management (complete book)

ninth edition

STEPHEN P. ROBBINS

PowerPoint Presentation by Charlie CookPowerPoint Presentation by Charlie CookThe University of West AlabamaThe University of West Alabama

MARY COULTER

© 2007 Prentice Hall, Inc. © 2007 Prentice Hall, Inc. All rights reserved.All rights reserved.

Introduction to Introduction to Management and Management and OrganizationsOrganizations

ChapterChapter

11

© 2007 Prentice Hall, Inc. All rights reserved. 1–2

L E A R N I N G O U T L I N E L E A R N I N G O U T L I N E Follow this Learning Outline as you read and study this chapter.Follow this Learning Outline as you read and study this chapter.

Who Are Managers?Who Are Managers?• Explain how managers differ from non-managerial Explain how managers differ from non-managerial

employees.employees.

• Describe how to classify managers in organizations.Describe how to classify managers in organizations.

What Is Management?What Is Management?• Define management.Define management.

• Explain why efficiency and effectiveness are important to Explain why efficiency and effectiveness are important to management.management.


L E A R N I N G O U T L I N E (cont’d) L E A R N I N G O U T L I N E (cont’d) Follow this Learning Outline as you read and study this chapter.Follow this Learning Outline as you read and study this chapter.

What Do Managers Do?What Do Managers Do?• Describe the four functions of management.Describe the four functions of management.

• Explain Mintzberg’s managerial roles.Explain Mintzberg’s managerial roles.

• Describe Katz’s three essential managerial skills and how Describe Katz’s three essential managerial skills and how the importance of these skills changes depending on the importance of these skills changes depending on managerial level.managerial level.

• Discuss the changes that are impacting managers’ jobs.Discuss the changes that are impacting managers’ jobs.

• Explain why customer service and innovation are Explain why customer service and innovation are important to the manager’s job.important to the manager’s job.



What Is An Organization?What Is An Organization?• Describe the characteristics of an organization.Describe the characteristics of an organization.

• Explain how the concept of an organization is changing.Explain how the concept of an organization is changing.

Why Study Management?Why Study Management?• Explain the universality of management concept.Explain the universality of management concept.

• Discuss why an understanding of management is Discuss why an understanding of management is important.important.

• Describe the rewards and challenges of being a manager.Describe the rewards and challenges of being a manager.


Who Are Managers?Who Are Managers?• ManagerManager

Someone who coordinates and oversees the work of Someone who coordinates and oversees the work of other people so that organizational goals can be other people so that organizational goals can be accomplished. accomplished.


Classifying ManagersClassifying Managers• First-line ManagersFirst-line Managers

Individuals who manage the work of non-managerial Individuals who manage the work of non-managerial employees.employees.

• Middle ManagersMiddle Managers Individuals who manage the work of first-line Individuals who manage the work of first-line

managers.managers.• Top ManagersTop Managers

Individuals who are responsible for making Individuals who are responsible for making organization-wide decisions and establishing plans organization-wide decisions and establishing plans and goals that affect the entire organization.and goals that affect the entire organization.


Exhibit 1–1Exhibit 1–1 Managerial LevelsManagerial Levels


What Is Management?What Is Management?• Managerial ConcernsManagerial Concerns

EfficiencyEfficiency ““Doing things right”Doing things right”

– Getting the most output Getting the most output for the least inputsfor the least inputs

EffectivenessEffectiveness ““Doing the right things”Doing the right things”

– Attaining organizational Attaining organizational goalsgoals


Exhibit 1–2Exhibit 1–2 Effectiveness and Efficiency in ManagementEffectiveness and Efficiency in Management


What Do Managers Do?What Do Managers Do?• Functional ApproachFunctional Approach

PlanningPlanning Defining goals, establishing strategies to achieve goals, Defining goals, establishing strategies to achieve goals,

developing plans to integrate and coordinate activities.developing plans to integrate and coordinate activities. OrganizingOrganizing

Arranging and structuring work to accomplish organizational Arranging and structuring work to accomplish organizational goals.goals.

LeadingLeading Working with and through people to accomplish goals.Working with and through people to accomplish goals.

ControllingControlling Monitoring, comparing, and correcting work.Monitoring, comparing, and correcting work.


Exhibit 1–3Exhibit 1–3 Management FunctionsManagement Functions


What Do Managers Do? (cont’d)What Do Managers Do? (cont’d)• Management Roles Management Roles

Approach (Mintzberg)Approach (Mintzberg) Interpersonal rolesInterpersonal roles

Figurehead, leader, liaisonFigurehead, leader, liaison Informational rolesInformational roles

Monitor, disseminator, Monitor, disseminator, spokespersonspokesperson

Decisional rolesDecisional roles Disturbance handler, resource Disturbance handler, resource

allocator, negotiatorallocator, negotiator


What Managers Actually Do (Mintzberg)What Managers Actually Do (Mintzberg)• InteractionInteraction

with otherswith others with the organizationwith the organization with the external context with the external context

of the organizationof the organization• ReflectionReflection

thoughtful thinkingthoughtful thinking• ActionAction

practical doingpractical doing


What Do Managers Do? (cont’d)What Do Managers Do? (cont’d)• Skills ApproachSkills Approach

Technical skillsTechnical skills Knowledge and proficiency in a specific fieldKnowledge and proficiency in a specific field

Human skillsHuman skills The ability to work well with other peopleThe ability to work well with other people

Conceptual skillsConceptual skills The ability to think and conceptualize about abstract and The ability to think and conceptualize about abstract and

complex situations concerning the organizationcomplex situations concerning the organization


Exhibit 1–5Exhibit 1–5 Skills Needed at Different Management LevelsSkills Needed at Different Management Levels


Exhibit 1–6Exhibit 1–6 Conceptual SkillsConceptual Skills

• Using information to solve business problemsUsing information to solve business problems• Identifying of opportunities for innovationIdentifying of opportunities for innovation• Recognizing problem areas and implementing Recognizing problem areas and implementing

solutionssolutions• Selecting critical information from masses of Selecting critical information from masses of

datadata• Understanding of business uses of technologyUnderstanding of business uses of technology• Understanding of organization’s business modelUnderstanding of organization’s business model

Source: Based on American Management Association Survey of Managerial Skills and Competencies, March/April 2000, found on AMA Web site (www.ama.org), October 30, 2002.


Exhibit 1–6Exhibit 1–6 Communication SkillsCommunication Skills

• Ability to transform ideas into words and actionsAbility to transform ideas into words and actions

• Credibility among colleagues, peers, and Credibility among colleagues, peers, and subordinatessubordinates

• Listening and asking questionsListening and asking questions

• Presentation skills; spoken formatPresentation skills; spoken format

• Presentation skills; written and/or graphic Presentation skills; written and/or graphic formatsformats



Exhibit 1–6Exhibit 1–6 Effectiveness SkillsEffectiveness Skills

• Contributing to corporate mission/departmental Contributing to corporate mission/departmental objectivesobjectives

• Customer focusCustomer focus• Multitasking: working at multiple tasks in parallelMultitasking: working at multiple tasks in parallel• Negotiating skillsNegotiating skills• Project managementProject management• Reviewing operations and implementing Reviewing operations and implementing

improvementsimprovements



Exhibit 1–6Exhibit 1–6 Effectiveness Skills (cont’d)Effectiveness Skills (cont’d)


• Setting and maintaining performance standards Setting and maintaining performance standards internally and externallyinternally and externally

• Setting priorities for attention and activitySetting priorities for attention and activity

• Time managementTime management


Exhibit 1–6Exhibit 1–6 Interpersonal Skills (cont’d)Interpersonal Skills (cont’d)


• Coaching and mentoring skillsCoaching and mentoring skills

• Diversity skills: working with diverse people and Diversity skills: working with diverse people and culturescultures

• Networking within the organizationNetworking within the organization

• Networking outside the organizationNetworking outside the organization

• Working in teams; cooperation and commitmentWorking in teams; cooperation and commitment


Exhibit 1–7Exhibit 1–7 Management Skills and Management Function MatrixManagement Skills and Management Function Matrix


How The Manager’s Job Is ChangingHow The Manager’s Job Is Changing• The Increasing Importance of CustomersThe Increasing Importance of Customers

Customers: the reason that organizations existCustomers: the reason that organizations exist Managing customer relationships is the responsibility of all Managing customer relationships is the responsibility of all

managers and employees.managers and employees. Consistent high quality customer service is essential for Consistent high quality customer service is essential for

survival.survival.

• InnovationInnovation Doing things differently, exploring new territory, and Doing things differently, exploring new territory, and

taking riskstaking risks Managers should encourage employees to be aware of and Managers should encourage employees to be aware of and

act on opportunities for innovation.act on opportunities for innovation.


Exhibit 1–8Exhibit 1–8Changes Impacting Changes Impacting the Manager’s Jobthe Manager’s Job


What Is An Organization?What Is An Organization?• An Organization DefinedAn Organization Defined

A deliberate arrangement of people to accomplish A deliberate arrangement of people to accomplish some specific purpose (that individuals independently some specific purpose (that individuals independently could not accomplish alone).could not accomplish alone).

• Common Characteristics of OrganizationsCommon Characteristics of Organizations Have a distinct purpose (goal)Have a distinct purpose (goal) Composed of peopleComposed of people Have a deliberate structureHave a deliberate structure


Exhibit 1–9Exhibit 1–9 Characteristics of OrganizationsCharacteristics of Organizations


Exhibit 1–10Exhibit 1–10 The Changing OrganizationThe Changing Organization


Why Study Management?Why Study Management?• The Value of Studying ManagementThe Value of Studying Management

The universality of managementThe universality of management Good management is needed in all organizations.Good management is needed in all organizations.

The reality of workThe reality of work Employees either manage or are managed.Employees either manage or are managed.

Rewards and challenges of being a managerRewards and challenges of being a manager Management offers challenging, exciting and creative Management offers challenging, exciting and creative

opportunities for meaningful and fulfilling work.opportunities for meaningful and fulfilling work. Successful managers receive significant monetary rewards Successful managers receive significant monetary rewards

for their efforts.for their efforts.


Exhibit 1–11Exhibit 1–11 Universal Need for ManagementUniversal Need for Management


Exhibit 1–12Exhibit 1–12 Rewards and Challenges of Being A ManagerRewards and Challenges of Being A Manager


Terms to KnowTerms to Know• managermanager• first-line managersfirst-line managers• middle managersmiddle managers• top managerstop managers• managementmanagement• efficiencyefficiency• effectivenesseffectiveness• planningplanning• organizingorganizing• leadingleading• controllingcontrolling

• management rolesmanagement roles• interpersonal rolesinterpersonal roles• informational rolesinformational roles• decisional rolesdecisional roles• technical skillstechnical skills• human skillshuman skills• conceptual skillsconceptual skills• organizationorganization• universality of universality of

managementmanagement

ninth edition

STEPHEN P. ROBBINS


MARY COULTER


Management Management Yesterday and TodayYesterday and Today

ChapterChapter

22



•Historical Background of ManagementHistorical Background of Management• Explain why studying management history is important.Explain why studying management history is important.

• Describe some early evidences of management practice.Describe some early evidences of management practice.

•Scientific ManagementScientific Management• Describe the important contributions made by Fredrick Describe the important contributions made by Fredrick

W. Taylor and Frank and Lillian Gilbreth.W. Taylor and Frank and Lillian Gilbreth.

• Explain how today’s managers use scientific Explain how today’s managers use scientific management.management.



•General Administrative TheoryGeneral Administrative Theory• Discuss Fayol’s contributions to management theory.Discuss Fayol’s contributions to management theory.

• Describe Max Weber’s contribution to management theory.Describe Max Weber’s contribution to management theory.

• Explain how today’s managers use general administrative Explain how today’s managers use general administrative theory.theory.

•Quantitative ApproachQuantitative Approach• Explain what the quantitative approach has contributed to Explain what the quantitative approach has contributed to

the field of management.the field of management.

• Discuss how today’s managers use the quantitative Discuss how today’s managers use the quantitative approach.approach.



•Toward Understanding Organizational BehaviorToward Understanding Organizational Behavior• Describe the contributions of the early advocates of OB.Describe the contributions of the early advocates of OB.

• Explain the contributions of the Hawthorne Studies to the Explain the contributions of the Hawthorne Studies to the field of management.field of management.

• Discuss how today’s managers use the behavioral Discuss how today’s managers use the behavioral approach.approach.

•The Systems ApproachThe Systems Approach• Describe an organization using the systems approach.Describe an organization using the systems approach.

• Discuss how the systems approach helps us Discuss how the systems approach helps us management.management.



•The Contingency ApproachThe Contingency Approach• Explain how the contingency approach differs from the Explain how the contingency approach differs from the

early theories of management.early theories of management.

• Discuss how the contingency approach helps us Discuss how the contingency approach helps us understand management.understand management.

•Current Issues and TrendsCurrent Issues and Trends• Explain why we need to look at the current trends and Explain why we need to look at the current trends and

issues facing managers.issues facing managers.

• Describe the current trends and issues facing managers.Describe the current trends and issues facing managers.


Historical Background of ManagementHistorical Background of Management• Ancient ManagementAncient Management

Egypt (pyramids) and China (Great Wall)Egypt (pyramids) and China (Great Wall) Venetians (floating warship assembly lines)Venetians (floating warship assembly lines)

• Adam SmithAdam Smith Published Published “The Wealth of Nations” “The Wealth of Nations” in 1776in 1776

Advocated the division of labor (job specialization) to Advocated the division of labor (job specialization) to increase the productivity of workersincrease the productivity of workers

• Industrial RevolutionIndustrial Revolution Substituted machine power for human laborSubstituted machine power for human labor Created large organizations in need of managementCreated large organizations in need of management


Exhibit 2–1Exhibit 2–1 Development of Major Management TheoriesDevelopment of Major Management Theories


Major Approaches to ManagementMajor Approaches to Management• Scientific ManagementScientific Management• General Administrative TheoryGeneral Administrative Theory• Quantitative ManagementQuantitative Management• Organizational BehaviorOrganizational Behavior• Systems ApproachSystems Approach• Contingency ApproachContingency Approach


Scientific ManagementScientific Management• Fredrick Winslow TaylorFredrick Winslow Taylor

The “father” of scientific managementThe “father” of scientific management Published Published Principles of Scientific ManagementPrinciples of Scientific Management (1911) (1911)

The theory of scientific managementThe theory of scientific management

– Using scientific methods to define the “one best way” for a Using scientific methods to define the “one best way” for a job to be done:job to be done:

• Putting the right person on the job with the correct tools Putting the right person on the job with the correct tools and equipment.and equipment.

• Having a standardized method of doing the job.Having a standardized method of doing the job.

• Providing an economic incentive to the worker.Providing an economic incentive to the worker.


Exhibit 2–2Exhibit 2–2 Taylor’s Four Principles of ManagementTaylor’s Four Principles of Management

1. Develop a science for each element of an individual’s work, which will replace the old rule-of-thumb method.

2. Scientifically select and then train, teach, and develop the worker.

3. Heartily cooperate with the workers so as to ensure that all work is done in accordance with the principles of the science that has been developed.

4. Divide work and responsibility almost equally between management and workers. Management takes over all work for which it is better fitted than the workers.


Scientific Management (cont’d)Scientific Management (cont’d)• Frank and Lillian GilbrethFrank and Lillian Gilbreth

Focused on increasing worker productivity through Focused on increasing worker productivity through the reduction of wasted motionthe reduction of wasted motion

Developed the microchronometer to time worker Developed the microchronometer to time worker motions and optimize work performancemotions and optimize work performance

• How Do Today’s Managers Use Scientific How Do Today’s Managers Use Scientific Management?Management? Use time and motion studies to increase productivityUse time and motion studies to increase productivity Hire the best qualified employeesHire the best qualified employees Design incentive systems based on outputDesign incentive systems based on output


General Administrative TheoryGeneral Administrative Theory• Henri FayolHenri Fayol

Believed that the practice of management was distinct Believed that the practice of management was distinct from other organizational functions from other organizational functions

Developed fourteen principles of management that Developed fourteen principles of management that applied to all organizational situationsapplied to all organizational situations

• Max WeberMax Weber Developed a theory of authority based on an ideal Developed a theory of authority based on an ideal

type of organization (bureaucracy)type of organization (bureaucracy) Emphasized rationality, predictability, impersonality, technical Emphasized rationality, predictability, impersonality, technical

competence, and authoritarianismcompetence, and authoritarianism


Exhibit 2–3Exhibit 2–3 Fayol’s 14 Principles of ManagementFayol’s 14 Principles of Management

1.1. Division of work.Division of work.

2.2. Authority.Authority.

3.3. Discipline.Discipline.

4.4. Unity of command.Unity of command.

5.5. Unity of direction.Unity of direction.

6.6. Subordination of Subordination of individual interests individual interests to the general to the general interest.interest.

7.7. Remuneration.Remuneration.

8.8. Centralization.Centralization.

9.9. Scalar chain.Scalar chain.

10.10. Order.Order.

11.11. Equity.Equity.

12.12. Stability of tenure Stability of tenure of personnel.of personnel.

13.13. Initiative.Initiative.

14.14. Esprit de corps.Esprit de corps.


Exhibit 2–4Exhibit 2–4 Weber’s Ideal BureaucracyWeber’s Ideal Bureaucracy


Quantitative Approach to ManagementQuantitative Approach to Management• Quantitative ApproachQuantitative Approach

Also called Also called operations researchoperations research or or management management sciencescience

Evolved from mathematical and statistical methods Evolved from mathematical and statistical methods developed to solve WWII military logistics and quality developed to solve WWII military logistics and quality control problemscontrol problems

Focuses on improving managerial decision making by Focuses on improving managerial decision making by applying:applying: Statistics, optimization models, information models, and Statistics, optimization models, information models, and

computer simulationscomputer simulations


Understanding Organizational Behavior Understanding Organizational Behavior • Organizational Behavior (OB)Organizational Behavior (OB)

The study of the actions of people at work; people are The study of the actions of people at work; people are the most important asset of an organizationthe most important asset of an organization

• Early OB AdvocatesEarly OB Advocates Robert OwenRobert Owen Hugo MunsterbergHugo Munsterberg Mary Parker FollettMary Parker Follett Chester BarnardChester Barnard


Exhibit 2–5Exhibit 2–5 Early Advocates of OBEarly Advocates of OB


•A series of productivity experiments conducted A series of productivity experiments conducted at Western Electric from 1927 to 1932.at Western Electric from 1927 to 1932.

•Experimental findingsExperimental findingsProductivity unexpectedly increased under imposed Productivity unexpectedly increased under imposed adverse working conditions.adverse working conditions.The effect of incentive plans was less than The effect of incentive plans was less than expected.expected.

•Research conclusionResearch conclusionSocial norms, group standards and attitudes more Social norms, group standards and attitudes more strongly influence individual output and work behavior strongly influence individual output and work behavior than do monetary incentives.than do monetary incentives.

The Hawthorne StudiesThe Hawthorne Studies


The Systems ApproachThe Systems Approach• System DefinedSystem Defined

A set of interrelated and interdependent parts A set of interrelated and interdependent parts arranged in a manner that produces a unified whole.arranged in a manner that produces a unified whole.

• Basic Types of SystemsBasic Types of Systems Closed systemsClosed systems

Are not influenced by and do not interact with their Are not influenced by and do not interact with their environment (all system input and output is internal).environment (all system input and output is internal).

Open systemsOpen systems Dynamically interact to their environments by taking in inputs Dynamically interact to their environments by taking in inputs

and transforming them into outputs that are distributed into and transforming them into outputs that are distributed into their environments.their environments.


Exhibit 2–6Exhibit 2–6 The Organization as an Open SystemThe Organization as an Open System


Implications of the Systems ApproachImplications of the Systems Approach• Coordination of the organization’s parts is Coordination of the organization’s parts is

essential for proper functioning of the entire essential for proper functioning of the entire organization.organization.

• Decisions and actions taken in one area of the Decisions and actions taken in one area of the organization will have an effect in other areas of organization will have an effect in other areas of the organization.the organization.

• Organizations are not self-contained and, Organizations are not self-contained and, therefore, must adapt to changes in their therefore, must adapt to changes in their external environment.external environment.


The Contingency ApproachThe Contingency Approach• Contingency Approach DefinedContingency Approach Defined

Also sometimes called the Also sometimes called the situational approach.situational approach.

There is no one universally applicable set of There is no one universally applicable set of management principles (rules) by which to manage management principles (rules) by which to manage organizations.organizations.

Organizations are individually different, face different Organizations are individually different, face different situations (contingency variables), and require situations (contingency variables), and require different ways of managing.different ways of managing.


Exhibit 2–7Exhibit 2–7 Popular Contingency VariablesPopular Contingency Variables

• Organization size• As size increases, so do the problems of coordination.

• Routineness of task technology• Routine technologies require organizational structures,

leadership styles, and control systems that differ from those required by customized or nonroutine technologies.

• Environmental uncertainty• What works best in a stable and predictable environment

may be totally inappropriate in a rapidly changing and unpredictable environment.

• Individual differences• Individuals differ in terms of their desire for growth,

autonomy, tolerance of ambiguity, and expectations.


Current Trends and IssuesCurrent Trends and Issues• GlobalizationGlobalization• EthicsEthics• Workforce DiversityWorkforce Diversity• EntrepreneurshipEntrepreneurship• E-businessE-business• Knowledge ManagementKnowledge Management• Learning OrganizationsLearning Organizations• Quality ManagementQuality Management


Current Trends and Issues (cont’d)Current Trends and Issues (cont’d)• GlobalizationGlobalization

Management in international organizationsManagement in international organizations Political and cultural challenges of operating in a Political and cultural challenges of operating in a

global marketglobal market Working with people from different culturesWorking with people from different cultures Coping with anticapitalist backlashCoping with anticapitalist backlash Movement of jobs to countries with low-cost laborMovement of jobs to countries with low-cost labor

• EthicsEthics Increased emphasis on ethics education in college Increased emphasis on ethics education in college

curriculumscurriculums Increased creation and use of codes of ethics by Increased creation and use of codes of ethics by

businessesbusinesses


Exhibit 2–8Exhibit 2–8 A Process for Addressing Ethical DilemmasA Process for Addressing Ethical Dilemmas

Step 1: What is the ethical dilemma?

Step 2: Who are the affected stakeholders?

Step 3: What personal, organizational, and external factors are important to my decision?

Step 4: What are possible alternatives?

Step 5: Make a decision and act on it.


Current Trends and Issues (cont’d)Current Trends and Issues (cont’d)• Workforce DiversityWorkforce Diversity

Increasing heterogeneity in the workforceIncreasing heterogeneity in the workforce More gender, minority, ethnic, and other forms of diversity in More gender, minority, ethnic, and other forms of diversity in

employeesemployees Aging workforceAging workforce

Older employees who work longer and do not retireOlder employees who work longer and do not retire The increased costs of public and private benefits for older The increased costs of public and private benefits for older

workersworkers An increasing demand for products and services related to An increasing demand for products and services related to

aging.aging.


Current Trends and Issues (cont’d)Current Trends and Issues (cont’d)• Entrepreneurship DefinedEntrepreneurship Defined

The process of starting new businesses, generally in The process of starting new businesses, generally in response to opportunities. response to opportunities.

• Entrepreneurship processEntrepreneurship process Pursuit of opportunitiesPursuit of opportunities Innovation in products, services, or business methodsInnovation in products, services, or business methods Desire for continual growth of the organizationDesire for continual growth of the organization


Current Trends and Issues (cont’d)Current Trends and Issues (cont’d)• E-Business (Electronic Business)E-Business (Electronic Business)

The work preformed by an organization using The work preformed by an organization using electronic linkages to its key constituencieselectronic linkages to its key constituencies

E-commerce: the sales and marketing aspect of an e-E-commerce: the sales and marketing aspect of an e-businessbusiness

• Categories of E-BusinessesCategories of E-Businesses E-business enhanced organizationE-business enhanced organization E-business enabled organizationE-business enabled organization Total e-business organizationTotal e-business organization


Exhibit 2–9Exhibit 2–9 Categories of E-Business InvolvementCategories of E-Business Involvement


Current Trends and Issues (cont’d)Current Trends and Issues (cont’d)• Learning OrganizationLearning Organization

An organization that has developed the capacity to An organization that has developed the capacity to continuously learn, adapt, and change.continuously learn, adapt, and change.

• Knowledge ManagementKnowledge Management The cultivation of a learning culture where The cultivation of a learning culture where

organizational members systematically gather and organizational members systematically gather and share knowledge with others in order to achieve share knowledge with others in order to achieve better performance.better performance.


Exhibit 2–10Exhibit 2–10 Learning Organization versus Traditional OrganizationLearning Organization versus Traditional Organization


Current Trends and Issues (cont’d)Current Trends and Issues (cont’d)• Quality ManagementQuality Management

A philosophy of management driven by continual A philosophy of management driven by continual improvement in the quality of work processes and improvement in the quality of work processes and responding to customer needs and expectationsresponding to customer needs and expectations

Inspired by the total quality management (TQM) ideas Inspired by the total quality management (TQM) ideas of Deming and Juranof Deming and Juran

Quality is not directly related to costQuality is not directly related to cost Poor quality results in lower productivityPoor quality results in lower productivity


Exhibit 2–11Exhibit 2–11 What is Quality Management? What is Quality Management?

Intense focus on the customer.

Concern for continual improvement

Process-focused.

Improvement in the quality of everything.

Accurate measurement.

Empowerment of employees.


Terms to KnowTerms to Know• division of labor (or job division of labor (or job

specialization)specialization)• Industrial RevolutionIndustrial Revolution• scientific managementscientific management• therbligstherbligs• general administrative theorygeneral administrative theory• principles of managementprinciples of management• bureaucracybureaucracy• quantitative approachquantitative approach• organizational behavior (OB)organizational behavior (OB)• Hawthorne StudiesHawthorne Studies• systemsystem

• closed systemsclosed systems• open systemsopen systems• contingency approachcontingency approach• workforce diversityworkforce diversity• entrepreneurshipentrepreneurship• e-business (electronic e-business (electronic

business)business)• e-commerce (electronic e-commerce (electronic

commerce)commerce)• intranetintranet• learning organizationlearning organization• knowledge managementknowledge management• quality managementquality management

ninth edition

STEPHEN P. ROBBINS


MARY COULTER


Organizational Culture Organizational Culture and Environment:and Environment:The ConstraintsThe Constraints

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•The Manager: Omnipotent or SymbolicThe Manager: Omnipotent or Symbolic• Contrast the action of manager according to the Contrast the action of manager according to the

omnipotent and symbolic views.omnipotent and symbolic views.• Explain the parameters of managerial discretion.Explain the parameters of managerial discretion.

•The Organization’s CultureThe Organization’s Culture• Describe the seven dimensions of organizational culture.Describe the seven dimensions of organizational culture.• Discuss the impact of a strong culture on organizations Discuss the impact of a strong culture on organizations

and managers.and managers.• Explain the source of an organization’s culture.Explain the source of an organization’s culture.• Describe how culture is transmitted to employees.Describe how culture is transmitted to employees.• Describe how culture affects managers.Describe how culture affects managers.



•Current Organizational Cultural Issues Facing Current Organizational Cultural Issues Facing ManagersManagers

• Describe the characteristics of an ethical culture, an Describe the characteristics of an ethical culture, an innovative culture, and a customer-responsive culture.innovative culture, and a customer-responsive culture.

• Discuss why workplace spirituality seems to be an Discuss why workplace spirituality seems to be an important concern.important concern.

• Describe the characteristics of a spiritual organization.Describe the characteristics of a spiritual organization.



•The Environment (cont’d)The Environment (cont’d)• Describe the components of the specific and general Describe the components of the specific and general

environments.environments.

• Discuss the two dimensions of environmental Discuss the two dimensions of environmental uncertainty.uncertainty.

• Identify the most common organizational stakeholders.Identify the most common organizational stakeholders.

• Explain the four steps in managing external stakeholder Explain the four steps in managing external stakeholder relationships.relationships.


The Manager: Omnipotent or Symbolic?The Manager: Omnipotent or Symbolic?• Omnipotent View of ManagementOmnipotent View of Management

Managers are directly responsible for an Managers are directly responsible for an organization’s success or failure.organization’s success or failure.

The quality of the organization is determined by the The quality of the organization is determined by the quality of its managers.quality of its managers.

Managers are held accountable Managers are held accountable for an organization’s performance for an organization’s performance yet it is difficult to attribute yet it is difficult to attribute good or poor performance good or poor performance directly to their influence directly to their influence on the organization.on the organization.


The Manager: Omnipotent or Symbolic?The Manager: Omnipotent or Symbolic?• Symbolic View of ManagementSymbolic View of Management

Much of an organization’s success or failure is due to Much of an organization’s success or failure is due to external forces outside of managers’ control.external forces outside of managers’ control.

The ability of managers to affect outcomes is The ability of managers to affect outcomes is influenced and constrained by external factors.influenced and constrained by external factors. The economy, customers, governmental policies, The economy, customers, governmental policies,

competitors, industry conditions, competitors, industry conditions, technology, and the actions of technology, and the actions of previous managersprevious managers

Managers symbolize control and Managers symbolize control and influence through their action.influence through their action.


Exhibit 3–1Exhibit 3–1 Parameters of Managerial DiscretionParameters of Managerial Discretion


The Organization’s CultureThe Organization’s Culture• Organizational CultureOrganizational Culture

A system of shared meanings and common beliefs A system of shared meanings and common beliefs held by organizational members that determines, in a held by organizational members that determines, in a large degree, how they act towards each other.large degree, how they act towards each other.

““The way we do things around here.”The way we do things around here.” Values, symbols, rituals, myths, and practicesValues, symbols, rituals, myths, and practices

Implications:Implications: Culture is a perception.Culture is a perception. Culture is shared.Culture is shared. Culture is descriptive.Culture is descriptive.


Exhibit 3–2Exhibit 3–2 Dimensions of Organizational CultureDimensions of Organizational Culture


Exhibit 3–3Exhibit 3–3 Contrasting Organizational CulturesContrasting Organizational Cultures

DimensionDimension Organization AOrganization A Organization BOrganization BAttention to DetailAttention to Detail HighHigh LowLowOutcome OrientationOutcome Orientation LowLow HighHighPeople OrientationPeople Orientation LowLow HighHighTeam OrientationTeam Orientation LowLow HighHighAggressivenessAggressiveness LowLow HighHighStabilityStability HighHigh LowLowInnovation and Risk TakingInnovation and Risk Taking LowLow HighHigh


Strong versus Weak CulturesStrong versus Weak Cultures• Strong CulturesStrong Cultures

Are cultures in which key values are deeply held and Are cultures in which key values are deeply held and widely held.widely held.

Have a strong influence on organizational members.Have a strong influence on organizational members.

• Factors Influencing the Strength of CultureFactors Influencing the Strength of Culture Size of the organizationSize of the organization Age of the organizationAge of the organization Rate of employee turnoverRate of employee turnover Strength of the original cultureStrength of the original culture Clarity of cultural values and beliefsClarity of cultural values and beliefs


Benefits of a Strong CultureBenefits of a Strong Culture• Creates a stronger employee commitment to the Creates a stronger employee commitment to the

organization.organization.

• Aids in the recruitment and socialization of new Aids in the recruitment and socialization of new employees.employees.

• Fosters higher organizational Fosters higher organizational performance by instilling and performance by instilling and promoting employee initiative.promoting employee initiative.


Organizational CultureOrganizational Culture• Sources of Organizational CultureSources of Organizational Culture

The organization’s founderThe organization’s founder Vision and missionVision and mission

Past practices of the organizationPast practices of the organization The way things have been doneThe way things have been done

The behavior of top management The behavior of top management

• Continuation of the Organizational CultureContinuation of the Organizational Culture Recruitment of like-minded employees who “fit”Recruitment of like-minded employees who “fit” SocializationSocialization of new employees to help them adapt of new employees to help them adapt

to the cultureto the culture


Exhibit 3–4Exhibit 3–4 Strong versus Weak Organizational CulturesStrong versus Weak Organizational Cultures


How Employees Learn CultureHow Employees Learn Culture• StoriesStories

Narratives of significant events or actions of people that convey Narratives of significant events or actions of people that convey the spirit of the organizationthe spirit of the organization

• RitualsRituals Repetitive sequences of activities that express and reinforce the Repetitive sequences of activities that express and reinforce the

values of the organizationvalues of the organization

• Material SymbolsMaterial Symbols Physical assets distinguishing the organizationPhysical assets distinguishing the organization

• LanguageLanguage Acronyms and jargon of terms, phrases, and word meanings Acronyms and jargon of terms, phrases, and word meanings

specific to an organizationspecific to an organization


How Culture Affects ManagersHow Culture Affects Managers• Cultural Constraints on ManagersCultural Constraints on Managers

Whatever managerial actions the organization Whatever managerial actions the organization recognizes as proper or improper on its behalfrecognizes as proper or improper on its behalf

Whatever organizational activities the organization Whatever organizational activities the organization values and encouragesvalues and encourages

The overall strength or weakness of the The overall strength or weakness of the organizational cultureorganizational culture

Simple rule for getting ahead in an organization:Simple rule for getting ahead in an organization:Find out what the organization rewards and do those things.Find out what the organization rewards and do those things.


Exhibit 3–5Exhibit 3–5 How an Organization’s Culture Is Established How an Organization’s Culture Is Established and Maintainedand Maintained


Exhibit 3–6Exhibit 3–6 Managerial Decisions Affected by CultureManagerial Decisions Affected by Culture

• Planning• The degree of risk that plans should contain• Whether plans should be developed by individuals or teams• The degree of environmental scanning in which management

will engage• Organizing

• How much autonomy should be designed into employees’ jobs• Whether tasks should be done by individuals or in teams• The degree to which department managers interact with each

other


Exhibit 3–6Exhibit 3–6 Managerial Decisions Affected by Culture (cont’d)Managerial Decisions Affected by Culture (cont’d)

• Leading • The degree to which managers are concerned with increasing

employee job satisfaction• What leadership styles are appropriate• Whether all disagreements—even constructive ones—should

be eliminated • Controlling

• Whether to impose external controls or to allow employees to control their own actions

• What criteria should be emphasized in employee performance evaluations

• What repercussions will occur from exceeding one’s budget


Organization Culture IssuesOrganization Culture Issues• Creating an Ethical Creating an Ethical

CultureCulture High in risk toleranceHigh in risk tolerance Low to moderate Low to moderate

aggressivenessaggressiveness Focus on means as Focus on means as

well as outcomeswell as outcomes

• Creating an Innovative Creating an Innovative CultureCulture Challenge and Challenge and

involvementinvolvement FreedomFreedom Trust and opennessTrust and openness Idea timeIdea time Playfulness/humorPlayfulness/humor Conflict resolutionConflict resolution DebatesDebates Risk-takingRisk-taking


Exhibit 3–7Exhibit 3–7 Suggestions for Managers: Creating a More Ethical CultureSuggestions for Managers: Creating a More Ethical Culture

• Be a visible role model.

• Communicate ethical expectations.

• Provide ethics training.

• Visibly reward ethical acts and punish unethical ones.

• Provide protective mechanisms so employees can discuss ethical dilemmas and report unethical behavior without fear.


Organization Culture Issues (cont’d)Organization Culture Issues (cont’d)• Creating a Customer-Responsive CultureCreating a Customer-Responsive Culture

Hiring the right type of employees (ones with a strong Hiring the right type of employees (ones with a strong interest in serving customers)interest in serving customers)

Having few rigid rules, procedures, and regulationsHaving few rigid rules, procedures, and regulations Using widespread empowerment of employeesUsing widespread empowerment of employees Having good listening skills in relating to customers’ Having good listening skills in relating to customers’

messagesmessages Providing role clarity to employees to reduce Providing role clarity to employees to reduce

ambiguity and conflict and increase job satisfactionambiguity and conflict and increase job satisfaction Having conscientious, caring employees willing to Having conscientious, caring employees willing to

take initiativetake initiative


Exhibit 3–8Exhibit 3–8 Suggestions for Managers: Creating a More Customer-Suggestions for Managers: Creating a More Customer-Responsive CultureResponsive Culture

• Hire service-contact people with the personality and attitudes consistent with customer service—friendliness, enthusiasm, attentiveness, patience, concern about others, and listening skills.

• Train customer service people continuously by focusing on improving product knowledge, active listening, showing patience, and displaying emotions.

• Socialize new service-contact people to the organization’s goals and values.

• Design customer-service jobs so that employees have as much control as necessary to satisfy customers.

• Empower service-contact employees with the discretion to make day-to-day decisions on job-related activities.

• As the leader, convey a customer-focused vision and demonstrate through decisions and actions the commitment to customers.


Spirituality and Organizational CultureSpirituality and Organizational Culture•Workplace SpiritualityWorkplace Spirituality

The recognition that people have an inner life that The recognition that people have an inner life that nourishes and is nourished by meaningful work that nourishes and is nourished by meaningful work that takes place in the context of community.takes place in the context of community.

•Characteristics of a Spiritual OrganizationCharacteristics of a Spiritual Organization Strong sense of purposeStrong sense of purpose Focus on individual developmentFocus on individual development Trust and opennessTrust and openness Employee empowermentEmployee empowerment Toleration of employees’ expressionToleration of employees’ expression


Benefits of SpiritualityBenefits of Spirituality• Improved employee productivityImproved employee productivity• Reduction of employee turnoverReduction of employee turnover• Stronger organizational performanceStronger organizational performance• Increased creativityIncreased creativity• Increased employee satisfactionIncreased employee satisfaction• Increased team performanceIncreased team performance• Increased organizational performanceIncreased organizational performance


Defining the External EnvironmentDefining the External Environment• External EnvironmentExternal Environment

Those factors and forces outside the organization that Those factors and forces outside the organization that affect the organization’s performance. affect the organization’s performance.

• Components of the External EnvironmentComponents of the External Environment Specific environment:Specific environment: external forces that have a external forces that have a

direct and immediate impact on the organization.direct and immediate impact on the organization. General environment:General environment: broad economic, socio- broad economic, socio-

cultural, political/legal, demographic, technological, cultural, political/legal, demographic, technological, and global conditions that and global conditions that maymay affect the organization. affect the organization.


Exhibit 3–9Exhibit 3–9 The External EnvironmentThe External Environment


Exhibit 3–10Exhibit 3–10 Selected U.S. Legislation Affecting BusinessSelected U.S. Legislation Affecting Business

• Occupational Safety and Health Act of 1970

• Consumer Product Safety Act of 1972

• Equal Employment Opportunity Act of 1972

• Worker Adjustment and Retraining Notification Act of 1988

• Americans with Disabilities Act of 1990

• Civil Rights Act of 1991

• Family and Medical Leave Act of 1993

• Child Safety Protection Act of 1994

• U.S. Economic Espionage Act of 1996

• Electronic Signatures in Global and National Commerce Act of 2000

• Sarbanes-Oxley Act of 2002

• Fair and Accurate Credit Transactions Act of 2003


How the Environment Affects ManagersHow the Environment Affects Managers• Environmental UncertaintyEnvironmental Uncertainty

The extent to which managers have knowledge of The extent to which managers have knowledge of and are able to predict change their organization’s and are able to predict change their organization’s external environment is affected by:external environment is affected by: Complexity of the environment:Complexity of the environment: the number of components the number of components

in an organization’s external environment.in an organization’s external environment.

Degree of change in environmental components:Degree of change in environmental components: how how dynamic or stable the external environment is.dynamic or stable the external environment is.


Exhibit 3–11Exhibit 3–11 Environmental Uncertainty MatrixEnvironmental Uncertainty Matrix


Stakeholder RelationshipsStakeholder Relationships• StakeholdersStakeholders

Any constituencies in the organization’s environment Any constituencies in the organization’s environment that are affected by the organization’s decisions and that are affected by the organization’s decisions and actionsactions

• Why Manage Stakeholder Relationships?Why Manage Stakeholder Relationships? It can lead to improved organizational performance.It can lead to improved organizational performance.

It’s the “right” thing to do given the interdependence It’s the “right” thing to do given the interdependence of the organization and its external stakeholders.of the organization and its external stakeholders.


Managing Stakeholder RelationshipsManaging Stakeholder Relationships1.1. Identify the organization’s external Identify the organization’s external

stakeholders.stakeholders.

2.2. Determine the particular interests and Determine the particular interests and concerns of the external stakeholders.concerns of the external stakeholders.

3.3. Decide how critical each external stakeholder Decide how critical each external stakeholder is to the organization.is to the organization.

4.4. Determine how to manage each individual Determine how to manage each individual external stakeholder relationship.external stakeholder relationship.


Exhibit 3–12Exhibit 3–12 Organizational StakeholdersOrganizational Stakeholders


Terms to KnowTerms to Know• omnipotent view of omnipotent view of

managementmanagement• symbolic view of symbolic view of

managementmanagement• organizational cultureorganizational culture• strong culturesstrong cultures• socializationsocialization

• workplace spiritualityworkplace spirituality• external environmentexternal environment• specific environmentspecific environment• general environmentgeneral environment• environmental uncertaintyenvironmental uncertainty• environmental complexityenvironmental complexity• stakeholdersstakeholders

ninth edition

STEPHEN P. ROBBINS


MARY COULTER


Managing in a Global Managing in a Global EnvironmentEnvironment

ChapterChapter

44



What’s Your Global Perspective?What’s Your Global Perspective?• Define parochialism.Define parochialism.• Contrast ethnocentric, polycentric, and geocentric Contrast ethnocentric, polycentric, and geocentric

attitudes towards global business.attitudes towards global business.• Explain why it’s important for managers to be sensitive to Explain why it’s important for managers to be sensitive to

global differencesglobal differences

Understanding the Global EnvironmentUnderstanding the Global Environment• Describe the current status of the European Union.Describe the current status of the European Union.• Discuss the North American Free Trade Agreement and Discuss the North American Free Trade Agreement and

other regional trade alliances in Latin America.other regional trade alliances in Latin America.• Tell about the Association of Southeast Asian Nations.Tell about the Association of Southeast Asian Nations.



Understanding the Global EnvironmentUnderstanding the Global Environment• Explain the interdependence that globalization involves.Explain the interdependence that globalization involves.• Discuss the role of the WTO.Discuss the role of the WTO.

Doing Business GloballyDoing Business Globally• Contrast multinational, multidomestic, global, Contrast multinational, multidomestic, global,

transnational, and born global organizations.transnational, and born global organizations.• Describe the different ways organizations can go Describe the different ways organizations can go

international.international.• Define global sourcing, exporting, importing, licensing, Define global sourcing, exporting, importing, licensing,

and franchising.and franchising.• Describe global strategic alliances, joint ventures, and Describe global strategic alliances, joint ventures, and

foreign subsidiaries.foreign subsidiaries.



Managing in a Global Environment (cont’d)Managing in a Global Environment (cont’d)• Explain how the global legal-political and economic Explain how the global legal-political and economic

environments affect managers.environments affect managers.• Discuss Hofstede’s five dimensions for assessing Discuss Hofstede’s five dimensions for assessing

cultures.cultures.• Explain the nine GLOBE dimensions for assessing Explain the nine GLOBE dimensions for assessing

cultures.cultures.• Discuss the challenges of doing business globally in Discuss the challenges of doing business globally in

today’s world.today’s world.


The Global MarketplaceThe Global Marketplace• Opportunities and ChallengesOpportunities and Challenges

Coping with the sudden appearance of new Coping with the sudden appearance of new competitorscompetitors

Acknowledging cultural, political, and economic Acknowledging cultural, political, and economic differencesdifferences

Dealing with increased uncertainty, fear, and anxietyDealing with increased uncertainty, fear, and anxiety Adapting to changes in the global environmentAdapting to changes in the global environment Avoiding parochialismAvoiding parochialism


What’s Your Global Perspective?What’s Your Global Perspective?• ParochialismParochialism

Is viewing the world solely through its own eyes and Is viewing the world solely through its own eyes and perspectives.perspectives.

Is not recognizing that others have different ways of Is not recognizing that others have different ways of living and working.living and working.

Is a significant obstacle for managers working in a Is a significant obstacle for managers working in a global business world.global business world.

Is falling into the trap of ignoring others’ values and Is falling into the trap of ignoring others’ values and customs and rigidly applying an attitude of “ours is customs and rigidly applying an attitude of “ours is better than theirs” to foreign cultures.better than theirs” to foreign cultures.


Exhibit 4–1Exhibit 4–1 Key Information About Three Global AttitudesKey Information About Three Global Attitudes


Adopting a Global PerspectiveAdopting a Global Perspective• Ethnocentric AttitudeEthnocentric Attitude

The parochialistic belief that the best work The parochialistic belief that the best work approaches and practices are those of the approaches and practices are those of the homehome country.country.

• Polycentric AttitudePolycentric Attitude The view that the managers in the The view that the managers in the hosthost country know country know

the best work approaches and practices for running the best work approaches and practices for running their business.their business.

• Geocentric AttitudeGeocentric Attitude A A world-orientedworld-oriented view that focuses on using the best view that focuses on using the best

approaches and people from around the globe.approaches and people from around the globe.


Regional Trading AgreementsRegional Trading Agreements• The European Union (EU)The European Union (EU)

A unified economic and trade entity A unified economic and trade entity Belgium, Denmark, France, Greece, Ireland, Italy, Belgium, Denmark, France, Greece, Ireland, Italy,

Luxembourg, the Netherlands, Portugal, Spain, the United Luxembourg, the Netherlands, Portugal, Spain, the United Kingdom, Germany, Austria, Finland, and SwedenKingdom, Germany, Austria, Finland, and Sweden

Economic and monetary union (Euro)Economic and monetary union (Euro)

• North American Free Trade Agreement (NAFTA)North American Free Trade Agreement (NAFTA) Eliminated barriers to free trade (tariffs, import Eliminated barriers to free trade (tariffs, import

licensing requirements, and customs user fees)licensing requirements, and customs user fees) United States, Canada, and MexicoUnited States, Canada, and Mexico


Exhibit 4–3Exhibit 4–3 European Union CountriesEuropean Union Countries


Regional Trading Agreements (cont’d)Regional Trading Agreements (cont’d)• U.S.-Central America Free Trade Agreement U.S.-Central America Free Trade Agreement

(CAFTA)(CAFTA)• Free Trade Area of the AmericasFree Trade Area of the Americas• Southern Cone Common Market (Mercosur)Southern Cone Common Market (Mercosur)• Association of Southeast Asian Nations Association of Southeast Asian Nations

(ASEAN)(ASEAN) Trading alliance of 10 Southeast Asian nationsTrading alliance of 10 Southeast Asian nations

• African UnionAfrican Union• South Asian Association for Regional South Asian Association for Regional

Cooperation (SARRC)Cooperation (SARRC)


Exhibit 4–4Exhibit 4–4 ASEAN MembersASEAN Members

Source: Based on J. McClenahen and T. Clark, “ASEAN at Work,” IW. May 19, 1997, p. 42.


The World Trade Organization (WTO)The World Trade Organization (WTO)• Evolved from the General Agreement on Tariffs Evolved from the General Agreement on Tariffs

and Trade (GATT) in 1995.and Trade (GATT) in 1995.

• Functions as the only global organization Functions as the only global organization dealing with the rules of trade among nations.dealing with the rules of trade among nations.

• Has 149 member nations and 32 observer Has 149 member nations and 32 observer governments.governments.

• Monitors and promotes world trade.Monitors and promotes world trade.


Different Types of International Different Types of International OrganizationsOrganizations• Multinational Corporation (MNC)Multinational Corporation (MNC)

Maintains operations in multiple countries.Maintains operations in multiple countries.

• Multidomestic CorporationMultidomestic Corporation Is an MNC that decentralizes management and other Is an MNC that decentralizes management and other

decisions to the local country.decisions to the local country.

• Global CompanyGlobal Company Is an MNC that centralizes its management and other Is an MNC that centralizes its management and other

decisions in the home country.decisions in the home country.


Different Types of International Different Types of International Organizations (cont’d)Organizations (cont’d)• Transnational Corporation (Borderless Transnational Corporation (Borderless

Organization)Organization) Is an MNC that has eliminated structural divisions that Is an MNC that has eliminated structural divisions that

impose artificial geographic barriers and is organized impose artificial geographic barriers and is organized along business lines that reflect a geocentric attitude.along business lines that reflect a geocentric attitude.

• Born Globals/International New Ventures (INVs)Born Globals/International New Ventures (INVs) Commit resources upfront (material, people, Commit resources upfront (material, people,

financing) to doing business in more than one financing) to doing business in more than one country.country.


Exhibit 4–5Exhibit 4–5 How Organizations Go GlobalHow Organizations Go Global


Other Forms of GlobalizationOther Forms of Globalization• Strategic AlliancesStrategic Alliances

Partnerships between and organization and a foreign Partnerships between and organization and a foreign company in which both share resources and company in which both share resources and knowledge in developing new products or building knowledge in developing new products or building new production facilities.new production facilities.

• Joint VentureJoint Venture A specific type of strategic alliance in which the A specific type of strategic alliance in which the

partners agree to form a separate, independent partners agree to form a separate, independent organization for some business purpose.organization for some business purpose.

• Foreign SubsidiaryForeign Subsidiary Directly investing in a foreign country by setting up a Directly investing in a foreign country by setting up a

separate and independent production facility or office. separate and independent production facility or office.


Managing in A Global EnvironmentManaging in A Global Environment• The Legal EnvironmentThe Legal Environment

Stability or instability of legal and political systemsStability or instability of legal and political systems Legal procedures are established and followedLegal procedures are established and followed Fair and honest elections held on a regular basisFair and honest elections held on a regular basis

Differences in the laws of various nationsDifferences in the laws of various nations Effects on business activitiesEffects on business activities Effects on delivery of products and servicesEffects on delivery of products and services


The Economic EnvironmentThe Economic Environment• Economic SystemsEconomic Systems

Market economyMarket economy An economy in which resources are primarily owned and An economy in which resources are primarily owned and

controlled by the private sector.controlled by the private sector. Command economyCommand economy

An economy in which all economic decisions are planned by An economy in which all economic decisions are planned by a central government.a central government.

• Monetary and Financial FactorsMonetary and Financial Factors Currency exchange ratesCurrency exchange rates Inflation ratesInflation rates Diverse tax policiesDiverse tax policies


The Cultural EnvironmentThe Cultural Environment• National CultureNational Culture

Is the values and attitudes shared by individuals from Is the values and attitudes shared by individuals from a specific country that shape their behavior and their a specific country that shape their behavior and their beliefs about what is important.beliefs about what is important.

May have more influence on an organization than the May have more influence on an organization than the organization culture.organization culture.


Exhibit 4–6Exhibit 4–6 What Are Americans LikeWhat Are Americans Like

Americans are very informal.Americans are direct.Americans are competitive.Americans are achievers.Americans are independent and individualistic.Americans are questioners.Americans dislike silence.Americans value punctuality.Americans value cleanliness.

Sources: Based on M. Ernest (ed.), Predeparture Orientation Handbook: For Foreign Students and Scholars Planning to Study in the United States (Washington, DC: U.S. Information Agency, Bureau of Cultural Affairs, 1984), pp. 103–05; A. Bennett, “American Culture Is Often a Puzzle for Foreign Managers in the U.S.,” Wall Street Journal, February 12, 1986, p. 29; “Don’t Think Our Way’s the Only Way,” The Pryor Report, February 1988, p. 9; and B.J. Wattenberg, “The Attitudes behind American Exceptionalism,” U.S. News & World Report, August 7, 1989, p. 25.


Hofstede’s Framework for Assessing CulturesHofstede’s Framework for Assessing Cultures

Individualismversus

Collectivism

PowerDistance

UncertaintyAvoidance

Achievement versus

Nurturing

Long-Termversus

Short-Term Orientation Culture


Exhibit 4–7Exhibit 4–7 Examples of Hofstede’s Cultural DimensionsExamples of Hofstede’s Cultural Dimensions

Source: Based on G. Hofstede, “Motivation, Leadership, and Organization: Do American Theories Apply Abroad?” Organizational Dynamics, Summer 1980, pp. 42–63.


Exhibit 4–8Exhibit 4–8 GLOBE HighlightsGLOBE Highlights

Source: M. Javidan and R. J. House, “Cultural Acumen for the Global Manager: Lessons from Project GLOBE,” Organizational Dynamics, Spring 2001, pp. 289–305. Copyright © 2001. Reprinted with permission from Elsevier.


Global Management in Today’s WorldGlobal Management in Today’s World• ChallengesChallenges

Openness associated with globalizationOpenness associated with globalization Significant cultural differences (e.g., Americanization)Significant cultural differences (e.g., Americanization) Adjusting leadership styles and management Adjusting leadership styles and management

approachesapproaches• RisksRisks

Loss of investments in unstable countriesLoss of investments in unstable countries Increased terrorismIncreased terrorism Economic interdependence Economic interdependence


Terms to KnowTerms to Know• parochialismparochialism• ethnocentric attitudeethnocentric attitude• polycentric attitudepolycentric attitude• geocentric attitudegeocentric attitude• European Union (EU)European Union (EU)• EuroEuro• North American Free Trade North American Free Trade

Agreement (NAFTA)Agreement (NAFTA)• Association of Southeast Asian Association of Southeast Asian

Nations (ASEAN)Nations (ASEAN)• World Trade Organization (WTO)World Trade Organization (WTO)• multinational corporations (MNCs)multinational corporations (MNCs)• multidomestic corporationmultidomestic corporation• global companyglobal company• transnational or borderless transnational or borderless

organizationorganization

• born globals born globals • global sourcingglobal sourcing• exportingexporting• importingimporting• licensinglicensing• franchisingfranchising• strategic alliancesstrategic alliances• joint venturejoint venture• foreign subsidiaryforeign subsidiary• market economymarket economy• command economycommand economy• national culturenational culture• GLOBEGLOBE• wikiswikis• blogsblogs

ninth edition

STEPHEN P. ROBBINS


MARY COULTER


Social Responsibility Social Responsibility and Managerial Ethicsand Managerial Ethics

ChapterChapter

55


L E A R N I N G O U T L I N E L E A R N I N G O U T L I N E Follow this Learning Outline as you read and study this chapterFollow this Learning Outline as you read and study this chapter..

What is Social Responsibility?What is Social Responsibility?• Contrast the classical and socioeconomic views of social Contrast the classical and socioeconomic views of social

responsibility.responsibility.

• Discuss the role that stakeholders play in the four stages Discuss the role that stakeholders play in the four stages of social responsibility.of social responsibility.

• Differentiate between social obligation, social Differentiate between social obligation, social responsiveness, and social responsibility.responsiveness, and social responsibility.



Social Responsibility and Economic PerformanceSocial Responsibility and Economic Performance• Explain what research studies have shown about the Explain what research studies have shown about the

relationship between an organization’s social involvement relationship between an organization’s social involvement and its economic performance.and its economic performance.

• Define social screening.Define social screening.

• Explain what conclusion can be reached regarding social Explain what conclusion can be reached regarding social responsibility and economic performance.responsibility and economic performance.



The Greening of ManagementThe Greening of Management• Describe how organizations can go green.Describe how organizations can go green.• Relate the approaches to being green to the concepts of Relate the approaches to being green to the concepts of

social obligation, social responsiveness, and social social obligation, social responsiveness, and social responsibility.responsibility.

Values-Based ManagementValues-Based Management• Discuss what purposes shared values serve.Discuss what purposes shared values serve.• Describe the relationship of values-based management to Describe the relationship of values-based management to

ethics.ethics.



Managerial EthicsManagerial Ethics• Discuss the factors that affect ethical and unethical Discuss the factors that affect ethical and unethical

behavior.behavior.• Describe the important roles managers play in Describe the important roles managers play in

encouraging ethical behavior.encouraging ethical behavior.



Social Responsibility and Ethics in Today’s WorldSocial Responsibility and Ethics in Today’s World• Explain why ethical leadership is important.Explain why ethical leadership is important.• Discuss how managers and organizations can protect Discuss how managers and organizations can protect

employees who raise ethical issues or concerns.employees who raise ethical issues or concerns.• Explain what role social entrepreneurs play.Explain what role social entrepreneurs play.• Describe social impact management.Describe social impact management.


What Is Social Responsibility?What Is Social Responsibility?• The Classical ViewThe Classical View

Management’s only social responsibility is to Management’s only social responsibility is to maximize profits (create a financial return) by maximize profits (create a financial return) by operating the business in the best interests of the operating the business in the best interests of the stockholders (owners of the corporation).stockholders (owners of the corporation).

Expending the firm’s resources on doing “social good” Expending the firm’s resources on doing “social good” unjustifiably increases costs that lower profits to the unjustifiably increases costs that lower profits to the owners and raises prices to consumers.owners and raises prices to consumers.


What Is Social Responsibility? (cont’d)What Is Social Responsibility? (cont’d)• The Socioeconomic ViewThe Socioeconomic View

Management’s social responsibility goes beyond Management’s social responsibility goes beyond making profits to include protecting and improving making profits to include protecting and improving society’s welfare.society’s welfare.

Corporations are not independent entities responsible Corporations are not independent entities responsible only to stockholders.only to stockholders.

Firms have a moral responsibility to larger society to Firms have a moral responsibility to larger society to become involved in social, legal, and political issues.become involved in social, legal, and political issues.

““To do the right thing”To do the right thing”


Exhibit 5–1Exhibit 5–1 To Whom is Management Responsible?To Whom is Management Responsible?


Exhibit 5–2Exhibit 5–2 Arguments For and Against Social ResponsibilityArguments For and Against Social Responsibility

• ForFor Public expectationsPublic expectations Long-run profitsLong-run profits Ethical obligationEthical obligation Public imagePublic image Better environmentBetter environment Discouragement of further Discouragement of further

governmental regulationgovernmental regulation Balance of responsibility Balance of responsibility

and powerand power Stockholder interestsStockholder interests Possession of resourcesPossession of resources Superiority of prevention Superiority of prevention

over cureover cure

• AgainstAgainst Violation of profit Violation of profit

maximizationmaximization Dilution of purposeDilution of purpose CostsCosts Too much powerToo much power Lack of skillsLack of skills Lack of accountabilityLack of accountability


From Obligation to Responsiveness to From Obligation to Responsiveness to ResponsibilityResponsibility• Social ObligationSocial Obligation

The obligation of a business to meet its economic and The obligation of a business to meet its economic and legal responsibilities and nothing more.legal responsibilities and nothing more.

• Social ResponsivenessSocial Responsiveness When a firm engages in social actions in response to When a firm engages in social actions in response to

some popular social need. some popular social need. • Social ResponsibilitySocial Responsibility

A business’s intention, beyond its legal and economic A business’s intention, beyond its legal and economic obligations, to do the right things and act in ways that obligations, to do the right things and act in ways that are good for society.are good for society.


Exhibit 5–3Exhibit 5–3 Social Responsibility versus Social ResponsivenessSocial Responsibility versus Social Responsiveness

Social Responsibility Social Responsiveness

Major consideration Ethical PragmaticFocus Ends MeansEmphasis Obligation ResponsesDecision framework Long term Medium and short term

Source: Adapted from S.L. Wartick and P.L. Cochran, “The Evolution of the Corporate Social Performance Model,” Academy of Management Review, October 1985, p. 766.


Does Social Responsibility Pay?Does Social Responsibility Pay?• Studies appear to show a positive relationship Studies appear to show a positive relationship

between social involvement and the economic between social involvement and the economic performance of firms.performance of firms. Difficulties in defining and measuring “social Difficulties in defining and measuring “social

responsibility” and “economic performance raise responsibility” and “economic performance raise issues of validity and causation in the studies.issues of validity and causation in the studies.

Mutual funds using social screening in investment Mutual funds using social screening in investment decisions slightly outperformed other mutual funds.decisions slightly outperformed other mutual funds.

• A general conclusion is that a firm’s social A general conclusion is that a firm’s social actions do not harm its long-term performance.actions do not harm its long-term performance.


Exhibit 5–4Exhibit 5–4 Social InvestingSocial Investing

Source: Social Investment Forum Foundation.


The Greening of ManagementThe Greening of Management• The recognition of the close link between an The recognition of the close link between an

organization’s decision and activities and its organization’s decision and activities and its impact on the natural environment.impact on the natural environment. Global environmental problems facing managers:Global environmental problems facing managers:

Air, water, and soil pollution from toxic wastesAir, water, and soil pollution from toxic wastes Global warming from greenhouse gas emissionsGlobal warming from greenhouse gas emissions Natural resource depletionNatural resource depletion


How Organizations Go GreenHow Organizations Go Green• Legal (or Light Green) ApproachLegal (or Light Green) Approach

Firms simply do what is legally required by obeying laws, rules, Firms simply do what is legally required by obeying laws, rules, and regulations willingly and without legal challenge.and regulations willingly and without legal challenge.

• Market ApproachMarket Approach Firms respond to the preferences of their customers for Firms respond to the preferences of their customers for

environmentally friendly products.environmentally friendly products.

• Stakeholder ApproachStakeholder Approach Firms work to meet the environmental demands of multiple Firms work to meet the environmental demands of multiple

stakeholdersstakeholders——employees, suppliers, and the community.employees, suppliers, and the community.

• Activist ApproachActivist Approach Firms look for ways to respect and preserve environment and be Firms look for ways to respect and preserve environment and be

actively socially responsible.actively socially responsible.


Exhibit 5–5Exhibit 5–5 Approaches to Being GreenApproaches to Being Green

Source: Based on R.E. Freeman. J. Pierce, and R. Dodd. Shades of Green: Business Ethics and the Environment (New York: Oxford University Press, 1995).


Evaluating the Greening of ManagementEvaluating the Greening of Management• Organizations become “greener” byOrganizations become “greener” by

Using the Sustainability Reporting Guidelines to Using the Sustainability Reporting Guidelines to document “green” actions.document “green” actions.

Adopting ISO 14001 standards for environmental Adopting ISO 14001 standards for environmental managementmanagement

Being named as one of the 100 Most Sustainable Being named as one of the 100 Most Sustainable Corporations in the World.Corporations in the World.


Values-Based ManagementValues-Based Management• Values-Based ManagementValues-Based Management

An approach to managing in which managers An approach to managing in which managers establish and uphold an organization’s shared values.establish and uphold an organization’s shared values.

• The Purposes of Shared ValuesThe Purposes of Shared Values Guiding managerial decisionsGuiding managerial decisions Shaping employee behaviorShaping employee behavior Influencing the direction of marketing effortsInfluencing the direction of marketing efforts Building team spiritBuilding team spirit

• The Bottom Line on Shared Corporate ValuesThe Bottom Line on Shared Corporate Values An organization’s values are reflected in the decisions An organization’s values are reflected in the decisions

and actions of its employees.and actions of its employees.


Exhibit 5–6Exhibit 5–6 Purposes of Shared ValuesPurposes of Shared Values


Exhibit 5–7Exhibit 5–7 Survey of Stated Survey of Stated Values of Values of OrganizationsOrganizations

Percentage ofCore Value RespondentsCustomer satisfaction 77% Ethics/integrity 76% Accountability 61% Respect for others 59% Open communication 51% Profitability 49% Teamwork 47% Innovation/change 47% Continuous learning 43% Positive work environment 42% Diversity 41% Community service 38% Trust 37% Social responsibility 33% Security/safety 33% Empowerment 32% Employee job satisfaction 31% Have fun 24%

Source: “AMA Corporate Values Survey,” (www.amanet.org), October 30, 2002.


Managerial EthicsManagerial Ethics

• Ethics DefinedEthics Defined Principles, values, and beliefs that define what is right Principles, values, and beliefs that define what is right

and wrong behavior.and wrong behavior.


Exhibit 5–8Exhibit 5–8 Factors That Affect Ethical and Unethical BehaviorFactors That Affect Ethical and Unethical Behavior


Factors That Affect Employee EthicsFactors That Affect Employee Ethics• Moral DevelopmentMoral Development

A measure of independence from outside influencesA measure of independence from outside influences Levels of Individual Moral DevelopmentLevels of Individual Moral Development

– Preconventional levelPreconventional level– Conventional levelConventional level– Principled levelPrincipled level

Stage of moral development interacts with:Stage of moral development interacts with: Individual characteristicsIndividual characteristics The organization’s structural designThe organization’s structural design The organization’s cultureThe organization’s culture The intensity of the ethical issueThe intensity of the ethical issue


Exhibit 5–9Exhibit 5–9 Stages of Moral DevelopmentStages of Moral Development

Source: Based on L. Kohlberg, “Moral Stages and Moralization: The Cognitive-Development Approach,” in T. Lickona (ed.). Moral Development and Behavior: Theory, Research, and Social Issues (New York: Holt, Rinehart & Winston, 1976), pp. 34–35.


Factors That Affect Employee Ethics Factors That Affect Employee Ethics (cont’d)(cont’d)

• Moral DevelopmentMoral Development Research Conclusions:Research Conclusions:

People proceed through the stages of moral development People proceed through the stages of moral development sequentially.sequentially.

There is no guarantee of continued moral development.There is no guarantee of continued moral development. Most adults are in Stage 4 (“good corporate citizen”).Most adults are in Stage 4 (“good corporate citizen”).


Individual Characteristics Affecting Individual Characteristics Affecting Ethical BehaviorsEthical Behaviors

• ValuesValues Basic convictions about what is right or wrong on a Basic convictions about what is right or wrong on a

broad range of issuesbroad range of issues


Individual CharacteristicsIndividual Characteristics• Personality VariablesPersonality Variables

Ego strengthEgo strength A personality measure of the strength of a person’s A personality measure of the strength of a person’s

convictionsconvictions

Locus of ControlLocus of Control A personality attribute that measures the degree to which A personality attribute that measures the degree to which

people believe they control their own life.people believe they control their own life. Internal locus:Internal locus: the belief that you control your destiny. the belief that you control your destiny. External locus:External locus: the belief that what happens to you is due to the belief that what happens to you is due to

luck or chance.luck or chance.


Other VariablesOther Variables• Structural VariablesStructural Variables

Organizational characteristics and mechanisms that Organizational characteristics and mechanisms that guide and influence individual ethics:guide and influence individual ethics: Performance appraisal systemsPerformance appraisal systems Reward allocation systemsReward allocation systems Behaviors (ethical) of managersBehaviors (ethical) of managers

• An Organization’s CultureAn Organization’s Culture• Intensity of the Ethical IssueIntensity of the Ethical Issue


Exhibit 5–10Exhibit 5–10 Determinants of Issue IntensityDeterminants of Issue Intensity


Ethics in an International ContextEthics in an International Context• Ethical standards are not universal.Ethical standards are not universal.

Social and cultural differences determine acceptable Social and cultural differences determine acceptable behaviors.behaviors.

• Foreign Corrupt Practices ActForeign Corrupt Practices Act Makes it illegal to corrupt a foreign official yet “token” Makes it illegal to corrupt a foreign official yet “token”

payments to officials are permissible when doing so is payments to officials are permissible when doing so is an accepted practice in that country.an accepted practice in that country.

• The Global CompactThe Global Compact


Exhibit 5–11Exhibit 5–11 The Global CompactThe Global Compact

Human Rights Principle 1: Support and respect the protection of international human rights within their

sphere of influence.Principle 2: Make sure business corporations are not complicit in human rights abuses.

Labor Standards Principle 3: Freedom of association and the effective recognition of the right to collective

bargaining. Principle 4: The elimination of all forms of forced and compulsory labor. Principle 5: The effective abolition of child labor. Principle 6: The elimination of discrimination in respect of employment and occupation.

Environment Principle 7: Support a precautionary approach to environmental challenges. Principle 8: Undertake initiatives to promote greater environmental responsibility. Principle 9: Encourage the development and diffusion of environmentally friendly

technologies.

Source: Courtesy of Global Compact.


How Managers Can Improve Ethical How Managers Can Improve Ethical Behavior in An OrganizationBehavior in An Organization1.1. Hire individuals with high ethical standards.Hire individuals with high ethical standards.2.2. Establish codes of ethics and decision rules.Establish codes of ethics and decision rules.3.3. Lead by example.Lead by example.4.4. Set realistic job goals and include ethics in Set realistic job goals and include ethics in

performance appraisals.performance appraisals.5.5. Provide ethics training.Provide ethics training.6.6. Conduct independent social audits.Conduct independent social audits.7.7. Provide support for individuals facing ethical Provide support for individuals facing ethical

dilemmas.dilemmas.


The Value of Ethics TrainingThe Value of Ethics Training• Can make a difference in ethical behaviors.Can make a difference in ethical behaviors.

• Increases employee awareness of ethical issues Increases employee awareness of ethical issues in business decisions.in business decisions.

• Clarifies and reinforces the organization’s Clarifies and reinforces the organization’s standards of conduct.standards of conduct.

• Helps employees become more confident that Helps employees become more confident that they will have the organization’s support when they will have the organization’s support when taking unpopular but ethically correct stances.taking unpopular but ethically correct stances.


Exhibit 5–12Exhibit 5–12 Clusters of Variables Found in 83 Corporate Clusters of Variables Found in 83 Corporate Codes of Business EthicsCodes of Business Ethics

Cluster 1. Be a Dependable Organizational Citizen1. Comply with safety, health, and security regulations.2. Demonstrate courtesy, respect, honesty, and fairness.3. Illegal drugs and alcohol at work are prohibited.4. Manage personal finances well.5. Exhibit good attendance and punctuality.6. Follow directives of supervisors.7. Do not use abusive language.8. Dress in business attire.9. Firearms at work are prohibited.

Cluster 2. Do Not Do Anything Unlawful or Improper That Will Harm the Organization1. Conduct business in compliance with all laws.2. Payments for unlawful purposes are prohibited.3. Bribes are prohibited.4. Avoid outside activities that impair duties.5. Maintain confidentiality of records.6. Comply with all antitrust and trade regulations.7. Comply with all accounting rules and controls.8. Do not use company property for personal benefit.9. Employees are personally accountable for company funds.10. Do not propagate false or misleading information.11. Make decisions without regard for personal gain.

Cluster 3. Be Good to Customers1. Convey true claims in product advertisements.2. Perform assigned duties to the best of your ability.3. Provide products and services of the highest quality.

Source: F. R. David, “An Empirical Study of Codes of Business Ethics: A Strategic Perspective,” paper presented at the 48th Annual Academy of Management Conference, Anaheim, California, August 1988.


Exhibit 5–13Exhibit 5–13 Twelve Questions for Examining the Ethics Twelve Questions for Examining the Ethics of a Business Decisionof a Business Decision

1. Have you defined the problem accurately?

2. How would you define the problem if you stood on the other side of the fence?

3. How did this situation occur in the first place?

4. To whom and to what do you give your loyalty as a person and as a member of the corporation?

5. What is your intention in making this decision?

6. How does this intention compare with the probable results?

7. Whom could your decision or action injure?

8. Can you discuss the problem with the affected parties before you make the decision?

9. Are you confident that your position will be as valid over a long period of time as it seems now?

10. Could you disclose without qualm your decision or action to your boss, your chief executive officer, the board of directors, your family, society as a whole?

11. What is the symbolic potential of your action if understood? If misunderstood?

12. Under what conditions would you allow exceptions to your stand?Source: Reprinted by permission of Harvard Business Review. An exhibit from “Ethics Without the Sermon,” by L. L. Nash. November–December 1981, p. 81. Copyright © 1981 by the President and Fellows of Harvard College. All rights reserved.


Effective Use of a Code of EthicsEffective Use of a Code of Ethics• Develop a code of ethics as a guide in handling Develop a code of ethics as a guide in handling

ethical dilemmas in decision making.ethical dilemmas in decision making.

• Communicate the code regularly to all Communicate the code regularly to all employees.employees.

• Have all levels of management continually Have all levels of management continually reaffirm the importance of the ethics code and reaffirm the importance of the ethics code and the organization’s commitment to the code.the organization’s commitment to the code.

• Publicly reprimand and consistently discipline Publicly reprimand and consistently discipline those who break the code.those who break the code.


Ethical LeadershipEthical Leadership• Managers must provide a Managers must provide a good role modelgood role model by: by:

Being ethical and honest at all times.Being ethical and honest at all times. Telling the truth; don’t hide or manipulate information.Telling the truth; don’t hide or manipulate information. Admitting failure and not trying to cover it up.Admitting failure and not trying to cover it up. Communicating shared ethical values to employees Communicating shared ethical values to employees

through symbols, stories, and slogans.through symbols, stories, and slogans. Rewarding employees who behave ethically and Rewarding employees who behave ethically and

punish those who do not.punish those who do not. Protecting employees (Protecting employees (whistleblowerswhistleblowers) who bring to ) who bring to

light unethical behaviors or raise ethical issues.light unethical behaviors or raise ethical issues.


Managing Ethical Lapses and Social Managing Ethical Lapses and Social IrresponsibilityIrresponsibility

• Provide ethical leadershipProvide ethical leadership• Protect employees who raise ethical issues Protect employees who raise ethical issues

(whistle-blowers)(whistle-blowers)


Awareness of Social IssuesAwareness of Social Issues• Social EntrepreneursSocial Entrepreneurs

Are individuals or organizations who seek out Are individuals or organizations who seek out opportunities to improve society by using practical, opportunities to improve society by using practical, innovative, and sustainable approaches.innovative, and sustainable approaches.

Want to make the world a better place and have a Want to make the world a better place and have a driving passion to make that happen. driving passion to make that happen.


Awareness of Social Issues (cont’d)Awareness of Social Issues (cont’d)• Social Impact ManagementSocial Impact Management

Is the field of inquiry at the intersection of business Is the field of inquiry at the intersection of business practice and wider societal concerns that reflects and practice and wider societal concerns that reflects and respects the complex interdependency of those two respects the complex interdependency of those two realities.realities.

Seeks to answer the question of how to go about Seeks to answer the question of how to go about increasing managers’ awareness within their increasing managers’ awareness within their decision-making processes of how society is decision-making processes of how society is impacted by the conduct and activities of their firms.impacted by the conduct and activities of their firms.


Terms to KnowTerms to Know• classical viewclassical view• socioeconomic viewsocioeconomic view• social obligationsocial obligation• social responsivenesssocial responsiveness• social responsibilitysocial responsibility• social screeningsocial screening• greening of managementgreening of management• values-based values-based


• ethicsethics• valuesvalues• ego strengthego strength• locus of controllocus of control• code of ethicscode of ethics• whistle-blowerwhistle-blower• social entrepreneursocial entrepreneur• social impact social impact


ninth edition

STEPHEN P. ROBBINS


MARY COULTER


Decision-Making: Decision-Making: The Essence of The Essence of the Manager’s Jobthe Manager’s Job

ChapterChapter

66



The Decision-Making ProcessThe Decision-Making Process• Define decision and decision-making process.Define decision and decision-making process.

• Describe the eight steps in the decision-making process.Describe the eight steps in the decision-making process.

The Manager as Decision MakerThe Manager as Decision Maker• Discuss the assumptions of rational decision making.Discuss the assumptions of rational decision making.

• Describe the concepts of bounded rationality, satisficing, Describe the concepts of bounded rationality, satisficing, and escalation of commitment.and escalation of commitment.

• Explain intuitive decision making.Explain intuitive decision making.

• Contrast programmed and nonprogrammed decisions.Contrast programmed and nonprogrammed decisions.



The Manager as Decision Maker (cont’d)The Manager as Decision Maker (cont’d)• Contrast the three decision-making conditions.Contrast the three decision-making conditions.

• Explain maximax, maximin, and minimax decision choice Explain maximax, maximin, and minimax decision choice approaches.approaches.

• Describe the four decision making styles.Describe the four decision making styles.

• Discuss the twelve decision-making biases managers Discuss the twelve decision-making biases managers may exhibit.may exhibit.

• Describe how manager can deal with the negative effects Describe how manager can deal with the negative effects of decision errors and biases.of decision errors and biases.

• Explain the managerial decision-making model.Explain the managerial decision-making model.



Decision Making for Today’s WorldDecision Making for Today’s World• Explain how managers can make effective decisions in Explain how managers can make effective decisions in

today’s world.today’s world.

• List six characteristics of an effective decision-making List six characteristics of an effective decision-making process.process.

• Describe the five habits of highly reliable organizations.Describe the five habits of highly reliable organizations.


Decision MakingDecision Making• DecisionDecision

Making a choice from two or more alternatives.Making a choice from two or more alternatives.

• The Decision-Making ProcessThe Decision-Making Process Identifying a problem and decision criteria and Identifying a problem and decision criteria and

allocating weights to the criteria.allocating weights to the criteria. Developing, analyzing, and selecting an alternative Developing, analyzing, and selecting an alternative

that can resolve the problem.that can resolve the problem. Implementing the selected alternative.Implementing the selected alternative. Evaluating the decision’s effectiveness.Evaluating the decision’s effectiveness.


Exhibit 6–1Exhibit 6–1The Decision-Making ProcessThe Decision-Making Process


Step 1: Identifying the ProblemStep 1: Identifying the Problem• ProblemProblem

A discrepancy between an existing and desired state A discrepancy between an existing and desired state of affairs.of affairs.

• Characteristics of ProblemsCharacteristics of Problems A problem becomes a problem when a manager A problem becomes a problem when a manager

becomes aware of it.becomes aware of it. There is pressure to solve the problem.There is pressure to solve the problem. The manager must have the authority, information, or The manager must have the authority, information, or

resources needed to solve the problem.resources needed to solve the problem.


Step 2: Identifying Decision CriteriaStep 2: Identifying Decision Criteria

• Decision criteria are factors that are important Decision criteria are factors that are important (relevant) to resolving the problem.(relevant) to resolving the problem. Costs that will be incurred (investments required)Costs that will be incurred (investments required) Risks likely to be encountered (chance of failure)Risks likely to be encountered (chance of failure) Outcomes that are desired (growth of the firm)Outcomes that are desired (growth of the firm)

Step 3: Allocating Weights to the CriteriaStep 3: Allocating Weights to the Criteria• Decision criteria are not of equal importance:Decision criteria are not of equal importance:

Assigning a weight to each item places the items in Assigning a weight to each item places the items in the correct priority order of their importance in the the correct priority order of their importance in the decision making process.decision making process.


Exhibit 6–2Exhibit 6–2 Criteria and Weights for Computer Replacement DecisionCriteria and Weights for Computer Replacement Decision

Criterion WeightMemory and Storage 10

Battery life 8

Carrying Weight 6

Warranty 4

Display Quality 3


Step 4: Developing AlternativesStep 4: Developing Alternatives• Identifying viable alternativesIdentifying viable alternatives

Alternatives are listed (without evaluation) that can Alternatives are listed (without evaluation) that can resolve the problem.resolve the problem.

Step 5: Analyzing AlternativesStep 5: Analyzing Alternatives• Appraising each alternative’s strengths and Appraising each alternative’s strengths and

weaknessesweaknesses An alternative’s appraisal is based on its ability to An alternative’s appraisal is based on its ability to

resolve the issues identified in steps 2 and 3.resolve the issues identified in steps 2 and 3.


Exhibit 6–3Exhibit 6–3 Assessed Values of Laptop Computers Assessed Values of Laptop Computers Using Decision CriteriaUsing Decision Criteria


Step 6: Selecting an AlternativeStep 6: Selecting an Alternative• Choosing the best alternativeChoosing the best alternative

The alternative with the highest total weight is The alternative with the highest total weight is chosen.chosen.

Step 7: Implementing the AlternativeStep 7: Implementing the Alternative

• Putting the chosen alternative into action.Putting the chosen alternative into action. Conveying the decision to and gaining commitment Conveying the decision to and gaining commitment

from those who will carry out the decision.from those who will carry out the decision.


Exhibit 6–4Exhibit 6–4 Evaluation of Laptop Alternatives Evaluation of Laptop Alternatives Against Weighted CriteriaAgainst Weighted Criteria


Step 8: Evaluating the Decision’s Step 8: Evaluating the Decision’s EffectivenessEffectiveness• The soundness of the decision is judged by its The soundness of the decision is judged by its

outcomes.outcomes. How effectively was the problem resolved by How effectively was the problem resolved by

outcomes resulting from the chosen alternatives?outcomes resulting from the chosen alternatives? If the problem was not resolved, what went wrong?If the problem was not resolved, what went wrong?


Exhibit 6–5Exhibit 6–5 Decisions in the Management FunctionsDecisions in the Management Functions


Making DecisionsMaking Decisions• RationalityRationality

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

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

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

organization’s interests rather than in their personal interests.organization’s interests rather than in their personal interests.


Exhibit 6–6Exhibit 6–6 Assumptions of RationalityAssumptions of Rationality


Making Decisions (cont’d)Making Decisions (cont’d)• Bounded RationalityBounded Rationality

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

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

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

Influence on decision makingInfluence on decision making Escalation of commitment: an increased commitment to a Escalation of commitment: an increased commitment to a

previous decision despite evidence that it may have been previous decision despite evidence that it may have been wrong. wrong.


The Role of IntuitionThe Role of Intuition

• Intuitive decision makingIntuitive decision making Making decisions on the basis of experience, feelings, Making decisions on the basis of experience, feelings,

and accumulated judgment. and accumulated judgment.


Exhibit 6–7Exhibit 6–7 What is Intuition?What is Intuition?

Source: Based on L. A. Burke and M. K. Miller, “Taking the Mystery Out of Intuitive Decision Making,” Academy of Management Executive, October 1999, pp. 91–99.


Types of Problems and DecisionsTypes of Problems and Decisions• Structured ProblemsStructured Problems

Involve goals that clear.Involve goals that clear.

Are familiar (have occurred before).Are familiar (have occurred before).

Are easily and completely definedAre easily and completely defined—infor—information about mation about the problem is available and complete.the problem is available and complete.

• Programmed DecisionProgrammed Decision A repetitive decision that can be handled by a routine A repetitive decision that can be handled by a routine

approach.approach.


Types of Programmed DecisionsTypes of Programmed Decisions• PolicyPolicy

A general guideline for making a decision about a A general guideline for making a decision about a structured problem.structured problem.

• ProcedureProcedure A series of interrelated steps that a manager can use A series of interrelated steps that a manager can use

to respond (applying a policy) to a structured problem.to respond (applying a policy) to a structured problem.

• RuleRule An explicit statement that limits what a manager or An explicit statement that limits what a manager or

employee can or cannot do.employee can or cannot do.


Policy, Procedure, and Rule ExamplesPolicy, Procedure, and Rule Examples• PolicyPolicy

Accept all customer-returned merchandise.Accept all customer-returned merchandise.

• ProcedureProcedure Follow all steps for completing merchandise return Follow all steps for completing merchandise return

documentation.documentation.

• RulesRules Managers must approve all refunds over $50.00.Managers must approve all refunds over $50.00.

No credit purchases are refunded for cash.No credit purchases are refunded for cash.


Problems and Decisions (cont’d)Problems and Decisions (cont’d)• Unstructured ProblemsUnstructured Problems

Problems that are new or unusual and for which Problems that are new or unusual and for which information is ambiguous or incomplete.information is ambiguous or incomplete.

Problems that will require custom-made solutions.Problems that will require custom-made solutions.

• Nonprogrammed DecisionsNonprogrammed Decisions Decisions that are unique and nonrecurring.Decisions that are unique and nonrecurring.

Decisions that generate unique responses.Decisions that generate unique responses.


Exhibit 6–8Exhibit 6–8 Programmed versus Nonprogrammed DecisionsProgrammed versus Nonprogrammed Decisions


Decision-Making ConditionsDecision-Making Conditions• CertaintyCertainty

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

• RiskRisk A situation in which the manager is able to estimate A situation in which the manager is able to estimate

the likelihood (probability) of outcomes that result the likelihood (probability) of outcomes that result from the choice of particular alternatives.from the choice of particular alternatives.


Exhibit 6–9Exhibit 6–9 Expected Value for Revenues from Expected Value for Revenues from the Addition of One Ski Liftthe Addition of One Ski Lift

ExpectedExpected × Probability = Value of Each

Event Revenues Alternative

Heavy snowfall $850,000 0.3 = $255,000

Normal snowfall 725,000 0.5 = 362,500

Light snowfall 350,000 0.2 = 70,000 $687,500


Decision-Making ConditionsDecision-Making Conditions• UncertaintyUncertainty

Limited information prevents estimation of outcome Limited information prevents estimation of outcome probabilities for alternatives associated with the probabilities for alternatives associated with the problem and may force managers to rely on intuition, problem and may force managers to rely on intuition, hunches, and “gut feelings”.hunches, and “gut feelings”. Maximax:Maximax: the optimistic manager’s choice to maximize the the optimistic manager’s choice to maximize the

maximum payoffmaximum payoff

Maximin:Maximin: the pessimistic manager’s choice to maximize the the pessimistic manager’s choice to maximize the minimum payoffminimum payoff

Minimax:Minimax: the manager’s choice to minimize maximum regret. the manager’s choice to minimize maximum regret.


Exhibit 6–10Exhibit 6–10 Payoff MatrixPayoff Matrix


Exhibit 6–11Exhibit 6–11 Regret MatrixRegret Matrix


Decision-Making StylesDecision-Making Styles• Dimensions of Decision-Making StylesDimensions of Decision-Making Styles

Ways of thinkingWays of thinking Rational, orderly, and consistentRational, orderly, and consistent

Intuitive, creative, and uniqueIntuitive, creative, and unique

Tolerance for ambiguityTolerance for ambiguity Low tolerance: require consistency and orderLow tolerance: require consistency and order

High tolerance: multiple thoughts simultaneouslyHigh tolerance: multiple thoughts simultaneously


Decision-Making Styles (cont’d)Decision-Making Styles (cont’d)• Types of Decision MakersTypes of Decision Makers

DirectiveDirective Use minimal information and consider few alternatives.Use minimal information and consider few alternatives.

AnalyticAnalytic Make careful decisions in unique situations.Make careful decisions in unique situations.

ConceptualConceptual Maintain a broad outlook and consider many alternatives in Maintain a broad outlook and consider many alternatives in

making decisions.making decisions. BehavioralBehavioral

Avoid conflict by working well with others and being receptive Avoid conflict by working well with others and being receptive to suggestions.to suggestions.


Exhibit 6–12Exhibit 6–12 Decision-Making MatrixDecision-Making Matrix


Exhibit 6–13Exhibit 6–13 Common Decision-Making Errors and BiasesCommon Decision-Making Errors and Biases


Decision-Making Biases and ErrorsDecision-Making Biases and Errors• HeuristicsHeuristics

Using “rules of thumb” to simplify decision making.Using “rules of thumb” to simplify decision making.

• Overconfidence BiasOverconfidence Bias Holding unrealistically positive views of one’s self and Holding unrealistically positive views of one’s self and

one’s performance.one’s performance.

• Immediate Gratification BiasImmediate Gratification Bias Choosing alternatives that offer immediate rewards Choosing alternatives that offer immediate rewards

and that to avoid immediate costs.and that to avoid immediate costs.


Decision-Making Biases and Errors Decision-Making Biases and Errors (cont’d)(cont’d)• Anchoring EffectAnchoring Effect

Fixating on initial information and ignoring subsequent Fixating on initial information and ignoring subsequent information.information.

• Selective Perception BiasSelective Perception Bias Selecting organizing and interpreting events based on Selecting organizing and interpreting events based on

the decision maker’s biased perceptions.the decision maker’s biased perceptions.

• Confirmation BiasConfirmation Bias Seeking out information that reaffirms past choices Seeking out information that reaffirms past choices

and discounting contradictory information.and discounting contradictory information.


Decision-Making Biases and Errors Decision-Making Biases and Errors (cont’d)(cont’d)• Framing BiasFraming Bias

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

• Availability BiasAvailability Bias Losing decision-making objectivity by focusing on the Losing decision-making objectivity by focusing on the

most recent events.most recent events.• Representation BiasRepresentation Bias

Drawing analogies and seeing identical situations Drawing analogies and seeing identical situations when none exist.when none exist.

• Randomness BiasRandomness Bias Creating unfounded meaning out of random events.Creating unfounded meaning out of random events.


Decision-Making Biases and Errors Decision-Making Biases and Errors (cont’d)(cont’d)• Sunk Costs ErrorsSunk Costs Errors

Forgetting that current actions cannot influence past Forgetting that current actions cannot influence past events and relate only to future consequences.events and relate only to future consequences.

• Self-Serving BiasSelf-Serving Bias Taking quick credit for successes and blaming Taking quick credit for successes and blaming

outside factors for failures.outside factors for failures.• Hindsight BiasHindsight Bias

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


Exhibit 6–14Exhibit 6–14 Overview of Managerial Decision MakingOverview of Managerial Decision Making


Decision Making for Today’s WorldDecision Making for Today’s World• Guidelines for making effective decisions:Guidelines for making effective decisions:

Understand cultural differences.Understand cultural differences. Know when it’s time to call it quits.Know when it’s time to call it quits. Use an effective decision-making process.Use an effective decision-making process.

• Habits of highly reliable organizations (HROs)Habits of highly reliable organizations (HROs) Are not tricked by their success.Are not tricked by their success. Defer to the experts on the front line.Defer to the experts on the front line. Let unexpected circumstances provide the solution.Let unexpected circumstances provide the solution. Embrace complexity.Embrace complexity. Anticipate, but also anticipate their limits.Anticipate, but also anticipate their limits.


Characteristics of an Effective Decision-Characteristics of an Effective Decision-Making ProcessMaking Process• It focuses on what is important.It focuses on what is important.

• It is logical and consistent.It is logical and consistent.

• It acknowledges both subjective and objective thinking It acknowledges both subjective and objective thinking and blends analytical with intuitive thinking.and blends analytical with intuitive thinking.

• It requires only as much information and analysis as is It requires only as much information and analysis as is necessary to resolve a particular dilemma.necessary to resolve a particular dilemma.

• It encourages and guides the gathering of relevant It encourages and guides the gathering of relevant information and informed opinion.information and informed opinion.

• It is straightforward, reliable, easy to use, and flexible.It is straightforward, reliable, easy to use, and flexible.


Terms to KnowTerms to Know• decisiondecision• decision-making processdecision-making process• problemproblem• decision criteriadecision criteria• rational decision makingrational decision making• bounded rationalitybounded rationality• satisficingsatisficing• escalation of commitmentescalation of commitment• intuitive decision makingintuitive decision making• structured problemsstructured problems• programmed decisionprogrammed decision• procedureprocedure• rulerule

• policypolicy• unstructured problemsunstructured problems• nonprogrammed decisionsnonprogrammed decisions• certaintycertainty• riskrisk• uncertaintyuncertainty• directive styledirective style• analytic styleanalytic style• conceptual styleconceptual style• behavioral stylebehavioral style• heuristicsheuristics• business performance business performance

management (BPM) softwaremanagement (BPM) software

ninth edition

STEPHEN P. ROBBINS


MARY COULTER


Foundations Foundations of Planningof Planning

ChapterChapter

77



What Is Planning?What Is Planning?• Define planning.Define planning.• Differentiate between formal and informal planning.Differentiate between formal and informal planning.• Describe the purposes of planning.Describe the purposes of planning.• Discuss the conclusions from studies of the relationship Discuss the conclusions from studies of the relationship

between planning and performance.between planning and performance.

How Do Managers Plan?How Do Managers Plan?• Define goals and plans.Define goals and plans.• Describe the types of goals organizations might have.Describe the types of goals organizations might have.• Explain why it’s important to know an organization’s Explain why it’s important to know an organization’s

stated and real goals.stated and real goals.• Describe each of the different types of plans.Describe each of the different types of plans.



Establishing Goals and Developing PlansEstablishing Goals and Developing Plans• Discuss how traditional goal setting works.Discuss how traditional goal setting works.

• Explain the concept of the meansExplain the concept of the means––end chain.end chain.

• Describe the management by objective (MBO) approach.Describe the management by objective (MBO) approach.

• Describe the characteristics of well-designed goals.Describe the characteristics of well-designed goals.

• Explain the steps in setting goals.Explain the steps in setting goals.

• Discuss the contingency factors that affect planning.Discuss the contingency factors that affect planning.

• Describe the approaches to planning.Describe the approaches to planning.



Contemporary Issues in PlanningContemporary Issues in Planning• Explain the criticisms of planning and whether they’re Explain the criticisms of planning and whether they’re

valid.valid.• Describe how managers can effectively plan in today’s Describe how managers can effectively plan in today’s

dynamic environment.dynamic environment.


What Is Planning?What Is Planning?• PlanningPlanning

A primary managerial activity that involves:A primary managerial activity that involves: Defining the organization’s goalsDefining the organization’s goals Establishing an overall strategy for achieving those goalsEstablishing an overall strategy for achieving those goals Developing plans for organizational work activities.Developing plans for organizational work activities.

Types of planningTypes of planning Informal:Informal: not written down, short-term focus; specific to an not written down, short-term focus; specific to an

organizational unit.organizational unit. Formal:Formal: written, specific, and long-term focus, involves written, specific, and long-term focus, involves

shared goals for the organization.shared goals for the organization.


Why Do Managers Plan?Why Do Managers Plan?• Purposes of PlanningPurposes of Planning

Provides directionProvides direction Reduces uncertaintyReduces uncertainty Minimizes waste and redundancyMinimizes waste and redundancy Sets the standards for controllingSets the standards for controlling


Planning and PerformancePlanning and Performance• The Relationship Between Planning And The Relationship Between Planning And

PerformancePerformance Formal planning is associated with:Formal planning is associated with:

Higher profits and returns on assets.Higher profits and returns on assets. Positive financial results.Positive financial results.

The quality of planning and implementation affects The quality of planning and implementation affects performance more than the extent of planning.performance more than the extent of planning.

The external environment can reduce the impact of The external environment can reduce the impact of planning on performance,planning on performance,

Formal planning must be used for several years Formal planning must be used for several years before planning begins to affect performance.before planning begins to affect performance.


How Do Managers Plan?How Do Managers Plan?• Elements of PlanningElements of Planning

Goals (also Objectives)Goals (also Objectives) Desired outcomes for individuals, groups, or entire Desired outcomes for individuals, groups, or entire

organizationsorganizations Provide direction and evaluation performance criteriaProvide direction and evaluation performance criteria

PlansPlans Documents that outline how goals are to be accomplishedDocuments that outline how goals are to be accomplished Describe how resources are to be allocated and establish Describe how resources are to be allocated and establish

activity schedulesactivity schedules


Types of GoalsTypes of Goals• Financial GoalsFinancial Goals

Are related to the expected internal financial Are related to the expected internal financial performance of the organization.performance of the organization.

• Strategic GoalsStrategic Goals Are related to the performance of the firm relative to Are related to the performance of the firm relative to

factors in its external environment (e.g., competitors).factors in its external environment (e.g., competitors).• Stated Goals versus Real GoalsStated Goals versus Real Goals

Broadly-worded official statements of the organization Broadly-worded official statements of the organization (intended for public consumption) that may be (intended for public consumption) that may be irrelevant to its real goals (what actually goes on in irrelevant to its real goals (what actually goes on in the organization).the organization).


Exhibit 7–1Exhibit 7–1 Stated Goals of Large Global CompaniesStated Goals of Large Global Companies

Execute strategic roadmap—“Plan to Win.”Grow the business profitably.Identify and develop diverse talent.Promote balanced, active lifestyles.(McDonald’s Corporation)

Continue to win market share globally.Focus on higher-value products.Reduce production costs.Lower purchasing costs.Integrate diversity.Gain ISO 14001 certification for all factories.(L’Oreal)

Respect the environment.Respect and support family unity and national traditions.Promote community welfare.Continue implementing quality systems.Continue to be a strong cash generator.(Grupo Bimbo)

Control inventory.Maintain industry’s lowest inventory shrinkage rate.Open 25–30 new locations in fiscal 2006.Live by the code of ethics every day.(Costco)

Expand selection of competitively priced products.Manage inventory carefully.Continue to improve store format every few years.Operate 2,000 stores by the end of the decade.Continue gaining market share.(Target)

Roll out newly-designed environmentally friendly cup in 2006.Open approximately 1,800 new stores globally in 2006.Attain net revenue growth of approximately 20 percent in 2006.Attain annual EPS growth of between 20 percent to 25 percent for the next 3 to 5 years.(Starbucks)

Source: Information from company’s Annual Reports, 2004–2005.


Exhibit 7–2Exhibit 7–2 Types of PlansTypes of Plans


Types of PlansTypes of Plans• Strategic PlansStrategic Plans

Apply to the entire organization.Apply to the entire organization. Establish the organization’s overall goals.Establish the organization’s overall goals. Seek to position the organization in terms of its Seek to position the organization in terms of its

environment.environment. Cover extended periods of time.Cover extended periods of time.

• Operational PlansOperational Plans Specify the details of how the overall goals are to be Specify the details of how the overall goals are to be

achieved.achieved. Cover short time period.Cover short time period.


Types of Plans (cont’d)Types of Plans (cont’d)• Long-Term PlansLong-Term Plans

Plans with time frames extending beyond three yearsPlans with time frames extending beyond three years• Short-Term PlansShort-Term Plans

Plans with time frames on one year or lessPlans with time frames on one year or less• Specific PlansSpecific Plans

Plans that are clearly defined and leave no room for Plans that are clearly defined and leave no room for interpretationinterpretation

• Directional PlansDirectional Plans Flexible plans that set out general guidelines, provide Flexible plans that set out general guidelines, provide

focus, yet allow discretion in implementation.focus, yet allow discretion in implementation.


Exhibit 7–3Exhibit 7–3 Specific Versus Directional PlansSpecific Versus Directional Plans


Types of Plans (cont’d)Types of Plans (cont’d)• Single-Use PlanSingle-Use Plan

A one-time plan specifically designed to meet the A one-time plan specifically designed to meet the need of a unique situation.need of a unique situation.

• Standing PlansStanding Plans Ongoing plans that provide guidance for activities Ongoing plans that provide guidance for activities

performed repeatedly.performed repeatedly.


Establishing Goals and Establishing Goals and Developing PlansDeveloping Plans• Traditional Goal SettingTraditional Goal Setting

Broad goals are set at the top of the organization.Broad goals are set at the top of the organization. Goals are then broken into subgoals for each Goals are then broken into subgoals for each

organizational level.organizational level. Assumes that top management knows best because Assumes that top management knows best because

they can see the “big picture.”they can see the “big picture.” Goals are intended to direct, guide, and constrain from Goals are intended to direct, guide, and constrain from

above.above. Goals lose clarity and focus as lower-level managers Goals lose clarity and focus as lower-level managers

attempt to interpret and define the goals for their areas attempt to interpret and define the goals for their areas of responsibility.of responsibility.


Exhibit 7–4Exhibit 7–4 The Downside of Traditional Goal SettingThe Downside of Traditional Goal Setting


Establishing Goals and Developing Establishing Goals and Developing Plans (cont’d)Plans (cont’d)• Maintaining the Hierarchy of GoalsMaintaining the Hierarchy of Goals

Means–Ends ChainMeans–Ends Chain The integrated network of goals that results from establishing The integrated network of goals that results from establishing

a clearly-defined hierarchy of organizational goals.a clearly-defined hierarchy of organizational goals. Achievement of lower-level goals is the means by which to Achievement of lower-level goals is the means by which to

reach higher-level goals (ends).reach higher-level goals (ends).


Establishing Goals and Developing Establishing Goals and Developing Plans (cont’d)Plans (cont’d)• Management By Objectives (MBO)Management By Objectives (MBO)

Specific performance goals are jointly determined by Specific performance goals are jointly determined by employees and managers.employees and managers.

Progress toward accomplishing goals is periodically Progress toward accomplishing goals is periodically reviewed.reviewed.

Rewards are allocated on the basis of progress Rewards are allocated on the basis of progress towards the goals.towards the goals.

Key elements of MBO:Key elements of MBO: Goal specificity, participative decision making, an explicit Goal specificity, participative decision making, an explicit

performance/evaluation period, feedbackperformance/evaluation period, feedback


Exhibit 7–5Exhibit 7–5 Steps in a Typical MBO ProgramSteps in a Typical MBO Program

1. The organization’s overall objectives and strategies are formulated.

2. Major objectives are allocated among divisional and departmental units.

3. Unit managers collaboratively set specific objectives for their units with their managers.

4. Specific objectives are collaboratively set with all department members.

5. Action plans, defining how objectives are to be achieved, are specified and agreed upon by managers and employees.

6. The action plans are implemented.7. Progress toward objectives is periodically reviewed, and

feedback is provided.8. Successful achievement of objectives is reinforced by

performance-based rewards.


Does MBO Work?Does MBO Work?• Reason for MBO SuccessReason for MBO Success

Top management commitment and involvementTop management commitment and involvement

• Potential Problems with MBO ProgramsPotential Problems with MBO Programs Not as effective in dynamic environments that require Not as effective in dynamic environments that require

constant resetting of goals.constant resetting of goals. Overemphasis on individual accomplishment may Overemphasis on individual accomplishment may

create problems with teamwork.create problems with teamwork. Allowing the MBO program to become an annual Allowing the MBO program to become an annual

paperwork shuffle.paperwork shuffle.


Exhibit 7–6Exhibit 7–6 Characteristics of Well-Designed GoalsCharacteristics of Well-Designed Goals

• Written in terms of Written in terms of outcomes, not actionsoutcomes, not actions Focuses on the ends, not Focuses on the ends, not

the means.the means.

• Measurable and Measurable and quantifiablequantifiable Specifically defines how the Specifically defines how the

outcome is to be measured outcome is to be measured and how much is expected.and how much is expected.

• Clear as to time frameClear as to time frame How long before measuring How long before measuring

accomplishment.accomplishment.

• Challenging yet attainableChallenging yet attainable Low goals do not motivate.Low goals do not motivate. High goals motivate if they High goals motivate if they

can be achieved.can be achieved.

• Written downWritten down Focuses, defines, and Focuses, defines, and

makes goals visible.makes goals visible.

• Communicated to all Communicated to all necessary organizational necessary organizational membersmembers Puts everybody “on the Puts everybody “on the

same page.”same page.”


Steps in Goal SettingSteps in Goal Setting1.1. Review the organization’s mission statement.Review the organization’s mission statement.

Do goals reflect the mission?Do goals reflect the mission?

2.2. Evaluate available resources.Evaluate available resources.Are resources sufficient to accomplish the mission?Are resources sufficient to accomplish the mission?

3.3. Determine goals individually or with others.Determine goals individually or with others.Are goals specific, measurable, and timely?Are goals specific, measurable, and timely?

4.4. Write down the goals and communicate them.Write down the goals and communicate them.Is everybody on the same page?Is everybody on the same page?

5.5. Review results and whether goals are being met.Review results and whether goals are being met.What changes are needed in mission, resources, or goals?What changes are needed in mission, resources, or goals?


Developing PlansDeveloping Plans• Contingency Factors in A Manager’s PlanningContingency Factors in A Manager’s Planning

Manager’s level in the organizationManager’s level in the organization Strategic plans at higher levelsStrategic plans at higher levels Operational plans at lower levelsOperational plans at lower levels

Degree of environmental uncertaintyDegree of environmental uncertainty Stable environment: specific plansStable environment: specific plans Dynamic environment: specific but flexible plansDynamic environment: specific but flexible plans

Length of future commitmentsLength of future commitments Commitment Concept:Commitment Concept: current plans affecting future current plans affecting future

commitments must be sufficiently long-term to meet those commitments must be sufficiently long-term to meet those commitments.commitments.


Exhibit 7–7Exhibit 7–7 Planning in the Hierarchy of OrganizationsPlanning in the Hierarchy of Organizations


Approaches to PlanningApproaches to Planning• Establishing a formal planning departmentEstablishing a formal planning department

A group of planning specialists who A group of planning specialists who helphelp managers managers write organizational plans.write organizational plans.

Planning is a function of management; it should never Planning is a function of management; it should never become the sole responsibility of planners.become the sole responsibility of planners.

• Involving organizational members in the processInvolving organizational members in the process Plans are developed by members of organizational Plans are developed by members of organizational

units at various levels and then coordinated with other units at various levels and then coordinated with other units across the organization.units across the organization.


Contemporary Issues in PlanningContemporary Issues in Planning• Criticisms of PlanningCriticisms of Planning

Planning may create rigidity.Planning may create rigidity.

Plans cannot be developed for dynamic Plans cannot be developed for dynamic environments.environments.

Formal plans cannot replace intuition and creativity.Formal plans cannot replace intuition and creativity.

Planning focuses managers’ attention on today’s Planning focuses managers’ attention on today’s competition not tomorrow’s survival.competition not tomorrow’s survival.

Formal planning reinforces today’s success, which Formal planning reinforces today’s success, which may lead to tomorrow’s failure.may lead to tomorrow’s failure.


Contemporary Issues in Planning Contemporary Issues in Planning (cont’d)(cont’d)• Effective Planning in Dynamic EnvironmentsEffective Planning in Dynamic Environments

Develop plans that are specific but flexible.Develop plans that are specific but flexible. Understand that planning is an ongoing process.Understand that planning is an ongoing process. Change plans when conditions warrant.Change plans when conditions warrant. Persistence in planning eventually pay off.Persistence in planning eventually pay off. Flatten the organizational hierarchy to foster the Flatten the organizational hierarchy to foster the

development of planning skills at all organizational development of planning skills at all organizational levels.levels.


Terms to KnowTerms to Know• planningplanning• goalsgoals• plansplans• stated goalsstated goals• real goalsreal goals• framingframing• strategic plansstrategic plans• operational plansoperational plans• long-term planslong-term plans• short-term plansshort-term plans• specific plansspecific plans

• directional plansdirectional plans• single-use plansingle-use plan• standing plansstanding plans• traditional goal settingtraditional goal setting• means-ends chainmeans-ends chain• management by management by

objectives (MBO)objectives (MBO)• missionmission• commitment conceptcommitment concept• formal planning formal planning

departmentdepartment

ninth edition

STEPHEN P. ROBBINS


MARY COULTER


Strategic Strategic ManagementManagement

ChapterChapter

88



The Importance of Strategic ManagementThe Importance of Strategic Management• Define strategic management, strategy, and business Define strategic management, strategy, and business

model.model.• Explain why strategic management is important.Explain why strategic management is important.

The Strategic Management ProcessThe Strategic Management Process• List the six steps in the strategic management process.List the six steps in the strategic management process.• Describe what managers do during external and internal Describe what managers do during external and internal

analyses.analyses.• Explain the role of resources, capabilities, and core Explain the role of resources, capabilities, and core

competencies.competencies.• Define strengths, weaknesses, opportunities, and threats.Define strengths, weaknesses, opportunities, and threats.



Types of Organizational StrategiesTypes of Organizational Strategies• Describe the three major types of corporate strategies.Describe the three major types of corporate strategies.

• Discuss the BCG matrix and how it’s used.Discuss the BCG matrix and how it’s used.

• Describe the role of competitive advantage in business-Describe the role of competitive advantage in business-level strategies.level strategies.

• Explain Porter’s five forces model.Explain Porter’s five forces model.

• Describe Porter’s three generic competitive strategies and Describe Porter’s three generic competitive strategies and the rule of three.the rule of three.



Strategic Management in Today’s EnvironmentStrategic Management in Today’s Environment• Explain why strategic flexibility is important.Explain why strategic flexibility is important.

• Describe strategies applying e-business techniques.Describe strategies applying e-business techniques.

• Explain what strategies organizations might use to Explain what strategies organizations might use to become more customer oriented and to be more become more customer oriented and to be more innovative.innovative.


Strategic ManagementStrategic Management• What managers do to develop the organization’s strategies.What managers do to develop the organization’s strategies.

StrategiesStrategies• The decisions and actions that determine the long-run performance The decisions and actions that determine the long-run performance

of an organization.of an organization.


Strategic Management (cont’d)Strategic Management (cont’d)• Business ModelBusiness Model

Is a strategic design for how a company intends to Is a strategic design for how a company intends to profit from its strategies, work processes, and work profit from its strategies, work processes, and work activities.activities.

Focuses on two things:Focuses on two things: Whether customers will value what the company is providing.Whether customers will value what the company is providing. Whether the company can make any money doing that.Whether the company can make any money doing that.


Why is Strategic Management ImportantWhy is Strategic Management Important

1.1. It results in higher organizational performance.It results in higher organizational performance.

2.2. It requires that managers examine and adapt It requires that managers examine and adapt to business environment changes.to business environment changes.

3.3. It coordinates diverse organizational units, It coordinates diverse organizational units, helping them focus on organizational goals.helping them focus on organizational goals.

4.4. It is very much involved in the managerial It is very much involved in the managerial decision-making process.decision-making process.


Exhibit 8–1Exhibit 8–1 The Strategic Management ProcessThe Strategic Management Process


Strategic Management ProcessStrategic Management Process• Step 1: Identifying the organization’s current Step 1: Identifying the organization’s current

mission, goals, and strategiesmission, goals, and strategies Mission:Mission: the firm’s reason for being the firm’s reason for being

The scope of its products and servicesThe scope of its products and services

Goals:Goals: the foundation for further planning the foundation for further planning Measurable performance targetsMeasurable performance targets

• Step 2: Doing an external analysisStep 2: Doing an external analysis The environmental scanning of specific and general The environmental scanning of specific and general

environmentsenvironments Focuses on identifying opportunities and threatsFocuses on identifying opportunities and threats


Exhibit 8–2Exhibit 8–2 Components of a Mission StatementComponents of a Mission Statement

Source: Based on F. David, Strategic Management, 11 ed. (Upper Saddle River, NJ: Prentice Hall, 2007), p.70.


Strategic Management Process (cont’d)Strategic Management Process (cont’d)• Step 3: Doing an internal analysisStep 3: Doing an internal analysis

Assessing organizational resources, capabilities, and activities:Assessing organizational resources, capabilities, and activities: Strengths create value for the customer and strengthen the Strengths create value for the customer and strengthen the

competitive position of the firm.competitive position of the firm. Weaknesses can place the firm at a competitive disadvantage.Weaknesses can place the firm at a competitive disadvantage.

Analyzing financial and physical assets is fairly easy, but Analyzing financial and physical assets is fairly easy, but assessing intangible assets (employee’s skills, culture, corporate assessing intangible assets (employee’s skills, culture, corporate reputation, and so forth) isn’t as easy.reputation, and so forth) isn’t as easy.

• Steps 2 and 3 combined are called a SWOT analysis. Steps 2 and 3 combined are called a SWOT analysis. (Strengths, Weaknesses, Opportunities, and Threats)(Strengths, Weaknesses, Opportunities, and Threats)


Exhibit 8–3Exhibit 8–3 Corporate Rankings (partial lists)Corporate Rankings (partial lists)

Sources: “America’s Most Admired Companies,” Fortune, February 22, 2006, p. 65; “The 100 Best Companies to Work For,” Fortune, January 11, 2006, p. 89; R. Alsop, “Ranking Corporate Reputations,” Wall Street Journal, December 6, 2005, p. B1; and “The 100 Top Brands,” BusinessWeek, August 1, 2005, p. 90.

Interbrand/BusinessWeek 100 Top Global Brands (2005)1. Coca-Cola2. Microsoft3. IBM4. General Electric5. Intel

Harris Interactive/Wall Street Journal National Corporate Reputation (2005)

1. Johnson & Johnson2. Coca-Cola3. Google4. United Parcel Service5. 3M Company

Hay Group/Fortune America’s Most Admired Companies (2006)

Great Place to Work Institute/Fortune100 Best Companies to Work For (2006)

1. General Electric2. FedEx3. Southwest Airlines4. Procter & Gamble5. Starbucks

1. Genentech2. Wegman’s Food Markets3. Valero Energy4. Griffin Hospital5. W. L. Gore & Associates


Strategic Management Process (cont’d)Strategic Management Process (cont’d)• Step 4: Formulating strategiesStep 4: Formulating strategies

Develop and evaluate strategic alternativesDevelop and evaluate strategic alternatives

Select appropriate strategies for all levels in the Select appropriate strategies for all levels in the organization that provide relative advantage over organization that provide relative advantage over competitorscompetitors

Match organizational strengths to environmental Match organizational strengths to environmental opportunitiesopportunities

Correct weaknesses and guard against threatsCorrect weaknesses and guard against threats


Strategic Management Process (cont’d)Strategic Management Process (cont’d)• Step 5: Implementing strategiesStep 5: Implementing strategies

Implementation:Implementation: effectively fitting organizational effectively fitting organizational structure and activities to the environment.structure and activities to the environment.

The environment dictates the chosen strategy; The environment dictates the chosen strategy; effective strategy implementation requires an effective strategy implementation requires an organizational structure matched to its requirements.organizational structure matched to its requirements.

• Step 6: Evaluating resultsStep 6: Evaluating results How effective have strategies been?How effective have strategies been?

What adjustments, if any, are necessary?What adjustments, if any, are necessary?


Types of Organizational StrategiesTypes of Organizational Strategies• Corporate StrategiesCorporate Strategies

Top management’s overall plan for the entire Top management’s overall plan for the entire organization and its strategic business unitsorganization and its strategic business units

• Types of Corporate StrategiesTypes of Corporate Strategies Growth: expansion into new products and marketsGrowth: expansion into new products and markets

Stability: maintenance of the status quoStability: maintenance of the status quo

Renewal: redirection of the firm into new marketsRenewal: redirection of the firm into new markets


Exhibit 8–4Exhibit 8–4 Levels of Organizational StrategyLevels of Organizational Strategy


Corporate StrategiesCorporate Strategies• Growth StrategyGrowth Strategy

Seeking to increase the organization’s business by Seeking to increase the organization’s business by expansion into new products and markets.expansion into new products and markets.

• Types of Growth StrategiesTypes of Growth Strategies ConcentrationConcentration

Vertical integrationVertical integration

Horizontal integrationHorizontal integration

DiversificationDiversification


Growth StrategiesGrowth Strategies• ConcentrationConcentration

Focusing on a primary line of business and increasing Focusing on a primary line of business and increasing the number of products offered or markets served.the number of products offered or markets served.

• Vertical IntegrationVertical Integration Backward vertical integration: attempting to gain Backward vertical integration: attempting to gain

control of inputs (become a self-supplier).control of inputs (become a self-supplier).

Forward vertical integration: attempting to gain control Forward vertical integration: attempting to gain control of output through control of the distribution channel or of output through control of the distribution channel or provide customer service activities (eliminating provide customer service activities (eliminating intermediaries).intermediaries).


Growth Strategies (cont’d)Growth Strategies (cont’d)• Horizontal IntegrationHorizontal Integration

Combining operations with another competitor in the Combining operations with another competitor in the same industry to increase competitive strengths and same industry to increase competitive strengths and lower competition among industry rivals.lower competition among industry rivals.

• Related DiversificationRelated Diversification Expanding by combining with firms in different, but Expanding by combining with firms in different, but

related industries that are “strategic fits.”related industries that are “strategic fits.”• Unrelated DiversificationUnrelated Diversification

Growing by combining with firms in unrelated Growing by combining with firms in unrelated industries where higher financial returns are possible.industries where higher financial returns are possible.


Growth Strategies (cont’d)Growth Strategies (cont’d)• Stability StrategyStability Strategy

A strategy that seeks to maintain the status quo to A strategy that seeks to maintain the status quo to deal with the uncertainty of a dynamic environment, deal with the uncertainty of a dynamic environment, when the industry is experiencing slow- or no-growth when the industry is experiencing slow- or no-growth conditions, or if the owners of the firm elect not to conditions, or if the owners of the firm elect not to grow for personal reasons.grow for personal reasons.


Growth Strategies (cont’d)Growth Strategies (cont’d)• Renewal StrategiesRenewal Strategies

Developing strategies to counter organization Developing strategies to counter organization weaknesses that are leading to performance declines.weaknesses that are leading to performance declines. Retrenchment:Retrenchment: focusing of eliminating non-critical focusing of eliminating non-critical

weaknesses and restoring strengths to overcome current weaknesses and restoring strengths to overcome current performance problems.performance problems.

Turnaround:Turnaround: addressing critical long-term performance addressing critical long-term performance problems through the use of strong cost elimination problems through the use of strong cost elimination measures and large-scale organizational restructuring measures and large-scale organizational restructuring solutions.solutions.


Corporate Portfolio AnalysisCorporate Portfolio Analysis• Managers manage portfolio (or collection) of businesses Managers manage portfolio (or collection) of businesses

using a corporate portfolio matrix such as the BCG using a corporate portfolio matrix such as the BCG Matrix.Matrix.

• BCG Matrix BCG Matrix Developed by the Boston Consulting GroupDeveloped by the Boston Consulting Group

Considers market share and industry growth rateConsiders market share and industry growth rate

Classifies firms as:Classifies firms as: Cash cows:Cash cows: low growth rate, high market share low growth rate, high market share Stars:Stars: high growth rate, high market share high growth rate, high market share Question marks:Question marks: high growth rate, low market share high growth rate, low market share Dogs:Dogs: low growth rate, low market share low growth rate, low market share


Exhibit 8–5Exhibit 8–5 The BCG MatrixThe BCG Matrix


Business or Competitive StrategyBusiness or Competitive Strategy• Business (or Competitive) StrategyBusiness (or Competitive) Strategy

A strategy focused on how an organization should A strategy focused on how an organization should compete in each of its SBUs (strategic business compete in each of its SBUs (strategic business units).units).


The Role of Competitive AdvantageThe Role of Competitive Advantage• Competitive AdvantageCompetitive Advantage

An organization’s distinctive competitive edge.An organization’s distinctive competitive edge.

• Quality as a Competitive AdvantageQuality as a Competitive Advantage Differentiates the firm from its competitors.Differentiates the firm from its competitors.

Can create a sustainable competitive advantage.Can create a sustainable competitive advantage.

Represents the company’s focus on quality Represents the company’s focus on quality management to achieve continuous improvement and management to achieve continuous improvement and meet customers’ demand for quality.meet customers’ demand for quality.


The Role of Competitive Advantage The Role of Competitive Advantage (cont’d)(cont’d)• Sustainable Competitive AdvantageSustainable Competitive Advantage

Continuing over time to effectively exploit resources Continuing over time to effectively exploit resources and develop core competencies that enable an and develop core competencies that enable an organization to keep its edge over its industry organization to keep its edge over its industry competitors.competitors.


Five Competitive ForcesFive Competitive Forces• Threat of New EntrantsThreat of New Entrants

The ease or difficulty with which new competitors can The ease or difficulty with which new competitors can enter an industry.enter an industry.

• Threat of SubstitutesThreat of Substitutes The extent to which switching costs and brand loyalty The extent to which switching costs and brand loyalty

affect the likelihood of customers adopting substitutes affect the likelihood of customers adopting substitutes products and services.products and services.

• Bargaining Power of BuyersBargaining Power of Buyers The degree to which buyers have the market strength The degree to which buyers have the market strength

to hold sway over and influence competitors in an to hold sway over and influence competitors in an industry. industry.


Five Competitive ForcesFive Competitive Forces• Bargaining Power of SuppliersBargaining Power of Suppliers

The relative number of buyers to suppliers and The relative number of buyers to suppliers and threats from substitutes and new entrants affect the threats from substitutes and new entrants affect the buyer-supplier relationship.buyer-supplier relationship.

• Current RivalryCurrent Rivalry Intensity among rivals increases when industry Intensity among rivals increases when industry

growth rates slow, demand falls, and product prices growth rates slow, demand falls, and product prices descend.descend.


Exhibit 8–6Exhibit 8–6 Forces in the Industry AnalysisForces in the Industry Analysis

Source: Based on M.E. Porter, Competitive Strategy: Techniques for Analyzing Industries and Competitors (New York: The Free Press, 1980).


Types of Competitive StrategiesTypes of Competitive Strategies• Cost Leadership StrategyCost Leadership Strategy

Seeking to attain the lowest total overall costs relative Seeking to attain the lowest total overall costs relative to other industry competitors.to other industry competitors.

• Differentiation StrategyDifferentiation Strategy Attempting to create a unique and distinctive product Attempting to create a unique and distinctive product

or service for which customers will pay a premium.or service for which customers will pay a premium.

• Focus StrategyFocus Strategy Using a cost or differentiation advantage to exploit a Using a cost or differentiation advantage to exploit a

particular market segment rather a larger market.particular market segment rather a larger market.


The Rule of ThreeThe Rule of Three• Similar to Porter’s generic competitive strategiesSimilar to Porter’s generic competitive strategies

The competitive forces in an industry will create a The competitive forces in an industry will create a situation where three companies (full-line generalists) situation where three companies (full-line generalists) will dominate a market.will dominate a market.

Some firms in the market become “super niche Some firms in the market become “super niche players” and while others end up as “ditch dwellers.”players” and while others end up as “ditch dwellers.”

Firms unable to develop either a cost or differentiation Firms unable to develop either a cost or differentiation advantage become “stuck in the middle” and lack advantage become “stuck in the middle” and lack prospects for long-term success.prospects for long-term success.

A few firms successfully pursue both differentiation A few firms successfully pursue both differentiation and cost advantages.and cost advantages.


Strategic Management TodayStrategic Management Today• Strategic FlexibilityStrategic Flexibility• New Directions in Organizational StrategiesNew Directions in Organizational Strategies

e-businesse-business customer servicecustomer service innovationinnovation


Exhibit 8–7Exhibit 8–7 Creating Strategic FlexibilityCreating Strategic Flexibility

• Know what’s happening with strategies currently being used by monitoring and measuring results.

• Encourage employees to be open about disclosing and sharing negative information.

• Get new ideas and perspectives from outside the organization.

• Have multiple alternatives when making strategic decisions.

• Learn from mistakes.

Source: Based on K. Shimizu and M. A. Hitt, “Strategic Flexibility: Organizational Preparedness to Reverse Ineffective Strategic Decisions,” Academy of Management Executive, November 2004, pp. 44–59.


How the Internet Has Changed Business How the Internet Has Changed Business • The Internet allows businesses to:The Internet allows businesses to:

Create knowledge bases that employees can tap into Create knowledge bases that employees can tap into anytime, anywhere.anytime, anywhere.

Turn customers into collaborative partners who help Turn customers into collaborative partners who help design, test, and launch new products.design, test, and launch new products.

Become virtually paperless in specific tasks such as Become virtually paperless in specific tasks such as purchasing and filing expense reports.purchasing and filing expense reports.

Manage logistics in real timeManage logistics in real time Change the nature of work tasks throughout the Change the nature of work tasks throughout the

organization. organization.


Strategies for Applying e-Business Strategies for Applying e-Business TechniquesTechniques• Cost LeadershipCost Leadership

On-line activities: bidding, order processing, inventory On-line activities: bidding, order processing, inventory control, recruitment and hiringcontrol, recruitment and hiring

• DifferentiationDifferentiation Internet-based knowledge systems, on-line ordering Internet-based knowledge systems, on-line ordering

and customer supportand customer support• FocusFocus

Chat rooms and discussion boards, targeted web Chat rooms and discussion boards, targeted web sitessites


Customer Service StrategiesCustomer Service Strategies• Giving the customers what they want.Giving the customers what they want.• Communicating effectively with them.Communicating effectively with them.• Providing employees with customer service Providing employees with customer service

training.training.


Innovation StrategiesInnovation Strategies• Possible EventsPossible Events

Radical breakthroughs in products.Radical breakthroughs in products. Application of existing technology to new uses.Application of existing technology to new uses.

• Strategic Decisions about InnovationStrategic Decisions about Innovation Basic researchBasic research Product developmentProduct development Process innovationProcess innovation

• First MoverFirst Mover An organization that brings a product innovation to An organization that brings a product innovation to

market or use a new process innovationsmarket or use a new process innovations


Exhibit 8–8Exhibit 8–8 First-Mover Advantages–DisadvantagesFirst-Mover Advantages–Disadvantages

• AdvantagesAdvantages Reputation for being Reputation for being

innovative and industry innovative and industry leaderleader

Cost and learning benefitsCost and learning benefits Control over scarce Control over scarce

resources and keeping resources and keeping competitors from having competitors from having access to themaccess to them

Opportunity to begin Opportunity to begin building customer building customer relationships and customer relationships and customer loyaltyloyalty

• DisadvantagesDisadvantages Uncertainty over exact Uncertainty over exact

direction technology direction technology and market will goand market will go

Risk of competitors Risk of competitors imitating innovationsimitating innovations

Financial and strategic Financial and strategic risksrisks

High development costsHigh development costs


Terms to KnowTerms to Know• strategic managementstrategic management• strategiesstrategies• business modelbusiness model• strategic management processstrategic management process• missionmission• opportunitiesopportunities• threatsthreats• resourcesresources• capabilitiescapabilities• core competenciescore competencies• strengthsstrengths• weaknessesweaknesses• SWOT analysisSWOT analysis

• corporate strategycorporate strategy• growth strategygrowth strategy• related diversificationrelated diversification• unrelated diversificationunrelated diversification• stability strategystability strategy• renewal strategyrenewal strategy• retrenchment strategyretrenchment strategy• turnaround strategyturnaround strategy• BCG matrixBCG matrix• business or competitive business or competitive

strategystrategy• strategic business unitsstrategic business units• competitive advantagecompetitive advantage


Terms to Know (cont’d)Terms to Know (cont’d)• cost leadership strategycost leadership strategy • differentiation strategydifferentiation strategy • focus strategyfocus strategy • stuck in the middlestuck in the middle • functional strategiesfunctional strategies • strategic flexibilitystrategic flexibility • first moverfirst mover

ninth edition

STEPHEN P. ROBBINS


MARY COULTER


Planning Tools Planning Tools and Techniquesand Techniques

ChapterChapter

99



Techniques for Assessing the EnvironmentTechniques for Assessing the Environment• List the different approaches to assess the environment.List the different approaches to assess the environment.• Explain what competitor intelligence is and ways that Explain what competitor intelligence is and ways that

managers can do it legally and ethically.managers can do it legally and ethically.• Describe how managers can improve the effectiveness of Describe how managers can improve the effectiveness of

forecasting.forecasting.• List the steps in the benchmarking process.List the steps in the benchmarking process.

Techniques for Allocating ResourcesTechniques for Allocating Resources• List the four techniques for allocating resources.List the four techniques for allocating resources.• Describe the different types of budgets.Describe the different types of budgets.• Explain what a Gantt chart and a load chart do.Explain what a Gantt chart and a load chart do.



Techniques for Allocating Resources (cont’d)Techniques for Allocating Resources (cont’d)• Describe how PERT network analysis works.Describe how PERT network analysis works.• Understand how to compute a breakeven point.Understand how to compute a breakeven point.• Describe how managers can use linear programming.Describe how managers can use linear programming.

Contemporary Planning TechniquesContemporary Planning Techniques • Explain why flexibility is so important to today’s planning Explain why flexibility is so important to today’s planning

techniques.techniques.• Describe project management.Describe project management.• List the steps in the project planning process.List the steps in the project planning process.• Discuss why scenario planning is an important planning Discuss why scenario planning is an important planning

tool.tool.


Assessing the EnvironmentAssessing the Environment• Environmental ScanningEnvironmental Scanning

The screening of large amounts of information to The screening of large amounts of information to anticipate and interpret change in the environment.anticipate and interpret change in the environment.

Competitor IntelligenceCompetitor Intelligence The process of gathering information about competitorsThe process of gathering information about competitors——

wwho they are; what they are doingho they are; what they are doing– Is not spying but rather careful attention to readily Is not spying but rather careful attention to readily

accessible information from employees, customers, accessible information from employees, customers, suppliers, the Internet, and competitors themselves.suppliers, the Internet, and competitors themselves.

May involve May involve reverse engineeringreverse engineering of competing products to of competing products to discover technical innovations.discover technical innovations.


Assessing the Environment (cont’d)Assessing the Environment (cont’d)• Environmental Scanning (cont’d)Environmental Scanning (cont’d)

Global ScanningGlobal Scanning Screening a broad scope of information on global forces that Screening a broad scope of information on global forces that

might affect the organization.might affect the organization. Has value to firms with significant global interests.Has value to firms with significant global interests. Draws information from sources that provide global Draws information from sources that provide global

perspectives on world-wide issues and opportunities.perspectives on world-wide issues and opportunities.


Assessing the Environment (cont’d)Assessing the Environment (cont’d)• ForecastingForecasting

The part of organizational planning that involves The part of organizational planning that involves creating predictions of outcomes based on creating predictions of outcomes based on information gathered by environmental scanning.information gathered by environmental scanning. Facilitates managerial Facilitates managerial

decision making.decision making.

Is most accurate in Is most accurate in stable environments.stable environments.


Assessing the Environment (cont’d)Assessing the Environment (cont’d)• Forecasting TechniquesForecasting Techniques

Quantitative forecastingQuantitative forecasting Applying a set of mathematical rules to a series of hard data Applying a set of mathematical rules to a series of hard data

to predict outcomes (e.g., units to be produced).to predict outcomes (e.g., units to be produced). Qualitative forecastingQualitative forecasting

Using expert judgments and opinions to predict less than Using expert judgments and opinions to predict less than precise outcomes (e.g., direction of the economy).precise outcomes (e.g., direction of the economy).

• Collaborative Planning, Forecasting, and Collaborative Planning, Forecasting, and Replenishment (CPFR) SoftwareReplenishment (CPFR) Software A standardized way for organizations A standardized way for organizations

to use the Internet to exchange data.to use the Internet to exchange data.


Exhibit 9–1Exhibit 9–1 Forecasting TechniquesForecasting Techniques

• Quantitative• Time series analysis• Regression models• Econometric models• Economic indicators• Substitution effect

• Qualitative• Jury of opinion• Sales force composition• Customer evaluation


Making Forecasting More EffectiveMaking Forecasting More Effective1.1. Use simple forecasting methods.Use simple forecasting methods.

2.2. Compare each forecast with its corresponding Compare each forecast with its corresponding “no change” forecast.“no change” forecast.

3.3. Don’t rely on a single forecasting method.Don’t rely on a single forecasting method.

4.4. Don’t assume that the turning points in a trend Don’t assume that the turning points in a trend can be accurately identified.can be accurately identified.

5.5. Shorten the time period covered by a forecast.Shorten the time period covered by a forecast.

6.6. Remember that forecasting is a developed Remember that forecasting is a developed managerial skill that supports decision making.managerial skill that supports decision making.


BenchmarkingBenchmarking• The search for the best practices among The search for the best practices among

competitors and noncompetitors that lead to competitors and noncompetitors that lead to their superior performance.their superior performance.

• By analyzing and copying these practices, firms By analyzing and copying these practices, firms can improve their performance.can improve their performance.


Exhibit 9–2Exhibit 9–2 Steps in BenchmarkingSteps in Benchmarking

Source: Based on Y.K. Shetty, “Aiming High: Competitive Benchmarking for Superior Performance,” Long Range Planning. February 1993, p. 42.


Allocating ResourcesAllocating Resources• Types of ResourcesTypes of Resources

The assets of the organizationThe assets of the organization Financial:Financial: debt, equity, and retained earnings debt, equity, and retained earnings

Physical:Physical: buildings, equipment, and raw materials buildings, equipment, and raw materials

Human:Human: experiences, skills, knowledge, and competencies experiences, skills, knowledge, and competencies

Intangible:Intangible: brand names, patents, reputation, trademarks, brand names, patents, reputation, trademarks, copyrights, and databasescopyrights, and databases


Allocating Resources: BudgetingAllocating Resources: Budgeting• BudgetsBudgets

Are numerical plans for allocating resources (e.g., Are numerical plans for allocating resources (e.g., revenues, expenses, and capital expenditures).revenues, expenses, and capital expenditures).

Are used to improve time, space, and use of material Are used to improve time, space, and use of material resources.resources.

Are the most commonly used Are the most commonly used and most widely applicable and most widely applicable planning technique for planning technique for organizations.organizations.


Exhibit 9–3Exhibit 9–3 Types of BudgetsTypes of Budgets

Source: Based on R.S. Russell and B.W. Taylor III. Production and Operations Management (Upper Saddle River, NJ: Prentice Hall, 1995), p. 287.


Exhibit 9–4Exhibit 9–4 Suggestions for Improving BudgetingSuggestions for Improving Budgeting

• Collaborate and communicate.

• Be flexible.

• Goals should drive budgets—budgets should not determine goals.

• Coordinate budgeting throughout the organization.

• Use budgeting/planning software when appropriate.

• Remember that budgets are tools.

• Remember that profits result from smart management, not because you budgeted for them.


Allocating Resources: SchedulingAllocating Resources: Scheduling• SchedulesSchedules

Plans that allocate resources by detailing what Plans that allocate resources by detailing what activities have to be done, the order in which they are activities have to be done, the order in which they are to be completed, who is to do each, and when they to be completed, who is to do each, and when they are to be completed.are to be completed.

Represent the coordination of various activities.Represent the coordination of various activities.


Allocating Resources: ChartingAllocating Resources: Charting• Gantt ChartGantt Chart

A bar graph with time on the horizontal axis and A bar graph with time on the horizontal axis and activities to be accomplished on the vertical axis.activities to be accomplished on the vertical axis.

Shows the expected and actual progress of various Shows the expected and actual progress of various tasks.tasks.

• Load ChartLoad Chart A modified Gantt chart that lists entire departments or A modified Gantt chart that lists entire departments or

specific resources on the vertical axis.specific resources on the vertical axis. Allows managers to plan and control capacity Allows managers to plan and control capacity

utilization.utilization.


Exhibit 9–5Exhibit 9–5 A Gantt ChartA Gantt Chart


Exhibit 9–6Exhibit 9–6 A Load ChartA Load Chart


Allocating Resources: AnalysisAllocating Resources: Analysis• Program Evaluation and Review Technique (PERT)Program Evaluation and Review Technique (PERT)

A flow chart diagram that depicts the sequence of activities A flow chart diagram that depicts the sequence of activities needed to complete a project and the time or costs needed to complete a project and the time or costs associated with each activity.associated with each activity. Events:Events: endpoints for completion. endpoints for completion. Activities:Activities: time required for each activity. time required for each activity. Slack time:Slack time: the time that a completed activity waits for another the time that a completed activity waits for another

activity to finish so that the next activity, which depends on the activity to finish so that the next activity, which depends on the completion of both activities, can start.completion of both activities, can start.

Critical path:Critical path: the path (ordering) of activities that allows all the path (ordering) of activities that allows all tasks to be completed with the least slack time.tasks to be completed with the least slack time.


Exhibit 9–7Exhibit 9–7 Steps in Developing a PERT NetworkSteps in Developing a PERT Network

1. Identify every significant activity that must be achieved for a project to be completed.

2. Determine the order in which these events must be completed.

3. Diagram the flow of activities from start to finish, identifying each activity and its relationship to all other activities.

4. Compute a time estimate for completing each activity.

5. Using the network diagram that contains time estimates for each activity, determine a schedule for the start and finish dates of each activity and for the entire project.


Exhibit 9–8Exhibit 9–8 Events and Activities in Constructing an Office BuildingEvents and Activities in Constructing an Office Building


Exhibit 9–9Exhibit 9–9 A Visual PERT Network for Constructing an Office BuildingA Visual PERT Network for Constructing an Office Building

Critical Path: A - B - C - D - G - H - J - K


Allocating Resources: Analysis (cont’d)Allocating Resources: Analysis (cont’d)• Breakeven AnalysisBreakeven Analysis

Is used to determine the point at which all fixed costs Is used to determine the point at which all fixed costs have been recovered and profitability begins.have been recovered and profitability begins. Fixed cost (FC)Fixed cost (FC) Variable costs (VC)Variable costs (VC) Total Fixed Costs (TFC)Total Fixed Costs (TFC) Price (P)Price (P)

• The Break-even Formula:The Break-even Formula:

Costs Variable Unit-Price UnitCosts Fixed TotalBreakeven :


Exhibit 9–10Exhibit 9–10 Breakeven AnalysisBreakeven Analysis


Allocating Resources: Analysis (cont’d)Allocating Resources: Analysis (cont’d)• Linear ProgrammingLinear Programming

A technique that seeks to solve resource allocation A technique that seeks to solve resource allocation problems using the proportional relationships problems using the proportional relationships between two variables.between two variables.


Exhibit 9–11Exhibit 9–11 Production Data for Cinnamon-Scented ProductsProduction Data for Cinnamon-Scented Products


Exhibit 9–12Exhibit 9–12 Graphical Solution to Linear Programming ProblemGraphical Solution to Linear Programming Problem

Max. Assembly

Max. Manufacturing

Max. Manufacturing

Max. Assembly

Max. Profits


Contemporary Planning TechniquesContemporary Planning Techniques• ProjectProject

A one-time-only set of activities that has a definite A one-time-only set of activities that has a definite beginning and ending point time.beginning and ending point time.

• Project ManagementProject Management The task of getting a project’s activities done on time, The task of getting a project’s activities done on time,

within budget, and according to specifications.within budget, and according to specifications. Define project goalsDefine project goals

Identify all required activities, materials, and laborIdentify all required activities, materials, and labor

Determine the sequence of completionDetermine the sequence of completion


Exhibit 9–13Exhibit 9–13 Project Planning ProcessProject Planning Process

Source: Based on R.S. Russell and B.W. Taylor III, Production and Operations Management (Upper Saddle River, NJ: Prentice Hall, 1995), p. 287.


Contemporary Planning Techniques Contemporary Planning Techniques (cont’d)(cont’d)• ScenarioScenario

A consistent view of what the future is likely to be.A consistent view of what the future is likely to be.

• Scenario PlanningScenario Planning An attempt not try to predict the future but to reduce An attempt not try to predict the future but to reduce

uncertainty by playing out potential situations under uncertainty by playing out potential situations under different specified conditions.different specified conditions.

• Contingency PlanningContingency Planning Developing scenarios that allow managers determine Developing scenarios that allow managers determine

in advance what their actions should be should a in advance what their actions should be should a considered event actually occur.considered event actually occur.


Exhibit 9–14Exhibit 9–14 Preparing for Unexpected EventsPreparing for Unexpected Events

• Identify potential unexpected events.

• Determine if any of these events would have early indicators.

• Set up an information gathering system to identify early indicators.

• Have appropriate responses (plans) in place if these unexpected events occur.

Source: S. Caudron, “Frontview Mirror,” Business Finance, December 1999, pp. 24–30.


Terms to KnowTerms to Know• environmental scanningenvironmental scanning• competitor intelligencecompetitor intelligence• forecastsforecasts• quantitative forecastingquantitative forecasting• qualitative forecastingqualitative forecasting• benchmarkingbenchmarking• resourcesresources• budgetbudget• schedulingscheduling• Gantt chartGantt chart• load chartload chart

• PERT networkPERT network• eventsevents• activitiesactivities• slack timeslack time• critical pathcritical path• breakeven analysisbreakeven analysis• linear programminglinear programming• projectproject• project managementproject management• scenarioscenario

ninth edition

STEPHEN P. ROBBINS


MARY COULTER


Organizational Organizational Structure and DesignStructure and Design

ChapterChapter

1010



Defining Organizational StructureDefining Organizational Structure• Discuss the traditional and contemporary views of work Discuss the traditional and contemporary views of work

specialization, chain of command, and span of control.specialization, chain of command, and span of control.• Describe each of the five forms of departmentalization.Describe each of the five forms of departmentalization.• Explain cross-functional teams.Explain cross-functional teams.• Differentiate, authority, responsibility, and unity of Differentiate, authority, responsibility, and unity of

command.command.• Tell what factors influence the amount of centralization Tell what factors influence the amount of centralization

and decentralization.and decentralization.• Explain how formalization is used in organizational Explain how formalization is used in organizational

design.design.



Organizational Design DecisionsOrganizational Design Decisions• Contrast mechanistic and organic organizations.Contrast mechanistic and organic organizations.• Explain the relationship between strategy and structure.Explain the relationship between strategy and structure.• Tell how organizational size affects organizational design.Tell how organizational size affects organizational design.• Discuss Woodward’s findings on the relationship of Discuss Woodward’s findings on the relationship of

technology and structure.technology and structure.• Explain how environmental uncertainty affects Explain how environmental uncertainty affects

organizational design.organizational design.



Common Organizational DesignsCommon Organizational Designs• Contrast the three traditional organizational designs.Contrast the three traditional organizational designs.• Explain team, matrix, and project structures.Explain team, matrix, and project structures.• Describe the design of virtual and network organizations.Describe the design of virtual and network organizations.• Discuss the organizational design challenges facing Discuss the organizational design challenges facing

managers today.managers today.


Defining Organizational StructureDefining Organizational Structure

• Organizational StructureOrganizational Structure The formal arrangement of jobs within an organization.The formal arrangement of jobs within an organization.

• Organizational DesignOrganizational Design A process involving decisions about six key elements:A process involving decisions about six key elements:

Work specializationWork specialization DepartmentalizationDepartmentalization Chain of commandChain of command Span of controlSpan of control Centralization and decentralizationCentralization and decentralization FormalizationFormalization


Exhibit 10–1Exhibit 10–1 Purposes of OrganizingPurposes 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.


Organizational StructureOrganizational Structure• Work SpecializationWork Specialization

The degree to which tasks in the organization are The degree to which tasks in the organization are divided into separate jobs with each step completed divided into separate jobs with each step completed by a different person.by a different person.

Overspecialization can result in human diseconomies Overspecialization can result in human diseconomies from boredom, fatigue, stress, poor quality, increased from boredom, fatigue, stress, poor quality, increased absenteeism, and higher turnover.absenteeism, and higher turnover.


Departmentalization by TypeDepartmentalization by Type• Functional Functional

Grouping jobs by Grouping jobs by functions performedfunctions performed

• ProductProduct Grouping jobs by product Grouping jobs by product

lineline• GeographicalGeographical

Grouping jobs on the Grouping jobs on the basis of territory or basis of territory or geographygeography

• Process Process Grouping jobs on the Grouping jobs on the

basis of product or basis of product or customer flowcustomer flow

• CustomerCustomer Grouping jobs by type of Grouping jobs by type of

customer and needscustomer and needs


Exhibit 10–2Exhibit 10–2 Functional DepartmentalizationFunctional Departmentalization

• Advantages• Efficiencies from putting together similar specialties and

people with common skills, knowledge, and orientations• Coordination within functional area• In-depth specialization

• Disadvantages• Poor communication across functional areas• Limited view of organizational goals


Exhibit 10–2 (cont’d)Exhibit 10–2 (cont’d) Geographical DepartmentalizationGeographical Departmentalization

• Advantages• More effective and efficient handling of specific

regional issues that arise• Serve needs of unique geographic markets better

• Disadvantages• Duplication of functions• Can feel isolated from other organizational areas


Exhibit 10–2 (cont’d)Exhibit 10–2 (cont’d) Product DepartmentalizationProduct Departmentalization

+ Allows specialization in particular products and services+ Managers can become experts in their industry+ Closer to customers– Duplication of functions– Limited view of organizational goals


Exhibit 10–2 (cont’d)Exhibit 10–2 (cont’d) Process DepartmentalizationProcess Departmentalization

+ More efficient flow of work activities– Can only be used with certain types of products


Exhibit 10–2 (cont’d)Exhibit 10–2 (cont’d) Customer DepartmentalizationCustomer Departmentalization

+ Customers’ needs and problems can be met by specialists- Duplication of functions- Limited view of organizational goals


Organization Structure (cont’d)Organization Structure (cont’d)• Chain of CommandChain of Command

The continuous line of authority that extends from The continuous line of authority that extends from upper levels of an organization to the lowest levels of upper levels of an organization to the lowest levels of the organization and clarifies who reports to who.the organization and clarifies who reports to who.


Organization Structure (cont’d)Organization Structure (cont’d)• AuthorityAuthority

The rights inherent in a managerial position to tell The rights inherent in a managerial position to tell people what to do and to expect them to do it.people what to do and to expect them to do it.

• ResponsibilityResponsibility The obligation or expectation to perform.The obligation or expectation to perform.

• Unity of CommandUnity of Command The concept that a person should have one boss and The concept that a person should have one boss and

should report only to that person.should report only to that person.


Organization Structure (cont’d)Organization Structure (cont’d)• Span of ControlSpan of Control

The number of employees who can be effectively and The number of employees who can be effectively and efficiently supervised by a manager.efficiently supervised by a manager.

Width of span is affected by:Width of span is affected by: Skills and abilities of the managerSkills and abilities of the manager Employee characteristicsEmployee characteristics Characteristics of the work being doneCharacteristics of the work being done Similarity of tasksSimilarity of tasks Complexity of tasksComplexity of tasks Physical proximity of subordinatesPhysical proximity of subordinates Standardization of tasks Standardization of tasks


Exhibit 10–3Exhibit 10–3 Contrasting Spans of ControlContrasting Spans of Control


Organization Structure (cont’d)Organization Structure (cont’d)• CentralizationCentralization

The degree to which decision-making is concentrated The degree to which decision-making is concentrated at a single point in the organizations.at a single point in the organizations. Organizations in which top managers make all the decisions Organizations in which top managers make all the decisions

and lower-level employees simply carry out those orders.and lower-level employees simply carry out those orders.

• DecentralizationDecentralization Organizations in which decision-making is pushed Organizations in which decision-making is pushed

down to the managers who are closest to the action.down to the managers who are closest to the action.• Employee EmpowermentEmployee Empowerment

Increasing the decision-making authority (power) of Increasing the decision-making authority (power) of employees.employees.


Exhibit 10–4Exhibit 10–4 Factors that Influence the Amount of CentralizationFactors that Influence the Amount of Centralization

• More CentralizationMore Centralization Environment is stable.Environment is stable. Lower-level managers are not as capable or experienced at Lower-level managers are not as capable or experienced at

making decisions as upper-level managers.making decisions as upper-level managers. Lower-level managers do not want to have a say in decisions.Lower-level managers do not want to have a say in decisions. Decisions are relatively minor.Decisions are relatively minor. Organization is facing a crisis or the risk of company failure.Organization is facing a crisis or the risk of company failure. Company is large.Company is large. Effective implementation of company strategies depends on Effective implementation of company strategies depends on

managers retaining say over what happens.managers retaining say over what happens.


Exhibit 10–4 (cont’d)Exhibit 10–4 (cont’d) Factors that Influence the Amount of Factors that Influence the Amount of CentralizationCentralization

• More DecentralizationMore Decentralization Environment is complex, uncertain.Environment is complex, uncertain. Lower-level managers are capable and experienced at making Lower-level managers are capable and experienced at making

decisions.decisions. Lower-level managers want a voice in decisions.Lower-level managers want a voice in decisions. Decisions are significant.Decisions are significant. Corporate culture is open to allowing managers to have a say in Corporate culture is open to allowing managers to have a say in

what happens.what happens. Company is geographically dispersed.Company is geographically dispersed. Effective implementation of company strategies depends on Effective implementation of company strategies depends on

managers having involvement and flexibility to make decisions.managers having involvement and flexibility to make decisions.


Organization Structure (cont’d)Organization Structure (cont’d)• FormalizationFormalization

The degree to which jobs within the organization are The degree to which jobs within the organization are standardized and the extent to which employee standardized and the extent to which employee behavior is guided by rules and procedures.behavior is guided by rules and procedures. Highly formalized jobs offer little discretion over what is to be Highly formalized jobs offer little discretion over what is to be

done.done. Low formalization means fewer constraints on how Low formalization means fewer constraints on how

employees do their work.employees do their work.


Organizational Design DecisionsOrganizational Design Decisions• Mechanistic OrganizationMechanistic Organization

A rigid and tightly controlled A rigid and tightly controlled structurestructure High specializationHigh specialization Rigid departmentalizationRigid departmentalization Narrow spans of controlNarrow spans of control High formalizationHigh formalization Limited information network Limited information network

(downward)(downward) Low decision participationLow decision participation

• Organic OrganizationOrganic Organization Highly flexible and Highly flexible and

adaptable structureadaptable structure Non-standardized jobsNon-standardized jobs Fluid team-based structureFluid team-based structure Little direct supervisionLittle direct supervision Minimal formal rulesMinimal formal rules Open communication Open communication

networknetwork Empowered employeesEmpowered employees


Exhibit 10–5Exhibit 10–5 Mechanistic versus Organic OrganizationMechanistic versus Organic Organization

• High specialization

• Rigid departmentalization

• Clear chain of command

• Narrow spans of control

• Centralization

• High formalization

• Cross-functional teams

• Cross-hierarchical teams

• Free flow of information

• Wide spans of control

• Decentralization

• Low formalization


Contingency FactorsContingency Factors• Structural decisions are influenced by:Structural decisions are influenced by:

Overall strategy of the organizationOverall strategy of the organization Organizational structure follows strategy.Organizational structure follows strategy.

Size of the organizationSize of the organization Firms change from organic to mechanistic organizations as Firms change from organic to mechanistic organizations as

they grow in size.they grow in size. Technology use by the organizationTechnology use by the organization

Firms adapt their structure to the technology they use.Firms adapt their structure to the technology they use. Degree of environmental uncertaintyDegree of environmental uncertainty

Dynamic environments require organic structures; Dynamic environments require organic structures; mechanistic structures need stable environments.mechanistic structures need stable environments.


Contingency Factors (cont’d)Contingency Factors (cont’d)• Strategy Frameworks:Strategy Frameworks:

InnovationInnovation Pursuing competitive advantage through meaningful and Pursuing competitive advantage through meaningful and

unique innovations favors an organic structuring.unique innovations favors an organic structuring. Cost minimizationCost minimization

Focusing on tightly controlling costs requires a mechanistic Focusing on tightly controlling costs requires a mechanistic structure for the organization.structure for the organization.

ImitationImitation Minimizing risks and maximizing profitability by copying Minimizing risks and maximizing profitability by copying

market leaders requires both organic and mechanistic market leaders requires both organic and mechanistic elements in the organization’s structure.elements in the organization’s structure.


Contingency Factors (cont’d)Contingency Factors (cont’d)• Strategy and StructureStrategy and Structure

Achievement of strategic goals is facilitated by Achievement of strategic goals is facilitated by changes in organizational structure that changes in organizational structure that accommodate and support change.accommodate and support change.

• Size and StructureSize and Structure As an organization grows larger, its structure tends to As an organization grows larger, its structure tends to

change from organic to mechanistic with increased change from organic to mechanistic with increased specialization, departmentalization, centralization, specialization, departmentalization, centralization, and rules and regulations.and rules and regulations.


Contingency Factors (cont’d)Contingency Factors (cont’d)• Technology and StructureTechnology and Structure

Organizations adapt their structures to their Organizations adapt their structures to their technology.technology.

Woodward’s classification of firms based on the Woodward’s classification of firms based on the complexity of the technology employed:complexity of the technology employed: Unit productionUnit production of single units or small batches of single units or small batches Mass productionMass production of large batches of output of large batches of output Process productionProcess production in continuous process of outputs in continuous process of outputs

Routine technology = mechanistic organizationsRoutine technology = mechanistic organizations Non-routine technology = organic organizationsNon-routine technology = organic organizations


Exhibit 10–6Exhibit 10–6 Woodward’s Findings on Technology, Structure, Woodward’s Findings on Technology, Structure, and Effectivenessand Effectiveness


Contingency Factors (cont’d)Contingency Factors (cont’d)• Environmental Uncertainty and StructureEnvironmental Uncertainty and Structure

Mechanistic organizational structures tend to be most Mechanistic organizational structures tend to be most effective in stable and simple environments.effective in stable and simple environments.

The flexibility of organic organizational structures is The flexibility of organic organizational structures is better suited for dynamic and complex environments.better suited for dynamic and complex environments.


Common Organizational DesignsCommon Organizational Designs• Traditional DesignsTraditional Designs

Simple structureSimple structure Low departmentalization, wide spans of control, centralized Low departmentalization, wide spans of control, centralized

authority, little formalizationauthority, little formalization Functional structureFunctional structure

Departmentalization by functionDepartmentalization by function– Operations, finance, human resources, and product Operations, finance, human resources, and product

research and developmentresearch and development Divisional structureDivisional structure

Composed of separate business units or divisions with limited Composed of separate business units or divisions with limited autonomy under the coordination and control the parent autonomy under the coordination and control the parent corporation.corporation.


Exhibit 10–7Exhibit 10–7 Strengths and Weaknesses of Traditional Strengths and Weaknesses of Traditional Organizational DesignsOrganizational Designs


Exhibit 10–8Exhibit 10–8 Contemporary Organizational DesignsContemporary Organizational Designs

Team StructureTeam Structure• • What it is:What it is: A structure in which the entire organization is made up of A structure in which the entire organization is made up of

work groups or teams.work groups or teams.

• • Advantages:Advantages: Employees are more involved and empowered. Reduced Employees are more involved and empowered. Reduced barriers among functional areas.barriers among functional areas.

• • Disadvantages:Disadvantages: No clear chain of command. Pressure on teams to perform.No clear chain of command. Pressure on teams to perform.

Matrix-Project StructureMatrix-Project StructureWhat it is:What it is: A structure that assigns specialists from different functional A structure that assigns specialists from different functional

areas to work on projects but who return to their areas when areas to work on projects but who return to their areas when the project is completed. Project is a structure in which the project is completed. Project is a structure in which employees continuously work on projects. As one project is employees continuously work on projects. As one project is completed, employees move on to the next project.completed, employees move on to the next project.

• • Advantages:Advantages: Fluid and flexible design that can respond to environmental Fluid and flexible design that can respond to environmental changes. Faster decision making.changes. Faster decision making.

• • Disadvantages:Disadvantages: Complexity of assigning people to projects. Task and Complexity of assigning people to projects. Task and personality conflicts.personality conflicts.


Exhibit 10–8 (cont’d)Exhibit 10–8 (cont’d) Contemporary Organizational Contemporary Organizational DesignsDesigns

Boundaryless StructureBoundaryless StructureWhat it is:What it is: A structure that is not defined by or limited to artificial A structure that is not defined by or limited to artificial

horizontal, vertical, or external boundaries; includes virtual horizontal, vertical, or external boundaries; includes virtual and network types of organizations.and network types of organizations.

• • Advantages:Advantages: Highly flexible and responsive. Draws on talent wherever it’s Highly flexible and responsive. Draws on talent wherever it’s found..found..

• • Disadvantages:Disadvantages: Lack of control. Communication difficulties..Lack of control. Communication difficulties..


Organizational Designs (cont’d)Organizational Designs (cont’d)• Contemporary Organizational DesignsContemporary Organizational Designs

Team structuresTeam structures The entire organization is made up of work groups or self-The entire organization is made up of work groups or self-

managed teams of empowered employees.managed teams of empowered employees.

Matrix and project structuresMatrix and project structures Specialists from different functional departments are Specialists from different functional departments are

assigned to work on projects led by project managers.assigned to work on projects led by project managers. Matrix and project participants have two managers.Matrix and project participants have two managers. In project structures, employees work continuously on In project structures, employees work continuously on

projects; moving on to another project as each project is projects; moving on to another project as each project is completed.completed.


Exhibit 10–9Exhibit 10–9 An Example of a Matrix OrganizationAn Example of a Matrix Organization


Organizational Designs (cont’d)Organizational Designs (cont’d)• Contemporary Organizational Designs (cont’d)Contemporary Organizational Designs (cont’d)

Boundaryless OrganizationBoundaryless Organization An flexible and unstructured organizational design that is An flexible and unstructured organizational design that is

intended to break down external barriers between the intended to break down external barriers between the organization and its customers and suppliers.organization and its customers and suppliers.

Removes internal (horizontal) boundaries:Removes internal (horizontal) boundaries:– Eliminates the chain of commandEliminates the chain of command– Has limitless spans of controlHas limitless spans of control– Uses empowered teams rather than departmentsUses empowered teams rather than departments

Eliminates external boundaries:Eliminates external boundaries:– Uses virtual, network, and modular organizational Uses virtual, network, and modular organizational

structures to get closer to stakeholders.structures to get closer to stakeholders.


Removing External BoundariesRemoving External Boundaries• Virtual OrganizationVirtual Organization

An organization that consists of a small core of full-time An organization that consists of a small core of full-time employees and that temporarily hires specialists to work on employees and that temporarily hires specialists to work on opportunities that arise.opportunities that arise.

• Network OrganizationNetwork Organization A small core organization that outsources its major A small core organization that outsources its major

business functions (e.g., manufacturing) in order to business functions (e.g., manufacturing) in order to concentrate what it does best.concentrate what it does best.

• Modular OrganizationModular Organization A manufacturing organization that uses outside suppliers to A manufacturing organization that uses outside suppliers to

provide product components for its final assembly provide product components for its final assembly operations.operations.


Today’s Organizational Design Today’s Organizational Design ChallengesChallenges• Keeping Employees ConnectedKeeping Employees Connected

Widely dispersed and mobile employeesWidely dispersed and mobile employees• Building a Learning OrganizationBuilding a Learning Organization• Managing Global Structural IssuesManaging Global Structural Issues

Cultural implications of design elementsCultural implications of design elements


Organizational Designs (cont’d)Organizational Designs (cont’d)• The Learning OrganizationThe Learning Organization

An organization that has developed the capacity to An organization that has developed the capacity to continuously learn, adapt, and change through the continuously learn, adapt, and change through the practice of knowledge management by employees.practice of knowledge management by employees.

Characteristics of a learning organization:Characteristics of a learning organization: An open team-based organization design that empowers An open team-based organization design that empowers

employeesemployees Extensive and open information sharingExtensive and open information sharing Leadership that provides a shared vision of the organization’s Leadership that provides a shared vision of the organization’s

future, support and encouragementfuture, support and encouragement A strong culture of shared values, trust, openness, and a A strong culture of shared values, trust, openness, and a

sense of community.sense of community.


Terms to KnowTerms to Know• organizingorganizing• organizational structureorganizational structure• organizational designorganizational design• work specializationwork specialization• departmentalizationdepartmentalization• functional departmentalizationfunctional departmentalization• product departmentalizationproduct departmentalization• geographical geographical

departmentalizationdepartmentalization• process departmentalizationprocess departmentalization• customer departmentalizationcustomer departmentalization• cross-functional teamscross-functional teams• chain of commandchain of command• authorityauthority

• responsibilityresponsibility• unity of commandunity of command• span of controlspan of control• centralizationcentralization• decentralizationdecentralization• employee empowermentemployee empowerment• formalizationformalization• mechanistic organizationmechanistic organization• organic organizationorganic organization• unit production unit production • mass production mass production • process productionprocess production• simple structuresimple structure• functional structurefunctional structure


Terms to KnowTerms to Know• divisional structuredivisional structure• team structureteam structure• matrix structurematrix structure• project structureproject structure• boundaryless organizationboundaryless organization• virtual organizationvirtual organization• network organizationnetwork organization• learning organizationlearning organization• organizational chartorganizational chart

ninth edition

STEPHEN P. ROBBINS


MARY COULTER


Communication Communication and Information and Information TechnologyTechnology

ChapterChapter

1111



Understanding CommunicationsUnderstanding Communications• Differentiate between interpersonal and organizational Differentiate between interpersonal and organizational

communication.communication.• Discuss the functions of communication.Discuss the functions of communication.

The Process of Interpersonal CommunicationsThe Process of Interpersonal Communications• Explain all the components of the communication process.Explain all the components of the communication process.• List the communication methods managers might use.List the communication methods managers might use.• Describe nonverbal communication and how it takes Describe nonverbal communication and how it takes

place.place.• Explain the barriers to effective interpersonal Explain the barriers to effective interpersonal

communication and how to overcome them.communication and how to overcome them.



Organizational CommunicationOrganizational Communication• Explain how communication can flow in an organization.Explain how communication can flow in an organization.• Describe the three common communication networks.Describe the three common communication networks.• Discuss how managers should handle the grapevine.Discuss how managers should handle the grapevine.

Understanding Information TechnologyUnderstanding Information Technology• Describe how technology affects managerial Describe how technology affects managerial

communication.communication.• Define e-mail, instant messaging, blogs and wikis, voice-Define e-mail, instant messaging, blogs and wikis, voice-

mail, fax, EDI, teleconferencing, videoconferencing, web mail, fax, EDI, teleconferencing, videoconferencing, web conferencing, intranet, and extranet.conferencing, intranet, and extranet.

• Explain how information technology affects organizations.Explain how information technology affects organizations.



Communication Issues in Today’s OrganizationCommunication Issues in Today’s Organization• Discuss the challenges of managing communication in an Discuss the challenges of managing communication in an

Internet world.Internet world.• Explain how organizations can manage knowledge.Explain how organizations can manage knowledge.• Explain why communicating with customers is an Explain why communicating with customers is an

important managerial issue.important managerial issue.• Explain how political correctness is affecting Explain how political correctness is affecting

communication.communication.


What Is Communication?What Is Communication?• CommunicationCommunication

The transfer and understanding of meaning.The transfer and understanding of meaning. Transfer means the message was received in a form that can Transfer means the message was received in a form that can

be interpreted by the receiver.be interpreted by the receiver. Understanding the message is not the same as the receiver Understanding the message is not the same as the receiver

agreeing with the message.agreeing with the message. Interpersonal CommunicationInterpersonal Communication

Communication between two or more peopleCommunication between two or more people Organizational CommunicationOrganizational Communication

All the patterns, network, and systems of communications All the patterns, network, and systems of communications within an organizationwithin an organization


Four Functions of CommunicationFour Functions of Communication

Functions ofFunctions ofCommunicationCommunication

ControlControl MotivationMotivation

EmotionalEmotionalExpressionExpressionInformationInformation


Functions of CommunicationFunctions of Communication• ControlControl

Formal and informal communications act to control Formal and informal communications act to control individuals’ behaviors in organizations.individuals’ behaviors in organizations.

• MotivationMotivation Communications clarify for employees what is to Communications clarify for employees what is to

done, how well they have done it, and what can be done, how well they have done it, and what can be done to improve performance.done to improve performance.


Functions of Communication (cont’d)Functions of Communication (cont’d)• Emotional ExpressionEmotional Expression

Social interaction in the form of work group Social interaction in the form of work group communications provides a way for employees to communications provides a way for employees to express themselves.express themselves.

• InformationInformation Individuals and work groups need information to Individuals and work groups need information to

make decisions or to do their work.make decisions or to do their work.


Interpersonal CommunicationInterpersonal Communication• MessageMessage

Source: sender’s intended meaningSource: sender’s intended meaning• EncodingEncoding

The message converted to symbolic formThe message converted to symbolic form• ChannelChannel

The medium through which the message travelsThe medium through which the message travels• DecodingDecoding

The receiver’s retranslation of the messageThe receiver’s retranslation of the message• NoiseNoise

Disturbances that interfere with communicationsDisturbances that interfere with communications


Exhibit 11–1Exhibit 11–1 The Interpersonal Communication ProcessThe Interpersonal Communication Process


Distortions in CommunicationsDistortions in Communications• Message EncodingMessage Encoding

The effect of the skills, attitudes, and knowledge of The effect of the skills, attitudes, and knowledge of the sender on the process of encoding the messagethe sender on the process of encoding the message

The social-cultural system of the senderThe social-cultural system of the sender

• The MessageThe Message Symbols used to convey the message’s meaningSymbols used to convey the message’s meaning The content of the message itselfThe content of the message itself The choice of message formatThe choice of message format Noise interfering with the messageNoise interfering with the message


Distortions in Communications (cont’d)Distortions in Communications (cont’d)• The ChannelThe Channel

The sender’s choice of the appropriate channel or The sender’s choice of the appropriate channel or multiple channels for conveying the messagemultiple channels for conveying the message

• ReceiverReceiver The effect of skills, attitudes, and knowledge of the The effect of skills, attitudes, and knowledge of the

receiver on the process of decoding the messagereceiver on the process of decoding the message The social-cultural system of the receiverThe social-cultural system of the receiver

• Feedback LoopFeedback Loop Communication channel distortions affecting the Communication channel distortions affecting the

return message from receiver to senderreturn message from receiver to sender


Interpersonal Communication MethodsInterpersonal Communication Methods• Face-to-faceFace-to-face• TelephoneTelephone• Group meetingsGroup meetings• Formal presentationsFormal presentations• MemosMemos• Traditional MailTraditional Mail• Fax machinesFax machines• Employee publicationsEmployee publications• Bulletin boardsBulletin boards• Audio- and videotapesAudio- and videotapes

• HotlinesHotlines• E-mailE-mail• Computer conferencingComputer conferencing• Voice mailVoice mail• TeleconferencesTeleconferences• VideoconferencesVideoconferences


Evaluating Communication MethodsEvaluating Communication Methods• FeedbackFeedback

• Complexity capacityComplexity capacity

• Breadth potentialBreadth potential

• ConfidentialityConfidentiality

• Encoding easeEncoding ease

• Decoding easeDecoding ease

• Time-space constraintTime-space constraint

• CostCost

• Interpersonal warmthInterpersonal warmth

• FormalityFormality

• ScanabilityScanability

• Time consumptionTime consumption


Exhibit 11–2Exhibit 11–2 Comparison of Communication MethodsComparison of Communication Methods

Note: Ratings are on a 1–5 scale where 1 = high and 5 = low. Consumption time refers to who controls the reception of communication. S/R means the sender and receiver share control.

Source: P. G. Clampitt, Communicating for Managerial Effectiveness (Newbury Park, CA: Sage Publications, 1991), p. 136.


Interpersonal Communication (cont’d)Interpersonal Communication (cont’d)• Nonverbal CommunicationNonverbal Communication

Communication that is transmitted without words.Communication that is transmitted without words. SoundsSounds with specific meanings or warnings with specific meanings or warnings ImagesImages that control or encourage behaviors that control or encourage behaviors Situational behaviorsSituational behaviors that convey meanings that convey meanings Clothing and physical surroundingsClothing and physical surroundings that imply status that imply status

Body language:Body language: gestures, facial expressions, and gestures, facial expressions, and other body movements that convey meaning.other body movements that convey meaning.

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


Interpersonal Communication BarriersInterpersonal Communication Barriers

DefensivenessDefensiveness

NationalNationalCultureCulture EmotionsEmotions

Information Information OverloadOverload

Interpersonal Interpersonal CommunicationCommunication

LanguageLanguage

FilteringFiltering


Barriers to Effective Interpersonal Barriers to Effective Interpersonal CommunicationCommunication• FilteringFiltering

The deliberate manipulation of information to make it The deliberate manipulation of information to make it appear more favorable to the receiver.appear more favorable to the receiver.

• EmotionsEmotions Disregarding rational and objective thinking Disregarding rational and objective thinking

processes and substituting emotional judgments processes and substituting emotional judgments when interpreting messages.when interpreting messages.

• Information OverloadInformation Overload Being confronted with a quantity of information that Being confronted with a quantity of information that

exceeds an individual’s capacity to process it.exceeds an individual’s capacity to process it.


Barriers to Effective Interpersonal Barriers to Effective Interpersonal Communication (cont’d)Communication (cont’d)• DefensivenessDefensiveness

When threatened, reacting in a way that reduces the When threatened, reacting in a way that reduces the ability to achieve mutual understanding.ability to achieve mutual understanding.

• LanguageLanguage The different meanings of and specialized ways The different meanings of and specialized ways

(jargon) in which senders use words can cause (jargon) in which senders use words can cause receivers to misinterpret their messages.receivers to misinterpret their messages.

• National CultureNational Culture Culture influences the form, formality, openness, Culture influences the form, formality, openness,

patterns and use of information in communications.patterns and use of information in communications.


Overcoming the Barriers to Effective Overcoming the Barriers to Effective Interpersonal CommunicationsInterpersonal Communications

• Use FeedbackUse Feedback• Simplify LanguageSimplify Language

• Listen ActivelyListen Actively• Constrain EmotionsConstrain Emotions

• Watch Nonverbal CuesWatch Nonverbal Cues


Exhibit 11–3Exhibit 11–3 Active Listening BehaviorsActive Listening Behaviors

Source: Based on P.L. Hunsaker, Training in Management Skills (Upper Saddle River, NJ: Prentice Hall, 2001).


Types of Organizational CommunicationTypes of Organizational Communication• Formal CommunicationFormal Communication

Communication that follows the official chain of Communication that follows the official chain of command or is part of the communication required to command or is part of the communication required to do one’s job.do one’s job.

• Informal CommunicationInformal Communication Communication that is not defined by the Communication that is not defined by the

organization’s hierarchy.organization’s hierarchy. Permits employees to satisfy their need for social interaction.Permits employees to satisfy their need for social interaction. Can improve an organization’s performance by creating Can improve an organization’s performance by creating

faster and more effective channels of communication.faster and more effective channels of communication.


Communication FlowsCommunication Flows

Lateral Lateral

Diagonal

Diagonal

DDoowwnnwwaarrdd

UUppwwaa

rrdd


Direction of Communication FlowDirection of Communication Flow• DownwardDownward

Communications that flow from managers to Communications that flow from managers to employees to inform, direct, coordinate, and evaluate employees to inform, direct, coordinate, and evaluate employees.employees.

• UpwardUpward Communications that flow from employees up to Communications that flow from employees up to

managers to keep them aware of employee needs managers to keep them aware of employee needs and how things can be improved to create a climate and how things can be improved to create a climate of trust and respect.of trust and respect.


Direction of Communication Flow Direction of Communication Flow (cont’d)(cont’d)• Lateral (Horizontal) CommunicationLateral (Horizontal) Communication

Communication that takes place among employees Communication that takes place among employees on the same level in the organization to save time and on the same level in the organization to save time and facilitate coordination.facilitate coordination.

• Diagonal CommunicationDiagonal Communication Communication that cuts across both work areas and Communication that cuts across both work areas and

organizational levels in the interest of efficiency and organizational levels in the interest of efficiency and speed.speed.


Types of Communication NetworksTypes of Communication Networks• Chain NetworkChain Network

Communication flows according to the formal chain of Communication flows according to the formal chain of command, both upward and downward.command, both upward and downward.

• Wheel NetworkWheel Network All communication flows in and out through the group All communication flows in and out through the group

leader (hub) to others in the group.leader (hub) to others in the group.• All-Channel NetworkAll-Channel Network

Communications flow freely among all members of Communications flow freely among all members of the work team.the work team.


Exhibit 11–4Exhibit 11–4 Three Common Organizational Communication Networks Three Common Organizational Communication Networks and How They Rate on Effectiveness Criteriaand How They Rate on Effectiveness Criteria


The GrapevineThe Grapevine• An informal organizational communication An informal organizational communication

network that is active in almost every network that is active in almost every organization.organization. Provides a channel for issues not suitable for formal Provides a channel for issues not suitable for formal

communication channels.communication channels. The impact of information passed along the grapevine The impact of information passed along the grapevine

can be countered by open and honest communication can be countered by open and honest communication with employees.with employees.


Understanding Information TechnologyUnderstanding Information Technology• Benefits of Information Technology (IT)Benefits of Information Technology (IT)

Increased ability to monitor individual and team Increased ability to monitor individual and team performanceperformance

Better decision making based on more complete Better decision making based on more complete informationinformation

More collaboration and More collaboration and sharing of informationsharing of information

Greater accessibility Greater accessibility to coworkersto coworkers


Information Technology (cont’d)Information Technology (cont’d)• Networked Computer Networked Computer

SystemsSystems Linking individual Linking individual

computers to create an computers to create an organizational network for organizational network for communication and communication and information sharing.information sharing.

• E-mailE-mail• Instant messaging (IM)Instant messaging (IM)• BlogsBlogs• WikisWikis• Voice-mailVoice-mail• Fax machinesFax machines• Electronic Data Exchange Electronic Data Exchange

(EDI)(EDI)• TeleconferencingTeleconferencing• VideoconferencingVideoconferencing• Web conferencingWeb conferencing


Information Technology (cont’d)Information Technology (cont’d)• Types of Network SystemsTypes of Network Systems

IntranetIntranet An internal network that uses Internet An internal network that uses Internet

technology and is accessible only to technology and is accessible only to employees.employees.

ExtranetExtranet An internal network that uses Internet An internal network that uses Internet

technology and allows authorized users technology and allows authorized users inside the organization to communicate inside the organization to communicate with certain outsiders such as customers with certain outsiders such as customers and vendors.and vendors.

Wireless (WIFI) capabilitiesWireless (WIFI) capabilities


How IT Affects OrganizationHow IT Affects Organization• Removes the constraints of time and distanceRemoves the constraints of time and distance

Allows widely dispersed employees to work together.Allows widely dispersed employees to work together.• Provides for the sharing of informationProvides for the sharing of information

Increases effectiveness and efficiency.Increases effectiveness and efficiency.• Integrates decision making and workIntegrates decision making and work

Provides more complete information and participation Provides more complete information and participation for better decisions.for better decisions.

• Creates problems of constant accessibility to Creates problems of constant accessibility to employeesemployees Blurs the line between work and personal lives.Blurs the line between work and personal lives.


Current Communication IssuesCurrent Communication Issues• Managing Communication in an Internet WorldManaging Communication in an Internet World

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

inadvertent or deliberate dissemination or to hackers.inadvertent or deliberate dissemination or to hackers. Lack of personal interactionLack of personal interaction

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

collaboration in virtual environements.collaboration in virtual environements.


Current Communication IssuesCurrent Communication Issues• Being connected versus being concernedBeing connected versus being concerned

Managing Internet gripe sites as a valuable resource Managing Internet gripe sites as a valuable resource for unique insights into the organization.for unique insights into the organization. Employee complaints (“hot-button” issues)Employee complaints (“hot-button” issues) Customer complaintsCustomer complaints

Responding to Internet gripe sitesResponding to Internet gripe sites Recognized them as a valuable source of information.Recognized them as a valuable source of information. Post messages that clarify misinformation.Post messages that clarify misinformation. Take action to correct problems noted on the site.Take action to correct problems noted on the site. Set up an internal gripe site.Set up an internal gripe site. Continue to monitor the public gripe site.Continue to monitor the public gripe site.


Current Communication Issues (cont’d)Current Communication Issues (cont’d)• Managing the Organization’s Knowledge Managing the Organization’s Knowledge

ResourcesResources Build online information databases that employees Build online information databases that employees

can access.can access. Create “communities of practice” for groups of people Create “communities of practice” for groups of people

who share a concern, share expertise, and interact who share a concern, share expertise, and interact with each other.with each other.


Communication and Customer ServiceCommunication and Customer Service• Communicating Effectively with CustomersCommunicating Effectively with Customers

Recognize the three components of the customer Recognize the three components of the customer service delivery process:service delivery process: The customerThe customer The service organizationThe service organization The service providerThe service provider

Develop a strong service culture focused on the Develop a strong service culture focused on the personalization of service to each customer.personalization of service to each customer. Listen and respond to the customer.Listen and respond to the customer. Provide access to needed service information.Provide access to needed service information.


““Politically Correct” CommunicationPolitically Correct” Communication• Do not use words or phrases that stereotype, Do not use words or phrases that stereotype,

intimidate, or offend individuals based on their intimidate, or offend individuals based on their differences.differences.

• However, choose words carefully to maintain as However, choose words carefully to maintain as much clarity as possible in communications.much clarity as possible in communications.


Terms to KnowTerms to Know• communicationcommunication• interpersonal interpersonal

communicationcommunication• organizational organizational

communicationcommunication• messagemessage• encodingencoding• channelchannel• decodingdecoding• communication processcommunication process• noisenoise• nonverbal communicationnonverbal communication

• body languagebody language• verbal intonationverbal intonation• filteringfiltering• selective perceptionselective perception• information overloadinformation overload• jargonjargon• active listeningactive listening• formal communicationformal communication• informal communicationinformal communication• downward communicationdownward communication• upward communicationupward communication


Terms to Know (cont’d)Terms to Know (cont’d)• lateral communicationlateral communication• diagonal communicationdiagonal communication• communication networkscommunication networks• grapevinegrapevine• e-maile-mail• instant messaging (IM)instant messaging (IM)• blogblog• wikiwiki• voice mailvoice mail• faxfax• electronic data electronic data

interchange (EDI)interchange (EDI)

• teleconferencingteleconferencing• videoconferencingvideoconferencing• web conferencingweb conferencing• intranetintranet• extranetextranet• communities of practicecommunities of practice

ninth edition

STEPHEN P. ROBBINS


MARY COULTER


Human Resource Human Resource ManagementManagement

ChapterChapter

1212



Why Human Resources Is Important: Why Human Resources Is Important: The HRM ProcessThe HRM Process

• Explain how an organization’s human resources can be a Explain how an organization’s human resources can be a significant source of competitive advantage.significant source of competitive advantage.

• List eight activities necessary for staffing the organization List eight activities necessary for staffing the organization and sustaining high employee performance.and sustaining high employee performance.

• Discuss the environmental factors that most directly affect Discuss the environmental factors that most directly affect the HRM process.the HRM process.



Human Resource Planning; Recruitment/ Human Resource Planning; Recruitment/ Decruitment; Selection; Orientation; TrainingDecruitment; Selection; Orientation; Training

• Contrast job analysis, job description, and job Contrast job analysis, job description, and job specification.specification.

• Discuss the major sources of potential job candidates.Discuss the major sources of potential job candidates.• Describe the different selection devices and which work Describe the different selection devices and which work

best for different jobs.best for different jobs.• Tell what a realistic job preview is and why it’s important.Tell what a realistic job preview is and why it’s important.• Explain why orientation is so important.Explain why orientation is so important.• Describe the different types of training and how that Describe the different types of training and how that

training can be provided.training can be provided.



Employee Performance Management; Employee Performance Management; Compensation/Benefits; Career DevelopmentCompensation/Benefits; Career Development

• Describe the different performance appraisal methods.Describe the different performance appraisal methods.

• Discuss the factors that influence employee Discuss the factors that influence employee compensation and benefits.compensation and benefits.

• Describe skill-based and variable pay systems.Describe skill-based and variable pay systems.

• Describe career development for today’s employees.Describe career development for today’s employees.

Current Issues in Human Resource ManagementCurrent Issues in Human Resource Management• Explain how managers can manage downsizing.Explain how managers can manage downsizing.

• Discuss how managers can manage workforce diversity.Discuss how managers can manage workforce diversity.



Current Issues in Human Resource Management Current Issues in Human Resource Management (cont’d)(cont’d)

• Explain what sexual harassment is and what managers Explain what sexual harassment is and what managers need to know about it.need to know about it.

• Describe how organizations are dealing with work-life Describe how organizations are dealing with work-life balances.balances.


The Importance of Human Resource The Importance of Human Resource Management (HRM)Management (HRM)• As a necessary part of the organizing function of As a necessary part of the organizing function of

managementmanagement Selecting, training, and evaluating the work forceSelecting, training, and evaluating the work force

• As an important strategic toolAs an important strategic tool HRM helps establish an organization’s sustainable HRM helps establish an organization’s sustainable

competitive advantage.competitive advantage.• Adds value to the firmAdds value to the firm

High performance work practices lead to both high High performance work practices lead to both high individual and high organizational performance.individual and high organizational performance.


Exhibit 12–1Exhibit 12–1 Examples of High-Performance Work PracticesExamples of High-Performance Work Practices

• Self-managed teamsSelf-managed teams• Decentralized decision makingDecentralized decision making• Training programs to develop knowledge, skills, Training programs to develop knowledge, skills,

and abilitiesand abilities• Flexible job assignmentsFlexible job assignments• Open communicationOpen communication• Performance-based compensationPerformance-based compensation• Staffing based on person–job and person–Staffing based on person–job and person–

organization fitorganization fit

Source: Based on W. R. Evans and W. D. Davis, “High-Performance Work Systems and Organizational Performance: The Mediating Role of Internal Social Structure,” Journal of Management, October 2005, p. 760.


The HRM ProcessThe HRM Process• Functions of the HRM ProcessFunctions of the HRM Process

Ensuring that competent employees are identified and Ensuring that competent employees are identified and selected.selected.

Providing employees with up-to-date knowledge and Providing employees with up-to-date knowledge and skills to do their jobs.skills to do their jobs.

Ensuring that the organization retains competent and Ensuring that the organization retains competent and high-performing employees who are capable of high high-performing employees who are capable of high performance.performance.


Exhibit 12–2Exhibit 12–2 Human Resource Management ProcessHuman Resource Management Process


Environmental Factors Affecting HRMEnvironmental Factors Affecting HRM• Employee Labor UnionsEmployee Labor Unions

Organizations that represent workers and seek to Organizations that represent workers and seek to protect their interests through collective bargaining.protect their interests through collective bargaining. Collective bargaining agreementCollective bargaining agreement

– A contractual agreement between a firm and a union A contractual agreement between a firm and a union elected to represent a bargaining unit of employees of the elected to represent a bargaining unit of employees of the firm in bargaining for wage, hours, and working conditions.firm in bargaining for wage, hours, and working conditions.

• Governmental Laws and RegulationsGovernmental Laws and Regulations Limit managerial discretion in hiring, promoting, and Limit managerial discretion in hiring, promoting, and

discharging employees.discharging employees. Affirmative Action: the requirement that organizations take Affirmative Action: the requirement that organizations take

proactive steps to ensure the full participation of protected proactive steps to ensure the full participation of protected groups in its workforce.groups in its workforce.


Exhibit 12–3Exhibit 12–3 Major U.S. Federal Laws and Regulations Related to HRMMajor U.S. Federal Laws and Regulations Related to HRM

19631963 Equal Pay ActEqual Pay Act19641964 Civil Rights Act, Title VII (amended in 1972) Civil Rights Act, Title VII (amended in 1972) 19671967 Age Discrimination in Employment Act Age Discrimination in Employment Act 19731973 Vocational Rehabilitation Act Vocational Rehabilitation Act 19741974 Privacy ActPrivacy Act19781978 Mandatory Retirement ActMandatory Retirement Act1986 1986 Immigration Reform and Control ActImmigration Reform and Control Act1988 1988 Worker Adjustment and Retraining Notification Act Worker Adjustment and Retraining Notification Act 1990 1990 Americans with Disabilities ActAmericans with Disabilities Act1991 1991 Civil Rights Act of 1991 Civil Rights Act of 1991 1993 1993 Family and Medical Leave Act of 1993Family and Medical Leave Act of 19931996 1996 Health Insurance Portability and Accountability Act of 1996Health Insurance Portability and Accountability Act of 199620032003 Fair and Accurate Credit Transactions ActFair and Accurate Credit Transactions Act20042004 FairPay Overtime InitiativeFairPay Overtime Initiative


Managing Human ResourcesManaging Human Resources• Human Resource (HR) PlanningHuman Resource (HR) Planning

The process by which managers ensure that they The process by which managers ensure that they have the right number and kinds of people in the right have the right number and kinds of people in the right places, and at the right times, who are capable of places, and at the right times, who are capable of effectively and efficiently performing their tasks.effectively and efficiently performing their tasks.

Helps avoid sudden talent shortages and surpluses.Helps avoid sudden talent shortages and surpluses. Steps in HR planning:Steps in HR planning:

Assessing current human resourcesAssessing current human resources Assessing future needs for human resourcesAssessing future needs for human resources Developing a program to meet those future needsDeveloping a program to meet those future needs


Current AssessmentCurrent Assessment• Human Resource InventoryHuman Resource Inventory

A review of the current make-up of the organization’s A review of the current make-up of the organization’s current resource statuscurrent resource status

Job AnalysisJob Analysis An assessment that defines a job and the behaviors An assessment that defines a job and the behaviors

necessary to perform the jobnecessary to perform the job

– Knowledge, skills, and abilities (KSAs)Knowledge, skills, and abilities (KSAs) Requires conducting interviews, engaging in direct Requires conducting interviews, engaging in direct

observation, and collecting the self-reports of employees and observation, and collecting the self-reports of employees and their managers.their managers.


Current Assessment (cont’d)Current Assessment (cont’d)• Job DescriptionJob Description

A written statement of what the job holder does, how A written statement of what the job holder does, how it is done, and why it is done.it is done, and why it is done.

• Job SpecificationJob Specification A written statement of the minimum qualifications that A written statement of the minimum qualifications that

a person must possess to perform a given job a person must possess to perform a given job successfully.successfully.


Meeting Future Human Resource NeedsMeeting Future Human Resource Needs

Supply of Employees Demand for Employees

Factors Affecting StaffingStrategic Goals

Forecast demand for products and services

Availability of knowledge, skills, and abilities


Recruitment and DecruitmentRecruitment and Decruitment• RecruitmentRecruitment

The process of locating, identifying, and attracting The process of locating, identifying, and attracting capable applicants to an organizationcapable applicants to an organization

• DecruitmentDecruitment The process of reducing a surplus of employees in The process of reducing a surplus of employees in

the workforce of an organizationthe workforce of an organization• E-recruitingE-recruiting

Recruitment of employees through the InternetRecruitment of employees through the Internet Organizational web sitesOrganizational web sites Online recruitersOnline recruiters


Exhibit 12–4Exhibit 12–4 Major Sources of Potential Job CandidatesMajor Sources of Potential Job Candidates


Exhibit 12–5Exhibit 12–5 Decruitment OptionsDecruitment Options


SelectionSelection• Selection ProcessSelection Process

The process of screening job applicants to ensure The process of screening job applicants to ensure that the most appropriate candidates are hired.that the most appropriate candidates are hired.

• What is Selection?What is Selection? An exercise in predicting which applicants, if hired, An exercise in predicting which applicants, if hired,

will be (or will not be) successful in performing well on will be (or will not be) successful in performing well on the criteria the organization uses to evaluate the criteria the organization uses to evaluate performance.performance.

Selection errors:Selection errors: Reject errors for potentially successful applicantsReject errors for potentially successful applicants Accept errors for ultimately poor performersAccept errors for ultimately poor performers


Exhibit 12–6Exhibit 12–6 Selection Decision OutcomesSelection Decision Outcomes


Validity and ReliabilityValidity and Reliability• Validity (of Prediction)Validity (of Prediction)

A proven relationship between the selection device A proven relationship between the selection device used and some relevant criterion for successful used and some relevant criterion for successful performance in an organization.performance in an organization. High tests scores equate to high job performance; low scores High tests scores equate to high job performance; low scores

to poor performance.to poor performance.

• Reliability (of Prediction)Reliability (of Prediction) The degree of consistency with which a selection The degree of consistency with which a selection

device measures the same thing.device measures the same thing. Individual test scores obtained with a selection device are Individual test scores obtained with a selection device are

consistent over multiple testing instances.consistent over multiple testing instances.


Exhibit 12–7Exhibit 12–7 Selection DevicesSelection Devices

• Application FormsApplication Forms• Written TestsWritten Tests• Performance SimulationsPerformance Simulations• InterviewsInterviews• Background InvestigationsBackground Investigations• Physical examinationsPhysical examinations


Written TestsWritten Tests• Types of TestsTypes of Tests

Intelligence: how smart are you?Intelligence: how smart are you? Aptitude: can you learn to do it?Aptitude: can you learn to do it? Attitude: how do you feel about it?Attitude: how do you feel about it? Ability: can you do it now?Ability: can you do it now? Interest: do you want to do it?Interest: do you want to do it?

• Legal Challenges to TestsLegal Challenges to Tests Lack of job-relatedness of test items or interview Lack of job-relatedness of test items or interview

questions to job requirementsquestions to job requirements Discrimination in equal employment opportunity Discrimination in equal employment opportunity

against members of protected classesagainst members of protected classes


Performance Simulation TestsPerformance Simulation Tests• Testing an applicant’s ability to perform actual Testing an applicant’s ability to perform actual

job behaviors, use required skills, and job behaviors, use required skills, and demonstrate specific knowledge of the job.demonstrate specific knowledge of the job. Work samplingWork sampling

Requiring applicants to actually perform a task or set of tasks Requiring applicants to actually perform a task or set of tasks that are central to successful job performance.that are central to successful job performance.

Assessment centersAssessment centers Dedicated facilities in which job candidates undergo a series Dedicated facilities in which job candidates undergo a series

of performance simulation tests to evaluate their managerial of performance simulation tests to evaluate their managerial potential.potential.


Other Selection ApproachesOther Selection Approaches• InterviewsInterviews

Although used almost universally, managers need to Although used almost universally, managers need to approach interviews carefully.approach interviews carefully.

• Background InvestigationsBackground Investigations Verification of application dataVerification of application data Reference checks:Reference checks:

Lack validity because self-selection of references ensures Lack validity because self-selection of references ensures only positive outcomes.only positive outcomes.

• Physical ExaminationsPhysical Examinations Useful for physical requirements and for insurance Useful for physical requirements and for insurance

purposes related to pre-existing conditions.purposes related to pre-existing conditions.


Exhibit 12–8Exhibit 12–8 Suggestions for InterviewingSuggestions for Interviewing

1.1. Structure a Structure a fixed set of questionsfixed set of questions for all applicants. for all applicants.

2.2. Have Have detailed informationdetailed information about the jobabout the job for which applicants for which applicants are interviewing.are interviewing.

3.3. Minimize any prior knowledgeMinimize any prior knowledge of applicants’ background, of applicants’ background, experience, interests, test scores, or other characteristics.experience, interests, test scores, or other characteristics.

4.4. Ask behavioral questionsAsk behavioral questions that require applicants to give that require applicants to give detailed accounts of actual job behaviors.detailed accounts of actual job behaviors.

5.5. Use a Use a standardized evaluation formstandardized evaluation form..

6.6. Take notesTake notes during the interview. during the interview.

7.7. Avoid short interviewsAvoid short interviews that encourage premature decision that encourage premature decision making.making.

Source: Based on D.A. DeCenzo and S.P. Robbins, Human Resource Management, 7th ed. (New York Wiley: 2002, p. 200)


Exhibit 12–9Exhibit 12–9 Examples of “Can’t Ask and Can Ask” Interview Questions Examples of “Can’t Ask and Can Ask” Interview Questions for Managers*for Managers*

Can’t AskCan’t Ask• What’s your birth date? What’s your birth date?

or How old are you?or How old are you?• What’s your marital What’s your marital

status? or Do you plan status? or Do you plan to have a family?to have a family?

• What’s your native What’s your native language?language?

• Have you ever been Have you ever been arrested?arrested?

Can AskCan Ask• Are you over 18?Are you over 18?• Would you relocate?Would you relocate?• Are you authorized to Are you authorized to

work in the United work in the United States?States?

• Have you ever been Have you ever been convicted of [fill in the convicted of [fill in the blank]?—The crime must blank]?—The crime must be reasonably related to be reasonably related to the performance of the the performance of the job.job.

* Note: Managers should be aware that there are numerous other “can and can’t ask” questions. Be sure to always check with your HR department for specific guidance.


Exhibit 12–10Exhibit 12–10 Quality of Selection Devices as PredictorsQuality of Selection Devices as Predictors


Other Selection Approaches (cont’d)Other Selection Approaches (cont’d)• Realistic Job Preview (RJP)Realistic Job Preview (RJP)

The process of relating to an applicant both the The process of relating to an applicant both the positive and the negative aspects of the job.positive and the negative aspects of the job. Encourages mismatched applicants to withdraw.Encourages mismatched applicants to withdraw. Aligns successful applicants’ expectations with actual job Aligns successful applicants’ expectations with actual job

conditions; reducing turnover.conditions; reducing turnover.


OrientationOrientation• Transitioning a new employee into the Transitioning a new employee into the

organization.organization. Work-unit orientationWork-unit orientation

Familiarizes new employee with work-unit goalsFamiliarizes new employee with work-unit goals Clarifies how his or her job contributes to unit goalsClarifies how his or her job contributes to unit goals Introduces he or she to his or her coworkersIntroduces he or she to his or her coworkers

Organization orientationOrganization orientation Informs new employee about the organization’s objectives, Informs new employee about the organization’s objectives,

history, philosophy, procedures, and rules.history, philosophy, procedures, and rules. Includes a tour of the entire facilityIncludes a tour of the entire facility


Exhibit 12–11Exhibit 12–11 Types of TrainingTypes of Training

TypeType IncludesIncludesGeneralGeneral Communication skills, computer systems application Communication skills, computer systems application

and programming, customer service, executive and programming, customer service, executive development, management skills and development, development, management skills and development, personal growth, sales, supervisory skills, and personal growth, sales, supervisory skills, and technological skills and knowledgetechnological skills and knowledge

SpecificSpecific Basic life/work skills, creativity, customer education, Basic life/work skills, creativity, customer education, diversity/cultural awareness, remedial writing, managing diversity/cultural awareness, remedial writing, managing change, leadership, product knowledge, public change, leadership, product knowledge, public speaking/presentation skills, safety, ethics, sexual speaking/presentation skills, safety, ethics, sexual harassment, team building, wellness, and others harassment, team building, wellness, and others

Source: Based on “2005 Industry Report—Types of Training,” Training, December 2005, p. 22.


Exhibit 12–12Exhibit 12–12 Employee Training MethodsEmployee Training Methods

• Traditional Traditional Training MethodsTraining Methods On-the-jobOn-the-job Job rotationJob rotation Mentoring and coachingMentoring and coaching Experiential exercisesExperiential exercises Workbooks/manualsWorkbooks/manuals Classroom lectures Classroom lectures

• Technology-Based Technology-Based Training MethodsTraining Methods CD-ROM/DVD/videotapes/ CD-ROM/DVD/videotapes/

audiotapesaudiotapes Videoconferencing/ Videoconferencing/

teleconferencing/teleconferencing/satellite TVsatellite TV

E-learningE-learning


Employee Performance ManagementEmployee Performance Management• Performance Management SystemPerformance Management System

A process of establishing performance standards and A process of establishing performance standards and appraising employee performance in order to arrive at appraising employee performance in order to arrive at objective HR decisions and to provide documentation objective HR decisions and to provide documentation in support of those decisions.in support of those decisions.


Exhibit 12–13 Advantages and Disadvantages of Performance Appraisal MethodsExhibit 12–13 Advantages and Disadvantages of Performance Appraisal Methods

MethodMethod AdvantageAdvantage DisadvantageDisadvantageWritten Written essaysessays

Simple to useSimple to use More a measure of evaluator’s writing More a measure of evaluator’s writing ability than of employee’s actual ability than of employee’s actual performanceperformance

Critical Critical incidentsincidents

Rich examples; behaviorally Rich examples; behaviorally basedbased

Time-consuming; lack quantificationTime-consuming; lack quantification

Graphic Graphic rating scalesrating scales

Provide quantitative data; Provide quantitative data; less time-consuming than less time-consuming than othersothers

Do not provide depth of job behavior Do not provide depth of job behavior assessedassessed

BARSBARS Focus on specific and Focus on specific and measurable job behaviorsmeasurable job behaviors

Time-consuming; difficult to developTime-consuming; difficult to develop

Multiperson Multiperson comparisonscomparisons

Compares employees with Compares employees with one anotherone another

Unwieldy with large number of Unwieldy with large number of employees; legal concernsemployees; legal concerns

MBOMBO Focuses on end goals; Focuses on end goals; results orientedresults oriented

Time-consumingTime-consuming

360-degree 360-degree appraisalsappraisals

ThoroughThorough Time-consumingTime-consuming


Compensation and BenefitsCompensation and Benefits• Benefits of a Fair, Effective, and Appropriate Benefits of a Fair, Effective, and Appropriate

Compensation SystemCompensation System Helps attract and retain high-performance employeesHelps attract and retain high-performance employees Impacts on the strategic performance of the firmImpacts on the strategic performance of the firm

• Types of CompensationTypes of Compensation Base wage or salaryBase wage or salary Wage and salary add-onsWage and salary add-ons Incentive paymentsIncentive payments Skill-based paySkill-based pay Variable payVariable pay


Exhibit 12–14Exhibit 12–14 Factors That Influence Compensation and BenefitsFactors That Influence Compensation and Benefits

Sources: Based on R.I. Henderson, Compensation Management, 6th ed. (Upper Saddle River, NJ: Prentice Hall, 1994), pp. 3–24; and A. Murray, “Mom, Apple Pie, and Small Business,” Wall Street Journal, August 15, 1994, p. A1


Career DevelopmentCareer Development• Career DefinedCareer Defined

The sequence of positions held by a person during The sequence of positions held by a person during his or her lifetime.his or her lifetime.

The Way It WasThe Way It Was Career DevelopmentCareer Development

– Provided for information, assessment, and trainingProvided for information, assessment, and training– Helped attract and retain highly talented peopleHelped attract and retain highly talented people

NowNow– Individuals—not the organization—are responsible for Individuals—not the organization—are responsible for

designing, guiding, and developing their own careers.designing, guiding, and developing their own careers. Boundaryless CareerBoundaryless Career

A career in which individuals, not organizations, define career A career in which individuals, not organizations, define career progression and organizational loyaltyprogression and organizational loyalty


Exhibit 12–15Exhibit 12–15 What College Graduates Want From JobsWhat College Graduates Want From Jobs

Top Factors for U.S. Top Factors for U.S. StudentsStudents

Work–life balance Work–life balance Annual base salaryAnnual base salary Job stability and securityJob stability and security Recognition for a job done Recognition for a job done

wellwell Increasingly challenging Increasingly challenging

taskstasks Rotational programsRotational programs

Top Factors for U.K. Top Factors for U.K. StudentsStudents

International career International career opportunitiesopportunities

Flexible working hoursFlexible working hours Variety of assignmentsVariety of assignments Paid overtimePaid overtime

Sources: Based on S. Shellenbarger, “Avoiding the Next Enron: Today’s Crop of Soon-to-Be Grads Seeks Job Security,” Wall Street Journal Online, February 16, 2006; “MBAs Eye Financial Services and Management Consulting,” HRMarketer.com, June 7, 2005; and J. Boone, “Students Set Tighter Terms for Work,” FinancialTimes.com, May 21, 2005.


Exhibit 12–16Exhibit 12–16Some Suggestions Some Suggestions for a Successful for a Successful Management CareerManagement Career


Current Issues in HRMCurrent Issues in HRM• Managing DownsizingManaging Downsizing

The planned elimination of jobs in an organizationThe planned elimination of jobs in an organization Provide open and honest communication.Provide open and honest communication. Provide assistance to employees being downsized.Provide assistance to employees being downsized. Reassure and counseling to surviving employees.Reassure and counseling to surviving employees.

• Managing Work Force DiversityManaging Work Force Diversity Widen the recruitment net for diversityWiden the recruitment net for diversity Ensure selection without discriminationEnsure selection without discrimination Provide orientation and training that is effectiveProvide orientation and training that is effective


Current Issues in HRM (cont’d)Current Issues in HRM (cont’d)• Sexual HarassmentSexual Harassment

An unwanted activity of a sexual nature that affects An unwanted activity of a sexual nature that affects an individual’s employment.an individual’s employment. Unwanted sexual advances, requests for sexual favors, and Unwanted sexual advances, requests for sexual favors, and

other verbal or physical conduct of a sexual nature when other verbal or physical conduct of a sexual nature when submission or rejection of this conduct explicitly or implicitly submission or rejection of this conduct explicitly or implicitly affects an individual’s employment.affects an individual’s employment.

An offensive or hostile environmentAn offensive or hostile environment An environment in which a person is affected by elements of An environment in which a person is affected by elements of

a sexual nature.a sexual nature.

• Workplace RomancesWorkplace Romances Potential liability for harassmentPotential liability for harassment


Current Issues in HRM (cont’d)Current Issues in HRM (cont’d)• Work-Life BalanceWork-Life Balance

Employees have personal lives that they don’t leave Employees have personal lives that they don’t leave behind when they come to work.behind when they come to work.

Organizations have become more attuned to their Organizations have become more attuned to their employees by offering employees by offering family-friendly benefitsfamily-friendly benefits:: On-site child careOn-site child care Summer day campsSummer day camps FlextimeFlextime Job sharingJob sharing Leave for personal mattersLeave for personal matters Flexible job hoursFlexible job hours


Current Issues in HRM (cont’d)Current Issues in HRM (cont’d)• Controlling HR CostsControlling HR Costs

Employee health-careEmployee health-care Encouraging healthy lifestylesEncouraging healthy lifestyles

– Financial incentivesFinancial incentives– Wellness programsWellness programs– Charging employees with poor health habits more for Charging employees with poor health habits more for

benefitsbenefits Employee pension plansEmployee pension plans

Reducing pension benefitsReducing pension benefits No longer providing pension plansNo longer providing pension plans


Terms to KnowTerms to Know• high-performance work high-performance work

practicespractices• human resource human resource

management processmanagement process• labor unionlabor union• affirmative actionaffirmative action• human resource planninghuman resource planning• job analysisjob analysis• job descriptionjob description• job specificationjob specification• recruitmentrecruitment• decruitmentdecruitment

• selectionselection• validityvalidity• reliabilityreliability• work samplingwork sampling• assessment centersassessment centers• realistic job preview (RJP)realistic job preview (RJP)• orientationorientation• performance performance

management systemmanagement system• written essaywritten essay• critical incidentscritical incidents• graphic rating scalesgraphic rating scales


Terms to Know (cont’d)Terms to Know (cont’d)• behaviorally anchored behaviorally anchored

rating scales (BARS)rating scales (BARS)• multiperson comparisonsmultiperson comparisons• 360 degree feedback360 degree feedback• skill-based pay skill-based pay • variable payvariable pay• careercareer• downsizingdownsizing• sexual harassmentsexual harassment• family-friendly benefitsfamily-friendly benefits

ninth edition

STEPHEN P. ROBBINS


MARY COULTER


Managing Change Managing Change and Innovationand Innovation

ChapterChapter

1313



Forces for Change: Two Views of the Change Forces for Change: Two Views of the Change ProcessProcess

• Discuss the external and internal forces for change.Discuss the external and internal forces for change.• Contrast the calm waters and white-water rapids Contrast the calm waters and white-water rapids

metaphors of change.metaphors of change.• Explain Lewin’s three-step model of the change process.Explain Lewin’s three-step model of the change process.

Managing Organizational ChangeManaging Organizational Change• Define organizational change.Define organizational change.• Contrast internal and external change agents.Contrast internal and external change agents.• Explain how managers might change structure, Explain how managers might change structure,

technology, and people.technology, and people.



Managing ChangeManaging Change• Explain why people resist change and how resistance Explain why people resist change and how resistance

might be managed.might be managed.

Contemporary Issues in Managing ChangeContemporary Issues in Managing Change• Explain why changing organizational culture is so difficult Explain why changing organizational culture is so difficult

and how managers can do it.and how managers can do it.• Describe employee stress and how managers can help Describe employee stress and how managers can help

employees deal with stress.employees deal with stress.• Discuss what it takes to make change happen Discuss what it takes to make change happen

successfully.successfully.



Stimulating InnovationStimulating Innovation• Explain why innovation isn’t just creativity.Explain why innovation isn’t just creativity.• Explain the systems view of innovation.Explain the systems view of innovation.• Describe the structural, cultural, and human resource Describe the structural, cultural, and human resource

variables that are necessary for innovation.variables that are necessary for innovation.• Explain what idea champions are and why they’re Explain what idea champions are and why they’re

important to innovation.important to innovation.


What Is Change?What Is Change?• Organizational ChangeOrganizational Change

Any alterations in the people, structure, or technology Any alterations in the people, structure, or technology of an organizationof an organization

• Characteristics of ChangeCharacteristics of Change Is constant yet varies in degree and directionIs constant yet varies in degree and direction Produces uncertainty yet is not completely Produces uncertainty yet is not completely

unpredictableunpredictable Creates both threats and opportunitiesCreates both threats and opportunities

• Managing change is an integral partManaging change is an integral partof every manager’s job.of every manager’s job.


Forces for ChangeForces for Change• External ForcesExternal Forces

MarketplaceMarketplace Governmental laws Governmental laws

and regulationsand regulations TechnologyTechnology Labor marketLabor market Economic changesEconomic changes

• Internal ForcesInternal Forces Changes in Changes in

organizational organizational strategystrategy

Workforce changesWorkforce changes New equipmentNew equipment Employee attitudesEmployee attitudes


Change Process ViewpointsChange Process Viewpoints• The Calm Waters MetaphorThe Calm Waters Metaphor

Lewin’s description of the change process as a break Lewin’s description of the change process as a break in the organization’s equilibrium statein the organization’s equilibrium state UnfreezingUnfreezing the status quo the status quo ChangingChanging to a new state to a new state RefreezingRefreezing to make the change permanent to make the change permanent

• White-Water Rapids MetaphorWhite-Water Rapids Metaphor The lack of environmental stability and predictability The lack of environmental stability and predictability

requires that managers and organizations continually requires that managers and organizations continually adapt (manage change actively) to survive.adapt (manage change actively) to survive.


Exhibit 13–1Exhibit 13–1 The Change ProcessThe Change Process


Change AgentsChange Agents• Change AgentsChange Agents

Persons who act as catalysts and assume the Persons who act as catalysts and assume the responsibility for managing the change process.responsibility for managing the change process.

• Types of Change AgentsTypes of Change Agents Managers: internal entrepreneursManagers: internal entrepreneurs Nonmanagers: change specialistsNonmanagers: change specialists Outside consultants: change implementation expertsOutside consultants: change implementation experts


Exhibit 13–2Exhibit 13–2 Three Categories of ChangeThree Categories of Change


Types of ChangeTypes of Change• StructuralStructural

Changing an organization’s Changing an organization’s structural components or its structural components or its structural designstructural design

• TechnologicalTechnological Adopting new equipment, Adopting new equipment,

tools, or operating methods tools, or operating methods that displace old skills and that displace old skills and require new onesrequire new ones Automation: replacing Automation: replacing

certain tasks done by certain tasks done by people with machinespeople with machines

ComputerizationComputerization

• PeoplePeople Changing attitudes, Changing attitudes,

expectations, perceptions, expectations, perceptions, and behaviors of the and behaviors of the workforceworkforce

• Organizational Organizational development (OD)development (OD) Techniques or programs to Techniques or programs to

change people and the change people and the nature and quality of nature and quality of interpersonal work interpersonal work relationships.relationships.


Organizational DevelopmentOrganizational Development• Organizational Development (OD)Organizational Development (OD)

Techniques or programs to change people and the Techniques or programs to change people and the nature and quality of interpersonal work relationships.nature and quality of interpersonal work relationships.

• Global ODGlobal OD OD techniques that work for U.S. organizations may OD techniques that work for U.S. organizations may

be inappropriate in other countries and cultures.be inappropriate in other countries and cultures.


Exhibit 13–3Exhibit 13–3 Organizational Development TechniquesOrganizational Development Techniques


Managing Resistance to ChangeManaging Resistance to Change• Why People Resist Change?Why People Resist Change?

The ambiguity and uncertainty that change introducesThe ambiguity and uncertainty that change introduces

The comfort of old habitsThe comfort of old habits

A concern over personal loss of status, money, A concern over personal loss of status, money, authority, friendships, and personal convenienceauthority, friendships, and personal convenience

The perception that change is incompatible with the The perception that change is incompatible with the goals and interest of the organizationgoals and interest of the organization


Exhibit 13–4Exhibit 13–4 Managerial Actions to Reduce Resistance to ChangeManagerial Actions to Reduce Resistance to Change

• Education and communicationEducation and communication• ParticipationParticipation• Facilitation and supportFacilitation and support• NegotiationNegotiation• Manipulation and co-optationManipulation and co-optation• Selecting people who accept changeSelecting people who accept change• CoercionCoercion


Issues in Managing Change (cont’d)Issues in Managing Change (cont’d)• Changing Organizational CulturesChanging Organizational Cultures

Cultures are naturally resistant to change.Cultures are naturally resistant to change. Conditions that facilitate cultural change:Conditions that facilitate cultural change:

The occurrence of a dramatic crisisThe occurrence of a dramatic crisis Leadership changing handsLeadership changing hands A young, flexible, and small organizationA young, flexible, and small organization A weak organizational cultureA weak organizational culture


Exhibit 13–5Exhibit 13–5 Strategies for Managing Cultural ChangeStrategies for Managing Cultural Change

• Set the tone through management behavior; top managers, Set the tone through management behavior; top managers, particularly, need to be positive role models.particularly, need to be positive role models.

• Create new stories, symbols, and rituals to replace those Create new stories, symbols, and rituals to replace those currently in use.currently in use.

• Select, promote, and support employees who adopt the new Select, promote, and support employees who adopt the new values.values.

• Redesign socialization processes to align with the new values.Redesign socialization processes to align with the new values.• To encourage acceptance of the new values, change the To encourage acceptance of the new values, change the

reward system.reward system.• Replace unwritten norms with clearly specified expectations.Replace unwritten norms with clearly specified expectations.• Shake up current subcultures through job transfers, job Shake up current subcultures through job transfers, job

rotation, and/or terminations.rotation, and/or terminations.• Work to get consensus through employee participation and Work to get consensus through employee participation and

creating a climate with a high level of trust.creating a climate with a high level of trust.


Issues in Managing Change (cont’d)Issues in Managing Change (cont’d)• Handling Employee StressHandling Employee Stress

StressStress The adverse reaction people have to excessive pressure The adverse reaction people have to excessive pressure

placed on them from extraordinary demands, constraints, or placed on them from extraordinary demands, constraints, or opportunities. opportunities.

Functional StressFunctional Stress

– Stress that has a positive effect on performance.Stress that has a positive effect on performance.

How Potential Stress Becomes Actual StressHow Potential Stress Becomes Actual Stress When there is uncertainty over the outcome.When there is uncertainty over the outcome. When the outcome is important.When the outcome is important.


Exhibit 13–6Exhibit 13–6 Causes of StressCauses of Stress


Exhibit 13–7Exhibit 13–7 Symptoms of StressSymptoms of Stress


Issues in Managing Change (cont’d)Issues in Managing Change (cont’d)• Reducing StressReducing Stress

Engage in proper employee selectionEngage in proper employee selection Match employees’ KSA’s to jobs’ Tasks, Duties, and Match employees’ KSA’s to jobs’ Tasks, Duties, and

Responsibilities (TDR’s)Responsibilities (TDR’s) Use realistic job interviews for reduce ambiguityUse realistic job interviews for reduce ambiguity Improve organizational communicationsImprove organizational communications Develop a performance planning programDevelop a performance planning program Use job redesignUse job redesign Provide a counseling programProvide a counseling program Offer time planning management assistanceOffer time planning management assistance Sponsor wellness programsSponsor wellness programs


Issues in Managing Change (cont’d)Issues in Managing Change (cont’d)• Making Change Happen SuccessfullyMaking Change Happen Successfully

Embrace changeEmbrace change—become a change-capable —become a change-capable organization.organization.

Create a simple, compelling message explaining why Create a simple, compelling message explaining why change is necessary.change is necessary.

Communicate constantly and honestly.Communicate constantly and honestly. Foster as much employee participation as possible—Foster as much employee participation as possible—

get all employees committed.get all employees committed. Encourage employees to be flexible.Encourage employees to be flexible. Remove those who resist and cannot be changed.Remove those who resist and cannot be changed.


Exhibit 13–8Exhibit 13–8 Characteristics of Change-Capable OrganizationsCharacteristics of Change-Capable Organizations

• Link the present and Link the present and the future.the future.

• Make learning a way Make learning a way of life.of life.

• Actively support and Actively support and encourage day-to-day encourage day-to-day improvements and improvements and changes.changes.

• Ensure diverse teams.Ensure diverse teams.

• Encourage mavericks.Encourage mavericks.

• Shelter breakthroughsShelter breakthroughs

• Integrate technology.Integrate technology.

• Build and deepen trust.Build and deepen trust.


Stimulating InnovationStimulating Innovation• CreativityCreativity

The ability to combine ideas in a unique way or to The ability to combine ideas in a unique way or to make an unusual association.make an unusual association.

• InnovationInnovation Turning the outcomes of the creative process into Turning the outcomes of the creative process into

useful products, services, or work methods.useful products, services, or work methods.• Idea ChampionIdea Champion

Dynamic self-confident leaders who actively and Dynamic self-confident leaders who actively and enthusiastically inspire support for new ideas, build enthusiastically inspire support for new ideas, build support, overcome resistance, and ensure that support, overcome resistance, and ensure that innovations are implemented.innovations are implemented.


Exhibit 13–9Exhibit 13–9 Innovative Companies Around the WorldInnovative Companies Around the World

Data: Boston Consulting Group * We broke ties by comparing 10-year annualized total shareholder returns. In ties between a public and a private company, the public company was favored.

Source: “A Global Pulse of Innovation,” BusinessWeek, April 24, 2006, p. 74.


Exhibit 13–10Exhibit 13–10 Systems View of InnovationSystems View of Innovation

Source: Adapted from R.W. Woodman, J.E. Sawyer, and R.W. Griffin, “Toward a Theory of Organizational Creativity,” Academy of Management Review, April 1993, p. 309.


Exhibit 13–11Exhibit 13–11Innovation Innovation VariablesVariables


Creating the “Right” Environment for Creating the “Right” Environment for InnovationInnovation• Structural VariablesStructural Variables

Adopt an organic structureAdopt an organic structure Make available plentiful resourcesMake available plentiful resources Engage in frequent interunit communicationEngage in frequent interunit communication Minimize extreme time pressures on creative Minimize extreme time pressures on creative

activitiesactivities Provide explicit support for creativityProvide explicit support for creativity


Creating the “Right” Environment for Creating the “Right” Environment for Innovation (cont’d)Innovation (cont’d)• Cultural VariablesCultural Variables

Accept ambiguityAccept ambiguity Tolerate the impracticalTolerate the impractical Have low external controlsHave low external controls Tolerate risk takingTolerate risk taking Tolerate conflictTolerate conflict Focus on ends rather than meansFocus on ends rather than means Develop an open-system focusDevelop an open-system focus Provide positive feedbackProvide positive feedback


Creating the “Right” Environment for Creating the “Right” Environment for Innovation (cont’d)Innovation (cont’d)• Human Resource VariablesHuman Resource Variables

Actively promote training and development to keep Actively promote training and development to keep employees’ skills current.employees’ skills current.

Offer high job security to encourage risk taking.Offer high job security to encourage risk taking. Encourage individual to be “champions” of change.Encourage individual to be “champions” of change.


Terms to KnowTerms to Know• organizational changeorganizational change• change agentchange agent• organizational organizational

development (OD)development (OD)• stressstress• creativitycreativity• innovationinnovation• idea championidea champion

ninth edition

STEPHEN P. ROBBINS


MARY COULTER


Foundations Foundations of Behaviorof Behavior

ChapterChapter

1414



Why Look at Individual Behavior?Why Look at Individual Behavior?• Explain why the concept of an organization as an iceberg Explain why the concept of an organization as an iceberg

is important to understanding organizational behavior.is important to understanding organizational behavior.• Describe the focus and the goals of organizational Describe the focus and the goals of organizational

behavior.behavior.• Define the six important employee behaviors that Define the six important employee behaviors that

managers want to explain, predict, and influence.managers want to explain, predict, and influence.

AttitudesAttitudes• Describe the three components of an attitude.Describe the three components of an attitude.• Discuss three job-related attitudes.Discuss three job-related attitudes.• Describe the impact job satisfaction has on employee Describe the impact job satisfaction has on employee

behavior.behavior.



Attitudes (cont’d)Attitudes (cont’d)• Explain how individuals reconcile inconsistencies Explain how individuals reconcile inconsistencies

between attitudes and behavior.between attitudes and behavior.•PersonalityPersonality

• Contrast the MBTI and the big-five model of personality.Contrast the MBTI and the big-five model of personality.• Describe the five personality traits that have proved to be Describe the five personality traits that have proved to be

most powerful in explaining individual behavior in most powerful in explaining individual behavior in organizations.organizations.

• Explain how emotions and emotional intelligence impact Explain how emotions and emotional intelligence impact behavior.behavior.



PerceptionPerception• Explain how an understanding of perception can help Explain how an understanding of perception can help

managers.managers.• Describe the key elements of attribution theory.Describe the key elements of attribution theory.• Discuss how the fundamental attribution error and self-Discuss how the fundamental attribution error and self-

serving bias can distort attributions.serving bias can distort attributions.• Name three shortcuts used in judging others.Name three shortcuts used in judging others.

LearningLearning• Explain how operant conditioning helps managers Explain how operant conditioning helps managers

understand, predict, and influence behavior.understand, predict, and influence behavior.• Describe the implications of social learning theory for Describe the implications of social learning theory for

managing people at work.managing people at work.



Learning (cont’d)Learning (cont’d)• Discuss how managers can shape behavior.Discuss how managers can shape behavior.

Contemporary OB IssuesContemporary OB Issues• Describe the challenges managers face in managing Gen Describe the challenges managers face in managing Gen

Y workers.Y workers.• Explain what managers can do to deal with workplace Explain what managers can do to deal with workplace

misbehavior. misbehavior.


Why Look at Individual Behavior?Why Look at Individual Behavior?• Organizational Behavior (OB)Organizational Behavior (OB)

The actions of people at workThe actions of people at work• Focus of Organizational BehaviorFocus of Organizational Behavior

Individual behaviorIndividual behavior Attitudes, personality, perception, learning, and motivationAttitudes, personality, perception, learning, and motivation

Group behaviorGroup behavior Norms, roles, team building, leadership, and conflictNorms, roles, team building, leadership, and conflict

• Goals of Organizational BehaviorGoals of Organizational Behavior To explain, predict and influence behavior.To explain, predict and influence behavior.


Exhibit 14.1Exhibit 14.1 The Organization as an IcebergThe Organization as an Iceberg


Important Employee BehaviorsImportant Employee Behaviors• Employee ProductivityEmployee Productivity

A performance measure of both efficiency and A performance measure of both efficiency and effectivenesseffectiveness

• AbsenteeismAbsenteeism The failure to report to work when expectedThe failure to report to work when expected

• TurnoverTurnover The voluntary and involuntary The voluntary and involuntary

permanent withdrawal from permanent withdrawal from an organizationan organization


Important Employee Behaviors (cont’d)Important Employee Behaviors (cont’d)• Organizational Citizenship Behavior (OCB)Organizational Citizenship Behavior (OCB)

Discretionary behavior that is not a part of an Discretionary behavior that is not a part of an employee’s formal job requirements, but which employee’s formal job requirements, but which promotes the effective functioning of the organization.promotes the effective functioning of the organization.

• Job SatisfactionJob Satisfaction The individual’s general attitude The individual’s general attitude

toward his or her jobtoward his or her job


Important Employee Behaviors (cont’d)Important Employee Behaviors (cont’d)• Workplace MisbehaviorWorkplace Misbehavior

Any intentional employee behavior that has negative Any intentional employee behavior that has negative consequences for the organization or individuals consequences for the organization or individuals within the organization.within the organization.

Types of MisbehaviorTypes of Misbehavior DevianceDeviance AggressionAggression Antisocial behaviorAntisocial behavior ViolenceViolence


Psychological Factors Affecting Psychological Factors Affecting Employee BehaviorEmployee Behavior

• AttitudesAttitudes

• PersonalityPersonality

• PerceptionPerception

• LearningLearning

• Employee Employee ProductivityProductivity

• AbsenteeismAbsenteeism• TurnoverTurnover• Organizational Organizational

CitizenshipCitizenship• Job SatisfactionJob Satisfaction• Workplace Workplace

MisbehaviorMisbehavior


Psychological FactorsPsychological Factors• AttitudesAttitudes

Evaluative statementsEvaluative statements—either favorable or —either favorable or unfavorable—concerning objects, people, or events.unfavorable—concerning objects, people, or events.

• Components Of An AttitudeComponents Of An Attitude Cognitive component:Cognitive component: the beliefs, opinions, the beliefs, opinions,

knowledge, or information held by a person.knowledge, or information held by a person. Affective component:Affective component: the emotional or feeling part the emotional or feeling part

of an attitude.of an attitude. Behavioral component:Behavioral component: the intention to behave in a the intention to behave in a

certain way.certain way.


Psychological Factors (cont’d)Psychological Factors (cont’d)• Job SatisfactionJob Satisfaction

Job satisfaction is affected by level of income earned Job satisfaction is affected by level of income earned and by the type of job a worker does.and by the type of job a worker does.

• Job Satisfaction and ProductivityJob Satisfaction and Productivity For individuals, productivity appears to lead to job For individuals, productivity appears to lead to job

satisfaction.satisfaction. For organizations, those with more satisfied For organizations, those with more satisfied

employees are more effective than those with less employees are more effective than those with less satisfied employees.satisfied employees.


Psychological Factors (cont’d)Psychological Factors (cont’d)• Job Satisfaction and AbsenteeismJob Satisfaction and Absenteeism

Satisfied employees tend to have lower levels of Satisfied employees tend to have lower levels of absenteeism.absenteeism.

• Job Satisfaction and TurnoverJob Satisfaction and Turnover Satisfied employees have lower levels of turnover; Satisfied employees have lower levels of turnover;

dissatisfied employees have higher levels of turnover.dissatisfied employees have higher levels of turnover. Turnover is affected by the level of employee Turnover is affected by the level of employee

performance.performance. The preferential treatment afforded superior employees The preferential treatment afforded superior employees

makes satisfaction less important in predicting their turnover makes satisfaction less important in predicting their turnover decisions.decisions.


Psychological Factors (cont’d)Psychological Factors (cont’d)• Job Satisfaction and Customer SatisfactionJob Satisfaction and Customer Satisfaction

The level of job satisfaction for frontline employees is The level of job satisfaction for frontline employees is related to increased customer satisfaction and loyalty.related to increased customer satisfaction and loyalty.

Interaction with dissatisfied customers can increase Interaction with dissatisfied customers can increase an employee’s job dissatisfaction.an employee’s job dissatisfaction.

Actions to increase job satisfaction for customer Actions to increase job satisfaction for customer service workers:service workers: Hire upbeat and friendly employees.Hire upbeat and friendly employees. Reward superior customer service.Reward superior customer service. Provide a positive work climate.Provide a positive work climate. Use attitude surveys to track employee satisfaction.Use attitude surveys to track employee satisfaction.


Psychological Factors (cont’d)Psychological Factors (cont’d)• Job Satisfaction and Workplace MisbehaviorJob Satisfaction and Workplace Misbehavior

Dissatisfied employees will respond somehowDissatisfied employees will respond somehow Not easy to predict exactly how they’ll respondNot easy to predict exactly how they’ll respond


Psychological Factors (cont’d)Psychological Factors (cont’d)• Job InvolvementJob Involvement

The degree to which an employee identifies with his The degree to which an employee identifies with his or her job, actively participates in it, and considers his or her job, actively participates in it, and considers his or her performance to be important to his or her self-or her performance to be important to his or her self-worth.worth. High levels of commitment are related to fewer absences and High levels of commitment are related to fewer absences and

lower resignation rates.lower resignation rates.


Psychological Factors (cont’d)Psychological Factors (cont’d)• Organizational CommitmentOrganizational Commitment

Is the degree to which an employee identifies with a Is the degree to which an employee identifies with a particular organization and its goals and wishes to particular organization and its goals and wishes to maintain membership in the organization.maintain membership in the organization.

Leads to lower levels of both absenteeism and Leads to lower levels of both absenteeism and turnover.turnover.

Could be becoming an outmoded measure as the Could be becoming an outmoded measure as the number of workers who change employers increases.number of workers who change employers increases.


Psychological Factors (cont’d)Psychological Factors (cont’d)• Perceived Organizational SupportPerceived Organizational Support

Is the general belief of employees that their Is the general belief of employees that their organization values their contribution and cares about organization values their contribution and cares about their well-being.their well-being.

Represents the commitment of the organization to the Represents the commitment of the organization to the employee.employee.

Providing high levels of support increases job Providing high levels of support increases job satisfaction and lower turnover.satisfaction and lower turnover.


Attitudes and ConsistencyAttitudes and Consistency• People seek consistency in two ways:People seek consistency in two ways:

Consistency among their attitudes.Consistency among their attitudes. Consistency between their attitudes and behaviors.Consistency between their attitudes and behaviors.

• If an inconsistency arises, individuals:If an inconsistency arises, individuals: Alter their attitudesAlter their attitudes

oror Alter their behaviorAlter their behavior

oror Develop a rationalization for the inconsistencyDevelop a rationalization for the inconsistency


Cognitive Dissonance TheoryCognitive Dissonance Theory• Cognitive DissonanceCognitive Dissonance

Any incompatibility or inconsistency between attitudes Any incompatibility or inconsistency between attitudes or between behavior and attitudes.or between behavior and attitudes. Any form of inconsistency is uncomfortable and individuals Any form of inconsistency is uncomfortable and individuals

will try to reduce the dissonance.will try to reduce the dissonance.

The intensity of the desire to reduce the dissonance is The intensity of the desire to reduce the dissonance is influenced by:influenced by: The importance of the factors creating the dissonance.The importance of the factors creating the dissonance. The degree to which an individual believes that the factors The degree to which an individual believes that the factors

causing the dissonance are controllable.causing the dissonance are controllable. Rewards available to compensate for the dissonance.Rewards available to compensate for the dissonance.


Attitude SurveysAttitude Surveys• Attitude SurveysAttitude Surveys

A instrument/document that presents employees with A instrument/document that presents employees with a set of statements or questions eliciting how they a set of statements or questions eliciting how they feel about their jobs, work groups, supervisors, or feel about their jobs, work groups, supervisors, or their organization.their organization.

Provide management with feedback on employee Provide management with feedback on employee perceptions of the organization and their jobs.perceptions of the organization and their jobs.


Exhibit 14.2Exhibit 14.2 Sample Attitude SurveySample Attitude Survey

Source: Based on T. Lammers, “The Essential Employee Survey,” Inc., December 1992, pp. 159–161.


The Importance of AttitudesThe Importance of Attitudes• Implication for ManagersImplication for Managers

Attitudes warn of potential behavioral problems: Attitudes warn of potential behavioral problems: Managers should do things that generate the positive Managers should do things that generate the positive

attitudes that reduce absenteeism and turnover.attitudes that reduce absenteeism and turnover.

Attitudes influence behaviors of employees:Attitudes influence behaviors of employees: Managers should focus on helping employees become more Managers should focus on helping employees become more

productive to increase job satisfaction.productive to increase job satisfaction.

Employees will try to reduce dissonance unless:Employees will try to reduce dissonance unless: Managers identify the external sources of dissonance.Managers identify the external sources of dissonance. Managers provide rewards compensating for the dissonance.Managers provide rewards compensating for the dissonance.


PersonalityPersonality• PersonalityPersonality

The unique combination of psychological The unique combination of psychological characteristics (measurable traits) that affect how a characteristics (measurable traits) that affect how a person reacts and interacts with others.person reacts and interacts with others.


Classifying Personality TraitsClassifying Personality Traits• Myers Briggs Type Indicator (MBTIMyers Briggs Type Indicator (MBTI®®))

A general personality assessment tool that A general personality assessment tool that measures the personality of an individual using four measures the personality of an individual using four categories:categories: Social interaction: Extrovert or Introvert (E or I)Social interaction: Extrovert or Introvert (E or I)

Preference for gathering data: Sensing or Intuitive (S or N)Preference for gathering data: Sensing or Intuitive (S or N)

Preference for decision making: Feeling or Thinking (F or T)Preference for decision making: Feeling or Thinking (F or T)

Style of decision making: Perceptive or Judgmental (P or J)Style of decision making: Perceptive or Judgmental (P or J)


Exhibit 14.3Exhibit 14.3 Examples of MBTIExamples of MBTI®® Types Types

TypeType DescriptionDescription

INFJ (introvert, intuitive, INFJ (introvert, intuitive, feeling, judgmental)feeling, judgmental)

Quietly forceful, conscientious, and concerned for others. Such Quietly forceful, conscientious, and concerned for others. Such people succeed by perseverance, originality, and the desire to people succeed by perseverance, originality, and the desire to do whatever is needed or wanted. They are often highly do whatever is needed or wanted. They are often highly respected for their uncompromising principles.respected for their uncompromising principles.

ESTP (extrovert, ESTP (extrovert, sensing, thinking, sensing, thinking, perceptive)perceptive)

Blunt and sometimes insensitive. Such people are matter-of-fact Blunt and sometimes insensitive. Such people are matter-of-fact and do notand do notworry or hurry. They enjoy whatever comes along. They work worry or hurry. They enjoy whatever comes along. They work best with real things that can be assembled or disassembled.best with real things that can be assembled or disassembled.

ISFP (introvert, sensing, ISFP (introvert, sensing, feeling, perceptive)feeling, perceptive)

Sensitive, kind, modest, shy, and quietly friendly. Such people Sensitive, kind, modest, shy, and quietly friendly. Such people strongly dislike strongly dislike disagreements and will avoid them. They are loyal followers and disagreements and will avoid them. They are loyal followers and quite often are relaxed about getting things done.quite often are relaxed about getting things done.

ENTJ (extrovert, ENTJ (extrovert, intuitive, thinking, intuitive, thinking, judgmental)judgmental)

Warm, friendly, candid, and decisive; also usually skilled in Warm, friendly, candid, and decisive; also usually skilled in anything that requires reasoning and intelligent talk, but may anything that requires reasoning and intelligent talk, but may sometimes overestimate what they are capable of doing.sometimes overestimate what they are capable of doing.

Source: Based on I. Briggs-Myers, Introduction to Type (Palo Alto, CA: Consulting Psychologists Press, 1980), pp. 7–8.


The Big-Five ModelThe Big-Five Model• ExtraversionExtraversion

Sociable, talkative, and Sociable, talkative, and assertiveassertive

• AgreeablenessAgreeableness Good-natured, Good-natured,

cooperative, and trustingcooperative, and trusting

• ConscientiousnessConscientiousness Responsible, dependable, Responsible, dependable,

persistent, and persistent, and achievement orientedachievement oriented

• Emotional StabilityEmotional Stability Calm, enthusiastic, and Calm, enthusiastic, and

secure or tense, nervous, secure or tense, nervous, and insecureand insecure

• Openness to ExperienceOpenness to Experience Imaginative, artistically Imaginative, artistically

sensitive, and intellectualsensitive, and intellectual


Other Personality InsightsOther Personality Insights• Locus of ControlLocus of Control

Internal locus:Internal locus: persons who believe that they control persons who believe that they control their own destiny.their own destiny.

External locus:External locus: persons who believe that what persons who believe that what happens to them is due to luck or chance (the happens to them is due to luck or chance (the uncontrollable effects of outside forces) .uncontrollable effects of outside forces) .

• Machiavellianism (Mach)Machiavellianism (Mach) The degree to which an individual is pragmatic, The degree to which an individual is pragmatic,

maintains emotional distance, and seeks to gain and maintains emotional distance, and seeks to gain and manipulate powermanipulate power—ends can justify means.—ends can justify means.


Other Personality Insights (cont’d)Other Personality Insights (cont’d)• Self-Esteem (SE)Self-Esteem (SE)

The degree to which people like or dislike themselvesThe degree to which people like or dislike themselves High SEsHigh SEs

Believe in themselves and expect success.Believe in themselves and expect success. Take more risks and use unconventional approaches.Take more risks and use unconventional approaches. Are more satisfied with their jobs than Low SEs.Are more satisfied with their jobs than Low SEs.

Low SEsLow SEs Are more susceptible to external influences.Are more susceptible to external influences. Depend on positive evaluations from others.Depend on positive evaluations from others. Are more prone to conform than high SEs.Are more prone to conform than high SEs.


Other Personality Insights (cont’d)Other Personality Insights (cont’d)• Self-MonitoringSelf-Monitoring

An individual’s ability to adjust his or her behavior to An individual’s ability to adjust his or her behavior to external, situational factors.external, situational factors.

High self-monitors:High self-monitors: Are sensitive to external cues and behave differently in Are sensitive to external cues and behave differently in

different situations.different situations. Can present contradictory public persona and private selvesCan present contradictory public persona and private selves

—impression management.—impression management. Low self-monitorsLow self-monitors

Do not adjust their behavior to the situation.Do not adjust their behavior to the situation. Are behaviorally consistent in public and private.Are behaviorally consistent in public and private.


Other Personality Insights (cont’d)Other Personality Insights (cont’d)• Risk-TakingRisk-Taking

The propensity (or willingness) to take risks.The propensity (or willingness) to take risks. High risk-takers take less time and require less information High risk-takers take less time and require less information

than low risk-takers when making a decision.than low risk-takers when making a decision. Organizational effectiveness is maximized when the Organizational effectiveness is maximized when the

risk-taking propensity of a manager is aligned with risk-taking propensity of a manager is aligned with the specific demands of the job assigned to the the specific demands of the job assigned to the manager.manager.


EmotionsEmotions• EmotionsEmotions

Intense feelings (reactions) that are directed at Intense feelings (reactions) that are directed at specific objects (someone or something)specific objects (someone or something)

Universal emotions:Universal emotions: AngerAnger FearFear SadnessSadness HappinessHappiness DisgustDisgust SurpriseSurprise


Emotional IntelligenceEmotional Intelligence• Emotional Intelligence (EI)Emotional Intelligence (EI)

An assortment of noncognitive skills, capabilities, and An assortment of noncognitive skills, capabilities, and competencies that influence a person’s ability to competencies that influence a person’s ability to succeed in coping with environmental demands and succeed in coping with environmental demands and pressures.pressures.

Dimensions of EI:Dimensions of EI: Self-awareness: knowing what you’re feelingSelf-awareness: knowing what you’re feeling Self-management: managing emotions and impulsesSelf-management: managing emotions and impulses Self-motivation: persisting despite setbacks and failuresSelf-motivation: persisting despite setbacks and failures Empathy: sensing how others are feelingEmpathy: sensing how others are feeling Social skills: handling the emotions of othersSocial skills: handling the emotions of others


Implications for ManagersImplications for Managers• Employee selectionEmployee selection• Helps in understanding employee behavior(s)Helps in understanding employee behavior(s)• By understanding others’ behavior(s), can work By understanding others’ behavior(s), can work

better with thembetter with them


Understanding Personality DifferencesUnderstanding Personality Differences• Personality-Job Fit Theory (Holland)Personality-Job Fit Theory (Holland)

An employee’s job satisfaction and likelihood of An employee’s job satisfaction and likelihood of turnover depends on the compatibility of the turnover depends on the compatibility of the employee’s personality and occupation.employee’s personality and occupation.

Key points of the theory:Key points of the theory: There are differences in personalities.There are differences in personalities. There are different types of jobs.There are different types of jobs. Job satisfaction and turnover are related to the match Job satisfaction and turnover are related to the match

between personality and job for an individual.between personality and job for an individual.


Exhibit 14.4Exhibit 14.4 Holland’s Typology of Personality and Sample OccupationsHolland’s Typology of Personality and Sample Occupations

Source: Based on J. L. Holland, Making Vocational Choices: A Theory of Vocational Personalities and Work Environments (Odessa, FL: Psychological Assessment Resources, 1997).


PerceptionPerception• PerceptionPerception

A process by which individuals give meaning (reality) A process by which individuals give meaning (reality) to their environment by organizing and interpreting to their environment by organizing and interpreting their sensory impressions.their sensory impressions.

• Factors influencing perception:Factors influencing perception: The perceiver’s personal characteristicsThe perceiver’s personal characteristics—interests, —interests,

biases and expectationsbiases and expectations The target’s characteristicsThe target’s characteristics——distinctiveness, contrast, distinctiveness, contrast,

and similarity)and similarity) The situation (context) factorsThe situation (context) factors——place, time, locationplace, time, location

——draw attention or distract from the targetdraw attention or distract from the target


Exhibit 14.5Exhibit 14.5 Perception Challenges: What Do You See?Perception Challenges: What Do You See?


How We Perceive PeopleHow We Perceive People• Attribution TheoryAttribution Theory

How the actions of individuals are perceived by others How the actions of individuals are perceived by others depends on what meaning (causation) we attribute to depends on what meaning (causation) we attribute to a given behavior.a given behavior. Internally caused behavior: under the individual’s controlInternally caused behavior: under the individual’s control Externally caused behavior: due to outside factorsExternally caused behavior: due to outside factors

Determining the source of behaviors:Determining the source of behaviors: Distinctiveness: different behaviors in different situationsDistinctiveness: different behaviors in different situations Consensus: behaviors similar to others in same situationConsensus: behaviors similar to others in same situation Consistency: regularity of the same behavior over timeConsistency: regularity of the same behavior over time


Exhibit 14.6Exhibit 14.6 Attribution TheoryAttribution Theory


How We Perceive People (cont’d)How We Perceive People (cont’d)• Attribution Theory – errors and biases (cont’d)Attribution Theory – errors and biases (cont’d)

Fundamental attribution errorFundamental attribution error The tendency to underestimate the influence of external The tendency to underestimate the influence of external

factors and to overestimate the influence of internal or factors and to overestimate the influence of internal or personal factors.personal factors.

Self-serving biasSelf-serving bias The tendency of individuals to attribute their successes to The tendency of individuals to attribute their successes to

internal factors while blaming personal failures on external internal factors while blaming personal failures on external factors.factors.


Shortcuts Used in Judging OthersShortcuts Used in Judging Others• Assumed SimilarityAssumed Similarity

Assuming that others are more like us than they Assuming that others are more like us than they actually are.actually are.

• StereotypingStereotyping Judging someone on the basis of our perception of a Judging someone on the basis of our perception of a

group he or she is a part of.group he or she is a part of.• Halo EffectHalo Effect

Forming a general impression of a person on the Forming a general impression of a person on the basis of a single characteristic of that personbasis of a single characteristic of that person


Implications for ManagersImplications for Managers• Employees react to perceptionsEmployees react to perceptions• Pay close attention to how employees perceive Pay close attention to how employees perceive

their jobs and management actionstheir jobs and management actions


LearningLearning• LearningLearning

Any relatively permanent change in behavior that Any relatively permanent change in behavior that occurs as a result of experience.occurs as a result of experience. Almost all complex behavior is learned.Almost all complex behavior is learned. Learning is a continuous, life-long process.Learning is a continuous, life-long process. The principles of learning can be used to shape behaviorThe principles of learning can be used to shape behavior

• Theories of learning:Theories of learning: Operant conditioningOperant conditioning Social learningSocial learning


Learning (cont’d)Learning (cont’d)• Operant Conditioning (B.F. Skinner)Operant Conditioning (B.F. Skinner)

The theory that behavior is a function of its The theory that behavior is a function of its consequences and is learned through experience.consequences and is learned through experience.

Operant behavior: voluntary or learned behaviorsOperant behavior: voluntary or learned behaviors Behaviors are learned by making rewards contingent to Behaviors are learned by making rewards contingent to

behaviors. behaviors. Behavior that is rewarded (positively reinforced) is likely to be Behavior that is rewarded (positively reinforced) is likely to be

repeated.repeated. Behavior that is punished or ignored is less likely to be Behavior that is punished or ignored is less likely to be

repeated.repeated.


Learning (cont’d)Learning (cont’d)• Social LearningSocial Learning

The theory that individuals learn through their The theory that individuals learn through their observations of others and through their direct observations of others and through their direct experiences.experiences.

Attributes of models that influence learning:Attributes of models that influence learning: Attentional:Attentional: the attractiveness or similarity of the model the attractiveness or similarity of the model Retention:Retention: how well the model can be recalled how well the model can be recalled Motor reproduction:Motor reproduction: the reproducibility of the model’s the reproducibility of the model’s

actionsactions Reinforcement:Reinforcement: the rewards associated with learning the the rewards associated with learning the

model behaviormodel behavior


Shaping: A Managerial ToolShaping: A Managerial Tool• Shaping BehaviorShaping Behavior

Attempting to “mold” individuals by guiding their Attempting to “mold” individuals by guiding their learning in graduated steps such that they learn to learning in graduated steps such that they learn to behave in ways that most benefit the organization.behave in ways that most benefit the organization.

Shaping methods:Shaping methods: Positive reinforcement:Positive reinforcement: rewarding desired behaviors. rewarding desired behaviors. Negative reinforcement:Negative reinforcement: removing an unpleasant removing an unpleasant

consequence once the desired behavior is exhibited.consequence once the desired behavior is exhibited. Punishment:Punishment: penalizing an undesired behavior. penalizing an undesired behavior. Extinction:Extinction: eliminating a reinforcement for an undesired eliminating a reinforcement for an undesired

behavior.behavior.


Contemporary Issues in OBContemporary Issues in OB• Managing Generational Differences in the Managing Generational Differences in the

WorkplaceWorkplace Gen Y: individuals born after 1978Gen Y: individuals born after 1978

Bring new attitudes to the workplace that reflect wide arrays Bring new attitudes to the workplace that reflect wide arrays of experiences and opportunitiesof experiences and opportunities

Want to work, but don’t want work to be their lifeWant to work, but don’t want work to be their life Challenge the status quoChallenge the status quo Have grown up with technologyHave grown up with technology


Exhibit 14.7Exhibit 14.7 Gen Y WorkersGen Y Workers

Source: Bruce Tulgan of Rainmaker Thinking. Used with permission.


Contemporary Issues in OBContemporary Issues in OB• Managing Negative Behavior in the WorkplaceManaging Negative Behavior in the Workplace

Tolerating negative behavior sends the wrong Tolerating negative behavior sends the wrong message to other employeesmessage to other employees

Both preventive and responsive actions to negative Both preventive and responsive actions to negative behaviors are needed:behaviors are needed: Screening potential employeesScreening potential employees Responding immediately and decisively to unacceptable Responding immediately and decisively to unacceptable

behaviorbehavior Paying attention to employee attitudesPaying attention to employee attitudes


Terms to KnowTerms to Know• behaviorbehavior• organizational behaviororganizational behavior• employee productivityemployee productivity• absenteeismabsenteeism• turnoverturnover• organizational citizenship organizational citizenship

behaviorbehavior• job satisfactionjob satisfaction• workplace misbehaviorworkplace misbehavior• attitudesattitudes• cognitive componentcognitive component• affective componentaffective component

• behavioral componentbehavioral component• job involvementjob involvement• organizational organizational

commitmentcommitment• perceived organizational perceived organizational

supportsupport• cognitive dissonancecognitive dissonance• attitude surveysattitude surveys• personalitypersonality• big-five modelbig-five model• locus of controllocus of control• MachiavellianismMachiavellianism


Terms to Know (cont’d)Terms to Know (cont’d)• self-esteemself-esteem• self-monitoringself-monitoring• impression managementimpression management• emotionsemotions• emotional intelligence (EI)emotional intelligence (EI)• perceptionperception• attribution theoryattribution theory• fundamental attribution fundamental attribution

errorerror• self-serving biasself-serving bias• assumed similarityassumed similarity• stereotypingstereotyping

• halo effecthalo effect• learninglearning• operant conditioningoperant conditioning• social learning theorysocial learning theory• shaping behaviorshaping behavior

ninth edition

STEPHEN P. ROBBINS


MARY COULTER


Understanding Understanding Groups and TeamsGroups and Teams

ChapterChapter

1515



Understanding GroupsUnderstanding Groups• Define the different types of groups.Define the different types of groups.• Describe the five stages of group development.Describe the five stages of group development.

Explaining Work Group BehaviorExplaining Work Group Behavior• Explain the major components that determine group Explain the major components that determine group

performance and satisfaction.performance and satisfaction.• Discuss how roles, norms, conformity, status systems, Discuss how roles, norms, conformity, status systems,

group size, and group cohesiveness influence group group size, and group cohesiveness influence group behavior.behavior.

• Explain how group norms can both help and hurt an Explain how group norms can both help and hurt an organization.organization.

• Define groupthink and social loafing.Define groupthink and social loafing.



Explaining Work Group Behavior (cont’d)Explaining Work Group Behavior (cont’d)• Describe the relationships between group cohesiveness Describe the relationships between group cohesiveness

and productivity.and productivity.• Discuss how conflict management influences group Discuss how conflict management influences group

behavior.behavior.• Tell the advantages and disadvantages of group decision Tell the advantages and disadvantages of group decision

making.making.

Creating Effective TeamsCreating Effective Teams• Compare groups and teams.Compare groups and teams.• Explain why teams have become so popular in Explain why teams have become so popular in

organizations.organizations.• Describe the four most common types of teams.Describe the four most common types of teams.



Creating Effective Teams (cont’d)Creating Effective Teams (cont’d)• List the characteristics of effective teams.List the characteristics of effective teams.

Current Challenges in Managing TeamsCurrent Challenges in Managing Teams• Discuss the challenges of managing global teamsDiscuss the challenges of managing global teams• Explain the role of informal (social) networks in managing Explain the role of informal (social) networks in managing

teams.teams.


Understanding GroupsUnderstanding Groups• GroupGroup

Two or more interacting and interdependent Two or more interacting and interdependent individuals who come together to achieve specific individuals who come together to achieve specific goals.goals.

Formal groupsFormal groups Work groups defined by the organization’s structure that have Work groups defined by the organization’s structure that have

designated work assignments and tasks.designated work assignments and tasks.– Appropriate behaviors are defined by and directed toward Appropriate behaviors are defined by and directed toward

organizational goals.organizational goals. Informal groupsInformal groups

Groups that are independently formed to meet the social Groups that are independently formed to meet the social needs of their members.needs of their members.


Exhibit 15–1Exhibit 15–1 Examples of Formal GroupsExamples of Formal Groups

• Command GroupsCommand Groups Groups that are determined by the organization chart Groups that are determined by the organization chart

and composed of individuals who report directly to a and composed of individuals who report directly to a given manager.given manager.

• Task GroupsTask Groups Groups composed of individuals brought together to Groups composed of individuals brought together to

complete a specific job task; their existence is often complete a specific job task; their existence is often temporary because once the task is completed, the temporary because once the task is completed, the group disbands. group disbands.


Exhibit 15–1Exhibit 15–1 Examples of Formal Groups (cont’d)Examples of Formal Groups (cont’d)

• Cross-Functional TeamsCross-Functional Teams Groups that bring together the knowledge and skills of Groups that bring together the knowledge and skills of

individuals from various work areas or groups whose individuals from various work areas or groups whose members have been trained to do each others’ jobs.members have been trained to do each others’ jobs.

• Self-Managed TeamsSelf-Managed Teams Groups that are essentially independent and in Groups that are essentially independent and in

addition to their own tasks, take on traditional addition to their own tasks, take on traditional responsibilities such as hiring, planning and responsibilities such as hiring, planning and scheduling, and performance evaluations.scheduling, and performance evaluations.


Stages in Group DevelopmentStages in Group Development• FormingForming

Members join and begin the Members join and begin the process of defining the process of defining the group’s purpose, structure, group’s purpose, structure, and leadership.and leadership.

• StormingStorming Intragroup conflict occurs as Intragroup conflict occurs as

individuals resist control by individuals resist control by the group and disagree over the group and disagree over leadership.leadership.

• NormingNorming Close relationships develop Close relationships develop

as the group becomes as the group becomes cohesive and establishes its cohesive and establishes its norms for acceptable norms for acceptable behavior.behavior.

• PerformingPerforming A fully functional group A fully functional group

structure allows the group to structure allows the group to focus on performing the task focus on performing the task at hand.at hand.

• AdjourningAdjourning The group prepares to The group prepares to

disband and is no longer disband and is no longer concerned with high levels concerned with high levels of performance.of performance.


Exhibit 15–2Exhibit 15–2 Stages of Group DevelopmentStages of Group Development


Exhibit 15–3Exhibit 15–3 Group Behavior ModelGroup Behavior Model


Work Group BehaviorWork Group Behavior• Internal Variables Affecting Group BehaviorInternal Variables Affecting Group Behavior

The individual abilities of the group’s membersThe individual abilities of the group’s members The size of the groupThe size of the group The level of conflictThe level of conflict The internal pressures on members to conform to the The internal pressures on members to conform to the

group’s normsgroup’s norms


Conditions Affecting Group BehaviorConditions Affecting Group Behavior• External (Organizational) External (Organizational)

ConditionsConditions Overall strategyOverall strategy Authority structuresAuthority structures Formal regulationsFormal regulations Available organizational Available organizational

resourcesresources Employee selection criteriaEmployee selection criteria Performance management Performance management

(appraisal) system(appraisal) system Organizational cultureOrganizational culture General physical layoutGeneral physical layout

• Internal Group Internal Group VariablesVariables Individual competencies Individual competencies

and traits of membersand traits of members Group structure Group structure Size of the groupSize of the group Cohesiveness and the level Cohesiveness and the level

of intragroup conflictof intragroup conflict Internal pressures on Internal pressures on

members to conform o the members to conform o the group’s normsgroup’s norms


Group StructureGroup Structure• RoleRole

The set of expected behavior patterns attributed to The set of expected behavior patterns attributed to someone who occupies a given position in a social someone who occupies a given position in a social unit that assist the group in task accomplishment or unit that assist the group in task accomplishment or maintaining group member satisfaction.maintaining group member satisfaction.

Role conflict: experiencing differing role expectationsRole conflict: experiencing differing role expectations Role ambiguity: uncertainty about role expectationsRole ambiguity: uncertainty about role expectations


Group Structure (cont’d)Group Structure (cont’d)• NormsNorms

Acceptable standards or expectations that are shared Acceptable standards or expectations that are shared by the group’s members.by the group’s members.

• Common types of normsCommon types of norms Effort and performanceEffort and performance

Output levels, absenteeism, promptness, socializingOutput levels, absenteeism, promptness, socializing

DressDress LoyaltyLoyalty


Group Structure (cont’d)Group Structure (cont’d)• ConformityConformity

Individuals conform in order to be accepted by Individuals conform in order to be accepted by groups.groups.

Group pressures can have an effect on an individual Group pressures can have an effect on an individual member’s judgment and attitudes.member’s judgment and attitudes.

The effect of conformity is not as strong as it once The effect of conformity is not as strong as it once was, although still a powerful force.was, although still a powerful force.

GroupthinkGroupthink The extensive pressure of others in a strongly cohesive or The extensive pressure of others in a strongly cohesive or

threatened group that causes individual members to change threatened group that causes individual members to change their opinions to conform to that of the group.their opinions to conform to that of the group.


Exhibit 15–4Exhibit 15–4 Examples of Cards Used in the Asch StudyExamples of Cards Used in the Asch Study


Group Structure (cont’d)Group Structure (cont’d)• Status SystemStatus System

The formal or informal prestige grading, position, or The formal or informal prestige grading, position, or ranking system for members of a group that serves as ranking system for members of a group that serves as recognition for individual contributions to the group recognition for individual contributions to the group and as a behavioral motivator.and as a behavioral motivator. Formal status systems are effective when the perceived Formal status systems are effective when the perceived

ranking of an individual and the status symbols accorded that ranking of an individual and the status symbols accorded that individual are congruent.individual are congruent.


Group Structure: Group SizeGroup Structure: Group Size• Small groupsSmall groups

Complete tasks faster Complete tasks faster than larger groups.than larger groups.

Make more effective use Make more effective use of facts.of facts.

• Large groupsLarge groups Solve problems better Solve problems better

than small groups.than small groups. Are good for getting Are good for getting

diverse input.diverse input. Are more effective in fact-Are more effective in fact-

finding.finding.

• Social LoafingSocial Loafing The tendency for The tendency for

individuals to expend less individuals to expend less effort when working effort when working collectively than when collectively than when work individually.work individually.


Group Structure (cont’d)Group Structure (cont’d)• Group CohesivenessGroup Cohesiveness

The degree to which members are attracted to a The degree to which members are attracted to a group and share the group’s goals.group and share the group’s goals. Highly cohesive groups are more effective and productive Highly cohesive groups are more effective and productive

than less cohesive groups when their goals aligned with than less cohesive groups when their goals aligned with organizational goals.organizational goals.


Exhibit 15–5Exhibit 15–5 The Relationship Between Cohesiveness and ProductivityThe Relationship Between Cohesiveness and Productivity


Group Processes: Group Decision MakingGroup Processes: Group Decision Making

• AdvantagesAdvantages Generates more complete Generates more complete

information and information and knowledge.knowledge.

Generates more diverse Generates more diverse alternatives.alternatives.

Increases acceptance of a Increases acceptance of a solution.solution.

Increases legitimacy of Increases legitimacy of decision.decision.

• DisadvantagesDisadvantages Time consumingTime consuming Minority dominationMinority domination Pressures to conformPressures to conform Ambiguous responsibilityAmbiguous responsibility


Exhibit 15–6Exhibit 15–6 Group versus Individual Decision MakingGroup versus Individual Decision Making

Criteria of Effectiveness Groups Individuals

Accuracy

Speed

Creativity

Degree of acceptance

Efficiency


Exhibit 15–7Exhibit 15–7 Techniques for Making More Creative Group DecisionsTechniques for Making More Creative Group Decisions


Group Processes: Conflict ManagementGroup Processes: Conflict Management• ConflictConflict

The perceived incompatible differences in a group The perceived incompatible differences in a group resulting in some form of interference with or resulting in some form of interference with or opposition to its assigned tasks.opposition to its assigned tasks. Traditional view:Traditional view: conflict must be avoided. conflict must be avoided.

Human relations view:Human relations view: conflict is a natural and inevitable conflict is a natural and inevitable outcome in any group.outcome in any group.

Interactionist view:Interactionist view: conflict can be a positive force and is conflict can be a positive force and is absolutely necessary for effective group performance.absolutely necessary for effective group performance.


Group Processes: Conflict Management Group Processes: Conflict Management (cont’d)(cont’d)• Categories of ConflictCategories of Conflict

Functional conflicts are constructive.Functional conflicts are constructive. Dysfunctional conflicts are destructive.Dysfunctional conflicts are destructive.

• Types of ConflictTypes of Conflict Task conflict: content and goals of the workTask conflict: content and goals of the work Relationship conflict: interpersonal relationshipsRelationship conflict: interpersonal relationships Process conflict: how the work gets doneProcess conflict: how the work gets done


Exhibit 15–8Exhibit 15–8 Conflict and Group PerformanceConflict and Group Performance


Group Processes: Conflict Management Group Processes: Conflict Management (cont’d)(cont’d)• Techniques to Reduce Conflict:Techniques to Reduce Conflict:

AvoidanceAvoidance

AccommodationAccommodation

ForcingForcing

CompromiseCompromise

CollaborationCollaboration


Exhibit 15–9Exhibit 15–9 Conflict-Management TechniquesConflict-Management Techniques

Source: Adapted from K.W. Thomas, “Conflict and Negotiation Processes in Organizations,” in M.D. Dunnette and L.M. Hough (eds.) Handbook of Industrial and Organizational Psychology, vol. 3, 2d ed. (Palo Alto, CA: Consulting Psychologists Press, 1992), p. 668. With permission


Group Tasks and Group EffectivenessGroup Tasks and Group Effectiveness• Highly complex and interdependent tasks Highly complex and interdependent tasks

require:require: Effective communications: discussion among group Effective communications: discussion among group

members.members. Controlled conflict: More interaction among group Controlled conflict: More interaction among group

members.members.


What Is a Team?What Is a Team?• Work TeamWork Team

A group whose members work intensely on a specific A group whose members work intensely on a specific common goal using their positive synergy, individual common goal using their positive synergy, individual and mutual accountability, and complementary skills.and mutual accountability, and complementary skills.

• Types of TeamsTypes of Teams Problem-solving teamsProblem-solving teams Self-managed work teamsSelf-managed work teams Cross-functional teamsCross-functional teams Virtual teamsVirtual teams


Exhibit 15–10Exhibit 15–10 Groups versus TeamsGroups versus Teams


Types of TeamsTypes of Teams• Problem-solving TeamsProblem-solving Teams

Employees from the same department and functional Employees from the same department and functional area who are involved in efforts to improve work area who are involved in efforts to improve work activities or to solve specific problems.activities or to solve specific problems.

• Self-managed Work TeamsSelf-managed Work Teams A formal group of employees who operate without a A formal group of employees who operate without a

manager and responsible for a complete work manager and responsible for a complete work process or segment.process or segment.


Types of Teams (cont’d)Types of Teams (cont’d)• Cross-functional TeamsCross-functional Teams

A hybrid grouping of individuals who are experts in A hybrid grouping of individuals who are experts in various specialties and who work together on various various specialties and who work together on various tasks.tasks.

• Virtual TeamsVirtual Teams Teams that use computer technology to link Teams that use computer technology to link

physically dispersed members in order to achieve a physically dispersed members in order to achieve a common goal.common goal.


Advantages of Using TeamsAdvantages of Using Teams• Teams outperform individuals.Teams outperform individuals.

• Teams provide a way to better use employee Teams provide a way to better use employee talents.talents.

• Teams are more flexible and responsive.Teams are more flexible and responsive.

• Teams can be quickly Teams can be quickly assembled, deployed, assembled, deployed, refocused, and disbanded.refocused, and disbanded.


Exhibit 15–11Exhibit 15–11 Characteristics of Effective TeamsCharacteristics of Effective Teams


Characteristics of Effective TeamsCharacteristics of Effective Teams• Have a clear Have a clear

understanding of their understanding of their goals.goals.

• Have competent Have competent members with relevant members with relevant technical and technical and interpersonal skills.interpersonal skills.

• Exhibit high mutual trust Exhibit high mutual trust in the character and in the character and integrity of their integrity of their members.members.

• Are unified in their Are unified in their commitment to team goals.commitment to team goals.

• Have good communication Have good communication systems.systems.

• Possess effective Possess effective negotiating skillsnegotiating skills

• Have appropriate Have appropriate leadershipleadership

• Have both internally and Have both internally and externally supportive externally supportive environmentsenvironments


Current Challenges in Managing TeamsCurrent Challenges in Managing Teams• Getting employees to:Getting employees to:

Cooperate with othersCooperate with others Share informationShare information Confront differencesConfront differences Sublimate personal Sublimate personal

interest for the greater interest for the greater good of the teamgood of the team


Managing Global TeamsManaging Global Teams• Group Member ResourcesGroup Member Resources

Unique cultural characteristics of team membersUnique cultural characteristics of team members Avoiding stereotypingAvoiding stereotyping

• Group StructureGroup Structure ConformityConformity—less groupthink—less groupthink StatusStatus—varies in importance among cultures—varies in importance among cultures Social loafingSocial loafing—predominately a Western bias—predominately a Western bias CohesivenessCohesiveness—more difficult to achieve—more difficult to achieve

• Group processes—capitalize on diverse ideasGroup processes—capitalize on diverse ideas

• Manager’s role—a communicator sensitive to the type of Manager’s role—a communicator sensitive to the type of globe team to use.globe team to use.


Exhibit 15–12Exhibit 15–12 Drawbacks and Benefits of Global TeamsDrawbacks and Benefits of Global Teams


Understanding Social NetworksUnderstanding Social Networks• Social NetworkSocial Network

The patterns of informal connections among The patterns of informal connections among individuals within groupsindividuals within groups

• The Importance of Social NetworksThe Importance of Social Networks Relationships can help or hinder team effectivenessRelationships can help or hinder team effectiveness Relationships improve team goal attainment and Relationships improve team goal attainment and

increase member commitment to the team.increase member commitment to the team.


Terms to KnowTerms to Know• groupgroup• formingforming• stormingstorming• normingnorming• performingperforming• adjourningadjourning• rolerole• normsnorms• groupthinkgroupthink• statusstatus• social loafingsocial loafing• group cohesivenessgroup cohesiveness

• conflictconflict• traditional view of conflicttraditional view of conflict• human relations view of human relations view of

conflictconflict• interactionist view of interactionist view of

conflictconflict• functional conflictsfunctional conflicts• dysfunctional conflictsdysfunctional conflicts• task conflicttask conflict• relationship conflictrelationship conflict• process conflictprocess conflict• work teamswork teams


Terms to KnowTerms to Know• problem-solving teamproblem-solving team• self-managed work teamself-managed work team• cross-functional teamcross-functional team• virtual teamvirtual team• social network structuresocial network structure

ninth edition

STEPHEN P. ROBBINS


MARY COULTER


LeadershipLeadershipChapterChapter

1717



Who Are Leaders and What Is LeadershipWho Are Leaders and What Is Leadership• Define leaders and leadership.Define leaders and leadership.

• Explain why managers should be leaders.Explain why managers should be leaders.

Early Leadership TheoriesEarly Leadership Theories• Discuss what research has shown about leadership traits.Discuss what research has shown about leadership traits.

• Contrast the findings of the four behavioral leadership Contrast the findings of the four behavioral leadership theories.theories.

• Explain the dual nature of a leader’s behavior.Explain the dual nature of a leader’s behavior.



Contingency Theories of LeadershipContingency Theories of Leadership• Explain how Fiedler’s theory of leadership is a Explain how Fiedler’s theory of leadership is a

contingency model.contingency model.• Contrast situational leadership theory and the leader Contrast situational leadership theory and the leader

participation model.participation model.• Discuss how path-goal theory explains leadership.Discuss how path-goal theory explains leadership.

Contemporary Views on LeadershipContemporary Views on Leadership• Differentiate between transactional and transformational Differentiate between transactional and transformational

leaders.leaders.• Describe charismatic and visionary leadership.Describe charismatic and visionary leadership.• Discuss what team leadership involves.Discuss what team leadership involves.



Leadership Issues in the Twenty-First CenturyLeadership Issues in the Twenty-First Century• Tell the five sources of a leader’s power.Tell the five sources of a leader’s power.• Discuss the issues today’s leaders face.Discuss the issues today’s leaders face.• Explain why leadership is sometimes irrelevant.Explain why leadership is sometimes irrelevant.


Leaders and LeadershipLeaders and Leadership• Leader – Someone who can influence others and who has Leader – Someone who can influence others and who has

managerial authoritymanagerial authority

• Leadership – What leaders do; the process of influencing a Leadership – What leaders do; the process of influencing a group to achieve goalsgroup to achieve goals

• Ideally, all managers Ideally, all managers should beshould be leaders leaders

• Although groups may have informal leaders who emerge, Although groups may have informal leaders who emerge, those are not the leaders we’re studyingthose are not the leaders we’re studying

Leadership research has tried to answer:Leadership research has tried to answer: What is an effective What is an effective leader?leader?


Early Leadership TheoriesEarly Leadership Theories• Trait Theories (1920s-30s)Trait Theories (1920s-30s)

Research focused on identifying personal Research focused on identifying personal characteristics that differentiated leaders from characteristics that differentiated leaders from nonleaders was unsuccessful. nonleaders was unsuccessful.

Later research on the leadership process identified Later research on the leadership process identified seven traits associated with successful leadership:seven traits associated with successful leadership: Drive, the desire to lead, honesty and integrity, self-Drive, the desire to lead, honesty and integrity, self-

confidence, intelligence, job-relevant knowledge, and confidence, intelligence, job-relevant knowledge, and extraversion.extraversion.


Exhibit 17–1Exhibit 17–1 Seven Traits Associated with LeadershipSeven Traits Associated with Leadership

Source: S. A. Kirkpatrick and E. A. Locke, “Leadership: Do Traits Really Matter?” Academy of Management Executive, May 1991, pp. 48–60; T. A. Judge, J. E. Bono, R. llies, and M. W. Gerhardt, “Personality and Leadership: A Qualitative and Quantitative Review,” Journal of Applied Psychology, August 2002, pp. 765–780.


Exhibit 17–2Exhibit 17–2 Behavioral Theories of LeadershipBehavioral Theories of Leadership


Exhibit 17–2 (cont’d)Exhibit 17–2 (cont’d) Behavioral Theories of LeadershipBehavioral Theories of Leadership


Early Leadership Theories (cont’d)Early Leadership Theories (cont’d)• Behavioral TheoriesBehavioral Theories

University of Iowa Studies (Kurt Lewin)University of Iowa Studies (Kurt Lewin) Identified three leadership styles:Identified three leadership styles:

– Autocratic style:Autocratic style: centralized authority, low participation centralized authority, low participation– Democratic style:Democratic style: involvement, high participation, feedback involvement, high participation, feedback– Laissez faire style:Laissez faire style: hands-off management hands-off management

Research findings: mixed resultsResearch findings: mixed results– No specific style was consistently better for producing better No specific style was consistently better for producing better

performanceperformance– Employees were more satisfied under a democratic leader Employees were more satisfied under a democratic leader

than an autocratic leader.than an autocratic leader.


Early Leadership Theories (cont’d)Early Leadership Theories (cont’d)• Behavioral Theories (cont’d)Behavioral Theories (cont’d)

Ohio State StudiesOhio State Studies Identified two dimensions of leader behaviorIdentified two dimensions of leader behavior

– Initiating structure:Initiating structure: the role of the leader in defining his the role of the leader in defining his or her role and the roles of group membersor her role and the roles of group members

– Consideration:Consideration: the leader’s mutual trust and respect for the leader’s mutual trust and respect for group members’ ideas and feelings.group members’ ideas and feelings.

Research findings: mixed resultsResearch findings: mixed results

– High-high leaders generally, but not always, achieved high High-high leaders generally, but not always, achieved high group task performance and satisfaction.group task performance and satisfaction.

– Evidence indicated that situational factors appeared to Evidence indicated that situational factors appeared to strongly influence leadership effectiveness.strongly influence leadership effectiveness.


Early Leadership Theories (cont’d)Early Leadership Theories (cont’d)• Behavioral Theories (cont’d)Behavioral Theories (cont’d)

University of Michigan StudiesUniversity of Michigan Studies Identified two dimensions of leader behaviorIdentified two dimensions of leader behavior

– Employee oriented:Employee oriented: emphasizing personal relationships emphasizing personal relationships

– Production oriented:Production oriented: emphasizing task accomplishment emphasizing task accomplishment

Research findings: Research findings:

– Leaders who are employee oriented are strongly Leaders who are employee oriented are strongly associated with high group productivity and high job associated with high group productivity and high job satisfaction.satisfaction.


The Managerial GridThe Managerial Grid• Managerial GridManagerial Grid

Appraises leadership styles using two dimensions:Appraises leadership styles using two dimensions: Concern for peopleConcern for people Concern for productionConcern for production

Places managerial styles in five categories:Places managerial styles in five categories: Impoverished managementImpoverished management Task managementTask management Middle-of-the-road managementMiddle-of-the-road management Country club managementCountry club management Team managementTeam management


Exhibit 17–3Exhibit 17–3TheTheManagerialManagerialGridGrid

Source: Reprinted by permission of Harvard Business Review. An exhibit from “Breakthrough in Organization Development” by Robert R. Blake, Jane S. Mouton, Louis B. Barnes, and Larry E. Greiner, November–December 1964, p. 136. Copyright © 1964 by the President and Fellows of Harvard College. All rights reserved.


Contingency Theories of LeadershipContingency Theories of Leadership• The Fiedler Model (cont’d)The Fiedler Model (cont’d)

Proposes that effective group performance depends Proposes that effective group performance depends upon the proper match between the leader’s style of upon the proper match between the leader’s style of interacting with followers and the degree to which the interacting with followers and the degree to which the situation allows the leader to control and influence.situation allows the leader to control and influence.

Assumptions:Assumptions: A certain leadership style should be most effective in different A certain leadership style should be most effective in different

types of situations.types of situations. Leaders do not readily change leadership styles.Leaders do not readily change leadership styles.

– Matching the leader to the situation or changing the Matching the leader to the situation or changing the situation to make it favorable to the leader is required.situation to make it favorable to the leader is required.


Contingency Theories… (cont’d)Contingency Theories… (cont’d)• The Fiedler Model (cont’d)The Fiedler Model (cont’d)

Least-preferred co-worker (LPC) questionnaireLeast-preferred co-worker (LPC) questionnaire Determines leadership style by measuring responses to 18 Determines leadership style by measuring responses to 18

pairs of contrasting adjectives.pairs of contrasting adjectives.

– High score: a relationship-oriented leadership High score: a relationship-oriented leadership stylestyle

– Low score: a task-oriented leadership styleLow score: a task-oriented leadership style Situational factors in matching leader to the situation:Situational factors in matching leader to the situation:

Leader-member relationsLeader-member relations Task structureTask structure Position powerPosition power


Exhibit 17–4Exhibit 17–4 Findings of the Fiedler ModelFindings of the Fiedler Model


Contingency Theories… (cont’d)Contingency Theories… (cont’d)• Hersey and Blanchard’s Situational Leadership Hersey and Blanchard’s Situational Leadership

Theory (SLT)Theory (SLT) Argues that successful leadership is achieved by Argues that successful leadership is achieved by

selecting the right leadership style which is contingent selecting the right leadership style which is contingent on the level of the followers’ readiness.on the level of the followers’ readiness. Acceptance:Acceptance: leadership effectiveness depends on whether leadership effectiveness depends on whether

followers accept or reject a leader.followers accept or reject a leader. Readiness:Readiness: the extent to which followers have the ability and the extent to which followers have the ability and

willingness to accomplish a specific task.willingness to accomplish a specific task.

Leaders must relinquish control over and contact with Leaders must relinquish control over and contact with followers as they become more competent.followers as they become more competent.



Theory (SLT)Theory (SLT) Creates four specific leadership styles incorporating Creates four specific leadership styles incorporating

Fiedler’s two leadership dimensions:Fiedler’s two leadership dimensions: Telling:Telling: high task-low relationship leadership high task-low relationship leadership

Selling:Selling: high task-high relationship leadership high task-high relationship leadership

Participating:Participating: low task-high relationship leadership low task-high relationship leadership

Delegating:Delegating: low task-low relationship leadership low task-low relationship leadership



Theory (SLT)Theory (SLT) Posits four stages follower readiness:Posits four stages follower readiness:

R1:R1: followers are unable and unwilling followers are unable and unwilling

R2:R2: followers are unable but willing followers are unable but willing

R3:R3: followers are able but unwilling followers are able but unwilling

R4:R4: followers are able and willing followers are able and willing


Contingency Theories… (cont’d)Contingency Theories… (cont’d)

• Leader Participation Model (Vroom and Yetton)Leader Participation Model (Vroom and Yetton) Posits that leader behavior must be adjusted to reflect Posits that leader behavior must be adjusted to reflect

the task structurethe task structure—whether it is routine, nonroutine, —whether it is routine, nonroutine, or in between—based on a sequential set of rules or in between—based on a sequential set of rules (contingencies) for determining the form and amount (contingencies) for determining the form and amount of follower participation in decision making in a given of follower participation in decision making in a given situation.situation.


Contingency Theories… (cont’d)Contingency Theories… (cont’d)• Leader Participation Model Leader Participation Model Contingencies:Contingencies:

Decision significanceDecision significance Importance of commitmentImportance of commitment Leader expertiseLeader expertise Likelihood of commitmentLikelihood of commitment Group supportGroup support Group expertiseGroup expertise Team competenceTeam competence


Exhibit 17–5Exhibit 17–5 Leadership Styles in the Vroom Leader Participation ModelLeadership Styles in the Vroom Leader Participation Model

• Decide:Decide: Leader makes the decision alone and either announces or Leader makes the decision alone and either announces or sells it to group.sells it to group.

• Consult Individually:Consult Individually: Leader presents the problem to group Leader presents the problem to group members individually, gets their suggestions, and then makes the members individually, gets their suggestions, and then makes the decision.decision.

• Consult Group:Consult Group: Leader presents the problem to group members in Leader presents the problem to group members in a meeting, gets their suggestions, and then makes the decision.a meeting, gets their suggestions, and then makes the decision.

• Facilitate:Facilitate: Leader presents the problem to the group in a meeting Leader presents the problem to the group in a meeting and, acting as facilitator, defines the problem and the boundaries and, acting as facilitator, defines the problem and the boundaries within which a decision must be made.within which a decision must be made.

• Delegate:Delegate: Leader permits the group to make the decision within Leader permits the group to make the decision within prescribed limits.prescribed limits.

Source: Based on V. Vroom, “Leadership and the Decision-Making Process,” Organizational Dynamics, vol. 28, no. 4 (2000), p. 84.


Exhibit 17–6Exhibit 17–6Time-DrivenTime-DrivenModelModel

Source: Adapted from V. Vroom, “Leadership and the Decision-Making Process,” Organizational Dynamics, vol. 28, no. 4 (2000), p. 87.


Contingency Theories… (cont’d)Contingency Theories… (cont’d)• Path-Goal ModelPath-Goal Model

States that the leader’s job is to assist his or her States that the leader’s job is to assist his or her followers in attaining their goals and to provide followers in attaining their goals and to provide direction or support to ensure their goals are direction or support to ensure their goals are compatible with organizational goals.compatible with organizational goals.

Leaders assume different leadership styles at Leaders assume different leadership styles at different times depending on the situation:different times depending on the situation: Directive leaderDirective leader Supportive leaderSupportive leader Participative leaderParticipative leader Achievement oriented leaderAchievement oriented leader


Exhibit 17–7Exhibit 17–7 Path-Goal TheoryPath-Goal Theory


Contemporary Views on LeadershipContemporary Views on Leadership• Transactional LeadershipTransactional Leadership

Leaders who guide or motivate their followers in the Leaders who guide or motivate their followers in the direction of established goals by clarifying role and direction of established goals by clarifying role and task requirements.task requirements.

• Transformational LeadershipTransformational Leadership Leaders who inspire followers to transcend their own Leaders who inspire followers to transcend their own

self-interests for the good of the organization by self-interests for the good of the organization by clarifying role and task requirements.clarifying role and task requirements.

Leaders who also are capable of having a profound Leaders who also are capable of having a profound and extraordinary effect on their followers.and extraordinary effect on their followers.


Contemporary Views…(cont’d)Contemporary Views…(cont’d)• Charismatic LeadershipCharismatic Leadership

An enthusiastic, self-confident leader whose An enthusiastic, self-confident leader whose personality and actions influence people to behave in personality and actions influence people to behave in certain ways.certain ways.

Characteristics of charismatic leaders:Characteristics of charismatic leaders: Have a vision.Have a vision. Are able to articulate the vision.Are able to articulate the vision. Are willing to take risks to achieve the vision.Are willing to take risks to achieve the vision. Are sensitive to the environment and follower needs.Are sensitive to the environment and follower needs. Exhibit behaviors that are out of the ordinary.Exhibit behaviors that are out of the ordinary.


Contemporary Views…(cont’d)Contemporary Views…(cont’d)• Visionary LeadershipVisionary Leadership

A leader who creates and articulates a realistic, A leader who creates and articulates a realistic, credible, and attractive vision of the future that credible, and attractive vision of the future that improves upon the present situation.improves upon the present situation.

• Visionary leaders have the ability to:Visionary leaders have the ability to: Explain the vision to others.Explain the vision to others. Express the vision not just verbally but through Express the vision not just verbally but through

behavior.behavior. Extend or apply the vision to different leadership Extend or apply the vision to different leadership

contexts.contexts.


Contemporary Views…(cont’d)Contemporary Views…(cont’d)• Team Leadership CharacteristicsTeam Leadership Characteristics

Having patience to share informationHaving patience to share information Being able to trust others and to give up authorityBeing able to trust others and to give up authority Understanding when to interveneUnderstanding when to intervene

• Team Leader’s JobTeam Leader’s Job Managing the team’s external boundaryManaging the team’s external boundary Facilitating the team processFacilitating the team process

Coaching, facilitating, handling disciplinary problems, Coaching, facilitating, handling disciplinary problems, reviewing team and individual performance, training, and reviewing team and individual performance, training, and communicationcommunication


Exhibit 17–8Exhibit 17–8 Specific Team Leadership RolesSpecific Team Leadership Roles


Leadership Issues in the 21Leadership Issues in the 21stst Century Century• Managing PowerManaging Power

Legitimate powerLegitimate power The power a leader has The power a leader has

as a result of his or her as a result of his or her position.position.

Coercive powerCoercive power The power a leader has The power a leader has

to punish or control.to punish or control. Reward powerReward power

The power to give The power to give positive benefits or positive benefits or rewards.rewards.

Expert powerExpert power The influence a leader The influence a leader

can exert as a result of can exert as a result of his or her expertise, his or her expertise, skills, or knowledge.skills, or knowledge.

Referent powerReferent power The power of a leader The power of a leader

that arise because of a that arise because of a person’s desirable person’s desirable resources or admired resources or admired personal traits.personal traits.


Developing Credibility and TrustDeveloping Credibility and Trust• Credibility (of a Leader)Credibility (of a Leader)

The assessment of a leader’s honesty, competence, The assessment of a leader’s honesty, competence, and ability to inspire by his or her followersand ability to inspire by his or her followers

• TrustTrust Is the belief of followers and others in the integrity, Is the belief of followers and others in the integrity,

character, and ability of a leader.character, and ability of a leader. Dimensions of trust:Dimensions of trust: integrity, competence, consistency, integrity, competence, consistency,

loyalty, and openness.loyalty, and openness. Is related to increases in job performance, Is related to increases in job performance,

organizational citizenship behaviors, job satisfaction, organizational citizenship behaviors, job satisfaction, and organization commitment.and organization commitment.


Exhibit 17–9Exhibit 17–9 Suggestions for Building TrustSuggestions for Building Trust

Practice openness.Practice openness.Be fair.Be fair.

Speak your feelings.Speak your feelings.Tell the truth.Tell the truth.

Show consistency.Show consistency.Fulfill your promises.Fulfill your promises.Maintain confidences.Maintain confidences.

Demonstrate competence.Demonstrate competence.


Providing Ethical LeadershipProviding Ethical Leadership• Ethics are part of leadership when leaders Ethics are part of leadership when leaders

attempt to:attempt to: Foster moral virtue through changes in attitudes and Foster moral virtue through changes in attitudes and

behaviors.behaviors. Use their charisma in socially constructive ways.Use their charisma in socially constructive ways. Promote ethical behavior by exhibiting their personal Promote ethical behavior by exhibiting their personal

traits of honesty and integrity.traits of honesty and integrity.• Moral LeadershipMoral Leadership

Involves addressing the means that a leader uses to Involves addressing the means that a leader uses to achieve goals as well as the moral content of those achieve goals as well as the moral content of those goals.goals.


Empowering EmployeesEmpowering Employees• EmpowermentEmpowerment

Involves increasing the decision-making discretion of Involves increasing the decision-making discretion of workers such that teams can make key operating workers such that teams can make key operating decisions in develop budgets, scheduling workloads, decisions in develop budgets, scheduling workloads, controlling inventories, and solving quality problems.controlling inventories, and solving quality problems.

Why empower employees?Why empower employees? Quicker responses problems and faster decisions.Quicker responses problems and faster decisions. Addresses the problem of increased spans of control in Addresses the problem of increased spans of control in

relieving managers to work on other problems.relieving managers to work on other problems.


Cross-Cultural LeadershipCross-Cultural Leadership• Universal Elements of Universal Elements of

Effective LeadershipEffective Leadership VisionVision ForesightForesight Providing encouragementProviding encouragement TrustworthinessTrustworthiness DynamismDynamism PositivenessPositiveness ProactivenessProactiveness


Exhibit 17–10Exhibit 17–10 Selected Cross-Cultural Leadership FindingsSelected Cross-Cultural Leadership Findings

• Korean leaders are expected to be paternalistic toward employees.• Arab leaders who show kindness or generosity without being

asked to do so are seen by other Arabs as weak.• Japanese leaders are expected to be humble and speak frequently.• Scandinavian and Dutch leaders who single out individuals with

public praise are likely to embarrass, not energize, those individuals.

• Effective leaders in Malaysia are expected to show compassion while using more of an autocratic than a participative style.

• Effective German leaders are characterized by high performance orientation, low compassion, low self-protection, low team orientation, high autonomy, and high participation.

Source: Based on J. C. Kennedy, “Leadership in Malaysia: Traditional Values, International Outlook,” Academy of Management Executive, August 2002, pp. 15–17; F.C. Brodbeck, M. Frese, and M. Javidan, “Leadership Made in Germany: Low on Compassion, High on Performance,” Academy of Management Executive, February 2002, pp. 16–29; M. F. Peterson and J. G. Hunt, “International Perspectives on International Leadership,” Leadership Quarterly, Fall 1997, pp. 203–31; R. J. House and R. N. Aditya, “The Social Scientific Study of Leadership: Quo Vadis?” Journal of Management, vol. 23, no. 3, (1997), p. 463; and R. J. House, “Leadership in the Twenty-First Century,” in A. Howard (ed.), The Changing Nature of Work (San Francisco: Jossey-Bass, 1995), p. 442.


Gender Differences and LeadershipGender Differences and Leadership• Research FindingsResearch Findings

Males and females use different styles:Males and females use different styles: Women tend to adopt a more democratic or participative style Women tend to adopt a more democratic or participative style

unless in a male-dominated job.unless in a male-dominated job. Women tend to use transformational leadership.Women tend to use transformational leadership. Men tend to use transactional leadership.Men tend to use transactional leadership.


Exhibit 17–11Exhibit 17–11 Where Female Managers Do Better: A ScorecardWhere Female Managers Do Better: A Scorecard

Source: R. Sharpe, “As Leaders, Women Rule,” BusinessWeek, November 20. 2000, p. 75.


Basics of LeadershipBasics of Leadership• Give people a reason to come to work.Give people a reason to come to work.

• Be loyal to the organization’s peopleBe loyal to the organization’s people

• Spend time with people who do the real work of Spend time with people who do the real work of the organization.the organization.

• Be more open and more candid about what Be more open and more candid about what business practices are acceptable and proper business practices are acceptable and proper and how the unacceptable ones should be fixed. and how the unacceptable ones should be fixed.


Leadership Can Be Irrelevant!Leadership Can Be Irrelevant!• Substitutes for LeadershipSubstitutes for Leadership

Follower characteristicsFollower characteristics Experience, training, professional orientation, or the need for Experience, training, professional orientation, or the need for

independenceindependence Job characteristicsJob characteristics

Routine, unambiguous, and satisfying jobsRoutine, unambiguous, and satisfying jobs Organization characteristicsOrganization characteristics

Explicit formalized goals, rigid rules and procedures, or Explicit formalized goals, rigid rules and procedures, or cohesive work groupscohesive work groups


Terms to KnowTerms to Know• leaderleader• leadershipleadership• behavioral theoriesbehavioral theories• autocratic styleautocratic style• democratic styledemocratic style• laissez-faire stylelaissez-faire style• initiating structureinitiating structure• considerationconsideration• high-high leaderhigh-high leader• managerial gridmanagerial grid• Fiedler contingency Fiedler contingency

modelmodel

• least-preferred co-worker least-preferred co-worker (LPC) questionnaire(LPC) questionnaire

• leader-member relationsleader-member relations• task structuretask structure• position powerposition power• situational leadership theory situational leadership theory

(SLT)(SLT)• readinessreadiness• leader participation modelleader participation model• path-goal theorypath-goal theory• transactional leaderstransactional leaders


Terms to Know (cont’d)Terms to Know (cont’d)• transformational leaderstransformational leaders• charismatic leadercharismatic leader• visionary leadershipvisionary leadership• legitimate powerlegitimate power• coercive powercoercive power• reward powerreward power• expert powerexpert power• referent powerreferent power• credibilitycredibility• trusttrust• empowermentempowerment

ninth edition

STEPHEN P. ROBBINS


MARY COULTER


Foundations Foundations of Controlof Control

ChapterChapter

1818



What Is Control and Why Is It Important?What Is Control and Why Is It Important?• Define control.Define control.• Contrast the three approaches to designing control Contrast the three approaches to designing control

systems.systems.• Discuss the reasons why control is important.Discuss the reasons why control is important.• Explain the planning-controlling link.Explain the planning-controlling link.

The Control ProcessThe Control Process• Describe the three steps in the control process.Describe the three steps in the control process.• Explain why what is measured is more critical than how Explain why what is measured is more critical than how

it’s measured.it’s measured.• Explain the three courses of action managers can take in Explain the three courses of action managers can take in

controlling.controlling.



Controlling Organizational PerformanceControlling Organizational Performance• Define organizational performance.Define organizational performance.

• Describe the most frequently used measures of Describe the most frequently used measures of organizational performance.organizational performance.

Tools for Organizational PerformanceTools for Organizational Performance• Contrast feedforward, concurrent, and feedback controls.Contrast feedforward, concurrent, and feedback controls.

• Explain the types of financial and information controls Explain the types of financial and information controls managers can use.managers can use.

• Describe how balanced scorecards and benchmarking are Describe how balanced scorecards and benchmarking are used in controlling.used in controlling.



Contemporary Issues in ControlContemporary Issues in Control• Describe how managers may have to adjust controls for Describe how managers may have to adjust controls for

cross-cultural differences.cross-cultural differences.

• Discuss the types of workplace concerns managers face Discuss the types of workplace concerns managers face and how they can address those concerns.and how they can address those concerns.

• Explain why control is important to customer interactions.Explain why control is important to customer interactions.

• Discuss what corporate governance is and how it’s Discuss what corporate governance is and how it’s changing.changing.


What Is Control?What Is Control?• ControllingControlling

The process of monitoring activities to ensure that The process of monitoring activities to ensure that they are being accomplished as planned and of they are being accomplished as planned and of correcting any significant deviations.correcting any significant deviations.

• The Purpose of ControlThe Purpose of Control To ensure that activities are completed in ways that To ensure that activities are completed in ways that

lead to accomplishment of organizational goals.lead to accomplishment of organizational goals.


Designing Control SystemsDesigning Control Systems• Market ControlMarket Control

Emphasizes the use of external market mechanisms Emphasizes the use of external market mechanisms to establish the standards used in the control system.to establish the standards used in the control system. External measures:External measures: price competition and relative market price competition and relative market

shareshare

• Bureaucratic ControlBureaucratic Control Emphasizes organizational authority and relies on Emphasizes organizational authority and relies on

rules, regulations, procedures, and policies.rules, regulations, procedures, and policies.• Clan ControlClan Control

Regulates behavior by shared values, norms, Regulates behavior by shared values, norms, traditions, rituals, and beliefs of the firm’s culture.traditions, rituals, and beliefs of the firm’s culture.


Exhibit 18–1Exhibit 18–1 Characteristics of Three Approaches to Control SystemsCharacteristics of Three Approaches to Control Systems

Type of ControlType of Control CharacteristicsCharacteristics

MarketMarket Uses external market mechanisms, such as price competition Uses external market mechanisms, such as price competition and relative market share, to establish standards used in and relative market share, to establish standards used in system. Typically used by organizations whose products or system. Typically used by organizations whose products or services are clearly specified and distinct and that face services are clearly specified and distinct and that face considerable marketplace competition.considerable marketplace competition.

BureaucraticBureaucratic Emphasizes organizational authority. Relies on administrative Emphasizes organizational authority. Relies on administrative and hierarchical mechanisms, such as rules, regulations, and hierarchical mechanisms, such as rules, regulations, procedures, policies, standardization of activities, well-procedures, policies, standardization of activities, well-defined job descriptions, and budgets to ensure that defined job descriptions, and budgets to ensure that employees exhibit appropriate behaviors and meet employees exhibit appropriate behaviors and meet performance standards.performance standards.

ClanClan Regulates employee behavior by the shared values, norms, Regulates employee behavior by the shared values, norms, traditions, rituals, beliefs, and other aspects of the traditions, rituals, beliefs, and other aspects of the organization’s culture. Often used by organizations in which organization’s culture. Often used by organizations in which teams are common and technology is changing rapidly.teams are common and technology is changing rapidly.


Why Is Control Important?Why Is Control Important?• As the final link in management functions:As the final link in management functions:

PlanningPlanning Controls let managers know whether their goals and plans Controls let managers know whether their goals and plans

are on target and what future actions to take.are on target and what future actions to take. Empowering employeesEmpowering employees

Control systems provide managers with information and Control systems provide managers with information and feedback on employee performance.feedback on employee performance.

Protecting the workplaceProtecting the workplace Controls enhance physical security and help minimize Controls enhance physical security and help minimize

workplace disruptions.workplace disruptions.


Exhibit 18–2Exhibit 18–2 The Planning–Controlling LinkThe Planning–Controlling Link


The Control ProcessThe Control Process• The Process of ControlThe Process of Control

1.1. Measuring actual Measuring actual performance.performance.

2.2. Comparing actual Comparing actual performance against a performance against a standard.standard.

3.3. Taking action to correct Taking action to correct deviations or inadequate deviations or inadequate standards.standards.


Exhibit 18–3Exhibit 18–3 The Control ProcessThe Control Process


Measuring: How and What We MeasureMeasuring: How and What We Measure• Sources of Sources of

Information (How)Information (How) Personal observationPersonal observation Statistical reportsStatistical reports Oral reportsOral reports Written reportsWritten reports

• Control Criteria Control Criteria (What)(What) EmployeesEmployees

SatisfactionSatisfactionTurnoverTurnoverAbsenteeismAbsenteeism

BudgetsBudgetsCostsCostsOutputOutputSalesSales


Exhibit 18–4Exhibit 18–4 Common Sources of Information Common Sources of Information for Measuring Performancefor Measuring Performance


ComparingComparing• Determining the degree of variation between Determining the degree of variation between

actual performance and the standard.actual performance and the standard. Significance of variation is determined by:Significance of variation is determined by:

The acceptable range of variation from the standard (forecast The acceptable range of variation from the standard (forecast or budget).or budget).

The size (large or small) and direction (over or under) of the The size (large or small) and direction (over or under) of the variation from the standard (forecast or budget).variation from the standard (forecast or budget).


Exhibit 18–5Exhibit 18–5 Defining the Acceptable Range of VariationDefining the Acceptable Range of Variation


Exhibit 18–6Exhibit 18–6 Sales Performance Figures for July, Sales Performance Figures for July, Eastern States DistributorsEastern States Distributors


Taking Managerial ActionTaking Managerial Action• Courses of ActionCourses of Action

““Doing nothing”Doing nothing” Only if deviation is judged to be insignificant.Only if deviation is judged to be insignificant.

Correcting actual (current) performanceCorrecting actual (current) performance Immediate corrective action to correct the problem at once.Immediate corrective action to correct the problem at once. Basic corrective action to locate and to correct the source of Basic corrective action to locate and to correct the source of

the deviation.the deviation. Corrective ActionsCorrective Actions

– Change strategy, structure, compensation scheme, or Change strategy, structure, compensation scheme, or training programs; redesign jobs; or fire employeestraining programs; redesign jobs; or fire employees


Taking Managerial Action (cont’d)Taking Managerial Action (cont’d)• Courses of Action (cont’d)Courses of Action (cont’d)

Revising the standardRevising the standard Examining the standard to ascertain whether or not the Examining the standard to ascertain whether or not the

standard is realistic, fair, and achievable.standard is realistic, fair, and achievable.

– Upholding the validity of the standard.Upholding the validity of the standard.

– Resetting goals that were initially set too low or too high.Resetting goals that were initially set too low or too high.


Exhibit 18–7Exhibit 18–7 Managerial Decisions in the Control ProcessManagerial Decisions in the Control Process


Controlling for Organizational Controlling for Organizational PerformancePerformance• What Is Performance?What Is Performance?

The end result of an activityThe end result of an activity

• What Is Organizational What Is Organizational Performance?Performance? The accumulated end results of all of the The accumulated end results of all of the

organization’s work processes and activitiesorganization’s work processes and activities Designing strategies, work processes, and work activities.Designing strategies, work processes, and work activities. Coordinating the work of employees.Coordinating the work of employees.


Organizational Performance Measures Organizational Performance Measures • Organizational ProductivityOrganizational Productivity

Productivity:Productivity: the overall output of goods and/or the overall output of goods and/or services divided by the inputs needed to generate services divided by the inputs needed to generate that output.that output. Output: sales revenuesOutput: sales revenues Inputs: costs of resources (materials, labor expense, and Inputs: costs of resources (materials, labor expense, and

facilities)facilities)

Ultimately, productivity is a measure of how efficiently Ultimately, productivity is a measure of how efficiently employees do their work.employees do their work.


Organizational Performance Measures Organizational Performance Measures • Organizational EffectivenessOrganizational Effectiveness

Measuring how appropriate organizational goals are Measuring how appropriate organizational goals are and how well the organization is achieving its goals.and how well the organization is achieving its goals. Systems resource modelSystems resource model

– The ability of the organization to exploit its environment in The ability of the organization to exploit its environment in acquiring scarce and valued resources.acquiring scarce and valued resources.

The process modelThe process model– The efficiency of an organization’s transformation process The efficiency of an organization’s transformation process

in converting inputs to outputs.in converting inputs to outputs. The multiple constituencies modelThe multiple constituencies model

– The effectiveness of the organization in meeting each The effectiveness of the organization in meeting each constituencies’ needs.constituencies’ needs.


Industry and Company RankingsIndustry and Company Rankings• Industry rankings on:Industry rankings on:

ProfitsProfits Return on revenueReturn on revenue Return on shareholders’ Return on shareholders’

equityequity Growth in profitsGrowth in profits Revenues per employeeRevenues per employee Revenues per dollar of Revenues per dollar of

assetsassets Revenues per dollar of Revenues per dollar of

equityequity

• Corporate Culture Corporate Culture AuditsAudits

• Compensation and Compensation and benefits surveysbenefits surveys

• Customer satisfactionCustomer satisfactionsurveyssurveys


Exhibit 18–8Exhibit 18–8 Popular Industry and Company RankingsPopular Industry and Company Rankings


Tools for Controlling Organizational Tools for Controlling Organizational PerformancePerformance• Feedforward ControlFeedforward Control

A control that prevents anticipated problems A control that prevents anticipated problems beforebefore actual occurrences of the problem.actual occurrences of the problem. Building in quality through design.Building in quality through design. Requiring suppliers conform to ISO 9002.Requiring suppliers conform to ISO 9002.

• Concurrent ControlConcurrent Control A control that takes place while the monitored activity A control that takes place while the monitored activity

is in progress.is in progress. Direct supervisionDirect supervision: management by walking around.: management by walking around.


Exhibit 18–9Exhibit 18–9 Types of ControlTypes of Control


Tools for Controlling Organizational Tools for Controlling Organizational Performance (cont’d)Performance (cont’d)• Feedback ControlFeedback Control

A control that takes place after an activity is done.A control that takes place after an activity is done. Corrective action is after-the-fact, when the problem has Corrective action is after-the-fact, when the problem has

already occurred.already occurred.

Advantages of feedback controls:Advantages of feedback controls: Provide managers with information on the effectiveness of Provide managers with information on the effectiveness of

their planning efforts.their planning efforts. Enhance employee motivation by providing them with Enhance employee motivation by providing them with

information on how well they are doing.information on how well they are doing.


Tools for Controlling Organizational Tools for Controlling Organizational Performance: Financial ControlsPerformance: Financial Controls• Traditional ControlsTraditional Controls

Ratio analysisRatio analysis LiquidityLiquidity LeverageLeverage ActivityActivity ProfitabilityProfitability

Budget AnalysisBudget Analysis Quantitative standardsQuantitative standards DeviationsDeviations

• Other MeasuresOther Measures Economic Value Added Economic Value Added

(EVA)(EVA) Market Value Added Market Value Added

(MVA)(MVA)


Exhibit 18–10Exhibit 18–10 Popular Financial RatiosPopular Financial Ratios


Exhibit 18–10Exhibit 18–10 Popular Financial Ratios (cont’d)Popular Financial Ratios (cont’d)


Tools for Controlling Organizational Tools for Controlling Organizational Performance: Financial Controls (cont’d)Performance: Financial Controls (cont’d)• Other MeasuresOther Measures

Economic Value Added (EVA)Economic Value Added (EVA) How much value is created by what a company does with its How much value is created by what a company does with its

assets, less any capital investments in those assets: assets, less any capital investments in those assets: the rate the rate of return earned over and above the cost of capital.of return earned over and above the cost of capital.

– The choice is to use less capital or invest in high-return The choice is to use less capital or invest in high-return projects.projects.


Tools for Controlling Organizational Tools for Controlling Organizational Performance: Financial Controls (cont’d)Performance: Financial Controls (cont’d)• Other Measures (cont’d)Other Measures (cont’d)

Market Value Added (MVA)Market Value Added (MVA) The value that the stock market places on a firm’s past and The value that the stock market places on a firm’s past and

expected capital investment projectsexpected capital investment projects

If the firm’s market value (its stock and debt) exceeds the If the firm’s market value (its stock and debt) exceeds the value of its invest capital (its equity and retained earnings), value of its invest capital (its equity and retained earnings), then managers have created wealth.then managers have created wealth.

• The Practice of Managing EarningsThe Practice of Managing Earnings


Controlling Organizational PerformanceControlling Organizational Performance• Balanced ScorecardBalanced Scorecard

Is a measurement tool that uses goals set by Is a measurement tool that uses goals set by managers in four areas to measure a company’s managers in four areas to measure a company’s performance:performance: FinancialFinancial CustomerCustomer Internal processesInternal processes People/innovation/growth assetsPeople/innovation/growth assets

Is intended to emphasize that all of these areas are Is intended to emphasize that all of these areas are important to an organization’s success and that there important to an organization’s success and that there should be a balance among them.should be a balance among them.


Information ControlsInformation Controls• Purposes of Information ControlsPurposes of Information Controls

As a tool to help managers control other As a tool to help managers control other organizational activities.organizational activities. Managers need the right information at the right time and in Managers need the right information at the right time and in

the right amount. the right amount.

As an organizational area that managers need to As an organizational area that managers need to control.control. Managers must have comprehensive and secure controls in Managers must have comprehensive and secure controls in

place to protect the organization’s important information.place to protect the organization’s important information.


Information ControlsInformation Controls• Management Information Systems (MIS)Management Information Systems (MIS)

A system used to provide management with needed A system used to provide management with needed information on a regular basis.information on a regular basis. Data:Data: an unorganized collection of raw, unanalyzed facts an unorganized collection of raw, unanalyzed facts

(e.g., unsorted list of customer names).(e.g., unsorted list of customer names).

Information:Information: data that has been analyzed and organized data that has been analyzed and organized such that it has value and relevance to managers.such that it has value and relevance to managers.


Benchmarking of Best PracticesBenchmarking of Best Practices• BenchmarkBenchmark

The standard of excellence against which to measure The standard of excellence against which to measure and compare.and compare.

• BenchmarkingBenchmarking Is the search for the best practices among Is the search for the best practices among

competitors or noncompetitors that lead to their competitors or noncompetitors that lead to their superior performance.superior performance.

Is a control tool for identifying and measuring specific Is a control tool for identifying and measuring specific performance gaps and areas for improvement.performance gaps and areas for improvement.


Exhibit 18–11Exhibit 18–11 Steps to Successfully Implement an Internal Steps to Successfully Implement an Internal Benchmarking Best Practices ProgramBenchmarking Best Practices Program

1.1. Connect best practices to strategies and goals.Connect best practices to strategies and goals.

2.2. Identify best practices throughout the organization.Identify best practices throughout the organization.

3.3. Develop best practices reward and recognition Develop best practices reward and recognition systems.systems.

4.4. Communicate best practices throughout the Communicate best practices throughout the organization.organization.

5.5. Create a best practices knowledge-sharing system.Create a best practices knowledge-sharing system.

6.6. Nurture best practices on an ongoing basis.Nurture best practices on an ongoing basis.


Contemporary Issues in ControlContemporary Issues in Control• Cross-Cultural IssuesCross-Cultural Issues

The use of technology to increase direct corporate The use of technology to increase direct corporate control of local operationscontrol of local operations

Legal constraints on corrective actions in foreign Legal constraints on corrective actions in foreign countriescountries

Difficulty with the comparability of data collected from Difficulty with the comparability of data collected from operations in different countriesoperations in different countries


Contemporary Issues in Control (cont’d)Contemporary Issues in Control (cont’d)• Workplace ConcernsWorkplace Concerns

Workplace privacy versus workplace monitoring:Workplace privacy versus workplace monitoring: E-mail, telephone, computer, and Internet usageE-mail, telephone, computer, and Internet usage Productivity, harassment, security, confidentiality, intellectual Productivity, harassment, security, confidentiality, intellectual

property protectionproperty protection Employee theftEmployee theft

The unauthorized taking of company property by employees The unauthorized taking of company property by employees for their personal use.for their personal use.

Workplace violenceWorkplace violence Anger, rage, and violence in the workplace is affecting Anger, rage, and violence in the workplace is affecting

employee productivity.employee productivity.


Exhibit 18–12Exhibit 18–12Types of Workplace Types of Workplace Monitoring by Monitoring by EmployersEmployers

Source: American Management Association/ePolicy Institute Research, “2005 Electronic Monitoring & Surveillance Survey,” American Management Association.


Exhibit 18–13Exhibit 18–13 Control Measures for Employee Theft or FraudControl Measures for Employee Theft or Fraud

Sources: Based on A.H. Bell and D.M. Smith. “Protecting the Company Against Theft and Fraud,” Workforce Online (www.workforce.com) December 3, 2000; J.D. Hansen. “To Catch a Thief,” Journal of Accountancy, March 2000, pp. 43–46; and J. Greenberg, “The Cognitive Geometry of Employee Theft,” in Dysfunctional Behavior in Organizations: Nonviolent and Deviant Behavior, eds. S.B. Bacharach, A. O’Leary-Kelly, J.M. Collins, and R.W. Griffin (Stamford, CT: JAI Press, 1998), pp. 147–93.


Exhibit 18–14Exhibit 18–14 Workplace ViolenceWorkplace Violence

Witnessed yelling or other verbal abuse 42%

Yelled at co-workers themselves 29%

Cried over work-related issues 23%

Seen someone purposely damage machines or furniture 14%

Seen physical violence in the workplace 10%

Struck a co-worker 2%

Source: Integra Realty Resources, October-November Survey of Adults 18 and Over, in “Desk Rage.” BusinessWeek, November 20, 2000, p. 12.


Exhibit 18–15Exhibit 18–15 Control Measures for Deterring or Reducing Control Measures for Deterring or Reducing Workplace ViolenceWorkplace Violence

Sources: Based on M. Gorkin, “Five Strategies and Structures for Reducing Workplace Violence,” Workforce Online (www.workforce.com). December 3, 2000; “Investigating Workplace Violence: Where Do You Start?” Workforce Online (www.forceforce.com), December 3, 2000; “Ten Tips on Recognizing and Minimizing Violence,” Workforce Online (www.workforce.com), December 3, 2000; and “Points to Cover in a Workplace Violence Policy,” Workforce Online (www.workforce.com), December 3, 2000.


Contemporary Issues in Control (cont’d)Contemporary Issues in Control (cont’d)• Customer InteractionsCustomer Interactions

Service profit chainService profit chain Is the service sequence from employees to customers to Is the service sequence from employees to customers to

profit. profit.

Service capability affects service value which impacts Service capability affects service value which impacts on customer satisfaction that, in turn, leads to on customer satisfaction that, in turn, leads to customer loyalty in the form of repeat business customer loyalty in the form of repeat business (profit).(profit).


Exhibit 18–16Exhibit 18–16 The Service Profit ChainThe Service Profit Chain

Source: Adapted and reprinted by permission of Harvard Business Review. An exhibit from “Putting the Service Profit Chain to Work,” by J. L. Heskett, T. O. Jones, G. W. Loveman, W. E. Sasser, Jr., and L. A. Schlesinger. March–April 1994: 166. Copyright (c) by the President and Fellows of Harvard College. All rights reserved. See also J. L. Heskett, W. E. Sasser, and L. A. Schlesinger, The Service Profit Chain (New York: Free Press, 1997).


Contemporary Issues in Control (cont’d)Contemporary Issues in Control (cont’d)• Corporate GovernanceCorporate Governance

The system used to govern a corporation so that the The system used to govern a corporation so that the interests of the corporate owners are protected.interests of the corporate owners are protected. Changes in the role of boards of directorsChanges in the role of boards of directors Increased scrutiny of financial reporting (Sarbanes-Oxley Act Increased scrutiny of financial reporting (Sarbanes-Oxley Act

of 2002)of 2002)

– More disclosure and transparency of corporate financial More disclosure and transparency of corporate financial informationinformation

– Certification of financial results by senior managementCertification of financial results by senior management


Terms to KnowTerms to Know• controllingcontrolling• market controlmarket control• bureaucratic controlbureaucratic control• clan controlclan control• control processcontrol process• range of variationrange of variation• immediate corrective immediate corrective

actionaction• basic corrective actionbasic corrective action• performanceperformance• organizational organizational

performanceperformance

• productivityproductivity• organizational organizational

effectivenesseffectiveness• feedforward controlfeedforward control• concurrent controlconcurrent control• management by walking management by walking

aroundaround• feedback controlfeedback control• economic value added economic value added

(EVA)(EVA)• market value added market value added

(MVA)(MVA)


Terms to Know (cont’d)Terms to Know (cont’d)• management information management information

system (MIS)system (MIS)• datadata• informationinformation• balanced scorecardbalanced scorecard• benchmarkingbenchmarking• employee theftemployee theft• service profit chainservice profit chain• corporate governancecorporate governance