Management

Course content References Assessment and evaluation

Course content

Management and managers Organizing Decision-making Leading Communication, Information, Motivation Management methods, tools and techniques Strategic planning and building competitive advantage Organizational culture and team management

References

Management - Richard L Daft (1) 658DAFm Management Stephen P Robbins (4) 658 ROB Management: people, performance, change Luiz R Gomez-Mejia

(1) 658GOM Gareth R. Jones, Jennifer M. George - Essentials of Contemporary

Management, 2nd edition, McGraw-Hill International edition, 2007

Assessment and evaluation

Final examination 70% : Multiple choice Theoretical questions Case study

Seminar 30% : Test 15% Active presence 5% Presentation of group project 10%

Group project requirements

Project structure:

1. Organizational environment analysis; the main opportunities and threats for a new business in the selected market/industry

2. Decision-making - select a few alternatives for starting up a business and use a decision making method to chose the most appropriate one considering the opportunities and threats already identified

3. Build an organizational structure for your business

Presentation: 20 min, with any type of visual support (blackboard, flipchart, PowerPoint)

Evaluation criteria:

Meeting the requirements (Group) Business viability (G) Visual support (G) Presentation clarity and relevance (Individual) Proper answering to questions (I) Groups 4-6 members

MANAGEMENT BASICS

1. What is Management?

2. Organizational Performance

3. Management History And Evolution

What is Management?

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

Organizations collections of people who work together and coordinate their actions to achieve a wide variety of goals

What is Management?

Resources include

People Skills Know-how and experience Machinery Raw materials Computers and IT Patents Financial capital Loyal customers

Why study management?

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

2. Helps people deal with their bosses and coworkers

3. Opens a path to a well-paying job and a satisfying career

4. Make personal plans and decisions, set goals, prioritize what you will do, and get others to do things for you

Organizational Performance

A measure of how efficiently and effectively managers use available resources to satisfy customers and achieve organizational goals

Goals

Efficiency

Resources

Effectiveness

Results

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Organizational Performance

Efficiency

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

Effectiveness

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

Management History and Evolution

1. Classical Theory

Scientific Theory, Administrative Theory, Bureaucracy

2. Behavioral Theory

Human relations, Hierarchy of needs, Theory X and Theory Y

3. Management Science

4. Integrative Theories

Systems Theory, Sociotechnical Theory, Contingency

Evolution of Management Thought

1. Classical Theory

Focus on the job and management functions to determine the best way to manage in all organizations.

Scientific Management - Best way to maximize job performance

Fredrick Winslow Taylor Father of Scientific Management Frank and Lillian Gilbreth

Work efficiency Henry Gantt

Work scheduling

Taylors principles to increase efficiency 1. Study the way workers perform their tasks, gather all the

informal job knowledge that workers posses, and experiment with ways of improving how tasks are performed

2. Codify the new methods of performing tasks into written rules and standard operating procedures

3. Carefully select workers who possess skills and abilities that match the needs of the task, and train them to perform the task according to the established rules and procedures

4. Establish a fair or acceptable level of performance for a task, and then develop a pay system that provides a reward for performance above the acceptable level

Classical Theory

Administrative Theory Henri Fayol

Father of Modern Management Principles and functions of management Max Weber

Bureaucracy concept Chester Barnard

Authority and power in organizations Mary Parker Follett

Worker participation, conflict resolution, and shared goals

Bureaucracy (Weber)

A more formalized, rigid structure of organization

A formal structure based on rules, formal legitimate authority and competence

A supervisor's power should be based on an individual's position within the organization, his or her level of professional competence and the supervisor's adherence to explicit rules and regulations

Bureaucracy (Weber)

Bureaucracy (Weber)

Principles:

1. Hierarchical organization

2. Delineated lines of authority in a fixed area of activity

3. Action taken on the basis of and recorded in written rules

4. Bureaucratic officials need expert training

5. Rules are implemented by neutral officials

6. Career advancement depends on technical qualifications judged by organization, not individuals

2. Behavioral Theory

Focus on people to determine the best way to manage in all organizations.

Human Relations Movement (later, the Behavioral Science Approach)

Elton Mayo Hawthorne studies Abraham Maslow

Hierarchy of needs theory Douglas McGregor

Theory X and Theory Y

Maslows Hierarchy of Needs Theory

Maslows Hierarchy of Needs Theory Physiological

living wage to purchase food and clothing Safety

Free from danger - wages to procure shelter Affiliation

Need to belong / social relationships with co-workers Esteem

Sense of achievement and accomplishment Compensation and reward

Self-Actualization Job that allows growth and creativity

Theory X and Theory Y

Believe employees 1. Are lazy 2. Resist Change 3. Do not like responsibility 4. Need pay incentives or threats 5. Disloyal

Believe employees 1. Are motivated 2. Open to Change 3. Can handle responsibility 4. Prefer rewards over threats 5. Are loyal

3. Management Science

Focus on the use of mathematics to aid in problem solving and decision making

Mathematical models are used in the areas of finance, management information systems (MIS), and operations management

4. Integrative Theories

Systems Theory Focuses on viewing the organization as a whole

and as the interrelationship of its parts (subsystems)

Sociotechnical Theory Focuses on integrating people and technology

Contingency Theory Focuses on determining the best management

approach for a given situation

Comparing Theories

Classical

Behavioral

Management Science

Systems Theory

Attempts to develop the best way to manage in all organizations by focusing on the jobs and structure of the firm

Attempts to develop a single best way to manage in all organizations by focusing on people and making them productive.

Recommends using math (computers) to aid in problem solving and decision making.

Manages by focusing on the organization as a whole and the interrelationship of its departments, rather than on individual parts.

Sociotechnical Theory

Recommends focusing on the integration of people and technology.

Contingency Theory

Recommends using the theory or the combination of theories that best meets the given situation.

COMMUNICATION

What is Communication Communication Functions and Importance The Communication Process

What is Communication?

Communication the sharing of information between two or more individuals or

groups to reach a common understanding.

the exchange of information between a sender and receiver and the inference (perception) of meaning between the individuals involved

process by which information is exchanged and understood by two or more people, usually with the intent to motivate or influence behavior

Communication and the Manager s Job 80% every working day in direct communication with others 48

min/hour

20% every work day in communication in the form of reading and writing -12 min/hour

The Manager as Communication Champion

External Information

Internal Information

Manager as Communication Champion

Purpose-Directed Direct attention to vision, values, desired outcomes Influence employee behavior

Strategic Conversations Open communication Listening Dialogue Feedback

Methods Rich channels Upward, downward, & horizontal channels Nonverbal communication Personal networks

Communication Functions

Control member behavior

Foster motivation for what is to be done

Provide a release for emotional expression

Provide information needed to make decisions

The Importance of Good Communication

Increased efficiency in new technologies and skills

Improved quality of products and services

Increased responsiveness to customers

More innovation through communication

The Communication Process

Phases of the Communication Process

Transmission phase: information is shared by two or more people.

Feedback phase: a common understanding is assured.

The process starts with a sender (an individual or group) who wants to share information and puts the message into symbols or language (encoding).

Noise: anything harming the communication process.

Types of Noise

The Communication Process

Sender: person wanting to communicate information (the message)

Medium - the pathway over which the message is transmitted (e.g., telephone, written note, email)

depends on the nature of the message, its intended purpose, the audience, proximity to the audience, time constraints, and personal skills and preferences

Receiver: the person getting the message. The receiver decodes (interprets) the message, allowing the

receiver to understand the message.

This is a critical point: failure to properly decode the message can lead to a misunderstanding.

The Communication Process

Encoding: translates thoughts into code or language that can be understood by others

Decoding occurs when receivers receive a message process of interpreting and making sense of a message

Feedback by receiver informs the sender that the message is understood or that it must be re-sent.

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Feedback and Learning

Feedback Enables managers to determine whether they have been

successful in communicating with others

Is often neglected Giving & receiving feedback is typically difficult both for

managers & employees

Successful managers focus their feedback To help develop the capacities of subordinates To teach the organization how to better reach its goals

INTERPERSONAL COMMUNICATION

Interpersonal Communication Types Communication Media and Media Richness Barriers to Effective Interpersonal Communication Communication Styles

Interpersonal Communication

Interpersonal communication - communication that occurs between two individuals.

Methods for Improving Interpersonal Communications Pay attention Make yourself clear Be an active listener Dont attack the persons defenses Get feedback

Interpersonal Communication

Oral Communication Verbal, spoken-only communication Advantages: Speed and feedback. Disadvantage: Distortion of the message due to unrecording.

Written Communication Also verbal (encoded into words), but recorded Advantages: Tangible and verifiable. Disadvantages: Time consuming and lacks feedback.

Nonverbal Communication Advantages: Supports other communications and provides

observable expression of emotions and feelings.

Disadvantage: Misperception of body language or gestures can influence receivers interpretation of message.

Nonverbal Communication

Any message, sent or received independent of the written or spoken word, that express meaning to others

Includes such factors as use of time and space, distance between persons when conversing, a persons manner of speaking, facial expressions, body posture, use of color, dress, walking behavior, seating arrangement, office locations and furnishings.

Nonverbal communication can complicate the task of communicating internationally.

The nonverbal part of communicating is more important in some societies than in others.

In many societies, the context (or setting) in which a message is delivered, with its nonverbal cues, has far more meaning than the words of the message itself.

Nonverbal Communication

Sounds with specific meanings or warnings Images that control or encourage behaviors Situational behaviors that convey meanings Clothing and physical surroundings that imply status Body language: gestures, facial expressions, and other body

movements that convey meaning.

Verbal intonation: emphasis that a speaker gives to certain words or phrases that conveys meaning.

Sources of Nonverbal Communication

Body movement and

gestures Touch

Facial expressions

Eye contact

Media Richness

The amount of information that can be transmitted during a communication episode.

Involves the capacity of a given communication medium to convey information and promote understanding

Based on feedback, channel, type of communication, and language source

Characteristics of Rich Media

1. Handle multiple cues simultaneously.

2. Facilitate rapid feedback.

3. Are very personal in context.

Communication Media

1. Face-to-Face

Has highest information richness. Can take advantage of verbal and nonverbal signals. Provides for instant feedback. Management by wandering around takes advantage of

this with informal talks to workers.

Communication Media

2. Spoken Communication Electronically Transmitted

Has the second highest information richness. Telephone conversations are information rich with tone of

voice, senders emphasis, and quick feedback, but provide no visual nonverbal cues.

Video conferences provide much of the face-to-face richness and reduce travel costs and meeting times.

Communication Media

3. Personally Addressed Written Communication

Has a lower richness than the verbal forms of communication, but still is directed at a given person.

Personal addressing helps ensure receiver actually reads the message - personal letters and e-mail are common forms.

Does not provide instant feedback to the sender although sender may get feedback later.

Excellent media for complex messages requesting follow-up actions by receiver.

Communication Media

4. Impersonal Written Communication

Has the lowest information richness. Good for messages to many receivers where little or

feedback is expected (e.g., newsletters, reports).

May add to the receivers information overload: A superabundance of information that increases the likelihood that important information is ignored and tangential information receives attention.

A Contingency Model for Selecting Communication Media

Hierarchy of Media Richness and Application for Managerial Applications

Effective Communication

Managers and their subordinates can become effective communicators by:

Selecting an appropriate medium for each message - there is no one best medium.

Considering information richness (the amount of information a medium can carry) - a medium with high richness can carry much more information to aid understanding.

Asking if there is a need for a paper path or electronic trail to provide documentation of the communication.

Barriers to Effective Interpersonal Communication

Personal

Semantics/language Poor choice/use of

channels Poor listening skills Information

Overload Filtering, screening

negative information

Physical

Time zone differences

Telephone-line static

Distance from others

Crashed computers Office design

Psychological

Perception Stereotypes Halo effects Selective perception Projection

Experiential Barriers

Emotions Defensiveness Status difference National Culture

Overcoming the Barriers to Effective Interpersonal Communications

Use Feedback Simplify Language

Listen Actively Constrain Emotions

Watch Nonverbal Cues

Active Listening Behaviors

Communication Styles

ORGANIZATIONAL COMMUNICATION

Formal Channels of Communication Informal Communication Channels Organizational Communication Problems and Ways to

Improve It Open Communication

Organizational Communication

Organizational Communication - communication that occurs among several individuals or groups.

Formal Communication Communication that follows the official chain of command

or is part of the communication required to do ones job. Informal Communication

Communication that is not defined by the organizations hierarchy.

Permits employees to satisfy their need for social interaction. Can improve an organizations performance by creating

faster and more effective channels of communication.

Formal Channels of Communication

Internal communication

flows among coworkers and between different work units, and its main purpose is coordination

External communication

two-way flow of information between employees and a variety of stakeholders outside the organization

Formal Channels of Communication

Downward communications go from superior to subordinate to inform, direct, coordinate, and evaluate employees.

Lateral (horizontal) communications move between departments or between people in the same department.

Upward communications move from subordinates to superiors to offer feedback, information on employees needs, performance reports and improvement suggestions.

Diagonal communications cut across both work areas and organizational levels in the interest of efficiency and speed

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Formal Channels of Communication

Informal Communication Channels

Informal communication channels Do not follow the chain of command or organizational

structure.

Grapevine Unofficial communication system of the informal

organization.

Liaison individuals Those who consistently pass along grapevine information

to others.

Organizational moles Those who use the grapevine to enhance their power and

status.

Grapevine Characteristics

Informal, not controlled by management. Perceived by most employees as being more believable

and reliable than formal communications.

Largely used to serve the self-interests of those who use it.

Results from: Desire for information about important situations Ambiguous conditions Conditions that cause anxiety

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Informal Communication Channels Three important types of channels:

1. Personal Networks

2.Management By Wondering Around

3.Grapevine Gossip chain, Cluster chain

Types of Communication Networks

Centralized Decentralized

Chain - communication flows according to the formal chain of command, both upward and downward

Y network a special case of chain which combines horizontal and vertical connections

Wheel/star network - all communication flows in and out through the group leader (hub) to others in the group

Circle network closed chain network

All-channel network - communications flow freely among all members of the work team

Communication Networks Characteristics

Another View The work network

With whom do you exchange information as part of your daily work routines?

The social network With whom do you check in, inside and outside the organization to find

out what is going on?

The innovation network With whom do you collaborate or kick around new ideas?

The expert knowledge network To whom do you turn for expertise or advice?

The career guidance or strategic network Whom do you go to for advice about the future?

The learning network Whom do you work with to improve existing processes or methods?

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Downward Communications Problem

Drop Off Distortion Loss of message content

Dealing with Drop Off Use right communication channel Consistency between verbal and nonverbal messages Active listening

Improving Downward Communication

Open-Book Management - a management style in which a company opens its books to the employees, sharing financial data, explaining numbers, and rewarding workers for improvement.

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Upward Communication Problem

Many organizations make a great effort to facilitate upward communication

Despite these efforts, barriers to accurate upward communication exist:

Managers may resist hearing about employee problems Employees may not trust managers sufficiently to push

information upward

Fostering Upward Organizational Communication

Social gatherings Regular meetings Performance appraisal

meetings

Grievances Attitude surveys A suggestion system An open door policy Indirect measures E-Mail

Improving Horizontal Communication

Appoint Liaison Personnel

Organize Committees and Task Forces

Use Independent Integrators

Horizontal Communications

Improving Informal Communications

Provide Physical Support

Emphasize Informality Maintain Communication Intensity

Informal Communications

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Open Communication

Sharing all types of information throughout the company, across functional and hierarchical levels

Recent trend - reflects managers increased emphasis on:

Empowering employees Building trust and commitment Enhancing collaboration

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Dialogue and Discussion: The Differences

Conversation

Lack of understanding, disagreement, divergent points of view Dialogue Discussion

Result Result

Reveal feelings Explore assumptions Suspend convictions Build common ground

Long-term, innovative solutions Unified group Shared meaning Transformed mind-sets

State positions Advocate convictions Convince others Build oppositions

Short-term resolution Agreement by logic Opposition beaten down Mind-sets held onto

INFORMATION AND IT

Attributes of Useful Information The Information Technology Revolution Computer-Aided Communication Computer-Based Information Systems Management Information Systems Current Communication Issues

Information and the Managers Job Data - raw, unsummarized, and unanalyzed facts. Information - data that is organized in a meaningful

fashion.

Why managers need information: To make effective decisions. To control activities of the organization. To coordinate the activities of the organization.

Knowledge - skills acquired through experience or education; the theoretical or practical understanding of a subject.

Attributes of Useful Information

Attributes of Useful Information

Attributes Quality The accuracy and reliability of available

information affects the quality of decisions that managers make using the information.

Timeliness The availability of real-time information that reflects current conditions allows managers to maximize the effectiveness of their decisions.

Completeness Complete information allows managers to consider all relevant factors when making decisions.

Relevance Having information specific to a situation assists managers in making better decisions.

Information Systems and Technology

Key Terms Information system

A system for acquiring, organizing, storing, manipulating, and transmitting information.

Management information system

An information system that managers plan and design to provide themselves with the specific information they need.

Information technology

The means by which information is acquired, organized, stored, manipulated, and transmitted.

The Information Technology Revolution

Information Technology

The Tumbling Price of Information

Wireless Communications

Computer Networks

Software Development

The Information Technology Revolution

1. The Tumbling Price of Information

The cost of computer hardware has dropped dramatically while the power of computers has risen sharply.

2. Wireless communications

Cellular service has grown rapidly. Wireless access now connects laptops, smartphones

etc. to networks.

The Information Technology Revolution

3. Computer Networks

Networking The exchange of information through a group or network

of interlinked computers.

Servers are powerful computers that relay information to client computers connected on a Local Area Network (LAN).

Mainframes are large computers processing vast amounts of information.

The Internet is a world wide network of computers.

4. Software Developments

Key Developments Operating systems Software that tells the computer how to run

itself.

Applications software Provide for functions such as word processing, spreadsheets, and graphics.

Artificial intelligence Behavior performed by a machine that, if performed by a human, would be called intelligent.

Speech recognition software

Allows a computer to hear and act on spoken commands.

Computer-Aided Communication

E-mail Advantages: quickly written, sent, and stored; low cost for

distribution.

Disadvantages: information overload, lack of emotional content, cold and impersonal.

Instant messaging Advantage: real time e-mail transmitted straight to the

receivers desktop. Disadvantage: can be intrusive and distracting.

Computer-Aided Communication

Intranet A private organization-wide information network.

Extranet An information network connecting employees with

external suppliers, customers, and strategic partners.

Videoconferencing An extension of an intranet or extranet that permits face-

to-face virtual meetings via video links.

Understanding Information Technology

Increased ability to monitor individual and team performance Better decision making based on more complete

information

More collaboration and sharing of information Greater accessibility to coworkers Removes the constraints of time and distance Blurs the line between work and personal lives.

Computer-Based Information Systems

IT Systems MK PR FN RD HR

Enterprise Resource Planning ERP x x x x x

Client Relationship Management CRM x

Supply Chain Management SCM x x x

Accounting and Finance System AFS x

e-Commerce e-Commerce x x

Computer Aided Manufacturing CAM x

Computer Aided Design CAD x

Knowledge Work Systems KWS x

(MK Marketing Functional Area, PR Production Functional Area, FN Financial Functional Area, RD Research & Development Functional Area, HR Human Resources Functional Area)

Computer-Based Management Information Systems

Management Information Systems

1. Transaction Processing Systems (TPS)

Systems designed to handle large volumes of routine transactions.

Were the first computer-based information systems handling billing, payroll, and supplier payments.

2. Operations Information Systems (OIS)

Systems that gather, organize, and summarize data in a form of value to managers.

Can help managers with non-routine decisions such as customer service and productivity.

Management Information Systems

3. Decision Support Systems (DSS)

Provide interactive models to help middle and upper managers make better decisions.

Excellent for unusual, non-programmed decisions. Analyzes investment potential, new product pricing. Executive Support System (ESS) - sophisticated

version of a DSS matched a top managers needs. Group Decision Support System - an executive

support system that links top managers so that they can function as a team

Management Information Systems

4. Expert Systems and Artificial Intelligence

Employ human knowledge captured in a computer to solve problems usually requiring human insight.

Uses artificial intelligence (AI) to recognize, formulate, solve problems, and learn from experience.

The Impact and Limitations of Information Systems

Management Information Systems: Have provided managers with better information, enabling

better decision making.

Effective information systems can be a source of competitive advantage.

Computerized communications can lack the vital elements of human communication that contribute to information richness.

Current Communication Issues

Legal and security issues Inappropriate use of company e-mail and instant messaging Loss of confidential and proprietary information due to

inadvertent or deliberate dissemination or to hackers.

Lack of personal interaction Being connected is not the same as face-to-face contact. Difficulties occur in achieving understanding and

collaboration in virtual environments.

Current Communication Issues

Managing the Organizations Knowledge Resources

Build online information databases that employees can access.

Create communities of practice for groups of people who share a concern, share expertise, and interact with each other.

Current Communication Issues

Communicating Effectively with Customers Recognize the three components of the customer service

delivery process:

The customer The service organization The service provider Develop a strong service culture focused on the

personalization of service to each customer.

Listen and respond to the customer. Provide access to needed service information.

Management and Managers

The Management ProcessThe Management Functions Managerial Skills Managers Roles And LevelsTypes Of Managers Management Styles

MANAGEMENT

The Management ProcessThe Management Functions

Management Processes

2 types of work processes: Management processes Operational processes

Operational process a collection of actions performed by most of the organizational staff in order to actually produce/deliver products and services

Management process a collection of specific actions performed by a manager or a group in order to plan, organize, lead and control the work of the rest of the staff

Management Functions

Planning

Setting objectives and determining in advance how the objectives will be met

Monitor for Change and Anticipate or ReactOrganizing

Setting and delegating tasks, designing structures and allocating resources to achieve objectives

Leading

Influencing employees to work toward achieving objectives Performed through coordination and motivation

Controlling

Establishing and implementing mechanisms to ensure that objectives are achieved

Management Functions

1. Planning

Process of identifying and selecting appropriate organizational goals and courses of action

Includes:

Analyzing the internal and external environment Setting objectives and goals Choosing the appropriate methods and techniques for reaching

the objectives

Key questions: what must be done/what can be done during a given interval

Outcome: strategies, policies, programs, forecasts

Steps in the Planning Process

1. Deciding which goals the organization will pursue

2. Deciding what courses of action to adopt to attain those goals

3. Deciding how to allocate organizational resources

Objectives

S Specific define expectations

M Measurable quantity, quality, timeliness and cost

A Achievable challenging, but reasonable

R Relevant linked with all higher level goals and objectives

T Time bound date or elapsed time to complete

Types of Organizational Objectives

Mission The organizations reason for existence A broadly stated definition of purpose that distinguishes

the organization from others of a similar type

Strategic objectives Long term Main organizational goals Senior management Organization as a whole

Tactical objectives Middle management Major divisions, functions Reached by summing the results of most of the work

processes in the organization

Operationalobjectives

Short term Specific, measurable results expected from

departments and work groups

Individual objectives

Specific, measurable results expected from individuals performing their allocated tasks

Critical for motivating people

Mission Statement Examples

"Our vision is to be earth's most customer centric company; to build a place where people can come to find and discover anything they might want to buy online." (Amazon)

"To bring inspiration and innovation to every athlete in the world." (Nike)

"Our mission: to inspire and nurture the human spirit one person, one cup and one neighborhood at a time." (Starbucks)

At the heart of The Chevron Way is our Vision to be the global energy company most admired for its people, partnership and performance.

Dole Food Company, Inc. is committed to supplying the consumer and our customers with the finest, high-quality products and to leading the industry in nutrition research and education. Dole supports these goals with a corporate philosophy of adhering to the highest ethical conduct in all its business dealings, treatment of its employees, and social and environmental policies.

2. Organizing

All the actions managers perform to create a structure of working relationships that allow organizational members to interact and cooperate to achieve organizational goals

Includes: Setting tasks according to the amount of work necessary for

reaching the organizational goals and objectives

Designing structures Distributing tasks and resources needed to perform them

Key questions: Who will do What to achieve the goals? How will it be done?

Organizing managerial actions: Setting specific tasks for each job considering the goals and

objectives pursued

Grouping people into departments according to the kinds of job-specific tasks they perform

Laying out lines of authority and responsibility Deciding how to use organizational resources

3. Leading

Implies coordinating people so everyone understands their part in achieving organizational goals and objectives and motivating them (energizing and enabling them to do what they are supposed to do) to actually perform it

Leadership involves using power, personality, influence, persuasion, and communication skills

Outcome: highly motivated and committed employees, who are able to work together in the right direction (achieving goals and objectives)

3a. Leading Coordinating people Involves all the managerial actions performed in order to

synchronize and facilitate peoples work so they can play their part in achieving the goals

Key question: what should be done to operationalize tasks?

Is based on communication under all forms and at all levels:

Meetings Briefings Reports Memos Feedback (of any type)

3b. Leading Motivating people Involves all the managerial actions intended to influence

people and determine them to act their part in achieving the organizational goals and objectives

Is based on internal and external motivation

Key question: Why do people participate to achieving objectives?

Successful motivation criteria: differentiation complexity gradualness

4. Controlling

Includes all managerial actions which: Measure results Point out differences between results

and objectives

Search for causes Diminish/eliminate differences

Key questions:What was the outcome of ones work and How does it compare with the objectives?

How Do The Management Functions Work Together

The management functions can only be performed in correlation, according to the phases of the managerial process:

1. Pre-operational phase when goals and objectives are set and the way they will be met is determined (planning, organizing)

2. Operational phase the actions needed to achieve the goals and objectives are actually performed (leading - coordinating, motivating)

3. Post-operational phase measuring results and correcting differences between results and objectives (controlling, leading -motivating)

Together > the cycle information-decision-action

Applying The Concept: Management Functions

Indicate which type of function the manager is performing in each situation.a. planning b. organizing c. leadingd. controlling e. non-management

1. The manager is showing an employee how to set up a machine for production.

2. The manager is determining how many units were produced during thefirst half of the shift.

3. An employee has been absent several times. The manager is discussingthe situation and trying to get the employee to improve attendance.

4. The manager is conducting a job interview to fill the position of a retiring employee.

5. The manager is fixing a broken machine.

Management and Managers

The Management ProcessThe Management Functions Managerial Skills Managers Roles And LevelsTypes Of Managers Management Styles

MANAGERS

Managerial skills Managers roles Levels of managementTypes of managers Management styles

What is a Manager?

The individual responsible for achieving organizational objectives through efficient and effective utilization of resources

A person who occupies a leading position within the organization and performs actions and tasks specific to managerial processes

What Does It Take to Be a Successful Manager?

Management Qualities Integrity, industriousness, and the ability toget along with people

Management Skills Technical Human and communication Conceptual and decision-making skills

The Ghiselli Study (6 Traits of Manager Success Inverse Order)6) initiative

5) self-assurance

4) decisiveness

3) intelligence

2) need for occupational achievement

1) supervisory ability

Managers Skills Conceptual and decision-making skills

The ability to analyze and diagnose a situation and distinguish between cause and effect.

Human and communication skills The ability to understand, alter, lead, and control the

behavior of other individuals and groups.

Technical skills Job-specific skills required to perform a particular type of

work or occupation at a high level.

Identify each ability as being one of the following types of management skills:a. technicalb. human and communicationc. conceptual and decision-making

1. The ability to see things as a whole and as the interrelationship of their parts.2. The ability to motivate employees to do a good job.3. The ability to perform departmental jobs such as data entryin a computer.4. The ability to determine what's going wrong and correct it.5. The ability to write memos and letters.

Applying The Concept: Managers Skills

Managers Roles Role - a set of expectations of how one will behave in a given

situation

Managers play various roles as necessary while performing their management functions so as to achieve organizational objectives.

Interpersonal Roles

Figurehead

symbolizing the organizations mission and what it is seeking to achieve

Leader

training, counseling, and mentoring high employee performance

Liaison

linking and coordinating the activities of people and groups both inside and outside the organization

Roles that managers assume to provide direction and supervision to both employees and the organization as a whole

Informational Roles

Monitor

analyzing information from both the internal and external environment

Disseminator

transmitting information to influence the attitudes and behavior of employees

Spokesperson

using information to positively influence the way people in and out of the organization respond to it

Roles associated with the tasks needed to obtain and transmit information in the process of managing the organization

Decisional Roles

Entrepreneur

deciding which new projects or programs to initiate and to invest resources in

Disturbance handler

managing an unexpected event or crisis

Resource allocator

assigning resources between functions and divisions, setting the budgets of lower managers

Negotiator

reaching agreements between other managers, unions, customers, or shareholders

Roles associated with methods managers use in planning strategy and utilizing resources

Identify each of the managerial activities as part of one of the three role categories:a. interpersonal roleb. informational rolec. decisional role

1. The manager discusses the new union contract with unionrepresentatives.2. The manager shows an employee how to fill out a form.3. The manager reads the Wall Street Journal while having coffee first thing in the morning.4. The manager develops new total quality management (TQM)techniques.5. The sales manager discusses a complaint with a customer.

Applying the Concept: Managers Roles

Levels of Management

Levels of Management

Chief executive officer (CEO) is companys most senior and important manager

Top managers Responsible for the performance of all departments and have cross-

departmental responsibility.

Establish organizational goals and monitor middle managers Decide how different departments should interact Ultimately responsible for the success or failure of an organization

Middle managers - Supervise first-line managers; responsible for finding the best way to organize human and other resources to achieve organizational goals

First line managers - Responsible for daily supervision of the non-managerial employees who perform many of the specific activities necessary to produce goods and services

Managers and ICs

Top managers: CEO, president, or vice president

Middle managers: Sales manager, branch manager, or department head

First-line managers: Crew leader, supervisor, head nurse, or office manager

Non-managers - Individual Contributors (ICs)

Non-management operative employees: Workers in the organization who are supervised by first-line managers.

Professionals / Specialists / Technicians (Knowledge Workers)

Types of Managers

General Managers Supervise the activities of several departments.

Functional Managers Supervise the activities of related tasks. Common functional areas:

Marketing / Sales / Product Development Operations / Production / Services Delivery Finance / Accounting Human Resources / Personnel Management Infrastructure (IT, Real Estate, Legal)

Project Managers Coordinate employees across several functional departments to

accomplish a specific task.

Relative Amount of Time That Managers Spend on the Managerial Functions

Skill Types Needed

Identify the level of management in the following five instances:a. topb. middlec. first-line

1. Supervises the operative employees.2. Has greater need for conceptual skills than for technical skills.3. Spends more time leading and controlling.4. Reports to an executive.5. Needs a balance of management skills and performs all of the management functions.

Applying The Concept: Differences Among Management Levels

Management Styles

Individual styles

1. Authoritarian and Autocratic

2. Participative and Democratic

3. Delegative / Laissez-faire

Adaptive Styles

1. Directive

2. Participative

3. Coaching

4. Delegative

Personalized collections of procedures and actions a manager develops and applies according to his / her skills, qualities and experience in order to successfully manage different situations.

Individual Management Styles

1. Authoritarian and Autocratic

the manager tells his or her employees what to do and how to do it, without getting their advice

should normally only be used on rare occasions2. Participative and Democratic

the manager includes one or more employees in the decision making process, but the manager normally maintains the final decision making authority

is normally used when the manager has part of the information, and his/her employees have other parts

3. Delegative (Free-rein, Laissez-faire)

the manager allows the employees to make the decisions, however, the manager is still responsible for the decisions that are made

is used when employees are able to analyze the situation and determine what needs to be done and how to do it

Individual Management Styles

Adaptive Styles2 Types of Managerial Attitudes

Command

Setting tasks Deciding what, when, where

and how should be done

Following how the tasks are performed

One-way (downwards) communication

Support

Encouraging cooperation Listening to the employees Involving employees in the

decision-making process

Both-ways (bidirectional) communication

Adaptive Styles

Directive

DiS

Delegative

DeS

Participative

PS

Coaching

CS

Command

Support

Adaptive Styles

Capable, but

unmotivated or fearful

employee

PS

Incapable and

unmotivated or fearful

employee

CS

Incapable but motivated

and involved employee

DiS

Capable and motivated

employee

DeS

Capability

Motivation

Directive Style: I decide, you act

When to use it:

In crisis On very close deadlines With unexperienced

employees

How to use it:

Find problems Set objectives and roles Plan to solve problems Make decisions Set tasks Evaluate and control how the

tasks are performed

Participative Style: I listen and offer support, you act

When to use it:

With capable, but not totally involved employees

With not sufficiently trained employees who need additional support

How to use it:

Manager and employee work together to find problems and set objectives

The employee is consulted regarding the best way to perform the task

The manager supplies support, help and resources on request

Splits the responsibility for the results with the employee

Cooperates with the employee to evaluate results

Coaching Style: I decide, we discuss it, you act

When to use it:

With fearful or unconfident employees

With unexperienced and/or partially untrained employees who dont yet possess all the skills needed for the job

How to use it:

The manager finds problems and sets objectives

The manager makes the plan to solve the problems and then discusses it with the employee

The manager explains his/her decisions and request ideas and contributions; supports and encourages initiative

Makes the final decisions after consulting the employee

Coordinates the employee and evaluates the results

Delegative Style: You decide, you act, I assess

When to use it:

When employees are capable, motivated and confident

How to use it:

Manager and employee work together to find problems and set objectives

The employee plans, decides and solves problems

The manager assesses the employees work at specific intervals

The employee self evaluates and takes responsibility

The Use of Management Styles

Statistically:

54% of managers use a single style in all situations (usually the authoritarian)

35% of managers use alternatively 2 styles according to circumstances

10% of managers use 3 styles adapted both to the employees they have and to their own personal inclinations

1% of managers use all styles

Differences between Large and Small Businesses

Differences between Large and Small Businesses

Organizing

Organizing key concepts and purpose Determinants of structure Steps in designing the organizational structure Grouping tasks into jobs: job design and job description Grouping jobs into functions and divisions and allocating authority

Integrating mechanisms How to organize for performance

Organizing Key Concepts Organizing

The process by which managers establish tasks and workingrelationships among employees to achieve goals.

Organizational StructureFormal system of task and reporting relationships showing how

workers use resources.

Organizational designThe process by which managers make specific choices that result

in a particular kind of organizational structure.

Organizing Key Concepts Work specialization - the degree to which organizational

tasks are subdivided into individual jobs; also called divisionof labor.

Organization chart - the visual representation of anorganizations structure.

Job analysis - an assessment that defines jobs and the behaviors necessary to perform them

Job description - a written statement that describes a job Job specification - a written statement of the minimum

qualifications that a person must possess to perform a given job successfully

Purposes of Organizing

Divides work to be done into specific jobs and departments. Assigns tasks and responsibilities associated with individual

jobs.

Coordinates diverse organizational tasks. Clusters jobs into units. Establishes relationships among individuals, groups, and

departments.

Establishes formal lines of authority. Allocates and deploys organizational resources.

Factors affecting organizational structure

Determinants of Structure

1. The Organizational Environment

The quicker the environment changes, the more problems face managers.

Structure must be more flexible (i.e., decentralized authority) when environmental change is rapid.

2. Strategy

Different strategies require the use of different structures. A differentiation strategy needs a flexible structure, low cost

may need a more formal structure.

Increased vertical integration or diversification also requires a more flexible structure.

Determinants of Structure

3. Technology

The combination of skills, knowledge, tools, equipment, computers and machines used in the organization.

More complex technology makes it harder for managers to regulate the organization.

Organizations utilizing complex technology require a flexible structure to be managed efficiently.

Organizations utilizing routine technology can be more readily managed using a formal structure.

Organizations with high employee interaction requirements need a flexible structure.

78

Types of Technology

Small Batch Technology Small quantities of one-of-a-kind products are produced by the

skills of the workers who work together in small groups.

Appropriate structure is decentralized and flexible. Mass Production Technology

Automated machines that are programmed to make high volumes of standard products.

Formal structure is the best choice for workers who must perform repetitive tasks.

Determinants of Structure

4. Human Resources

Highly skilled workers whose jobs require working in teams usually need a more flexible structure.

Higher skilled workers (such as researchers and doctors) often have internalized professional norms.

Managers must take into account all four factors (environment, strategy, technology and human resources) when designing the structure of the organization.

Formal and informal structures

Formal structures

Based on rules, procedures and standards

Documented in job descriptions and organizational charts

Key words: authority, hierarchy, span of control, chain of command

Informal structures/groups

Groups that perform any type of activity, without an explicit common goal

Networks of people and relationships, based on spontaneous individual affiliations in the work environment

May include both managers and ICs

Steps in Designing Organizational Structure

1. Documenting organizational goals and objectives

2. Acknowledging the amount of work needed for achieving the goals and objectives and turning it into tasks

3. Grouping tasks into jobs and jobs into functions and divisions

4. Allocating authority and evaluating chains of command

5. Reviewing and updating organizational charts and job descriptions as often as necessary

Grouping Tasks Into Jobs: Job Design Job Design

The process by which managers decide how to divide tasks into specific jobs.

Division of Labor Splitting the work to be performed into particularly impersonal

tasks and assigning tasks to individual workers.

The appropriate division of labor results in an effective and efficient workforce.

Job Simplification Reducing the tasks each worker performs: too much

simplification results in boredom.

Copyright 2004 McGraw-Hill. All rights reserved.

Job Design

Job Enlargement increase the width of task Increasing the number of tasks for a given job by changing the

division of labor.

The intention is to reduce boredom and fatigue by increasing variety of tasks performed.

Job Enrichment - increase the depth of task Increasing the degree of responsibility a worker has over a job. Intended to increase worker involvement and self-discretion. Requires a flexible organizational structure to allow employees

to act flexibly and creatively.

Job Description

Job descriptions are written statements that describe the: Duties, Responsibilities, Most important contributions and outcomes needed from a

position,

Required qualifications of candidates, Reporting relationship and coworkers of a particular job.

are based on objective information obtained through job analysis

Job analysis - an understanding of the competencies and skills required to accomplish needed tasks, and the needs of the organization to produce work

Job Description Template Title of Job Position Description Reports to: and Direct Reports (Span of Authority) Job Purpose Primary Objectives Specific Duties and Responsibilities of the Job Qualifications

Job Requirements (Specialized Knowledge, Skills, Abilities, Personal Characteristics)

Education, Professional Certification, Experience Physical Demands

Work Environment Approval (Approved by, Date of approval, Reviewed by) Employee Acknowledgement (employees and supervisors

signature)

Listing Duties and Responsibilities

Identify between three and eight primary duties and responsibilities for the position

List the primary duties and responsibilities in order of importance

Begin each statement with an action verb Use the present tense of verbs Use gender neutral language such as s/he Use generic language such a photocopy instead of Xerox Where appropriate use qualifiers to clarify the task where,

when, why or how often

Avoid words that are open to interpretation

Job Characteristics Model

Job Characteristic

Skill variety Employee uses a wide range of skills

Task identity Worker is involved in all tasks of the job from

beginning to end of production process

Task significance Worker feels the task is meaningful to organization

Autonomy Employee has freedom to schedule tasks and carry

them out

Feedback Worker gets direct information about how well the

job is done

The Job Characteristics Model

Figure 7.2

Grouping jobs into functions and divisions

Functional Structure

Functions:

Finance/Accounting

Manufacturing/ Operations/ Services Delivery

Sales/ Marketing R&D HR Infrastructure

(Legal, IT)

Divisional Structure

Product

Geographic

Market/Customer

Matrix Structure

Groups people and resources by

Product

Groups people and resources by

Function

Product Team

Structure

Permanently assigned team

members

Cross-functional teams

Types of StructuresFunctional Structure

An organizational structure composed of all the departmentsthat an organization requires to produce its goods or services.

Advantageso Encourages learning from others doing similar jobs.

o Easy for managers to monitor and evaluate workers.

Disadvantageso Difficult for departments to communicate with others.

o Preoccupation with own department and losing sight of organizational goals.

The Functional Structure of Pier 1 Imports

Figure 7.3

Types of Structures

Divisional Structure

An organizational structure composed of separate business units within which are the functions that work together to produce a specific product for a specific customer.

Divisions create smaller, manageable parts of a firm. Divisions develop a business-level strategy to compete. Divisions have marketing, finance, and other functions. Functional managers report to divisional managers who then

report to corporate upper management.

DivisionalStructures

Figure 7.4

Types of Divisional Structures

Product Structure Customers are served by self-contained divisions that handle a

specific type of product or service.

Allows functional managers to specialize in one product area. Division managers become experts in their area. Removes need for direct supervision of division by corporate

managers.

Divisional management improves the use of resources.

725

Viacoms 2001 Product Structure

726

Types of Divisional Structures

Geographic Structure Each regional or a country or area with customers with differing

needs is served by a local self-contained division producing products that best meet those needs.

Global geographic structure Different divisions serve each world region when managers find

different problems or demands across the globe.

Generally, this structure is adopted when managers are pursuing a multidomestic strategy.

Copyright 2004 McGraw-Hill. All rights reserved.

Types of Divisional Structures

Market (Customer) Structure Each kind of customer is served by a self-contained division Global market (customer) structure Customers in different regions buy similar products so firms can

locate manufacturing facilities and product distribution networks where they decide is best.

Firms pursuing a global strategy will use this type of structure.

Global Geographic and Global Product Structures

Types of Structures

Matrix Structure

An organizational structure that simultaneously groups people and resources by function and product.

Results in a complex network of superior-subordinate reporting relationships.

The structure is very flexible and can respond rapidly to the need for change.

Each employee has two bosses (functional manager and product manager) and possibly cannot satisfy both.

730

Matrix Structure

Types of Structures

Product Team Structure

The members are permanently assigned to the team and empowered to bring a product to market.

Avoids problems of two-way communication and the conflicting demands of functional and product team bosses.

Cross-functional team is composed of a group of managers from different departments working together to perform organizational tasks.

732

Product Team Structure

Allocating Authority

Authority - The power to hold people accountable for their actions and to make decisions concerning the use of organizational resources.

Hierarchy of Authority - An organizations chain of command, specifying the relative authority of each manager.

Span of Control - The number of subordinates who report directly to a manager.

Line Manager Managers in the direct chain of command who have authority over people

and resources lower down.

Primarily responsible for the production of goods or services. Staff Manager

Managers who are functional-area specialists that give advice to line managers.

The Hierarchy of Authority and Span of Control at McDonalds Corporation

Tall and Flat Organizations

Tall structures have of many levels authority and narrow spans of control.

As hierarchy levels increase, communication gets difficult, creating delays in the time being taken to implement decisions.

Communications can also become garbled as it is repeated through the firm.

Flat structures have fewer levels and wide spans of control. Structure results in quick communications but can lead to

overworked managers.

Flat Organizations

Tall Organizations

The Minimum Chain of Command

Managers should carefully evaluate: Do the organization have the right number of middle managers? Can the structure be altered to reduce levels?

Centralized and Decentralized of Authority Decentralization puts more authority at lower levels and leads

to flatter organizations.

Decentralization works best in dynamic, highly competitive environments.

Stable environments favor centralization of authority.

Integrating Mechanisms

Copyright 2004 McGraw-Hill. All rights reserved. 740

Strategic Alliances and Network Structures

Strategic Alliance An agreement in which managers pool or share firms resources

and know-how with a foreign company and the two firms share in the rewards and risks of starting a new venture.

Network Structure: A series of strategic alliances that an organization creates with

suppliers, manufacturers, and distributors to produce and market a product.

Network structures allow firms to bring resources together in a boundary-less organization.

How to Organize for Performance

Do Always start with the

objectives

Keep the chain of command to its minimum

Have potential replacements for all managerial positions

Keep structures simple for a faster information flow

The more dynamic the environment, the more flexible the structure

Dont Positions reporting to more

than one manager

High dependency between a jobs duties and anothers outcome (replace with collaboration)

Burdening some of the jobs with too many responsibilities, or duties unrelated to the job purpose

Organizational charts or jobs descriptions kept unchanged for years

Table of Contents

DefinitionsThe Manager as Decision Maker Organizational Decisions Type, Nature, ScopeThe Decision Making Process Decision Making under Certainty Decision Making under Risk Decision Making under Uncertainty Decisions Based on Break-Even Analysis Group Decision Making Common Decision-Making Errors and Biases

How Do You Make Decisions?

Think about the way you decided you should attend the Management lecture today !

Did you decide based on:

Reason (the advantages could be more important than the disadvantages)

Habit (thats the schedule) Knowledge gain Persuasion Emotion (I like management) Other

Definitions

Decision Making - the process by which an individual choose a specific course of action to respond to the opportunities and problems that confront him/her.

Managerial Decision Making - the process by which managers respond to opportunities and threats by analyzing options, and making determinations about specific organizational goals and courses of action

It is essentially a subjective process, even when managers use scientific decision making methods

Decisions in the Management Functions

Planning What are the organization's long-term objectives? What strategies will best achieve those objectives? What should the organization's short-term

objectives be?

How difficult should individual goals be?

Decisions in the Management Functions

Organizing How many employees should I have report directly

to me?

What type of structure works best for my business in the current situation?

How much centralization should there be in the organization?

How should jobs be designed? When should the organization implement a different

structure?

Decisions in the Management Functions

Leading How do I handle employees who appear to be low

in motivation?

What is the most effective leadership/managementstyle in a given situation?

How will a specific change affect worker productivity?

When is the right time to stimulate competition?

Decisions in the Management Functions

Controlling What activities in the organization need to be

controlled?

How should those activities be controlled? When is a performance deviation significant? What type of management information system

should the organization have?

The Manager as Decision Maker

Everyone in an organization makes decisions, but decision making is particularly important in a managers job.

Decision making is part of all four managerial functions -decision making is the essence of management.

There are three perspectiveson how decisions are made:

Rationality Bounded Rationality Intuition

Rationality

We assume that managers decision making is going to be rational.

Managers make consistent, value-maximizing choices with specified constraints.

Assumptions are that decision makers: Are perfectly rational, fully objective, and logical. Have carefully defined the problem and identified all viable

alternatives.

Have a clear and specific goal. Will select the alternative that maximizes outcomes in the

organizations interests rather than in their personal interests.

Bounded Rationality

Managers make decisions rationally, but are limited (bounded) by their ability to process information.

Assumptions are that decision makers: Will not seek out or have knowledge of all alternatives Will satisficechoose the first alternative encountered that

satisfactorily solves the problemrather than maximize the outcome of their decision by considering all alternatives and choosing the best.

Influence on decision making according to their personality and experience

Escalation of commitment: an increased commitment to a previous decision despite evidence that it may have been wrong.

Satisficing (Good Enough)

Why

sat

isfic

e?

Humans have a limited capacity for rational thinking

They generally construct and analyze a simplified model

Their behavior with respect to the simplified model may be rational

But, the rational solution for the simplified model may NOT BE rational in the real-world situation

Rationality is bounded not only by limitations on human processing capacities, but also by individual differences

There is a tradeoff between the time and cost of searching for an optimum versus the value of obtaining one

A good enough or satisficing solution may be found if a certain goal level is attained

The Role of Intuition

Managers often use their intuition and it may actually help their decision making.

Intuitive decision making - making decisions on the basis of experience, feelings, and accumulated judgment.

How common is intuitive decision making? One survey of corporate executives found that almost half of managers

used intuition more than formal analysis to run their companies.

Situations where intuitive approach can help most: Rapid response is required The conditions change fast The problem is poorly structured The manager has to deal with ambigous, incomplete, or conflicting

information

There is no precedent

Intuition

Basic Types of Organizational Decisions

Non-programmed

Novel opportunities or problems

Requires extra information

Uncertainty

Programmed

Recurring opportunities or problems

There are rules or guidelines to follow

based on experience

Little ambiguity involved

Nature of Decision

Structured Problems Routine and repetitive with standard solution Well defined decision making procedure Given a well-defined set of input, a well defined set of output is

defined

Semi-structured Problems Has some structured aspect Some of the inputs or outputs or procedures are not well

defined

Unstructured Problems All phases of decision making process are unstructured Not well defined input, output set and procedures

Scope of Decision

Operational Planning and Control Focus on efficient and effective execution

of specific tasks

They affect activities taking place right now(E.g. What should be today's production level?)

Management Control and Tactical Planning Focus on effective utilization of resources Longer range planning horizon

(E.g. What is next years production level?)

Strategic Planning Long-range goals and policies for resource allocation

(E.g. What new products should be offered?)

Information Characteristics

Characteristics Operational Managerial StrategicAccuracy High LowLevel of detail Detailed AggregateTime horizon Present FutureUse Frequent InfrequentSource Internal ExternalScope Narrow WideNature Quantitative QualitativeAge Current Current/old

Six Steps in Decision Making

Recognize the need for a decision

Generate alternatives

Assess alternatives

Choose among alternatives

Implement the chosen alternative

Learn from feedback

Degrees of Outcome Predictability

Certainty

A situation in which a manager can make accurate decisions because the outcome of every alternative is known.

Risk

A conditions in which the decision maker is able to estimate the likelihood of certain outcomes.

The ability to assign probabilities may be result of past personal experiences or secondary information.

Uncertainty

The choice of alternative is influenced by the limited amount of information available to the decision maker.

Certainty

Full knowledge of available alternatives Full knowledge of what outcome will result from each

alternative

Few certain decisions in the real world Example: Suppose a person has 50000 to invest for a one-

year period. One alternative is to open a savings account paying 4% interest and another is to invest in a Government treasury note paying 9% interest. If both investments are secure and guaranteed, then there is a certainty that the treasury note will be the better investment.

Method: Preference Matrix

The Decision Making Process under Certainty

Risk

Knowledge of what the alternatives are Know the probabilities of outcomes resulting from each

alternative.

Method: Decision Tree

Uncertainty

Goals are known, but information about alternatives and future outcomes is incomplete (probabilities unknown)

Methods (Decision rules): Maximin Maximax Laplace Minimax regret

Preference Matrix (Certainty)

Allows the manager to rate one/several alternatives according to a selection of performance criteria

Alternative/ Criteria

C1 C2 ... Cj ... Cn

A1 a11 a12 ... a1j ... a1n

A2 a21 a22 ... a2j ... a2n

...

Ai ai1 a12 ... aij ... ain

...

Am am1 am2 ... amj ... amn

Preference Matrix (Certainty) Each alternative is scored on any scale, such as from 1 (worst

possible) to 10 (best possible), or from 0 to 1, as long as the same scale is applied to all the alternatives being compared

The criteria are weighted accordind to their perceived importance, with the total of these weights tipically equaling 100 (%)

The total score of an alternative is the sum of the weighted scores (weight x score) for all the criteria

The manager can compare the scores for alternatives against one another (and choose the one with the highest score) or against a predetermined standard.

Decision Tree (Risk)

1. Is a schematic model of available alternatives, along with their possible consequences

2. It consists of a number of square nodes representing decision points, left by branches, representing alternatives; branches leaving circular nodes represent events

3. The decision tree is drawn from left to right, but it is solved by working from right to left

4. Calculate the expected payoff for each node as follows:

For an event node, multiply the payoff of each branch by the events probability. Add the results to get the events node expected payoff

For a decision node, pick the alternative that has the best expected payoff; if an alternative leads to an event node, its payoff is equal to that nodes expected payoff (already calculated)

Decision Tree (Risk) - ExampleMary is a manager of a gadget factory. Her factory has been quite successful the past three years. She is wondering whether or not it is a good idea to expand her factory this year. The cost to expand her factory is $1.5M. If she does nothing and the economy stays good and people continue to buy lots of gadgets she expects $3M in revenue; while only $1M if the economy is bad.

If she expands the factory, she expects to receive $6M if economy is good and $2M if economy is bad.

She also assumes that there is a 40% chance of a good economy and a 60% chance of a bad economy.

Which is the best alternative?

Decision Making under Uncertainty

Alternatives/

Conditions

C1 C2 C3 C4 C5 C6 C7 C8

A1 2000 3100 2650 3200 2600 3350 2980 2800

A2 3290 2300 2400 2650 2800 3100 3200 2700

A3 3700 2900 2300 2150 2600 2900 2700 3150

A4 2400 2540 3000 3100 3000 2900 2750 2850

A5 3100 3300 2200 2350 2400 2350 3500 2600

A6 2900 3200 2850 2500 2550 2900 3600 3300

Decision Making under Uncertainty The manager can list the possible events but cannot estimate their

probabilities

Decision rules:1. Maximin (pesimistic) choose the alternative that is the best of

the worst; anticipates the worst case for each alternative

2. Maximax (optimistic) choose the alternative that is the best of the best; used when the decision maker has high expectations

3. Laplace (realistic) choose the alternative with the bestweighted payoff; to find the weighted payoff, give equalimportance (or probability) to each event

4. Minimax regret choose the alternative with the best worstregret (the alternative with the highest compared payoff in case the worst happens)

Regret the difference between a given payoff and the best payoff in thesame conditions (on the same column); it shows how much is lost by pickingan alternative over the one that is best for this event (situation/conditions)

Decisions Based on Break-Even Analysis

To evaluate the idea for a new service/product To asess the performance of an existing service/product To evaluate a process (make-or-buy decisions)

Break-Even Analysis

Break-even quantity the volume at which total revenues equal total costs.

money Revenue (pQ)

Q Units (quantity)

Total Cost (F + cQ)

Variable cost (cQ)

Fixed cost (F)

Break-even point

BEP

Break-Even Analysis

a) Evaluating services or products:

Is the predicted sales volume sufficient to break even? How low must be the variable cost per unit be to break even,

based on current prices and sales forecast?

How low must the fixed cost be to break even? How do price levels affect the break even volume?

Total cost = F + cQRevenue = pQ

Q = Fp - c

F fixed costc variable cost per unitQ quantity (number of units sold)p price per unit

Example:

A hospital is considering a new procedure to be offered at 200 RON per patient. The fixed cost per year would be 100 000 RON, with variable cost of 100 RON per patient. What is the break even quantity for this service?

C=F+cQ

C=100000+100*x

R=200*x

C=R

100000+100*x=200*x

x=1000

1

500

1.000

1.500

1

500

1.000

1.500

-

50.000

100.000

150.000

200.000

250.000

300.000

350.000

- 200 400 600 800 1.000 1.200 1.400 1.600

ct valoare

b) Evaluating processes:When choosing between two internal processes;When choosing between an internal process and buying

services or materials on the outside

Fb + cbQ = Fm + cmQ

Fb fixed cost (per year) of the buy optioncb variable cost per unit of the buy optionFm fixed cost (per year) of the make optioncm variable cost per unit of the buy option

Q = Fm - Fbcb - cm

Break-Even Analysis

Example:

The manager of a fast-food restaurant featuring hamburgers is adding salads to the menu. For the two new options, the price for the customer will be the same.

The make options is to install a salad bar stocked with vegetables, fruits, and toppings and let the customer assemble the salad. The salad bar should have be leased and a part-time employee hired. The manager estimates the fixed costs at 12000 RON and variable costs totaling 5,5 RON per salad.

The buy option is to have preassembled salads available for sale. They would be purchased from a local supplier at 6 RON per salad. Offering preassembled salads would require installation and operation of additional refrigeration, with an annual fixed cost of 2400 RON.

The manager expects to sell 25000 salads per year.

What is the break-even quantity?

Group Decision Making

The responsibility of decision making is divided between group members, and the resulting decision represents the consensus they reached

Techniques: Brainstorming - involves a group of people (5-10), sitting around a table,

generating ideas in the form of free association; the primary focus is on generation of ideas rather then on evaluation of ideas.

Nominal Group Technique (NGT) - is similar to brainstorming except that the approach is more structured; members form the group in name only and operate independently, generating ideas for solving the problem on their own, in silence and in writing. Members do not interact with each other so that strong personality domination is avoided.

Delphi Technique similar to the nominal group technique, except that it involves obtaining the opinions of experts physically separated from each other and unknown to each other.

Group Decision Making

Advantages

Availability/ diversity of members skills, knowledge, expertise

Enhanced memory Greater ability to correct

errors

Greater decision acceptance More alternatives generated Better understanding of the

decision

Disadvantages

Time consuming Group conflict, social

pressure, group polarization

Potential for groupthink Lack of clear responsibility

(diffusion of responsibility)

Social loafing

Groupthink

Phenomenon in which the norm for consensus overrides the realistic appraisal of alternative course of action

Conditions: Team leaders opinion is known Team is highly cohesive Team is isolated from outside influences Team has recent decision failures

Symptoms of Groupthink

Group members rationalize any resistance to the assumptions they have made.

Members apply direct pressures on those who express doubts about shared views or who question the alternative favored by the majority.

Members who have doubts or differing points of view keep silent about misgivings

Characteristics: Illusion of invulnerability Collective rationalizations Stereotypes of other groups Self-censorship Illusions of unanimity

Steps for Minimizing Groupthink

Group leader encourages thoughtfulness/ criticism Group leader refrains from expressing own opinion and

views until group has considered all alternatives

Group leader encourages group members to gather information from outside people

Group leader assigns devils advocate Group leader holds second meeting for important decisions

Use Individual Decision Making When

An individual has all capabilities necessary to make a good decision

An individual can gather and assess all necessary information

Acceptance of decision is unnecessary or likely to occur anyway

Common Decision-Making Errors and Biases

Common Decision-Making Errors and Biases

Overconfidence Bias - Holding unrealistically positive views of ones self and ones performance. Immediate Gratification Bias - Choosing alternatives that offer

immediate rewards and that to avoid immediate costs.

Anchoring Effect - Fixating on initial information and ignoring subsequent information.

Selective Perception Bias - Selecting organizing and interpreting events based on the decision makers biased perceptions. Confirmation Bias - Seeking out information that reaffirms past

choices and discounting contradictory information.

Framing Bias - Selecting and highlighting certain aspects of a situation while ignoring other aspects.

Common Decision-Making Errors and Biases

Availability Bias - Losing decision-making objectivity by focusing on the most recent events.

Representation Bias - Drawing analogies and seeing identical situations when none exist.

Randomness Bias - Creating unfounded meaning out of random events.

Sunk Costs Errors - Forgetting that current actions cannot influence past events and relate only to future consequences.

Self-Serving Bias - Taking quick credit for successes and blaming outside factors for failures.

Hindsight Bias - Mistakenly believing that an event could have been predicted once the actual outcome is known (after-the-fact).

Management Methods, Tools and Techniques

Meeting Delegation SWOT Project Management Management By Objectives

MEETING

Meeting

A coming together of an assembly for a short period of time, usually under the leadership of a manager

Why have a meeting? To solve a problem. To make a decision. To develop a plan. To gather or convey information. To get a response to information. To obtain approval/reach consensus. To establish understanding/rapport. To clarify responsibilities. To create a sense of teamwork.

The Main Purpose of a Meeting

To provide and discuss informationwhile:

Deciding future strategy

Reviewing activities

Solving problems

Updating projects

Evaluating situations or employees

Types of Meetings

Formal with formal rules of procedure

Informal flexible rules

Annual General Meetings: Board of Directors Meetings Committee Meetings Departamental

Meetings/Meetings of Senior Management

Project Meetings

Team meetings Work progress meetings

Effective Meeting Management

To ensure a meeting achieves its objectives and that costs are kept to a minimum, a meeting must be:

Properly planned Effectively conducted Accurately minuted Steps:

Preparing the meeting Opening the meeting Conducting the meeting Closing the meeting

Preparing The Meeting

Define the purpose of the meeting and the outcomes

Solicit input from members on any other topics/issues that need to be discussed

Develop an agenda with timeframes taking into consideration any outside parties coming to speak and the relevant priority of agenda items

Distribute the agenda before the meeting

Send any relevant information or inform participants of any necessary preparation needed to meet the meeting purpose

Preparing The MeetingSelecting Participants

The decision about who is to attend depends on what you want to accomplish in the meeting.