illustrates the concept of how different types of noise interfere with the communication process: ✓ Among the types of noise that can interfere with the effectiveness of communication, the following are well worth noting: Semantic problems in the forms of poor written or oral expression, the absence of feedback, improper choice and use of communication channels, physical distractions, status differences between senders and receivers, and cultural differences can all in one way or another complicate the communication process. Unless these factors are given attention, they can reduce communication effectiveness.

DISCUSSION TOPIC You can demonstrate the impact of noise on the communication process by having 5 or 6 students play a round of “telephone” in class. The first student reads a selected written paragraph, whispering it to the second student. The second student repeats the message from memory, as accurately as possible, whispering to the third student, and so on. Compare the message, as recited by the last student, to the original paragraph.

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Poor use of channels makes it hard to communicate effectively. ✓ Noise is anything that interferes with the communication process ✓ Learning activity - Ask students to make a list of "noise" that interferes with the communication process in your classroom. Their list will may include: environmental noise, texting, Facebook on laptops, neighbors talking, hunger, listening in a second language, faculty speaking in a boring, monotone way . . . . ✓ Communication channel is the medium used to carry a message ✓ Channel richness is the capacity of a communication channel to effectively carry information ✓ Inset illustration on illustrates the concept with a continuum of low richness media to high richness media.

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Poor written or oral expression makes it hard to communicate effectively ✓ Communication needs to be clear to be understood. ✓ Most managers need to practice written communication and presentation skills

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Table 15.1 lists “Essential Ingredients of Successful Presentations,” as follows: ✓ Be prepared—Know what you want to say; know how you want to say it; rehearse -saying it. ✓ Set the right tone—Focus on your audience; make eye contact and act pleasantly and confidently. ✓ Sequence your points—State your purpose, make important points, follow with -details, and then summarize. ✓ Support your points—Give specific reasons for your points; state them in 15-6

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understandable terms. ✓ Accent the presentation—Use good visual aids; provide supporting handouts when possible. ✓ Add the right amount of polish—Attend to details; have room, materials, and -arrangements ready to go. ✓ Check the technology—Check everything ahead of time; make sure it works and know how to use it. ✓ Don’t bet on the Internet—Beware of plans to make real-time Internet visits; save sites on a disk and use a browser to open the file. ✓ Be professional—Be on time; wear appropriate attire; act organized, confident, and enthusiastic.

Failure to spot nonverbal signals makes it hard to communicate effectively ✓ Nonverbal communication takes place through gestures, expressions, posture and use of interpersonal space. ✓ Mixed messages result when words communicate one message and actions, body language DISCUSSION TOPIC

A fun way to illustrate the power of nonverbal communication is to call on volunteers to “act out” various emotions without speaking verbally. Specifically, you may whisper to one volunteer to “act angry,” another to “be sad,” another to “be happy,” etc. Alternatively, you may ask one student to portray all of these emotions, plus any others that you choose. Then you can ask the students’ classmates to guess which emotion is being portrayed.

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Status differences make it hard to communicate effectively ✓ Information filtering is intentional distortion of information to make it more favorable to the recipient ✓ Unpleasant information is minimized or eliminated

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Physical distractions make it hard to communicate effectively • Physical distractions can be avoided or minimized by planning the message to minimize interruptions. Most of us don't multi-task effectively when communicating.

15.2 Questions for discussion suggested answers 1) When is texting not an appropriate way to convey a message in a work situation?

Text is a low context medium, but it is very inexpensive. That means that it is not very effective, but very efficient. Messages that require high effectiveness would not be a good choice for text. An example might be anything that might need clarification with two way communication, or a complex message about a sensitive subject, like a firing, discipline or even compliment. This might be a tough sell to students that feel that texting can convey about anything.

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2) If someone just isn’t a good writer or speaker, what can he or she do to improve communication skills?

A great idea would be to take a college writing or speech class. If that isn't an option, reading articles, going to workshops, joining an organization like Toastmasters, taking a Dale Carnegie class or even reading this chapter would be a good start.

3) How can a higher-level manager avoid the problem of filtering when lower-level staffers pass information upward to her?

A manager that is approachable and displays emotional intelligence will find that direct reports are much more comfortable in presenting information of any kind. A policy of "Management by Wandering/Walking Around (MBWA)" will help employees feel that the manger is accessible and approachable.

Takeaway Question 15.3: How Can We Improve Communication With People at Work?

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Active listening helps people say what they really mean ✓ Active listening is the process of taking action to help someone else say what he or she really means ✓ Rules for active listening ➢ Listen for message content ➢ Listen for feelings ➢ Respond to feelings ➢ Note all cues ➢ Paraphrase and restate Constructive feedback is specific, timely, and relevant ✓ Feedback is the process of telling other people how you feel about something they did or said, or about the situation in general ✓ Tips to Remember box includes ideas for communicating feedback effectively

DISCUSSION TOPIC Divide the class into groups of four or five students. Using the guidelines for providing constructive feedback, have each group devise a plan for how they would go about providing feedback to a fellow team member who is not carrying his/her fair share of the team’s work load.

Select two or three of the teams to share their feedback plans with the entire class.

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Tips to Remember: How To Give Constructive Feedback ✓ Choose the right time—Give feedback at a time when the receiver seems most willing or able to accept it. ✓ Be genuine—Give feedback directly and with real feeling, based on trust between you and the receiver. ✓ Be specific—Make feedback specific rather than general; use clear and recent examples to make points. ✓ Stick to the essentials—Make sure the feedback is valid; limit it to things the receiver can be expected to do something about.

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✓ Keep it manageable—Give feedback in small doses; never give more than the receiver can handle at any particular time.

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Office spaces can be designed to encourage interaction and communication ✓ Proxemics is the study of the way we use space ✓ Physical distance between people conveys varying intentions in terms of intimacy, openness, and status as they communicate with one another

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Manager’s Library: Collaboration: How Leaders Avoid the Traps, Build Common Ground, and Reap Big Results by Morten Hansen ✓ Teamwork is criticized as not living up to our managerial expectations in Collaboration by Morton Hansen. Rather than give up on teamwork, Hansen suggests that the problem lies in our reluctance or inability to communicate effectively in a team and suggests that managers appreciate these problems and work to overcome them. Reflect and React questions ask students to relate the communication barriers described by Hansen to their own experience in teams.

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Transparency and openness ensure that accurate and timely information is shared ✓ Communication transparency involves being honest and openly sharing accurate and complete information. ✓ Open book management provides employees with accurate information about the employer's financial status

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Appropriate online behavior can facilitate better communication ✓ E-mail, text, and social networking communication may or may not be appropriate in the organization or circumstance. Know your audience and plan the best medium for the message ✓ Electronic grapevine uses technology to transmit information around informal networks inside and outside organizations ➢ Some organizations monitor employee communication

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Facts to Consider: Employees Should Worry About Electronic Monitoring ✓ Do employers have the right to track employee internet use on the job? Yes and they frequently do. This feature shares some statistics on employer monitoring of employees and the disciplinary actions taken. This is a great opportunity to discuss the policies of student's employers or of the college.

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Sensitivity and etiquette can improve cross-cultural communication ✓ Ethnocentrism is a major source of intercultural difficulties ✓ Ethnocentrism is the tendency to consider one’s culture superior to any and all others ✓ Cultural etiquette is the use of appropriate manners and behaviors when communicating with people from other cultures Ethics Check: Blogging is Easy, Bug Bloggers Beware

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✓ Catherine Sanderson is one of the growing number of employees that have lost their jobs because they discussed work in their blogs. The questions in You Decide ask readers to compare blogs to other situations that question the ethics of sharing work experiences with the general public. How does the situation differ when viewed from the perspective of employer versus the employee perspective?

To add a little educational controversy: What if it was a student blogging about what goes on in class or posting comments about a professor on www.ratemyprofessor.com?

Would it be any different if professors shared their experience about students on a blog?

15.3 Reflect/React Suggested Answers 1) Which rules for active listening do you think most people break?

Most people do not listen to message content. This can occur because they are formulating a response or are distracted.

2) Is transparency in communications a sure winner, or could a manager have problems with it?

MBWA cannot be the sole source of information for a manager. It may contain employee bias or error. But MBWA is a very effective tool for building trust and communication and credibility with employees.

3) How could you redesign your office space, or that of your instructor or boss, to make it more communication friendly?

The desk should face visitors as they enter through the open door; the environment should be at least comfortable, if not inviting-a side chair would be helpful in this regard. A small conference table either round or oval in design would enable open communication.

Teaching Notes In this section, ideas, exercises, and assignments are provided to assist you in integrating the concepts in Exploring Management for your students, especially the special features of the text.

Management Live: Communications/Networking and The Devil Wears Prada In the Devil Wears Prada, Andy (Anne Hathaway) learns how to survive in the seemingly cutthroat worlds of high fashion and publishing with possibly the worst boss in either world, Miranda Priestly (Meryl Streep). The communication and networking skills she learns not only help her survive, but she learns to excel at them. Students may find that making their way into a management career will require learning new communication and networking skills. A few may have already experienced the pressure of learning communicate in a world in which they do not feel comfortable. Discussion questions for students center around the necessity of changing one’s communication to find success.

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Facts to Consider: Employees Should Worry About Electronic Monitoring Do employers have the right to track employee internet use on the job? Yes and they frequently do. This feature shares some statistics on employer monitoring of employees and the disciplinary actions taken. This is a great opportunity to discuss the policies of student's employers or of the college.

Role Models: The Limited’s Linda Heasley Gives Others Reasons to Work With Her Although they both work in fashion, the fictional Miranda in the Devil Wears Prada and the very real Linda Heasley, CEO of The Limited couldn't be more different. In addition to the questions listed in “What's the Lesson Here?,” Consider asking students: How does Heasley encourage effective and efficient communication?

How does Heasley seem to reduce "noise" that enters the communication process?

Find Inspiration: Jay-Z Raps to a Business Empire “This guy from out in the projects who didn’t graduate from high school is now living this sort of life,” Jay-Z says about himself. “And this is how he got there.” His lyrics don’t always tell an easy story or recommend a solution. But they do make the case for how communication, other talents, and positive goals can help create career success.

Ask students to discuss whether it was luck that moved Jay-Z toward fame and fortune or something else? Raw talent alone isn’t enough to succeed in any business. Success happens when talent is partnered with insight, intuition, and an ability to make the right decisions. Did Jay-Z make the connections and uses his communication skills to great business advantage? If so, how?

Manager's Library: Collaboration: How Leaders Avoid the Traps, Build Common Ground, and Reap Big Results by Morten Hansen Teamwork is criticized as not living up to our managerial expectations in Collaboration by Morton Hansen. Rather than give up on teamwork, Hansen suggests that the problem lies in our reluctance or inability to communicate effectively in a team and suggests that managers appreciate these problems and work to overcome them.

Reflect and React questions ask students to relate the communication barriers described by Hansen to their own experience in teams.

Ethics Check: Blogging is Easy, But Bloggers Beware Catherine Sanderson is one of the growing number of employees that have lost their jobs because they discussed work in their blogs. The questions in You Decide ask readers to compare blogs to .

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other situations that question the ethics of sharing work experiences with the general public.

How does the situation differ when viewed from the perspective of employer versus the employee perspective?

To add a little educational controversy: What if it was a student blogging about what goes on in class or posting comments about a professor on www.ratemyprofessor.com?

Would it be any different if professors shared their experience about students on a blog?

Explore Yourself: Communication and Networking Communication and networking skills are valuable tools for career success as we've discussed.

This Explore Yourself feature suggests that students take the Feedback and Assertiveness assessment in the Skill-Building Portfolio. Discussion may follow on the value of these abilities to communication and networking.

Hot Topic: Good Idea or Not? Gain Influence by Tapping the Science of Persuading Two scenes are presented. The first has to do with hoteliers wanting to wash fewer towels. The second has to do with restaurant servers wanting to maximize tips. Each offers a lesson to do so.

Can these lessons be turned into advice for leaders? Leadership is complicated in any setting.

But, it ultimately requires success at influencing other people. Do a self-check of your success in leadership situations: To what extent is “persuasion” part of your leadership skill portfolio? How about the leaders you work with: Do they pass or fail as masters of the science of persuasion?

And if persuasion is so important, should we spend more time learning and practicing how to do it really well?

Career Situation: What Would You Do?

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Your boss just sent a text message that he wants you at a meeting starting at 3 p.m. Your daughter is performing a music program at her elementary school at 2:45 p.m., and she wants you to attend. You’re out of the office making sales calls and have scheduled appointments to put you close to the school in the early afternoon. The office is a long way across town. Do you call the boss, text him, or send him an email? What exactly will you say in your response to his message?

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As the leader of your work team, some members have come to you and pointed out that there is no way they can complete the current project on time. In fact, they expect to be at least two weeks late. This is a “pet” project for your boss, and your understanding is that she has a lot riding on its success for her career advancement. She is aloof and very formal in her dealings with you. Now you’re stuck in the middle between her and your team. What actions will you take, and why?

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The restaurant you own and manage is being hit hard by a bad economy. The number of customers is down, as is the amount of the average dinner bill. You employ a staff of 12, but you’re going to have to cut back or go to job sharing so that the payroll covers no 15-12

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more than 8. One of the servers just told you that someone is tweeting that the restaurant is going to close its doors after the coming weekend. Loyal customers and staff are “buzzing” about the news and it’s starting to travel more widely. How do you deal with this situation?

Tips to Remember: How to Give Constructive Feedback • Choose the right time—Give feedback at a time when the receiver seems most willing or able to accept it.

• Be genuine—Give feedback directly and with real feeling, based on trust between you and the receiver.

• Be specific—Make feedback specific rather than general; use clear and recent examples to make points.

• Stick to the essentials—Make sure the feedback is valid; limit it to things the receiver can be expected to do something about.

• Keep it manageable—Give feedback in small doses; never give more than the receiver can handle at any particular time.

Terms to Define Active listening

Feedback

Channel richness

Information filtering

Charisma

Mixed message

Charismatic leadership tactics

Noise

Communication

Nonverbal communication

Communication channel

Open-book management

Communication transparency

Persuasive communication

Credible communication

Proxemics

Cultural etiquette

Social capital

Effective communication Efficient communication Electronic grapevine Ethnocentrism .

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Multiple-Choice Questions 1. Who is responsible for encoding a message in the communication process? (a) Sender (b) Receiver (c) Observer (d) Consultant 2. Issues of “respect” and “integrity” are associated with _____________ in communication. (a) noise (b) filtering (c) credibility (d) ethnocentrism 3. Which is the best example of a team leader providing descriptive rather than evaluative feedback to a team member? (a) You are a slacker. (b) You are not responsible. (c) You cause me lots of problems. (d) You have been late to meetings three times this month.

4. When interacting with an angry co-worker who is complaining about a work problem, a manager skilled at active listening would most likely try to _____________. (a) delay the conversation until a better time (b) point out that the conversation would be better held at another location (c) express displeasure in agreement with the coworker’s complaint (d) rephrase the co-worker’s complaint to encourage him to say more 5. When the intended meaning of the sender and the interpreted meaning of the receiver are the same, communication is _____________. (a) effective (b) persuasive (c) passive (d) efficient 6. What happens when a communication is persuasive? (a) The receiver understands the message. (b) The sender feels good about the message. (c) The receiver acts as the sender intended. (d) The sender becomes a passive listener.

7. How can a manager build the credibility needed for persuasive communications? (a) Offer rewards for compliance with requests. (b) Clarify penalties for noncompliance with requests. (c) Remind everyone that she or he is the boss. (d) Work hard to establish good relationships with others.

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8. One of the rules for giving constructive feedback is to make sure that it is always _____________. (a) general rather than specific (b) indirect rather than direct (c) given in small doses (d) delivered at a time convenient for the sender 9. When a worker receives an e-mail memo from the boss with information about changes to his job assignment and ends up confused because he doesn’t understand it, the boss has erred by making a bad choice of _____________ for communicating the message. (a) words (b) channels (c) nonverbals (d) filters 10. The safest conclusion about privacy in electronic communications is _____________. (a) it’s guaranteed by law (b) it’s not a problem (c) it really doesn’t exist (d) it can be password protected 11. A/An _____________ is higher in channel richness than a/an ____________. (a) memo; voice mail (b) letter; video conference (c) chat message; e-mail (d) voice mail; telephone conversation 12. The negative effects of status differences on communication between lower and higher levels in organizations show up in the form of _____________. (a) filtering (b) MBWA (c) ethnocentrism (d) passive listening 13. A manager who understands the influence of proxemics in communication is likely to _____________. (a) avoid sending mixed messages (b) arrange work spaces to encourage interaction (c) be very careful choosing written words (d) send frequent e-mail messages to team members 14. When a person’s words say one thing but his or her body language suggests something quite different, the person is sending _____________. (a) a mixed message (b) noise (c) social capital .

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(d) destructive feedback 15. If a visitor to a foreign culture makes gestures commonly used at home even after learning that they are offensive to locals, the visitor can be described as _____________. (a) a passive listener (b) ethnocentric (c) more efficient than effective (d) an active listener

Short-Response Questions: 16. What is the goal of active listening?

The manager’s goal in active listening is to help the subordinate say what he or she really means. To do this, the manager should carefully listen for the content of what someone is saying, paraphrase or reflect back what the person appears to be saying, remain sensitive to nonverbal cues and feelings, and not be evaluative.

17. Why do managers sometimes make bad decisions based on information received from their subordinates?

Well-intentioned managers can make bad decisions when they base decisions on bad information. Because of the manager’s position of authority in the organization, those below him or her may be reluctant to communicate upward information that they believe the manager doesn’t want to hear. Thus, they may filter the information to make it as agreeable to the manager as possible. As a result of this filtering of upward communication, the manager may end up with poor or incomplete information and subsequently make bad decisions.

18. What are four errors team leaders might make when trying to give constructive feedback to team members?

The four major errors in giving constructive feedback would be (1) being general rather than specific, (2) choosing a poor time, (3) including in the message irrelevant things, and (4) overwhelming the receiver with too much information at once.

19. How does ethnocentrism influence cross-cultural communication?

Ethnocentrism is when a person views his or her own culture as superior to others. It can interfere with cross-cultural communication when the ethnocentrism leads the person to ignore cultural signals that indicate his or her behavior is inappropriate or offensive by local cultural standards. With the ethnocentric attitude of cultural superiority, the individual is inclined not to change personal ways or display the sensitivity to local cultural ways that are necessary to effective communication.

Integration and Application Questions: 20. Glenn was recently promoted to be the manager of a new store being opened by a large department store chain. He wants to start out right by making sure that communications are always good between him, the six department heads, and the 50 full-time and part-time sales associates. He knows he’ll be making a lot of decisions in the new job, and he wants to be sure .

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that he is always well informed about store operations. He also wants to make sure everyone is always “on the same page” about important priorities. Put yourself in Glenn’s shoes.

Questions: What should Glenn do right from the start to ensure that he and the department managers communicate well with one another? How can he open up and maintain good channels of communication with the sales associates?

Glenn can do a number of things to establish and maintain a system of communication with his employees and for his department store branch. To begin, he should, as much as possible, try to establish a highly interactive style of management based on credibility and trust. Credibility is earned through building personal power through expertise and reference. With credibility, he might set the tone for the department managers by using MBWA—“managing by wandering around.” Once this pattern is established, trust will build between him and other store employees, and he should find that he learns a lot from interacting directly with them. Glenn should also set up a formal communication structure, such as bimonthly store meetings, where he communicates store goals, results, and other issues to the staff , and in which he listens to them in return. An e-mail system whereby Glenn and his staff could send messages to one another from their workstation computers would also be beneficial.

Self-Assessment 15: Feedback and Assertiveness Instructions For each statement below, decide which of the following answers best fits you.

1 = Never true 2 = Sometimes true 3 = Often true 4 = Always true _______ 1. I respond with more modesty than I really feel when my work is complimented. _______ 2. If people are rude, I will be rude right back. _______ 3. Other people find me interesting. _______ 4. I find it difficult to speak up in a group of strangers. _______ 5. I don’t mind using sarcasm if it helps me make a point. _______ 6. I ask for a raise when I feel I really deserve it. _______ 7. If others interrupt me when I am talking, I suffer in silence. _______ 8. If people criticize my work, I find a way to make them back down. _______ 9. I can express pride in my accomplishments without being boastful. _______ 10. People take advantage of me. _______ 11. I tell people what they want to hear if it helps me get what I want. _______ 12. I find it easy to ask for help. _______ 13. I lend things to others even when I don’t really want to. _______ 14. I win arguments by dominating the discussion. _______ 15. I can express my true feelings to someone I really care for. _______ 16. When I feel angry with other people, I bottle it up rather than express it. _______ 17. When I criticize someone else’s work, they get mad. _______ 18. I feel confident in my ability to stand up for my rights.

Scoring and Interpretation Aggressiveness tendency score—Add items 2, 5, 8, 11, 14, and 17.

Passiveness tendency score—Add items 1, 4, 7, 10, 13, and 16.

Assertiveness tendency score—Add items 3, 6, 9, 12, 15, and 18. .

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The maximum score in any single area is 24. The minimum score is 6. Try to find someone who knows you well. Have this person complete the instrument also as it relates to you. Compare his or her impression of you with your own score. What is this telling you about your behavior tendencies in social situations?

Class Exercise 15: Communication and Teamwork Dilemmas Instructions 1. Identify from the list below the three activities that you find most uncomfortable when part of a team. (a) Telling a friend that she or he must stop coming late to team meetings (b) Pointing out to a team member that his or her poor performance is hurting the team (c) Asking teammates to comment on your criticism of the consensus that seems to be emerging on a particular issue (d) Telling a teammate who has problems working with others on the team that he or she has to do something about it (e) Responding to a team member who has just criticized your performance (f) Responding to a team member who has just criticized your attitude toward the team (g) Responding to a team member who becomes emotional and defensive when you criticize his or her performance (h) Having a teammate challenge you to justify your contributions to a discussion 2. Form three-person teams as assigned by your instructor. Identify the three behaviors with which each person indicates the most discomfort.

3. Have each team member practice performing these behaviors with another member, while the third member acts as an observer. Be direct, but try to perform the behavior in an appropriate way. Listen to feedback from the observer, and try the behaviors again, perhaps with different members of the group practicing each behavior.

4. When finished, discuss the overall exercise, and be prepared to share highlights of the exercise with the rest of the class.

Team Project 15: How Words Count Question What words do people use in organizations that carry meanings that create unintended consequences for the speaker?

Research Directions 1. Brainstorm with others to make a list of words that you have used or heard used by people and that cause other persons to react or respond negatively and even with anger toward the person speaking them.

2. For each word on the list, write its “positive” meaning and “negative” meaning.

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3. Choose two or three of the words that seem especially significant. Write role-plays that display speakers using each word in the positive sense in conversations and in which the words are interpreted positively by the receivers.

4. For these same words, write role-plays that display speakers using each word conversationally with positive intentions but in which they are interpreted negatively by the receiver.

5. Explain the things that make a difference in how the same words are interpreted by receivers.

6. Draft a report that explains how people in organizations can avoid getting trapped unintentionally in problems caused by poor choice and/or use of words in their conversations.

Cases for Critical Thinking: Twitter – Rewriting Communication Sidebar: Yammer Makes Microblogging Corporate The case explores the impact Twitter is having on the way we communicate. Whether or not you tweet, there’s no denying that Twitter’s having a profound effect on the way we communicate with each other and the outside world. But is the popular microblogging service reinventing communication or just abbreviating it? Do tweets contribute to the conversation or dumb it down? Many social media researchers, sociologists, and corporate marketing experts are asking themselves the same questions. Co-founder Evan Williams believes, “It adds a layer of information and connection to people’s lives that wasn’t there before. “It has the potential to be a really substantial part of how people keep in touch with each other.” Nicely said. But, really, is a tweet in 140 characters or less effective communication or just a distraction?

Case discussion questions and suggested answers: 1. DISCUSSION What are the advantages and disadvantages of trying to communicate via Twitter? How can a 140- character tweet really be effective? What guidelines would you recommend for maximizing the effectiveness of a tweet?

Advantages: Quick and simplistic Concise and to the point Less time and energy to send a message Low cost Anonymity You can follow anyone and anyone can follow you Easy to use Disadvantages: Limits its effectiveness.

Low channel richness Opportunity for “noise” to interfere (getting lost in other messages or distracted readers not getting or misunderstanding the message). .

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Shortened words increase the chance of miscommunication Profile doesn’t contain much information Guidelines to maximize effectiveness of a Tweet: If appropriate, use “How To” in the message as an attention getter (sell the headline) Make it relevant to your readers (remember everyone is in a hurry) Check spelling, punctuation and grammar (avoid all caps) Engage your followers by asking questions and responding Tweet only great content 2. DISCUSSION Choose a national brand or entertainment personality, and discuss the ways Twitter might be used to create a following and desired brand image. How about a college course? In what ways could an instructor use Twitter to improve the classroom or online learning experience? Is Twitter more appropriate for the national brand and entertainment personality than for the college instructor? Why or why not?

Brand: Zappos uses Twitter effectively to engage customers. Tony Hsieh’s Twitter account, @Zappos humanizes the brand and reinforces his mantra and company promise of “making people happy.” Scrolling through Hsieh’s timeline provides ideas of how executives use Twitter for customer engagement. All Zappos employees are allowed to Tweet with only one social media guideline: “Be real and honest.”

Whole Foods uses Twitter extensively – and is known to have over 300 different Twitter accounts (mainly, by store). Whole Foods uses Twitter as a customer service vehicle, to promote, and to share recipes.

Starbucks uses Twitter for crowdsourcing suggestions and ideas. One study showed that brands with promoted tweets are more likely to influence a consumer’s choice of brand. Hollywood is using Twitter with sneak previews of films, consumer products use Twitter for promotions.

It might be interesting to discuss with students (or have them guess) the 20 top brands on Twitter. To date, they include: Whole Foods, Starbucks, Samsung, Delta Airlines, Tom’s Shoes, JetBlue, McDonald’s, Coke, Verizon, Adidas, Best Buy. As of July 1, 2013, the ten accounts with the most followers belonged to the following individuals and organizations: Justin Bieber (41.2 million followers worldwide) Lady Gaga (38.8m) - most followed account for a female Katy Perry (38.7m) Barack Obama (33.4m) - most followed account for a politician Rihanna (30.2m) Taylor Swift (30.1m) YouTube (29.7m) - highest account not representing an individual .

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Britney Spears (28.77m) Justin Timberlake (22.2m) Instagram (22.1m) College course: Twitter is used in an academic environment and can be used by college professors to promote their course(s), share information, show class pictures, post articles, and with Vine, upload short video clips. Twitter is a way to engage students. At one college, otherwise quiet and less engaged students were known to tweet comments or questions during lecture via laptop or smartphone. A real-time feed was displayed prominently at the front of the lecture hall.

Tweet about: Due dates Assignments Share information and news events Field trips Speaker events on campus Lectures Group projects Career fairs Club meetings Class notes 3. PROBLEM SOLVING You’ve been given a first assignment as the new summer intern in the office of a corporate CEO. The task is to analyze Yammer and make a presentation to the CEO and her executive team recommending whether or not to adopt its social media technology for corporate purposes. What points will you make in the presentation to summarize its potential uses, possible downsides, and overall strategic value to the firm?

Uses Stated on Yammer’s website: “That’s why over 200,000 companies, including 85% of the Fortune 500, use Yammer at work to foster team collaboration, empower employees, drive business agility and socialize their intranets.”

Improve team project alignment, break down silos, and easily manage projects and events.

Make every employee feel more connected and engaged.

Managing collaboration networks to minimize unwanted chatter and input

Downsides Limiting: Yammer only allows members to connect with other members who belong to the same email domain.

Communicate more effectively company-wide, quickly find experts and information, and facilitate peer-to-peer learning.

Information overload

Innovate and adapt when launching new products.

The organizational culture must support and use Yammer in order for the communication to be effective.

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merge cultures during an acquisition

Misconception that Yammer replicates email.

With Yammer as your intranet, business applications are made social.

You still have to go outside Yammer to manage projects, store documents, assign tasks, and send instant messages.

Because outside tools must be used, Yammer becomes almost a distraction from the normal tools used to get work done.

Reach of communication to company employees only (this can be a pro or con) Real-time information exchange on company-related issues only.

Specific groups can be formed for specific projects.

Useful in companies where workers are geographically dispersed.

This unique feature provides corporate employees with the ability to communicate privately, using a graphical user interface (GUI) that resembles Facebook.

Strategic value to the firm: some of the items in the “uses” column above offer strategic value to the firm. They include: Yammer allows members belonging to the same email domain to connect, communication is private, increased communication and collaboration by sharing information and, improved team project alignment. Silos can be broken down and projects/events easily managed.

4. FURTHER RESEARCH Focus on current developments with Twitter and Yammer. What is presently happening with each firm and its product? Are they still innovating, and if so, what new directions are evident for each firm? Is Twitter on a continued path of success, or is its 140-character appeal starting to fade? Is Yammer doing well as part of the Microsoft ownership umbrella? Or, has it suffered and lost momentum since being acquired by the big firm? Who are the major competitors faced by Twitter and Yammer at the moment. Are they real threats, or not?

Current developments: Twitter Vine – video sharing app Yahoo and Twitter have partnered to bring tweets directly into Yahoo’s homepage newsfeed on web and mobile Twitter is going to serve ads based upon internet surfing habits – but unlike other companies, it is offering privacy settings that let you opt out of the system.

Twitter wants to bring video clips into realtime stream Twitter is looking into TV-related content deals with broadcast network company Viacom and NBC.

Yammer Purchased by Microsoft in July of 2012.

Microsoft updated Office 365 service to allow customers to replace the SharePoint newsfeed with Yammer.

Yammer users have increased to 8 million since it was purchased by Microsoft (5 million at the time of purchase).

Microsoft says Yammer momentum is tremendous.

Over 85% of Fortune 500 firms are using Yammer.

Competitors: Yahoo, Google, Facebook, FourSquare Tumblr, Yammer .

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Suggested Team Exercise for Chapter 15 Break the class into teams and ask the teams to consider each of the flowing communication scenarios and to discuss and summarize their answers to each scenario: 1. You are the CEO of a company and, because of very poor sales due to the recent recession, have determined that you need to terminate 10% of your workforce as a cost control measure. How would you communicate this message to all employees in a large company with multiple locations?

2. You need to advise an employee who works in customer service that he or she is too abrasive with customers based on surveys that you have received. Where and how would you communicate this issue?

3. You are the Manager of Employee Benefits and want to communicate a change in the car mileage reimbursement rate from $.55 a mile to $.50 a mile for use of employees’ personal automobiles for company business. How would you do this?

4. You are the CEO of a pharmaceutical company and have just learned that the Food and Drug Administration has approved one of your drugs for use in cancer treatment. You need to advise your immediate executive staff. However this is very sensitive information. How would you do this?

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CHAPTER 16 Diversity and Global Cultures There are new faces in the neighborhood Chapter 16 Overview Each Chapter contains several inset features designed to assist the student reader in applying the concepts to relevant examples. Management Live illustrates how popular movies demonstrate management concepts in the chapter. Role Models features a management professional that illustrates key chapter concepts in a novel, visionary or inspirational way. Explore Yourself refers students to self assessment activities relevant to concepts in the chapter. Ethics Check profiles examples of ethical issues in management. Manager's Library features books that illustrate current events or trends relevant to chapter concepts. Facts to Consider introduces research or trends that may be used for class discussion in the classroom or online for distance learning.

This chapter begins by examining the importance of diversity in the workplace. As the population ages, it also becomes more ethnically diverse. The concept of inclusion and diversity is discussed. Multicultural organizations displaying commitments to diversity are discussed next, along with characteristics of multicultural organizations. Some of the common issues plaguing minorities and women are listed. The challenges created by organizational subcultures (by gender, age, ethnicity, nationality, and even occupation) are reviewed and lastly, why top leaders should make diversity a top priority is discussed.

Next, the chapter’s focus turns to culture shock, a result of feeling confused and uncomfortable when dealing with an unfamiliar culture. The concept and importance of cultural intelligence is discussed as a way to deal with and adapt to foreign cultures. The silent languages of cultures are listed, and the tightness and looseness of cultures by social norms and their degree of sanctioning within societies is reviewed. The five dimensions of national cultures are listed and the topic of intercultural competencies as essential career skills is covered.

Chapter 16 Takeaway Questions: Takeaway Question 16.1: What Should We Know About Diversity in the Workplace?

Takeaway Question 16.2: What Should We Know About Diversity Among Global Cultures?

Chapter 16 Objectives: • • • • • • .

To define diversity and its impact in the workplace To understand diversity behind age, race, ethnicity, gender, physical ability, and sexual orientation.

To explain high employee turnover among women and minorities and the revolving door syndrome To understand the lack of inclusivity in organizations To explain the model for a multicultural organization and its commitment to diversity To list characteristics of multicultural organizations 16-1

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To explain the ways women and minorities suffer from diversity bias To discuss the leaking pipeline problem which surfaces in male dominant cultures To explain how some people try to “fit in” by adapting through biculturalism.

To understand how informal groups or organizational, generational, gender, ethnic, and occupational subcultures are formed.

To explain what it means for an organization to manage diversity To explain the R. Roosevelt Thomas continuum of leadership approach to diversity.

To explain why global businesses should be concerned about culture shock To list the stages of culture shock To define cultural intelligence.

To explain the difference between a high-context culture and a low-context culture.

To explain the characteristics of members of a monochromic vs. polychromic culture.

To understand the tightness and looseness of cultures by social norms and their degree of sanctioning within societies.

To list Hofstede’s five dimensions of national cultures To understand why intercultural competencies are essential for career success.

Chapter 16 Lecture Outline: Takeaway Question 16.1: What Should We Know About Diversity in the Workplace?

• Inclusion drives the business case for diversity.

• Multicultural organizations cultures value and support diversity.

• Minorities and women suffer diversity bias in many situations.

• Organizational subcultures can create diversity challenges.

• Managing diversity should be a top leadership priority.

Takeaway Question 16.2: What Should We Know About Diversity Among Global Cultures?

• Culture shock comes from discomfort in cross-cultural situations.

• Cultural intelligence is the capacity to adapt to foreign cultures.

• The “silent” languages of cultures include context, time, and space.

• Cultural tightness and looseness varies around the world.

• Hofstede’s model identifies five value differences among national cultures.

• Intercultural competencies are essential for career skills.

Chapter 16 Supporting Materials: Figures Figure 16.1 How Do Glass Ceilings Constrain Career Advancement for Women and Minorities?

Figure 16.2 How Do Countries Compare on Hofstede’s Five Dimensions of National Cultures? .

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Thematic Boxes and More • Management Live: Diversity Maturity and Finding Forrester • Role Models: Salman Khan Crosses Borders to Foster Learning • Ethics Check: Fair-Trade fashion • Facts to Consider: Employee Morale Varies Around the World • Manager’s Library: Half the Sky: Turning Oppression into Opportunity for Women Worldwide by Nicholas D. Kristof and Sheryl WuDunn • Find Inspiration: New Continent Attracts a Global Giant • Explore Yourself: Diversity Maturity • Table 16.1: Characteristics of Multicultural Organizations Applications • TestPrep 16 Multiple-Choice Questions • Skill Building Portfolio o Self-Assessment 16: Diversity Awareness o Class Exercise 16: Alligator River Story o Team Project 16: Job Satisfaction Around the World • Case Snapshot: Cultural Charades in Business Process Outsourcing • Sidebar case: Beyond Race and Gender • Hot Topic: Good Idea or Not? Use punishment to sting incivility in the workplace

Chapter Outline: Takeaway Question 16.1: What Should We Know About Diversity in the Workplace?

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Inclusion drives the business case for diversity ✓ Revolving door syndrome refers to high employee turnover among minorities and women.

• Inclusivity-the degree to which an organization is open to anyone who can perform a job, regardless of race, sexual preference, gender, or other diversity attribute • Inclusive organizational cultures value and support diversity

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Multicultural organizations value and support diversity ✓ Multicultural organization - based on pluralism and operates with inclusivity and respect for diversity ✓ Multicultural organizations display commitments to diversity like those in Table 16.1 below. ✓ A truly diverse culture or climate is one that is rich in beliefs, values and expectations ✓ Diversity is good for businesses-a potential source of competitive advantage ✓ IBM attributes growth in sales to minority-owned businesses and women-owned smaller businesses to an increased presence of women and minorities in its management ranks ✓ Research company Catalyst says that companies with a greater percentage of women on their boards outperform those whose boards have the lowest female representation

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• See Table 16.1 for “Characteristics of a Multicultural Organization” Pluralism—Members of minority and majority cultures influence key values and policies.

Structural integration—Minority-culture members are well represented at all -levels and in all responsibilities.

Informal network integration—Mentoring and support groups assist career -development of minority-culture members.

Absence of prejudice and discrimination—Training and task force activities support the goal of eliminating culture-group biases.

Minimum intergroup conflict—Members of minority and majority cultures avoid destructive conflicts.

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Minorities and women suffer diversity bias in many situations Leaking pipeline problem shows up in male dominant organizational cultures. It occurs as women leave careers because their employer lacks family-friendly human resource policies and practices.

• Biculturalism is the display of majority culture characteristics that seem necessary to succeed in the work environment • Glass Ceiling is a real barrier to career advancement-not publicized barrier that acts as a limit to women and minority members advancing into higher positions •

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Figure 16.1 illustrates the concept of how glass ceilings constrain career advancement for women and minorities: Organizations consist of a majority culture (often white males) and minority cultures (including women, people of color, and other minorities). It is likely that members of the majority culture will dominate higher management levels. One of the potential consequences is a “glass ceiling” effect that, although not publicized, acts as a barrier that sometimes makes it hard for women and minorities to advance and gain entry into higher management ranks.

• Find Inspiration: New Continent Attracts a Global Giant The case explores the issue of experience with cross-cultural relationships. When Walmart closed the deal to buy 51% ownership of South Africa’s Massmart, it joined forces with an established and successful retailer. Walmart hopes to find the right fit with African cultures with the assistance of its local partner. Some questions to discuss in class: how experienced are you at cross-cultural relationships, whether in the neighborhood or while traveling?

What do you need to know to succeed in a globally connected world of work?

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Age Race Job Functions Generations

✓ May be students at school who group around their majors ✓ Occupational subcultures develop as people form shared identities around the work that they do. ✓ Ethnic or national subcultures -- exist among people from various races, language groups, regions, and countries. ✓ Cultural intelligence -- sometimes called CQ, is defined as a “person’s capability to function effectively in situations characterized by cultural diversity.” ✓ Gender subcultures are common to form among persons that share the same gender identities. ✓ Generational subcultures – age is the basis for generational subcultures in organizations. ✓ Ethnocentrism is the belief that one’s membership group or subculture is superior to all •

Managing diversity should be a top leadership priority • • • • •

Margin figure illustrates continuum of leadership approaches to diversity described by R. Roosevelt Thomas Affirmative action commits the organization to hiring and advancing minorities and women Valuing diversity commits the organization to education and training programs designed to help people better understand and respect individual differences Managing diversity is always seeking ways to make an organization truly multi cultural and inclusive Role Models: Salman Khan Crosses Borders to Foster Learning This feature profiles how instructional technology has changed the face of learning. The idea of Khan Academy began when Salmon Khan was asked to help his cousin with math. Soon, he was uploading tutorials to YouTube. Some praise the Khan Academy as “the future of education” and “game-changing.”

Skeptics are less sure. But it’s hard to question the benefits of “flipping the classroom” and using the Internet so that students can study from anywhere and at their own time and at their own pace. Questions to discuss with students: What’s your take on supplementing traditional in-class learning with online learning? When you’re struggling in a course, are you ready to engage a tutor who might be reaching out to you from India, the Philippines, or some other country?

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Explore Yourself: Diversity Maturity The assessment for this Chapter is entitled “Diversity Awareness.” The assessment tool is intended to help students reflect on their own sensitivity to diverse people.

The questions lend themselves to an interesting class discussion after students have completed the assessment.

Today’s organizations and the nature of our global workforce demand diversity maturity from anyone who is serious about career success. Being mature about diversity means being able to answer a confident “yes” to questions such as these: • Do you accept responsibility for improving your performance?

• Do you understand diversity concepts?

• Do you make decisions about others based on their -abilities?

• Do you understand that diversity issues are complex?

• Are you able to cope with tensions in addressing -diversity?

• Are you willing to challenge the way things are?

• Are you willing to learn continuously?

Be honest; admit where you still have work left to do. Use your answers to help set future goals to ensure that your actions, not just your words, consistently display positive diversity values. Get to know yourself better by taking the self-assessment on Diversity Awareness and completing the other activities in the Exploring Management

DISCUSSION TOPIC Point out to students that diversity maturity is relevant to how they deal with relationships in the educational environment as well as in the workplace. Have the students assess their own diversity maturity within their college/university community, by answering Yes or No to the following questions: Do you accept responsibility for improving your performance?

Do you understand diversity concepts?

Do you make decisions about other based on their abilities?

Do you understand that diversity issues are complex?

Are you able to cope with tensions in addressing diversity?

Are you willing to challenge the way things are?

Are you willing to learn continuously?

16.1 Questions for discussion suggested answers 1) What subcultures do you see operating at work and/or in school, and how do they affect relationships and daily events?

Possible subculture groups students may observe include ethnic groups, religious groups, men, women, non-traditional students and foreign students. Interest groups such as students with different majors, fans of anime, theater, video games, athletes... .

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2) What are some of the things organizations and leaders can do to reduce diversity bias faced by minorities and women in the workplace?

Leaders of organizations need to proactively support and articulate the very real benefits of diversity – its benefits to new products and services, stronger global sensitivity resulting in more markets and customers, and a learning opportunity for employees. The message needs to be, much like attention to new products or processes, diversity is integral to the company’s strategic success.

3) What does the existence of an affirmative action policy say about an organization’s commitment to diversity?

Existence of an affirmative action policy alone may not be evidence that an organization has truly committed to a proactive diversity policy. In some situations, such policies follow years of poor practices resulting in problems necessitating such policies. The Los Angeles Police force is such an example. One of the key issues in the Rodney King beating “fallout” was an under-representation of minorities on the force relative to the Los Angeles population proportions. Affirmative action may initially have been instilled as a compliance strategy to correct long-term issues. True integration and acceptance of diverse cultures and employees within a workforce may take a much longer time for effectiveness.

Takeaway Question 16.2: What Should We Know About Diversity Among Global Cultures?

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Culture shock comes from discomfort in cross-cultural situations ✓ Culture shock is feelings of confusion and discomfort when in or dealing with an unfamiliar culture ✓ Stages of adjustment to a new culture (or culture shock), include: ➢ Confusion ➢ Small victories ➢ Honeymoon ➢ Irritation and anger ➢ Reality

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Facts to Consider: Employee Morale Varies Around the World This feature provides information on employee morale in countries around the world.

These questions may be used in class or online for discussion in addition to the questions listed in the "Your Thoughts?" section. ➢ Is it possible that a country with a high employee morale ranking might have a lower standard of living and per capita income than a country with a higher morale ranking? How might this happen? ➢ What do you believe would need to happen for the United States to climb in the rankings?

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Cultural intelligence is the capacity to adapt and adjust to foreign cultures ➢ High cultural self-awareness and flexibility 16-7

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➢ Willingness to learn from what is unfamiliar; modification of behaviors to act with sensitivity to another culture’s ways DISCUSSION TOPIC If any of your students have lived or traveled abroad, ask them to describe their experiences and relate them to the stages of adjusting to a new culture.

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The “silent” languages of cultures include context, time, and space • High-context cultures - what is said or written may convey only part of the real message • Body language, physical setting, and non verbal signals important • Low-context cultures - most communication tales place via the written or spoken word (U.S., Canada, and Germany) • Monochronic cultures - one in which people do things one at a time • Polychronic cultures - one in which people try to work on many different things at once, perhaps not in any particular order (Egypt) • Proxemics—the varying ways people use personal space to communicate •

Ethics Check: Fair-Trade Fashion Perhaps you’re one of a growing number of consumers who like to shop “fair trade.”

Does it feel good when you buy coffee, for example, that is certified as grown by persons who were paid fairly for their labor? But what about clothing?

The You Decide questions ask: Are you willing to pay a bit more for a fair-trade product? And what do you think about Fair Indigo’s business model? Is it “fashion” that sells apparel, or fashion plus conditions of -origin? Is Fair Indigo at the forefront of the next new wave of value creation in retailing—fair-trade fashion?

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Cultural tightness and looseness varies around the world ✓ In a tight culture, such as ones found in Korea, Japan, or Malaysia, social norms are strong and clear. Prevailing, well-known norms guide behavior. ✓ In a loose culture, such as ones found in Australia, Brazil, or Hungary, social norms are mixed and less clear cut. People may be less concerned with them, and conformity will vary. ✓ A mix of tightness or looseness on a cross-cultural team may result in soft or unstated conflict and missed performance opportunity.

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Manager’s Library: Half the Sky: Turning Oppression into Opportunity for Women Worldwide by Nicholas D. Kristof and Sheryl WuDunn Half the Sky is taken from an ancient proverb that credits women with holding up half the sky. The trouble is, in China and many other countries, women are exploited in the workplace and in society. The book explores the plight of poor and uneducated women and the circumstances they live in which can be considered nothing but tragic. The authors of Half the Sky encourage us to recognize the injustice these women face and work to eliminate it. Consider showing your students the website at www.halftheskymovement.org 16-8

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and challenge them to find ways to get involved. Reflect and React questions probe students' view on the role of business in helping eliminate global "gendercide."

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Hofstede’s model identifies five value differences among national cultures • See Figure 16.2 for a depiction of how countries compare on Hofstede’s five dimensions of national cultures: Countries vary on Hofstede’s five dimensions of value differences in national cultures. For example, Japan scores somewhat comparatively higher on power distance and substantially higher on uncertainty avoidance and masculinity; the United States is much more individualistic and short-term oriented. The implications of such cultural differences can be significant. Imagine what they might mean when international business executives try to work out problems.

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Power distance is the degree to which a society accepts or rejects the unequal distribution of power among people in organizations and the institutions of society Uncertainty avoidance the degree to which a society tolerates risk and uncertainty Individualism-collectivism is the degree to which a society emphasizes individuals and their self-interests Masculinity-femininity is the degree to which a society values assertiveness and materialism rather than feelings, relationships and quality of life Time orientation is the degree to which a society emphasizes short-term or longterm goals Ecological fallacy is acting with the mistaken assumption that a generalized cultural value applies equally and always to all members of the culture

Intercultural competencies are essential career skills ✓ Intercultural competencies, skills and personal characteristics help us function successfully in cross-cultural situations. ✓ They are “must haves” for career success. ✓ Perception management – a person must be inquisitive and curious about cultural differences and be flexible and nonjudgmental when interpreting and dealing with situations in which differences are at play. ✓ Relationship management – a person must be genuinely interested in others, sensitive to their emotions and feelings, and able to make personal adjustments while engaging in cross-cultural interactions. ✓ Self-management – a person must have a strong sense of personal identity, understand their own emotions and values, and be able to stay self-confident even in situations that call for personal adaptations due to cultural differences.

16.2 Questions for discussion suggested answers 1) Should religion be included on Hall’s list of the silent languages of culture?

Religion could be considered a silent language. An example would be Muslims washing their feet which may not be understood by non-Muslims. Religions also involve many rituals and gestures which may be misinterpreted.

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2) Which of Hofstede’s cultural dimensions might pose the greatest challenges to U.S. managers working in Asia, the Middle East, or Latin America?

Cultures in the United States and the Middle Eastern cultures differ greatly on the dimension of in-group collectivism. The Middle East is high on this measure, meaning that people there tend to be much more loyal and cohesive toward families and organizational memberships. The United States culture ranks low on this measure.

Another key difference would be the role and dress of females in each country. The Middle East scores low on gender egalitarianism.

3) Even though cultural differences are readily apparent around the world, is the trend today for cultures to converge and become more like one another?

With advances in the speed and quality of technology and communications, people globally are becoming increasingly exposed to other countries’ cultures and practices.

An example in the United States is the homogenization of shopping malls and the seeming disappearance of regional accents.

Teaching Notes In this section, ideas, exercises, and assignments are provided to assist you in integrating the concepts in Exploring Management for your students, especially the special features of the text.

Management Live: Diversity Maturity and Finding Forrester Finding Forrester explores the nature of racism and perceptions. Since the movie is about a minority college student and the perceptions others have of him because of his race and fact that he is a star basketball player. Students are challenged to examine their level of diversity maturity, the ability to respect and work with others who are of a different ethnicity or culture.

This is an opportunity for a discussion of how your students view themselves and others they perceive as different. Ask students to determine which subcultures exist at your school and how they affect relationships.

Facts to Consider: Employee Morale Varies Around the World This feature provides information on employee morale in countries around the world. These questions may be used in class or online for discussion in addition to the questions listed in the "Your Thoughts?" section.

• Is it possible that a country with a high employee morale ranking might have a lower standard of living and per capita income than a country with a higher morale ranking?

How might this happen?

• What do you believe would need to happen for the United States to climb in the rankings?

Role Models: Salman Khan Crosses Borders to Foster Learning

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This feature profiles how instructional technology has changed the face of learning. The idea of Khan Academy began when Salmon Khan was asked to help his cousin with math. Soon, he was uploading tutorials to YouTube. Some praise the Khan Academy as “the future of education” and “game-changing.” Skeptics are less sure. But it’s hard to question the benefits of “flipping the classroom” and using the Internet so that students can study from anywhere and at their own time and at their own pace. Questions to discuss with students: What’s your take on supplementing traditional in-class learning with online learning? When you’re struggling in a course, are you ready to engage a tutor who might be reaching out to you from India, the Philippines, or some other country?

Find Inspiration: New Continent Attracts a Global Giant The case explores the issue of experience with cross-cultural relationships. When Walmart closed the deal to buy 51% ownership of South Africa’s Massmart, it joined forces with an established and successful retailer. Walmart hopes to find the right fit with African cultures with the assistance of its local partner. Some questions to discuss in class: how experienced are you at cross-cultural relationships, whether in the neighborhood or while traveling? What do you need to know to succeed in a globally connected world of work?

Manager's Library: Half the Sky: Turning Oppression into Opportunity for Women Worldwide by Nicholas D. Kristof and Sheryl WuDunn Half the Sky is taken from an ancient proverb that credits women with holding up half the sky.

The trouble is, in China and many other countries, women are exploited in the workplace and in society. The book explores the plight of poor and uneducated women and the circumstances they live in which can be considered nothing but tragic. The authors of Half the Sky encourage us to recognize the injustice these women face and work to eliminate it. Consider showing your students the website at www.halftheskymovement.org and challenge them to find ways to get involved. Reflect and React questions probe students' view on the role of business in helping eliminate global "gendercide."

Ethics Check: Fair-Trade fashion Perhaps you’re one of a growing number of consumers who like to shop “fair trade.” Does it feel good when you buy coffee, for example, that is certified as grown by persons who were paid fairly for their labor? But what about clothing? The “You Decide” questions ask: Are you willing to pay a bit more for a fair-trade product? And what do you think about Fair Indigo’s business model? Is it “fashion” that sells apparel, or fashion plus conditions of -origin? Is Fair Indigo at the forefront of the next new wave of value creation in retailing—fair-trade fashion?

Explore Yourself: Diversity Maturity The assessment for this Chapter is entitled “Diversity Awareness.” The assessment tool is intended to help students reflect on their own sensitivity to diverse people. The questions lend themselves to an interesting class discussion after students have completed the assessment. .

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Today’s organizations and the nature of our global workforce demand diversity maturity from anyone who is serious about career success. Being mature about diversity means being able to answer a confident “yes” to questions such as these: • Do you accept responsibility for improving your performance?

• Do you understand diversity concepts?

• Do you make decisions about others based on their -abilities?

• Do you understand that diversity issues are complex?

• Are you able to cope with tensions in addressing -diversity?

• Are you willing to challenge the way things are?

• Are you willing to learn continuously?

Be honest; admit where you still have work left to do. Use your answers to help set future goals to ensure that your actions, not just your words, consistently display positive diversity values.

Get to know yourself better by taking the self-assessment on Diversity Awareness and completing the other activities in the Exploring Management

Hot Topic: Good Idea or Not? Use punishment to sting incivility in the workplace A recent study of workplace incivility found that it has many adverse effects on work attitudes and behavior. It’s a fair guess that diversity and cultural differences are sometimes – perhaps often – at the core of rude and uncivil comments and behavior.

Discuss whether incivility should become subject to penalties at work. Given all the complexities of human behavior, and individual and cultural differences, can you draw a line that would help identify a specific comment or behavior as “unacceptable” in a work setting? What examples of across-the-line incivility can you give? Should incivility of any form be subject to meaningful penalties at work?

Career Situation: What Would You Do?

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One of your co-workers brought along his friend to lunch. When discussing his new female boss, the friend says: “It really irritates me not only that she gets the job just because she’s a woman, but she’s also Hispanic. There’s no way that someone like me had a chance given her pedigree. And she now has the gall to act as if we’re all one big happy team and the rest of us should accept her leadership. As for me, I’ll do my best to make it difficult for her to succeed.” It was uncomfortable for you just to hear this. Your co-worker looks dismayed but isn’t -saying anything. What do you do? Will you just let the comment go, or do something more?

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You’ve just been asked to join a team being sent to China for 10 days to discuss a new software development project with your firm’s Chinese engineers. It’s your first trip to China or Asia. In fact, you’ve only been to Europe as part of a study tour when in college. The trip is scheduled four weeks from today. What can you do to prepare 16-12

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for the trip and for your work with Chinese colleagues? What worries you the most about the trip and how well you’ll do in the unfamiliar cultural circumstances?

Terms to Define Biculturalism

Masculinity-femininity

Cultural intelligence

Monochronic culture

Culture shock

Multicultural organization

Diversity

Occupational subcultures

Ecological fallacy

Organizational subcultures

Ethnic or national subcultures

Polychronic culture

Ethnocentrism

Power distance

Gender subcultures

Proxemics

Generational subcultures

Revolving Door Syndrome

Glass ceiling

Tight Culture

High-context culture

Time orientation

Inclusivity

Uncertainty avoidance

Individualism--collectivism Intercultural Competencies Leaking pipeline problem Loose Culture Low-context culture Managing diversity .

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Multiple-Choice Questions 1. Which statement is most consistent with arguments that diversity is good for -organizations? (a) Having a diverse workforce guarantees success. (b) Diversity is easy to manage because it is already valued by all people. (c) Diverse workforces are good at dealing with diverse customers. (d) When workforces are diverse, organizations can spend less on training.

2. When members of minority cultures feel that they have to behave similar to the ways of the majority culture, this tendency is called ______________ (a) biculturalism (b) particularism (c) the glass ceiling effect (d) multiculturalism 3. The beliefs that older workers are not creative and prefer routine, low-stress jobs are stereotypes that might create bad feelings among members of different ______________subcultures in organizations. (a) gender (b) generational (c) functional (d) ethnic 4. Among the three leadership approaches to diversity identified by Thomas, which one is primarily directed at making sure that minorities and women are hired by the organization? (a) equal employment opportunity (b) affirmative action (c) valuing diversity (d) managing diversity 5. Pluralism and the absence of discrimination and prejudice in policies and practices are two important hallmarks of ______________. (a) the glass ceiling effect (b) a multicultural organization (c) quality circles (d) affirmative action 6. The term ______________helps describe an organization that fully integrates members of minority cultures and majority cultures. (a) Equal employment opportunity (b) Affirmative action (c) Revolving door syndrome (d) Pluralism 7. When members of the marketing department stick close to one another, as well as share jokes and even a slang language, the likelihood is that a/an ______________subculture is forming. (b) generational (a) occupational (c) gender (d) ethnic 8. When someone experiences culture shock on a study abroad trip, the first stage is likely to be one of anxiety caused by confusion in the new cultural setting. What is the next stage in culture shock? .

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(a) Experiencing a sense of confidence from small victories in dealing with differences. (b) Displaying outright irritation and anger at the ways of this new culture. (c) Wanting to give up and go home immediately. (d) Accepting reality and enjoying the good and bad aspects.

9. When dealing with proxemics as a silent language of culture, what is the issue of most concern? (a) How people use the spoken word to communicate. (b) How people use nonverbal to communicate. (c) How people use time to communicate. (d) How people use space to communicate.

10. In ______________cultures, members tend to do one thing at a time; in _________cultures, members tend to do many things at once. (a) monochronic; polychronic (b) universal; particular (c) collectivist; individualist (d) neutral; affective 11. When a foreign visitor to India attends a dinner and criticizes as “primitive” the local custom of eating with one’s fingers, he or she can be described as acting in a/an ______________way. (a) culturally intelligent (b) polychronic (c) monochronic (d) ethnocentric 12. In a high-context culture we would expect to find ______________. (a) low uncertainty avoidance (b) high power distance (c) use of monochronic time (d) emphasis on nonverbal and verbal -communication 13. It is common in Malaysian culture for people to value teamwork and to display great respect for authority. Hofstede would describe this culture as high in both ______________. (a) uncertainty avoidance and feminism (b) universalism and particularism (c) collectivism and power distance (d) long-term orientation and masculinity 14. On which dimension of national culture did the United States score highest and Japan score highest in Hofstede’s original survey research? (a) masculinity, femininity (b) long-term, short-term (c) individualism, masculinity (d) high uncertainty avoidance, collectivism 15. If someone commits what Hofstede calls the “ecological fallacy,” what are they likely to be doing? (a) Disregarding monochronic behavior. (b) Assuming all members of a culture fit the -popular stereotype. (c) Emphasizing proxemics over time orientation. (d) Forgetting that cultural intelligence can be learned. .

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Short-Response Questions: 16. What is the difference between valuing diversity and managing diversity?

An approach of valuing diversity shows through leadership a commitment to helping people understand their differences, often through education and training programs. An approach of managing diversity, according to Roosevelt Thomas, is a step beyond in that it is where the leadership commits to changing the culture of the organization to empower everyone and create a fully inclusive environment where human resources are respected and fully utilized.

17. How can subculture differences create diversity challenges in organizations?

There are numbers of subcultures that form in organizations and can become the source of perceived differences as people work with one another across subculture boundaries.

Examples of common organizational subcultures include those based on age, gender, profession, and work function. If younger workers stereotype older workers as uncreative and less ambitious, a team consisting of an age mix of members might experience some difficulties. This illustrates an example of problems among generational subcultures.

18. If you were asked to give a short class presentation on the “silent languages” of culture, what cultural issues would you talk about and what examples would you give?

The anthropologist Edward Hall identified communication context, time, and space as silent languages of culture. High-context cultures rely on nonverbal and situational cues as well as the spoken word to convey messages, whereas low-context cultures are more focused on what is being said. An American businessperson might press an Indonesian client to sign a contract immediately, whereas the body language of the client might say she doesn’t want to, even though she is offering a reluctant “okay” in their conversation.

Monochromic cultures deal with time in a linear fashion, whereas polychromic cultures view it as more nonlinear and dynamic. Whereas the American schedules time, saves time, and tries to meet time deadlines (monochromic behavior), a Mexican might be less concerned about time budgeting like this and more likely to act flexibly in terms of time schedules and engagements. Proxemics involves the use of space in communication. If you observe Americans in conversation, there is likely to be a modest amount of distance maintained between speakers. But in Italy the conversation is likely to take place in much closer face-to-face conditions, and this would likely make the American a bit uncomfortable.

19. In what ways can the power distance dimension of national culture become an important issue in management?

Organizations are power structures, and the way people view and respond to power differences in organizations can be very significant in how they operate. In a national culture where power distance is high, there would be a tendency in organizations to respect persons of authority—perhaps defer to them, use job titles and formal greetings, and refrain from challenging their views in public meetings. In a low or moderate power distance culture, by contrast, there might be more informality in using first names without job titles and being more casual in relationships and even in public disagreements with views expressed by senior people. .

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Integration and Application Questions: 20. A friend in West Virginia owns a small manufacturing firm employing about 50 workers. His son spent a semester in Japan as an exchange student. Upon return, he said to his dad: “Boy, the Japanese really do things right; everything is organized in teams; decisions are made by consensus, with everyone participating; no one seems to disagree with anything the bosses say. I think we should immediately start more teamwork and consensus decision making in our factory.”

Questions: The friend asks you for advice. Using insights from Hofstede’s framework, what would you say to him? What differences in the Japanese and American cultures should be considered in this situation, and why?

The friend must recognize that the cultural differences between the United States and Japan may affect the success of group-oriented work practices such as quality circles and work teams. The United States was the most individualistic culture in Hofstede’s study of national cultures; Japan is much more collectivist. Group practices such as the quality circle and teams are natural and consistent with the Japanese culture. When introduced into a more individualistic culture, these same practices might cause difficulties or require some time for workers to get used to. At the very least, the friend should proceed with caution, discuss ideas for the new practices with the workers before making any changes, and then monitor the changes closely so that adjustments can be made to improve them as the workers gain familiarity with them and have suggestions of their own.

Self-Assessment 16: Diversity Awareness Instructions Indicate “O” for often, “S” for sometimes, and “N” for never in response to each of the following questions as they pertain to where you work or go to school.

1. How often have you heard jokes or remarks about other people that you consider offensive?

2. How often do you hear men “talk down” to women in an attempt to keep them in an inferior status?

3. How often have you felt personal discomfort as the object of sexual harassment?

4. How often do you work or study with persons of different ethnic or national cultures?

5. How often have you felt disadvantaged because members of ethnic groups other than yours were given special treatment?

6. How often have you seen a woman put in an uncomfortable situation because of unwelcome advances by a man?

7. How often does it seem that African Americans, Hispanics, Caucasians, women, men, and members of other minority demographic groups seem to “stick together” during work breaks or other leisure situations?

8. How often do you feel uncomfortable about something you did and/or said to someone of the opposite sex or a member of an ethnic or racial group other than yours? .

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9. How often do you feel efforts are made in this setting to raise the level of cross-cultural understanding among people who work and/or study together?

10. How often do you step in to communicate concerns to others when you feel actions and/or words are used to the disadvantage of minorities?

Interpretation There are no correct answers for the Diversity Awareness Checklist. The key issue is the extent to which you are sensitive to diversity issues in the workplace or university. Are you comfortable with your responses? How do you think others in your class responded? Why not share your responses with others and examine different viewpoints on this important issue?

Class Exercise 16: Alligator River Story Read this story.

There lived a woman named Abigail who was in love with a man named Gregory. Gregory lived on the shore of a river. Abigail lived on the opposite shore of the same river. The river that separated the two lovers was teeming with dangerous alligators. Abigail wanted to cross the river to be with Gregory. Unfortunately, the bridge had been washed out by a heavy flood the previous week. So she went to ask Sinbad, a riverboat captain, to take her across. He said he would be glad to if she would consent to go to bed with him prior to the voyage. She promptly refused and went to a friend named Ivan to explain her plight. Ivan did not want to get involved at all in the situation. Abigail felt her only alternative was to accept Sinbad’s terms. Sinbad fulfilled his promise to Abigail and delivered her into the arms of Gregory.

When Abigail told Gregory about her amorous escapade in order to cross the river, Gregory cast her aside with disdain. Heartsick and rejected, Abigail turned to Slug with her tale of woe. Slug, feeling compassion for Abigail, sought out Gregory and beat him brutally. Abigail was overjoyed at the sight of Gregory getting his due. As the sun set on the horizon, people heard Abigail laughing at Gregory.

Instructions 1. After reading the story, rank the five characters in the story beginning with the one you consider the most offensive and ending with the one you consider the least objectionable.

That is, the character who seems to be the most reprehensible to you should be entered first in the list, then the second most reprehensible, and so on, with the least reprehensible or objectionable being entered fifth. Of course, you will have your own reasons for why you rank them in the order that you do. Very briefly note these, too.

2. Form groups as assigned by your instructor (at least four persons per group with gender mixed). Each group should (a) Elect a spokesperson for the group (b) Compare how the group members have ranked the characters (c) Examine the reasons used by each of the members for their rankings (d) Seek consensus on a final group ranking 3. After completing the prior steps, discuss in the group the outcomes and reasons for agreement .

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or disagreement on the rankings. Pay particular attention to any patterns that emerge.

4. Have a spokesperson be prepared to discuss the results of the exercise and the discussion within your group with the rest of the class.

Career Situation: What Would You Do? •

You’ve just been asked to join a team being sent to China for 10 days to discuss a new software development project with your firm’s Chinese engineers. It’s your first trip to China or Asia. In fact, you’ve only been to Europe as part of a study tour when in college. The trip is scheduled four weeks from today. What can you do to prepare for the trip and for your work with Chinese colleagues? What worries you the most about the trip and how well you’ll do under the circumstances?

•

One of your co-workers brought along his friend to lunch. When discussing his new female boss, the friend says: “It really irritates me not only that she gets the job just because she’s a woman, but she’s also Hispanic. There’s no way that someone like me had a chance given her pedigree. And she now has the gall to act as if we’re all one big happy team and the rest of us should accept her leadership. As for me, I’ll do my best to make it difficult for her to succeed.” It was uncomfortable for you just to hear this. Your co-worker looks dismayed but isn’t -saying anything. What do you do? Just let the comment go, or something more?

Team Project 16: Job Satisfaction Around the World Question Does job satisfaction vary around the world, and does it reflect differences in national cultures?

Instructions 1. Gather together recent reports on job satisfaction among workers in the United States.

2. Gather similar data on workers in other countries—for example, Canada, the United Kingdom, Germany, Brazil, Mexico, Japan, India.

3. Compare the job satisfaction data across countries to answer the project question.

4. Consider pursuing your results further by researching how the various countries compare on working conditions, labor laws, and related matters. Use this information to add context to your findings.

5. Prepare a report to share your study with the rest of your class.

Cases for Critical Thinking: Cultural Charades in Business Process Outsourcing Sidebar: Beyond Race and Gender The case explores the implications of business process outsourcing or BPO, upon the personalities, lifestyle, careers, and culture of local workers worldwide. When you call a toll-free number for customer service assistance, possibly pertaining to finance or banking, an airline reservation, an insurance claim or technical support for one of your gadgets, there is a good .

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possibility that the person on the other end of the line is half-a-world away. India and the Philippines are two of the biggest call center players. Your experience as a caller is part of the quest of multinational companies (think: Dell, American Express, and Verizon) to realize significant cost savings in customer service by outsourcing the work to lower-wage countries.

Case discussion questions and suggested answers: 1. DISCUSSION What are the main arguments why the BPO industry contributes to a loss of cultural identity for workers who are asked to “act as Westerners” while serving customers of large multinational firms? How do you evaluate these arguments? If cultural identity loss is occurring, do financial benefits to the workers make its loss worthwhile? Should loss of cultural identity by BPO workers be a real social concern, or is it just a natural outcome of changes accompanying the global economy?

The main arguments have to do with what some critics call “psychological effects on call center employees who are expected to ape the Western employees they have replaced in terms of accents, slang, and even names.”

Whether financial benefits make this loss worthwhile will vary by individual (family structure, values, beliefs, and so on). Some may see the financial benefits and independence that comes with it, worthy of this “cultural loss.” Others may be adapting to the shift of the current generation experiencing and in-tune with the Western world.

In varying degrees, the loss of cultural identity can be seen as both a social concern and a natural outcome of changes accompanying the global economy. During the call center boom, many young people in India took advantage of this opportunity, viewed as a new experience, and potentially, an improved life. As the BPO industry continues to shrink, there could potentially be a shift back to the traditional cultural values of families staying together (which includes traditional gender roles). Typically, most of the employees at a BPO center are women, and in the past, women have not been allowed to work at night. Some couples rarely see one another, depending upon the shift each works.

2. DISCUSSION How is diversity defined by your school, employer, or community group? What are major differences among these definitions? What are the implications of these differences for the organizations and their members? In what specific ways are these organizations moving (or not) beyond demographics in their approach to diversity? Do you think these shifts are good for the organization and its members? Why or why not?

This answer will vary.

For each, diversity can be defined as: • By a school: by backgrounds, viewpoints, perspectives, geographic, academic standing, learning aptitude, major, athletic ranking, ethnicity, lifestyle, hobbies, food choices, and more.

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•

By an employer, as follows: Lifestyle, hobbies, interests, caring for aging parents, pet lovers.

•

By a community group, as follows: religious, hobbies, interests, and so on.

The organizations moving beyond just demographics in their approach to diversity will vary.

Certainly, as discussed in the textbook, gender diversity has become more transparent. With greater options for all to marry, there will be increased diversity of those who choose to not to get married married and those who choose not to remain in a partnership unmarried.

3. PROBLEM SOLVING If you were leading a new diversity task force at your place of employment, what goal(s) would you present at the first meeting? What issues would you put on the agenda, and why? What disagreements or concerns among members might you expect to emerge at the first two or three meetings? What notes would you prepare ahead of time so that you could keep the discussion constructive when these arise?

Possible goals: • Recruiting and retaining a diverse workforce • Measuring and creating a welcoming workplace for all • Developing an understanding of inclusivity and diversity • Establishing opportunities for diversity awareness • Developing resources for diversity training • Diversifying top management and leadership • Organizational structure which supports diversity and change Agenda issues: • Before issues are placed on the agenda, it may be best to first have a discussion about why there is a need for the task force. Many times, there is a lack of understanding by top management (usually majority) that a human being’s perception differs by race, culture, gender, orientation, age, disability and other factors.

• Common issues include: work-life balance, lifestyle differences, generation gaps (a multi-generational workplace), disabilities, ethnic, language and cultural differences, respect in the workplace, leadership commitment to diversity initiatives, •

Disagreements or concerns among members may result in recruitment and selection methods (particularly with internal recruitment), how diversity and inclusivity is understood and explained, how diversity and inclusivity is measured, whether diversity training and awareness is required, restructuring to support diversity and change, and so on.

4. FURTHER RESEARCH What is the current status of the business process outsourcing industry in India? Is it still a growth industry, or is it slowing down? What are the pros and cons being discussed on the Indian side . . . on the multinational contractor side? What other countries are big players in BPO? Is BPO in general a good thing for developing countries? How are multinationals responding to

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customer complaints about BPO? Are they paying any attention to criticisms that the BPO industry causes a loss of cultural identity for its employees? If so, what are they doing about it?

Current status of the business process outsourcing industry in India: Once a symbol of India’s economic boom (mainly from 2004-2006), the BPO industry in India has recently seen heavy attrition and loss of qualified individuals (with the recent phenomenon of many employees leaving without telling management). Rising wage inflation, declining talent pool quality and rising infrastructure costs have spurred a shift from India to places like the Philippines and South Africa. In 2010, the Philippines surpassed India as a top BPO destination. Today, Manilla, the capital of the Philippines, has emerged as a top BPO destination. This is due mainly to the English-speaking proficiency and adaptability and familiarity of Western culture, lower costs, high quality telecommunications, government support, and a large pool of young college graduates. The workforce is service oriented, quick to learn, and easy to train – and they work well with other cultures.

Another BPO trend is that of customers moving BPO work closer to their home base. Some clients want to get voice work combined with non-voice analytics or accounting work.

Multinationals and their response to customer complaints and criticisms of the BPO industry: Complaints about the BPO industry range from sweat shop labor-type conditions to underpayment of wages and lack of benefits. Critics are calling for stricter regulation of this industry.

What are they doing about the concern of a loss of cultural identify among its employees?

Call center jobs are known to make workers lose touch with family and friends. The odd shifts and times add to that. Add to the stress of long hours, the initial culture shock of a call center adds to a loss of cultural identity. It remains to be seen whether large multinationals are doing much about the loss of an employee’s cultural identity.

Suggested Team Exercise for Chapter 16 Community Involvement Exercise Break the class into teams of three or four and ask each group to identify how many “cultures” and/or “subcultures” are in their group? These may be related to ethnic, religious, age, gender, etc. differences. Have them develop a list and then share it with the entire class.

Ask them to discuss how may in their group can speak and read more than one language?

Another question would be to ask students how many learned English as a second language.

Compare the number of languages spoken by native English speakers versus the number spoken by those who learned another language first. Ask them to summarize the implications of their findings as they apply to a manager's role.

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Instructor’s Manual

CHAPTER 17 Globalization and International Management Going Global Isn’t Just for Travelers Chapter 17 Overview Each Chapter contains several inset features designed to assist the student reader in applying the concepts to relevant examples. Management Live illustrates how popular movies demonstrate management concepts in the chapter. Role Models features a management professional that illustrates key chapter concepts in a novel, visionary or inspirational way. Explore Yourself refers students to self assessment activities relevant to concepts in the chapter. Ethics Check profiles examples of ethical issues in management. Manager's Library features books that illustrate current events or trends relevant to chapter concepts. Facts to Consider introduces research or trends that may be used for class discussion in the classroom or online for distance learning.

The chapter begins by defining globalization, a global economy, and outsourcing. Next is a list of why businesses go global. A common international business activity, global sourcing, is discussed – and explained is the concept of a global supply chain, or how businesses purchase materials, manufacturing, and services worldwide. Next, a review of market entry approaches is given. In addition, joint ventures, global strategic alliances, and foreign subsidiaries are discussed.

Next, the chapter describes the global business environment with its legal and political systems, trade agreements and barriers, and economic alliances. Global businesses and what they do, including the advantages and disadvantages of global corporations for host countries is explained. Ethical problems such as corruption, sweatshops and child labor are examined.

Next, the concept of a global corporation and how it operates is discussed, along with how their operations can be controversial at home and abroad. There is a review of host-country complaints and home-country complaints. Ethical challenges faced by managers of global corporations are discussed. The four functions of management within the context of a global business are examined. The importance of leading global operations requires universal leadership skills and global managers well versed working in different cultures.

Chapter 17 Takeaway Questions: •

Takeaway 17.1 How Does Globalization Affect International Business?

•

Takeaway 17.2 What Are Global Corporations, and How Do they Work?

Chapter 17 Objectives: • • .

To explain the growing interdependence of the world’s economies.

To understand how we live and work in a global economy.

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• • • • • • • • • • • • • • • • •

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Define globalization and its implications for international management.

To understand the positive and negative effects of outsourcing.

To understand and list a number of large international businesses.

To review and explain methods of doing business globally.

Describe and give examples of global sourcing, exporting/importing, franchising/licensing, joint ventures, and foreign subsidiaries.

To explain the importance of global sourcing for an international business.

To explain the importance of a network of outsourcing suppliers and contractors of a company’s global supply chain.

To understand how firms active in international business invest in operations in foreign countries through joint ventures.

To explain the complex legal and political systems which impact businesses operating internationally.

Explain the goals of the World Trade Organization, or WTO. Discuss the significance of regional economic alliances such as NAFTA, the EU, ASEAN, and SADC. To explain and examine the facets of multinational corporations or MNCs. List at least three host-country complaints and three home-country complaints about global business operations.

To describe the Foreign Corrupt Practices Act (FCPA) as it relates to doing business overseas.

To review the various management functions as they are performed within the context of a multinational corporation To discuss how currency risk can impact planning for an international business.

To explain the global business technology as a game changer for international businesses.

Chapter 17 Lecture Outline: • • • •

• •

Takeaway 17.1 How Does Globalization Affect International Business?

Globalization involves the growing interdependence of the world’s economies.

Global sourcing is a common international business activity.

Export/import, licensing, and franchising are market entry approaches to international business.

Joint ventures and wholly owned subsidiaries are direct investment approaches to international business.

International business is complicated by different legal and political systems.

International businesses must navigate regional economic alliances

•

Takeaway 17.2 What Are Global Corporations, and How Do they Work?

• • • • •

Global corporations or MNCs do substantial business in many countries.

The actions of global corporations can be controversial at home and abroad.

Managers of global corporations face a variety of ethical challenges.

Planning and controlling are complicated in global corporations.

Organizing can be difficult in global corporations.

•

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• •

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Leading is challenging in global corporations.

Technology is a global game changer.

Chapter 17 Supporting Materials: Figures Figure 17.1 How Does a T-Shirt Travel through the World’s Global Economy?

Figure 17.2 What Can Go Right and Wrong in Relationships Between Global -Corporations and Their Host Countries?

Figure 17.3 How Can Multinational Corporations Organize for Success in Their Global Operations?

Thematic Boxes and More • Management Live: Cultural Awareness and The Amazing Grace • Role Models: Nobel Peace Prize Winner Asks Global Firms to Fight Poverty • Ethics Check: Nationalism and protectionism • Facts to Consider: Corruption and Bribes Haunt Global Business • Manager’s Library: The New Digital Age: Reshaping the Future of People, Nations and Business by Eric Schmidt and Jared Cohen • Explore Yourself: More on Cultural Awareness • Tips to Remember: Checklist for Choosing a Good Joint Venture Partner Applications • TestPrep 17 Multiple-Choice Questions • Skill Building Portfolio o Self-Assessment 17: Global Intelligence o Class Exercise 17: American Football o Team Project 17: Globalization Pros and Cons • Case Snapshot: Harley Davidson – Style and Strategy with a Global Reach • Sidebar case: NOT Made in China • Hot Topic: Pro and Con Debate? Avoid China problems by reshoring our manufacturing

Chapter Outline: Takeaway Question 17.1: How Does Globalization Affect International Business?

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Globalization involves the growing interdependence of the world's economies ✓ Global economy - an economy that is worldwide; one in which resource supplies, product markets , and business competition are worldwide ✓ Globalization - process of growing interdependence among elements of the global economy ✓ Insourcing - creation of domestic jobs by foreign employers • 1 of 20 persons in Ohio is working for a foreign firm

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Outsourcing - shifts local jobs to foreign locations to take advantage of lower wages, infrastructure, educated workforce or government support

Figure 17.1 illustrates the path that a t-shirt takes from the point the cotton is grown in Texas to its purchase in Florida by author Pietra Rivoli in The Travels of a T-Shirt in the Global Economy. The t-shirt eventually ends up as used clothing in a market in Tanzinia.

The people, countries and economies it touches make for interesting reading.

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Globalization creates a variety of international business opportunities ✓ International business - conducts for-profit transactions of goods and services across national boundaries. ✓ Reasons a business may "go international" ➢ Profits ➢ Customers ➢ Suppliers ➢ Capital ➢ Labor ➢ Risk ➢ Economic development

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Global Sourcing is a common international business activity • Global sourcing is when a business purchases materials, manufacturing components, or services from around the world • Global Supply Chain refers to the network of outsourcing suppliers and contractors of a firm.

• Role Models: Nobel peace prize winner asks global firms to fight poverty This feature asks: “Should global businesses balance the pursuit of profit with genuine efforts to do public good?” A strong and positive “Yes!” is the answer given by Nobel Peace Prize winner Muhammad Yunus. The Bangladeshi economist gained fame for creating the Grameen Bank to offer microcredit loans to help fight poverty in his home country. The bank loans small amounts (as low as $30) to poor applicants (96% women) so that they can start their own small businesses and gain financial independence.

Questions to discuss with students: When a multinational company travels into countries where social problems like poverty, disease, and illiteracy are present, should it find a way to help? Can the social business model really take off in the global business context? Or, is this something most likely to remain the “unusual” case rather than the “common” one in the future? Do you agree, or not, that global corporations can become powerful tools for eliminating social problems?

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Export/Import, licensing, and franchising are market entry approaches to international business • Exporting is selling locally made products in foreign markets • Importing is buying foreign-made products and selling them in domestic markets 17-4

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Licensing agreements occur when a foreign firm pays for the rights to make or sell another company’s products in a specified region • Franchising is when a foreign firm buys the rights to use another’s name and operating method in its home country ➢ Often used in the fast food restaurant business •

Joint ventures and wholly owned subsidiaries are direct investment approaches to international business.

• A joint venture is a co-ownership arrangement in which the foreign and local business agree to pool resources, share risks, and jointly operate the new business • A global strategic alliance is an arrangement in which each partner hopes to achieve through cooperation things they couldn’t do or would have a hard time doing alone ➢ Method used in China by many automakers ✓ A foreign subsidiary is a local operation completely owned and controlled by a foreign firm ➢ Often very expensive and therefore entails more risk ✓ Greenfield venture - foreign subsidiary is established after firm has experience in joint ventures •

Tips to Remember: Checklist for Choosing a Good Joint Venture Partner • Familiar with your firm’s major business • Employs a strong local workforce • Values its customers • Values its employees • Has strong local market for its own products • Has record of good management • Has good profit potential • Has sound financial standing • Has reputation for ethical decision making • Has reputation for socially responsible practices

DISCUSSION TOPIC Prior to discussing this chapter in class, have each student find a recent newspaper or magazine article that relates to globalization issues. Articles can easily be found in business publications such as The Wall Street Journal, Business Week, Fortune, and Forbes, as well as many other publications such as the “Money” section of USA Today, or popular magazines such as Time and Newsweek. Each student should be prepared to discuss his/her article in class. Choose several students to talk about the key ideas in their selected articles, and ask the entire class to help identify how these ideas relate to the challenges of globalization.

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➢ Intellectual property matters an area of controversy in China World Trade Organization (WTO) is a global institution that was established to promote free trade and open markets around the world ➢ Member nations now number 153 ➢ Members are given the most favored nation status ➢ For extended learning, consider accessing the WTO "for students" site and encourage them to try some of the interactive learning Chapters. The URL is http://www.wto.org/english/forums_e/students_e/students_e.htm Nontariff barriers are nontax policies that governments enact to discourage imports, such as quotas and import restrictions Tariffs are taxes placed on imports in order raise their price in comparison to similar domestic products, protecting the domestic producer Protectionism is a call for tariffs and other favorable treatment such as subsidies for domestic producers, giving them an advantage over foreign producers

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Ethics Check: Nationalism and Protectionism This Ethics Check feature explains what happened when Bolivia took over oil and gas fields regardless of who owned them with the argument that the natural resources belong to Bolivia. When discussing what can go wrong in an MNC- Host Country relationship, nationalization isn't specifically mentioned in figure 17.2, but it's among the worst things that can go wrong. Suddenly, the government just takes ownership of the MNC located in the country. Sounds good, but what rights do global firms have that paid for the right to use those resources? You Decide questions probe students' thoughts on exploitation of resources by foreigners and the ethics of nationalization.

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International businesses must navigate regional economic alliances ➢ NAFTA, a result of the growth of regional economic alliances, stands for the North American Free Trade agreement. ➢ NAFTA, the North American Free Trade Agreement, creates a trade zone that frees the flows of goods and services, workers, and investments among the United States, Canada, and Mexico. ➢ European Union or EU is both a regional economic and political alliance. The EU now comprises 28 countries that are integrating politically with a European Parliament and economically by removing barriers to cross-border trade and business development. ➢ APEC, Asia-Pacific Economic Cooperation, links 21 nations to promote free trade and investment in the Pacific region. ➢ Southern Africa Development Community, SADC, links 14 southern African countries in trade and economic development efforts to improve prosperity and living standards for their citizens.

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Explore Yourself: Cultural Awareness The assessment for this chapter is entitled Cultural Awareness. The forces of globalization are best understood and dealt with in a context of cultural awareness. The assessment tool is intended to help students reflect on their readiness to participate in the global work environment.

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Ask students to list the factors that influence their personal readiness to participate in a global work environment. Ask them to compare their results to those of their classmates.

This may lead to a few controversial topics.

DISCUSSION TOPIC Divide the class into small discussion groups. Assign each group one of the following four geographic regions: Europe, the Americas, Asia and the Pacific Rim, or Africa. Have the groups spend 10-12 minutes identifying the potential challenges and opportunities that these areas face in the context of the global economy. Have each group report out to the entire class with a brief summary of its key discussion points.

17.1 Questions for discussion suggested answers 1) Why would a government want to prohibit a foreign firm from owning more than 49% of a local joint venture?

Ownership of more than 49% constitutes at least an equal control of voting and ownership, and may mean majority control if over 50% legal majority. Majority control (voting and legal control) is power in any organization. In some ventures, such as sensitive defense or shipping industries, such control may be perceived as a national security risk.

2) Are joint ventures worth the risk of being taken advantage of by foreign partners, as with GM’s “Chery” case in China?

Many laws such as the Foreign Corrupt Practices Act may, in fact, put U.S. companies at a disadvantage compared to other countries. Many American executives, owners, investors, and employees complain that there is not a “level playing field” in laws that protect the environment, worker safety, child labor exploitation, bribery etc. and that these laws results in an unfair competitive advantage that unfairly tilts toward other countries.

3) What aspects of the U.S. legal environment might prove complicated for a Russian firm starting new operations in the United States?

The Russian company will need to become familiar with anti-trust laws, occupational health and safety, equal opportunity, and sexual harassment laws and regulations.

Other laws may include incorporation and business ownership, intellectual property, contracts and foreign currency exchange. Tariffs may also be placed on imports of materials from Russia.

Takeaway Question 17.2: What Are Global Corporations, and How Do they Work?

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Global corporations or MNCs do substantial business in many countries

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✓ A global corporation, also known as a multinational corporation (MNC) has extensive operations in several foreign countries and derives a substantial portion of its sales and profits from international sources ✓ Transnational corporations operate worldwide without being identified with one national home ➢ Nestlé a good example ➢ Total integration of global operations, make decisions from a global perspective, and employ senior executives from many different countries ➢ For extended learning, consider showing students the Nestlé international website at www.nestle.com. The section on their global brands is an interesting view of their global reach.

DISCUSSION TOPIC An easy way to get students involved in a discussion at this point is to ask them to provide examples of global corporations or MNCs. Students should be able to quickly generate a long list of MNCs. Engage in some discussion of where these firms have their operations and what types of products or services they provide.

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The actions of global corporations can be controversial at home and abroad ✓ Globalization Gap involves large global firms growing larger and more quickly than smaller firms and even countries are able to grow. ✓ Global corporations hold one third of the world's productive assets and control 70% of world trade ✓ 90% based in Northern Hemisphere ✓ Figure 17.2 depicts what can go right and wrong in relationships between a MNC and its host country ➢ When things go right, both the global corporation, or MNC, and its host country gain. The global firm gets profits or resources, and the host country often sees more jobs and employment opportunities, higher tax revenues, and useful technology transfers. But when things go wrong, each finds ways to blame the other.

Managers of global corporations face a variety of ethical challenges ✓ Corruption - illegal practices to further business ✓ The Foreign Corrupt Practices Act makes it illegal for U.S. companies to engage in corrupt practices overseas ➢ May put U.S. firms at a competitive disadvantage, particularly in countries that consider commissions or bribes to be a cost of doing business ✓ Sweatshops - places were employees work long hours for low wages and often in unsafe conditions ✓ Child labor - the full-time employment of children for work otherwise done by adults

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Facts to Consider: Corruption and Bribes Haunt Global Business The Facts to Consider feature lists the best and worst countries for corruption and bribery. Use these additional questions for class discussion: 17-8

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What criteria would you use to evaluate the level of corruption in a country?

What criteria would you use to evaluate the level of bribery?

Visit the website of Transparency International at http://www.transparency.org/. Have the rankings changed? How have the rankings of the United States changed in recent years?

How does corruption impact you as a consumer or employee?

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Planning and controlling can be difficult in global corporations ✓ Currency risk - fluctuations in foreign exchange rates ➢ Weak dollar - more dollars are necessary to buy one Euro. This is bad for U.S. tourists, but may be good for U.S. companies that have strong sales in Europe, because U.S. products become more affordable to European buyers ✓ Political risk - the potential loss in value of an investment in or managerial control over a foreign asset because of instability and political changes in the host country ✓ Political risk analysis - tries to forecast the probability of disruptive events that can threaten the security of a foreign investment

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Organizing can be difficult in global corporations ✓ Global area structure - arranges production and sales functions into separate geographical units and assigns a top manager to oversee them ✓ Global product structure - gives worldwide responsibilities to product group mangers who are assisted by area specialists on the corporate staff See Figure 17.3 “How can multinational corporations organize for success in their global operations?” for a depiction of both of the above organization structures When the international side of a business grows, the structure often gets complicated.

One approach is a global area structure, which assigns senior managers to oversee all product operations in major parts of the world. Another is the global product structure, in which area specialists advise other senior managers on business practices in their parts of the world.

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Leading is challenging in multinational corporations ✓ Global managers - managers aware of international developments and competent in working across cultures ✓ The margin feature "Universal Facilitators of Leadership Success" lists traits of successful and unsuccessful global manager.

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Technology is a global game changer ✓ We tend to think of global business technology in communication terms—ease of linking a firm’s customers with overseas call centers, ease of staying in touch with global supply chains, or risk of losing privileged information and intellectual property through security breaches and outright theft. ✓ All such things are important. But there’s another, emerging side to technology that has important ramifications for global firms—the growth of digital manufacturing. ✓ Companies like General Electric are building factories that run with lots of technology and a few highly skilled people.

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✓ Entrepreneurs use similar technologies to start small firms that spin out customized products on demand and at low cost. ✓ The Wall Street Journal calls it a “new industrial revolution” that might fuel a resurgence of “Made in America” labels.

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Manager's Library: The New Digital Age: Reshaping the Future of People, Nations and Business by Eric Schmidt and Jared Cohen How is technological change affecting global firms like IBM, Nike, Samsung, and others? What do executives in multinationals have to gain and fear as technology keeps evolving? When the authors say “technology is neutral, but people aren’t,” what are the implications for you, for your organizations, and for your government? And when it comes to the “new digital age,” can politicians afford not to listen to what business executives have to say? These are some of the questions from a book about the new digital age and how it is reshaping the future.

17.2 Questions for discussion suggested answers 1) Should becoming a transnational corporation be the goal of all MNCs? Yes, becoming transnational is in the interests of all companies that seek growth in sales and profits and new product and process ideas. Examples would include CocaCola, Ikea, McDonald’s, Accenture, and many other companies.

2) Is there anything that global firms and host governments can do to avoid conflicts and bad feelings with one another?

The best deterrent to conflict between a host country and a MNC is the proactive involvement of the MNC in supporting and respecting the culture and people of the host country. This also calls for greater social responsibility in being involved within local communities.

3) Are laws such as the Foreign Corrupt Practices Act unfair to American companies trying to compete around the world?

They certainly present challenges. Chapter Three explains that what is considered ethical can vary across cultures. The Foreign Corrupt Practices Act seems to take a stand that looks like Ethical Imperialism or the view that one's own ethical standard must be imposed on others. Cultural Relativism, or the belief that context alone determines ethical behavior would dictate "when in Rome, do as the Romans do". This would respect the local culture or laws, possible creating an ethical dilemma for the global manager from the U.S. If global managers from other countries operate with a cultural relativism view, while U.S. managers are held to an Ethical Imperialism view because of the Foreign Corrupt Practices Act, the U.S. company many view the act as unfairly restricting the ability to compete.

Teaching Notes In this section, ideas, exercises, and assignments are provided to assist you in integrating the concepts in Exploring Management for your students, especially the special features of the text. .

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Management Live: Cultural Awareness and The Amazing Grace The popular television show The Amazing Race highlights the cultural differences between countries as teams from the U.S. travel around the world. Sometimes their lack of awareness of the countries they visit is a little embarrassing, but it's always entertaining to watch.

How much do you and your students know about the companies that you do business with? Are you aware of where your clothing, car, shoes or even your textbook were made?

Challenge your students to do a little research into the origins of the products they buy as you study chapter 17.

Facts to Consider: Corruption and Bribes Haunt Global Business The Facts to Consider feature lists the best and worst countries for corruption and bribery. Use these additional questions for class discussion: • What criteria would you use to evaluate the level of corruption in a country?

• What criteria would you use to evaluate the level of bribery?

• Visit the website of Transparency International at http://www.transparency.org/. Have the rankings changed? How have the rankings of the United States changed in recent years?

• How does corruption impact you as a consumer or employee?

Role Models: Nobel Peace Prize Winner Asks Global Firms to Fight Poverty This feature asks: “Should global businesses balance the pursuit of profit with genuine efforts to do public good?” A strong and positive “Yes!” is the answer given by Nobel Peace Prize winner Muhammad Yunus. The Bangladeshi economist gained fame for creating the Grameen Bank to offer microcredit loans to help fight poverty in his home country. The bank loans small amounts (as low as $30) to poor applicants (96% women) so that they can start their own small businesses and gain financial independence.

Questions to discuss with students: When a multinational company travels into countries where social problems like poverty, disease, and illiteracy are present, should it find a way to help? Can the social business model really take off in the global business context? Or, is this something most likely to remain the “unusual” case rather than the “common” one in the future? Do you agree, or not, that global corporations can become powerful tools for eliminating social problems?

Manager's Library: The New Digital Age: Reshaping the Future of People, Nations and Business by Eric Schmidt and Jared Cohen How is technological change affecting global firms like IBM, Nike, Samsung, and others? What do executives in multinationals have to gain and fear as technology keeps evolving? When the authors say “technology is neutral, but people aren’t,” what are the implications for you, for your organizations, and for your government? And when it comes to the “new digital age,” can politicians afford not to listen to what business executives have to say? These are some of the questions from a book about the new digital age and how it is reshaping the future. .

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Ethics Check: Nationalism and Protectionism This Ethics Check feature explains what happened when Bolivia took over oil and gas fields regardless of who owned them with the argument that the natural resources belong to Bolivia.

When discussing what can go wrong in an MNC- Host Country relationship, nationalization isn't specifically mentioned in figure 17.2, but it's among the worst things that can go wrong.

Suddenly, the government just takes ownership of the MNC located in the country. Sounds good, but what rights do global firms have that paid for the right to use those resources?

You Decide questions probe students' thoughts on exploitation of resources by foreigners and the ethics of nationalization.

Explore Yourself: More on Cultural Awareness The assessment for this chapter is entitled “Cultural Awareness.” The forces of globalization are best understood and dealt with in a context of cultural awareness. The assessment tool is intended to help students reflect on their readiness to participate in the global work environment.

Ask students to list the factors that influence their personal readiness to participate in a global work environment. Ask them to compare their results to those of their classmates. This may lead to a few controversial topics.

Hot Topic: Good idea or Not? Avoid China problems by reshoring our manufacturing This feature covers the trend of companies who choose to bring production “back home.” Two manufacturing companies are profiled and both report to more control over local production, despite transportation costs and higher labor costs. The risk of theft of intellectual property is also reduced when production is done “at home.” Questions to ask: Even with its lower labor costs, is China still a manufacturing power?

Career Situation: What Would You Do?

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Your new design for a revolutionary golf putter has turned out to be a big hit with your friends and players on the local golf courses. So, you decide to have some made, start selling them, and see if you can make a business out of it. A friend says: “Go to China, someone there will build it cheap and to your quality standard.”But you’re not sure.

Sending your design to China for manufacturing is worrisome, and there’s a side of you that would really like to have “Made in America” stamped on the clubs. Make a list of positives and negatives of manufacturing in each place. What factors are likely to drive your final decision on global versus local sourcing?

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You’ve just read in the newspaper that one of your favorite brands of sports shoes is being investigated for being made in sweatshop conditions at factories in Asia. It really disturbs you, but the shoes are great. A student group on campus has a campaign to boycott the brand. Will you join the boycott, or not, and why? How effective are such consumer threats? Is it still too easy for global firms to get away with bad behaviors? If 17-12

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so, what can and should be done about it?

Tips to Remember: Checklist for Choosing a Good Joint Venture Partner • Familiar with your firm’s major business • Employs a strong local workforce • Values its customers • Values its employees • Has strong local market for its own products • Has record of good management • Has good profit potential • Has sound financial standing • Has reputation for ethical decision making • Has reputation for socially responsible practices

Terms to Define APEC

Global manager

Child labor corporation (MNC)

Global sourcing Global strategic alliance

Corruption Globalization Currency risk Globalization gap EU Greenfield venture Exporting Foreign Corrupt Foreign subsidiary Franchising Global corporation or Global economy

Importing Insourcing International business Joint venture Licensing

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Most favored nation status Multinational NAFTA Nontariff barriers Outsourcing Political risk Political risk analysis Practices Act Protectionism Reshoring SADC Sweatshop Tariffs Transnational corporation World Trade Organization (WTO)

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Multiple-Choice Questions

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1. In addition to gaining new markets, businesses go international in the search for ____________. (a) political risk (b) protectionism (c) lower labor costs (d) most favored nation status 2. When boot-maker Rocky Brands bought 70% ownership of a manufacturing company in the Dominican -Republic, Rocky was engaging in which form of international business? (a) import/export (b) licensing (c) foreign subsidiary (d) joint venture 3. When Limited Brands buys cotton in Egypt and has pants sewn from it in Sri Lanka according to designs made in Italy and then sells the pants in the United States, this is a form of international business known as ____________. (a) licensing (b) importing (c) joint venturing (d) global sourcing 4. When foreign investment creates new jobs that are filled by local domestic workers, some call the result ____________ as opposed to the more controversial notion of outsourcing. (a) globalization (b) insourcing (c) joint venturing (d) licensing 5. When a Hong Kong firm makes an agreement with the Walt Disney Company to use the Disney logo and legally make jewelry in the shape of Disney cartoon characters, Disney is engaging in a form of international business known as ____________. (a) exporting (b) licensing (c) joint venturing (d) franchising 6. One major difference between an international business and a transnational corporation is that the transnational tries to operate ____________. (a) without a strong national identity (b) in at least six foreign countries (c) with only domestic managers at the top (d) without corruption 7. The Foreign Corrupt Practices Act makes it illegal for ____________. (a) U.S. businesses to work with subcontractors running foreign sweatshop operations (b) foreign businesses to pay bribes to U.S. government officials Chapter 17

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(c) U.S. businesses to make “payoffs” abroad to gain international business contracts (d) foreign businesses to steal intellectual -property from U.S. firms operating in their countries 8. The World Trade Organization, or WTO, would most likely become involved in disputes between countries over ____________. (a) exchange rates (b) ethnocentrism (c) nationalization (d) tariffs and protectionism 9. The athletic footwear maker New Balance discovered that exact copies of its running shoe designs were on sale in China under the name “New Barlun.” This is an example of a/an ____________ problem in international business. (a) most favored nation (b) global strategic alliance (c) joint venture (d) intellectual property rights 10. When the profits of large international businesses are disproportionately high relative to those of smaller firms and even the economies of some countries, this is called ____________. (a) return on risk for business investment (b) the globalization gap (c) protectionism (d) most favored nation status 11. If a new government seizes all foreign assets of global firms operating in the country, the loss to foreign firms is considered a ____________ risk of international business. (a) franchise (b) political (c) currency (d) corruption 12. Who gains most when the dollar weakens versus a foreign currency such as the Brazilian real? (a) American consumers of Brazilian products. (b) Brazilian firms selling products in America. (c) American firms selling products in Brazil. (d) Brazilian consumers of European products.

13. Which of the following is identified by researchers as a universal inhibitor of leadership success across cultures? (a) Being positive. (b) Acting autocratic. (c) Being a good planner. (d) Acting trustworthy.

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14. If an international business firm has separate vice presidents in charge of its Asian, African, and European divisions, it is most likely using a global ____________ structure. (a) product (b) functional (c) area (d) matrix 15. Which is the definition of a truly “global manager?” (a) A manager who is competent working across cultures (b) A manager who travels internationally on business at least once a year (c) A manager who lives and works in a foreign country (d) A manager who is employed by a transnational corporation

Short-Response Questions: 16. What is the difference between a joint venture and a wholly owned subsidiary?

In a joint venture the foreign corporation and the local corporation each own a portion of the firm—e.g., 75% and 25%. In a wholly owned subsidiary the foreign firm owns the local subsidiary in its entirety.

17. List three reasons why host countries sometimes complain about MNCs. The relationship between an MNC and a host country should be mutually beneficial.

Sometimes, however, host countries complain that MNCs take unfair advantage of them and do not include them in the benefits of their international operations. The complaints against MNCs include taking excessive profits out of the host country, hiring the best local labor, not respecting local laws and customs, and dominating the local economy. Engaging in corrupt practices is another important concern.

18. What does it mean in an international business sense if a U.S. senator says she favors “protectionism”?

If a senator says she favors “protectionism” in international trade, it basically means that she wants to make sure that domestic American firms are protected against foreign competitors. In other words, she doesn’t want foreign companies coming into America and destroying through competition the local firms. Thus, she wants to protect them in some ways such as imposing import tariff s on the foreign firms’ products or imposing legal restrictions on them setting up businesses in America.

19. What is the difference between currency risk and political risk in international business?

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Currency risk in international business involves the rise and fall of currencies in relationship with one another. For an American company operating in Japan, currency risk involves the value of the dollar vis-ã -vis the yen. When the dollar falls relative to the yen (requiring more of them to buy 1 yen), it means that buying products and making investments in Japan will be more costly; the “risk” of this eventuality needs to be planned for when business relationships are entered in foreign countries. Political risk is the potential loss in one’s investments in foreign countries due to wars or political changes that might threaten the assets. An example would be a Socialist government coming into power and deciding to “nationalize” or take over ownership of all foreign companies.

Integration and

Integration and Application Questions: Integration and Application Question 20. Picture yourself sitting in a discussion group at the local bookstore and proudly signing copies of your newly published book, Business Transitions in the New Global Economy. A book buyer invites a comment from you by stating: “I am interested in your point regarding the emergence of transnational corporations. But, try as I might, a company like Ford or Procter & Gamble will -always be ‘as American as Apple pie’ for me.”

Questions: How would you respond in a way that both (a) clarifies the difference between a multinational and a transnational corporation, and (b) explains reasons why Ford or P&G may wish not to operate as or be viewed as “American” companies?

This issue of MNC versus transnational is growing in importance. When a large global company such as Ford or IBM is strongly associated with a national identity, the firm might face risk in international business when foreign consumers or governments are angry at the firm’s home country; they might stop buying its products or make it hard for them to operate. When the MNC has a strong national identity, its home constituents might express anger and create problems when the firm makes investments in creating jobs in other countries. Also, when the leadership of the MNC views itself as having one national home, it might have a more limited and even ethnocentric approach to international operations. When a firm such as Ford or P&G operates as a transnational, by contrast, it becomes a global citizen and, theoretically at least, is freed from some potential problems identified here. Because a transnational views the world as its home, furthermore, its workforce and leadership are more likely to be globally diverse and have broad international perspectives on the company and its opportunities.

Self-Assessment 17: Global Intelligence Instructions Use the following scale to rate yourself on these 10 items.

1= Very poor 2 = Poor 3 = Acceptable 4 = Good 5 = Very good

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1. I understand my own culture in terms of its expectations, values, and influence on communication and relationships.

2. When someone presents me with a different point of view, I try to understand it rather than attack it.

3. I am comfortable dealing with situations where the available information is incomplete and the outcomes unpredictable.

4. I am open to new situations and am always looking for new information and learning opportunities.

5. I have a good understanding of the attitudes and perceptions toward my culture as they are held by people from other cultures.

6. I am always gathering information about other countries and cultures and trying to learn from them.

7. I am well informed regarding the major differences in the government, political, and economic systems around the world.

8. I work hard to increase my understanding of people from other cultures.

9. I am able to adjust my communication style to work effectively with people from different cultures.

10. I can recognize when cultural differences are influencing working relationships, and I adjust my attitudes and behavior accordingly.

Interpretation To be successful in the global economy, you must be comfortable with the cultural diversity that it holds. This requires a global mindset that is receptive to and respectful of cultural differences, global knowledge that includes the continuing quest to know and learn more about other nations and cultures, and global work skills that allow you to work effectively across cultures.

Scoring The goal is to score as close to a perfect 5 as possible on each of the three dimensions of global intelligence. Develop your scores as follows: • Items (1 + 2 + 3 +4)/4 ____________ Global Mindset Score—The extent to which you are receptive to and respectful of cultural differences.

• Items (5 +6 +7)/3 Global Knowledge Score—Your openness to know and learn more about other nations and cultures.

• Items (8 + 9 + 10)/3 Global Work Skills Score—Your capacity to work effectively across cultures.

Class Exercise 17: American Football Instructions Form into groups as assigned by the instructor. In the group, do the following: 1. Discuss American football—the rules, the way the game is played, the way players and coaches behave, and the roles of owners and fans.

2. Use American football as a metaphor to explain the way U.S. corporations run and how they tend to behave in terms of strategies and goals.

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3. Prepare a class presentation for a group of visiting Japanese business executives. In this presentation, use the metaphor of American football to (1) explain American business strategies and practices to the Japanese and (2) critique the potential strengths and weaknesses of the American business approach in terms of success in the global marketplace.

Team Project 17: Globalization Pros and Cons Question “Globalization” is frequently in the news. You can easily read or listen to both advocates and opponents. What is the bottom line? Is globalization good or bad, and for whom?

Instructions 1. What does the term “globalization” mean? Review various definitions, and find the common ground.

2. Read and study the scholarly arguments about globalization. Summarize what the scholars say about the forces and consequences of globalization in the past, present, and future.

3. Examine current events relating to globalization. Summarize the issues and arguments. What is the positive side of globalization? What are the negatives that some might call its “dark” side?

4. Consider globalization from the perspective of your local community or one of its major employers. From their perspectives, is globalization a threat or an opportunity, and why?

5. Take a position on globalization. State what you believe to be the best course for government and business leaders to take. Justify your position.

Cases for Critical Thinking: Harley Davidson – Style and Strategy with a Global Reach Sidebar: NOT Made in China Although the company had been exporting motorcycles ever since it was founded, it was not until the late 1980s that Harley-Davidson management began to think seriously about international markets. New ads were developed specifically for different markets, and rallies were adapted to fit local customs. The company also began to actively recruit and develop dealers in Europe and Japan. It purchased a Japanese distribution company and built a large parts warehouse in Germany.

Harley is currently the number one motorcycle brand in five European countries, and number two in four countries. This sustained buying has earned Harley four consecutive quarters of sales and market share growth in Europe. Harley has learned from its international activities and continues to make inroads in overseas markets including China and India.

Case discussion questions and suggested answers: Chapter 17

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1. DISCUSSION What are the advantages and disadvantages to Harley of using exports, joint ventures, and wholly owned subsidiaries as ways of expanding its reach into new countries? Is one approach more often preferable to others? Or, can each be a good choice under certain circumstances? Explain.

Advantage Exports: Much of Harley’s growth is from exports of its product, well-known for being “Made in the USA.” Exporting is vital to its business strategy of “Made in the USA.” Harley Davidson has grown sales internationally through dealer expansion and greater control.

There are over 100 new international dealers in India, China and Brazil.

To date, there are more international dealers than U.S. dealers.

Exporting is still fairly simple, low cost and investment risk.

Joint Ventures: joint venture with Porsche AG of Stuttgart, Germany and Japan.

Sharing knowledge, marketing, and technology.

Decreases capital risk involved, leverage Porsche’s relationship with the German government, local facilities, managerial skills, and market know-how.

Wholly owned subsidiaries: shorter turnaround times, lower shipping costs.

Greater quality and supply chain control.

Disadvantages Exports: Expansion in export markets is vital to Harley’s existence, but there can be political and legal issues which preclude its entry into certain markets (namely, India).

If marketing and distribution channels change, this could impact business.

Lack of knowledge of a foreign market.

High transportation costs.

Trade barriers and tariffs Problems with local agents Exchange rate fluctuations, duties and taxes

Joint Ventures: Privacy and proprietary issues, including decisions, policies and differences in execution strategies.

Differences in culture, management styles, and motivation(s) for entering the joint venture.

Wholly owned subsidiaries: laws of another country, taxes, and tariffs, political and economic pressures.

Capital investment and outlay.

Each can be a good choice under the circumstance, but key for Harley, above all else, is to maintain its “Made in the USA” reputation.

2. DISCUSSION What is the major case in favor of global sourcing? What is the major case against it? Are rising labor costs, problems with intellectual property theft, and human tragedies in unsafe factories giving outsourcing a bad name that it doesn’t deserve? Is the strategy flawed to the point where it should be used only sparingly? Or, is it more a case of making a good choice of outsourcing country locations and business partners?

In favor of global sourcing Cost savings Allows a company to stay in business and remain competitive (“if you can’t beat ‘em, join ‘em” mentality).

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Against Global Sourcing Loss of jobs at home Quality suffers – due mainly to less control over manufacturing, operations, and service levels.

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Access to intellectual property, greater experience, larger talent pools, and knowledge-base There is a legally binding contract (and recourse) for services performed by an outsourcing firm. This is not the case when services are performed within an organization.

Reduced time to market at points of consumption or service.

Focus on a company’s core competencies Labor and talent can be hired as needed

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Sweatshop labor-like conditions for workers – exploitative Producing the product/service at home provides jobs and bolsters the local and national economy.

Increased or slower time to market.

Natural disasters can cause supply chain disruption Identifying reputable suppliers and reliable labor sources can be difficult.

Security issues and potential for knockoffs and counterfeiting

While the news media continues to report incidents of property theft, human tragedies, riots, inhuman treatment, and unsafe factory conditions, for some companies, outsourcing is still an viable decision. Without the option, many companies would cease to exist. Needless to say, the topic remains controversial, as outlined in the table above.

3. PROBLEM SOLVING The countries of sub-Saharan Africa are among the world’s emerging economies that are attracting international investors and global firms. If you were advising Harley’s CEO on business expansion in this region, what would you recommend in terms of setting up sales centers and manufacturing sites in countries like South Africa, Kenya, and Zimbabwe? When a new location is set up, what would you suggest as the proper role for locals to play? Should they run everything, or should there be a mix of locals and expatriates? And if the CEO wants to send expatriates to some locations, what selection criteria would you recommend, and why?

Currently, Harley Davidson has three dealerships located in Africa. Since Harley-Davidson prides itself on “Made in the USA,” it may not make sense to recommend any type of manufacturing of its motorcycles in South Africa, Kenya or Zimbabwe. For its retail dealers, it may make sense for locals to sell its vehicles. When sending expatriates to some locations, a selection criterion of product knowledge and cultural intelligence makes good sense.

4. FURTHER RESEARCH How is Harley doing today? Where is it operating in the world, and is it doing well in these global locations? What are the problems and opportunities of the moment in Harley’s international operations? Who are its top competitors in other parts of the world, and how is Harley faring against them? Is there any risk that Harley will lose focus on its American customer base in the rush to expand even further as a global company?

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Its most recent annual report reads: “Harley-Davidson is also committed to sales growth internationally, including through strategic dealer expansion. From late 2009 through March 2013, we have added 99 new international dealers in emerging markets such as India, China and Brazil as well as in established markets, in line with our objective to add 100-150 international dealers through 2014. Today, there are more international Harley-Davidson dealers than U.S. dealers. And international new Harley-Davidson motorcycle sales have grown from 30.2% of total worldwide sales in 2008 to 35.3% in 2012.”

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Harley-Davidson aims to attract more women, minorities, and younger riders.

The company has cut its product development time by 30% to get new models to market quicker.

The company hopes that its union will accept more flexible work rules, as it continues to consolidate operations to increase efficiency.

Retail Harley Davidson retail sales in emerging markets grew 30% over 2012.

Competitors: Honda, Kawasaki, Ultra, Triumph, Viper, Polaris Industries.

Suggested Team Exercise for Chapter 17 International Business Research Organize the class into teams of three or four. Assign each team a country to research in depth. I recommend that you select major emerging economies such as India or China, as well as countries that may be somewhat obscure to increase interest. Each team should have a different country. (You could assign this as an individual assignment, as well).

Each team should prepare a presentation to the class on their assigned country.

Two excellent websites that you may refer the teams to use, among other resources, are: The CIA World Factbook: https://www.cia.gov/cia/publications/factbook/index.html and also NationMaster.com: http://www.nationmaster.com/index.php Each team should provide a thorough report to the rest of the class based on their research including some of the following (much more could be added if you wish to make this an in-depth project): • • • • • • •

Using a globe, show the country’s location How big is the country? Compare it to another country or state What are the country’s primary natural resources?

What is the population size?

Provide the birth and death rates.

What is the life expectancy at birth and how does this compare to the United States?

How many internet users are there?

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What is (are) the primary religion(s)?

What is the primary language?

What is the literacy rate (%) of the entire population?

What type of government?

What is the name of the capitol?

What currency is used in the country.

Provide an overview of the economy. What are the main industries, exports, imports?

What is the GDP per capita? (This is a good relative indicator of a country’s wealth or poverty that takes into consideration population size). Compare this to the Unites States.

Crime or other issues or risks identified.

Assign each student (this may be an individual assignment, or you may prefer to use pairs or small teams) a global corporation for a research assignment. Some companies may be duplicated based on class size, but this will not detract from the value of the exercise. They should obtain the following information (you may select all or parts of these questions for a large or small assignment): ✓ In how many countries does the company have operations or facilities? Provide a summary with sources to support this finding. ✓ Does the company have any subsidiaries or joint ventures or other forms of operating? ✓ Where is the corporate headquarters located? ✓ How many employees does the company have in total? ✓ Provide an analysis of the percentage of sales by country or region for the company for a recent fiscal (financial) year. ✓ How is the company organized structurally (organization chart)

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